Employee Benefit Plans

3 Months Ended

Sep. 30, 2023

A. Stock-based Compensation Plans. Stock-based compensation consists of the following:

The Company's share-based compensation consists of stock options, time-based restricted stock, time-based restricted stock units, performance-based restricted stock, and performance-based restricted stock units. The Company also offers an employee stock purchase plan for eligible employees. Beginning in September 2022, the Company discontinued granting stock options, time-based restricted stock and performance-based restricted stock. Any such future awards will be grants of time-based restricted stock units and/or performance-based restricted stock units, depending on employee eligibility. Time-based restricted stock unit awards and performance-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock, and for awards granted to employees with a home country outside the United States are generally settled in cash.

•Restricted Stock.

•Time-Based Restricted Stock Units. Time-based restricted stock units generally vest ratably over 3 years. Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Time-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock and cannot be transferred during the vesting period. Time-based restricted stock unit awards granted to employees with a home country outside the United States are generally settled in cash and cannot be transferred during the vesting period. Compensation expense relating to the issuance of share-settled units is measured based on the fair value of the award on the grant date and recognized on a straight-line basis over the vesting period. Compensation expense relating to the issuance of cash-settled units is recorded over the vesting period and is initially based on the fair value of the award on the grant date and is subsequently remeasured at each reporting date during the vesting period based on the change in the ADP stock price. Dividend cash equivalents are paid on share-settled units, and dividend cash equivalents are not paid on cash-settled units.

•Performance-Based Restricted Stock Units. Performance-based restricted stock units generally vest over a one to three year performance period and a subsequent service period of up to 38 months. Under these programs, the Company communicates “target awards” at the beginning of the performance period with

possible payouts at the end of the performance period ranging from 0% to 200% of the “target awards.” Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Performance-based restricted stock units cannot be transferred and are settled in either cash or stock, depending on the employee's home country. Compensation expense relating to the issuance of performance-based restricted stock units settled in cash is recognized over the vesting period initially based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded during the performance period based on probable and actual performance against targets. In addition, compensation expense is remeasured at each reporting period during the vesting period based on the change in the ADP stock price. Compensation expense relating to the issuance of performance-based restricted stock units settled in stock is recorded over the vesting period based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded based on the probable and actual performance against targets. Dividend equivalents are paid on awards under the performance-based restricted stock unit program.

•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.

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 program. The Company repurchased 1.0 million and 1.4 million shares in the three months ended September 30, 2023 and 2022, respectively. 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.

The following table represents pre-tax stock-based compensation expense for the three months ended September 30, 2023 and 2022, respectively:


	Three Months Ended
	September 30,
	2023		2022
Operating expenses	$	7.4	$	6.0
Selling, general and administrative expenses	42.8		37.1
Research and development	8.6		7.5
Total stock-based compensation expense	$	58.8	$	50.6

During the three months ended September 30, 2023, 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, 2023	2,654	$	155

Options exercised	(305)	$	148
Options forfeited/cancelled	(5)	$	176
Options outstanding at September 30, 2023	2,344	$	156

Time-Based Restricted Stock and Time-Based Restricted Stock Units:


	Number of Shares (in thousands)	Number of Units (in thousands)
Restricted shares/units outstanding at July 1, 2023	450	730
Restricted shares/units granted	—	605
Restricted shares/units vested	(289)	(256)
Restricted shares/units forfeited	(4)	(8)
Restricted shares/units outstanding at September 30, 2023	157	1,071

Performance-Based Restricted Stock and Performance-Based Restricted Stock Units:


	Number of Shares (in thousands)	Number of Units (in thousands)
Restricted shares/units outstanding at July 1, 2023	197	821
Restricted shares/units granted	113	224
Restricted shares/units vested	(103)	(363)
Restricted shares/units forfeited	(3)	(3)
Restricted shares/units outstanding at September 30, 2023	204	679

B. Pension Plans

The components of net pension income were as follows:


	Three Months Ended
	September 30,
	2023		2022
Service cost – benefits earned during the period	$	1.3	$	1.2
Interest cost on projected benefits	21.2		19.5
Expected return on plan assets	(29.0)		(31.9)
Net amortization and deferral	0.7		0.5
Settlement charges and special termination benefits	—		1.4
Net pension (income)/expense	$	(5.8)	$	(9.3)