Share-based Payments

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

SHARE-BASED PAYMENTS

The Mosaic Company 2014 Stock and Incentive Plan (the “2014 Stock and Incentive Plan”) was approved by our shareholders and became effective on May 15, 2014. It permits up to 25 million shares of common stock to be issued under share-based awards granted under the plan. The 2014 Stock and Incentive Plan provides for grants of stock options, restricted stock, restricted stock units, performance units and a variety of other share-based and non-share-based awards. Our employees, officers, directors, consultants, agents, advisors and independent contractors, as well as other designated individuals, are eligible to participate in the 2014 Stock and Incentive Plan.

The Mosaic Company 2004 Omnibus Stock and Incentive Plan (the “Omnibus Plan”), which was approved by our shareholders and became effective in 2004 and subsequently amended, provided for the grant of shares and share options to employees for up to 25 million shares of common stock. While awards may no longer be made under the Omnibus Plan, it will remain in effect with respect to the awards that had been granted thereunder prior to its termination.

Mosaic settles stock option exercises, restricted stock units and certain performance units and performance shares with newly issued common shares. The Compensation Committee of the Board of Directors administers the 2014 Stock and Incentive Plan and the Omnibus Plan subject to their respective provisions and applicable law.

Stock Options

Stock options are granted with an exercise price equal to the market price of our stock at the date of grant and have a ten-year contractual term. The fair value of each option award is estimated on the date of the grant using the Black-Scholes option valuation model. Stock options vest in equal annual installments in the first three years following the date of grant (graded vesting). Stock options are expensed on a straight-line basis over the required service period, based on the estimated fair value of the award on the date of grant, net of estimated forfeitures.

Valuation Assumptions

Assumptions used to calculate the fair value of stock options awarded in 2017 are noted in the following table. There were no stock options granted or issued in 2020, 2019, or 2018. Expected volatility is based on the simple average of implied and historical volatility using the daily closing prices of the Company’s stock for a period equal to the expected term of the option. The risk-free interest rate is based on the U.S. Treasury rate at the time of the grant for instruments of comparable life.


	Year Ended December 31, 2017
Weighted average assumptions used in option valuations:
Expected volatility	35.35	%
Expected dividend yield	1.97	%
Expected term (in years)	7
Risk-free interest rate	2.34	%

A summary of the status of our stock options as of December 31, 2020, and activity during 2020, is as follows:


	Shares (in millions)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2019	2.2	$	44.69
Granted	—	—
Cancelled	(0.4)	$	48.46
Outstanding as of December 31, 2020	1.8	$	43.89	2.9	$	—
Exercisable as of December 31, 2020	1.8	$	43.89	2.9	$	—

The weighted-average grant date fair value of options granted during 2017 were $9.91. There were no options exercised during 2020, 2019 or 2018.

Restricted Stock Units

Restricted stock units are issued to various employees, officers and directors at a price equal to the market price of our stock at the date of grant. The fair value of restricted stock units is equal to the market price of our stock at the date of grant. Restricted stock units generally cliff vest after three years of continuous service and are expensed on a straight-line basis over the required service period, based on the estimated grant date fair value, net of estimated forfeitures.

A summary of the status of our restricted stock units as of December 31, 2020, and activity during 2020, is as follows:


	Shares (in millions)	Weighted Average Grant Date Fair Value Per Share
Restricted stock units as of December 31, 2019	1.8	$	27.27
Granted	1.2	15.56
Issued and cancelled	(0.5)	$	27.27
Restricted stock units as of December 31, 2020	2.5	$	21.48

Performance Units

During the years ended December 31, 2020, 2019 and 2018, 1,309,170, 603,856 and 401,098 total shareholder return (“TSR”) performance units were granted, respectively. Final performance units are awarded based on the increase or decrease, subject to certain limitations, in Mosaic’s share price from the grant date to the third anniversary of the award, plus dividends (a measure of total shareholder return or TSR). The beginning and ending stock prices are based on a 30 trading-day average stock price. Holders of the awards must be employed at the end of the performance period in order for any units to vest, except in the event of death, disability or retirement at or after age 60, certain changes in control or the exercise of Committee or Board discretion as provided in the related award agreements.

The fair value of each TSR performance unit is determined using a Monte Carlo simulation. This valuation methodology utilizes assumptions consistent with those of our other share-based awards and a range of ending stock prices; however, the expected term of the awards is three years, which impacts the assumptions used to calculate the fair value of performance units as shown in the table below. 419,472 of the TSR performance awards issued in 2020 are to be settled in cash, and are therefore accounted for as a liability with changes in value recorded through earnings during the service period. The remaining TSR performance units issued in 2020, and all of the 2019 and 2018 TSR performance units, are considered equity-classified fixed awards measured at grant-date fair value and not subsequently re-measured. All of the TSR performance units cliff vest after three years of continuous service and are expensed on a straight-line basis over the required service period, based on the estimated grant date fair value of the award net of estimated forfeitures.

A summary of the assumptions used to estimate the fair value of TSR performance units is as follows:


	Years Ended December 31,
	2020			2019			2018
Performance units granted	1,309,170			603,856			401,098
Average fair value of performance units on grant date	$	13.52		$	25.87		$	28.09
Weighted average assumptions used in performance unit valuations:
Expected volatility	43.49		%	33.70		%	34.30		%
Expected dividend yield	1.24		%	0.72		%	0.37		%
Expected term (in years)	3			3			3
Risk-free interest rate	0.61		%	2.43		%	2.42		%

A summary of our performance unit activity during 2020 is as follows:


	Shares (in millions)	Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2019	1.4	$	27.13
Granted	1.3	13.52
Issued and cancelled	(0.1)	$	26.85
Outstanding as of December 31, 2020	2.6	$	18.27

Share-Based Compensation Expense

We recorded share-based compensation expense of $24.5 million, $31.6 million and $27.5 million for 2020, 2019 and 2018, respectively. The tax benefit related to share exercises and lapses in the year was $5.2 million, $6.7 million and $5.8 million for 2020, 2019 and 2018, respectively.

As of December 31, 2020, there was $24.9 million of total unrecognized compensation cost related to options, restricted stock units and performance units and shares granted under the 2014 Stock and Incentive Plan and the Omnibus Plan. The unrecognized compensation cost is expected to be recognized over a weighted-average period of one year. No options vested in 2020, 2019 or 2018.

There was no cash received from exercises of share-based payment arrangements for 2020, 2019 or 2018. We received a tax benefit for tax deductions from options of $3.3 million, $2.6 million and $2.3 million in 2020, 2019 and 2018, respectively.