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Stock-Based Compensation
3 Months Ended
Mar. 31, 2019
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 March 31, 2019, 6,318,953 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 272,602 shares of common stock were available for future issuance at March 31, 2019.

Unrestricted stock and ESPP activity for the three months ended March 31, 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 March 31,
In thousands
2019
 
2018
Stock options
$
581

 
$
831

Restricted stock units
6,467

 
7,057

Unrestricted stock awards
157

 
207

Phantom stock units
918

 
690

Total stock-based compensation
$
8,123

 
$
8,785

 
 
 
 
Related tax benefit
$
1,443

 
$
1,534



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
(62
)
 
40.31

 
 
 
2,104

 
 
Forfeited
(3
)
 
72.25

 
 
 
 
 
 
Expired
(7
)
 
95.96

 
 
 
 
 
 
Outstanding, March 31, 2018
1,027

 
$
49.49

 
6.5
 
$
24,051

 
 
 
 
 
 
 
 
 
 
 
 
Outstanding, January 1, 2019
895

 
$
47.93

 
6.2
 
$
4,806

 
 
Exercised
(20
)
 
44.99

 
 
 
211

 
 
Forfeited
(7
)
 
67.53

 
 
 
 
 
 
Outstanding, March 31, 2019
868

 
$
47.83

 
6.0
 
$
4,402

 
 
 
 
 
 
 
 
 
 
 
 
Exercisable, March 31, 2019
734

 
$
44.46

 
5.5
 
$
4,402

 
 
 
 
 
 
 
 
 
 
 
 
Expected to vest, March 31, 2019
134

 
$
66.25

 
8.6
 
$

 
 

At March 31, 2019, total unrecognized stock-based compensation expense related to nonvested stock options was $1.8 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 March 31,
 
2019
 
2018
Expected volatility
%
 
30.9
%
Risk-free interest rate
%
 
2.8
%
Expected term (years)
N/A

 
6.1


There were no employee stock options granted for the three months ended March 31, 2019.

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
136

 
$
69.30

 
 
Released (1)
(352
)
 

 
$
17,231

Forfeited
(28
)
 

 
 
Outstanding, March 31, 2018
891

 

 
 
 
 
 
 
 
 
Outstanding, January 1, 2019
817

 
$
59.70

 
 
Granted
107

 
56.04

 
 
Released (1)
(316
)
 
60.29

 
$
19,074

Forfeited
(17
)
 
66.17

 
 
Outstanding, March 31, 2019
591

 
64.51

 
 
 
 
 
 
 
 
Vested but not released, March 31, 2019
8

 
 
 
$
361

 
 
 
 
 
 
Expected to vest, March 31, 2019
579

 
 
 
$
27,018


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

At March 31, 2019, total unrecognized compensation expense on restricted stock units was $36.2 million, which is expected to be recognized over a weighted average period of approximately 2.0 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 March 31,
 
2019
 
2018
Expected volatility
31.3
%
 
28.0
%
Risk-free interest rate
2.5
%
 
2.2
%
Expected term (years)
1.6

 
2.1

 
 
 
 
Weighted average fair value
$
60.91

 
$
78.56




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
31

 
$
69.30

Released
(27
)
 


Forfeited
(1
)
 


Outstanding, March 31, 2018
87

 


 
 
 
 
Expected to vest, March 31, 2018
85

 
 
 
 
 
 
Outstanding, January 1, 2019
83

 
$
61.80

Granted
12

 
49.39

Released
(35
)
 
55.99

Forfeited
(2
)
 
63.88

Outstanding, March 31, 2019
58

 
62.56

 
 
 
 
Expected to vest, March 31, 2019
58

 




At March 31, 2019, total unrecognized compensation expense on phantom stock units was $2.5 million, which is expected to be recognized over a weighted average period of approximately 2.1 years. As of both March 31, 2019 and December 31, 2018, we have recognized a phantom stock liability of $0.3 million and $1.5 million, respectively, within wages and benefits payable in the Consolidated Balance Sheets.