STOCK-BASED COMPENSATION

12 Months Ended

Jun. 30, 2012

Notes to Financial Statements [Abstract]

STOCK-BASED COMPENSATION

NOTE 7

STOCK-BASED COMPENSATION

We have stock-based compensation plans under which we annually grant stock option, restricted stock, restricted stock unit (RSU) and performance stock unit (PSU) awards to key managers and directors. Exercise prices on options granted have been, and continue to be, set equal to the market price of the underlying shares on the date of the grant. Since September 2002, the key manager stock option awards granted are vested after three years and have a 10-year life. The key manager stock option awards granted from July 1998 through August 2002 vested after three years and have a 15-year life. Key managers can elect to receive up to 50% of the value of their option award in RSUs. Key manager RSUs vest and are settled in shares of common stock five years from the grant date. The awards provided to the Company's directors are in the form of restricted stock and RSUs.

In addition to our key manager and director grants, we make other minor stock option and RSU grants to employees for which the terms are not substantially different. In 2011, we implemented a performance stock program (PSP) and granted PSUs to senior level executives. Under this program, the number of PSUs that will vest three years after the respective grant date is based on the Company's performance relative to pre-established performance goals during that three year period.

A total of 180 million shares of common stock were authorized for issuance under stock-based compensation plans approved by shareholders in 2003 and 2009. A total of 87 million shares remain available for grant under the 2003 and 2009 plans.

Total stock-based compensation expense for stock option grants was $317, $358 and $417 for 2012, 2011 and 2010, respectively. Total compensation cost for restricted stock, RSUs and PSUs was $60, $56 and $36 in 2012, 2011 and 2010, respectively. The total income tax benefit recognized in the income statement for stock options, restricted stock, RSUs and PSUs was $102, $117 and $118 in 2012, 2011 and 2010, respectively.

In calculating the compensation expense for stock options granted, we utilize a binomial lattice-based valuation model. Assumptions utilized in the model, which are evaluated and revised, as necessary, to reflect market conditions and experience, were as follows:

Years ended June 30	2012		2011		2010
Interest rate	0.2-2.1%		0.3-3.7%		0.3-4.0%
Weighted average interest rate	1.9	%	3.4	%	3.7	%
Dividend yield	2.6	%	2.4	%	2.2	%
Expected volatility	12-18%		14-18%		15-20%
Weighted average volatility	15	%	16	%	18	%
Expected life in years	8.5		8.8		8.8

Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of options outstanding under the plans as of June 30, 2012, and activity during the year then ended is presented below:

Options in thousands	Options		Weighted Avg. Exercise  Price		Weighted Avg. Remaining Contract-ual Life in  Years	Aggregate Intrinsic Value (in  millions)
Outstanding, beginning of year	363,174		$	51.75
Granted	30,225		67.05
Exercised	(38,967	)	44.53
Canceled	(1,339	)	59.12
OUTSTANDING, END OF YEAR	353,093		53.83		5.0	$	3,125
EXERCISABLE	268,131		50.52		3.8	3,109

The weighted average grant-date fair value of options granted was $8.05, $11.09 and $13.47 per share in 2012, 2011 and 2010, respectively. The total intrinsic value of options exercised was $820, $628 and $342 in 2012, 2011 and 2010, respectively. The total grant-date fair value of options that vested during 2012, 2011 and 2010 was $435, $445 and $563, respectively. We have no specific policy to repurchase common shares to mitigate the dilutive impact of options; however, we have historically made adequate discretionary purchases, based on cash availability, market trends and other factors, to satisfy stock option exercise activity.

At June 30, 2012, there was $297 of compensation cost that has not yet been recognized related to stock option grants. That cost is expected to be recognized over a remaining weighted average period of 1.8 years. At June 30, 2012, there was $125 of compensation cost that has not yet been recognized related to restricted stock, RSUs and PSUs. That cost is expected to be recognized over a remaining weighted average period of 3.1 years.

Cash received from options exercised was $1,735, $1,237 and $703 in 2012, 2011 and 2010, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $239, $188 and $89 in 2012, 2011 and 2010, respectively.