Advance Auto Parts 2010 Annual Report Download - page 89

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
January 1, 2011, January 2, 2010 and January 3, 2009
(in thousands, except per share data)
.
F-35
Share-Based Compensation Expense & Cash Flows
The expense the Company has incurred annually related to the issuance of share-based compensation is
included in SG&A. The Company receives cash upon the exercise of stock options, as well as when employees
purchase stock under the employee stock purchase plan, or ESPP. Total share-based compensation expense and cash
received included in the Company’s consolidated statements of operations and consolidated statement of cash flows,
respectively, are reflected in the table below, including the related income tax benefits, for fiscal years ended
January 1, 2011, January 2, 2010 and January 3, 2009 as follows:
2010 2009 2008
Share-based compensation expense 22,311$ 19,682$ 17,707$
Deferred income tax benefit 8,456 7,361 6,640
Cash received upon exercise and from ESPP 36,113 35,402 35,220
Excess tax benefit share-based compensation 7,260 3,219 9,047
As of January 1, 2011, there was $29,521 of unrecognized compensation expense related to all share-based
awards that is expected to be recognized over a weighted average period of 1.2 years.
The fair value of each SAR was estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions:
Black-Scholes Option Valuation Assumptions
(1)
2010 2009 2008
Risk-free interest rate
(2)
0.9% 1.6% 2.5%
Expected dividend yield 0.4% 0.6% 0.8%
Expected stock price volatility
(3)
36.3% 39.2% 32.3%
Expected life of awards (in months)
(4)
50 50 50
(1) Forfeitures are based on historical experience.
(2) The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate having term consistent
with the expected life of the award.
(3) Expected volatility is determined using a blend of historical and implied volatility.
(4) The expected life of the Company’s awards represents the estimated period of time until exercise and is based
on historical experience of previously granted awards.