Energizer 2007 Annual Report Download - page 33

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Energizer Holdings, Inc. 2007 Annual Report
6. Earnings Per Share
For each period presented below, basic earnings per share is based
on the average number of shares outstanding during the period.
Diluted earnings per share is based on the average number of
shares used for the basic earnings per share calculation, adjusted
for the dilutive effect of stock options and restricted stock
equivalents.
The following table sets forth the computation of basic and
diluted earnings per share (shares in millions):
FOR THE YEAR ENDED SEPTEMBER 30, 2007 2006 2005
Numerator:
Net earnings for basic and
dilutive earnings per share $321.4 $260.9 $280.7
Denominator:
Weighted-average shares - basic 56.7 61.2 71.0
Effect of dilutive securities
Stock options 1.0 1.4 1.7
Restricted stock equivalents 0.6 0.5 0.8
Total dilutive securities 1.6 1.9 2.5
Weighted-average shares - diluted 58.3 63.1 73.5
Basic net earnings per share $ 5.67 $ 4.26 $ 3.95
Diluted net earnings per share $ 5.51 $ 4.14 $ 3.82
7. Share-Based Payments
The Company’s 2000 Incentive Stock Plan (the Plan) was adopted
by the Board of Directors in March 2000 and approved by share-
holders, with respect to future awards which may be granted under
the Plan, at the 2001 Annual Meeting of Shareholders. Under the
Plan, awards of restricted stock, restricted stock equivalents or
options to purchase the Company’s common stock (ENR stock)
may be granted to directors, officers and key employees. A maxi-
mum of 15.0 million shares of ENR stock was approved to be issued
under the Plan. At September 30, 2007, 2006 and 2005, respec-
tively, there were 3.3 million, 3.7 million and 3.8 million shares
available for future awards.
Options under the Plan have been granted at the market price
on the grant date and generally vest ratably over three to five years.
These awards have a maximum term of 10 years. Restricted stock
and restricted stock equivalent awards may also be granted under
the Plan. 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.
The Company 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 defer-
ring 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 immedi-
ately 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
after specified restriction periods. 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. This plan is
reflected in Other Liabilities on the Consolidated Balance Sheet.
On October 1, 2005, the Company adopted SFAS No. 123
(revised 2004), “Share-Based Payment” (SFAS 123R), using the
“modified retrospective” method. Accordingly, prior year results
have been adjusted to incorporate the effects of SFAS 123R. The
impact to the Company’s net earnings is consistent with the pro
forma disclosures provided in previous financial statements. The
Statement of Cash Flows for fiscal year 2005 was adjusted in accor-
dance with SFAS 123R to reflect excess tax benefits as an inflow
from financing activities.
Beginning with new grants in fiscal 2006, the Company used the
straight-line method of recognizing compensation cost. In fiscal
years prior to 2006, the Company used the accelerated method of
recognizing compensation costs for awards with graded vesting.
The accelerated method treated tranches of a grant as separate
awards, amortizing the compensation costs over each vesting period
within a grant.
Total compensation cost charged against income for the
Company’s share-based compensation arrangements was $25.3,
$16.0 and $14.3 for the years ended September 30, 2007, 2006 and
2005, respectively and was recorded in selling, general and adminis-
trative (SG&A) expense. The total income tax benefit recognized
in the Consolidated Statement of Earnings for share-based com-
pensation arrangements was $9.2, $5.9 and $5.3 for the years ended
September 30, 2007, 2006 and 2005, respectively. Restricted stock
issuance and shares issued for stock options exercises under the
Company’s share-based compensation program are generally issued
from treasury shares.
Options As of September 30, 2007, the aggregate intrinsic value of
stock options outstanding and stock options exercisable was $186.4
and $156.5, respectively. The aggregate intrinsic value of stock
options exercised for the years ended September 30, 2007, 2006
and 2005 was $107.8, $34.0 and $78.2, respectively. When valuing
new grants, Energizer uses an implied volatility, which reflects the
expected volatility for a period equal to the expected life of the
option. No new option awards were granted in the year ended