Stock-Based Compensation Plans

The Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (the “2004 Plan”) provides that, in addition to other types of awards, non-qualified and incentive stock options to purchase Common Stock may be granted to employees and non-employee directors at market prices at date of grant. This plan also provides for the granting of restricted stock units ("RSUs").

Options become exercisable in installments beginning one year after the date of grant and expire 10 years after the date of grant. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. Options with graded vesting are valued as single awards and the compensation cost recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. No options were granted during 2013. The following table sets forth the information about the weighted-average grant date fair value of options and the weighted-average assumptions used for such grants.



	2012			2011
Weighted average grant date fair value	$	13.80		$	18.52
Weighted average assumptions used:
Expected volatility	.450			.462
Expected option term in years	6.7			6.7
Risk-free interest rate	1.31		%	2.68		%
Expected dividend yield	.02		%	.74		%

Expected volatility is based on an analysis of historical volatility of our common stock. Expected option term is the period of time that options granted are expected to be outstanding and is derived by analyzing the historical option exercise experience of our optionees. Risk-free interest rate is determined using the implied yield currently available for zero coupon U.S. treasury issues with a remaining term equal to the expected term of the option. Expected dividend yield is based on the approved annual dividend rate in effect and the market price of our common stock at the time of grant.

A summary of option transactions for the three years ended May 31, 2013, follows:



	Shares Under Option		Weighted-Average Option Price
Outstanding at May 31, 2010	1,764,516		$	38.54
Granted	358,450		$	40.22
Exercised	(103,280	)	$	22.51
Canceled	(47,245	)	$	43.13
Outstanding at May 31, 2011	1,972,441		$	39.58
Granted	389,850		$	29.75
Exercised	(105,269	)	$	21.44
Canceled	(111,452	)	$	42.31
Outstanding at May 31, 2012	2,145,570		$	38.54
Exercised	(560,097	)	$	32.90
Canceled	(76,940	)	$	37.72
Outstanding at May 31, 2013	1,508,533		$	40.68

Options exercisable at May 31, were 878,423 for 2013, 1,160,420 shares for 2012 and 1,040,521 shares for 2011 at a weighted-average option price of $45.95, $42.59 and $41.34 respectively. The following table summarizes information about stock options outstanding as of May 31, 2013.



	Range of Exercise Prices
	$16.04 - $29.38		$33.57 - $48.60		$50.63 - $70.18
Options outstanding
Shares outstanding	501,792		616,051		390,940
Weighted-average remaining life in years	7.43		5.97		3.23
Weighted-average exercise price	$	27.62	$	39.57	$	59.18
Options exercisable
Shares exercisable	170,822		316,661		390,940
Weighted-average remaining life in years	6.22		4.74		3.23
Weighted-average exercise price	$	25.95	$	40.39	$	59.18

Outstanding options expire on various dates to January 11, 2022. As of May 31, 2013, there were 2,767,638 shares available for future awards under the 2004 Plan.

As of May 31, 2013, the aggregate intrinsic value (the difference in the closing market price of our common stock of $71.41 and the exercise price to be paid by the optionee) of stock options outstanding was $46.4 million. The aggregate intrinsic value of exercisable stock options at that date was $22.4 million. The total intrinsic value for options exercised (the difference in the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) was $15.1 million in 2013, $1.0 million in 2012, and $1.7 million in 2011.

We began issuing time-lapse RSUs to employees during 2013. RSUs vest at the end of a four year term. We determine the fair value of time-lapse RSUs using the average stock price on the date of grant, and value them as a single award with the related compensation cost recognized using a straight-line method over the vesting period adjusted for estimated forfeitures. Employees received 95,120 RSUs during 2013 with an average closing stock price on the date of grant of $55.92.

We have provided additional stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted stock payments and a former stock awards program which was settled during fiscal year 2012. At May 31, 2013, outstanding stock appreciation rights totaled 133,315 shares, deferred compensation agreements to be settled in common stock totaled 4,635 shares and unvested restricted stock totaled 14,331 shares. Other credits at May 31, 2012 included $4.1 million of accrued stock-based compensation accounted for as liabilities, which were expected to be settled in cash. Common stock totaling 4.2 million shares at May 31, 2013 and 2.5 million shares at May 31, 2012 have been reserved for the settlement of stock-based compensation.

Total stock-based compensation included in selling, general and administrative expense was $9.5 million in 2013, $2.4 million in 2012, and $5.6 million in 2011. Prior to effects of the January 4, 2013 stock appreciation rights agreement and the deferred compensation agreements noted below, the impact of changes in our company's stock price on stock-based awards previously accounted for as liabilities increased stock-based compensation $4.7 million in 2013, reduced stock-based compensation $2.6 million in 2012 and increased stock-based compensation $0.8 million in 2011.

Total tax expense or benefit recognized in our statements of operations for stock-based compensation was an expense of $1.0 million in 2013, less than $0.1 million in 2012 and $1.1 million 2011. No cash tax benefit was realized for stock-based compensation in 2013, 2012 and 2011.

As of May 31, 2013, the total unrecognized stock-based compensation expense was $12.0 million. We currently expect to recognize approximately $4.6 million of this expense in 2014, $3.4 million in 2015, $2.7 million in 2016 and $1.3 million in 2017

Effective January 4, 2013 the outstanding stock appreciation rights agreement was extended and modified to require settlement in shares instead of cash. Also effective December 28, 2012, deferred compensation agreements totaling 101,790 shares were settled with shares. The results of these changes were insignificant to compensation expense. In addition, as a result of the changes, the Company will no longer face volatility in compensation expense due to the changes in the Company's stock price.