STOCKHOLDERS' EQUITY

Preferred Stock

The Company is authorized to issue up to 15,000,000 shares of preferred stock at $1.00 par value. At December 31, 2012, no shares of preferred stock have been issued; however, 2,000,000 shares of Series A Junior Participating Preferred Stock have been reserved for issuance in connection with the Company’s Shareholder Rights Plan. Additional series of preferred stock may be designated and the related rights and preferences fixed by action of the Board of Directors.

Shareholder Rights Plan

In May 2008, the Board of Directors approved a shareholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of common stock. Each right represents the right to purchase one-hundredth of a share of Preferred Stock, at an exercise price of $100.00, subject to adjustment. The rights are only exercisable ten days after a person or group acquires, or commences a tender or exchange offer to acquire, beneficial ownership of 15% or more of the Company’s outstanding common stock.

Subject to the terms of the shareholder rights plan and the discretion of the Board of Directors, each right would entitle the holder to purchase a number of additional shares of common stock of LP having a total market value of twice the exercise price of each right. The rights expire in June 2018, but can be redeemed by action of the Board of Directors prior to that time at $0.01 per right.

Warrants

During 2009, LP issued warrants to purchase 18,395,963 shares of LP common stock at an exercise price of $1.39 per share subject to mandatory cashless exercise provisions. During the years ended December 31, 2012 and December 31, 2011, warrant exercises resulted in the issuances of 605,798 and 4,981,305 shares. At December 31, 2012, the remaining outstanding warrants were exercisable to purchase approximately 3,211,707 shares. The warrants (at date of grant) were valued based upon Black-Scholes option pricing model using expected stock price volatility of 53%; no expected dividends; risk-free interest rate of 2.6%; and an expected life of 8 years, which resulted in a fair value per share of $0.72.

Common Stock Plans

At December 31, 2012, LP had stock-based employee compensation plans as described below. The total compensation expense related to all of LP’s stock-based compensation plans was $8.4 million for the year ended December 31, 2012; $7.8 million for the year ended December 31, 2011 and $8.8 million for the year ended December 31, 2010.

LP recognizes these compensation costs net of an estimated forfeiture rate and recognizes the compensation costs for only those shares expected to vest on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three years. LP estimated the forfeiture rate for 2012, 2011 and 2010 based on its historical experience during the preceding three years. During 2010, LP changed the service requirement for future awards for its then current Chief Executive Officer which allowed awards to vest regardless of service period. For these awards, LP is required to expense the entire amount of the award as of the date of grant.

Stock Compensation Plans

LP grants options and stock settled stock appreciation rights (SSARs) to key employees and directors to purchase LP common stock. On exercise or issuance, LP generally issues these shares from treasury. The options and SSARs are granted at market price at the date of grant. For employees, options and SSARs become exercisable over three years and expire ten years after the date of grant. For directors, these options become exercisable in 10% increments every three months, starting three months after the date of grant, and expire ten years after the date of grant. At December 31, 2012, 3.4 million shares were available under the current stock award plans for stock-based awards. The following table sets out the weighted average assumptions used to estimate the fair value of the options and SSARs granted using the Black-Scholes option-pricing model:



	2012			2011			2010
Expected stock price volatility	64		%	64		%	59		%
Expected dividend yield	—		%	—		%	—		%
Risk-free interest rate	0.7		%	2.1		%	2.4		%
Expected life of options (in years)	5.1			5.2			5.1
Weighted average fair value of options and SSARs granted	$	4.75		$	5.59		$	3.73

Expected Stock Price Volatility: The fair values of stock-based payments were valued using the Black-Scholes valuation method with a volatility factor based on LP’s historical stock prices.

Expected Dividend Yield: The Black-Scholes valuation model calls for a single expected dividend yield as an input. This is determined based upon current annual dividend as of the date of grant compared to the grant price.

Risk-Free Interest Rate: LP bases the risk-free interest rate used in the Black-Scholes valuation method on U.S. Treasury issues with an equivalent term. Where the expected term of LP’s stock-based awards do not correspond with the terms for which interest rates are quoted, LP performed a straight-line interpolation to determine the rate from the available maturities.

Expected Life of Options: Expected life represents the period that LP’s stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.

Estimated Pre-vesting Forfeitures: When estimating forfeitures, LP considers voluntary termination behavior as well as workforce reduction programs.

The following table summarizes stock options and SSARs outstanding as of December 31, 2012 as well as activity during the three year period then ended.



Share amounts in thousands	Options/ SSARs		Weighted Average Exercise Price		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Options outstanding at January 1, 2010	6,611		$	13.99
Options granted	1,160		$	7.05
Options exercised	(83	)	$	2.17
Options canceled	(108	)	$	11.36
Options outstanding at December 31, 2010	7,580		$	13.10
Options granted	834		$	10.06
Options exercised	(18	)	$	4.93
Options canceled	(81	)	$	15.88
Options outstanding at December 31, 2011	8,315		$	12.78
Options granted	971		$	8.85
Options exercised	(751	)	$	6.24
Options canceled	(60	)	$	16.69
Options outstanding at December 31, 2012	8,475		$	12.88	5.8	$	64.7
Vested and expected to vest at December 31, 2012⁽¹⁾	8,051		$	—	—	$	61.4
Options exercisable at December 31, 2012	6,622		$	14.01	5.0	$	45.3

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⁽¹⁾	Options or SSARS expected to vest based upon historical forfeiture rate

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between LP’s closing stock price on the last trading day of 2012 and the exercise price, multiplied by the number of in-the-money options and SSARs) that would have been received by the holders had all holders exercised their awards on December 31, 2012. This amount changes based on the market value of LP’s stock as reported by the New York Stock Exchange.

As of December 31, 2012, there was $3.8 million of total unrecognized compensation costs related to stock options and SSARs. These costs are expected to be recognized over a weighted-average period of 1.4 years. LP recognized $3.7 million, $3.9 million and $4.9 million in compensation expense associated with these awards for the years ended December 31, 2012, 2011 and 2010.

Incentive Share Awards

LP has granted incentive share stock awards (restricted stock units) to certain key employees as allowed under the current stock award plans. The awards entitle the participant to receive a specified number of shares of LP common stock at no cost to the participant. Awards granted under this plan vest three years from the date of grant. The market value of these grants approximates the fair value. LP recorded compensation expense related to these awards in 2012, 2011 and 2010 of $2.3 million, $2.3 million and $1.9 million. As of December 31, 2012, there was $2.7 million of total unrecognized compensation cost related to unvested incentive share awards. This expense will be recognized over a weighted-average period of 1.1 years.

The following table summarizes incentive share awards outstanding as of December 31, 2012 as well as activity during the three year period then ended.



	Shares		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Incentive share awards outstanding at January 1, 2010	570,569
Incentive shares awards granted	400,907
Incentive share awards vested	(4,236	)
Incentive share awards canceled	(11,304	)
Incentive share awards outstanding at December 31, 2010	955,936
Incentive shares awards granted	336,816
Incentive share awards vested	(121,500	)
Incentive share awards canceled	(58,384	)
Incentive share awards outstanding at December 31, 2011	1,112,868
Incentive shares awards granted	330,426
Incentive share awards vested	(407,909	)
Incentive share awards canceled	(74,997	)
Incentive share awards outstanding at December 31, 2012	960,388		1.1	$	18.6
Vested and expected to vest at December 31, 2012⁽¹⁾	912,369		1.1	$	17.6
Incentive share awards exercisable at December 31, 2012	—		—	—

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⁽¹⁾	Incentive shares expected to vest based upon historical forfeitures rate

Restricted Stock

LP grants restricted stock to certain senior executive employees. The shares vest three years from the date of grant. During the vesting period, the participants have voting rights and receive dividends, but the shares may not be sold, assigned, transferred, pledged or otherwise encumbered. Additionally, granted but unvested shares are forfeited upon termination of employment. The fair value of the restricted shares on the date of the grant is amortized ratably over the vesting period which is generally three years. As of December 31, 2012, there was $2.0 million of total unrecognized compensation costs related to restricted stock. This expense will be recognized over the next 1.1 years.

The following table summarizes restricted stock awards outstanding as of December 31, 2012 as well as activity during the three year period then ended.



	Number of Shares		Weighted Average Grant Date Fair Value
Restricted stock awards outstanding at January 1, 2010	665,521		$	8.02
Restricted stock awards granted	210,536		7.00
Restrictions lapsing	(77,320	)	22.99
Restricted stock awards canceled	(15,448	)	5.93
Restricted stock awards at December 31, 2010	783,289		6.31
Restricted stock awards granted	149,239		10.14
Restrictions lapsing	(171,800	)	15.27
Restricted stock awards canceled	—		—
Restricted stock awards at December 31, 2011	760,728		5.04
Restricted stock awards granted	202,009		8.85
Restrictions lapsing	(405,750	)	2.17
Restricted stock awards canceled	—		—
Restricted stock awards at December 31, 2012	556,987		$	8.51

LP recorded compensation expense related to these awards in 2012, 2011 and 2010 of $1.5 million, $1.3 million, and $1.7 million.

LP annually grants to each director restricted stock or restricted stock units. As of December 31, 2012, LP has 394,358 shares (or restricted stock units) outstanding under this program. Compensation expense recognized in 2012 related to these grants was $0.3 million.

Performance Share Awards

In connection with Mr. Stevens' appointment to Chief Executive Officer on May 4, 2012, he was awarded 300,000 performance shares. This award was granted pursuant to the terms of LP's 1997 Incentive Stock Award Plan. If pre-determined market-based performance goals are met, shares of LP's stock will be issued to Mr. Stevens based upon a pre-determined vesting schedule based upon the required service periods. The fair market value of this award was determined based on the fair value as of the date of grant times the number of shares adjusted for the weighted probability of the attainment of certain performance goals. LP recorded compensation expense related to these awards of $0.2 million in 2012. As of December 31, 2012, there was $1.1 million of total unrecognized compensation expense related to this award. This expense will be recognized over the next 3.3 years.

Phantom Stock

Beginning in 2011, LP annually grants phantom stock units to its directors. The awards are considered liability awards. The director does not receive rights of a shareholder, nor is any stock transfered. The units will be paid in cash at the end of the five year vesting period. The value of one unit is based on the market value of one share of common stock on the vesting date. The cost of the grants is recognized over the vesting period and is included in stock-based compensation expense. As of December 31, 2012, LP had phantom stock units covering 75,816 shares outstanding under this program. LP recorded compensation expense related to these awards of $0.4 million in 2012.