Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

General

The Company grants certain stock-based compensation awards, including restricted stock awards, restricted stock units, performance share awards and stock options. Stock-based compensation expense associated with these awards was $26 million and $10 million in the third quarter of 2022 and 2021, respectively, and $70 million and $26 million for the nine months ended

September 30, 2022 and 2021, respectively. Stock-based compensation expense is included in general and administrative expense in the Condensed Consolidated Statement of Operations.

Refer to Note 13 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 - Employees

During the nine months ended September 30, 2022, the Company granted 2,244,405 restricted stock units to employees of the Company with a weighted average grant date value of $24.80 per unit. The fair value of restricted stock unit grants is based on the closing stock price on the grant date. Restricted stock units generally vest either at the end of a three-year service period or on a graded or graduated vesting basis at each anniversary date over a three-year service period. The Company used an annual forfeiture rate assumption of zero to five percent for purposes of recognizing stock-based compensation expense for its restricted stock units.

Restricted Stock Units - Non-Employees Directors

In June 2022, the Company granted 45,472 restricted stock units, with a weighted-average grant date value of $35.19 per unit, to the Company’s non-employee directors. The fair value of these units is measured based on the closing stock price on grant date. These units will vest in April 2023 and the Company will recognize compensation expense ratably over the vesting period.

Performance Share Awards

The Company has two outstanding types of performance share awards: one based on performance conditions measured against the Company’s internal performance metrics (“Employee Performance Share Awards”) and one based on market conditions (“TSR Performance Share Awards”). The Company used an annual forfeiture rate assumption of zero to five percent 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 the Employee Performance Share Awards 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 the Company’s common stock.

Employee Performance Share Awards. During 2022, the compensation committee of the Board of Directors of the Company certified that the performance conditions for certain of the Employee Performance Share Awards that were granted in 2020 and 2021 had been met. In July 2022, 1,775,790 shares with a grant date fair value of $22 million were issued and fully vested.

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 nine months ended September 30, 2022, the Company granted 1,161,599 TSR Performance Share Awards, which 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 and certain industry-related indices over a three-year performance period, which commenced on February 1, 2022 and ends on January 31, 2025. The 2022 TSR Performance Share Awards include a feature that will reduce the potential cash component of the award if the actual performance is negative over the three-year period and the base calculation indicates an above-target payout.

The following assumptions were used to determine the grant date fair value of the equity component on February 28, 2022 and the period-end fair value of the liability component of the TSR Performance Share Awards:


	Grant Date			September 30, 2022
Fair value per performance share award	$	17.89		$	12.47
Assumptions:
Stock price volatility	42.3		%	42.3		%
Risk-free rate of return	1.60		%	4.19		%