Pep Boys 2012 Annual Report Download - page 23

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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 goals. In order to directly align our
named executive officers’ short-term incentive compensation with that of our overall performance, these pre-
established goals consist entirely of corporate (as opposed to individual) objectives. For fiscal 2012, the named
executive officers’ annual short-term incentive opportunities were as follows:
% of Base Salary
Title Threshold Target Cash Cap(a)Maximum
President & CEO 50 100 150 200
Executive Vice President 37.5 75 112.5 150
Senior Vice Presidents 22.5 45 67.5 90
(a) Amounts achieved above the “cash cap” percentage up to the “maximum” percentage are earned and paid out over
the subsequent three years, assuming the executive remains employed by the Company.
For fiscal year 2012, the Compensation Committee recommended, and the full Board approved, the following
objectives and associated weightings under the Annual Incentive Bonus Plan.
Objective
Weighting
(%) Threshold Target Cash Cap Maximum
Pre-Tax Income(a) 50 $56,133 $66,039 $74,294 $82,549
Pre-Tax ROIC(b) 25 10.0%11.1% 12.1% 13.1%
Total Revenue 25 $2,178,309,000 $2,245,679,000 $2,301,821,000 $2,357,963,000
Total 100
(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.
For fiscal 2012, the Compensation Committee established target levels that it believed were achievable, but also
substantially uncertain. The Compensation Committee retains full discretion to 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 2012, the Company did not achieve its threshold results against its corporate objectives, so no short-
term incentive plan compensation was paid to the named executive officers, except for Messrs. Stern and Carey for
whom a pro-rated portion (based on time in position during fiscal 2012) of their short-term incentive was guaranteed
at target level as an inducement to join the Company.
Long-Term Incentives. We believe that compensation through equity grants directly aligns the interests of
management with that of the Company’ s shareholders. The Stock Incentive Plan providesfor the grant of stock
options at exercise prices equal to the fair market value (the mean of 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 2012equity grants, the Compensation Committee recommended, and the full Board approved,
equity grants consisting of 40% time-based vesting stock options and 60% performance-based vesting restricted
stock units (RSUs). Stock options vest over three years and have a seven-year term. Two-thirds of the 2012
performance-based RSUs are tied to the Company achieving at least a threshold return on invested capital and one-
third are tied to achieving at least a threshold level of total shareholder return measured relative to our peer group.
Both performance-based RSU metrics are measured over a three-year performance period. The Compensation
Committee then established target grant values intended to be competitive at market median of our peer group. In