NOTE 13. 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.
	o	Time-Based Restricted Stock. The Company has issued time-based restricted stock to certain key employees. These shares are restricted as to transfer and in certain circumstances must be returned to the Company at the original purchase price. 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, which is up to five years from the date of grant.
	o	Performance-Based Restricted Stock. The performance-based restricted stock program has a one-year performance period, and a subsequent six-month service period. Under this program, the Company communicates "target awards" to 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 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 18 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 14.6 million shares in fiscal 2012 as compared to 14.2 million shares repurchased in fiscal 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 $78.7 million, $76.3 million, and $67.6 million was recognized in earnings from continuing operations in fiscal 2012, 2011, and 2010, respectively, as well as related tax benefits of $29.0 million, $28.2 million, and $22.3 million, respectively.


Years ended June 30,		2012		2011		2010

Operating expenses	$	13.4	$	13.1	$	11.7
Selling, general and administrative expenses		53.8		51.8		45.9
System development and programming costs		11.5		11.4		10.0
Total pretax stock-based compensation expense	$	78.7	$	76.3	$	67.6

As of June 30, 2012, the total remaining unrecognized compensation cost related to non-vested stock options and restricted stock awards amounted to $8.8 million and $40.5 million, respectively, which will be amortized over the weighted average remaining requisite service period of 1.8 years and 1.0 years, respectively.

In fiscal 2012, the following activity occurred under our existing plans:

Stock Options:


	Number of Options			Weighted Average Price per Share
Year ended June 30, 2012	(in thousands)			(in dollars)

Options outstanding,
beginning of year	21,714		$	40
Options granted	1,136		$	54
Options exercised	(6,228	)	$	40
Options canceled	(435	)	$	42
Options outstanding, end of year	16,187		$	41

Options exercisable, end of year	13,632		$	39
Shares available for future grants,
end of year	29,452
Shares reserved for issuance under
stock option plans, end of year	45,639

Performance-Based Restricted Stock:


	Number of Shares (in thousands)

Year ended June 30, 2012

Restricted shares outstanding, beginning of year	1,351
Restricted shares granted	1,801
Restricted shares vested	(1,581)
Restricted shares forfeited	(97)
Restricted shares outstanding, end of year	1,474

Time-Based Restricted Stock:


	Number of Shares (in thousands)

Year ended June 30, 2012

Restricted shares outstanding, beginning of year	493
Restricted shares granted	31
Restricted shares vested	(144)
Restricted shares forfeited	(22)
Restricted shares outstanding, end of year	358

The aggregate intrinsic value of stock options outstanding and exercisable as of June 30, 2012 was $245.0 million and $221.7 million, respectively, which has a remaining life of 4.1 years and 3.4 years, respectively. The aggregate intrinsic value for stock options exercised in fiscal 2012, 2011, and 2010 was $83.8 million, $95.7 million and $29.1 million, respectively.

In fiscal 2010, the Company issued 1.4 million shares in connection with the final compensatory employee stock purchase plan offering that vested on December 31, 2009.

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:


Years ended June 30,		2012		2011		2010

Risk-free interest rate		0.8% - 1.0%		1.4% - 2.4%		2.3% - 2.6%
Dividend yield		2.8% - 3.1%		2.9% - 3.3%		3.2% - 3.4%
Weighted average volatility factor		24.9% - 25.9%		24.5% - 24.9%		25.9% - 30.4%
Weighted average expected life (in years)		5.2 - 5.3		5.1 - 5.2		5.0 - 5.1
Fair value	$	8.46	$	7.59	$	7.05

The weighted average fair values of restricted stock plan issuances were as follows:


Year ended June 30,		2012

Performance-based restricted stock	$	44.33
Time-based restricted stock	$	54.40

B. Pension Plans. The Company has a defined benefit cash balance pension plan covering substantially all U.S. employees, under which employees are credited with a percentage of base pay plus interest. The plan interest credit rate varies from year-to-year based on the ten-year U.S. Treasury rate. Employees are fully vested upon completion of three years of service. The Company's policy is to make contributions within the range determined by generally accepted actuarial principles. In addition, the Company has various retirement plans for its non-U.S. employees and maintains a Supplemental Officers Retirement Plan ("SORP"). The SORP is a defined benefit plan pursuant to which the Company pays supplemental pension benefits to certain key officers upon retirement based upon the officers' years of service and compensation.

A June 30 measurement date was used in determining the Company's benefit obligations and fair value of plan assets.

The Company is required to (a) recognize in its statement of financial position an asset for a plan's net overfunded status or a liability for a plan's net underfunded status, (b) measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year, and (c) recognize changes in the funded status of a defined benefit plan in the year in which the changes occur in accumulated other comprehensive income (loss).

The Company's pension plans funded status as of June 30, 2012 and 2011 is as follows:


June 30,		2012			2011

Change in plan assets:
Fair value of plan assets at beginning of year	$	1,313.3		$	981.7
Actual return on plan assets		106.6			200.0
Employer contributions		91.6			158.1
Currency translation adjustments		(4.6	)		8.1
Benefits paid		(37.4	)		(34.6	)

Fair value of plan assets at end of year	$	1,469.5		$	1,313.3

Change in benefit obligation:
Benefit obligation at beginning of year	$	1,178.8		$	1,087.9
Service cost		57.2			52.5
Interest cost		62.1			56.6
Actuarial (gains)/ losses		159.4			(5.4	)
Currency translation adjustments		(10.8	)		14.5
Benefits paid		(37.4	)		(34.6	)
Acquisitions		2.8			7.3

Projected benefit obligation at end of year	$	1,412.1		$	1,178.8

Funded status - plan assets less benefit obligations	$	57.4		$	134.5

The amounts recognized on the Consolidated Balance Sheets as of June 30, 2012 and 2011 consisted of:


June 30,		2012			2011

Noncurrent assets	$	170.3		$	231.5
Current liabilities		(4.3	)		(4.5	)
Noncurrent liabilities		(108.6	)		(92.5	)
Net amount recognized	$	57.4		$	134.5

The accumulated benefit obligation for all defined benefit pension plans was $1,399.9 million and $1,167.4 million at June 30, 2012 and 2011, respectively.

The Company's pension plans with accumulated benefit obligations in excess of plan assets as of June 30, 2012 and 2011 had the following projected benefit obligation, accumulated benefit obligation and fair value of plan assets:


June 30,		2012		2011

Projected benefit obligation	$	171.5	$	150.7
Accumulated benefit obligation	$	161.8	$	143.2
Fair value of plan assets	$	60.8	$	55.6

The components of net pension costs were as follows:


Years ended June 30,		2012			2011			2010

Service cost - benefits earned
during the period	$	57.2		$	52.5		$	47.6
Interest cost on projected benefits		62.1			56.6			59.1
Expected return on plan assets		(97.6	)		(88.5	)		(76.5	)
Amortization of losses		15.0			20.1			4.5

	$	36.7		$	40.7		$	34.7

The net actuarial loss, prior service cost and transition obligation for the defined benefit pension plans that are included in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit cost are $411.0 million, $6.2 million, and $0.7 million, respectively, at June 30, 2012. The estimated net actuarial loss, prior service cost, and transition obligation for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic pension cost over the next fiscal year are $29.3 million, $1.4 million, and $0.2 million, respectively, at June 30, 2012.

Assumptions used to determine the actuarial present value of benefit obligations were:


Years ended June 30,	2012		2011

Discount rate	3.90	%	5.40	%
Increase in compensation levels	4.00	%	4.00	%

Assumptions used to determine the net pension expense generally were:


Years ended June 30,	2012		2011		2010

Discount rate	5.40	%	5.25	%	6.80	%
Expected long-term rate of return on assets	7.25	%	7.25	%	7.25	%
Increase in compensation levels	4.00	%	5.50	%	5.50	%

The discount rate is based upon published rates for high-quality fixed-income investments that produce cash flows that approximate the timing and amount of expected future benefit payments.

The expected long-term rate of return on assets is determined based on historical and expected future rates of return on plan assets considering the target asset mix and the long-term investment strategy.

Plan Assets

The Company's pension plans' asset allocations at June 30, 2012 and 2011 by asset category were as follows:


	2012		2011

United States Fixed Income Securities	41	%	38	%
United States Equity Securities	41	%	41	%
International Securities	18	%	21	%

Total	100	%	100	%

The Company's pension plans' asset investment strategy is designed to ensure prudent management of assets, consistent with long-term return objectives and the prompt fulfillment of all pension plan obligations. The investment strategy and asset mix were developed in coordination with an asset liability study conducted by external consultants to maximize the funded ratio with the least amount of volatility.

The pension plans' assets are currently invested in various asset classes with differing expected rates of return, correlations and volatilities, including large capitalization and small capitalization U.S. equities, international equities, U.S. fixed income securities and cash.


The target asset allocation ranges are generally as follows:

United States Fixed Income Securities	35% – 45%
United States Equity Securities	37% – 50%
International Equity Securities	12%– 20%

The pension plans' fixed income portfolio is designed to match the duration and liquidity characteristics of the pension plans' liabilities. In addition, the pension plans invest only in investment-grade debt securities to ensure preservation of capital. The pension plans' equity portfolios are subject to diversification guidelines to reduce the impact of losses in single investments. Investment managers are prohibited from buying or selling commodities and from the short selling of securities.

None of the pension plans' assets are directly invested in the Company's stock, although the pension plans may hold a minimal amount of Company stock to the extent of the Company's participation in the S&P 500 Index.

Plan investments included in Level 1 are valued using closing prices for identical instruments that are traded on active exchanges. Plan investments included in Level 2 are valued utilizing inputs obtained from an independent pricing service, which are reviewed by the Company for reasonableness. To determine the fair value of our Level 2 plan assets, a variety of inputs are utilized, including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, new issue data, and monthly payment information. The Plan has no Level 3 investments at June 30, 2012.

The following table presents the investments of the pension plans measured at fair value at June 30, 2012:


		Level 1		Level 2		Level 3		Total


Comingled trusts	$	-	$	583.5	$	-	$	583.5
U.S. Government securities		-		272.5		-		272.5
Mutual funds		269.6		-		-		269.6
Corporate and municipal bonds		-		272.8		-		272.8
Mortgage-backed security bonds		-		13.9		-		13.9
Total pension assets	$	269.6	$	1,142.7	$	-	$	1,412.3

In addition to the investments in the above table, the pension plans also held cash and cash equivalents of $57.2 million as of June 30, 2012.

The following table presents the investments of the pension plans measured at fair value at June 30, 2011:


		Level 1		Level 2		Level 3		Total


Comingled trusts	$	-	$	529.7	$	-	$	529.7
U.S. Government securities		-		207.4		-		207.4
Mutual funds		283.4		-		-		283.4
Corporate and municipal bonds		-		237.7		-		237.7
Mortgage-backed security bonds		-		33.1		-		33.1
Total pension assets	$	283.4	$	1,007.9	$	-	$	1,291.3

In addition to the investments in the above table, the pension plans also held cash and cash equivalents of $22.0 million as of June 30, 2011.

Contributions

During fiscal 2012, the Company contributed $91.6 million to the pension plans. In July 2012, the Company contributed $125.0 million to the pension plans and expects to contribute an additional $8.3 million to the pension plans during its fiscal year ended June 30, 2013 ("fiscal 2013").

Estimated Future Benefit Payments

The benefits expected to be paid in each year from fiscal 2013 to 2017 are $48.2 million, $52.8 million, $60.4 million, $67.4 million and $77.4 million, respectively. The aggregate benefits expected to be paid in the five fiscal years from 2018 to 2022 are $525.7 million. The expected benefits to be paid are based on the same assumptions used to measure the Company's pension plans' benefit obligations at June 30, 2012 and includes estimated future employee service.

C. Retirement and Savings Plan. The Company has a 401(k) retirement and savings plan, which allows eligible employees to contribute up to 35% of their compensation annually and allows highly compensated employees to contribute up to 10% of their compensation annually. The Company matches a portion of employee contributions, which amounted to approximately $65.9 million, $57.5 million, and $55.8 million for the calendar years ended December 31, 2011, 2010, and 2009, respectively.