Stock Plans

9 Months Ended

Sep. 30, 2022

‎

(11) Stock Plans:

Upon emergence, the Frontier Communications Parent, Inc. 2021 Management Incentive Plan (the “2021 Incentive Plan”) was approved and adopted by the Board. The 2021 Incentive Plan permits stock-based awards to be made to employees, directors, or consultants of the Company or its affiliates, as determined by the Compensation and Human Capital Committee of the Board. Under the 2021 Incentive Plan, 15,600,000 shares of common stock have been reserved for issuance. Equity awards have been issued in the form of time-based restricted stock units (RSUs) and performance-based stock units (PSUs). As of September 30, 2022, unvested awards relating to approximately 2,090,000 shares were outstanding under our long-term incentive plan. Further, upon emergence, all outstanding stock-based compensation plans of Old Frontier were terminated.

Restricted Stock Units

The following summary presents information regarding unvested RSUs under the 2021 Incentive Plan:


2021 Incentive Plan
		Weighted
		Average
	Number of	Grant Date		Aggregate
	Shares	Fair Value		Fair Value
	(in thousands)	(per share)		(in millions)
Balance at January 1, 2022	2,483	$	28.67	$	72
Restricted stock granted	1,078	$	25.86	$	25
Restricted stock vested	(862)	$	25.73	$	(20)
Restricted stock forfeited	(140)	$	25.86
Balance at September 30, 2022	2,559	$	25.83	$	60

For purposes of determining compensation expense, the fair value of each RSU grant is based on the closing price of our common stock on the date of grant. The non-vested RSUs granted in 2021 and 2022 generally vest, and are expensed, on a ratable basis over three years from the grant date of the award. Total remaining unrecognized compensation cost associated with unvested RSU awards that is deferred at September 30, 2022 was $56 million and the weighted average vesting period over which this cost is expected to be recognized is approximately 2 years.

None of the RSU awards may be sold, assigned, pledged, or otherwise transferred, voluntarily or involuntarily, by the employees until the applicable time-based restrictions lapse, subject to limited exceptions. RSUs, when vested, will be paid out in the form of common stock. Compensation expense, including compensation related to non-employee directors, recognized in “Selling, general, and administrative expenses”, of $27 million for the nine month-period ended September 30, 2022, has been recorded in connection with RSUs.

Performance Stock Units

Under the 2021 Incentive Plan, a target number of PSUs are awarded to certain participants with respect to a three-year performance period (a “Measurement Period”). The performance metrics under the 2021 and 2022 PSU grants consist of targets for (1) Adjusted Fiber EBITDA, (2) Fiber Locations Constructed and (3) Expansion Fiber Penetration. In addition, there is an overall relative total shareholder return (“TSR”) modifier, which is based on Frontier’s total return to stockholders over the Measurement Period relative to the S&P 400 Mid Cap Index. Each performance metric is weighted 33.3%, and targets for each metric are set for each of the three years during the Measurement Period. Achievement of the metrics will be measured separately, and the number of awards earned will be determined based on actual performance relative to the targets of each performance metric, plus the effect of the TSR modifier. Achievement is measured on a cumulative basis for each performance metric individually at the end of the three-year Measurement Period. The payout of the 2021 PSUs can range

from 0% to a maximum award payout of 300% of the target units. The payout of the 2022 PSUs can range from 0% to a maximum award payout of 200% of the target units.

The number of PSU awards earned at the end of the Measurement Period may be more or less than the number of target PSUs granted as a result of performance. An executive must maintain a satisfactory performance rating during the Measurement Period and generally must be employed by Frontier upon determination in order for the award to vest. The Compensation and Human Capital Committee will determine the number of shares earned for the Measurement Period in the first quarter of the year following the end of the Measurement Period. PSUs, to the extent earned, will be paid out in the form of common stock shortly following this determination.

Under ASC 718, Stock Based Compensation Expense, a grant date and the fair value of a performance award are determined once the targets are finalized. All targets for the 2021 awards have been set and the fair value of the grants will be amortized over the appropriate period. For the 2022 PSU awards, the targets related to two of the three performance metrics have not been established. As a result, we are recognizing expense with respect to 1/3 of the aggregate outstanding 2022 PSU awards over the appropriate period.

The following summary presents information regarding performance shares as of September 30, 2022 and changes during the nine months then ended with regard to performance shares awarded under the 2021 Incentive Plan:


2021 Incentive Plan
			Weighted
			Average
	Number of		Grant Date	Aggregate
	Shares		Fair Value	Fair Value
	(in thousands)		(per share)	(in millions)
Balance at January 1, 2022	3,144	$	25.62	$	92
Target performance shares awarded, net	388	$	25.66	$	9
Target performance shares forfeited	(47)	$	25.62
Balance at September 30, 2022	3,485	$	25.62	$	82

For purposes of determining compensation expense, the fair value of each performance share grant is estimated based on the closing price of a share of our common stock on the date of the grant, adjusted to reflect the fair value of the relative TSR modifier. For the nine months ended September 30, 2022, we recognized net compensation expense, reflected in “Selling, general, and administrative expenses,” of $27 million related PSU awards.