Energizer 2006 Annual Report Download - page 34

ENERGIZER HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Dollars in millions, except per share and percentage data)
32 ENR 2006 ANNUAL REPORT
was $15.27 and $14.81 per option, respectively. This was estimated at
the grant date using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
2005 2004
Risk-free interest rate 3.86% 3.92%
Expected life of option 6 years 7.5 years
Expected volatility of ENR stock 22.2% 19.4%
Expected dividend yield on ENR stock – –
As of September 30, 2006, there was $3.6 of total unrecognized
compensation costs related to stock options granted, which will be
recognized over a weighted-average period of approximately six months.
For outstanding nonqualified stock options, the weighted average
remaining contractual life is 5.1 years.
The following table summarizes nonqualified ENR stock option
activity during the current year (shares in millions):
Weighted-Average
Shares Exercise Price
Outstanding on October 1, 2005 4.76 $ 25.38
Exercised (0.92) 23.33
Cancelled (0.03) 28.57
Outstanding on September 30, 2006 3.81 25.85
Exercisable on September 30, 2006 2.79 $ 21.45
Restricted Stock Equivalents (RSE)
In October 2005, the Board of Directors approved two different grants
of RSE. First, a grant to key employees, included approximately 73,000
shares that vest ratably over four years. The second grant for 80,000
shares was awarded to a group of key senior management and consists
of two pieces: 1) 25% of the total restricted stock equivalents granted
vest on the third anniversary of the date of grant; 2) the remainder vests
on the date that the Company publicly releases its earnings for its 2008
fiscal year contingent upon the Company’s compound annual growth in
earnings per share (CAGR) for the three year period ending on
September 30, 2008. If a CAGR of 10% is achieved, an additional 25% of
the grant vests. The remaining 50% will vest in its entirety on the third
anniversary of the grant date, only if the Company achieves a CAGR at or
above 15%, with smaller percentages of that remaining 50% vesting if
the Company achieves a CAGR between 11% and 15%. The total award
expected to vest is amortized over the vesting period.
The following table summarizes RSE activity during the current year
(shares in millions):
Weighted-Average
Grant Date
Shares Fair Value
Nonvested RSE at October 1, 2005 0.52 $ 36.76
Granted 0.15 52.81
Vested (0.13) 33.43
Cancelled (0.01) 29.60
Nonvested RSE at September 30, 2006 0.53 $ 42.44
As of September 30, 2006, there was $11.6 of total unrecognized
compensation costs related to RSE granted under the Plan, which will be
recognized over a weighted-average period of approximately 2.7 years.
The weighted-average fair value for RSE granted in 2006, 2005 and
2004 was $52.81, $48.90 and $38.77, respectively. The fair value of RSE
vested in 2006, 2005 and 2004 was $6.9, $1.9 and $4.5, respectively.
Subsequent to year-end, in October 2006, the Board of Directors
approved two grants of RSE. First, a grant to key employees, included
approximately 108,225 shares that vest ratably over four years. The
second grant for 303,000 shares was awarded to key senior manage-
ment with similar performance and vesting requirements to the RSE
award granted in 2005, as described above.
Other Share-Based Compensation
During the quarter ended December 31, 2005, the Board of Directors
approved an award for officers of the Company. This award totaled
196,800 share equivalents and has the same features as the restricted
stock award granted to senior management discussed above, but will be
settled in cash and mandatorily deferred until the individual’s retirement
or other termination of employment. The total award expected to vest is
amortized over the three year vesting period and the amortized portion is
recorded at the closing market price of Energizer stock at each period
end. As of September 30, 2006, there was $9.4 of total unrecognized
compensation costs related to this award. The related liability is reflected
in Other Liabilities in the Company’s Consolidated Balance Sheet.