Advance Auto Parts 2005 Annual Report Download - page 59

the director until he or she ceases to be a director. The DSUs are then distributed to the director following his or
her last date of service.
The Company granted six and nine DSUs in fiscal years 2005 and 2004, respectively at a weighted average fair
value of $39.65 and $27.71, respectively. For fiscal years 2005 and 2004, respectively, the Company recognized a
total of $237 and $494, on a pre-tax basis, in compensation expense related to these DSU grants. Additionally, the
DSU Plan provides 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 deferred stock units are payable to the partic-
ipants at a future date or over a specified time period as elected by the participants in accordance with the DSU Plan.
Shares authorized for grant under the LTIP are 8,620 at December 31, 2005 and January 1, 2005. Subsequent
to December 31, 2005, the Company granted 2,049 stock options at an exercise price of $40.45.
Total option activity for the last three fiscal years was as follows:
2005 2004 2003
Weighted- Weighted- Weighted-
Number of Average Number of Average Number of Average
Plan Shares Exercise Price Shares Exercise Price Shares Exercise Price
Fixed Price Options
Outstanding at beginning of year........... 6,840 $15.77 8,117 $10.03 8,304 $ 8.75
Granted................................................... 2,237 34.01 2,028 26.08 1,878 14.52
Exercised ................................................ (2,727) 10.53 (2,914) 7.03 (1,901) 8.59
Forfeited ................................................. (158) 24.15 (391) 14.93 (164) 14.11
Outstanding at end of year ......................... 6,192 $24.46 6,840 $15.77 8,117 $10.03
Other Options
Outstanding at beginning of year........... —$— — $ — 1,500 $ 6.00
Exercised ................................................ ——— — (1,500) 6.00
Outstanding at end of year..................... —$— —$— —$—
For each of the Company’s option grants during fiscal years 2005, 2004 and 2003, 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:
Weighted-Average
Remaining
Weighted-Average Contractual Life Weighted Price of
Number of Exercise Price of of Outstanding Number of Exercise Price of
Shares Outstanding Outstanding Shares Shares (in years) Shares Exercisable Exercisable Shares
$ 5.61–$13.46............................ 1,267 $12.17 3.7 814 $11.46
$14.00–$25.94............................ 1,140 17.12 3.8 977 15.99
$26.21–$29.12............................ 1,588 26.29 5.0 461 26.31
$30.05–$33.37............................ 1,883 33.37 6.1 — 31.49
$33.57–$42.10............................ 314 38.17 6.2 14 39.46
6,192 $24.46 4.9 2,266 $16.52
Advance Auto Parts I Annual Report 2005 I 57
As permitted under SFAS No. 123, the Company
accounts for its stock options using the intrinsic value
method prescribed in APB Opinion No. 25. Under
APB Opinion No. 25, compensation cost for stock
options is measured as the excess, if any, of the market
price of the Company’s common stock at the measure-
ment date over the exercise price. Accordingly, the
Company has not recognized compensation expense
on the issuance of its stock options because the exercise
price equaled the fair market value of the underlying
stock on the grant date. No compensation expense was
required for the fiscal years ended December 31, 2005,
January 1, 2005 and January 3, 2004.
The Company maintains an employee stock pur-
chase plan, which qualifies as a non-compensatory
plan under Section 423 of the Internal Revenue Code
of 1986, as amended. In May 2002 the Company reg-
istered 2,100 shares with the Securities and Exchange
Commission to be issued under the plan. Through
2005 all eligible Team Members could elect to have a
portion of compensation paid in the form of Company
stock in lieu of cash calculated at 85% of fair market
value at the beginning or end of the quarterly pur-
chase period. As a result of the non-compensatory
nature of this plan, the Company has not recognized
compensation expense under APB No. 25. However,
the Company has recognized the value of its stock
issued under the plan as non-cash compensation in
selling, general and administrative expenses of the
accompanying consolidated statements of operations.
There are annual limitations on Team Member elec-
tions of either $25 per Team Member or 10% of com-
pensation, whichever is less. Under the plan, Team
Members acquired 110, 177 and 220 shares in fiscal