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 June 30, 2018, 6,571,411 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 322,765 shares of common stock were available for future issuance at June 30, 2018.

Unrestricted stock and ESPP activity for the three and six months ended June 30, 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 June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
Stock options	$	952	$	598	$	1,783	$	1,257
Restricted stock units	7,365		4,071		14,422		8,368
Unrestricted stock awards	207		255		414		510
Phantom stock units	587		492		1,277		884
Total stock-based compensation	$	9,111	$	5,416	$	17,896	$	11,019

Related tax benefit	$	1,594	$	1,100	$	3,128	$	2,328

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	132		65.80					$	21.99
Exercised	(34	)	37.58			933
Forfeited	(35	)	47.38
Expired	(47	)	67.43
Outstanding, June 30, 2017	975		$	47.54	6.7	$	21,680

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	(87	)	40.08			2,779
Forfeited	(3	)	68.43
Expired	(66	)	95.33
Outstanding, June 30, 2018	943		$	46.92	6.7	$	14,066

Exercisable June 30, 2018	648		$	41.97	5.8	$	12,006

Expected to vest, June 30, 2018	295		$	57.82	8.7	$	2,061

At June 30, 2018, total unrecognized stock-based compensation expense related to nonvested stock options was $4.1 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 June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Expected volatility	—	%	30.8	%	30.9	%	32.6	%
Risk-free interest rate	—	%	1.8	%	2.8	%	2.0	%
Expected term (years)	N/A		5.5		6.1		5.5

There were no employee stock options granted for the three months ended June 30, 2018.

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	140		$	65.48
Released	(328	)			$	12,533
Forfeited	(19	)
Outstanding, June 30, 2017	494

Outstanding, January 1, 2018	556		$	47.68
Converted upon acquisition	579		69.40
Granted	150		67.61
Released	(445	)	53.01		$	23,609
Forfeited	(79	)	68.56
Outstanding, June 30, 2018	761		62.85

Vested but not released, June 30, 2018	11				$	656

Expected to vest, June 30, 2018	699				$	41,948

At June 30, 2018, total unrecognized compensation expense on restricted stock units was $48.8 million, which is expected to be recognized over a weighted average period of approximately 2.2 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 June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Expected volatility	—		%	28.0		%	28.0		%	28.0		%
Risk-free interest rate	—		%	1.4		%	2.2		%	1.1		%
Expected term (years)	N/A			2.5			2.1			1.7

Weighted average fair value	$	—		$	75.58		$	78.56		$	77.65

There were no performance-based restricted stock units granted for the three months ended June 30, 2018.

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	(20	)
Forfeited	(6	)
Outstanding, June 30, 2017	68

Expected to vest, June 30, 2017	68

Outstanding, January 1, 2018	63		$	51.88
Converted upon acquisition	21		69.40
Granted	32		69.22
Released	(32	)	52.59
Forfeited	(3	)	57.29
Outstanding, June 30, 2018	81		62.76

Expected to vest, June 30, 2018	81

At June 30, 2018, total unrecognized compensation expense on phantom stock units was $4.1 million which is expected to be recognized over a weighted average period of approximately 2.1 years. As of June 30, 2018 and December 31, 2017, we have recognized a phantom stock liability of $1.0 million and $1.7 million, respectively, within wages and benefits payable in the Consolidated Balance Sheets.