XML 33 R16.htm IDEA: XBRL DOCUMENT
v3.6.0.2

Stock-Based Compensation (Text Block) | 12 Months Ended
--- | ---
Dec. 31, 2016
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] |
Stock-Based Compensation [Text Block] | Stock-Based Compensation We recognize stock-based compensation expense for awards of stock options, and the issuance of restricted stock units and unrestricted stock awards. We expense stock-based compensation primarily using the straight-line method over the requisite service period. For the years ended December 31, stock-based compensation expense and the related tax benefit were as follows:
| 2016 |  | 2015 |  | 2014
| (in thousands)
Stock options | $ | 2,357 |  |  | $ | 2,648 |  |  | $ | 2,333 |
Restricted stock units | 14,723 |  |  | 10,735 |  |  | 14,591 |
Unrestricted stock awards | 955 |  |  | 706 |  |  | 936 |
Phantom stock units | 1,077 |  |  | — |  |  | — |
Total stock-based compensation | $ | 19,112 |  |  | $ | 14,089 |  |  | $ | 17,860 |
Related tax benefit | $ | 4,927 |  |  | $ | 4,228 |  |  | $ | 4,994 |
We issue new shares of common stock upon the exercise of stock options or when vesting conditions on restricted stock units are fully satisfied. Subject to stock splits, dividends, and other similar events, 7,473,956 shares of common stock are reserved and authorized for issuance under our 2010 Stock Incentive Plan (Stock Incentive Plan). Awards consist of stock options, restricted stock units, and unrestricted stock awards. At December 31, 2016, 2,092,602 shares were available for grant under the Stock Incentive Plan. The Stock Incentive Plan shares are subject to a fungible share provision such that, with respect to grants made after December 31, 2009, 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 stock appreciation right. Stock Options Options to purchase our common stock are granted to certain employees, senior management, and members of our Board of Directors with an exercise price equal to the market close price of the stock on the date the Board of Directors approves the grant. Options generally become exercisable in three equal annual installments beginning one year from the date of grant and generally expire 10 years from the date of grant. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated based on our historical experience and future expectations. The fair values of stock options granted were estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Dividend yield | — |  |  | — |  |  | — |
Expected volatility | 33.5 | % |  | 34.3 | % |  | 39.3 | %
Risk-free interest rate | 1.3 | % |  | 1.7 | % |  | 1.7 | %
Expected term (years) | 5.5 |  |  | 5.5 |  |  | 5.5 |
Expected volatility is based on a combination of the historical volatility of our common stock and the implied volatility of our traded options for the related expected term. We believe this combined approach is reflective of current and historical market conditions and is an appropriate indicator of expected volatility. The risk-free interest rate is the rate available as of the award date on zero-coupon U.S. government issues with a term equal to the expected life of the award. The expected life is the weighted average expected life of an award based on the period of time between the date the award is granted and the estimated date the award will be fully exercised. Factors considered in estimating the expected life include historical experience of similar awards, contractual terms, vesting schedules, and expectations of future employee behavior. We have not paid dividends in the past and do not plan to pay dividends in the foreseeable future. A summary of our stock option activity for the years ended December 31 is as follows:
| Shares |  | Weighted Average Exercise Price per Share |  | Weighted Average Remaining Contractual Life |  | Aggregate Intrinsic Value(1) |  | Weighted Average Grant Date Fair Value
| (in thousands) |  |  |  | (years) |  | (in thousands) |  |
Outstanding, January 1, 2014 | 1,180 |  |  | $ | 54.79 |  |  | 4.6 |  | $ | 1,300 |  |  |
Granted | 160 |  |  | 35.65 |  |  |  |  |  |  | $ | 13.65 |
Exercised | (67 | ) |  | 28.03 |  |  |  |  | 826 |  |  |
Forfeited | (7 | ) |  | 44.06 |  |  |  |  |  |  |
Expired | (143 | ) |  | 68.97 |  |  |  |  |  |  |
Outstanding, December 31, 2014 | 1,123 |  |  | $ | 51.90 |  |  | 4.4 |  | $ | 1,676 |  |  |
Granted | 291 |  |  | $ | 35.25 |  |  |  |  |  |  | $ | 12.09 |
Exercised | (24 | ) |  | 36.05 |  |  |  |  | $ | 26 |  |  |
Forfeited | (17 | ) |  | 37.47 |  |  |  |  |  |  |
Expired | (193 | ) |  | 52.17 |  |  |  |  |  |  |
Outstanding, December 31, 2015 | 1,180 |  |  | $ | 48.31 |  |  | 5.7 |  | $ | 405 |  |  |
Granted | 191 |  |  | $ | 40.40 |  |  |  |  |  |  | $ | 13.27 |
Exercised | (58 | ) |  | 37.00 |  |  |  |  | $ | 742 |  |  |
Forfeited | (36 | ) |  | 35.29 |  |  |  |  |  |  |
Expired | (318 | ) |  | 55.13 |  |  |  |  |  |  |
Outstanding, December 31, 2016 | 959 |  |  | $ | 45.64 |  |  | 6.6 |  | $ | 19,125 |  |  |
Exercisable, December 31, 2016 | 562 |  |  | $ | 51.18 |  |  | 5.1 |  | $ | 9,181 |  |  |
Expected to vest, December 31, 2016 | 385 |  |  | $ | 37.76 |  |  | 8.7 |  | $ | 9,658 |  |  |
(1) | The aggregate intrinsic value of outstanding stock options represents amounts that would have been received by the optionees had all in- the-money options been exercised on that date. Specifically, it is the amount by which the market value of Itron’s stock exceeded the exercise price of the outstanding in-the-money options before applicable income taxes, based on our closing stock price on the last business day of the period. The aggregate intrinsic value of stock options exercised during the period is calculated based on our stock price at the date of exercise.
As of December 31, 2016, total unrecognized stock-based compensation expense related to nonvested stock options was $3.2 million, which is expected to be recognized over a weighted average period of approximately 1.9 years. Restricted Stock Units Certain employees, senior management, and members of our Board of Directors receive restricted stock units as a component of their total compensation. The fair value of a restricted stock unit is the market close price of our common stock on the date of grant. Restricted stock units generally vest over a three year period. Compensation expense, net of forfeitures, is recognized over the vesting period. Subsequent to vesting, the restricted stock units are converted into shares of our common stock on a one-for-one basis and issued to employees. We are entitled to an income tax deduction in an amount equal to the taxable income reported by the employees upon vesting of the restricted stock units. In 2013, the performance-based restricted stock units that were awarded under the Performance Award Agreement were determined based on (1) our achievement of specified non-GAAP EPS targets, as established at the beginning of each year for each of the calendar years contained in the performance periods (2-year and 3-year awards) (the performance condition) and (2) our total shareholder return (TSR) relative to the TSR attained by companies that are included in the Russell 3000 Index during the performance periods (the market condition). Compensation expense, net of forfeitures, was recognized on a straight-line basis, and the units vest upon achievement of the performance condition, provided participants are employed by Itron at the end of the respective performance periods. For U.S. participants who retire during the performance period, a pro-rated number of restricted stock units (based on the number of days of employment during the performance period) immediately vest based on the attainment of the performance goals as assessed after the end of the performance period. Depending on the level of achievement of the performance condition, the actual number of shares to be earned ranges between 0% and 160% of the awards originally granted. At the end of the 2-year and 3-year performance periods, if the performance conditions are achieved at or above threshold, the number of shares earned is further adjusted by a TSR multiplier payout percentage, which ranges between 75% and 125%, based on the market condition. Therefore, based on the attainment of the performance and market conditions, the actual number of shares that vest may range from 0% to 200% of the awards originally granted. For the 2-year awards granted under the 2013 performance award, 14,433 restricted stock units became eligible for distribution at December 31, 2014. For the 3-year awards granted under the 2013 performance award, 15,648 restricted stock units became eligible for distribution at December 31, 2015. For years subsequent to 2013, the performance-based restricted stock units to be issued are determined based on the same performance and market conditions as the 2013 awards, but the performance period is 3-years. For the 3-year awards granted under the 2014 performance award, 110,259 restricted stock units became eligible for distribution at December 31, 2016. No awards became eligible for distribution under the 2015 and 2016 awards since the performance periods had not concluded as of December 31, 2016. Due to the presence of the TSR multiplier market condition, we utilize a Monte Carlo valuation model to determine the fair value of the awards at the grant date. This pricing model uses multiple simulations to evaluate the probability of our achievement of various stock price levels to determine our expected TSR performance ranking. 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:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Dividend yield | — |  |  | — |  |  | — |
Expected volatility | 30.0 | % |  | 30.1 | % |  | 32.3 | %
Risk-free interest rate | 0.7 | % |  | 0.7 | % |  | 0.4 | %
Expected term (years) | 1.8 |  |  | 2.1 |  |  | 2.0 |
Weighted-average grant date fair value | $ | 44.92 |  |  | $ | 33.48 |  |  | $ | 35.15 |
Expected volatility is based on the historical volatility of our common stock for the related expected term. We believe this approach is reflective of current and historical market conditions and is an appropriate indicator of expected volatility. The risk-free interest rate is the rate available as of the award date on zero-coupon U.S. government issues with a term equal to the expected term of the award. The expected term is the term of an award based on the period of time between the date of the award and the date the award is expected to vest. The expected term assumption is based upon the plan's performance period as of the date of the award. We have not paid dividends in the past and do not plan to pay dividends in the foreseeable future. The following table summarizes restricted stock unit activity for the years ended December 31:
| Number of Restricted Stock Units |  | Weighted Average Grant Date Fair Value |  | Aggregate Intrinsic Value(1)
| (in thousands) |  |  |  | (in thousands)
Outstanding, January 1, 2014 | 658 |  |  |  |  |
Granted(2) | 350 |  |  | $ | 35.74 |  |  |
Released | (291 | ) |  |  |  | $ | 14,402 |
Forfeited | (35 | ) |  |  |  |
Outstanding, December 31, 2014 | 682 |  |  |  |  |
Granted(3) | 434 |  |  | $ | 35.09 |  |  |
Released | (296 | ) |  |  |  | $ | 12,204 |
Forfeited | (64 | ) |  |  |  |
Outstanding, December 31, 2015 | 756 |  |  |  |  |
Granted (4) | 306 |  |  | $ | 41.58 |  |  |
Released | (312 | ) |  |  |  | $ | 11,944 |
Forfeited | (82 | ) |  |  |  |
Outstanding, December 31, 2016 | 668 |  |  |  |  |
Vested but not released, December 31, 2016 | 115 |  |  |  |  | $ | 7,242 |
Expected to vest, December 31, 2016 | 477 |  |  |  |  | $ | 30,006 |
(1) | The aggregate intrinsic value is the market value of the stock, before applicable income taxes, based on the closing price on the stock release dates or at the end of the period for restricted stock units expected to vest.
(2) | Restricted stock units include 14,433 shares for the 2-year award under the 2013 Performance Award Agreement, which are eligible for distribution at December 31, 2014.
(3) | Restricted stock units include 15,648 shares for the 3-year award under the 2013 Performance Award Agreement, which are eligible for distribution at December 31, 2015.
(4) | Restricted stock units include 110,259 shares for the 3-year award under the 2014 Performance Award Agreement, which are eligible for distribution at December 31, 2016.
At December 31, 2016, unrecognized compensation expense on restricted stock units was $21.6 million, which is expected to be recognized over a weighted average period of approximately 1.8 years. Unrestricted Stock Awards We grant unrestricted stock awards to members of our Board of Directors as part of their compensation. Awards are fully vested and recognized when granted. The fair value of unrestricted stock awards is the market close price of our common stock on the date of grant. The following table summarizes unrestricted stock award activity for the years ended December 31:
| 2016 |  | 2015 |  | 2014
| (in thousands, except per share data)
Shares of unrestricted stock granted | 21 |  |  | 20 |  |  | 24 |
Weighted average grant date fair value per share | $ | 44.94 |  |  | $ | 35.01 |  |  | $ | 39.06 |
Phantom Stock Units Phantom stock units are a form of share-based award that are indexed to our stock price and are settled in cash upon vesting. Since phantom stock units are settled in cash, compensation expense recognized over the vesting period will vary based on changes in fair value. Fair value is remeasured at the end of each reporting period based on the market close price of our common stock. The following table summarizes phantom stock unit activity:
| Number of Phantom Stock Units |  | Weighted Average Grant Date Fair Value
| (in thousands) |  |
Outstanding, January 1, 2016 | — |  |  |
Granted | 63 |  |  | $ | 40.11 |
Forfeited | (1 | ) |  |
Outstanding, December 31, 2016 | 62 |  |  |
Expected to vest, December 31, 2016 | 57 |  |  |
At December 31, 2016, 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 2.2 years. We have recognized a phantom stock liability of $1.0 million within wages and benefits payable in the Consolidated Balance Sheets as of December 31, 2016. Employee Stock Purchase Plan Under the terms of the ESPP, employees can deduct up to 10% of their regular cash compensation to purchase our common stock at a discount from the fair market value of the stock at the end of each fiscal quarter, subject to other limitations under the plan. The sale of the stock to the employees occurs at the beginning of the subsequent quarter. The following table summarizes ESPP activity for the years ended December 31:
| 2016 |  | 2015 |  | 2014
| (in thousands)
Shares of stock sold to employees(1) | 20 |  |  | 54 |  |  | 61 |
(1) | Stock sold to employees during each fiscal quarter under the ESPP is associated with the offering period ending on the last day of the previous fiscal quarter.
There were approximately 371,000 shares of common stock available for future issuance under the ESPP at December 31, 2016.

X
- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65895303&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=68057994&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB Topic 14) -URI http://asc.fasb.org/extlink&oid=27013229&loc=d3e301413-122809 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_ShareBasedCompensationAllocationAndClassificationInFinancialStatementsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration