Energizer 2011 Annual Report Download - page 74

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share and percentage data)
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 vested and credited to the
participant's account is determined and 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 Sheets.
The Company uses the straight-line method of recognizing compensation cost. Total compensation cost charged against income
for the Company’s share-based compensation arrangements was $37.3, $28.2 and $15.3 for the years ended September 30,
2011, 2010 and 2009, respectively, and was recorded in SG&A expense. The total income tax benefit recognized in the
Consolidated Statements of Earnings and Comprehensive Income for share-based compensation arrangements was $13.9, $10.2
and $5.6 for the years ended September 30, 2011, 2010 and 2009, respectively. Restricted stock issuance and shares issued for
stock option exercises under the Company’s share-based compensation program are generally issued from treasury shares.
Options
In October 2009, the Company granted non-qualified stock options to purchase 266,750 shares of ENR stock to certain
executives and employees of the Company. The options vest on the third anniversary of the date of the grant, but may
accelerate and become exercisable before that date upon the recipient’s death or disability or upon a change in control. The
options remain exercisable for 10 years from the date of grant. However, this term may be reduced under certain circumstances
including the recipient’s termination of employment.
As of September 30, 2011, the aggregate intrinsic value of stock options outstanding and stock options exercisable was $12.4
and $12.2, respectively. The aggregate intrinsic value of stock options exercised for the years ended September 30, 2011, 2010
and 2009 was $8.3, $21.1 and $9.3, 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 fiscal
years ended September 30, 2011 and 2009. The weighted-average fair value of options granted in fiscal 2010 was $27.00 per
option. This was estimated using the Black Scholes option-pricing model with the following weighted-average assumptions:
Risk-free interest rate
Expected life of option
Expected volatility of ENR stock
Expected dividend yield on ENR stock
2010
3.98%
5.5 years
37.04%
—
As of September 30, 2011, unrecognized compensation costs related to stock options granted was $2.3, which will be
recognized in fiscal 2012. For outstanding nonqualified stock options, the weighted-average remaining contractual life is 4.3
years.
The following table summarizes nonqualified ENR stock option activity during the current fiscal year (shares in millions):
Outstanding on October 1, 2010
Exercised
Outstanding on September 30, 2011
Exercisable on September 30, 2011
Shares
1.00
(0.23)
0.77
0.51
Weighted-Average
Exercise Price
$ 47.12
36.06
$ 50.36
$ 42.97
Restricted Stock Equivalents (RSE)
In October 2006, the Board of Directors approved two grants of RSE. First, a grant to certain employees included 112,350
shares, of which 109,000 shares vested. The second grant for 303,000 shares was awarded to senior executives and consisted
of two pieces: 1) 25% of the total restricted stock equivalents granted, or 69,000, net of forfeitures, vested on the third
anniversary of the date of grant; 2) substantially all of the remainder of the RSE did not vest because the Company performance
target was not achieved.
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