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Annual report pursuant to Section 13 and 15(d)

STOCK COMPENSATION PLANS

v3.24.0.1
STOCK COMPENSATION PLANS
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] Ìý
Stock Compensation Plans
NOTE 10 - STOCK COMPENSATION PLANS
At DecemberÌý31, 2023, 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. As of DecemberÌý31, 2023, there were 23.0 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.
Upon vesting of share-based compensation awards, we issue shares from treasury shares before issuing new shares. Forfeitures are recognized when they occur.
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) 2023 2022 2021
Cost of goods sold $ (9) $ (5) $ (2)
Selling, general and administrative expenses (32) (23) (16)
Stock based compensation expense (41) (28) (18)
Income tax benefit 10Ìý 7Ìý 4Ìý
Stock based compensation expense, net of tax $ (31) $ (21) $ (14)
Decrease in basic earnings per common share $ (0.06) $ (0.04) $ (0.03)
Decrease in diluted earnings per common share $ (0.06) $ (0.04) $ (0.03)
The total compensation cost related to outstanding awards not yet recognized is $53Ìýmillion at DecemberÌý31, 2023. This expense is expected to be recognized over the remaining weighted-average period of 1.7 years.
PERFORMANCE SHARES
The following table summarizes the performance award activity:
2023 2022 2021
(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 2.7Ìý $ 18.53Ìý 2.4Ìý $ 14.04Ìý 2.5Ìý $ 10.34Ìý
Granted 1.1Ìý 31.88Ìý 1.0Ìý 28.46Ìý 0.7Ìý 25.12Ìý
Distributed (1.8) 6.50Ìý (1.1) 17.04Ìý (1.3) 11.74Ìý
Performance adjustment 0.7Ìý 6.43Ìý 0.5Ìý 17.84Ìý 0.6Ìý 11.93Ìý
Forfeited/canceled (0.2) 28.65Ìý (0.1) 23.74Ìý (0.1) 11.27Ìý
Outstanding at end of year 2.5Ìý $ 29.09Ìý 2.7Ìý $ 18.53Ìý 2.4Ìý $ 14.04Ìý
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.
We value our performance shares using a Monte Carlo simulation on the grant date. A correlation matrix of historical and projected stock prices was developed for both the Company and its predetermined peer group of metals and mining companies. The fair value assumes that the performance objective will be achieved. The expected term of the grant represents the time from the grant date to the end of the service period. We estimate the volatility of our common shares and that of the peer group of metals and mining companies using daily price intervals for all companies. The risk-free interest rate is the rate at the grant date on zero-coupon government bonds, with a term commensurate with the remaining performance period.
RESTRICTED STOCK UNITS
The following table summarizes the restricted stock units activity:
2023 2022 2021
(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 $ 13.66Ìý 2.1Ìý $ 10.31Ìý 2.1Ìý $ 7.12Ìý
Granted 1.2Ìý 19.30Ìý 1.0Ìý 19.41Ìý 0.7Ìý 17.45Ìý
Distributed (0.9) 5.99Ìý (0.6) 10.47Ìý (0.6) 7.31Ìý
Forfeited/canceled (0.2) 19.84Ìý (0.1) 17.82Ìý (0.1) 9.50Ìý
Outstanding at end of year 2.5Ìý $ 18.87Ìý 2.4Ìý $ 13.66Ìý 2.1Ìý $ 10.31Ìý
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:
2023 2022 2021
(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 0.6Ìý $ 10.39Ìý 1.0Ìý $ 12.75Ìý 2.5Ìý $ 11.60Ìý
Exercised (0.1) 10.22Ìý (0.3) 16.55Ìý (1.5) 10.36Ìý
Forfeited/canceled —Ìý 21.05Ìý (0.1) 22.78Ìý —Ìý 36.48Ìý
Outstanding at end of year 0.5Ìý $ 9.59Ìý 0.6Ìý $ 10.39Ìý 1.0Ìý $ 12.75Ìý
Exercisable at end of year 0.5Ìý $ 9.59Ìý 0.6Ìý $ 10.52Ìý 0.9Ìý $ 13.35Ìý
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. The total intrinsic value of options exercised in 2023 was $1 million and the amount in 2022 was $3 million. As of DecemberÌý31, 2023, all outstanding options were exercisable. For options outstanding at DecemberÌý31, 2023, the weighted-average remaining contractual life was 2.1 years and the aggregate intrinsic value was $5 million.
The fair value of stock options is estimated on the date of grant using a Black-Scholes model using the grant date price of our common shares, the option exercise price, the option’s expected term, the volatility of our common shares, the risk-free interest rate and the dividend yield over the option’s expected term.
NONEMPLOYEE DIRECTORS
Our nonemployee directors are entitled to receive restricted share awards under the Directors’ Plan. For 2023, 2022 and 2021, nonemployee directors were granted a specified number of restricted shares, with a value equal to $140,000, $140,000 and $120,000, 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.