Stock-Based Awards

6 Months Ended

Jul. 27, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Awards

Stock-Based Awards

The Company has certain stock-based compensation plans under which it grants stock-based awards, including common stock, stock options, time-based restricted share units (“RSUs”), and performance-based restricted share units (“Performance RSUs”) to attract, retain, and reward talented employees, officers, and directors, and to align stockholder and employee interests.

Compensation expense for stock-based awards is based on fair value at the measurement date. This expense fluctuates over time as a function of the duration of vesting periods of the stock-based awards and the Company’s performance, as measured by criteria set forth in performance-based awards. Stock-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations and the amount of expense ultimately recognized depends on the quantity of awards that actually vest. Accordingly, stock-based compensation expense may vary from period to period.

The performance criteria for the Company’s performance-based equity awards utilize the Company’s operating earnings (adjusted for certain amounts) as a percentage of contract revenues for the applicable four-quarter period (a “Performance Year”) and its Performance Year operating cash flow level (adjusted for certain amounts). Additionally, certain awards include three-year performance measures that, if met, result in supplemental shares awarded. For Performance RSUs, the Company evaluates compensation expense quarterly and recognizes expense for performance-based awards only if it determines it is probable that performance criteria for the awards will be met.

Stock-based compensation expense and the related tax benefit recognized during the three and six months ended July 27, 2019 and July 28, 2018 were as follows (dollars in thousands):

	For the Three Months Ended				For the Six Months Ended
	July 27, 2019		July 28, 2018		July 27, 2019		July 28, 2018
Stock-based compensation	$	2,277	$	6,048	$	5,756	$	10,911
Income tax effect of stock-based compensation	$	561	$	1,420	$	1,429	$	2,489

In addition, during the three months ended July 27, 2019 and July 28, 2018, the Company realized a nominal amount of net excess tax benefits and approximately $0.4 million of excess tax benefits, respectively, related to the vesting and exercise of share-based awards. During the six months ended July 27, 2019 and July 28, 2018, the Company realized approximately $0.6 million of net tax deficiencies and $0.5 million of excess tax benefits, respectively.

As of July 27, 2019, the Company had unrecognized compensation expense related to stock options, RSUs, and target Performance RSUs (based on the Company’s expected achievement of performance measures) of $2.7 million, $11.4 million, and $15.1 million, respectively. This expense will be recognized over a weighted-average number of years of 2.5, 2.6, and 1.8, respectively, based on the average remaining service periods for the awards. As of July 27, 2019, the Company may recognize an additional $30.3 million in compensation expense in future periods if the maximum number of Performance RSUs is earned based on certain performance measures being met.

Stock Options

The following table summarizes stock option award activity during the six months ended July 27, 2019:

	Stock Options
	Shares		Weighted Average Exercise Price
Outstanding as of January 26, 2019	583,291		$	34.24
Granted	39,276		$	45.94
Options exercised	(16,870	)	$	10.79
Canceled	—		$	—
Outstanding as of July 27, 2019	605,697		$	35.65
Exercisable options as of July 27, 2019	503,200		$	28.10

RSUs and Performance RSUs

The following table summarizes RSU and Performance RSU award activity during the six months ended July 27, 2019:

	Restricted Stock
	RSUs				Performance RSUs
	Share Units		Weighted Average Grant Date Fair Value		Share Units		Weighted Average Grant Date Fair Value
Outstanding as of January 26, 2019	126,470		$	87.92	377,354		$	96.51
Granted	112,172		$	48.22	475,629		$	45.94
Share units vested	(19,063	)	$	90.44	(43,900	)	$	93.49
Forfeited or canceled	(586	)	$	67.88	(33,960	)	$	99.57
Outstanding as of July 27, 2019	218,993		$	67.42	775,123		$	65.52

The total number of granted Performance RSUs presented above consists of 333,567 target shares and 142,062 supplemental shares. The total number of Performance RSUs outstanding as of July 27, 2019 consists of 547,946 target shares and 227,177 supplemental shares. With respect to the Company’s Performance Year ended July 27, 2019, approximately 58,351 target shares and 33,068 supplemental shares will be canceled during the three months ended October 26, 2019 as a result of the performance period criteria being partially met.