Lumber Liquidators 2008 Annual Report Download - page 69

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NOTE 9. NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted net income per common share:
Year Ended December 31,
2008 2007 2006
Net Income ............................................. $ 22,149 $ 11,326 $ 12,898
Weighted Average Common Shares Outstanding—Basic ......... 26,772,288 16,646,674 15,000,100
Effect of Dilutive Securities:
Common Stock Equivalents ............................ 318,305 150,460 —
Redeemable Preferred Stock ............................ — 6,837,861 7,952,018
Warrants ........................................... — — 37,285
Weighted Average Common Shares Outstanding—Diluted ........ 27,090,593 23,634,995 22,989,403
Net Income per Common Share—Basic ....................... $ 0.83 $ 0.68 $ 0.86
Net Income per Common Share—Diluted ..................... $ 0.82 $ 0.48 $ 0.56
The following have been excluded from the computation of Weighted Average Common Shares
Outstanding—Diluted because the effect would be anti-dilutive:
As of December 31,
2008 2007 2006
Stock Options .................................................... 435,760 170,000 1,796,847
Restricted Stock Awards ........................................... 5,800 81,300 —
NOTE 10. RELATED PARTY TRANSACTIONS
As described in Note 5, the Company leases a number of its store locations and Corporate Headquarters
from ANO and Related Companies.
NOTE 11. COMMITMENTS AND CONTINGENCIES
The Company is from time to time subject to claims and disputes arising in the normal course of business.
In the opinion of management, while the outcome of any such claims and disputes cannot be predicted with
certainty, the ultimate liability of the Company in connection with these matters is not expected to have a
material adverse effect on the Company’s results of operations, financial position or cash flows.
The Variable Plan
On December 7, 2007, Kevin filed a demand for arbitration seeking to recover the number of shares to
which he alleged he was entitled under the Variable Plan and naming the Founder and the Company as
respondents. In accordance with the terms of the Variable Plan, the Company determined and certified that the
Vested Shares were exercisable under the Variable Plan. Pursuant to the terms of the Variable Plan, the Founder
had previously placed 1.5 million shares of common stock in escrow (the “Escrowed Shares”) for purposes of
satisfying his obligations thereunder, which the Company had generally guaranteed. The Company was not a
party to the escrow arrangement between the Founder and Kevin.
On or about May 29, 2008, Kevin filed an Amended Statement of Claim in the arbitration in which he
maintained that he was entitled to more than the Vested Shares. He asserted claims against the Founder and the
Company for breach of contract, fraud and a violation of the Massachusetts Weekly Wage Act (the “Wage Act”).
He sought transfer of the number of shares owed to him under the Variable Plan as well as treble damages,
attorney’s fees and costs under the Wage Act.
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