Stockholders' Deficit

12 Months Ended

Dec. 31, 2018

Stockholders' Equity Note [Abstract]

Stockholders' Deficit

Stockholders’ Deficit

The following reflects total stock-based compensation expense recognized under all programs:

	Year Ended December 31,
	2020		2019		2018
Related to SGC stock options	$	9	$	5	$	12
Related to SGC RSUs	30		23		32
Related to SciPlay RSUs	22		9		—
Total	$	61	$	37	$	44

The following table sets forth the change in the number of shares of common stock outstanding during the fiscal years ended December 31, 2020 and 2019:

	December 31,
	2020	2019
Shares outstanding as of beginning of period	94	92
Shares issued as part of equity-based compensation plans and the ESPP, net of shares surrendered	1	2
Shares outstanding as of end of period	95	94

Series A Junior Participating Preferred Stock and Rights Agreement

On June 19, 2017, the Board of Directors of SGC approved, and SGC entered into, a rights agreement between SGC and American Stock Transfer & Trust Company, LLC (the “Rights Agreement”). Concurrently, the Board of Directors of SGC adopted a resolution reserving for issuance a series of 20,000 shares of preferred stock. On January 10, 2018, the Rights Agreement was amended and restated to account for the Reincorporation Merger (the “Amended and Restated Rights Agreement”). In connection with the Amended and Restated Rights Agreement, the preferred stock was designated as Series A Junior Participating Preferred Stock, par value $.001 per share, upon the exercise of rights under the Amended and Restated Rights Agreement. The Amended and Restated Rights Agreement provides for a dividend of one preferred share purchase right (“Right”) for each share of common stock of SGC. Each Right entitles the holder to purchase one ten-thousandth of a share of Series A Junior Preferred Stock for a purchase price of $109.00, subject to adjustment as provided in the Amended and Restated Rights Agreement.

On June 16, 2020, the Rights Agreement was further amended to extend its term to June 19, 2023 (subject to earlier expiration as described in the Rights Agreement). The Board will submit such amendment extending the Rights Agreement to a vote by the Company’s stockholders at the Company’s 2021 annual stockholders’ meeting. As of December 31, 2020, none of these shares were outstanding and no Rights were exercised.

Scientific Games Stock-Based and Other Incentive Compensation

Pursuant to our incentive stock plans we offer stock-based compensation in the form of stock options and RSUs to employees and our non-employee directors. The terms of such stock option and RSU awards, including the vesting schedule of such awards, are determined at our discretion subject to the terms of the applicable equity-based compensation plan. We also offer an ESPP, which allows for a total of up to 2 million shares of common stock to be purchased by eligible employees under offerings made each January 1 and July 1. Employees participate through payroll deductions up to a maximum of 15% of eligible compensation. The term of each offering period is six months and shares are purchased on the last day of the offering period at a 15% discount to the stock’s market value. For offering periods in 2020, 2019 and 2018 we issued approximately 80 thousand, 100 thousand and 83 thousand shares of common stock at an average price of $19.55 per share, $19.32 per share and $22.79 per share, respectively.

Options granted over the last several years have generally become exercisable in four equal installments beginning on the first anniversary of the date of grant or when certain performance targets are determined to have been met, in all cases, with a maximum term of ten years. RSUs typically vest in four equal installments beginning on the first anniversary of the date of grant or when certain performance targets are determined to have been met.

We recognize expense for stock-based compensation plans based on the estimated fair value of the related awards in accordance with ASC 718. Stock options are granted with exercise prices that are not less than the fair market value of our common stock on the date of grant. We periodically grant certain stock-based awards that are contingent upon SGC or certain of our subsidiaries achieving certain pre-determined financial performance targets. Upon determining that the performance target is probable, the fair value of the award is recognized over the service period. Determining the probability of achieving a performance target requires estimates and judgment.        

As of December 31, 2020, we had approximately 23 million shares of common stock authorized for awards under the 2003 Incentive Compensation Plan, as amended and restated (the “2003 Plan”) (plus available shares from a pre-existing equity-based compensation plan). As of December 31, 2020, we had approximately 3 million shares reserved under the 2003 Plan for future grants of equity awards and less than 0.1 million shares available under a pre-existing plan.

Stock Options

During 2020, we issued 2 million stock options with a weighted average exercise price of $35.41 and a total grant date fair value of $54 million. At December 31, 2020, we had $33 million of unrecognized stock-based compensation expense relating to approximately 2 million unvested stock options that will be amortized over a weighted-average period of approximately two years and have an average remaining contract term of 6.3 years with a weighted average exercise price of $33.60. During the year ended December 31, 2020, we received $4 million in cash from the exercise of stock options.

Restricted Stock Units

A summary of the changes in RSUs outstanding under our equity-based compensation plans during 2020 is presented below:

	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested RSUs as of December 31, 2019	2.9	$	24.80
Granted	2.7	$	13.75
Vested	(1.3)	$	19.77
Cancelled	(1.0)	$	19.25
Unvested RSUs as of December 31, 2020	3.3	$	19.07

The weighted-average grant date fair value of RSUs granted during 2020 and 2019 was $13.75 and $21.78, respectively. The fair value of each RSU grant is based on the market value of our common stock at the time of grant. At December 31, 2020, we had $40 million of unrecognized stock-based compensation expense relating to unvested RSUs that will be amortized over a weighted-average period of approximately two years. The fair value at vesting date of RSUs vested during the years ended December 31, 2020, 2019 and 2018 was $16.8 million, $22.0 million and $88.0 million, respectively.

SciPlay Stock-Based Compensation

In 2019, SciPlay adopted the SciPlay Long-Term Incentive Plan (“SciPlay LTIP”). The SciPlay LTIP authorizes the issuance of up to 6.5 million shares of SciPlay’s Class A common stock to be granted in connection with awards of incentive and nonqualified stock options, restricted stock, RSUs, stock appreciation rights and performance-based awards. As of December 31, 2020, there were a total of 4.1 million time-based and performance-based SciPlay RSUs outstanding with an average grant price of $15.27 per share of SciPlay Class A common stock. As of December 31, 2020, SciPlay had $8 million in unrecognized stock-based compensation expense that is expected to be recognized over a weighted-average expected vesting period of 0.6 years.