Common Stock

12 Months Ended

Sep. 30, 2021

Class of Stock Disclosures [Abstract]

Share Repurchases

Under the Board-approved share repurchase program, authorization of $340.0 million was previously granted to repurchase shares. In September 2019, the Board approved an additional $170.0 million for repurchases. In July 2021, the Board approved an increase to the share repurchase program in an amount of $500.0 million. Repurchases may be made on the open market or via private transactions, and are used to manage our capital structure, offset the dilutive impact of stock-based compensation and return cash to shareholders. The Merger Agreement places restrictions on our ability to repurchase shares of our common stock. As a result, we do not expect to make repurchases under the common stock repurchase program while the Merger Agreement is in effect. However, we may continue to repurchase shares of our common stock from employees in connection with employee payroll tax withholding for restricted stock distributions. For the fiscal year ended September 30, 2021, we repurchased 1.2 million shares of our common stock in the open market valued at $130.7 million. For the fiscal year ended September 30, 2020, we repurchased 0.5 million shares of our common stock in the open market valued at $54.1 million. For the fiscal year ended September 30, 2019, we repurchased 1.2 million shares of our common stock in the open market valued at $117.2 million. As of September 30, 2021, a cumulative total of $477.3 million had been used, leaving us with availability of $532.7 million for future repurchases.

The following table summarizes common stock purchased in connection with employee payroll tax withholding for restricted stock distributions for the following fiscal years:


	Year Ended September 30
	2021		2020		2019
Total number of shares purchased	99,259		158,521		48,908
Dollar value of shares purchased (in millions)	$	9.5	$	16.5	$	4.7

Stock-Based Compensation

We have stock-based compensation plans under which employees and non-employee directors may be granted options to purchase shares of Company common stock at the fair market value at the time of grant. In addition to stock options, we grant performance share units (“PSUs”) and RSUs to certain management level employees and vested restricted stock to non-employee directors. We also offer eligible employees the opportunity to buy shares of our common stock at a discount via an Employee Stock Purchase Plan (“ESPP”).

The Stock Incentive Plan, which was approved at the 2021 annual meeting of shareholders, replaced the 2002 Stock Incentive Plan. Common shares reserved for issuance under the plan total 3.0 million. As of September 30, 2021, approximately 3.0

million shares were available for future grants under our stock-based compensation plans. We generally settle our stock-based awards with treasury shares. As of September 30, 2021, we had 22.6 million treasury shares available for use to settle stock-based awards.

The stock-based compensation cost that was charged against income for all plans was $45.6 million, $38.4 million and $34.4 million for the fiscal years ended September 30, 2021, 2020 and 2019.

We recognize a tax benefit based on the increase in value from the grant date to the exercise date for stock options and from the grant date to the distribution date for the performance share units and restricted share units. The tax benefit is recorded during the year in which the exercise or distribution occurs. The tax benefit for exercises and distributions for the fiscal years ended September 30, 2021, 2020 and 2019 was $1.5 million, $4.7 million, and $5.2 million.

Options

Stock options granted by our Compensation Committee of our Board under the Stock Incentive Plan are non-qualified stock options. These awards are generally granted with exercise prices equal to the average of the high and low prices of our common stock on the date of grant. They vest in equal annual installments over a three- or four-year period and the maximum contractual term is ten years. We use a Binomial option-pricing model to estimate the fair value of stock options, and compensation cost is recognized on a straight-line basis over the requisite service period.

The following table sets forth the weighted average fair value per share of stock options and the related valuation assumptions used in the determination of those fair values:


	Year Ended September 30
	2021		2020		2019
Weighted average fair value per share	$	23.86	$	24.80	$	25.28

Valuation assumptions:
Risk-free interest rate	0.4%		1.6%		3.0%
Expected dividend yield	0.9%		0.8%		0.8%
Expected volatility	32.3%		27.7%		30.5%
Weighted average expected life (years)	4.7		4.7		4.7

The risk-free interest rate is based upon observed U.S. Treasury interest rates appropriate for the term of our employee stock options. Expected dividend yield is based on the history and our expectation of dividend payouts. Expected volatility was based on our historical stock price volatility. Expected life represents the weighted average period the stock options are expected to remain outstanding and is a derived output of the Binomial model. The expected life of employee stock options is impacted by the above assumptions as well as the post-vesting forfeiture rate and the exercise factor used in the Binomial model. These two variables are based on the history of exercises and forfeitures for previous stock options granted by us.

The following table summarizes transactions under our stock option plans for the fiscal year ended September 30, 2021:


	Weighted Average Number of Shares (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in millions)
Balance Outstanding as of October 1, 2020	740	$	81.14
Granted	213	94.17
Exercised	(162)	64.81
Cancelled/Forfeited	(24)	75.91
Balance Outstanding as of September 30, 2021	767	$	88.39	7.3	$	47.3
Exercisable as of September 30, 2021	332	$	78.04	5.9	$	23.9
Options Expected to Vest	421	96.26		8.3	22.6

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on our closing stock price of $150.00, as reported by the New York Stock Exchange on September 30, 2021. This amount, which changes continuously

based on the fair value of our common stock, would have been received by the option holders had all option holders exercised their options as of the balance sheet date.

The total intrinsic value of options exercised during fiscal years ended September 30, 2021, 2020 and 2019 was $7.9 million, $6.9 million and $17.7 million.

As of September 30, 2021, there was $5.2 million of unrecognized compensation expense related to stock options granted under the Stock Incentive Plan. This unrecognized compensation expense does not consider potential forfeitures, and is expected to be recognized over a weighted average period of 2.4 years.

Restricted Stock Units

RSUs are granted to certain employees with fair values equal to the average of the high and low prices of our common stock on the date of grant, multiplied by the number of units granted. RSU grants are contingent upon continued employment and vest over periods ranging from one to four years. Dividends, payable in common stock equivalents, accrue on the grants and are subject to the same specified terms as the original grants, including the risk of forfeiture.

The following table summarizes transactions for our nonvested RSUs for the fiscal year ended 2021:


	Number of Share Units (in thousands)	Weighted Average Grant Date Fair Value
Nonvested RSUs as of October 1, 2020	337	$	112.41
Granted	297	92.16
Vested	(240)	93.89
Forfeited	(28)	95.38
Nonvested RSUs as of September 30, 2021	366	$	109.42

As of September 30, 2021, there was $20.8 million of total unrecognized compensation expense related to nonvested RSUs granted under the Stock Incentive Plan. This unrecognized compensation expense does not consider potential forfeitures, and is expected to be recognized over a weighted average period of 1.8 years. The total vest date fair value of shares that vested during fiscal years ended September 30, 2021, 2020 and 2019 was $22.5 million, $18.1 million and $16.6 million.

Performance Share Units

Our Compensation Committee grants PSUs to certain employees and these awards are subject to any stock dividends, stock splits, and other similar rights inuring to common stock, but unlike our RSUs are not entitled to dividend reinvestment. Vesting of the grants is contingent upon achievement of performance targets and corresponding service requirements.

The fair value of the PSUs is equal to the average of the high and low prices of our common stock on the date of grant, multiplied by the number of units granted. For PSUs with a market condition such as total shareholder return, the Monte-Carlo simulation method is used to determine fair value. The Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of our and our group of peer companies’ future expected stock prices.

The following table sets forth the weighted average fair value per share for PSUs and the related valuation assumptions used in the determination of those fair values. PSUs granted for the fiscal years ended September 30, 2021, 2020 and 2019 are based on company-specific performance targets, with a total shareholder return collar.


	Year Ended September 30
	2021		2020		2019
Weighted average fair value per share	$	100.15	$	110.53	$	112.79

Valuation assumptions:
Risk-free interest rate	0.3%		1.6%		3.0%
Expected volatility	34.7%		23.8%		22.8%

The basis for the assumptions listed above is similar to the valuation assumptions used for stock options, as discussed previously.

The following table summarizes transactions for our nonvested PSUs during fiscal year ended September 30, 2021:


	Number of Share Units (in thousands)	Weighted Average Grant Date Fair Value
Nonvested PSUs as of October 1, 2020	165	$	111.73
Granted	79	104.36
Vested	(51)	126.55
Forfeited	(10)	108.41
Nonvested PSUs as of September 30, 2021	183	$	104.55

As of September 30, 2021, there was $10.5 million of unrecognized compensation expense related to PSUs granted under the Stock Incentive Plan based on the expected achievement of certain performance targets or market conditions. This unrecognized compensation expense as of September 30, 2021 does not reflect a reduction for our estimate of potential forfeitures and is expected to be recognized over a weighted average period of 1.7 years. The total fair value of shares that vested during fiscal years ended September 30, 2021, 2020 and 2019 was $6.5 million, $14.1 million and $8.0 million.