Share-Based Compensation

12 Months Ended

Jun. 30, 2012

Share-Based Compensation

Share-Based Compensation

14.Share-Based Compensation

Carpenter has two share-based compensation plans: the 1993 Plan covering officers and key employees and the Director’s Plan covering non-employee directors.  Awards granted under the share-based compensation plans are generally paid from shares held in treasury and any additional required share payments are made with newly issued shares. The total compensation cost that has been charged against income related to these share-based compensation plans was $13.3 million, $14.4 million, and $7.4 million for the years ended June 30, 2012, 2011 and 2010, respectively.

1993 Plan

The 1993 plan provides that the Board of Directors may grant stock options, restricted stock, and restricted stock units, and determine the terms and conditions of each grant.  The 1993 plan provides the Chief Executive Officer with limited authority to grant awards.  As of June 30, 2012, 2,784,394 shares were available for awards which may be granted under this plan.

Director’s Plan

The Director’s plan provides for the granting of stock options, performance units and stock units to non-employee Directors. As of June 30, 2012, 833,624 shares were reserved for awards which may be granted under this plan.

Stock Options (all plans):

Stock options granted under the plans above are granted with an exercise price equal to at least the fair market value of the Company’s common stock on the date of grant. The options are exercisable after one to three years of service and expire no longer than ten years from the grant date.

The fair value of stock options awarded in fiscal years 2012, 2011 and 2010 were estimated on the date of each grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	Year Ended June 30,
	2012		2011		2010
Expected volatility	54	%	55	%	54	%
Dividend yield	1	%	2	%	2	%
Risk-free interest rate	1.4	%	1.6	%	2.6	%
Expected term (in years)	5.0		5.0		5.0

The assumptions are based on multiple factors, including historical exercise patterns of employees in relatively homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and the implied volatility of our stock price based on historical performance for the same expected term of the options granted. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of each grant.

	Number of Awards		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (In Millions)
Outstanding at June 30, 2009	541,263		35.36
Granted	592,746		18.50
Exercised	(29,559	)	10.00
Cancelled	(283,795	)	28.31
Outstanding at June 30, 2010	820,655		26.53
Granted	227,600		34.78
Exercised	(85,590	)	17.91
Cancelled	(5,858	)	31.31
Outstanding at June 30, 2011	956,807		29.23
Granted	152,450		55.04
Exercised	(79,444	)	23.57
Cancelled	(7,207	)	27.11
Outstanding at June 30, 2012	1,022,606		$	33.54	7.1 Years	$	16.5
Exercisable at June 30, 2012	669,060		$	30.17	6.4 Years	$	12.6

Outstanding and Exercisable Options:

Exercise Price Range	Number Outstanding at June 30, 2012	Weighted Average Remaining Contractual Term (in Years)	Weighted Average Exercise Price		Number Exercisable at June 30, 2012	Weighted Average Exercise Price
$5.00 -$20.00	259,262	6.2	$	16.40	189,106	$	16.07
$20.01 - $30.00	199,416	6.9	22.64		197,563	22.65
$30.01 - $40.00	212,451	8.1	34.62		86,080	34.86
$40.01 - $50.00	141,342	6.4	44.00		123,315	43.62
$50.00 - $63.54	210,135	7.7	56.89		72,996	58.84
	1,022,606		$	33.54	669,060	$	30.17

The weighted average grant date fair value of options awarded during fiscal years 2012, 2011 and 2010 was $23.46, $14.75 and $7.77, respectively. Share based compensation charged against income related to stock options for the years ended June 30, 2012, 2011 and 2010 was $3.1 million, $3.8 million and $2.2 million, respectively. As of June 30, 2012, $1.7 million of compensation cost related to non vested stock options remains to be recognized over a weighted average remaining life of 1.3 years.

Of the options outstanding at June 30, 2012, 797,761 relate to the 1993 plan and 224,845 relate to the Directors’ Plan.

Nonvested Stock Awards (all plans):

Nonvested stock awards are granted to employees with performance and/or service conditions. Nonvested awards receive non-forfeitable cash dividends during the restriction period. The fair value of the nonvested stock awards is determined based on the Company’s stock price at the grant date.

Performance-based restricted share awards are earned only if Carpenter achieves certain performance goals during a specified performance period according to the terms determined by the Board at the date of the grant. These shares vest from one to two years from the date of the attainment of the specified performance goals. Compensation cost is determined and charged to expense beginning in the performance period through the vesting period.

Time-based restricted share awards vest three years from the date of grant. Compensation cost related to time based share awards is recognized over the vesting period of the award.

Amounts charged to compensation expense for nonvested stock awards was $6.1 million, $7.7 million and $3.4 million for the years end June 30, 2012, 2011 and 2010, respectively. As of June 30, 2012, $3.3 million of compensation cost related to nonvested restricted stock awards remains to be recognized over a weighted average remaining life of 1.4 years.

	Number of Awards		Weighted- Average Grant Date Fair Value
Nonvested Balance at June 30, 2009	258,564		$	50.90
Time-based granted	219,448		$	19.66
Performance-based earned	110,904		$	18.59
Vested	(125,222	)	$	50.04
Forfeited	(118,667	)	$	32.78
Nonvested Balance at June 30, 2010	345,027		$	26.63
Time-based granted	171,617		$	33.10
Performance-based earned	131,644		$	32.52
Vested	(165,576	)	$	33.43
Forfeited	(1,971	)	$	36.64
Nonvested Balance at June 30, 2011	480,741		$	28.17
Time-based granted	43,408		$	49.75
Performance-based earned	77,423		$	55.69
Vested	(171,140	)	$	28.00
Forfeited	(11,101	)	$	21.75
Nonvested Balance at June 30, 2012	419,331		$	35.71

Total Stockholder Return Awards:

The Company granted Total Stockholder Return (“TSR”) awards in fiscal year 2012, 2011 and 2010. The TSR awards are granted at a target number of shares, and vest based on the Company’s total stockholder return compared to the total stockholder returns of a group of peer companies at the end of a three-year period. The actual number of shares awarded may range from a minimum of 50 percent of the target shares to a maximum of two times target. Participants do not have any rights to dividends (or equivalents) during the performance period. The fair value of the TSR awards was estimated using Monte Carlo valuation models. Compensation cost recognized in fiscal years 2012, 2011 and 2010 related to TSR awards was $3.0 million, $1.9 million and $0.6 million, respectively.

Director Stock Units

According to the provisions of the Director’s plan, on the date of each annual stockholders’ meeting or on such other regularly scheduled date as the Board of Directors may determine from time to time in light of the Company’s prevailing practices for the grant of equity awards to employees, each Director shall be granted, in place of cash compensation, a number of stock units determined by dividing 50 percent of the Director’s annual retainer by the fair market value of the Company’s common stock on that date. Each Director may elect to increase the percentage up to 100 percent of the annual retainer to be paid in stock units in lieu of cash. Stock units granted at each annual meeting will be forfeited if the Director terminates service as a Director for any reason other than retirement, disability or death before the next annual stockholders’ meeting. Additional units are credited to each Director on a quarterly basis to reflect dividend equivalents on the Company’s common stock.

Following a Director’s retirement, the Director will be paid the number of the Company’s common stock shares equal to the number of stock units credited to the Director’s account.

	Number of Units	Weighted- Average Grant Date Fair Value
Outstanding at June 30, 2009	100,063	$	25.95
Granted	59,332	$	18.12
Dividend equivalents	3,469	$	—
Outstanding at June 30, 2010	162,864	$	22.66
Granted	29,822	$	36.45
Dividend equivalents	3,015	$	—
Outstanding at June 30, 2011	195,701	$	25.81
Granted	22,660	$	47.89
Dividend equivalents	3,049	$	—
Outstanding at June 30, 2012	221,410	$	27.10

Compensation cost is determined using the grant-date fair value and charged to expense over the vesting period of one year and amounted to $1.1 million, $1.0 million and $1.2 million for the years ended June 30, 2012, 2011 and 2010, respectively. As of June 30, 2012, $0.3 million of compensation cost related to director stock units remains to be recognized over a weighted average remaining life of 0.3 years.