STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

NOTE 13. STOCK-BASED COMPENSATION

Stock-based compensation granted includes stock options, performance stock awards, restricted stock awards and deferred directors’ compensation. Stock-based compensation expense (benefit) was as follows:


	Three Months Ended March 31,
		2022		2021
		($ in millions)
Stock-based compensation		$	4.7	$	4.7
Mark-to-market adjustments		(2.9)		8.1
Total expense		$	1.8	$	12.8

The fair value of each stock option granted, which typically vests ratably over three years, but not less than one year, was estimated on the date of grant, using the Black-Scholes option-pricing model with the following weighted-average assumptions:


Grant date	2022
Dividend yield	1.60		%
Risk-free interest rate	1.93		%
Expected volatility of Olin common stock	48		%
Expected life (years)	7.0
Weighted-average grant fair value (per option)	$	21.18
Weighted-average exercise price	$	49.71
Options granted	729,600

Dividend yield was based on our current dividend yield as of the option grant date. Risk-free interest rate was based on zero coupon U.S. Treasury securities rates for the expected life of the options. Expected volatility of Olin common stock was based on our historical stock price movements, as we believe that historical experience is the best available indicator of the expected volatility. Expected life of the option grant was based on historical exercise and cancellation patterns, as we believe that historical experience is the best estimate of future exercise patterns.

Performance share awards are denominated in shares of our stock and are paid half in cash and half in stock. Payouts for performance share awards are based on two criteria: (1) 50% of the award is based on Olin’s total shareholder returns (TSR) over the applicable three-year performance cycle in relation to the TSR over the same period among a portfolio of public companies which are selected in concert with outside compensation consultants and (2) 50% of the award is based on Olin’s net income over the applicable three-year performance cycle in relation to the net income goal for such period as set by the compensation committee of Olin’s board of directors. The expense associated with performance shares is recorded based on our estimate of our performance relative to the respective target. The fair value of each performance stock award based on net income was estimated on the date of grant, using the current stock price. The fair value of each performance stock award based on TSR was estimated on the date of grant, using a Monte Carlo simulation model with the following weighted average assumptions:


Grant date	2022
Risk-free interest rate	1.74		%
Expected volatility of Olin common stock	59		%
Expected average volatility of peer companies	47		%
Average correlation coefficient of peer companies	0.51
Expected life (years)	3.0
Grant date fair value (TSR based award)	$	64.13
Grant date fair value (net income based award)	$	49.71
Awards granted	184,000

Risk-free interest rate was based on zero coupon U.S. Treasury securities rates for the expected life of the performance stock awards. Expected volatility of Olin common stock and peer companies was based on historical stock price movements, as

we believe that historical experience is the best available indicator of the expected volatility. The average correlation coefficient of peer companies was determined based on historical trends of Olin’s common stock price compared to the peer companies. Expected life of the performance stock award grant was based on historical exercise and cancellation patterns, as we believe that historical experience is the best estimate of future exercise patterns.