XML 40 R24.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Stock-based Compensation and Outstanding Awards | 12 Months Ended
--- | ---
Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-based Compensation and Outstanding Awards | 17. Stock-based Compensation and Outstanding Awards Under the terms of the NOW Inc. Long Term Incentive Plan (the “Plan”), 16 million shares of the Company’s common stock were authorized for grant to employees, non-employee directors and other persons. The Plan provides for the grant of stock options, restricted stock awards, restricted stock units, phantom shares and performance stock awards. Stock-based compensation expense recognized for the years ended December 31, 2021, 2020 and 2019 totaled $8 million, $6 million and $13 million, respectively. The tax effected benefit for share-based compensation arrangements was $2 million, $1 million, and $3 million for the years ended December 31, 2021, 2020 and 2019, respectively. Unvested stocks and awards associated with certain management employees who retired in 2020 were allowed to continue to vest after retirement for a period less than one year during the term in which such employees served as consultants to the Company. The Company accounted for this change as a Type III modification under ASC Topic 718 since the expectation of the award vesting changed from improbable to probable, resulting in a reduction of stock-based compensation expense based on the modification-date fair value for the year ended December 31, 2020. Each of the stock-based compensation arrangements are discussed below. Stock Options Stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards generally have either a 7-year or a 10-year contractual term and vest over a 3-year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. The grant-date fair value of stock options is determined using the Black-Scholes framework. Additionally, the Company’s stock options provide for full vesting of unvested outstanding options, in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company. For the stock options granted in 2021, 2020 and 2019, the fair value of each option award was estimated on the date of grant using the Black-Scholes framework that uses the assumptions noted in the table below. The expected volatility was based on the implied volatility on the Company’s stock, historical volatility of the Company’s stock and the historical volatility of other, similar companies. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant for the period consistent with the expected term. The expected dividends were based on the Company’s history and expectation of dividend payouts. The expected term was based on the average of the vesting period and contractual term:
|  | December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Valuation Assumptions: |  |  |  |  |  |  |  |  |
Expected volatility |  |  | 61.3 | % |  |  | 43.7 | % |  |  | 43.7 | %
Risk-free interest rate |  |  | 0.5 | % |  |  | 1.4 | % |  |  | 2.5 | %
Expected dividends (per share) |  | $ | — |  |  | $ | — |  |  | $ | — |
Expected term (in years) |  |  | 4.5 |  |  |  | 4.5 |  |  |  | 4.5 |
The following table summarizes award activity for stock options:
Stock Options |  | Shares (in thousands) |  |  | Weighted-Average Exercise Price |  |  | Weighted-Average Remaining Contractual Term (in years) |  |  | Aggregate Intrinsic Value (in millions) |
Outstanding as of December 31, 2020 |  |  | 4,386 |  |  | $ | 17.93 |  |  |  |  |  |  |
Granted |  |  | 750 |  |  |  | 10.26 |  |  |  |  |  |  |
Forfeited and expired |  |  | (1,208 | ) |  |  | 23.81 |  |  |  |  |  |  |
Exercised |  |  | (314 | ) |  |  | 9.88 |  |  |  |  |  |  |
Other adjustment |  |  | (18 | ) |  |  | 26.16 |  |  |  |  |  |  |
Outstanding as of December 31, 2021 |  |  | 3,596 |  |  | $ | 15.02 |  |  |  | 3.4 |  |  | $ | — |
Exercisable at December 31, 2021 |  |  | 2,379 |  |  | $ | 17.39 |  |  |  | 2.3 |  |  | $ | — |
The weighted average grant-date fair value of options granted for the years ended December 31, 2021, 2020 and 2019 was $5.03, $3.59 and $6.02, respectively. The total intrinsic value of options exercised for the years ended December 31, 2021, 2020 and 2019 was less than $1 million. As of December 31, 2021, unrecognized compensation cost related to stock option awards was approximately $4 million, which is expected to be recognized over a weighted average period of 1.7 years. Cash received from exercises of stock options was $3 million for the year ended December 31, 2021. Restricted Stock Awards, Restricted Stock Units and Phantom Shares (“RSAs and RSUs”) Restricted stock generally cliff vests after 1 or 3 years. The grant-date fair value of RSA and RSU grants is determined using the closing quoted market price on the grant date. Additionally, the Company’s RSA and RSU agreements provide for full vesting of RSAs and RSUs in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company. The following table summarizes award activity for RSAs and RSUs:
RSAs / RSUs |  | Shares (in thousands) |  |  | Weighted-Average Grant-Date Fair Value |
Nonvested as of December 31, 2020 |  |  | 634 |  |  | $ | 10.25 |
Granted |  |  | 430 |  |  |  | 10.31 |
Vested (1) |  |  | (281 | ) |  |  | 8.76 |
Forfeited |  |  | (42 | ) |  |  | 11.43 |
Nonvested as of December 31, 2021 |  |  | 741 |  |  | $ | 10.79 |
(1) 54 thou sand shares were withheld and retired from the vesting of shares to employees to satisfy minimum tax withholding. The weighted average grant-date fair value was $10.31, $8.78 and $13.42 for RSAs and RSUs granted for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, unrecognized compensation cost related to RSAs and RSUs was $4 million, which is expected to be recognized over a weighted average period of 1.4 year. The total vest-date fair value of shares vested for the years ended December 31, 2021, 2020 and 2019 was $3 million, $4 million, and $12 million, respectively. Performance Stock Awards (“PSAs”) PSAs generally have a 3-year vesting period from the grant date and vest at the end of the vesting period with potential payouts varying from zero for performance below the threshold performance metric to 200% of the target award PSAs for performance above the maximum performance metric. The grant-date fair value of market-condition PSA grants is determined using a Monte Carlo simulation probabilistic model. The grant-date fair value of performance-condition PSA grants is determined using the closing quoted market price on the grant date. Additionally, the Company’s performance award agreements provide for full vesting of PSAs at the target level in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company. The Company granted PSAs to senior management employees whereby the PSAs can be earned based on performance against established metrics over a three-year performance period. The PSAs are divided into three independent parts that are subject to separate performance metrics: (i) one-half of the PSAs have a Total Shareholder Return (“TSR”) metric, (ii) one-quarter of the PSAs have an EBITDA metric, and (iii) one-quarter of the PSAs have a Return on Capital Employed (“ROCE”) metric. Performance against the TSR metric is determined by comparing the performance of the Company’s TSR with the TSR performance of designated peer companies for the three-year performance period. Performance against the EBITDA metric is determined by comparing the performance of the Company’s actual EBITDA average for each of the three-years of the performance period against the EBITDA metrics set by the Company’s Compensation Committee of the Board of Directors. Performance against the ROCE metric is determined by comparing the performance of the Company’s actual ROCE average for each of the three-years of the performance period against the ROCE metrics set by the Company’s Compensation Committee of the Board of Directors. The following table summarizes award activity for performance stock awards:
PSAs |  | Shares (in thousands) |  |  | Weighted-Average Grant-Date Fair Value |
Nonvested as of December 31, 2020 |  |  | 315 |  |  | $ | 12.53 |
Granted |  |  | 490 |  |  |  | 13.08 |
Vested (1) |  |  | (94 | ) |  |  | 10.52 |
Forfeited |  |  | (42 | ) |  |  | 10.32 |
Nonvested as of December 31, 2021 |  |  | 669 |  |  | $ | 13.35 |
(1) 28 thousand shares were withheld and retired from the vesting of shares to employees to satisfy minimum tax withholding. The weighted average grant-date fair value of PSAs granted for the years ended December 31, 2021, 2020 and 2019 was $13.08, $12.12 and $17.69 respectively. As of December 31, 2021, unrecognized compensation cost related to PSAs was $4 million, which is expected to be recognized over a weighted average period of 1.7 years. The total vest-date fair value of PSAs vested for the year ended December 31, 2021, 2020 and 2019 was $1 million, less than $1 million, and $2 million, respectively.

X
- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration