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Annual report pursuant to Section 13 and 15(d)

STOCK COMPENSATION PLANS

v3.20.4
STOCK COMPENSATION PLANS
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract] Ìý
STOCK COMPENSATION PLANS At DecemberÌý31, 2020, we had outstanding awards under two share-based compensation plans: the A&R 2015 Equity Plan and the 2012 Amended Equity Plan. On March 13, 2020, the maximum number of shares that may be issued under the A&R 2015 Equity Plan increased by 5.7 million common shares in relation to the outstanding AK Steel stock-based incentive awards that we converted at a 0.400 rate of exchange. The converted stock-based incentive awards include 2.0 million stock options, 1.0 million long-term performance plan awards, 0.5 million performance shares, 0.2 million restricted stock awards and 0.3 million restricted stock units. As of DecemberÌý31, 2020, there were 4.9 million remaining shares available for grant under the A&R 2015 Equity Plan. No additional grants were issued from the 2012 Amended Equity Plan after the date of approval of the A&R 2015 Equity Plan; however, all awards previously granted under the 2012 Amended Equity Plan will continue in accordance with the terms of the outstanding awards.
Stock-Based Compensation Expense
The following table summarizes the total compensation expense recognized for stock-based compensation awards:
(InÌýMillions,Ìýexcept per
shareÌýamounts)
Year Ended December 31,
Ìý 2020 2019 2018
Cost of goods sold $ (2) $ (2) $ (2)
Selling, general and administrative expenses (13) (16) (13)
Acquisition-related costs (2) —Ìý —Ìý
Stock based compensation expense (17) (18) (15)
Income tax benefit1
4Ìý 4Ìý —Ìý
Stock based compensation expense, net of tax $ (13) $ (14) $ (15)
Decrease in basic earnings per common share $ (0.03) $ (0.05) $ (0.05)
Decrease in diluted earnings per common share $ (0.03) $ (0.05) $ (0.05)
1 No income tax benefit in 2018 due to the full valuation allowance.
The total compensation cost related to outstanding awards not yet recognized is $14Ìýmillion at DecemberÌý31, 2020. This expense is expected to be recognized over the remaining weighted-average period of approximately 1.7 years.
Performance Shares
The following table summarizes the performance award activity:
Year Ended December 31,
2020 2019 2018
Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value
Outstanding at beginning of year 1,935,878Ìý $ 15.58Ìý 1,424,723Ìý $ 14.46Ìý 1,848,312Ìý $ 13.42Ìý
Granted 2,510,853Ìý 5.49Ìý 572,104Ìý 18.31Ìý 675,599Ìý 11.93Ìý
Distributed (1,938,786) 12.23Ìý —Ìý —Ìý (489,953) 10.89Ìý
Performance adjustment 549,154Ìý 15.63Ìý —Ìý —Ìý (560,720) 10.69Ìý
Forfeited/canceled (604,873) 5.70Ìý (60,949) 15.12Ìý (48,515) 19.33Ìý
Outstanding at end of year 2,452,226Ìý $ 10.34Ìý 1,935,878Ìý $ 15.58Ìý 1,424,723Ìý $ 14.46Ìý
The 2.5Ìýmillion awards granted in 2020 include 1.0 million long-term performance plan awards and 0.5 million performance shares relating to the AK Steel replacement awards. As of DecemberÌý31, 2020, 0.3Ìýmillion long-term performance plan awards and 0.1Ìýmillion performance shares were outstanding as a result of qualifying termination events that triggered accelerated performance share payouts and prorated long-term performance plan awards payouts at target. The long-term performance plan awards are based on a three-year Adjusted EBITDA metric. The weighted average grant date fair value for the converted performance awards was $4.59 per share.
The outstanding performance shares vest over a period of three years and are intended to be paid out in common shares. Performance is measured on the basis of relative TSR for the period and measured against the constituents of the S&P Metals and Mining ETF Index. The number of shares actually earned at the end of the three-year period will vary, based on performance, from 0% to 200% of the number of performance shares granted.
Restricted Stock Units
The following table summarizes the restricted stock units activity:
Year Ended December 31,
2020 2019 2018
Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value
Outstanding at beginning of year 2,147,183Ìý $ 9.10Ìý 4,694,360Ìý $ 4.18Ìý 4,403,112Ìý $ 3.64Ìý
Granted 1,160,928Ìý 4.87Ìý 572,104Ìý 11.24Ìý 685,599Ìý 7.53Ìý
Distributed (1,101,115) 8.58Ìý (3,058,307) 1.95Ìý (254,196) 3.30Ìý
Forfeited/canceled (63,413) 7.31Ìý (60,974) 9.31Ìý (140,155) 5.17Ìý
Outstanding at end of year 2,143,583Ìý $ 7.12Ìý 2,147,183Ìý $ 9.10Ìý 4,694,360Ìý $ 4.18Ìý
The 1.2Ìýmillion restricted stock units granted in 2020 include 0.2 million restricted stock awards relating to AK Steel replacement awards. The restricted stock awards relating to AK Steel vest ratably on the first, second and third anniversaries of the grant. We valued the restricted stock awards and restricted stock units at $4.87 per share using the closing price of our common shares on March 13, 2020, the grant date.
All of the outstanding restricted stock units are subject to continued employment, are retention based, and are payable in common shares or cash in certain circumstances at a time determined by the Compensation Committee at its discretion. The restricted stock units that were granted in 2020, 2019 and 2018 cliff vest over three years on December 31, 2022, December 31, 2021 and December 31, 2020, respectively.
Stock OptionsÌýÌýÌýÌý
The following table summarizes the stock option activity:
Year Ended December 31,
2020 2019 2018
Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Excercise Price
Outstanding at beginning of year 563,230Ìý $ 10.42Ìý 563,230Ìý $ 10.42Ìý 599,870Ìý $ 10.25Ìý
Granted 2,010,277Ìý 11.86Ìý —Ìý —Ìý —Ìý —Ìý
Exercised (79,973) 7.01Ìý —Ìý —Ìý (36,640) 7.70Ìý
Forfeited/canceled (7,726) 41.04Ìý —Ìý —Ìý —Ìý —Ìý
Outstanding at end of year 2,485,808Ìý $ 11.60Ìý 563,230Ìý $ 10.42Ìý 563,230Ìý $ 10.42Ìý
Exercisable at end of year 2,172,052Ìý $ 11.86Ìý 563,230Ìý $ 10.42Ìý 563,230Ìý $ 10.42Ìý
Stock options granted to date generally vest over a period from one to three years with an expiration date at ten years from the date of grant. On March 13, 2020, we granted 2.0 million options as AK Steel replacement awards. The weighted average fair value of the converted options was $0.51 per share and was calculated using the Black-Scholes option-pricing model. Qualifying termination events resulted in vest date accelerations and reductions to the option expiration date from ten years to three years.
The total intrinsic value of options exercised in 2020 and 2018 were immaterial. For options outstanding at DecemberÌý31, 2020, the weighted-average remaining contractual life was 3.2 years and the aggregate intrinsic value was $11 million. For options exercisable at DecemberÌý31, 2020, the weighted-average remaining contractual life was 2.5 years and the aggregate intrinsic value was $9 million.
Nonemployee Directors
Our nonemployee directors are entitled to receive restricted share awards under the Directors’ Plan. For 2020, 2019 and 2018, nonemployee directors were granted a specified number of restricted shares, with a value equal to $100,000. The number of shares is based on the closing price of our common shares on the date of the Annual Meeting. The restricted share awards issued under the Directors' Plan generally vest 12 months from the grant date. The awards are subject to any deferral election and the terms of the Directors’ Plan and an award agreement.
On March 13, 2020, 0.3 million restricted stock units previously awarded to the members of the AK Steel board of directors were distributed per the terms of the AK Steel Merger Agreement.
For the last three years, grants of restricted and/or deferred shares have been awarded to elected or re-elected nonemployee directors as follows:
Year of Grant Restricted Shares Deferred Shares
2020 253,809Ìý 54,794Ìý
2019 86,477Ìý 23,659Ìý
2018 92,718Ìý 17,170Ìý