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Stock-Based Compensation
 9 Months Ended
Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation Stock-Based Compensation

We maintain the Second Amended and Restated 2010 Stock Incentive Plan (Stock Incentive Plan), which allows us to grant stock-based compensation awards, including stock options, restricted stock units, phantom stock, and unrestricted stock units. Under the Stock Incentive Plan, we have 12,623,538 shares of common stock reserved and authorized for issuance subject to stock splits, dividends, and other similar events. At September 30, 2018, 6,449,209 shares were available for grant under the Stock Incentive Plan. We issue new shares of common stock upon the exercise of stock options or when vesting conditions on restricted stock units are fully satisfied. These shares are subject to a fungible share provision such that the authorized share reserve is reduced by (i) one share for every one share subject to a stock option or share appreciation right granted under the Plan and (ii) 1.7 shares for every one share of common stock that was subject to an award other than an option or share appreciation right.

As part of the acquisition of SSNI, we reserved and authorized 2,880,039 shares, collectively, of Itron common stock to be issued under the Stock Incentive Plan for certain SSNI common stock awards that were converted to Itron common stock awards on January 5, 2018 (Acquisition Date) pursuant to the Agreement and Plan of Merger or were available for issuance pursuant to future awards under the Silver Spring Networks, Inc. 2012 Equity Incentive Plan (SSNI Plan). New stock-based compensation awards
originally from the SSNI Plan may only be made to individuals who were not employees of Itron as of the Acquisition Date. Notwithstanding the foregoing, there is no fungible share provision for shares originally from the SSNI Plan. 

We also periodically award phantom stock units, which are settled in cash upon vesting and accounted for as liability-based awards with no impact to the shares available for grant.

In addition, we maintain the Employee Stock Purchase Plan (ESPP), for which 305,979 shares of common stock were available for future issuance at September 30, 2018.

Unrestricted stock and ESPP activity for the three and nine months ended September 30, 2018 and 2017 was not significant.

Stock-Based Compensation Expense
Total stock-based compensation expense and the related tax benefit were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Stock options
$
911

 
$
717

 
$
2,694

 
$
1,974

Restricted stock units
5,381

 
4,170

 
19,803

 
12,538

Unrestricted stock awards
158

 
232

 
572

 
742

Phantom stock units
762

 
626

 
2,039

 
1,510

Total stock-based compensation
$
7,212

 
$
5,745

 
$
25,108

 
$
16,764

 
 
 
 
 
 
 
 
Related tax benefit
$
1,259

 
$
1,192

 
$
4,387

 
$
3,520



Stock Options
A summary of our stock option activity is as follows:
 
Shares
 
Weighted
Average Exercise
Price per Share
 
Weighted Average
Remaining
Contractual Life
 
Aggregate
Intrinsic Value
 
Weighted
Average Grant
Date Fair Value
 
(in thousands)
 
 
 
(years)
 
(in thousands)
 
 
Outstanding, January 1, 2017
959

 
$
45.64

 
6.6
 
$
19,125

 
 
Granted
135

 
65.94

 
 
 
 
 
$
21.98

Exercised
(36
)
 
38.68

 
 
 
972

 
 
Forfeited
(35
)
 
47.38

 
 
 
 
 
 
Expired
(47
)
 
67.43

 
 
 
 
 
 
Outstanding, September 30, 2017
976

 
$
47.60

 
6.5
 
$
30,320

 
 
 
 
 
 
 
 
 
 
 
 
Outstanding, January 1, 2018
956

 
$
47.10

 
6.3
 
$
21,965

 
 
Converted upon acquisition
42

 
51.86

 
 
 
 
 
$
14.86

Granted
117

 
68.90

 
 
 
 
 
$
24.55

Exercised
(151
)
 
38.98

 
 
 
4,509

 
 
Forfeited
(3
)
 
68.43

 
 
 
 
 
 
Expired
(66
)
 
95.31

 
 
 
 
 
 
Outstanding, September 30, 2018
895

 
$
47.92

 
6.6
 
$
15,332

 
 
 
 
 
 
 
 
 
 
 
 
Exercisable September 30, 2018
590

 
$
42.53

 
5.6
 
$
12,867

 
 
 
 
 
 
 
 
 
 
 
 
Expected to vest, September 30, 2018
305

 
$
58.35

 
8.5
 
$
2,466

 
 

At September 30, 2018, total unrecognized stock-based compensation expense related to nonvested stock options was $3.5 million, which is expected to be recognized over a weighted average period of approximately 1.6 years.

The weighted-average assumptions used to estimate the fair value of stock options granted and the resulting weighted average fair value are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Expected volatility
28.6
%
 
29.0
%
 
30.6
%
 
32.5
%
Risk-free interest rate
2.9
%
 
1.8
%
 
2.8
%
 
2.0
%
Expected term (years)
6.1

 
5.5

 
6.1

 
5.5



Restricted Stock Units
The following table summarizes restricted stock unit activity:
 
Number of
Restricted Stock Units
 
Weighted
Average Grant
Date Fair Value
 
Aggregate
Intrinsic Value
 
(in thousands)
 
 
 
(in thousands)
Outstanding, January 1, 2017
701

 

 
 
Granted
141

 
$
65.54

 
 
Released
(340
)
 

 
$
13,097

Forfeited
(23
)
 

 
 
Outstanding, September 30, 2017
479

 

 
 
 
 
 
 
 
 
Outstanding, January 1, 2018
556

 
$
47.68

 
 
Converted upon acquisition
579

 
69.40

 
 
Granted
262

 
65.22

 
 
Released
(494
)
 
54.08

 
$
26,753

Forfeited
(102
)
 
68.15

 
 
Outstanding, September 30, 2018
801

 
62.57

 
 
 
 
 
 
 
 
Vested but not released, September 30, 2018
9

 
 
 
$
586

 
 
 
 
 
 
Expected to vest, September 30, 2018
741

 
 
 
$
47,554


At September 30, 2018, total unrecognized compensation expense on restricted stock units was $46.0 million, which is expected to be recognized over a weighted average period of approximately 2.1 years.

The weighted-average assumptions used to estimate the fair value of performance-based restricted stock units granted and the resulting weighted average fair value are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Expected volatility
N/A
 
27.9
%
 
28.0
%
 
28.0
%
Risk-free interest rate
N/A
 
1.4
%
 
2.2
%
 
1.0
%
Expected term (years)
N/A
 
2.3

 
2.1

 
1.7

 
 
 
 
 
 
 
 
Weighted average fair value
N/A
 
$
80.64

 
$
78.56

 
$
77.75



There were no performance-based restricted stock units granted for the three months ended September 30, 2018.
Phantom Stock Units
The following table summarizes phantom stock unit activity:
 
Number of Phantom Stock Units
 
Weighted
Average Grant
Date Fair Value
 
(in thousands)
 
 
Outstanding, January 1, 2017
62

 


Granted
32

 
$
65.55

Released
(20
)
 


Forfeited
(7
)
 


Outstanding, September 30, 2017
67

 


 
 
 
 
Expected to vest, September 30, 2017
67

 
 
 
 
 
 
Outstanding, January 1, 2018
63

 
$
51.88

Converted upon acquisition
21

 
69.40

Granted
37

 
68.06

Released
(34
)
 
53.55

Forfeited
(3
)
 
56.47

Outstanding, September 30, 2018
84

 
62.53

 
 
 
 
Expected to vest, September 30, 2018
84

 




At September 30, 2018, total unrecognized compensation expense on phantom stock units was $3.9 million which is expected to be recognized over a weighted average period of approximately 2.0 years. As of both September 30, 2018 and December 31, 2017, we have recognized a phantom stock liability of $1.7 million within wages and benefits payable in the Consolidated Balance Sheets.