Energizer 2000 Annual Report Download - page 37

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(8) STOCK-BASED COMPENSATION
Energizer’s 2000 Incentive Stock Plan was adopted by the Board of
Directors in March 2000 and is being submitted to shareholders for
their approval, with respect to future awards which may be granted
under the Plan, at the 2001 Annual Meeting of Shareholders. Under
the Plan, awards to purchase shares of Energizer’s common stock
may be granted to directors, officers and key employees. A maxi-
mum of 15.0 million shares of Energizer (ENR) stock was approved
to be issued under the Plan. At September 30, 2000, there were
7.0 million shares available for future awards.
Options which have been granted under the Plan have been granted
at the market price on the grant date and generally vest ratably over
four or five years. Awards have a maximum term of 10 years.
Restricted stock and restricted stock equivalent awards may also
be granted under the Plan. During 2000, the Board of Directors
approved the grants of up to 635,000 restricted stock equivalents to
a group of key employees and directors upon their purchase of an
equal number of shares of ENR stock within a specified period. The
restricted stock equivalents will vest three years from their respective
dates of grant and will convert into unrestricted shares of ENR stock
at that time, or, at the recipient’s election, will convert at the time
of the recipient’s retirement or other termination of employment. As
of September 30, 2000, 488,415 restricted stock equivalents had
been granted. The weighted-average fair value for restricted stock
equivalents granted in 2000 was $18.30.
Under the terms of the Plan, option shares and prices, and restricted
stock and stock equivalent awards, are adjusted in conjunction with
stock splits and other recapitalizations so that the holder is in the
same economic position before and after these equity transactions.
Energizer also permits deferrals of bonus and salary, and, for
directors, retainers and fees, under the terms of its Deferred
Compensation Plan. Under this Plan, employees or directors
deferring amounts into the Energizer Common Stock Unit Fund
are credited with a number of stock equivalents based on the fair
value of ENR stock at the time of deferral. In addition, during 2000,
they were credited with an additional number of stock equivalents
equal to 25% for employees, and 33 1/3% for directors, of the
amount deferred. This additional company match vests immediately
for directors and three years from the date of initial crediting for
employees. Amounts deferred into the Energizer Common Stock
Unit Fund, and vested company matching deferrals, may be trans-
ferred to other investment options offered under the Plan. At the time
of termination of employment, or for directors, at the time of termi-
nation of service on the Board, or at such other time for distribution
which may be elected in advance by the participant, the number of
equivalents then credited to the participant’s account is determined
and then an amount in cash equal to the fair value of an equivalent
number of shares of ENR stock is paid to the participant.
Energizer applies APB 25 and related interpretations in accounting
for its stock-based compensation. Accordingly, charges to earnings
for stock-based compensation were $4.8 in 2000. Had cost for
stock-based compensation been determined based on the fair value
method set forth under SFAS 123, Energizer’s net earnings and earn-
ings per share would have been reduced to the pro forma amounts
indicated in the table below. Pro forma amounts are for disclosure
purposes only and may not be representative of future calculations.
Fiscal 2000
Basic Diluted
Net Earnings Earnings
Earnings per Share per Share
As reported $181.4 $1.89 $1.88
Pro forma $176.1 $1.83 $1.83
The weighted-average fair value for options granted in fiscal 2000
was $7.13 per option. This was estimated at the grant date using the
Black-Scholes option pricing model with the following weighted-
average assumptions:
2000
Risk-free interest rate 5.85%
Expected life of option 7.5 years
Expected volatility of
ENR stock 20.30%
Expected dividend
yield on ENR stock –%