Napa Auto Parts 2006 Annual Report Download - page 38

Notes to Consolidated Financial Statements
(continued)
36
5. Stock Options and Restricted Stock Awards (continued)
A summary of the Company’s stock option activity and related
information is as follows:
2006
Shares Weighted
(000’s) Average
Exercise
Price
Outstanding at beginning of year 5,589 $ 34
Granted (1) 1,340 44
Exercised (805) 32
Forfeited (40) 38
Outstanding at end of year 6,084 $ 35
Exercisable at end of year 3,268 $ 33
Shares available for future grants 8,000
(1)Total includes 94,000 Restricted Stock Units (“RSUs”). e weighted average
exercise price excludes RSUs. e exercise prices for options outstanding as of
December 31, 2006 ranged from approximately $21 to $44. e weighted-average
remaining contractual life of all options outstanding is approximately seven years.
The weighted-average grant date fair value of options granted
during the years 2006, 2005 and 2004 was $9.14, $8.58 and
$6.94, respectively. The aggregate intrinsic value of options exer-
cised during the years ended December 31, 2006, 2005 and 2004
was $10.7 million, $19.6 million and $18.1 million, respectively.
In 2006, the Company granted approximately 1,246,000 Stock
Appreciation Rights (“SARs”) and 94,000 RSUs. In 2005, the
Company granted approximately 1,169,000 SARs and 91,000
RSUs. In 2004, the Company granted approximately 1,146,000
SARs and 124,000 RSUs. SARs represent a right to receive the
excess, if any, of the fair market value of one share of common
stock on the date of exercise over the grant price. RSUs represent
a contingent right to receive one share of the Company’s common
stock at a future date provided certain pre-tax prot targets are
achieved. The majority of awards vest on a pro-rata basis for
periods ranging from one to ve years and are expensed accordingly
on a straight-line basis.
A summary of the Company’s nonvested share awards (RSUs)
activity is as follows:
Weighted-
Average
Shares Grant Date
Nonvested Share Awards (RSUs) (000’s) Fair Value
Nonvested at January 1, 2006 178 $ 40
Granted 94 44
Vested (13) 44
Forfeited or Expired (4) 41
Nonvested at December 31, 2006 255 $ 41
Prior to the adoption of SFAS No. 123(R), the Company presented
all tax benets for deductions resulting from the exercise of stock
options as operating cash ows in the consolidated statements of
cash ows. SFAS No. 123(R) requires the cash ows resulting from
the tax benets related to tax deductions in excess of the com-
pensation cost recognized for those options (excess tax benets)
to be classied as nancing cash inow. For the year ended
December 31, 2006, approximately $3.0 million of excess tax
benets was classied as a nancing cash inow.
6. Income Taxes
Deferred income taxes reect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities
for nancial reporting purposes and amounts used for income tax
purposes. Undistributed earnings of the Company’s foreign sub-
sidiaries are considered to be indenitely reinvested. As such, no
U.S. federal and state income taxes have been provided thereon,
and it is not practicable to determine the amount of the related
unrecognized deferred income tax liability. Signicant components
of the Company’s deferred tax assets are as follows:
(in thousands) 2006 2005
Deferred tax assets related to:
Expenses not yet deducted
for tax purposes $ 114,146 $ 115,890
Pension liability not yet
deducted for tax purposes 193,194 N/A
307,340 115,890
Deferred tax liabilities related to:
Employee and retiree benefits 160,798 159,890
Inventory 88,672 90,920
Property and equipment 24,787 28,828
Other 9,605 17,973
283,862 297,611
Net deferred tax (asset) liability (23,478) 181,721
Current portion of
deferred tax liability 15,361 24,914
Non-current deferred
tax (asset) liability $ (38,839) $ 156,807