Napa Auto Parts 2008 Annual Report Download - page 37

to January 1, 2003, to employees that remained unvested prior to
the effective date of SFAS No. 123(R). is compensation cost is
expected to be recognized over a weighted-average period of approxi-
mately four years.
For the year ended December 31, 2008, total compensation cost related
to nonvested awards not yet recognized was approximately $19.6 mil-
lion. e weighted-average period over which this compensation cost is
expected to be recognized is approximately three years. e aggregate
intrinsic value for options and RSUs outstanding at December 31,
2008 and 2007 was approximately $24.9 million and $58.5 million,
respectively. e aggregate intrinsic value for options and RSUs vested
totaled approximately $13.3 million and $37.9 million at December
31, 2008 and 2007, respectively. At December 31, 2008, the weighted-
average contractual life for outstanding and exercisable options and
RSUs was six and five years, respectively. For the years ended Decem-
ber 31, 2008, 2007, and 2006, $13.0 million, $14.3 million, and $11.9
million of share-based compensation cost was recorded, respectively.
e total income tax benefit recognized in the consolidated statements
of income for share-based compensation arrangements was approxi-
mately $5.2 million, $5.7 million, and $4.8 million for 2008, 2007, and
2006, respectively. ere have been no modifications to valuation meth-
odologies or methods subsequent to the adoption of SFAS No. 123(R).
For the years ended December 31, 2008, 2007, and 2006, the fair
value for options and SARs granted was estimated using a Black-
Scholes option pricing model with the following weighted-average
assumptions, respectively: risk-free interest rate of 3.5%, 4.6%, and
4.8%; dividend yield of 3.0%, 3.1%, and 2.9%; annual historical volatil-
ity factor of the expected market price of the Company’s common
stock of 17%, 21%, and 21%; an average expected life and estimated
turnover based on the historical pattern of existing grants of six years
and 4.0% to 5.1%, respectively. e fair value of RSUs is based on the
price of the Company’s stock on the date of grant. e total fair value
of shares vested during the years ended December 31, 2008, 2007, and
2006, was $14.9 million, $10.5 million, and $6.9 million, respectively.
A summary of the Company’s stock option activity and related
information is as follows:
Shares (1) Weighted-Average
(000’s) Exercise Price (2)
Outstanding at beginning of year 6,315 $ 38
Granted 1,501 42
Exercised (224) 32
Forfeited (121) 46
Outstanding at end of year (3) 7,471 $ 41
Exercisable at end of year 4,550 $ 39
Shares available for future grants 5,170
(1) Shares include Restricted Stock Units (RSUs).
(2) e weighted average exercise price excludes RSUs.
(3) e exercise prices for options outstanding as of December 31, 2008 ranged from
approximately $21 to $49. e weighted-average remaining contractual life of all
options outstanding is approximately seven years.
e weighted-average grant date fair value of options and SARs
granted during the years 2008, 2007, and 2006 was $5.78, $9.64,
and $9.14, respectively. e aggregate intrinsic value of options
exercised during the years ended December 31, 2008, 2007, and
2006 was $5.0 million, $15.6 million, and $10.7 million.
In 2008, the Company granted approximately 1,385,000 SARs
and 116,000 RSUs. In 2007, the Company granted approximately
1,272,000 SARs and 95,000 RSUs. In 2006, the Company granted
approximately 1,246,000 SARs and 94,000 RSUs. SARs repre-
sent 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
profit targets are achieved. e majority of awards vest on a pro-rata
basis for periods ranging from one to five 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 Grant
Shares Date Fair
Nonvested Share Awards (RSUs) (000’s) Value
Nonvested at January 1, 2008 312 $ 43
Granted 116 42
Vested (118) 36
Forfeited or Expired (36) 43
Nonvested at December 31, 2008 274 $ 42
Prior to the adoption of SFAS No. 123(R), the Company presented
all tax benefits for deductions resulting from the exercise of stock
options as operating cash flows in the consolidated statements of
cash flows. SFAS No. 123(R) requires the cash flows resulting from
the tax benefits or tax (expense) related to tax deductions in excess
of or less than the compensation cost recognized for those options to
be classified as financing cash inflow (outflow). For the years ended
December 31, 2008, 2007 and 2006 approximately ($0.6 million),
$4.4 million and $3.0 million, respectively, of excess tax benefits
(expense) was classified as a financing cash inflow (outflow).
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