Stock-Based Compensation
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
STOCK-BASED COMPENSATION
The Company maintains an equity incentive plan, the 2014 Omnibus Incentive Plan, as amended and restated effective as of May 13, 2016 (the 2014 Omnibus Plan), to govern awards granted to Vectrus employees and directors, including nonqualified stock options (NQOs), restricted stock units (RSUs), total shareholder return (TSR) awards and other awards. We account for NQOs and stock-settled RSUs as equity-based compensation awards. TSR awards, described below, and cash-settled RSUs are accounted for as liability-based compensation awards.
The maximum number of shares of the Company's common stock authorized for issuance under the 2014 Omnibus Plan is 2.6 million shares. As of December 31, 2019, there were 1.0 million shares remaining available for future awards.
Stock-based compensation expense and the associated tax benefits impacting our Consolidated Statements of Income were as follows:


Year Ended December 31,
(In thousands)

2019
 
2018
Compensation costs for equity-based awards

$
4,426

 
$
3,490

Compensation costs for liability-based awards

3,836

 
606

Total compensation costs, pre-tax

$
8,262

 
$
4,096

Future tax benefit

$
1,792

 
$
888


Liability-based awards are revalued at the end of each reporting period to reflect changes in fair value. The Company paid $0.8 million and $1.0 million related to liability-based compensation awards during the years ended December 31, 2019 and 2018, respectively.
At December 31, 2019, total unrecognized compensation costs related to equity-based awards and liability-based awards were $4.6 million and $3.7 million, respectively, which are expected to be recognized ratably over a weighted average period of 1.68 years and 1.79 years, respectively.
Non-Qualified Stock Options
NQOs vest in one-third increments on the first, second and third anniversaries of the grant date and expire 10 years from the date of grant.
A summary of the status of our NQOs as of December 31, 2019, 2018 and 2017 and changes during the years then ended is presented below:


Year Ended December 31,


2019

2018

2017
(In thousands, except per share data)
 
Shares
 
Weighted Average Exercise Price Per Share
 
Shares
 
Weighted Average Exercise Price Per Share
 
Shares
 
Weighted Average Exercise Price Per Share
Outstanding at January 1,

251

 
$23.00
 
325

 
$22.74
 
384

 
$21.47
Granted

—

 
$0.00
 
—

 
$0.00
 
75

 
$22.82
Exercised

(161
)
 
$22.74
 
(73
)
 
$21.87
 
(110
)
 
$18.41
Forfeited, canceled or expired

(13
)
 
$24.47
 
(1
)
 
$20.62
 
(24
)
 
$22.61
Outstanding at December 31,

77

 
$23.30
 
251

 
$23.00
 
325

 
$22.74
Options exercisable

59

 
$23.35
 
184

 
$23.35
 
201

 
$22.57

The following table summarizes information about NQOs outstanding and exercisable as of December 31, 2019:
(In thousands, except per share data)
 
Options Outstanding
 
Options Exercisable
Range of Exercise Prices Per Share
 
Number
 
Weighted Average Remaining Contractual Life (In Years)
 
Weighted Average Exercise Price Per Share
 
Aggregate Intrinsic Value
 
Number
 
Weighted Average Remaining Contractual Life (In Years)
 
Weighted Average Exercise Price Per Share
 
Aggregate Intrinsic Value
$20.06 - $21.98
 
58

 
6.67
 
$
21.49

 
$
1,720

 
43

 
6.49
 
$
21.34

 
$
1,291

$24.61 - $32.49
 
19

 
6.18
 
29.21

 
434

 
16

 
5.91
 
29.24

 
361

Total options and aggregate intrinsic value
 
77

 
6.52
 
$
23.30

 
$
2,154

 
59

 
6.30
 
$
23.35

 
$
1,652


The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on our closing stock price of $51.26 per share on December 31, 2019, which would have been received by the option holders if all option holders had exercised their options as of that date. There were no exercisable options "out of the money" as of December 31, 2019. The aggregate intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017 was $2.1 million, $0.1 million and $1.4 million, respectively.
As of December 31, 2019, the total number of stock options expected to vest (including those that have already vested) was 0.1 million. These stock options have a weighted-average exercise price of $23.30 per share, an aggregate intrinsic value of $2.2 million and a weighted average remaining contractual life of 6.5 years.
The fair value of stock options is determined on the date of grant utilizing a Black-Scholes valuation model. No stock options were granted in 2019 or 2018. The following weighted-average assumptions were utilized in deriving the fair value for NQOs:
 
 
Year Ended December 31,
 

2017
 
Expected volatility
 
30.8
%
 
Expected life (in years)

7

 
Risk-free rates

2.30
%
 
Weighted-average grant date fair value per share

$
8.48

 

Black-Scholes model volatility is based on daily average volatility of our peer group over seven years, which is consistent with the expected term. Peer group companies were selected from companies within the aerospace and defense industry that most closely match our business, including size, diversification, and customer base. The expected term of the stock option represents the estimated period of time until exercise and is based on the vesting period of the award and the estimated exercise patterns of employees. The risk-free rate is based on the U.S. Treasury stripped coupon rates with maturities corresponding to the expected term of 7 years, measured as of the grant date.
Restricted Stock Units
The fair value of RSUs is determined based on the closing price of Vectrus common stock on the date of the grant. In general, under the 2014 Omnibus Plan, for employee RSUs granted in 2014 and after, one-third of the award vests on each of the three anniversary dates following the grant date. Director RSUs are granted on the date of the annual meeting and vest the business day immediately prior to the next annual meeting. RSUs have no voting rights. If an employee leaves the Company prior to vesting, whether through resignation or termination for cause, the RSUs are forfeited. If an employee retires or is terminated by the Company other than for cause, all or a pro rata portion of the RSUs may vest.
The table below provides a roll-forward of outstanding RSUs for the years ended December 31, 2019, 2018, and 2017.


Year Ended December 31,


2019

2018

2017
(In thousands, except per share data)

Shares
 
Weighted Average Grant Date Fair Value Per Share
 
Shares
 
Weighted Average Grant Date Fair Value Per Share
 
Shares
 
Weighted Average Grant Date Fair Value Per Share
Outstanding at January 1,

257

 
$
28.90

 
221

 
$
23.58

 
285

 
$23.01
Granted

206

 
$
30.03

 
163

 
$
33.08

 
144

 
$23.74
Vested

(138
)
 
$
31.92

 
(110
)
 
$
24.93

 
(171
)
 
$23.18
Forfeited or canceled

(24
)
 
$
35.57

 
(17
)
 
$
25.54

 
(37
)
 
$21.69
Outstanding at December 31,

301

 
$
30.30

 
257

 
$
28.90

 
221

 
$23.58

The total grant date fair value of RSUs that vested during the years ended December 31, 2019, 2018 and 2017 was $4.1 million, $3.3 million and $4.5 million, respectively.
Total Shareholder Return Awards
TSR awards are performance-based cash awards that are subject to a three-year performance period. Any payments earned are made in cash following completion of the performance period according to the achievement of specified performance goals. During the years ended December 31, 2019, 2018, and 2017, we granted TSR awards with aggregate target TSR values of $2.5 million, $2.2 million, and $1.5 million, respectively. The fair value of TSR awards is measured quarterly and is based on the Company’s performance relative to the performance of the Aerospace and Defense Companies in the S&P 1500 Index. Depending on the Company’s performance during the three-year performance period, payments can range from 0% to 200% of the target value. For the years ended December 31, 2019, 2018, and 2017, we recorded $2.9 million, $0.3 million and $1.0 million, respectively, in compensation expense related to TSR awards. Payments of $1.6 million were made in January 2020 for the 2017 TSR awards, payments of $0.5 million were made in January 2019 for the 2016 TSR awards, and payments of $0.6 million were made in January 2018 for the 2015 TSR awards. Payments, if any, for the 2018 and 2019 TSR awards are expected to be made in January 2021 and January 2022, respectively. As of December 31, 2019 and 2018, we had $4.0 million and $1.5 million, respectively, recorded as a liability related to TSR awards in compensation and other employee benefits and other non-current liabilities on the Consolidated Balance Sheets.