XML 30 R16.htm IDEA: XBRL DOCUMENT v3.22.1
STOCK-BASED COMPENSATION PLAN
 3 Months Ended
Mar. 31, 2022
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION PLAN STOCK-BASED COMPENSATION PLAN:
Under SJI's Omnibus Equity Compensation Plan (Plan), shares, stock appreciation rights, and options may be issued to SJI’s officers (Officers), non-employee directors (Directors) and other key employees.

Grants to Officers and other key employees - SJI grants time-based shares of restricted stock, one-third of which vest annually over a three-year period and which are limited to a 100% payout. The vesting and payout of time-based shares of restricted stock is solely contingent upon the service requirement being met in years one, two, and three of the grant. SJI also grants performance-based restricted shares which vest over a three-year period and are subject to SJI achieving certain market or earnings-based performance targets, which can cause the actual amount of shares that ultimately vest to range from 0% to 200% of the original shares granted. During the three months ended March 31, 2022, SJI granted a total of 184,935 restricted shares to Officers and other key employees under the Plan. No restricted shares were granted during the three months ended March 31, 2021. No options were granted or outstanding during the three months ended March 31, 2022 and 2021. No stock appreciation rights have been issued under the Plan.

Performance-based grants containing market-based performance targets use SJI's TSR relative to a peer group to measure performance. As these TSR-related performance-based grants are contingent upon market and service conditions, SJI is required to measure and recognize stock-based compensation expense based on the fair value at the date of grant on a straight-line basis over the requisite three-year period of each award. In addition, SJI identifies specific forfeitures of share-based awards, and compensation expense is adjusted accordingly over the requisite service period. Compensation expense is not adjusted based on the actual achievement of market goals. The fair value of TSR-related performance-based restricted stock awards on the date of grant is estimated using a Monte Carlo simulation model.
Performance-based grants containing earnings-based performance targets use pre-defined CEGR goals for SJI to measure performance. As CEGR-based grants are contingent upon performance and service conditions, SJI is required to measure and recognize stock-based compensation expense based on the fair value at the date of grant over the requisite three-year period of each award. The fair value is measured as the market price at the date of grant. The initial accruals of compensation expense are based on the estimated number of shares expected to vest, assuming the requisite service is rendered and probable outcome of the performance condition is achieved. That estimate is revised if subsequent information indicates that the actual number of shares is likely to differ from previous estimates. Compensation expense is ultimately adjusted based on the actual achievement of service and performance targets.

Grants to Directors - No restricted shares were granted to Directors during the three months ended March 31, 2022 and March 31, 2021. Shares issued to Directors vest over twelve months and contain no performance conditions. As a result, 100% of the shares granted generally vest.

The following table summarizes the nonvested restricted stock awards outstanding at March 31, 2022, and the assumptions used to estimate the fair value of the awards:
GrantsShares OutstandingFair Value Per ShareExpected VolatilityRisk-Free Interest Rate
Officers & Key Employees -2020 - TSR31,957 $25.51 34.8 %0.21 %
2020 - CEGR, Time80,644 $25.19 N/AN/A
2021 - TSR35,091 $28.11 39.9 %0.27 %
2021 - CEGR, Time171,526 $25.33 N/AN/A
2022 - TSR37,608 $35.05 43.6 %1.83 %
2022 - CEGR, Time147,327 $35.05 N/AN/A
Directors - 202154,419 $24.75 N/AN/A

Expected volatility is based on the actual volatility of SJI’s share price over the preceding three-year period as of the valuation date. The risk-free interest rate is based on the zero-coupon U.S. Treasury Bond, with a term equal to the three-year term of the Officers’ and other key employees’ restricted shares. As notional dividend equivalents are credited to the holders during the three-year service period, no reduction to the fair value of the award is required. As the Directors’ restricted stock awards contain no performance conditions and dividends are paid or credited to the holder during the twelve month service period, the fair value of these awards is equal to the market value of the shares on the date of grant.

The following table summarizes the total stock-based compensation cost to SJI for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended
March 31,
 20222021
Officers & Key Employees$1,317 $1,264 
Directors112 10 
Total Cost1,429 1,274 
Capitalized(38)(23)
Net Expense$1,391 $1,251 


As of March 31, 2022, there was $10.4 million of total unrecognized compensation cost related to nonvested stock-based compensation awards granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.2 years.
The following table summarizes information regarding restricted stock award activity for SJI during the three months ended March 31, 2022, excluding accrued dividend equivalents:
Officers and Other Key EmployeesDirectorsWeighted
Average
Fair Value
Nonvested Shares Outstanding, January 1, 2022492,475 54,419 $26.72 
  Granted184,935 — $35.05 
  Cancelled/Forfeited(71,775)— $25.86 
  Vested(101,482)— $30.25 
Nonvested Shares Outstanding, March 31, 2022
504,153 54,419 $28.69 

SJI has a policy of issuing new shares to satisfy its obligations under the Plan; therefore, there are no cash payment requirements resulting from the normal operation of the Plan. At the discretion of the Officers, Directors and other key employees, the receipt of vested shares can be deferred until future periods. These deferred shares are included in Treasury Stock on the condensed consolidated balance sheets.

A change in control could result in such shares becoming non-forfeitable or immediately payable in cash. At the Effective Time of the Merger, each share granted and outstanding under the Plan immediately before the Effective Time will be converted into the right to receive $36.00 in cash, without interest.

During the three months ended March 31, 2022, SJI issued 70,872 shares to its Officers and other key employees at a market value of $2.3 million. During the three months ended March 31, 2021, SJI issued 110,891 shares at a market value of $2.7 million. These issued shares include shares deferred for payout in prior periods.
SJG - Officers and other key employees of SJG participate in the stock-based compensation plans of SJI. During the three months ended March 31, 2022, there were 21,784 restricted shares (time-based and performance-based) granted to SJG officers and other key employees. No restricted shares were granted to SJG officers and key employees during the three months ended March 31, 2021.