Share-Based Compensation | 16. Share-Based Compensation Equity Classified Awards The SunCoke Energy, Inc. Long-Term Performance Enhancement Plan (“SunCoke LTPEP”) provides for the grant of equity-based awards including stock options and share units, or restricted stock, to the Company’s directors, officers, and other employees, advisors, and consultants who are selected by the plan committee for participation in the SunCoke LTPEP. All awards vest immediately upon a change in control and a qualifying termination of employment as defined by the SunCoke LTPEP. The plan authorizes the issuance of (i) 1,600,000 shares of SunCoke Energy common stock issuable upon the adjustment of Sunoco, Inc. equity awards in connection with the Separation and Distribution Agreement between Sunoco, Inc. and SunCoke and (ii) up to 7,500,000 shares, which reflects the 6,000,000 shares initially authorized under the Plan and an additional 1,500,000 shares to be issued under the Plan pursuant to an amendment effective February 14, 2018, of SunCoke Energy, Inc. common stock pursuant to new awards under the SunCoke LTPEP. The Company measures the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award. The performance metrics of equity awards are remeasured on a quarterly basis for updates to the probability of achievement. The market metrics of equity awards are not remeasured. The total cost is recognized over the requisite service period. Award forfeitures are accounted for as they occur. Stock Options There were no stock options granted by the Company during 2020. The Company granted the following stock options during the years ended December 31, 2019 and 2018, with an exercise price equal to the closing price of our common stock on the date of grant: Weighted Average Per Share Number of Shares Exercise Price Weighted Average Grant Date Fair Value Traditional stock options: 2019 grant 267,897 $ 9.87 $ 4.09 2018 grant 78,447 $ 10.49 $ 5.38 The stock options vest in three equal annual installments beginning one year from the date of grant. The stock options expire ten years from the date of grant. The Company calculates the value of each employee stock option, estimated on the date of grant, using the Black-Scholes option pricing model with a Monte Carlo simulation for the performance based options. The weighted-average fair value of employee stock options granted during the years ended December 31, 2019 and 2018 was based on using the following weighted-average assumptions: 2019 2018 Risk free interest rate 2 % 3 % Expected term 6 years 6 years Volatility 53 % 52 % Dividend yield 2 % — % The risk-free interest rate assumption is based on the U.S. Treasury yield curve at the date of grant for periods which approximate the expected life of the option. The expected term of the employee options represent the average contractual term adjusted by the average vesting period of each option tranche. We based our expected volatility on our historical volatility over our entire available trading history. The dividend yield assumption is based on the Company’s expectation of dividend payouts at the time of grant. The following table summarizes information with respect to common stock option awards outstanding as of December 31, 2020 and stock option activity during the fiscal year then ended: Number of Weighted Weighted Average Remaining Contractual Term (years) Aggregate Outstanding at December 31, 2019 3,136,831 $ 15.02 4.3 $ 0.3 Exercised (2,825) $ 3.80 Forfeited (33,146) $ 12.25 Outstanding at December 31, 2020 3,100,860 $ 15.02 3.2 $ 0.1 Exercisable at December 31, 2020 2,733,205 $ 15.69 2.4 $ 0.1 Expected to vest at December 31, 2020 367,655 $ 10.01 7.8 $ — Intrinsic value for stock options is defined as the difference between the current market value of our common stock and the exercise price of the stock options. Total intrinsic value of stock options exercised in 2020 was immaterial and was $0.8 million on options exercised during 2018. There were no stock options exercised during 2019. Restricted Stock Units The Company granted the following restricted stock units ("RSUs") during the years ended December 31, 2020, 2019 and 2018: Number of RSUs Weighted Average Grant-Date Fair Value per Unit Grant Date Fair Value (Dollars in millions) 2020 grants 304,332 $ 6.04 $ 1.8 2019 grants 136,425 $ 9.87 $ 1.3 2018 grants 32,128 $ 10.49 $ 0.3 The RSUs vest in three annual installments beginning one year from the date of grant. The following table summarizes information with respect to RSUs outstanding as of December 31, 2020 and RSU activity during the fiscal year then ended: Number of Weighted Nonvested at December 31, 2019 165,384 $ 9.95 Granted 304,332 $ 6.04 Vested (63,729) $ 9.97 Forfeited — $ — Nonvested at December 31, 2020 405,987 $ 7.02 Total grant date fair value of RSUs vested was $0.6 million, $0.2 million and $1.2 million during 2020, 2019 and 2018, respectively. Performance Share Units The Company grants performance share units ("PSUs"), which represent the right to receive shares of the Company's common stock, contingent upon the attainment of Company performance and market goals and continued employment. The Company granted the following PSUs during the years ended December 31, 2020, 2019 and 2018: Number of PSUs Fair Value per Unit Grant Date Fair Value (Dollars in millions) 2020 grant (1) 228,248 $ 6.70 $ 1.5 2019 grant (1) 227,378 $ 10.79 $ 2.5 2018 grant (1) 96,389 $ 11.36 $ 1.1 (1) The service period for the 2020, 2019, and 2018 PSUs ends on December 31, 2022, 2021 and 2020, and the awards will vest during the first quarter of 2023, 2022 and 2021, respectively. The PSU grants were split 50/50 between the Company's three three three The following table summarizes information with respect to unearned PSUs outstanding as of December 31, 2020 and PSU activity during the fiscal year then ended: Number of Weighted Nonvested at December 31, 2019 575,363 $ 11.20 Granted 228,248 $ 6.70 Vested (92,992) $ 11.40 Forfeited (25,316) $ 11.40 Nonvested at December 31, 2020 685,303 $ 9.76 Liability Classified Awards Restricted Stock Units Settled in Cash During the years ended December 31, 2020, 2019 and 2018, the Company issued 263,998, 147,851 and 98,364 restricted stock units to be settled in cash ("Cash RSUs"), respectively, which vest in three annual installments beginning one year from the grant date. The weighted average grant date fair value of the Cash RSUs granted during the years ended December 31, 2020, 2019 and 2018, was $6.04, $9.66 and $10.71, respectively, and was based on the closing price of our common stock on the day of grant. The Cash RSU liability at December 31, 2020 was adjusted based on the closing price of our common stock on December 31, 2020 of $4.35 per share. The Cash RSU liability at December 31, 2020 was not material. Cash Incentive Award The Company also granted share-based compensation to eligible participants under the SunCoke Energy, Inc. Long-Term Cash Incentive Plan ("SunCoke LTCIP"), which became effective January 1, 2016. The SunCoke LTCIP is designed to provide for performance-based, cash-settled awards. All awards vest immediately upon a change in control and a qualifying termination of employment as defined by the SunCoke LTCIP. The Company issued a grant date fair value award of $2.0 million, $0.6 million and $1.0 million during the years ended December 31, 2020, 2019 and 2018, respectively, for which the service periods end on December 31, 2023, 2022 and 2021, respectively, and the awards will vests during the first quarter of 2024, 2023 and 2022, respectively. The 2019 and 2018 awards are split 50/50 between the Company's three-year cumulative Adjusted EBITDA performance and the Company's three The cash incentive award liability at December 31, 2020 was adjusted based on the Company's current performance related to the above awards. The cash incentive award liability at December 31, 2020 was not material. Summary of Share-Based Compensation Expense Below is a summary of the compensation expense, unrecognized compensation costs, the period for which the unrecognized compensation cost is expected to be recognized over and the estimated forfeiture rate for each award: Years Ended December 31, 2020 2019 2018 2020 2019 2018 December 31, 2020 Compensation Expense (1) Net of tax Unrecognized Compensation Cost Recognition Period (Dollars in millions) (Dollars in millions) (Years) Equity Awards: Stock Options $ 0.3 $ 1.1 $ 0.5 $ 0.3 $ 0.9 $ 0.4 $ 0.1 1.1 RSUs 1.9 1.0 0.4 1.5 0.9 0.3 $ 0.5 1.9 PSUs 1.5 2.2 1.9 1.2 1.8 1.7 $ 1.5 1.5 Total equity awards $ 3.7 $ 4.3 $ 2.8 $ 3.0 $ 3.6 $ 2.4 Liability Awards: Cash RSUs $ 0.8 $ 0.9 $ 0.8 $ 0.6 $ 0.7 $ 0.6 $ 0.6 1.9 Cash incentive award 0.6 0.4 0.9 0.4 0.3 0.7 $ 1.2 1.9 Total liability awards $ 1.4 $ 1.3 $ 1.7 $ 1.0 $ 1.0 $ 1.3 (1) Compensation expense is recognized by the Company in selling, general and administrative expenses on the Consolidated Statements of Operations. |