OfficeMax 2007 Annual Report Download - page 87

compensation expense to be recognized related to this grant, net of estimated forfeitures, is
approximately $14 million.
In 2006, the Company granted to employees and nonemployee directors 1,157,479 restricted
stock units (‘‘RSUs’’). The weighted-average grant-date fair value of the RSUs was $28.79. As of
December 29, 2007, 927,474 of these RSUs were unvested, and vest after defined service periods
as follows: 463,737 in 2008 and 463,737 in 2009. The remaining compensation expense to be
recognized related to this grant, net of estimated forfeitures, is approximately $7 million.
In 2005, the Company granted to employees and nonemployee directors 728,123 RSUs. The
weighted-average grant-date fair value of the RSUs was $33.15. As of December 29, 2007, 51,900
of these RSUs were unvested, and vest after defined service periods as follows: 45,900 units in
2008 and 3,000 units in both 2009 and 2010. The remaining compensation expense to be
recognized related to this grant, net of estimated forfeitures, is approximately $0.2 million.
Restricted stock shares are restricted until they vest and cannot be sold by the recipient until
the restriction has lapsed. RSUs are restricted until they vest and are convertible into one common
share after the restriction has lapsed. No entries are made in the financial statements on the grant
date of restricted stock and RSU awards. The Company recognizes compensation expense related
to these awards over the vesting periods based on the closing prices of the Company’s common
stock on the grant dates. If these awards contain performance criteria, management periodically
reviews actual performance against the criteria and adjusts compensation expense accordingly. In
2007, 2006 and 2005, the Company recognized $26.4 million, $24.1 million and $9.2 million,
respectively, of pre-tax compensation expense and additional paid-in capital related to restricted
stock and RSU awards.
Restricted shares and RSUs are not included as shares outstanding in the calculation of basic
earnings per share, but are included in the number of shares used to calculate diluted earnings per
share as long as all applicable performance criteria are met, and their effect is dilutive. When the
restriction lapses on restricted stock, the par value of the stock is reclassified from additional
paid-in-capital to common stock. When the restriction lapses on RSUs, the units are converted to
unrestricted common shares and the par value of the stock is reclassified from additional
paid-in-capital to common stock. Unrestricted shares are included in shares outstanding for
purposes of calculating both basic and diluted earnings per share. Depending on the terms of the
applicable grant agreement, restricted stock and RSUs may be eligible to receive all dividends
declared on the Company’s common shares during the vesting period; however, such dividends are
not paid until the restrictions lapse.
Stock Units
The Company has a shareholder approved deferred compensation program for certain of its
executive officers that allows them to defer a portion of their cash compensation. Previously, these
officers could allocate their deferrals to a stock unit account. Each stock unit is equal in value to
one share of the Company’s common stock. The Company matched deferrals used to purchase
stock units with a 25% Company allocation of stock units. The value of deferred stock unit accounts
is paid in shares of the Company’s common stock when an officer retires or terminates
employment. There were 9,377 and 13,464 stock units allocated to the accounts of these executive
officers at December 29, 2007 and December 30, 2006, respectively. As a result of an amendment
to the plan, no additional deferrals can be allocated to the stock unit accounts.
Stock Options
In addition to the 2003 DSCP and the 2003 Plan discussed above, the Company has the
following shareholder-approved stock option plans: the Key Executive Stock Option Plan
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