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STOCK-BASED COMPENSATION
 12 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION
10. STOCK-BASED COMPENSATION

In January 2017, the NJR 2017 Stock Award and Incentive Plan replaced the NJR 2007 Stock Award and Incentive Plan. Shares have been issued in the form of performance shares, restricted stock, deferred retention stock and unrestricted common stock to non-employee directors. As of September 30, 2019, 3,291,481 shares remain available for future issuance.

The following table summarizes all stock-based compensation expense recognized during the following fiscal years:
(Thousands)
2019
2018
2017
Stock-based compensation expense:
 
 
 
Performance share awards
$
5,804

$
3,526

$
2,614

Restricted and non-restricted stock
2,492

2,191

1,732

Deferred retention stock
1,500

7,128

1,461

Compensation expense included in operation and maintenance expense
9,796

12,845

5,807

Income tax benefit (1)
(2,848
)
(3,734
)
(2,372
)
Total, net of tax
$
6,948

$
9,111

$
3,435


(1)
Excludes additional tax benefit related to delivered shares of $1.3 million, $3 million and $1.3 million as of September 30, 2019, 2018 and 2017, respectively.

Performance Shares

In fiscal 2019, the Company granted to certain officers 36,392 performance shares, which are market condition awards that vest on September 30, 2021, subject to the Company meeting certain performance conditions. In fiscal 2019, the Company also granted to certain officers 63,870 performance shares, of which 33,844 vest on September 30, 2021 and 30,026 vest annually over a three-year period beginning on September 30, 2019, both of which are subject to the Company meeting certain performance conditions.

In fiscal 2018, the Company granted to certain officers 31,836 performance shares, which are market condition awards that vest on September 30, 2020, subject to the Company meeting certain performance conditions. In fiscal 2018, the Company also granted to certain officers 59,341 performance shares, of which 29,608 vest on September 30, 2020 and 29,733 vest annually over a three-year period beginning in September 30, 2018, both of which are subject to the Company meeting certain performance conditions.

In fiscal 2017, the Company granted to certain officers 44,576 performance shares, which are market condition awards that vested on September 30, 2019, subject to the Company meeting certain performance conditions. In fiscal 2017, the Company also granted to certain officers 51,931 performance shares, of which 25,806 vested in September 30, 2019 and 26,125 vest annually over a three-year period beginning in September 2017, both of which were subject to the Company meeting certain performance conditions. The vesting of these awards are shown in the table below.

There is approximately $2.4 million of deferred compensation related to unvested performance shares that is expected to be recognized over the weighted average period of 1.7 years.

The following table summarizes the performance share activity under the stock award and incentive plans for the past three fiscal years:
 
Shares (1)
Weighted Average
Grant Date
Fair Value
Total Fair Value of Vested Shares (in Thousands)
Non-vested and outstanding at September 30, 2016
179,916

 
$27.47
 
 
—

 
Granted
96,507

 
$33.57
 
 
—

 
Vested (2)
(95,407
)
 
$28.88
 
 
$
4,179

 
Cancelled/forfeited
(24,429
)
 
$29.14
 
 
—

 
Non-vested and outstanding at September 30, 2017
156,587

 
$30.12
 
 
—

 
Granted
91,177

 
$44.67
 
 
—

 
Vested (3)
(100,146
)
 
$29.49
 
 
$
4,714

 
Cancelled/forfeited
(2,442
)
 
$31.45
 
 
—

 
Non-vested and outstanding at September 30, 2018
145,176

 
$39.67
 
 
—

 
Granted
100,262

 
$47.98
 
 
—

 
Vested (4)
(103,009
)
 
$38.52
 
 
$
4,622

 
Cancelled/forfeited
(11,920
)
 
$44.34
 
 
—

 
Non-vested and outstanding at September 30, 2019
130,509

 
$46.53
 
 
—

 
(1)
The number of common shares issued related to certain performance shares may range from zero to 150 percent of the number of shares shown in the table above based on the Company’s achievement of performance goals.
(2)
As certified by the Company’s Leadership and Compensation Committee on November 14, 2017, the number of common shares related to performance shares earned was 108.44 percent, or 39,595 shares, the number of common shares earned related to NFE performance was 119 percent or 36,498 shares, and the number of common shares earned related to Performance Based Restricted Stock was 100 percent or 28,223 shares. Each award earned excludes accumulated dividends. The number represented on this line is the target number of 100 percent.
(3)
As certified by the Company’s Leadership and Compensation Committee on November 13, 2018, the number of common shares earned related to TSR performance was 99 percent or 38,660 shares, the number of common shares earned related to NFE performance was 121 percent or 39,694 shares, and the number of common shares earned related to Performance Based Restricted Stock was 100 percent or 36,998 shares. Each award earned excludes accumulated dividends. The number represented on this line is the target number of 100 percent.
(4)
As certified by the Company’s Leadership and Compensation Committee on November 12, 2019, the number of common shares earned related to TSR performance was 119 percent or 43,641 shares, the number of common shares earned related to NFE performance was 117 percent or 26,413 shares and the number of common shares earned related to Performance Based Restricted Stock was 100 percent or 24,468 shares. Each award earned excludes accumulated dividends. The number represented on this line is the target number of 100 percent.

The Company measures compensation expense related to performance shares based on the fair value of these awards at their date of grant. In accordance with ASC 718, Compensation - Stock Compensation, compensation expense for market condition grants are recognized for awards granted, and are not adjusted based on actual achievement of the performance goals. The Company estimated the fair value of these grants on the date of grant using a lattice model. Performance condition grants are initially fair valued at the Company’s stock price on grant date, and are subsequently adjusted for actual achievement of the performance goals.

Restricted Stock

In fiscal 2019, the Company granted 29,222 shares of restricted stock that vest annually over a three-year period beginning October 15, 2019. In fiscal 2019, the Company also granted 6,062 shares of restricted stock that vest annually over a three-year period beginning April 2020. In fiscal 2018, the Company granted 27,949 shares of restricted stock that vest annually over a three-year period beginning in October 2018. In fiscal 2017, the Company granted 22,591 shares of restricted stock that vest annually over a three-year period beginning in October 2017. In fiscal 2017, the Company also granted 6,143 shares of restricted stock that vest annually over a three-year period beginning May 2018. There is approximately $943,000 of deferred compensation related to unvested restricted stock shares that is expected to be recognized over the weighted average period of 1.9 years.

The following table summarizes the restricted stock activity under the stock award and incentive plans for the past three fiscal years:
 
Shares
Weighted Average
Grant Date
Fair Value
Total Fair Value of Vested Shares (in Thousands)
Non-vested and outstanding at September 30, 2016
73,071

 
$29.09
 
 
—

 
Granted
28,734

 
$35.79
 
 
—

 
Vested
(38,752
)
 
$28.92
 
 
$
1,344

 
Cancelled/forfeited
(11,899
)
 
$31.56
 
 
—

 
Non-vested and outstanding at September 30, 2017
51,154

 
$32.40
 
 
—

 
Granted
27,949

 
$45.00
 
 
—

 
Vested
(33,815
)
 
$31.23
 
 
$
1,438

 
Cancelled/forfeited
(1,120
)
 
$33.54
 
 
—

 
Non-vested and outstanding at September 30, 2018
44,168

 
$41.24
 
 
—

 
Granted
35,284

 
$48.24
 
 
—

 
Vested
(20,748
)
 
$39.26
 
 
$
935

 
Cancelled/forfeited
(548
)
 
$42.96
 
 
—

 
Non-vested and outstanding at September 30, 2019
58,156

 
$46.18
 
 
—

 


Deferred Retention Stock

Deferred retention stock awards are granted upon approval by the Board of Directors, which generally occurs subsequent to the fiscal year end. Deferred retention stock awards vest immediately when granted, with shares delivered at a future date in accordance with the terms of the underlying agreements. The expense for these awards is recognized in the fiscal year in which services are rendered.

The following table summarizes the deferred retention stock award under the stock award and incentive plans for the past three fiscal years:
 
Shares
Weighted Average
Grant Date
Fair Value
Total Fair Value of Vested Shares (in Thousands)
Outstanding at September 30, 2016
662,479

 
$29.06
 
 
—

 
Granted/Vested
63,977

 
$35.64
 
 
—

 
Delivered
(53,878
)
 
$23.11
 
 
$
1,774

 
Outstanding at September 30, 2017
672,578

 
$29.54
 
 
—

 
Granted/Vested
24,167

 
$45.00
 
 
—

 
Delivered
(452,694
)
 
$29.42
 
 
$
19,581

 
Forfeited
(1,969
)
 
$35.56
 
 

 
Outstanding at September 30, 2018
242,082

 
$32.99
 
 
—

 
Granted/Vested
167,407

 
$47.95
 
 
—

 
Delivered
(158,733
)
 
$30.32
 
 
$
7,145

 
Forfeited
(7,195
)
 
$44.41
 
 
—

 
Outstanding at September 30, 2019
243,561

 
$44.67
 
 
—

 


Non-Employee Director Stock

Non-employee director compensation includes an annual January retainer that is awarded in stock. The shares vest immediately and are subsequently amortized to expense over a 12-month period. The following summarizes non-employee director share awards for the past three fiscal years:
 
2019
2018
2017
Shares granted
26,165
(1) 
26,524
27,972
Weighted average grant date fair value
$44.80
 
$39.85
$35.59
(1)
$311,000 of expense remains as of September 30, 2019, to be recognized through December 31, 2019.