(9) Stock-Based Compensation

The Company is authorized to grant up to 6,900,000 stock-based compensation awards to key executives, employees and directors of the Company under the 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.

The Company’s intent is to settle stock awards in shares upon vesting to the extent that the Company has approved shares available under the Plan. A total of 75,461 shares of common stock remain available for future grant under the Plan at March 31, 2014. As a result, awards of 250,000 stock options that were made in March 2014 under the Plan were not deducted from the shares of common stock remaining available for future grant and these option awards, which may at the Company’s election be settled in cash, were classified as liabilities, and compensation cost for these liability-classified awards will be remeasured at each balance sheet date until such time that the Plan has been amended to increase the number of shares available. Under FASB ASC Topic 718, “Stock Compensation”(ASC 718), options or similar instruments on shares are classified as liabilities when a cash settlement feature exists in the stock based award that can be exercised only upon the occurrence of an event that is outside the employee’s control.

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 restricted stock unit 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 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 March 31, 2014, the Compensation Committee has approved the grant of an aggregate of 5,498,333 restricted stock unit awards to eligible participants.

In March 2014, the Compensation Committee established the 2014 performance targets for 866,500 restricted stock units awarded in 2014, 2013 and 2012. The restricted stock unit awards granted during the first quarter of 2014 had a weighted average grant date fair value of $27.33. The grant date fair value is determined based on the closing price of the Company’s common stock on the date of the grant.

There were no restricted stock unit awards forfeited during the three months ended March 31, 2014.

For the three months ended March 31, 2014 and 2013, the Company recognized $3.9 million and $2.3 million, respectively, of compensation expense related to restricted stock unit awards, and such expense is included in general and administrative expenses in the Consolidated Statements of Operations. As of March 31, 2014 there was $22.3 million of unrecognized compensation cost related to the unvested awards which, absent significant forfeitures in the future, is expected to be recognized over a weighted average period of approximately 3.1 years.

A summary of restricted stock unit awards activity for the three months ended March 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	(161,668	)	$	19.30		$	4,619
Granted	866,500		$	27.33		$	24,843
Forfeited	—		—			—
Total Granted and Unvested	1,066,500		$	25.15		$	30,577
Approved for grant	401,000				(a)	$	11,497
Total Awarded and Unvested - March 31, 2014	1,467,500		n.a.			$	42,073

(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 awards at March 31, 2014 are scheduled to vest as follows, subject where applicable to the achievement of performance targets. As described above, certain performance targets are not yet established.

		Number
Vesting Date		of Awards
2014		125,000
2015		342,500
2016		202,500
2017		752,500
2018		36,000
2019		9,000
		1,467,500

Approximately 150,000 of the unvested restricted stock unit awards will vest based on the satisfaction of service requirements and 1,317,500 of the unvested restricted stock unit awards will vest based on the satisfaction of both service requirements and the achievement of 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 March 31, 2014, the Compensation Committee has approved the award of an aggregate of 2,785,465 stock option awards to eligible participants.

In March 2014, the Compensation Committee established the 2014 performance target for 714,000 stock options awarded in 2014, 2013 and 2012. The stock option awards granted during the first quarter of 2014 had a weighted average grant date fair value of $17.69.

For the three months ended March 31, 2014 and 2013, the Company recognized compensation expense of $1.5 million and $0.8 million, respectively, related to stock option awards, and such expenses are included in general and administrative expenses in the Consolidated Statements of Operations. As of March 31, 2014, there was $12.1 million of unrecognized compensation expense related to the outstanding options, which, absent significant forfeitures in the future, is expected to be recognized over a weighted average period of approximately 3.3 years.

A summary of stock option activity for the three months ended March 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	—	—			—
Forfeited	—	—			—
Total Granted and Outstanding	2,009,000	$	12.70		$	19.56
Approved for grant	336,000			(a)	$	11.88
Total Awarded and Outstanding - March 31, 2014	2,345,000	n.a.			$	18.46

(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 1,155,000 options that have vested and were exercisable at March 31, 2014 at a weighted average exercise price of $20.67 per share.

Of the remaining options outstanding, approximately 495,000 options will vest based on the satisfaction of service requirements and 1,850,000 options will vest based on the satisfaction of both service requirements and the achievement of performance targets.

At March 31, 2014, the outstanding options of 2,009,000 had an intrinsic value of $18.3 million and a weighted average remaining contractual life of 6.6 years.

The following table details the key assumptions used in estimating the grant date fair values of stock option awards granted during the first quarter of 2014 based on the Black Scholes option pricing model using the following key assumptions:

Number of options	250,000			75,000			9,000			150,000			230,000
Risk-free interest rate	2.08		%	1.72		%	2.25		%	1.46		%	1.82		%
Expected life of options (years)	6.5			5.3			7.0			4.6			5.6
Expected volatility of underlying stock	50.97		%	51.72		%	50.68		%	47.69		%	51.86		%
Expected quarterly dividends (per share)	$	0.00		$	0.00		$	0.00		$	0.00		$	0.00