Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

General

The Company grants certain stock-based compensation awards, including restricted stock awards, restricted stock units and performance share awards. Stock-based compensation expense associated with these awards was $11.4 million and $2.1 million in the third quarter of 2020 and 2019, respectively, and $36.0 million and $24.0 million during the first nine months of 2020 and 2019, respectively. Stock-based compensation expense is included in general and administrative expense in the Condensed Consolidated Statement of Operations.

Refer to Note 14 of the Notes to the Consolidated Financial Statements in the Form 10-K for further description of the various types of stock-based compensation awards and the applicable award terms.

Restricted Stock Units

During the first nine months of 2020, 127,165 restricted stock units were granted to non-employee directors of the Company with a weighted-average grant date value of $15.80 per unit. The fair value of these units is measured based on the closing stock price on grant date and compensation expense is recorded immediately. These units immediately vest and are issued when the director ceases to be a director of the Company.

Performance Share Awards

The performance period for the awards granted during the first nine months of 2020 commenced on January 1, 2020 and ends on December 31, 2022. The Company used an annual forfeiture rate assumption ranging from zero to five for purposes of recognizing stock-based compensation expense for its performance share awards.

Performance Share Awards Based on Internal Performance Metrics

The fair value of performance share award grants based on internal performance metrics is based on the closing stock price on the grant date. Each performance share award represents the right to receive up to 100 percent of the award in shares of common stock. Based on the Company’s probability assessment at September 30, 2020, it is considered probable that the criteria for all performance awards based on internal metrics awards will be met.

Employee Performance Share Awards. During the first nine months of 2020, 722,500 Employee Performance Share Awards were granted at a grant date value of $15.60 per share. The 2020 awards vest 100 percent on the third anniversary, provided that the Company averages $100 million or more of operating cash flow during the three-year performance period, as set by the Company’s compensation committee. If the Company does not meet the performance metric for the applicable period, then the performance shares that would have been issued on the anniversary date will be forfeited.

Hybrid Performance Share Awards. During the first nine months of 2020, 506,412 Hybrid Performance Share Awards were granted at a grant date value of $15.60 per share. The 2020 awards vest 25 percent on each of the first and second anniversary dates and 50 percent on the third anniversary, provided that the Company has $100 million or more of operating cash flow for the year preceding the vesting date, as set by the Company’s compensation committee. If the Company does not meet the performance metric for the applicable period, then the portion of the performance shares that would have been issued on that anniversary date will be forfeited.

Performance Share Awards Based on Market Conditions

These awards have both an equity and liability component, with the right to receive up to the first 100 percent of the award in shares of common stock and the right to receive up to an additional 100 percent of the value of the award in excess of the equity component in cash. The equity portion of these awards is valued on the grant date and is not marked to market, while the liability portion of the awards is valued as of the end of each reporting period on a mark-to-market basis. The Company calculates the fair value of the equity and liability portions of the awards using a Monte Carlo simulation model.

TSR Performance Share Awards. During the first nine months of 2020, 862,180 TSR Performance Share Awards were granted and are earned, or not earned, based on the comparative performance of the Company’s common stock measured against a predetermined group of companies in the Company’s peer group over a three-year performance period.

The following assumptions were used to determine the grant date fair value of the equity component (February 19, 2020) and the period-end fair value of the liability component of the TSR Performance Share Awards:


	Grant Date			September 30, 2020
Fair value per performance share award	$	13.79		$13.28 - $17.30
Assumptions:
Stock price volatility	29.5		%	36.8% - 48.4%
Risk free rate of return	1.39		%	0.10% - 0.14%