STOCK-BASED COMPENSATION

3 Months Ended

Sep. 30, 2012

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 9 — STOCK-BASED COMPENSATION

The Company has various stock-based compensation programs (the “Plans”) under which awards, including stock options, performance share units (“PSU”), restricted stock units (“RSU”), market share units (“MSU”), performance share units based on total stockholder return, and share units, may be granted.  As of September 30, 2012, approximately 18,482,000 shares of the Company’s Class A Common Stock were reserved and available to be granted pursuant to these Plans.

Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, PSUs, RSUs, MSUs, performance share units based on total stockholder return, and share units.  Compensation expense attributable to net stock-based compensation is as follows:

	Three Months Ended September 30
(In millions)	2012		2011
Compensation expense	$	54.5	$	45.4
Income tax benefit	17.6		14.9

As of September 30, 2012, the total unrecognized compensation cost related to unvested stock-based awards was $183.0 million and the related weighted-average period over which it is expected to be recognized is approximately 2.3 years.

Stock Options

The following is a summary of the Company’s stock option programs as of September 30, 2012 and changes during the three months then ended:

(Shares in thousands)	Shares		Weighted- Average Exercise Price Per Share		Aggregate Intrinsic Value (1) (in millions)		Weighted- Average Contractual Life Remaining in Years
Outstanding at June 30, 2012	15,810.8		$	28.86
Granted at fair value	3,189.3		59.78
Exercised	(730.2	)	22.17
Expired	(10.4	)	24.20
Forfeited	(55.8	)	37.62
Outstanding at September 30, 2012	18,203.7		34.52		$	492.5	7.4
Vested and expected to vest at September 30, 2012	17,930.1		34.22		$	490.3	7.3
Exercisable at September 30, 2012	7,361.8		22.52		$	287.5	5.7

(1) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

The following is a summary of the per-share weighted-average grant date fair value of stock options granted and total intrinsic value of stock options exercised:

	Three Months Ended September 30
(In millions, except per share data)	2012		2011
Per-share weighted-average grant date fair value of stock options granted	$	20.36	$	17.34
Intrinsic value of stock options exercised	$	27.3	$	5.5

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended September 30
	2012	2011
Weighted-average expected stock-price volatility	34%	35%
Weighted-average expected option life	8 years	8 years
Average risk-free interest rate	1.2%	1.7%
Average dividend yield	1.0%	1.0%

The Company uses a weighted-average expected stock-price volatility assumption that is a combination of both current and historical implied volatilities of the underlying stock.  The implied volatilities were obtained from publicly available data sources.  For the weighted-average expected option life assumption, the Company considers the exercise behavior of past grants and models the pattern of aggregate exercises.  The average risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the options and the average dividend yield is based on historical experience.

Performance Share Units

During the three months ended September 30, 2012, the Company granted approximately 250,800 PSUs, which will be settled in stock subject to the achievement of the Company’s net sales, diluted net earnings per common share and return on invested capital goals for the three fiscal years ending June 30, 2015, all subject to continued employment or retirement of the grantees.  Certain PSUs granted in fiscal 2013 are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSU.  Other PSUs granted in fiscal 2013 are not accompanied by dividend equivalent rights and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant less the discounted present value of the dividends expected to be paid on the shares during the vesting period.  In September 2012, approximately 495,900 shares of the Company’s Class A Common Stock were issued and related accrued dividends were paid, relative to the target goals set at the time of issuance, in settlement of 330,600 PSUs that vested as of June 30, 2012.

The following is a summary of the status of the Company’s PSUs as of September 30, 2012 and activity during the three months then ended:

		Weighted-Average
		Grant Date
(Shares in thousands)	Shares	Fair Value Per Share
Nonvested at June 30, 2012	625.9	$	37.31
Granted	250.8	59.08
Vested	—	—
Forfeited	—	—
Nonvested at September 30, 2012	876.7	43.54

Restricted Stock Units

The Company granted approximately 1,279,900 RSUs during the three months ended September 30, 2012 which, at the time of grant, were scheduled to vest as follows: 635,400 on October 31, 2013, 335,400 on October 31, 2014, 32,600 on June 30, 2015, 4,900 on September 4, 2015, 206,600 on November 2, 2015, 32,600 on June 30, 2016 and 32,600 on June 30, 2017, all subject to the continued employment or retirement of the grantees.  Certain RSUs granted in fiscal 2013 are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the RSU and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant.  Other RSUs granted in fiscal 2013 are not accompanied by dividend equivalent rights and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant less the discounted present value of the dividends expected to be paid on the shares during the vesting period.

The following is a summary of the status of the Company’s RSUs as of September 30, 2012 and activity during the three months then ended:

			Weighted-Average
			Grant Date
(Shares in thousands)	Shares		Fair Value Per Share
Nonvested at June 30, 2012	2,392.9		$	38.22
Granted	1,279.7		59.25
Vested	(79.6	)	16.75
Forfeited	(28.6	)	41.97
Nonvested at September 30, 2012	3,564.4		46.22

Performance Share Units Based on Total Stockholder Return

During the three months ended September 30, 2012, the Company granted PSUs to an executive of the Company with an aggregate target payout of 162,760 shares of the Company’s Class A Common Stock, subject to continued employment through the end of the relative performance periods, which end June 30, 2015, 2016 and 2017.  Such PSUs will be settled based upon the Company’s relative total stockholder return (“TSR”) over the relevant performance period as compared to companies in the S&P 500 on July 1, 2012.  No settlement will occur if the Company’s TSR falls below a minimum threshold, and up to an aggregate of 260,416 shares of the Company’s Class A Common Stock will be issued depending on the extent to which the Company’s TSR equals or exceeds the minimum threshold.  The PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs.

The grant date fair value of the PSUs of $11.0 million was estimated using a lattice model with a Monte Carlo simulation and the following assumptions for each performance period, respectively: contractual life of 33, 45 and 57 months, average risk-free interest rate of 0.3%, 0.5% and 0.7% and a dividend yield of 1.0%.  Using the historical stock prices and dividends from public sources, the Company estimated the covariance structure of the returns on S&P 500 stocks.  The volatility for the Company’s stock produced by this estimation was 32%.  The average risk-free interest rate is based on the U.S. Treasury strip rates over the contractual term of the grant and the dividend yield is based on historical experience.

Market Share Unit

As of September 30, 2012, the Company had one outstanding market share unit with a grant date fair value of $10.6 million that was estimated using a lattice model with a Monte Carlo simulation and the following assumptions: contractual life of 41 months, a weighted-average expected volatility of 29%, a weighted-average risk-free interest rate of 1.6% and a weighted-average dividend yield of 1.0%.  The Company used an expected stock-price volatility assumption that is a combination of both current and historical implied volatilities from options on the underlying stock.  The implied volatilities were obtained from publicly available data sources.  The expected life is equal to the contractual term of the grant.  The average risk-free interest rate is based on the U.S. Treasury strip rates over the contractual term of the grant and the average dividend yield is based on historical experience.

Share Units

The Company grants share units to certain non-employee directors under the Non-Employee Director Share Incentive Plan.  The following is a summary of the status of the Company’s share units as of September 30, 2012 and activity during the three months then ended:

		Weighted-Average
		Grant Date Fair Value Per
(Shares in thousands)	Shares	Share
Outstanding at June 30, 2012	73.7	$	28.69
Granted	—	—
Dividend equivalents	—	—
Converted	—	—
Outstanding at September 30, 2012	73.7	28.69

Cash Units

Certain non-employee directors defer cash compensation in the form of cash payout share units, which are not subject to the Plans.  These share units are classified as liabilities and, as such, their fair value is adjusted to reflect the current market value of the Company’s Class A Common Stock.  The Company recorded $1.6 million as compensation expense and $1.5 million as compensation income to reflect additional deferrals and the change in the market value for the three months ended September 30, 2012 and 2011, respectively.