Share-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Successor Company

The Company has established the Peabody Energy Corporation 2017 Incentive Plan (the 2017 Incentive Plan) for employees, non-employee directors and consultants that allows for the issuance of share-based compensation in various forms including options (including non-qualified stock options and incentive stock options), stock appreciation rights, restricted stock, restricted stock units, deferred stock, performance units, dividend equivalents and cash incentive awards. Under the 2017 Incentive Plan, approximately 14 million shares of the Company’s Common Stock were reserved for issuance. As of December 31, 2019, there are approximately 8.9 million shares of the Company’s Common Stock available for grant.

Share-Based Compensation Expense and Cash Flows

The Company’s share-based compensation expense is recorded in “Operating costs and expenses” and “Selling and administrative expenses” in the consolidated statements of operations. Cash received by the Company upon the exercise of stock options is reflected as a financing activity in the consolidated statements of cash flows. Share-based compensation expense and cash flow amounts were as follows:



	Successor
	Year Ended December 31, 2019		Year Ended December 31, 2018		April 2 through December 31, 2017
	(Dollars in millions)
Share-based compensation expense	$	38.3	$	34.9	$	21.8
Tax benefit	—		—		—
Share-based compensation expense, net of tax benefit	$	38.3	$	34.9	$	21.8

Cash received upon the exercise of stock options	—		—		—
Write-off tax benefits related to share-based compensation	—		—		—

As of December 31, 2019, the total unrecognized compensation cost related to nonvested awards was $27.7 million, net of taxes, which is expected to be recognized over 2.5 years with a weighted-average period of 0.6 years.

Deferred Stock Units

During the years ended December 31, 2019 and 2018 and the period April 2 through December 31, 2017, the Company granted deferred stock units to each of the non-employee members of the Board. The fair value of these units is equal to the market price of the Company’s Common Stock at the date of grant. These deferred stock units generally vest on a monthly basis over 12 months and are settled in Common Stock three years after the date of grant.

Restricted Stock Units

On the Effective Date, the Company granted restricted stock units under the 2017 Incentive Plan and the terms of the relevant restricted stock unit agreement to all employees, including its executive officers (the Emergence Awards). The Emergence Awards granted to the Company’s executive officers generally will vest ratably on each of the first three anniversaries of the Effective Date, subject to, among other things, each such executive officer’s continued employment with the Company. The Emergence Awards will become fully vested upon each such executive officer’s termination of employment by the Company and its subsidiaries without Cause or by the executive for Good Reason (each, as defined in the 2017 Incentive Plan or award agreement) or due to a termination of employment with the Company and its subsidiaries by reason of death or Disability (as defined in the 2017 Incentive Plan or award agreement). In order to receive the Emergence Awards, the executive officers were required to execute restrictive covenant agreements protecting the Company’s interests.

The Company grants restricted stock units to certain senior management and non-senior management employees. For units granted to both senior and non-senior management employees containing only service conditions, the fair value of the award is equal to the market price of the Company’s Common Stock at the date of grant. Units granted to senior and non-senior management employees vest at various times (none of which exceed three years) in accordance with the underlying award agreement. Compensation cost for both senior and non-senior management employees is recognized on a straight-line basis over the requisite service period. The payouts for active grants awarded during the years ended December 31, 2019 and 2018 and the period April 2 through December 31, 2017 will be settled in the Company’s Common Stock.

A summary of restricted stock unit activity is as follows:



	Year Ended December 31, 2019		Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2018	2,641,087		$	24.87
Granted	664,899		29.75
Vested	(1,401,268	)	23.40
Forfeited	(198,693	)	30.96
Nonvested at December 31, 2019	1,706,025		$	26.89

The total fair value at grant date of restricted stock units granted during the years ended December 31, 2019 and 2018 and the period April 2 through December 31, 2017 was $19.8 million, $18.2 million and $79.8 million, respectively.

The restricted stock units receive dividend equivalent units (DEUs) upon payment of cash dividends to holders of Common Stock. DEUs vest subject to the same vesting requirements as the underlying restricted stock unit award. As of December 31, 2019, there were approximately 176,000 nonvested DEUs. The total fair value of restricted stock units and DEUs vested was $40.3 million, $46.2 million and $0.9 million during the years ended December 31, 2019 and 2018 and the period April 2 through December 31, 2017, respectively.

Performance Units

Performance units are typically granted annually in January and vest over a three-year measurement period and are primarily limited to senior management personnel. The performance units are usually subject to the achievement of goals based on the following conditions: three-year return on invested capital and environmental reclamation (performance condition). In addition, the payout of the performance units can be increased or decreased by up to 25% of the award based on three-year stock price performance compared to a custom peer group (market condition). There were no performance units granted during the period April 2 through December 31, 2017. Awards granted during the years ended December 31, 2019 and 2018 will be settled in the Company's Common Stock.

A summary of performance unit activity is as follows:



	Year Ended December 31, 2019		Weighted Average Remaining Contractual Life
Nonvested at December 31, 2018	206,630		2.0
Granted	264,918
Vested	—
Forfeited	(44,942	)
Nonvested at December 31, 2019	426,606		1.6

As of December 31, 2019, no performance units had vested.

The performance units receive DEUs upon payment of cash dividends to holders of Common Stock. DEUs vest subject to the same vesting requirements as the underlying performance unit award. As of December 31, 2019, there were approximately 44,000 nonvested DEUs

The performance condition awards were valued utilizing the grant date fair values of the Company’s Common Stock adjusted for dividends foregone during the vesting period. The market condition awards were valued utilizing a Monte Carlo simulation model which incorporates the total stockholder return hurdles set for each grant. The assumptions used in the valuations for grants were as follows:



	Year Ended December 31,
	2019		2018
Risk-free interest rate	2.44	%	2.24	%
Expected volatility	48.81	%	57.75	%
Dividend yield	—	%	—	%

Predecessor Company

In accordance with the Plan and as previously disclosed, each share of the Company’s common stock outstanding prior to the Effective Date, including all options and warrants to purchase such stock, were extinguished, canceled and discharged, and each such share, option or warrant had no further force or effect as of the Effective Date. Furthermore, all of the Company’s equity award agreements under prior incentive plans, and the awards granted pursuant thereto, were extinguished, canceled and discharged and had no further force or effect as of the Effective Date.

Share-Based Compensation Expense and Cash Flows

The Predecessor Company’s share-based compensation expense was recorded in “Selling and administrative expenses” in the consolidated statements of operations. Cash received by the Predecessor Company upon the exercise of stock options and when employees purchased stock under the employee stock purchase plans was reflected as a financing activity in the consolidated statements of cash flows. Share-based compensation expense and cash flow amounts were as follows:



	Predecessor
	January 1 through April 1, 2017
	(Dollars in millions)
Share-based compensation expense - equity classified awards	$	1.9
Tax benefit	—
Share-based compensation expense, net of tax benefit	$	1.9

Cash received upon the exercise of stock options and from employee stock purchases	—
Write-off tax benefits related to share-based compensation	—