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Stock-Based Compensation | 12 Months Ended
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May 31, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Note L – Stock-Based Compensation Under our employee and non-employee director stock-based compensation plans (the “Plans”), we may grant incentive or non-qualified stock options, restricted common shares and performance shares to employees and non-qualified stock options and restricted common shares to non-employee directors. We classify share-based compensation expense within SG&A expense to correspond with the same financial statement caption as the majority of the cash compensation paid to employees who have been awarded common shares. A total of 3,072 common shares were authorized and available for issuance in connection with the Plans in place at May 31, 2023. We recognized pre-tax stock-based compensation expense of $19,178 ($14,786 after-tax), $16,100 ($12,349 after-tax) and $19,129 ($14,729 after-tax) under the Plans during fiscal 2023, fiscal 2022 and fiscal 2021, respectively. At May 31, 2023, the total unrecognized compensation cost related to non-vested awards was $23,009, which will be expensed over the next three fiscal years. Non-Qualified Stock Options Stock options may be granted to purchase common shares at not less than 100% of the fair market value of the underlying common shares on the grant date. All outstanding stock options are non-qualified stock options. The exercise price of all stock options granted has been set at 100% of the fair market value of the underlying common shares on the grant date. Generally, stock options granted to employees vest and become exercisable at the rate of 33% per year beginning one year from the grant date, and expire ten years after the grant date. Non-qualified stock options granted to non-employee directors vest and become exercisable on the earlier of (a) the first anniversary of the grant date or (b) the date on which the next annual meeting of shareholders of Worthington Industries is held following the grant date for any stock option granted as of the date of an annual meeting of shareholders of Worthington Industries. Stock options can be exercised through net-settlement, at the election of the option holder. U.S. GAAP requires that all share-based awards be recorded as expense in the statement of earnings based on their grant date fair value. We calculate the fair value of our non-qualified stock options using the Black-Scholes option pricing model and certain assumptions. The computation of fair values for all stock options incorporates the following assumptions: expected volatility (based on the historical volatility of the common shares); risk-free interest rate (based on the U.S. Treasury strip rate for the expected term of the stock options); expected term (based on historical exercise experience); and dividend yield (based on annualized current dividends and an average quoted price of the common shares over the preceding annual period). The table below sets forth the non-qualified stock options granted during each of the last three fiscal years. For each grant, the exercise price was equal to the closing market price of the underlying common shares at the respective grant date. The fair values of these stock options were based on the Black-Scholes option pricing model, calculated at the respective grant dates. The calculated pre-tax stock-based compensation expense for these stock options will be recognized on a straight-line basis over the three-year vesting period of the stock options.
(In thousands, except per common share amounts) |  | 2023 |  |  | 2022 |  |  | 2021 |
Granted |  |  | 84 |  |  |  | 55 |  |  |  | 116 |
Weighted average exercise price, per common share |  | $ | 46.39 |  |  | $ | 60.19 |  |  | $ | 36.93 |
Weighted average grant date fair value, per common share |  | $ | 16.36 |  |  | $ | 19.76 |  |  | $ | 10.43 |
Pre-tax stock-based compensation |  | $ | 1,381 |  |  | $ | 1,077 |  |  | $ | 1,213 |
The weighted average fair value of stock options granted in fiscal 2023, fiscal 2022 and fiscal 2021 was based on the following weighted average assumptions:
|  | 2023 |  |  | 2022 |  |  | 2021 |
Dividend yield |  |  | 2.33 | % |  |  | 2.10 | % |  |  | 2.94 | %
Expected volatility |  |  | 41.63 | % |  |  | 41.62 | % |  |  | 40.82 | %
Risk-free interest rate |  |  | 3.19 | % |  |  | 1.10 | % |  |  | 0.43 | %
Expected life (years) |  |  | 6.0 |  |  |  | 6.0 |  |  |  | 6.0 |
The following tables summarize our stock option activity for the prior three fiscal years:
|  | 2023 |  |  | 2022 |  |  | 2021 |
(In thousands, except per common share amounts) |  | Stock Options |  |  | Weighted Average Exercise Price |  |  | Stock Options |  |  | Weighted Average Exercise Price |  |  | Stock Options |  |  | Weighted Average Exercise Price |
Outstanding, beginning of year |  |  | 602 |  |  | $ | 39.66 |  |  |  | 602 |  |  | $ | 36.44 |  |  |  | 1,352 |  |  | $ | 27.34 |
Granted |  |  | 84 |  |  |  | 46.39 |  |  |  | 55 |  |  | 60.19 |  |  |  | 116 |  |  |  | 36.93 |
Exercised |  |  | (113 | ) |  |  | 29.71 |  |  |  | (53 | ) |  |  | 23.80 |  |  |  | (854 | ) |  |  | 22.16 |
Forfeited |  |  | - |  |  |  | - |  |  |  | (2 | ) |  | 44.69 |  |  |  | (12 | ) |  |  | 31.52 |
Outstanding, end of year |  |  | 573 |  |  | $ | 42.61 |  |  |  | 602 |  |  | $ | 39.66 |  |  |  | 602 |  |  | $ | 36.44 |
Exercisable at end of year |  |  | 418 |  |  | $ | 40.84 |  |  |  | 447 |  |  | $ | 37.68 |  |  |  | 389 |  |  | $ | 35.55 |
|  |  |  |  | Weighted |  |  |  |
|  |  |  |  | Average |  |  |  |
|  | Number of |  |  | Remaining |  |  | Aggregate |
|  | Stock |  |  | Contractual |  |  | Intrinsic |
|  | Options |  |  | Life |  |  | Value |
|  | (In thousands) |  |  | (In years) |  |  | (In thousands) |
May 31, 2023 |  |  |  |  |  |  |  |  |
Outstanding |  |  | 573 |  |  |  | 5.47 |  |  | $ | 7,970 |
Exercisable |  |  | 418 |  |  |  | 4.38 |  |  | $ | 6,472 |
May 31, 2022 |  |  |  |  |  |  |  |  |
Outstanding |  |  | 602 |  |  |  | 5.15 |  |  | $ | 4,987 |
Exercisable |  |  | 447 |  |  |  | 4.09 |  |  | $ | 4,065 |
May 31, 2021 |  |  |  |  |  |  |  |  |
Outstanding |  |  | 602 |  |  |  | 5.61 |  |  | $ | 18,037 |
Exercisable |  |  | 389 |  |  |  | 4.15 |  |  | $ | 12,415 |
The total intrinsic value of stock options exercised during fiscal 2023 was $2,574. The total amount of cash received from the exercise of stock options during fiscal 2023 was $3,093, and the related excess tax benefit realized from share-based payment awards was $619. The following table summarizes information about non-vested stock option awards for fiscal 2023:
|  |  |  |  | Weighted |
|  |  |  |  | Average |
|  | Number of |  |  | Grant Date |
|  | Stock Options |  |  | Fair Value |
|  | (In thousands) |  |  | Per Common Share |
Non-vested, beginning of year |  |  | 155 |  |  | $ | 13.66 |
Granted |  |  | 84 |  |  |  | 16.36 |
Vested |  |  | (84 | ) |  |  | 12.40 |
Non-vested, end of year |  |  | 155 |  |  | $ | 15.80 |
Service-Based Restricted Common Shares Restricted common shares that contain service-based vesting conditions may be awarded to certain employees and non-employee directors. Service-based restricted common shares granted to employees cliff vest three years from the date of grant. Service-based restricted common shares granted to non-employee directors vest under the same parameters as discussed above with respect to non-qualified stock option grants. All service-based restricted common shares are valued at the closing market price of the common shares on the date of the grant. The table below sets forth the service-based restricted common shares granted under the Plans during each of the past three fiscal years. The calculated pre-tax stock-based compensation expense for these restricted common shares will be recognized on a straight-line basis over their respective three-year service periods.
(In thousands, except per common share amounts) |  | 2023 |  |  | 2022 |  |  | 2021 |
Granted |  |  | 358 |  |  |  | 192 |  |  |  | 307 |
Weighted average grant date fair value, per common share |  | $ | 49.89 |  |  | $ | 57.19 |  |  | $ | 38.99 |
Pre-tax stock-based compensation |  | $ | 17,884 |  |  | $ | 10,993 |  |  | $ | 11,985 |
The following table summarizes the activity for service-based restricted common shares for the past three fiscal years.
|  | 2023 |  |  | 2022 |  |  | 2021 |
(In thousands, except per common share amounts) |  | Restricted Common Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Restricted Common Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Restricted Common Shares |  |  | Weighted Average Grant Date Fair Value |
Outstanding, beginning of year |  |  | 650 |  |  | $ | 44.12 |  |  |  | 777 |  |  | $ | 40.36 |  |  |  | 643 |  |  | $ | 41.79 |
Granted |  |  | 358 |  |  |  | 49.89 |  |  |  | 192 |  |  |  | 57.19 |  |  |  | 307 |  |  |  | 38.99 |
Vested |  |  | (184 | ) |  |  | 40.52 |  |  |  | (295 | ) |  |  | 42.90 |  |  |  | (146 | ) |  |  | 43.41 |
Forfeited |  |  | (24 | ) |  |  | 48.94 |  |  |  | (24 | ) |  |  | 42.36 |  |  |  | (27 | ) |  |  | 42.15 |
Outstanding, end of year |  |  | 800 |  |  | $ | 47.39 |  |  |  | 650 |  |  | $ | 44.12 |  |  |  | 777 |  |  | $ | 40.36 |
Weighted average remaining contractual life of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
outstanding restricted common shares (in years) |  |  | 1.28 |  |  |  |  |  |  | 1.25 |  |  |  |  |  |  | 1.33 |  |  |  |
Aggregate intrinsic value of outstanding restricted |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
common shares |  | $ | 44,926 |  |  |  |  |  | $ | 30,283 |  |  |  |  |  | $ | 51,541 |  |  |  |
Aggregate intrinsic value of restricted common |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
shares vested during the year |  | $ | 8,897 |  |  |  |  |  | $ | 16,534 |  |  |  |  |  | $ | 5,873 |  |  |  |
Market-Based Restricted Common Shares On June 24, 2022, we granted 10 market-based restricted common shares to one key employee under one of the Plans. Vesting of these restricted common shares is contingent upon the average closing price of the common shares reaching $65.00 during any 90 consecutive day period during the five-year period following the date of grant and completion of a three-year service vesting period. The grant date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $35.49 per common share. The pre-tax stock-based compensation expense for these market-based restricted common shares of $355 will be recognized on a straight-line basis over the three-year service period, net of any forfeitures. The following assumptions were used to determine the grant date fair value and the derived service period for these restricted common shares:
Dividend yield |  | 2.67 | %
Expected volatility |  | 43.00 | %
Risk-free interest rate |  | 3.18 | %
On June 25, 2020, we granted an aggregate of 45 market-based restricted common shares to three key employees under one of the Plans. Vesting of these restricted common share awards is contingent upon the average closing price of the common shares reaching $65.00 during any 90 consecutive day period during the five-year period following the date of grant and completion of a three-year service vesting period. The grant date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $20.87 per common share. The calculated pre-tax stock-based compensation expense for these restricted common shares is $939 and will be recognized on a straight-line basis over the five-year service vesting period, net of any forfeitures. The following assumptions were used to determine the grant date fair value and the derived service period for these restricted common shares:
Dividend yield |  | 2.71 | %
Expected volatility |  | 41.50 | %
Risk-free interest rate |  | 0.32 | %
On September 25, 2019, we granted 50 market-based restricted common shares to one key employee under one of the Plans. Vesting of this restricted common share award is contingent upon the price of the common shares reaching $65.00 per common share and remaining at or above that price for 90 consecutive days during the five-year period following the date of grant and the completion of a five-year service vesting period. The grant date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $14.31 per common share. The pre-tax stock-based compensation expense for these restricted common shares of $716 will be recognized on a straight-line basis over the five-year service vesting period, net of any forfeitures. The following assumptions were used to determine the grant date fair value and the derived service period for these restricted common shares:
Dividend yield |  | 2.69 | %
Expected volatility |  | 34.90 | %
Risk-free interest rate |  | 1.60 | %
On September 26, 2018, we granted an aggregate of 225 market-based restricted common shares to two key employees under one of the Plans. Vesting of these restricted common share awards is contingent upon the price of the common shares reaching $65.00 per common share and remaining at or above that price for 90 consecutive days during the five-year period following the date of grant and the completion of a five-year service vesting period. The grant date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $23.38 per common share. The calculated pre-tax stock-based compensation expense for these restricted common shares is $5,261 and will be recognized on a straight-line basis over the five-year service vesting period, net of any forfeitures. The following assumptions were used to determine the grant date fair value and the derived service period for these restricted common shares:
Dividend yield |  | 2.16 | %
Expected volatility |  | 33.60 | %
Risk-free interest rate |  | 2.96 | %
Performance Shares We have awarded performance shares to certain key employees that are contingent (i.e., vest) based upon the level of achievement with respect to corporate targets for cumulative corporate economic value added, earnings per share growth and, in the case of business unit executives, business unit EBIT targets for the three-fiscal-year periods ended or ending May 31, 2023, 2024 and 2025. These performance share awards will be paid, to the extent earned, in common shares in the fiscal quarter following the end of the applicable three-fiscal-year performance period. The fair value of performance share awards is determined by the closing market price of the underlying common shares at the respective grant dates of the awards and the pre-tax stock-based compensation expense is based on our periodic assessment of the probability of the targets being achieved and our estimate of the number of common shares that will ultimately vest and be issued. The table below sets forth the performance shares we granted (at target levels) during fiscal 2023, fiscal 2022 and fiscal 2021:
(In thousands, except per common share amounts) |  | 2023 |  |  | 2022 |  |  | 2021 |
Granted |  |  | 68 |  |  |  | 36 |  |  |  | 64 |
Weighted average grant date fair value, per common share |  | $ | 46.39 |  |  | $ | 60.19 |  |  | $ | 36.93 |
Pre-tax stock-based compensation |  | $ | 3,153 |  |  | $ | 2,191 |  |  | $ | 2,362 |
The following table summarizes our performance share award activity for the past three fiscal years:
|  | 2023 |  |  |  |  |  |  | 2022 |  |  |  |  |  |  | 2021 |  |  |  |
|  |  |  | Weighted |  |  |  |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  | Average |  |  |  |  |  | Average |  |  |  |  |  | Average |
|  |  |  | Grant |  |  |  |  |  | Grant |  |  |  |  |  | Grant |
| Performance |  |  | Date Fair |  |  | Performance |  |  | Date Fair |  |  | Performance |  |  | Date Fair |
(In thousands, except per common share amounts) | Shares |  |  | Value |  |  | Shares |  |  | Value |  |  | Shares |  |  | Value |
Outstanding, beginning of year |  | 160 |  |  | $ | 42.93 |  |  |  | 177 |  |  | $ | 39.23 |  |  |  | 158 |  |  | $ | 42.45 |
Granted (1) |  | 118 |  |  |  | 43.40 |  |  |  | 67 |  |  |  | 52.22 |  |  |  | 65 |  |  |  | 36.93 |
Vested |  | (89 | ) |  |  | 38.91 |  |  |  | (65 | ) |  |  | 42.82 |  |  |  | (3 | ) |  |  | 47.76 |
Forfeited |  | (17 | ) |  |  | 39.36 |  |  |  | (19 | ) |  |  | 41.80 |  |  |  | (43 | ) |  |  | 46.86 |
Outstanding, end of year |  | 172 |  |  | $ | 46.37 |  |  |  | 160 |  |  | $ | 42.93 |  |  |  | 177 |  |  | $ | 39.23 |
Weighted average remaining contractual life of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
outstanding performance shares (in years) |  | 1.59 |  |  |  |  |  |  | 0.90 |  |  |  |  |  |  | 1.17 |  |  |  |
Aggregate intrinsic value of outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
performance shares | $ | 9,636 |  |  |  |  |  | $ | 7,445 |  |  |  |  |  | $ | 11,730 |  |  |  |
Aggregate intrinsic value of performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
shares vested during the year | $ | 4,056 |  |  |  |  |  | $ | 3,994 |  |  |  |  |  | $ | 100 |  |  |  |
(1) Includes common shares related to previously granted awards that paid out at percentages above target levels.

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