Stock-Based Compensation
 6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
STOCK-BASED COMPENSATION
The Company maintains an equity incentive plan (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.
Stock-based compensation expense and the associated tax benefits impacting our Condensed Consolidated Statements of Income were as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
July 1,
 
June 30,
 
July 1,
(In thousands)
 
2017
 
2016
 
2017
 
2016
Compensation costs for equity-based awards
 
$
563

 
$
872

 
$
1,546

 
$
2,348

Compensation costs for liability-based awards
 
1,345

 
683

 
1,449

 
920

Total compensation costs, pre-tax
 
$
1,908

 
$
1,555

 
$
2,995

 
$
3,268

Future tax benefit
 
$
679

 
$
554

 
$
1,065

 
$
1,165


Liability-based awards are revalued at the end of each reporting period to reflect changes in fair value.
As of June 30, 2017, total unrecognized compensation costs related to equity-based awards and liability-based awards were $4.2 million and $2.1 million, respectively, which are expected to be recognized ratably over a weighted average period of 2.00 years and 2.02 years, respectively.

The following table provides a summary of the activities for NQOs and RSUs for the six months ended June 30, 2017:
 
 
NQOs
 
RSUs
(In thousands, except per share data)
 
Shares
 
Weighted Average Exercise Price Per Share
 
Shares
 
Weighted Average Grant Date Fair Value Per Share
Outstanding at January 1, 2017
 
384

 
$21.47
 
285

 
$23.01
Granted
 
71

 
$22.27
 
136

 
$23.25
Exercised
 
(105
)
 
$18.01
 
 
 
 
Vested
 
 
 
 
 
(110
)
 
$24.33
Forfeited or expired
 
(19
)
 
$22.59
 
(23
)
 
$21.28
Outstanding at June 30, 2017
 
331

 
$22.67
 
288

 
$22.77


During the six months ended June 30, 2017, we granted long-term incentive awards to employees consisting of 70,985 NQOs and 135,833 RSUs with respective weighted average grant date fair values per share of $8.26 and $23.25. The NQOs vest in one-third cumulative annual installments on the first, second, and third anniversaries of the grant date and expire 10 years from the date of grant. Based on the closing price of Vectrus common stock on the grant dates, the weighted average option exercise price is $22.27. The fair value of each NQO grant was estimated on the date of grant using the Black-Scholes option pricing model. For employee RSUs, 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 an annual meeting of shareholders and vest on the business day immediately prior to the next annual meeting. The fair value of each RSU grant was determined based on the closing price of Vectrus common stock on the date of grant. Stock compensation expense will be recognized ratably over the vesting period of the awards.
The fair value of stock options is determined on the date of grant utilizing a Black-Scholes valuation model. The following weighted-average assumptions were utilized in deriving the fair value for NQOs for the six months ended June 30, 2017:
Expected volatility
 
30.7
%
Expected life (in years)
 
7

Risk-free rates
 
2.30
%
Weighted-average grant date fair value per share
 
$8.26

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 six months ended June 30, 2017, we granted 2017 TSR awards with aggregate target TSR value of $1.3 million. 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.