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 10,473,956 shares of common stock reserved and authorized for issuance subject to stock splits, dividends, and other similar events. At March 31, 2018, 4,215,490 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 a part of the acquisition of SSNI, we reserved and authorized 730,457 shares of Itron common stock to be issued for certain Silver Spring Network common stock awards that were converted to Itron common stock awards at acquisition date pursuant to the Agreement and Plan of Merger (SSNI Plan). New stock based compensation awards from the SSNI Plan may only be made to previous and newly hired employees of SSNI. The shares were converted from the Silver Spring Networks, Inc. 2012 Equity Incentive Plan, Non-Plan Inducement Stock Options, Non-Plan Inducement Restricted Stock Units and Non-Plan Inducement Performance Stock Units. There is no fungible share provision. As of March 31, 2018, 142,336 shares were available for grant under 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 approximately 331,993 shares of common stock were available for future issuance at March 31, 2018.

Unrestricted stock and ESPP activity for the three months ended March 31, 2018 and 2017 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,
	2018		2017
	(in thousands)
Stock options	$	831	$	659
Restricted stock units	7,057		4,297
Unrestricted stock awards	207		255
Phantom stock units	690		392
Total stock-based compensation	$	8,785	$	5,603

Related tax benefit	$	1,534	$	1,228

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	121		65.55					$	22.01
Exercised	(5	)	35.29			120
Outstanding, March 31, 2017	1,075		$	47.92	6.7	$	17,236

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

Exercisable March 31, 2018	716		$	45.96	5.5	$	19,725

Expected to vest, March 31, 2018	308		$	57.74	8.9	$	4,255

At March 31, 2018, total unrecognized stock-based compensation expense related to nonvested stock options was $5.0 million, which is expected to be recognized over a weighted average period of approximately 1.8 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,
	2018		2017
Expected volatility	30.9	%	32.7	%
Risk-free interest rate	2.8	%	2.0	%
Expected term (years)	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	131		$	63.12
Released	(317	)			$	12,066
Forfeited	(3	)
Outstanding, March 31, 2017	512

Outstanding, January 1, 2018	556		$	47.68
Converted upon acquisition	579		69.40
Granted	136		69.30
Released	(352	)	47.18		$	17,231
Forfeited	(28	)	68.44
Outstanding, March 31, 2018	891		63.72

Vested but not released, March 31, 2018	10				$	729

Expected to vest, March 31, 2018	788				$	56,369

At March 31, 2018, total unrecognized compensation expense on restricted stock units was $61.3 million, which is expected to be recognized over a weighted average period of approximately 2.4 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,
	2018			2017
Expected volatility	28.0		%	28.0		%
Risk-free interest rate	2.2		%	1.0		%
Expected term (years)	2.1			1.7

Weighted average fair value	$	78.56		$	77.78

Phantom Stock Units

The following table summarizes phantom stock unit activity:



	Number of Phantom Stock Units		Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding, January 1, 2017	62
Granted	32		$	65.55
Released	(19	)
Forfeited	(2	)
Outstanding, March 31, 2017	73

Expected to vest, March 31, 2017	73

Outstanding, January 1, 2018	63		$	51.88
Converted upon acquisition	21		69.40
Granted	31		69.30
Released	(27	)	50.19
Forfeited	(1	)	69.36
Outstanding, March 31, 2018	87		62.61

Expected to vest, March 31, 2018	85

At March 31, 2018, total unrecognized compensation expense on phantom stock units was $5.7 million which is expected to be recognized over a weighted average period of approximately 2.2 years. As of March 31, 2018 and December 31, 2017, we have recognized a phantom stock liability of $0.6 million and $1.7 million, respectively, within wages and benefits payable in the Consolidated Balance Sheets.