Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

In connection with the Sinclair Transactions, we assumed all obligations of HollyFrontier under HollyFrontier’s existing stock-based compensation plans, which includes the HF Sinclair Corporation 2007 Long-Term Incentive Compensation Plan (previously known as the HollyFrontier Corporation Long-Term Incentive Compensation Plan, the “2007 Plan”) and the HF Sinclair Corporation Amended and Restated 2020 Long Term Incentive Plan (previously known as the HollyFrontier Corporation 2020 Long Term Incentive Plan, the “2020 Plan”). Awards are no longer granted, and as of December 1, 2022, none are outstanding, under the 2007 Plan. The 2007 Plan previously provided for, and the 2020 Plan currently provides for, the grant of unrestricted and restricted stock, restricted stock units, other stock based awards, stock options, performance awards, substitute awards, cash awards and stock appreciation rights. Subject to adjustment for certain events, an aggregate of 6,019,255 of these awards may be issued pursuant to awards granted under the 2020 Plan. We also have a stock compensation deferral plan which allows non-employee directors to defer settlement of vested stock granted under our share-based compensation plan. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting is to expense the costs ratably over the vesting periods. Share-based awards paid in cash upon vesting are accounted for as liability awards and recorded at fair value at the end of each reporting period with a mark-to-mark adjustment recognized in earnings.

The stock-based compensation expense and associated tax benefit were as follows:


	Years Ended December 31,
	2022		2021		2020
	(In thousands)
Compensation expense:
Restricted stock units	$	27,264	$	29,453	$	23,539
Performance stock units	8,683		12,591		6,130
Total compensation expense	$	35,947	$	42,044	$	29,669
Tax benefit recognized on compensation expense	$	8,918	$	10,545	$	3,965

Additionally, HEP maintains an equity-based compensation plan for Holly Logistic Services, L.L.C.'s non-employee directors and certain executives and employees. Compensation cost attributable to HEP’s equity-based compensation plan was $1.9 million, $2.6 million and $2.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Restricted Stock Units

Under our long-term incentive plan, we grant certain officers and other key employees restricted stock unit awards, which are payable in stock or cash and generally vest over a period of one to three years. Restricted stock unit award recipients have the right to receive dividends, however, restricted stock units do not have any other rights of absolute ownership. Upon vesting, restrictions on the restricted stock units lapse at which time they convert to common shares or cash. In addition, we grant non-employee directors restricted stock unit awards, which typically vest over a period of one year and are payable in stock. The fair value of each restricted stock unit award is measured based on the grant date market price of our common shares and is amortized over the respective vesting period. We account for forfeitures on an estimated basis.

A summary of restricted stock unit activity during the year ended December 31, 2022 is presented below:


Restricted Stock Units	Grants	Weighted Average Grant Date Fair Value

Outstanding at January 1, 2022	1,604,540	$	29.11
Granted	463,074	$	59.41
Vested	(804,846)	$	32.91
Forfeited	(206,893)	$	29.30

Outstanding at December 31, 2022	1,055,875	$	39.46

For the years ended December 31, 2022, 2021 and 2020, restricted stock units vested having a grant date fair value of $26.5 million, $28.4 million and $28.2 million, respectively. For the years ended December 31, 2021 and 2020, we granted restricted stock units having a weighted average grant date fair value of $33.95 and $22.20, respectively. As of December 31, 2022, there was $27.7 million of total unrecognized compensation cost related to non-vested restricted stock unit grants. That cost is expected to be recognized over a weighted-average period of 1.4 years. For the years ended December 31, 2022, 2021 and 2020, we paid $5.8 million, $3.4 million and $1.3 million, respectively, in cash equal to the value of the stock award on the vest date to certain employees to settle 96,005, 105,459 and 55,222 restricted stock units, respectively.

Performance Share Units

Under our long-term incentive plan, we grant certain officers and other key employees performance share units, which are payable in stock or cash upon meeting certain criteria over the service period, and generally vest over a period of three years. Under the terms of our performance share unit grants, awards are subject to “financial performance” and “market performance” criteria. Financial performance is based on our financial performance compared to a peer group of independent refining companies, while market performance is based on the relative standing of total shareholder return achieved by HF Sinclair compared to peer group companies. The number of shares ultimately issued or cash paid under these awards can range from zero to 200% of target award amounts. Holders of performance share units have the right to receive dividend equivalents and other distributions with respect to such performance share units based on the target level of payout.

A summary of performance share unit activity and changes during the year ended December 31, 2022 is presented below:


Performance Share Units	Grants	Weighted Average Grant Date Fair Value

Outstanding at January 1, 2022	864,626	$	33.49
Granted	206,979	$	72.04
Vested	(134,685)	$	46.08
Forfeited	(165,723)	$	32.83

Outstanding at December 31, 2022	771,197	$	41.78

For the year ended December 31, 2022, we issued 151,315 shares of common stock, representing a 150% payout on vested performance share units having a grant date fair value of $6.2 million. For the years ended December 31, 2021 and 2020, we issued common stock upon the vesting of the performance share units having a grant date fair value of $4.5 million and $6.2 million, respectively. As of December 31, 2022, there was $21.7 million of total unrecognized compensation cost related to non-vested performance share units. That cost is expected to be recognized over a weighted-average period of 1.8 years. For the year ended December 31, 2022, we paid $0.7 million in cash equal to the value of the stock award on the vest date to certain employees to settle 12,108 performance share units.