Stock-Based Compensation

Total stock-based compensation expense for the years ended June 30, 2016, June 30, 2015, and June 30, 2014 was $6.3 million, $6.3 million and $5.7 million, respectively. Measured but unrecognized stock-based compensation expense at June 30, 2016 was $9.3 million, all of which related to nonvested deferred shares which are expected to be recognized as expense over a weighted average period of 1.7 years. The recognized tax benefit related to the stock-based compensation expense for the years ended June 30, 2016, June 30, 2015 and June 30, 2014 totaled $3.2 million, $2.5 million and $2.8 million, respectively.

Plan Information

Matrix Service Company's 2012 Stock and Incentive Compensation Plan ("2012 Plan") provides stock-based and cash-based incentives for officers, other key employees and directors. Stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares and cash-based awards can be issued under this plan. Upon approval of the 2012 Plan by the Company's stockholders, the 2004 Stock Incentive Plan ("2004 Plan") was frozen with the exception of normal vesting, forfeiture and other activity associated with awards previously granted under the 2004 Plan. Awards totaling 2,300,000 shares have been authorized under the 2012 Plan. At June 30, 2016 there were 1,249,780 shares available for grant under the 2012 Plan.

Stock Options

Stock options are granted at the market value of the Company’s common stock on the grant date and expire after 10 years. The Company’s policy is to issue shares upon the exercise of stock options from its treasury shares, if available. The Company did not award any new stock options in fiscal years 2014, 2015, or 2016.

Stock option activity and related information for the year ended June 30, 2016 is as follows:



	Number of Options		Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Aggregate Intrinsic Value
			(Years)			(In thousands)
Outstanding at June 30, 2015	190,100		5.7	$	9.90	$	1,593
Granted	—			—
Exercised	(68,037	)		9.38		$	728
Cancelled	—			—
Outstanding at June 30, 2016	122,063		5.3	10.19		$	769
Vested at June 30, 2016	122,063		5.3	10.19		$	769
Exercisable at June 30, 2016	122,063		5.3	$	10.19	$	769

The total intrinsic value of stock options exercised during fiscal 2016, 2015, and 2014 was $0.7 million, $0.7 million and $2.4 million, respectively.

Nonvested Deferred Shares

The Company has issued nonvested deferred shares under the following types of arrangements:


•	Time-based awards—Employee awards generally vest in four or five equal annual installments beginning one year after the grant date. Director awards cliff vest on the earlier of three years or upon retirement from the Board.

•

Market-based awards—These awards are in the form of performance units which vest 3 years after the grant date only if the Company’s common stock achieves certain levels of total shareholder return when compared to the total shareholder return of a peer group of companies as selected by the Compensation Committee of the Board of Directors. The payout is pro-rated and can range from zero to 200% of the original award depending on the Company's relative total shareholder return during the performance period. These awards are settled entirely in stock. As of June 30, 2016, there are approximately 125,000, 81,000, and 128,000 performance units that are scheduled to vest in fiscal 2017, fiscal 2018, and fiscal 2019, respectively.

All awards vest upon the death or disability of the participant or upon a change of control of the Company.

The grant date fair value of the time-based awards is determined by the market value of the Company's common stock on the grant date. The grant date fair value of the market-based awards is calculated using a Monte Carlo model. For the fiscal 2016 grant, the model estimated the fair value of the award based on approximately 100,000 simulations of the future prices of the Company's common stock compared to the future prices of the common stock of its peer companies based on historical volatilities. The model also took into account the expected dividends of the peer companies over the performance period.

Nonvested deferred share activity for the twelve months ended June 30, 2016 is as follows:



	Shares		Weighted Average Grant Date Fair Value per Share
Nonvested shares at June 30, 2015	990,268		$	17.49
Shares granted	370,490		$	20.77
Performance shares awarded in excess of target	157,022		$	11.32
Shares vested and released	(631,443	)	$	12.39
Shares cancelled	(94,342	)	$	20.65
Nonvested shares at June 30, 2016	791,995		$	21.45

There were 242,649 and 381,038 deferred shares granted in fiscal 2015 and 2014 with average grant date fair values of $29.31 and $18.01, respectively. There were 631,443, 326,763 and 266,029 deferred shares that vested and were released in fiscal 2016, 2015 and 2014 with weighted average fair values of $22.34, $23.93 and $22.38 per share, respectively.