Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

STOCK-BASED COMPENSATION:

CNX's Equity Incentive Plan provides for grants of stock-based awards to key employees and to non-employee directors. Amendments to the Equity Incentive Plan have been adopted and approved by the Board of Directors and the Company's shareholders since the commencement of the Equity Incentive Plan. Most recently, in May 2020 the Company's Shareholders adopted and approved a 10,775,000 increase to the total number of shares available for issuance. At December 31, 2020, 14,081,055 shares of common stock remained available for grant under the plan. The Equity Incentive Plan provides that the aggregate number of shares available for issuance will be reduced by one share for each share relating to stock options and by 1.62 for each share relating to Performance Share Units (PSUs) or Restricted Stock Units (RSUs). No award of stock options may be exercised under the Equity Incentive Plan after the tenth anniversary of the grant date of the award.

For those shares expected to vest, CNX recognizes stock-based compensation costs on a straight-line basis over the requisite service period of the award, which is generally the vesting term. Options and RSUs vest over a three-year term. PSUs granted in 2016-2019 vest over a five-year term at 20% per year and PSUs granted in 2020 vest over a three-year term at 33.3% per year subject to performance conditions. If an employee leaves the Company, all unvested shares are forfeited. CNX recognizes forfeitures as they occur. The vesting of all awards will accelerate in the event of death and disability and may accelerate upon a change in control of CNX.

Pursuant to the terms of the change in control severance agreements of certain employees and CNX officers, outstanding equity awards held by such employees vest upon a stockholder (or stockholder group) becoming the beneficial owner of more than 25% of the Company's outstanding common stock. During the year ended December 31, 2019, Southeastern Asset Management, Inc. and its affiliates ("SEAM") acquired shares of CNX's common stock in the open market which resulted in SEAM's aggregate share ownership exceeding more than 25% of CNX's common stock outstanding. This transaction, as such, constituted a change in control event under the severance agreements, resulting in the accelerated vesting of 473,126 restricted stock units and 903,100 performance share units held by the aforementioned employees that were issued prior to 2019. Those affected employees and officers each consented to waive the change in control vesting provision included in the change in control severance agreements with respect to their restricted stock unit and performance share unit awards that were issued during 2019. The accelerated vesting resulted in $19,654 of additional long-term equity-based compensation expense for the year ended December 31, 2019, and is included in Selling, General and Administrative Costs in the Consolidated Statements of Income. The performance share unit awards that vested continue to be subject to the attainment of performance goals as determined by the Compensation Committee of CNX's Board of Directors after the end of the applicable performance period.

The total stock-based compensation expense recognized relating to CNX shares during the years ended December 31, 2020, 2019 and 2018 was $12,897, $36,545 and $18,930, respectively. The related deferred tax benefit totaled $2,134, $3,955, $4,169, respectively.

As of December 31, 2020, CNX has $10,830 of unrecognized compensation cost related to all non-vested stock-based compensation awards, which is expected to be recognized over a weighted-average period of 1.82 years. When stock options are exercised, and restricted and performance stock unit awards become vested, the issuances are made from CNX's common stock shares.

Pursuant to the Merger (See Note 4 - Acquisitions and Dispositions for more information), all outstanding phantom units previously granted under the CNXM long-term incentive plan were converted into the right to receive 0.88 shares of common stock of CNX. As such, all outstanding phantom units were converted, effective as of the closing of the Merger, into CNX restricted stock units. Each CNX restricted stock unit will be subject to the same vesting, forfeiture and other terms and conditions applicable to the converted CNXM phantom units. Under Accounting Standards Codification Topic 718, Compensation - Stock Compensation, it was determined that there was no additional compensation cost to record as the conversion of awards did not result in incremental fair value.

Stock Options:

CNX examined its historical pattern of option exercises in an effort to determine if there were any discernible activity patterns based on certain employee populations. From this analysis, CNX identified two distinct employee populations and used the Black-Scholes option pricing model to value the options for each of the employee populations. The expected term computation presented in the table below is based upon a weighted average of the historical exercise patterns and post-vesting termination behavior of the two populations. The risk-free interest rate was determined for each vesting tranche of an award based upon the calculated yield on U.S. Treasury obligations for the expected term of the award. A combination of historical and implied volatility is used to determine expected volatility and future stock price trends.

The total fair value of options granted during the years ended December 31, 2020, 2019 and 2018 was $1,066, $50, and $143 respectively, based on the following assumptions and weighted average fair values:


	December 31,
	2020			2019			2018
Weighted Average Fair Value of Grants	$	3.56		$	3.48		$	6.50
Risk-free Interest Rate	1.61		%	2.13		%	2.66		%
Expected Dividend Yield	—		%	—		%	—		%
Expected Forfeiture Rate	—		%	—		%	—		%
Expected Volatility	55.33		%	43.60		%	52.68		%
Expected Term in Years	5.11			6.50			3.71

A summary of the status of stock options granted is presented below:


				Weighted
				Average
		Weighted		Remaining	Aggregate
		Average		Contractual	Intrinsic
		Exercise		Term (in	Value (in
	Shares	Price		years)	thousands)
Outstanding at December 31, 2019	4,696,264	$	18.05
Granted	299,541	$	10.46
Exercised	(298,513)	$	6.87
Forfeited	(3,561)	$	10.53
Expired	(493,222)	$	43.53
Outstanding at December 31, 2020	4,200,509	$	15.32	4.18	$	9,430
Exercisable at December 31, 2020	3,908,444	$	15.68	3.81	$	9,330

At December 31, 2020, there were 3,710,157 employee stock options outstanding under the Equity Incentive Plan. Non-employee director stock options vest one year after the grant date. There are 490,352 stock options outstanding under these grants.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between CNX's closing stock price on the last trading day of the year ended December 31, 2020 and the option's exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2020. This amount varies based on the fair market value of CNX's stock. The total intrinsic value of options exercised for the years ended December 31, 2020, 2019 and 2018 was $1,263, $175, and $2,077, respectively.

Cash received from option exercises for the years ended December 31, 2020, 2019 and 2018 was $2,052, $546 and $1,714, respectively. The tax impact from option exercises totaled $328, $46 and $569 for the years ended December 31, 2020, 2019 and 2018, respectively.

Restricted Stock Units:

Under the Equity Incentive Plan, CNX grants certain employees and non-employee directors RSU awards, which entitle the holder to receive shares of common stock as the award vests. Non-employee director RSUs vest at the end of one year. Compensation expense is recognized over the vesting period of the units, described above. The total fair value of RSUs granted during the years ended December 31, 2020, 2019 and 2018 was $10,619, $10,844 and $13,768, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2020, 2019 and 2018 was $4,798, $10,391 and $6,437, respectively.

The following table represents the nonvested restricted stock units and their corresponding fair value (based upon the closing share price) at the date of grant:


	Number of	Weighted Average
	Shares	Grant Date Fair Value
Nonvested at December 31, 2019	1,033,200	$11.71
Granted	1,251,065	$8.49
RSUs granted in conversion, as a result of the CNXM Merger	204,619	$18.01
Vested	(577,834)	$10.95
Forfeited	(39,923)	$9.65
Nonvested at December 31, 2020	1,871,127	$10.10

Performance Share Units:

Under the Equity Incentive Plan, CNX grants certain employees performance share unit awards, which entitle the holder to shares of common stock subject to the achievement of certain market and performance goals. Compensation expense is recognized over the performance measurement period of the units in accordance with the provisions of the Stock Compensation Topic of the FASB Accounting Standards Codification for awards with market and performance vesting conditions. The total fair value of performance share units granted during the years ended December 31, 2020, 2019 and 2018 was $3,826, $6,741 and $8,570, respectively. The total fair value of performance share units vested during the years ended December 31, 2020, 2019 and 2018 was $1,926, $4,668 and $7,547, respectively.

The following table represents the nonvested performance share units and their corresponding fair value (based upon the Monte Carlo Methodology) on the date of grant:


	Number of	Weighted Average
	Shares	Grant Date Fair Value
Nonvested at December 31, 2019	1,400,836	$18.91
Granted	660,634	$5.79
PSUs Issued	112,158	$20.39
Vested	(274,716)	$20.82
Forfeited	(131,474)	$18.37
Nonvested at December 31, 2020	1,767,438	$13.85

Performance Options:

Under the Equity Incentive Plan, CNX granted certain employees performance options in 2010, which entitled the holder to shares of common stock subject to the achievement of certain performance goals. Compensation expense was recognized over the vesting period of the options. The Black-Scholes option valuation model was used to value each tranche separately. There have been no performance options granted since 2010. The 927,268 performance options that were outstanding and exercisable at a weighted average exercise price of $39.00 at December 31, 2019 expired as of December 31, 2020.