Share-Based Compensation

During 2015, 2014 and 2013 we recognized $41.5 million, $42.5 million and $41.1 million of pre-tax share-based compensation expense, respectively. The total income tax benefit related to share-based compensation expense was $13.2 million, $12.9 million and $12.5 million during 2015, 2014 and 2013, respectively. We recognize compensation expense on grants of share-based compensation awards on a straight-line basis over the service period of each award recipient. As of September 30, 2015, total unrecognized compensation cost related to share-based compensation awards was $36.8 million, net of estimated forfeitures, which we expect to recognize over a weighted average period of approximately 1.6 years.

Our 2012 Long-Term Incentives Plan (2012 Plan) authorizes us to deliver up to 6.8 million shares of our common stock upon exercise of stock options or upon grant or in payment of stock appreciation rights, performance shares, performance units, restricted stock units and restricted stock. Our 2003 Directors Stock Plan, as amended, authorizes us to deliver up to 0.5 million shares of our common stock upon exercise of stock options or upon grant of shares of our common stock and restricted stock units. Shares relating to awards under our 2012 Plan, 2008 Long-Term Incentives Plan, as amended, or our 2000 Long-Term Incentives Plan, as amended, that terminate by expiration, forfeiture, cancellation or otherwise without the issuance or delivery of shares will be available for further awards under the 2012 Plan. Approximately 2.8 million shares under our 2012 Plan and 0.3 million shares under our 2003 Directors Stock Plan remain available for future grant or payment at September 30, 2015. We use treasury stock to deliver shares of our common stock under these plans. Our 2012 Plan does not permit share-based compensation awards to be granted after February 7, 2022.

Stock Options

We have granted non-qualified and incentive stock options to purchase our common stock under various incentive plans at prices equal to the fair market value of the stock on the grant dates. The exercise price for stock options granted under the plans may be paid in cash, already-owned shares of common stock or a combination of cash and such shares. Stock options expire ten years after the grant date and vest ratably over three years.

The per-share weighted average fair value of stock options granted during the years ended September 30, 2015, 2014 and 2013 was $26.70, $34.03 and $25.18, respectively. The total intrinsic value of stock options exercised was $46.1 million, $108.1 million and $131.7 million during 2015, 2014 and 2013, respectively. We estimated the fair value of each stock option on the date of grant using the Black-Scholes pricing model and the following assumptions:



	2015		2014		2013
Average risk-free interest rate	1.61	%	1.52	%	0.66	%
Expected dividend yield	2.25	%	2.13	%	2.35	%
Expected volatility	31	%	41	%	43	%
Expected term (years)	5.1		5.2		5.3

The average risk-free interest rate is based on U.S. treasury security rates corresponding to the expected term in effect as of the grant date. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of our common stock as of the grant date. We determined expected volatility using daily historical volatility of our stock price over the most recent period corresponding to the expected term as of the grant date. We determined the expected term of the stock options using historical data adjusted for the estimated exercise dates of unexercised options.

A summary of stock option activity for the year ended September 30, 2015 is:



	Shares (in thousands)		Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Term (years)	Aggregate Intrinsic Value of In-The-Money Options (in millions)
Outstanding at October 1, 2014	4,523		$	75.65
Granted	1,041		115.62
Exercised	(897	)	67.18
Forfeited	(90	)	105.58
Cancelled	(3	)	84.75
Outstanding at September 30, 2015	4,574		85.81		6.8	$	92.1
Vested or expected to vest at September 30, 2015	4,397		84.94		6.8	91.5
Exercisable at September 30, 2015	2,665		70.23		5.6	85.2

Performance Share Awards

Certain officers and key employees are also eligible to receive shares of our common stock in payment of performance share awards granted to them. Grantees of performance shares will be eligible to receive shares of our common stock depending upon our total shareowner return, assuming reinvestment of all dividends, relative to the performance of companies in the S&P 500 Index over a three-year period. The awards actually earned will range from zero percent to 200 percent of the targeted number of performance shares for the three-year performance periods and will be paid, to the extent earned, in the fiscal quarter following the end of the applicable three-year performance period. For the three-year performance period ending September 30, 2015, the payout will be 93% of the target number of shares, with a maximum of 68,000 shares to be delivered in payment under the awards in December 2015.

A summary of performance share activity for the year ended September 30, 2015 is as follows:



	Performance Shares (in thousands)		Wtd. Avg. Grant Date Share Fair Value
Outstanding at October 1, 2014	224		$	102.54
Granted⁽¹⁾	87		103.70
Adjustmentfor performance results achieved⁽²⁾	71		101.57
Vested and issued	(154	)	101.57
Forfeited	(2	)	103.56
Outstanding at September 30, 2015	226		103.33


(1)	Performance shares granted assuming achievement of performance goals at target.


(2)	Adjustments were due to the number of shares vested under the fiscal 2014 awards at the end of the three-year performance period ended September 30, 2014 being higher than the target number of shares.

The following table summarizes information about performance shares vested during the years ended September 30, 2015, 2014 and 2013:



	2015			2014			2013
Percent payout	187		%	180		%	173		%
Shares vested (in thousands)	154			127			232
Total fair value of shares vested (in millions)	$	17.2		$	14.2		$	18.7

The per-share fair value of performance share awards granted during the years ended September 30, 2015, 2014 and 2013 was $103.70, $108.48 and $98.15, respectively, which we determined using a Monte Carlo simulation and the following assumptions:



	2015		2014		2013
Average risk-free interest rate	0.96	%	0.60	%	0.32	%
Expected dividend yield	2.22	%	2.11	%	2.32	%
Expected volatility	24	%	33	%	36	%

The average risk-free interest rate is based on the three-year U.S. treasury security rate in effect as of the grant date. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of our common stock as of the grant date. The expected volatilities were determined using daily historical volatility for the most recent three-year period as of the grant date.

Restricted Stock and Restricted Stock Units

We grant restricted stock and restricted stock units to certain employees, and non-employee directors may elect to receive a portion of their compensation in restricted stock units. Restrictions on employee restricted stock and employee restricted stock units generally lapse over periods ranging from one to five years. Director restricted stock units generally are payable upon retirement. We value restricted stock and restricted stock units at the closing market value of our common stock on the date of grant. The weighted average grant date fair value of restricted stock and restricted stock unit awards granted during the years ended September 30, 2015, 2014 and 2013 was $115.02, $109.69 and $80.17, respectively. The total fair value of shares vested during the years ended September 30, 2015, 2014, and 2013 was $8.0 million, $6.4 million, and $9.4 million, respectively.

A summary of restricted stock and restricted stock unit activity for the year ended September 30, 2015 is as follows:



	Restricted Stock and Restricted Stock Units (in thousands)		Wtd. Avg. Grant Date Share Fair Value
Outstanding at October 1, 2014	190		$	84.57
Granted	52		115.02
Vested	(71	)	73.79
Forfeited	(8	)	100.61
Outstanding at September 30, 2015	163		98.22

We also granted seven thousand shares of unrestricted common stock to non-employee directors during the year ended September 30, 2015. The weighted average grant date fair value of the unrestricted stock awards granted during the years ended September 30, 2015, 2014, and 2013 was $111.43, $108.86 and $76.65, respectively.