82 / Schnitzer Steel Industries, Inc. Form 10-K 2021 The estimated fair value of an RSU is based on the market closing price of the underlying Class A common stock on the date of grant. The weighted average grant date fair value of RSUs granted was $22.26, $14.88, and $27.61 per unit for the years ended August 31, 2021, 2020, and 2019, respectively. The total estimated fair value of RSUs granted during each of the years ended August 31, 2021, 2020, and 2019 was $7 million. For RSUs granted in each of the years ended August 31, 2020 and 2021, the compensation cost associated with these RSUs is recognized over the requisite service period of the awards, net of forfeitures, which for participants who were retirement eligible as of the grant date or who will become retirement eligible during the five-year term of the award is the longer of two years or the period ending on the date retirement eligibility is achieved. For the awards granted in the year ended August 31, 2019, RSU compensation cost is recognized over the requisite service period of the award, net of estimated forfeitures, or to the date retirement eligibility is achieved (if before the end of the service period). RSU compensation cost was $7 million, $4 million, and $6 million for the years ended August 31, 2021, 2020, and 2019, respectively. A summary of the Company’s RSU activity for the year ended August 31, 2021 is as follows: Number of Units (in thousands) Weighted Average Grant Date Fair Value Outstanding as of August 31, 2020 986 $ 20.10 Granted 318 $ 22.26 Vested (327) $ 20.95 Forfeited (21) $ 15.50 Outstanding as of August 31, 2021 956 $ 20.62 The total fair value of RSUs which vested, based on the market closing price of the underlying Class A common stock on the vesting date, was $10 million, $6 million, and $7 million for the years ended August 31, 2021, 2020, and 2019, respectively. As of August 31, 2021, total unrecognized compensation costs related to unvested RSUs amounted to $10 million, which is expected to be recognized over a weighted average period of two years. Performance Share Awards The SIP authorizes performance-based awards to certain employees subject to certain conditions and restrictions. Vesting is subject to both the continued employment of the participant with the Company and the achievement of certain performance goals established by the Compensation Committee. A participant generally must be employed by the Company on October 31 following the end of the performance period to receive an award payout. However, adjusted awards will be paid if employment terminates earlier on account of a qualifying employment termination event such as death, disability, retirement, termination without cause after the first year of the performance period, or a sale of the Company. The Compensation Committee determined that performance share awards granted in fiscal years 2021, 2020, and 2019 comprise two separate and distinct awards with different vesting conditions. Awards vest if the threshold level under the specified metric is met at the end of the approximately three-year performance period. The award performance metrics were the Company’s total shareholder return (“TSR”) relative to a designated peer group and the Company’s return on capital employed (“ROCE”). Awards share payouts depend on the extent to which the performance goals have been achieved. The number of shares that a participant receives is equal to the award granted multiplied by a payout factor, which ranges from a threshold of 50% to a maximum of 200%. The TSR award stipulates certain limitations to the payout in the event the payout reaches a defined ceiling level or the Company’s TSR is negative. The Company estimates the fair value of TSR awards using a Monte-Carlo simulation model utilizing several key assumptions, including the following for TSR awards granted during the years ended August 31: 2021 2020 2019 Expected share price volatility (SSI) 48.5% 38.9% 42.5% Expected share price volatility (Peer group) 54.9% 44.5% 51.4% Expected correlation to peer group companies 44.5% 34.3% 35.6% Risk-free rate of return 0.23% 1.58% 2.89% The compensation cost for the TSR awards based on the grant-date fair value, net of estimated forfeitures, is recognized over the requisite service period (or to the date a qualifying employment termination event entitles the recipient to a prorated award, if before the end of the service period), regardless of whether the market condition has been or will be satisfied. Compensation cost for TSR awards was $3 million, $3 million, and $4 million for the years ended August 31, 2021, 2020, and 2019, respectively.
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