[10] Stock-Based Compensation

Tutor Perini Corporation Long-Term Incentive Plan

The Company is authorized to grant up to 8,500,000 stock-based compensation awards to key executives, employees and directors of the Company under the Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (the “Plan”). The Plan allows stock-based compensation awards to be granted in a variety of forms, including stock options, stock appreciation rights, restricted stock unit awards, unrestricted stock awards, deferred stock awards and dividend equivalent rights. The terms and conditions of the awards granted are established by the Compensation Committee of the Company’s Board of Directors who also administers the Plan.

A total of 659,740 shares of common stock are available for future grant under the Plan at December 31, 2014.

Restricted Stock Unit Awards

Restricted stock unit awards generally vest subject to the satisfaction of service requirements or the satisfaction of both service requirements and achievement of certain performance targets. Upon vesting, each award is exchanged for one share of the Company’s common stock. The grant date fair values of these awards are determined based on the closing price of the Company’s common stock on either the award date (if subject only to service conditions), or the date that the Compensation Committee establishes the applicable performance target (if subject to performance conditions). The related compensation expense is amortized over the applicable requisite service period. As of December 31, 2014, the Compensation Committee has approved the grant of an aggregate of 5,976,430 restricted stock unit awards to eligible participants.

The restricted stock unit awards granted in 2014, 2013 and 2012 had weighted-average grant date fair values of $27.10, $19.87 and $14.39, respectively. The grant date fair value is determined based on the closing price of the Company’s common stock on the date of grant.

The following table presents the compensation expense recognized related to the restricted stock unit awards which is included in general and administrative expenses in the Consolidated Statements of Operations:



	Year ended December 31,
	2014		2013		2012
	(in millions)
Restricted Stock Compensation Expense	$	13.4	$	4.9	$	7.1
Related Income Tax Benefit	$	5.4	$	1.9	$	1.5

As of December 31, 2014, there was $15.5 million of unrecognized compensation expense related to the unvested restricted stock unit awards which, absent significant forfeitures in the future, is expected to be recognized over a weighted-average period of approximately 2.8 years.

During 2014, the Compensation Committee established the 2014 performance targets for 866,500 restricted stock units awarded in 2014, 2013, and 2012 and the 2015 performance target for 120,097 restricted stock units awarded in 2014. During 2014, the Compensation Committee approved the award of 788,097 new restricted stock units.

A summary of restricted stock unit awards activity during the year ended December 31, 2014 is as follows:



				Aggregate
		Weighted-Average		Intrinsic
	Number	Grant Date		Value
	of Shares	Fair Value		(in thousands)
Granted and Unvested - January 1, 2014	361,668	$	17.30	$	9,512
Vested	(281,668)	$	16.76	$	8,049
Granted	996,597	$	27.10	$	23,988
Forfeited	(20,000)	$	24.77	$	—
Total Granted and Unvested	1,056,597	$	26.54	$	25,432
Approved for grant	749,000		(a)	$	18,028
Total Awarded and Unvested - December 31, 2014	1,805,597		n.a.	$	43,461

______________

(a)

Grant date fair value cannot be determined currently because the related performance targets for future years have not yet been established by the Compensation Committee.

The outstanding unvested restricted stock unit awards at December 31, 2014 are scheduled to vest as follows, subject where applicable to the achievement of performance targets. As described above, certain performance targets have not yet been established.



		Number
Vesting Date		of Awards
2015		390,500
2016		202,500
2017		857,597
2018		196,000
2019		159,000
		1,805,597

Approximately 53,000 of the unvested restricted stock unit awards will vest based on the satisfaction of service requirements and 1,752,597 will vest based on the satisfaction of both service requirements and the achievement of pre-tax income performance targets.

Stock Options

Stock option awards generally vest subject to the satisfaction of service requirements or the satisfaction of both service requirements and achievement of certain performance targets. The grant date fair values of these awards are determined based on the Black-Scholes option price model on either the award date (if subject only to service conditions), or the date that the Compensation Committee establishes the applicable performance target (if subject to performance conditions). The related compensation expense is amortized over the applicable requisite service period. The exercise price of the options is equal to the closing price of the Company’s common stock on the date the awards were approved by the Compensation Committee, and the awards expire ten years from the award date. As of December 31, 2014, the Compensation Committee has approved an aggregate of 3,085,465 stock option awards to eligible participants.

The stock option awards granted in 2014, 2013 and 2012 had weighted-average grant date fair values of $17.69, $7.90 and $5.65, respectively. The grant date fair value is determined based on the Black-Scholes option pricing model as discussed below.

The following table presents the compensation expense recognized related to stock option grants which is included in general and administrative expenses in the Consolidated Statements of Operations:



	Year ended December 31,
	2014		2013		2012
	(in millions)
Stock Option Compensation Expense	$	5.2	$	1.7	$	2.4
Related Income Tax Benefit	$	2.1	$	0.7	$	1.0

As of December 31, 2014, there was $7.9 million of unrecognized compensation expense related to the outstanding stock option grants which, absent significant forfeitures in the future, is expected to be recognized over a weighted- average period of approximately 2.7 years.

During 2014, the Compensation Committee established the 2014 performance targets for 380,000 stock options awarded in 2012 and 84,000 stock options awarded in 2013. During 2014, the Compensation Committee approved the award of, and set performance targets for, 250,000 new stock options.

A summary of stock option activity during the year ended December 31, 2014 is as follows:



		Weighted-Average
	Number	Grant Date		Exercise
	of Shares	Fair Value		Price
Total Granted and Outstanding - January 1, 2014	1,295,000	$	9.94	$	20.20
Granted	714,000	$	17.69	$	18.40
Exercised	(20,000)	$	7.25	$	12.54
Forfeited	—		—		—
Total Granted and Outstanding	1,989,000	$	12.75	$	19.63
Approved for grant	636,000		(a)		17.62
Total Awarded and Outstanding - December 31, 2014	2,625,000		n.a.		19.14

______________

(a)

Grant date fair value cannot be determined currently because the related performance targets for future years have not yet been established by the Compensation Committee.

There were 1,210,000 options that have vested and were exercisable at December 31, 2014 at a weighted-average exercise price of $20.35 per share.

Of the remaining options outstanding, approximately 475,000 will vest based on the satisfaction of service requirements and 2,150,000 will vest based on the satisfaction of both service requirements and the achievement of performance targets.

At December 31, 2014, the outstanding options of 1,989,000 had an intrinsic value of $10.4 million and a weighted-average remaining contractual life of 5.9 years.

The following table details the key assumptions used in estimating the grant date fair values of stock option awards granted during 2014, 2013 and 2012 based on the Black-Scholes option pricing model:



	Grant dates established during
	2014								2013					2012
Awarded during	2014		2013		2013	2012		2012	2013		2009 (1)		2012			2009 (1)
Number of options	250,000		75,000		9,000	150,000		230,000	50,000		150,000			15,000			150,000
Risk-free interest rate	2.08	%	1.72	%	2.25	1.46	%	1.82	1.64	%	0.48	%		1.12	%		0.88	%
Expected life of options (years)	6.5		5.3		7.0	4.6		5.6	5.7		3.6			7.3			4.4
Expected volatility of underlying stock	50.97	%	51.72	%	50.68	47.69	%	51.86	51.81	%	51.00	%		50.59	%		53.89	%
Expected quarterly dividends (per share)	—		—		—	—		—	—		—		—	—			—

______________

(1)

During 2009, the Compensation Committee approved the award of 750,000 stock options that vest in five equal annual installments from 2010 to 2014 subject to the achievement of pre-tax income performance targets established by the Compensation Committee for fiscal years 2009 to 2013. The Compensation Committee has established the performance targets for fiscal years 2011, 2012 and 2013, and these tranches were deemed granted for accounting purposes.