aapdef14a.htm
UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Cofidential, for Use of the
Commission Only (as permitted by Rule
14a-6(5)(2))
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
ADVANCE AUTO PARTS,
INC.
(Name of Registrant as Specified in
its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): |
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Fee paid previously with preliminary
materials. |
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous filing by
registration number, or the Form or Schedule and the date of its
filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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ADVANCE
AUTO PARTS, INC.
5008
AIRPORT ROAD
ROANOKE,
VIRGINIA 24012
______________
NOTICE
OF 2008 ANNUAL MEETING OF STOCKHOLDERS
May 15,
2008
_____________
It is my
pleasure to invite you to attend the 2008 Annual Meeting of the Stockholders of
Advance Auto Parts, Inc. (the “Company”), a Delaware corporation, on Thursday,
May 15, 2008 at 8:30 a.m. Eastern Daylight Time (EDT). The meeting
will be held at The Hotel Roanoke and Conference Center, 110 Shenandoah Avenue,
NW, Roanoke, Virginia 24016.
At the
Annual Meeting, stockholders will vote on the following matters, which are
further described in this Proxy Statement:
1. |
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Election
of eight directors to the Board of Directors to serve until the 2009
annual meeting of stockholders;
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2.
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Ratification
of the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for 2008;
and
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To act upon such
other matters, if any, as may properly come before the
meeting. |
The Board
of Directors set March 24, 2008 as the Record Date. Only record
holders of our common stock at the close of business on that day are entitled to
vote at our Annual Meeting or any adjournment of our Annual
Meeting.
We invite
you to attend the meeting and vote. We urge you, after reading this proxy
statement, to sign and return the enclosed proxy card as promptly as possible in
the enclosed postage prepaid envelope or vote your proxy by Internet or
telephone by following the instructions on the form of
proxy. If you attend the meeting, you may vote in person, even
if you previously voted by proxy.
By order
of the Board of Directors,
Michael
A. Norona
Executive
Vice President, Chief Financial Officer
and
Secretary
Roanoke,
Virginia
April 9,
2008
TABLE OF
CONTENTS
ABOUT THE ANNUAL
MEETING |
1
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PROPOSAL
NO. 1 ELECTION OF DIRECTORS
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Nominees for Election to Our
Board |
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CORPORATE
GOVERNANCE
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MEETINGS
AND COMMITTEES OF THE BOARD |
11
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COMPENSATION
COMMITTEE REPORT |
13
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COMPENSATION
DISCUSSION AND ANALYSIS |
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ADDITIONAL
INFORMATION REGARDING EXECUTIVE COMPENSATION |
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Summary
Compensation Table
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2007
Grants of Plan-Based Awards Table
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Outstanding
Equity Awards at 2007 Fiscal Year-End Table |
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2007
Option Exercises and Stock Vested Table |
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2007
Non-Qualified Deferred Compensation Table |
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Potential
Payments Upon Termination or Change in Control |
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NON-MANAGEMENT
DIRECTOR COMPENSATION
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INFORMATION
CONCERNING OUR EXECUTIVE OFFICERS
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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STOCK
OWNERSHIP GUIDELINES
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SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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PROPOSAL
NO. 2 RATIFICATION OF APPOINTMENT BY THE AUDIT COMMITTEE OF DELOITTE &
TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2008
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2007
and 2006 Audit Fees
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AUDIT
COMMITTEE REPORT
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OTHER
MATTERS
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______________
ADVANCE
AUTO PARTS, INC.
PROXY
STATEMENT
FOR
2008 ANNUAL MEETING OF STOCKHOLDERS
______________
ABOUT
THE ANNUAL MEETING AND VOTING
What
is the purpose of the Annual Meeting?
At our
Annual Meeting, the stockholders will act upon the matters outlined in the
Notice of Meeting on the first page of this proxy statement, including the
election of directors and the ratification of the Company’s independent
registered public accounting firm (the “independent auditors”). This
proxy statement summarizes the information you need to know to vote at the
Annual Meeting. This proxy statement and form of proxy were first
mailed to stockholders on or about April 9, 2008.
Where
will the Meeting be held?
The 2008
Annual Meeting will be held on Thursday, May 15, 2008 at 8:30 a.m. (EDT), at The
Hotel Roanoke and Conference Center, 110 Shenandoah Avenue, NW, Roanoke,
Virginia 24016. The Hotel Roanoke and Conference Center is accessible
to persons with disabilities. If you have a disability, we can
provide reasonable assistance to help you participate in the meeting upon
request.
Who
is soliciting my vote?
The Board
of Directors of the Company (“Board”) is soliciting your proxy to vote at the
Annual Meeting.
What
am I voting on?
You are
voting on two items:
1. |
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The
election of the following eight directors to the Board to serve until the
2009 annual meeting of
stockholders:
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John C.
Brouillard |
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William S.
Oglesby |
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Lawrence P.
Castellani |
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Gilbert T.
Ray |
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Darren R.
Jackson |
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Carlos A.
Saladrigas |
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Nicholas J.
LaHowchic |
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Francesca M.
Spinelli |
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Ratification
of the appointment of Deloitte & Touche LLP (“Deloitte”) as the
Company’s independent registered public accounting firm for
2008.
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What
are the voting recommendations of the Board?
The Board
recommends the following votes:
1. |
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FOR
each of the director nominees;
and
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FOR
ratification of the appointment of Deloitte as independent registered
public accounting firm for
2008.
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Will
any other matters be voted on?
The Board
does not intend to present any other matters at the Annual
Meeting. We do not know of any other matters that will be brought
before the stockholders for a vote at the Annual Meeting. If any
other matter is properly brought before the Annual Meeting, your signed proxy
card gives authority to Darren R. Jackson and Michael A. Norona as proxies, with
full power of substitution (“Proxies”), to vote on such matters in their
discretion.
Who
is entitled to vote?
Stockholders
of record as of the close of business on March 24, 2008 (the “Record Date”) are
entitled to vote at the Annual Meeting.
How
many votes do I have?
You will
have one vote for every share of Company common stock that you owned at the
close of business on the Record Date. You are not entitled to
cumulate your vote.
What
is the difference between holding shares as a stockholder of record and as a
beneficial owner?
Many
stockholders hold their shares through a broker or bank rather than directly in
their own names. As summarized below, there are some distinctions
between shares held of record and those owned beneficially.
Stockholder
of Record
If your
shares are registered directly in your name with the Company’s transfer agent,
BNY Mellon Shareowner Services, you are considered, with respect to those
shares, the stockholder of
record, and these proxy materials are being sent directly to you by the
Company.
Beneficial
Owner
If your
shares are held in a stock brokerage account or by a bank, you are considered
the beneficial owner of
shares held in street name, and these proxy materials are being forwarded to you
by your bank or broker, which is considered the stockholder of record of these
shares. As the beneficial owner, you have the right to direct your
bank or broker how to vote and are also invited to attend the Annual
Meeting. However, since you are not the stockholder of record, you
may not vote these shares in person at the Annual Meeting unless you bring with
you a legal proxy from the stockholder of record. Your bank or broker
has enclosed a voting instruction card for you to use for providing directions
for how to vote your shares.
How
do I vote?
If you
are a stockholder of record, there are four ways to vote:
· By
Internet at www.proxyvote.com;
· By
toll-free telephone at 1-800-690-6903;
· By
completing and mailing your proxy card; or
· By
written ballot at the Annual Meeting.
If you
vote by Internet or telephone, your vote must be received by 11:59 P.M. (EDT) on
May 14th, the day before the Annual Meeting. Your shares will be
voted as you indicate. If you return your proxy card but you do not
indicate your voting preferences, the Proxies will vote your shares FOR items 1
and 2.
If your
shares are held in street name, you should follow the voting directions provided
by your bank or broker. You may complete and mail a voting
instruction card to your bank or broker or, in most cases, submit voting
instructions by the Internet or telephone to your bank or broker. If
you provide specific voting instructions by mail, the Internet or telephone,
your shares should be voted by your bank or broker as you have
directed.
We will
distribute written ballots at the Annual Meeting to any stockholder who wants to
vote. If you hold your shares in street name, you must request a
legal proxy from your broker to vote at the Annual Meeting.
Can
I change my vote?
Yes. If
you are a stockholder of record, you can change your vote or revoke your proxy
any time before the Annual Meeting by:
· Entering
a new vote by Internet or telephone;
· Returning
a later-dated proxy card;
· Sending
written notice of revocation to Michael A. Norona, Executive Vice President,
Chief Financial Officer and Secretary, at the Company’s address of record, which
is 5008 Airport Road, Roanoke, VA 24012; or
· Completing
a written ballot at the Annual Meeting.
If your
shares are held in street name, you must follow the specific directions provided
to you by your bank or broker to change or revoke any instructions you have
already provided to your bank or broker.
Is
my vote confidential?
It is the
policy of the Company that all proxies, ballots, and vote tabulations that
identify the vote of a stockholder will be kept confidential from the Company,
its directors, officers, and employees until after the final vote is tabulated
and announced, except in limited circumstances including any contested
solicitation of proxies, when required to meet a legal requirement, to defend a
claim against the Company or to assert a claim by the Company, and when written
comments by a stockholder appear on a proxy card or other voting
material.
How
are votes counted?
Votes are
counted by inspectors of election designated by the corporate
secretary.
Who
pays for soliciting proxies?
The
Company will pay for the cost of preparing, assembling, printing and mailing
this proxy statement and the accompanying form of proxy to our stockholders, as
well as the cost of soliciting proxies relating to the meeting. We may request
banks and brokers to solicit their customers, on whose behalf such banks and
brokers hold our common stock in street name. We will reimburse these
banks and brokers for their reasonable out-of-pocket expenses for these
solicitations. Our officers, directors and employees may supplement
these solicitations of proxies by telephone, facsimile, e-mail and personal
solicitation. We will pay no additional compensation to our officers,
directors or employees for these activities.
What
is the quorum requirement of the Annual Meeting?
A
majority of the outstanding shares on the Record Date, represented in person or
by proxy at the Annual Meeting, constitutes a quorum for voting on items at the
Annual Meeting. If you vote, your shares will be part of the
quorum. Abstentions, including those recorded by brokers holding
their customers’ shares, will be counted in determining the
quorum. On the Record Date, there were 94,806,781 shares outstanding
and 963 stockholders of record. A majority of common stock, or
47,403,391 shares, will constitute a quorum.
What
are broker non-votes?
Broker
non-votes occur when holders of record, such as banks and brokers holding shares
on behalf of beneficial owners, do not receive voting instructions from the
beneficial owners at least ten days before the Annual Meeting.
If that
happens, the bank or broker may vote those shares only on matters deemed
“routine” by the New York Stock Exchange. On non-routine matters, a
bank or broker cannot vote without instructions from the beneficial owner,
resulting in a so-called “broker non-vote.” Broker non-votes will not
affect the outcome of the matters being voted on at the Annual Meeting, assuming
that a quorum is obtained.
What
vote is required to approve each proposal?
Item
1. For the election of directors, the eight nominees receiving the
highest number of “FOR” votes will be elected.
Item
2. Ratification of our independent registered public accounting firm
requires the approving vote of a majority of the votes cast on this proposal by
the holders of shares of our common stock who are present, or represented, and
entitled to vote at the annual meeting. Abstentions count as votes
cast and have the effect of a vote against the proposal.
Who
can attend the Annual Meeting?
All
Advance Auto Parts stockholders as of the close of business on the Record Date
may attend.
What
do I need to do to attend the Annual Meeting?
If you
are a stockholder of record, your proxy card is your admission ticket to the
Annual Meeting. If you own shares in street name, you will need to
ask your broker or bank for an admission ticket in the form of a legal
proxy. You will need to bring the legal proxy with you to the Annual
Meeting. If you do not receive the legal proxy in time, bring your
most recent brokerage statement with you to the Annual Meeting. We
can use your statement to verify your ownership of our common stock and admit
you to the Annual Meeting; however, you will not be able to vote your shares at
the Annual Meeting without a legal proxy.
What
does it mean if I get more than one proxy card?
It means
you own shares in more than one account. You should vote the shares
on each of your proxy cards.
How
can I consolidate multiple accounts registered in variations of the same
name?
If you
have multiple accounts, we encourage you to consolidate your accounts by having
all your shares registered in exactly the same name and address. You
may do this by contacting our transfer agent, BNY Mellon Shareowner Services,
toll-free at (866) 865-6327 or at P.O. Box 358015, Pittsburgh, PA 15252-8015,
Attention: Shareholder Correspondence.
I
own my shares indirectly through my broker, bank, or other nominee, and I
receive multiple copies of the annual report, proxy statement, and other
mailings because more than one person in my household is a beneficial
owner. How can I change the number of copies of these mailings that
are sent to my household?
If you
and other members of your household are beneficial owners, you may eliminate
this duplication of mailings by contacting your broker, bank, or other
nominee. Duplicate mailings in most cases are wasteful for us and
inconvenient for you, and we encourage you to eliminate them whenever you
can. If you have eliminated duplicate mailings, but for any reason
would like to resume them, you must contact your broker, bank, or other
nominee.
I
own my shares directly as a registered owner of Company stock and so do other
members of my family living in my household. How can I change the
number of copies of the annual report and proxy statement being delivered to my
household?
Family
members living in the same household generally receive only one copy per
household of the annual report, proxy statement, and most other
mailings. The only item which is separately mailed for each
registered stockholder or account is a proxy card. If you wish to
start receiving separate copies in your name, apart from others in your
household, you must contact BNY Mellon Shareowner Services toll-free at (866)
865-6327 or at P.O. Box 358015, Pittsburgh, PA 15252-8015, Attention:
Shareholder Correspondence, and request that action. Within 30 days
after your request is received we will start sending you separate
mailings. If, for any reason, you and members of your household are
receiving multiple copies and you want to eliminate the duplications, please
also contact BNY Mellon Shareowner Services and request that
action. That request must be made by each person in the household
entitled to receive the materials.
Multiple
stockholders live in my household and together we received only one copy of this
year’s annual report and proxy statement. How can I obtain my own
separate copy of those documents for the Annual Meeting in May?
You may
pick up copies in person at the Annual Meeting or download them from our
Internet web site, www.AdvanceAutoParts.com
(click on the homepage link to Annual Meeting materials). If you want
copies mailed to you and are a beneficial owner, you must request them from your
broker, bank, or other nominee. If you want copies mailed and are a
stockholder of record, we will mail them promptly if you request them from our
corporate office by phone at (540) 561-8490 or by mail to 5008 Airport Road,
Roanoke, VA 24102, Attention: Investor Relations. We cannot guarantee
you will receive mailed copies before the Annual Meeting.
Where
can I find the voting results of the Annual Meeting?
We plan
to announce preliminary voting results at the Annual Meeting and publish final
results in our Report on Form 10-Q for the second quarter of 2008.
What
is the deadline for consideration of shareholder proposals for the 2009 Annual
Meeting?
A
stockholder who wants to present a proposal at the 2009 annual meeting and have
it included in our proxy statement for that meeting must submit the proposal in
writing at our offices at 5008 Airport Road, Roanoke, Virginia 24012, Attention:
Corporate Secretary, on or before December 10, 2008. Applicable SEC
rules and regulations govern the submission of stockholder proposals and our
consideration of them for inclusion in next year’s proxy statement.
A
stockholder who wants to present a proposal at the 2009 annual meeting (but not
to include the proposal in our proxy statement) or to nominate a person for
election as a director must comply with the requirements set forth in our
by-laws. Our by-laws require, among other things, that our corporate
secretary receive written notice from the record holder of intent to present
such proposal or nomination no less than 45 days and no more than 75 days prior
to the anniversary of the date on which we first mailed the proxy materials for
the preceding year’s annual meeting. Therefore, we must receive
notice of such proposal no earlier than January 24, 2009, and no later than
February 23, 2009. The notice must contain the information required
by our by-laws. You may obtain a print copy of our by-laws upon
request from our corporate secretary at Advance Auto Parts, 5008 Airport Road,
Roanoke, Virginia 24012. Our by-laws are also available on our web
site at www.AdvanceAutoParts.com. Management
may vote proxies in its discretion on any matter at the 2009 annual meeting if
we do not receive notice of the matter within the time frame described in this
paragraph. In addition our Chair or any other person presiding at the
meeting may exclude any matter that is not properly presented in accordance with
these requirements.
How
can I find the Company’s proxy materials and annual report on the
Internet?
This
proxy statement and the 2007 annual report to shareholders are available on our
Internet web site at www.AdvanceAutoParts.com.
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
At the
meeting, you will elect eight members of our Board to serve until our 2009
annual meeting of stockholders and until their respective successors are elected
and qualified. Our Board has nominated John C. Brouillard, Lawrence
P. Castellani, Darren R. Jackson, Nicholas J. LaHowchic, William S. Oglesby,
Gilbert T. Ray, Carlos A. Saladrigas, and Francesca M. Spinelli for
election as directors. All of the nominees are current members of our
Board. Each nominee has consented to being named in this proxy
statement as a nominee and has agreed to serve as a director if
elected. None of the nominees to our Board has any family
relationship with any other nominee or with any of our executive
officers. Mr. William L. Salter, who is a current director, is
retiring from the Board at the end of his current term and is not standing for
re-election.
The
persons named as proxies in the accompanying form of proxy have advised us that
at the meeting, unless otherwise directed, they intend to vote the shares
covered by the proxies FOR the election of the nominees named
above. If one or more of the nominees are unable to serve, or for
good cause will not serve, the persons named as proxies may vote for the
election of any substitute nominees that our Board may propose. The
persons named as proxies may not vote for a greater number of persons than the
number of nominees named above.
Nominees
for Election to Our Board
The
following table provides information about our nominees for director as of the
Record Date, March 24, 2008.
Name
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Age
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Position
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John
C. Brouillard(1)
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59
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Chair
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Lawrence
P. Castellani(3)
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62
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Director
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Darren
R. Jackson
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43
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Director,
President and Chief Executive Officer
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Nicholas
J. LaHowchic(1)(3)
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60
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Director
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William
S. Oglesby(3)(4)
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48
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Director
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Gilbert
T. Ray(2)(4)
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63
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Director
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Carlos
A. Saladrigas(1)
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59
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Director
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Francesca
M. Spinelli(2)
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54
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Director
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_______________
(1)
Member of Audit Committee
(2)
Member of
Compensation Committee
(3)
Member of
Finance Committee
(4)
Member of
Nominating and Corporate Governance Committee
Mr. Brouillard, Chair, became
a member of our Board in May 2004 and was appointed Lead Director on February
14, 2007. Mr. Brouillard served as the interim Chair, President and
Chief Executive Officer of the Company from May 2007 until January 7, 2008, when
he became the non-executive Chair of the Board. Mr. Brouillard
retired as Chief Administrative and Financial Officer of H.E. Butt Grocery
Company in June 2005, a position that he had held since February
1991. From 1977 to 1991, Mr. Brouillard held various positions with
Hills Department Stores, including serving as President of that
company. Mr. Brouillard serves as a director of Eddie Bauer Holdings,
Inc.
Mr. Castellani, Director,
became a member of our Board in February 2000. Mr. Castellani is the
former Chairman of the Board and retired Chief Executive Officer of Advance Auto
Parts, Inc. He served as our Chairman from February 2003 until May
2006 and as our Chief Executive Officer from February 2000 to May
2005. Prior to joining us, Mr. Castellani served as President
and Chief Executive Officer of Ahold Support Services in Latin America (a
division of Royal Ahold, a supermarket company) from February 1998 to
February 2000. Prior to that, Mr. Castellani was President and
Chief Executive Officer of Tops Friendly Markets, a supermarket chain
headquartered in Buffalo, New York. Mr. Castellani serves as a
director of hhgregg, Inc., an electronics and appliances retailer, and as an
affiliate executive with the Freeman Spogli & Co. private equity
firm.
Mr. Jackson, Director,
President and Chief Executive Officer, became a member of our Board in July
2004. Mr. Jackson became the President and Chief Executive Officer on
January 7, 2008. Prior to joining us, Mr. Jackson served in
various
executive positions with Best Buy Co., Inc., a specialty retailer of consumer
electronics, office products, appliances and software, from July 2007 to
December 2007, ultimately as Executive Vice President of Customer Operating
Groups. He joined Best Buy in 2000 and was appointed its Executive
Vice President-Finance and Chief Financial Officer in February of
2001. Prior to 2000, he served as Vice President and Chief Financial
Officer of Nordstrom, Inc., Full-line Stores, a fashion specialty retailer, and
held various senior positions including Chief Financial Officer of Carson Pirie
Scott & Company. He began his career at KPMG. Mr.
Jackson serves as Vice Chairman of the Marquette University board and as a
director of Cristo Rey Network.
Mr. LaHowchic, Director,
became a member of our Board in May 2006. Mr. LaHowchic is the
retired President & CEO of Limited Logistics Services, Inc., which provides
supply chain, compliance and procurement services to Limited Brands, Inc. and
other retailers. He held this position from October 1997 to February
2007. Mr. LaHowchic is also the retired Executive Vice President of
Limited Brands, Inc., a retail consumer packaged goods company. He
held that position from April 2004 to February 2007. Prior to October
1997, he served as President of Becton Dickinson Supply Chain Services, a
medical technology company. Mr. LaHowchic serves as a director of
Express Scripts, Inc.
Mr. Oglesby, Director, became
a member of our Board in December 2004. Mr. Oglesby is currently
Senior Managing Director for The Blackstone Group, L.P., a global investment and
advisory firm, and has held this position since April 2004. Mr.
Oglesby has over 25 years of investment experience as a result of holding
managing director positions with Credit Suisse First Boston; Donaldson Lufkin
& Jenrette; and Kidder, Peabody & Co.
Mr. Ray, Director, became
a member of our Board in December 2002. Mr. Ray was a
partner of the law firm of O’Melveny & Myers LLP until his retirement
in February 2000. Mr. Ray is a member of the boards of Watson
Wyatt Worldwide, Inc.; IHOP Corp.; Automobile Club of Southern California;
Sierra Monolithics, Inc.; and Diamond Rock Hospitality
Company. Mr. Ray is also a trustee of SunAmerica Series Trust;
Seasons Series Trust; and The John Randolph Haynes and Dora Haynes
Foundation.
Mr. Saladrigas, Director,
became a member of our Board in May 2003. Mr. Saladrigas has been the
Vice Chairman of Premier American Bank in Miami, Florida since June
2007. From September 2001 until June 2007, he served as the Chairman
of Premier American Bank. From November 1984 to May 2002, he was the
Chief Executive Officer of ADP TotalSource (previously The Vincam Group, Inc.),
a human resources outsourcing company that provides human resource functions to
small and mid-sized businesses. Mr. Saladrigas serves as a director
of Progress Energy, Inc.; Carolina Power & Light Company; and Florida
Progress Corporation.
Ms. Spinelli, Director,
became a member of our Board in November 2002. Ms. Spinelli has
been the Senior Vice President, People for PetSmart, Inc., a retail supplier of
pet products and services, since September 2003. Previously,
Ms. Spinelli served as the Senior Vice President of People for RadioShack
Corporation, an electronics retailer, a position she held from
December 1999 to June 2003. From July 1998 to
December 1999, she served as Vice President of People for RadioShack
Corporation. From February 1997 to July 1998,
Ms. Spinelli served as Corporate Vice President of Organizational
Development for Wal-Mart Stores, Inc. From March 1993 to
February 1997, Ms. Spinelli served as Vice President of Human
Resources for McLane Company, Inc., a former division of Wal-Mart Stores,
Inc.
OUR
BOARD OF DIRECTORS RECOMMENDS
A
VOTE FOR EACH OF OUR
BOARD’S NOMINEES.
CORPORATE
GOVERNANCE
Guidelines
on Significant Governance Issues
The
responsibility of our Board is to review, approve and regularly monitor the
effectiveness of our fundamental operating, financial and other business plans,
policies and decisions, including the execution of our strategies and
objectives. Accordingly, our Board has adopted guidelines on the following
significant governance issues:
●
|
the structure of our
Board, including, among other things, the size, mix of independent and
non-independent members, membership criteria, term of service,
compensation and assessment of performance of our Board; |
●
|
Board procedural
matters, including, among other things, selection of the chair of the
Board, Board meetings, Board communications, retention of counsel and
advisors and our expectations regarding the performance of our
directors; |
●
|
committee matters,
including, among other things, the types of committees, charters of
committees, independence of committee members, chairs of committees,
service of committee members, committee agendas and committee minutes and
reports; |
●
|
chief executive
officer evaluation, management development and succession
planning;
|
●
|
codes of conduct;
and |
●
|
other matters,
including charitable contributions, use of the corporate airplane, auditor
services, Board access to management and interaction with third parties,
directors and officers insurance and the indemnification/limitation of
liability of directors, our policy prohibiting Company loans to the
Company’s executive officers and directors, and confidential stockholder
voting. |
A
complete copy of our guidelines on significant governance issues is available on
our web site at www.AdvanceAutoParts.com
or you may obtain a print copy by request to our corporate secretary at 5008
Airport Road, Roanoke, Virginia 24012.
Director
Independence
Our
Board, after consultation with and the recommendation of the Nominating and
Corporate Governance Committee, determined that Messrs. Brouillard, LaHowchic,
Oglesby, Ray, Saladrigas and Ms. Spinelli are each “independent” directors under
the listing standards of the NYSE, because each of these directors: (1) has no
material relationship with us or our subsidiaries, either directly or indirectly
as a partner, shareholder or officer of an organization that has a relationship
with us or our subsidiaries and (2) satisfies the “bright line independence”
criteria set forth in Section 303A.02(b) of the NYSE’s listing
standards. In addition, based on such standards, the Board determined
that: (1) Mr. Castellani is not independent because he has served as an
executive officer of the company within the past three years; and (2) Mr.
Jackson is not independent because he is our President and Chief Executive
Officer. The Board made this determination after assessing the
issue of materiality of any relationship not merely from the standpoint of each
director or nominee, but also from that of persons or organizations with which
the director or nominee may have an affiliation, based upon all facts and
circumstances known to the Board, including, among other things, a review of
questionnaires submitted by these directors and a review of a recent resume or
biography of each director. In addition, in determining the
independence of one nominee, the Board considered an agreement between the
Company and the nominee’s employer to provide advisory services to the Company
with respect to strategy options. No fees and approximately $20,000
in expense reimbursements have been paid pursuant to the agreement, and the
engagement has expired.
Our Board
reviews each director’s status under this definition annually with the
assistance of the Nominating and Corporate Governance Committee. Each
director is required to keep the Nominating and Corporate Governance Committee
fully and promptly informed as to any developments that might affect his or her
independence.
Meetings
of Non-Management Directors
During
2007, the non-management directors on our Board met a total of seven
times. In addition, the independent directors met separately one time
during 2007. The lead director, who was Mr. Salter until
February 2007 and Mr. Brouillard from February 2007 until May 2007, presided at
these meetings until May 7, 2007. During the remainder of 2007,
these meetings were presided over by the independent directors who served as
committee chairs during that time period. For 2008, our
non-management directors are scheduled to meet separately in conjunction with
each of the five scheduled meetings of the Board. Mr. Brouillard, who
became the non-executive Chair of the Board on January 7, 2008,
is
expected to preside over these meetings during 2008.
Stockholder
and Interested Party Communications with our Board
Communications with our Board
Generally. Stockholders who desire to communicate with our
Board, or with a specific director, including on an anonymous or confidential
basis, may do so by delivering a written communication to our Board, c/o Advance
Auto Parts, Inc., 5008 Airport Road, Roanoke, Virginia 24012, Attention: General
Counsel. The general counsel will not edit or modify any such
communication received and will forward each such communication to the
appropriate director or directors, as specified in the
communication. If the envelope containing a communication that a
stockholder wishes to be confidential is conspicuously marked “Confidential,”
the general counsel will not open the communication. Communications
will be forwarded by the general counsel to our Board or any specified directors
on a bi-monthly basis. The general counsel will ensure the timely
delivery of time sensitive communications to the extent such communication
indicates time sensitivity. In addition, we have a policy that each
of our directors should make every reasonable effort to attend each annual
meeting of stockholders. All of our current directors were in
attendance at our 2007 annual meeting of stockholders.
Interested Party Communications with
our Independent Directors, our Non-Management Directors or our Board
Chair. Any interested party, including stockholders, who
desires to communicate directly with one or more of the independent directors,
our non-management directors as a group, or our Board Chair, including on an
anonymous or confidential basis, may do so by delivering a written communication
to the independent directors, the non-management directors as a group or to our
Board Chair, c/o Advance Auto Parts, Inc., 5008 Airport Road, Roanoke,
Virginia 24012, Attention: General Counsel. The general
counsel will not open any such communication received and will forward each such
communication to the appropriate individual director or group of directors, as
specified in the communication. Such communications will not be
disclosed to the non-independent or non-management members of our Board or
management unless so instructed by the independent or non-management
directors. Communications will be forwarded by the general counsel on
a bi-monthly basis. The general counsel will ensure the timely
delivery of time sensitive communications to the extent such communication
indicates time sensitivity.
Nominations
for Directors
Identifying Director
Candidates. The Nominating and Corporate Governance Committee
is responsible for leading the search for and evaluating qualified individuals
to become nominees for election as directors. The Committee is
authorized to retain a search firm to assist in identifying, screening and
attracting director candidates. During 2007 the Committee did not
utilize the services of a search firm. After a director candidate has
been identified, the Committee evaluates each candidate for director within the
context of the needs of the Board in its composition as a whole. The
Committee considers such factors as the candidate’s business experience, skills,
independence, judgment and ability and willingness to commit sufficient time and
attention to the activities of the Board. At a minimum,
committee-recommended candidates for nomination must possess the highest
personal and professional ethics, integrity and values, and commit to
representing the long-term interests of our stockholders.
Stockholder Recommendations for
Director Candidates. The Nominating and Corporate Governance
Committee will consider stockholder suggestions for nominees for
directors. Any stockholder who desires to recommend a director
candidate must submit the recommendation in writing and follow the procedures
set forth in our by-laws. The by-laws require that a stockholder’s
nomination be received by the corporate secretary not less than 45 days or more
than 75 days prior to the first anniversary date of the mailing of our proxy
materials for the preceding year’s annual meeting. The notice should
include the following information about the proposed nominee: name, age,
business and residence address, principal occupation or employment, the number
of shares of Company stock owned by the nominee, and other information required
by the SEC’s regulations. In addition, the stockholder providing the
notice should provide his or her name and address as they appear on the
Company’s books and the number of shares that are beneficially owned by the
stockholder. The Committee does not evaluate any candidate for
nomination as a director any differently solely because the candidate was
recommended by a stockholder. You may obtain a copy of our by-laws by
requesting a copy from our corporate secretary at Advance Auto Parts, Inc., 5008
Airport Road, Roanoke, Virginia 24012. Our by-laws also
are available on our web site at www.AdvanceAutoParts.com.
Code
of Ethics and Business Conduct
We expect
and require all of our employees, who we refer to as our Team Members, our
officers and our directors, and any parties with whom we do business to conduct
themselves in accordance with the highest ethical
standards.
Accordingly,
we have adopted a code of ethics and business conduct, which outlines our
commitment to, and expectations for, honest and ethical conduct by all of these
persons and parties in their business dealings. A complete copy of
the code of ethics and business conduct is available on our web site at www.AdvanceAutoParts.com
or you may obtain a print copy by request to our corporate secretary at 5008
Airport Road, Roanoke, Virginia 24012.
Code
of Ethics for Finance Professionals
We also
have adopted a code of ethics for finance professionals to promote and provide
for ethical conduct by our finance professionals, as well as for full, fair and
accurate financial management and reporting. Our finance
professionals include our chief executive officer, chief financial officer,
controller and any other person performing similar functions. We
expect all of these finance professionals to act in accordance with the highest
standards of professional integrity, to provide full and accurate disclosure in
reports and other documents filed with the U.S. Securities and Exchange
Commission (“SEC”) and other regulators or in any public communications, to
comply with all applicable laws, rules and regulations, and to deter
wrongdoing. Our code of ethics for finance professionals is intended
to supplement our code of ethics and business conduct. A complete
copy of the code of ethics for finance professionals is available on our web
site at www.AdvanceAutoParts.com
or you may obtain a print copy by request to our corporate secretary at 5008
Airport Road, Roanoke, Virginia 24012.
Related
Party Transactions
On an
annual basis, each director and executive officer is obligated to complete a
Director and Officer Questionnaire which requires disclosure of any transactions
with the Company in which the director or executive officer, or any member of
his or her immediate family, has a direct or indirect material
interest. Pursuant to our code of ethics and business conduct,
officers and directors are required to disclose to the Chair of the Nominating
and Corporate Governance Committee of the Board or to our general counsel any
transactions or relationship that may create an actual or perceived conflict of
interest.
Mr.
Ricardo S. Coro, Senior Vice President, Information Technology, and Mr. Clarence
R. Martin, Jr., former Senior Vice President, Supply Chain, served as executive
officers of the Company for a portion of fiscal year 2007. Mr. Coro’s
base salary of $293,800 and Mr. Martin’s base salary of $275,000 were approved
by management. Their annual and long-term incentive compensation was
approved by the Board’s independent Compensation Committee.
For
fiscal year 2008, all compensation for all executive officers of the Company has
been approved by the Board’s independent Compensation Committee.
Mr.
Freeland, who became the Company’s Executive Vice President, Supply Chain and
Information Technology in February 2008, was formerly the President of Optimal
Advantage, a consulting firm that he founded. During 2007,
prior to Mr. Freeland becoming an executive officer, the Company retained
Optimal Advantage to perform consulting services at a cost of
$500,000. Mr. Freeland divested his interest in Optimal Advantage
prior to becoming an executive officer of the Company; however, as part of the
terms of his employment offer approved by the Compensation Committee, the
Company agreed to provide assistance with Mr. Freeland’s business lease
obligation up to a maximum of $350,000, which must be repaid by Mr. Freeland if
he leaves the Company within one year. In addition, in order to
assist Mr. Freeland to transition his business, the Company agreed to utilize
the consulting services of Optimal Advantage for at least three
months.
MEETINGS
AND COMMITTEES OF THE BOARD
The
Board
Each
director is expected to make every reasonable effort to attend each meeting of
the Board and any Committee of which the director is a member and to be
reasonably available to management and the other directors between
meetings. Our Board met 11 times during 2007. Each
director attended 75 percent or more of the total number of meetings of the
Board and meetings of the committees of the Board on which he or she
served.
Committees
of the Board
We
currently have an Audit Committee, a Compensation Committee and a Nominating and
Corporate Governance Committee, each of which is comprised of independent
directors in accordance with the listing standards of the New York Stock
Exchange (“NYSE”). In addition, we have a Finance
Committee. The following table sets forth the names of each current
committee member, the primary responsibilities of each committee and the number
of times each committee met in 2007:
Name
of Committee and
Members
|
Primary
Responsibilities
|
#
of Meetings
in
2007
|
Audit
Carlos
A. Saladrigas (Chair)
John
C. Brouillard
Nicholas
J. LaHowchic
|
· monitors the
integrity of our financial statements, reporting processes, internal
controls, risk management and legal and regulatory
compliance;
· selects,
determines the compensation of, evaluates and, when appropriate, replaces
our independent registered public accounting firm; pre-approves all audit
and permitted non-audit services;
· monitors the
qualifications, independence and performance of our independent registered
public accounting firm; and
· oversees our
internal audit function.
|
9
|
Compensation
Francesca
M. Spinelli (Chair)
Gilbert
T. Ray
William
L. Salter
|
· reviews and
approves our executive compensation philosophy;
· annually
reviews and approves corporate goals and objectives relevant to the
compensation of the CEO and evaluates the CEO’s performance in light of
these goals;
· determines the
compensation of our executive officers and approves compensation for key
members of management; and
· oversees our
incentive and equity-based compensation plans.
|
9
|
Finance
William
S. Oglesby (Chair)
Lawrence
P. Castellani
Nicholas
J. LaHowchic
|
· reviews and
makes recommendations to the Board regarding our financial policies,
including investment guidelines, deployment of capital and short-term and
long-term financing;
·
reviews
credit metrics, including debt ratios, levels and leverage
ratios;
· reviews all
aspects of financial planning, strategic planning, cash uses and our
expansion program; and
· reviews and
recommends the annual budget to the Board.
|
8
|
Nominating
and Corporate Governance
Gilbert
T. Ray (Chair)
William
S. Oglesby
William
L. Salter
|
· assists the
Board in identifying, evaluating and recommending candidates for election
to the Board;
· establishes
procedures and provides oversight for evaluating the Board and
management;
· develops,
recommends and reassesses our corporate governance guidelines;
and
· evaluates the
size, structure and composition of the Board and its
committees.
|
4
|
Our Board
has adopted written charters for each committee setting forth the roles and
responsibilities of each committee. Each of the charters is available
on our web site at www.AdvanceAutoParts.com. In
addition, you may obtain a print copy of each charter by request to our
corporate secretary at 5008 Airport Road, Roanoke,
Virginia 24012.
Compensation
Committee Interlocks and Insider Participation
None of
our executive officers currently serves on the compensation committee of any
other company or board of directors of any other company of which any member of
our Compensation Committee or Board is an executive officer.
COMPENSATION
COMMITTEE REPORT
Our Committee is comprised entirely of
three independent directors who meet independence, experience and other
qualification requirements of the NYSE listing standards, and the rules and
regulations of the SEC. Our Committee chair is Ms.
Spinelli. The Compensation Committee operates under a written charter
adopted by the Board. Our charter can be viewed on our web site at
www.AdvanceAutoParts.com,
under the investor relations section.
We have
relied on management’s representation that the compensation discussion and
analysis presented in this proxy statement has been prepared with integrity and
objectivity in conformity with SEC regulations. Based upon our
discussion with management, we recommended to the Board that the compensation
discussion and analysis be included in this proxy statement.
THE
COMPENSATION COMMITTEE
Francesca
M. Spinelli (Chair)
Gilbert
T. Ray
William
L. Salter
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
In this section, we provide you with an
overview and analysis of our compensation program and policies, the material
compensation decisions we have made during 2007 under those programs and
policies, and the material factors considered in making those
decisions. Later in this proxy statement under the heading
“Additional Information Regarding Executive Compensation” you will find a series
of tables containing specific information about compensation earned in
2007.
Compensation
Decision Roles
The
Compensation Committee of the Board (“Committee”) approves all compensation for
our named executive officers and authorizes all equity awards under the 2004
Advance Auto Parts Long-Term Incentive Plan. Decisions regarding
non-equity compensation of other employees are made by
management. The Chief Executive Officer annually reviews the
performance of each named executive officer and other selected officers and
makes recommendations with respect to salary adjustments
and incentive amounts to the Committee. The Chief
Executive Officer’s performance is reviewed annually by the
Committee. The Committee has final approval on the determination of
compensation recommendations for executives. Management is
responsible for developing and maintaining an effective compensation program
throughout the Company and preparing documents required for compliance with
applicable United States law.
Compensation
Philosophy and Objectives
Compensation provided to executive
officers of the Company is intended to be closely linked with the performance of
the Company. Our compensation programs are designed to ensure
that:
|
compensation is
linked to annual and long-term Company performance goals that are
structured to align the interests of executive officers with those of the
Company’s stockholders; |
|
a significant
portion of total compensation is stock-based, thereby further aligning the
interests of executive officers and Company stockholders; and |
|
compensation is
competitively positioned with compensation levels at comparable retail
competitors so the Company can attract, retain and motivate superior
management talent essential to the Company’s long-term
success. |
Setting
Executive Compensation
Based on the foregoing objectives, the
Committee has structured the Company’s annual and long-term incentives to
motivate executives to achieve the business goals set by the Company and reward
the executives for achieving such goals. For the past three years,
the Committee has engaged Hay Group, an independent consulting firm, to conduct
an annual review of the total compensation program and to provide relevant
market data and alternatives for the Committee to consider when making
compensation decisions for our named executive officers, as well as for other
key executives. The Committee has engaged Frederic W. Cook
& Co., Inc., an independent consulting firm, to serve as its independent
compensation consulting firm commencing in fiscal year 2008.
The Committee considered compensation
data provided by Hay Group based on its 2007 National Retail Industry database
as one component of its decisions for executives’ compensation in
2007. Hay Group collected data from a broad group of over ninety
retail companies with which we compete for key management and executive
talent. After adjusting the data using standard statistical methods
based on revenue to make the information more comparable for the review, Hay
Group provided this retail compensation data to the Committee in a summary
form. Due to the number of companies comprising the retail
compensation data provided by Hay Group, the manner in which these data have
been adjusted, and the additional factors taken into consideration in
determining the compensation for each executive, we believe describing the
retail compensation data in more general terms better serves our investors’
understanding of our compensation policies than listing the more than ninety
companies in the database.
Information from the retail
compensation data described above provides compensation data regarding base
salary, annual incentives, and long-term incentives for the Committee to
consider as it makes decisions about executive compensation each
year. The Committee also considers the Company’s relative performance
compared with an established group of peer companies in the retail
industry. The sixteen companies that comprised our peer group for
2007 were selected based on their similarity to the Company on the basis of
several factors, including sales, store and employee count, and overall market
value. The 2007 peer group is essentially unchanged from the prior
year other than two companies that were removed due to a change of
ownership. Half of the peer group companies listed below are included
in the retail compensation data provided by Hay Group. The companies
comprising our 2007 peer group are:
AutoZone |
Barnes &
Noble |
Bed Bath &
Beyond |
Borders
Group |
Circuit
City |
CSK Auto |
Dollar
Tree |
Foot
Locker |
Genuine
Parts |
Longs Drug
Stores |
O’Reilly
Automotive |
Collective
Brands |
The Pep
Boys |
PetSmart |
RadioShack |
Williams-Sonoma |
We intend
to set total direct compensation levels, defined as the combined value of annual
and long-term compensation, based on the Company’s relative performance compared
to this peer group. Our overall total direct compensation level is
determined based on our annual earnings per share growth over a three-year
period. To calculate the level of total direct compensation, the
annual earnings per share growth for the most recent year has a weight of 50
percent, and the two prior years’ performance are each weighted 25
percent. When our annual earnings per share growth performance is at
the median of our peer group, our total direct compensation levels should be
roughly equivalent to the median total direct compensation level for the retail
compensation data. When performance is below median of the peer
group, total direct compensation levels are targeted to be below the median
total direct compensation level for the retail compensation
data. Total direct compensation levels will approach the
seventy-fifth percentile of the retail compensation data when we achieve top
quartile results based on our earnings per share growth performance compared
with our peer group.
Executive
Compensation Components
The principal components of the
Company’s compensation for executive officers are:
|
base salary, which
is intended to compensate executives for their primary responsibilities
and individual contributions; |
|
performance-based
incentives, which are intended to link annual compensation and short-term
performance; |
|
long-term equity
incentives, which are intended to link long-term compensation with
stockholder value over the long-term; and |
|
retirement savings
and other compensation. |
Although
there is no pre-established policy or target for the allocation between specific
compensation components, long-term equity compensation opportunity generally
represents at least 50 percent of total direct compensation which reflects our
intent to align executive and stockholder interests.
Base
Salary
Executives’
base salaries are reviewed annually as part of the Company’s performance review
process. During its review of base salaries for executives, the
Committee considers the executive’s individual performance, experience, and
responsibilities compared with the retail compensation data provided by Hay
Group, as well as the executive’s pay relative to other Company
executives. The Committee has determined that in order to enable the
Company to attract and retain executive talent important to the Company’s
long-term growth, the compensation strategy should aim to position base salaries
at a level approaching the median of the retail compensation data described in
the “Setting Executive Compensation” section above. All executives
have individual goals established near the beginning of the fiscal
year. The executive’s annual goals include specific goals related to
Company initiatives for improving our operations and are intended to drive our
Company’s business during the fiscal year as well as professional development
goals.
The
specific nature of the executive’s individual goals and measurement of success
vary with the individual executive’s area of responsibility and may or may not
be tied to a specific financial measure. For instance, achieving a
defined amount of savings from a business process review was included as an
objective for one executive. Another executive was responsible for
successfully executing a key business strategy in the information technology
group. The Committee considers the chief executive officer’s most
recent evaluation of an executive’s performance as compared to the executive’s
individual goals along with the executive’s scope of responsibilities and the
Company’s performance and reviews data from Hay Group in exercising its judgment
regarding base salary decisions for each executive. Thus, if the
Company has performed well as measured against its strategic goals, but an
individual executive has fallen short of achieving his individual performance
goals, the Committee may exercise its judgment in maintaining the executive’s
base salary level at a constant level from one year to the next or may approve a
lower salary increase than would have been the case if the executive had
achieved his individual performance goals. Conversely, if the
executive’s individual performance has been outstanding, he may receive a salary
increase even when the Company’s performance may have fallen short.
Historically,
the Company pursued an executive compensation strategy that relied on lower base
salaries and higher annual and long-term incentive opportunities for executives
as compared to the retail compensation data . Currently,
base salary levels for the Company’s executives are between the twenty-fifth and
fiftieth percentile of the retail compensation data described in the “Setting
Executive Compensation” section. The Committee has determined that in
order to enable the Company to attract and retain executive talent important to
the Company’s long-term growth, the compensation strategy should be adjusted
over time to position base salaries at a level approaching the median of the
retail compensation data. As one step toward that goal, in 2006 the
Committee increased the base salaries for our named executive officers and, with
the exception of the chief executive officer, commensurately reduced their
annual and long-term incentive opportunities. This adjustment
improved the competitive position of executives’ base salaries relative to the
retail compensation data and positioned their bonus target opportunities at the
median of the retail compensation data. Our then chief executive
officer’s salary and bonus target opportunity was not adjusted in the same
manner because his salary and bonus target opportunity had been addressed at the
time he became the chief executive officer in mid-2005. There is no
predetermined time line or plan for increases or further adjustments in base
salary levels for executives. Future decisions on executives’ base
salaries will also depend on changes in the scope of the executive’s
responsibilities and the executive’s successful execution of those
responsibilities.
Annual
Incentive Plan
Our annual incentive plan provides for
the payment of cash bonuses based upon Company performance in relation to
predetermined financial targets established near the beginning of the
year. We aim to establish incentive targets annually at industry
median levels, with the opportunity for above median targets for correspondingly
higher performance. The overall incentive potential varies depending
upon the executive’s position. For 2007, our chief executive officer
had an incentive target of 100 percent of base salary and other named executive
officers had an incentive target of 60 percent of base
salary. Potential annual incentive payout ranges from zero to 200
percent of each executive officer’s annual incentive target. The
maximum payout would have required the Company to exceed all predetermined
financial targets. For additional information about the annual
incentive plan, please refer to the “2007 Grants of Plan-Based Awards Table,”
which shows the threshold, target and maximum incentive amounts payable under
the plan for 2007, and the “Summary Compensation Table,” which shows the actual
non-equity incentive plan compensation paid to executives for 2007 fiscal year
performance.
The
following financial performance measures were established for 2007 with relative
weights based on their significance in driving stockholder value: 1) sales
compared to budget level: 30 percent; 2) operating income compared
to budget
level: 30 percent; 3) specific achievement of operating income growth goals
compared to prior year: 30 percent; and 4) inventory turns compared to budget
level: 10 percent. Budgeted sales, operating income, and inventory turn targets
are approved by the Board of Directors on an annual basis as part of the annual
financial planning process. These targets are determined by reviewing
the Company’s historical performance and attempting to derive challenging, but
attainable performance targets in light of market and competitive
conditions. The following table shows the annual incentive plan
measures and payouts for 2006 and 2007:
Annual Incentive Plan
Performance Goals and Results
|
|
|
|
Target
Performance Objectives
|
|
|
|
|
Performance
|
|
|
|
|
|
Target
|
|
Maximum
|
|
Actual
|
|
Actual
|
Measure
|
|
Weight
|
|
Threshold
|
|
(100%
Payout)
|
|
(200%
Payout)
|
|
Performance
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
30%
|
|
96%
|
|
100%
|
|
104%
|
|
95.7%
|
|
0.0%
|
Operating
Income
|
|
30%
|
|
90%
|
|
100%
|
|
110%
|
|
89.4%
|
|
0.0%
|
Operating
Income Growth
|
|
30%
|
|
110%
|
|
110%
|
|
135%
|
|
103.2%
|
|
0.0%
|
Inventory
Turns
|
|
10%
|
|
90%
|
|
100%
|
|
110%
|
|
95.9%
|
|
72.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
30%
|
|
96%
|
|
100%
|
|
104%
|
|
94.7%
|
|
0.0%
|
Operating
Income
|
|
30%
|
|
90%
|
|
100%
|
|
110%
|
|
89.4%
|
|
0.0%
|
Operating
Income Growth
|
|
30%
|
|
110%
|
|
115%
|
|
135%
|
|
98.7%
|
|
0.0%
|
Inventory
Turns
|
|
10%
|
|
90%
|
|
100%
|
|
110%
|
|
96.2%
|
|
72.0%
|
The
financial goals established within our annual budget process are intended to be
challenging for our Company and our employees. Performance against
the budget and established incentive goals proved to be very difficult in a
challenging retail market as demonstrated by the low level of annual incentive
payments to our executives in fiscal years 2006 and 2007. Annual
incentive plan payouts to our executives over the past four years ranged from 7
percent to 95 percent of targets, averaging roughly 48 percent, which indicates
the difficulty associated with achieving our annual incentive
goals.
Long-Term
Incentive Compensation
We
include a long-term incentive compensation component to link executives’
compensation to the Company’s long-term financial success and provide our
executive officers with performance incentives. In 2007, we
granted stock appreciation rights, or SARs, and restricted stock to our
executive officers under the Advance Auto Parts Long-Term Incentive Plan, which
was approved by stockholders in May 2004 and amended in
2007. Long-term incentive guidelines are established for each
executive level after first determining the appropriate level of total direct
compensation based on individual and Company performance and analysis of
comparable retail compensation data as described in the “Setting Executive
Compensation” section of this proxy statement.
Total
direct compensation is the sum of base salary, annual bonus opportunity and
long-term incentive value. After comparing the Company’s
earnings-per-share performance to that of the peer group previously described in
the “Setting Executive Compensation” section of this proxy statement, the
Committee exercises its discretion to establish the appropriate total
compensation level. For example, earnings-per-share performance level
at the fiftieth percentile of our peer group would result in a total direct
compensation level at approximately the fiftieth percentile level of the retail
compensation data. If the Company’s earnings per share performance is less, by
comparison, than the median performance of its peer group, the amount of total
direct compensation will be proportionately less. After determining
the appropriate total compensation level, the guideline for long-term incentive
compensation for each executive level is determined at the discretion of the
Committee by subtracting the average base and annual incentive target
opportunity for each executive level from the level of total direct
compensation. As such, the value of the long-term incentive
compensation award will increase or decrease based on the Company’s relative
performance against the peer group and any resulting increase or decrease in
total direct compensation. The Committee periodically evaluates
this strategy and intends in 2008 to ensure that it appropriately supports the
Company’s emerging business strategies.
Individual
executives’ long-term grants were determined based on the executive’s
performance relative to the established long-term grant
guidelines. The Committee considered the executive’s most recent
performance evaluation as more fully described in the “Base Salary” section of
this proxy statement and other talent assessments to determine
whether
the amount of long-term incentives actually granted to each individual executive
should be adjusted as compared to the option guideline level previously
established for the executive.
Except
for any SARs and restricted stock awarded as part of the compensation
arrangement for a newly-hired executive officer, long-term incentive grants have
been approved by the Committee at a meeting held one to two days prior to the
public release of the Company’s periodic financial results. The grant
date for such long-term incentive awards is generally the third trading day on
the New York Stock Exchange following the release of
earnings. Newly-hired or promoted executives are generally eligible
to receive prorated long-term incentive grants shortly after their hire or
promotion date based on the long-term grant guidelines approved by the Committee
for the fiscal year. Proration is based on the time from promotion or
hire through the end of the fiscal year. Please refer to the “2007 Grants of
Plan-Based Awards” and “Outstanding Equity Awards at 2007 Fiscal Year-End”
tables for additional information about executives’ 2007 long-term incentive
awards.
The
Committee decides the type, mix and vesting schedule for each year’s awards
based on the parameters of the long-term incentive plan and input and
consideration of market trends presented by the Committee’s compensation
consultant. For 2007, the Committee decided to grant long-term
incentive awards in the form of SARs and restricted stock. The
February 2007 long-term incentive awards were granted with 75 percent of the
value in SARs and the remaining 25 percent in restricted stock. The
SARs were granted with an exercise price equal to the closing stock price on the
grant date. The SARs have a term of seven years and vest annually in
equal thirds during the three years following grant, starting with the first
anniversary of the grant, according to the terms of the SARs award certificate.
The SARs will be settled in shares of Company stock at the time they are
exercised. The amount of appreciation, calculated as the difference between the
grant price and stock price at the time of exercise, will be settled through
issuance of Company stock, with any fractional shares paid in cash by the
Company. The restricted stock awards do not vest until February 2010,
but dividend and voting rights were granted as part of the restricted stock
awards.
Retirement
Savings Programs
Executives are eligible to participate
in the Company’s 401(k) plan, along with other eligible employees of the
Company, once they meet eligibility requirements. Generally,
executives’ ability to accumulate retirement savings through the Company’s
401(k) plan is limited due to Internal Revenue Service limitations with respect
to highly compensated employees. Consequently, the Company has
established a non-qualified deferred compensation plan for named executive
officers and certain other eligible executives. Pursuant to the plan,
eligible employees were able to defer up to 30 percent of their annual salary
and up to ten percent of bonus earnings in 2007. Earnings on
deferrals depend on the investment funds selected by the executives, all of
which are market-based. The Company made no contributions and did not
match executives’ deferrals into the non-qualified deferred compensation plan in
2007. All compensation deferred under this plan is distributed in
cash to the executive on a future date elected by the participating executive or
upon termination of employment, whichever occurs first.
Executive officers and senior vice
presidents of the Company may also voluntarily defer up to 50 percent of their
base salary on a bi-weekly basis into the Company’s Deferred Stock Unit
Plan. Deferred earnings are converted into equivalent stock units of
Company stock based on the closing stock price on the deferral
date. Prior to the beginning of the year in which the deferrals
begin, eligible executives make irrevocable participation elections and
designate future distribution dates for both the deferred compensation and
deferred stock unit plans. All deferred stock units, or DSUs, are
settled in Company stock.
Specific information about named
executive officers’ deferrals is presented in detail under the “2007
Non-qualified Deferred Compensation Table” contained in this proxy
statement.
Other
Compensation
The Company provides named executive
officers and certain other executives taxable allowances that the Company and
the Committee believe are reasonable and consistent with the objectives of the
overall compensation program, and better enable the Company to attract and
retain superior employees for key positions. The Committee
periodically reviews allowance levels for named executive
officers. Executives may apply their allowances toward personal
automobile expenses, legal and financial planning, health club memberships, and
personal supplemental disability or life insurance policies based on their
individual needs. Offering these allowances enables the Company to
maintain a competitive total compensation package for
executives. Allowance reimbursement amounts for named executive
officers are included in the “Summary Compensation Table” contained in this
proxy statement. Our named executive
officers
are also eligible for personal use of the Company airplane in accordance with
the airplane use policy approved by the Committee.
Effective March 31, 2006, the Company
entered into employment agreements with Messrs. Coppola, Klasing, Moore,
Mueller, Murray, Wade and other selected officers. The initial term
of the agreements was one year, and the agreements extend from year-to-year
unless terminated by the employee or the Company. Upon termination of
employment by the Company without cause or by the employee with good reason as
defined in the employment agreement, the agreements contain severance provisions
that provide for payment of one year of base salary payable in installments over
a time period that ends at the earlier of one year or March 15 of the year
following termination. The agreements also provide for
payment of the pro rata share of any bonus that is based upon the Company’s
achievement of certain financial targets approved by our Board and earned by the
affected executive officer prior to the termination of his employment as well as
any unused vacation due to the employee prior to the termination of
employment. The executive officer has also agreed not to compete with
the Company, to preserve our confidential information, not to recruit or employ
our employees in other businesses and not to solicit our customers or suppliers
for competitors during the term of the executive’s employment and for one year
following termination of employment. In the case of death, a lump sum
amount equal to the executive’s annual salary shall be paid to his designated
beneficiary or estate. In the case of termination of employment due
to disability as defined in the agreement, the executive will receive an amount
equal to 30 percent of his base salary for a one-year period in addition to the
benefits under our qualified group disability plan. Executives are
also granted a right to continue their medical benefits for one year at the same
cost as active employees during the one-year period. These agreements
are intended to provide for a continuity of senior
management. Information regarding applicable payments under such
agreements for the named executive officers is provided under the heading
“Potential Payments Upon Termination or Change in Control Table” contained in
this proxy statement.
Subsequent
to the end of our 2007 fiscal year, the Company entered into an employment
agreement with Mr. Jackson, who became the Company’s President and Chief
Executive Officer effective January 7, 2008. Mr. Jackson’s employment
agreement provides for an initial three-year term, which will be automatically
renewable for additional one-year terms unless terminated by either
party. Mr. Jackson’s initial base salary will be $800,000 per
year. Commencing with the Company’s 2008 fiscal year, he will be
eligible for an annual performance-based cash bonus with a target of 1.5 times
his then annual base salary, the metrics of which will be determined consistent
with the metrics applied to other senior officers. In addition, the
Company will pay Mr. Jackson a one-time payment equal to the bonus for 2007 he
would have earned under his former employer’s executive bonus plan up to a
maximum of $975,000 (subject to a minimum of $650,000) to be payable at the time
that the former employer’s bonuses for 2007 are paid, but in any event by June
30, 2008. The agreement also provides that effective January 7, 2008,
Mr. Jackson would receive equity grants under the Company’s 2004 Long-Term
Incentive Plan (“2004 LTIP”) consisting of (a) 110,000 shares of restricted
stock which will vest on the third anniversary of the effective date of the
grant and (b) 225,000 SARs. One fourth of the SARs were vested
immediately with a one-year holding period before they may be exercised, and the
remaining three fourths of the SARs will vest equally on the first, second and
third anniversaries of the grant date. In the event of death or
“Disability” (as defined in the agreement), the grants of restricted stock and
SARs will vest to the extent they have not already vested. The
exercise price of the SARs awarded to Mr. Jackson is $37.28, the closing price
of the Company’s common stock on January 7, 2008.
If the
Company terminates Mr. Jackson’s employment without “Cause” (as defined in the
agreement) or if Mr. Jackson terminates his employment for “Good Reason” (as
defined in the agreement) (other than following a Change of Control), he will be
entitled to severance in an amount equal to one year of his base salary at the
rate then in effect, plus an amount equal to his target bonus for such
year. In addition, the Company will pay his COBRA premium for
continuation of health coverage, subject to Mr. Jackson’s signing a general
release and complying with the non-competition and non-solicitation agreements
described below. If within twelve months after a “Change of Control”
(as defined in the agreement) the Company terminates Mr. Jackson’s employment
without Cause or Mr. Jackson terminates his employment for Good Reason, he will
be entitled to a severance payment equal to two times his base salary at the
rate then in effect, plus two times his target bonus, together with the other
benefits and equity rights as specified in the preceding
paragraph. In the event of a Change in Control, Mr. Jackson will also
be entitled to a tax gross-up payment intended to make him whole for excise
taxes that may be imposed on the Change in Control payments. Mr.
Jackson will be subject to standard confidentiality and non-disparagement
agreements during and following his employment as well as customary
non-competition and non-solicitation covenants which will continue following the
termination of his employment.
Subsequent
to our 2007 fiscal year, the Committee approved the terms of an employment
arrangement with Mr. Norona, effective with the commencement of his employment
as the Company’s Executive Vice President, Chief
Financial
Officer, and Secretary, on February 12, 2008. Under the terms of his
employment arrangement, Mr. Norona is entitled to receive an annual salary of
$415,000 and is eligible for a performance-based cash bonus for fiscal year 2008
with a bonus target of 60 percent of base salary and an opportunity to earn up
to 120 percent of base salary, to be determined consistent with the financial
and other performance metrics applied to other senior officers. In
addition, the Company will pay Mr. Norona a one-time payment equal to the bonus
for 2007 he would have earned under his former employer’s executive bonus plan
and expected to be in the range of $150,000 to $180,000, to be paid on or about
May 1, 2008. Mr. Norona and his eligible dependents will be
eligible to participate in all of the Company’s applicable benefit plans and
programs pursuant to the terms of such programs.
On
February 15, 2008, Mr. Norona received a special grant of 50,000 shares of
restricted stock that will vest equally in one-third increments on the first,
second and third anniversaries of the grant date and a special grant of 50,000
SARs, with an exercise price of $33.66, the closing price of the Company’s
common stock on the date of grant. One fourth of the SARs were vested
immediately with a one-year holding period before they may be exercised, and the
remaining three fourths of the SARs will vest equally on the first, second and
third anniversaries of the grant date. The special grants are made
pursuant to the 2004 LTIP. Effective February 19, 2008, Mr. Norona
received equity grants under the Company’s 2004 LTIP valued at $750,000 on date
of grant consisting of (a) 25 percent of the value issued in the form
of 5,547 shares of restricted stock that will vest annually in three equal
installments commencing on the first anniversary of the grant date and (b) 75
percent of the value issued in the form of 63,561 SARs that will vest equally in
one-third increments on the first, second and third anniversaries of the grant
date. The SARs were granted with an exercise price of $33.80, the
closing price of the Company’s common stock on the date of
grant. Future equity grants will depend on job performance and the
business performance of the Company.
As an executive officer of the Company,
Mr. Norona will be offered, and he accepted the Company’s offer of employment
subject to the execution of, an employment agreement, which is expected to
provide that Mr. Norona will receive one year’s base pay and his target bonus
amount if his employment is terminated by the Company without “Cause” (to be
defined in the agreement) during the term of the agreement. The
remaining terms of the agreement are still under consideration by the
Committee.
Ownership
Guidelines
The Company has stock ownership
guidelines which establish required levels of stock ownership by named executive
officers and members of our Board. These guidelines are designed to
further strengthen and align Company leadership with stockholders’ interests and
to enhance stockholder value over the long-term. Details of these
guidelines are included in the “Security Ownership” section of this proxy
statement and are posted on the Company’s web site.
Tax
Deductibility of Pay
We take into consideration the
potential impact of Section 162(m) of the Internal Revenue Code, which disallows
a tax deduction for any publicly held corporation for individual compensation
exceeding $1 million in any taxable year paid to the Company’s named executive
officers other than compensation paid in accordance with a shareholder approved
performance-based incentive plan. All annual incentive plan payments
to named executive officers for 2007 were made using performance measures
established and certified by the Committee according to the Executive Incentive
Plan approved by stockholders in 2007. Annual incentive payments made
prior to 2007 have been made according to a performance-based incentive plan
that generally matched the provisions of the plan approved by shareholders in
2007. We intend to structure compensation payments to meet the
requirements of Section 162(m), other than restricted stock or restricted stock
units which are not considered performance-based under 162(m) of the Tax Code
and, as such, are generally not deductible by the Company. However,
the Committee retains the authority to award compensation which may not be fully
deductible by the Company. Shareholder approval of the 2004 Long-Term
Incentive Plan permits us to exclude from the $1 million limit any
performance-based compensation resulting from long-term incentives or other
qualifying awards granted under the plan to our named executive
officers.
ADDITIONAL
INFORMATION REGARDING EXECUTIVE COMPENSATION
Summary
Compensation Table
The following Summary Compensation
Table provides the compensation earned for 2007 by our interim chief executive
officer, chief executive officer prior to his departure in May 2007, principal
financial officer and the other three most highly compensated executive officers
as of the end of our last completed fiscal year. Compensation data is
also provided for Mr. Mueller, a person who would otherwise be among the three
most highly compensated executive officers had he not left the Company before
the end of 2007.
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Stock
Awards
(a)
($)
|
Option
Awards
(b)
($)
|
Non-Equity
Incentive
Plan
Compensation
(c)
($)
|
All
Other
Compensation
(d)
(e) (f) (g)
(h)
(i)
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
John
C. Brouillard
|
2007
|
$ 784,625
|
$ 68,706
|
$ 100,421
|
$ -
|
$ 973
|
$ 954,725
|
Non-Executive
Chair (j)
|
2006
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
Michael
O. Moore
|
2007
|
391,763
|
59,939
|
693,408
|
17,143
|
83,552
|
1,245,805
|
Former
EVP, Chief Financial Officer
|
2006
|
380,260
|
-
|
439,592
|
16,159
|
106,486
|
942,497
|
|
|
|
|
|
|
|
|
Jimmie
L. Wade
|
2007
|
496,449
|
113,223
|
1,122,613
|
21,699
|
20,005
|
1,773,989
|
EVP,
Customer Experience Officer
|
2006
|
481,510
|
-
|
1,223,406
|
20,548
|
14,471
|
1,739,935
|
|
|
|
|
|
|
|
|
Elwyn
G. Murray III
|
2007
|
457,584
|
106,165
|
805,088
|
21,699
|
19,859
|
1,410,395
|
EVP,
Customer Development Officer
|
2006
|
386,246
|
-
|
540,692
|
16,497
|
9,417
|
952,852
|
|
|
|
|
|
|
|
|
Paul
W. Klasing
|
2007
|
369,632
|
56,410
|
847,881
|
16,144
|
19,472
|
1,309,539
|
SVP,
Corporate Development
|
2006
|
358,748
|
-
|
857,274
|
15,334
|
14,338
|
1,245,694
|
|
|
|
|
|
|
|
|
Michael
N. Coppola
|
2007
|
285,578
|
-
|
(547,481)
|
20,614
|
541,711
|
300,422
|
Former
Chairman, President & CEO (k)
|
2006
|
772,502
|
-
|
2,383,314
|
54,990
|
21,972
|
3,232,778
|
|
|
|
|
|
|
|
|
David
B. Mueller
|
2007
|
148,849
|
-
|
98,368
|
6,310
|
225,068
|
478,595
|
Former
EVP, Merchandising (k)
|
2006
|
341,234
|
-
|
727,592
|
14,699
|
9,370
|
1,092,895
|
(a) |
Except for Mr.
Brouillard, represents the dollar amounts recognized for the fair value of
restricted stock granted during fiscal 2007 in accordance with Statement
of Financial Accounting Standards No. 123 (revised 2004), “Share-Based
Payment,” or SFAS 123R. Pursuant to SEC rules, the amounts shown exclude
the impact of estimated forfeitures related to service-based vesting
conditions. The grant date fair value is calculated using the closing
price of the Company’s stock on the date of grant. For additional
information, refer to Note 16 of the Company’s consolidated financial
statements in the 2007 Form 10-K filed with the SEC on February 27, 2008.
See the “2007 Grants of Plan-Based Awards” table for information on
options granted in 2007. These amounts reflect the Company’s accounting
expense, and do not correspond to the actual value that will be realized
by the named executive officers. |
(b) |
Represents the
dollar amounts recognized for the 2007 and 2006 fiscal years for the fair
value of SARs and stock options granted in those years, as well as
prior fiscal years, in accordance with SFAS 123R. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. For information on the valuation
assumptions, refer to Note 16 of the Company’s consolidated financial
statements in the 2007 Form 10-K filed with the SEC on February 27, 2008.
See the “Grants of Plan-Based Awards” table for information on SARs
granted in 2007. These amounts reflect the Company’s accounting expense,
and do not correspond to the actual value that will be realized by the
named executive officers. |
(c) |
Amounts in this
column were paid to the named executives in February 2007 and 2008 for
each preceding year, respectively, according to the annual incentive plan
in place for each respective fiscal year. |
(d) |
Includes company
matching contributions according to the terms of the Company’s 401(k)
plan. |
(e) |
Includes life
insurance premiums paid by the Company for coverage equal to one times the
executive’s annual salary, which is the incremental cost required to cover
a benefit stated in the terms of each executive’s employment contract,
with the exception of Mr. Brouillard, who did not have an employment
agreement. |
(f) |
Includes executive
allowance reimbursements for 2007 as follows: Mr. Wade - $13,250 for
personal automobile use; Mr. Murray - $13,250 for personal automobile use;
Mr. Moore - $13,250 for personal automobile use and supplemental
insurance; Mr. Klasing - $13,250 for personal automobile use; Mr. Coppola
- $16,625 for personal automobile use; and Mr. Mueller- $7,750 for
personal automobile use, supplemental insurance and financial planning.
Information about these taxable perquisites is provided under the heading
“Other Compensation” of this proxy statement. |
(g) |
For Mr. Moore, this
column also includes reimbursement of $38,328 for moving expenses and a
tax reimbursement in the amount of $25,506 provided in accordance with the
Company’s relocation program. |
(h) |
This column also
includes the value of any personal use of the Company aircraft calculated
as the incremental cost to the Company and tax reimbursements related to
personal use of the Company aircraft. Individual expenses related to plane
use |
|
and
any related tax reimbursements provided in accordance with the Company’s
plane use policy are reported for 2007 and 2006. 2007
reportable compensation was as follows: Mr. Coppola - $9,306; and Mr.
Mueller - $920. No tax reimbursements applied to 2007 plane
use. The incremental cost to the Company for personal use of Company
aircraft is calculated based on the primary variable operating costs to
the Company, including fuel, maintenance and other miscellaneous variable
costs.
|
(i) |
For Mr. Brouillard,
the amount reported is the value of dividends earned on DSUs and converted
to additional DSUs. For all others, the amount reported
includes dividends paid during 2007 on restricted stock granted to
executives in 2007. |
(j) |
From May 7, 2007
until January 7, 2008, Mr. Brouillard served as Interim Chair, President,
and CEO. Effective January 7, 2008, Mr. Brouillard’s tenure as Interim
Chair, President, and CEO ended, and he became the non-executive Chair of
the Board. Information included for Mr. Brouillard represents
salary compensation he received while serving as the interim President and
Chief Executive Officer and stock-based compensation he received in May
2007. Mr. Brouillard essentially received stock-based
compensation in the amount of twice the normal level of stock-based
compensation awarded to non-employee directors. See the “2007
Director Summary Compensation Table” for information on stock awards to
directors. No information is provided for 2006, while Mr.
Brouillard served as a non-employee director, due to its lack of
comparability with the 2007 compensation. The table does
not include a special one-time cash payment in the amount of $200,000
approved by the Board and paid to Mr. Brouillard subsequent to December
29, 2007. |
(k) |
Messrs. Coppola and
Mueller are former executive officers of the Company, with respective
separation dates on May 7, 2007 and May 25, 2007. Mr. Coppola’s
compensation attributed to option awards is negative for 2007 as a result
of the forfeiture of options in connection with his departure from the
Company. Information provided in the “All Other Compensation”
column includes severance payments of $516,254 to Mr. Coppola and $216,074
to Mr. Mueller paid during 2007 according to the terms of their individual
separation agreements. |
2007
Grants of Plan-Based Awards Table
The following table sets forth
information concerning grants of cash and stock-based awards made under our
employee compensation and incentive plans. The non-equity incentive
plan information represents our annual bonus plan.
|
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards
|
All
Other
Stock
Awards
Number
of
Shares
of
|
All
Other
Option
Awards
Number
of
Securities
Underlying
|
Exercise
Price
of
Option
|
Grant
Date
Fair
Value of
Stock
and
Option
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Stock
(#)
|
Options
(#)
|
Awards
($)
|
Awards
($)
|
|
|
|
|
|
|
|
|
|
Mr.
Brouillard (a)
|
5/21/2007
|
$ -
|
$ -
|
$ -
|
-
|
15,000
|
$ 41.64
|
$ 183,300
|
|
5/21/2007
|
-
|
-
|
-
|
1,650
|
-
|
-
|
68,706
|
|
|
|
|
|
|
|
|
|
Mr.
Moore
|
2/20/2007
|
41,476
|
237,008
|
474,015
|
-
|
56,118
|
38.03
|
637,500
|
|
2/20/2007
|
-
|
-
|
-
|
5,588
|
-
|
-
|
212,512
|
|
|
|
|
|
|
|
|
|
Mr.
Wade
|
2/20/2007
|
52,501
|
300,007
|
600,013
|
-
|
66,021
|
38.03
|
749,999
|
|
2/20/2007
|
-
|
-
|
-
|
6,574
|
-
|
-
|
250,009
|
|
5/21/2007
|
-
|
-
|
-
|
5,000
|
-
|
-
|
208,200
|
|
|
|
|
|
|
|
|
|
Mr.
Murray
|
2/20/2007
|
52,501
|
300,007
|
600,013
|
-
|
59,420
|
38.03
|
675,011
|
|
2/20/2007
|
-
|
-
|
-
|
5,916
|
-
|
-
|
224,985
|
|
5/21/2007
|
-
|
-
|
-
|
5,000
|
-
|
-
|
208,200
|
|
|
|
|
|
|
|
|
|
Mr.
Klasing
|
2/20/2007
|
39,061
|
223,205
|
446,410
|
-
|
52,817
|
38.03
|
600,001
|
|
2/20/2007
|
-
|
-
|
-
|
5,259
|
-
|
-
|
200,000
|
|
|
|
|
|
|
|
|
|
Mr.
Coppola
|
2/20/2007
|
136,500
|
780,000
|
1,560,000
|
-
|
132,042
|
38.03
|
1,499,997
|
|
2/20/2007
|
-
|
-
|
-
|
13,148
|
-
|
-
|
500,018
|
|
|
|
|
|
|
|
|
|
Mr.
Mueller
|
2/20/2007
|
63,001
|
360,006
|
720,012
|
-
|
59,420
|
38.03
|
675,011
|
|
2/20/2007
|
-
|
-
|
-
|
5,916
|
-
|
-
|
224,985
|
(a) As
Interim Chair, President and CEO, Mr. Brouillard did not participate in the
employee incentive programs.
The
threshold non-equity incentive award amounts shown in the table represent the
amounts that would have been paid if the Company’s performance had met the
minimum level of all four financial targets as more fully described in the
“Compensation Discussion and Analysis” section of this proxy
statement. The target amounts represent the amounts that would have
been paid to the named executive officers if the Company’s performance met its
performance goals for each
financial
target, and the maximum amounts represent the amounts that would have been paid
if the Company’s performance met or exceeded all maximum performance objectives.
For Mr. Brouillard, the shares reported represent DSUs and stock options granted
to him as part of his compensation as a director. See the “2007
Director Compensation Table” for information on stock awards to
directors. For all other named executive officers, the shares
reported under “All Other Stock Awards” represent shares of restricted stock
that will vest on the third anniversary of the date of the grant. The
shares were granted with voting and dividend rights. The Company
currently pays a quarterly cash dividend of $0.06 per share. The
number of securities reported in “All Other Option Awards” represents SARs that
have a term of seven years and must be settled in shares of Company
stock. The 2007 SARs become exercisable in three approximately equal
annual installments commencing on the first anniversary of the date of
grant.
Outstanding
Equity Awards at 2007 Fiscal Year-End Table
The following table provides
information concerning stock-based awards granted to our named executive
officers that were outstanding at the end of our last fiscal year.
|
|
Option
Awards (a)
|
|
Stock
Awards (b)
|
Name
|
Grant
Date
|
Number
of Securities
Underlying
Unexercised
Options
Exercisable
Unexercisable
(#)
(#)
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units
of
Stock That
Have
Not Vested
(#)
|
Market
Value of
Shares
or Units
of
Stock That
Have
Not Vested
($)
|
|
|
|
|
|
|
|
|
|
|
Mr.
Brouillard (c)
|
5/24/2004
|
7,500
|
-
|
$ 28.07
|
|
5/24/2011
|
|
-
|
-
|
|
5/23/2005
|
5,000
|
2,500
|
39.65
|
|
5/23/2012
|
|
-
|
-
|
|
5/22/2006
|
2,500
|
5,000
|
38.35
|
|
5/22/2013
|
|
-
|
-
|
|
5/21/2007
|
-
|
15,000
|
41.64
|
|
5/21/2014
|
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Mr.
Moore
|
12/19/2005
|
30,000
|
15,000
|
42.10
|
|
12/19/2012
|
|
-
|
-
|
|
2/21/2006
|
30,000
|
60,000
|
40.45
|
|
2/21/2013
|
|
-
|
-
|
|
2/20/2007
|
-
|
56,118
|
38.03
|
|
2/20/2014
|
|
-
|
-
|
|
2/20/2007
|
-
|
-
|
-
|
|
-
|
|
5,588
|
$ 213,294
|
|
|
|
|
|
|
|
|
|
|
Mr.
Wade
|
2/18/2003
|
40,000
|
-
|
13.46
|
|
2/18/2010
|
|
-
|
-
|
|
8/18/2003
|
45,000
|
-
|
24.34
|
|
8/18/2010
|
|
-
|
-
|
|
2/23/2004
|
135,000
|
-
|
26.21
|
|
2/23/2011
|
|
-
|
-
|
|
2/22/2005
|
90,000
|
45,000
|
33.37
|
|
2/22/2012
|
|
-
|
-
|
|
2/21/2006
|
35,000
|
70,000
|
40.45
|
|
2/21/2013
|
|
-
|
-
|
|
2/20/2007
|
-
|
66,021
|
38.03
|
|
2/20/2014
|
|
-
|
-
|
|
2/20/2007
|
-
|
-
|
-
|
|
-
|
|
6,574
|
250,930
|
|
5/21/2007
|
-
|
-
|
-
|
|
-
|
|
5,000
|
190,850
|
|
|
|
|
|
|
|
|
|
|
Mr.
Murray
|
4/20/2005
|
60,000
|
30,000
|
33.57
|
|
4/20/2012
|
|
-
|
-
|
|
2/21/2006
|
30,000
|
60,000
|
40.45
|
|
2/21/2013
|
|
-
|
-
|
|
2/20/2007
|
-
|
59,420
|
38.03
|
|
2/20/2014
|
|
-
|
-
|
|
2/20/2007
|
-
|
-
|
-
|
|
-
|
|
5,916
|
225,814
|
|
5/21/2007
|
-
|
-
|
-
|
|
-
|
|
5,000
|
190,850
|
|
|
|
|
|
|
|
|
|
|
Mr.
Klasing
|
2/18/2003
|
90,000
|
-
|
13.46
|
|
2/10/2010
|
|
-
|
-
|
|
8/18/2003
|
15,000
|
-
|
24.34
|
|
8/18/2010
|
|
-
|
-
|
|
2/23/2004
|
90,000
|
-
|
26.21
|
|
2/23/2011
|
|
-
|
-
|
|
2/22/2005
|
60,000
|
30,000
|
33.37
|
|
2/22/2012
|
|
-
|
-
|
|
2/21/2006
|
30,000
|
60,000
|
40.45
|
|
2/21/2013
|
|
-
|
-
|
|
2/20/2007
|
-
|
52,817
|
38.03
|
|
2/20/2014
|
|
-
|
-
|
|
2/20/2007
|
-
|
-
|
-
|
|
-
|
|
5,259
|
200,736
|
|
|
|
|
|
|
|
|
|
|
Mr.
Coppola (d)
|
-
|
-
|
-
|
-
|
|
-
|
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Mr.
Mueller (d)
|
-
|
-
|
-
|
-
|
|
-
|
|
-
|
-
|
(a)
All stock
options and SARs vest in three equal annual increments commencing on the first
anniversary date of the grant.
(b) |
Except for Mr.
Brouillard, all stock awards listed in the table are awards of restricted
stock that vest on the third anniversary of the grant date. The
market value of the stock awards is reflective of the closing price of the
Company’s stock as of December 28, 2007 ($38.17). |
(c) |
All stock options
displayed for Mr. Brouillard are grants related to his service as a board
member. Mr. Brouillard’s option grant in 2007 was twice the
normal level for a non-employee director as a result of his appointment to
the position of Interim Chair, President and CEO. |
(d) |
Mr. Coppola and Mr.
Mueller exercised all vested stock options which had inherent value
shortly after their separation of employment in May
2007. Values derived from the option exercises are shown in the
“2007 Option Exercises and Stock Vested Table.” Grants made to
Mr. Coppola and Mr. Mueller in February 2007, as reported in the “2007
Grants of Plan-based Awards Table,” were forfeited upon their separation
from employment. As a result, Mr. Coppola and Mr. Mueller had
no outstanding stock incentives at the end of our fiscal
year. |
2007
Option Exercises and Stock Vested Table
The
following table sets forth information with respect to our named executive
officers who exercised stock options during 2007. No restricted stock
awards vested during 2007.
|
|
Option
Awards
|
Name
|
|
|
|
Value
Realized on
Exercise ($)
|
|
|
|
|
|
Mr.
Brouillard
|
|
-
|
|
$
-
|
Mr.
Moore
|
|
-
|
|
-
|
Mr.
Wade
|
|
109,999
|
|
2,647,972
|
Mr.
Murray
|
|
-
|
|
-
|
Mr.
Klasing
|
|
165,000
|
|
5,065,107
|
Mr.
Coppola
|
|
558,000
|
|
8,115,633
|
Mr.
Mueller
|
|
140,000
|
|
1,189,833
|
2007
Non-Qualified Deferred Compensation Table
The following table sets forth
information with respect to our named executive officers concerning executive
contributions to non-qualified deferred compensation plans during
2007. Aggregate earnings information includes changes in market value
of the investments plus any dividends received by the executive for their
DSUs.
Name
|
|
Executive Contributions
in Last
FY (a) ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Brouillard (c)
|
|
$ 68,706
|
|
$ 2,329
|
|
$ 15,705
|
|
$ 171,143
|
Mr.
Moore
|
|
39,151
|
|
1,280
|
|
-
|
|
40,431
|
Mr.
Wade
|
|
101,290
|
|
24,273
|
|
-
|
|
412,928
|
Mr.
Murray
|
|
-
|
|
-
|
|
-
|
|
-
|
Mr.
Klasing
|
|
36,945
|
|
9,444
|
|
-
|
|
169,440
|
Mr.
Coppola
|
|
27,000
|
|
13,289
|
|
-
|
|
271,686
|
Mr.
Mueller
|
|
2,979
|
|
(200)
|
|
2,778
|
|
-
|
(a) |
Additional
information is provided under “Retirement Savings” in the Compensation
Discussion and Analysis section of this proxy statement. Any
amounts reported for “Executive Contributions” are also reported in the
Summary Compensation Table of this proxy statement in the “Stock Awards”
column for Mr. Brouillard and in the “Salary” column for other
executives. |
(b) |
Represents
unrealized gains or losses on market-based investments selected by
executives for their deferred compensation balances. For Mr.
Brouillard and Mr. Mueller, the amount reported includes the value of
dividends earned on DSUs and converted to additional DSUs and the change
in overall value of DSUs based on the Company’s stock price. |
(c) |
Mr. Brouillard’s
deferred compensation represents the value of the compensation he has
received in the form of DSUs that he received for service as a
director. He received a distribution of Company stock valued at
$15,705 in January 2007 in accordance with the irrevocable distribution
instructions he established prior to
2007. |
Potential
Payments Upon Termination of Employment or Change in Control Table
The following table provides an
estimate of the inherent value of each of our named executive officer’s
employment agreement or other compensation arrangements described above,
assuming termination of employment or change in control occurred on December 28,
2007, the last business day of our 2007 fiscal year. Mr. Brouillard
does not have any reportable payments in the table because he did not have an
employment agreement or other compensation as the Company’s interim Chief
Executive Officer that would have been triggered by termination of his
employment.
Executive and Benefits
|
|
Due
Cause (a)
|
|
|
Retirement
|
|
|
Disability
|
|
|
Death
|
|
|
By
Company Other than Retirement,
Disability,
Death, or Due
Cause
or by Employee
for Good Reason (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Brouillard
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Wade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
500,011 |
|
|
$ |
500,011 |
|
|
$ |
- |
|
Annual
Incentive Plan (b)
|
|
|
- |
|
|
|
21,699 |
|
|
|
21,699 |
|
|
|
21,699 |
|
|
|
21,699 |
|
|
|
- |
|
Stock
Incentives (c) (d) (e)
|
|
|
3,657,350 |
|
|
|
3,882,593 |
|
|
|
3,882,593 |
|
|
|
3,882,593 |
|
|
|
3,657,350 |
|
|
|
3,882,593 |
|
Restricted
Stock (f)
|
|
|
- |
|
|
|
441,780 |
|
|
|
441,780 |
|
|
|
441,780 |
|
|
|
- |
|
|
|
441,780 |
|
Healthcare
(g)
|
|
|
- |
|
|
|
- |
|
|
|
8,098 |
|
|
|
- |
|
|
|
8,098 |
|
|
|
8,098 |
|
Life
Insurance
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
500,011 |
|
|
|
- |
|
|
|
- |
|
Disability
(h)
|
|
|
- |
|
|
|
- |
|
|
|
450,010 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Deferred
Compensation (i)
|
|
|
414,189 |
|
|
|
414,189 |
|
|
|
414,189 |
|
|
|
414,189 |
|
|
|
414,189 |
|
|
|
414,189 |
|
|
|
$ |
4,071,539 |
|
|
$ |
4,760,261 |
|
|
$ |
5,218,369 |
|
|
$ |
5,760,283 |
|
|
$ |
4,601,347 |
|
|
$ |
4,746,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Murray
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
500,011 |
|
|
$ |
500,011 |
|
|
$ |
- |
|
Annual
Incentive Plan (b)
|
|
|
- |
|
|
|
21,699 |
|
|
|
21,699 |
|
|
|
21,699 |
|
|
|
21,699 |
|
|
|
- |
|
Stock
Incentives (c) (d) (e)
|
|
|
276,000 |
|
|
|
422,319 |
|
|
|
422,319 |
|
|
|
422,319 |
|
|
|
276,000 |
|
|
|
422,319 |
|
Restricted
Stock (f)
|
|
|
- |
|
|
|
416,664 |
|
|
|
416,664 |
|
|
|
416,664 |
|
|
|
- |
|
|
|
416,664 |
|
Healthcare
(g)
|
|
|
- |
|
|
|
- |
|
|
|
8,098 |
|
|
|
- |
|
|
|
8,098 |
|
|
|
8,098 |
|
Life
Insurance
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
500,011 |
|
|
|
- |
|
|
|
- |
|
Disability
(h)
|
|
|
- |
|
|
|
- |
|
|
|
450,010 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Deferred
Compensation (i)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
$ |
276,000 |
|
|
$ |
860,682 |
|
|
$ |
1,318,790 |
|
|
$ |
1,860,704 |
|
|
$ |
805,808 |
|
|
$ |
847,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Moore
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation
|
|
$ |
- |
|
|
$ |
395,013 |
|
|
$ |
395,013 |
|
|
$ |
395,013 |
|
|
$ |
395,013 |
|
|
$ |
- |
|
Annual
Incentive Plan (b)
|
|
|
- |
|
|
|
17,143 |
|
|
|
17,143 |
|
|
|
17,143 |
|
|
|
17,143 |
|
|
|
- |
|
Stock
Incentives (c) (d) (e)
|
|
|
- |
|
|
|
7,857 |
|
|
|
7,857 |
|
|
|
7,857 |
|
|
|
- |
|
|
|
7,857 |
|
Restricted
Stock (f)
|
|
|
- |
|
|
|
213,294 |
|
|
|
213,294 |
|
|
|
213,294 |
|
|
|
- |
|
|
|
213,294 |
|
Healthcare
(g)
|
|
|
- |
|
|
|
- |
|
|
|
7,282 |
|
|
|
- |
|
|
|
7,282 |
|
|
|
7,282 |
|
Life
Insurance
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
395,013 |
|
|
|
- |
|
|
|
- |
|
Disability
(h)
|
|
|
- |
|
|
|
- |
|
|
|
355,512 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Deferred
Compensation (i)
|
|
|
40,310 |
|
|
|
40,310 |
|
|
|
40,310 |
|
|
|
40,310 |
|
|
|
40,310 |
|
|
|
40,310 |
|
|
|
$ |
40,310 |
|
|
$ |
673,617 |
|
|
$ |
1,036,411 |
|
|
$ |
1,068,630 |
|
|
$ |
459,748 |
|
|
$ |
268,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Klasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation
|
|
$ |
- |
|
|
$ |
372,008 |
|
|
$ |
372,008 |
|
|
$ |
372,008 |
|
|
$ |
372,008 |
|
|
$ |
- |
|
Annual
Incentive Plan (b)
|
|
|
- |
|
|
|
16,144 |
|
|
|
16,144 |
|
|
|
16,144 |
|
|
|
16,144 |
|
|
|
- |
|
Stock
Incentives (c) (d) (e)
|
|
|
3,795,750 |
|
|
|
3,947,144 |
|
|
|
3,947,144 |
|
|
|
3,947,144 |
|
|
|
3,795,750 |
|
|
|
3,947,144 |
|
Restricted
Stock (f)
|
|
|
- |
|
|
|
200,736 |
|
|
|
200,736 |
|
|
|
200,736 |
|
|
|
- |
|
|
|
200,736 |
|
Healthcare
(g)
|
|
|
- |
|
|
|
- |
|
|
|
8,098 |
|
|
|
- |
|
|
|
8,098 |
|
|
|
8,098 |
|
Life
Insurance
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
372,008 |
|
|
|
- |
|
|
|
- |
|
Disability
(h)
|
|
|
- |
|
|
|
- |
|
|
|
334,807 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Deferred
Compensation (i)
|
|
|
169,340 |
|
|
|
169,340 |
|
|
|
169,340 |
|
|
|
169,340 |
|
|
|
169,340 |
|
|
|
169,340 |
|
|
|
$ |
3,965,090 |
|
|
$ |
4,705,372 |
|
|
$ |
5,048,277 |
|
|
$ |
5,077,380 |
|
|
$ |
4,361,340 |
|
|
$ |
4,325,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Coppola (j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
780,000 |
|
|
$ |
- |
|
Annual
Incentive Plan
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,614 |
|
|
|
- |
|
Stock
Incentives
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,115,633 |
|
|
|
- |
|
Healthcare
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,568 |
|
|
|
- |
|
Deferred
Compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
271,686 |
|
|
|
- |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
9,192,501 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Mueller (j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
360,006 |
|
|
$ |
- |
|
Annual
Incentive Plan
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,310 |
|
|
|
- |
|
Stock
Incentives
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,189,833 |
|
|
|
- |
|
Healthcare
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,439 |
|
|
|
- |
|
Deferred
Compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,778 |
|
|
|
- |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,563,366 |
|
|
$ |
- |
|
(a) |
Voluntary
termination or termination for Due Cause makes an executive ineligible for
any employment agreement benefits other than any rights he may have under
the normal terms of other benefit plans. Executives must
exercise vested long-term incentives within 90 days after the date of
termination. The term “Due Cause” is defined in the
agreements as (i) a material violation of the executive’s obligations
under the agreement or a directive from the Board of Directors or the
executive’s superior that is
willful |
|
and deliberate and
that has not been cured; (ii) a material violation of the loyalty
obligations as provided in the agreement; (iii) an act of dishonesty
intended to or that does result in personal enrichment or material adverse
effect upon the Company; (iv) a conviction of a felony involving fraud,
breach of trust, or misappropriation; or (v) a determination that the
executive is addicted to a controlled substance. The agreements
provide that the executive’s employment is deemed to be terminated by the
Company without Due Cause if the executive elects to terminate his
employment as a result of: (i) a failure by the Company to pay the
executive any compensation due to the executive; (ii) the assignment of
any duties materially inconsistent (except in the nature of a promotion or
lateral move) with the position in the Company that he held immediately
prior to the reassignment or a substantial adverse alteration in the
nature or status of his position or responsibilities; or (iii) requiring
the executive to be based more than 60 miles from the Company’s office at
which he was principally employed immediately prior to the date of the
relocation. |
(b) |
At the end of 2007,
the named executive officers were eligible only for annual incentive
payments earned prior to their termination date. The delivery of any such
payments would coincide with the regular payment date for other
executives. Refer to the “Grants of Plan-Based Awards Table” for the range
of potential payments. Actual amounts earned for 2007 are shown
here. In the case of voluntary termination or termination for
Due Cause, the executive would be ineligible to receive the payment
because he would not have been actively employed on the date of
distribution. |
(c) |
Amounts shown here
are calculated as the differences between the exercise price of the
outstanding stock long-term incentives and the closing price of our stock
at the end of our fiscal year ($38.17). |
(d) |
An executive’s
retirement, defined as age 55 plus 10 years of service, allows all
unvested stock long-term incentives to continue vesting into
retirement. “Retirement” column amounts indicate the value of
all outstanding long-term incentives, based on footnote (c), assuming all
executives qualify for retirement. |
(e) |
The terms of
executives’ stock option agreements provide that all stock long-term
incentives are 100 percent vested when a change in control occurs, unless
an equivalent substitute equity award is provided by the acquiring
company. |
(f) |
The terms of
executives’ restricted stock awards provide that restricted stock becomes
100 percent vested when a change in control occurs, unless an equivalent
substitute equity award is provided by the acquiring company. |
(g) |
Amounts provided
here represent the Company’s cost of providing one year of healthcare
coverage to the executive. |
(h) |
Disability amounts
shown consist of the amount the executives receive under the Company’s
qualified plan plus an amount equal to 30 percent of their annual salary
as specified in their employment agreements. |
(i) |
Executives’
deferred compensation balances are always 100 percent vested and are not
affected by any type of termination.
|
(j) |
The employment of
Messrs. Coppola and Mueller terminated prior to December 28,
2007. The amounts shown were paid to them in conjunction with
their separation from employment in
2007. |
NON-MANAGEMENT
DIRECTOR COMPENSATION
Under our director compensation
program, each non-management director receives a combination of cash and
equity-based compensation. Non-management directors receive an annual
retainer of $25,000 and all additional applicable retainers or fees as set forth
in the following table. Specific committee member information is provided in the
“Corporate Governance” section of this proxy statement.
Board
Participation Type
|
|
Retainer/Fee
|
Chair
|
|
$100,000
|
Lead
Director
|
|
$ 25,000
|
Audit
Committee Chair
|
|
$ 15,000
|
Compensation
Committee Chair
|
|
$ 10,000
|
Finance
Committee Chair
|
|
$ 10,000
|
Nominating
and Corporate Governance Committee Chair
|
|
$ 10,000
|
Board
Meeting Attendance
|
|
$ 2,000
|
Telephonic
Board Meeting Attendance
|
|
$ 1,000
|
Committee
Meeting Attendance
|
|
$ 1,000
|
Telephonic
Committee Meeting Attendance
|
|
$ 750
|
Each non-management director may elect
to receive all or a portion of his or her annual retainer on a deferred basis in
the form of DSUs. Each DSU is equivalent to one share of our common
stock. Dividends paid by the Company are credited toward the purchase
of additional DSUs. DSUs are payable in the form of common stock to
participating directors over a specified period of time as elected by the
participating director, or whenever their Board service ends, whichever is
sooner.
In addition, each non-management
director receives stock-based compensation. In 2007, each director, except Mr.
Brouillard, received 7,500 stock options and 825 DSUs. Mr. Brouillard
received 15,000 stock options and 1,650 DSUs. The stock options will
vest in three equal annual installments commencing on the first anniversary of
the grant date and expire after seven years. DSUs are fully vested
upon grant but will not be available for distribution until the director’s
service on the Board ends.
In November 2007, the Board approved a
change to the equity portion of the director compensation program, which
established long-term incentives valued at $120,000 per year. The
value of the long-term incentives will be awarded annually in the form of 50
percent in SARs and 50 percent in DSUs. The first grant under the new
program will be made in May 2008. Under the new program, newly
appointed Board members will receive an initial grant valued at $120,000.
Thereafter, annual stock-based compensation is granted to a director shortly
after the date of the annual stockholder meeting. Each new director’s
first annual grant will be prorated based upon the number of days served as a
director during the year preceding the first annual grant. SARs vest in three
equal annual installments commencing on the first anniversary of the grant and
expire after seven years.
Subsequent to the Company’s fiscal year
end, the board of directors approved a special one-time cash payment of $200,000
to Mr. Brouillard in recognition of his service as interim President and
CEO.
2007
Director Summary Compensation Table
Information provided in the following
table reflects the compensation delivered to non-management directors for our
last fiscal year:
Name
|
|
Fees
Earned or Paid
in Cash (a) ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
C. Brouillard (e)
|
|
$ |
13,668 |
|
|
$ |
68,706 |
|
|
$ |
100,421 |
|
|
$ |
973 |
|
|
$ |
183,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence
P. Castellani
|
|
|
46,250 |
|
|
|
34,353 |
|
|
|
760,325 |
|
|
|
348 |
|
|
|
841,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darren
R. Jackson
|
|
|
50,500 |
|
|
|
34,353 |
|
|
|
79,250 |
|
|
|
715 |
|
|
|
164,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas
J. LaHowchic
|
|
|
51,500 |
|
|
|
34,353 |
|
|
|
18,800 |
|
|
|
493 |
|
|
|
105,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
S. Oglesby
|
|
|
58,000 |
|
|
|
34,353 |
|
|
|
80,046 |
|
|
|
1,050 |
|
|
|
173,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gilbert
T. Ray
|
|
|
62,750 |
|
|
|
34,353 |
|
|
|
83,689 |
|
|
|
798 |
|
|
|
181,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlos
A. Saladrigas
|
|
|
61,750 |
|
|
|
34,353 |
|
|
|
81,621 |
|
|
|
748 |
|
|
|
178,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
L. Salter
|
|
|
51,750 |
|
|
|
34,353 |
|
|
|
76,796 |
|
|
|
831 |
|
|
|
163,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Francesca
M. Spinelli
|
|
|
57,750 |
|
|
|
34,353 |
|
|
|
77,485 |
|
|
|
848 |
|
|
|
170,436 |
|
(a)
|
Information
includes paid or deferred board annual retainers, chair retainers and
board and committee meeting fees paid to directors based on their
respective meeting attendance during 2007.
|
(b) |
Represents the
dollar amounts recognized for the fair value of DSUs granted during fiscal
2007 in accordance with Statement of Financial Accounting Standards No.
123 (revised 2004), “Share-Based Payment,” or SFAS 123R. The grant date
fair value is calculated using the closing price of the Company’s stock on
the date of grant. The reported fair value is based on the number of units
granted multiplied by the stock price ($41.64) on May 21, 2007, the grant
date. For additional information, refer to Note 16 of the Company’s
consolidated financial statements in the 2007 Form 10-K filed with the SEC
on February 27, 2008. These amounts reflect the Company’s accounting
expense and do not correspond to the actual value that will be realized by
the directors. |
(c) |
Represents the
dollar amounts recognized during fiscal year 2007 for the fair value of
stock options granted in 2007, as well as prior fiscal years, in
accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to service-based
vesting conditions. For fiscal 2007, the Company’s directors received
grants of options on May 21, 2007 with an exercise price of $41.64, the
closing price of the Company’s stock on the date of grant. The grant date
fair value per option was $12.22. For information on the valuation
assumptions, refer to Note 16 of the Company’s consolidated financial
statements in the 2007 Form 10-K filed with the SEC on February 27, 2008.
These amounts reflect the Company’s accounting expense, and do not
correspond to the actual value that will be realized by the
directors. The amount reported for Mr. Castellani reflects the
accounting expense for stock options granted to him during his tenure as
our past chief executive officer and chairman and other grants awarded to
him under our director compensation arrangements, all of which continue to
vest during his service as a director. |
(d) |
Amounts reported are
the value of dividends earned on DSUs and converted to additional
DSUs. |
(e) |
Compensation
reported for Mr. Brouillard includes additional DSUs and stock options
awarded to him by the Board of Directors when he assumed the role of
interim Chief Executive Officer in May 2007. The amounts
reported in this table for “Stock Awards”, “Option Awards” and “All Other
Compensation” are also reported in the Summary Compensation
Table. Reported cash compensation for Mr. Brouillard includes
the normal board compensation fees paid to him prior to when he became
Interim Chief Executive Officer in 2007. Refer to the Summary Compensation
Table for compensation paid to Mr. Brouillard while he served as Interim
Chair, President, and Chief Executive
Officer. |
Directors’
Outstanding Equity Awards at 2007 Fiscal-Year End
The following table provides
information about non-management directors’ outstanding equity as of the end of
our last fiscal year:
Name
|
|
Outstanding
Stock
Options
(#)
|
|
Outstanding
Deferred
Stock
Units
(#)
|
John
C. Brouillard
|
|
37,500
|
|
4,476
|
Lawrence
P. Castellani (a)
|
750,000
|
|
1,660
|
Darren
R. Jackson
|
|
28,750
|
|
3,191
|
Nicholas
J. LaHowchic
|
|
15,000
|
|
2,264
|
William
S. Oglesby
|
|
26,875
|
|
4,741
|
Gilbert
T. Ray
|
|
36,250
|
|
3,539
|
Carlos
A. Saladrigas
|
|
52,500
|
|
3,330
|
William
L. Salter
|
|
48,124
|
|
3,679
|
Francesca
M. Spinelli
|
|
56,250
|
|
3,747
|
(a)
|
Outstanding
stock options for Mr. Castellani reflect those awarded to him during his
tenure as our past chief executive officer and chairman and other grants
awarded to him under our director compensation arrangement, all of which
continue to vest during his service as a
director.
|
INFORMATION
CONCERNING OUR EXECUTIVE OFFICERS
The
following table provides information about our executive officers as of March
24, 2008.
Name
|
|
Age
|
|
Position
|
|
Darren R.
Jackson |
43
|
|
President
and Chief Executive Officer and Director
|
|
|
|
|
|
|
Kevin
P. Freeland
|
50
|
|
Executive
Vice President, Supply Chain and Information Technology
|
|
|
|
|
|
|
Elwyn G. Murray
III |
41
|
|
Executive
Vice President, Customer Development Officer
|
|
|
|
|
|
|
Michael
A. Norona
|
44
|
|
Executive
Vice President, Chief Financial Officer and Secretary
|
|
|
|
|
|
|
Jimmie
L. Wade
|
53
|
|
Executive
Vice President, Customer Experience Officer
|
|
|
|
|
|
|
Keith
A. Oreson
|
51
|
|
Senior
Vice President, Human Resources
|
Our
executive officers are elected by and serve at the discretion of our
Board. Set forth below is a brief description of the business
experience of all executive officers other than Mr. Jackson, who is also a
Director and whose business experience is set forth in the “Information
Concerning Members of Our Board” section of this proxy statement.
Mr. Freeland, Executive Vice
President, Supply Chain and Information Technology, joined us in February 2008.
Before joining Advance, Mr. Freeland was the President and Founder of
Optimal Advantage, a boutique retail consulting firm, from 2004 to 2008.
Prior to establishing his own business, Mr. Freeland spent eight years with Best
Buy Co., Inc., a specialty retailer of consumer electronics, office products,
appliances and software, serving as its Vice President of Inventory, Senior Vice
President of Inventory and, ultimately, President of the Musicland
Division. Mr. Freeland also spent eight years at Payless Shoe Source, a
family footwear and accessories retail chain, in a variety of merchandising
positions, including his final position as Vice President of Merchandise
Distribution.
Mr. Murray, Executive Vice
President, Customer Development Officer, joined us in April 2005 and has served
in his current position since February 2008. In his current position,
he is responsible for customer strategy, segment management and value
proposition development and deployment, merchandising, marketing and
advertising. From May 2007 until February 2008, Mr. Murray served as Executive
Vice President, Merchandising, Supply Chain and Technology, and from April 2005
until May 2007, he served as Executive Vice President,
Administration. Before joining Advance, Mr. Murray served in a
variety of positions for Food Lion, LLC, a supermarket chain. From
May 2002 to January 2005, he served as Senior Vice President of Store
Operations. From January 2001 to April 2002, he served as Senior Vice
President of Procurement, Distribution and Quality Assurance. From July 1999 to
December 2000, he served as Vice President of Procurement and Pricing, and from
December 1998 to June 1999, he held the position of Vice President of
Marketing. Prior to 1998, Mr. Murray held a number of other positions
with Food Lion in a variety of functional areas including category management,
information technology and purchasing.
Mr. Norona, Executive Vice
President, Chief Financial Officer and Secretary, joined us in February
2008. Before joining Advance, Mr. Norona served as the President of
Financial Services for Best Buy Co., Inc., a national retailer of consumer
electronics, office products, appliances and software, from March 2007 to
February 2008. Prior to that position, he served Best Buy as Vice
President of Financial Services from June 2006 until March 2007, as Vice
President Finance-Retail Decision Support from May 2004 until June 2006, and as
Vice President Finance-Shared Services from April 2002 until May
2004. Prior to April 2002, Mr. Norona served in escalating financial
leadership roles, ultimately as head of Finance, with Future Shop, a Best Buy
subsidiary.
Mr. Wade, Executive Vice
President, Customer Experience Officer, joined us in February 1994 and has
held his current position since February 2008. In his current
position, he has responsibility for store operations, new store development and
the accompanying customer experience. From May 2005 until February
2008, Mr. Wade served as Executive Vice President, Business
Development. Mr. Wade was named President in October 1999
and was named Chief Financial Officer in March 2000. He served
as President and Chief Financial Officer through August 2003 and served as
President until May 2005. Mr. Wade also served as our Secretary
from March 2000 until April 2001. Prior to
1993,
Mr. Wade was Vice President, Finance and Operations, for S.H. Heironimus, a
regional department store company. Mr. Wade is a certified
public accountant.
Mr. Oreson, Senior Vice
President, Human Resources, joined us in May 2005. Before joining
Advance, Mr. Oreson served as Vice President of Human Resources for Frank’s
Nursery & Crafts, Inc., a lawn and garden products retailer, from 1998 to
May 2005. From 1993 to 1997, he served as Senior Vice President, Human Resources
for ARAMARK Uniform Services, a provider of food services, facilities management
and uniform apparel. Prior to 1993, Mr. Oreson worked for Pizza Hut, a division
of PepsiCo, where he held a variety of positions, ultimately serving as Division
Director, Human Resources.
There are
no family relationships among any of our executive officers.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information known to us regarding the ownership of
our common stock as of March 24, 2008 by:
● |
each
person or entity known to us that beneficially owns more than 5 percent of
our common stock;
|
● |
each
member of our Board;
|
● |
each
of our executive officers named in the “Summary Compensation Table”
included in the “Executive Compensation” section of this proxy statement;
and
|
● |
all
directors and executive officers as a
group.
|
Beneficial
ownership is determined in accordance with the rules of the SEC. In
computing the number of shares beneficially owned by a person and the percentage
of ownership held by that person, shares of common stock subject to options and
warrants held by that person that are currently exercisable or will become
exercisable within 60 days after March 24, 2008 are deemed outstanding, while
these shares are not deemed outstanding for computing percentage ownership of
any other person. The address of each beneficial owner for which an
address is not otherwise indicated is: c/o Advance Auto Parts, Inc., 5008
Airport Road, Roanoke, Virginia 24012. Unless otherwise indicated in
the footnotes to the table, the persons and entities named in the table have
sole voting and investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. We know of no
agreements among our stockholders which relate to voting or investment power
over our common stock or any arrangement that may at a subsequent date result in
a change in control of the Company.
The
percentages of common stock beneficially owned are based on 94,806,781 shares of
our common stock outstanding at March 24, 2008.
|
|
|
Shares
Beneficially
Owned
|
|
|
Name
of Beneficial Owner
|
|
Number
|
|
Percentage
|
|
|
FMR,
LLC.(1)
82
Devonshire Street
Boston,
Massachusetts 02109
|
|
8,391,676
|
|
8.9%
|
|
|
John
C. Brouillard(2)
|
|
29,932
|
|
*
|
|
|
Lawrence
P. Castellani(3)
|
|
772,792
|
|
*
|
|
|
Darren
R. Jackson(4)
|
|
136,726
|
|
*
|
|
|
Nicholas
J. LaHowchic(5)
|
|
15,768
|
|
*
|
|
|
William
S. Oglesby(6)
|
|
26,624
|
|
*
|
|
|
Gilbert
T. Ray(7)
|
|
37,395
|
|
*
|
|
|
Carlos
A. Saladrigas(8)
|
|
48,335
|
|
*
|
|
|
William
L. Salter(9)
|
|
46,184
|
|
*
|
|
|
Francesca
M. Spinelli(10)
|
|
54,003
|
|
*
|
|
|
Michael
O. Moore
|
|
-
|
|
*
|
|
|
Jimmie
L. Wade(11)
|
|
493,991
|
|
*
|
|
|
Elwyn
G. Murray III(11)
|
|
187,132
|
|
*
|
|
|
Paul
W. Klasing(11)(12)
|
|
399,713
|
|
*
|
|
|
Michael
N. Coppola
|
|
318
|
|
*
|
|
|
David
B. Mueller
|
|
350
|
|
*
|
|
|
All
executive officers and directors as a group (18 persons)(13)
|
2,418,474
|
|
2.5%
|
|
_______________
* |
Less
than 1 percent of the outstanding shares of common stock. |
|
|
|
|
|
|
|
|
(1) |
Based solely on a
Schedule 13G filed with the SEC by FMR LLC (“FMR”) and Edward C. Johnson,
3rd,
all such shares are beneficially owned by four entities: (a) Fidelity
Management & Research Company, a registered investment advisor to
various investment companies (“Fidelity Funds”) and a wholly-owned
subsidiary of FMR (“FM&RC”), (b) Pyramis Global Advisors, LLC
(“PGALLC”), an indirect wholly-owned subsidiary of FMR and a registered
investment advisor, (c) Pyramis Global Advisors Trust Company
(“PGATC”), an indirect wholly-owned subsidiary of FMR and a bank and (d)
Fidelity International Limited (“FIL”), a qualified institution. FM&RC
is the beneficial owner of 5,906,836 shares. Mr. Johnson (Chairman of
FMR), FMR (through its control of FM&RC) and Fidelity Funds each has
sole dispositive power with respect to 5,906,836 shares. Neither
Mr. Johnson nor FMR has the sole power to vote or direct the voting
of the shares owned directly by Fidelity Funds. The sole voting power of
all shares directly owned by Fidelity Funds resides with the Board of
Trustees of such funds. PGALLC is the beneficial owner of 200,000 shares.
Mr. Johnson and FMR (through its control of PGALLC) each has sole
dispositive and voting power with respect to 200,000 shares. PGATC is the
beneficial owner of 1,681,940 shares. Mr. Johnson and FMR (through
its control of PGATC) each has sole dispositive and voting power with
respect to |
|
1,681,940
shares. FIL is the beneficial owner of 602,900 shares of which it has sole
dispositive power of 602,900 shares and sole voting power of 509,100
shares.
|
(2)
|
Includes
4,484 shares of our common stock with respect to DSUs and 25,000 shares of
our common stock subject to options exercisable within 60 days of March
24, 2008.
|
(3)
|
Includes
1,663 shares of our common stock issuable with respect to DSUs and 742,500
shares of our common stock subject to options exercisable within 60 days
of March 24, 2008.
|
(4)
|
Includes
110,000 shares of our common stock with respect to restricted common
stock; 5,476 shares of our common stock issuable with respect to DSUs; and
21,250 shares of our common stock subject to options exercisable within 60
days of March 24, 2008.
|
(5)
|
Includes
2,268 shares of our common stock issuable with respect to DSUs and 7,500
shares of our common stock subject to options exercisable within 60 days
of March 24, 2008.
|
(6)
|
Includes
4,749 shares of our common stock issuable with respect to DSUs and 19,375
shares of our common stock subject to options exercisable within 60 days
of March 24, 2008.
|
(7)
|
Includes
3,545 shares of our common stock issuable with respect to DSUs and 28,750
shares of our common stock subject to options exercisable within 60 days
of March 24, 2008.
|
(8)
|
Includes
3,335 shares of our common stock issuable with respect to DSUs and 45,000
shares of our common stock subject to options exercisable within 60 days
of March 24, 2008.
|
(9)
|
Includes
3,685 shares of our common stock issuable with respect to DSUs and 40,624
shares of our common stock subject to options exercisable within 60 days
of March 24, 2008.
|
(10)
|
Includes
3,753 shares of our common stock issuable with respect to DSUs and 48,750
shares of our common stock subject to options exercisable within 60 days
of March 24, 2008.
|
(11) |
Includes
shares of our common stock subject to options and SARs beneficially owned
by the following persons and exercisable within 60 days of March 24, 2008:
Mr. Klasing – 362,605; Mr. Murray – 169,806; and Mr. Wade –
447,007. Also includes shares of our restricted stock owned by
the following persons: Mr. Klasing – 7,108 shares; Mr. Murray –
16,326 shares; and Mr. Wade – 16,984 shares.
|
(12)
|
Includes
indirect ownership of 30,000 shares held by Mr. Klasing’s
wife.
|
(13)
|
Includes
219,462 shares of our common stock with respect to restricted common
stock; 36,021 shares of our common stock issuable with respect to DSUs;
and 2,055,271 shares of our common stock subject to options and SARs
beneficially owned and exercisable within 60 days of March 24, 2008 by our
executive officers and directors.
|
STOCK
OWNERSHIP GUIDELINES FOR DIRECTORS AND EXECUTIVE COMMITTEE
In an
effort to align the interests of non-employee directors and members of
management’s Executive Committee more closely with the interests of
stockholders, the Company’s Board has adopted Stock Ownership Guidelines as
follows:
Directors |
Stock valued at 3
times their annual retainer |
Chairman, President
and CEO |
Stock valued at 3
times their annual base salary |
Other Executive
Committee Members |
Stock valued at 1
times their annual base salary |
Incumbent
Directors and Executive Committee Members are expected to achieve this level of
stock ownership by the end of year 2012. Current Executive Committee
Members who have been in their current positions for less than two years will be
given an additional two years to reach the target ownership
levels. Those individuals who do not achieve the required levels of
ownership within the prescribed amount of time will be required to retain a
designated percentage of the net shares received upon the exercise of any stock
options or SARs until the guideline ownership levels have been
reached.
Shares or
units held by a director or an executive officer in any deferral plan are
included in calculating the value of ownership to determine whether the minimum
ownership requirement has been met. Currently, each director receives
a portion of his or her annual retainer in the form of DSUs and is permitted to
defer a portion of his or her cash retainer in the form of DSUs.
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of
the Securities Exchange Act of 1934 requires “insiders,” including our executive
officers, directors and beneficial owners of more than 10 percent of our common
stock, to file reports of ownership and changes in ownership of our common stock
with the SEC and the NYSE, and to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review
of copies of such forms received by us, or written representations from
reporting persons that no Forms 5 were required for those persons, we
believe that our insiders complied with all applicable
Section 16(a) filing requirements during fiscal 2007, with the
following exceptions:
The
timely filed Form 3 filed on behalf of Clarence R. Martin, Jr., did not report
his ownership of 5,971 DSUs, but the ownership was reported on an amended Form 3
filed four days later. The acquisition of a total of 10 DSUs by Mr.
Mueller in three separate transactions over the course of one month as a result
of salary deferral were reported on a late-filed Form 4.
PROPOSAL
NO. 2
RATIFICATION
OF APPOINTMENT BY THE AUDIT COMMITTEE OF
DELOITTE
& TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR 2008
Our Audit
Committee has selected Deloitte & Touche LLP (“Deloitte”) as our independent
registered public accounting firm for fiscal 2008. Deloitte also
served as our independent registered public accounting firm for fiscal
2007. You are being asked to ratify the appointment by our Audit
Committee of Deloitte as our independent registered public accounting firm for
fiscal 2008.
Members
of Deloitte will be present at the Annual Meeting, will have an opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions. If Deloitte should decline to act or otherwise
become incapable of acting, or if Deloitte’s engagement is discontinued for any
reason, our Audit Committee will appoint another accounting firm to serve as our
independent registered public accounting firm for fiscal 2008.
2007
and 2006 Audit Fees
The
following table summarizes the aggregate fees billed by Deloitte for 2007 and
2006 for the following professional services:
|
|
2007
|
|
|
2006
|
|
|
|
($
in thousands)
|
|
|
($
in thousands)
|
|
Audit
Fees (a)
|
|
|
$1,968 |
|
|
|
$1,477 |
|
Audit-Related
Fees
|
|
|
- |
|
|
|
|
|
Tax
Fees (b)
|
|
|
- |
|
|
|
|
|
All
Other Fees
|
|
|
- |
|
|
|
- |
|
Total
|
|
|
$1,968 |
|
|
|
$1,477 |
|
(a) |
Fees for audit
services billed in 2007 and 2006 consisted of: |
|
● |
|
audit of our annual
financial statements |
|
● |
|
reviews of our
quarterly financial statements |
|
● |
|
attestation of
management’s assessment and effectiveness of internal controls as required
by the Sarbanes-Oxley Act of 2002, Section 404 |
|
● |
|
statutory
and regulatory audits, consents and other services related to SEC
matters
|
Our 2007
audit fees increased 33% compared to 2006. This increase was higher than
increases experienced in previous years primarily due to additional audit
services provided by Deloitte in connection with our corporate restructuring
project, financial systems upgrade and adoption of Financial Interpretation No.
48, “Accounting for Uncertainty in Income Taxes.”
The Audit
Committee is required by its charter to pre-approve audit services and permitted
non-audit services to be performed by our independent registered public
accounting firm. The Audit Committee approved all services provided
by Deloitte during 2007.
In
considering the nature of the services provided by Deloitte, the Audit Committee
determined that such services are compatible with the provision of independent
audit services. The Audit Committee discussed these services with
Deloitte and management to determine that they are permitted under the rules and
regulations concerning auditor independence promulgated by the SEC to implement
the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified
Public Accountants.
OUR BOARD RECOMMENDS A VOTE FOR RATIFICATION
OF
DELOITTE & TOUCHE LLP AS OUR
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR 2008.
AUDIT COMMITTEE REPORT
We are
responsible for providing independent, objective oversight of Advance’s
accounting functions and internal controls and operate pursuant to a written
charter approved by Advance’s Board. We are comprised entirely of
three independent directors who meet independence, experience and other
qualification requirements of the NYSE listing standards, Section 10A(m)(3) of
the Securities Exchange Act of 1934 and the rules and regulations of the
SEC. Advance’s Board has determined the committee’s current chair,
Mr. Saladrigas, is the Audit Committee “financial expert,” as defined by SEC
rules.
Management
is responsible for Advance’s financial reporting process, including Advance’s
system of internal control, and for the preparation of consolidated financial
statements in accordance with accounting principles generally accepted in the
United States. Advance’s independent registered public accounting
firm, or “independent accountants,” are responsible for auditing its
consolidated financial statements and providing an opinion as to their
conformity with accounting principles generally accepted in the United States as
well as attesting and reporting on the effectiveness of its internal controls
over financial reporting. Our responsibility is to monitor and review
these processes. It is not our duty or responsibility to conduct auditing or
accounting reviews or procedures. Consequently, in carrying out our
oversight responsibilities, we shall not be charged with, and are not providing,
any expert or special assurance as to Advance’s financial statements, or any
professional certification as to the independent accountants’
work. In addition, we have relied on management’s representation that
the financial statements have been prepared with integrity and objectively in
conformity with accounting principles generally accepted in the United States,
and on the representations of independent accountants included in their report
on Advance’s financial statements.
During
2007 we met nine times, including five times via conference call. We
schedule our meetings to ensure we have sufficient time to devote attention to
all of our tasks. During 2007 and subsequent to the end of the year,
we:
● |
appointed
Deloitte & Touche LLP as the independent registered public accounting
firm for fiscal year 2007;
|
● |
met
with management and the independent accountants to review and discuss
Advance’s critical accounting policies and significant
estimates;
|
● |
met
with management and the independent accountants to review and approve the
fiscal year 2007 audit plan;
|
● |
met
regularly with both the independent accountants and internal audit outside
the presence of management;
|
● |
met
with management and the independent accountants to review the audited
financial statements for the year ended December 29, 2007, and internal
controls over financial reporting as of December 29,
2007;
|
● |
reviewed
and approved the quarterly and annual reports prior to filing with the
SEC;
|
● |
reviewed
and approved the quarterly earnings press releases and other financial
press releases;
|
● |
met
with the Chief Internal Audit Executive to review, among other things, the
audit plan, test work, findings and recommendations, and
staffing;
|
● |
reviewed
the processes by which risk is assessed and mitigated;
and
|
● |
completed
all other responsibilities under the Audit Committee
charter.
|
We have
discussed with the independent accountants the matters required by Statement on
Auditing Standards No. 114 (The Auditor’s Communication With Those Charged With
Governance), which includes a review of significant accounting estimates and
Advance’s accounting practices. In addition, we have received written
disclosures from the independent accountants required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees), and
discussed with independent accountants their firm’s independence.
Based
upon our discussion with management and the independent accountants, and our
review of the representations of management and the independent accountants, we
recommended to the Board that the audited consolidated financial statements be
included in Advance’s annual report on Form 10-K for the year ended December 29,
2007.
We
considered whether the independent accountants’ provision of non-audit services
to Advance is compatible with maintaining the independent accountants’
independence, and have determined the provision of the non-audit services are
compatible with the independent accountants’
independence. Accordingly, we have approved retention of Deloitte as
Advance’s independent registered public accounting firm for fiscal year
2008.
We
reviewed and reassessed the adequacy of the Audit Committee Charter and
recommended changes, which were approved by the Board.
THE AUDIT
COMMITTEE
Carlos A.
Saladrigas, Chair
John C.
Brouillard
Nicholas
J. LaHowchic
OTHER
MATTERS
A copy of
our 2007 annual report of stockholders is being mailed to each stockholder of
record together with this proxy statement. The annual report is not
part of our proxy soliciting material.
By order
of the Board of Directors,
Michael
A. Norona
Executive
Vice President,
Chief
Financial Officer and Secretary
Roanoke,
Virginia