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AUTOZONE, INC.
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14, 2005 14, 2005. 1. to elect eight directors; 2. to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 1. 2. 3. voted.) How many independent directors does AutoZone have? 2005. .16, 200416, 2004.“we”“we,” and “the Company” mean AutoZone, Inc., and16, 2004,14, 2005, at 8:30 a.m. CST at the J.R. Hyde III Store Support Center, 123 South Front Street, Memphis, Tennessee., to be our proxy solicitation agent for a fee of $7,500$5,000 plus expenses. We also may make additional solicitations in person, by telephone, facsimile, e-mail, or other forms of communication. Brokers, banks, and others who hold our stock for beneficial owners will be reimbursed by us for their expenses related to forwarding our proxy materials to the beneficial owners.2004.2005.to approve the 2005 Executive Incentive Compensation Plan to replace our expiring Amended and Restated 2000 Executive Incentive Plan; and3.20052006 fiscal year.21, 2004.17, 2005. Only stockholders of record at the close of business on that date are entitled to attend and vote at the Annual Meeting. The only class of stock that can be voted at the meeting is our common stock. Each share of common stock is entitled to one vote on all matters that come before the meeting. At the close of business on the record date, October 21, 2004,17, 2005, we had 79,776,94076,614,649 shares of common stock outstanding.anthe AutoZone Employee Stock Purchase Plan account?the 2005 Executive Incentive Compensation Plan, FOR Ernst & Young LLP as independent registered public accounting firm and in the proxies’ discretion on any other matter that may properly be brought before the meeting or any adjournment of the meeting.EquiServe, Inc.Computershare. A representative of EquiServeComputershare will serve as the inspector of election.proxy;proxy, or2005. The2006. Under Nevada law, directors are elected by a plurality, so the eight persons nominated for director and receiving the most votes will be elected. Since directors are electedPursuant to AutoZone’s Corporate Governance Principles, however, any nominee for director who receives a greater number of votes "withheld" from his or her election than votes "for" such election is required to tender his or her resignation for consideration by a plurality, abstentionsthe Nominating and Corporate Governance Committee of the Board. The Nominating and Corporate Governance Committee will recommend to the Board the action to be taken with respect to such resignation.affecteffect on theirthe election of directors. (“brokerBroker non-votes” are shares held by banks or brokers on behalf of their customers that are represented at the meeting but are not voted).Each20032004 annual meeting.44,45, has been a Directordirector since 2000. He has been the Edgar S. Woolard, Jr. Professor of Corporate Governance since 2000 and is the Director of the Center for Corporate Governance at the University of Delaware. He is also of counsel to Holland & Knight LLP. Previously, he had been a Professor at the Stetson University College of Law since 1990. Mr. Elson is also a Directordirector of Alderwoods Group, Inc., HealthSouth Corporation, and the Investor Responsibility Research Center.42,43, has been a Directordirector since 2002. He has been the President and Chief Operating Officer for Earl G. Graves Publishing Company, publisher of Black Enterprise magazine, since 1998 and has been employed by the same company in various capacities since 1988.57,58, has been a Directordirector since 1996. She has been the President and Chief Executive Officer of the Institute for Student Achievement since 2000. Previously, she was the Superintendent of the Memphis, Tennessee City School System since 1992.61,62, has been a Directordirector since 1986.1986 and non-executive Chairman of the Board since March, 2005. He has been the President of Pittco, Inc., an investment company, since 1989 and has been the Chairman of GTx, Inc., a biotechnology, pharmaceutical company since 2000. Mr. Hyde was AutoZone’s Chairman from 1986 to 1997 and its Chief Executive Officer from 1986 to 1996. He was Chairman and Chief Executive Officer of Malone & Hyde, AutoZone’s former parent company, until 1988. Mr. Hyde is also a Directordirector of FedEx Corporation.42,43, has been a Directordirector since 1999. He is the Chairman and Chief Executive Officer of ESL Investments, Inc., a private investment firm which he founded in 1988, and has beenis the Chairman of the Board and a Directordirector of Sears Holdings Corporation. From May, 2003, until the completion of the Sears-Kmart combination in March, 2005, Mr. Lampert served as Chairman of the Board and a director of Kmart Holding Corporation since May 2003. Mr. LampertCorporation. He is also a Directordirector of AutoNation, Inc.58,59, has been a Directordirector since 2000. He is a private investor.investor and is Chairman of the Board and a director of Danka Business Systems PLC. Until his retirement in 1999, he had held various positions with The Home Depot, Inc., including Senior Vice President-Strategic Business Development from 1997 to 1999; President, Midwest Division from 1994 to 1997; and Senior Vice President-Corporate Information Systems from 1990 to 1994. He was also President of SciQuest.com, Inc. in 2000. He is also a Director of Danka Business Systems PLC.Steve Odland,William C. Rhodes, III 46,, 40, has been Chairman,President, Chief Executive Officer, and a Directordirector since January 2001,March, 2005. Prior to his appointment as President and PresidentChief Executive Officer, Mr. Rhodes was Executive Vice President-Store Operations and Commercial. Prior to fiscal 2005, he had been Senior Vice President-Supply Chain and Information Technology since Mayfiscal 2002, and prior thereto had been Senior Vice President-Supply Chain since 2001. Previously,Prior to that time, he was an executive with Ahold USA from 1998 to 2000. Mr. Odland was President ofserved in various capacities within the Foodservice Division of Sara Lee BakeryCompany, including Vice-President-Stores in 2000, Senior Vice President-Finance and Vice President-Finance in 1999 and Vice President-Operations Analysis and Support from 1997 to 1998. He1999. Prior to 1994, Mr. Rhodes was employed by The Quaker Oats Company from 1981 to 1996 in various executive positions. Mr. Odland is also a director of General Mills, Inc.manager with Ernst & Young, LLP.James J. PostlIndependence, 57, has been a Director since May 2003. He was the President (from 1998 to 2002), Chief Executive Officer (from 2000 to 2002) and Chief Operating Officer (from 1998 to 2000) for Pennzoil-Quaker State Company, which was sold to Shell Oil Company, a subsidiary of Royal Dutch Petroleum Company, in 2002. Previously, Mr. Postl was employed by Nabisco Biscuit Company, where he was President until 1998. Mr. Postl is also a Director of Cooper Industries PLC and Centex Corporation.McKenna, and James J. Postl.McKenna. All of these directors meet the independence standards of our Corporate Governance Principles and the New York Stock Exchange listing standards.AutoZone’sAutoZone's independent auditor in the last five years;www.autozoneinc.com..fiveseven meetings in fiscal year 2004.20032004 Annual Meeting, eightall directors were present.Directors’ standing committees?Directors?auditor,auditor;others,others;controls,controls;statements,statements;behavior,behavior; andand Mr. Postl (Chairman), all of whom are independent directors.Mr. PostlMs. Gove is an independent director and that heshe meets the qualifications of an audit committee financial expert as defined by the Securities and Exchange Commission.20042005 fiscal year, the Audit Committee held eleven meetings.www.autozoneinc.com..20042005 fiscal year, the Compensation Committee held fourthree meetings. Committee and Corporate Governance Committee’s charter can be found at AutoZone’s corporate web site at www.autozoneinc.com.20042005 fiscal year, the Nominating and Corporate Governance Committee held four meetings.
Corporate Secretary, AutoZone, Inc., 123 South Front Street, Memphis, Tennessee 38103. All such communications will be forwarded unopened to the addressee. Communications addressed to the Board of Directors or to the non-management directors as a group will be forwarded to Charles M. Elson, an independent director, and communications addressed to a committee of the Board will be forwarded to the chairman of that committee.
PROPOSAL 2-Approval of the AutoZone, Inc. 2005 Executive Incentive Compensation Plan
Our Board of Directors is recommending approval of the AutoZone, Inc. 2005 Executive Incentive Compensation Plan to replace our Amended and Restated 2000 Executive Incentive Compensation Plan, which expires on December 9, 2004. Approval of the plan requires that more votes be cast in favor of the plan than votes cast against. Abstentions and broker non-votes will not be counted as voting either for or against.
The Board of Directors recommends that the stockholders vote FOR the 2005 Executive Incentive Compensation Plan.
The following is a summary of the AutoZone, Inc. 2005 Executive Incentive Compensation Plan. For complete details, refer to the plan, which is reproduced in its entirety as Exhibit A to this Proxy Statement.
PROPOSAL 2004 2003 Audit Fees $ 621,100 $ 562,954 Audit Related Fees1 12,000 — Tax Fees2 464,845 617,357 All Other Fees — — Beneficial Ownership Name of Beneficial Owner Shares Ownership Steve Odland1 520,953 * Charles M. Elson2 14,154 * Earl G. Graves, Jr.3 1,290 * N. Gerry House4 11,817 * J.R. Hyde, III5 646,948 * Edward S. Lampert6 21,355,385 26.8 % W. Andrew McKenna7 26,065 * James J. Postl8 857 * Michael Archbold9 60,422 * Harry L. Goldsmith10 138,629 * Michael E. Longo11 80,036 * Robert D. Olsen12 140,548 * All current directors and executive officers as a group (18 persons)13 23,197,424 29.1 % Beneficial Ownership Name and Address Shares Ownership ESL Partners, L.P.1 21,355,385 26.8 % 200 Greenwich Avenue Davis Selected Advisers, LP2 5,413,330 6.0 % 2949 East Elvira Road, Suite 101 Long-Term Annual Compensation Awards Name and Principal Position Year Salary1 Bonus2 Other Annual Securities All Other Steve Odland 2004 1,000,000 1,282,000 110,160 75,000 110,078 Chairman, President & 2003 946,154 1,561,154 138,604 250,000 15,569 Chief Executive Officer 2002 662,500 2,090,400 28,624 125,000 5,538 Michael E. Longo 2004 326,769 251,351 — 30,000 16,921 Executive Vice President, 2003 318,308 315,126 13,141 50,000 15,373 Supply Chain, Information Technology, Mexico & Store Development 2002 314,942 596,246 — 25,000 4,915 Michael Archbold6 2004 313,615 241,233 12,611 30,000 30,957 Executive Vice President, 2003 305,077 302,026 11,307 26,000 10,973 Chief Financial Officer 2002 173,077 377,669 36,098 75,000 3,046 Robert D. Olsen 2004 307,077 236,204 — 25,000 36,397 Senior Vice President, 2003 300,700 297,693 — 26,000 16,861 Mexico & Store Development 2002 299,195 566,434 — 20,000 4,589 Harry L. Goldsmith 2004 297,923 229,163 — 35,000 35,248 Senior Vice President, 2003 285,207 282,357 — 26,000 13,323 General Counsel & Secretary 2002 283,448 536,622 — 20,000 3,600 Life Company Mr. Odland $ 4,440 $ 105,638 Mr. Longo 4,341 12,580 Mr. Archbold 4,203 26,754 Mr. Olsen 4,157 32,240 Mr. Goldsmith 4,003 31,245 Number of % of Total Exercise or Expiration Option Term1 5%($) 10%($) Steve Odland 73,200 6.41 $ 89.18 9/6/2013 4,105,422 10,403,916 1,800 0.16 $ 89.18 9/5/2013 100,953 255,834 Michael E. Longo 28,200 2.47 $ 89.18 9/6/2013 1,581,597 4,008,066 1,800 0.16 $ 89.18 9/5/2013 100,953 255,834 Michael Archbold 28,000 2.45 $ 89.18 9/6/2013 1,570,380 3,979,640 2,000 0.18 $ 89.18 9/5/2013 112,170 284,260 Robert D. Olsen 23,200 2.03 $ 89.18 9/6/2013 1,301,172 3,297,416 1,800 0.16 $ 89.18 9/5/2013 100,953 255,834 Harry L. Goldsmith 33,200 2.91 $ 89.18 9/6/2013 1,862,022 4,718,716 1,800 0.16 $ 89.18 9/5/2013 100,953 255,834 Number of Securities Value of Unexercised Shares Acquired Value Exercisable Unexercisable Exercisable Unexercisable Steve Odland — — 331,250 393,750 12,382,875 6,145,125 Michael E. Longo 60,000 3,831,838 50,666 83,334 1,631,518 723,484 Michael Archbold — — 44,000 87,000 336,935 392,055 Robert D. Olsen — — 83,166 87,834 3,703,626 2,078,064 Harry L. Goldsmith — — 113,610 67,000 5,349,798 525,680 Name Annual Benefit Steve Odland $ 97,929 Michael E. Longo 41,368 Michael Archbold — Robert D. Olsen 26,537 Harry L. Goldsmith 39,571 executives for the Company. Such determination is based on the Committee’s judgment and on information from a variety of sources about salaries for comparable positions. At the beginning of each fiscal year, the year and, in the case of executive officers other than the CEO, on the recommendations of the Chief Executive Officer. the table entitled “Option/SAR Grants in Last Fiscal Year.” Aug. 99 Aug. 00 Aug. 01 Aug. 02 Aug. 03 Aug. 04 AutoZone, Inc. $ 100.00 $ 91.67 $ 197.92 $ 301.46 $ 382.50 $ 314.00 S&P 500 Index 100.00 113.07 90.03 70.63 79.16 88.50 Peer Group 100.00 66.56 113.14 121.99 140.67 153.52 Compensation Committee, as well as other benefit programs. Plan Category Number of securities to Weighted-average Number of securities Equity compensation plans approved by security holders 4,953,118 $ 54.58 3,992,313 Equity compensation plans not approved by securities holders 73,155 $ 37.97 — Total 5,026,273 $ 54.42 3,992,313 What is the 2005 Executive Incentive Compensation Plan?The Internal Revenue Code (the “Code”) prohibits us from deducting compensation in excess of $1 million for the chief executive officer and our other four most highly paid officers unless the compensation in excess of $1 million is based on an objective measure of performance. The AutoZone, Inc. 2005 Executive Incentive Compensation Plan is intended to qualify as a performance-based compensation plan under the Code so that performance bonuses paid to our executive officers are tax deductible to AutoZone. The plan requires that the Compensation Committee establish objective performance goals and that the performance goals be met before a participant may receive a bonus.Who is eligible to participate in the plan?The Company’s executive officers, as determined by the Compensation Committee, are eligible to participate in the plan.How are performance goals established?Under the plan, at the beginning of each fiscal year, the Compensation Committee must establish a goal, which may be a range from a minimum to a maximum attainable bonus. The goal may be based on one or more of the following measures:•Earnings•Return on invested capital•Earnings per share•Economic value added•Sales•Return on inventory•Market share•EBIT•Operating or net cash flows•Gross profit margin•Pre-tax profits•Sales per square foot•Earnings before interest and taxes•Comparable store salesThe goal may be different for different executives. No bonus may be paid under the plan unless at least the minimum goal is attained. However, the Compensation Committee may disregard for goal purposes one-time charges and extraordinary events such as asset write-downs, litigation judgments or settlements, the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results, accruals for reorganization or restructuring, and any other extraordinary non-recurring items, acquisitions or divestitures and any foreign exchange gains or losses.How is the bonus paid under the plan?After the end of each fiscal year, the Compensation Committee must certify the attainment of goals, if any, under the plan and direct the amount to be paid to each participant. The Committee, in its discretion, may reduce or eliminate any bonus to be paid to an executive, even if a goal was attained. The bonus may only be paid after the attainment of the goals has been certified. The bonus will be paid in cash.What is the maximum compensation that a participant may receive under the plan?No participant may receive more than $4 million as a bonus under the plan.Does AutoZone currently have an executive incentive compensation plan?Currently, the AutoZone, Inc. Amended and Restated 2000 Executive Incentive Compensation Plan is in effect, but it will expire on December 9, 2004. Therefore, we are proposing the new plan.What are the differences between the new plan and the existing plan?The maximum bonus under the existing plan was the lesser of 200% of the executive’s annual salary or $2 million as a bonus under the plan. The new plan will allow up to $4 million to be paid as a bonus. Also, the existing plan gave the Compensation Committee the discretion to pay bonuses in whole or in part in common stock, while the new plan provides that bonuses will be paid in cash.Who participated in the existing plan last fiscal year?Twelve AutoZone executives were granted bonuses under the existing plan for fiscal 2004. This table shows bonuses for the named executive officers and all executive officers as a group under the existing plan for the 2004 fiscal year:2000 Executive Incentive Compensation PlanFiscal 2004 AwardsName and PositionDollarValue ($)Steve OdlandChairman, President & Chief Executive Officer1,282,000Michael E. LongoExecutive Vice President, Supply Chain, Information Technology, Mexico & Store Development251,351Michael ArchboldExecutive Vice President, Chief Financial Officer241,233Robert D. OlsenSenior Vice President, Mexico & Store Development236,204Harry L. GoldsmithSenior Vice President, General Counsel & Secretary229,163Executive Group13,127,918______________1Twelve persons, including all of the persons named above.It is not possible at this time to determine what awards may be granted under the proposed AutoZone, Inc. 2005 Executive Incentive Compensation Plan to the named executive officers and all executive officers as a group. If the AutoZone, Inc. 2005 Executive Incentive Compensation Plan had been in effect in fiscal 2004, such officers and group of officers would not have received awards that were different in type or amount than those that they actually received in fiscal 2004.3-Ratification2-Ratification of Independent Registered Public Accounting Firmseventeeneighteen fiscal years, has been selected by the Audit Committee to be AutoZone’s independent registered public accounting firm for fiscal year 2005.2006. Representatives of Ernst & Young LLP will be present at the Annual Meeting to make a statement if they so desire and to answer any appropriate questions.1Audit Related Fees were for Sarbanes-Oxley Section 404 advisory services.2Tax Fees for 2004 and 2003 were for tax compliance assistance and assistance with audits and tax planning, which for 2004 consisted of $83,442 for tax compliance assistance and $381,403 for assistance with audits and tax planning, and in 2003 consisted of $149,795 for tax compliance assistance and $467,562 for assistance with audits and tax planning. Audit Fees $ 1,516,996 $ 621,100 38,491 12,000 — 464,845 2,500 — Audit Related Fees in 2005 were for a SAS70 pre-assessment on our Pay on Scan Process, and in 2004 were for Sarbanes-Oxley Section 404 advisory services. Tax Fees for 2004 were for tax compliance assistance and assistance with audits and tax planning, which consisted of $83,442 for tax compliance assistance and $381,403 for assistance with audits and tax planning. 3 All Other Fees for 2005 were subscription fees to Ernst & Young LLP’s online accounting research service. Charter,charter, a copy of which can be obtained at our web site at www.autozoneinc.com. The Audit Committee pre-approved 100% of the services provided by Ernst & Young LLP during the 20042005 fiscal year. The Audit Committee considers the services listed above to be compatible with maintaining Ernst & Young LLP’s independence.28, 2004,27, 2005, with AutoZone’s management. In addition, we have discussed with Ernst & Young LLP, AutoZone’s independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 61, the Sarbanes-Oxley Act of 2002, and the charter of the Committee.28, 2004,27, 2005, on Form 10-K for filing with the Securities and Exchange Commission.Charter,charter, the Audit Committee does not have the duty to plan or conduct audits or to determine that AutoZone’s financial statements are complete, accurate, or in accordance with generally accepted accounting principles; AutoZone’s management and the independent auditor have this responsibility. Nor does the audit committeeAudit Committee have the duty to assure compliance with laws and regulations and the policies of the Board of Directors.James J. PostlW. Andrew McKennaas of October 21, 2004, by each director, the Chief Executive Officer, the former Chief Executive Officer, and the other four most highly compensated executive officers, and all current directors and executive officers as a group. Unless stated otherwise in the notes to the table, each person named below has sole authority to vote and invest the shares shown.
As of October 21, 2004
Percentage 124,603 * 17,647 * 166 * 6,010 * 15,255 * 650,386 * �� 21,358,821 27.9% 29,545 * 121,498 * 69,188 * 593,110 * 196,632 * 11,350 * 22,744,683 29.7% 443,750118,000 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004. Does not include 2,320 shares owned by Mr. Odland’s spouse.17, 2005.1,5222,015 shares that may be acquired immediately upon termination as a director by conversion of stock appreciation rights and 6,6089,608 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005.1,290166 shares that may be acquired immediately upon termination as a director by conversion of stock appreciation rights.3,2041,728 shares that may be acquired immediately upon termination as a director by conversion of stock appreciation rights and 7,5004,282 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005.200,000255,000 shares held by a charitable foundation for which Mr. Hyde is an officer and a director and for which he shares investment and voting power, 5,4385,876 shares that may be acquired immediately upon termination as a director by conversion of stock appreciation rights, and 8,50011,500 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005. Does not include 2,000 shares owned by Mr. Hyde’s wife.67Mr. Lampert is the Chief Executive Officer of ESL Investments, Inc. All shares indicated, other than 3,7854,221 shares owned directly by Mr. Lampert and 5,5008,500 shares that may be acquired by Mr. Lampert upon exercise of stock options either immediately or within 60 days of October 21, 2004,17, 2005, are owned by a group consisting of affiliates of ESL Investments, Inc. See also footnote 1 under Security Ownership of Certain Beneficial Owners, below.78Includes 3,1103,590 shares that may be acquired immediately upon termination as a director by conversion of stock appreciation rights and 6,9559,955 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005.8Includes 857 shares that may be acquired immediately upon termination as a director by conversion of stock appreciation rights.58,000112,000 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005, and 1,400 shares held by trusts for which Mr. Goldsmith is a beneficiary.124,36065,250 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004, and 1,400 shares held by trusts for which Mr. Goldsmith is a beneficiary.17, 2005.76,250157,000 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005.1213Includes 100,91611,250 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005.1314Includes 15,42117,017 shares that may be acquired immediately upon termination as a director by conversion of stock appreciation rights and 1,029,339656,970 shares that may be acquired upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005.
of Beneficial Owner
Percentage
Greenwich, CT 06830
Tucson, AZ 85706 21,358,821 27.9% 200 Greenwich Avenue Greenwich, CT 06830 5,551,062 7.2% 2949 East Elvira Road, Suite 101 Tucson, AZ 85706 3,7854,221 shares owned directly by Mr. Lampert and 5,5008,500 shares that may be acquired by Mr. Lampert upon exercise of stock options either immediately or within 60 days of October 21, 2004.17, 2005. Each entity or person has the sole power to vote and dispose of the shares deemed beneficially owned by it.13F13F-HR/A filed with the Securities and Exchange Commission by Davis Selected Advisers, LP datedon August 27, 200411, 2005 reporting beneficial ownership as of June 30, 2004.2005.officers for the past three fiscal years.officers.
Compensation
($)
($)
Compensation3
($)
Underlying
Options/SAR’s4
Compensation5
($) 2005 426,616 251,216 7,031 80,000 22,265 President & Chief Executive Officer Harry L. Goldsmith 2005 314,385 129,213 — 40,000 26,893 Executive Vice President, 2004 297,923 229,163 — 35,000 35,248 General Counsel & 2003 285,207 282,357 — 26,000 13,323 Secretary 2005 335,615 137,938 — 40,000 9,319 Executive Vice President, 2004 326,769 251,351 — 30,000 16,921 Supply Chain, Information 2003 318,308 315,126 13,141 50,000 15,373 Technology, Mexico & Store Development 2005 609,423 — 54,740 75,000 98,106 Former Chairman, President & 2004 1,000,000 1,282,000 110,160 75,000 110,078 Chief Executive Officer 2003 946,154 1,561,154 138,604 250,000 15,569 Robert D. Olsen 2005 313,923 129,023 — 25,000 26,888 Executive Vice President, 2004 307,077 236,204 — 25,000 36,397 Supply Chain, Information 2003 300,700 297,693 — 26,000 16,861 Technology, Mexico & Store Development 2005 375,385 154,284 73,302 55,000 4,888 Executive Vice President, Merchandising and Marketing Fiscal year 2002 consisted of 53 weeks. Therefore, salary for 2002 for each person included an additional week. Bonuses for fiscal year 2002 were paid based on 52 week base salaries.2Bonuses are shown for the fiscal year earned, but paid in the following fiscal year. Discounts on stock purchased under the 2005 $ 7,031 — $ 54,470 — AutoZone, Inc. Second Amended and Restated 2004 — — $ 110,160 — Executive Stock Purchase Plan 2003 — $ 13,141 $ 138,604 — Sign-on bonus 2005 — — — $ 40,000 Relocation expenses 2005 — — — $ 33,302 Amounts shown for Mr. Odland for 2004, 2003 and 2002 and for Mr. Archbold for 2004 represent discounts on stock purchased under the Amended and Restated Executive Stock Purchase Plan. Amount shown for Mr. Longo for 2003 is for discounts on stock purchased under the Amended and Restated Executive Stock Purchase Plan. Amounts shown for Mr. Archbold for 2003 include $8,090 in relocation expenses and $3,217 paid in taxes on relocation expenses and in 2002 includes $25,442 in relocation expenses and $10,656 paid in taxes on relocation expenses.4All amounts shown are stock options granted in accordance with the Second Amended and Restated 1996 Stock Option Plan. AutoZone did not grant SARs to executive officers in the fiscal years shown.54 Amounts shown for 20042005 consist of:
Insurance
contributions to
defined
contribution
plans Mr. Rhodes 2,788 19,477 Mr. Goldsmith 5,177 21,716 Mr. Longo 3,797 5,522 Mr. Odland 6,549 91,557 Mr. Olsen 5,378 21,510 Mr. Shea 4,888 — ArchboldLongo resigned as Executive Vice President, Supply Chain, Information Technology, Mexico and Store Development effective October 28, 2005.first employedappointed Executive Vice President, Merchandising and Marketing in February 2002.September, 2004.Option/SAR GrantsLong-Term Incentive Plans – Awards in Last Fiscal Year20042005 fiscal year.
Securities
Underlying
Options/SARs
Granted (#)2
Options/SARs
Granted to
Employees in
Fiscal Year
Base Price
($/Sh)
DateWilliam C. Rhodes, III 30,000 2.8 $ 75.64 9/29/14 1,427,100 3,616,530 50,000 4.6 $ 98.30 3/14/15 3,091,000 7,833,250 Harry L. Goldsmith 30,000 2.8 $ 75.64 9/29/14 1,427,100 3,616,530 10,000 0.9 $ 86.55 4/08/15 544,310 1,379,380 Michael E. Longo 30,000 2.8 $ 75.64 9/29/14 1,427,100 3,616,530 10,000 0.9 $ 86.55 4/08/15 544,310 1,379,380 Steve Odland 75,000 7.0 $ 75.64 9/29/14 3 3,567,750 9,041,325 Robert D. Olsen 20,000 1.9 $ 75.64 9/29/14 951,400 2,411,020 5,000 0.5 $ 86.55 4/08/15 272,155 689,690 James A. Shea 45,000 4.2 $ 75.64 9/29/14 2,140,650 5,424,795 10,000 0.9 $ 86.55 4/08/15 544,310 1,379,380
FY-End Option/SAR Valuescertainthe named executive officers during the most recent fiscal year, and their exercisable and unexercisable stock options as of August 28, 2004.27, 2005. The fiscal year-end value of “in-the-money” stock options is the aggregate difference between the exercise price of the option and $75.36$95.45 per share, the market value of the common stock on August 27, 2004.2005. Executive officers do not have SARs.
Underlying Unexercised
Options/SARS at FY-End (#)
In-the-Money Options/SARs
At FY End ($)
on Exercise (#)
Realized ($) William C. Rhodes, III — — 88,750 125,250 4,602,510 1,465,618 Harry L. Goldsmith 52,110 3,460,036 84,250 84,250 4,538,278 1,421,928 Michael E. Longo 48,750 2,993,080 31,500 93,750 630,945 1,754,813 Steve Odland 493,750 22,030,360 — — — — Robert D. Olsen — — 134,250 61,750 8,179,978 1,132,303 James A. Shea — — — 55,000 — 980,450 CEO and our other four most highly compensatednamed executive officers. Sixty monthly payments are guaranteed after retirement. The benefits stated in the table will not be reduced by Social Security or other amounts received by a participant.
At Age 65William C. Rhodes, III 21,311 Harry L. Goldsmith 39,571 Michael E. Longo 41,368 Steve Odland 97,929 Robert D. Olsen 26,537 James A. Shea — The compensationCompensation of other AutoZone employees is based on a similar philosophy.Compensation PhilosophyExecutiveconsists ofprogram are salary, bonus, and stock options.Salary. The Compensation Committee desiresbelieves that each executive’s overall compensation should reflect each executive’shis or her performance over time. Basetime, and a mix of cash and equity-based compensation is used to achieve that goal.are setfor AutoZone’s executive officers at levels determined bywhich the Compensation Committee independently determines to adequatelybe adequate to reward and retain capable executives.Compensation Committee reviews and establishes annual base salaries for the annual salary ofChief Executive Officer and the other executive officers. The Committee makes an independent determination of the appropriate level of these officers’ salaries taking into consideration the salary ranges recommended for a particular position by outside compensation consultants, andofficers based on each executive officer’s performance forduring the past fiscal year.EachAutoZone officers and certain other employees are eligible to receive bonuses each fiscal year based on the Company’s attainment of objectives set by the Committee at the beginning of the fiscal year. Bonuses for the executive officers are paid a bonus based onawarded pursuant to the attainmentAutoZone, Inc. 2005 Executive Incentive Compensation Plan (the “Executive Incentive Plan”), which was approved by our shareholders in December, 2004. The Committee approves the bonuses of goals set by the Compensation Committee. The goals forexecutive officers and all bonus-eligible employees of the Company.2004the Committee establishes the bonus objectives for the fiscal year. The objectives can pertain to earnings, earnings per share, sales, market share, operating or net cash flows, pre-tax profits, earnings before interest and taxes, return on invested capital, economic value added, return on inventory, gross profit margin, sales per square foot, comparable store sales, or a combination of objectives. The objectives may change annually to support our business mission. For the 2005 fiscal year, the objectives were based on AutoZone’s earnings before interest and taxes (EBIT) and return on invested capital, (ROIC). The Compensation Committee establishes a bonus payout matrix atas are the beginning ofobjectives for the 2006 fiscal year granting higher rewards as a percentage of annual salary as milestones shown on the matrix are achieved. The better AutoZone’s performance, the higher the bonus payout.year. As a general matter,rule, as an executive’s level of management responsibility increases, the portion of his or her total compensation dependent on Company performance as measured by business goalsobjectives increases.management.management, including executive officers. Stock options may beare granted to executivesexecutive officers pursuant to the AutoZone, Inc. 1996 Stock Option Plan (the “Stock Option Plan”) upon initial hire, and thereafter are typically granted annually in accordance with guidelines established by the Committee. TheThese guidelines allow forestablish a range for the number of potential option shares tostock options that could potentially be granted forto each position, witheligible employee, including executive officers, based on the grade level of his or her position. The actual grant is determined by the Committee based on the guidelines and the performance of the individual in the position.Compensation Committee approvesestablishes the compensation level for the Chief Executive Officer, including salary and incentive compensation, and reviews and approves any long-term incentive awards for the CEO.AutoZone’s The Chief Executive Officer’s compensation is reviewed annually by the Committee in conjunction with his performance review, taking into account all forms of compensation, including base salary, cash bonus, long-term incentive awards, and the value of perquisites received.Steve Odland, received anand the results of this evaluation are used by the Committee to determine the CEO’s compensation. The Committee does not rely solely on predetermined formulas or a finite set of criteria when it evaluates the CEO’s performance; rather, the evaluation is a subjective determination by the Committee, taking into account such factors as AutoZone’s financial performance and results, the CEO’s leadership in advancing AutoZone’s strategic and operating priorities, and the achievement of short and long-term goals.in fiscal year 2004 of $1 million. He was also paidand awarded him 50,000 stock options, based on his increased responsibilities. Mr. Rhodes received a bonus of $1,282,000,$251,216 for the 2005 fiscal year pursuant to the Executive Incentive Plan, which was calculated in accordance with the bonus matrix discussed above. The bonus paid was a resultbased on EBIT of the increase in EBIT to $999 million from $918$976 million and an increaseROIC of 23.9%. Mr. Rhodes also received grants of 80,000 stock options during fiscal 2005, including the grant made upon his appointment as Chief Executive Officer, as shown in ROIC to 25.1% from 23.4%.federal tax codeInternal Revenue Code (“Code”) limits to $1 million the amount of compensation that we may deduct in any year for the Chief Executive Officer and our other four most highly paid officers to $1 million.officers. However, this deduction limitation does not apply to performance-based compensation as defined in the tax code.Code. Our compensation plans, including the Executive Incentive Compensation Plan, are generally designed and implemented so that they qualify for full deductibility. However, we may from time to time pay compensation to our executive officers that may not be deductible.19992000 to the end of fiscal year 2004,2005, changes in the value of $100 invested in each of AutoZone’s common stock, Standard & Poor’s 500 Composite Index, and a peer group consisting of other automotive aftermarket retailers. AutoZone, Inc. $ 100.00 $ 215.91 $ 328.86 $ 417.27 $ 342.55 $ 433.86 S&P 500 Index 100.00 79.62 62.47 70.01 78.27 86.73 Peer Group 100.00 169.99 183.27 211.35 230.65 301.87 Effective October 23, 2003,Odland’s employment agreement, originally entered in 2001, was amendedRhodes became the Company's President and restated to provide for a term expiring at the end of 2007, unless terminated earlierChief Executive Officer. In connection with his appointment as described in this section. The agreement provides that Mr. Odland will serve as Chairman of the BoardPresident and Chief Executive Officer, through December 31, 2007, at a minimumMr. Rhodes’ annual base salary of $1 millionwas increased to $600,000 and a minimumhis bonus eligibility oftarget was increased to 100% of base salary under our Executive Incentive Compensation Plan. Aftersalary. He received a grant of 50,000 stock options having an exercise price of $98.30, which will vest in one-fourth increments on March 13, 2006, 2007, his2008 and 2009. Additionally, the Company agreed that if Mr. Rhodes’ employment will be at will and may beis terminated by AutoZone or Mr. Odland at any time, subject to the obligations of AutoZone described below.Mr. Odland’s employment agreement provides that upon a termination of the agreement before January 1, 2008, by AutoZoneCompany without cause, or by Mr. Odland for good reason or upon a change of control as defined in the agreement (collectively, a “Covered Termination”), Mr. Odland will resign from the Board of Directors and cease to be Chief Executive Officer, but will remain an employee of AutoZone, performing services as requested by the Chief Executive Officer, and be paid his base salary through December 31, 2007, but not longer than three years (the “Continuation Period”) plus any earned and unpaid bonus for the prior fiscal year and a full bonus for the fiscal year in which the agreement is terminated. His stock options will continue to vest and may be exercised as set forth in the applicable stock option agreements until the end of the Continuation Period. At the end of the Continuation Period, Mr. Odland’s employment will terminate and he will receive severance benefits consisting of an amount equal to 2.99 times his then-current base salary.(less amounts paidis subject to him as salary during the Continuation Period) and continued health insurance coverage generally until the third anniversary of the termination of the agreement (collectively, the “Severance Benefits”). Further stock option exercise and vesting after the end of the Continuation Period will be governedannual merit reviews by the terms of the applicable stock option agreements.If a Covered Termination occurs after December 31, 2007, Mr. Odland’s employment will cease immediatelyCompensation Committee, and he will receive the Severance Benefits plus any earned and unpaid bonus for the prior fiscal year and a full bonus for the fiscal year in which the agreement is terminated. Additionally, any grants of stock options and other equity compensation made after the effective date of the agreement will vest in full and become immediately exercisable, and he generally will have 90 daysentitled to exercise such options or other equity compensation.If the agreement is terminated by AutoZone for cause, as definedparticipate in the agreement, or by Mr. Odland without good reason, Mr. Odland’s employment will terminate and he will ceasebenefit programs afforded to our executive officers. These include eligibility to receive any further salary, bonus or benefits (other thancompensation pursuant to the AutoZone PensionExecutive Incentive plan and long-term incentive compensation pursuant to the Stock Option Plan, or required by law). All stock options granted will be governedas approved by the terms of the applicable stock option agreements.In any event, after the termination of the agreement or Mr. Odland’s employment, Mr. Odland agrees not to compete with AutoZone or to hire or encourage others to hire any of our employees for a period of three years. of base salary at predetermined targets. Mr. Longo has an employment agreement providing that he is employed by AutoZone at a minimum base salary of $225,000 and a minimum bonus eligibility of 50% of base salary at predetermined targets. Mr. Olsen has an employment agreement providing that he is employed by AutoZone at a minimum base salary of $285,000 and a minimum bonus eligibility of 60% of base salary. AllThe minimum salaries and bonuses are subject to increase by the Compensation Committee.Allus.AutoZone. If anthe agreement is terminated by usAutoZone for cause, or by the executive for any reason, the executive will cease to be an employee, and will cease to receive salary, bonus, and other benefits. If histhe agreement is terminated by usAutoZone without cause, Mr. Goldsmith and Mr. Longo each will remain employeesan employee for three years after the termination date, and Mr. Olsen will remain an employee for two years after the termination date and each(each, a “Continuation Period”). Each executive will continue to receive his then-current salary and other benefits of an employee, and will receive a prorated bonus for the fiscal year in which he was terminated, but no bonuses thereafter. Each executive’s stock options will continue to vest and may be exercised in accordance with the respective stock option agreements until the end of thehis Continuation Period, after which further stock option exercises and vesting will be governed by the terms of the respective stock option agreements. If the executive is terminated from his position by usAutoZone or by the executive for reasons other than a change in control, then the executive will be prohibited from competing against AutoZone for the period of time after the termination date.his Continuation Period. “Cause” is defined in each agreement as the willful engagement by the executive in conduct which is demonstrably or materially injurious to AutoZone, monetarily or otherwise. “Change in control” in each agreement means either the acquisition of a majority of our voting securities by or the sale of substantially all of our assets to a non-affiliate of the company.28, 2004,27, 2005, with respect to compensation plans under which shares of AutoZone Commoncommon stock may be issued.
be issued upon
exercise of
outstanding options,
warrants and rights
exercise price of
outstanding
options, warrants
and rights
remaining available
for future issuance
under equity
compensation plans
(excluding
securities
reflected in the
first column) Equity compensation plans approved by security holders 3,787,440 $ 66.22 3,364,875 Equity compensation plans not approved by securities holders 67,583 $ 44.46 — Total 3,855,023 $ 61.84 3,364,875 with the exception of a Form 4 reporting a grant of stock options to Steve Handschuh, Senior Vice President, Commercial on March 17, 2004, which was filed on May 24, 2004.manner. Copies of the insider trading reports can be found on the AutoZone corporate website at www.autozoneinc.com.
www.autozoneinc.com.20052006 must be received by July 3, 2005.June 28, 2006. In accordance with our bylaws, Stockholder proposals received after August 18, 2005,16, 2006, but by September 17, 2005,15, 2006, may be presented at the meeting, but will not be included in the 2005 Proxy Statement. Any stockholder proposal received after September 17, 2005,15, 2006, will not be eligible to be presented for a vote to the stockholders in accordance with our bylaws. Any proposals must be mailed to AutoZone, Inc., Attention: Secretary, Post Office Box 2198, Dept. 8074, Memphis, Tennessee 38101-2198.
By order of the Board of Directors,Harry L. GoldsmithSecretary /s/ Harry L. Goldsmith Secretary Memphis, TennesseeOctober 27, 2004AUTOZONE, INC.2005 EXECUTIVE INCENTIVE COMPENSATION PLAN1.PurposeThe AutoZone, Inc. 2005 Executive Incentive Compensation Plan (“Plan”) is designed to provide incentives to eligible employees of AutoZone, Inc. (the “Company”) and its affiliates who have significant responsibility for the success and growth of the Company and assist the Company in attracting, motivating, and retaining key employees on a competitive basis. The Plan is designed to ensure that the annual bonus paid pursuant to this Plan to eligible employees of the Company is deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). This Plan shall be ratified by the Company’s stockholders pursuant to 26 C.F.R. § 1.162-27(e)(4)(vi) at the annual meeting to be held on December 16, 2004, and shall be effective for the entire 2005 fiscal year. If the stockholders do not ratify the Plan, the Plan shall not become effective.2.Administration of the PlanThe Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (“Committee”). The Committee shall be appointed by the Board of Directors of the Company and shall consist of at least two outside directors of the Company that satisfy the requirements of Code Section 162(m). The Committee shall have the sole discretion and authority to administer and interpret the Plan in accordance with Code Section 162(m). The Committee’s interpretations of the Plan, and all actions taken and determinations made by the Committee pursuant to the powers vested in it hereunder, shall be conclusive and binding on all parties concerned, including the Company, its stockholders and any person receiving an award under the Plan.3.EligibilityThe individuals entitled to participate in the Plan shall be the executive officers of the Company, as determined by the Committee.4.AwardsExecutive officers as determined by the Committee may be granted annual incentive awards under this Plan at such times of each year as will satisfy the requirements of Code Section 162(m), provided, however, that if an individual becomes an executive officer during a year, an incentive goal for that individual shall be made for that fiscal year at the time she or he becomes an executive officer. The Committee may, in its discretion, grant annual incentive awards to non-executive officers and managers of the Company outside of this Plan.The annual incentive award to each executive officer shall be based on the Company, a subsidiary or division, attaining one or more of the following objective goals as established by the Committee for the fiscal year:(a) earnings(b) earnings per share(c) sales(d) market share(e) operating or net cash flows(f) pre-tax profits(g) earnings before interest and taxes(h) return on invested capital(i) economic value added(j) return on inventory(k) EBIT(l) gross profit margin(m) sales per square foot(n) comparable store salesDifferent measures of goal attainment may be set for different plan participants. The performance goal may be a single goal or a range with a minimum goal up to a maximum goal, with corresponding increases in the incentive award up to the maximum award set by the Committee and as may be limited by this Plan. Such performance goals may disregard, at the Committee’s discretion, the effect of one-time charges and extraordinary events such as asset write-downs, litigation judgments or settlements, changes in tax laws, accounting principles or other laws or provisions affecting reported results, accruals for reorganization or restructuring, and any other extraordinary non-recurring items, acquisitions or divestitures and any foreign exchange gains or losses. These goals shall be established by the Committee either by written consent or as evidenced by the minutes of a meeting at such times as to qualify amounts paid under this Plan for tax deductible treatment under Code Section 162(m).Payment of an earned award will be made in cash. Upon completion of each fiscal year, the Committee shall review performance versus the established goal, and shall certify (either by written consent or as evidenced by the minutes of a meeting) the specified performance goals achieved for the fiscal year (if any), and direct which award payments are payable under the Plan, if any. No payment will be made if the minimum pre-established goals are not met. The Committee may, in its discretion, reduce or eliminate an individual’s award that would have been otherwise paid. No individual may receive in any one fiscal year an award under the Plan of an amount greater than $4 million.5.Miscellaneous Provisions(a) The Company shall have the right to deduct all federal, state, or local taxes required by law or Company policy from any award paid.(b) Nothing contained in this Plan grants to any person any claim or right to any payments under the Plan. Such payments shall be made at the sole discretion of the Compensation Committee.(c) Nothing contained in this Plan or any action taken by the Committee pursuant to this Plan shall be construed as giving an individual any right to be retained in the employ of the Company.(d) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any award under the Plan.(e) The Plan may be amended, subject to the limits of Code Section 162(m), or terminated by the Committee at any time. However, no amendment to the Plan shall be effective without prior approval of the Company’s stockholders which would (i) increase the maximum amount that may be paid under the Plan to any person or (ii) modify the business criteria on which performance targets are to be based under the Plan.(f) This Plan shall terminate on the fifth anniversary after the date of ratification by the Company’s stockholders.C/O EQUISERVE TRUST COMPANY N.A.P.O. BOX 43068PROVIDENCE, RI 02940Your vote is important. Please vote immediately.Vote-by-InternetLog on to the Internet and go tohttp://www.eproxyvote.com/azoVote-by-TelephoneCall toll-free1-877-PRX-VOTE (1-877-779-8683)ORIf you vote over the Internet or by telephone, please do not mail your card.DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAILZAUZ61Please markvotes as inthis example.#AUZxThis proxy when properly executed will be voted in the manner directed below. If no direction is made, this proxy will be voted FOR the election of the directors nominated by the Board of Directors and FOR proposals 2 and 3.1. Election of Directors.Nominees: (01) Charles M. Elson, (02) Earl G. Graves, Jr., (03) N. Gerry House, (04) J.R. Hyde, III, (05) Edward S. Lampert, (06) W. Andrew McKenna; FORAGAINSTABSTAIN(07) Steve Odland and (08) James J. Postl.2. Approval of 2005 Executive Incentive Compensation Plan.FORALLNOMINEESWITHHELDFROM ALLNOMINEES3.Ratification of independent registered public accountants.4.In the discretion of the proxies named herein, upon such other matters as may properly come before the meeting.For all nominees except as noted aboveMARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFTMARK HERE IF YOU PLAN TO ATTEND THE MEETINGPlease sign this proxy exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such.Signature: Date: Signature: Date: DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAILZAUZ62PROXYAUTOZONE, INC.PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANYFOR THE ANNUAL MEETING OF STOCKHOLDERSI hereby appoint Harry L. Goldsmith and Rebecca W. Ballou, and each of them, as proxies, with full power of substitution to vote all shares of common stock of AutoZone, Inc., which I would be entitled to vote at the Annual Meeting of AutoZone, Inc., to be held at the J.R. Hyde III Store Support Center, 123 South Front Street, Memphis, Tennessee, on Thursday, December 16, 2004, at 8:30 a.m., CST, and at any adjournments, on items 1, 2 and 3, as I have specified and in their discretion on other matters as may come before the meeting.SEE REVERSESIDECONTINUED AND TO BE SIGNED ON REVERSE SIDESEE REVERSESIDE