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 the six-month period ended November 30, 2013.

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 six-month period ended November 30, 2013, follows:



	Shares Under Option		Weighted-Average Option Price
Outstanding at May 31, 2013	1,508,533		$	40.68
Exercised	(35,592	)	$	40.32
Canceled	(25,300	)	$	64.21
Outstanding at November 30, 2013	1,447,641		$	40.28
Exercisable at November 30, 2013	828,221		$	45.50

The following table summarizes information about stock options outstanding as of November 30, 2013.



	Range of Exercise Prices
	$16.04 - $29.38		$33.57 - $48.60		$50.63 - $70.18
Options outstanding
Shares outstanding	495,032		591,919		360,690
Weighted-average remaining life in years	6.94		5.57		2.96
Weighted-average exercise price	$	27.64	$	39.58	$	58.76
Options exercisable
Shares exercisable	167,102		300,429		360,690
Weighted-average remaining life in years	5.71		4.40		2.96
Weighted-average exercise price	$	25.95	$	40.44	$	58.76

Outstanding options expire on various dates up to January 11, 2022. As of November 30, 2013, there were 2,693,963 shares available for future awards under the 2004 Plan.

As of November 30, 2013, the aggregate intrinsic value (the difference in the closing market price of our common stock of $58.12 and the exercise price to be paid by the optionee) of stock options outstanding was $27.6 million. The aggregate intrinsic value of exercisable stock options at that date was $12.6 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 $0.3 million for both of the three-month periods ended November 30, 2013 and 2012 and $0.8 million and $1.0 million for the six-month periods ended November 30, 2013 and 2012 , respectively.

We began issuing RSUs subject to service based only conditions to employees in fiscal 2013. In the six-month period ended November 30, 2013, we began issuing RSUs subject to market and service based conditions to employees. All RSUs vest at the end of a four year term subject to achievement of market conditions for those RSUs with market conditions. We determine the fair value of RSUs subject to service based only conditions using the closing 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. We determine the fair value of RSUs subject to market and service based conditions using a Monte Carlo simulation, 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 85,169 RSUs during the six-month period ended November 30, 2013 with a closing stock price on the date of grant of $70.68, of which 54,512 are market based awards and the remaining are service based awards.

We have provided additional stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted stock payments. At November 30, 2013, outstanding stock appreciation rights totaled 133,315 shares and deferred compensation agreements to be settled in common stock totaled 5,495 shares.

Common stock totaling 4.1 million shares at November 30, 2013 have been reserved for the settlement of stock-based compensation.

Total stock-based compensation included in selling, general and administrative expense was $1.5 million and $2.7 million in the three-month periods ended November 30, 2013 and 2012. Total stock-based compensation included in selling, general and administrative expense was $4.0 million, which included $1.0 million in stock grants to the Company's Directors in the six-month period ended November 30, 2013 and $5.5 million in the six-month period ended November 30, 2012.

Prior to our executing the January 4, 2013 stock appreciation rights agreement and the deferred compensation agreements, the impact of changes in our company's stock price on stock-based awards previously accounted for as liabilities increased stock-based compensation $0.9 million in the three-month period ended November 30, 2012 and $1.7 million in the six-month period ended November 30, 2012.

No tax expense or benefit was recognized for stock-based compensation in our statement of operations in the six-month period ended November 30, 2013, and less than $0.1 million was recognized in the six-month period ended November 30, 2012. No cash tax benefit was realized for stock-based compensation in the six-month periods ended November 30, 2013 and 2012, respectively.

As of November 30, 2013, the total unrecognized stock-based compensation expense was $14.1 million. Stock-based compensation expense expected to be recognized in the twelve-month periods ending November 30, 2014 is $5.2 million, $4.4 million in 2015, $3.4 million in 2016 and $1.1 million in 2017.