STOCK-BASED COMPENSATION

At September 30, 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 $1.8 million for the quarter ended September 30, 2012 as compared to $1.6 million for the quarter ended September 30, 2011 and $6.4 million for the nine months ended September 30, 2012 and September 30, 2011.

Stock Compensation Plans

LP grants options to Purchase LP common stock and stock settled stock appreciation rights (SSARs) to key employees and directors. On exercise, LP generally issues shares from treasury to settle these awards. The options and SSARs are granted at market price at the date of grant. For employees, SSARs become exercisable ratably over a three year period 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 September 30, 2012, 3.0 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 in the first nine months of the respective years noted:



	2012	2011
Expected stock price volatility	63.6%	63.9%
Expected dividend yield	—%	—%
Risk-free interest rate	0.7%	2.1%
Expected life of options	5 years	5 years
Weighted average fair value of options and SSARs granted	$4.75	$5.62

The following table summarizes stock options and SSARs outstanding as of September 30, 2012, as well as activity during the nine month period then ended.



Share amounts in thousands	Options and SSARs		Weighted Average Exercise Price		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Options / SSARs outstanding at January 1, 2012	8,315		$	12.78
SSARs granted	971		8.86
Options / SSARs exercised	(401	)	5.85
Options /SSARs canceled	(51	)	16.84
Options/SSARs outstanding at September 30, 2012	8,834		$	12.64	6.0	$	28.8
Vested and expected to vest at September 30, 2012	8,392		—		—	$	27.3
Options/SSARS exercisable at September 30, 2012	6,954		$	13.67	—	$	21.9

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 the third quarter 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 September 30, 2012. This amount changes based on the market value of LP's stock as reported by the New York Stock Exchange.

As of September 30, 2012, there was $4.7 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 1.7 years. LP recorded compensation expense related to these awards in the first nine months of 2012 of $2.8 million.

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 vest three years from date of grant. The awards entitle the participant to receive a specified number of shares of LP common stock at no cost to the participant. The market value of these grants approximates the fair value. LP recorded compensation expense related to these awards in the first nine months of 2012 of $2.2 million. As of September 30, 2012, there was $3.4 million of total unrecognized compensation cost related to unvested incentive share awards. This expense will be recognized over a weighted-average period of 1.4 years.

The following table summarizes incentive share awards outstanding as of September 30, 2012 as well as activity during the nine months then ended.



	Shares		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Incentive share awards outstanding at January 1, 2012	1,112,868
Incentive share awards granted	329,426
Incentive share awards vested	(407,909	)
Incentive share awards canceled	(56,755	)
Incentive shares outstanding at September 30, 2012	977,630		1.4	$	12.2
Vested and expected to vest at September 30, 2012	928,749		—	$	11.6
Incentive share awards exercisable at September 30, 2012	—		—	—

Restricted Stock

LP grants restricted stock to certain senior 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 September 30, 2012, there was $2.5 million of total unrecognized compensation costs related to restricted stock. This expense will be recognized over the next 1.4 years.

The following table summarizes the restricted stock outstanding as of September 30, 2012 as well as activity during the nine months then ended.



	Number of Shares		Weighted Average Grant Date Fair Value
Restricted stock awards outstanding at January 1, 2012	760,728		$	5.04
Restricted stock awards granted	202,009		8.85
Restrictions lapsed	(405,750	)	2.17
Restricted stock awards at September 30, 2012	556,987		$	8.51

LP recorded compensation expense related to these awards in the first nine months of 2012 of $1.2 million.

Through 2010, LP annually granted to each director restricted stock or restricted stock units. As of September 30, 2012, LP had 80,356 shares (or restricted stock units) outstanding under this program.

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. As of September 30, 2012, there was $1.2 million of total unrecognized compensation costs related to this award. This expense will be recognized over the next 3.6 years.

Phantom stock

Beginning in 2011, LP annually grants phantom stock units to its directors. The director does not receive rights of a shareholder, nor is any stock transfered. The units will be paid out 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 September 30, 2012, LP had 75,816 shares outstanding under this program.