Share-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

Prior to May 19, 2020 we issued share-based compensation to employees and non-employee directors under the NiSource Inc. 2010 Omnibus Plan ("2010 Omnibus Plan"), which was most recently approved by stockholders at the Annual Meeting of Stockholders held on May 12, 2015. The 2010 Omnibus Plan provided for awards to employees and non-employee directors of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards and superseded the Director Stock Incentive Plan (“Director Plan”) with respect to grants made after the effective date of the 2010 Omnibus Plan.

The stockholders approved and adopted the NiSource Inc. 2020 Omnibus Incentive Plan ("2020 Omnibus Plan") at the Annual Meeting of Stockholders held on May 19, 2020. The 2020 Omnibus Plan provides for awards to employees and non-employee directors of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards and supersedes the 2010 Omnibus Plan with respect to grants made after the effective date of the 2020 Omnibus Plan.

The 2020 Omnibus Plan provides that the number of shares of common stock of NiSource available for awards is 10,000,000 plus the number of shares subject to outstanding awards that expire or terminate for any reason that were granted under the 2020 Omnibus Plan, the 2010 Omnibus Plan or any other equity plan under which awards were outstanding as of May 19, 2020. At December 31, 2020, there were 10,007,832 shares available for future awards under the 2020 Omnibus Plan.

We recognized stock-based employee compensation expense of $13.5 million, $16.3 million and $15.2 million, during 2020, 2019 and 2018, respectively, as well as related tax benefits of $3.3 million, $4.0 million and $3.7 million, respectively. We recognized related excess tax expense from the distribution of vested share-based employee compensation of $0.4 million in 2020 and excess tax benefits of $0.8 million and $1.0 million in 2019 and 2018, respectively.

As of December 31, 2020, the total remaining unrecognized compensation cost related to non-vested awards amounted to $19.1 million, which will be amortized over the weighted-average remaining requisite service period of 1.9 years.

Restricted Stock Units and Restricted Stock. We granted 235,100, 166,031, and 158,689 restricted stock units and shares of restricted stock to employees, subject to service conditions in 2020, 2019, and 2018, respectively. The total grant date fair value of the restricted stock units and shares of restricted stock during 2020, 2019, and 2018, respectively, was $6.1 million, $4.1 million, and $3.5 million based on the average market price of our common stock at the date of each grant less the present value of any dividends not received during the vesting period, which will be expensed over the vesting period which is generally three

years. As of December 31, 2020, 223,724, 135,170, and 119,333 non-vested restricted stock units and shares of restricted stock granted in 2020, 2019, and 2018, respectively.

If an employee terminates employment before the service conditions lapse under the 2018, 2019 or 2020 awards due to (1) retirement or disability (as defined in the award agreement), or (2) death, the service conditions will lapse on the date of such termination with respect to a pro rata portion of the restricted stock units and shares of restricted stock based upon the percentage of the service period satisfied between the grant date and the date of the termination of employment. In the event of a change in control (as defined in the award agreement), all unvested shares of restricted stock and restricted stock units awarded will immediately vest upon termination of employment occurring in connection with a change in control. Termination due to any other reason will result in all unvested shares of restricted stock and restricted stock units awarded being forfeited effective on the employee’s date of termination.

A summary of our restricted stock unit award transactions for the year ended December 31, 2020 is as follows:


(shares)	Restricted Stock Units	Weighted Average Award Date Fair Value Per Unit ($)
Non-vested at December 31, 2019	302,606	23.49
Granted	235,100	25.77
Forfeited	(38,220)	24.18
Vested	(21,259)	24.68
Non-vested at December 31, 2020	478,227	24.51

Employee Performance Shares. We granted 528,729 and 552,389 performance shares subject to service, performance and market-based vesting conditions in 2020 and 2019, respectively. We awarded 514,338 performance shares subject to similar service, performance and market conditions in 2018. The performance conditions are based on the achievement of one non-GAAP financial measure, relative total shareholder return and additional operational measures as outlined below.

The financial measure is cumulative net operating earnings per share ("NOEPS"), which we define as income from continuing operations adjusted for certain items. The number of cumulative NOEPS shares determined using this measure shall be increased or decreased based on our relative total shareholder return, a market-based vesting condition, which we define as the annualized growth in dividends and share price of a share of our common stock (calculated using a 20 trading day average of our closing price over the performance period, approximately) compared to the total shareholder return of a predetermined peer group of companies. A relative shareholder return result within the first quartile will result in an increase to the NOEPS shares of 25%, while a relative shareholder return result within the fourth quartile will result in a decrease of 25%. A Monte Carlo analysis was used to value the portion of these awards dependent on the market-based vesting condition. The grant date fair value of the NOEPS shares is based on the average market price of our common stock at the date of each grant less the present value of dividends not received during the vesting period, which will be expensed over the requisite service period of three years. See table below for further details on these awards.

If a threshold level of cumulative NOEPS financial performance is achieved, additional operational measures, which we refer to as the customer value framework and which consists of equally weighted areas of focus, apply. Each area of focus represents an equal portion of the customer value framework shares, and the targets for all areas of focus must be met for the customer value framework shares to vest at 100%. The grant date fair value of the customer value framework shares is based on the average market price of our common stock on the grant date of each award less the present value of dividends not received during the vesting period, which will be expensed over the requisite service period of three years for those customer value framework shares that are granted. See table below for further details on these awards.

For the 2020 awards, the customer value framework consists of four equally weighted areas of focus including safety, customer satisfaction, culture and environmental, each representing 25% of the customer value framework shares. For the 2019 and 2018 awards, the customer value framework consists of five equally weighted areas of focus including financial and all those noted for the 2020 awards, each representing 20% of the customer value framework shares.

For the 2018 awards, individual payout percentages for these shares may range from 0%-200% as determined by the compensation committee in its sole discretion. Due to this discretion, these shares are not considered to be granted under ASC

718. The service inception date fair value of the awards is based on the closing market price of our common stock on the service inception date of each award. This value will be reassessed at each reporting period to be based on our closing market price of our common stock at the reporting period date with adjustments to expense recorded as appropriate.

The following table presents details of the performance awards described above.


Award Year	Service Conditions Lapse date	Performance Period	Award Conditions	Shares outstanding at 12/31/2020 (shares)	Grant Date Fair Value (in millions)
2020	02/28/23	01/01/2020- 12/31/2022	Non-GAAP Financial Measure	392,619	$	11.7
			Operational Measures	90,604	$	2.6
2019	02/28/22	01/01/2019- 12/31/2021	Non-GAAP Financial Measure	384,680	$	11.7
			Operational Measures	88,769	$	2.5
2018	02/26/21	01/01/2018- 12/31/2020	Non-GAAP Financial Measure	347,479	$	9.2
			Operational Measures(1)	80,185	$	2.4

(1) Grant date fair value amount represents the service inception date fair value of these awards as they are not yet granted.

A summary of our performance award transactions for the year ended December 31, 2020 is as follows:


(shares)	Performance Awards	Weighted Average Grant Date Fair Value Per Unit ($)(1)
Non-vested at December 31, 2019	1,503,251	22.74
Granted	528,729	27.01
Forfeited	(118,716)	25.63
Vested	(528,928)	28.30
Non-vested at December 31, 2020	1,384,336	25.09

(1) 2018 performance shares awarded based on the customer value index are included at reporting date fair value as these awards have not been granted under ASC 718 as discussed above.

Non-employee Director Awards. As of May 19, 2020, awards to non-employee directors may be made only under the 2020 Omnibus Plan. Currently, restricted stock units are granted annually to non-employee directors, subject to a non-employee director’s election to defer receipt of such restricted stock unit award. The non-employee director’s annual award of restricted stock units vest on the first anniversary of the grant date subject to special pro-rata vesting rules in the event of retirement or disability (as defined in the award agreement), or death. The vested restricted stock units are payable as soon as practicable following vesting except as otherwise provided pursuant to the non-employee director’s deferral election. Certain restricted stock units remain outstanding from the 2010 Omnibus Plan and the Director Plan. All such awards are fully vested and shall be distributed to the directors upon their separation from the Board.

As of December 31, 2020, 210,273 restricted stock units are outstanding to non-employee directors under either the 2020 Omnibus Plan, the 2010 Omnibus Plan or the Director Plan. Of this amount, 67,806 restricted stock units are unvested and expected to vest.

401(k) Match, Profit Sharing and Company Contribution. We have a voluntary 401(k) savings plan covering eligible employees that allows for periodic discretionary matches as a percentage of each participant’s contributions payable in cash for nonunion employees and generally payable in shares of NiSource common stock for union employees, subject to collective bargaining. We also have a retirement savings plan that provides for discretionary profit sharing contributions similarly payable in cash or shares of NiSource common stock to eligible employees based on earnings results, and eligible employees hired after

January 1, 2010 receive a non-elective company contribution of 3% of eligible pay similarly payable in cash or shares of NiSource common stock. For the years ended December 31, 2020, 2019 and 2018, we recognized 401(k) match, profit sharing and non-elective contribution expense of $37.8 million, $37.5 million and $37.6 million, respectively.