Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

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 June 30, 2019, 6,340,860 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 255,845 shares of common stock were available for future issuance at June 30, 2019.

Unrestricted stock and ESPP activity for the three and six months ended June 30, 2019 and 2018 was not significant.

Stock-Based Compensation Expense

Total stock-based compensation expense and the related tax benefit were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2019		2018		2019		2018
Stock options	$	443	$	952	$	1,024	$	1,783
Restricted stock units	5,977		7,365		12,444		14,422
Unrestricted stock awards	158		207		315		414
Phantom stock units	525		587		1,443		1,277
Total stock-based compensation	$	7,103	$	9,111	$	15,226	$	17,896

Related tax benefit	$	1,275	$	1,594	$	2,718	$	3,128

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, 2018	956		$	47.10	6.3	$	21,965
Converted upon acquisition	42		51.86					$	14.86
Granted	101		69.30					$	24.83
Exercised	(87	)	40.08			2,779
Forfeited	(3	)	68.43
Expired	(66	)	95.33
Outstanding, June 30, 2018	943		$	46.92	6.7	$	14,066

Outstanding, January 1, 2019	895		$	47.93	6.2	$	4,806
Exercised	(59	)	40.57			1,057
Forfeited	(8	)	67.38
Expired	(9	)	66.36
Outstanding, June 30, 2019	819		$	48.06	5.8	$	12,958

Exercisable, June 30, 2019	691		$	44.67	5.3	$	12,841

Expected to vest, June 30, 2019	128		$	66.35	8.4	$	117

At June 30, 2019, total unrecognized stock-based compensation expense related to nonvested stock options was $1.4 million, which is expected to be recognized over a weighted average period of approximately 1.5 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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Expected volatility	—	%	—	%	—	%	30.9	%
Risk-free interest rate	—	%	—	%	—	%	2.8	%
Expected term (years)	N/A		N/A		N/A		6.1

There were no employee stock options granted for the three and six months ended June 30, 2019, and for the three months ended June 30, 2018.

Restricted Stock Units

The following table summarizes restricted stock unit activity:



In thousands	Number of Restricted Stock Units		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding, January 1, 2018	556
Converted upon acquisition	579
Granted	150		$	67.61
Released ⁽¹⁾	(445	)			$	23,609
Forfeited	(79	)
Outstanding, June 30, 2018	761

Outstanding, January 1, 2019	817		$	59.70
Granted	118		56.40
Released ⁽¹⁾	(363	)	61.42		$	22,304
Forfeited	(36	)	66.61
Outstanding, June 30, 2019	536		63.92

Vested but not released, June 30, 2019	8				$	516

Expected to vest, June 30, 2019	524				$	32,796

⁽¹⁾ Shares released is presented gross of shares netted for employee payroll tax obligations.

At June 30, 2019, total unrecognized compensation expense on restricted stock units was $29.8 million, which is expected to be recognized over a weighted average period of approximately 1.9 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 June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Expected volatility	—		%	—		%	31.3		%	28.0		%
Risk-free interest rate	—		%	—		%	2.5		%	2.2		%
Expected term (years)	N/A			N/A			1.6			2.1

Weighted average fair value	$	—		$	—		$	60.91		$	78.56

There were no performance-based restricted stock units granted for the three months ended June 30, 2019 and 2018.

Phantom Stock Units

The following table summarizes phantom stock unit activity:



In thousands	Number of Phantom Stock Units		Weighted Average Grant Date Fair Value
Outstanding, January 1, 2018	63
Converted upon acquisition	21
Granted	32		$	69.22
Released	(32	)
Forfeited	(3	)
Outstanding, June 30, 2018	81

Expected to vest, June 30, 2018	81

Outstanding, January 1, 2019	83		$	61.80
Granted	13		50.33
Released	(37	)	56.37
Forfeited	(4	)	65.18
Outstanding, June 30, 2019	55		62.40

Expected to vest, June 30, 2019	55

At June 30, 2019, total unrecognized compensation expense on phantom stock units was $2.8 million, which is expected to be recognized over a weighted average period of approximately 1.9 years. As of both June 30, 2019 and December 31, 2018, we have recognized a phantom stock liability of $0.7 million and $1.5 million, respectively, within wages and benefits payable in the Consolidated Balance Sheets.