Share-Based Compensation

3 Months Ended

Sep. 30, 2012

Share-Based Compensation [Abstract]

Share-Based Compensation

(14)           Share-Based Compensation

a. Stock Plan

The Company's share-based compensation program consists of the Globe Specialty Metals, Inc. 2006 Employee, Director and Consultant Stock Plan (the Stock Plan). The Stock Plan was initially approved by the Company's stockholders on November 10, 2006, and was amended and approved by the Company's stockholders on December 6, 2010 to increase by 1,000,000 the number of shares of common stock authorized for issuance under the Stock Plan. The Stock Plan, as amended, provides for the issuance of a maximum of 6,000,000 shares of common stock for the granting of incentive stock options, nonqualified options, stock grants, and share-based awards. Any remaining shares available for grant, but not yet granted, will be carried over and used in the following fiscal years.

On August 17, 2012, the Board authorized the Company to offer to amend outstanding options representing the right to purchase shares issued to directors, officers and current employees pursuant to the Stock Plan, to permit these options alternatively to be settled for cash or exercised for the issuance of shares, at the election of the option holder. This modification of the outstanding options changed its classification from equity awards to liability awards and the fair value of the liability awards is remeasured at the end of each reporting period through settlement. For the three months ended September 30, 2012, the total incremental and remeasurement of compensation cost resulting from the modification was $23,576. The expense is reported within selling, general, and administrative expenses.

At September 30, 2012, there were 479,977 shares available for grant. All option grants have maximum contractual terms ranging from 5 to 10 years. It is the Company's policy to issue new shares to satisfy the requirements of its share-based compensation plan. The Company does not expect to repurchase shares in the future to support its share-based compensation plan.

During the three months ended September 30, 2012, share-based compensation awards consisted of the issuance of 13,188 nonqualified stock options and 4,468 restricted stock grants. A summary of the changes in options outstanding under the Stock Plan during the three months ended September 31, 2012 is presented below:

				Weighted-
				Average
			Weighted-	Remaining		Aggregate
	Number of		Average	Contractual		Intrinsic
	Options		Exercise Price	Term in Years		Value
Outstanding as of June 30, 2012	4,365,397	$	8.10	2.65	$	29,690
Granted	13,188		13.43
Exercised	(303,333)		4.05
Forfeited and expired	—		—
Outstanding as of September 30, 2012	4,075,252	$	8.41	2.46	$	32,163
Exercisable as of September 30, 2012	3,298,066	$	6.06	2.11		32,108

The Company estimates the fair value of grants using the Black-Scholes option pricing model. The following assumptions were used to estimate the fair value of stock option awards for the three months ended and as of September 30, 2012:

	2013
Risk-free interest rate	0.22 to 0.91%
Expected dividend yield	1.64
Expected volatility	47.00 to 60.30
Expected forfeiture rate	—
Expected term (years)	1.60 to 6.05

The risk-free interest rate is based on the yield of zero coupon U.S. Treasury bonds with terms similar to the expected term of options. The expected dividend yield is based on the Company's current annual dividend yield of $0.25 per common share. The expected volatility is based on historical changes in stock prices or historical volatilities of similar companies since there is limited trading data related to the Company's common stock. The expected forfeiture rate and expected term are based on historical exercise behavior.

During the three months ended September 30, 2012, 64,206 options vested, resulting in total vested options of 3,298,066. There are 777,187 nonvested options outstanding at September 30, 2012.

For the three months ended September 30, 2012, pre-tax share-based compensation expense was $24,056. For the three months ended September 30, 2011, pre-tax share-based compensation expense was $458. The expense is reported within selling, general, and administrative expenses.

As of September 30, 2012, the Company has unearned compensation expense of $1,145, before income taxes, related to nonvested stock option awards. The unrecognized compensation expense is expected to be recognized over 2.2 years.

b. Executive Bonus Plan

In addition to share-based awards issued under the Stock Plan, the Company issues restricted stock units under the Company's Executive Bonus Plan. These restricted stock units proportionally vest over three years, but are not delivered until the end of the third year. The Company will settle these awards by cash transfer, based on the Company's stock price on the date of transfer. During the three months ended September 30, 2012, there were no restricted stock units granted, and as of September 30, 2012, 487,367 restricted stock units were outstanding. For the three months ended September 30, 2012, pre-tax compensation expense for these restricted stock units was $829. The expense is reported within selling, general, and administrative expenses. The $2,048 liability associated with these restricted stock units is included in other long-term liabilities at September 30, 2012.