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Share-Based Compensation | 12 Months Ended
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Sep. 30, 2022
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation The Company grants share-based awards under the 2004 Employee and Director Equity-Based Compensation Plan (“2004 Plan”), which provides long-term incentive compensation to employees and directors consisting of: stock appreciation rights (“SARs”), performance-based restricted stock units, time-vested restricted stock units and other stock awards. The fair value of share-based payments is recognized as compensation expense in net income. BD estimates forfeitures based on experience at the time of grant and adjusts expense to reflect actual forfeitures. The amounts and location of compensation cost relating to share-based payments included in the consolidated statements of income is as follows:
(Millions of dollars) | 2022 |  | 2021 |  | 2020
Cost of products sold | $ | 46 |  |  | $ | 43 |  |  | $ | 40 |
Selling and administrative expense | 156 |  |  | 158 |  |  | 150 |
Research and development expense | 37 |  |  | 36 |  |  | 34 |
Acquisitions and other restructurings | 1 |  |  | 1 |  |  | 20 |
Total share-based compensation cost | $ | 240 |  |  | $ | 238 |  |  | $ | 245 |
Tax benefit associated with share-based compensation costs recognized | $ | 55 |  |  | $ | 55 |  |  | $ | 57 |
Total share-based compensation expense includes pre-tax compensation expense included in Income from Discontinued Operations, Net of Tax that was not material in 2022, 2021 and 2020. Upon the Company's acquisition of Bard in 2018, certain pre-acquisition equity awards of Bard were converted into either BD SARs or BD restricted stock awards, as applicable. These awards have substantially the same terms and conditions as the converted Bard awards immediately prior to the acquisition date. Compensation expense of $16 million associated with these replacement awards was recorded in Acquisitions and other restructurings in 2020. Stock Appreciation Rights SARs represent the right to receive, upon exercise, shares of common stock having a value equal to the difference between the market price of common stock on the date of exercise and the exercise price on the date of grant. SARs generally vest over a period of four years and have a term of ten years. The fair value of awards was estimated on the date of grant using a lattice-based binomial option valuation model and these valuations were largely based upon the following weighted-average assumptions:
| 2022 |  | 2021 |  | 2020
Risk-free interest rate | 1.41% |  | 0.68% |  | 1.69%
Expected volatility | 22.0% |  | 23.0% |  | 19.0%
Expected dividend yield | 1.42% |  | 1.46% |  | 1.24%
Expected life | 7.3 years |  | 7.4 years |  | 7.4 years
Fair value derived | $49.45 |  | $44.38 |  | $48.82
Expected volatility is based upon historical volatility for the Company’s common stock and other factors. The expected life of SARs granted is derived from the output of the lattice-based model, using assumed exercise rates based on historical exercise and termination patterns, and represents the period of time that SARs granted are expected to be outstanding. The risk-free interest rate used is based upon the published U.S. Treasury yield curve in effect at the time of grant for instruments with a similar life. The dividend yield is based upon the most recently declared quarterly dividend as of the grant date. The Company issued 0.7 million shares during 2022 to satisfy the SARs exercised. A summary of SARs outstanding as of September 30, 2022 and changes during the year then ended is as follows:
| SARs (in thousands) |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value (Millions of dollars)
Balance at October 1 | 6,295 |  |  | $ | 179.64 |  |  |  |  |
Granted | 909 |  |  | 245.09 |  |  |  |  |
Exercised | (1,408) |  |  | 125.57 |  |  |  |  |
Forfeited, canceled or expired | (191) |  |  | 234.50 |  |  |  |  |
Awards transferred to Embecta at spin-off (a) | (159) |  |  | 239.77 |  |  |  |  |
Adjustments to BD awards related to the spin-off of Embecta (b) | 97 |  |  |  |  |  |  |
Balance at September 30 | 5,544 |  |  | $ | 197.31 |  |  | 5.66 |  | $ | 183 |
Vested and expected to vest at September 30 | 5,377 |  |  | 196.10 |  |  | 5.58 |  | $ | 183 |
Exercisable at September 30 | 3,877 |  |  | $ | 180.47 |  |  | 4.51 |  | $ | 183 |
(a)In connection with the spin-off of Embecta, all outstanding (vested and unvested) BD SARs which had been granted to Embecta employees were converted into Embecta awards. These awards preserved the same intrinsic value, as well as general terms and conditions, of the original BD awards. (b)In connection with the spin-off of Embecta, all outstanding BD awards were adjusted to preserve the aggregate value of the awards as measured immediately prior to the spin-off. A summary of SARs exercised during 2022, 2021 and 2020 is as follows:
(Millions of dollars) | 2022 |  | 2021 |  | 2020
Total intrinsic value of SARs exercised | $ | 184 |  |  | $ | 102 |  |  | $ | 212 |
Total fair value of SARs vested | $ | 36 |  |  | $ | 39 |  |  | $ | 46 |
Performance-Based and Time-Vested Restricted Stock Units Performance-based restricted stock units cliff vest three years after the date of grant. These units are tied to the Company’s performance against pre-established targets over a performance period of three years. The performance measures for fiscal years 2022, 2021 and 2020 were average annual currency-neutral revenue growth and average annual return on invested capital, with the combined factor subject to adjustment based on the Company's relative total shareholder return (measures the Company’s stock performance during the performance period against that of peer companies). Under the Company’s long-term incentive program, the actual payout under these awards may vary from zero to 200% of an employee’s target payout, based on the Company’s actual performance over the performance period of three years. In fiscal years 2021 and 2020, the Company also issued additional performance-based time-vested units to certain key executives, which cliff vest three years after the date of grant and are tied to the Company’s performance against average annual growth in the Company’s Adjusted EPS over a performance period of three years. No shares will be issuable if the performance targets have not been met. The fair value is based on the market price of the Company’s stock on the date of grant. Compensation cost initially recognized assumes that the target payout level will be achieved and is adjusted for subsequent changes in the expected outcome of performance-related conditions. For units for which the performance conditions are modified after the date of grant, any incremental increase in the fair value of the modified units, over the original units, is recorded as compensation expense on the date of the modification for vested units, or over the remaining performance period for units not yet vested. Time-vested restricted stock unit awards vest on a graded basis over a period of three years, except for certain key executives of the Company, including the executive officers, for which such units generally vest one year following the employee’s retirement. The related share-based compensation expense is recorded over the requisite service period, which is the vesting period or is based on retirement eligibility. The fair value of all time-vested restricted stock units is based on the market value of the Company’s stock on the date of grant. A summary of restricted stock units outstanding as of September 30, 2022 and changes during the year then ended is as follows:
| Performance-Based |  | Time-Vested
| Stock Units (in thousands) |  |  | Weighted Average Grant Date Fair Value |  | Stock Units (in thousands) |  | Weighted Average Grant Date Fair Value
Balance at October 1 | 957 |  |  |  | $ | 231.63 |  |  | 1,556 |  |  | $ | 221.11 |
Granted | 390 |  |  |  | 242.39 |  |  | 969 |  |  | 239.39 |
Distributed | (39) |  |  |  | 237.55 |  |  | (524) |  |  | 224.81 |
Forfeited or canceled | (369) |  |  |  | 235.18 |  |  | (378) |  |  | 228.88 |
Awards transferred to Embecta at spin-off (a) | (21) |  |  |  | $ | 234.18 |  |  | (88) |  |  | $ | 237.60 |
Adjustments to BD awards related to the spin-off of Embecta (b) | 16 |  |  |  |  |  | 27 |  |  |
Balance at September 30 | 934 |  | (c) |  | $ | 230.46 |  |  | 1,561 |  |  | $ | 224.87 |
Expected to vest at September 30 | 483 |  | (d) |  | $ | 229.32 |  |  | 1,453 |  |  | $ | 224.31 |
(a)In connection with the spin-off of Embecta, all outstanding (vested and unvested) BD restricted stock units which had been granted to Embecta employees were converted into Embecta awards. These awards preserved the same intrinsic value, as well as general terms and conditions, of the original BD awards. (b)In connection with the spin-off of Embecta, all outstanding BD awards were adjusted to preserve the aggregate value of the awards as measured immediately prior to the spin-off. (c)Based on 200% of target payout for performance based restricted units and 100% of the performance based time-vested units. (d)Net of expected forfeited units and units in excess of the expected performance payout of 65 thousand and 386 thousand shares, respectively. The weighted average grant date fair value of restricted stock units granted during the years 2022, 2021 and 2020 are as follows:
| Performance-Based |  | Time-Vested
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Weighted average grant date fair value of units granted | $ | 242.39 |  |  | $ | 216.39 |  |  | $ | 245.06 |  |  | $ | 239.39 |  |  | $ | 223.60 |  |  | $ | 249.94 |
The total fair value of stock units vested during 2022, 2021 and 2020 was as follows:
| Performance-Based |  | Time-Vested
(Millions of dollars) | 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Total fair value of units vested | $ | 14 |  |  | $ | 16 |  |  | $ | 27 |  |  | $ | 169 |  |  | $ | 203 |  |  | $ | 211 |
At September 30, 2022, the weighted average remaining vesting term of performance-based and time vested restricted stock units is 1.23 and 0.90 years, respectively. Unrecognized Compensation Expense and Other Stock Plans The amount of unrecognized compensation expense for all non-vested share-based awards as of September 30, 2022, is approximately $253 million, which is expected to be recognized over a weighted-average remaining life of approximately 1.9 years. At September 30, 2022, 7.2 million shares were authorized for future grants under the 2004 Plan. The Company has a policy of satisfying share-based payments through either open market purchases or shares held in treasury. At September 30, 2022, the Company has sufficient shares held in treasury to satisfy these payments. As of September 30, 2022, 101 thousand shares were held in trust relative to a Director's Deferral plan, which provides a means to defer director compensation, from time to time, on a deferred stock or cash basis. Also as of September 30, 2022, 231 thousand shares were issuable under a Deferred Compensation Plan that allows certain highly-compensated employees, including executive officers, to defer salary, annual incentive awards and certain equity-based compensation.

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