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Share-Based Compensation | 12 Months Ended
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Jun. 30, 2022
Share-based Payment Arrangement [Abstract] |
Shared-Based Compensation | Share-Based Compensation The Company’s Board of Directors amended the II-VI Incorporated 2018 Omnibus Incentive Plan, which was approved by the shareholders at the Annual Meeting in November 2018. The Amended Omnibus Plan (the “Plan”) was approved at the annual meeting in November 2020. The Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted shares, restricted share units, deferred shares, performance shares and performance share units to employees, officers and directors of the Company. The maximum number of shares of the Company’s common stock authorized for issuance under the Plan is limited to 9,550,000 shares of common stock, not including any remaining shares forfeited under the predecessor plans that may be rolled into the Plan. The Plan has vesting provisions predicated upon the death, retirement or disability of the grantee. As of June 30, 2022, there were approximately 7 million shares available to be issued under the Plan, including forfeited shares from predecessor plans. The Company records share-based compensation expense for these awards, which requires the recognition of the grant-date fair value of share-based compensation in net earnings. The Company recognizes the share-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period. The Company accounts for cash-based stock appreciation rights, cash-based restricted share units and cash-based performance share units as liability awards, in accordance with U.S. GAAP. Share-based compensation expense for the fiscal years ended June 30, 2022, 2021 and 2020 is as follows $000:
Year Ended June 30, |  | 2022 |  | 2021 |  | 2020
Stock Options and Cash-Based Stock Appreciation Rights |  | $ | 3,218 |  |  | $ | 10,626 |  |  | $ | 11,893 |
Restricted Share Awards, Restricted Share Units, and Cash-Based Restricted Share Units |  | 56,365 |  |  | 47,060 |  |  | 49,957 |
Performance Share Units and Cash Based Performance Share Units |  | 10,077 |  |  | 16,640 |  |  | 11,977 |
|  | $ | 69,660 |  |  | $ | 74,326 |  |  | $ | 73,827 |
Stock Options and Cash-Based Stock Appreciation Rights: The Company utilized the Black-Scholes valuation model for estimating the fair value of stock options and cash-based stock appreciation rights. During the fiscal years ended June 30, 2022 and June 30, 2021, no stock options were issued. During fiscal year ended June 30, 2020, the weighted-average fair value of options granted under the Plan was $14.79 per option, using the following assumptions:
Year Ended June 30, |  |  |  |  |  |  |  | 2020
Risk-free interest rate |  |  |  |  |  |  |  | 1.50 | %
Expected volatility |  |  |  |  |  |  |  | 39 | %
Expected life of options |  |  |  |  |  |  |  | 6.91 years
Dividend yield |  |  |  |  |  |  |  | None
The risk-free interest rate is derived from the average U.S. Treasury Note rate during the period, which approximates the rate in effect at the time of grant related to the expected life of the options. The risk-free interest rate shown above is the weighted average rate for all options granted during the fiscal year. Expected volatility is based on the historical volatility of the Company’s common stock over the period commensurate with the expected life of the options. The expected life calculation is based on the observed time to post-vesting exercise and/or forfeitures of options by our employees. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no current intention to pay cash dividends in the future. Stock option and cash-based stock appreciation rights activity during the fiscal year ended June 30, 2022 was as follows:
|  | Stock Options |  | Cash-Based Stock Appreciation Rights
|  | Number of Shares |  | Weighted Average Exercise Price |  | Number of Rights |  | Weighted Average Exercise Price
Outstanding - July 1, 2021 |  | 2,642,634 |  |  | $ | 29.26 |  |  | 145,334 |  |  | $ | 33.80 |
Exercised |  | (188,015) |  |  | $ | 26.78 |  |  | (14,054) |  |  | $ | 37.00 |
Forfeited and Expired |  | (21,729) |  |  | $ | 30.78 |  |  | (3,718) |  |  | $ | 35.80 |
Outstanding - June 30, 2022 |  | 2,432,890 |  |  | $ | 29.41 |  |  | 127,562 |  |  | $ | 33.39 |
Exercisable - June 30, 2022 |  | 1,990,721 |  |  | $ | 27.61 |  |  | 86,211 |  |  | $ | 30.86 |
As of June 30, 2022, 2021 and 2020, the aggregate intrinsic value of stock options and cash-based stock appreciation rights outstanding and exercisable was $48 million, $88 million and $80 million, respectively. Aggregate intrinsic value represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the year ended June 30, and the option’s exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2022. This amount varies based on the fair market value of the Company’s stock. The total intrinsic value of stock options and cash-based stock appreciation rights exercised during the fiscal years ended June 30, 2022, 2021, and 2020 was $8 million, $49 million, and $20 million, respectively. As of June 30, 2022, total unrecognized compensation cost related to non-vested stock options and cash-based stock appreciation rights was $3 million. This cost is expected to be recognized over a weighted-average period of approximately 1 year. Outstanding and exercisable stock options at June 30, 2022 were as follows:
|  | Stock Options and Cash-Based Stock Appreciation Rights Outstanding |  | Stock Options and Cash-Based Stock Appreciation Rights Exercisable
|  | Number of |  | Weighted Average Remaining |  | Weighted Average |  | Number of |  | Weighted Average Remaining |  | Weighted Average
Range of |  | Shares or |  | Contractual Term |  | Exercise |  | Shares or |  | Contractual Term |  | Exercise
Exercise Prices |  | Rights |  | (Years) |  | Price |  | Rights |  | (Years) |  | Price
$13.34 - $18.07 |  | 549,192 |  |  | 2.62 |  | $ | 16.14 |  |  | 549,192 |  |  | 2.62 |  | $ | 16.14 |
$18.07 - $24.35 |  | 596,310 |  |  | 3.23 |  | $ | 20.96 |  |  | 590,046 |  |  | 3.19 |  | $ | 20.87 |
$24.35 - $35.39 |  | 490,512 |  |  | 5.72 |  | $ | 33.29 |  |  | 401,104 |  |  | 5.33 |  | $ | 34.10 |
$35.39 - $36.90 |  | 541,065 |  |  | 7.19 |  | $ | 36.46 |  |  | 254,550 |  |  | 7.14 |  | $ | 36.45 |
$36.90 - $49.90 |  | 383,373 |  |  | 6.08 |  | $ | 47.94 |  |  | 282,040 |  |  | 6.02 |  | $ | 47.85 |
|  | 2,560,452 |  |  | 4.84 |  | $ | 29.60 |  |  | 2,076,932 |  |  | 4.32 |  | $ | 27.74 |
Restricted Share Awards, Restricted Share Units, and Cash-Based Restricted Share Units: Restricted share awards, restricted share units, and cash-based restricted share units compensation expense was calculated based on the number of shares or units expected to be earned by the grantee multiplied by the stock price at the date of grant (for restricted share awards and restricted share units) or the stock price at the period end date (for cash-based restricted share units), and is being recognized over the vesting period. Generally, the restricted share awards, restricted share units, and cash-based restricted share units have a three-year tranche vesting provision. There were no restricted share awards issued in the fiscal year ending June 30, 2022, and all previous restricted share awards have been amortized in full. Restricted share unit, and cash-based restricted share unit activity during the fiscal year ended June 30, 2022, was as follows:
|  |  |  | Restricted Share Units |  | Cash-Based Restricted Share Units
|  |  |  |  |  | Number of Units |  |  | Weighted Average Grant Date Fair Value |  | Number of Units |  | Weighted Average Grant Date Fair Value
Nonvested - July 1, 2021 |  |  |  |  |  | 2,326,172 |  |  |  | $ | 43.67 |  |  | 45,873 |  |  | $ | 38.75 |
Granted |  |  |  |  |  | 849,467 |  |  |  | $ | 63.63 |  |  | 3,538 |  |  | $ | 63.60 |
Vested |  |  |  |  |  | (1,117,600) |  |  |  | $ | 40.67 |  |  | (26,589) |  |  | $ | 40.48 |
Forfeited |  |  |  |  |  | (159,861) |  |  |  | $ | 44.87 |  |  | (2,344) |  |  | $ | 45.29 |
Nonvested - June 30, 2022 |  |  |  |  |  | 1,898,178 |  |  |  | $ | 54.24 |  |  | 20,478 |  |  | $ | 40.05 |
As of June 30, 2022, total unrecognized compensation cost related to non-vested, restricted share unit and cash-based restricted share units was $58 million. This cost is expected to be recognized over a weighted-average period of approximately two years. The restricted share unit compensation expense was calculated based on the number of shares expected to be earned, multiplied by the stock price at the date of grant, and is being recognized over the vesting period. The cash-based restricted share unit compensation expense was calculated based on the number of units expected to be earned, multiplied by the stock price at the period-end date, and is being recognized over the vesting period. The total fair value of the restricted share awards, restricted share units, and cash-based restricted share units granted during the years ended June 30, 2022, 2021 and 2020, was $54 million, $59 million and $11 million, respectively. The total fair value of restricted share awards, restricted share units and cash-based restricted share units vested was $67 million, $69 million and $75 million during fiscal years 2022, 2021 and 2020, respectively. Performance Share Units and Cash-Based Performance Share Units: The Compensation Committee of the Board of Directors of the Company has granted certain executive officers and employees performance share units and cash-based performance share units under the Plan. As of June 30, 2022, the Company had outstanding grants covering performance periods ranging from 12 to 36 months. These grants are intended to provide continuing emphasis on specified financial performance goals that the Company considers important contributors to the creation of long-term shareholder value. These grants are payable only if the Company achieves specified levels of financial performance during the performance periods. For our relative Total Shareholder Return (“TSR”) performance-based units, which are based on market performance of our stock as compared to the S&P Composite 1500 – Electronic Equipment, Instruments & Components Index, the compensation cost is recognized over the performance period on a straight-line basis, because the grants vest only at the end of the measurement period and the probability of actual shares expected to be earned is considered in the grant date valuation. As a result, the expense is not adjusted to reflect the actual shares earned. We estimate the fair value of the TSR performance-based units using the Monte-Carlo simulation model. The performance share unit compensation expense was calculated based on the number of shares expected to be earned, multiplied by the stock price at the date of grant, and is being recognized over the vesting period. The cash-based performance share unit compensation expense was calculated based on the number of units expected to be earned, multiplied by the stock price at the period-end date, and is being recognized over the vesting period. Performance share unit and cash-based performance share unit activity relating to the Plan during the year ended June 30, 2022, was as follows:
|  | Performance Share Units |  | Cash-Based Performance Share Units
|  | Number of Units |  | Weighted Average Grant Date Fair Value |  | Number of Units |  | Weighted Average Grant Date Fair Value
Nonvested - July 1, 2021 |  | 518,309 |  |  | $ | 45.28 |  |  | 27,724 |  |  | $ | 39.43 |
Granted |  | 167,764 |  |  | $ | 83.03 |  |  | — |  |  | $ | — |
Vested |  | (200,611) |  |  | $ | 62.69 |  |  | (23,514) |  |  | $ | 49.90 |
Forfeited |  | (16,407) |  |  | $ | 53.49 |  |  | — |  |  | $ | — |
Performance Adjustments |  | 122,530 |  |  | $ | — |  |  | 13,914 |  |  | $ | 49.90 |
Nonvested - June 30, 2022 |  | 591,585 |  |  | $ | 40.48 |  |  | 18,124 |  |  | $ | 33.88 |
As of June 30, 2022, total unrecognized compensation cost related to non-vested performance share units and cash-based performance share units was $10 million. This cost is expected to be recognized over a weighted-average period of approximately 1.75 years. The total fair value of the performance share units and cash-based performance share units granted during the fiscal years ended June 30, 2022, 2021 and 2020 was $14 million, $14 million and $15 million, respectively. The total fair value of performance share units and cash-based performance share units vested during the fiscal years ended June 30, 2022, 2021 and 2020 was $11 million, $9 million and $6 million, respectively. The performance adjustments relate to grants that exceeded the performance targets when vested during FY22, including the final number of shares issued, which were 200% of the target units based on actual results during the three-year performance period.

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