Share-Based Compensation |
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| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation | 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 Incentive 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 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 2021 associated with liability awards includes 0.2 million of performance share units held by five employees that are scheduled to vest in 2022 that were reclassified from equity awards to liability awards during 2021 as a result of a modification to settle the awards in cash in lieu of shares. We recognized approximately $18 million in incremental expense as a result of the modification.
The total unrecognized compensation cost at December 31, 2021 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 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. These awards vest based on service conditions (, , or -year service periods) and performance conditions. All performance conditions of the awards have been achieved as of December 31, 2021.
The table below provides a summary of our restricted stock outstanding (in millions, except for per share information):
The fair value of restricted stock share awards vested for the years ended December 31, 2021, 2020 and 2019 were $2 million, $3 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 and certain awards vesting in 2022 that settled in cash in lieu of shares. In addition, in December 2021 the Board authorized the Compensation Committee, in its discretion, to permit certain officers to make an election to cash settle their performance stock units that are earned and vest in 2023 and 2024.
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. Both restricted stock units and performance stock units will be settled in Cheniere common stock (on a one-for-one basis) and are classified as equity awards, however, a portion of the performance stock units granted in 2021 and 2022 will partially settle in cash, subject to individual limits. In addition, in December 2021 the Board authorized the Compensation Committee, in its discretion, to permit certain officers to make an election to cash settle their performance stock units that are earned and vest in 2023 and 2024. The portion of performance stock units expected to settle in Cheniere common stock (on a one-for-one basis) are classified as equity awards and the portion of performance stock units expected to settle in cash are classified as liability awards.
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 0.2 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 1.3 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, 2021, 2020 and 2019. 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, 2021, 2020 and 2019 was $1 million, $4 million and $11 million, respectively.
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