Pep Boys 2011 Annual Report Download - page 115

THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2011, January 30, 2010 and January 31, 2009
NOTE 14—EQUITY COMPENSATION PLANS (Continued)
based on the U.S. treasury yield curve for issues with a remaining term equal to the expected term.
The fair value of each option granted during fiscal 2011, 2010 and 2009 is estimated on the date of
grant using the Black-Scholes option-pricing model and, in certain situations where the grant includes
both a market and a service condition, the Monte Carlo simulation model is used. The following are
the weighted-average assumptions:
Year ended
January 28, January 29, January 30,
2012 2011 2010
Dividend yield ......................... 1.0% 1.35% 2.3%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . 58% 56% 65%
Risk-free interest rate range:
High ................................ 1.9% 2.0% 2.3%
Low................................. 1.6% 0.9% 1.6%
Ranges of expected lives in years . . . . . . . . . . . . 4 - 5 4 - 5 4 - 5
The Company granted approximately 95,000 and 105,000 RSUs in fiscal 2011 and 2010,
respectively, that will vest if the employees remain continuously employed through the third anniversary
date of the grant and the Company achieves a return on invested capital target for fiscal year 2013 and
2012, respectively. The number of underlying shares that may be issued upon vesting will range from
0% to 150%, depending upon the Company achieving the financial targets in fiscal year 2013 and 2012,
respectively. At the date of the grants, the fair values were $12.48 per unit and $10.34 per unit for the
2011 and 2010 awards, respectively. The Company also granted approximately 48,000 and 52,000 RSUs
for fiscal 2011 and 2010, respectively, that will vest if the employees remain continuously employed
through the third anniversary date of the grant and will become exercisable if the Company satisfies a
total shareholder return target in fiscal 2013 and 2012, respectively. The number of underlying shares
that may become exercisable will range from 0% to 175% depending upon whether the market
condition is achieved. The Company used a Monte Carlo simulation to estimate a $14.73 and $12.99
per unit grant date fair value for the 2011 and 2010 RSUs, respectively. The non-vested restricted stock
award table reflects the maximum vesting of underlying shares for performance and market based
awards granted in both 2011 and 2010.
During fiscal 2011 and 2010, the Company granted approximately 50,000 and 61,000 restricted
stock units, respectively, related to officers’ deferred bonus matches under the Company’s non-qualified
deferred compensation plan, which vest over a three year period. The fair value of these awards was
$13.68 and $12.53, respectively. During fiscal 2011 and 2010, the Company granted approximately
42,000 and 52,000 RSUs, respectively, to its non-employee directors of the board that vested
immediately. The fair value for these awards was $10.67 and $9.55 per unit, respectively.
The Company reflects in its consolidated statement of cash flows any tax benefits realized upon
the exercise of stock options or issuance of RSUs in excess of that which is associated with the expense
recognized for financial reporting purposes. The amounts reflected as financing cash inflows and
operating cash outflows in the Consolidated Statement of Cash Flows for fiscal 2011, 2010 and 2009 are
immaterial.
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