Office Depot 2008 Annual Report Download - page 72

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Restricted Stock and Performance-Based Grants
Our employee share-based awards are generally issued in the first quarter of the year. In 2008, we granted
approximately 2.7 million shares of time-based restricted stock to our employees. These grants typically vest
annually over a three-year service period. The weighted average fair value of $11.24 for these awards was based on
the grant date market price. As of December 27, 2008, none of the shares granted in 2008 had vested. In 2007, we
granted to employees approximately 0.7 million shares of time-based restricted stock with annual vesting over a
three-year service period valued at the grant date market price of $32.46 per share. A summary of the status of the
company’s nonvested shares as of December 27, 2008, and changes during the year ended December 27, 2008 is
presented below.
2008 2007 2006
Shares
Weighted
Average
Grant-Date
Price
Shares
Weighted
Average
Grant-Date
Price Shares
Weighted
Average
Grant-Date
Price
Nonvested at beginning of year................ 850,115 $ 30.67 1,675,130 $ 19.82 2,996,611 $ 19.01
Granted..................................................... 2,651,737 11.24 670,013 32.46 324,117 33.13
Vested ...................................................... (543,068) 24.22 (1,367,070) 18.31 (1,443,874) 18.29
Forfeited................................................... (295,568) 17.81 (127,958) 30.06 (201,724) 20.22
Nonvested at end of year.......................... 2,663,216 $ 14.06 850,115 $ 30.67 1,675,130 $ 19.82
As of December 27, 2008, there was approximately $23 million of total unrecognized compensation cost related to
nonvested restricted stock. That cost, net of forfeitures, is expected to be recognized over a weighted-average period
of 1.9 years. We estimate that 5% of these shares will be forfeited. The total grant date fair value of shares vested
during 2008 was approximately $13 million.
Employee Stock Purchase Plan
Prior to the end of 2008, the company maintained an Employee Stock Purchase Plan, which was approved by Office
Depot’s stockholders. The Plan permitted eligible employees to purchase our common stock at 85% of its fair
market value. For the years presented, compensation expense has been recognized for the difference between
employee cost and fair value. Share needs associated with this plan were satisfied through open market purchases.
This plan was terminated, effective December 31, 2008.
Retirement Savings Plans
Eligible company employees may participate in the Office Depot, Inc. Retirement Savings Plan (401(k) Plan), which
was approved by the board of directors. This plan allows those employees to contribute a percentage of their salary,
commissions and bonuses, up to the higher of $15,500 in 2008 or 50% of their eligible compensation, in accordance
with the provisions of Section 401(k) of the Internal Revenue Code. Prior to the end of 2008, employer matching
contributions were equivalent to 50% of the first 6% of an employee’s contributions, subject to the limits of the plan.
Those contributions were invested in the same manner as the participants’ pre-tax contributions. The plan also
allows for a discretionary matching contribution in addition to the normal match if approved by the board of
directors. The compensation and benefits committee of the board of directors amended the plan to eliminate the
predetermined matching contributions effective with the first payroll period of 2009, no further predetermined
matching contributions will be made to the plan.
Office Depot also sponsors the Office Depot, Inc. Non-Qualified Deferred Compensation Plan that permits eligible
highly compensated employees, who are limited in the amount they can contribute to the 401(k) Plan, to
alternatively defer a portion of their salary, commissions and bonuses up to maximums and under restrictive
conditions specified in this plan and to participate in company matching provisions. The matching contributions to
the deferred compensation plan were allocated to hypothetical investment alternatives selected by the participants.
The compensation and benefits committee of the board of directors amended the plan to eliminate the predetermined
matching contributions effective with the first payroll period beginning in 2009. Prior to the end of 2008, all
deferred compensation plan participants were given the opportunity to take advantage of the transition election rules
provided under the final 409A regulations of the Internal Revenue Code to modify distribution elections previously
elected for plans years 2005 through 2008.