Pep Boys 2011 Annual Report Download - page 143

For fiscal year 2011, the Compensation Committee recommended, and the full Board approved,
the following objectives under the Annual Incentive Bonus Plan.
Weighting
Objective (%) Threshold Target Cash Cap Maximum
Pre-Tax Income(a) . . . . . . 50 $ 61,058 $ 67,842 $ 74,826 $ 84,803
Pre-Tax ROIC(b) . . . . . . . 25 11.1% 11.7% 12.5% 13.7%
Total Revenue . . . . . . . . 25 $2,056,276,000 $2,098,241,000 $2,140,206,000 $2,182,171,000
Total............... 100
Net Promotor
Modifier(c):
Retail Score . . . . . . . . 76 79 82 n/a
Adjustment Factor . . $5% 0 +5%
Service Score . . . . . . . 73 76 79 n/a
Adjustment Factor . . $5% 0 +5%
(a) Calculated before unusual, non-operating gains and losses.
(b) Pre-Tax Income (before unusual, non-operating gains and losses) divided by debt plus equity.
(c) The calculated aggregate payout on the first three objectives may be increased or decreased by a
factor up to 5% for each of Retail and Service Net Promoter scores—a customer satisfaction score
that measures the likelihood of referring others to Pep Boys.
For fiscal 2011, the Compensation Committee established target levels that it believed were
achievable, but also substantially uncertain. The Compensation Committee retains full discretion to
either award or withhold in its entirety, or to increase or decrease the amount of, short-term incentive
plan compensation regardless of the attainment, or failure to attain, the relevant performance goal(s)
(except that short-term incentive plan compensation cannot be increased in the case of compensation
meant to qualify as ‘‘performance based’’ compensation under Section 162(m) of the Internal Revenue
Code).
For fiscal 2011 the Company achieved the following results against its corporate objectives (i) pre-
tax income at $42,834,000, (ii) pre-tax return on invested capital at 8.7% and (iii) total revenue at
$2,063,627,000. The Company replaced net promoter scores with a customer acquisition and retention
metric during fiscal 2011, so accordingly, the net promoter modifier was removed from the annual
incentive plan payout calculations. The Company’s fiscal 2011 results resulted in an aggregate potential
payout of 14.7% of target. Accordingly, for fiscal 2011, the Compensation Committee approved short-
term incentive plan compensation (in accordance with the above referenced formula without any
discretionary adjustment) for Mr. Odell at 14.7%, each of Messrs. Arthur, Shull and Webb at 11.0%
and Mr. Cirelli at 6.6% of their respective 2011 annual salaries. Mr. Odell declined $30,000 of his
incentive payment that he was otherwise entitled to receive, which amount, at Mr. Odell’s request, was
allocated to accounts set aside by Pep Boys to provide associates’ children with educational scholarships
and to provide hardship assistance to Pep Boys’ associates.
Long-Term Incentives. We believe that compensation through equity grants directly aligns the
interests of management with that of its shareholders. The Stock Incentive Plan provides for the grant
of stock options, at exercise prices equal to the fair market value (the mean between and the high and
low quoted selling prices) of Pep Boys stock on the date of grant, and for the grant of restricted stock
units.
For the fiscal 2011 equity grants, the Compensation Committee recommended, and the full Board
approved, equity grants consisting of 40% time-based vesting stock options and 60% performance-based
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