Lumber Liquidators 2008 Annual Report Download - page 65

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The Company maintains a stock unit plan for regional store management, the 2006 Stock Unit Plan for
Regional Managers (the “2006 Regional Plan”). In 2006, certain Regional Managers were granted a total of
85,000 stock units vesting over approximately a five year period with the Founder contributing the 85,000 shares
of common stock necessary to provide for the exercise of the stock units. No additional grants of stock units are
available under the 2006 Regional Plan. The stock units would have expired without value unless a trigger event,
as defined, occurred. The IPO was a trigger event, and the Company recorded $258 of stock-based compensation
expense in the fourth quarter of 2007. Through December 2008, 51,000 stock units had vested and the Founder
had transferred the corresponding shares of common stock. Pursuant to the provisions of the 2006 Regional Plan,
the Company purchased 10,406 shares of common stock from the Regional Managers at the fair market value on
the vest dates for a total of $103, to cover applicable federal and state withholding taxes. We expect the
remaining $258 of stock-based compensation expense to be recognized over the next 2 years.
In 2004, the Company established a stock warrant plan (the “Warrant Plan”) with a senior executive who
separated from the Company in May 2006. As a result of the separation during the second quarter of 2006, the
Company reversed the $259 of compensation expense that had been previously recognized.
Stock Options
The following table summarizes activity related to stock options:
Shares
Weighted Average
Exercise Price
Remaining Average
Contractual
Term (Years)
Aggregate
Intrinsic
Value
Balance, December 31, 2005 .................. —
Granted ............................... 1,796,847 $ 7.69
Exercised .............................. —
Forfeited .............................. —
Balance, December 31, 2006 .................. 1,796,847 7.69
Granted ............................... 175,000 10.78
Exercised .............................. —
Forfeited .............................. (5,000) 11.00
Balance at December 31, 2007 ................. 1,966,847 7.95 8.8 $2,038
Granted ............................... 288,760 10.47
Exercised .............................. (26,500) 7.67
Forfeited .............................. (3,000) 16.55
Balance, December 31, 2008 .................. 2,226,107 $ 8.27 8.0 $5,199
Exercisable at December 31, 2008 .............. 1,180,279 $ 7.78 7.7 $3,296
The aggregate intrinsic value is the difference between the exercise price and the closing price of the
Company’s common stock on December 31. The intrinsic value of the stock options exercised during 2008 was
$201.
As of December 31, 2008, total unrecognized compensation cost related to unvested options was
approximately $3,243, net of estimated forfeitures, which we expect to recognize over a weighted average period
of approximately 2.0 years.
The fair value of each stock option award is estimated by management on the date of the grant using the
Black-Scholes-Merton option pricing model. The weighted average fair value of options granted during 2008,
2007 and 2006 were $4.99, $4.08 and $3.74, respectively.
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