Energizer 2002 Annual Report Download - page 36

ENR 2002 Annual Report Page 34
11. Stock-Based Compensation
Energizer’s 2000 Incentive Stock Plan (the Plan) was adopted by the
Board of Directors in March 2000 and approved by shareholders, 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 (ENR stock) may be
granted to directors, officers and key employees. A maximum of 15.0
million shares of ENR stock was approved to be issued under the Plan.
At September 30, 2002, 2001 and 2000, respectively, there were 6.1
million, 6.6 million and 7.0 million shares available for future awards.
Options that have been granted under the Plan have been granted at the
market price on the grant date and generally vest ratably over three to 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 2002 and 2000, the Board of Directors
approved the grants of up to 20,000 and 635,000 restricted stock equiv-
alents, respectively 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 con-
vert at the time of the recipient’s retirement or other termination of
employment. During fiscal 2002, 2001 and 2000, respectively, 37,700,
120,885 and 488,415 restricted stock equivalents had been granted.
The weighted-average fair value for restricted stock equivalents granted
in 2002, 2001 and 2000 was $18.97, $19.94 and $18.30, respectively.
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, the participants 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 transferred to other investment
options offered under the plan. At the time of termination of employment,
or for directors, at the time of termination 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. Charges to earnings for stock-based
compensation were $4.4, $4.1 and $4.8 in 2002, 2001 and 2000,
respectively. Had cost for stock-based compensation been determined
based on the fair value method set forth under SFAS 123, Energizer’s
net earnings and earnings 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.
2002 2001 2000
Net earnings/(loss):
As reported $ 186.4 $ (39.0) $ 181.4
Pro forma $ 178.4 $ (53.0) $ 176.1
Basic earnings/(loss) per share:
As reported $ 2.05 $ (0.42) $ 1.89
Pro forma $ 1.96 $ (0.57) $ 1.83
Diluted earnings/(loss) per share:
As reported $ 2.01 $ (0.42) $ 1.88
Pro forma $ 1.92 $ (0.57) $ 1.83
The weighted-average fair value of options granted in fiscal 2002, 2001
and 2000 was $9.65, $7.51 and $7.13 per option, respectively. This was
estimated at the grant date using the Black-Scholes option-pricing model
with the following weighted-average assumptions:
2002 2001 2000
Risk-free interest rate 4.70% 4.90% 5.85%
Expected life of option 7.5 years 7.5 years 7.5 years
Expected volatility of ENR stock 19.0% 19.3% 20.3%
Expected dividend yield on ENR stock – % – % – %
Energizer Holdings, Inc.
Notes to Consolidated Financial Statements Continued
(Dollars in millions, except per share data)