Lowe's 2005 Annual Report Download - page 41

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average฀fair฀value฀of฀$39.30฀in฀2003.฀These฀grants฀normally฀vest฀over฀three฀to฀
five฀years.฀Related฀expenses฀(charged฀to฀stock฀compensation฀expense)฀for฀2005,฀
2004฀and฀2003฀were฀$18฀million,฀$12฀million฀and฀$5฀million,฀respectively.
฀ The฀Company฀has฀three฀stock฀incentive฀plans,฀referred฀to฀as฀the฀“2001,”฀
“1997”฀and฀“1994”฀Incentive฀Plans,฀under฀which฀incentive฀and฀non-qualified฀
stock฀options฀may฀be฀granted฀to฀key฀employees.฀No฀awards฀may฀be฀granted฀
after฀2011฀under฀the฀2001฀plan,฀after฀2007฀under฀the฀1997฀plan฀and฀after฀2004฀
under฀the฀1994฀plan.฀Stock฀options฀generally฀have฀terms฀of฀seven฀years,฀nor-
mally฀vest฀evenly฀over฀three฀years,฀and฀are฀assigned฀an฀exercise฀price฀of฀not฀
less฀than฀the฀fair฀market฀value฀of฀a฀share฀of฀the฀Company’s฀common฀stock฀on฀
the฀date฀of฀grant.฀Related฀expenses฀(charged฀to฀stock฀compensation฀expense)฀
for฀2005,฀2004฀and฀2003฀were฀$46฀million,฀$39฀million฀and฀$33฀million,฀
respectively.฀At฀February฀3,฀2006,฀there฀were฀14,324,000฀and฀87,000฀shares฀
available฀for฀grants฀under฀the฀2001฀and฀1997฀plans,฀respectively,฀and฀no฀
shares฀available฀for฀grants฀under฀the฀1994฀plan.
฀ Stock฀option฀information฀related฀to฀the฀2001,฀1997฀and฀1994฀Incentive฀
Plans฀is฀summarized฀as฀follows:
Key฀Employee฀Stock฀Option฀Plans
฀฀฀฀฀ ฀ Weighted฀Average฀
฀฀฀฀฀ Shares฀ Exercise฀Price฀฀
฀฀฀฀฀ (In฀thousands)฀ Per฀Share
Outstanding฀at฀January฀31,฀2003฀ 20,651฀ $฀ 33.37
฀ Granted฀ ฀ 4,318฀ ฀ 40.39
฀ Canceled฀or฀expired฀ (1,129)฀ ฀ 39.66
฀ Exercised฀ (3,745)฀ ฀ 26.20
Outstanding฀at฀January฀30,฀2004฀ 20,095฀ $฀ 35.68
฀ Granted฀ ฀ 2,959฀ ฀ 56.11
฀ Canceled฀or฀expired฀ (759)฀ ฀ 44.88
฀ Exercised฀ (3,077)฀ ฀ 30.18
Outstanding฀at฀January฀28,฀2005฀ 19,218฀ $฀ 39.56
฀ Granted฀ ฀ 2,970฀ ฀ 58.94
฀ Canceled฀or฀expired฀ (486)฀ ฀ 52.57
฀ Exercised฀ (6,554)฀ ฀ 34.77
Outstanding฀at฀February฀3,฀2006฀ 15,148฀ $฀ 45.01
Exercisable฀at฀January฀30,฀2004฀ 7,525฀ $฀ 27.58
Exercisable฀at฀January฀28,฀2005฀ 8,795฀ $฀ 30.93
Exercisable฀at฀February฀3,฀2006฀ 9,703฀ $฀ 39.89
฀ Outstanding฀ Exercisable
฀ ฀ ฀ Weighted฀ Weighted฀ ฀ Weighted฀
฀ ฀ ฀ Average฀ Average฀ ฀ Average฀
Range฀of฀ ฀ Options฀ Remaining฀ Exercise฀ Options฀ Exercise฀
Exercise฀Prices฀ ฀ (In฀Thousands)฀ Term฀ Price฀ (In฀Thousands)฀ Price
฀$฀ 7.52฀–฀$12.60฀ 14฀ 1.2฀ $฀10.74฀ 14฀ $฀10.74
฀ 13.19฀–฀฀ 19.44฀ 127฀ 1.7฀ 15.24฀ 127฀ 15.24
฀ 21.34฀–฀฀ 31.16฀ 2,421฀ 1.7฀ 26.02฀ 2,405฀ 26.02
฀ 35.12฀–฀฀ 52.06฀ 7,608฀ 3.5฀ 43.15฀ 6,367฀ 43.59
฀$53.75฀–฀$66.11฀ 4,978฀ 5.7฀ 57.95฀ 790฀ 56.75
Totals฀ ฀ 15,148฀ 3.9฀ $ ฀ 45.01฀ 9,703฀ $ ฀ 39.89
฀ The฀Company฀maintains฀the฀Lowe’s฀Companies,฀Inc.฀Amended฀and฀Restated฀
Directors’฀Stock฀Option฀and฀Deferred฀Stock฀Unit฀Plan฀for฀its฀non-employee฀
directors฀(Directors’฀Plan).฀Prior฀to฀the฀amendment฀to฀the฀Directors’฀Plan฀in฀
2005,฀each฀non-employee฀Director฀was฀awarded฀4,000฀options฀on฀the฀date฀฀
of฀the฀first฀board฀meeting฀after฀each฀annual฀meeting฀of฀the฀Company’s฀share-
holders฀(the฀award฀date).฀The฀options฀vested฀evenly฀over฀three฀years,฀expired฀
after฀seven฀years฀and฀were฀assigned฀a฀price฀equal฀to฀the฀fair฀market฀value฀of฀
the฀Company’s฀common฀stock฀on฀the฀date฀of฀grant.฀Since฀the฀amendment,฀each฀
non-employee฀Director฀is฀awarded฀a฀number฀of฀deferred฀stock฀units,฀which฀
represent฀non-vested฀stock,฀equal฀to฀$85,000฀based฀on฀the฀fair฀market฀value฀
of฀the฀Company’s฀common฀stock฀on฀the฀date฀of฀grant.฀The฀deferred฀stock฀units฀
vest฀immediately.฀The฀maximum฀number฀of฀shares฀available฀for฀grant฀under฀
the฀Directors’฀Plan฀is฀500,000,฀subject฀to฀adjustment฀in฀the฀event฀of฀a฀stock฀
dividend,฀stock฀split฀or฀other฀similar฀event฀as฀specified฀in฀the฀plan.฀No฀awards฀
may฀be฀granted฀under฀the฀Directors’฀Plan฀after฀the฀award฀date฀in฀2008.฀In฀2005,฀
15,000฀deferred฀stock฀units฀were฀awarded฀with฀a฀weighted฀average฀fair฀market฀
value฀of฀$57.15.฀In฀2005,฀the฀related฀expense฀(charged฀to฀stock฀compensation฀
expense)฀for฀the฀options฀and฀awards฀was฀$1฀million.฀The฀amount฀of฀stock฀
compensation฀expense฀recognized฀in฀2004฀and฀2003฀was฀insignificant.
฀ Stock฀option฀information฀related฀to฀the฀Directors’฀Plan฀is฀summarized฀฀
as฀follows:
Directors’฀Stock฀Option฀Plans
฀฀฀฀฀ ฀ Weighted฀Average฀
฀ ฀ ฀ ฀ ฀ Shares฀ Exercise฀Price฀฀
฀฀฀฀฀ (In฀thousands)฀ Per฀Share
Outstanding฀at฀January฀31,฀2003฀ 136฀ $฀ 34.38
฀ Granted฀ ฀ 36฀ ฀ 42.26
฀ Exercised฀ (25)฀ ฀ 28.74
฀ Canceled฀or฀expired฀ (12)฀ ฀ 43.03
Outstanding฀at฀January฀30,฀2004฀ 135฀ $฀ 36.77
฀ Granted฀ ฀ 40฀ ฀ 53.57
฀ Exercised฀ (10)฀ ฀ 27.62
฀ Canceled฀or฀expired฀ (8)฀ ฀ 42.83
Outstanding฀at฀January฀28,฀2005฀ 157฀ $฀ 41.28
฀ Granted฀ ฀ –฀ ฀ –
฀ Exercised฀ (4)฀ ฀ 25.84
฀ Canceled฀or฀expired฀ (4)฀ ฀ 49.80
Outstanding฀at฀February฀3,฀2006฀ 149฀ $฀ 41.46
Exercisable฀at฀January฀30,฀2004฀ 71฀ $฀ 31.28
Exercisable฀at฀January฀28,฀2005฀ 89฀ $฀ 34.96
Exercisable฀at฀February฀3,฀2006฀ 117฀ $฀ 38.93
฀ Outstanding฀ Exercisable
฀ ฀ ฀ Weighted฀ Weighted฀ ฀ Weighted฀
฀ ฀ ฀ Average฀ Average฀ ฀ Average฀
Range฀of฀ ฀ Options฀ Remaining฀ Exercise฀ Options฀ Exercise฀
Exercise฀Prices฀ ฀ (In฀Thousands)฀ Term฀ Price฀ (In฀Thousands)฀ Price
$22.88฀–฀$42.26฀฀ 83฀ 2.5฀ $฀33.97฀ 74฀ $฀33.09
$47.16฀–฀$53.57฀฀ 66฀ 4.4฀ 50.75฀ 43฀ 49.16
Totals฀ ฀ 149฀ 3.4฀ $ ฀ 41.46฀ 117฀ $ ฀ 38.93
฀ The฀Company฀maintains฀a฀qualified฀Employee฀Stock฀Purchase฀Plan฀(ESPP)฀
that฀allows฀eligible฀employees฀to฀participate฀in฀the฀purchase฀of฀designated฀
shares฀of฀the฀Company’s฀common฀stock.฀Ten฀million฀shares฀were฀authorized฀
for฀this฀plan฀with฀2,095,001฀remaining฀available฀at฀February฀3,฀2006.฀The฀
purchase฀price฀of฀the฀shares฀under฀the฀ESPP฀equals฀85%฀of฀the฀closing฀price฀
on฀the฀date฀of฀purchase.฀The฀Company฀issued฀1,227,436;฀1,331,294฀and฀
1,441,518฀shares฀of฀common฀stock฀pursuant฀to฀this฀plan฀during฀2005,฀2004฀
and฀2003,฀respectively.฀As฀discussed฀in฀Note฀1,฀effective฀February฀1,฀2003,฀the฀
Company฀adopted฀the฀fair-value฀recognition฀provisions฀of฀SFAS฀No.฀123฀for฀all฀
employee฀awards฀granted฀or฀modified฀after฀January฀31,฀2003.฀As฀a฀result,฀
during฀2005,฀2004฀and฀2003,฀the฀Company฀recognized฀stock฀compensation฀
expense฀totaling฀$11฀million,฀$19฀million฀and฀$13฀million,฀respectively,฀relating฀
to฀stock฀issued฀under฀the฀ESPP฀during฀that฀period,฀which฀is฀included฀in฀the฀
$76฀million,฀$70฀million฀and฀$51฀million฀in฀stock฀compensation฀expense฀rec-
ognized฀in฀2005,฀2004฀and฀2003,฀respectively.