Stock-Based Compensation and Earnings Per Share
 6 Months Ended
Mar. 31, 2016
Stock Based Compensation and Earnings Per Share Abstract  
Stock-Based Compensation and Earnings Per Share
Stock-Based Compensation and Earnings Per Share

Stock-based compensation expense, which is calculated net of an assumed forfeiture rate, and related income tax benefit included within the Condensed Consolidated Statement of Operations is as follows:
 
Three Months Ended
 
Six Months Ended
 
March 31
 
March 31
(in millions)
2016
 
2015
 
2016
 
2015
Stock-based compensation expense included in:
 
 
 
 
 
 
 
Product cost of sales
$
3

 
$
2

 
$
5

 
$
4

Selling, general and administrative expenses
6

 
5

 
10

 
8

Total
$
9

 
$
7

 
$
15

 
$
12

Income tax benefit
$
3

 
$
2

 
$
5

 
$
4



The Company issued awards of equity instruments under the Company's various incentive plans for the six months ended March 31, 2016 and 2015 as follows:
 
Options
 
Performance Shares
 
Restricted Stock Units
(shares in thousands)
Number Issued
Weighted Average Fair Value
 
Number Issued
Weighted Average Fair Value
 
Number Issued
Weighted Average Fair Value
Six months ended March 31, 2016
628.9

$
17.76

 
128.6

$
85.05

 
68.3

$
85.75

Six months ended March 31, 2015
555.6

$
19.60

 
129.7

$
82.63

 
65.9

$
84.23



The maximum number of shares of common stock that can be issued in respect of performance shares granted in 2016 based on the achievement of performance targets for years 2016 through 2018 is approximately 306,000.

The fair value of each option granted by the Company was estimated using a binomial lattice pricing model and the following weighted average assumptions:
 
2016 Grants
 
2015 Grants
Risk-free interest rate
0.8% - 2.5%

 
0.5% - 2.6%

Expected dividend yield
1.5% - 1.6%

 
1.6
%
Expected volatility
20.0
%
 
24.0
%
Expected life
7 years

 
7 years



Employee Benefits Paid in Company Stock
During the six months ended March 31, 2016 and 2015, 0.3 million and 0.3 million shares, respectively, of the Company's common stock were issued to employees under the Company's employee stock purchase and defined contribution savings plans at a value of $27 million and $23 million for the respective periods.

Earnings Per Share and Diluted Share Equivalents
The computation of basic and diluted earnings per share is as follows:
 
Three Months Ended
 
Six Months Ended
 
March 31
 
March 31
(in millions, except per share amounts)
2016
 
2015
 
2016
 
2015
Numerator for basic and diluted earnings per share:
 
 
 
 
 
 
 
Income from continuing operations
$
172

 
$
163

 
$
305

 
$
332

Income (loss) from discontinued operations, net of taxes
(1
)
 
(6
)
 
1

 
(8
)
Net income
$
171

 
$
157

 
$
306

 
$
324

Denominator:
 

 
 

 
 
 
 
Denominator for basic earnings per share – weighted average common shares
130.8

 
132.2

 
131.1

 
132.6

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options
1.0

 
1.1

 
1.1

 
1.1

Performance shares, restricted stock and restricted stock units
0.5

 
0.4

 
0.5

 
0.4

Dilutive potential common shares
1.5

 
1.5


1.6


1.5

Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion
132.3

 
133.7


132.7


134.1

Earnings (loss) per share:
 

 
 

 
 
 
 
Basic
 
 
 
 
 
 
 
Continuing operations
$
1.31

 
$
1.23

 
$
2.33

 
$
2.50

Discontinued operations
—

 
(0.04
)
 
—

 
(0.06
)
Basic earnings per share
$
1.31

 
$
1.19

 
$
2.33

 
$
2.44

Diluted
 
 
 
 
 
 
 
Continuing operations
$
1.30

 
$
1.22

 
$
2.30

 
$
2.48

Discontinued operations
(0.01
)
 
(0.05
)
 
0.01

 
(0.06
)
Diluted earnings per share
$
1.29

 
$
1.17

 
$
2.31

 
$
2.42



The Company adopted ASU 2016-09 (see Note 2) during the three months ended March 31, 2016. This standard requires excess tax benefits or deficiencies associated with share-based payments to be recorded as a discrete income tax benefit or expense in the period incurred rather than within Additional paid-in capital. ASU 2016-09 also requires excess tax benefits and deficiencies to be excluded from assumed future proceeds in the calculation of diluted shares outstanding. The Company adopted the standard prospectively, resulting in a $3 million and $0.02 increase to net income from continuing operations and diluted earnings per share from continuing operations, respectively, for the six months ended March 31, 2016.

The average outstanding diluted shares calculation excludes options with an exercise price that exceeds the average market price of shares during the period. Stock options excluded from the average outstanding diluted shares calculation for the three and six months ended March 31, 2016 were 0.6 million and 0 million, respectively, compared to none for the three and six months ended March 31, 2015.

Earnings per share amounts are computed independently each quarter. As a result, the sum of each quarter's per share amount may not equal the total per share amount for the full year.