Share-Based Compensation

6 Months Ended

Mar. 31, 2017

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

Share-Based Compensation

12. SHARE-BASED COMPENSATION

We have various share-based compensation programs, which include deferred stock units, stock options, and restricted stock. During the six months ended 31 March 2017, we granted market-based and time-based deferred stock units. Under all programs, the terms of the awards are fixed at the grant date. We issue shares from treasury stock upon the payout of deferred stock units, the exercise of stock options, and the issuance of restricted stock awards. As of 31 March 2017, there were 4,815,869 shares available for future grant under our Long-Term Incentive Plan (LTIP), which is shareholder approved.

As discussed in Note 3, Discontinued Operations, we completed the separation of EMD through the spin-off of Versum on 1 October 2016. In connection with the spin-off, the Company adjusted the number of deferred stock units and stock options pursuant to existing anti-dilution provisions in the LTIP, to preserve the intrinsic value of the awards immediately before and after the separation. The outstanding awards will continue to vest over the original vesting period defined at the grant date. Outstanding awards at the time of spin-off were primarily converted into awards of the holder’s employer following the separation. The adjustment to the awards did not result in incremental fair value and no incremental compensation expense was recorded related to the conversion of these awards.

Share-based compensation cost recognized in continuing operations on the consolidated income statements is summarized below:

	Three Months Ended						Six Months Ended
	31 March						31 March
	2017			2016			2017			2016
Before-Tax Share-Based Compensation Cost	$	9.5		$	8.1		$	18.5		$	16.4
Income Tax Benefit	(3.3		)	(2.7		)	(6.3		)	(5.5		)
After-Tax Share-Based Compensation Cost	$	6.2		$	5.4		$	12.2		$	10.9

Before-tax share-based compensation cost is primarily included in selling and administrative expense on our consolidated income statements. The amount of share-based compensation cost capitalized in fiscal year 2017 and 2016 was not material.

Deferred Stock Units

During the six months ended 31 March 2017, we granted 116,740 market-based deferred stock units. The market-based deferred stock units are earned out at the end of a performance period beginning 1 October 2016 and ending 30 September 2019, conditioned on the level of the Company’s total shareholder return in relation to a defined peer group over the three-year performance period.

The market-based deferred stock units had an estimated grant-date fair value of $156.87 per unit, which was estimated using a Monte Carlo simulation model. The model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the grant and calculates the fair value of the awards. We generally expense the grant-date fair value of these awards on a straight line basis over the vesting period. The calculation of the fair value of market-based deferred stock units used the following assumptions:

Expected volatility	20.6	%
Risk-free interest rate	1.4	%
Expected dividend yield	2.5	%

In addition, during the six months ended 31 March 2017, we granted 152,541 time-based deferred stock units at a weighted average grant-date fair value of $143.66.