Share-Based Compensation

Share-Based Compensation Plans

We maintain stock incentive plans (collectively, the “Plans”) for the benefit of certain of our officers, directors and employees. The following tables provide total share-based compensation expense by type of award:



	Three Months Ended March 31
(in millions)	2014		2013
Restricted share unit expense	$	15	$	15
Employee stock option expense	6		5
Performance share unit expense	3		2
Total share-based compensation	$	24	$	22



	Nine Months Ended March 31
(in millions)	2014		2013
Restricted share unit expense	$	46	$	44
Employee stock option expense	16		17
Performance share unit expense	10		7
Total share-based compensation	$	72	$	68

The total tax benefit related to share-based compensation was $8 million for both the three months ended March 31, 2014 and 2013 and $25 million for both the nine months ended March 31, 2014 and 2013.

Stock Options

Employee stock options granted under the Plans generally vest in equal annual installments over three years and are exercisable for periods ranging from seven to ten years from the grant date. All stock options are exercisable at a price equal to the market value of the common shares underlying the option on the grant date and, when exercised, are issued out of treasury shares.

The following table summarizes all stock option transactions under the Plans:



(in millions, except per share amounts)	Stock Options		Weighted-Average Exercise Price per Common Share
Outstanding at June 30, 2013	15		$	36.97
Granted	2		51.77
Exercised	(7	)	38.45
Canceled and forfeited	—		—
Outstanding at March 31, 2014	10		$	39.04
Exercisable at March 31, 2014	6		$	33.55

At March 31, 2014, the total pre-tax compensation cost, net of estimated forfeitures, related to nonvested stock options not yet recognized was $29 million, which is expected to be recognized over a weighted-average period of two years. The following table provides additional data related to stock option activity at:



(in millions, except contractual lives)	March 31, 2014		June 30, 2013
Aggregate intrinsic value of outstanding options at period end	$	308	$	156
Aggregate intrinsic value of exercisable options at period end	$	202	$	113
Weighted-average remaining contractual life of outstanding options (in years)	6		4
Weighted-average remaining contractual life of exercisable options (in years)	4		3

Stock options are granted to our officers and certain employees. The fair values were estimated on the grant date using a lattice valuation model. We believe the lattice model provides reasonable estimates because it has the ability to take into account individual exercise patterns based on changes in our stock price and other variables, and it provides for a range of input assumptions.

Restricted Share Units

Restricted share units granted under the Plans generally vest in equal annual installments over three years. The fair value is determined by the grant date market price of our common shares. Restricted share units accrue cash dividend equivalents that are payable upon vesting of the awards.

The following table summarizes all transactions related to restricted share units under the Plans:



(in millions, except per share amounts)	Restricted Share Units		Weighted-Average Grant Date Fair Value per Share
Nonvested at June 30, 2013	3		$	38.74
Granted	1		52.21
Vested	(1	)	37.48
Canceled and forfeited	—		—
Nonvested at March 31, 2014	3		$	45.42

At March 31, 2014, the total pre-tax compensation cost, net of estimated forfeitures, related to nonvested restricted share units not yet recognized was $89 million, which is expected to be recognized over a weighted-average period of two years.

Performance Share Units

Performance share units vest over a three-year performance period based on achievement of specific performance goals. Based on the extent to which the targets are achieved, vested shares may range from zero to 200 percent of the target award amount. The fair value of performance share units is determined by the grant date market price of our common shares. The compensation expense associated with nonvested performance share units is dependent on our periodic assessment of the probability of the targets being achieved and our estimate of the number of shares that will ultimately be issued. Performance share units accrue cash dividend equivalents that are payable upon vesting of the awards.

During the nine months ended March 31, 2014, 274 thousand performance share units were granted at target at a weighted-average fair value per share of $51.49. Also during the nine months ended March 31, 2014, 157 thousand performance share units with an initial two-year performance period and a weighted-average grant date fair value per share of $41.60 vested based on achievement of 143 percent of the target performance goal. At March 31, 2014, there were 864 thousand nonvested performance share units with a weighted-average grant date fair value per share of $44.39.

At March 31, 2014, the total pre-tax compensation cost, net of estimated forfeitures, related to nonvested performance share units not yet recognized was $18 million, which is expected to be recognized over a weighted-average period of two years.