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Share-Based Compensation
 12 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation SHARE-BASED COMPENSATION
Our outstanding share-based compensation programs include deferred stock units and stock options. During the fiscal year ended 30 September 2021, we granted market-based and time-based deferred stock units. We have not issued stock option awards since fiscal year 2015. The terms of our share-based awards are fixed at the grant date. We issue shares from treasury stock upon payout of deferred stock units and exercise of stock options.
At the annual shareholders meeting held on 28 January 2021, the shareholders approved a new Long-Term Incentive Plan ("LTIP"), which has an authorized pool of 1,500,000 shares available for future grant, plus additional shares underlying awards outstanding on the date the LTIP was adopted but that are not issued. As of 30 September 2021, there were 1,566,433 shares available for future grant under our LTIP.
Share-based compensation cost recognized on the consolidated income statements is summarized below:
202120202019
Before-tax share-based compensation cost$44.5 $55.8 $41.2 
Income tax benefit(11.0)(13.0)(9.7)
After-tax share-based compensation cost$33.5 $42.8 $31.5 
Before-tax share-based compensation cost relates to deferred stock units and is primarily included in "Selling and administrative" on our consolidated income statements. The amount of share-based compensation cost capitalized in fiscal years 2021, 2020, and 2019 was not material.
Deferred Stock Units
We have granted deferred stock units to executives, selected employees, and outside directors. These deferred stock units entitle the recipient to one share of common stock upon vesting, which is conditioned, for employee recipients, on continued employment during the deferral period and may be conditioned on achieving certain performance targets. We grant deferred stock unit awards with a two- to five-year deferral period that is subject to payout upon death, disability, or retirement. Deferred stock units issued to outside directors are paid after service on the Board of Directors ends at the time elected by the director (not to exceed 10 years after service ends). We generally expense the grant-date fair value of these awards on a straight-line basis over the vesting period; however, expense recognition is accelerated for retirement eligible individuals who meet the requirements for vesting upon retirement. We have elected to account for forfeitures as they occur, rather than to estimate them. Forfeitures have not been significant historically.
Market-based deferred stock units vest as long as the employee continues to be employed by the Company and upon the achievement of the performance target. The performance target, which is approved by the Compensation Committee, is our share price appreciation and dividends paid, or "total shareholder return," in relation to a defined peer group over a three-year performance period beginning 1 October of the fiscal year of grant. We granted 77,251, 80,215, and 114,929 market-based deferred stock units in fiscal years 2021, 2020, and 2019, respectively.
The fair value of market-based deferred stock units was estimated using a Monte Carlo simulation model as these equity awards are tied to a market condition. 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 estimated grant-date fair value of market-based deferred stock units was $235.48, $275.19, and $229.61 per unit in fiscal years 2021, 2020, and 2019, respectively. The calculation of the fair value of these market-based deferred stock units used the following assumptions:
202120202019
Expected volatility29.9 %17.8 %17.5 %
Risk-free interest rate0.2 %1.6 %2.8 %
Expected dividend yield2.1 %2.4 %2.6 %
In addition, we granted 110,555 time-based deferred stock units at a weighted average grant-date fair value of $282.48. In fiscal years 2020 and 2019, we granted 123,448 and 169,666 time-based deferred stock units at a weighted average grant-date fair value of $230.92 and $168.68, respectively.
A summary of deferred stock unit activity in fiscal year 2021 is presented below:
Shares (000)Weighted Average
Grant-Date Fair Value
Deferred stock units outstanding at 30 September 2020926 $181.14 
Granted188 261.95 
Paid out(330)185.33 
Forfeited(17)241.55 
Adjusted87 161.64 
Deferred stock units outstanding at 30 September 2021854 $194.12 
Cash payments made for deferred stock units totaled $5.2, $4.8, and $1.9 in fiscal years 2021, 2020, and 2019, respectively. As of 30 September 2021, there was $47.0 of unrecognized compensation cost related to deferred stock units. This cost is expected to be recognized over a weighted average period of 1.5 years. The total fair value of deferred stock units paid out during fiscal years 2021, 2020, and 2019, including shares vested in prior periods, was $88.0, $65.4, and $19.2, respectively.
Stock Options
We have granted awards of options to purchase common stock to executives and selected employees. The exercise price of stock options equals the market price of our stock on the date of the grant. Options generally vest incrementally over three years and remain exercisable for ten years from the date of grant. As of 30 September 2021, there was no unrecognized compensation cost as all stock option awards were fully vested.
A summary of stock option activity in fiscal year 2021 is presented below:
Shares (000)Weighted Average
Exercise Price
Stock options outstanding and exercisable at 30 September 2020941 $96.95 
Exercised(140)80.63 
Stock options outstanding and exercisable at 30 September 2021801 $99.79 
The weighted average remaining contractual term of stock options outstanding and exercisable at 30 September 2021 was 1.9 years. The aggregate intrinsic value of these stock options was $125, which represents the amount by which our closing stock price of $256.11 as of 30 September 2021 exceeds the exercise price multiplied by the number of in-the-money options outstanding or exercisable. The intrinsic value of stock options exercised during fiscal years 2021, 2020, and 2019 was $29.0, $65.7, and $87.2, respectively.
Compensation cost is generally recognized over the stated vesting period consistent with the terms of the arrangement, which is either on a straight-line or graded-vesting basis. Expense recognition is accelerated for retirement-eligible individuals who would meet the requirements for vesting of awards upon their retirement.
Cash received from option exercises during fiscal year 2021 was $10.6. The total tax benefit realized from stock option exercises in fiscal year 2021 was $6.8, of which $6.5 was the excess tax benefit.