XML 30 R14.htm IDEA: XBRL DOCUMENT v3.21.1
Share-Based Compensation
 12 Months Ended
Mar. 31, 2021
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based CompensationThe Company provides share-based compensation to its employees, officers, and non-employee directors, including restricted stock units (“RSUs”), performance-based stock units (“PSUs”, formerly referred to as total shareholder return units or “TSRUs”), performance-based restricted stock units (“PeRSUs”), stock options, and an employee stock purchase plan (“ESPP”) (collectively, “share-based awards”). Most of the share-based awards are granted in the first quarter of each fiscal year.
Compensation expense for the share-based awards is recognized for the portion of awards ultimately expected to vest. The Company estimates the number of share-based awards that will ultimately vest primarily based on historical experience. The estimated forfeiture rate established upon grant is re-assessed throughout the requisite service period and is adjusted when actual forfeitures occur. The actual forfeitures in future reporting periods could be higher or lower than current estimates.
Compensation expense is classified in the Consolidated Statements of Operations in the same manner as cash compensation paid to the Company’s employees.
Impact on Net Income
The components of share-based compensation expense and related tax benefits are as follows:
Years Ended March 31,
(In millions)202120202019
Restricted stock unit awards (1)
$137 $104 $75 
Stock options4 7 12 
Employee stock purchase plan10 8 8 
Share-based compensation expense
151 119 95 
Tax benefit for share-based compensation expense (2)
(23)(18)(12)
Share-based compensation expense, net of tax
$128 $101 $83 
(1)Includes compensation expense recognized for RSUs, PeRSUs, and PSUs.
(2)Income tax benefit is computed using the tax rates of applicable tax jurisdictions. Additionally, a portion of compensation expense is not tax-deductible. Income tax expense for 2021, 2020, and 2019 included discrete income tax expense of $2 million, $2 million, and $4 million, respectively.
Stock Plans
In July 2013, the Company’s stockholders approved the 2013 Stock Plan to replace the 2005 Stock Plan. Under these stock plans, the Company may issue restricted stock, RSUs, PSUs, PeRSUs, stock options, and other share-based awards to selected employees, officers, and non-employee directors. The 2013 Stock Plan reserves 30 million shares plus unused reserved shares under the 2005 Stock Plan. As of March 31, 2021, 20 million shares remain available for future grant under the 2013 Stock Plan.
Restricted Stock Unit Awards
RSUs entitle the holder to receive a specified number of shares of the Company’s common stock which vest over a period of generally three to four years as determined by the Compensation Committee at the time of grant. The fair value of the award is determined based on the market price of the Company’s common stock on the grant date and the related compensation expense is recognized over the vesting period on a straight-line basis.
Non-employee directors receive an annual grant of RSUs, which vest immediately and are expensed upon grant. The director may elect to receive the underlying shares immediately or defer receipt of the shares if they meet director stock ownership guidelines. The shares will be automatically deferred for those directors who do not meet the director stock ownership guidelines. At March 31, 2021, approximately 82,000 RSUs for the Company’s directors are vested.
PSUs are conditional upon the attainment of market and performance objectives over a specified period. The number of vested PSUs is assessed at the end of a three-year performance period upon attainment of meeting certain earnings per share targets, average return on invested capital, and for certain participants, total shareholder return relative to a peer group of companies and, for special PSUs granted in 2019, meeting certain cumulative operating profit metrics. The Company uses the Monte Carlo simulation model to measure the fair value of the total shareholder return portion of the PSUs. The earnings per share portion of the PSUs is measured at the grant date market price. PSUs have a requisite service period of generally three years. Expense is attributed to the requisite service period on a straight-line basis based on the fair value of the PSUs, adjusted for the performance modifier at the end of each reporting period. For PSUs that are designated as equity awards, the fair value is measured at the grant date. For PSUs that are eligible for cash settlement and designated as liability awards, the Company re-measures the fair value at the end of each reporting period and adjusts a corresponding liability in its Consolidated Balance Sheets for changes in fair value.
PeRSUs are awards for which the number of RSUs awarded is conditional upon the attainment of one or more performance objectives over a specified period. All outstanding PeRSU awards have completed the performance period and are now classified and accounted for as RSUs. The Company did not grant any PeRSUs during the years ended March 31, 2021 and 2020.
The weighted-average assumptions used in the Monte Carlo valuations are as follows:
Years Ended March 31,
202120202019
Expected stock price volatility36 %30 %31 %
Expected dividend yield
1.1 %1.3 %0.9 %
Risk-free interest rate0.2 %2.2 %2.6 %
Expected life (in years)
333
The following table summarizes activity for restricted stock unit awards (RSUs, PSUs, and PeRSUs) during 2021:
(In millions, except per share data)SharesWeighted-
Average
Grant Date Fair
Value Per Share
Nonvested, March 31, 20203$135.57 
Granted1155.47 
Cancelled—133.70 
Vested(1)147.63 
Nonvested, March 31, 20213$142.13 
The following table provides data related to restricted stock unit award activity:
Years Ended March 31,
(In millions)202120202019
Total fair value of shares vested$79 $67 $59 
Total compensation cost, net of estimated forfeitures, related to nonvested restricted stock unit awards not yet recognized, pre-tax
$147 $155 $119 
Weighted-average period in years over which restricted stock unit award cost is expected to be recognized
232
Stock Options
Stock options are granted with an exercise price at no less than the fair market value and those options granted under the stock plans generally have a contractual term of seven years and follow a four-year vesting schedule.
Compensation expense for stock options is recognized on a straight-line basis over the requisite service period and is based on the grant-date fair value for the portion of the awards that is ultimately expected to vest. The Company uses the Black-Scholes options-pricing model to estimate the fair value of its stock options. Once the fair value of an employee stock option is determined, current accounting practices do not permit it to be changed, even if the estimates used are different from actual.
Weighted-average assumptions used to estimate the fair value of employee stock options were as follows: (1)
Year Ended
March 31, 2019
Expected stock price volatility (2)
26 %
Expected dividend yield (3)
0.9 %
Risk-free interest rate (4)
2.8 %
Expected life (in years) (5)
4.6
(1)The Company did not grant any stock options during the years ended March 31, 2021 and 2020.
(2)The computation of expected volatility was based on a combination of the historical volatility of the Company’s common stock and implied market volatility. The Company believes this market-based input provides a reasonable estimate of its future stock price movements and is consistent with employee stock option valuation considerations.
(3)Expected dividend yield is based on historical experience and investors’ current expectations.
(4)The risk-free interest rate for periods within the expected life of the option is based on the constant maturity U.S. Treasury rate in effect at the grant date.
(5)The expected life of the options is based primarily on historical employee stock option exercises and other behavioral data and reflects the impact of changes in the contractual life of current option grants compared to the Company’s historical grants.
The following is a summary of stock options outstanding at March 31, 2021:
Options OutstandingOptions Exercisable
Range of Exercise
Prices		Number of
Options
Outstanding
at Year End
(In millions)		Weighted-
Average
Remaining
Contractual
Life (Years)		Weighted-
Average
Exercise Price		Number of
Options
Exercisable at
Year End
(In millions)		Weighted-
Average
Exercise Price
$118.41 –$183.201 3$166.18 1 $171.38 
183.20 –237.861 1216.23 1 216.23 
2 2 
The following table summarizes stock option activity during 2021:
(In millions, except per share data)SharesWeighted-
Average
Exercise
Price		Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value (2)
Outstanding, March 31, 20202$180.48 3$1 
Granted—— 
Cancelled—187.12 
Exercised—153.51 
Outstanding, March 31, 20212$183.29 2$36 
Vested and expected to vest (1)
2$183.38 2$35 
Vested and exercisable, March 31, 20212189.20 224 
(1)The number of options expected to vest takes into account an estimate of expected forfeitures.
(2)The intrinsic value is calculated as the difference between the period-end market price of the Company’s common stock and the exercise price of “in-the-money” options.
The following table provides data related to stock option activity:
Years Ended March 31,
(In millions, except per share data)202120202019
Weighted-average grant date fair value per stock option$— $— $34.98 
Aggregate intrinsic value on exercise$5 $17 $16 
Cash received upon exercise$38 $66 $29 
Tax benefits realized related to exercise$4 $4 $4 
Total fair value of stock options vested$10 $16 $16 
Total compensation cost, net of estimated forfeitures, related to unvested stock options not yet recognized, pre-tax
$2 $6 $15 
Weighted-average period in years over which stock option compensation cost is expected to be recognized
222
Employee Stock Purchase Plan
The Company has an ESPP under which 21 million shares have been authorized for issuance. The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions. The deductions occur over three-month purchase periods and the shares are then purchased at 85% of the market price at the end of each purchase period. Employees are allowed to terminate their participation in the ESPP at any time during the purchase period prior to the purchase of the shares. The 15% discount provided to employees on these shares is included in compensation expense. The shares related to funds outstanding at the end of a quarter are included in the calculation of diluted weighted-average shares outstanding. These amounts have not been significant for all the years presented. The Company recognizes costs for employer matching contributions as ESPP expense over the relevant purchase period. Shares issued under the ESPP were not material in 2021, 2020, and 2019. At March 31, 2021, 2 million shares remain available for issuance.