STOCK-BASED COMPENSATION

At June 30, 2015, 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 $2.7 million for the quarter ended June 30, 2015, $2.4 million for the quarter ended June 30, 2014, $5.1 million for the six months ended June 30, 2015 and $4.5 million for the six months ended June 30, 2014.

SSARS and Options

LP grants stock settled stock appreciation rights (SSARs) to key employees and directors. On exercise, LP generally issues shares from treasury to settle these awards. The SSARs are granted at the market price at the date of grant. SSARs become exercisable annually ratably over a three year period and expire ten years after the date of grant. At June 30, 2015, 3.9 million shares were available to grant 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 SSARs granted using the Black-Scholes option-pricing model in the first six months of the respective years noted.



	2015	2014
Expected stock price volatility	54.4%	57.5%
Expected dividend yield	—%	—%
Risk-free interest rate	1.5%	1.5%
Expected life of options (in years)	6 years	5 years
Weighted average fair value of options and SSARs granted	$8.80	$9.03

The following table summarizes stock options and SSARs outstanding as of June 30, 2015, as well as activity during the six 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 and SSARs outstanding at January 1, 2015	7,004		$	14.19
Options and SSARs granted	379		17.04
Options and SSARs exercised	(1,141	)	11.45
Options and SSARs canceled	(281	)	26.41
Options and SSARs outstanding at June 30, 2015	5,961		14.32		4.7	$	28.3
Vested and expected to vest at June 30, 2015⁽¹⁾	5,663		—		—	$	26.9
Options and SSARs exercisable at June 30, 2015	5,185		$	13.78	4.1	$	28.3

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⁽¹⁾	Options and 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 the second quarter of 2015 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 June 30, 2015. This amount changes based on the market value of LP's stock as reported by the New York Stock Exchange.

As of June 30, 2015, there was $5.7 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 1.8 years. LP recorded compensation expense related to these awards in the first six months of 2015 of $1.9 million.

Incentive Share Awards

LP has granted incentive share stock awards (restricted stock units) to certain key employees and directors. The employee awards vest three years from date of grant and awards to directors vest one year 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 at the time of grant approximates the fair value. LP recorded compensation expense related to these awards in the first six months of 2015 of $1.7 million. As of June 30, 2015, there was $6.1 million of total unrecognized compensation cost related to unvested incentive share awards. This expense will be recognized over a weighted-average period of 1.7 years.

The following table summarizes incentive share awards outstanding as of June 30, 2015 as well as activity during the six months then ended.



	Shares		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Incentive share awards outstanding at January 1, 2015	593,613
Incentive share awards granted	250,129
Incentive share awards vested	(273,995	)
Incentive share awards canceled	(15,083	)
Incentive shares outstanding at June 30, 2015	554,664		1.7	$	9.5
Vested and expected to vest at June 30, 2015⁽¹⁾	526,931		—	$	9.0

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

Restricted Stock

LP grants restricted stock to certain senior key 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 generally 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 June 30, 2015, there was $2.7 million of total unrecognized compensation costs related to restricted stock. This expense will be recognized over the next 1.5 years.

The following table summarizes the restricted stock outstanding as of June 30, 2015 as well as activity during the six months then ended.



	Number of Shares		Weighted Average Grant Date Fair Value
Restricted stock awards outstanding at January 1, 2015	453,146		$	13.93
Restricted stock awards granted	69,744		17.04
Restrictions lapsing	(225,645	)	8.71
Restricted stock canceled	(14,544	)	19.29
Restricted stock awards at June 30, 2015	282,701		18.59

Compensation expense related to these awards recognized in the first six months of 2015 was $0.9 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. LP recorded compensation expense related to these awards of $0.2 million in the first six months of 2015. As of June 30, 2015, there was $0.3 million of total unrecognized compensation costs related to this award. This expense will be recognized over the next year.

In 2015, LP awarded performance shares to certain senior key employees. These performance shares are earned based upon LP attaining specified revenue growth rates associated with its SmartSide products as compared to the prior year and LP's overall revenue growth as compared to a predetermined peer group, in each case for 2015. The performance period is measured over 2015 with a subsequent two year vesting period. LP recorded compensation expense related to these awards of $0.3 million in the first six months of 2015. As of June 30, 2015, there was $1.4 million of total unrecognized compensation costs related to this award. This expense will be recognized over the next 2.5 years.

Phantom stock

During 2011 and 2012, LP made annual grants of phantom stock units to its directors. Subsequent to the approval of the 2013 Omnibus Plan, phantom stock units are no longer granted to directors. Holders of phantom stock units do 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 expense associated with these grants is recognized over the vesting period and is included in stock-based compensation expense. Since these awards are settled in cash, such awards are required to be remeasured based upon the changes in LP's stock price. As of June 30, 2015, LP had 66,339 shares outstanding under this program.