STOCK PROGRAMS

9 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Additional information relating to the Company's stock programs and the DECIEM stock options are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

The Company's Stock Programs

Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, including long-term price-vested units and share units. Compensation expense attributable to net stock-based compensation was $69 million and $91 million for the three months ended March 31, 2023 and 2022, respectively, and was $234 million and $283 million for the nine months ended March 31, 2023 and 2022, respectively.

Stock Options

During the nine months ended March 31, 2023, the Company granted stock options in respect of approximately 1.2 million shares of Class A Common Stock with an weighted-average exercise price per share of $246.01 and a weighted-average grant date fair value per share of $79.09. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The aggregate intrinsic value of stock options exercised during the nine months ended March 31, 2023 was $74 million.

Restricted Stock Units

During the nine months ended March 31, 2023, the Company granted RSUs in respect of approximately 1.1 million shares of Class A Common Stock with a weighted-average grant date fair value per share of $246.34 that, at the time of grant, are scheduled to vest at 0.4 million, 0.3 million, and 0.4 million shares per year, in fiscal 2024, fiscal 2025 and fiscal 2026, respectively. Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees. The RSUs are generally 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 generally valued at the closing market price of the Company’s Class A Common Stock on the date of grant.

Performance Share Units

During the nine months ended March 31, 2023, the Company granted PSUs with a target payout of approximately 0.1 million shares of Class A Common Stock with a grant date fair value per share of $246.15, which will be settled in stock subject to the achievement of the Company’s net sales, diluted net earnings per common share and return on invested capital goals for the three fiscal years ending June 30, 2025, 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 2022, 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 0.1 million PSUs with a performance period ended June 30, 2022.

DECIEM Stock Options

The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and are 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 for the three and nine months ended March 31, 2023 was not material. The total stock option expense for the three and nine months ended March 31, 2022 resulted in income of $60 million and $58 million, respectively, net of foreign currency remeasurements and reflects a reduction in the fair value of the DECIEM stock options. There were no DECIEM stock options exercised during the nine months ended March 31, 2023.

The DECIEM stock options are reported as a stock option liability of $73 million and $74 million in Other noncurrent liabilities in the accompanying consolidated balance sheets at March 31, 2023 and June 30, 2022, respectively. The fair value of the stock options were calculated using the following key assumptions in the Monte Carlo Method:


	March 31, 2023	June 30, 2022
Risk-free rate	4.20%	3.20%
Term to mid of last twelve-month period	0.67 years	1.42 years
Operating leverage adjustment	0.45	0.45
Net sales discount rate	7.00%	6.00%
EBITDA discount rate	10.30%	9.40%
EBITDA volatility	35.80%	33.90%
Net sales volatility	16.10%	15.30%