Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION PLANS

v3.19.3
STOCK-BASED COMPENSATION PLANS
9 Months Ended
Sep. 30, 2019
STOCK-BASED COMPENSATION PLANS  
STOCK-BASED COMPENSATION PLANS

17. STOCK-BASED COMPENSATION PLANS

On May 5, 2016, our stockholders approved a new Huntsman Corporation 2016 Stock Incentive Plan (the “2016 Stock Incentive Plan”), which reserved 8.2 million shares for issuance. The Huntsman Corporation Stock Incentive Plan, as amended and restated (the “Prior Plan”), remains in effect for outstanding awards granted pursuant to the Prior Plan, but no further awards may be granted under the Prior Plan. Under the 2016 Stock Incentive Plan we may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, phantom stock, performance share units and other stock-based awards to our employees, directors and consultants and to employees and

consultants of our subsidiaries, provided that incentive stock options may be granted solely to employees. The terms of the grants under both the 2016 Stock Incentive Plan and the Prior Plan are fixed at the grant date. Initially, there were approximately 8.2 million shares available for issuance under the 2016 Stock Incentive Plan. However, the number of shares available for issuance may be adjusted to include any shares surrendered, exchanged, forfeited or settled in cash pursuant to the Prior Plan. As of September 30, 2019, we had approximately 8 million shares remaining under the 2016 Stock Incentive Plan available for grant. Option awards have a maximum contractual term of 10 years and generally must have an exercise price at least equal to the market price of our common stock on the date the option award is granted. Outstanding stock-based awards generally vest annually over a three-year period.

The compensation cost from continuing operations under the 2016 Stock Incentive Plan and the Prior Plan for our Company and Huntsman International were as follows (dollars in millions):

Three months

Nine months

ended

ended

September 30,

September 30,

    

2019

2018

2019

2018

Huntsman Corporation compensation cost

    

$

7

$

7

$

22

$

22

Huntsman International compensation cost

7

7

21

21

The total income tax benefit recognized in the condensed consolidated statements of operations for us and Huntsman International for stock-based compensation arrangements was $7 million and $17 million for the nine months ended September 30, 2019 and 2018, respectively.

Stock Options

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of our common stock through the grant date. The expected term of options granted was estimated based on the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions noted below represent the weighted average of the assumptions utilized for stock options granted during the periods.

Three months

Nine months

ended

ended

September 30,

September 30,

2019

2018

2019

2018

Dividend yield

NA

2.0

%

2.9

%

1.5

%

Expected volatility

NA

54.5

%

54.0

%

55.2

%

Risk-free interest rate

NA

2.8

%

2.5

%

2.6

%

Expected life of stock options granted during the period

NA

5.9

years

5.9

years

5.9

years

During the three months ended September 30, 2019, no stock options were granted.

A summary of stock option activity under the 2016 Stock Incentive Plan and the Prior Plan as of September 30, 2019 and changes during the nine months then ended is presented below:

Weighted

Weighted

Average

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

Option Awards

    

Shares

    

Price

    

Term

    

Value

(in thousands)

(years)

(in millions)

Outstanding at January 1, 2019

    

4,545

$

17.81

Granted

896

22.66

Exercised

(214)

10.32

Forfeited

(47)

25.24

Outstanding at September 30, 2019

5,180

18.89

6.4

$

27

Exercisable at September 30, 2019

3,750

16.72

5.5

26

The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2019 was $9.27 per option. As of September 30, 2019, there was $10 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the 2016 Stock Incentive Plan and the Prior Plan. That cost is expected to be recognized over a weighted-average period of approximately 2.0 years.

The total intrinsic value of stock options exercised during the nine months ended September 30, 2019 and 2018 was approximately $2 million and $77 million, respectively. Cash received from stock options exercised during the nine months ended September 30, 2019 and 2018 was approximately $1 million and $17 million, respectively. The cash tax benefit from stock options exercised during the nine months ended September 30, 2019 and 2018 was approximately nil and $17 million, respectively.

Nonvested Shares

Nonvested shares granted under the 2016 Stock Incentive Plan and the Prior Plan consist of restricted stock and performance share unit awards, which are accounted for as equity awards, and phantom stock, which is accounted for as a liability award because it can be settled in either stock or cash.

The fair value of each performance share unit award is estimated using a Monte Carlo simulation model that uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the nine months ended September 30, 2019 and 2018, the weighted-average expected volatility rate was 34.6% and 44.3%, respectively, and the weighted average risk-free interest rate was 2.5% and 2.3%, respectively. For the performance share unit awards granted in the nine months ended September 30, 2019 and 2018, the number of shares earned varies based upon the Company achieving certain performance criteria over a three-year performance period. The performance criteria are total stockholder return of our common stock relative to the total stockholder return of a specified industry peer group for the three-year performance periods.

A summary of the status of our nonvested shares as of September 30, 2019 and changes during the nine months then ended is presented below:

Equity Awards

Liability Awards

Weighted

Weighted

Average

Average

Grant-Date

Grant-Date

    

Shares

    

Fair Value

    

Shares

    

Fair Value

(in thousands)

(in thousands)

Nonvested at January 1, 2019

1,923

$

19.08

504

$

20.66

Granted

708

24.60

256

22.64

Vested

(968)

(1)(2)

13.61

(313)

16.32

Forfeited

(16)

26.15

(16)

25.17

Nonvested at September 30, 2019

1,647

24.60

431

24.81

(1) As of September 30, 2019, a total of 389,095 restricted stock units were vested but not yet issued, of which 30,486 vested during the nine months ended September 30, 2019. These shares have not been reflected as vested shares in
this table because, in accordance with the restricted stock unit agreements, shares of common stock are not issued for vested restricted stock units until termination of employment.

(2) A total of 412,246 performance share unit awards are reflected in the vested shares in this table, which represents the target number of performance share unit awards for this grant and were included in the balance at December 31, 2018. During the nine months ended September 30, 2019, an additional 357,006 performance share unit awards with a grant date fair value of $10.22 vested above the target in accordance the performance criteria of these awards.

As of September 30, 2019, there was $26 million of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the 2016 Stock Incentive Plan and the Prior Plan. That cost is expected to be recognized over a weighted-average period of approximately 1.9 years. The value of share awards that vested during the nine months ended September 30, 2019 and 2018 was $24 million each.