Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

We have a principal share-based compensation plan (the “2020 Long-Term Incentive Plan”), which allows us to grant new equity awards until February 12, 2030. We also have a long-term incentive compensation plan which expires pursuant to its terms on December 31, 2020 and will continue to govern outstanding equity awards granted thereunder; however, as of February 12, 2020, no new awards are being granted under this plan. The compensation cost charged against income for these plans was $6.9 million and $9.2 million for the three months ended September 30, 2020 and 2019, respectively, and $19.8 million and $30.0 million for the nine months ended September 30, 2020 and 2019, respectively. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting is to expense the costs ratably over the vesting periods.

Additionally, HEP maintains a share-based compensation plan for Holly Logistic Services, L.L.C.’s non-employee directors and certain executives and employees. Compensation cost attributable to HEP’s share-based compensation plan was $0.6 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively, and $1.5 million and $1.8 million for the nine months ended September 30, 2020 and 2019, respectively.

Restricted Stock Units

Under our long-term incentive plan, we grant certain officers and other key employees restricted stock unit awards, which are payable in stock or cash and generally vest over a period of three years. Certain restricted stock unit award recipients have the right to receive dividends, however, restricted stock units do not have any other rights of absolute ownership. Upon vesting, restrictions on the restricted stock units lapse at which time they convert to common shares or cash. In addition, we grant non-employee directors restricted stock unit awards, which typically vest over a period of one year and are payable in stock. The fair value of each restricted stock unit award is measured based on the grant date market price of our common shares and is amortized over the respective vesting period. We account for forfeitures on an estimated basis.

A summary of restricted stock unit activity during the nine months ended September 30, 2020 is presented below:


Restricted Stock Units	Grants	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value ($000)

Outstanding at January 1, 2020	1,101,781	$	53.30
Granted	65,041	35.26
Vested	(80,872)	44.40
Forfeited	(70,884)	53.51
Converted from performance share units	19,450	38.13
Outstanding at September 30, 2020	1,034,516	52.41		$	20,390

For the nine months ended September 30, 2020, restricted stock units vested having a grant date fair value of $3.6 million. As of September 30, 2020, there was $16.6 million of total unrecognized compensation cost related to non-vested restricted stock unit grants. That cost is expected to be recognized over a weighted-average period of 1.0 year.

Performance Share Units

Under our long-term incentive plan, we grant certain officers and other key employees performance share units, which are payable in stock or cash upon meeting certain criteria over the service period, and generally vest over a period of three years. Under the terms of our performance share unit grants, awards are subject to “financial performance” and “market performance” criteria. Financial performance is based on our financial performance compared to a peer group of independent refining companies, while market performance is based on the relative standing of total shareholder return achieved by HollyFrontier compared to peer group companies. The number of shares ultimately issued or cash paid under these awards can range from zero to 200% of target award amounts. Holders of performance share units have the right to receive dividend equivalents and other distributions with respect to such performance share units based on the target level of payout.

A summary of performance share unit activity and changes during the nine months ended September 30, 2020 is presented below:


Performance Share Units						Grants

Outstanding at January 1, 2020						375,588

Vested						(12,129)
Forfeited						(18,766)
Converted to restricted stock units						(19,450)
Outstanding at September 30, 2020						325,243

For the nine months September 30, 2020, we issued 7,889 shares of common stock, representing a 100% payout on vested performance share units having a grant date fair value of $0.5 million. As of September 30, 2020, there was $7.7 million of total unrecognized compensation cost related to non-vested performance share units having a grant date fair value of $58.07 per unit. That cost is expected to be recognized over a weighted-average period of 1.3 years.