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Share-based Compensation Plans | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Share-based Compensation Plans | (14) SHARE-BASED COMPENSATION PLANS Our Amended and Restated 2015 Omnibus Incentive Plan allows for the granting of stock, restricted stock, restricted stock units, stock options, performance shares and performance share units. We had 2,132,275 shares available to grant at December 31, 2023. Compensation expense is determined using the grant date fair value estimated in accordance with the provisions of accounting standards for stock compensation and is recognized over the vesting periods of the individual awards. As of December 31, 2023, total unrecognized compensation expense related to non-vested stock awards was $10.6 million and is expected to be recognized over a weighted-average period of 1.7 years. Stock-based compensation expense, which is included in Operations and maintenance on the accompanying Consolidated Statements of Income, was as follows for the ye ars ended December 31 (in millions):
| 2023 |  | 2022 |  | 2021 |
Stock-based compensation expense | $ | 7.0 |  | $ | 8.6 |  | $ | 9.7 |
Restricted Stock The fair value of restricted stock and restricted stock unit awards equals the market price of our stock on the date of grant. The shares carry a restriction on the ability to sell the shares until the shares vest. The shares substantially vest over three years, contingent on continued employment. Compensation expense related to the awards is recognized over the vesting period. A summary of the status of the restricted stock and restricted stock units at December 31, 2023, was as follows:
| Restricted Stock |  | Weighted-Average Grant Date Fair Value |
Balance at January 1, 2023 |  | 178,129 |  | $ | 67.23 |
Granted |  | 110,198 |  |  | 63.33 |
Vested |  | (97,084 | ) |  | 67.56 |
Forfeited |  | (26,556 | ) |  | 65.10 |
Balance at December 31, 2023 |  | 164,687 |  | $ | 64.81 |
The weighted-average grant-date fair value of restricted stock granted, and the total fair value of shares vested during the years ended December 31, were as follows:
| Weighted-Average Grant Date Fair Value |  | Total Fair Value of Shares Vested |
|  |  | (in millions) |
2023 | $ | 63.33 |  | $ | 5.9 |
2022 | $ | 69.03 |  | $ | 6.4 |
2021 | $ | 65.64 |  | $ | 5.4 |
As of December 31, 2023, there was $6.3 million of unrecognized compensation expense related to non-vested restricted stock that is expected to be recognized over a weighted-average period of 1.6 years. Performance Share Units Beginning in 2021, certain officers of the Company, and its subsidiaries, were granted performance share units which have a three-year vesting period, do not have voting rights until vested, and are subject to three specified conditions. A market condition of relative total shareholder return and two equally weighted performance metrics of average earnings per share and the average cost to serve. Beginning in 2023, the metric of natural gas emissions reduction by 2035 was added, resulting in three equally weighted performance metrics. The units are paid 100% in common stock should conditions be met and can range from 0% to 200% of the target award. Dividend equivalents are accrued during the vesting period and paid out based on the final number of shares awarded. In the event of participant’s death or retirement at age 55 or older, shares awarded vest on a pro-rata basis commensurate with the months of service performed over the three-year period. Performance Share Units - Market Condition The fair value of each share unit is based on the Company’s closing price at December 31 of the year prior to the award and a Monte Carlo simulation. The Monte Carlo simulation is used to estimate expected share payout based on the Company’s TSR for a three-year performance period relative to the designated peer group beginning January 1 of the award year. The significant assumptions included in the company's Monte Carlo simulations were as follows:
| 2023 | 2022
Fair value of share units award | $77.95 | $74.48
Risk-free rate | 3.84% | 0.97%
Black Hills Corporation’s common stock volatility | 31% | 30%
Volatility range for the peer group | 24-39% | 22-67%
Performance Share Units - Performance Condition A performance condition share unit vests at the end of the three-year performance period if the specified performance conditions are achieved. The conditions are based on the Company’s average earnings per share, the average cost to serve and natural gas emissions reductions by 2035. The grant-date fair value for an individual outcome of a performance condition is determined by the closing common share price on the grant date or, beginning in 2023, the average ten-day closing common share price preceding the grant date. The following table summarizes the performance share unit activity for the year ended December 31, 2023:
| Performance Share Units - Market Condition |  | Performance Share Units - Performance Condition |
| Share Units |  | Weighted-Average Fair Value per Share Unit |  | Share Units |  | Weighted-Average Fair Value per Share Unit |
Nonvested at January 1, 2023 |  | 68,474 |  | $ | 69.91 |  |  | 45,666 |  | $ | 66.19 |
Granted |  | 50,440 |  |  | 77.95 |  |  | 21,615 |  |  | 71.50 |
Forfeited |  | (8,167 | ) |  | 73.43 |  |  | (4,627 | ) |  | 68.03 |
Nonvested at December 31, 2023 |  | 110,747 |  | $ | 73.31 |  |  | 62,654 |  | $ | 67.88 |
As of December 31, 2023, there was $4.0 million of unrecognized compensation expense related to outstanding performance share/units that is expected to be recognized over a weighted-average period of 1.8 years. On January 25, 2024, the Compensation Committee of our Board of Directors confirmed a payout equal to 16.21% of target shares valued at $0.5 million. The payout was fully accrued at December 31, 2023. Performance Share Plan Prior to 2021, certain officers of the Company and its subsidiaries became participants in a market-based performance share award plan. Performance shares are awarded based on our total shareholder return over designated performance periods as measured against a selected peer group. In addition, certain stock price performance must be achieved for a payout to occur. The final value of the performance shares will vary according to the number of shares of common stock that are ultimately granted based upon the actual level of attainment of the performance criteria. These performance share awards were paid 50% in cash and 50% in common stock. The outstanding performance periods at December 31, 2023 were as follows:
|  |  | Possible Payout Range of Target
Grant Date | Performance Period | Target Grant of Shares | Minimum | Maximum
January 1, 2020 | January 1, 2020 - December 31, 2022 | 35,571 | 0% | 200%
A summary of the status of the Performance Share Plan at December 31, 2023 was as follows:
| Equity Portion |  | Liability Portion |
|  |  | Weighted-Average Grant Date |  |  |  | Weighted-Average Fair Value at |
| Shares |  | Fair Value (a) |  | Shares |  | December 31, 2023 |
Performance Shares balance at beginning of period |  | 18,105 |  | $ | 81.42 |  |  | 18,105 |  |  |
Granted |  | — |  |  | — |  |  | — |  |  |
Forfeited |  | — |  |  | — |  |  | — |  |  |
Vested |  | (18,105 | ) |  | 81.42 |  |  | (18,105 | ) |  |
Performance Shares balance at end of period |  | — |  | $ | — |  |  | — |  | $ | — |
(a) The grant date fair values for the performance shares granted in 2020 were determined by Monte Carlo simulation using a blended volatility o f 18%, comprised of 50% historical volatility and 50% implied volatility and the average risk-free interest rate of the three-year United States Treasury security rate in effect as of the grant date. Performance plan payouts have been as follows (in millions, except stock issued):
Performance Period | Year Paid | Stock Issued |  | Cash Paid |  | Total Intrinsic Value |
January 1, 2020 to December 31, 2022 | 2023 |  | 4,958 |  | $ | 0.3 |  | $ | 0.7 |
January 1, 2019 to December 31, 2021 | 2022 |  | 7,582 |  | $ | 0.5 |  | $ | 1.0 |
January 1, 2018 to December 31, 2020 | 2021 |  | 27,515 |  | $ | 1.6 |  | $ | 3.3 |

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