13. SHARE-BASED COMPENSATION AND SAVINGS PLANS

Share-Based Compensation Plans

We maintain stock incentive plans (collectively, the "Plans") for the benefit of certain of our officers, directors and employees. Employee 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 date of grant. All employee stock options granted under the Plans are exercisable at a price equal to the fair market value of the Common Shares underlying the option at the date of grant. Employee restricted shares and restricted share units granted under the Plans generally vest in equal installments over three years and entitle holders to dividends or cash dividend equivalents. Beginning in fiscal 2012, performance share units, which represent shares potentially issuable in the future upon the achievement of specified performance goals, were granted under the Plans. Restricted shares, restricted share units and performance share units accrue dividends or cash equivalents that are payable upon vesting of the awards.

The compensation expense recognized for all share-based compensation awards is net of estimated forfeitures and is recognized using the straight-line method over the applicable service period. We classify share-based compensation within SG&A expenses to correspond with the same line item as the majority of the cash compensation paid to employees.

The following table provides total share-based compensation expense by type of award for the three months ended September 30, 2011 and 2010:


	Three Months Ended September 30,
(in millions)	2011			2010
Restricted share and share unit expense	$	12.9		$	13.5
Employee stock option expense		6.4			7.7
Performance share unit expense		1.0			0.0
Stock appreciation right (income)/expense		(0.5	)		0.2

Total share-based compensation expense (1)	$	19.8		$	21.4

(1)	The tax benefit related to share-based compensation expense was $7.2 million and $7.8 million for the three months ended September 30, 2011 and 2010, respectively.

Stock Options

The fair values of the stock options granted to our employees and directors were estimated on the date of grant 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.

The following table summarizes all stock option transactions under the Plans from June 30, 2011 through September 30, 2011:


(in millions, except per share amounts)	Stock Options			Weighted Average Exercise Price per Common Share		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at June 30, 2011		23.1		$	37.02		3.6	$	217.0
Granted		2.3			41.60
Exercised		(0.5	)		30.54
Canceled and forfeited		(0.1	)		45.65

Balance at September 30, 2011		24.8		$	37.56		4.0	$	155.8

Exercisable at September 30, 2011		18.1		$	38.99		2.8	$	101.1

Restricted Shares and Restricted Share Units

The fair value of restricted shares and restricted share units is determined by the number of shares granted and the grant date market price of our Common Shares.

The following table summarizes all transactions related to restricted shares and restricted share units under the Plans from June 30, 2011 through September 30, 2011:


(in millions, except per share amounts)	Restricted Share and Restricted Share Units			Weighted Average Grant Date Fair Value Per Share
Nonvested at June 30, 2011		3.6		$	31.31
Granted		1.5			41.61
Vested		(1.6	)		32.47
Canceled and forfeited		0.0			0.0

Nonvested at September 30, 2011		3.5		$	35.15

Performance Share Units

Performance share units generally vest based on the achievement of target compound annual non-GAAP EPS growth rate and dividend yield over two-year and three-year performance periods. Based on the extent to which the targets are achieved, vested shares may range from 0 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. 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.

The following table summarizes information related to performance share units under the Plans based on target award amounts from June 30, 2011 through September 30, 2011:


(in millions, except per share amounts)	Performance Share Units		Weighted Average Grant Date Fair Value Per Share
Nonvested at June 30, 2011		0.0	$	0.0
Granted		0.4		42.65
Vested		0.0		0.0
Canceled and forfeited		0.0		0.0

Nonvested at September 30, 2011 (1)		0.4	$	42.65

(1)	The amount of outstanding nonvested performance share units as of September 30, 2011, at the maximum award level was 0.8 million.

Adjustments to Stock Incentive Plans

In connection with the Spin-Off, on August 31, 2009, we adjusted share-based compensation awards granted under the Plans into awards based on our Common Shares and/or CareFusion common stock, as applicable. For purposes of the vesting of these equity awards, continued employment or service with us or with CareFusion is treated as continued employment for purposes of both our and CareFusion's equity awards. See Note 17 to the consolidated financial statements in the Annual Report on Form 10-K for fiscal 2010 for an explanation of these adjustments.

The following table summarizes the share-based compensation awards outstanding as of September 30, 2011:


	Our Awards				CareFusion Awards
(in millions)	Stock Options		Restricted Shares and Share Units		Stock Options		Restricted Shares and Share Units
Held by our employees and former employees		23.5		3.5		5.8		0.0
Held by CareFusion employees		1.3		0.0

Total		24.8		3.5