OfficeMax 2011 Annual Report Download - page 107

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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 shares of our common stock 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 accrue all dividends declared on
the Company’s common stock during the vesting period; however, such dividends are not paid until the
restrictions lapse.
Stock Units
The Company previously had a shareholder approved deferred compensation program for certain of its
executive officers that allowed them to defer a portion of their cash compensation. Previously, these executive
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 executive officer retires or terminates employment. There were 2,441 and 3,889 stock units
allocated to the accounts of these executive officers at December 31, 2011 and December 25, 2010, respectively.
As a result of an amendment to the plan, no additional deferrals can be allocated to the stock unit accounts.
Stock Options
The Company’s stock options generally are issued at a price equal to fair market value on the grant date and
typically expire within seven years of the grant date. Stock options granted under the OfficeMax Incentive and
Performance Plan generally vest over a three year period. In 2011, 2010 and 2009, the Company recognized
$11.1 million, $5.2 million and $2.4 million, respectively, of pre-tax compensation expense and additional
paid-in capital related to stock options. The remaining compensation expense to be recognized related to
outstanding stock options, net of estimated forfeitures, is approximately $8.3 million. The remaining
compensation expense is to be recognized through the first quarter of 2014.
A summary of stock option activity for fiscal years 2011, 2010 and 2009 is presented in the following table:
2011 2010 2009
Shares
Wtd. Avg.
Ex. Price Shares
Wtd. Avg.
Ex. Price Shares
Wtd. Avg.
Ex. Price
Balance at beginning of year ........ 4,313,290 $16.52 3,249,773 $15.14 1,495,795 $31.95
Options granted .................. 1,457,280 13.33 2,060,246 16.24 2,071,360 4.77
Options exercised ................ (405,988) 4.80 (408,519) 4.80 — —
Options forfeited and expired ....... (548,030) 13.80 (588,210) 16.02 (317,382) 26.70
Balance at end of year ............. 4,816,552 $16.86 4,313,290 $16.52 3,249,773 $15.14
Exercisable at end of year .......... 2,122,136 1,301,257 1,225,646
Weighted average fair value of options
granted (Black-Scholes) ......... $ 7.07 $ 8.08 $ 2.63
75