Share-Based Compensation

3 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

Share-Based Compensation Plans

We maintain stock incentive plans (collectively, the “Plans”) for the benefit of our officers, directors and certain employees. The following table provides total share-based compensation expense by type of award:

	Three Months Ended September 30,
(in millions)	2012		2011
Restricted share and share unit expense	$	15	$	13
Employee stock option expense	7		6
Performance share unit expense	2		1
Total	$	24	$	20

The total tax benefit related to share-based compensation was $8 million and $7 million for the three months ended September 30, 2012 and 2011, respectively.

Stock Options

Employee stock options granted under the Plans generally vest in equal annual installments over three years and are exercisable for periods ranging from seven to ten years from the grant date. All employee stock options are exercisable at a price equal to the market value of the Common Shares underlying the option at the grant date.

The following table summarizes all stock option transactions under the Plans:

(in millions, except per share amounts)	Stock Options		Weighted-Average Exercise Price per Common Share
Outstanding at June 30, 2012	21		$	37.29
Granted	3		39.81
Exercised	(1	)	28.55
Canceled and forfeited	(1	)	42.95
Outstanding at September 30, 2012	22		$	37.65
Exercisable at September 30, 2012	17		$	37.42

The following table provides additional data related to stock options:

(in millions, except contractual lives)	September 30, 2012		June 30, 2012
Aggregate intrinsic value of outstanding options	$	94	$	137
Aggregate intrinsic value of exercisable options	85		84
Weighted-average remaining contractual life of outstanding options (in years)	4		3
Weighted-average remaining contractual life of exercisable options (in years)	3		2

The fair values of the stock options granted to our officers and certain employees were estimated on the grant date using a lattice valuation model. We believe the lattice model provides reasonable estimates because it has the ability to take into account individual exercise patterns based on changes in our stock price and other variables, and it provides for a range of input assumptions.

Restricted Shares and Restricted Share Units

Restricted shares and restricted share units granted under the Plans generally vest in equal installments over three years. The fair value is determined by the grant date market price of our Common Shares. Restricted shares and restricted share units accrue dividends or cash dividend equivalents that are payable upon vesting of the awards.

The following table summarizes all transactions related to restricted shares and restricted share units under the Plans:

(in millions, except per share amounts)	Shares		Weighted-Average Grant Date Fair Value per Share
Nonvested at June 30, 2012	4		$	35.46
Granted	2		39.79
Vested	(2	)	32.94
Canceled and forfeited	—		—
Nonvested at September 30, 2012	4		$	38.58

Performance Share Units

Performance share units generally vest over two-year and three-year performance periods based on achievement of specific performance goals. Based on the extent to which the targets are achieved, vested shares may range from zero percent to 200 percent of the target award amount. The fair value of performance share units is determined by the grant date market price of our Common Shares and the compensation expense associated with nonvested performance share units is dependent on our periodic assessment of the probability of the targets being achieved and our estimate of the number of shares that will ultimately be issued. Performance share units accrue cash dividend equivalents that are payable upon vesting of the awards.

The following table summarizes all transactions related to performance share units under the Plans (based on target award amounts):

(in millions, except per share amounts)	Share Units	Weighted-Average Grant Date Fair Value per Share
Nonvested at June 30, 2012	1	$	42.60
Granted (1)	—	—
Vested	—	—
Canceled and forfeited	—	—
Nonvested at September 30, 2012	1	$	41.36

(1) During the three months ended September 30, 2012, 350 thousand performance share units were granted at target at a weighted-average fair value of $39.81.

Adjustments to Stock Incentive Plans

In connection with the Spin-Off, we adjusted share-based compensation awards granted under the Plans into awards based on our Common Shares and/or CareFusion common stock, as applicable.

The following table summarizes total stock options outstanding according to the underlying stock of the award:

(in millions)	Our Awards	CareFusion Awards
Held by our employees and former employees	21	4
Held by CareFusion employees	1
Outstanding at September 30, 2012	22