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Stock-Based Compensation | 9 Months Ended
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Feb. 28, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Note L – Stock-Based Compensation Non-Qualified Stock Options During the nine months ended February 28, 2023, we granted non-qualified stock options covering a total of 84,400 common shares, no par value, of Worthington Industries (the “common shares”) under our stock-based compensation plans. The exercise price of $46.39 per share was equal to the market price of the underlying common shares on the grant date. The fair value of these non-qualified stock options, based on the Black-Scholes option-pricing model, calculated at the grant date, was $16.36 per share. The calculated pre-tax stock-based compensation expense for these non-qualified stock options of $1,381,000 and will be recognized on a straight-line basis o ver the three-year vesting period, net of any forfeitures. The following assumptions were used to value these non-qualified stock options:
Dividend yield |  |  | 2.33 | %
Expected volatility |  |  | 41.63 | %
Risk-free interest rate |  |  | 3.19 | %
Expected term (years) |  |  | 6.0 |
Expected volatility is based on the historical volatility of the common shares and the risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the non-qualified stock options. The expected term was developed using historical exercise experience. Service-Based Restricted Common Shares During the nine months ended February 28, 2023, we granted an aggregate of 345,550 service-based restricted common shares under our stock-based compensation plans, which generally vest three years after their grant date. The fair value of these restricted common shares was equal to the weighted average closing market price of the underlying common shares on the date of grant, or $49.49 per share. The calculated pre-tax stock-based compensation expense for these restricted common shares is $17,100,000 and will be recognized on a straight-line basis over the three-year service-based vesting period, net of any forfeitures. Market-Based Restricted Common Shares On June 24, 2022, we granted 10,000 market-based restricted common shares to one key employee under one of our stock-based compensation 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 share. The calculated pre-tax stock-based compensation expense for these market-based restricted common shares is $355,000 and will be recognized on a straight-line basis over the three-year service-based vesting period. 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 | %
Performance Share Awards We have awarded performance shares to certain key employees under our stock-based compensation plans. These performance shares are earned based on 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, a business unit adjusted earnings before interest and taxes (“ adjusted EBIT”) target, in each case for the three-year periods 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-year performance period. The fair values of our performance shares are determined by the closing market prices of the underlying common shares at the respective grant dates of the performance shares 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 be issued. During the nine months ended February 28, 2023, we granted performance share awards covering an aggregate of 58,100 common shares (at target levels). The calculated pre-tax stock-based compensation expense for these performance shares is $2,695,000 (at target levels). The ultimate pre-tax stock-based compensation expense to be recognized over the three-year performance period on all tranches will vary based on our periodic assessment of the probability of the targets being achieved.

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