Pep Boys 2007 Annual Report Download - page 23

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15
Components of Compensation.
Base Salary. The Human Resources Committee reviews base salaries annually to reflect the experience,
performance and scope of responsibility of the named executive officers and to ensure that the salaries are at levels
that are appropriate to retain high quality individuals. The Human Resources Committee measures each named
executive officer’s individual performance during the applicable fiscal year on a five-point scale, based upon such
executive officer’s supervisor’s assessment. These performance values are then applied against the relative position
of the named executive officer’s current salary within the market range for his position and the budgeted percentage
increase for all officers as a group. This budgeted percentage increase was 2.0% for fiscal 2007. Due to our poor
operating performance in fiscal 2006, no named executive officer was awarded a merit-based increase to their base
salary for fiscal 2007.
Short-Term Incentives. The named executive officers participate in our Annual Incentive Bonus Plan, which is a
short-term incentive plan designed to reward the achievement of pre-established corporate and, except for the
President & CEO, individual goals. For fiscal 2007, the named executive officers’ bonus levels were as follows:
% of
Salary
Weig
hting
Title Threshold Target MAX CAP Corporate (%) Individual (%)
President
& CEO
75
150
225
300
100
0
COO 37.5 75 112.5 150 60 40
SVP 22.5 45 67.5 90 60 40
For fiscal 2007, the corporate bonus objectives, which are those financial measures deemed most important to
Pep Boys’ overall success, and their weightings were as follows:
Objective
Weighting
(%)
Threshold
Target
MAX
CAP
Operating Profit 70 $45,000,000 $63,800,000 $75,000,000 $90,000,000
Field Management
Turnover Percentage
10
*
*
*
*
Working Capital
(inventory minus A/P)
10
$360,000,000
$340,700,000
$330,000,000
$320,000,000
Service Center
Customer Service Index
10
40
44
46
48
* Confidential commercial information, the disclosure of which would result in competitive harm for the
Company.
For fiscal 2007, the Human Resources Committee established target levels that it believed were achievable.
However, it also believed, at the time the target levels were established, that the achievement of the targets was
substantially uncertain.
Individual performance goals were also established for Messrs. Cirelli and Yanowitz (those named executive
officers who were in position at the beginning of fiscal 2007) based upon departmental objectives.
For fiscal 2007, the Company achieved its bonus objectives in the areas of (i) field management turnover
percentage at target and (ii) service center customer service index at threshold (40), resulting in a corporate bonus
payout of 13.55% of target. In addition, each of Messrs. Cirelli and Yanowitz earned individual bonus payouts of
100% and 100% of target, respectively, based upon the achievement of certain departmental objectives.
Accordingly, for fiscal 2007, Messrs. Cirelli and Yanowitz each received bonus payouts of 21% of their respective
2007 annual salaries. As an inducement for Messrs. Rachor, Webb and Odell to join the Company in fiscal 2007,
each of their fiscal 2007 bonus payouts were guaranteed at target level regardless of the Company’s performance
against its bonus objectives. Because Messrs. Smith and Page left the employment of the Company prior to the
conclusion of fiscal 2007, neither of them received a bonus payout.
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