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Employee Stock Compensation Plans
12 Months Ended
Dec. 31, 2021
Share-based Payment Arrangement [Abstract]  
Employee Stock Compensation Plans
8. STOCK COMPENSATION PLANS

The Company recognizes all share-based payments as compensation expense in its financial statements based on their fair value. As of December 31, 2021, the Company’s stock-based compensation consisted of restricted stock units, employee stock purchase plan and stock options. The Company recorded stock-based compensation expense for the years ended December 31 as follows:
In millions202120202019
Restricted stock units$123 $78 $94 
Employee stock purchase plan8 
Stock options23 24 
Stock-based compensation expense154 108 107 
Tax benefit(18)(13)(12)
Total stock-based compensation (net of tax)$136 $95 $95 

Approximately 30 million shares remain authorized to be issued under the 2017 Stock Incentive Plan (“SIP”). Details of the Company's stock-based compensation plans are discussed below.

Restricted Stock Units

The SIP provides for the grant of several different forms of stock-based compensation, including restricted stock units. Restricted stock units can have service-based and/or performance-based vesting with performance goals being established by the Compensation and Human Resource Committee of the Company’s Board of Directors. Any grant of restricted stock units is generally subject to a vesting period of 12 months to 48 months, to the extent permitted by the SIP. Performance-based grants conditionally vest upon achievement of future performance goals based on performance criteria such as the Company’s achievement of specific return on capital and/or other financial metrics (as defined in the SIP) during the performance period. Performance-based grants must be earned, based on performance, before the actual number of shares to be awarded is known. The Compensation and Human Resource Committee considers the likelihood of meeting the performance criteria based upon estimates and other relevant data, and certifies performance based on its analysis of achievement against the performance criteria. A recipient of restricted stock units does not have the rights of a stockholder and is subject to restrictions on transferability and risk of forfeiture. Other terms and conditions applicable to any award of restricted stock units will be determined by the Compensation and Human Resource Committee and set forth in the agreement relating to that award.

As discussed in Note 3, “Business Combinations and Divestitures”, the Company converted certain outstanding unvested Cardtronics awards into NCR awards pursuant to an exchange ratio as defined in the acquisition agreement. Each restricted stock award that was outstanding, whether performance-based or time-based, was converted into time-based awards, and will continue to be governed by the same vesting terms as the original Cardtronics awards.

The following table reports restricted stock unit activity during the year ended December 31, 2021:
Shares in thousandsNumber of UnitsWeighted Average Grant-Date Fair Value per Unit
Unvested shares as of January 16,658 $26.84 
Shares granted4,768 $34.00 
Shares converted per acquisition agreement1,283 $44.30 
Shares vested(4,263)$27.89 
Shares forfeited(524)$35.34 
Unvested shares as of December 317,922 $32.86 

Stock-based compensation expense is recognized in the financial statements based upon fair value. The total fair value of units vested and distributed in the form of NCR common stock was $119 million in 2021, $74 million in 2020, and $78 million in 2019. As of December 31, 2021, there was $132 million of unrecognized compensation cost related to unvested restricted stock unit grants. The unrecognized compensation cost is expected to be recognized over a remaining weighted-average period of 1.0 year. The weighted average grant date fair value for restricted stock unit awards granted in 2020 and 2019 was $26.50 and
$24.31, respectively. The weighted average grant date fair value of restricted stock awards assumed through the Cardtronics acquisition is based on the fair value on the date assumed.

The following table represents the composition of restricted stock unit grants in 2021:
Shares in thousandsNumber of UnitsWeighted Average Grant-Date Fair Value
Service-based units1,708 $36.13 
Performance-based units3,060 $32.81 
Total restricted stock units4,768 $34.00 

On February 23, 2021, the Company granted market-based restricted stock units with 50% of the award vesting on December 31, 2022 and 50% of the award vesting on December 31, 2023. The number of awards that vest are subject to the performance of the Company's stock price from the date of grant to December 31, 2022. The fair value was determined to be $47.20 based on using a Monte-Carlo simulation model and will be recognized over the requisite service period. The table below details the assumptions used in determining the fair value of the market-based restricted stock units granted on February 23, 2021.
Dividend yield %
Risk-free interest rate0.10 %
Expected volatility57.20 %

Expected volatility for the market-based restricted stock units is calculated as the historical volatility of the Company’s stock over a period of three years, as management believes this is the best representation of prospective trends. The risk-free interest rate was determined based on a blend of the one and two year U.S. Treasury yield curves in effect at the time of the grant.

On September 22, 2021, the Company granted market-based restricted stock units with the award vesting on September 9, 2024. The number of awards that vest are subject to the performance of the Company's stock price from the date of grant to September 9, 2024. The fair value was determined to be $51.02 based on using a Monte-Carlo simulation model and will be recognized over the requisite service period. The table below details the assumptions used in determining the fair value of the market-based restricted stock units granted on September 22, 2021.

Dividend yield %
Risk-free interest rate0.47 %
Expected volatility58.47 %

Expected volatility for the market-based restricted stock units is calculated as the historical volatility of the Company’s stock over a period of three years, as management believes this is the best representation of prospective trends. The risk-free interest rate was determined based on a blend of the two years and three years U.S. Treasury yield curves in effect at the time of the grant.

Stock Options

The SIP also provides for the grant of stock options to purchase shares of NCR common stock. The Compensation and Human Resource Committee has discretion to determine the material terms and conditions of option awards under the SIP, provided that (i) the exercise price must be no less than the fair market value of NCR common stock (defined as the closing price) on the date of grant, (ii) the term must be no longer than ten years, and (iii) in no event shall the normal vesting schedule provide for vesting in less than one year. Other terms and conditions of an award of stock options will be determined by the Compensation and Human Resource Committee as set forth in the agreement relating to that award. The Compensation and Human Resource Committee has authority to administer the SIP, except that the Committee on Directors and Governance of the Company’s Board of Directors will administer the SIP with respect to non-employee members of the Board of Directors. New shares of the Company’s common stock are issued as a result of stock option exercises.
During the year ended December 31, 2021, the Company did not grant any stock options. As discussed in Note 3, “Business Combinations and Divestitures”, the Company converted certain outstanding unvested Cardtronics awards into NCR awards. Cardtronics stock option awards were converted into NCR stock option awards with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio (as defined in the acquisition agreement) and will continue to be governed generally by the same terms and conditions as were applicable prior to the acquisition. The fair value of options that the Company assumed in connection with the acquisition of Cardtronics were estimated using the Black-Scholes model.

During the year ended December 31, 2020, stock options granted were premium-priced stock options with an exercise price equal to either 110% or 115% of the closing stock price on the date of the grant. The weighted average exercise price of the stock options granted in the year ended December 31, 2020 was $36.26. The weighted average fair value of the option grants was $7.64 for the year ended December 31, 2020 based on using a Monte-Carlo simulation model and will be recognized over the requisite service period. These option grants have a 7 year contractual term that vest at the end of 36 months.

The table below details the assumptions used in determining the fair value of the option grants:


For the year ended December 31, 2020
Dividend yield— 
Risk-free interest rate1.34 %
Expected volatility34.63 %
Expected holding period - years3.7

Expected volatility is calculated as the historical volatility of the Company’s stock over a period equal to the expected term of the options, as management believes this is the best representation of prospective trends. The Company uses historical data to estimate option exercise and employee terminations within the valuation model. The expected holding period represents the period of time that options are expected to be outstanding. For the options granted during the year ended December 31, 2020, the seven-year U.S. Treasury yield curve was used to determine the risk-free interest rate.
The following table summarizes the Company’s stock option activity for the year ended December 31, 2021:
Shares in thousandsShares Under OptionWeighted Average Exercise Price per ShareWeighted Average Remaining Contractual Term (in years)Aggregate Intrinsic Value
(in millions)
Outstanding as of January 19,798 $32.82 
Granted— — 
Assumed through acquisition192 $28.93 
Exercised(832)$30.54 
Forfeited or expired(79)$30.64 
Outstanding as of December 319,079 $32.96 4.54$65.69 
Fully vested and expected to vest as of December 314,987 $33.91 4.83$31.39 
Exercisable as of December 314,074 $31.82 4.18$34.13 

As of December 31, 2021, the total unrecognized compensation cost of $21 million related to unvested stock option grants is expected to be recognized over a weighted average period of approximately 0.6 years.

The total intrinsic value of all options exercised was $9 million in 2021, $1 million in 2020, and $1 million in 2019. Cash received from option exercises under all share-based payment arrangements was $25 million in 2021, $2 million in 2020, and $2 million in 2019. The tax benefit realized from option exercises was $1 million in 2021. There was no tax benefit realized from stock options exercised in 2020 and 2019.


Employee Stock Purchase Plan
The Company's amended Employee Stock Purchase Plan (“ESPP”) provides employees a 15% discount on stock purchases using a three-month look-back feature where the discount is applied to the stock price that represents the lower of NCR’s closing stock price on either the first day or the last day of each calendar quarter. Participants can contribute between 1% and 10% of their compensation. The amended ESPP was approved by NCR stockholders in 2016 and became effective January 1, 2017.

Employees purchased approximately 0.8 million shares in 2021, 1.3 million shares in 2020, and 0.8 million shares in 2019, for approximately $26 million in 2021, $21 million in 2020 and $18 million in 2019. A total of 4 million shares were originally authorized to be issued under the ESPP before its amendment. Under the amended ESPP, 10 million shares were newly authorized to be issued, plus any shares remaining unissued under the prior ESPP after the last 2016 purchase date. Approximately 6.8 million authorized shares remain unissued under our amended ESPP as of December 31, 2021.