Advance Auto Parts 2013 Annual Report Download - page 85

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 28, 2013, December 29, 2012 and December 31, 2011
(in thousands, except per share data)
F-33
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 when Team Members purchase stock under the employee stock purchase plan (“ESPP”), as well as
upon the exercise of stock options that were granted prior to Fiscal 2007. 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 December 28,
2013, December 29, 2012 and December 31, 2011 as follows:
December 28,
2013
December 29,
2012
December 31,
2011
Share-based compensation expense $ 13,191 $ 15,236 $ 19,553
Deferred income tax benefit 4,991 5,774 7,411
Proceeds from the issuance of common stock,
primarily exercise of stock options 3,611 8,495 21,056
Tax withholdings related to the exercise of stock
appreciation rights (21,856)(26,677)(6,582)
Excess tax benefit from share-based compensation 16,320 23,099 9,663
As of December 28, 2013, there was $33,691 of unrecognized compensation expense related to all share-based awards that
is expected to be recognized over a weighted average period of 1.6 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) December 28,
2013
December 29,
2012
December 31,
2011
Risk-free interest rate (2) 1.1% 0.5% 0.7%
Expected dividend yield 0.3% 0.3% 0.4%
Expected stock price volatility (3) 26.9% 33.2% 36.3%
Expected life of awards (in months) (4) 49 49 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.