XML 154 R28.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Share-Based Compensation
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement, Noncash Expense [Abstract]  
SHARE-BASED COMPENSATION SHARE-BASED COMPENSATION
Incentive compensation and award plan - On January 11, 2017, we adopted the TechnipFMC plc Incentive Award Plan (the “Plan”). The Plan provides certain incentives and awards to officers, employees, non-employee directors and consultants of TechnipFMC and its subsidiaries. The Plan allows our Board of Directors to make various types of awards to non-employee directors and the Compensation Committee (the “Committee”) of the Board of Directors to make various types of awards to other eligible individuals. Awards may include share options, share appreciation rights, performance share units, restricted share units, restricted shares or other awards authorized under the Plan. All awards are subject to the Plan’s provisions, including all share-based grants previously issued by FMC Technologies and Technip prior to consummation of the Merger. Under the Plan, 24.1 million ordinary shares were authorized for awards. At December 31, 2019, 14.4 million ordinary shares were available for future grant.
The exercise price for options is determined by the Committee but cannot be less than the fair market value of our ordinary shares at the grant date. Restricted share and performance share unit grants generally vest after three years of service.
Under the Plan, our Board of Directors has the authority to grant non-employee directors share options, restricted shares, restricted share units and performance shares. Unless otherwise determined by our Board of Directors, awards to non-employee directors generally vest one year from the date of grant. Restricted share units are settled when a director ceases services to the Board of Directors. At December 31, 2019, outstanding awards to active and retired non-employee directors included 83.4 thousand share units.
The measurement of share-based compensation expense on restricted share awards is based on the market price and fair value at the grant date and the number of shares awarded. The fair value of performance shares is estimated using a combination of the closing stock price on the grant date and the Monte Carlo simulation model. We use Black-Scholes options pricing model to measure the fair value of stock options granted on or after January 1, 2017.
The share-based compensation expense for each award is recognized ratably over the applicable service period or the period beginning at the start of the service period and ending when an employee becomes eligible for retirement (currently age 62 under the plan), after taking into account estimated forfeitures.
We recognize compensation expense and the corresponding tax benefits for awards under the Plan. The compensation expense under the Plan is as follows:
 
Year Ended December 31,
(In millions)
2019
 
2018
 
2017
Share-based compensation expense
$
74.5

 
$
49.1

 
$
44.4

Income tax benefits related to share-based compensation expense
$
20.1

 
$
13.2

 
$
12.0


As of December 31, 2019, the portion of share-based compensation expense related to outstanding awards to be recognized in future periods is as follows:
 
December 31, 2019
Share-based compensation expense not yet recognized (in millions)
$
76.9

Weighted-average recognition period (in years)
1.7


Restricted Share Units
A summary of the non-vested restricted share units activity is as follows:
(Shares in thousands)
Shares
 
Weighted-Average 
Grant Date 
Fair Value
Non-vested at December 31, 2018
2,977.4

 
$
30.10

Granted
1,969.1

 
$
21.24

Vested
(347.1
)
 
$
29.44

Cancelled/forfeited
(73.5
)
 
$
27.79

Non-vested at December 31, 2019
4,525.9

 
$
27.44


The total grant date fair value of restricted stock units vested during years ended December 31, 2019 and 2018 was $10.2 million and $4.8 million, respectively.
Performance Shares
The Board of Directors has granted certain employees, senior executives and Directors or Officers restricted share units that vest subject to achieving satisfactory performances. For performance share units issued on or after January 1, 2017, performance is based on results of return on invested capital and total shareholder return (“TSR”).
For the performance share units which vest based on TSR, the fair value of performance shares is estimated using a combination of the closing stock price on the grant date and the Monte Carlo simulation model. The weighted-average fair value and the assumptions used to measure the fair value of performance share units subject to performance-adjusted vesting conditions in the Monte Carlo simulation model were as follows:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Weighted-average fair value (a)
$29.04
 
$41.97
 
$34.42
Expected volatility (b)
34.00
%
 
34.00
%
 
34.87
%
Risk-free interest rate (c)
2.42
%
 
2.37
%
 
1.50
%
Expected performance period in years (d)
3.0

 
3.0

 
3.0

(a) The weighted-average fair value was based on performance share units granted during the period.
(b) Expected volatility is based on normalized historical volatility of our shares over a preceding period commensurate with the expected term of the option.
(c) From 2017, the risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
(d) For awards subject to service-based vesting, due to the lack of historical exercise and post-vesting termination patterns of the post-Merger employee base, the expected term was estimated using a simplified method for all awards granted in 2019, 2018 and 2017.
A summary of the non-vested performance share unit activity is as follows:
(Shares in thousands)
Shares
 
Weighted-Average 
Grant Date 
Fair Value
Non-vested at December 31, 2018
3,043.8

 
$
27.02

Granted
1,514.7

 
$
24.99

Vested
(597.6
)
 
$
22.30

Cancelled/forfeited
(143.2
)
 
$
27.94

Non-vested at December 31, 2019
3,817.7

 
$
28.52


The total grant date fair value of performance share units vested during years ended December 31, 2019, 2018 and 2017 was $13.3 million, $7.0 million and $33.3 million, respectively.
Share Option Awards
The fair value of each option award is estimated as of the date of grant using the Black-Scholes options pricing model.
Share options awarded prior to 2017 were granted subject to performance criteria based upon certain targets, such as TSR, return on capital employed, and operating income from recurring activities. Subsequent share options granted are time based awards vesting over three years.
The weighted-average fair value and the assumptions used to measure fair value are as follows:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Weighted-average fair value (a)
$
5.64

 
$
9.07

 
$
8.79

Expected volatility (b)
32.5
%
 
32.5
%
 
35.7
%
Risk-free interest rate (c)
2.5
%
 
2.7
%
 
2.1
%
Expected dividend yield (d)
2.6
%
 
2.0
%
 
2.0
%
Expected term in years (e)
6.5

 
6.5

 
6.5

(a)
The weighted-average fair value was based on stock options granted during the period.
(b)
Expected volatility is based on normalized historical volatility of our shares over a preceding period commensurate with the expected term of the option.
(c)
From 2017, the risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Prior to 2017, the risk free rate was based on the bond yields from the European Central Bank.
(d)
Share options awarded in 2019, 2018 and 2017 were valued using an expected dividend yield of 2.6%, 2.0% and 2.0%, respectively.
(e)
For awards subject to service-based vesting, due to the lack of historical exercise and post-vesting termination patterns of the post-Merger employee base, the expected term was estimated using a simplified method for all awards granted in 2019, 2018 and 2017.
The following is a summary of option transactions during years ended December 31, 2019, 2018 and 2017:
 
Number of Shares
 
Weighted average exercise price
 
Weighted average remaining life
(in years)
Balance as of December 31, 2016
2,188.8

 
€
61.72

 
5.0
Adjustments due to Merger (a)
2,188.8

 
€
—

 
 
Granted
798.4

 
€
29.29

 
 
Exercised
—

 
€
—

 
 
Cancelled
(292.2
)
 
€
47.60

 
 
Balance as of December 31, 2017
4,883.8

 
€
36.35

 
4.6
Granted
602.2

 
$
30.70

 
 
Exercised
—

 
$
—

 
 
Cancelled
(827.6
)
 
$
47.20

 
 
Balance as of December 31, 2018
4,658.4

 
$
33.68

 
4.8
Granted
800.0

 
$
20.98

 
 
Exercised
—

 
$
—

 
 
Cancelled
(616.0
)
 
$
48.65

 
 
Balance as of December 31, 2019
4,842.4

 
$
29.68

 
5.3
Exercisable at December 31, 2019
1,617.7

 
$
35.92

 
3.0
(a)
The Weighted-Average Grant Date Fair Value for the increase in shares due to the merger remains at $0.00 in order to recalculate the new weighted average for the December 31, 2016 non-vested shares (see Note 2).
The aggregate intrinsic value of stock options outstanding and stock options exercisable as of December 31, 2019 was $0.4 million and nil, respectively.
Cash received from the option exercises was nil, nil and nil during years ended December 31, 2019, 2018 and 2017, respectively. The total intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017 was nil, nil and nil, respectively. To exercise stock options, an employee may choose (1) to pay, either directly or by way of the group savings plan, the stock option strike price to obtain shares, or (2) to sell the shares immediately after having exercised the stock option (in this case, the employee does not pay the strike price but instead receives the intrinsic value of the stock options in cash).
The following summarizes significant ranges of outstanding and exercisable options at December 31, 2019:
 
Options Outstanding
 
Options Exercisable
Exercise Price Range
Number of options
(in thousands)
 
Weighted average remaining life (in years)
 
Weighted average exercise price
 
Number of options
(in thousands)
 
Weighted average exercise price
$20.00-$33.00
4,330.4

 
5.7
 
$
26.55

 
1,105.7

 
$
26.54

$45.00-$51.00
33.0

 
2.0
 
$
45.49

 
33.0

 
$
45.49

$55.00-$57.00
479.0

 
1.4
 
$
56.93

 
479.0

 
$
56.93

Total
4,842.4

 
5.3
 
$
29.68

 
1,617.7

 
$
35.92