Equity Incentive Program

6 Months Ended

Jun. 30, 2017

Share-based Compensation [Abstract]

Equity Incentive Program

Stock-based compensation expense recognized in the Consolidated Statements of Earnings totaled $6.3 million and $5.6 million for the three months ended June 30, 2017 and 2016, respectively. For the six months ended June 30,2017 and 2016, stock-based compensation expense was $12.4 million and $11.0 million, respectively.

Stock Options

The expense related to stock options granted in the six months ended June 30, 2017 and 2016 was estimated on the date of grant using a Black-Scholes option-pricing model based on the assumptions shown in the table below.

	Six Months Ended June 30,
	2017			2016
Risk-free interest rate	1.73%	to	1.93%	1.04%	to	1.12%
Dividend yield	—%			—%
Expected life (years)	4.5			4.5
Volatility	38.1%	to	38.8%	37.0%	to	39.6%
Fair value at date of grant	$6.07	to	$6.73	$3.76	to	$4.27

The following table summarizes the Company's stock-settled stock appreciation right ("SSAR") and stock option activity for the six months ended June 30,2017 (in millions except share and per share amounts).

	SSARs							Stock Options
	Number of Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Term (Years)	Number of Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Term (Years)
Outstanding at December 31, 2016	898,718		$	21.25				4,684,117		$	18.03
Granted	—		—					779,561		19.21
Exercised	(31,665	)	12.33					(218,389	)	14.49
Forfeited	—		—					(223,893	)	15.35
Expired	(16,537	)	23.20					(54,982	)	26.77
Outstanding at June 30, 2017	850,516		$	21.54	$	0.3	4.5	4,966,414		$	18.38	$	9.6	5.2
Exercisable at June 30, 2017	850,516		$	21.54	$	0.3	4.5	2,213,679		$	20.53	$	2.9	4.6

There was no unrecognized compensation expense related to SSARs at June 30, 2017. At June 30, 2017, unrecognized compensation expense related to stock options not yet exercisable was $11.7 million and is expected to be recognized over a weighted-average period of 1.3 years.

RSUs

The following table summarizes the Company's restricted stock unit ("RSU") balances for the six months ended June 30,2017.

	Share units		Weighted-average grant date fair value
Unvested at December 31, 2016	2,074,998		$	14.94
Granted	1,200,457		19.14
Vested	(709,951	)	16.03
Forfeited	(294,511	)	15.70
Unvested at June 30, 2017	2,270,993		$	16.70

At June 30, 2017, $30.6 million of unrecognized compensation expense related to RSUs is expected to be recognized over a weighted-average period of 1.5 years.

PSUs

In February 2017, the Company granted performance stock units ("PSUs") to senior management. The PSUs are awards that are subject to both performance and market conditions and provide the recipient with Knowles stock upon vesting. The awards vest three years subsequent to the initial grant date. The performance condition of the award is based on the Company's financial performance while the award's market condition relates to the Company's stock performance. Given the conditional nature of the PSU awards, the recipients can receive an award of the Company's common stock that can range from 0% to 225% of the initial grant value and is based on the level of achievement of the specified conditions. The Company will ratably recognize the expense over the requisite service period of the PSU and adjust the expense as appropriate. The fair value of the PSUs is determined by using a binomial model simulation.

The following table summarizes the Company's PSU balances for the six months ended June 30,2017.

	Share units	Weighted-average grant date fair value
Unvested at December 31, 2016	—	$	—
Granted	171,875	15.40
Vested	—	—
Forfeited	—	—
Unvested at June 30, 2017	171,875	$	15.40

At June 30, 2017, $2.4 million of unrecognized compensation expense related to PSUs is expected to be recognized over a weighted-average period of 2.6 years.