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Stock-Based Compensation
9 Months Ended
Sep. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

Note 12 – Stock-Based Compensation

During the nine months ended September 30, 2020, the Board of Directors granted 931,244 time-vested restricted stock units, 182,180 performance-vested restricted stock units, and 511,020 stock options.    

Time-vested restricted stock units are issued with the fair value equal to the closing market price of TimkenSteel common shares on the date of grant. These restricted stock units do not have any performance conditions for vesting. Expense is recognized over the service period, adjusted for any forfeitures that should occur during the vesting period. The weighted average fair value of the restricted stock units granted during the nine months ended September 30, 2020 was $4.24 per share. There were no time-vested restricted stock units granted in the third quarter of 2020. 

Performance-vested restricted stock units issued in 2020 vest based on achievement of a total shareholder return (TSR) metric. The TSR metric is considered a market condition, which requires TimkenSteel to reflect it in the fair value on grant date using an advanced option-pricing model. The fair value of each performance share was therefore determined using a Monte Carlo valuation model, a generally accepted lattice pricing model under ASC 718 – Stock-based Compensation. The Monte Carlo valuation model, among other factors, uses commonly-accepted economic theory underlying all valuation models, estimates fair value using simulations of future share prices based on stock price behavior and considers the correlation of peer company returns in determining fair value. The weighted average fair value of the performance-vested restricted stock units granted during the nine months ended September 30, 2020 was $4.98 per share. The Board of Directors granted 38,900 performance-vested restricted stock units in the third quarter of 2020.

Stock options are issued with an exercise price equal to the closing market price of TimkenSteel common shares on the date of grant. The fair value of stock options is determined using a Black-Scholes option pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate and the expected dividend yield. The weighted average exercise price and weighted average fair value of the stock option grants during the nine months ended September 30, 2020 were $5.26 per share and $2.23 per share, respectively. There were no stock option grants in the third quarter of 2020.   

TimkenSteel recognized stock-based compensation expense of $1.6 million and $5.2 million for the three and nine months ended September 30, 2020, compared to $1.4 million and $4.4 for the same periods in 2019, respectively. Future stock-based compensation expense regarding the unvested portion of all awards is approximately $6.7 million. The future expense is expected to be recognized over the remaining vesting periods through 2024.