Share-Based Compensation |
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| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation |
NOTE 16—SHARE-BASED COMPENSATION
We have granted restricted stock shares, restricted stock units, performance stock units and phantom units to employees and non-employee directors under the 2011 Incentive Plan, as amended (the “2011 Plan”) and the 2020 Incentive Plan (the “2020 Plan”). The 2011 Plan and the 2020 Plan provide for the issuance of 35.0 million shares and 8.0 million shares, respectively, of our common stock that may be in the form of various share-based performance awards deemed by the Compensation Committee of our Board (the “Compensation Committee”).
We recognize share-based compensation based upon the estimated fair value of awards. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period.
For equity-classified share-based compensation awards (which include restricted stock shares, restricted stock units and performance stock units granted to employees and non-employee directors), compensation cost is recognized based on the grant-date fair value and not subsequently remeasured unless modified. The fair value is recognized as expense (net of any capitalization) using the straight-line basis for awards that vest based solely on service conditions and using the accelerated recognition method for awards that vest based on performance conditions. For awards with both time and performance-based conditions, we recognize compensation cost based on the probable outcome of the performance condition at each reporting period. For liability-classified share-based compensation awards that cash settle (which include phantom units, certain restricted stock that will settle in cash and a portion of performance stock units), compensation costs are remeasured at fair value through settlement or maturity.
We account for forfeitures as they occur.
Total share-based compensation consisted of the following (in millions):
(1) The amount of share-based compensation recognized in 2022 and 2021 associated with liability awards includes incremental expense as a result of modifications made for certain employees to settle certain awards in cash in lieu of shares, resulting in a reclassification from equity awards to liability awards. During the years ended December 31, 2022 and 2021, we recognized $56 million and $18 million, respectively, in incremental expense as a result of the modifications.
The total unrecognized compensation cost at December 31, 2022 relating to non-vested share-based compensation arrangements consisted of the following:
Restricted Stock Share Awards
Restricted stock share awards are awards of common stock that are granted to the members of our Board of Directors for their service, subject to restrictions on transfer and to a risk of forfeiture if the recipient is unaffiliated with us prior to the lapse of the restrictions. These awards vest over a -year service period. There were nominal non-vested restricted stock share awards outstanding as of December 31, 2022.
The fair value of restricted stock share awards vested for the years ended December 31, 2022, 2021 and 2020 were $2 million, $2 million and $3 million, respectively.
Restricted Stock Unit and Performance Stock Unit Awards
Restricted stock units are stock awards that vest over a service period of three years and entitle the holder to receive shares of our common stock upon vesting, subject to restrictions on transfer and to a risk of forfeiture if the recipient terminates employment with us prior to the lapse of the restrictions. Performance stock units provide for cliff vesting after a period of three years with payouts based on metrics dependent upon market and performance achieved over the defined performance period compared to pre-established performance targets. The settlement amounts of the awards are based on a performance condition consisting of cumulative distributable cash flow per share, and in certain circumstances, a market condition consisting of absolute total shareholder return (“ATSR”) of our common stock. All performance stock units will settle entirely in stock, with the exception of awards granted in 2021 and 2022 to certain officers which will settle in cash up to a cap of $3 million. Additionally, certain restricted stock unit and performance stock unit awards vesting in 2023 may be settled in cash in lieu of shares, for which the officers elected such settlement at the Compensation Committee’s permission. The Compensation Committee, in its discretion, also has authorization from the Board to permit certain officers to make an election to cash settle their earned performance stock units that vest in 2024 and restricted stock units that vest in 2024 and 2025.
Where applicable, the compensation for performance stock units containing a market condition of ATSR is based on a fair value assigned to the market metric using a Monte Carlo model as of the grant date, which utilizes level 3 inputs such as projected stock volatility and projected risk free rates, and remains constant through the vesting period for the equity-settled component and is remeasured each reporting period for the cash-settled component. Compensation cost attributed to the performance metric will vary due to changing estimates regarding the expected achievement of the performance metric of
cumulative distributable cash flow per share. The number of shares that may be earned at the end of the vesting period ranges from 0% up to 300% of the target award amount. The restricted stock units, and portion of performance stock units, that will be settled in Cheniere common stock (on a one-for-one basis) are accounted for as equity awards and the remainder that will settle in cash are accounted for as liability awards.
The fair value of awards, or portion of awards, that are accounted for as liability awards was $98 million and $40 million as of December 31, 2022 and 2021, respectively, and recognized within our Consolidated Balance Sheets as accrued liabilities and other non-current liabilities.
The table below provides a summary of our restricted share unit and performance stock unit awards outstanding assuming payout at target for awards containing performance conditions (in millions, except for per unit information):
(1)This number includes 0.4 million incremental shares of our common stock that were issued based on performance results from previously-granted performance stock unit awards.
(2)This number excludes 0.8 million performance stock units, which represent the incremental number of common units that would be issued if the maximum level of performance under the target awards amount is achieved.
The table below provides a summary of restricted share unit and performance stock unit awards issued and fair value of units vested:
Phantom Units Awards
Phantom units are share-based awards granted to employees over a vesting period that entitle the grantee to receive the cash equivalent to the value of a share of our common stock upon each vesting. Phantom units are not eligible to receive quarterly distributions. These awards vest based on service conditions (, or -year service periods). We did not issue any phantom units to our employees and non-employee directors during the years ended December 31, 2022, 2021 and 2020. The remaining outstanding phantom units vested during the year ended December 31, 2021. The value of phantom units vested during the years ended December 31, 2022, 2021 and 2020 was zero, $1 million and $4 million, respectively.
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