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 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 as determined by the Compensation Committee of our Board (the “Compensation Committee”).
We initially recognize share-based compensation based upon the estimated fair value of awards.
For equity-classified share-based compensation awards, compensation cost is recognized based on the grant-date fair value and not subsequently remeasured unless modified. For liability-classified share-based compensation awards that cash settle or include an election to be cash settled, compensation costs are remeasured at fair value through settlement or maturity.
Except for awards that contain market conditions, the grant-date fair value is estimated based on our stock price on the grant date. The grant-date fair value of awards containing market conditions is estimated using a fair value model as further described herein.
For awards that contain graded vesting periods, the fair value is recognized as expense (net of any capitalization in accordance with GAAP) using the straight-line basis, generally over the term of the entire award, except when modifications may require an accelerated method. For awards that contain cliff vesting periods, the fair value is recognized as expense (net of any capitalization in accordance with GAAP) using the straight-line basis over the requisite service period.
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.
The recognition period for share-based compensation costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period.
We account for forfeitures as they occur.
Total share-based compensation consisted of the following (in millions):
The total unrecognized compensation cost at December 31, 2023 relating to non-vested share-based compensation arrangements consisted of the following:
Equity-Classified Awards
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, 2023.
The fair value of restricted stock share awards vested for the year ended December 31, 2023 was $1 million.
Restricted Stock Units
Restricted stock units are stock awards that contain a graded vesting period of up to three years and, with the exception of awards to certain officers which contain a cash settlement option, as described in Liability-Classified Awards below, will settle in 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.
The table below provides a summary of activity related to our equity-classified restricted stock units (in millions, except for per unit information):
(1)See further details in Liability-Classified Awards below.
(2)The total fair value of shares vested was $183 million for the year ended December 31, 2023.
Performance Stock Units
Performance stock units provide for cliff vesting after a period of three years with payouts dependent upon the achievement of metrics compared to pre-established performance targets over the defined performance period, including 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 in stock, with the exception of awards to certain officers which contain cash settlement features, either as granted or modified, as described in Liability-Classified Awards below.
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.
Compensation cost attributed to the performance metric will vary due to changing estimates of units to be earned, based on expected achievement of the performance metric. The number of units that may be earned at the end of the vesting period ranges from 0% up to 300% of the target award amount.
For performance stock units containing a cash-settlement feature, the compensation cost of the cash settled component is remeasured at each reporting period, as discussed in Liability-Classified Awards below.
The table below provides the assumptions used in estimating the fair value of unvested awards containing market conditions as of the end of the respective periods, and for which the performance period had not yet ended:
(1)The performance stock units are entitled to dividend equivalents during the performance period. Therefore, when calculating simulated returns, we applied an annual dividend yield of zero percent.
(2)Represents the range associated with individual vesting years.
The table below provides a summary of activity related to our equity-classified performance stock units (in millions, except for per unit information):
(1)Includes 0.1 million performance stock units granted in 2023 to certain officers containing a cash settlement cap of $3 million.
(2)Represents incremental units recognized as a result of final performance measures or estimated measures.
(3)See further details in Liability-Classified Awards below.
(4)The total fair value of shares vested was $36 million for the year ended December 31, 2023.
Liability-Classified Awards
Restricted stock units and performance stock units granted to certain officers may be settled in cash in lieu of shares, following approval by the Compensation Committee, in order to limit dilution from equity grants consistent with our share repurchase program under our long-term capital allocation plan, provided that we have sufficient liquidity to do so and the officers maintain certain stock ownership requirements. The Compensation Committee also has authorization from the Board to permit certain officers to make an election to cash settle their earned performance stock units that are expected to vest in 2025 and restricted stock units that are expected to vest in 2025 and 2026. Notwithstanding those awards which contain a cash settlement option, performance stock units granted to certain officers contain a cash settlement cap of $3 million.
A total of 0.5 million units were reclassified from equity to liability during the year ended December 31, 2023, as a result of modifications made for certain employees to settle certain awards in cash in lieu of shares. Under GAAP, the modifications are treated as an exchange of the original award for a new award. During the years ended December 31, 2023, 2022 and 2021, we recognized $86 million, $56 million and $18 million, respectively, in incremental expense as a result of the modifications, attributed to six, six, and five employees impacted, respectively.
During the year ended December 31, 2023, we paid $84 million to settle a total of 0.5 million liability-classified awards, which approximated the fair value of the awards on the settlement date and was inclusive of payout for an incremental 0.3 million of performance stock units based on final performance measures achieved.
As described above, liability-classified share-based compensation awards are remeasured at fair value through settlement or maturity. The fair value of non-vested liability-classified awards was $165 million and $98 million as of December 31, 2023 and 2022, respectively, and consisted of 0.2 million of unvested restricted stock units and 0.6 million of unvested performance stock units as of December 31, 2023 and 0.2 million of unvested restricted stock units and 0.1 million of unvested performance stock units as of December 31, 2022.
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