Lowe's 2006 Annual Report Download - page 43

39
Lowe’s 2006 Annual Report
Transactions related to stock options issued under the 2006, 2001,
1997, 1994 and Directors’ plans for the year ended February 2, 2007 are
summarized as follows:
Weighted- Weighted- Aggregate
Average Average Intrinsic
Shares Exercise Price Remaining Value
(In thousands) Per Share Term (In years) (In thousands)
Outstanding at
February 3, 2006 30,595 $22.48
Granted 6,691 33.65
Canceled,
forfeited or expired (1,140) 30.82
Exercised (5,758) 17.89
Outstanding at
February 2, 2007 30,388 25.51 3.72 $262,577
Vested and expected
to vest at
February 2, 2007 (1) 29,235 25.24 3.64 $260,641
Exercisable at
February 2, 2007 19,438 $22.06 2.70 $234,952
(1) Includes outstanding vested options as well as outstanding, nonvested options aer
a forfeiture rate is applied.
Performance Accelerated Restricted Stock Awards
PARS are valued at the market price of a share of the Company’s common
stock on the date of grant. In general, these awards vest at the end of a ve-
year service period from the date of grant, unless performance acceleration
goals are achieved, in which case, awards vest 50% at the end of three years
or 100% at the end of four years. e performance acceleration goals are
based on targeted Company return on beginning non-cash assets, as dened
in the PARS agreement. PARS are expensed on a straight-line basis over
the shorter of the explicit service period related to the service condition or
the implicit service period related to the performance conditions, based
on the probability of meeting the conditions. e Company uses historical
data to estimate the timing and amount of forfeitures. e weighted-
average grant-date fair value per share of PARS granted was $34.10 and
$29.24 in 2006 and 2005, respectively. No PARS were granted in 2004. e
total fair value of PARS vested was approximately $1 million in 2005. No
PARS vested in 2006 or 2004.
Transactions related to PARS issued under the 2006, 2001, 1997 and
1994 plans for the year ended February 2, 2007 are summarized as follows:
Weighted-Average
Grant-Date
Fair Value
Shares Per Share
Nonvested at February 3, 2006 595,830 $29.25
Granted 893,160 34.10
Canceled or forfeited (50,410) 32.05
Nonvested at February 2, 2007 1,438,580 $32.17
Restricted Stock Awards
e restricted stock awards are valued at the market price of a share of the
Company’s common stock on the date of grant. In general, these awards
vest at the end of a three-year period from the date of grant and are expensed
on a straight-line basis over that period, which is considered to be the
requisite service period. e Company uses historical data to estimate the
timing and amount of forfeitures. e weighted-average grant-date fair
value per share of restricted stock awards granted was $27.34, $32.30
and $28.38 in 2006, 2005 and 2004, respectively. e total fair value of
restricted stock awards vested was approximately $4 million in 2005.
No restricted stock awards vested in 2006 or 2004.
Transactions related to restricted stock issued under the 2006, 2001,
1997 and 1994 plans for the year ended February 2, 2007 are summarized
as follows:
Weighted-Average
Grant-Date
Fair Value
Shares Per Share
Nonvested at February 3, 2006 1,765,312 $31.17
Granted 206,886 27.34
Canceled or forfeited (84,616) 30.80
Nonvested at February 2, 2007 1,887,582 $30.77
Deferred Stock Units
e deferred stock units are valued at the market price of a share of the
Company’s common stock on the date of grant. For key employees, these
awards generally vest over three to ve years and are expensed on a straight-
line basis over that period, which is considered to be the requisite service
period. e Company uses historical data to estimate the timing and amount
of forfeitures. For non-employee directors, these awards vest immediately
and are expensed on the grant date. e weighted-average grant-date fair
value per share of deferred stock units granted was $31.02 and $28.58 in
2006 and 2005, respectively. No deferred stock units were granted in 2004.
e total fair value of deferred stock units vested was approximately
$5 million and $17 million in 2006 and 2005, respectively. No deferred
stock units vested in 2004. ere were 568,000 deferred stock units outstand-
ing at February 2, 2007.
Transactions related to deferred stock units issued under the 2006,
2001, 1997, 1994 and Directors’ plans for the year ended February 2, 2007
are summarized as follows:
Weighted-Average
Grant-Date
Fair Value
Shares Per Share
Nonvested at February 3, 2006 500,000 $19.65
Granted 38,000 31.02
Vested (158,000) 22.38
Nonvested at February 2, 2007 380,000 $19.65
ESPP
e purchase price of the shares under the ESPP equals 85% of the closing
price on the date of purchase. e Company’s share-based payment expense
is equal to 15% of the closing price on the date of purchase. Prior to the
adoption of SFAS No. 123(R), the ESPP was considered an equity award.
In connection with the implementation of SFAS No. 123(R), the ESPP was
reclassied as a liability award. is liability award is measured at fair value
at each reporting date and the share-based payment expense is recognized
over the six-month oering period. Twenty million shares were authorized
for this plan with 1,268,979 remaining available at February 2, 2007. e
Company issued 2,916,259 shares of common stock pursuant to this plan
during the year ended February 2, 2007.
Note 10 EMPLOYEE RETIREMENT PLANS
e Company maintains a dened contribution retirement plan for its
employees (the 401(k) Plan). Employees are eligible to participate in the
401(k) Plan aer completing 90 days of continuous service. Participants
are allowed to choose from a group of mutual funds in order to designate
how both employer and employee contributions are to be invested. e
Company’s common stock is also one of the investment options for con-
tributions to the 401(k) Plan. Company shares held on the participants’
behalf by the 401(k) Plan are voted by the participants. e Company
makes contributions to the 401(k) Plan each payroll period, based upon
a matching formula applied to employee contributions (baseline match).