Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

We grant stock-based compensation awards under the Second Amended and Restated 2010 Stock Incentive Plan (Stock Incentive Plan), including stock options, restricted stock units, phantom stock, and unrestricted stock units. In 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 December 31, 2019, 5,977,990 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 2,299,591 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 ESPP, for which 232,563 shares of common stock were available for future issuance at December 31, 2019.

Unrestricted stock and ESPP activity for the years ended December 31, 2019, 2018, and 2017 was not significant.

Stock-Based Compensation Expense

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


	Year Ended December 31,
In thousands	2019		2018		2017
Stock options	$	1,770	$	3,675	$	2,695
Restricted stock units	24,560		26,859		17,738
Unrestricted stock awards	630		729		974
Phantom stock units	3,301		2,165		1,747
Total stock-based compensation	$	30,261	$	33,428	$	23,154

Related tax benefit	$	5,390	$	6,019	$	5,034

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					$	21.99
Exercised	(41)	39.92			$	1,071
Forfeited	(35)	47.38
Expired	(62)	70.12
Outstanding, December 31, 2017	956	$	47.10	6.3	$	21,965

Converted upon acquisition	42	$	51.86				$	14.86
Granted	122	68.21					$	24.29
Exercised	(152)	38.99			$	4,520
Forfeited	(7)	60.03
Expired	(66)	95.31
Outstanding, December 31, 2018	895	$	47.93	6.2	$	4,806

Granted	76	$	76.55				$	26.20
Exercised	(489)	43.55			$	15,759
Forfeited	(13)	67.34
Expired	(11)	66.24
Outstanding, December 31, 2019	458	$	56.38	7.0	$	12,641

Exercisable, December 31, 2019	272	$	46.37	5.8	$	10,223

At December 31, 2019, total unrecognized stock-based compensation expense related to unvested stock options was $2.5 million, which is expected to be recognized over a weighted average period of approximately 2.3 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:


	Year Ended December 31,
	2019		2018		2017
Expected volatility	31.7	%	30.5	%	32.5	%
Risk-free interest rate	1.7	%	2.8	%	2.0	%
Expected term (years)	6.1		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	273	$	50.95
Released	(372)			$	14,219
Forfeited	(46)
Outstanding, December 31, 2017	556	$	47.68

Converted upon acquisition	579	$	69.40
Granted	387	$	57.48
Released	(593)			$	32,567
Forfeited	(112)
Outstanding, December 31, 2018	817	$	59.70

Granted	404	$	62.97
Released	(471)	$	62.28	$	29,304
Forfeited	(66)	$	66.12
Outstanding, December 31, 2019	684	$	64.38

Vested but not released, December 31, 2019	72			$	6,037

At December 31, 2019, total unrecognized compensation expense on restricted stock units was $32.1 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 with a service and market condition and the resulting weighted average fair value are as follows:


	Year Ended December 31,
	2019			2018			2017
Expected volatility	31.4		%	28.0		%	28.0		%
Risk-free interest rate	2.5		%	2.2		%	1.0		%
Expected term (years)	1.6			2.1			1.7

Weighted average grant date fair value	$	61.25		$	78.56		$	77.75

Phantom Stock Units

The following table summarizes phantom stock unit activity:


	Number of Phantom Stock Units	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
	In thousands			In thousands
Outstanding, January 1, 2017	62
Granted	32	$	65.55
Released	(20)			$	1,310
Forfeited	(11)
Outstanding, December 31, 2017	63



Outstanding, January 1, 2018	63
Converted upon acquisition	21
Granted	41	$	66.67
Released	(35)			$	2,409
Forfeited	(7)
Outstanding, December 31, 2018	83



Outstanding, January 1, 2019	83	$	61.80
Granted	55	$	60.49
Released	(42)	$	57.13	$	2,625
Forfeited	(7)	$	66.09
Outstanding, December 31, 2019	89	$	62.85

At December 31, 2019, total unrecognized compensation expense on phantom stock units was $5.3 million, which is expected to be recognized over a weighted average period of approximately 2.1 years. As of December 31, 2019 and 2018, we have recognized a phantom stock liability of $2.3 million and $1.5 million, respectively, within wages and benefits payable in the Consolidated Balance Sheets.