Note 16 - Stock-based Compensation Plans

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

16. STOCK-BASED COMPENSATION PLANS

As of September 30, 2023, we had approximately 5 million shares remaining under the stock-based compensation plans available for grant. Option awards have a maximum contractual term of 10 years and generally must have an exercise price at least equal to the market price of our common stock on the date the option award is granted. Outstanding stock-based awards generally vest annually over a three-year period or in total at the end of a three-year period. Certain performance share unit awards vest in total at the end of a two-year period.

The compensation cost from continuing operations under the stock-based compensation plans for our Company and Huntsman International were as follows (dollars in millions):

	Three months				Nine months
	ended				ended
	September 30,				September 30,
	2023		2022		2023		2022
Huntsman Corporation compensation cost	$	7	$	6	$	22	$	26
Huntsman International compensation cost		7		6		21		24

The total income tax benefit recognized in the condensed consolidated statements of operations for us and Huntsman International for stock-based compensation arrangements was $2 million and $7 million for the nine months ended September 30, 2023 and 2022, respectively.

Stock Options

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of our common stock through the grant date. The expected term of options granted was estimated based on the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions noted below represent the weighted average of the assumptions utilized for stock options granted during the periods.

During each of the nine months ended  September 30, 2023 and 2022, no stock options were granted.

A summary of stock option activity under the stock-based compensation plans as of September 30, 2023 and changes during the nine months then ended is presented below:

						Weighted
				Weighted		average
				average		remaining		Aggregate
				exercise		contractual		intrinsic
Option awards	Shares			price		term		value
	(in thousands)					(years)		(in millions)
Outstanding at January 1, 2023		3,413		$	21.93
Exercised		(383	)		19.76
Forfeited		(51	)		30.93
Outstanding at September 30, 2023		2,979			22.06		3.9	$	11
Exercisable at September 30, 2023		2,906			21.89		3.8		11

As of  September 30, 2023, there was less than $1 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of approximately 0.4 years. 

The total intrinsic value of stock options exercised during the nine months ended September 30, 2023 and 2022 was approximately $3 million and $12 million, respectively. Cash received from stock options exercised during the nine months ended September 30, 2023 and 2022 was approximately $4 million and $6 million, respectively. The cash tax benefit from stock options exercised during the nine months ended September 30, 2023 and 2022 was approximately nil and $2 million, respectively.

Nonvested Shares

Nonvested shares granted under the stock-based compensation plans consist of restricted stock and performance share unit awards, which are accounted for as equity awards, and phantom stock, which is accounted for as a liability award because it can be settled in either stock or cash. The fair value of each restricted stock and phantom stock award is estimated to be the closing stock price of Huntsman’s stock on the date of grant.

We grant two types of performance share unit awards. For one type of performance share unit award, the performance criteria are total stockholder return of our common stock relative to the total stockholder return of a specified industry peer group for the three-year performance periods. The fair value of each performance share unit award is estimated using a Monte Carlo simulation model that uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the nine months ended September 30, 2023 and 2022, the weighted-average expected volatility rate was 37.6% and 43.5%, respectively, and the weighted average risk-free interest rate was 4.38% and 1.67%, respectively. For the performance share unit awards granted during the nine months ended September 30, 2023 and 2022, the number of shares earned varies based upon the Company achieving certain performance criteria over a three-year performance period.

During the first quarter of 2022, we granted a second type of performance share unit award, which also includes a market condition. The performance criteria are our corporate free cash flow achieved relative to targets set by management, modified for the total stockholder return of our common stock relative to the total stockholder return of a specified industry peer group for the two-year performance period. The fair value of each performance share unit award is estimated using a Monte Carlo simulation model that uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the nine months ended September 30, 2022, the weighted-average expected volatility rate was 37.9% and the weighted average risk-free interest rate was 1.43%. For the performance share unit awards granted during the nine months ended September 30, 2022, the number of shares earned varies based upon the Company achieving certain performance criteria over a two-year performance period. No performance share unit awards of this type were granted during the nine months ended September 30, 2023.

A summary of the status of our nonvested shares as of September 30, 2023 and changes during the nine months then ended is presented below:

	Equity awards						Liability awards
					Weighted					Weighted
					average					average
					grant-date					grant-date
	Shares				fair value		Shares			fair value
	(in thousands)						(in thousands)
Nonvested at January 1, 2023		1,802			$	35.15		257		$	31.61
Granted		945				36.54		114			30.83
Vested		(723	)	(1)(2)		27.23		(165	)		29.51
Forfeited		(90	)			36.87		(17	)		33.76
Nonvested at September 30, 2023		1,934				38.71		189			32.77

(1) As of September 30, 2023, a total of 115,685 restricted stock units were vested but not yet issued, of which 9,400 vested during the nine months ended September 30, 2023. These shares have not been reflected as vested shares in this table because, in accordance with the restricted stock unit agreements, shares of common stock are not issued for vested restricted stock units until termination of employment.

(2) A total of 264,624 performance share unit awards are reflected in the vested shares in this table, which represents the target number of performance share unit awards for this grant and were included in the balance at December 31, 2022. During the nine months ended September 30, 2023, an additional 132,314 performance share unit awards with a grant date fair value of $22.85 were issued due to the target performance criteria being exceeded.

As of September 30, 2023, there was approximately $38 million of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of approximately 2.0 years. The value of share awards that vested during the nine months ended September 30, 2023 and 2022 was approximately $28 million and $32 million, respectively.