Equity

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 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").

The Restated Plan: Pursuant to amendments approved by the Company's shareholders on July 20, 2009, shares available or that become available for grant under the Restated Plan are available for grant under the 2007 Plan, and no new grants will be made under the Restated Plan. As such, there were no shares available for grants under the Restated Plan as of June 30, 2014.

The 2007 Plan: The 2007 Plan was originally approved by the Company's shareholders in May 2007 and amended and restated as of July 20, 2009 and further amended as of December 4, 2012. As of June 30, 2014, the Company had reserved a total of 5,000 shares of common stock for issuance under the 2007 Plan. In addition, any shares subject to outstanding awards that expire unexercised or any shares that are forfeited under the Restated Plan (for tax withholding or otherwise) will be available for reissuance under the 2007 Plan, which amount was 2,022 in total through fiscal year 2014. The Company may generally grant six types of awards under the 2007 Plan: restricted stock awards and restricted stock units, stock options (including both incentive stock options, within the meaning of Section 422 of the Internal Revenue Code and non-qualified options), phantom stock, stock bonus awards, other awards (including stock appreciation rights) and performance based awards. In addition, the Compensation Committee of the Board of Directors may, in its discretion, make other awards. The 2007 Plan provides that the exercise price for each stock option shall not be less than the fair market value (or par value) of the common stock of the Company at the time the stock option is granted. The maximum number of shares of common stock that may be the subject of awards to a participant in any Company tax year is 600. Stock options granted under the 2007 Plan generally vest ratably over four years and expire seven years from the date of grant. As of June 30, 2014, 1,874 shares remained available for grants under the 2007 Plan.

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 consolidated statements of operations. Stock-based compensation expense includes the estimated effects of forfeitures, and estimates of forfeitures will be adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized in the period of change and will also impact the amount of expense to be recognized in future periods. During fiscal years 2014, 2013 and 2012, the Company recognized stock-based compensation expense in cost of services and general and administrative expenses within the consolidated statements of operations as follows:



	2014		2013		2012
Cost of services	$	2,137	$	1,623	$	1,556
General and administrative expenses	2,521		2,209		4,994
Total stock-based compensation expense	$	4,658	$	3,832	$	6,550

The benefits associated with the tax deductions in excess of recognized compensation cost are required to be reported as financing activities in the consolidated statements of cash flows. This reduces reported operating cash flows and increases reported financing cash flows. As a result, net financing cash flows included $3,115, $203 and $0 in fiscal year 2014, 2013 and 2012, respectively, from the benefits of tax deductions in excess of recognized compensation cost. The tax benefit of any resulting excess tax deduction increases the additional paid-in capital ("APIC") pool. Any resulting tax deficiency is deducted from the APIC pool.

Stock Options

A summary of stock option activity for fiscal years ended 2014, 2013 and 2012 under the Plans is as follows:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding options as of June 30, 2011 (805 exercisable)	923		$	10.94
Options granted	6		5.33
Options exercised	(1	)	2.93
Options forfeited	(1	)	1.41
Options expired	(140	)	19.37
Outstanding options as of June 30, 2012 (751 exercisable)	787		9.41
Options exercised	(38	)	4.28
Options forfeited	(3	)	3.49
Options expired	(39	)	9.82
Outstanding options as of June 30, 2013 (695 exercisable)	707		9.69
Options exercised	(17	)	4.29
Options forfeited	(1	)	6.03
Options expired	(35	)	13.58
Outstanding options as of June 30, 2014	654		$	9.62	1.0	$	230
Options exercisable as of June 30, 2014	649		$	9.66	1.0	$	221
Options vested and expected to vest as of June 30, 2014	654		$	9.62	1.0	$	230

The aggregate intrinsic value is measured using the fair market value at the date of exercise (for options exercised) or as of June 30, 2014 (for outstanding options), less the applicable exercise price. The closing price of the Company's common stock on the New York Stock Exchange was $6.22 as of June 30, 2014. The total intrinsic value of options exercised in fiscal year 2014, 2013 and 2012 were $43, $129 and $2, respectively. The total proceeds received from option exercises was $71, $161 and $2 in fiscal years 2014, 2013 and 2012, respectively.

As of June 30, 2014, there was $10 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 1.4 years.

The following table summarizes additional information about stock options outstanding as of June 30, 2014:



	Options Outstanding				Options Exercisable				Options Vested and Expected to Vest
Range of Exercise Prices	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years
$ 1.92 - $ 2.97	26	$	2.55	1.9	26	$	2.55	1.9	26	$	2.55	1.9
2.98 - 5.97	48	3.71		2.2	44	3.69		2.0	48	3.71		2.2
5.98 - 9.01	153	7.39		1.4	152	7.41		1.4	153	7.39		1.4
9.34 - 16.03	422	11.43		0.7	422	11.43		0.7	422	11.43		0.7
17.84 - 18.09	5	17.89		0.4	5	17.89		0.4	5	17.89		0.4
$ 1.92 - $18.09	654	$	9.62	1.0	649	$	9.66	1.0	654	$	9.62	1.0

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. There were 11, 16 and 193 non-vested RSA's as of June 30, 2014, 2013 and 2012, respectively. There were no RSA's granted during fiscal year 2014. RSA grants totaled 8 and 11 shares at a weighted-average grant date fair value of $53 and $38 during fiscal years 2013 and 2012, respectively. The total fair value of RSA's vested during fiscal years 2014, 2013 and 2012 was $39, $1,322 and $958, respectively.

As of June 30, 2014, there was $42 of total unrecognized compensation expense related to unvested RSA's, and this expense is expected to be recognized over a weighted-average period of 2.0 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 fiscal years 2014, 2013 and 2012 is as follows:



	Restricted Stock Units		Weighted Average Grant Date Fair Value
Non-vested units as of June 30, 2011	1,162		$	3.00
Units granted	683		4.91
Units vested	(414	)	3.17
Units forfeited	(7	)	3.31
Non-vested units as of June 30, 2012	1,424		3.87
Units granted	412		6.98
Units vested	(512	)	3.76
Units forfeited	(18	)	5.03
Non-vested units as of June 30, 2013	1,306		4.87
Units granted	343		7.76
Units vested	(626	)	4.51
Units forfeited	(16	)	6.13
Non-vested units as of June 30, 2014	1,007		$	6.06

RSU grants totaled 343, 412, and 683 shares at a weighted-average grant date fair value of $2,661, $2,876 and $3,358 during fiscal years 2014, 2013 and 2012, respectively. The total fair value of RSU's vesting during fiscal years 2014, 2013 and 2012, was $4,618, $3,521 and $1,569, respectively.

As of June 30, 2014, there was $4,181 of total unrecognized compensation expense related to unvested RSU's, and this expense is expected to be recognized over a weighted-average period of 2.3 years.

Effective July 1, 2011, the Company entered into a Third Amended and Restated Employment Agreement (the "Employment Agreement") with Christopher P. Vincze, pursuant to which Mr. Vincze will remain in his current position as Chairman of the Board of Directors and Chief Executive Officer of the Company. In connection with the Employment Agreement, 300 RSU's were granted on July 1, 2011 (the "2012 Award") and 300 RSU's were granted on July 1, 2012 (the "2013 Award"), all of which were deemed effective July 1, 2011 for compensation expense recognition. Forty percent of the shares of common stock subject to the RSU's contain time-based vesting restrictions and the remaining sixty percent are subject to performance-based vesting restrictions. The time-based vesting component of the 2012 Award vests in equal one-fourth increments on July 1 of 2012, 2013, 2014, and 2015; and the time-based vesting component of the 2013 Award vests in equal one-third increments on July 1 of 2013, 2014, and 2015. The performance-based vesting components of both RSU's would vest in their entirety based on earnings per share ("EPS") for the Company's fiscal year ending June 30, 2014 (or an earlier trailing four-quarter period) (the "FY 2014 Target"). If the FY 2014 Target was not achieved prior to July 1, 2014, the performance vesting components would vest in their entirety (if at all) based on EPS in a trailing four-quarter period ending on or before July 1, 2015. The Compensation Committee of the Company's Board of Directors determined that as of June 30, 2012 the performance condition of the 2012 and 2013 Awards had been achieved based on fiscal year 2012 financial performance, and therefore the performance vesting components of the 2012 Award and the 2013 Award vested on June 30, 2012 and July 1, 2012, respectively. Compensation expense of $2,347 was recorded relating to these awards during fiscal year 2012.

Performance Stock Units

Compensation expense for PSU's is recognized ratably over the vesting term, which is generally four years, 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. As of June 30, 2014, the performance condition of the PSU's granted during fiscal year 2014, as determined by the Compensation Committee of the Company's Board of Directors, had been achieved at 100% of value. Compensation expense relating to PSU's of $1,811 was recorded during fiscal year 2014.

PSU grants totaled 355, 399 and 734 shares with a weighted-average grant date fair value of $2,827, $2,963 and $3,785 during fiscal years 2014, 2013 and 2012, respectively. The total fair value of PSU's vested during fiscal years 2014, 2013 and 2012, was $2,299, $2,693 and $2,280, respectively.

As of June 30, 2014, there was $3,704 of total unrecognized compensation expense related to non-vested PSU's and this expense is expected to be recognized over a weighted-average period of 1.8 years.

A summary of non-vested PSU activity for fiscal years 2014, 2013 and 2012 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, 2011	551		—		551		$	2.88
Units granted	734		—		734		$	5.15
Units vested	(427	)	—		(427	)	$	4.62
Units forfeited	(5	)	—		(5	)	$	3.48
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	(17	)	—		(17	)	$	5.94
Non-vested units as of June 30, 2013	853		—		853		$	5.18
Units granted	355		34		389		$	7.96
Units vested	(278	)	(34	)	(312	)	$	4.17
Units forfeited	(51	)	—		(51	)	$	7.15
Non-vested units as of June 30, 2014	879		—		879		$	6.50


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

Directors' Deferred Compensation

In fiscal year 2014, each non-employee director of the Company received an annual retainer of $45 payable at each director's election in cash or common stock subject to deferral under the Directors' Deferred Compensation Plan. The Company issued approximately 6, 5 and 8 shares of common stock in fiscal years 2014, 2013 and 2012, respectively, to its non-employee directors under the Directors' Deferred Compensation Plan. The Company recognized approximately $45, $34, and $40 in expense based on the fair value of the shares issued in fiscal years 2014, 2013 and 2012, respectively.