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 the interests of employees, officers, and directors with those of the stockholders.

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 goals 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 and realized during the three and nine months ended October 27, 2018 and October 28, 2017 were as follows (dollars in thousands):



	For the Three Months Ended				For the Nine Months Ended
	October 27, 2018		October 28, 2017		October 27, 2018		October 28, 2017
Stock-based compensation	$	7,366	$	7,380	$	18,277	$	17,169
Income tax effect of stock-based compensation	$	2,083	$	2,882	$	4,572	$	6,695

As of October 27, 2018, the Company had unrecognized compensation expense related to stock options, RSUs, and target Performance RSUs (based on the Company’s estimate of performance goal achievement) of $2.9 million, $9.8 million, and $22.0 million, respectively. This expense will be recognized over a weighted-average number of years of 2.4, 2.5, and 1.8, respectively, based on the average remaining service periods for the awards. As of October 27, 2018, the Company may recognize an additional $9.6 million in compensation expense in future periods if the maximum amount of Performance RSUs is earned based on certain performance criteria being met.

Stock Options

The following table summarizes stock option award activity during the nine months ended October 27, 2018:



	Stock Options
	Shares		Weighted Average Exercise Price
Outstanding as of January 27, 2018	636,730		$	27.93
Granted	28,796		$	106.19
Options exercised	(45,217	)	$	11.07
Canceled	—		$	—
Outstanding as of October 27, 2018	620,309		$	32.80

Exercisable options as of October 27, 2018	509,023		$	23.16

RSUs and Performance RSUs

The following table summarizes RSU and Performance RSU award activity during the nine months ended October 27, 2018:



	Restricted Stock
	RSUs				Performance RSUs
	Share Units		Weighted Average Grant Price		Share Units		Weighted Average Grant Price
Outstanding as of January 27, 2018	133,896		$	71.81	390,327		$	80.52
Granted	54,757		$	102.14	218,628		$	106.19
Share units vested	(18,713	)	$	74.95	(54,704	)	$	83.07
Forfeited or canceled	(6,673	)	$	70.56	(55,255	)	$	74.45
Outstanding as of October 27, 2018	163,267		$	81.67	498,996		$	92.16

The total amount of granted Performance RSUs presented above consists of 158,841 target shares and 59,787 supplemental shares. The total amount of Performance RSUs outstanding as of October 27, 2018 consists of 375,719 target shares and 123,277 supplemental shares. With respect to the Company’s Performance Year ended July 28, 2018, the Company canceled 24,689 supplemental shares of Performance RSUs during the three months ended October 27, 2018 as a result of the performance criteria for attaining supplemental shares being partially met.