Office Depot 2007 Annual Report Download - page 66

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NOTE G — EMPLOYEE BENEFIT PLANS
Long-Term Incentive Plan
During 2007, the company’s board of directors adopted a new equity incentive plan which obtained shareholder
approval on April 25, 2007. This plan is known as the Office Depot, Inc. 2007 Long-Term Incentive Plan (the
“Plan”) and replaces the Long-Term Equity Incentive Plan which expired in October 2007. We believe that the Plan
will serve to align the interests of its officers, directors and key employees with the interests of its shareholders. The
Plan permits the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units,
performance-based, and other equity-based incentive awards. Stock options must be issued at the market price on
the date of the grant unless an employee owns 10% or more of Office Depot’s outstanding common stock, in which
case the option price must be at least 110% of the market price on the date of grant. Options granted under the Plan
become exercisable from one to five years after the date of grant, provided that the individual is continuously
employed with the company. All options granted expire no more than ten years following the date of grant.
Long-Term Incentive Stock Plan
A summary of the activity in our stock option plans for the last three years is presented below.
2007 2006 2005
Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price
Outstanding at beginning of year..... 12,384,083 $ 20.14 16,806,110 $ 17.20 26,109,787 $ 16.04
Granted ............................................ 3,522,720 32.52 1,970,274 33.73 3,757,200 20.82
Canceled .......................................... (434,863) 25.12 (540,238) 18.94 (1,806,751) 17.74
Exercised ......................................... (1,877,638) 16.11 (5,852,063) 16.45 (11,254,126) 15.63
Outstanding at end of year............... 13,594,302 $ 23.86 12,384,083 $ 20.14 16,806,110 $ 17.20
The weighted-average grant date fair values of options granted during 2007, 2006, and 2005 were $10.05, $11.49,
and $7.24, respectively, using the following weighted average assumptions for grants:
•Risk-free interest rates of 4.5% for 2007, 4.6% for 2006, and 3.8% for 2005
•Expected lives of 4.7 years for 2007, 5.0 years for 2006, and 5.0 years for 2005
•A dividend yield of zero for all three years
•Expected volatility ranging from 25% to 43% for 2007, 27% to 31% for 2006, and 30% to 32% for 2005
The following table summarizes information about options outstanding at December 29, 2007.
Options Outstanding
Options Exercisable
Range of
Exercise Prices
Number
Outstanding
Weighted Average
Remaining
Contractual Life
(in years)
Weighted Average
Exercise Price
Number
Exercisable
Weighted Average
Exercise Price
$4.43-$ 6.64.................... 8,568 2.5 $ 6.19 8,568 $ 6.19
6.65-9.97......................... 461,472 3.0 8.69 461,472 8.69
9.98-14.96....................... 1,077,170 2.8 11.40 1,077,170 11.40
14.97-22.45..................... 5,248,762 3.8 18.25 4,398,705 18.11
22.46-45.00..................... 6,798,330 5.8 31.22 1,968,940 27.97
$4.43-$45.00................... 13,594,302 4.7 $23.86 7,914,855 $19.09
As of December 29, 2007, there was approximately $37 million of total stock-based compensation expense that has
not yet been recognized relating to non-vested awards granted under our option plans as calculated under FAS 123R.
This expense, net of forfeitures, is expected to be recognized over a weighted-average period of approximately 2.3
years. We estimate that between 5%-10% of these shares will be forfeited. The number of exercisable shares was 7.9
million shares of common stock at December 29, 2007, 7.1 million shares of common stock at December 30, 2006
and 9.8 million shares of common stock at December 31, 2005.