Share-Based Compensation

9 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Note 7 – Share-Based Compensation

The Company grants share-based awards under the 2004 Employee and Director Equity-Based Compensation Plan (the “2004 Plan”), which provides long-term incentive compensation to employees and directors. The Company believes that such awards align the interests of its employees and directors with those of its shareholders.

The fair values of stock appreciation rights granted during the annual share-based grants in November of 2014 and 2013, respectively, were estimated on the date of grant using a lattice-based binomial valuation model based on the following assumptions:


	2015			2014
Risk-free interest rate		2.20	%		2.31	%
Expected volatility		19.00	%		19.00	%
Expected dividend yield		1.78	%		2.00	%
Expected life		7.6 years			7.8 years
Fair value derived	$	24.82		$	19.90

The fair value of share-based payments is recognized as compensation expense in net income. For the three months ended June 30, 2015 and 2014, compensation expense charged to income was $46 million and $24 million, respectively. For the nine months ended June 30, 2015 and 2014, compensation expense charged to income was $138 million and $91 million, respectively. Certain pre-acquisition equity awards of CareFusion were converted into BD restricted stock awards or BD stock options with accelerated vesting terms at the acquisition date. In addition, as an incentive to encourage post-acquisition employee retention, certain pre-acquisition equity awards of CareFusion were converted into either BD restricted stock awards or BD stock options, as applicable, as of the acquisition date, with substantially the same terms and conditions as were applicable under such CareFusion awards immediately prior to the acquisition date. Compensation expense for the three and nine months ended June 30, 2015 included $20 million and $37 million, respectively, associated with these replacement awards and was recorded in Acquisition-related costs.

The amount of unrecognized compensation expense for all non-vested share-based awards as of June 30, 2015 was approximately $205 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.0 years. Included in the unrecognized compensation expense is $52 million associated with the CareFusion replacement awards described above. As of June 30, 2015, there were approximately 2 million of such replacement awards outstanding.