Advance Auto Parts 2004 Annual Report Download - page 51

Advance฀Auto฀Parts,฀Inc.฀and฀Subsidiaries
49
the฀ stock฀ options฀ vest฀ over฀ a฀ three-year฀ period฀ in฀ equal฀
installments฀beginning฀on฀the฀first฀anniversary฀grant฀date.
฀ In฀ addition฀to฀stock฀options,฀the฀Company฀also฀has฀ the฀
ability฀ to฀ offer฀ additional฀ types฀ of฀ equity฀ incentives฀ as฀
allowed฀under฀ the฀LTIP.฀Accordingly,฀during฀fiscal฀2004,฀
the฀ Company฀ created฀ the฀ Advance฀ Auto฀ Parts,฀ Inc.฀
Deferred฀Stock฀Unit฀Plan฀for฀Non-Employee฀Directors฀and฀
Selected฀Executives,฀or฀the฀DSU฀Plan.฀The฀DSU฀Plan฀pro-
vides฀for฀the฀annual฀grant฀of฀deferred฀stock฀units,฀or฀DSUs,฀
to฀the฀Company’s฀Board฀of฀Directors฀as฀allowed฀under฀the฀
LTIP.฀ Each฀ DSU฀ is฀ equivalent฀ to฀ one฀ share฀ of฀ common฀
stock฀of฀the฀Company.฀The฀DSUs฀are฀immediately฀vested฀
upon฀issuance฀since฀the฀DSU฀Plan฀provides฀for฀the฀Board฀
members฀ to฀ receive฀ their฀ equivalent฀ shares฀ at฀ any฀ point฀
upon฀departure฀from฀the฀Board.฀The฀Company฀granted฀six฀
DSUs฀ in฀ fiscal฀ 2004฀ at฀ a฀ weighted฀ average฀ fair฀ value฀ of฀
$41.57.฀For฀fiscal฀2004,฀the฀Company฀recognized฀a฀total฀of฀
$494,฀on฀a฀pre-tax฀basis,฀in฀compensation฀expense฀related฀
to฀the฀issuance฀of฀DSUs.฀Additionally,฀the฀DSU฀Plan฀pro-
vides฀ for฀ the฀ deferral฀ of฀ compensation฀ as฀ earned฀ in฀ the฀
form฀of฀an฀annual฀retainer฀for฀Board฀members฀and฀wages฀
for฀certain฀highly฀compensated฀employees฀of฀the฀Company.฀
These฀DSUs฀are฀payable฀to฀the฀participants฀at฀a฀future฀date฀
or฀ over฀ a฀ specified฀ time฀ period฀ as฀ elected฀ by฀ the฀ partici-
pants฀in฀accordance฀with฀the฀DSU฀Plan.
฀ Shares฀ authorized฀ for฀ grant฀ under฀ the฀ LTIP฀ are฀ 5,747฀฀
at฀January฀1,฀2005.฀Subsequent฀to฀January฀1,฀2005,฀the฀
Company฀granted฀1,298฀stock฀options฀at฀an฀exercise฀price฀
of฀$50.06.
฀ As฀ a฀ result฀ of฀ the฀ recapitalization฀ in฀ fiscal฀ 1998,฀ an฀
existing฀stockholder฀received฀stock฀options,฀referred฀to฀as฀
other฀ options,฀to฀purchase฀up฀ to฀1,000฀shares฀of฀common฀
stock.฀The฀stock฀options฀are฀fully฀vested,฀nonforfeitable฀and฀
provided฀ for฀ a฀ $5.00฀ per฀ share฀ exercise฀ price,฀ increasing฀
$1.00฀ per฀ share฀ annually,฀ through฀ the฀ expiration฀ date฀ of฀
April฀2005.฀The฀fair฀value฀of฀these฀options,฀as฀determined฀
at฀the฀ grant฀ date,฀were฀included฀in฀the฀ recapitalization฀in฀
fiscal฀ 1998฀ as฀ consideration฀ paid฀ to฀ the฀ existing฀ stock-
holder.฀ The฀ other฀ options฀ were฀ completely฀ exercised฀ dur-
ing฀fiscal฀2003.
฀ Total฀option฀activity฀for฀the฀last฀three฀fiscal฀years฀was฀as฀follows:
2004 2003 2002
Plan
Number฀฀
of฀Shares
Weighted-Average฀
Exercise฀Price
Number฀฀
of฀Shares
Weighted-Average฀
Exercise฀Price
Number฀฀
of฀Shares
Weighted-Average฀
Exercise฀Price
Fixed฀Price฀Options
Outstanding฀at฀beginning฀of฀year฀............. 5,411 $15.05 5,536 $13.13 6,056 $11.24
Granted฀...................................................... 1,352 39.13 1,252 21.78 1,104 21.13
Exercised฀................................................... (1,942) 10.54 (1,274) 12.89 (1,556) 11.17
Forfeited฀..................................................... (261) 22.39 (103) 21.16 (68) 21.16
Outstanding฀at฀end฀of฀year฀........................ 4,560 $23.68 5,411 $15.05 5,536 $13.13
Other฀Options
Outstanding฀at฀beginning฀of฀year฀............. — $฀ ฀ ฀— 1,000 $฀ 9.00 1,000 $฀ 8.00
Exercised฀................................................... — — (1,000) 9.00 — —
Outstanding฀at฀end฀of฀year฀........................ — $฀ ฀ ฀— — $฀ ฀ ฀— 1,000 $฀ 9.00
฀ For฀each฀ of฀the฀Company’s฀option฀grants฀ during฀fiscal฀ years฀ 2004,฀2003฀and฀2002,฀the฀Company฀ granted฀options฀at฀
prices฀consistent฀with฀the฀market฀price฀of฀its฀stock฀on฀each฀respective฀grant฀date.฀Information฀related฀to฀the฀Company’s฀
options฀by฀range฀of฀exercise฀prices฀is฀as฀follows:
Number฀฀
of฀Shares฀฀
Outstanding
Weighted-Average฀฀
Exercise฀Price฀of฀฀
Outstanding฀Shares
Weighted-Average฀฀
Remaining฀Contractual฀฀
Life฀of฀Outstanding฀฀
Shares฀(in฀years)
Number฀฀
of฀Shares฀฀
Exercisable
Weighted฀Price฀of฀฀
Exercise฀Price฀of฀฀
Exercisable฀Shares
$฀ 5.00–$฀ 9.99................................................... 164 $฀ 8.45 1.9 164 $฀ 8.45
$10.00–$19.99................................................... 1,231 ฀ 12.01 2.5 1,220 11.94
$20.00–$29.99................................................... 1,742 ฀ 20.89 4.6 793 21.23
$30.00–$39.99................................................... 1,375 ฀ 38.86 6.1 38 37.06
$40.00–$49.99................................................... 48 ฀ 41.71 6.6 — —
4,560 $23.68 4.4 2,215 $15.44