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 $13.1 million, $13.3 million, and $14.4 million for the years ended June 30, 2013, 2012 and 2011, 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, 2013, 2,343,472 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, 2013, 790,049 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 2013, 2012 and 2011 were estimated on the date of each grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	Years Ended June 30,
	2013		2012		2011
Expected volatility	55	%	54	%	55	%
Dividend yield	1	%	1	%	2	%
Risk-free interest rate	0.7	%	1.4	%	1.6	%
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, 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
Granted	198,904		48.60
Exercised	(115,600	)	19.82
Cancelled	(17,182	)	48.42
Outstanding at June 30, 2013	1,088,728		$	37.51	6.8 Years	$	11.4

Exercisable at June 30, 2013	759,720		$	33.02	6.0 Years	$	10.8

Outstanding and Exercisable Options:

Exercise Price Range	Number Outstanding at June 30, 2013	Weighted Average Remaining Contractual Term (in Years)	Weighted Average Exercise Price		Number Exercisable at June 30, 2013	Weighted Average Exercise Price
$5.00 -$20.00	176,139	5.9	$	17.18	176,139	$	17.18
$20.01 - $30.00	189,624	6.0	22.66		189,624	22.66
$30.01 - $40.00	196,699	7.1	34.64		138,419	34.73
$40.01 - $50.00	294,669	7.5	46.23		127,251	43.93
$50.01 - $63.54	231,597	6.9	56.47		128,287	57.40
	1,088,728		$	37.51	759,720	$	33.02

The weighted average grant date fair value of options awarded during fiscal years 2013, 2012 and 2011 was $20.37, $23.46 and $14.75, respectively. Share based compensation charged against income related to stock options for the years ended June 30, 2013, 2012 and 2011 was $3.4 million, $3.1 million and $3.8 million, respectively. As of June 30, 2013, $2.0 million of compensation cost related to nonvested stock options remains to be recognized over a weighted average remaining life of 1.4 years.

Of the options outstanding at June 30, 2013, 877,477 relate to the 1993 plan and 211,251 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 typically 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 $4.8 million, $6.1 million and $7.7 million for the years end June 30, 2013, 2012 and 2011, respectively. As of June 30, 2013, $3.3 million of compensation cost related to nonvested restricted stock awards remains to be recognized over a weighted average remaining life of 1.1 years.

	Number of Awards		Weighted- Average Grant Date Fair Value
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
Time-based granted	22,838			50.15
Performance-based earned	41,816			47.85
Vested	(254,967	)		31.39
Forfeited	(13,603	)		51.85
Nonvested Balance at June 30, 2013	215,415		$	43.75

Total Stockholder Return Awards:

The Company granted Total Stockholder Return (“TSR”) awards in fiscal years 2013, 2012 and 2011. 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 2013, 2012 and 2011 related to TSR awards was $3.7 million, $3.0 million and $1.9 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. These stock units vest as to one-quarter of the units for every three months of service following the grant date subject to the Director’s continued service, and are fully vested on the first anniversary of the grant date. At the Director’s election, the remaining 50 percent of the annual retainer and 100 percent of committee chair fees may be paid in stock units in lieu of cash. These units are immediately vested.

In addition to the grant of retainer stock units described above, each Director may be granted annually an additional award of stock units as the Board may determine by resolution. These stock units vest as to one-quarter of the units for every three months of service following the grant date subject to the Director’s continued service, and are fully vested on the first anniversary of the grant date.

Additional units are credited to each Director on a quarterly basis to reflect dividend equivalents on the Company’s common stock.

In the case of separation from service due to death or disability, all stock units shall immediately vest.

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, 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
Granted	21,710		53.53
Dividend equivalents	3,399		—
Outstanding at June 30, 2013	246,519	$	30.06

Compensation cost is determined using the grant-date fair value and charged to expense over the vesting period of one year and amounted to $1.2 million, $1.1 million and $1.0 million for the years ended June 30, 2013, 2012 and 2011, respectively. As of June 30, 2013, $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.