Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.20.2
Stock-Based Compensation
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation STOCK-BASED COMPENSATION:
Stock Incentive Plans
The 2019 Plan was approved by Quanta’s stockholders in May 2019 and provides for the award of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, RSUs, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Current and prospective employees, directors, officers, advisors or consultants of Quanta or its affiliates are eligible to participate in the 2019 Plan. Subject to certain adjustments, the maximum number of shares available for issuance under the 2019 Plan is 7,466,592 shares, plus any shares underlying share-settling awards previously awarded pursuant to the 2011 Plan that are ultimately forfeited, canceled, expired or settled in cash subsequent to stockholder approval of the 2019 Plan. All awards subsequent to stockholder approval of the 2019 Plan have been and will be made pursuant to the 2019 Plan and applicable award agreements. Awards made under the 2011 Plan prior to approval of the 2019 Plan remain subject to the terms of the 2011 Plan and applicable award agreements.
RSUs to be Settled in Common Stock
During the three months ended June 30, 2020 and 2019, Quanta granted a nominal amount and 0.1 million shares of RSUs to be settled in common stock, with weighted average grant date fair values of $35.90 and $36.50. During the six months ended June 30, 2020 and 2019, Quanta granted 1.9 million and 1.6 million shares of RSUs to be settled in common stock, with weighted average grant date fair values of $39.03 and $35.86. The grant date fair value for RSUs to be settled in common stock is based on the market value of Quanta common stock on the date of grant. RSU awards to be settled in common stock are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs in three equal annual installments following the date of grant. Holders of RSUs to be settled in common stock awarded under the 2011 Plan generally are entitled to receive a cash dividend equivalent payment equal to any cash dividend payable on account of the underlying Quanta common stock on the payment date of any such dividend. Holders of RSUs to be settled in common stock awarded under the 2019 Plan are also entitled to cash dividend equivalent payments in an amount equal to any cash dividend payable on account of the underlying Quanta common stock; however, payment of such amounts is not made until the RSUs vest, such that the dividend equivalent payments are subject to forfeiture.
During each of the three months ended June 30, 2020 and 2019, vesting activity consisted of approximately 0.1 million of RSUs settled in common stock with an approximate fair value at the time of vesting of $2.2 million and $3.1 million. During each of the six months ended June 30, 2020 and 2019, vesting activity consisted of approximately 1.2 million RSUs settled in common stock with an approximate fair value at the time of vesting of $45.9 million and $44.6 million.
During the three months ended June 30, 2020 and 2019, Quanta recognized $14.2 million and $12.6 million of non-cash stock-based compensation expense related to RSUs to be settled in common stock. During the six months ended June 30, 2020 and 2019, Quanta recognized $26.2 million and $23.9 million of non-cash stock-based compensation expense related to RSUs to be settled in common stock. Such expense is recorded in “Selling, general and administrative expenses.” As of June 30, 2020, there was $101.9 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 2.57 years.
PSUs to be Settled in Common Stock
PSUs provide for the issuance of shares of common stock upon vesting, which occurs at the end of a three-year performance period based on achievement of certain company performance metrics established by the Compensation Committee of Quanta’s Board of Directors, including financial and operational goals and Quanta’s total shareholder return as compared to a predetermined group of peer companies. The final number of shares of common stock issuable upon vesting of PSUs can range from 0% to 200% of the number of PSUs initially granted, depending on the level of achievement, as determined by the Compensation Committee of Quanta’s Board of Directors. Holders of PSUs are entitled to cash dividend equivalent payments in an amount equal to any cash dividend payable on account of the underlying Quanta common stock; however, payment of such amounts is not made until the PSUs vest, such that the dividend equivalent payments are subject to forfeiture.
During the three months ended June 30, 2020 and 2019, Quanta granted no and a nominal amount of PSUs to be settled in common stock. During the six months ended June 30, 2020 and 2019, Quanta granted 0.4 million and 0.3 million of PSUs to be settled in common stock with a weighted average grant date fair value of $34.56 and $40.15 per unit. The grant date fair value of the PSUs was determined as follows: (i) for the portion of the awards based on company financial and operational performance metrics, by multiplying the number of units granted by the closing price of Quanta’s common stock on the date of grant and (ii) for the portion of the awards based on total shareholder return, by utilizing a Monte Carlo simulation valuation methodology. The Monte Carlo simulation valuation methodology applied the following key inputs:
 
 
2020
 
2019
Valuation date price based on March 26, 2020 and March 8, 2019 closing stock prices of Quanta common stock
 
$31.49
 
$35.19
Expected volatility
 
34
%
 
25
%
Risk-free interest rate
 
0.35
%
 
2.43
%
Term in years
 
2.76

 
2.81


Quanta recognizes expense, net of estimated forfeitures, for PSUs based on the forecasted achievement of the company financial and operational performance metrics and forecasted performance with respect to relative total shareholder return, multiplied by the completed portion of the three-year period and the fair value of the total number of shares of common stock that Quanta anticipates will be issued based on such achievement. During the three months ended June 30, 2020 and 2019, Quanta recognized $7.8 million and $1.9 million in compensation expense associated with PSUs. During the six months ended June 30, 2020 and 2019, Quanta recognized $10.7 million and $3.6 million in compensation expense associated with PSUs. Such expense
is recorded in “Selling, general and administrative expenses.” During the three months ended June 30, 2020 and 2019, no PSUs vested, and no shares of common stock were issued in connection with PSUs. During the six months ended June 30, 2020, 0.2 million PSUs vested, and 0.5 million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs. During the six months ended June 30, 2019, 0.2 million PSUs vested, and 0.4 million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs.
RSUs to be Settled in Cash
Certain RSUs granted by Quanta are settled solely in cash. These cash-settled RSUs are intended to provide plan participants with cash performance incentives that are substantially equivalent to the risks and rewards of stock ownership in Quanta, typically vest in three equal annual installments following the date of grant, and are subject to forfeiture under certain conditions, primarily termination of service. Additionally, subject to certain restrictions, Quanta’s non-employee directors may elect to settle a portion of their RSU awards in cash. For RSUs settled in cash, the holders receive for each vested RSU an amount in cash equal to the fair market value of one share of Quanta common stock on the settlement date, as specified in the applicable award agreement.
Compensation expense related to RSUs to be settled in cash was $1.6 million and $1.1 million for the three months ended June 30, 2020 and 2019 and $2.7 million and $3.7 million for the six months ended June 30, 2020 and 2019. Such expense is recorded in “Selling, general and administrative expenses.” RSUs that are anticipated to be settled in cash are not included in the calculation of weighted average shares outstanding for earnings per share, and the estimated earned value of such RSUs is classified as a liability. Quanta paid $0.2 million and $2.1 million to settle liabilities related to cash-settled RSUs in the three months ended June 30, 2020 and 2019 and $3.5 million and $5.0 million to settle liabilities related to cash-settled RSUs in the six months ended June 30, 2020 and 2019. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were $2.4 million and $4.3 million at June 30, 2020 and December 31, 2019.