Stock-Based Compensation

12 Months Ended

Sep. 30, 2011

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

11. STOCK-BASED COMPENSATION

The Company has three share-based compensation plans, which are described below. The compensation cost charged against income for those plans was approximately $47 million, $52 million and $27 million for the fiscal years ended September 30, 2011, 2010 and 2009, respectively. The total income tax benefit recognized in the consolidated statements of income for share-based compensation arrangements was approximately $19 million, $21 million and $11 million for the fiscal years ended September 30, 2011, 2010 and 2009, respectively. The Company applies a non-substantive vesting period approach whereby expense is accelerated for those employees that receive awards and are eligible to retire prior to the award vesting.

Stock Option Plan

The Company’s 2007 Stock Option Plan, as amended (the Plan), which is shareholder-approved, permits the grant of stock options to its employees for up to approximately 41 million shares of new common stock as of September 30, 2011. Option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards vest between two and three years after the grant date and expire ten years from the grant date (approximately 20 million shares of common stock remained available to be granted at September 30, 2011).

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s stock and other factors. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The expected term of options represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods during the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	Year Ended September 30,
	2011	2010	2009
Expected life of option (years)	4.5 - 6.0	4.3 - 5.0	4.2 - 4.5
Risk-free interest rate	1.10% - 1.58%	1.91% - 2.20%	2.57% - 2.68%
Expected volatility of the Company’s stock	38.00%	40.00%	28.00%
Expected dividend yield on the Company’s stock	1.74%	1.73%	1.52%

A summary of stock option activity at September 30, 2011, and changes for the year then ended, is presented below:

						Weighted
						Average		Aggregate
	Weighted		Shares			Remaining		Intrinsic
	Average		Subject to			Contractual		Value
	Option Price		Option			Life (years)		(in millions)
Outstanding, September 30, 2010	$	24.17		35,158,109
Granted		30.64		4,994,156
Exercised		19.15		(5,522,620	)
Forfeited or expired		29.17		(405,633	)
Outstanding, September 30, 2011	$	25.87		34,224,012			5.7	$	91
Exercisable, September 30, 2011	$	24.79		22,401,363			4.3	$	83

The weighted-average grant-date fair value of options granted during the fiscal years ended September 30, 2011, 2010 and 2009 was $9.09, $7.70 and $6.68, respectively.

The total intrinsic value of options exercised during the fiscal years ended September 30, 2011, 2010 and 2009 was approximately $101 million, $33 million and $4 million, respectively.

In conjunction with the exercise of stock options granted, the Company received cash payments for the fiscal years ended September 30, 2011, 2010 and 2009 of approximately $105 million, $52 million and $8 million, respectively.

The Company has elected to utilize the alternative transition method for calculating the tax effects of stock-based compensation. The alternative transition method includes computational guidance to establish the beginning balance of the additional paid-in capital pool (APIC Pool) related to the tax effects of employee stock-based compensation, and a simplified method to determine the subsequent impact on the APIC Pool for employee stock-based compensation awards that are vested and outstanding upon adoption of ASC 718. The tax benefit from the exercise of stock options, which is recorded in capital in excess of par value, was $30 million, $7 million and $1 million for the fiscal years ended September 30, 2011, 2010 and 2009, respectively. The Company does not settle equity instruments granted under share-based payment arrangements for cash.

At September 30, 2011, the Company had approximately $31 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 0.8 years.

Stock Appreciation Rights (SARs)

The Plan also permits SARs to be separately granted to certain employees. SARs vest under the same terms and conditions as option awards; however, they are settled in cash for the difference between the market price on the date of exercise and the exercise price. As a result, SARs are recorded in the Company’s consolidated statements of financial position as a liability until the date of exercise.

The fair value of each SAR award is estimated using a similar method described for option awards. The fair value of each SAR award is recalculated at the end of each reporting period and the liability and expense adjusted based on the new fair value.

The assumptions used to determine the fair value of the SAR awards at September 30, 2011 were as follows:

Expected life of SAR (years)	0.5 - 5.2
Risk-free interest rate	0.06% - 1.01%
Expected volatility of the Company’s stock	38.00%
Expected dividend yield on the Company’s stock	1.80%

A summary of SAR activity at September 30, 2011, and changes for the year then ended, is presented below:

						Weighted
						Average		Aggregate
	Weighted		Shares			Remaining		Intrinsic
	Average		Subject to			Contractual		Value
	SAR Price		SAR			Life (years)		(in millions)
Outstanding, September 30, 2010	$	25.23		3,237,113
Granted		30.54		585,190
Exercised		22.91		(290,973	)
Forfeited or expired		29.28		(67,355	)
Outstanding, September 30, 2011	$	26.24		3,463,975			6.0	$	8
Exercisable, September 30, 2011	$	25.16		2,032,304			4.4	$	7

In conjunction with the exercise of SARs granted, the Company made payments of $4 million, $3 million and $2 million during the fiscal years ended September 30, 2011, 2010 and 2009, respectively.

Restricted (Nonvested) Stock

The Company has a restricted stock plan that provides for the award of restricted shares of common stock or restricted share units to certain key employees. Awards under the restricted stock plan typically vest 50% after two years from the grant date and 50% after four years from the grant date. The plan allows for different vesting terms on specific grants with approval by the board of directors.

A summary of the status of the Company’s nonvested restricted stock awards at September 30, 2011, and changes for the fiscal year then ended, is presented below:

	Weighted		Shares/Units
	Average		Subject to
	Price		Restriction
Nonvested, September 30, 2010	$	31.60		765,455
Granted		35.02		331,700
Vested		25.57		(32,750	)
Nonvested, September 30, 2011	$	32.85		1,064,405

At September 30, 2011, the Company had approximately $11 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the restricted stock plan. That cost is expected to be recognized over a weighted-average period of 1.2 years.