Note 12. Employee Benefit Plans

A. Stock Plans. The Company recognizes stock-based compensation expense in net earnings based on the fair value of the award on the date of grant. Stock-based compensation consists of the following:

•

Stock Options. 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. Stock options are issued under a graded vesting schedule. Options granted prior to July 1, 2008 generally vest ratably over five years and have a term of 10 years. Options granted after July 1, 2008 generally vest ratably over four years and have a term of 10 years. Compensation expense for stock options is recognized over the requisite service period for each separately vesting portion of the stock option award.


•	Employee Stock Purchase Plan. The Company offers an employee stock purchase plan that allows eligible employees to purchase shares of common stock at a price equal to 95% of the market value for the Company's common stock on the last day of the offering period. This plan has been deemed non-compensatory and therefore, no compensation expense has been recorded.


•	Restricted Stock.

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Time-Based Restricted Stock. The Company has issued time-based restricted stock to certain employees which are subject to vesting periods of up to five years from the date of grant. These shares are restricted as to transfer during the vesting period, and are forfeited if the grantee ceases to be employed by the Company prior to vesting or in certain other circumstances. The Company records stock compensation expense relating to the issuance of restricted stock based on market prices on the date of grant on a straight-line basis over the period in which the transfer restrictions exist.

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Performance-Based Restricted Stock. The performance-based restricted stock program has a one-year performance period, and a subsequent one-year service period. Under this program, the Company communicates "target awards" to certain key employees at the beginning of the performance period and, as such, dividends are not paid in respect of the "target awards" during the performance period. After the performance period, if the performance targets are achieved, associates are eligible to receive dividends on shares awarded under the program. The performance target is based on earnings per share growth over the performance period, with possible payouts at the end of the performance period ranging from 0% to 150% of the "target awards." Stock-based compensation expense is measured based upon the fair value of the award on the grant date. Compensation expense is recognized on a straight-line basis over the vesting period of approximately 24 months, based upon the probability that the performance target will be met.

The Company currently utilizes treasury stock to satisfy stock option exercises, issuances under the Company's employee stock purchase plan and restricted stock awards. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase programs. The Company repurchased 2.0 million shares in the three months ended December 31, 2012 as compared to 0.9 million shares repurchased in the three months ended December 31, 2011 and the Company repurchased 5.4 million shares in the six months ended December 31, 2012 as compared to 6.2 million shares repurchased in the six months ended December 31, 2011. The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions.

Stock-based compensation expense of $24.3 million and $27.1 million was recognized in earnings for the three months ended December 31, 2012 and 2011, respectively, as well as related tax benefits of $9.2 million and $10.0 million, respectively. Stock-based compensation expense of $41.9 million and $45.5 million was recognized in earnings for the six months ended December 31, 2012 and 2011, respectively, as well as related tax benefits of $15.7 million and $16.8 million, respectively.



	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2012		2011		2012		2011
Operating expenses	$	4.7	$	4.5	$	7.6	$	7.5
Selling, general and administrative expenses	15.8		18.9		27.6		31.6
System development and programming costs	3.8		3.7		6.7		6.4
Total pretax stock-based compensation expense	$	24.3	$	27.1	$	41.9	$	45.5

As of December 31, 2012, the total remaining unrecognized compensation cost related to non-vested stock options and restricted stock awards amounted to $4.9 million and $93.9 million, respectively, which will be amortized over the weighted-average remaining requisite service periods of 1.7 years and 1.7 years, respectively.

During the six months ended December 31, 2012, the following activity occurred under the Company’s existing plans:

Stock Options:



	Number of Options (in thousands)		Weighted Average Price (in dollars)
Options outstanding at July 1, 2012	16,187		$	41
Options granted	33		$	58
Options exercised	(2,859	)	$	38
Options canceled	(145	)	$	40
Options outstanding at December 31, 2012	13,216		$	41

Performance-Based Restricted Stock:



	Number of Shares (in thousands)
Restricted shares outstanding at July 1, 2012	1,474
Restricted shares granted	544
Restricted shares vested	(6	)
Restricted shares forfeited	(139	)
Restricted shares outstanding at December 31, 2012	1,873

Time-Based Restricted Stock:



	Number of Shares (in thousands)
Restricted shares outstanding at July 1, 2012	358
Restricted shares granted	1,146
Restricted shares vested	(39	)
Restricted shares forfeited	(13	)
Restricted shares outstanding at December 31, 2012	1,452

The fair value of each stock option issued is 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 grant is derived from the output of the binomial model and represents the period of time that options granted are expected to be outstanding.

The fair value for stock options granted was estimated at the date of grant using the following assumptions:



	Six Months Ended
	December 31,
	2012			2011
Risk-free interest rate	0.8		%	1.0		%
Dividend yield	2.7		%	3.0% - 3.1%
Weighted average volatility factor	24.4		%	24.9% - 25.7%
Weighted average expected life (in years)	5.3			5.2
Weighted average fair value (in dollars)	$	8.90		$	7.00

B. Pension Plans

The components of net pension expense were as follows:



	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2012			2011			2012			2011
Service cost – benefits earned during the period	$	16.8		$	14.3		$	33.6		$	28.6
Interest cost on projected benefits	13.8			15.5			27.5			31.0
Expected return on plan assets	(27.4		)	(24.4		)	(54.8		)	(48.8		)
Net amortization and deferral	7.7			3.7			15.5			7.5
Net pension expense	$	10.9		$	9.1		$	21.8		$	18.3

During the six months ended December 31, 2012, the Company contributed $130.1 million to the pension plans and expects to contribute approximately $4.2 million during the remainder of the fiscal year ended June 30, 2013.