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Equity Incentive Program | 12 Months Ended
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Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Share-based Compensation, Performance Shares Award Outstanding Activity [Table Text Block] | 13. Equity Incentive Program The following table summarizes the stock-based compensation expense recognized by the Company for the periods presented:
| Years Ended December 31,
(in millions) | 2018 |  | 2017 |  | 2016
Pre-tax stock-based compensation expense |  |  |  |  |
Cost of goods sold | $ | 1.6 |  |  | $ | 1.8 |  |  | $ | 1.5 |
Research and development expenses | 7.8 |  |  | 6.1 |  |  | 4.7 |
Selling and administrative expenses | 17.6 |  |  | 16.8 |  |  | 14.7 |
Total pre-tax stock-based compensation expense | 27.0 |  |  | 24.7 |  |  | 20.9 |
Tax benefit | — |  |  | — |  |  | — |
Total stock-based compensation expense, net of tax | $ | 27.0 |  |  | $ | 24.7 |  |  | $ | 20.9 |
Compensation expense for stock-based awards is measured based on the fair value of the awards as of the date the stock-based awards are granted and adjusted to the estimated number of awards that are expected to vest. Forfeitures are estimated based on historical experience at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Compensation costs for stock-based awards are amortized over their service period. Prior to the Separation in 2014, Knowles employees participated in our Former Parent's incentive stock program. Adopted in connection with the Separation, the Knowles' Corporation 2014 Equity and Cash Incentive Plan (the "Plan") provided for the conversion of certain awards granted under our Former Parent's equity incentive program to Knowles equity awards and authorized the grant of several different forms of benefits, including stock options, RSUs, PSUs, and stock-settled appreciation rights ("SSARs"). In general, each award is subject to the same terms and conditions as were in effect prior to the Separation, except that our Former Parent's performance shares converted to time-based RSUs. In addition, the Company made a grant comprised of both stock options and time-based RSUs that vest 50% on the third and fourth anniversaries from the date of the grant. The Company also made grants of both stock options and time-based RSUs that vest evenly over each of the first three years following the date of the grant. The Company elected to use the straight-line method to attribute the expense over the service period of the awards. Stock Option s and SSARs The fair value of stock options granted by the Company was estimated on the date of grant using a Black-Scholes option-pricing model based on the assumptions shown in the table below.
| 2018 |  | 2017 |  | 2016
Risk-free interest rate | 2.59% |  | 1.73% | to | 1.93% |  | 1.04% | to | 1.25%
Dividend yield | —% |  | —% |  | —%
Expected life (years) | 4.5 |  | 4.5 |  | 4.5
Volatility | 41.2% |  | 33.2% | to | 38.8% |  | 37.0% | to | 39.6%
Fair value at date of grant | $4.83 | to | $6.59 |  | $5.02 | to | $6.73 |  | $3.76 | to | $4.83
The determination of expected volatility is based on a blended peer group volatility for companies in similar industries, stage of life, and with similar market capitalization since there is not sufficient historical volatility data for Knowles common stock over the period commensurate with the expected term of stock options, as well as other relevant factors. The risk-free interest rate is based on U.S. government issues with a remaining term equal to the expected life of the stock options. The expected term is the period over which our employees are expected to hold their options. It is based on the simplified method from the SEC’s safe harbor guidelines. The Company does not currently anticipate paying dividends over the expected term. The exercise price per share for the stock options granted by the Company was equal to the closing price of Knowles' stock on the NYSE on the date of the grant. The period during which options granted by the Company were exercisable was fixed by Knowles' Compensation Committee of the Board of Directors at the time of grant. Generally, stock options vest one-third on each of the first three anniversaries of the grant date and expire 7 years from the grant date. The following table summarizes the Company's SSAR and stock option activity for the year ended December 31, 2018.
| 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)
(in millions, except share and per share amounts)
Outstanding at December 31, 2017 | 850,516 |  |  | $ | 21.54 |  |  |  |  |  |  | 4,901,739 |  |  | $ | 18.36 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |  |  | 963,692 |  |  | 14.34 |  |  |  |  |
Exercised | (30,624 | ) |  | 12.26 |  |  |  |  |  |  | (44,326 | ) |  | 11.02 |  |  |  |  |
Forfeited | — |  |  | — |  |  |  |  |  |  | (120,458 | ) |  | 15.54 |  |  |  |  |
Expired | (37,897 | ) |  | 22.79 |  |  |  |  |  |  | (229,154 | ) |  | 21.63 |  |  |  |  |
Outstanding at December 31, 2018 | 781,995 |  |  | $ | 21.85 |  |  | $ | — |  |  | 3.1 |  | 5,471,493 |  |  | $ | 17.64 |  |  | $ | 3.4 |  |  | 4.1
Exercisable at December 31, 2018 | 781,995 |  |  | $ | 21.85 |  |  | $ | — |  |  | 3.1 |  | 3,517,954 |  |  | $ | 19.31 |  |  | $ | 2.2 |  |  | 3.5
The aggregate intrinsic value in the table above represents the difference between the Company's closing stock price on December 31, 2018 and the exercise price of each SSAR and stock option, multiplied by the number of in-the-money awards. There was no unrecognized compensation expense related to SSARs at December 31, 2018. Unrecognized compensation expense related to stock options not yet exercisable at December 31, 2018 was $5.8 million. This cost is expected to be recognized over a weighted-average period of 1.3 years. Other information regarding the exercise of SSARs and stock options is listed below:
| Years Ended December 31,
(in millions) | 2018 |  | 2017 |  | 2016
SSARs |  |  |  |  |
Fair value of SSARs that are exercisable | $ | 1.8 |  |  | $ | 1.9 |  |  | $ | 1.9 |
Aggregate intrinsic value of SSARs exercised | 0.1 |  |  | 0.2 |  |  | 0.1 |
Stock Options |  |  |  |  |
Cash received by Knowles for exercise of stock options | 0.5 |  |  | 3.3 |  |  | — |
Aggregate intrinsic value of options exercised | 0.2 |  |  | 1.1 |  |  | — |
RSUs The following table summarizes the Company's RSU balances for the year ended December 31, 2018:
| Share units |  | Weighted-average grant date fair value
Unvested at December 31, 2017 | 2,202,576 |  |  | $ | 16.54 |
Granted | 1,707,911 |  |  | 14.28 |
Vested | (1,036,207 | ) |  | 16.95 |
Forfeited | (427,849 | ) |  | 14.84 |
Unvested at December 31, 2018 | 2,446,431 |  |  | $ | 15.12 |
RSUs generally vest based on the passage of time. RSUs have a three year vesting schedule and vest one-third on each of the first three anniversaries of the grant date. At December 31, 2018, $23.1 million of unrecognized compensation expense related to RSUs is expected to be recognized over a weighted-average period of 1.3 years. PSUs In February 2018 and 2017, the Company granted PSUs to senior management. In each case, the awards will cliff vest three years following the grant date and the number of PSUs that may be earned and vest is based on the Company's revenues and stock price performance over a three year performance period. PSUs will be settled in shares of the Company's common stock. Depending on the Company's overall performance relative to revenues and stock price, the size of the PSU awards are subject to adjustment, up or down, resulting in awards at the end of the performance period that can range from 0% to 225% of the initial grant value. The Company will ratably recognize the expense over the applicable service period for each grant of PSUs and adjust the expense as appropriate. The fair value of the PSUs is determined by using a Monte Carlo simulation. The following table summarizes the Company's PSU balances for the year ended December 31, 2018:
| Share units |  | Weighted-average grant date fair value
Unvested at December 31, 2017 | 176,000 |  |  | $ | 15.32 |
Granted | 381,967 |  |  | 13.78 |
Vested | — |  |  | — |
Forfeited | — |  |  | — |
Unvested at December 31, 2018 | 557,967 |  |  | $ | 14.27 |
At December 31, 2018, $6.3 million of unrecognized compensation expense related to PSUs is expected to be recognized over a weighted-average period of 1.9 years.

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- Definition Tabular disclosure of the number and weighted-average grant date fair value for outstanding performance shares. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=109197908&loc=d3e5070-113901 + Details
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