Advance Auto Parts 2015 Annual Report Download - page 89

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
January 2, 2016, January 3, 2015 and December 28, 2013
(in thousands, except per share data)
F-35
Share-Based Compensation Expense & Cash Flows
Total share-based compensation expense and cash received included in the Company’s consolidated statements of
operations and consolidated statements of cash flows, including the related income tax benefits, for 2015, 2014 and 2013 are as
follows:
2015 2014 2013
Share-based compensation expense $ 36,929 $ 21,705 $ 13,191
Deferred income tax benefit 13,596 8,013 4,991
Proceeds from the issuance of common stock,
primarily exercise of stock options 5,174 6,578 3,611
Tax withholdings related to the exercise of stock
appreciation rights (13,112)(7,102)(21,856)
Excess tax benefit from share-based compensation 13,002 10,487 16,320
As of January 2, 2016, there was $37,583 of unrecognized compensation expense related to all share-based awards that was
expected to be recognized over a weighted average period of 1.2 years. Expense related to the issuance of share-based
compensation is included in SG&A in the accompanying consolidated statements of operations. Expense is recognized net of
forfeitures, which are estimated based on historical experience.
The Company modified selected awards for certain terminated employees during 2015, such that the employees would vest
in awards that would have otherwise been forfeited. Incremental expense recognized during 2015 associated with these
modifications was $6,633. Four of these modified awards will be cash settled in March 2016 and therefore are accounted for as
liability awards. The value of the liability awards is insignificant as of January 2, 2016.
The fair value of each SAR granted 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 2015 2014 2013
Risk-free interest rate (1) 1.3% 1.2% 1.1%
Expected dividend yield 0.1% 0.2% 0.3%
Expected stock price volatility (2) 27.3% 27.0% 26.9%
Expected life of awards (in months) (3) 44 49 49
(1) 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.
(2) Expected volatility is determined using a blend of historical and implied volatility.
(3) 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.
Time-Based Share Awards
Stock Options
The Company had no outstanding stock options during 2015. The aggregate intrinsic value, defined as the amount by which
the market price of the stock on the date of exercise exceeded the exercise price, of stock options exercised in 2014 and 2013
was $3,747 and $1,916, respectively.