Lumber Liquidators 2007 Annual Report Download - page 66

on the implied yield of U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected life of
the options was determined using a lattice model to estimate the expected term as an input into the Black-
Scholes-Merton closed-form model.
Stock options outstanding and exercisable as of December 31, 2007 are summarized below:
Outstanding Exercisable
Range of Exercise Prices
Number of
Option
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (Years)
Number
of
Option
Shares
Weighted
Average
Exercise
Price
$ 7.58 – $7.83 ................................. 1,796,847 $ 7.69 8.7 708,876 $7.65
$10.26 – $11.00 ............................... 170,000 10.78 9.7 — —
Balance, December 31, 2007 ..................... 1,966,847 $ 7.95 8.8 708,876 $7.65
Restricted Stock Awards
Shares
Weighted
Average Grant
Date Fair Value
Nonvested, December 31, 2006 ................................... — $—
Granted ................................................. 88,830 8.95
Vested .................................................. — —
Forfeited ................................................. 7,530 8.95
Nonvested, December 31, 2007 ................................... 81,300 $8.95
During 2007, the Company recognized $16 related to restricted stock awards that were granted at the IPO.
As of December 31, 2007, total unrecognized compensation cost related to unvested restricted stock awards was
approximately $279, net of estimated forfeitures, which will be recognized over a weighted average period of
approximately 3.9 years.
The Variable Plan
The Variable Plan was originally established in 1998, and through an amendment in 2005, the Variable
Right, as amended, was established to award Kevin a right to purchase an ownership position in Common Stock
from the Founder for his service to the Company. The ownership position was defined as a fixed percentage of
2.5% of the Common Stock on a fully diluted basis, as defined in the agreement, plus an additional ownership
percentage based on certain performance criteria, primarily a comparison of the net income of the region under
Kevin’s management to total Company net income on a trailing twelve-month basis. Under the Variable Plan
agreement, the Company was required to determine the number of shares of Common Stock exercisable under
the Variable Right at vesting. The Common Stock earned under the Variable Right would be contributed by the
Founder, and 1.5 million shares of Common Stock were placed in escrow by the Founder, representing the
maximum amount of shares the Founder and Kevin believed would be earned under the Variable Right.
The Variable Plan provided for a cash settlement of the Variable Right at a defined, performance based,
value through put-call provisions, executed by the Founder or Kevin, if an IPO or sale event, as defined, had not
taken place prior to February 1, 2008. The Founder was liable for the cash payment, and the Company
guaranteed his performance. The Company has accounted for the Variable Plan in accordance with the provisions
of SFAS 123(R), and at December 31, 2006, the Company had a long-term, Stock Compensation Liability of
$9,132, representing the estimated cumulative value determined by the Company’s estimation of shares earned
under the Variable Right at an estimated fair value per share.
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