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STOCK PROGRAMS | 12 Months Ended
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Jun. 30, 2021
Share-based Payment Arrangement [Abstract] |
STOCK PROGRAMS | STOCK PROGRAMS As of June 30, 2021, the Company has two active equity compensation plans which include the Amended and Restated Fiscal 2002 Share Incentive Plan (the “Fiscal 2002 Plan”) and the Amended and Restated Non-Employee Director Share Incentive Plan (collectively, the “Plans”). These Plans currently provide for the issuance of approximately 88.8 million shares of Class A Common Stock, which consist of shares originally provided for and shares transferred to the Fiscal 2002 Plan from other inactive plans and employment agreements, to be granted in the form of stock-based awards to key employees, consultants and non-employee directors of the Company. As of June 30, 2021, approximately 13.2 million shares of Class A Common Stock were reserved and available to be granted pursuant to these Plans. The Company may satisfy the obligation of its stock-based compensation awards with either new or treasury shares. The Company’s equity compensation awards include stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, including long-term price-vested units (“PVUs”), and share units. Total net stock-based compensation expense is attributable to the granting of and the remaining requisite service periods of stock options, RSUs, PSUs, long-term PSUs and share units. Compensation expense attributable to net stock-based compensation is as follows:
|  | Year Ended June 30
(In millions) |  | 2021 |  | 2020 |  | 2019
Compensation expense(1) |  | $ | 327 |  |  | $ | 213 |  |  | $ | 243 |
Income tax benefit |  | $ | 50 |  |  | $ | 41 |  |  | $ | 47 |
(1)Excludes compensation expense relating to liability-classified awards, including DECIEM stock options discussed below. As of June 30, 2021, the total unrecognized compensation cost related to unvested stock-based awards was $230 million and the related weighted-average period over which it is expected to be recognized is approximately one year. Stock Options The following is a summary of the Company’s stock option programs as of June 30, 2021 and changes during the fiscal year then ended:
(Shares in thousands) |  | Shares |  | Weighted- Average Exercise Price Per Share |  | Aggregate Intrinsic Value(1) (in millions) |  | Weighted-Average Contractual Life Remaining in Years
Outstanding at June 30, 2020 |  | 8,645.0 |  |  | $ | 108.30 |  |  |  |  |
Granted at fair value |  | 1,542.0 |  |  | 218.95 |  |  |  |  |
Exercised |  | (2,459.0) |  |  | 87.50 |  |  |  |  |
Expired |  | (11.1) |  |  | 130.55 |  |  |  |  |
Forfeited |  | (101.7) |  |  | 192.96 |  |  |  |  |
Outstanding at June 30, 2021 |  | 7,615.2 |  |  | 136.24 |  |  | $ | 1,385 |  |  | 6.0
Vested and expected to vest at June 30, 2021 |  | 7,547.9 |  |  | 135.58 |  |  | $ | 1,377 |  |  | 6.0
Exercisable at June 30, 2021 |  | 4,953.3 |  |  | 102.02 |  |  | $ | 1,070 |  |  | 5.0
(1)The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The exercise period for all stock options generally may not exceed ten years from the date of grant. Stock option grants to individuals generally become exercisable in three substantively equal tranches over a service period of up to four years. The Company attributes the value of option awards on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. The following is a summary of the per-share weighted-average grant date fair value of stock options granted and total intrinsic value of stock options exercised:
|  | Year Ended June 30
(In millions, except per share data) |  | 2021 |  | 2020 |  | 2019
Per-share weighted-average grant date fair value of stock options granted |  | $ | 54.83 |  |  | $ | 51.46 |  |  | $ | 38.62 |
Intrinsic value of stock options exercised |  | $ | 407 |  |  | $ | 309 |  |  | $ | 283 |
The fair value of each of the Company's option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
|  | Year Ended June 30
|  | 2021 |  | 2020 |  | 2019
Weighted-average expected stock-price volatility |  | 26.1% |  | 25.1% |  | 24.5%
Weighted-average expected option life |  | 8 years |  | 7 years |  | 7 years
Average risk-free interest rate |  | 0.5% |  | 1.5% |  | 2.8%
Average dividend yield |  | 1.0% |  | 1.0% |  | 1.1%
The Company uses a weighted-average expected stock-price volatility assumption that is a combination of both current and historical implied volatilities of the underlying stock. The implied volatilities were obtained from publicly available data sources. For the weighted-average expected option life assumption, the Company considers the exercise behavior for past grants and models the pattern of aggregate exercises. The average risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the options and the average dividend yield is based on historical experience. Restricted Stock Units The Company granted RSUs in respect of approximately 1.0 million shares of Class A Common Stock during fiscal 2021 with a weighted-average grant date fair value per share of $220.04 that, at the time of grant, are scheduled to vest as follows: 0.3 million in fiscal 2022, 0.4 million in fiscal 2023 and 0.3 million in fiscal 2024. Vesting of RSUs granted is generally subject to the continued employment or the retirement of the grantees. The RSUs are accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were valued at the closing market price of the Company’s Class A Common Stock on the date of grant. The following is a summary of the status of the Company’s RSUs as of June 30, 2021 and activity during the fiscal year then ended:
(Shares in thousands) |  | Shares |  | Weighted-Average Grant Date Fair Value Per Share
Nonvested at June 30, 2020 |  | 1,948.3 |  |  | $ | 157.89 |
Granted |  | 984.0 |  |  | 220.04 |
Dividend equivalents |  | 12.7 |  |  | 186.14 |
Vested |  | (989.7) |  |  | 145.53 |
Forfeited |  | (98.1) |  |  | 190.54 |
Nonvested at June 30, 2021 |  | 1,857.2 |  |  | 195.77 |
Performance Share Units During fiscal 2021, the Company granted PSUs with a target payout of approximately 0.2 million shares of Class A Common Stock with a weighted-average grant date fair value per share of $217.88, which will be settled in stock subject to the achievement of the Company’s net sales and diluted net earnings per common share for the three fiscal years ending June 30, 2023, all subject to continued employment or the retirement of the grantees. For PSUs granted, no settlement will occur for results below the applicable minimum threshold. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant. In September 2020, approximately 0.2 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of the issuance, in settlement of 0.5 million PSUs which vested as of June 30, 2020. The following is a summary of the status of the Company’s PSUs as of June 30, 2021 and activity during the fiscal year then ended:
(Shares in thousands) |  | Shares |  | Weighted-Average Grant Date Fair Value Per Share
Nonvested at June 30, 2020 |  | 695.1 |  |  | $ | 139.17 |
Granted |  | 161.2 |  |  | 217.88 |
Vested and issued(1) |  | — |  |  | — |
Forfeited |  | (56.2) |  |  | 92.18 |
Nonvested at June 30, 2021 |  | 800.1 |  |  | 158.33 |
(1) Approximately 0.2 million PSUs with a performance period ended June 30, 2021 to be issued in September 2021 are included in Nonvested at June 30, 2021. Long-term Performance Share Units During September 2015, the Company granted PSUs to an executive of the Company with an aggregate target payout of 387,848 shares (in three tranches of approximately 129,283 each) of the Company’s Class A Common Stock, generally subject to continued employment through the end of relative performance periods, which end June 30, 2018, 2019, and 2020. Since the Company achieved positive Net Earnings, as defined in the PSU award agreement, for the fiscal year ended June 30, 2016, performance and vesting of each tranche will be based on the Company achieving positive Cumulative Operating Income, as defined in the PSU award agreement, during the relative performance period. Payment with respect to a tranche will be made on the third anniversary of the last day of the respective performance period. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as the payment of shares of Class A Common Stock. The grant date fair value of these PSUs of $30 million was estimated using the closing stock price of the Company’s Class A Common Stock as of September 4, 2015, the date of grant. Through June 30, 2021, 129,283 shares of the Company’s Class A Common Stock were issued, and the related dividends to be paid, in accordance with the terms of the grant, related to the performance periods ended June 30, 2018. During January 2016, the Company granted PSUs to an executive of the Company with an aggregate target payout of 71,694 shares (in three tranches of 23,898 each) of the Company’s Class A Common Stock. Since the Company achieved positive Net Earnings, as defined in the PSU award agreement, for the fiscal year ended June 30, 2017, the vesting of each tranche will generally be subject to continued employment through the end of relative service periods that end on January 29, 2018, 2019 and 2020. Payment with respect to a tranche will be made within 30 business days of the date on which the PSUs vest. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as the payment of shares of the Company’s Class A Common Stock. The grant date fair value of these PSUs of $6 million was estimated using the closing stock price of the Company’s Class A Common Stock as of January 28, 2016, the date of grant. In January 2020, 23,898 shares of the Company’s Class A Common Stock were issued, and the related dividends were paid, in accordance with the terms of the grant related to the performance period of the award that ended January 29, 2020. Through June 30, 2020, 71,694 shares of the Company’s Class A Common Stock were issued, and the related dividends were paid, in accordance with the terms of the grant, related to the performance periods ended January 29, 2018, 2019 and 2020. In February 2018, the Company granted to an executive of the Company PSUs with an aggregate payout of 195,940 shares (in two tranches of 97,970 shares each) of the Company’s Class A Common Stock, generally subject to continued employment through the end of the respective performance periods ending June 30, 2021 and 2022. No portion of the award will generally vest unless the Company has achieved positive Cumulative Operating Income, as defined in the performance share unit award agreement, during the relevant performance period. Settlement, if any, with respect to both tranches will be made on September 3, 2024. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as any payment of shares of Class A Common Stock. The grant date fair value of these PSUs of $27 million was estimated using the closing stock price of the Company’s Class A Common Stock as of the date of grant. Since the Company achieved positive Cumulative Operating Income, as defined in the PSU award agreement, for the fiscal year ended June 30, 2021, the end of the first performance period under the grant, 97,970 shares of the Company’s Class A Common Stock are anticipated to be issued, and the related dividends to be paid, in accordance with the terms of the grant. In March 2021, the Company granted to the Company’s Chief Executive Officer (“CEO”) PSUs with an aggregate payout of 68,578 shares of the Company's Class A Common Stock, to incentivize him to continue serving through at least June 30, 2024. Generally, no portion of this award will vest unless the Company has achieved positive Cumulative Operating Income, as defined in the performance share unit award agreement, during the relevant performance period, and delivery of shares of the Company’s Class A Common Stock, if any, will be made on September 2, 2025. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as any delivery of shares of the Company's Class A Common Stock. The aggregate grant date fair value of the PSUs of approximately $20 million was estimated using the closing stock price of the Company's Class A Common Stock on the date of grant. Long-term Price-Vested Units In March 2021, the Company granted to the Company’s CEO PVUs with an aggregate payout of 85,927 shares, divided into three tranches, of the Company's Class A Common Stock, to incentivize him to continue serving through at least June 30, 2024. Generally, no portion of this award will vest unless the Company has achieved positive Cumulative Operating Income, as defined in the price-vested unit award agreement, during the relevant performance period. In addition, the vesting of each tranche is contingent upon the Company’s achievement of the respective stock price goal, which means that the average closing price per share of the Company’s Class A Common Stock traded on the New York Stock Exchange be at or above the applicable stock price goal (noted in the table below) for 20 consecutive trading days during the applicable performance period. The number of shares subject to each tranche of the price-vested unit award, as well as the stock price goals, service periods, performance periods and share delivery dates for each tranche are as follows:
|  | Number of Shares per Tranche |  | Stock Price Goal (per Share) |  | Service Period |  | Performance Period for Stock Price Goal |  | Performance Period for Cumulative Operating Income Goal |  | Share Delivery Date
First tranche |  | 27,457 |  |  | $ | 323.03 |  |  | March 11, 2021 - June 30, 2024 |  | March 11, 2021 - June 30, 2024 |  | July 1, 2021 - June 30, 2025 |  | September 2, 2025
Second tranche |  | 28,598 |  |  | $ | 333.21 |  |  | March 11, 2021 - June 30, 2024 |  | March 11, 2021 - June 30, 2024 |  | July 1, 2021 - June 30, 2025 |  | September 2, 2025
Third tranche |  | 29,872 |  |  | $ | 343.61 |  |  | March 11, 2021 - June 30, 2024 |  | March 11, 2021 - June 30, 2024 |  | July 1, 2021 - June 30, 2025 |  | September 2, 2025
Total shares |  | 85,927 |  |  |  |  |  |  |  |  |  |  |
Generally, delivery of shares of the Company’s Class A Common Stock, if any, will be made on September 2, 2025. The PVUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as any delivery of shares of the Company's Class A Common Stock. The aggregate grant date fair value of the PVUs of approximately $20 million was estimated using the Monte Carlo Method, which requires certain assumptions. The significant assumptions used for this award were as follows:
Expected volatility |  | 31.8 | %
Dividend yield |  | 0.8 | %
Risk-free interest rate |  | 0.4 | %
Expected term |  | 3.3 years
Share Units The Company grants share units to certain non-employee directors under the Amended and Restated Non-Employee Director Share Incentive Plan. The share units are convertible into shares of the Company’s Class A Common Stock as provided for in that plan. Share units are accompanied by dividend equivalent rights that are converted to additional share units when such dividends are declared. The following is a summary of the status of the Company’s share units as of June 30, 2021 and activity during the fiscal year then ended:
(Shares in thousands) |  | Shares |  | Weighted-Average Grant Date Fair Value Per Share
Outstanding at June 30, 2020 |  | 136.8 |  |  | $ | 62.46 |
Granted |  | 3.6 |  |  | 246.82 |
Dividend equivalents |  | 1.2 |  |  | 262.37 |
Outstanding at June 30, 2021 |  | 141.6 |  |  | 68.73 |
Cash Units Certain non-employee directors defer cash compensation in the form of cash payout share units, which are not subject to the Plans. These share units are classified as liabilities and, as such, their fair value is adjusted to reflect the current market value of the Company’s Class A Common Stock. The Company recorded $29 million, $2 million and $9 million as compensation expense to reflect additional deferrals and the change in the market value for fiscal 2021, 2020 and 2019, respectively. DECIEM Stock Options As a result of the fiscal 2021 acquisition of additional shares of DECIEM, the Company has a stock option plan relating to its majority-owned subsidiary DECIEM (“DECIEM Stock Option Plan”). The DECIEM stock options were issued in replacement of and exchange for certain vested and unvested DECIEM employee stock options previously issued by DECIEM. The DECIEM stock options are subject to the terms and conditions of the DECIEM 2021 Stock Option Plan. At exchange or replacement date, post-combination vested options totaled 90,978 options and post-combination unvested options totaled 3,123 options of which 59 vested as of June 30, 2021. The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and will be remeasured to fair value at each reporting date through date of settlement. Total stock-based compensation expense is attributable to the exchange or replacement of and the remaining requisite service period of stock options. The total stock option expense from the date of acquisition to June 30, 2021 was $40 million, with no related income tax benefit. As of June 30, 2021, the total unrecognized compensation cost related to unvested stock awards of the DECIEM Stock Option Plan was $4 million and the related weighted-average period over which it is expected to be recognized is approximately two years. The following is a summary of the DECIEM stock option program as of June 30, 2021 and changes during the fiscal year then ended:
(Shares in thousands) |  | Shares |  | Weighted- Average Exercise Price Per Share |  | Aggregate Intrinsic Value(1) (in millions) |  | Weighted-Average Contractual Life Remaining in Years
Outstanding at June 30, 2020 |  | — |  |  | $ | — |  |  |  |  |
Granted at fair value |  | 94.1 |  |  | 52.76 |  |  |  |  |
Exercised |  | — |  |  |  |  |  |  |
Expired |  | — |  |  |  |  |  |  |
Forfeited |  | — |  |  |  |  |  |  |
Outstanding at June 30, 2021 |  | 94.1 |  |  | 52.76 |  |  | $ | 145 |  |  | 2.9
Vested and expected to vest at June 30, 2021 |  | 91.0 |  |  | 54.54 |  |  | $ | 140 |  |  | 2.9
Exercisable at June 30, 2021 |  | — |  |  | — |  |  | $ | — |  |  | —
(1)The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. Stock option grants to individuals under the DECIEM Stock Option Plan will vest between two to seven tranches over a service period of up to two years. The Company attributes the value of option awards under the DECIEM Stock Option Plan on a graded vesting basis where awards vest at specified rates over a specified period. The following is a summary of the per-share weighted-average grant date fair value of stock options granted and total intrinsic value of stock options exercised:
|  | Year Ended June 30
|  | 2021 |  | 2020 |  | 2019
Per-share weighted-average grant date fair value of stock options granted |  | $ | 1,557 |  |  | $ | — |  |  | $ | — |
Intrinsic value of stock options exercised |  | $ | — |  |  | $ | — |  |  | $ | — |
The initial fair value of the DECIEM stock option liability was calculated using the acquisition date fair value multiplied by the number of options replaced (consisting of vested and partially vested stock options) on the day following the acquisition date. As discussed in Note 5 – Acquisition of Businesses, DECIEM stock options, with total fair value of $294 million, were reported as part of the total consideration transferred. The DECIEM stock options are reported as a stock option liability of $141 million in Other noncurrent liabilities in the accompanying consolidated balance sheets at June 30, 2021. The fair value of the stock options were calculated using the following key assumptions into the Monte Carlo Method:
|  | May 18, 2021 |  | June 30, 2021
Risk-free rate |  | 0.50% |  | 0.50%
Term to mid of last twelve-month period |  | 2.54 years |  | 2.42 years
Operating leverage adjustment |  | 0.45 |  | 0.45
Net sales discount rate |  | 3.30% |  | 3.40%
EBITDA discount rate |  | 6.80% |  | 6.90%
EBITDA volatility |  | 38.30% |  | 37.70%
Net sales volatility |  | 17.20% |  | 17.00%

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