STOCK-BASED COMPENSATION

The activity related to the Company’s incentive equity awards for the three months ended March 31, 2019 consisted of the following:



	Stock Options				Time-based Restricted Stock Units				Performance-based Restricted Stock Units
	Number of Options		Weighted- Average Exercise Price		Number of Shares		Weighted- Average Grant Date Fair Value		Number of Shares		Weighted- Average Grant Date Fair Value
Balances at January 1, 2019	4,043,012		$	57.27	1,205,587		$	81.48	496,155		$	85.23
Granted	505,531		98.31		31,754		95.10		—		—
Exercise of stock options (a)	(109,354	)	41.82		—		—		—		—
Vesting of restricted stock units	—		—		(263	)	64.32		—		—
Expired/forfeited	(5,769	)	94.85		(12,448	)	89.81		(848	)	104.91
Balances at March 31, 2019 (b),(c)	4,433,420		$	62.28	1,224,630		$	81.75	495,307		$	85.20

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(a)	Stock options exercised during the period of January 1, 2019 through March 31, 2019 had an aggregate intrinsic value of $6.5 million.

(b)

As of March 31, 2019, the Company’s outstanding vested and currently exercisable stock options using the March 29, 2019 closing stock price of $103.69 (approximately 2.6 million shares) had an aggregate intrinsic value of $154.7 million with a weighted-average exercise price of $44.47 and a weighted-average remaining contractual life of 5.3 years. The total of all stock options outstanding as of March 31, 2019 have a weighted-average remaining contractual life of 6.7 years.

(c)

As of March 31, 2019, time-based restricted stock units and performance-based restricted stock units expected to vest using the March 29, 2019 closing stock price of $103.69 (approximately 1.2 million and 0.5 million shares, respectively) had an aggregate intrinsic value of $122.1 million and $50.2 million, respectively. Performance-based restricted stock units granted in the table above represent initial target awards, and performance adjustments for (i) change in shares issued based upon attainment of performance goals determined in the period, and (ii) estimated change in shares issued resulting from attainment of performance goals to be determined at the end of the prospective performance period.

The activity related to the Company’s incentive equity awards for the nine months ended March 31, 2019 consisted of the following:



	Stock Options				Time-based Restricted Stock Units				Performance-based Restricted Stock Units
	Number of Options		Weighted- Average Exercise Price		Number of Shares		Weighted- Average Grant Date Fair Value		Number of Shares		Weighted- Average Grant Date Fair Value
Balances at July 1, 2018	4,478,288		$	55.69	982,399		$	67.72	395,689		$	74.29
Granted	528,978		98.72		324,700		120.93		123,187		115.92
Exercise of stock options (a)	(559,512	)	43.17		—		—		—		—
Vesting of restricted stock units	—		—		(17,426	)	42.18		(19,077	)	58.97
Expired/forfeited	(14,334	)	94.27		(65,043	)	76.01		(4,492	)	78.44
Balances at March 31, 2019	4,433,420		$	62.28	1,224,630		$	81.75	495,307		$	85.20

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(a)	Stock options exercised during the period of July 1, 2018 through March 31, 2019 had an aggregate intrinsic value of $45.2 million.

The Company has stock-based compensation plans under which the Company annually grants stock option and restricted stock unit awards. Stock options are granted to employees at exercise prices equal to the fair market value of the Company’s common stock on the dates of grant, with the measurement of stock-based compensation expense recognized in Net earnings based on the fair value of the award on the date of grant. Stock-based compensation expense of $17.4 million and $14.6 million, as well as related expected tax benefits of $4.1 million and $4.3 million were recognized for the three months ended March 31, 2019 and 2018, respectively. Stock-based compensation expense of $46.8 million and $39.2 million, as well as related expected tax benefits of $10.7 million and $11.6 million were recognized for the nine months ended March 31, 2019 and 2018, respectively.

As of March 31, 2019, the total remaining unrecognized compensation cost related to non-vested stock options and restricted stock unit awards amounted to $19.6 million and $53.9 million, respectively, which will be amortized over the weighted-average remaining requisite service periods of 3.0 years and 1.7 years, respectively.

For stock options issued, the fair value of each stock option was estimated on the date of grant using a binomial option pricing model. The binomial model considers a range of assumptions related to volatility, risk-free interest rate and employee exercise behavior. Expected volatilities utilized in the binomial model are based on a combination of implied market volatilities, historical volatility of the Company’s stock price and other factors. Similarly, the dividend yield is based on historical experience and expected future changes. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The binomial model also incorporates exercise and forfeiture assumptions based on an analysis of historical data. The expected life of the stock option grants is derived from the output of the binomial model and represents the period of time that options granted are expected to be outstanding.