Stock-Based Compensation

The Company has two plans under which stock-based awards have been issued: the TRC Companies, Inc. Restated Stock Option Plan (the "Restated Plan"), and the Amended and Restated 2007 Equity Incentive Plan (the "2007 Plan"), (collectively "the Plans"). The Company issues new shares or utilizes treasury shares, when available, to satisfy awards under the Plans. Awards are made by the Compensation Committee of the Board of Directors; however, the Compensation Committee has delegated to the Chief Executive Officer ("CEO") the authority to grant awards for up to 10 shares to individual employees subject to a limitation of 100 shares in any 12 month period.

Stock-based awards under the Plans consist of stock options, restricted stock awards ("RSA's"), restricted stock units ("RSU's") and performance stock units ("PSU's").

Stock-Based Compensation

The Company measures stock-based compensation cost at the grant date based on the fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's condensed consolidated statements of operations. Stock-based compensation expense includes the estimated effects of forfeitures, and estimates of forfeitures are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized in the period of change and also impact the amount of expense to be recognized in future periods. During the three and nine months ended March 29, 2013 and March 30, 2012, the Company recognized stock-based compensation expense in cost of services and general and administrative expenses within the condensed consolidated statements of operations as follows:



		Three Months Ended				Nine Months Ended
		March 29, 2013		March 30, 2012		March 29, 2013		March 30, 2012
Cost of services		$	344	$	364	$	1,172	$	1,219
General and administrative expenses		548		1,720		1,613		3,270
	Total stock-based compensation expense	$	892	$	2,084	$	2,785	$	4,489

Stock Options

The Company uses the Black-Scholes option pricing model for determining the estimated grant date fair value for stock options. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of the employee stock options. The average expected life is based on the contractual term of the option and expected employee exercise and historical post-vesting employment termination experience. The Company estimates the volatility of its stock using historical volatility in accordance with current accounting guidance. Management determined that historical volatility of TRC common stock is most reflective of market conditions and the best indicator of expected volatility. The dividend yield assumption is based on the Company's historical and expected dividend payouts. There were no stock options granted during the three and nine months ended March 29, 2013.




	Three Months Ended		Nine Months Ended
	March 29, 2013	March 30, 2012	March 29, 2013	March 30, 2012
Risk-free interest rate	N/A	0.66%	N/A	0.66%
Expected life	N/A	4.0 years	N/A	4.0 years
Expected volatility	N/A	80.8%	N/A	80.8%
Expected dividend yield	N/A	None	N/A	None
Weighted-average fair value of options granted	N/A	$2.56	N/A	$2.56

A summary of stock option activity for the nine months ended March 29, 2013 under the Plans is as follows:



					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual	Aggregate
			Exercise		Term	Intrinsic
	Options		Price		(in years)	Value
Outstanding options as of June 30, 2012 (751 exercisable)	787		$	9.41
Options exercised	(34	)	$	4.30
Options forfeited	(2	)	$	3.14
Options expired	(39	)	$	9.82
Outstanding options as of March 29, 2013	712		$	9.65	2.3 years	$	311
Options exercisable as of March 29, 2013	697		$	9.76	2.3 years	$	280
Options vested and expected to vest as of March 29, 2013	711		$	9.65	2.3 years	$	310
Shares available for future grants	2,219

The aggregate intrinsic value is measured using the fair market value at the date of exercise (for options exercised) or as of March 29, 2013 (for outstanding options), less the applicable exercise price. The closing price of the Company's common stock on the New York Stock Exchange was $6.45 as of March 29, 2013. The total intrinsic value of options exercised for the three and nine months ended March 29, 2013 was $0 and $121, respectively. The total proceeds received from option exercises for the three and nine months ended March 29, 2013 was $0 and $146, and there was a tax benefit of $0 and $4 realized by the Company, respectively. There were no options exercised during the nine months ended March 30, 2012.

As of March 29, 2013, there was $28 of total unrecognized compensation expense related to unvested stock option grants under the Plans, and this expense is expected to be recognized over a weighted-average period of 2.3 years.

Restricted Stock Awards

Compensation expense for RSA's is recognized ratably over the vesting term, which is generally four years. The fair value of the RSA's is determined based on the closing market price of the Company's common stock on the grant date.

A summary of non-vested RSA activity for the nine months ended March 29, 2013 is as follows:



			Weighted-
	Restricted		Average
	Stock		Grant Date
	Awards		Fair Value
Non-vested awards as of June 30, 2012	193		$	2.94
Awards granted	8		$	7.06
Awards vested	(183	)	$	2.91
Awards forfeited	(2	)	$	2.90
Non-vested awards as of March 29, 2013	16		$	5.21

RSA grants totaled 8 shares with a total weighted-average grant date fair value of $53 during the nine months ended March 29, 2013. RSA grants totaled 11 shares with a total weighted-average grant date fair value of $38 during the nine months ended March 30, 2012. The total fair value of RSA's vested during the three and nine months ended March 29, 2013 was $110 and $1,322, respectively. The total tax benefit realized by the Company from RSA vestings for the three and nine months ended March 29, 2013 was $0 and $50, respectively. The total fair value of RSA's vested during the three and nine months ended March 30, 2012 was $136 and $958, respectively.

As of March 29, 2013, there was $73 of total unrecognized compensation expense related to unvested RSA's under the Plans, and this expense is expected to be recognized over a weighted-average period of 3.1 years.

Restricted Stock Units

Compensation expense for RSU's is recognized ratably over the vesting term, which is generally four years. The fair value of RSU's is determined based on the closing market price of the Company's common stock on the grant date.

A summary of non-vested RSU activity for the nine months ended March 29, 2013 is as follows:



			Weighted-
	Restricted		Average
	Stock		Grant Date
	Units		Fair Value
Non-vested units as of June 30, 2012	1,424		$	3.87
Units granted	376		$	7.03
Units vested	(488	)	$	3.66
Units forfeited	(13	)	$	4.61
Non-vested units as of March 29, 2013	1,299		$	4.85

RSU grants totaled 100 and 376 shares with a total weighted-average grant date fair value of $591 and $2,646 during the three and nine months ended March 29, 2013. RSU grants totaled 22 and 662 shares with a total weighted-average grant date fair value of $128 and $3,229 during the three and nine months ended March 30, 2012. The total fair value of RSU's vested during the three and nine months ended March 29, 2013 was $132 and $3,369, respectively. The total tax benefit realized by the Company from RSU vestings for the three and nine months ended March 29, 2013 was $0 and $92, respectively. The total fair value of RSU's vested during the three and nine months ended March 30, 2012 was $146 and $1,448, respectively.

As of March 29, 2013, there was $4,907 of total unrecognized compensation expense related to unvested RSU's under the Plans, and this expense is expected to be recognized over a weighted-average period of 2.4 years.

Performance Stock Units

Compensation expense for PSU's is recognized if and when the Company concludes that it is probable that the performance condition will be achieved. The Company reassesses the probability of vesting at each reporting period for awards with performance conditions and adjusts compensation expense based on its probability assessment. The fair value of the PSU's is determined based on the closing market price of the Company's common stock on the grant date.

The number of PSU's earned is determined based on the Company's performance against predefined targets. The range of payout is zero to 150% of the number of granted PSU's. The number of PSU's earned is determined based on actual performance at the end of the performance period. PSU grants totaled 399 shares with a total weighted-average grant date fair value of $2,963 during the nine months ended March 29, 2013. These PSU's will vest over four years upon meeting certain financial targets for the fiscal year ending June 30, 2013. PSU grants totaled 734 shares with a total weighted-average grant date fair value of $3,785 during the nine months ended March 30, 2012. The total fair value of PSU's vested during the three and nine months ended March 29, 2013, was $0 and $2,693, respectively. The total tax benefit realized by the Company from PSU vestings for the three and nine months ended March 29, 2013 was $0 and $57, respectively. The total fair value of PSU's vested during the three and nine months ended March 30, 2012, was $7 and $529, respectively.

At March 29, 2013, there was $2,602 of total unrecognized compensation expense related to non-vested PSU's; this expense is expected to be recognized over a weighted-average period of 1.8 years.

A summary of non-vested PSU activity for the nine months ended March 29, 2013 is as follows:



							Weighted-
	PSU				Total		Average
	Original		PSU		PSU		Grant Date
	Awards		Adjustments (1)		Awards		Fair Value
Non-vested units as of June 30, 2012	853		—		853		$	3.96
Units granted	399		32		431		$	7.43
Units vested	(382	)	(32	)	(414	)	$	4.70
Units forfeited	(11	)	—		(11	)	$	5.69
Non-vested units as of March 29, 2013	859		—		859		$	5.19


(1)	Represents the additional number of PSU's issued based on the final performance condition achieved at the end of the performance period.