NOTE 21. STOCK PLANS AND STOCK-BASED COMPENSATION

For stock options, SSARs and non-performance-based RSUs, stock-based compensation expense is recognized on a straight-line basis ratably over the respective vesting periods. For RSUs subject to graded vesting schedules for which vesting is based on achievement of a performance metric in addition to grantee service (performance-based RSUs), stock-based compensation expense is recognized on an accelerated basis by treating each vesting tranche as if it was a separate grant. A summary of the components of stock-based compensation expense recognized during the years ended June 30, 2013, 2012, and 2011, together with the income tax benefits realized, is as follows (in thousands):


	Year ended June 30,
		2013		2012		2011
Stock-based compensation included in indirect costs and selling expense:
Restricted stock and RSU expense	$	8,150	$	13,526	$	14,201
SSARs and non-qualified stock option expense		682		1,973		3,714
Total stock-based compensation expense	$	8,832	$	15,499	$	17,915
Income tax benefit recognized for stock-based compensation expense	$	3,342	$	6,062	$	6,549

The Company recognizes the effect of expected forfeitures of equity grants by estimating an expected forfeiture rate for grants of equity instruments. Amounts recognized for expected forfeitures are subsequently adjusted periodically and at major vesting dates to reflect actual forfeitures.

The incremental income tax benefits realized upon the exercise or vesting of equity instruments are reported as financing cash flows. During the years ended June 30, 2013, 2012, and 2011, the Company recognized $1.6 million, $0.4 million, and $2.2 million of excess tax benefits, respectively, which have been reported as financing cash inflows in the accompanying consolidated statements of cash flows.

Equity Grants and Valuation

Under the terms of its 2006 Stock Incentive Plan (the 2006 Plan), the Company may issue, among others, non-qualified stock options, restricted stock, RSUs, SSARs, and performance awards, collectively referred to herein as equity instruments. During the periods presented, all equity instrument grants were made in the form of RSUs. Annual grants under the 2006 Plan are generally made to the Company's key employees during the first quarter of the Company's fiscal year and to members of the Company's Board of Directors during the second quarter of the Company's fiscal year. With the approval of its Chief Executive Officer, the Company also issues equity instruments to strategic new hires and to employees who have demonstrated superior performance.

In September 2012, the Company made its annual grant to key employees consisting of 238,810 Performance-based Restricted Stock Units (PRSUs). The final number of such PRSUs that would be considered earned by participants and vest was based on the achievement of a specified net after tax profit (NATP) for the year ended June 30, 2013 and on the average share price of Company stock for the 90 day period ending September 14, 2013 as compared to the average share price for the 90 day period ended September 14, 2012. The specified NATP for the year ended June 30, 2013 was not met and as a result no PRSUs will be earned for this grant. During the three month period ended March 31, 2013 the Company determined it was probable that it would not achieve the specified NATP and reversed all stock-based compensation associated with this grant.

On February 21, 2013, the Company made a one-time grant of 300,000 RSUs to its newly appointed Chief Executive Officer. These RSUs will vest in three equal annual increments beginning on the third anniversary of his employment, dependent upon continuing service as an employee of the Company.

The Company also issues equity instruments in the form of RSUs under its Management Stock Purchase Plan (MSPP) and Director Stock Purchase Plan (DSPP). In addition, annual grants are made to members of the Company's Board of Directors in the form of a set dollar value of RSUs. Grants to members of the Board of Directors vest based on the passage of time and continued service as a Director of the Company.

Upon the exercise of stock options and SSARs and the vesting of restricted shares and RSUs, the Company fulfills its obligations under the equity instrument agreements by either issuing new shares of authorized common stock or by issuing shares from treasury. The total number of shares authorized by shareholders for grants under the 2006 Plan and its predecessor plan was 12,450,000 as of June 30, 2013. The aggregate number of grants that may be made may exceed this approved amount as forfeited SSARs, stock options, restricted stock and RSUs, and vested but unexercised SSARs and stock options that expire, become available for future grants. As of June 30, 2013, cumulative grants of 12,911,686 equity instruments underlying the shares authorized have been awarded, and 4,005,519 of these instruments have been forfeited.

Non-qualified stock options granted prior to January 1, 2004 lapse and are no longer exercisable if not exercised within ten years of the date of grant. Equity instruments granted on or after January 1, 2004 have a term of seven years. For SSAR and stock option awards, grantees whose employment has terminated have 60 days after their termination date to exercise vested SSARs and stock options, or they forfeit their right to the instruments. Grantees whose employment is terminated due to death or permanent disability will vest in 100 percent of their equity instrument grants. Also, effective for grants made on or after July 1, 2004, grantees who were age 62 on or before July 1, 2008 who retire on or after age 65 will vest in 100 percent of their equity instrument grants upon retirement, with the exception of performance-based RSUs, which must be held at least until the measurement period is complete. Grantees who were not age 62 on or before July 1, 2008, who retire on or after age 62, vest in a prorated portion of their equity instrument grants upon retirement, based upon their service during the vesting period.

Stock options vest ratably over a three, four, or five year period, depending on the year of grant. Restricted shares and most non-performance-based RSUs vest in full three years from the date of grant. RSUs granted to the Company's Chief Executive Officer in February 2013 and to the Company's Chief Operating Officer in February 2012 have longer vesting periods. SSARs granted in prior years as part of the Company's then customary annual award vest ratably over a five year period in a manner consistent with the vesting of stock options.

Other than performance-based RSUs which contain a market-based element, the fair value of RSU grants is determined based on the closing price of a share of the Company's common stock on the date of grant. The fair value of RSUs with market-based vesting features is also measured on the grant date, but is done so using a binomial lattice model. The weighted-average fair value of RSUs granted during the years ended June 30, 2013, 2012, and 2011, was $59.07, $47.34, and $43.79, respectively.

No stock options or SSARs were granted during the years ended June 30, 2013, 2012 or 2011. Activity for all outstanding SSARs and stock options, and the corresponding exercise price and fair value information, for the years ended June 30, 2013, 2012, and 2011, is as follows:


						Weighted		Weighted
						Average		Average
	Number					Exercise		Grant Date
	of Shares			Exercise Price		Price		Fair Value
Outstanding, June 30, 2010	3,086,428		$	9.94– $65.04	$	48.66	$	19.23
Exercisable, June 30, 2010	1,455,220			9.94– 65.04		44.99		18.08
Exercised	(791,722	)		9.94– 62.48		36.36		14.82
Forfeited	(85,460	)		45.77– 54.39		49.47		18.88
Expired	(98,942	)		48.83– 63.20		58.61		22.09
Outstanding, June 30, 2011	2,110,304			34.10– 65.04		52.78		20.77
Exercisable, June 30, 2011	1,177,209			34.10– 65.04		55.19		22.17
Exercised	(365,306	)		34.10– 62.48		48.72		19.10
Forfeited	(32,630	)		45.77– 54.39		48.64		17.95
Expired	(28,670	)		48.83– 62.48		60.20		19.19
Outstanding, June 30, 2012	1,683,698			34.10– 65.04		53.62		21.21
Exercisable, June 30, 2012	1,362,451			34.10– 65.04		54.79		22.01
Exercised	(838,618	)		34.10– 58.40		48.76		18.93
Forfeited	(10,350	)		42.95– 49.36		48.37		17.03
Expired	(559,180	)		36.13– 65.04		63.46		26.51
Outstanding, June 30, 2013	275,550			37.67– 59.30		48.62		17.54
Exercisable, June 30, 2013	243,170		$	37.67– $59.30	$	48.58	$	17.60

Changes in the number of unvested SSARs and stock options and in unvested restricted stock and RSUs during each of the years in the three-year period ended June 30, 2013, together with the corresponding weighted-average fair values, are as follows:


	SSARs and				Restricted Stock and
	Stock Options				Restricted Stock Units
				Weighted				Weighted
				Average				Average
	Number			Grant Date	Number			Grant Date
	of Shares			Fair Value	of Shares			Fair Value
Unvested at June 30, 2010	1,631,208		$	20.26	949,630		$	47.41
Granted	—			—	800,112			43.79
Vested	(612,653	)		22.38	(357,954	)		47.87
Forfeited	(85,460	)		18.88	(69,687	)		45.01
Unvested at June 30, 2011	933,095			18.99	1,322,101			45.23
Granted	—			—	817,918			47.34
Vested	(579,218	)		19.72	(266,658	)		48.09
Forfeited	(32,630	)		17.95	(222,040	)		46.59
Unvested at June 30, 2012	321,247			17.80	1,651,321			45.97
Granted	—			—	605,277			59.07
Vested	(278,517	)		17.92	(347,497	)		47.27
Forfeited	(10,350	)		17.03	(866,355	)		53.04
Unvested at June 30, 2013	32,380		$	17.02	1,042,746		$	47.74

Information regarding the cash proceeds received, and the intrinsic value and total tax benefits realized resulting from stock option exercises is as follows (in thousands):


	Year ended June 30,
		2013		2012		2011
Cash proceeds received	$	13,050	$	7,466	$	22,077
Intrinsic value realized	$	6,594	$	3,865	$	14,561
Income tax benefit realized	$	2,595	$	1,521	$	5,731

The total intrinsic value of RSUs that vested during the years ended June 30, 2013, 2012, and 2011 was $17.6 million, $13.4 million and $15.4 million, respectively, and the tax benefit realized for these vestings was $6.9 million, $5.3 million and $6.1 million, respectively.

The grant date fair value of stock options that vested during each of the years in the three-year period ended June 30, 2013 was $5.0 million, $11.4 million, and $13.7 million, respectively.

Outstanding SSAR and Stock Option Information

Information regarding the SSARs and stock options outstanding and exercisable as of June 30, 2013, is as follows (intrinsic value in thousands):


		SSARs and Options Outstanding						SSARs and Options Exercisable
					Weighted						Weighted
				Weighted	Average					Weighted	Average
				Average	Remaining					Average	Remaining
	Range of	Number of		Exercise	Contractual		Intrinsic	Number of		Exercise	Contractual		Intrinsic
	exercise Price	Instruments		Price	Life		Value	Instruments		Price	Life		Value
$	30.00-$39.99	6,400	$	37.67	2.14	$	165	5,120	$	37.67	2.14	$	132
$	40.00-$49.99	259,150		48.48	1.54		3,891	228,050		48.36	1.46		3,451
$	50.00-$59.99	10,000		59.30	1.56		42	10,000		59.30	1.56		42
		275,550	$	48.62	1.56	$	4,098	243,170	$	48.58	1.48	$	3,625

As of June 30, 2013, there was sixty thousand dollars of unrecognized compensation cost related to SSARs and stock options scheduled to be recognized during the first quarter of the year ending June 30, 2014 and $24.3 million of unrecognized compensation cost related to restricted stock and RSUs scheduled to be recognized over a weighted-average period of 2.2 years.

Stock Purchase Plans

The Company adopted the 2002 Employee Stock Purchase Plan (ESPP), MSPP and DSPP in November 2002, and implemented these plans beginning July 1, 2003. There are 1,000,000, 500,000, and 75,000 shares authorized for grants under the ESPP, MSPP and DSPP, respectively.

The ESPP allows eligible full-time employees to purchase shares of common stock at 95 percent of the fair market value of a share of common stock on the last day of the quarter. The maximum number of shares that an eligible employee can purchase during any quarter is equal to two times an amount determined as follows: 20 percent of such employee's compensation over the quarter, divided by 95 percent of the fair market value of a share of common stock on the last day of the quarter. The ESPP is a qualified plan under Section 423 of the Internal Revenue Code and, for financial reporting purposes, was amended effective July 1, 2005 so as to be considered non-compensatory. Accordingly, there is no stock-based compensation expense associated with shares acquired under the ESPP. As of June 30, 2013, participants have purchased 938,233 shares under the ESPP, at a weighted-average price per share of $46.41. Of these shares, 78,225 were purchased by employees at a weighted-average price per share of $52.09 during the year ended June 30, 2013. During the year ended June 30, 3013, the Company established a 10b5-1 plan to facilitate the open market purchase of shares of Company stock to satisfy its obligations under the ESPP.

The MSPP provides those senior executives with stock holding requirements a mechanism to receive RSUs in lieu of up to 100 percent of their annual bonus. For the fiscal years ended June 30, 2013, 2012 and 2011, RSUs awarded in lieu of bonuses earned are granted at 85 percent of the closing price of a share of the Company's common stock on the date of the award, as reported by the New York Stock Exchange. RSUs granted under the MSPP vest at the earlier of 1) three years from the grant date, 2) upon a change of control of the Company, 3) upon a participant's retirement at or after age 65, or 4) upon a participant's death or permanent disability. Vested RSUs are settled in shares of common stock. The Company recognizes the value of the discount applied to RSUs granted under the MSPP as stock compensation expense ratably over the three-year vesting period.

The DSPP allows directors to elect to receive RSUs at the market price of the Company's common stock on the date of the award in lieu of up to 100 percent of their annual retainer fees. Vested RSUs are settled in shares of common stock.

Activity related to the MSPP and the DSPP during the year ended June 30, 2013 is as follows:


		MSPP			DSPP
RSUs outstanding, June 30, 2012		50,363			402
Granted		10,160			1,148
Issued		(26,430	)		(1,413	)
Forfeited		(4,802	)		—
RSUs outstanding, June 30, 2013		29,291			137
Weighted average grant date fair value
as adjusted for the applicable discount	$	44.57
Weighted average grant date fair value				$	56.18