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Annual report pursuant to Section 13 and 15(d)

STOCK COMPENSATION PLANS

v3.22.4
STOCK COMPENSATION PLANS
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] Ìý
STOCK COMPENSATION PLANS
NOTE 10 - STOCK COMPENSATION PLANS
At DecemberÌý31, 2022, we had outstanding awards under three share-based compensation plans: the 2021 Equity Plan, the A&R 2015 Equity Plan and the 2012 Amended Equity Plan. On April 28, 2021, our shareholders approved the 2021 Equity Plan, which succeeded the A&R 2015 Equity Plan and made available 26.0 million new common shares plus 2.5 million shares remaining available under the A&R 2015 Equity Plan. As of DecemberÌý31, 2022, there were 25.0 million remaining shares available for grant under the 2021 Equity Plan. No additional grants were issued from the 2012 Amended Equity Plan or the A&R 2015 Equity Plan after the date of approval of the 2021 Equity Plan; however, all awards previously granted under the predecessor plans 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:
Year Ended December 31,
(In millions, except per share amounts) 2022 2021 2020
Cost of goods sold $ (5) $ (2) $ (2)
Selling, general and administrative expenses (23) (16) (13)
Acquisition-related costs —Ìý —Ìý (2)
Stock based compensation expense (28) (18) (17)
Income tax benefit 7Ìý 4Ìý 4Ìý
Stock based compensation expense, net of tax $ (21) $ (14) $ (13)
Decrease in basic earnings per common share $ (0.04) $ (0.03) $ (0.03)
Decrease in diluted earnings per common share $ (0.04) $ (0.03) $ (0.03)
The total compensation cost related to outstanding awards not yet recognized is $40Ìýmillion at DecemberÌý31, 2022. This expense is expected to be recognized over the remaining weighted-average period of 1.8 years.
PERFORMANCE SHARES
The following table summarizes the performance award activity:
2022 2021 2020
(Shares in millions) 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 2.4Ìý $ 14.04Ìý 2.5Ìý $ 10.34Ìý 1.9Ìý $ 15.58Ìý
Granted 1.0Ìý 28.46Ìý 0.7Ìý 25.12Ìý 1.0Ìý 6.93Ìý
Granted - replacement awards —Ìý —Ìý —Ìý —Ìý 1.6Ìý 4.59Ìý
Distributed (1.1) 17.04Ìý (1.3) 11.74Ìý (1.9) 12.23Ìý
Performance adjustment 0.5Ìý 17.84Ìý 0.6Ìý 11.93Ìý 0.5Ìý 15.63Ìý
Forfeited/canceled (0.1) 23.74Ìý (0.1) 11.27Ìý (0.6) 5.70Ìý
Outstanding at end of year 2.7Ìý $ 18.53Ìý 2.4Ìý $ 14.04Ìý 2.5Ìý $ 10.34Ìý
On March 13, 2020, we granted 1.0 million long-term performance plan awards and 0.5 million performance shares as AK Steel replacement awards. The long-term performance plan awards are based on a three-year Adjusted EBITDA metric.
We value our performance shares using a Monte Carlo simulation on the grant date. 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:
2022 2021 2020
(Shares in millions) 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 2.1Ìý $ 10.31Ìý 2.1Ìý $ 7.12Ìý 2.1Ìý $ 9.10Ìý
Granted 1.0Ìý 19.41Ìý 0.7Ìý 17.45Ìý 1.0Ìý 4.87Ìý
Granted - replacement awards —Ìý —Ìý —Ìý —Ìý 0.2Ìý 4.87Ìý
Distributed (0.6) 10.47Ìý (0.6) 7.31Ìý (1.1) 8.58Ìý
Forfeited/canceled (0.1) 17.82Ìý (0.1) 9.50Ìý (0.1) 7.31Ìý
Outstanding at end of year 2.4Ìý $ 13.66Ìý 2.1Ìý $ 10.31Ìý 2.1Ìý $ 7.12Ìý
We value our restricted stock units using the closing price of our common shares on 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. Most restricted stock units were granted under three-year cliff vesting terms.
STOCK OPTIONS
The following table summarizes the stock option activity:
2022 2021 2020
(Shares in millions) Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price
Outstanding at beginning of year 1.0Ìý $ 12.75Ìý 2.5Ìý $ 11.60Ìý 0.6Ìý $ 10.42Ìý
Granted - replacement awards —Ìý —Ìý —Ìý —Ìý 2.0Ìý 11.86Ìý
Exercised (0.3) 16.55Ìý (1.5) 10.36Ìý (0.1) 7.01Ìý
Forfeited/canceled (0.1) 22.78Ìý —Ìý 36.48Ìý —Ìý 41.04Ìý
Outstanding at end of year 0.6Ìý $ 10.39Ìý 1.0Ìý $ 12.75Ìý 2.5Ìý $ 11.60Ìý
Exercisable at end of year 0.6Ìý $ 10.52Ìý 0.9Ìý $ 13.35Ìý 2.2Ìý $ 11.86Ìý
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.
The total intrinsic value of options exercised in 2022 was $3 million and the amount in 2021 was $13 million. For options outstanding at DecemberÌý31, 2022, the weighted-average remaining contractual life was 2.6 years and the aggregate intrinsic value was $4 million. For options exercisable at DecemberÌý31, 2022, the weighted-average remaining contractual life was 2.4 years and the aggregate intrinsic value was $4 million.
NONEMPLOYEE DIRECTORS
Our nonemployee directors are entitled to receive restricted share awards under the Directors’ Plan. For 2022, 2021 and 2020, nonemployee directors were granted a specified number of restricted shares, with a value equal to $140,000, $120,000 and $100,000, respectively. 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.