| 2 | Advisory vote to approve the compensation of the Company’s named executive officers; | | 3. | Advisory vote on the frequency of the stockholder advisory vote on the compensation of the Company'sCompany’s named executive officers; |
| officers | | FOR | 4.3 | Approval of the Advance Auto Parts, Inc. 2017 Amended and Restated Executive Incentive Plan; |
| | 5. | Ratification of the appointment by the Audit Committee of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2017; |
| 2024 | | FOR | 6.4 | ApprovalAmendment of a proposal to amend the Company'sour Restated Certificate of Incorporation to reduceeliminate or limit the threshold stock ownership requirement from 25 percentpersonal liability of officers to 10 percent for stockholdersthe extent permitted by recent amendments to call a special meeting; and |
| the Delaware General Corporation Law | | FOR | 7.5 | Action upon such other matters, if any, as may properly come before the meeting.meeting | | |
The Board of Directors recommends a
Advance Voting Methods (Your vote FOR Proposal Nos. 1 through 6 withmust be received by 11:59 p.m. (EDT) on May 21, 2024, the specification of an annual vote for Proposal No. 3. The persons named as proxies will use their discretion to vote on other matters that may properly arise atday before the Annual Meeting.Meeting) | | | | | | | | | | | | INTERNET www.proxyvote.com | TOLL FREE TELEPHONE 1-800-690-6903 | MAIL Complete and sign your proxy card |
The Board of Directors set March 20, 2017 as the Record Date. Only holders of record 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 attendjoin our Annual Meeting and vote. We urge you, after reading the Proxy Statement,attached proxy statement (the "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 our Annual Meeting, youproxy or by signing and returning the enclosed proxy card in the enclosed postage prepaid envelope as promptly as possible. You may vote in person,live at the virtual meeting even if you previously voted by proxy. By order of the Board of Directors,
Tammy Moss Finley
Executive Vice President, General Counsel
and Corporate Secretary
Roanoke, Virginia
April 6, 2017
TABLE OF CONTENTS
| | | | ABOUT THE ANNUAL MEETING AND VOTING | | | | | PROPOSAL NO. 1 ELECTION OF DIRECTORS | | | | | | Nominees for Election to Our Board | | | | | CORPORATE GOVERNANCE | | | | MEETINGS AND COMMITTEES OF THE BOARD | | | | DIRECTOR COMPENSATION | | | | COMPENSATION COMMITTEE REPORT | | | | COMPENSATION DISCUSSION AND ANALYSIS | | | | ADDITIONAL INFORMATION REGARDING EXECUTIVE COMPENSATION | | | | | | Summary Compensation Table | | | | | | 2016 Grants of Plan-Based Awards Table | | | | | | Outstanding Equity Awards at 2016 Fiscal Year-End Table | | | | | | 2016 Option Exercises and Stock Vested Table | | | | | | 2016 Non-Qualified Deferred Compensation Table | | | | | | Potential Payments Upon Termination of Employment or Change in Control Table | | | | | PROPOSAL NO. 2 STOCKHOLDER ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS | | | | INFORMATION CONCERNING OUR EXECUTIVE OFFICERS | | | | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | | | | | STOCK OWNERSHIP GUIDELINES FOR DIRECTORS AND EXECUTIVE OFFICERS | | | | | SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | | | | EQUITY COMPENSATION PLAN INFORMATION TABLE | | | | PROPOSAL NO. 3 STOCKHOLDER ADVISORY VOTE ON THE FREQUENCY OF THE STOCKHOLDER VOTE ON THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS | | | | PROPOSAL NO. 4 APPROVAL OF ADVANCE AUTO PARTS, INC. 2017 AMENDED AND RESTATED EXECUTIVE INCENTIVE PLAN | | | | PROPOSAL NO. 5 RATIFICATION OF APPOINTMENT BY THE AUDIT COMMITTEE OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2017 | | | | AUDIT COMMITTEE REPORT | | | | PROPOSAL NO. 6 APPROVAL OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO REDUCE THE THRESHOLD STOCK OWNERSHIP REQUIREMENT FOR STOCKHOLDERS TO CALL A SPECIAL MEETING | | | | OTHER MATTERS | | | | | APPENDIX A - ADVANCE AUTO PARTS, INC. 2017 AMENDED AND RESTATED EXECUTIVE INCENTIVE PLAN | |
 ______________
ADVANCE AUTO PARTS, INC.
PROXY STATEMENT
FOR 2017 ANNUAL MEETING OF STOCKHOLDERS
______________
ABOUT THE ANNUAL MEETING AND VOTING
Important Notice Regarding Availability of Proxy Materials for Stockholder Meeting to be Held on May 17, 2017.
This Proxy Statement and the 2016 annual report to stockholders are available on our Internet website at www.AdvanceAutoParts.com.
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 the eleven nominees named below as directors, an advisory vote to approve the compensation of our named executive officers, an advisory vote on the frequency of the stockholder advisory vote on the compensation of our named executive officers, the approval of our 2017 Amended and Restated Executive Incentive Plan, the ratification of our independent registered public accounting firm (the "independent auditors") and approval of a proposal to amend the Company's Certificate of Incorporation to reduce the threshold stock ownership requirement from 25 percent to 10 percent for stockholders to call a special meeting. 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 6, 2017.
When and where will the Meeting be held?
The 2017 Annual Meeting will be held on Wednesday, May 17, 2017 at 8:30 a.m. (EDT), at the Advance Auto Parts Store Support Center University Building located at 4709 Hargrove Road, Raleigh, North Carolina 27616. Our Store Support 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?
Our BoardImportant Notice Regarding the Availability of Directors ("Board") is soliciting your proxy to vote at the Annual Meeting.
Will a proxy solicitor be used?
Yes, we have engaged Okapi Partners LLC ("Okapi Partners") to assist in the solicitation of proxiesProxy Materials for the Annual Meeting to be held May 22, 2024:
The Notice of 2024 Annual Stockholders' Meeting and we estimate we will pay Okapi Partners a feeProxy Statement and the 2023 Annual Report on Form 10-K, are available at www.proxyvote.com.
The Notice of approximately $15,000. We have also agreed to reimburse Okapi Partners for reasonable administrative and out-of-pocket expenses incurred in connection with the proxy solicitation and indemnify Okapi Partners against certain losses, costs and expenses.
What will I be voting on?
At the Annual Meeting stockholders will voteand the accompanying Proxy Statement are being distributed or made available, as the case may be, on or about April [•], 2024.
By order of the following matters:Board of Directors, Tammy Moss Finley Executive Vice President, General Counsel and Corporate Secretary Raleigh, North Carolina April [•], 2024
Proxy Statement Summary Voting Roadmap | | | | | | | | | | Proposal 1 | Board Recommendation | 1. | The electionElection of the following eleven nominees named in the Proxy Statement to the Board of Directors ("Board") to serve until the 20182025 annual meeting of stockholders:stockholders
| The Board recommends a vote FOR each director nominee See page 1 |
| | | | | | | | | | | | | | | | | | | Name and Age | Director Since | Occupation | Current Committees | Other Current Public Company Boards | | Carla J. Bailo, 63 Independent | 2020 | President and Chief Executive Officer, ECOS Consulting, LLC | Nominating & Corporate Governance Audit | SM Energy Company Vesuvius plc | • | John F. BergstromFerraro, 68 Independent | • Adriana Karaboutis2015 | Former Global Chief Operating Officer, Ernst & Young
| Audit (Chair)
| International Flavors & Fragrances Inc.
ManpowerGroup, Inc. | • John C. Brouillard | • Joan M. Hilson, 64 Independent | 2022 | Chief Financial & Strategy Officer, Signet Jewelers Ltd. | Audit Finance (Chair) | | | Jeffrey J. Jones II, 56 Independent | 2019 | President, Chief Executive Officer, H&R Block, Inc. | Compensation (Chair) Nominating & Corporate Governance | H&R Block, Inc. | | Eugene I. Lee, Jr., 62 Independent Chair of the Board | 2015 | Former Chairman and Chief Executive Officer, Darden Restaurants, Inc. | Finance | | | Shane M. O'Kelly, 55 President and Chief Executive Officer | 2023 | President and Chief Executive Officer, Advance Auto Parts, Inc. | | | | Douglas A. Pertz, 69 Independent | 2018 | Former President and Chief Executive Officer, The Brink's Company | Nominating & Corporate Governance (Chair) Compensation | Vestis Corporation | • Brad | Thomas W. BussSeboldt, 57 Independent | • William S. Oglesby2024 | President, Seboldt Consulting Services LLC | Committees not yet assigned | | • Fiona P. Dias | • Reuben E. SloneGregory L. Smith, 60 Independent | 2024 | Executive Vice President, Global Operation and Supply Chain, Medtronic plc | Committees not yet assigned | | • John F. Ferraro | • Jeffrey C. SmithSherice R. Torres, 50 Independent | 2021 | Chief Marketing Officer, ChargePoint, Inc. | Compensation | | • Thomas R. Greco | A. Brent Windom, 63 Independent | 2024 | President, Windom Consulting LLC | Committees not yet assigned | |
Director Skills, Core Competencies and Characteristics In 2023, the Nominating and Corporate Governance Committee reviewed the core competencies that it believes should be represented on our Board. The Committee regularly evaluates the composition and diversity of the Board with respect to qualifications and skill sets that are important in consideration of the Company's long-term strategic plan and with respect to providing effective leadership and diverse viewpoints on matters considered by the Board. The following shows certain key skills, competencies and characteristics of our director nominees. *A-Asian; B-Black or African American; H-Hispanic or Latino; W-White; O-Other
Of the eleven director nominees: | | | | | | | | | 10of 11 are independent | | 3of 11 are diverse with respect to gender (3) or race/ethnicity (1) |
Stockholder Engagement | | | Regular Outreach We value dialogue with our stockholders and regularly conduct stockholder governance outreach in addition to recurring outreach regarding quarterly results and company performance. Feedback from stockholders is shared with the Board and applicable Committees periodically. Governance outreach discussions with our stockholders generally include our Chief Executive Officer (“CEO”) and management representatives from Investor Relations, Human Resources and the office of the General Counsel and Corporate Secretary. Discussions are primarily focused on corporate governance, executive compensation and certain business sustainability matters, including topics discussed in our Corporate Sustainability and Social Report. In addition to our governance outreach and regularly quarterly outreach, we also meet with existing and potential investors to discuss the company's operations and strategy. | 2.Recent Engagement In addition to holding regular proactive outreach sessions, throughout the past year we have had additional dialogue with several investors at their request. These discussions have often included, or been conducted directly with, the Chair of the Board, and focused on company performance, strategy and leadership of the Company and the Board. As a result of this engagement during 2024, we entered into a Cooperation Agreement with shareholders affiliated with Third Point LLC (together with its affiliates, "Third Point") and Saddle Point Management, L.P. (together with its affiliates, "Saddle Point") pursuant to which Messrs. Seboldt, Smith and Windom were appointed the Board and are nominated for election at the Annual Meeting. |
Corporate Governance Highlights | | | | | | | | | | | | | | | | ü | Annual election of all directors | | ü | Strong Guidelines on Significant Governance Issues | | ü | Directors elected by majority voting | | ü | Annual evaluation of the Board, Committees and individual directors | | ü | Independent Chair of the Board | | ü | New director searches focused on key skills for the Company's long-term strategic plan | | ü | Approximately 91% of our director nominees are independent | | ü | Board policy on CEO succession planning | | ü | All NYSE required Board committees consist solely of independent directors | | ü | Policies prohibiting hedging and (unless certain stringent requirements are met) prohibiting pledging for all employees and directors | | ü | Regular executive sessions of independent directors | | ü | Robust stock ownership guidelines for directors and Executive Officers | | ü | Proxy Access right for up to 20 person groups of stockholders owning 3% of our stock for 3 years to nominate up to 20% of our Board | | ü | Direct oversight by the Nominating and Corporate Governance Committee of development and communication of business sustainability matters | | ü | Right for stockholders of 10% or more of the Company's stock to call a special meeting | | ü | Average tenure of 3.7 years for our director nominees |
| | | | | | | | | | Proposal 2 | Board Recommendation | Advisory vote to approve the compensation of the Company’s named executive officers;officers. | The Board recommends a vote FOR this Proposal See page 18 |
Executive Compensation Highlights Our compensation programs continue to center on a pay for performance philosophy. Compensation actions in 2023 were directly aligned with this philosophy to ensure our leadership’s interests are aligned with those of our stockholders. As company performance lagged, compensation for our executive officers also significantly declined. Notably for 2023, our executive officers did not receive any payout for short-term incentive awards or any payout for long-term performance-based awards. Furthermore, awards for executives in role transition were thoughtfully designed to provide market appropriate levels of compensation. The following table summarizes the compensation elements provided for our Named Executive Officers ("NEOs") in 2023:
| | | | | | | | | | | | | | | | | | | Element | Purpose | | Metrics | 3.Base Salary | Advisory vote onFixed annual cash compensation to attract and retain executives | | Established after review of base salaries of executives of companies in our peer group and the frequencyperformance of the stockholder advisory vote on the compensation of the Company's namedeach executive officers; |
| officer | 4.Short-Term Incentive ("STI")(1) | ApprovalPerformance-based, variable pay that delivers cash incentives when executives meet or exceed key financial and operating targets | | •
•
• | 1/3 Enterprise Comparable Store Sales 1/3Enterprise Operating Income 1/3Free Cash Flow If all financial objective thresholds achieved, payouts modified up to +/- 5 percentage points based on achievement of the Advance Auto Parts, Inc. 2017 Amendedindividualized, functional diversity, equity and Restated Executive Incentive Plan; |
inclusion ("DEI") related goals
| | 5.Long-Term Incentive ("LTI") | Performance- and service-based equity compensation to reward executives for a balanced combination of meeting or exceeding key financial and operating targets and creating long-term shareholder value | | 50% Performance-based Restricted Stock Units ("PSUs") | | 25% Time-based Restricted Stock Units ("RSUs") | | 25% Nonqualified stock options |
(1) Enterprise Comparable Stores Sales represents revenue generated by stores, branches and e-commerce in 2023 relative to the revenue generated by stores, branches and e-commerce in 2022, including locations open for 13 complete accounting periods and excluding sales to independently owned Carquest locations. Free Cash Flow represents the amount of cash the Company generates from operations less purchases of property and equipment.
2023 Performance Plan Payouts | | | | | | | | | | | | | | | | 2023 Short-Term Incentive Plan Payout | | Threshold | Target | Maximum | | | Enterprise Operating Income | x | | | 0% | | Enterprise Comparable Store Sales | x | | | | Free Cash Flow | x | | |
| | | | | | | | | | | | | | | | 2021-2023 Long-Term Incentive Plan Payout | | Threshold | Target | Maximum | | | Relative Total Shareholder Return | x | | | 0% |
For additional information about 2023 results achieved and corresponding plan payouts, please see the discussion beginning on page 19 in Compensation Discussion & Analysis ("CD&A"). Strong Compensation Governance | | | | | | | | | | | | | | | | STOCKHOLDER FRIENDLY PRACTICES WE EMPLOY | | STOCKHOLDER UNFRIENDLY PRACTICES WE AVOID | | ü | Pay for Performance with rigorous objective financial and operational metrics that are closely tied to our success and delivery of stockholder value | | û | Excise tax gross ups for Change in Control payments | | ü | Incentive Compensation Clawback Policy | | û | Repricing or exchange of underwater stock options | | ü | “Double Trigger” vesting | | û | Dividends on unearned annual performance-based equity awards | | ü | Robust Stock Ownership Guidelines | | û | Hedging | | ü | Independence requirements for our Compensation Consultant | | û | Pledging unless certain stringent requirements are met |
For a detailed discussion of our executive compensation program, including the correlation to our comprehensive strategic plan focused on creating long-term stockholder value, please see CD&A beginning on page 19.
| | | | | | | | | | Proposal 3 | Board Recommendation | Ratification of the appointment by the Audit Committee of Deloitte & Touche LLP ("Deloitte") as the Company’s independent registered public accounting firm for 2017;2024 | The Board recommends a vote FOR this Proposal See page 51 |
| | | | | | | | | | Proposal 4 | Board Recommendation | 6. | Approval of a proposal to amend the Company's Certificate of Incorporation to reduce the threshold stock ownership requirement from 25 percent to 10 percent for stockholders to call a special meeting; and |
7. Action upon such other matters, if any, as may properly come before the meeting.
What are the voting recommendations of the Board?
The Board recommends the following votes:
| | 1. | FOR the election of each of the eleven director nominees to the Board ("Proposal No. 1"); |
| | 2. | FOR the advisory vote to approve the compensation of the Company’s named executive officers ("Proposal No. 2"); |
| | 3. | FOR an advisory vote that our stockholders be provided the opportunity every year to approve the compensation of our named executive officers by a stockholder advisory vote ("Proposal No. 3"); |
| | 4. | FOR the approval of our 2017 Amended and Restated Executive Incentive Plan ("Proposal No. 4"); |
| | 5. | FOR the ratification of the appointment of Deloitte as our independent registered public accounting firm for 2017 ("Proposal No. 5"); and
|
| | 6. | FOR the approval of an amendment to our restated certificate of incorporation to eliminate or limit the Company's Certificatepersonal liability of Incorporationofficers to reduce the threshold stock ownership requirement from 25 percentextent permitted by recent amendments to 10 percent for stockholders to callthe Delaware General Corporation Law | The Board recommends a special meeting ("vote FOR this Proposal No. 6"). See page 54 |
Will
Table of Contents | | | | | | | | | | | | | | | | Proposal No. 1 Election of Directors | | | Framework for Executive Compensation | | | Nominees for Election to Our Board | | | Other Compensation and Benefit Programs | | | Corporate Governance | | | Compensation Committee Report | | | Overview | | | Compensation Program Risk Assessment | | | Board Composition and Refreshment | | | Additional Information Regarding Executive Compensation | | | Nominations for Directors | | | Summary Compensation Table | | | Board Independence and Structure | | | Grants of Plan-Based Awards in 2023 | | | Board's Role in Risk Oversight | | | Outstanding Equity Awards at 2023 Fiscal Year End | | | Board Evaluation | | | Option Exercises and Stock Vested in 2023 | | | Stockholder and Interested Party Communications with our Board | | | Non-Qualified Deferred Compensation for 2023 | | | Code of Ethics and Business Conduct | | | Potential Payments Upon Termination of Employment or Change in Control | | | Code of Ethics for Finance Professionals | | | CEO Pay Ratio | | | Insider Trading Policy | | | Pay Versus Performance | | | Related Party Transactions | | | Information Concerning our Executive Officers | | | Succession Planning | | | Security Ownership of Certain Beneficial Owners and Management | | | Director Compensation | | | Stock Ownership Guidelines for Directors and Executive Officers | | | 2023 Director Summary Compensation | | | Delinquent Section 16(a) Reports | | | Directors' Outstanding Equity Awards at 2023 Fiscal-Year End | | | Equity Compensation Plan Information | | | Proposal No. 2 Stockholder Advisory Vote to Approve the Compensation of the Company's Named Executive Officers | | | Proposal No. 3 Ratification of Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for 2024 | | | Compensation Discussion and Analysis | | | Proposal No. 4 Approval of Amendment to Our Restated Certificate of Incorporation to Eliminate or Limit the Personal Liability of Officers to the Fullest Extent Permitted by the Delaware General Corporation Law | | | Executive Summary | | | Other Matters | | | Compensation Governance | | | Appendix A - Amendment to Restated Certificate of Incorporation | A-1 |
Note: Unless otherwise indicated in the text, any other matters be voted on?
The Board does not intendreference to present any other matters ata year is intended to refer to 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 Tammy M. Finley and Thomas B. Okray as proxies, with full power of substitution ("Proxies"), to vote on such matters in their discretion in accordance with their best judgment.
Who is entitled to vote?
Stockholders of record asCompany’s fiscal year of the close of business on March 20, 2017 (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 votes.
What is the difference between holding sharessame date as a stockholder of record and as a beneficial owner?
Many stockholders hold their shares through a broker or bank rather than directlydescribed 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 our transfer agent, Computershare, 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 to provide you 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 16, 2017, the day before the Annual Meeting. Your shares will be voted as you indicate. If you sign and return your proxy card but you do not indicate your voting preferences, the Proxies will vote your shares FOR Proposal Nos. 1, 2 and 4 through 6 and FOR an annual vote for Proposal 3.
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. AS A RESULT OF THE NEW YORK STOCK EXCHANGE’S RULES,YOUR BANK OR BROKER CANNOT VOTE WITH RESPECT TO ANY PROPOSAL, EXCEPT FOR PROPOSAL NO. 5, UNLESS IT RECEIVES VOTING INSTRUCTIONS FROM YOU.
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 bank or broker to vote in person at the Annual Meeting.
Can I change my vote or revoke my proxy?
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 by 11:59 P.M. (EDT) on May 16, 2017;
Returning a later-dated proxy card;
Sending written notice of revocation to Tammy M. Finley, Executive Vice President, General Counsel, and Corporate Secretary at the Company’s address of record, which is 5008 Airport Road, Roanoke, VA 24012; or
Completing a written ballot at the2023 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 our policy that all proxies, ballots, voting instructions and 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?
We 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 Annual Meeting, including the fees of Okapi Partners. 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. 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 of our common stock on the Record Date, represented in person or by proxy at the Annual Meeting, constitutes a quorum for voting on proposals 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, and broker non-votes will be counted in determining the quorum. On the Record Date, there were 73,818,777 shares outstanding and 417 stockholders of record. A majority of our common stock, or 36,909,389 shares, will constitute a quorum. A majority of the shares present at the Annual Meeting may adjourn the meeting even if the number of shares present do not 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 by the date specified in the statement requesting voting instructions that has been provided by the bank or broker.
If that happens, the bank or broker may vote those shares only on matters as permitted by The New York Stock Exchange. The New York Stock Exchange prohibits banks and brokers from voting uninstructed shares in, among other things, the election of directors and matters related to executive compensation; accordingly, banks and brokers cannot vote with respect to any Proposal presented for consideration in this Proxy Statement except for Proposal No. 5 unless they receive voting instructions from the beneficial owners. Broker non-votes are not treated as votes cast under Delaware law.
What vote is required to approve each proposal?
Proposal No. 1. For the election of directors, the eleven nominees for director will be elected if they receive a majority of the votes cast at the Annual Meeting for the election of directors. For purposes of the election of directors, a majority of votes cast means that the number of shares voted "for" a director’s election exceeds 50 percent of the number of votes cast with respect to that director’s election, and votes cast include votes to withhold authority and exclude abstentions and broker non-votes. Accordingly, abstentions and broker non-votes will have no effect on the outcome of the proposal.
Proposal No. 2. The advisory vote to approve the compensation of the Company’s named executive officers 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 by proxy, and entitled to vote at the Annual Meeting. Abstentions count as votes cast and have the effect of a vote against the proposal. The number of votes cast excludes broker non-votes, and broker non-votes will have no effect on the outcome of the proposal. Although the advisory vote to approve the compensation of the Company’s named executive officers is non-binding, the Board and the Compensation Committee will review the voting results and consider them in making future decisions about executive compensation programs.
Proposal No. 3. For the advisory vote on the frequency of the stockholder advisory vote on the compensation of the Company's named executive officers, a plurality of the votes cast on this proposal by the holders of shares of our common stock who are present, or represented by proxy and entitled to vote at the Annual Meeting will be considered the stockholders’ preferred frequency. The number of votes cast excludes broker non-votes, and broker non-votes will have no effect on the outcome of the proposal. Although the vote is non-binding, the Board and the Compensation Committee will review the voting results and consider them in making the decision on the frequency of the stockholder advisory vote on executive compensation, and the
Company will report the Board's final intent in the Current Report on Form 8-K that provides10-K filed with the results of the voting at the Annual Meeting.
Proposal No. 4. Approval of the Advance Auto Parts, Inc. 2017 Amended and Restated Executive Incentive Plan 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 by proxy, and entitled to vote at the annual meeting. Abstentions count as votes cast and have the effect of a vote against the proposal. The number of votes cast excludes broker non-votes, and broker non-votes will have no effect on the outcome of the proposal.
Proposal No. 5. 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 by proxy, and entitled to vote at the Annual Meeting. Abstentions count as votes cast and have the effect of a vote against the proposal. The number of votes cast excludes broker non-votes, and broker non-votes will have no effect on the outcome of the proposal.
Proposal No. 6. Approval of an amendment to the Company's Certificate of Incorporation to reduce the threshold stock ownership requirement from 25 percent to 10 percent for stockholders to call a special meeting requires the approving vote of a majority of the shares of our common stock entitled to vote at the Annual Meeting. Abstentions and broker non-votes have the effect of a vote against the proposal.
Who can attend the Annual Meeting?
Only Advance Auto Parts stockholders as of the close of business on the Record Date may attend the Annual Meeting.
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 along with valid picture identification. 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, Computershare, toll-free at (866) 865-6327 or at P.O. Box 30170, College Station, TX 77842, 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 Computershare toll-free at (866) 865-6327 or at P.O. Box 30170, College Station, TX 77842, 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 Computershare 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 website, www.AdvanceAutoParts.com (click on the homepage link to 2017 Annual Meeting materials). If you want copies mailed to you and you are a beneficial owner, you must request them from your broker, bank, or other nominee. If you want copies mailed to you and you are a stockholder of record, we will promptly mail additional copies to you, at no charge, if you request them from our corporate office by phone at (919) 573-3826 or by mail to 2635 East Millbrook Road, Raleigh, NC 27604, 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 a Report on Form 8-K within four business days following the Annual Meeting.
What is the deadline for consideration of stockholder proposals or director nominations for the 2018 annual meeting of stockholders?
If you are a stockholder and you want to present a proposal at the 2018 annual meeting and have it included in our proxy statement for that meeting, you must submit the proposal in writing at our offices at 5008 Airport Road, Roanoke, Virginia 24012, Attention: Corporate Secretary, on or before December 7, 2017. Applicable Securities and Exchange Commission ("SEC") rules and regulations governon March 12, 2024 (the "2023 Form 10-K").
Proposal No. 1 Election of Directors At the submission of stockholder proposals and our consideration of them for inclusion in next year’s proxy statement.
If you want to present a proposal at the 2018 annual meeting (other than pursuant to SEC rules and regulations) or to nominate a person for election as a director, you 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 stockholder of intent to present such proposal or nomination no less than 120 days and no more than 150 days prior to the first anniversary of the date of the preceding year’s annual meeting. Therefore, we must receive notice of such proposal no earlier than December 18, 2017, and no later than January 17, 2018. The notice must contain the information required by our by-laws. You may obtain a print copy of our by-laws by submitting a request to: Advance Auto Parts, 5008 Airport Road, Roanoke, Virginia 24012, Attention: Corporate Secretary. Our by-laws are also available on our website at www.AdvanceAutoParts.com. Our Chair or any other person presiding at the meeting may exclude any matter that is not properly presented in accordance with these requirements.
What is the deadline for director nominations for the 20182024 annual meeting of stockholders using proxy access?
A shareholder, or group of up to 20 shareholders, that has owned continuously for at least three years shares of our common stock representing an aggregate of at least three percent of the outstanding shares of our common stock may nominate and include in our proxy materials director nominees constituting the greater of (i) two individuals and (ii) 20% of our Board. All director nominees must satisfy the requirements included in the Company’s by-laws.
If you are a stockholder and want to nominate a director for our 2018 annual meeting of stockholders, we must receive notice of the nomination no earlier than November 7, 2017 and no later than December 7, 2017. The notice of nomination using process access should be submitted in writing to our offices at 5008 Airport Road, Roanoke, Virginia 24012, Attention: Corporate Secretary. The notice of nomination must include the information required for director nominations using proxy access required by our by-laws. Proxy access nominees who do not receive at least a 25% vote in favor of election or withdraw their nomination will be ineligible as a nominee for the following two years.
You may obtain a print copy of our by-laws by submitting a request to: Advance Auto Parts, 5008 Airport Road, Roanoke, Virginia 24012, Attention: Corporate Secretary. Our by-laws are also available on our website at www.AdvanceAutoParts.com.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting,(the "Annual Meeting"), you will vote to elect as directors the eleven nominees listed below to serve until our 2018 Annual Meeting2025 annual meeting of stockholders or until their respective successors are elected and qualified. Our Board has nominated John F. Bergstrom, John C. Brouillard, Brad W. Buss, Fiona P. Dias,Carla J. Bailo, John F. Ferraro, Thomas R. Greco, Adriana Karaboutis,Joan M. Hilson, Jeffrey J. Jones II, Eugene I. Lee, Jr., William S. Oglesby, Reuben E. SloneShane M. O'Kelly, Douglas A. Pertz, Thomas W. Seboldt, Gregory L. Smith, Sherice R. Torres and Jeffrey C. SmithA. Brent Windom 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. In the normal course of its deliberations, ourThe Board may decide at a later time to add one or more directors who possess skills and experience that may be beneficial to our Board and our Company.does not have any vacancies.
The persons named as Proxiesproxies in the accompanying form of proxy have advised us that at the Annual 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 will not serve, the persons named as Proxiesproxies may vote for the election of any substitute nominees that our Board may propose. The persons named as Proxiesproxies may not vote for a greater number of persons than the number of nominees named above. Our by-laws provide that a nominee for director in an uncontested election must receive a majority of the votes cast at the Annual Meeting for the election of that director in order to be elected. If a nominee for director who is an incumbent director is not elected and no successor has been elected at the Annual Meeting, the director is expected to tender his or her resignation from the Board contingent on acceptance of such resignation by the Board.
Nominees for Election to Our Board The following table provides information is provided about our nominees for director effective as of the Record Date, record date, March 20, 201725, 2024 (the "Record Date"). CARLA J. BAILOIndependent President and Chief Executive Officer, ECOS Consulting, LLC | | | | | | | | | | | | | | | Name | |  Age: 63Director sinceSince: | | Independent YesNoAugust 2020
| | Committee Memberships | | Committee: Audit; Nominating and Corporate Governance Other Current Public Company Boards | John F. Bergstrom | | 2008 | | x | | Compensation (Chair) | | Associated Banc-Corp | | | | | | | | | Kimberly-Clark Corporation | | | | | | | | | WECBoards:SM Energy Group, Inc. | John C. Brouillard | | 2004 | | x | | Finance | | | Brad W. Buss | | 2016 | | x | | Audit (Chair) | | Cavium, Inc. | | | | | | | Finance | | Tesla, Inc. | Fiona P. Dias | | 2009 | | x | | Compensation | | HSN, Inc. | | | | | | | Finance | | Realogy Holdings Corp. | John F. Ferraro | | 2015 | | x | | Audit | | ManpowerGroup Inc. | | | | | | | Nominating & Corporate Governance (Chair) | | International Flavors & Fragrances Inc. | Thomas R. Greco | | 2016 | | x | | | | G&K Services, Inc. | Adriana Karaboutis | | 2015 | | x | | Audit | | | | | | | | | Nominating & Corporate Governance | | | Eugene I. Lee, Jr. | | 2015 | | x | | Compensation | | Darden Restaurants, Inc. | | | | | | | Nominating & Corporate Governance | | | William S. Oglesby | | 2004 | | x | | Compensation | | | | | | | | | Finance (Chair) | | | Reuben E. Slone | | 2016 | | x | | Audit | | | | | | | | | Finance | | | Jeffrey C. Smith | | 2015 | | x | | | | Yahoo! Inc. | | | | | | | | | Perrigo Company Vesuvius plc |
| | | | Mr. Bergstrom, 70, became a member of our Board in May 2008. Mr. Bergstrom is the ChairmanKey Experience and Chief Executive Officer of Bergstrom Corporation, which is one of the top 50 automobile dealership groups in America. Mr. Bergstrom has served in his current role at Bergstrom Corporation for more than five years. Mr. Bergstrom has served as a director of Associated Banc-Corp, a diversified bank holding company, since December 2010; Kimberly-Clark Corporation, a global health and hygiene company, since 1987; and WEC Energy Group, Inc., formerly Wisconsin Energy Corporation, a diversified energy company, since 1987.Skills
Bergstrom Corporation has been cited as the number one quality automotive dealerWith an accomplished career in the countryautomotive industry, including several leadership roles in both corporate and highlighted for its focus on outstanding customer service. With over 35 years of experience in automotive sales, service and parts management in an organization representing all major automotive manufacturers that distribute cars in the United States, Mr. Bergstromacademic settings, Ms. Bailo brings a unique and valuable point of view to our Board. In addition, asShe also has significant experience in the environmental sustainability space and brings a result of his service as a director of several other public companies, including membershipdifferentiated perspective on the compensation committees of Associated Banc-Corp and WEC Energy Group, Inc., he is in a positionbusiness sustainability matters to share withour Board. She has been designated by the Board his experienceas an audit committee financial expert consistent with governance issues facing public companies.SEC regulations.
| | Mr. Brouillard, 68, became a member of our Board in May 2004 and served as Executive Chairman from November 2015 to May 2016, after serving as non-executive chair ofProfessional Experience
Ms. Bailo is currently the Board from January 2008 to November 2015. Prior to that time, he served as interim Chair, President and Chief Executive Officer of the Company from May 2007 until January 2008 and Lead Director from February 14, 2007 to May 2007. Mr. Brouillard retired as Chief Administrative and Financial Officer of H.E. Butt Grocery Company, a regional food retailer, in June 2005,ECOS Consulting, LLC, an energy efficiency solutions provider, a position that he hadshe has held since February 1991. From 1977 to 1991, Mr. Brouillard held various positions with Hills Department Stores, a discount department store company, including serving as President of that company.
Mr. Brouillard's background as a chief administrative and financial officer with a grocery retail company recognized for outstanding customer service provides him with strong insights into the types of management and financial issues that face companies in the retail sector. After having2014. Ms. Bailo also served on our Board for over ten years, including seven years as the independent Board ChairPresident and eight months as the interim Chief Executive Officer of The Center for Automotive Research, an independent, non-profit research organization that engages with leaders in the Company, Mr. Brouillard is uniquely situatedglobal automotive industry to understandsupport technology advancements and improve the inner workings of Advance's Board and management processes. His considerable experience in finance and accounting matters has been valuable to the Board and the Company's management, and his past service on the board of another public company has strengthened his understandingcompetitiveness of the governance concerns facingU.S. automotive industry, from October 2017 to September 2022. Previously, Ms. Bailo served as Assistant Vice President, Mobility Research and Business Development of The Ohio State University, a public companies.
| | Mr. Buss, 53, became a member of our Board in March 2016. Mr. Buss retired in February 2016 as the Chief Financial Officer of SolarCity Corporation, a provider of clean energy services, where he had served since August 2014.research university, from 2015 to October 2017. Prior to joining SolarCity, he served as Chief Financial Officer and Executive Vice President, Finance and Administration of Cypress Semiconductor Corporation, a semiconductor design and manufacturing company, from August 2005 to June 2014. Prior to August 2005, Mr. Buss2015, Ms. Bailo held various financial leadership roles with Altera Corporation, a provider of custom logic solutions, Cisco Systems, a networking company, Veba Electronics LLC, a distributor of semiconductors and computer products, and Wyle Electronics, Inc.Nissan Motor Co. Ltd., a semiconductormultinational automobile manufacturer, and computer parts distributor. Mr. Bussbegan her career with General Motors Company, a multinational vehicle and financial services corporation. Ms. Bailo has served on the board of directors for Cavium, Inc.,SM Energy Company, a providercompany engaged in hydrocarbon exploration, since October 2018, and on the board of highly integrated semiconductor products,directors for Vesuvius plc, an international ceramics company, since July 2016 and for Tesla, Inc., a manufacturer of electric vehicles and energy storage products, since November 2009. He also served as a director and Chair of the Audit Committee for Café Press Inc., an online retailer of stock and user-customized on demand products, from October 2007 to August 2016. He formerly served as the Chair of the Audit Committee for Tesla, Inc.
Mr. Buss’ extensive financial background, knowledge gained from his experience in the technology industry, and board positions provide valuable insight to our Board on issues that impact public companies. He has been designated by the Board as an Audit Committee financial expert consistent with SEC regulations.February 2023.
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JOHN F. FERRAROIndependent
Former Global Chief Operating Officer, Ernst & Young | | | | | | | Ms. Dias, 51, became a member of our Board in September 2009. Ms. Dias is currently Principal Digital Partner at Ryan Retail Consulting, a global consulting firm, and has held this position since January 2015. Previously, she was Chief Strategy Officer of ShopRunner, an online shopping service, from August 2011 to October 2014. Before that, she was Executive Vice President, Strategy & Marketing, of GSI Commerce, Inc., a provider of digital commerce solutions from February 2007 to June 2011. Prior to 2007, Ms. Dias was Executive Vice President and Chief Marketing Officer of Circuit City Stores, Inc., a specialty retailer of consumer electronics, and also held senior marketing positions with PepsiCo, Pennzoil-Quaker State Company and The Procter & Gamble Company. Ms. Dias has served as a director of HSN, Inc., an interactive multichannel retailer, since July 2016 and of Realogy Holdings Corp., a real estate brokerage company, since June 2013. She also served as a director of Choice Hotels, Inc., a hotel franchisor, from November 2004 to April 2012.
Age: 68
Ms. Dias possesses extensive experience in marketing and managing consumer and retail brands. Her experience with developing, implementing and assessing marketing plans and initiatives allows the Board to benefit from her marketing expertise. In addition, Ms. Dias' e-commerce and digital marketing experience with a broad spectrum of brands aligns well with the Board's assessment of the Company's multi-channel strategies. Her position as a director of other public companies also enables her to share with the Board her experience with governance issues facing public companies.Director Since:
| | Mr. Ferraro, 61, became a member of our Board in February 2015 and served as Lead Independent Director from November 2015 to May 2016. Mr. Ferraro served as Global Chief Operating Officer, or COO, of Ernst & Young ("EY"), a leading professional services firm, from 2007 to December 2014. He retired as a partner of EY at the end of January 2015. In addition, Mr. Ferraro served as a member of EY’s Global Executive board for more than 10 years. Mr. Ferraro joined EY in 1976 and prior to his COO role, he served in several senior leadership positions at EY, including Global Vice Chair Audit. Mr. Ferraro is a CPA and a member of the American Institute of Certified
Committee: Audit (Chair) Other Current Public Accountants. Mr. Ferraro has served as a director for ManpowerGroup Inc., a provider of workforce solutions, since January 2016, and for Company Boards: International Flavors & Fragrances Inc., a manufacturer of flavors ManpowerGroup Inc. | Key Experience and fragrances, since May 2015.
Skills
Mr. Ferraro has extensive financial, corporate management, governance and public policy experience which enables him to assist the Board in identifying trends and developments that affect public companies. In addition, the Board benefits from his experience in the areas of marketing and the development of corporate strategy. He has been designated by the Board as an Audit Committeeaudit committee financial expert consistent with SEC regulations. | | Professional Experience Mr. Greco, 58, President and Chief Executive Officer, became a member ofFerraro served as our Board in Aprilindependent Lead Director from November 2015 to May 2016. Mr. Greco became the President and Chief Executive Officer on August 14, 2016, having served as Chief Executive Officer since April 11, 2016. From September 2014 until April 2016, Mr. Greco served as Chief Executive Officer, Frito-Lay North America,Ferraro founded RP Intellectual Partners LLC, a unitsuccessor to a part of PepsiCo, Inc. (“PepsiCo”), a leading global food and beverage company. As Chief Executive Officer, Frito-Lay North America, Mr. Greco was responsible for overseeing PepsiCo’s snack and convenient foods businessAlpha Alpha Intellectual Partners LLC, in the U.S. and Canada. Mr. Greco previouslyNovember 2022. He also served as Executive Vice President, PepsiCoStrategy and President, Frito-Lay North AmericaSales of Aquilon Energy Services, a software and services company for the energy industry from September 2011 until SeptemberFebruary 2019 to July 2019. He served as Global Chief Operating Officer ("COO") of Ernst & Young ("EY"), a leading professional services firm, from 2007 to December 2014 and retired as a partner of EY at the end of January 2015. In addition, Mr. Ferraro served as a member of EY’s Global Executive Board for more than 10 years. Mr. Ferraro joined EY in 1976 and prior to his COO role he served in several senior leadership positions at EY, including Global Vice Chair Audit. Mr. Ferraro practiced as a Certified Public Accountant for 35 years. Mr. Ferraro has served as a director for ManpowerGroup Inc., a provider of workforce solutions, since January 2016, and for International Flavors & Fragrances Inc., a manufacturer of flavors and fragrances, since May 2015. |
JOAN M. HILSONIndependent Chief Financial & Strategy Officer, Signet Jewelers Ltd. | | | | | | Age: 64 Director Since: March 2022 Committees: Audit Finance (Chair) Other Current Public Company Boards: None
| Key Experience and Skills Ms. Hilson brings more than 35 years of finance experience and deep specialty retail experience to our Board. In her role as Chief Financial & Strategy Officer of Signet Jewelers, she has been integral to leading transformation on a strategy intended to drive profitable growth through innovation, capital management, real estate optimization and expansion of market share, which brings valuable perspective to our Board. She has been designated by the Board as an audit committee financial expert consistent with SEC regulations.
Professional Experience Ms. Hilson has served as Chief Financial & Strategy Officer of Signet Jewelers, Ltd., the world's largest retailer of diamond jewelry, since March 2021, and she has served as Signet's Chief Financial Officer since April 2019. Prior to joining Signet, Ms. Hilson served as Chief Financial Officer of David’s Bridal Inc., a large specialty clothing retailer from 2014 to 2019; Executive Vice President and Chief Financial Officer and other executive financial leadership roles at American Eagle Outfitters, Inc., a lifestyle, clothing and accessories retailer from 2005 to 2012; and in several financial reporting, financial planning and merchandise planning positions at Limited Brands, Inc., a specialty retailer, including as Executive Vice President and Chief CommercialFinancial Officer for Pepsi BeveragesVictoria’s Secret Stores division. Ms. Hilson served as the Controller of Sterling Jewelers (now Signet Jewelers) from 1985 to 1992. She began her career as an auditor at Coopers & Lybrand LLP, one of the oldest professional financial and consulting services firms in the United States (which subsequently merged with PricewaterhouseCoopers). |
JEFFREY J. JONES IIIndependent President and Chief Executive Officer, H&R Block, Inc. | | | | | | Age: 56 Director Since: February 2019 Committees: Compensation (Chair); Nominating and Corporate Governance Other Current Public Company from 2009Boards: H&R Block, Inc.
| Key Experience and Skills Mr. Jones brings to September 2011. Mr. Greco joined PepsiCothe Board over 30 years of executive management, innovative leadership and operational excellence experience while holding key roles with top companies in Canada in 1986the retail, consumer products, agency and technology industries. He has served as President and Chief Executive Officer of a leading tax services provider for nearly a decade, where he has had substantial experience with launching initiatives to drive traffic, brand affinity and loyalty. Additionally, his position as a director of another public company also enables him to share with the Board his experience with governance issues facing public companies.
Professional Experience Mr. Jones is currently President and Chief Executive Officer of H&R Block, Inc., a global consumer tax services provider, a position he has held since October 2017. Prior to October 2017, Mr. Jones served as H&R Block’s President and Chief Executive Officer-Designate beginning in a variety of positions, including Region ViceAugust 2017. Previously, Mr. Jones served as President, Midwest; President, Frito-Lay Canada; Senior Vice President, Sales, Frito-Lay North America; President, Global Sales, PepsiCo;Ride Sharing at Uber Technologies Inc., an on-demand car service company, from September 2016 until March 2017 and Executive Vice President Sales, North America Beverages. Before joining PepsiCo,and Chief Marketing Officer at Target Corporation, a retail sales company, from April 2012 to September 2016. Prior to his time at Target Corporation, Mr. Greco worked atJones held various executive and leadership roles related to sales, agency and marketing with iconic brands such as The Proctor & GambleCoca-Cola Company a consumer packaged goods company. Mr. Grecoand The Gap, Inc. He has served as a director of G&K Services,H&R Block, Inc., a service-focused provider of branded uniform since 2017. |
EUGENE I. LEE, JR.Independent (Chair of the Board) Former Chairman and Chief Executive Officer, Darden Restaurants, Inc. | | | | | | Age: 62 Director Since: November 2015 Committee: Finance Other Current Public Company Boards: None
| Key Experience and facility services programs, since July 2014.Skills
Mr. Greco’s executive responsibilitiesLee’s prior experience as the CEOChiefExecutive Officer of Frito-Lay North America, where he worked to grow revenue and increase profits,a national group of chain restaurants provides him with importantstrong insights into customer service and the types of management issues that face companies with large numbers of employees in numerous locations throughout the country. In addition, he brings experience in the consumer retail industry. Mr. Greco brings to the Board significant experiencemarketing, real estate, strategic planning and leadership in the areas of corporate strategy, marketing, supply chain and logistics.
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| | | | Ms. Karaboutis, 54, became a member of our Board in February 2015. Ms. Karaboutis served as Executive Vice President, Technology, Business Solutions and Corporate Affairs at Biogen Inc., an independent biotechnology company from September 2014 to March 2017. She oversaw information technology, digital health and data sciences, and from December 2015 also oversaw global public affairs, government affairs, public policy and patient advocacy. From March 2010 to September 2014, Ms. Karaboutis was Vice President, and within the first year was promoted to Global Chief Information Officer (CIO), of Dell, Inc., a global technology company, where she was responsible for leading an efficient and innovative global IT organization focused on powering Dell as an end-to-end technology solutions provider. Ms. Karaboutis spent more than 20 years at General Motors Company and Ford Motor Company in various international leadership positions, including computer-integrated manufacturing, supply chain operations and information technology. She served as president of the Michigan Council of Women in Technology (MCWT) from 2008 to 2010 and was a board member of the Manufacturing Executive Leadership Forum from 2009 to 2014. Ms. Karaboutis currently serveschange management. His long tenured service on the boardboards of directors of Blue Cross Blue ShieldRARE Hospitality International, Inc. and Darden Restaurants, Inc., as well as his temporary service as Interim Executive Chair of Massachusettsthe Advance Auto Parts Board, have deepened his governance expertise and on the Babson College advisory board for the Center for Women’s Entrepreneurial Leadership (CWEL).leadership experience.
Ms. Karaboutis possesses extensive experience in corporate management, manufacturing, logistics and technology, and in driving proactive engagement with internal and external stakeholders to support corporate business goals. In addition, her experience with corporate strategy and change management allows the Board to benefit from her insights as the Company continues growing its Professional and e-commerce businesses.Experience
| | Mr. Lee, 55, became a member of our Board in November 2015. He is served as the President and Chief Executive Officer of Darden Restaurants, Inc. ("Darden"(“Darden”), the owner and operator of Olive Garden, LongHorn Steakhouse, Bahama Breeze, Cheddar’s Scratch Kitchen, Seasons 52, The Capital Grille, Eddie V’s and Yard House restaurants in North America, positions he has held sincefrom February 2015. Prior to that,2015 through January 2021. Previously, Mr. Lee served as Darden’s President and Interim CEOChief Executive Officer from October 2014 to February 2015, and President and Chief Operating Officer from September 2013 to October 2014. He served as President of Darden’s Specialty Restaurant Group from October 2007 to September 2013 following Darden’s acquisition of RARE Hospitality International, Inc., where he had served as President and a member of the Board of Directors since 2001. Mr. Lee has served as a member of the Darden Board of Directors sincefrom February 2015.
Mr. Lee’s experience as the chiefexecutive officer of a national group of chain restaurants provides him with strong insights into customer service and the types of management issues that face companies with large numbers of employees in numerous locations throughout the country. In addition, he brings experience in marketing, real estate and change management.2015 through September 2023.
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SHANE M. O'KELLY President and Chief Executive Officer, Advance Auto Parts, Inc. | | | | | | Age: 55 Director Since: September 2023 Committee: None Other Current Public Company Boards: None | Key Experience and Skills Mr. Oglesby, 57, becameO'Kelly has served as our President and Chief Executive Officer and a member of our Board since 2023. Previously, Mr. O'Kelly was the Chief Executive Officer of HD Supply, Inc. ("HD Supply") where he improved operational execution, oversaw the transition of a distribution center network and delivered record sales and profit numbers. Mr. O'Kelly brings to the Board significant experience and leadership in the areas of general management, retail operations and strategic planning.
Professional Experience Mr. O’Kelly joined Advance Auto Parts as President and Chief Executive Officer in September 2023. Prior to joining Advance, Mr. O’Kelly served as the Chief Executive Officer of of HD Supply, a national distributor and provider of maintenance, repair and operations (“MRO”) products and a wholly-owned subsidiary of The Home Depot, Inc. (the “Home Depot”), a leading home improvement retailer, from December 2020 to September 2023. From March 2018 through December 2020, Mr. O’Kelly served as Chief Executive Officer of Interline Brands, Inc., a leading national distributor and marketer of MRO products that was merged into Home Depot in December 2004. Since2020. He previously served as Chief Executive Officer of PetroChoice Holdings, Inc., a leading national lubricant distributor, from June 2011 to March 2018, and as Chief Executive Officer of AH Harris & Sons, Inc., a specialty construction supply distributor, from January 2016,2008 to June 2011. Mr. Oglesby hasO’Kelly formerly served as a senior advisorto PJT Partners, aCaptain in the U.S. Army. | | |
DOUGLAS A. PERTZIndependent Former President and Chief Executive Officer, The Brink's Company | | | | | | Age: 69 Director Since: May 2018 Committee: Nominating and Corporate Governance (Chair) Compensation Other Current Public Company Boards: Vestis Corporation | Key Experience and Skills Mr. Pertz has led several global advisory firm, which was spun outcompanies as Chief Executive Officer over the past 20 years and throughout his career has guided multinational organizations through both operational turnaround and growth acceleration. Mr. Pertz’s leadership positions have honed his operational expertise in branch and route-based logistics, business-to-business services, channel and brand marketing and growth through acquisition.
Professional Experience Mr. Pertz served as President and Chief Executive Officer of The Blackstone Group, L.P.Brink’s Company (“Brink’s”), the world’s largest cash management company including cash-in-transit, ATM services, international transportation of valuables, cash management and payment services, from June 2016 through May 2022. Prior to joining Brink’s, Mr. Pertz was the president and CEO of Recall Holdings Limited (“Recall”), a global investmentprovider of digital and advisory firm, where he previously heldphysical information management and security services, from 2013 to 2016. Previously, Mr. Pertz served as Chief Executive Officer of several other public companies, including IMC Global, the positionpredecessor company to The Mosaic Company, a mining and production company, and Culligan Water Technologies, Inc., a water systems treatment company. Mr. Pertz currently serves on the board of Senior Managing Directordirectors for Vestis as Vice Chairman. Mr. Pertz was a member of the Brink's board of directors from April 2004 through December 2015.June 2016 to May 2023, including serving as Executive Chairman from May 2022 to May 2023. Additionally, Mr. Oglesby has over 30 years of investment banking experience as a result of his position with The Blackstone Group, L.P., and previous managing director positions with Credit Suisse First Boston; Donaldson Lufkin & Jenrette; and Kidder, Peabody & Co.
Mr. OglesbyPertz has served on our Board forthe board of directors of other public companies, including Recall, Nalco Holdings, The Mosaic Company, IMC Global and Bowater.
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THOMAS W. SEBOLDTIndependent President, Seboldt Consulting Services LLC | | | | | | Age: 57 Director Since: March 2024 Committee: Not yet assigned Other Current Public Company Boards: None | Key Experience and Skills Mr. Seboldt has over ten years. Withthree decades of service in the automotive industry. In particular, his broaddeep experience in merchandising at O'Reilly Automotive, Inc. brings key experience in a focus area for the investment banking business, Mr. Oglesby is uniquely equipped to provideCompany. He has also served in leadership roles on several prominent industry associations, which provides the Board with valuable insights into capitalization strategies, capital market mechanics and strategic expansion opportunities. His experience with us andon matters of particular importance in the aftermarket automotive industry.
Professional Experience Mr. Seboldt is a seasoned executive in the automotive aftermarketretail industry enables him to provide critical insights into strategic opportunities for our Company,with over three decades of industry experience. Mr. Seboldt has been the President of Seboldt Consulting Services LLC, an automotive industry consulting firm, since January 2019. Previously, Mr. Seboldt spent the vast majority of his career with O’Reilly Automotive, Inc., an American auto parts retailer, from 1987 until November 2018, where he held several titles of increasing responsibility, including our acquisitionVice President, Merchandising. Mr. Seboldt has also served on the board of General Parts International, Inc. ("GPI"prominent industry associations including the California Automotive Wholesalers’ Association (“CAWA”) and the Auto Care Association. During his tenure on the CAWA Board, Mr. Seboldt has served in 2014.a variety of positions, including President, Vice President, Executive Committee member and Treasurer. |
GREGORY L. SMITHIndependent
Executive Vice President, Global Operations and Supply Chain, Medtronic plc | | | | | | Age: 60 Director Since: March 2024 Committee: Not yet assigned Other Current Public Company Boards: None | Key Experience and Skills Mr. Slone, 54, becameSmith brings deep expertise in supply chain to the Board, providing valuable insights in a memberkey area of our Boardfocus for the Company. His executive experience in March 2016. He has servedmultinational retail organizations, including organizations that serve both consumers and other businesses, brings valuable perspective to the Board.
Professional Experience Mr. Smith is a proven supply chain expert with nearly 40 years of experience across a variety of industries. Mr. Smith currently serves as SeniorExecutive Vice President, Global Operation and Supply Chain Management at Walgreen Co., one of the nation’s largest drugstore chains and part of the Retail Pharmacy USA Division of Walgreens Boots Alliance, Inc., since May 2012.Medtronic plc, a leading global healthcare technology company. Prior to joining Walgreens,Medtronic in 2021, Mr. Slone served asSmith was Executive Vice President, Supply Chain and General Manager of Services for OfficeMax,Walmart Inc., a providermultinational omni-channel retail corporation, from 2017 to 2021 and Senior Vice President, Global Operations of office products, business machinesThe Goodyear Tire and related items, "print-for-pay" services and office furniture,Rubber Company, a multinational tire manufacturer, from 20042011 to 2012. Prior to OfficeMax,2016. Earlier in his career, Mr. Slone held various supply chainSmith spent a decade with Conagra Foods, Inc., a consumer packaged goods company, where he served in several leadership positions, including Executive Vice President, Supply Chain. He previously held roles with Whirlpool Corporation, General MotorsUnited Signature Foods LLC and Aurora Foods Inc. |
SHERICE R. TORRESIndependent Chief Marketing Officer, ChargePoint, Inc. | | | | | | Age: 50 Director Since: September 2021 Committee: Compensation Other Current Public Company Boards: None
| Key Experience and Federal-Mogul Holdings Corporation. He also held prior consulting positionsSkills Ms. Torres has nearly 25 years of executive management experience with Electronic Data Systems Corporationtop companies in marketing, brand management, strategic planning and Ernst & Young. He authored “Leading a Supply Chain Turnaround” and co-authored “Are You the Weakest Link in your Company’s Supply Chain?,” articles published in the October 2004 and September 2007 issues of the Harvard Business Review, respectively. In May 2010, Harvard Business Press published the book entitled “The New Supply Chain Agenda: The 5 Steps That Drive Real Value,” which was co-authored by Mr. Slone.
Mr. Slone is a supply chain thought leader. Mr. Slone’s supply chain expertise, his retail and automotive industry experience, and hissocial responsibility. This deep experience in change management are expecteddigital marketing is complemented by her experience with and commitment to provide valuable insights to our Board as we evaluateenhancing diversity, equity and work to optimize our supply chain.inclusion.
| | Mr. Smith, 44, became a member of our Board in November 2015 andProfessional
Ms. Torres has served as the independent Chair of the Board since May 2016. He is a Managing Member, Chief Executive Officer and Chief InvestmentMarketing Officer of Starboard Value LP, a New York-based investment adviser with a focused and fundamental approach to investing in publicly traded U.S. companies, which he co-founded in March 2011, after having launched the Starboard Value investment strategy in 2002. Previously, Mr. Smith was a Partner and Managing Director of Ramius LLC, a subsidiary of the Cowen Group, Inc. (“Cowen”). Mr. Smith is a former member of Cowen’s Operating Committee and Cowen’s Investment Committee. Prior to joining Ramius LLC in January 1998, he served as Vice President of Strategic Development and a director of The Fresh Juice Company, Inc. Mr. Smith began his career in the Mergers and Acquisitions department at Société Générale. Mr. Smith currently serves as a director of Yahoo! Inc., a multinational technology company, a position he has held since April 2016, and on Perrigo Company plc, a global over-the-counter consumer goods and pharmaceutical company since February 2017. Previously, he served as Chairman of the Board of Directors of Darden Restaurants, Inc., a full service restaurant chain, from October 2014 to April 2016. Mr. Smith also previously served as a director of Quantum Corporation, a global expert in data protection and big data management, from May 2013 to May 2015; Office Depot, Inc., an office supply company, from August 2013 to September 2014; Regis Corporation, a global leader in beauty salons, hair restoration centers and cosmetology education, from October 2011 until October 2013; and Surmodics,ChargePoint, Inc., a leading provider of drug deliverynetworked hardware and surface modification technologies to the healthcare industry,software solutions for charging electric vehicles, since August 2023. Previously, Ms. Torres served as Chief Marketing Officer of Circle Internet Financial, LLC, a global internet finance firm, from January 20112022 to August 2012. Mr. Smith also previously2023. From November 2020 until January 2022, she served as ChairmanChief Marketing Officer of Novi, a division of Meta, a leading technology company, where she led all aspects of global marketing across Facebook's payment products. From August 2014 to May 2020, Ms. Torres served as Global Marketing Director for Google, Inc., a leading technology company, and from May 2020 to October 2020, she served as Global Inclusion Director for Google. Prior to 2014, Ms. Torres served in a variety of leadership roles at Viacom (now Paramount), a media and entertainment company, across consumer products, strategic planning and digital. She began her career in the Boardchange management consulting practice of DirectorsDeloitte Touche Tohmatsu Limited, a multinational professional services provider. Ms. Torres also served on the board of Phoenix Technologies Ltd.directors of LogicMark, LLC, a seller of medical alert devices, from February 2022 to March 2023.
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A. BRENT WINDOMIndependent President, Windom Consulting LLC | | | | | | Age: 63 Director Since: March 2024 Committee: Not yet assigned Other Current Public Company Boards: None | Key Experience and Skills Mr. Windom's deep automotive industry experience, including service as a director of Zoran Corporation, Actel Corporation, S1 Corporation, and Kensey Nash Corporation.
With his broad experience investing in public companies to improve value, Mr. Smith is equipped to providechief executive officer at multiple organizations, provides the Board with insights into governance, oversight, accountability, management discipline, capitalization strategies,valuable insights. Mr. Window's expertise in operations, particularly in the automotive aftermarket, provide highly relevant subject matter expertise. He also brings experience in Canadian operations to the Board.
Professional Experience Mr. Windom, 63, is an experienced automotive industry executive, having spent nearly four decades working in roles across the sector. Most recently, Mr. Windom has served as the President of Windom Consulting LLC, an executive consulting services business, since July 2021. From May 2019 to June 2021, Mr. Windom served as President and capital market mechanics. In addition, his serviceChief Executive Officer of Uni-Select Inc., a leading automotive refinish, industrial coatings and automotive aftermarket parts distributor. Previously, Mr. Windom was President and COO of Canadian Automotive Group, Uni-Select’s Canadian business, from July 2017 to May 2019. Mr. Windom also served as president and Chief Executive Officer of Auto Plus | Pep Boys, a director on the boardsmajor U.S.-based distributor of many other public companies provides the Companyautomotive aftermarket parts and an aftermarket retailer, from February 2016 until July 2017, which was formed following Icahn Enterprises L.P.’s acquisition of Uni-Select USA, Inc. and Beck/Arnley Worldparts, Inc. Prior to joining IEH Auto Parts, Mr. Windom spent 10 years with valuable insights on corporate governanceUni-Select, where he held positions of increasing responsibility including President and compensation practices that concern the Board and the Company.Chief Operating Officer, Uni-Select USA.
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THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR EACH OF OUR BOARD’S NOMINEES.
| | | | | | | THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF OUR BOARD NOMINEES. |
Corporate Governance
CORPORATE GOVERNANCE
Overview Our Company believesWe believe that goodour strong corporate governance practices reflect our values and support our strategic and financial performance. The compass of our corporate governance practices can be found in our by-laws, our Guidelines on Significant Governance Issues and our Code of Ethics and Business Conduct, which were adopted by our Board to guide our Company, our Board and our employees ("Team Members"(“associates”) and are available on our website at www.AdvanceAutoParts.comir.advanceautoparts.com under the Investor Relations section. Our by-laws provide that in an uncontested election, directors must receive a majority of the votes cast at the Annual Meeting for the election of directors and that, subject to certain procedural and/or stock ownership requirements, stockholders may request a special meeting of stockholders and submit nominees for director for consideration by the Nominating and Corporate Governance Committee or for inclusion in our proxy statement through proxy access."Governance." Each standing committee of the Board has a charter, available at www.AdvanceAutoParts.comir.advanceautoparts.com under the Investor Relations section,"Governance," that spells out the roles and responsibilities assigned to it by the Board. In addition, the Board has established policies and procedures that address matters such as chiefrisk oversight, stockholder and interested party communications with the Board, transactions with related persons, insider trading, executive officer succession planning transactions with related persons, riskand other matters. For additional information about corporate governance highlights, please see "Proxy Summary - Corporate Governance Highlights."
Board Composition and Refreshment Of the eleven director nominees that compose our Board: | | | | | | | | | 10of 11 are independent | | 3of 11 are diverse with respect to gender (3) or race/ethnicity (1) |
Our directors possess a breadth of skills and depth of experience relevant to being able to provide effective oversight communicationsfor the execution of the Company's agenda and creation of long-term value. For additional information about the skills, experiences and characteristics of our Board, please see "Proxy Summary - Director Skills, Core Competencies and Characteristics." We believe the Board benefits from a balance of newer directors, who bring fresh perspectives, and longer serving directors, who have contributed to our strategy over time and have deep understanding of our operations. We continually assess the composition of the Board, including the Board's size and the diversity, skills and experience of our directors, to ensure continued alignment with the strategic direction of the Company. In 2024, in connection with engagement with shareholders Third Point and Saddle Point, the Board by stockholdersadded three new directors to the Board with deep industry and other interested parties,operational expertise. The Board does not currently have any vacancies. | | | | | | | | | 6new directors have joined our Board in the past 3 years | | 3.7years average tenure of our director nominees |
Nominations for Directors Identifying Director Candidates The Nominating and Corporate Governance Committee is responsible for leading the search for and evaluating qualified individuals, including those of diverse backgrounds, 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. 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, diversity and qualificationsability and willingness to commit sufficient time and attention to the activities of the Board. At a minimum, 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 directors. This "Corporate Governance" section provides insights into howstockholders. Although the Board has implemented these policiesnot adopted a formal policy with regard to diversity (including, but not limited to, with respect to gender, race, ethnicity, sexual orientation, disability and procedures to benefit our Company and our stockholders. Guidelines on Significant Governance Issues
The responsibility of our Board is to review, approve and regularly monitorage) in the effectiveness of our fundamental operating, financial and other business plans, as well as our 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 and compensation;
the assessment of performance of our Board through the annual evaluationcomposition of the Board, individual directorsthe Committee is committed to considering candidates of diverse backgrounds in every director search it leads and strives to compose a Board committees;that reflects diverse viewpoints that will actively and constructively contribute to the Board’s discourse and deliberations.
Board procedural matters, including, among other things, selection of2024 Cooperation Agreement
On March 11, 2024, we entered into the chair ofCooperation Agreement with shareholders affiliated with Third Point and Saddle Point (collectively, the Board, Board meetings, Board communications, retention of counsel and advisers and our expectations regarding"Investor Group"). Pursuant to 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, development and succession planning;
codes of conduct; and
other matters, including 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 our executive officers and directors, use of the corporate airplane, and confidential stockholder voting.
A complete copy of our Guidelines on Significant Governance Issues is available on our website at www.AdvanceAutoParts.com under the Investor Relations section.
Director Independence
Our Board, after consultation withCooperation Agreement, and upon the recommendation of the Nominating and Corporate Governance Committee, determined that,the Board appointed each of A. Brent Windom, Gregory L. Smith and Thomas W. Seboldt (the "New Directors") as new independent members of the Board, effective March 11, 2024 and agreed to nominate each of the New Directors to stand for election at the Annual Meeting.
Pursuant to the Cooperation Agreement, the Investor Group has agreed to abide by certain standstill restrictions and voting commitments. The Cooperating Agreement also includes procedures regarding the replacement of any of the New Directors, a mutual non-disparagement provision and provisions permitting the Investor Group to meet periodically with the exceptionBoard (once annually) and management (quarterly). The Investor Group's right to participate in the selection of Messrs. Brouillardthe replacement New Directors, the Company's obligations with respect to the appointment of such replacement New Directors, and Greco,the Investor Group's meeting rights with the Board and management are subject to the Investor Group beneficially owning a "net long position" of, or having aggregate net long exposure to, at least 50% of their "net long position" as of the date of the Cooperation Agreement. Certain provisions of the Cooperation Agreement, including the standstill and mutual non-disparagement provisions, will remain effective until the earlier of (i) 30 days prior to the deadline for the submission of stockholder nominations for the Company's 2025 annual meeting of stockholders and (ii) 150 days prior to the anniversary of the 2024 Annual Meeting. Stockholder Recommendations for Director Candidates, Proxy Access and Universal Proxy Rules The Nominating and Corporate Governance Committee will consider stockholder suggestions for nominees for directors. Any stockholder who desires to recommend a candidate for director must submit the recommendation in writing and follow the procedures set forth in our by-laws. Our by-laws require that a stockholder’s nomination be received by the corporate secretary not less than 120 days nor more than 150 days prior to the first anniversary of the date of the preceding year’s annual meeting. The notice should include the following information about the proposed nominee: name, age, business and residence addresses, principal occupation or employment, the number of shares of Company stock owned by the nominee and additional information required by our by-laws as well as any information that may be 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 our books, the number and type of shares or other equitable interests that are beneficially owned by the stockholder and additional information required by our by-laws. The Committee does not evaluate any candidate for nomination as a director any differently solely because the candidate was recommended by a stockholder. A copy of our by-laws may be obtained by submitting a request to: Advance Auto Parts, Inc., 4200 Six Forks Road, Raleigh, North Carolina 27609, Attention: Corporate Secretary. Our by-laws also are available on our website at ir.advanceautoparts.com under "Governance." Additionally, our by-laws provide that a stockholder, or group of 20 or fewer stockholders, owning at least three percent of our outstanding shares continuously for at least three years may nominate candidates to serve on the Board and have those candidates included in our annual meeting materials. The maximum number of proxy access candidates that a stockholder or stockholder group may propose as nominees is the greater of (i) two or (ii) 20 percent of the Board. This process is subject to additional eligibility, procedural and disclosure requirements as provided in our by-laws, including the requirements that the nominee must be deemed to be independent under applicable stock exchange listing requirements and that notice of such nominations must be delivered to us neither later than 120 days nor earlier than 150 days prior to the first anniversary of the date on which we mailed the proxy statement for the preceding year’s annual meeting of stockholders. As specified in our by-laws, if a stockholder intends to comply with the SEC's universal proxy rules and to solicit proxies in support of director nominees other than the Company's nominees, the stockholder must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act not less than 120 days nor more than 150 days prior to the first anniversary of the date of the preceding year's annual meeting. Board Independence and Structure Independence Our Board reviews each director's independence at least annually with the assistance of the Nominating and Corporate Governance Committee and has determined that each of our incumbent directors other than Mr. O'Kelly is an “independent” director under the listing standards of the New York Stock Exchange ("NYSE"(“NYSE”), because each of these directors: individuals: (1)has no material relationship with us or our subsidiaries, either directly or indirectly, as a partner, stockholder or officer of an organization that has a relationship with us or our subsidiariessubsidiaries; and (2)satisfies the “bright line independence” criteria set forth in Section 303A.02(b) of the NYSE’s listing standards. Based on such standards, the The Board determined that Mr. Brouillard is not independent because he served as our Executive Chairman from November 2015 to May 2016, and that Mr. GrecoO'Kelly is not independent because he is employed as our President and Chief Executive Officer.
To determine whether a director was qualified to be considered independent,In the independence determination, the Board assessed 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. Our Board reviews each director’s status under this definition at least 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 and Independent Directors
During 2016, the non-management directors on our Board met one time and the independent directors met a total of ten times. During 2016, these meetings were presided over by Mr. Ferraro, who served as the independent Lead Director until May 2016, and by Mr. Smith, independent Chair of the Board, commencing in May 2016. For 2017, our independent and non-management directors are scheduled to meet separately in conjunction with each of the four scheduled non-telephonic meetings of the Board. Mr. Smith, our independent Chair, is expected to preside over these meetings during 2017. Our Board regularly meets without the CEO being present.
Board Leadership Structure
Our Guidelines on Significant Governance Issues and by-laws allow the Board to combine or separate the roles of the Chair of the Board and the Chief Executive Officer. The Board regularly considers whether to maintain the separation of the roles of Chair and Chief Executive Officer. In the event that the Board chooses to combine these roles, or in the event that the Chair of the Board is not an independent director, our governance guidelinesGuidelines on Significant Governance Issues provide for the selection of an independent Lead Director. The Board has maintained the separation of the roles of Chair of the Board and Chief Executive Officer since January 2008. From January 2008 until November 2015, Mr. Brouillard servedLee currently serves as the independent Chair of the Board and provided leadership toBoard. Although the Board and support tobelieves this structure is appropriate under the Chief Executive Officer. In anticipationpresent circumstances, the Board has also not adopted a policy on whether the roles of the departure ofChairman and Chief Executive Officer Darren Jackson at the end of fiscal year 2015,should be separated or combined because the Board appointed Mr. Brouillard to serve as the Executive Chairman of thebelieves that there is no single best blueprint for structuring Board as of November 12, 2015. In that role, Mr. Brouillard provided executive leadership and guidance duringthat, as circumstances change, the period of management transition and continued to provideoptimal leadership to the Board. At the time Mr. Brouillard was named the Executive Chairman, he was no longer deemed independent and the Board named Mr. Ferraro to serve as the Board's independent Lead Director from November 2015 until May 2016. In May 2016, Mr. Smith was named as the Board's independent Chair. structure may change. The responsibilities of the independent Chair or independent Lead Director include participating in development of the Board’s agenda, as well as facilitating the discussions and interactions of the Board to ensure that all directors’ viewpoints areevery director's viewpoint is heard and considered. The Chair presides over meetings of the Board and, if independent, also over meetings of the independent directors. When the Chair is not independent, the independent Lead Director is expected to preside over meetings of the independent directors. Where an independent Lead Director exists, he or she also has the responsibility to act as principal liaison among the Chair, the Chief Executive Officer and the full Board.
Committees and Meetings
Our Board met seven times during 2023 and received periodic written updates from management throughout the year. Each incumbent 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 during his or her tenure. Our Guidelines on Significant Governance Issues provide that our directors should attend annual meetings of stockholders, and all of our current directors who were serving at the time attended our 2023 annual meeting of stockholders and were available for questions from our stockholders. In accordance with applicable NYSE listing requirements, our independent directors hold regular executive sessions at which management, including the Chief Executive Officer, is not present. During 2023, these meetings were presided over by Mr. Lee, our independent Chair of the Board. We currently have an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which consists of entirely of independent directors in accordance with the listing standards of the NYSE and whose members satisfy the board committee qualification requirements of the NYSE and SEC, as well as a Finance Committee, which also consists entirely of independent directors. The following table sets forth the names of each current committee member, the number of times each committee met in 2023 and the primary responsibilities of each committee. From February 2023 through August 2023, we also had a Succession Committee, composed entirely of independent directors, to lead a search and evaluation of internal and external candidates for Chief Executive Officer. AUDIT COMMITTEE | | | | | | | | | | | | | Members: | | Primary Responsibilities | John F. Ferraro (Chair) Carla J. Bailo Joan M. Hilson Arthur L. Valdez Jr. Meetings in 2023: 11 | | • | monitors the integrity of our financial statements, reporting processes, internal controls and legal and regulatory compliance; | | • | appoints, determines the compensation of, evaluates and, when appropriate, replaces our independent registered public accounting firm; | | • | pre-approves all audit and permitted non-audit services to be performed by our independent registered public accounting firm; | | • | monitors the qualifications and independence and oversees performance of our independent registered public accounting firm; | | • | reviews, discusses with management and oversees the Company's information technology, cyberscurity risk and privacy exposures; and | | • | reviews with management the implementation and effectiveness of the Company’s compliance programs, discusses guidelines and policies with respect to risk assessment and risk management and oversees our internal audit function. |
COMPENSATION COMMITTEE | | | | | | | | | | | | | Members: | | Primary Responsibilities | Jeffrey J. Jones II (Chair) Douglas A. Pertz Sherice R. Torres
Meetings in 2023:10 | | • | 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 and approves the compensation of our executive officers; | | • | oversees our incentive and equity based compensation plans, reviews and approves our peer companies and data sources for purposes of evaluating our compensation competitiveness and establishing the appropriate competitive positioning of the levels and mix of compensation elements; | | • | oversees development and implementation of the succession plans for executive management (other than the CEO), including identifying successors and reporting annually to the Board; | | • | oversees the Company’s executive compensation recovery (“clawback”) policy; and | | • | recommends to the Board compensation guidelines for determining the form and amount of compensation for outside directors. |
NOMINATING and CORPORATE GOVERNANCE COMMITTEE | | | | | | | | | | | | | Members: | | Primary Responsibilities | Douglas A. Pertz (Chair) Carla J. Bailo Jeffrey J. Jones II
Meetings in 2023:5 | | • | 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; | | • | oversees development and implementation of the CEO succession plan, including identifying the CEO's successor and reporting annually to the Board; | | • | develops, recommends and reassesses our corporate governance guidelines; | | • | reviews and recommends retirement and other policies for directors and recommends to the Board whether to accept or reject a director's resignation; | | • | reviews the development and communication of our business sustainability programs; | | • | evaluates the size, structure and composition of the Board and its committees; and | | • | establishes procedures for stockholders to recommend candidates for nomination as directors and to send communications to the Board. |
FINANCE COMMITTEE | | | | | | | | | | | | | Members: | | Primary Responsibilities | Joan M. Hilson (Chair) Eugene I. Lee, Jr. Arthur Valdez Jr.
Meetings in 2023:3 (established May 2023) | | • | reviews and makes recommendations to the Board regarding the Company's financial policies, practices and strategies; | | • | reviews any significant changes to the Company's capital structure and financing arrangements; | | • | reviews the financial aspects of any proposed acquisition or divestiture; | | • | reviews and provides input to management in connection with development of the Company's financial plan; and | | • | reviews major banking relationships and lines of credit. |
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 website at ir.advanceautoparts.com under "Governance."
Board’s Role in Risk Oversight One of our Board’s responsibilities is the oversight of the enterprise-wide risk management activities of the Company. Risk is inherent in any business, and the Board’s oversight, assessment and decisions regarding risks occur in the context of, and in conjunction with, the other activities of the Board and its committees that are comprised solely of non-management directors. As further described below, the Board, directly and through its committees, regularly engages in risk dialogue with management. Our management retains primary responsibility for identifying risks and risk controls related to significant business activities and mapping those risks to our long-term strategy. On an annual basis, our management executes a comprehensive risk identification and analysis process and reports and discusses its findings with the Board. In addition to the comprehensive annual review, management provides regular updates to the Audit Committee, or as appropriate, the full Board, on risk exposure and mitigation efforts, as well as discusses any recommendations with respect to risk management. Each committee of the Board is responsible for oversight of areas of risk related to its delegated responsibilities as follows, and each of the committees regularly reports on its discussions and activities to the Board: •Audit Committee: financial reporting; capital structure and financial policies; independent audit; enterprise risk management process and assessment; Internal Audit; internal controls and compliance (including ethics hotline reporting); cybersecurity and data privacy •Compensation Committee: compensation programs, policies and practices, including with respect to confirmation that they do not encourage unnecessary or excessive risk taking and the relationship between them and the relationship among our risk management policies and practices •Nominating and Corporate Governance Committee: corporate governance; director candidate selection; Board and CEO succession; Board evaluation; business sustainability programs; related party transactions and potential conflicts of interest; insider trading; and political and charitable contributions •Finance Committee: financial risk assessment and management; capital strategies; insurance programs
Board Evaluation
The Board recognizes that a robust and constructive evaluation process is an essential component of good corporate governance and Board effectiveness. Our Guidelines on Significant Governance Issues provide that the Board is responsible for annually conducting an evaluation of the Board and individual directors and that each committee is responsible for evaluating its performance. The Board evaluation process was a focus area for our independent Chair and the Nominating and Corporate Governance Committee in 2016.
Evaluations are designed to assess the qualifications, attributes, skills and experience represented on the Board and whether the Board, its committees and individual directors are functioning effectively. For fiscal 2016, the evaluation process included personal interviews of each director by an independent third party who compiled the results of the interviews, which were reported to and discussed by the Board. The topics addressed in the evaluation process included: the role and functioning of the Board and Board committees; interpersonal dynamics of the Board and committees; diversity of the Board; qualifications of directors; Board succession; director preparedness; Board interaction with management and management succession; and Board committee structure and governance. | | | | | | | | | | | | | | | | Role of the Board The Board is responsible for annually conducting an evaluation of the Board and individual directors. | | | Role of the Board’s Committees The Nominating and Corporate Governance Committee coordinates each Committee's annual evaluation of its performance and reporting of the results to the Board. | | | | | | | 2023 Evaluation Process The evaluation process included live interviews with each director conducted by an independent third party, who compiled the results and discussed them with the Chair of the Board and the Chair of the Nominating and Corporate Governance Committee. The results of the assessment were then reported to and discussed by the full Board. | | | Topics Addressed in 2023 Topics addressed in the evaluation process included, among others: the role and functioning of the Board and Board committees; Board oversight of and interaction with management, including recent management transitions; Board composition and refreshment; interpersonal dynamics of the Board and committees; diversity of the Board; qualifications of directors; Board committee structure and governance; and representation of stockholder interests. |
Stockholder and Interested Party Communications with our Board Any interested party, including any stockholder, who desires to communicate with our Board generally or directly with a specific director, one or more of the independent directors, our non-management directors as a group or our Chair of the Board, Chair, including on an anonymous or confidential basis, may do so by delivering a written communication to the Board, a specific director, the independent directors, the non-management directors as a group or to our Chair of the Board, Chair, c/o Advance Auto Parts, Inc., 5008 Airport4200 Six Forks Road, Roanoke, Virginia 24012,Raleigh, North Carolina 27609, Attention: General Counsel. The general counsel will not open a communication that is conspicuously marked "Confidential" orand is addressed to one or more of our independent directors, our non-management directors as a group or our Chair of the Board Chair and will forward each such communication to the appropriate individual director or group of directors, as specified in the communication.directors. Such communications will not be disclosed to the non-independent or management members of our Board or to management unless so instructed by the independent or non-non-management directors.
management directors. Communications will be forwarded by the general counsel on a bi-monthly basis. The general counsel will ensure the timely delivery of any time sensitive communication 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. Eleven directors, comprising all of the directors who have been nominated for reelection at the 2017 annual meeting of stockholders, were in attendance at our 2016 annual meeting of stockholders.
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 2016, the Committee utilized the services of a search firm to assist in identifying potential director candidates. 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.
The Nominating and Corporate Governance Committee also considers whether the nominee would likely provide a diverse viewpoint and actively and constructively participate in the Board’s discourse and deliberations. The Board has not adopted a formal policy with regard to diversity (as to gender, race, ethnic background and experience) in the composition of the Board although the Committee strives to compose a Board that reflects sensitivity to the need for an appreciation of such diversity, including racial and gender diversity.
In November 2015, we entered into an agreement with Starboard Value LP ("Starboard") and certain of its affiliates (the "Starboard Agreement") regarding the membership and composition of the Board. Under the terms of the Starboard Agreement, our Board agreed to immediately appoint Mr. Smith as an independent director, and Starboard became entitled to recommend two additional independent nominees for election as directors. In addition, we agreed to nominate two additional independent candidates for election as directors and that following the conclusion of the 2016 Annual Meeting, the size of the Board will not exceed thirteen directors.
Mr. Lee was subsequently recommended by Starboard as a candidate for election to our Board, and Messrs. Buss and Slone were identified by the Nominating and Corporate Governance Committee as potential candidates for election to our Board. After completing its evaluation of each of these candidates to determine whether they possess the desired qualifications for service on our Board, the Nominating and Corporate Governance Committee recommended that Mr. Lee be elected by the Board to serve as an independent director commencing in November 2015 and that Messrs. Buss and Slone be elected by the Board to serve as independent directors commencing in March 2016.
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 candidate for director 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 120 days nor more than 150 days prior to the first anniversary of the date of the preceding year’s annual meeting. The notice should include the following information about the proposed nominee: name, age, business and residence addresses, principal occupation or employment, the number of shares of Company stock owned by the nominee and additional information required by our by-laws as well as any information that may be 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 our books, the number and type of shares or other equitable interests that are beneficially owned by the stockholder and additional information required by our by-laws. 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 submitting a request to: Advance Auto Parts, Inc., 5008 Airport Road, Roanoke, Virginia 24012, Attention: Corporate Secretary. Our by-laws also are available on our website at www.AdvanceAutoParts.com under the Investor Relations section.
Proxy Access
Our Board regularly considers our corporate governance practices in light of developing best practices as well as the information received as a result of stockholder outreach and communications. As a result of such consideration, our Board
recently adopted an amendment to our by-laws to provide that a stockholder, or group of 20 or fewer stockholders, owning at least three percent of our outstanding shares continuously for at least three years may nominate candidates to serve on the Board and have those candidates included in our annual meeting materials. The maximum number of proxy access candidates that a stockholder or stockholder group may propose as nominees is the greater of (i) two or (ii) twenty percent of the Board. This process is subject to additional eligibility, procedural and disclosure requirements as provided in our by-laws, including the requirements that the nominee must be deemed to be independent under applicable stock exchange listing requirements and that notice of such nominations must be delivered to us not later than 120 days nor earlier than 150 days prior to the first anniversary of the date on which we mailed the proxy statement for the preceding year’s annual meeting of stockholders.
Code of Ethics and Business Conduct We expect and require all of our Team Members,associates, 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. Our Team Members,Code of Ethics and Business Conduct includes provisions with respect to the human rights standards for our company and those with whom we do business. Our associates, officers and our directors are expected to review and acknowledge our Code of Ethics and Business Conduct annually. In addition, our associates and our officers are expected to participate in training on our Code of Ethics and Business Conduct on an annual basis. A complete copy of our Code of Ethics and Business Conduct is available at www.AdvanceAutoParts.comir.advanceautoparts.com under "Governance." The Company will disclose within four business days any substantive changes in or waivers of the Investor Relations section.Code of Ethics and Business Conduct granted to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website rather than by filing a Form 8-K.
Code of Ethics for Finance Professionals We have also 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 chiefprincipal executive officer, chiefprincipal financial officer, chiefprincipal accounting officer or 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 any public communications as well as reports and other documents filed with the SEC and other regulators, 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 at www.AdvanceAutoParts.comir.advanceautoparts.com under "Governance." The Company will disclose within four business days any substantive changes in or waivers of the Investor Relations section.Code of Ethics for Finance Professionals granted to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website rather than by filing a Form 8-K.
Insider Trading Policy Also related to our commitment to, and expectations for, honest and ethical business conduct and compliance with applicable laws, rules and regulations, we have adopted an Insider Trading Policy that governs purchases, sales and other dispositions of our securities, as well as the disclosure of material, nonpublic information about our Company, by our directors, officers and associates that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us. A copy of our Insider Trading Policy was filed as Exhibit 10.39 to our Annual Report on Form 10-K for the year ended 2023. Related Party Transactions Pursuant to our Code of Ethics and Business Conduct and the Board’s policy with respect to related party transactions, 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 transaction or relationship that may create an actual or perceived conflict of interest. Pursuant to the Board’s policy, our general counsel’s office reviews such transactions or relationships and advises the Nominating and Corporate Governance Committee in the event that a transaction or relationship is determined to be a related party transaction. The Nominating and Corporate Governance Committee then reviews the transaction in light of the relevant facts and circumstances and makes a determination of whether to ratify or approve the transaction. In the case of a transaction involving a director, the Nominating and Corporate Governance Committee would also review the transaction to determine whether it might have an effect on the independence of the director. The Nominating and Corporate Governance Committee reports its conclusions and recommendations to the Board for its consideration.
In addition, our Guidelines on Significant Governance Issues require each director to disclose to the Board (or Auditthe Nominating and Corporate Governance Committee) any interest that he or she has in any contract or transaction that is being considered by the Board (or Audit Committee) for approval. After making such a disclosure and responding to any questions the Board may have, the interested director is expected to abstain from voting on the matter and leave the meeting while the remaining directors discuss and vote on such matter.
On an annual basis, each director and executive officer is obligated to complete a Directorquestionnaire that requires identification of Related Persons as defined by the Company's Related Persons Policy 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. The annual Director and Officer Questionnairequestionnaire is prepared and distributed by our general counsel’s office, and each director orand executive officer returns the completed questionnaire to the general counsel’s office for review. Any related party transactions with directors or executive officers that have been identified through the processes described above are disclosed consistent with applicable rules and regulations.regulations; there were no such transactions during 2023.
Prior to our acquisition of GPI in early 2014, GPI was a privately held company controlled by O. Temple Sloan, III and his family. Mr. Sloan retired as a director of the Company in May 2016. Since the commencement of fiscal year 2016, Mr. Sloan and/or various members of his immediate family and/or entities owned, directly or indirectly, wholly or substantially, by any of
them (each a "Sloan-related Party"), have been involved in various transactions with GPI or its subsidiaries (a "GPI Entity"), including the following:
GPI Entities received aggregate rent of approximately $334,600 for Fiscal 2016 through March 20, 2017, from a Sloan-related Party for multiple real property subleases.
GPI Entities paid aggregate rent of approximately $42,600 for Fiscal 2016 through March 20, 2017, to Sloan-related Parties for multiple real property leases and subleases.
A GPI Entity guarantees equipment lease obligations of certain GPI customers to a Sloan-related Party lessor. The largest aggregate amount of principal of these guarantee obligations outstanding as of March 20, 2017 is approximately $150,000. This liability generally decreases on a monthly basis as customers pay off their lease obligations.
Certain Sloan-related Parties have been, and continue to be, both customers and suppliers of certain GPI Entities. For Fiscal 2016 through March 20, 2017, these Sloan-related Parties, as customers, paid GPI Entities approximately $26,300 and, as suppliers, received approximately $427,800 from GPI Entities.
In connection with our acquisition of GPI in early 2014, the Sloan-related Parties, including Mr. Sloan, are entitled in the aggregate to approximately 12 percent of the purchase price we paid to acquire GPI. For more information regarding the GPI acquisition, see the "Acquisitions" footnote to our Consolidated Financial Statements contained in our 2016 Annual Report on Form 10-K filed with the SEC on February 28, 2017.
Since the outset of Fiscal 2016, car dealerships owned by Bergstrom Corporation, where Mr. Bergstrom is the Chairman and Chief Executive Officer, paid us a total of approximately $318,800 to purchase automotive parts. Such purchases were made in the ordinary course of business upon terms available to our similarly situated Professional customers.
Succession Planning
In light of the critical importance of executive leadership to our success and consistent with our Guidelines on Significant Governance Issues, the Board has adopted a chief executive officer succession planning process that is led by the Nominating and Corporate Governance Committee. The Guidelines on Significant Governance Issues and the Nominating and Corporate Governance Committee Charter provide that the Nominating and Corporate Governance Committee is charged with the responsibility of developing a process for identifying and evaluating candidates to succeed the chief executive officerChief Executive Officer and to report at least annually to the Board on the status of the succession plan, including issues related to the preparedness for the possibility of an emergency situation involving senior management and assessment of the long-term growth and development of the senior management team.Chief Executive Officer, and identifying the Chief Executive Officer's successor. The Compensation Committee is charged with overseeing non-CEO succession planning. Our Guidelines on Significant Governance Issues also provide that in the event the Board undertakes to name a successor to the Chief Executive Officer, the independent directors shall name a Succession Committee to identify, assess and make recommendations to the Board regarding candidates for that position. Consistent with those provisions, and under the terms of the Starboard Agreement, the Nominating and Corporate Governance Committee was assigned, together with Mr. Brouillard, then Executive Chair ofFrom February 2023 through August 2023, the Board to oversee the process for selectinghad a chief executive officer to succeed Mr. Jackson, who retired at the end of the 2015 fiscal year. As a result of this process, Mr. Greco was identified and recommended to the Board for election as our Chief Executive Officer and a director effective April 11, 2016.
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 12 times during 2016. Each incumbent 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 AuditSuccession Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which is comprisedcomposed entirely of independent directors, in accordance with the listing standardsto conduct a search and evaluation of the NYSE. In addition, we have a Finance Committee. The following table sets forth the names of each current committee member, the number of times each committee met in 2016internal and the primary responsibilities of each committee.
external candidates for Chief Executive Officer.
| | | | Name of Committee and Members | Primary Responsibilities | Audit
(met 12 times)
Brad W. Buss (Chair)
John F. Ferraro
Adriana Karaboutis
Reuben E. Slone
| •
•
•
•
•
•
•
| monitors the integrity of our financial statements, reporting processes, internal controls, and legal and regulatory compliance;
appoints, determines the compensation of, evaluates and, when appropriate, replaces our independent registered public accounting firm;
pre-approves all audit and permitted non-audit services to be performed by our independent registered public accounting firm;
monitors the qualifications and independence and oversees performance of our independent registered public accounting firm;
reviews with management the implementation and effectiveness of the Company's compliance programs;
discusses guidelines and policies with respect to risk assessment and risk management; and
oversees our internal audit function.
| Director Compensation (met 18 times)
John F. Bergstrom (Chair)
Fiona P. Dias
Eugene I. Lee, Jr.
William S. Oglesby
| •
•
•
•
•
•
•
| 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 and approves the compensation of our executive officers;
oversees our incentive and equity-based compensation plans;
reviews and approves our peer companies and data sources for purposes of evaluating our compensation competitiveness and establishing the appropriate competitive positioning of the levels and mix of compensation elements;
oversees the Company's executive compensation recovery ("claw-back") policy; and
recommends to the Board compensation guidelines for determining the form and amount of compensation for outside directors.
| Finance
(met 5 times)
William S. Oglesby (Chair)
John C. Brouillard
Brad W. Buss
Fiona P. Dias
Reuben E. Slone
| •
•
•
•
•
| 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, debt levels and leverage ratios;
reviews all aspects of financial planning, cash uses and our expansion program;
reviews and recommends the annual financial plan to the Board; and
reviews the financial aspects of proposed acquisitions and divestitures.
|
| | | | Name of Committee and Members | Primary Responsibilities | Nominating and Corporate Governance
(met 11 times)
John F. Ferraro (Chair)
Adriana Karaboutis
Eugene I. Lee, Jr.
| •
•
•
•
•
•
•
| 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;
oversees development and implementation of executive succession plans, including identifying the CEO's successor and reporting annually to the Board;
develops, recommends and reassesses our corporate governance guidelines;
reviews and recommends retirement and other policies for directors and recommends to the Board whether to accept or reject a director's resignation;
evaluates the size, structure and composition of the Board and its committees; and
establishes procedures for stockholders to recommend candidates for nomination as directors and to send communications to the Board.
|
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 website at www.AdvanceAutoParts.com under the Investor Relations section.
On August 5, 2008, the SEC approved a settlement with Ernst & Young LLP and two of its partners, including Mr. Ferraro, relating to auditor independence issues arising out of business relationships between Ernst & Young LLP and an individual who was also a member of the board of directors of three of its audit clients. The underlying matters at issue occurred in 2002 while Mr. Ferraro was serving as Vice Chairman of Ernst & Young LLP. Ernst & Young and Mr. Ferraro resolved the matter by way of a negotiated settlement in which the respondents neither admitted nor denied the underlying allegations and accepted an administrative cease and desist order. The negotiated resolution did not involve any suspension, fines or other sanctions on Mr. Ferraro. Mr. Ferraro thereafter remained a partner in good standing at Ernst & Young through January 2015. During its evaluation of Mr. Ferraro as potential director, the Board took into consideration all factors regarding Mr. Ferraro’s character and experience and determined that he would be a significant asset as a member of the Board.
Board’s Role in Risk Oversight
As part of its responsibility for the oversight of our financial matters and regulatory compliance, the Audit Committee is charged with discussing our guidelines and policies with respect to risk assessment and risk management. Our senior internal audit professional, who reports to the Audit Committee, has developed an enterprise risk management ("ERM") framework through which management has identified the key areas of risk that face our Company which, in addition to risks specific to our business, include data privacy and cyber security as well as business continuity risks. Periodically the enterprise risks identified by management and the related action plans developed in consultation with senior management are reviewed with the Audit Committee. As appropriate, ERM action plans are incorporated into our strategic business plan. The full Board is responsible to oversee the key areas of risk identified through this process. We have used elements of the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, ERM framework to build a tailored approach to risk management that fits the culture and risk environment of the Company.
Aligning Stockholder Interests and Compensation Risk Mitigation
We have reviewed all of our compensation programs and found none that would be reasonably likely to have a material adverse effect on the Company. Our performance-based executive compensation program, as described more fully in the Compensation Discussion and Analysis ("CD&A") section of this Proxy Statement, coupled with our stock ownership guidelines, aligns the interests of our executives with stockholders by encouraging long-term superior performance without encouraging excessive or unnecessary risk-taking. Our long-standing compensation philosophy discussed in the CD&A is a key component of our history of consistent growth, which demonstrates an alignment of the interests of participants and stockholders and rewards each with increased value over the long term. As illustrated in the Framework for Executive Compensation section of the CD&A, the compensation of our executives is primarily based on performance over a long-term
period. We believe the performance-based vesting of a substantial portion of our executives' long-term incentive compensation drives long-term decision making, mitigates adverse risk-taking that may occur due to year-over-year performance measurements, and rewards growth over the long term. The Compensation Committee, with the guidance and assistance of its independent compensation consultant, reviews and approves compensation components for all named executive officers and other executive officers. Annual incentives are reviewed each year and payments are subject to Compensation Committee discretion. The bonus plans for other Team Members are linked to financial, customer or operating measures. Management regularly reviews and audits our bonus plans to ensure short-term incentives are appropriately linked to business outcomes, and the results of the audits are regularly reported to the Compensation Committee. Directors and management are subject to our insider trading policy, which prohibits hedging with Company stock and prohibits the pledging of Company stock unless certain stringent requirements are met.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves, or in the past fiscal year has served, as a member of the Compensation Committee (or other board committee performing equivalent functions, or in the absence of any such committee, the board of directors) or the board of directors of any entity that has one or more of its executive officers serving on our Compensation Committee or Board.
DIRECTOR COMPENSATION
Under our director compensation program, each non-management director receives annual compensation that is comprisedconsisting of a combination of cash and equity-basedequity based compensation. Management directors do not receive any additional compensation for services as a director. Each non-management director receives an annual retainer of $85,000, which is paid in quarterly installments,$100,000 and additional applicable retainers or fees as set forth in the following paragraph.
Directors who chair Board committees receive additional retainer amounts annually for their committee chair responsibilities. The Audit Committee chairChair receives $20,000 and$25,000, the Compensation Committee chairChair receives $15,000. Each chair of$20,000, the other Board committeesNominating and Corporate Governance Chair receives $10,000.$17,500 and the Finance Committee Chair receives $17,500. The independent Board chairChair (or the independent lead directorLead Director in the event the Board chairChair is not independent) receives an additional $100,000$200,000 annual retainer.
Members of the Succession Committee, which included Jeffrey J. Jones II (Chair), Carla J. Bailo and John F. Ferraro, received $5,000 per month of service ($10,000 for the Chair) while such Committee was in service during 2023.
Each non-management director may elect to defer or receive all or a portion of his or her retainer amounts on a deferred basis in the form of deferred stock units, or DSUs. Each DSU is equivalent to one share of our common stock. Dividends paid by us are credited toward the purchase of additional DSUs and are distributed together with the underlying 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 with the Company ends, whichever is sooner.
In addition, each non-management director receives equity compensation valued at $125,000$165,000 per year.year as of the date of grant. The equity compensation is awarded annually in the form of DSUs, granted to directors shortly after the date of the annual stockholder meeting.meeting, and will be distributed in common shares after the director’s service with the Company ends. Board members who are appointed at any time other than at the annual meeting receive a prorated DSU award with a grant value based upon the number of months from their election date until the next annual stockholder meeting. DSUs granted prior to Fiscal 2016 vested immediately on the award date and will be distributed in common shares after the director’s service on the Board ends. Commencing in Fiscal 2016, theThe annual grant of DSUs willmay vest on a pro-rata basisbased upon the number of months the director has served during the current term in the event that a director's service as a member of the Board ends before May 1one year from the date of the following calendar year.grant. On May 25, 2016,June 12, 2023, each non-management director serving at the time received 8572,466 DSUs valued at $125,000$165,000 on the date of grant.
In conjunction with being named byDuring 2023, the Board temporarily expanded the role of the Chair of the Board to serve as Interim Executive Chair of the Board to provide additional operational oversight and support to the management team in light of the Chief Executive Officer transition. The Compensation Committee, in consultation with F.W. Cook, designed the compensation for the Interim Executive Chair role to provide meaningful compensation while retaining the compensatory structure for independent directors. Although not performing executive duties, the expectations for devotion of time and variety of duties for the Interim Executive Chair role were significant. The Compensation Committee determined that the role of Executive Chairman, we entered into a compensation arrangement with Mr. Brouillard, effective November 12, 2015. The agreement provided that during his tenure as Executive Chairman, he would be entitled to receive an annual base salary of $500,000. In addition, on December 1, 2015, he received a grant of restricted stock units ("RSUs")DSUs valued at $500,000 as of the date of grant that would vest$1,125,000 on December 1, 2016,a quarterly basis so long as Mr. Brouillard continued his tenure as Executive Chair and/or as a director of the Company throughrole existed, with the expectation that date. Mr. Brouillard'sthe role as Executive Chair ended on May 18, 2016, withwould cease after one quarter’s service following the appointment of Mr. Smith as independent Chaira new Chief Executive Officer. Such amounts were benchmarked against, and with Mr. Brouillard continuing to serve asestablished at less than the pro-rated annual median level, for a director of the Company. Under the terms of the grant, if Mr. Brouillard's tenure astarget annual long-term incentive award for a director had ended prior to December 1, 2016, other than on account of his voluntary resignation, an amount based on the portion of time that he served as an employee and/or director as a percentage of the full one-year vesting period would have vested. If he had voluntarily resigned prior to December 1, 2016, the RSUs would have been forfeited. During his tenure as Executive Chairman, Mr. Brouillard did not receive compensation as a non-employee director.chief executive officer.
20162023 Director Summary Compensation Table
Information provided in the following table reflects the compensation delivered to our non-management directors who are not named executive officers for our last fiscal year:2023: | | | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned or Paid in Cash(a) | | Stock Awards(b) | | Total | | Carla J. Bailo | | $ | 130,000 | | | $ | 165,000 | | | $ | 295,000 | | | John F. Ferraro | | 155,000 | | | 165,000 | | | 320,000 | | | Joan M. Hilson | | 117,500 | | | 165,000 | | | 282,500 | | | Jeffrey J. Jones II | | 180,000 | | | 165,000 | | | 345,000 | | | Eugene I. Lee, Jr. | | 300,000 | | | 3,540,000 | | | 3,840,000 | | | Douglas A. Pertz | | 117,500 | | | 165,000 | | | 282,500 | | | Sherice R. Torres | | 100,000 | | 165,000 | | 265,000 | | | Arthur L. Valdez Jr. | | 100,000 | | | 165,000 | | | 265,000 | |
(a)Includes earned or deferred board and chair retainers for 2023. Each of Messrs. Seboldt, Smith and Windom were appointed to the Board in March 2024 and received no compensation during 2023. (b)Represents the grant date fair value of DSUs granted during 2023. The grant date fair value is calculated in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 ("ASC Topic 718") based on the closing price of the Company’s stock on the date of grant. For additional information regarding the valuation assumptions of these awards, refer to Note 15 of the Company’s consolidated financial statements in the 2023 Form 10-K filed with the SEC on March 12, 2024. These amounts reflect the aggregate grant date fair value. Mr. Lee received compensation for three quarters of service as Interim Executive Chair of the Board as described in the text above. | | | | | | | | | | | | | | | Name | | Fees Earned or Paid in Cash (a) ($) | | Stock Awards (b) ($) | | All Other Compensation (c) ($) | | Total ($) | | John F. Bergstrom | | 50,000 |
| | 125,000 |
| | — |
| | 175,000 |
| | John C. Brouillard | | 42,500 |
| | 125,000 |
| | 223,384 |
| | 390,884 |
| | Brad W. Buss | | 66,667 |
| | 145,833 |
| | — |
| | 212,500 |
| | Fiona P. Dias | | 42,500 |
| | 125,000 |
| | — |
| | 167,500 |
| | John F. Ferraro | | 140,000 |
| | 125,000 |
| | — |
| | 265,000 |
| | Adriana Karaboutis | | 42,500 |
| | 125,000 |
| | — |
| | 167,500 |
| Eugene I. Lee, Jr. | | 42,500 |
| | 125,000 |
| | — |
| | 167,500 |
| | William S. Oglesby | | 47,500 |
| | 125,000 |
| | — |
| | 172,500 |
| | J. Paul Raines (d) | | — |
| | — |
| | — |
| | — |
| | Gilbert T. Ray (d) | | — |
| | — |
| | — |
| | — |
| | Carlos A. Saladrigas (d) | | — |
| | — |
| | — |
| | — |
| | O. Temple Sloan, III (d) | | — |
| | 155,895 |
| | — |
| | 155,895 |
| | Reuben E. Slone | | 56,667 |
| | 145,833 |
| | — |
| | 202,500 |
| Jeffrey C. Smith | | 92,500 |
| | 125,000 |
| | — |
| | 217,500 |
| | Jimmie L. Wade | | 28,333 |
| | — |
| | — |
| | 28,333 |
|
| | (a) | Includes paid or deferred board retainers and chair retainers during Fiscal 2016, which were paid in quarterly installments commencing in Fiscal 2016. For Mr. Ferraro, includes the pro-rated retainer he received in conjunction with his service as the Board's independent lead director until May 18, 2016. For Messrs. Buss and Slone, includes pro-rated Fiscal 2015 director compensation received after they joined our Board in March 2016 and prior to our 2016 annual meeting of stockholders. For Mr. Wade, includes the pro-rated Fiscal 2015 director compensation for the period of time he served as a non-management director during Fiscal 2016 following his retirement as an employee at the end of Fiscal 2015 and prior to his retirement as a director following our 2016 annual meeting.
|
| | (b) | Except in the case of Mr. Sloan, represents the grant date fair value of DSUs granted during Fiscal 2016. The grant date fair value is calculated using the closing price of the Company’s stock on the date of grant. For Messrs. Buss and Slone, includes pro-rated Fiscal 2015 director compensation received after they joined our Board in March 2016 and prior to our 2016 annual meeting of stockholders. For Mr. Sloan, the stock awards represent the incremental fair value associated with awards modified during 2016, calculated in accordance with ASC Topic 718. The modification of these awards was approved by our Board in connection with his retirement from the Board in May 2016. For additional information regarding the valuation assumptions of these awards, refer to Note 17 of the Company’s consolidated financial statements in the 2016 Form 10-K filed with the SEC on February 28, 2017. These amounts reflect the aggregate grant date fair value computed in accordance with ASC Topic 718, and do not correspond to the actual value that will be realized by the directors.
|
| | (c) | For Mr. Brouillard, includes the portion of his base salary as Executive Chairman earned in 2016. |
| | (d) | Messrs. Raines, Ray, Saladrigas and Sloan retired from the Board immediately following our 2016 annual meeting and received no non-employee director compensation during Fiscal 2016. |
Directors’ Outstanding Equity Awards at 20162023 Fiscal-Year End Table The following table provides information about the equity awards outstanding as of the end of our last fiscal year for our non-management directors who are not also named executive officers:served during fiscal 2023. | | | | | | | | | | Name | | Outstanding SARs | Outstanding Deferred Stock Units | Outstanding RSUs | | John F. Bergstrom | | — |
| 10,997 |
| — |
| | John C. Brouillard | | — |
| 15,722 |
| — |
| | Brad W. Buss | | — |
| 988 |
| — |
| | Fiona P. Dias | | — |
| 10,509 |
| — |
| | John F. Ferraro | | — |
| 2,442 |
| — |
| | Adriana Karaboutis | | — |
| 1,859 |
| — |
| | Eugene I. Lee, Jr | | — |
| 1,272 |
| — |
| | William S. Oglesby | | — |
| 15,033 |
| — |
| | J. Paul Raines (a) | | — |
| — |
| — |
| | Gilbert T. Ray (a) | | — |
| — |
| — |
| | Carlos A. Saladrigas (a) | | — |
| 617 |
| — |
| | O. Temple Sloan, III (b) | | 1,915 |
| — |
| 1,966 |
| | Reuben E. Slone | | — |
| 988 |
| — |
| | Jeffrey C. Smith | | — |
| 1,272 |
| — |
| | Jimmie L. Wade (b) | | — |
| — |
| 834 |
|
| | | | | | | | | | Name | | Outstanding Deferred
Stock Units (#) | (a)Carla J. Bailo | | Upon their retirement from the Board in May 2016, substantially all DSUs that had been granted to Messrs. Raines, Ray and Saladrigas as part of their non-employee director compensation were distributed in accordance with the terms of the director compensation plan and/or applicable distribution elections.
| 5,066 | | (b)John F. Ferraro | | Outstanding stock appreciation rights ("SARs") and RSUs for Messrs. Sloan and Wade reflect equity awards granted to them as executives of the Company. Amounts shown for SARs and 884 of the RSUs granted in February 2014 to Mr. Sloan represent performance-based awards at a zero percent payout for operating income and 35 percent payout for comparable store sales growth - or a weighted 17.5 percent payout of the performance awards, as described further in the "CD&A" section of this Proxy Statement.16,412 | | | Joan M. Hilson | | 3,525 | | | Jeffrey J. Jones II | | 7,555 | | | Eugene I. Lee, Jr | | 66,040 | | | Douglas A. Pertz | | 9,796 | | | Sherice R. Torres | | 3,859 | | | Arthur L. Valdez Jr. | | 5,066 | |
Proposal No. 2
Stockholder Advisory Vote to Approve the Compensation
COMPENSATION COMMITTEE REPORTof the Company's Named Executive Officers
At the 2023 Annual Meeting of Stockholders, 90.9% of the shares voted were cast in support of our compensation program for executive officers. We encourage you to review the CD&A section of this Proxy Statement and vote to approve the compensation of our named executive officers as disclosed therein and in the accompanying tables and narrative discussion contained in this Proxy Statement. We are providing this opportunity to vote on the compensation of our named executive officers as required by Section 14A of the Securities Exchange Act of 1934. Although your vote is advisory and not binding on our Board, our Compensation Committee or the Board will carefully consider the voting results and take them into consideration when making future decisions regarding executive compensation policies and procedures. We generally hold a say-on-pay vote annually, and it is expected that the next say-on-pay vote will occur at the 2025 annual meeting of stockholders. Our executive compensation programs have played a key role in our ability to attract and retain a highly experienced, successful team to manage our Company and drive strategic and financial results for our stockholders. We believe our executive compensation programs are well structured to further our business objectives and support our culture. We believe that our compensation programs help further engage our workforce and position us to deliver strong results for our stockholders, our customers and the communities in which we operate. We believe our executive compensation programs strike the appropriate balance between utilizing responsible, measured pay practices and effectively incentivizing our executives to dedicate themselves fully to value creation for our stockholders. This balance is evidenced by the following: •The compensation of our executives is based on a design that aims to align pay with both the attainment of annual operational and financial goals, which the Compensation Committee establishes, and sustained long-term value creation; •Our compensation programs are substantially tied into our key business objectives and the success of our stockholders. If the value we deliver to our stockholders declines, so does the value of the compensation we deliver to our executives; •We maintain high levels of corporate governance oversight over our executive pay programs; •We closely monitor the compensation programs and pay levels of executives from companies of similar size and complexity to help ensure that our compensation programs are within the norm of a range of market practices; and •Our Compensation Committee, is comprised entirely of four independent directors who meet independence, experiencein conjunction with our Nominating and Corporate Governance Committee and senior management, engages in a talent review process annually to address succession and executive development for our Chief Executive Officer and other qualification requirementskey executives. The Board strongly endorses our executive compensation programs and recommends that our stockholders vote in favor of the NYSE listing standards, and the rules and regulations of the SEC. Mr. Bergstrom is the chair of our Compensation Committee. The Compensation Committee operates under a written charter adopted by the Board. Our charter can be viewed on our website at www.AdvanceAutoParts.com under the Investor Relations section.following resolution:
We have relied on management’s representation"RESOLVED, that the compensation of our named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the "Compensation Discussion and Analysis," compensation tables and narrative discussion and analysis presentedcontained in this Proxy Statement, has been prepared with integrity and objectivity and in conformity with SEC regulations. Based upon our review and discussion with management, we recommended to the Board that the compensation discussion and analysis be included in this Proxy Statement.is hereby APPROVED."
THE COMPENSATION COMMITTEE
John F. Bergstrom (Chair)
Fiona P. Dias
Eugene I. Lee, Jr.
William S. Oglesby
COMPENSATION DISCUSSION AND ANALYSIS
This section describes the compensation packages of our principal executive officer, principal financial officer, and three other most highly compensated executive officers as of December 31, 2016. We refer to these executives as our “Named Executive Officers” or “NEOs.”
| | | | | | | | 2016 NEOs | Role | Thomas R. Greco | President and Chief Executive Officer | Thomas B. Okray | Executive Vice President, Chief Financial Officer | Robert B. Cushing | Executive Vice President, Professional | Charles E. Tyson | Executive Vice President, Merchandising, Marketing and Replenishment | Natalie S. Schechtman | Senior Vice President, Human ResourcesTHE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL ON AN ADVISORY BASIS OF THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS |
Additionally, compensation arrangements for our former President
Compensation Discussion and Interim Chief Executive Officer, George E. Sherman, and former Executive Vice President and Chief Financial Officer, Michael A. Norona, are reported in the section of this Proxy Statement entitled "Additional Information Regarding Executive Compensation." Our CD&A is organized in the following manner:Analysis
Executive Summary Compensation GovernancePay for Performance Philosophy and Alignment
FrameworkWe promote a culture based on ownership and accountability, and a critical component of that is a compensatory framework that pays for Executiveperformance. We hold our executives accountable for delivering results by closely linking the metrics of our incentive plans to our annual operating plan and delivery of strong relative shareholder return.
Overview of Business Performance and 2023 Compensation New Leadership Team: Compensation ApproachIn 2023, we did not achieve several of our operational objectives and saw significant deterioration of our share price. We acted with a sense of urgency to stabilize the business and position the Company to return to profitable growth, but our full year financial results were well below our expectations.
Other elements
The amount of compensation realized by our executives heavily depends on our performance. Based on our 2023 performance, executive officers are receiving no payout from the short-term incentive compensation plan for 2023. Based on relative Total Shareholder Return performance from 2021 – 2023, performance shares did not vest in March 2024. Our long-term incentive structure also issues to our executives time-based restricted stock, which has significantly declined in value, and benefitsstock options, for which all exercise prices are currently significantly below market value.
Consistent Alignment Between Performance and Compensation
Executive SummaryThe below charts depict historical achievement of key operational and long-term objectives, demonstrating significant variances in executive compensation based on business performance. For additional information about how we select plan metrics and determine performance level goals, see “—Short-Term Incentive Compensation” and “—Long-Term Incentive Compensation.”
Financial HighlightsHistorical Short-Term Incentive Program Payouts*
In 2016, we focused on plans to continue to build value for our stockholders as well as to deliver superior attention to and care for our customers. Our journey to complete the integration of our GPI acquisition remained a priority, while being equally focused on the future of our business and developing our business strategy to meet the competitive demands of an industry strongly positioned for growth. Our full year 2016 results were mixed as investments to better serve our customers pressured our operating income; however, as the following table demonstrates, we closed the year with improving comparable store sales results, and we believe we are well positioned for success in the future.
Historical Long-Term Incentive Program Payouts
Shareholder Support of Executive Compensation Program
| | | Comparable Store Sales Growth | 2016 Period | Actual | Full Year | (1.4)% | | | First Quarter | (1.9)% | Second Quarter | (4.1)% | Third Quarter | (1.0)% | Fourth Quarter | 3.1% |
Fiscal 2016 wasWe evaluate our pay practices and executive compensation program annually. We value the feedback of our stockholders, and in addition to considering the prior year’s say-on-pay voting results, we proactively engage in outreach with many of our stockholders to solicit their input on a yearwide range of significant change and progress for us. This included organizational changestopics, including executive compensation. We consider any feedback provided by our stockholders, including the prior year’s say-on-pay results and the developmentadvice of our compensation consultant with respect to current peer practices, broader market trends and best practices as we determine how to best incentivize and reward executive performance.
At our 2023 Annual Meeting of Shareholders, 90.9% of the votes cast approved our executive compensation program. 2023 Leadership Changes As described further herein, we had several transitions in top leadership positions during 2023, including:
(a) Chief Executive Officer;
(b) Chief Financial Officer, including service of an Interim Chief Financial Officer; and
(c) Other Executive Leadership Changes, including re-allocation of certain responsibilities and elimination of one position, intended to better structure and streamline the organization to deliver improved operational performance.
The Board took decisive action to identify and recruit a long-term business strategy necessary to dramatically improve performance innew Chief Executive Officer with the coming years. Our full year 2016 results were inconsistent with our long-term expectations for our performance. Totalskills and comparable store sales for 2016 decreased 1.7% and 1.4%, respectively, from 2015. Our sales were negatively impacted in 2016 by challenges with inventory availability and service levels contributing to an operating income decrease of 4.6 percentexperience required for the full year as compared to Fiscal 2015. Under Mr. Greco’s leadership following his appointment to the role of CEO in April 2016, we began making investments to better serve our customers, accelerate sales momentumCompany’s current operational challenges and gain market share. Our first priority is to stabilize sales growth to consistently deliver positive comparable store sales performance and then turn our attention to bottom line profitability margins. We remain confident in the long-term growth and profitability opportunity as we balance our investments in the business with productivity measures to expand margins.
Both our long-term incentive ("LTI") plan for the Fiscal 2014 through Fiscal 2016 performance period and our 2016 annual incentive plan ("2016 AIP") utilized measures of comparable store sales and operating income as their performance metrics. Based on the results:
No NEO received a payout under the 2016 AIP because the performance thresholds were not met. Mr. Cushing received a prorated 2016 bonus based on his leadership for our Worldpac business prior to assuming the role of EVP, Professional. The Worldpac bonus was based on performance versus targets established for Worldpac operating income in 2016.
The NEOs who received performance-based SARs in fiscal 2014 received a pro-rated payout of their performance-based SARs under the LTI plan for the Fiscal 2014 to 2016 performance period. This payout was based on a 35 percent of target payout based on actual results as compared to the target level performance for comparable store sales, and no payout was madeprovided critical oversight with respect to the operating income elementtransition of the performance-based LTI plan.
Our overall financial resultsChief Financial Officer role. For all executives experiencing transition in roles during 2023, the Compensation Committee of the Board thoughtfully designed their compensation structures to provide market appropriate pay and incentive opportunities. The key compensatory elements associated with these transitions are more fully described in our current Report on Form 8-K filed with the SEC on February 21, 2017,“—2023 Leadership Changes and in “Management’sRelated Compensatory Decisions.”
2023 Named Executive Officers This “Compensation Discussion and AnalysisAnalysis” section describes how we compensate our executive officers and specific compensatory decisions and outcomes for 2023. Our named executive officers (or “NEOs”) for 2023 were:
| | | | | | | Shane M. O’Kelly | President, Chief Executive Officer (from September 11, 2023) | | Thomas R. Greco | Former President, Chief Executive Officer (through September 10, 2023) | | Ryan P. Grimsland | Executive Vice President, Chief Financial Officer (from November 27, 2023) | | Anthony A. Iskander | Interim Chief Financial Officer (from August 18, 2023, through November 26, 2023), Senior Vice President, Finance and Treasurer | | Jeffrey W. Shepherd | Former Executive Vice President, Chief Financial Officer (until August 18, 2023) | | Herman L. Word, Jr. | Executive Vice President, U.S. Stores and Independents | | Tammy M. Finley | Executive Vice President, General Counsel and Corporate Secretary | | Stephen J. Szilagyi | Executive Vice President, Supply Chain | | Robert B. Cushing | Executive Vice President, Professional* | | Jason B. McDonell | Former Executive Vice President, Merchandising, Marketing and e-Commerce (until December 1, 2023) |
* Mr. Cushing is still a senior executive in the organization but ceased serving as an executive officer following re-allocation of Financial Condition and Resultscertain responsibilities effective April 13, 2023. Overview of Operations” in our 2016 Annual Report on Form 10-K filed with the SEC on February 28, 2017.Executive Compensation Program
Investor Outreach: Connecting with our Stockholders
At our 2016 annual meeting, the proposal to approveWe have designed our executive compensation received approval by 83 percentprogram to accomplish the following:
(a) Competitive total target direct pay to retain key executive talent;
(b) Achievement of stockholders who voted, which was a somewhat lower rate of approval than we had experienced in prior years. As a result, and in light of recent changes in our Board and executive leadership, during the fall of 2016 members of management and our Board Chair had discussions with several key stockholders who represent approximately 15 percentshort-term operational objectives of our outstanding stock regarding our compensationbusiness;
(c) Creation of long-term shareholder value; and corporate governance programs.
(d) Alignment between pay and performance.
Our discussions focused on theexecutive compensation program comprises of our new leadership team and potential changes to our incentive programs intended to improve alignment of management's interests with those of our stockholders, and we sought input regarding performance metrics under consideration for our short-term and long-term incentive plans. We discussed the potential addition of a free cash flow performance measure to ourthree principal elements: base pay, short-term incentive program in conjunction with our strategic focus on improving productivity and to complement our existing performance measures based on comparable store sales and operating income. In addition, we discussed the potential elimination of operating income as a performance metric for our LTI plan in order to reduce the duplication of metrics that previously existed between our shortcompensation (“STI”) and long-term incentive compensation plans and(“LTI”) that support the substitutionachievement of metrics based on Relative Total Shareholder Return ("TSR") and return on invested capital to reward
these goals.
management for successful execution with respect to these aspects of our strategic plan. Ultimately, for our 2017 annual and long-term incentive compensation plans, we have implemented performance metrics that we believe are well aligned with the expectations of our stockholders and the feedback we received.
We believe it is extremely important as a part of our governance process to ensure that our stockholders have a forum to discuss questions or concerns and an opportunity to provide feedback. We plan to develop a systematic approach for future outreach efforts to our stockholders.
Fiscal Year 2016 Executive Officer Compensation Program Highlights
The Company's compensation programs continue to center on a pay-for-performance philosophy. Compensation actions for Fiscal 2016 were directly aligned with this philosophy to ensure our leadership’s interests are aligned with those of our stockholders. The following table summarizesprovides an overview of each element of our executive compensation program.
2023 Leadership Changes and Related Compensatory Decisions Chief Executive Officer In February 2023, Thomas R. Greco announced his planned retirement from the compensation elements provided for our NEOs in Fiscal 2016, as well asCompany. In consideration of his upcoming cessation of service, and to further motivate Mr. Greco to remain focused on and deliver against important operational objectives of the rationale for the key actions and decisions made byCompany, the Compensation Committee with respectadopted a 2023 long-term incentive award that aligned to each element.these objectives for Mr. Greco as follows: | | | | | | | | | | | | | 2022 | 2023 | Rationale | | Target Level: | $6,500,000 | $3,000,000 | Lower target level chosen in consideration of expected retirement | | Vehicle Mix: | 50% PSUs; 25% RSUs; 25% options | 100% PSUs | Align focus to key metric of operating income (to be achieved while still in role); settle in shares to further align interests with shareholders | | Metrics: | Three Year Relative Total Shareholder Return | One Year Operating Income* |
*The vesting schedule was the latter of the end of the one-year performance period or a transition period following Mr. Greco's retirement.
The target levels of the PSU award were aligned to those of the 2023 STI program, further outlined below, and since the threshold level was not achieved, no shares settled to Mr. Greco from this award. Upon the appointment of a new CEO in September 2023, Mr. Greco stepped down from the President and CEO role but remained an employee of the Company serving in an advisory capacity throughout 2023.
In September 2023, Shane M. O’Kelly joined the Company as President and Chief Executive Officer. The elements of Mr. O’Kelly’s 2023 compensation are described below: | | | | | | | | | | Component | Description | | Compensation Element | Purpose | 2016 ActionsRationale | | Base Salary | Fixed annual cash compensation$1,125,000 | Market competitiveness | | 2023 STI program | Not eligible to attract and retain executivesparticipate until 2024 | For Mr. Greco, Mr. Okray and Ms. Schechtman, all of whom joined us in 2016,Joined substantially into the Compensation Committee established annual base salaries intended to align with the median of the market for their respective roles.performance period
Mr. Cushing was provided a salary increase at the time of his promotion to EVP, Professional.
| Annual Incentive Plan ("AIP") Cash Incentive Plan | Performance-based variable pay that delivers cash incentives when executives meet or exceed key financial results | For Fiscal 2016, no performance-based bonuses were paid under the AIP because the minimum performance thresholds were not met.2023 LTI program | LTI Equity Compensation | Performance and service-based equity compensation to reward executives for a balanced combination of meeting or exceeding key financial results and creating long-term stockholder valueOne-time cash bonuses* | During Fiscal Year 2016,•$1,000,000 upon hire
•$500,000 on or prior to March 15, 2024 •$500,000 upon relocation to Raleigh, North Carolina no annuallater than September 15, 2024 | Designed to replace compensation foregone at Mr. O’Kelly’s prior employer and incentivize prompt relocation to the Company’s headquarters in Raleigh, North Carolina | | One-time equity grants | •78,982 RSUs •150,000 stock options (each vesting ratably over three years, subject to continued employment) | RSUs to replace the value of awards forfeited by Mr. O’Kelly for leaving his prior employer and create strong initial alignment with shareholders.
Options granted in lieu of a 2023 LTI awards were grantedgrant to NEOsprovide a pro-rata, long-term incentive award for the Fiscal 2017-2019 performance period. The Company has realignedportion of 2023 during which Mr. O’Kelly served as President and CEO; since he joined substantially into the timing of our LTI cycle and going forward will grant in first quarter of each fiscal year. Accordingly, annual LTI grants were made in March 2017.
Mr. Cushing received LTI awards as a part of his new compensation package when promoted to the EVP, Professional role. Mr. Greco, Mr. Okray and Ms. Schechtman were given LTI grants in conjunction with their new hire compensation packages. Those grants are described in more detail in our "2016 New Executive Leadership" discussion.
Payout for the performance-based SARs for the Fiscal 2014-2016 performance period, was 17.5%the Committee determined stock options (which have no value unless stock price increases) were more appropriate than the standard vehicle mix for LTI.
| | Other compensation* | Relocation and commuting benefits until Mr. O’Kelly relocates to Raleigh, North Carolina (see “—Summary Compensation Table) | Accommodate an appropriate transition time from Mr. O’Kelly’s prior place of target, reflecting a 35% of target payout for comparable store sales performance and no payout for operating income performance.residence |
*Subject to repayment in part or full under certain separation circumstances before the first and second anniversaries of the payment dates
2016 New Executive LeadershipChief Financial Officer
We welcomed three new executive officers in 2016 as a part of our journey to transform our business. Mr. Greco joined Advance Auto Parts in April 2016 following a successful 30-year career at PepsiCo, with his most recent role being CEO of Frito-Lay North America. Mr. Okray joinedIn August 2023, Jeffrey W. Shepherd, the Company as ourCompany’s former Executive Vice President, Chief Financial Officer separated from the Company. Such separation triggered termination without cause payment pursuant to his employment agreement with the Company. See “—Summary Compensation Table” and “—Termination and Change of Control Table” for additional information about amounts paid pursuant to Mr. Shepherd’s employment agreement.
In August 2023, Anthony A. Iskander became the Interim Chief Financial Officer, Senior Vice President, Finance and Treasurer. Compensatory decisions associated with Mr. Iskander’s assignment and service as Interim Chief Financial Officer are described below: | | | | | | | | | | Component | Description | Rationale | | Base Salary | $406,000 | Market competitiveness | | Additional Monthly Stipend | $25,000 per month of service as Interim CFO and three-month transition period thereafter | Approximates the monthly difference between median CFO base salary and Mr. Iskander’s current base salary; stipend provided to compensate for additional responsibilities of Interim CFO role and onboarding of the full-time CFO during the transition period | | One-time equity grant | $500,000 RSUs | Promote retention and compensate for additional responsibilities of Interim CFO role; level of award approximated the average of the 25th and 50th percentiles of annual LTI levels for CFOs in the Company’s peer group, less what Mr. Iskander had received to-date in LTI for 2023, prorated for six months of anticipated service |
On November 27, 2023, Ryan M. Grimsland joined the Company as Executive Vice President, Chief Financial Officer and Mr. Iskander ceased being an executive officer, continuing service in October 2016 and brings more than 25 years of finance, operations and supply chain experience to the business from both Amazon and General Motors. Ms. Schechtman began herhis role as Senior Vice President, Human ResourcesFinance and Treasurer. The elements of Mr. Grimsland’s 2023 compensation are described below: | | | | | | | | | | Component | Description | Rationale | | Base Salary | $675,000 | Market competitiveness | | 2023 STI program | Not eligible to participate until 2024
| Joined substantially into the performance period
| | 2023 LTI program | | One-time cash bonuses* | $750,000 | Designed to replace compensation foregone at Mr. Grimsland’s prior employer | | One-time equity grants | •$1,600,000 RSUs •$400,000 stock options (each vesting ratably over three years, subject to continued employment) | To replace the value of awards forfeited by Mr. Grimsland for leaving his prior employer and create strong initial alignment with shareholders.
|
*Subject to repayment in May 2016, coming most recently from a nearly ten-year career at PepsiCo. Lastly, Mr.part or full under certain separation circumstances before the first and second anniversaries of the payment dates Other Leadership Changes In April 2023, the Company and Robert B. Cushing, was promoted to the role of Executive Vice President, Professional, in 2016. He brings vast experience with our Professional customers from his tenure at Worldpac and expansionagreed to reassign portions of his role will facilitateresponsibilities to other executives to further streamline field operations and support long-term succession planning. The transfer of such responsibilities contributed to certain compensatory decisions for other executive officers as further described in “—Components of Compensation.”
In November 2023, the Company reorganized parts of the executive leadership team and transitioned responsibilities for marketing, merchandising and e-commerce to other leaders, triggering separation without cause payment under the employment agreement with Jason B. McDonell, then Executive Vice President, Merchandising, Marketing and e-Commerce. See “—Summary Compensation Table” and “—Termination and Change of Control Table” for additional information about amounts paid pursuant to Mr. McDonell’s employment agreement.
Components of Compensation Principles. Base salary is an enhanced focus on this criticalintegral part of our business.executive compensation program designed to provide a competitive, fixed rate of compensation. Base salary is paid in cash administered based on our regular payroll practices.
Methodology. The key factors considered when determining an executive’s base salary are the scope and complexity of the role, competitiveness with the market, individual contributions to business outcomes and talent retention.
2023 Decisions & Rationale. The table below shows and explains the annual adjustments made to base salaries for our NEOs for 2023:
| | | | | | | | | | | | | | | | NEO | 2022 Base Salary | 2023 Base Salary | Change (%) | Principal Rationale | | Shane M. O’Kelly | N/A | $1,125,000 | N/A | New hire; determined based on market competitiveness | | Thomas R. Greco | $1,125,000 | $1,125,000 | — | % | Salary competitive with market | | Ryan M. Grimsland | N/A | $675,000 | N/A | New hire; determined based on market competitiveness | | Anthony A. Iskander | N/A | $406,000* | N/A | Assigned to executive officer role mid-2023; market competitiveness | | Jeffrey W. Shepherd | $762,000 | $762,000 | — | % | Salary competitive with market | | Herman L. Word, Jr. | $575,000 | $600,000 | 4.3 | % | Increased scope of role with transfer of certain responsibilities related to the Professional business | | Tammy M. Finley | $495,000 | $520,000 | 5.1 | % | Market competitiveness | | Stephen J. Szilagyi | N/A | $550,000 | N/A | New hire; determined based on market competitiveness | | Robert B. Cushing | $645,000 | $645,000 | — | % | Salary competitive with market | | Jason B. McDonell | $575,000 | $650,000 | 13.0 | % | Increased scope of role with new responsibilities related to inventory and availability |
The following table summarizes* In addition to his base salary, Mr. Iskander received a monthly stipend of $25,000 per month during his tenure as Interim Chief Financial Officer and a three-month transition period thereafter, which amount approximates the difference between the median annual salary of Chief Financial Officers among the Company’s peer group and Mr. Iskander’s annual salary of $406,000.
Short-Term Incentive Compensation Principles. We provide opportunity to earn STI to link pay to performance by aligning the achievement of short-term operational objectives of our business to annual compensation and provide competitive overall compensation. We tie performance measures for our STI program closely to key elementstargeted deliverables of our annual operating plan. STI is paid annually in cash based on achievement of the pre-determined metrics.
2023 Design & Methodology. While the overall design of our STI program for 2023 was largely unchanged from 2022, we updated one of the metrics used in the program, updated the structure of the payout curves and adjusted the DEI modifier. Overall Program Design. The program consists of three equally weighted pre-established financial metrics coupled with an individual modifier ranging from +/- 5 percentage points for performance against pre-established DEI goals. Following discussion with F.W. Cook and management, the Compensation Committee determined that the financial metrics in the program continued to be the most appropriate measures of achievement of our operational goals for 2023. However, consistent with the Company’s decision to stop reporting non-GAAP financial measures in February 2023, the Compensation Committee replaced “Adjusted Operating Income” with “Operating Income” calculated in accordance with U.S. generally accepted accounting principles. The Compensation Committee also determined that for 2023, a narrower range of individual modification was appropriate considering the more advanced maturity of DEI initiatives at the Company. Additionally, for 2023, the modifier would only apply if threshold performance for all three financial metrics was achieved.
| | | | | | | Metric | Rationale | | Comparable Store Sales | As an aftermarket automotive retailer, a key measure of our performance is how much revenue our stores generate on a comparable, year-over-year basis. One of our key long-term strategic initiatives is to improve sales and profitability per store, and focusing annually on delivering positive comparable store sales is an important contributor to that initiative. | | Operating Income | Operating income is a key profitability measure for our business. Through this metric, we seek to incentivize and reward short-term performance that contributes to long-term, sustainable improvements in the profitability of our business. | | Free Cash Flow | An important pillar of our long-term strategy is to return cash to our stockholders. Our ability to do so depends on our generation of free cash flow, and we include free cash flow as an STI metric to measure and reward this key component of our strategy on an annual basis. |
Determination of Targets. In general, we seek to align STI target levels to the targeted performance reflected in our annual operating plan. We believe this methodology focuses our team, including our executive officers, on delivering the goals of our annual operating plan and directly aligns their short-term, at-risk compensation packagesto the performance of our business objectives. Using the target achievement levels as an anchor, the Compensation Committee then set maximum achievement levels as stretch goals that would require exceptional performance to payout and threshold achievement levels that would still encourage strong execution but would appropriately reflect risks to full achievement of 2023 operating targets. In 2023, the Compensation Committee decided to adopt a payout curve that would minimize payout variability around the target performance level, aligning payouts above target to exceptionally exceeding prior year performance. For all metrics, threshold payout required greater than prior year performance. The below further outlines specific considerations with respect to our 2023 annual operating plan targets, which equated target performance levels for our STI metrics. | | | | | | | | | | | | | Comparable Store Sales | Operating Income | Free Cash Flow | | 2022 Actual Results | 0.3% | $714.2 million | $298.2 million | | 2023 STI Target | 2.5% | $923.0 million | $400.0 million | | Rationale | 2022 performance delivered incremental growth from exceptionally strong prior year performance. 2023 targeted level contemplated return to stronger year over year sales growth following targeted actions to improve availability and drive topline sales performance.
| Business plan built to deliver higher operating income year over year. | Business plan contemplated impact of investments in strategic initiatives and targeted stronger levels of cash flow than prior year
|
Mr. O’Kelly was not eligible for 2023 STI compensation but will have an STI target value of 150% of his base salary for 2024. Target STI compensation for each of these new executives, which consistour other NEOs was 85% of an annual compensation package that is consistent with our compensation philosophy and aligned with market, as well as certain one-time sign-on and make-whole compensation elements. For additional information regarding our NEOs' compensation arrangements, please see the "Additional Information Regarding Executive Compensation" sectionbase salary, other than for Mr. Greco, who had a target of this Proxy Statement and the Employment Agreements section of this CD&A. All compensation with respect to one-time, performance-based awards described in the following table is subject to our Incentive Compensation Clawback Policy. Mr. Cushing also received a one-time incentive LTI award as part150% of his promotional compensation package. The compensation packagesbase salary, and Mr. Iskander, who had a target of 65% of base salary given his position as Senior Vice President. These levels were determined in consideration of the scope and complexity of the role, market data versus the Company peer group and individual contributions to business outcomes. 2023 Potential v. Actual STI Payouts | | | | | | | | | | | | | | | | | | | | | | | | | Metric | Weight | Threshold (35% Payout) | Low (90% Payout) | Target (100% Payout) | High (110% Payout) | Maximum (200% Payout) | Payout |  (0.3)% | | Comparable Store Sales | 1/3 | 0.0% | 1.0% | 2.5% | 4.0% | 5.5% | 0 | % | $114.4 | | Operating Income | 1/3 | $ | 812 | | $ | 877 | | $ | 923 | | $ | 969 | | $ | 1,087 | | 0 | % | $43.7 | | Free Cash Flow | 1/3 | $ | 300 | | $ | 340 | | $ | 400 | | $ | 460 | | $ | 560 | | 0 | % | | | | | | | | |
DEI Modifier. Each NEO had pre-established DEI goals among their individual objectives established at the start of the year. For 2023, the categories of goals applicable to each NEO remained unchanged. Each executive had six DEI goals as follows: | | | | | | | Representation Goals (4) | Inclusion Goals (2) | | People of color – percentage of employees (1) across NEO’s function and (2) at management levels in NEO’s function | Participation in team member networks and events designed to promote and develop an inclusive culture | | Women – percentage of employees (1) across NEO’s function and (2) at management levels in NEO’s function | Percentage of employees across NEO’s function and at management levels in NEO’s function involved in a team member network |
Representation goals for 2023 were determined in consideration of the Company’s stated long-term DEI goal of increasing representation, including leadership representation, of women and people of color by 25% by 2026. Inclusion goals for 2023 were determined in consideration of building on strong performance from 2022. At the end of the performance period, management evaluated the degree of achievement across the six DEI goals for each executive officer. Since threshold performance was not achieved for each of the new membersfinancial metrics, management did not recommend, and the Compensation Committee did not approve, any DEI modifiers for STI payouts.
Long-Term Incentive Compensation Principles. LTI is intended to align the interests of our leadership, including our executive officers, with those of our shareholders. It is an important part of providing competitive overall compensation to our executives, promotes retention and helps balance focus between the Executive Leadership teamshorter-term execution of operational priorities with longer-term objectives.
2023 Design & Methodology. The design of our LTI program for 2023 was unchanged from 2022. Overall Program Design. LTI is awarded to executives annually with a three-year performance/vesting period, with the target value awarded divided as shown below and vesting generally subject to continued employment. 50% of our annual LTI awards to executives are describedissued in detail inPSUs, whose value depends not only on the "New Leadership Team: Compensation Approach" section of this CD&A.Company’s absolute TSR, but also on achievement against the long-term performance measure. | | | | | | | | | | | | | % of Target Award | Vehicle | | | | | Executive | Compensation Element | Compensation TypeVesting | Rationale | Mr. Greco50% | PSUs | If at all, at the end of a three-year performance period based on RTSR against the other companies in the S&P 500 | Align a substantial portion of executive compensation entirely dependent upon delivery of sustainable, long-term total shareholder return | | 25% | RSUs | Ratably over three years | Further align the interests of our executives with those of our stockholders and retain key talent | | 25% | Stock options | Ratably over three years, with a 10-year term | Make a portion of executive compensation entirely contingent upon stock price appreciation and promote retention (while options provide a significant source of potential long-term value to individuals, vested options are generally cancelled 90 days following cessation of employment) |
Determination of Targets. In determining the target performance level for the PSU component of our LTI in 2023, the Compensation Committee determined that target payout should only be achieved for above-median RTSR achievement versus companies in the S&P 500. It determined that maximum payout should only be achieved for extraordinary results delivering top quintile RTSR over the performance period, which it believed to be a significant stretch goal. The level for threshold payout was established such that the award would only pay out with significant improvement from RTSR performance for the prior three-year performance period. Importantly, even if RTSR exceeds the 55th percentile, payout will be capped at 100% of target in the event absolute total shareholder return is negative for the performance period.
| | | | | | | | | | | | | | | | Prior Period Performance | Threshold (35% payout) | Target (100% payout) | Maximum (200% payout) | | Three-year RTSR against the S&P 500 | •
•7th %ile
| Annualized Target Total Direct Compensation: $7,585,000
86% Performance Based35th %ile
| Annual55th %ile | •80th %ile |
Each executive officers’ annual grant is made at a target value that depends on the scope and complexity of the role, market data and individual contributions to business outcomes. In consideration of the announcement of Mr. Greco’s intended retirement in 2023, the Compensation Committee increased the target LTI value for several executive officers to further incentivize executive officers’ focus on and commitment to the Company’s long-term performance while further retaining key executives during the Chief Executive Officer transition. The Compensation Committee made the following determinations with respect to target LTI value for our NEOs:
| | | | | | | | | | | | | | | | NEO | 2022 Target LTI | 2023 Target LTI | Change (%) | Principal Rationale | | Shane M. O’Kelly | N/A | N/A | N/A | Mid-year hire; in lieu of a regular 2023 LTI award, Mr. O’Kelly received a sign-on equity award of 150,000 stock options | | Thomas R. Greco | $6,500,000 | $3,000,000 | (53.9)% | Reduced size of target award in anticipation of cessation of service; provide meaningful incentive during Mr. Greco’s last year of service to focus on and deliver against a financial measure that will align with the long-term success of the organization | | Ryan M. Grimsland | N/A | N/A | N/A | Near year-end hire | | Anthony A. Iskander | N/A | $950,000 * | N/A | See explanation below | | Jeffrey W. Shepherd | $1,600,000 | $1,900,000 | 18.8% | Promote retention during Chief Executive Officer transition | | Herman L. Word, Jr. | $800,000 | $1,150,000 | 43.8% | Adjustment to $900,000 on account of increased responsibilities and market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition | | Tammy M. Finley | $750,000 | $1,100,000 | 46.7% | Adjustment to $850,000 on account of market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition | | Stephen J. Szilagyi | N/A | $800,000 | N/A | New hire; based on market competitiveness | | Robert B. Cushing | $1,000,000 | $1,000,000 | 0.0% | No adjustment given planned realignment of certain responsibilities to streamline field operations and support long-term succession planning | | Jason B. McDonell | $900,000 | $1,250,000 | 38.9% | Adjustment to $1,000,000 on account of increased responsibilities and market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition |
* Mr. Iskander became an executive officer on August 18, 2023. 2023 Target LTI represents annual award made for his prior, non-executive position, a one-time retention award granted to promote retention during the Chief Executive Officer transition and a one-time award granted in connection with his role assignment to Interim Chief Financial Officer. The amount granted in connection with this assignment represented the approximate average of the 25th percentile and 50th percentile of annual LTI levels for Chief Financial Officer based on the Company’s peer group, less what Mr. Iskander had received to-date in LTI, prorated for six months of service.
Although neither received a regular annual LTI award for 2023, Mr. O’Kelly’s target LTI value for 2024 will be $6,500,000 and Mr. Grimsland’s target LTI value for 2024 will be $1,600,000.
2023 Potential v. Actual LTI Payout
Our awards to executive officers made in 2021 depended solely on relative total shareholder return against companies in the S&P 500. Our relative TSR for the 2021-2023 performance period ranked below the threshold, and therefore no shares vested for the 2021 – 2023 performance period. The following depicts potential v. actual results achieved.
| | | | | | | | | | | | | | | | | | | Metric | Weight | Threshold (35% payout) | Target compensation designed to align with market median (100% payout) | Maximum (200% payout) | Payout | 7th percentile •
•
| $2,000,000 Cash sign-on
$10,200,000 Long-Term Incentive Sign-on, time and performance based
| One-Time | • | Replacement of forfeited compensation from former employer that is subject to both performance and continued service requirements | •RTSR | $3,000,000 Long-Term Incentive1/3 | One-Time35th percentile | •55th percentile | Inducement compensation for accepting position; subject to continued service requirements80th percentile | 0% | | Mr. Okray | •
•
Annualized Target Total Direct Compensation: $2,000,000
75% Performance based
| Annual | • | Target compensation is below median compensation for CFO | • | $380,000 Cash Sign-on | One-Time | • | Replacement of forfeited compensation from former employer that is subject to continued service requirements | • | $2,000,000 Long-Term Incentive Sign-on, time based | Ms. Schechtman | •
•
| Annualized Target Total Direct Compensation: $962,500
64% Performance Based
| Annual | • | Target compensation designed to align with market median | • | $250,000 Cash sign-on | One-Time | • | Replacement of forfeited compensation from former employer that is subject to continued service requirements |
Our Leadership Transition
With
Other Compensation and Pay Practices
Employment Agreements We have employment agreements with each of our new leadership assuming their responsibilities, prior leaders Messrs. Sherman and Norona departed the Company effective December 31, 2016. In connection with their departures both executives received severance benefits, which were consistent withexecutive officers that outline the terms and conditions of their employment agreements.with us. Each employment agreement describes the base salary, STI and LTI opportunities of the executive. Each agreement is for a one-year term and automatically renews for successive one-year periods unless 90 days advance notice is provided. Our employment agreements include confidentiality, non-competition and non-solicitation obligations for our executive officers. The agreements also outline the compensation to which they are entitled in the event of death, disability, termination by the Company for Due Cause, termination by the Company other than for Due Cause, resignation by the executive for Good Reason, resignation by the executive without Good Reason and termination following a change in control. These terms are more fully described in more detail“—Potential Payments Upon Termination or Change in Control Table.” We believe these various compensatory arrangements in the Employment Agreements sectionevent of an executive’s severance are important to enabling attraction and retention of key executive talent and promote focus on achievement of long-term strategic objectives. Other Compensation and Benefit Programs Other than certain relocation benefits extended to Mr. O’Kelly in connection with his appointment as President and Chief Executive Officer, we do not offer any perquisites to our NEOs or benefits that are not available to or are available on different terms than they are available for, other team members. Our executive officers, including our NEOs, may participate in our broadly-offered employee benefit programs, including principally our 401(k) retirement savings plan, which is available to all team members over age 21 and provides a company match on employee deferrals; our deferred compensation plan, which enables all team members who are “highly compensated employees” (as defined in such plan) to defer up to 50% of base salary and 50% of short-term incentive compensation, with settlements in cash; and our deferred stock unit plan, which enables all senior and executive vice presidents to defer up to 50% of base salary, with settlements in company stock. In addition, executive officers and other team members are eligible for certain relocation benefits to facilitate moving to the Company's headquarters. For detailed information about deferrals made by NEOs into our deferred compensation plan and our deferred stock unit plan, see “—Non-Qualified Deferred Compensation for 2023." Granting of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information We do not grant stock options or similar awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement, and do not time the public release of such information based on stock option grant dates. Our annual grants of stock options are awarded on a predetermined date during an “open trading window.” The only grant of stock options or similar awards outside of this CD&A.annual cycle has been to Mr. O’Kelly in connection with his hire, and such award was also made on a predetermined date during an “open trading window.” During the last completed fiscal year, we have not awarded options to any named executive officer during the period beginning four business days before and ending one business day after the filing of a period report on Form 10-Q or Form 10-K or the filing or furnishing of a current report on Form 8-K, and we have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
Compensation Governance
We believe good corporate governance practices that reflect our values and support our strong strategic and financial performance must include policies and procedures related to our compensation practices. We regularly review our compensation programs to ensure that our incentives are aligned with stockholder value.
Compensation Framework Highlights
| | | We Do … | We Do Not … | ü Pay for Performance with rigorous objective financial metrics that are closely tied to our success and delivery of stockholder value
| û Provide Excise Tax Gross-Ups for Change in Control Payments.
| ü Have an Incentive Compensation Clawback Policy
| û Reprice or exchange underwater stock options
| ü Incorporate “Double-Trigger” Vesting
| û Pay dividends on unearned annual performance-based equity awards
| ü Have Stock Ownership Guidelines
| û Permit hedging
| ü Ensure independence requirements are met for our Compensation Consultant
| û Permit pledging unless certain stringent requirements are met
|
•As illustrated in our Framework for Executive Compensation overview below, a significant percentage of our compensation package is performance-based for all of our NEOs and in particular for our CEO’s total direct compensation (86 percent of total compensation for our CEO is performance-based).
•Our Board has adopted anLong-Term Incentive Compensation Clawback Policy which provides that incentives may be required
Principles. LTI is intended to be repaid to the Company if the covered executive’s fraud or willful misconduct results in an accounting restatement. More information can be found in the "Employment Agreements" section of this CD&A.
•The employment agreements of our NEOs do not provide for excise tax gross-ups for excess parachute payments in connection with a Change in Control.
•The terms of our LTI grants provide that in connection with a Change in Control, vesting of awards only occurs if the awards are not replaced or the executive’s employment is terminated without Due Cause within 24 months following a Change in Control. All unvested LTI awards that are currently outstanding are subject to double-trigger vesting.
•Our Board has established Stock Ownership Guidelines which require our directors and senior officers to achieve and maintain meaningful levels of stock ownership to ensure alignment withalign the interests of our stockholders. Our CEO is required to hold shares equivalent to six times his base salary. Beginning in 2017, the holding level requirement forleadership, including our President and Executive Vice Presidents has increased from two times base salary to three times base salary.
•Our Insider Trading Policy (i) prohibits directors and certain employees, including executive officers, from transactions in our stock except during specified windows, (ii) prohibits directors and all employees from pledging our common stock unless certain stringent requirements are met and (iii) prohibits directors and all employees from engaging in hedgingwith those of our common stock. We do not permit hedging or pledgingshareholders. It is an important part of providing competitive overall compensation to our executives, promotes retention and helps balance focus between the shorter-term execution of operational priorities with longer-term objectives.
2023 Design & Methodology. The design of our LTI awards.program for 2023 was unchanged from 2022.
•Overall Program Design. LTI is awarded to executives annually with a three-year performance/vesting period, with the target value awarded divided as shown below and vesting generally subject to continued employment. 50% of our annual LTI awards to executives are issued in PSUs, whose value depends not only on the Company’s absolute TSR, but also on achievement against the long-term performance measure.
| | | | | | | | | | | | | % of Target Award | Vehicle | Vesting | Rationale | | 50% | PSUs | If at all, at the end of a three-year performance period based on RTSR against the other companies in the S&P 500 | Align a substantial portion of executive compensation entirely dependent upon delivery of sustainable, long-term total shareholder return | | 25% | RSUs | Ratably over three years | Further align the interests of our executives with those of our stockholders and retain key talent | | 25% | Stock options | Ratably over three years, with a 10-year term | Make a portion of executive compensation entirely contingent upon stock price appreciation and promote retention (while options provide a significant source of potential long-term value to individuals, vested options are generally cancelled 90 days following cessation of employment) |
Determination of Targets. In determining the target performance level for the PSU component of our LTI in 2023, the Compensation Committee determined that target payout should only be achieved for above-median RTSR achievement versus companies in the S&P 500. It determined that maximum payout should only be achieved for extraordinary results delivering top quintile RTSR over the performance period, which it believed to be a significant stretch goal. The level for threshold payout was established such that the award would only pay out with significant improvement from RTSR performance for the prior three-year performance period. Importantly, even if RTSR exceeds the 55th percentile, payout will be capped at 100% of target in the event absolute total shareholder return is negative for the performance period.
| | | | | | | | | | | | | | | | Prior Period Performance | Threshold (35% payout) | Target (100% payout) | Maximum (200% payout) | | Three-year RTSR against the S&P 500 | 7th %ile | 35th %ile | 55th %ile | 80th %ile |
Each executive officers’ annual grant is made at a target value that depends on the scope and complexity of the role, market data and individual contributions to business outcomes. In consideration of the announcement of Mr. Greco’s intended retirement in 2023, the Compensation Committee has exercised its authorityincreased the target LTI value for several executive officers to engagefurther incentivize executive officers’ focus on and retaincommitment to the services of an independent compensation consultant.
Compensation Decision Roles
Company’s long-term performance while further retaining key executives during the Chief Executive Officer transition. The Compensation Committee has final approval of all compensation recommendationsmade the following determinations with respect to target LTI value for our NEOs.NEOs:
| | | | | | | | | | | | | | | | NEO | 2022 Target LTI | 2023 Target LTI | Change (%) | Principal Rationale | | Shane M. O’Kelly | N/A | N/A | N/A | Mid-year hire; in lieu of a regular 2023 LTI award, Mr. O’Kelly received a sign-on equity award of 150,000 stock options | | Thomas R. Greco | $6,500,000 | $3,000,000 | (53.9)% | Reduced size of target award in anticipation of cessation of service; provide meaningful incentive during Mr. Greco’s last year of service to focus on and deliver against a financial measure that will align with the long-term success of the organization | | Ryan M. Grimsland | N/A | N/A | N/A | Near year-end hire | | Anthony A. Iskander | N/A | $950,000 * | N/A | See explanation below | | Jeffrey W. Shepherd | $1,600,000 | $1,900,000 | 18.8% | Promote retention during Chief Executive Officer transition | | Herman L. Word, Jr. | $800,000 | $1,150,000 | 43.8% | Adjustment to $900,000 on account of increased responsibilities and market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition | | Tammy M. Finley | $750,000 | $1,100,000 | 46.7% | Adjustment to $850,000 on account of market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition | | Stephen J. Szilagyi | N/A | $800,000 | N/A | New hire; based on market competitiveness | | Robert B. Cushing | $1,000,000 | $1,000,000 | 0.0% | No adjustment given planned realignment of certain responsibilities to streamline field operations and support long-term succession planning | | Jason B. McDonell | $900,000 | $1,250,000 | 38.9% | Adjustment to $1,000,000 on account of increased responsibilities and market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition |
* Mr. Iskander became an executive officer on August 18, 2023. 2023 Target LTI represents annual award made for his prior, non-executive position, a one-time retention award granted to promote retention during the Chief Executive Officer transition and a one-time award granted in connection with his role assignment to Interim Chief Financial Officer. The Compensation Committee has engaged Frederic W. Cook & Co., Inc. (“FW Cook”), an independent consulting firm, to provide advice and assistance toamount granted in connection with this assignment represented the Compensation Committee when making decisions. FW Cook reports to the Compensation Committee, and all services provided by FW Cook are on behalfapproximate average of the Compensation Committee.
| | | | | | Compensation Committee | | FW Cook | | CEO and Management | þ Review annual performance and compensation of CEO and NEOs, including salary, short-term and long-term incentives
| þ Provide advice and assistance to the Compensation Committee when making compensation decisions
| þ CEO annually reviews performance of all executives
| þ Review, make recommendations and approve compensation plans
| þ Assist with reviews and updates on compensation best practices
| þ Management develops and maintains an effective pay and performance management system throughout the Company, and develops the strategic plan and business goals which are then incorporated into our incentive programs as performance measures
| þ Periodic review of our peer group
| þ Provide the Compensation Committee with updates on regulatory and compliance changes related to executive compensation if and when applicable
| þ CEO makes recommendations for salary and incentive compensation commensurate with performance of each executive and of the Company
| þ Oversight of our Incentive Compensation Clawback Policy
|
Setting Executive Compensation
In determining appropriate compensation opportunities25th percentile and 50th percentile of annual LTI levels for our NEOs, the Compensation Committee reviews competitive market data provided by FW Cook on compensation practices among a peer group of other specialty retailers. On behalf of the Compensation Committee, FW Cook conducts an annual review of the compensation practices of our peer group. Our peer group is established using a set of guiding principles:
Limit consideration to companies with revenues between $3 billion and $23 billion, generally equivalent to a minimum of one-third and a maximum of two and a half times our revenues;
Include domestic, publicly traded companies that have a targeted focus of similar industries (including, but not limited to, Automotive Retail, General Merchandise Stores and Specialty Stores); and
Consider companies with similar customers and/or business operations and likely proxy advisory firm peer groups.
In 2015, the Compensation Committee selected the following companies (listed in alphabetical order), which include several of our direct competitors as well as other specialty retailers with both commercial distribution and retail businesses, to comprise the peer group used in competitive comparisons of executive compensation levels and to help the Committee evaluate compensation opportunities for 2016:
| | | | AutoZone, Inc. | Genuine Parts Company | The Sherwin-Williams Company | Dollar General Corporation | LKQ Corporation | Tractor Supply Company | Dollar Tree, Inc. | O’Reilly Automotive, Inc. | W.W. Grainger, Inc. | Family Dollar Stores, Inc. | Office Depot, Inc. | WESCO International, Inc. | Fastenal Company | Staples, Inc. | |
In August 2016, FW Cook conducted its annual review of our peer group. Family Dollar was acquired by Dollar Tree and will no longer be included. Additionally,Chief Financial Officer based on the principles for inclusion, CarMax, Inc., Dick’s Sporting Goods, Inc. and HD Supply Holdings, Inc. were added to theCompany’s peer group, usedless what Mr. Iskander had received to-date in competitive comparisonsLTI, prorated for six months of service.
Although neither received a regular annual LTI award for 2023, Mr. O’Kelly’s target LTI value for 2024 will be $6,500,000 and Mr. Grimsland’s target LTI value for 2024 will be $1,600,000.
2023 Potential v. Actual LTI Payout
Our awards to helpexecutive officers made in 2021 depended solely on relative total shareholder return against companies in the Committee evaluate 2017 pay opportunities.S&P 500. Our relative TSR for the 2021-2023 performance period ranked below the threshold, and therefore no shares vested for the 2021 – 2023 performance period. The following depicts potential v. actual results achieved.
Compensation Positioning | | | | | | | | | | | | | | | | | | | Metric | Weight | Threshold (35% payout) | Target (100% payout) | Maximum (200% payout) | Payout | 7th percentile | | RTSR | 1/3 | 35th percentile | 55th percentile | 80th percentile | 0% | | |
The Compensation Committee considers multiple sources when determining executive pay. Generally speaking, we target the market median for annual compensation at target. The Committee reviews compensation data from our peer group as well
Other Compensation and Pay Practices
as from external information from Hay Group, an independent firm retained by management, that provides information on compensation practices specific to the retail industry.
Employment Agreements
Framework for Executive Compensation
Compensation Philosophy and Objectives
Our executive compensation philosophy is straightforward - we pay for performance. Our executives are accountable for the performance of the business and are compensated based on that performance. In order to ensure we are effectively meeting our pay for performance philosophy, we strive to deliver a significant portionWe have employment agreements with each of our executive compensation through performance-based incentives. The Annual Total Direct Compensation mix for our CEO and our other NEOs is illustrated below.
Variable, performance based compensation for our CEO is 86% of his total compensation.
Our other NEOs, on average, have 65% of their total compensation tied to variable, performance based compensation.
Although we have no pre-established policy or target allocation between specific compensation components, the majority of an executive officer’s annual total target compensation is determined by our performance as compared to performance goals established for our short-term and long-term plans.
Base Salary
The Compensation Committee reviews the information provided by FW Cook regarding our executive officers’ base salary levels compared to base salaries of executives of companies in our peer group as presented in their latest available proxy statements. The Committee also reviews the assessment of the performance of each executive officer. Performance reviews generally include assessing outcomes compared to specific business and strategic objectivesofficers that are established and reviewed annually.
The following table summarizes 2016 base salaries compared to 2015. Three of our five NEOs were newly appointed to the Company in 2016 and therefore did not receive an increase. Rather, their base salaries were established based on the Compensation Committee’s assessment of their scope of responsibility and the relevant market data for our peer companies as provided by FW Cook. Mr. Cushing received a salary increase when he was promoted to the role of Executive Vice President, Professional.
| | | | | | NEOs | 2015 Salary | 2016 Salary | % Change | | Thomas R. Greco | Not applicable | $1,100,000 | Not applicable | | Thomas B. Okray | Not applicable | $500,000 | Not applicable | | Robert B. Cushing | $448,000 | $470,000 | 5% | | Charles E. Tyson | $490,000 | $490,000 | 0% | | Natalie S. Schechtman | Not applicable | $350,000 | Not applicable |
Annual Incentive Plan
Our compensation philosophy connects our executives’ potential annual earnings to the achievement of performance objectives designed to support execution of our business strategies. Our AIP provides for the payment of cash bonuses based upon our performance in relation to predetermined financial targets established during the first quarter of the fiscal year. For Fiscal 2016, we established incentive targets so that total annual cash compensation at the target level would achieve the Committee's desired positioning relative to market data, with the opportunity for higher total annual cash compensation for correspondingly higher performance. The overall AIP potential varies depending upon the executive’s position. All AIP target opportunities for our NEOs were established under the stockholder-approved 2007 Executive Incentive Plan.
| | | | | | NEOs | Base Salary | AIP Target (%) | AIP Target ($) | | Thomas R. Greco | $1,100,000 | 135% | $1,485,000 | | Thomas B. Okray | $500,000 | 90% | $450,000 | | Robert B. Cushing | $470,000 | 85% | $399,500 | | Charles E. Tyson | $490,000 | 85% | $416,500 | | Natalie S. Schechtman | $350,000 | 75% | $262,500 |
For our three NEOs who joined the Company in 2016, the treatment of their 2016 AIP is based onoutline the terms of their respective offersemployment with us. Each employment agreement describes the base salary, STI and LTI opportunities of employment as described below.the executive. Each of their respectiveagreement is for a one-year term and automatically renews for successive one-year periods unless 90 days advance notice is provided. Our employment agreements do NOT provideinclude confidentiality, non-competition and non-solicitation obligations for any continuing or further bonus guaranteesour executive officers. The agreements also outline the compensation to which they are entitled in the event of death, disability, termination by the Company for Due Cause, termination by the Company other than whatfor Due Cause, resignation by the executive for Good Reason, resignation by the executive without Good Reason and termination following a change in control. These terms are more fully described in “—Potential Payments Upon Termination or Change in Control Table.” We believe these various compensatory arrangements in the event of an executive’s severance are important to enabling attraction and retention of key executive talent and promote focus on achievement of long-term strategic objectives.
Other Compensation and Benefit Programs Other than certain relocation benefits extended to Mr. O’Kelly in connection with his appointment as President and Chief Executive Officer, we do not offer any perquisites to our NEOs or benefits that are not available to or are available on different terms than they are available for, other team members. Our executive officers, including our NEOs, may participate in our broadly-offered employee benefit programs, including principally our 401(k) retirement savings plan, which is described herein:available to all team members over age 21 and provides a company match on employee deferrals; our deferred compensation plan, which enables all team members who are “highly compensated employees” (as defined in such plan) to defer up to 50% of base salary and 50% of short-term incentive compensation, with settlements in cash; and our deferred stock unit plan, which enables all senior and executive vice presidents to defer up to 50% of base salary, with settlements in company stock. In addition, executive officers and other team members are eligible for certain relocation benefits to facilitate moving to the Company's headquarters. For detailed information about deferrals made by NEOs into our deferred compensation plan and our deferred stock unit plan, see “—Non-Qualified Deferred Compensation for 2023."
Granting of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
We do not grant stock options or similar awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement, and do not time the public release of such information based on stock option grant dates. Our annual grants of stock options are awarded on a predetermined date during an “open trading window.” The only grant of stock options or similar awards outside of this annual cycle has been to Mr. GrecoO’Kelly in connection with his hire, and such award was guaranteedalso made on a minimum bonus for Fiscal 2016 at target level as considerationpredetermined date during an “open trading window.” During the last completed fiscal year, we have not awarded options to any named executive officer during the period beginning four business days before and ending one business day after the filing of a period report on Form 10-Q or Form 10-K or the filing or furnishing of a current report on Form 8-K, and we have not timed the disclosure of material nonpublic information for the bonus opportunity he forfeited from his previous employer upon his departure and as an acknowledgment that he was joining us inpurpose of affecting the middlevalue of a year for which he would have limited opportunity to influence outcomes based on previously established performance metrics.executive compensation. Mr. Okray was not eligible to receive a bonus for 2016 because he joined the Company in late 2016. He is entitled to receive his 2017 AIP payment at a minimum of target level bonus as part of the negotiated terms of his employment.
Ms. Schechtman received a one-time guaranteed bonus for Fiscal 2016 at target level reasons similar to Mr. Greco.
With the exception of Mr. Greco and Ms. Schechtman, our AIP payouts in 2016 were based on our performance versus the goals approved by the Compensation Committee. Mr. Greco and Ms. Schechtman's payouts were based on their annual target bonus amounts provided in the table above of $1,485,000 and $262,500 respectively. For 2016, our plan metrics were Operating Income (80%) and Comparable Store Sales (20%). The performance thresholds are outlined in the table below. Mr. Tyson did not receive a payout under the 2016 AIP as the required thresholds were not met. Mr. Cushing received a partial cash-bonus payout for his performance as the leader of our Worldpac organization prior to assuming the role of EVP, Professional. This payout was based on the Operating Income results versus target for the Worldpac business in 2016. Worldpac achieved 93.4% of its Operating Income target, resulting in a payout of 80.2%. His final bonus was prorated based on time spent in this role.
2016 Annual Incentive Plan Performance Results Table
The following table shows the actual performance results for Fiscal 2016, as well as the threshold, target and maximum performance goals for Fiscal 2016.
| | | | | | | | | Metric | Performance Weight | 2016 Potential Payout Results | Actual Results | Final Payout | | Threshold | 100% of Target | 200% of Target (Maximum) | | Enterprise Operating Income ($ in millions) | 80% | $1,014.5 | $1,107.1 | $1,153.3 | $828.5 | 0.0% | | Enterprise Comparable Store Sales (%) | 20% | 1.0% | 2.0% | 4.0% | (1.4)% | 0.0% |
Target level and actual enterprise operating income results exclude the impact of amortization related to the acquisition of GPI intangibles. For additional information about our AIP, please refer to the "2016 Grants of Plan-Based Awards Table" contained in this Proxy Statement, which shows the threshold, target and maximum incentive amounts payable under the plan for our Fiscal 2016 performance.
Long-Term Incentive Compensation
Our executives receive long-term incentive compensationPrinciples. LTI is intended to link theiralign the interests of our leadership, including our executive officers, with those of our shareholders. It is an important part of providing competitive overall compensation to our long-term financial success. Historically, we have granted awards in December priorexecutives, promotes retention and helps balance focus between the shorter-term execution of operational priorities with longer-term objectives.
2023 Design & Methodology. The design of our LTI program for 2023 was unchanged from 2022. Overall Program Design. LTI is awarded to executives annually with a three-year performance/vesting period, with the starttarget value awarded divided as shown below and vesting generally subject to continued employment. 50% of each three-year vesting and performance period. However, in 2016 the Compensation Committee approved a change in the timing of grants ofour annual LTI awards to executives are issued in PSUs, whose value depends not only on the first quarterCompany’s absolute TSR, but also on achievement against the long-term performance measure.
| | | | | | | | | | | | | % of Target Award | Vehicle | Vesting | Rationale | | 50% | PSUs | If at all, at the end of a three-year performance period based on RTSR against the other companies in the S&P 500 | Align a substantial portion of executive compensation entirely dependent upon delivery of sustainable, long-term total shareholder return | | 25% | RSUs | Ratably over three years | Further align the interests of our executives with those of our stockholders and retain key talent | | 25% | Stock options | Ratably over three years, with a 10-year term | Make a portion of executive compensation entirely contingent upon stock price appreciation and promote retention (while options provide a significant source of potential long-term value to individuals, vested options are generally cancelled 90 days following cessation of employment) |
Determination of each fiscal year. Therefore, our annual grantsTargets. In determining the target performance level for the 2017 through 2019 performance period were made in March 2017.
Performance LTI Awards: December 2013, December 2014 and December 2015
Beginning with the December 2013 Annual Grant, the Committee determined and approved that the performance-basedPSU component of our LTI program would be delivered as performance-based SARs. The metrics selected for these awards were three year cumulative operating income and three year average comparable store sales growth, equally weighted at 50 percent per metric, asin 2023, the Compensation Committee determined that target payout should only be achieved for above-median RTSR achievement versus companies in the S&P 500. It determined that maximum payout should only be achieved for extraordinary results delivering top quintile RTSR over the performance period, which it believed these were critical areasto be a significant stretch goal. The level for threshold payout was established such that the award would only pay out with significant improvement from RTSR performance for the prior three-year performance period. Importantly, even if RTSR exceeds the 55th percentile, payout will be capped at 100% of target in the event absolute total shareholder return is negative for the performance period.
| | | | | | | | | | | | | | | | Prior Period Performance | Threshold (35% payout) | Target (100% payout) | Maximum (200% payout) | | Three-year RTSR against the S&P 500 | 7th %ile | 35th %ile | 55th %ile | 80th %ile |
Each executive officers’ annual grant is made at a target value that depends on the scope and complexity of the role, market data and individual contributions to business outcomes. In consideration of the announcement of Mr. Greco’s intended retirement in 2023, the Compensation Committee increased the target LTI value for several executive officers to further incentivize executive officers’ focus that tie directlyon and commitment to the Company’s long-term performance while further retaining key executives during the Chief Executive Officer transition. The Compensation Committee made the following determinations with respect to target LTI value for our successNEOs:
| | | | | | | | | | | | | | | | NEO | 2022 Target LTI | 2023 Target LTI | Change (%) | Principal Rationale | | Shane M. O’Kelly | N/A | N/A | N/A | Mid-year hire; in lieu of a regular 2023 LTI award, Mr. O’Kelly received a sign-on equity award of 150,000 stock options | | Thomas R. Greco | $6,500,000 | $3,000,000 | (53.9)% | Reduced size of target award in anticipation of cessation of service; provide meaningful incentive during Mr. Greco’s last year of service to focus on and deliver against a financial measure that will align with the long-term success of the organization | | Ryan M. Grimsland | N/A | N/A | N/A | Near year-end hire | | Anthony A. Iskander | N/A | $950,000 * | N/A | See explanation below | | Jeffrey W. Shepherd | $1,600,000 | $1,900,000 | 18.8% | Promote retention during Chief Executive Officer transition | | Herman L. Word, Jr. | $800,000 | $1,150,000 | 43.8% | Adjustment to $900,000 on account of increased responsibilities and market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition | | Tammy M. Finley | $750,000 | $1,100,000 | 46.7% | Adjustment to $850,000 on account of market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition | | Stephen J. Szilagyi | N/A | $800,000 | N/A | New hire; based on market competitiveness | | Robert B. Cushing | $1,000,000 | $1,000,000 | 0.0% | No adjustment given planned realignment of certain responsibilities to streamline field operations and support long-term succession planning | | Jason B. McDonell | $900,000 | $1,250,000 | 38.9% | Adjustment to $1,000,000 on account of increased responsibilities and market competitiveness; further adjusted to promote retention during the Chief Executive Officer transition |
* Mr. Iskander became an executive officer on August 18, 2023. 2023 Target LTI represents annual award made for his prior, non-executive position, a one-time retention award granted to promote retention during the Chief Executive Officer transition and deliverya one-time award granted in connection with his role assignment to Interim Chief Financial Officer. The amount granted in connection with this assignment represented the approximate average of stockholder value. With the exception25th percentile and 50th percentile of Messrs. Grecoannual LTI levels for Chief Financial Officer based on the Company’s peer group, less what Mr. Iskander had received to-date in LTI, prorated for six months of service.
Although neither received a regular annual LTI award for 2023, Mr. O’Kelly’s target LTI value for 2024 will be $6,500,000 and Okray and Ms. Schechtman, all of our NEOs receivedMr. Grimsland’s target LTI value for 2024 will be $1,600,000.
2023 Potential v. Actual LTI Payout
Our awards to executive officers made in 2021 depended solely on relative total shareholder return against companies in the S&P 500. Our relative TSR for each of these performance-based SARs cycles.
2014-2016 LTI Performance Vesting Table
The following table shows the actual2021-2023 performance results for Fiscal Years 2014 to 2016, as set forth in our audited financial statements, as well asperiod ranked below the threshold, and target performance levels for annual LTI granttherefore no shares vested for the Fiscal 2014 to Fiscal 20162021 – 2023 performance period.
| | | | | | | | | Metric | PerformanceWeight | Potential Payout Results | Actual Results | Final Potential Payout % by Metric | | Threshold | 100% of Target | 200% of Target (Maximum) | | Cumulative Operating Income ($ in millions) | 50% | $2,622.1 | $2,833.2 | $3,112.7 | $2,489.0 | 0.0% | | Average Annual Comparable Store Sales Growth (%) | 50% | 0.0% | 1.5% | 3.5% | 0.2% | 35.0% |
As a result of the 50 percent weighting for each metric, the final weighted average payout for the performance-based LTI award for Messrs. Cushing, Tyson, Norona and Sherman was 17.5 percent of target for the Fiscal 2014 to Fiscal 2016 performance period.
2017 Annual LTI Program
Commencing in Fiscal 2017, we have instituted several changes to our LTI program so that we may continue to enhance the alignment between the interests of our executives and the interests of our stockholders. The Compensation Committee has approved the program adjustments, which were implemented with the award of our annual grants in March 2017. The following table provides a summary of our annual 2017 LTI program changes. We feel that in particular the updates to our metrics for the performance-based LTI program were important adjustments to ensure our incentive schemes are aligned with our Company's business plan. Return on Invested Capital is a critical measure to ensure we are making wise decisions with our Capital as we move forward to grow our business. Relative Total Shareholder Return will allow us to stay laser focused on out-performing our competitors.depicts potential v. actual results achieved.
| | | | | | | | | | | | | | | | | | | Metric | Weight | Threshold (35% payout) | Target (100% payout) | Maximum (200% payout) | Payout | 7th percentile | | RTSR | 1/3 | 35th percentile | 55th percentile | 80th percentile | 0% | | |
| | | | | | | Change | From | To | Rationale | F | Award Timing | Fourth Quarter of Calendar Year | First Quarter of Calendar Year | Clearer alignment with applicable performance periods | F | Award Vehicle Weighting | 50% Performance-Based | 70% Performance-Based | Strengthen alignment of Pay and Performance | 50% Time-Based | 30% Time-Based | F | Metrics | 50% Operating Income | One third Return on Invested Capital | Eliminate some duplication of metrics between AIP and LTI plans. Ensure we have long-term metrics that align with our Company's business plan as well as link performance-based compensation to improving stockholder value. | 50% Comparable Store Sales Growth | One third Relative TSR | | One third Comparable Store Sales Growth |
New Leadership Team: Compensation Approach
As we discussed in our Executive Summary, we were fortunate to welcome three new leaders to help us transform and continue to grow our business while focusing on investments in our customers. Each new leader was offered a compensation opportunity commensurate with his or her new role within the organization as well as certain one-time compensation elements to induce them to join the organization and/or replace compensation forfeited from his or her prior employer. The elements of these compensation packages are described below.
Mr. Greco, President and Chief Executive Officer
Base Salary: $1,100,000 on an annualized basis
Target Bonus: 135% of base salary
| | ◦ | One-Time Consideration: For 2016, Mr. Greco's bonus was guaranteed at target in consideration for his transition from employment at PepsiCo. A portion was to replace the bonus opportunity he forfeited from his previous employer upon joining us, and the remainder was in acknowledgment of the fact that he was joining us in the middle of a year for which he would have limited opportunity to influence outcomes based on previously established bonus goals.
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| | ◦ | Ongoing Compensation: For 2017 and beyond, Mr. Greco's bonus will be based on the performance of the Company measured against the bonus criteria approved for each respective plan year for the NEOs. His maximum bonus opportunity is 200 percent of target.
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Sign On Bonus: $2,000,000
| | ◦ | One-Time Consideration: Mr. Greco received a cash sign on award to replace the unvested cash-based long-term incentive awards that he forfeited when he left his prior employment. The sign-on bonus is subject to a 100 percent clawback if Mr. Greco resigns without Good Reason (as defined in his employment agreement) prior to the one-year anniversary of his date of hire, and a 50 percent clawback if he resigns without Good Reason between the first and second year anniversaries of his date of hire.
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Long-Term Incentive Awards: Mr. Greco received four LTI awards, each with unique terms as described below:
| | ◦ | Ongoing Compensation: For the Fiscal 2016-2018 performance period, Mr. Greco received an annual LTI grant under the Company's 2014 LTI Plan, with generally the same terms as the December 2015 grants to other executives. The grant date fair value of Mr. Greco's annual equity grant was $5,000,000, and this award is comprised of 50% performance-based SARs and 50% time-based RSUs. The SARs, which will have a seven year term, may be earned from 25 percent to 200 percent of the target number of shares underlying the SARs, based 50 percent on the Company's three-year Operating Income results compared to target and 50 percent on the Company's three-year average annual comparable store sales growth performance. The time-based RSUs will vest in three equal installments beginning on the one year anniversary of the grant date.
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| | ◦ | One-Time Consideration: Mr. Greco received a grant of Make-Whole RSUs to replace unvested performance shares and pension benefits from his prior employment. The aggregate value of the award, $10,200,000, is equal to the total value of the forfeited performance shares and pension benefits and was delivered in two distinct grants:
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| | 1. | One Time performance-based RSU grant with a grant date fair value of $8,000,000 vesting in three equal installments beginning on the first anniversary of the grant date, subject to (i) Mr. Greco's continued employment through the applicable vesting date, and (ii) Mr. Greco satisfying two performance conditions of (a) completion of establishing his Executive Leadership team for the company and (b) completion of the five-year business plan to be presented to the Board of Directors
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within one-year of his commencement of employment. The Compensation Committee deemed Mr. Greco to have achieved these performance conditions.
| | 2. | One-Time time-based RSU grant with a grant date fair value of $2,200,000. This award will vest in three equal installments on the second, third and fourth anniversaries of the grant date subject to Mr. Greco's continued employment through the respective vesting dates.
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| | ◦ | One-Time Consideration: Mr. Greco received a grant of time-based SARs with a grant date fair value of $3,000,000 as inducement compensation for accepting employment with the Company. This award, which will have a seven-year term, will vest in three equal installments on the third, fourth and fifth anniversaries of the grant date, subject to Mr. Greco's continued employment through the respective vesting periods.
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Mr. Okray, Chief Financial Officer
Base Salary: $500,000 on annualized basis
Target Bonus: 90% of base salary
| | ◦ | One-Time Consideration: Mr. Okray was not eligible for a 2016 annual incentive bonus. For the 2017 Fiscal year, Mr. Okray was offered a bonus guaranteed at his target award value in consideration of his transition from his previous employment at Amazon.
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| | ◦ | Ongoing Compensation: For 2018 and beyond, Mr. Okray's bonus will be based on the performance of the Company measured against the bonus criteria approved for each respective plan year for the NEOs. His maximum bonus opportunity is 200 percent of target.
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Sign on Bonus: $380,000
| | ◦ | One-Time Consideration: Mr. Okray received a cash sign on award to replace compensation that he forfeited when he left his prior employment. The sign on bonus is subject to a 100 percent clawback if Mr. Okray resigns without Good Reason (as defined in his employment agreement) prior to the one-year anniversary of his date of hire.
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Long-Term Incentive Awards: Mr. Okray received two LTI awards, each with unique terms and conditions:
| | ◦ | One-Time Consideration: Mr. Okray received a one-time grant of time-based RSUs with a grant date fair value of $2,000,000 that may vest in 70 percent and 30 percent portions on the first and second anniversaries of the grant date, respectively, to replace a portion of the value of equity he forfeited from his former employment.
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| | ◦ | Ongoing Compensation: Due to the timing changes made to our annual LTI program, Mr. Okray did not receive an annual LTI award in 2016.
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Ms. Schechtman, Senior Vice President, ept7Human Resources
Base Salary: $350,000 on an annualized basis
Target Bonus: 75% of base salary
| | ◦ | One-Time Consideration: For the 2016 Fiscal year, Ms. Schechtman was offered a bonus guaranteed at her target award value for similar reasons as for the one-time bonus guarantee for Mr. Greco.
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| | ◦ | Ongoing Compensation: For 2017 and beyond, Ms. Schechtman's bonus will be based on the performance of the Company measured against the bonus criteria approved for each respective plan year for the NEOs. Her maximum bonus opportunity is 200 percent of target.
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Sign on Bonus: $250,000
| | ◦ | One-Time Consideration: Ms. Schechtman received a cash sign on award to replace the value forfeited from her former employer. The sign on bonus is subject to repayment if Ms. Schechtman voluntarily resigns prior to the completion of two years of service with us.
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Long-Term Incentive Awards:
| | ◦ | Ongoing Consideration: For the Fiscal 2016-2018 performance period, Ms. Schechtman received a prorated annual LTI grant based on her date of hire under the 2014 LTI Plan, with generally the same terms as the December 2015 grants to other executives. The grant date fair value of the grant was $188,462 and this award is comprised of 33% performance-based SARs and 67% time-based RSUs. The SARs, which will have a seven year term, may be earned from 25 percent to 200 percent of the target number of shares underlying the SARs, based 50 percent on the Company's three-year Operating Income results versus target and 50 percent on the Company's three-year average annual comparable store sales growth performance. The time-based RSUs will vest in three equal installments beginning on the one year anniversary of the grant date.
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In addition, Mr. Cushing, who previously served as the President of our Worldpac business, was named to the newly created role of Executive Vice President, Professional. In conjunction with his promotion and commensurate with his new
role, Mr. Cushing received a 5 percent salary increase, a prorated 2016 annual LTI grant for the Fiscal 2016-2018 performance period, and a special LTI grant comprised of 2,525 performance-based RSUs with a value of $408,747 on the date of grant.
Retirement Savings Programs
Executives are eligible to participate in our 401(k) plan, along with our other eligible employees, once they meet eligibility requirements. During 2016, consistent with our matching offered to all employees, we matched 50 percent of each dollar up to 6 percent of an executive's contributions or the maximum contributions permitted by Internal Revenue Service ("IRS") plan testing limitations, whichever is lower. Generally, executives’ ability to accumulate retirement savings through our 401(k) plan is limited due to Internal Revenue Service limitations with respect to highly compensated employees. Thus, we have established a non-qualified deferred compensation plan for NEOs and certain other eligible executives. Pursuant to the plan, eligible employees were able to defer up to 50 percent of their annual salary and up to 50 percent of their bonus earnings in 2016. Earnings on deferrals, if any, depend on the market-based investment funds selected by the executives. We do not match executives’ deferrals into the non-qualified deferred compensation plan. 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. Distribution of deferred compensation payments must occur at least six months after termination of employment.
Executive officers and senior vice presidents may also voluntarily defer up to 50 percent of their base salary into our deferred stock unit plan. Deferred earnings are converted into equivalent stock units at 100 percent of the market price based on the closing price of our stock on the deferral date. Prior to the beginning of the year in which the deferrals begin, eligible executives must 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 our stock.
Detailed information about deferrals made by NEOs is presented in the "2016 Non-Qualified Deferred Compensation Table" contained in this Proxy Statement.
Other Compensation and Pay Practices
We do not provide perquisites to our executive. In 2015 and prior years, taxable perquisite allowances were provided to NEOs and certain other executives under our Executive Choice Plan, through which eligible executives received reimbursement for services they receive for financial/estate planning, tax planning/preparation, and associated legal fees. The Executive Choice Plan was discontinued effective with the commencement of Fiscal 2016. In addition, the personal use of the corporate aircraft was discontinued effective with the commencement of Fiscal 2016.
During 2016, Messrs. Greco, Okray and Cushing and Ms. Schechtman received certain relocation benefits, which included reimbursement of temporary living expenses, moving expense reimbursement, home sale/purchase assistance and tax reimbursements under the Company's relocation program and approved by the Compensation Committee.
Employment Agreements
We compete for executive talent, and we believe that providing severance protection plays an important role in attracting and retaining key executives. Accordingly, we have entered into employment agreements with all NEOs and other selected senior executives. The agreements for Messrs. Greco, Okray, Cushing and Tyson automatically renew for an additional one-year term unless either party provides notice of non-renewal at least 90 days prior to the end of the then effective term. We entered into an employment agreement with Mr. Greco effective April 11, 2016. We entered into an employment agreement with Mr. Okray effective October 31, 2016. We entered into an employment agreement with Mr. Tyson effective April 29, 2013, which was amended effective June 17, 2014 to provide that his employment location would be Raleigh, North Carolina, in conjunction with our establishmenteach of our second store support center following our acquisition of GPI. We entered into an employment agreement with Mr. Cushing effective August 21, 2016. We entered into an employment agreement with Ms. Schechtman effective May 9, 2016, for an initial one-year term. Her agreement providesexecutive officers that after the initial one-year term, the agreement is extended each day for an additional day until we provide at least 90 days' notice of our intention not to extend her agreement.
The agreements with Messrs. Greco, Okray, Cushing and Tyson specify annual base salary and annual performance-based cash target bonus amounts for each executive, calculated as a specified percentage of the executive’s base salary. The performance measures are determined by the Compensation Committee annually and are consistent with the measures applied to other senior executives. Ms. Schechtman's agreement does not specify her annual base salary or annual cash target bonus amounts. For Fiscal 2016, Mr. Greco and Ms. Schechtman were each entitled to receive a minimum annual bonus equal to their
respective Target Bonus Amounts. For Fiscal 2017, Mr. Okray will be entitled to receive a minimum annual bonus equal to his Target Bonus Amount. Each NEO is eligible to participate in all of our applicable benefit plans and programs pursuant tooutline the terms of such programs.
Iftheir employment with us. Each employment agreement describes the executive’sbase salary, STI and LTI opportunities of the executive. Each agreement is for a one-year term and automatically renews for successive one-year periods unless 90 days advance notice is provided. Our employment is terminatedagreements include confidentiality, non-competition and non-solicitation obligations for our executive officers. The agreements also outline the compensation to which they are entitled in the event of the executive’s death, we have agreed to pay to the executive’s designated beneficiary or estate an amount equal to one year of base salary at the rate then in effect, plus, in the case of Messrs. Greco, Okray, Cushing and Tyson, an amount equal to the executive’s target level bonus in effect at the time of the executive's death. In the case of Ms. Schechtman, if her employment is terminated in the event of her death, we have agreed to pay to her designated beneficiary or estate an amount equal to one year of base salary at the rate then in effect, plus an amount equal to the pro rata portion of any bonus that would have been payable with respect to all fiscal quarters completed prior to termination of employment, provided the criteria for such bonus other than executive's continued employment are satisfied.
In the event of termination of employment due to disability as defined in the agreements, the executive will receive a lump sum payment amount equal to 30 percent of base salary at the rate then in effect, plus an amount equal to the executive’s target level annual bonus then in effect (or in the case of Ms. Schechtman, an amount equal to the pro rata portion of any bonus that would have been payable to the executive with respect to all fiscal quarters completed prior to termination of employment, provided the criteria for such bonus other than the executive's continued employment are satisfied) in addition to the benefits payable under our qualified group disability plan. Executives are also granted a right to continue their medical benefits for up to one year post-termination at the same cost as active employees, except for Mr. Greco, who may continue his medical benefits for up to 18 months post-termination at the same cost as active employees.
In addition, under the terms of the executives' long-term incentive awards (except for Mr. Greco's inducement SARs award), if the executive’s employment is terminated on account of death or disability, all time-based RSUs and SARs granted to the executive pursuant to our 2004 and 2014 LTI Plans or any successor plan will vest and become exercisable if not then vested or exercisable. If the executive’s employment is terminated on account of death, disability, or retirement prior totermination by the vesting date ofCompany for Due Cause, termination by the executive’s performance-based SARs or RSUs (except for Mr. Greco's sign-on RSU award and Mr. Cushing's September 2016 RSU award), the performance-based SARs or RSUs will become eligible for exercise or issuance on the normal vesting date for performance-based awards on a pro-rata basis for the time that the executive was employed during the performance period. The pro rata amount of performance SARs or RSUs that will become eligible for exercise or issuance will be based on our actual performance through the end of the performance period. In the event Mr. Greco's employment is terminated on account of his death or disability, or if we terminate his employment without "Due Cause" or he terminates his employment for "Good Reason," as defined in his agreement, a pro rata portion of his unvested inducement award of time-based SARs will vest and become exercisable based on the time that he was employed during the vesting period and all of his unvested sign-on time-based and performance-based RSUs will vest as of the effective date of his termination of employment. In the event Mr. Cushing's employment is terminated on account of his death or disability, or if we terminate his employment without "Due Cause" or he terminates his employment for "Good Reason," as defined in his agreement, a pro rata portion of his unvested September 2016 performance-based RSUs may vest based on our actual performance for the completed 2017 or 2018 performance periods.
If we terminate the executive’s employment without "Due Cause" or if the executive terminates his or her employment for "Good Reason," as defined in the agreements, other than following a Change in Control, as defined in the 2014 LTIP, or as defined in the 2004 LTIP in the case of Mr. Tyson, Messrs. Okray, Cushing and Tyson will be entitled to a lump sum severance payment in an amount equal to one year of base salary at the rate then in effect, plus an amount equal to an average of the past three years' annual bonus payments. Mr. Greco is entitled to an amount equal to one and one half times his annual base salary at the rate then in effect and an amount equal to one and one half times the average value of the annual bonuses paid to him for the three completed fiscal years immediately prior to the date of such termination, as well as an annual bonus for the fiscal year of termination of employment, based on actual full-year performance, pro-rated to reflect the time of service for such fiscal year through the date of termination. For Ms. Schechtman, if we terminate her employment without "Due Cause," as defined in her agreement, other than following a Change in Control, as defined in the 2014 LTIP, she will be entitled to a lump sum severance payment in an amount equal to one year of base salary at the rate then in effect, plus an amount equal to the pro rata portion of any bonus that would have been payable with respect to all fiscal quarters completed prior to termination of employment, provided the criteria for such bonus other than her continued employment are satisfied. Except as described in the preceding paragraph with respect to Mr. Greco's inducement and sign-on grants, and Mr. Cushing's September 2016 RSU award, any performance-based grants of SARs and RSUs will vest immediately on a pro rata basis based on our performance for the amount of time the executive was employed during the performance period measured as of the most recently completed fiscal quarter. Executives are also granted a right to continue their medical benefits for one year post-termination at the same cost as active employees and to receive outplacement services for a period of up to one year, except for Mr. Greco who may continue his medical benefits for 18 months post-termination at such cost.
Except in the case of Ms. Schechtman, if, within twelve months after a Change in Control, we terminate the executive officer’s employmentCompany other than for Due Cause, death or disability, orresignation by the executive terminates the executive’s employment for Good Reason, resignation by the executive will be entitled to receivewithout Good Reason and termination following a lump sum severance paymentchange in an amount equal to two times base salary at the rate thencontrol. These terms are more fully described in effect, plus two times the target annual bonus amount then“—Potential Payments Upon Termination or Change in effect. Mr. Greco is also entitled toControl Table.” We believe these benefitsvarious compensatory arrangements in the event of an executive’s severance are important to enabling attraction and retention of key executive talent and promote focus on achievement of long-term strategic objectives.
Other Compensation and Benefit Programs Other than certain relocation benefits extended to Mr. O’Kelly in connection with his employmentappointment as President and Chief Executive Officer, we do not offer any perquisites to our NEOs or benefits that are not available to or are available on different terms than they are available for, other team members. Our executive officers, including our NEOs, may participate in our broadly-offered employee benefit programs, including principally our 401(k) retirement savings plan, which is terminatedavailable to all team members over age 21 and provides a company match on employee deferrals; our deferred compensation plan, which enables all team members who are “highly compensated employees” (as defined in contemplation of a Change in Control within three months priorsuch plan) to the consummation of a Change in Control. Ms. Schechtman will be entitleddefer up to receive a lump sum severance payment in an amount equal to one year50% of base salary at the rate thenand 50% of short-term incentive compensation, with settlements in effect plus an amount equalcash; and our deferred stock unit plan, which enables all senior and executive vice presidents to defer up to 50% of base salary, with settlements in company stock. In addition, executive officers and other team members are eligible for certain relocation benefits to facilitate moving to the pro rata portionCompany's headquarters. For detailed information about deferrals made by NEOs into our deferred compensation plan and our deferred stock unit plan, see “—Non-Qualified Deferred Compensation for 2023." Granting of any annual bonus that would have been payableCertain Equity Awards Close in Time to the Release of Material Nonpublic Information We do not grant stock options or similar awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement, and do not time the public release of such information based on stock option grant dates. Our annual grants of stock options are awarded on a predetermined date during an “open trading window.” The only grant of stock options or similar awards outside of this annual cycle has been to Mr. O’Kelly in connection with his hire, and such award was also made on a predetermined date during an “open trading window.” During the last completed fiscal year, we have not awarded options to any named executive providedofficer during the criteria for such bonus other than executive's continued employment have been satisfied. In addition, we will provideperiod beginning four business days before and ending one business day after the executive certain outplacement services forfiling of a period report on Form 10-Q or Form 10-K or the filing or furnishing of upa current report on Form 8-K, and we have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
Compensation Governance Roles and Responsibilities We reduce risks associated with executive compensation by employing strong governance and compensation practices. The Compensation Committee of our Board of Directors, which consists solely of independent directors, designs and oversees our executive compensation program and approves all aspects of compensation for each of our executives. None of our executives, including the CEO, participates in the discussions regarding their respective compensation. The Compensation Committee receives advice from management and from an independent consultant, F.W. Cook, in performing this work. Our stockholders approve any equity-based plans for our executives, provide feedback on our practices and vote annually on our executive compensation program.
| | | | | | | Management | •Develop business plans and strategy, which are then integrated into incentive plan design and used to establish performance goals | •CEO: determine other executive officers' objectives and review their performance | •Make recommendations with respect to executive officer compensation, incentive plan design and performance measures | | Stockholders | •Vote annually on our executive compensation framework and practices | •Provide feedback to management on executive compensation through shareholder outreach | | F.W. Cook | •Provide independent, expert advice regarding executive compensation matters directly to the Compensation Committee | •Analyze and make recommendations regarding the Company's peer group | •Provide competitive market data | •Assist with design of incentive plans and evaluation of pay practices, including associated risks | •Provide updates on regulatory matters related to executive compensation | | Compensation Committee | •Determine compensation for executive officers | •Review and approve the Company's peer group used for executive compensation matters | •Approve executive officer employment, severance and/or change in control agreements | •Review, recommend to the Board and administer incentive plans applicable to executives | •Approve and oversee implementation of compensatory policies applicable to executive officers, such as the Incentive Clawback Policy and Stock Ownership Guidelines | •Make recommendations to the Board with respect to non-employee director compensation | | Full Board of Directors | •Determine annual CEO objectives and annually review CEO performance | •Approve any incentive plans applicable to executive officers | •Approve all non-employee director compensation | •Receive regular reports from the Compensation Committee and share perspective where applicable |
Role of Peer Group and Benchmarking We use a group of similarly situated peer companies to one year.help us evaluate the competitiveness of our executives’ compensation. On the whole, we aim to provide our executives with total target compensation that approximates the median among our peers, being mindful of the importance of competitiveness of pay and retention of talent. We do not target any particular benchmark level for any aspect of executive compensation, but rather seek to provide our executives with compensation that is well-balanced between long-term and short-term components. We also use our peer group to evaluate the market competitiveness of our incentive plans, broader pay practices and non-employee director compensation. We select approximately 15 to 20 U.S.-based public companies in our and similar industries based on objective criteria, including net revenues (approximately one-third to three times our revenue), number of employees (approximately one-third to three times our employee population), market capitalization (approximately one-fourth to four and a half times our 12-month average market capitalization) and business similarity with respect to products, customers and/or operations, seeking a balanced representation of company size and endeavoring to promote year-over-year continuity where reasonable. We review our peer group annually. For 2023 our peer group consisted of the following: | | | | | | | | | | Academy Sports & Outdoor, Inc. | Dollar Tree, Inc. | Tractor Supply Company | | AutoZone, Inc. | Fastenal Company | Ulta Beauty, Inc. | | Bath & Body Works, Inc. | Genuine Parts Company | W.W. Grainger, Inc. | | CarMax, Inc. | LKQ Corporation | WESCO International, Inc. | | Dick’s Sporting Goods, Inc. | O’Reilly Automotive, Inc. | Williams-Sonoma Inc. | | Dollar General Corporation | Office Depot, Inc. | |
In August 2023, we reviewed our peer group again and our Compensation Committee, with advice of F.W. Cook, determined that the peer group was still appropriate and no further changes were needed.
Important Pay Practices No Single-Trigger Vesting for Change in Control. We do not have any single trigger acceleration arrangement in the event of a Changechange in Control,control for any of our executive officers. Incentive Compensation Clawback Policy. We maintain a policy that requires repayment of incentive compensation, including, among other types of compensation, short-term incentive cash compensation and performance-based equity awards, received by executives in the event of an accounting restatement in accordance with the listing standards of the New York Stock Exchange. Stock Ownership Guidelines. To further align the interests of our officers and directors with those of our stockholders, all time-based SARsof our executive officers and RSUs,directors are required to hold a certain value of our stock. All shares of common stock beneficially owned by the individual, as well as Mr. Greco's sign-onoutstanding but unvested time-based restricted stock units, count towards the required thresholds; we do not consider the value of outstanding but unvested performance-based RSUs, will vestrestricted stock units, vested or unvested stock options or any other type of derivative equity when determining whether an individual satisfies the ownership guidelines.
| | | | | | | | | | Position | | Holding Requirement | | Chief Executive Officer | | 6x base salary | | Chief Financial Officer | | 3x base salary | | Executive/Senior Vice President | | 2x base salary | | Director (non-employee) | | 6x annual cash retainer |
Individuals have five years following appointment or promotion into a role to meet the applicable ownership guideline, and become exercisableuntil such guideline is satisfied, must retain at least 50% of all net equity that vests to them. We review our ownership guidelines at least annually, including each individual’s progress towards attaining the requisite ownership thresholds. All of our executive officers and directors are currently in compliance with our ownership guidelines. Prohibited Pay Practices. We do not engage in practices that we believe would promote excessive risk taking, and we avoid compensatory programs or issuedpractices that we believe do not promote the best interests of our company and its stockholders. •We do not reprice or exchange underwater stock options. •We do not permit our employees or directors to hedge our stock, and we do not permit our stock to be pledged except in very limited circumstances with stringent requirements to be satisfied. We also do not permit hedging or pledging of any of our LTI awards. •We do not permit certain of our employees, including our executive officers, or our directors to trade our stock outside of limited specified windows and only if the acquiring entity doesallow trading activity following pre-clearance procedures to ensure compliance with applicable regulatory requirements. •We do not exchangeprovide any meaningful perquisites or replace the LTI grants or upon termination of employment without Due Cause within 24 months following the Changebenefits to our executive officers. Our executives participate in Control event. Performance-based SARs and RSUs (except for Mr. Cushing's September 2016 RSUs) will vest at the same time onbenefits and retirement plans as our other employees.
Compensation Committee Report Our Compensation 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. Mr. Jones is the chair of our Compensation Committee. The Compensation Committee operates under a pro rata basis basedwritten charter adopted by the Board. Our charter can be viewed on our performance forwebsite at ir.advanceautoparts.com under the amount of time"Governance" section.
We have relied on management’s representation that the executive was employed duringCD&A presented in this Proxy Statement has been prepared with integrity and objectivity and in conformity with SEC regulations. We have reviewed and discussed the performance period measured as of the most recently completed fiscal quarter priorCD&A with management, and based upon our review and discussion with management, we recommended to the ChangeBoard that the CD&A be included in Control event. Mr. Cushing's September 2016 RSUs will vest basedthis Proxy Statement and incorporated by reference into our 2023 Annual Report on Form 10-K.
| | | | THE COMPENSATION COMMITTEE | | Jeffrey J. Jones II (Chair) | | Douglas A. Pertz | | Sherice R. Torres |
Compensation Program Risk Assessment We assess our executive and broad-based compensation and benefits programs to determine whether the following: (i) ifprograms' provisions and operation create undesired or unintentional material risk. The risk assessment process includes a review of our compensation program policies and practices, such as our performance-based executive compensation programs and stock ownership guidelines, to ensure that the Change in Control event occurs prior to the endinterests of the 2017our executives are aligned with those of our stockholders by encouraging long-term superior performance period, the number of awards will be calculated based on the amount of time he was employed during the performance period, (ii) if the Change in Control event occurs during the 2018 performance period, the number of awards will be calculated based on actual 2017 performancewithout encouraging excessive or unnecessary risk-taking. We take into consideration compensation terms and the amount of time he was employed during the 2018 performance period, and (iii) if the Change in Control event occurs after the 2018 performance period but before thepractices, such as performance-based vesting date, the number of awards will be calculated based on actual 2017 and 2018 performance. Executives are also granted a right to continue their medical benefits for up to one year post-termination at the same cost as active employees, except for Mr. Greco who may continue his medical benefits for 18 months post-termination at such cost.
In the event of a Change in Control,substantial portion of our executives' long-term incentive compensation, to drive long-term decision making and mitigate adverse risk taking that may occur due to year-over-year performance measurements, and rewards growth over the employment agreementslong term. We regularly review and audit our bonus plans to ensure short-term incentives are appropriately linked to business outcomes, and such reviews are shared with Messrs. Greco, Okray, Cushingthe Compensation Committee.
We have reviewed all of our compensation programs and Tyson provide that if payments upon termination of employment related to a Change in Control would be subjected to the excise tax imposed by Section 4999 of the Internal Revenue Code, and if reducing the amount of the payments would result in greater benefits to the executive (after taking into consideration the payment of all income and excise taxesfound none that would be owedreasonably likely to have a material adverse effect on the Company. Our performance based executive compensation program, as a result of the Changedescribed more fully in Control payments), we will reduce the Change in Control payments by the amount necessary to maximize the benefits received by the executive, determined on an after-tax basis. The Change in Control payments are not eligible for tax gross-up payments.
The executives are subject to standard confidentiality and non-disparagement agreements during and following their employment. To the extent permitted by law, each executive has also agreed not to competeCD&A, coupled with us, 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 order to receive any payments or benefits under the employment agreement after termination of employment, the executive or his or her legal representative must execute a release that is satisfactory to us. The employment agreements with all of our NEOs provide that any incentive compensation granted to the executive by us is subject to our Incentive Compensation Clawback Policy as adopted by our Board or the Compensation Committee from time to time.
We entered into an employment agreement with Mr. Norona on June 4, 2008, and we entered into an employment agreement with Mr. Sherman effective April 29, 2013. During Fiscal 2014, the employment agreements of Messrs. Norona, and Sherman were amended effective June 17, 2014 to provide their employment location would be Raleigh, North Carolina, in conjunction with our establishment of our second store support center following our acquisition of GPI. On November 11, 2015, we and Mr. Sherman entered into a second amendment to his employment agreement in conjunction with his appointment as our interim CEO commencing in Fiscal 2016. The agreement established Mr. Sherman's base salary for the time that he served as our interim CEO and increased his annual target bonus opportunity for Fiscal 2016. The key terms of the employment agreements of Mr. Sherman and Mr. Norona were substantially similar to those of Mr. Tyson.
We entered into a Mutual Separation and Release Agreement (the “Norona Release Agreement”) with Mr. Norona and on December 19, 2016, effective upon the termination of his employment with the Company at the end of Fiscal 2016, under which he has received severance benefits consistent with the provisions of his employment agreement with the Company, including payment of an amount equal to one times his annual base salary and the average of the bonus payments made to him for Fiscal 2011 through Fiscal 2015. The Company entered into a Mutual Separation and Release Agreement (the “Sherman Release Agreement”) with Mr. Sherman on September 8, 2016, effective upon the termination of his employment with the Company at the end of Fiscal 2016, under which he has received severance benefits consistent with the provisions of his employment agreement with the Company, including payment of an amount equal to one times his annual base salary and the average of the bonus payments made to Mr. Sherman for Fiscal 2013 through Fiscal 2015.
Ownership Guidelines
We have had stock ownership guidelines, aligns the interests of our executives with stockholders by encouraging long-term superior performance without encouraging excessive or unnecessary risk taking. We believe that our long standing compensation philosophy discussed in place since 2006 that prescribe required levelsCD&A is a key component of stock ownershipour history of consistent growth, which demonstrates an alignment of the interests of participants and the timeline for achieving the required levels of stock ownership by NEOs. These guidelines are designed to further strengthenstockholders and align our leadershiprewards each with stockholders’ interests and to enhance stockholderincreased value over the long term. In November 2016, our Compensation Committee approved revised ownership guidelines to further strengthenAs illustrated in CD&A, the alignment of the interestscompensation of our executives and stockholders.
| | | | Executive | Revised Guideline | Comments | CEO | 6 times Base Salary | No change from prior | CFO | 3 times Base Salary | Increase from 2 times Base Salary | EVP and SVP | 2 times Base Salary | For SVPs, increase from 1 times Base Salary. No change for EVPs. |
Tax Deductibilityis primarily based on performance over a long-term period. We believe the performance based vesting of Pay
In designing our executive compensation programs, we consider 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 $1,000,000 in any taxable year paid to our NEOs. Compensation paid in accordance with a stockholder approved performance-based incentive plan is exempt from Section 162(m) and is tax-deductible by us. Our 2007 Executive Incentive Plan was established and approved by our stockholders in 2007. All 2016 annual incentives available to our NEOs were subject to performance measures established and certified by the Committee consistent with the provisions of the Executive Incentive Plan, except that, under the terms of their respective compensation arrangements for Fiscal 2016, Mr. Greco and Ms. Schechtman were entitled to receive a minimum annual incentive payment at their respective target levels. The stockholder-approved 2004 and 2014 LTI Plans enable us to exclude from the $1,000,000 limit any performance-based compensation resulting from long-term incentives or other qualifying awards granted under the plan to our NEOs. SARs and the performance-basedsubstantial portion of our RSUs were structuredexecutives' long-term incentive compensation drives long-term decision making, mitigates adverse risk taking that may occur due to year-over-year performance measurements, and administeredrewards growth over the long term. The Compensation Committee, with the intentionguidance and assistance of its independent compensation consultant, reviews and approves compensation components for all named executive officers and other executive officers. Annual incentives are reviewed each year and payments are subject to meetCompensation Committee discretion. The bonus plans for other associates are linked to financial, customer or operating measures. All associates, including officers, and our directors are subject to our Insider Trading Policy, which prohibits hedging existing ownership positions in the tax-deductibilityCompany's securities, short selling the Company's stock, purchasing or selling derivative securities, and, unless certain stringent requirements are met, pledging Company stock.
Clawback Actions Pursuant to the Company's Compensation Recovery Policy, adopted by the Compensation Committee on August 7, 2023, in the event the Company is required to prepare an accounting restatement, the Company will seek to recover reasonably promptly the amount of Section 162(m)incentive compensation received by the Company's executive officers that exceeds the amount of incentive compensation that would have been received by the executive officers taking into account the effects of the Internal Revenue Code. We intendaccounting restatement. Pursuant to structureNYSE rules, the Compensation Recovery Policy applies to any compensation programsreceived by the Company's executive officers on or after October 2, 2023. As disclosed in the Company's Annual Report on Form 10-K for fiscal 2023, in February 2023, the Company determined that it would revise certain prior periods reported in the Form 10-K to meetcorrect identified immaterial errors in the requirementsconsolidated financial statements for the fiscal years ended 2022 and 2021 and for the quarterly periods of Section 162(m), other than time-based restricted stock or RSUs, which are not considered performance-based2023. The correction of these errors qualified as a restatement under Section 162(m)the Compensation Recovery Policy. None of the Internal Revenue Code. Accordingly, awardsincentive compensation received by the Company's executive officers on or after October 2, 2023 was impacted by the restatement. As previously noted, there was no payout of time-vested restricted stock or RSUs are generallythe Company's STI program for 2023, which in any event was determined based on final 2023 results that were not deductible by us torestated. In addition, none of the extent that an individual's compensation exceeds the $1,000,000 limit of Section 162(m). However, the Committee retains the authority to award compensation which may not be fully deductible by us. At the 2012 Annual Meeting, our stockholders re-approved the performance objectivesCompany's PSUs for the 2007 Executive Incentive Plan and2021-2023 performance period vested due to below-threshold performance, resulting in a payout of 0 shares. Accordingly, there was no incentive compensation earned during the 2004 LTIPrecoupment period under the Compensation Recovery Policy that was subject to maintain the Committee's ability to grant qualified "performance-based" compensation under Section162(m) of the Internal Revenue Code. The 2014 LTIP was approved by our stockholders at the 2014 Annual Meeting. We are seeking stockholder approval of the 2017 Executive Incentive Plan so that we can continue to qualify annual bonuses as "performance-based" compensation under Section 162(m) of the Internal Revenue Code.
clawback.
Additional Information Regarding
ADDITIONAL INFORMATION REGARDING EXECUTIVE COMPENSATIONExecutive Compensation
Summary Compensation Table
The following Summary Compensation Table provides the compensation earned by our chief executive officer, principal financial officer and the other three most highly compensatednamed executive officers as of the end of each of the last three completed fiscal years. Fiscal 2014 was comprised of 53 weeks. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bonus | | Stock Awards | | Option or SAR Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation (f) (g) (h) | | | Name and Principal Position | | | | Salary | | (a) | | (b) (d) | | (c) (d) | | (e) | | (i) (j) (k) | | Total | | | Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | | | | | | | | | | | | | | | | | | | Thomas R. Greco | | 2016 | | 803,852 |
| | 3,485,000 |
| | 12,700,097 |
| | 5,500,036 |
| | — |
| | 331,782 |
| | 22,820,767 |
| | President and Chief Executive Officer | |
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| | | | | | | | | | | | | | | | | | | | Thomas B. Okray | | 2016 | | 86,540 |
| | 380,000 |
| | 2,000,130 |
| | — |
| | — |
| | 114,452 |
| | 2,581,122 |
| | EVP, Chief Financial Officer | |
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| | | | | | | | | | | | | | | | | | | | Robert B. Cushing | | 2016 | | 453,910 |
| | — |
| | 437,747 |
| | 28,866 |
| | 179,669 |
| | 53,035 |
| | 1,153,227 |
| | EVP, Professional | |
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| | | | | | | | | | | | | | | | | | | | Charles E. Tyson | | 2016 | | 490,006 |
| | — |
| | — |
| | — |
| | — |
| | 5,975 |
| | 495,981 |
| | EVP, Merchandising, Marketing & Replenishment | | 2015 | | 486,834 |
| | — |
| | 300,030 |
| | 300,030 |
| | — |
| | 16,014 |
| | 1,102,908 |
| | | 2014 | | 478,375 |
| | — |
| | 350,091 |
| | 350,041 |
| | — |
| | 447,406 |
| | 1,625,913 |
| | | | | | | | | | | | | | | | | | | | Natalie S. Schechtman | | 2016 | | 210,674 |
| | 512,500 |
| | 126,323 |
| | 62,216 |
| | — |
| | 179,366 |
| | 1,091,079 |
| | SVP, Human Resources | |
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| | | | | | | | | | | | | | | | | | | | Michael A. Norona | | 2016 | | 565,011 |
| | — |
| | — |
| | — |
| | — |
| | 714,297 |
| | 1,279,308 |
| | Former EVP, Chief Financial Officer | | 2015 | | 561,834 |
| | — |
| | 425,080 |
| | 425,006 |
| | — |
| | 16,459 |
| | 1,428,379 |
| | | 2014 | | 560,570 |
| | 150,000 |
| | 450,066 |
| | 450,057 |
| | — |
| | 395,815 |
| | 2,006,508 |
| | | | | | | | | | | | | | | | | | | | George E. Sherman | | 2016 | | 785,579 |
| | — |
| | — |
| | — |
| | — |
| | 873,595 |
| | 1,659,174 |
| | Former President | | 2015 | | 744,715 |
| | — |
| | 900,089 |
| | 900,017 |
| | — |
| | 8,846 |
| | 2,553,667 |
| | | 2014 | | 670,674 |
| | — |
| | 600,110 |
| | 600,037 |
| | — |
| | 581,962 |
| | 2,452,783 |
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| | (a) | For Mr. Greco, represents a cash sign-on bonus of $2,000,000 and his guaranteed annual cash bonus for Fiscal 2016 in the amount of $1,485,000. For Mr. Okray, represents a cash sign-on bonus. For Ms. Schechtman, represents a cash sign-on bonus of $250,000 and her guaranteed annual cash bonus for Fiscal 2016 in the amount of $262,500. For Mr. Norona, represents a special cash bonus of $150,000 received in Fiscal 2014 for the key role he played in the acquisition of GPI. |
| | (b) | Represents the grant date fair value of RSUs granted for each year. The grant date fair value is calculated using the closing price of our common stock on the date of grant. For additional information regarding the valuation assumptions of this award, refer to Note 17 of our consolidated financial statements in the 2016 Form 10-K filed with the SEC on February 28, 2017. See the "2016 Grants of Plan-Based Awards Table" and "Outstanding Equity Awards at 2016 Fiscal Year-End Table" in this Proxy Statement for information on stock awards granted in 2016 and prior years. These amounts reflect the aggregate grant date fair value computed in accordance with the Financial Accounting Standards Board’s Accounting Statement of Codification Topic 718 ("ASC Topic 718"), and do not correspond to the actual value that may be realized by the NEOs. Any performance awards included in these amounts have been valued based on the probable outcome of the performance conditions as of the grant date. |
| | (c) | Represents the grant date fair value of SARs granted for each year. For additional information regarding the valuation assumptions of this award, refer to Note 17 of our consolidated financial statements in the 2016 Form 10-K filed with the SEC on February 28, 2017. See the "2016 Grants of Plan-Based Awards Table" and "Outstanding Equity Awards at 2016 Fiscal Year-End Table" in this Proxy Statement for information on SARs awards granted in 2016 and prior years. These amounts reflect the aggregate grant date fair value computed in accordance with ASC Topic 718, and do not correspond to the actual value that may be realized by the NEOs. Any performance awards included in these amounts have been valued based on the probable outcome of the performance conditions as of the grant date.
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| | (d) | The maximum value for performance awards (based on grant-date fair values), assuming the highest level of performance is achieved for performance awards granted, is provided for each executive in the table below. |
| | | | | | | | | | | | | | Name | | Year | | Performance-Based RSUs Maximum Grant-Date Fair Value ($) | | Performance-Based SARs Maximum Grant-Date Fair Value ($) | | Maximum Grant-Date Fair Value of Performance-Based Stock Awards and SARs ($) | | | | | | | | | | | | Mr. Greco | | 2016 | | 8,000,006 |
| | 5,000,008 |
| | 13,000,014 |
| | | | | | | | | | | | Mr. Okray | | 2016 | | — |
| | — |
| | — |
| | | | | | | | | | | | Mr. Cushing | | 2016 | | 408,747 |
| | 57,732 |
| | 466,479 |
| | | | | | | | | | | | Mr. Tyson | | 2016 | | — |
| | — |
| | — |
| | | | 2015 | | — |
| | 600,060 |
| | 600,060 |
| | | | 2014 | | — |
| | 700,082 |
| | 700,082 |
| | | | | | | | | | | | Ms. Schechtman | | 2016 | | — |
| | 124,432 |
| | 124,432 |
| | | | | | | | | | | | Mr. Norona | | 2016 | | — |
| | — |
| | — |
| | | | 2015 | | — |
| | 850,012 |
| | 850,012 |
| | | | 2014 | | — |
| | 900,114 |
| | 900,114 |
| | | | | | | | | | | | Mr. Sherman | | 2016 | | — |
| | — |
| | — |
| | | | 2015 | | — |
| | 1,800,034 |
| | 1,800,034 |
| | | | 2014 | | — |
| | 1,200,074 |
| | 1,200,074 |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bonus | | Stock Awards | | Option Awards | | Non-Equity
Incentive Plan
Compensation | | All Other
Compensation | | | Name and
Principal Position | | | | Salary | | | | (a) (b) | | (c) | | | | (d) | | Total | | Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | Shane M. O'Kelly | | 2023 | | $ | 302,885 | | | $ | 1,000,000 | | | $ | 4,593,593 | | | $ | 3,523,500 | | | $ | — | | | $ | 19,108 | | | $ | 9,439,086 | | | President, Chief Executive Officer (from Sept. 11, 2023) | | | | | | | | | | | | | | | | | | Thomas R. Greco | | 2023 | | 1,125,000 | | | — | | | 3,000,021 | | | — | | | — | | | 14,023 | | | 4,139,044 | | Former President and
Chief Executive Officer (through Sept. 10, 2023) | | 2022 | | 1,121,155 | | | — | | | 4,875,008 | | | 1,625,014 | | | 749,756 | | | 14,015 | | | 8,384,948 | | | 2021 | | 1,100,008 | | | — | | | 4,500,044 | | | 1,499,981 | | | 2,940,300 | | | 11,938 | | | 10,052,271 | | | Ryan P. Grimsland | | 2023 | | 38,942 | | | 750,000 | | | 1,600,030 | | | 400,004 | | | — | | | 42 | | | 2,789,018 | | | Executive Vice President, Chief Financial Officer (from Nov. 27, 2023) | | | | | | | | | | | | | | | | | | Anthony A. Iskander | | 2023 | | 371,913 | | | — | | | 900,064 | | | 50,027 | | | — | | | 4,384 | | | 1,326,388 | | | Interim Chief Financial Officer (from Aug. 18, 2023, through Nov. 26, 2023), Senior Vice President, Finance and Treasurer | | | | | | | | | | | | | | | | | | Jeffrey W. Shepherd | | 2023 | | 512,885 | | | — | | | 1,424,946 | | | 475,083 | | | — | | | 1,413,918 | | | 3,826,832 | | | Former Executive Vice President, Chief Financial Officer (until Aug. 18, 2023) | | 2022 | | 756,308 | | | — | | | 1,199,889 | | | 400,154 | | | 248,911 | | | 5,684 | | | 2,610,946 | | | 2021 | | 667,740 | | | — | | | 749,949 | | | 250,060 | | | 1,214,013 | | | 5,690 | | | 2,887,452 | | | Herman L. Word, Jr. | | 2023 | | 595,192 | | | — | | | 862,535 | | | 287,498 | | | — | | | 10,925 | | | 1,756,150 | | | Executive Vice President, U.S. Stores and Independents | | 2022 | | 465,193 | | | — | | | 799,986 | | | 100,079 | | | 408,525 | | | 7,213 | | | 1,780,995 | | | | | | | | | | | | | | | | | | | Tammy M. Finley | | 2023 | | 515,192 | | | — | | | 824,969 | | | 275,044 | | | — | | | 14,034 | | | 1,629,239 | | | Executive Vice President, General Counsel and Corporate Secretary | | | | | | | | | | | | | | | | | | Stephen J. Szilagyi | | 2023 | | 518,269 | | | — | | | 599,977 | | | 200,039 | | | — | | | 19,306 | | | 1,337,591 | | | Executive Vice President, Supply Chain | | | | | | | | | | | | | | | | | | Robert B. Cushing | | 2023 | | 645,000 | | | — | | | 749,972 | | | 250,030 | | | — | | | 12,880 | | | 1,657,881 | | | Executive Vice President, Professional | | 2022 | | 641,923 | | | — | | | 750,033 | | | 249,981 | | | 260,035 | | | 12,875 | | | 1,914,847 | | | 2021 | | 621,027 | | | — | | | 925,253 | | | 224,908 | | | 1,046,563 | | | 12,253 | | | 2,830,004 | | | Jason B. McDonell | | 2023 | | 599,038 | | | — | | | 937,532 | | | 312,476 | | | — | | | 1,136,378 | | | 2,985,424 | | | Former Executive Vice President, Merchandising, Marketing and e-Commerce (until Dec. 1, 2023) | | 2022 | | 571,154 | | | — | | | 674,988 | | | 225,043 | | | 190,270 | | | 21,743 | | | 1,683,199 | | | 2021 | | 526,967 | | | — | | | 737,690 | | | 212,497 | | | 930,325 | | | 12,412 | | | 2,419,891 | |
(a)Represents the grant date fair value of RSUs granted during each of the years presented. For performance-based and time-based awards, the grant date fair value is calculated using the closing price of our common stock on the date of grant. For market-based awards, fair value amounts reflect the value calculated on a Monte Carlo simulation model that assesses the probability of satisfying the market performance conditions. For additional information regarding the valuation assumptions of this award, refer to Note 15 of our consolidated financial statements in the 2023 Form 10-K filed with the SEC on March 12, 2024. See the "Grants of Plan-Based Awards in 2022 Table" and "Outstanding Equity Awards at 2023 Fiscal Year-End" table in this Proxy Statement for information on stock awards granted in 2023 and prior years. Any performance awards included in these amounts have been valued based on the probable outcome of the performance conditions as of the grant date. (b)The maximum value shown above does not include RSUs and SARsfor performance awards (as of the grant date), assuming the highest level of performance is achieved for performance awards granted, to Mr. Grecois provided for each executive in 2016the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSUs Maximum Grant Date Fair Value ($) | | Mr. O'Kelly | Mr. Greco | Mr. Grimsland | Mr. Iskander | Mr. Shepherd | Mr. Word | Ms. Finley | Mr. Szilagyi | Mr. Cushing | Mr. McDonell | | 2023 | n/a | $ | 6,000,042 | | n/a | $ | 199,992 | | $ | 1,899,928 | | $ | 1,149,956 | | $ | 1,099,958 | | $ | 799,970 | | $ | 999,962 | | $ | 1,249,953 | | | 2022 | | $ | 6,500,010 | | | | $ | 1,599,852 | | $ | 399,963 | | | | $ | 999,907 | | $ | 900,121 | | | 2021 | | $ | 5,999,941 | | | | $ | 1,000,049 | | | | | $ | 900,150 | | $ | 850,024 | |
(c) These nonqualified stock option awards were granted as part of the annual long-term incentive program in 2023. These awards will vest in equal thirds commencing on the first anniversary of the grant date, with grant-date fair valuesan exercise period of $4,700,091 and $3,000,032, respectively, due to10 years from the fact that they are 100 percent time-based. For Mr. Okray and Ms. Schechtman, the maximum value does not include RSUs granted in 2016 due to the fact that they are 100 percent time-based. For Mr. Cushing the maximum value does not include RSUs granted in 2016 with a grant-datedate of grant. The aggregate grant date fair value of $29,000 duethe equity awards is calculated in accordance with ASC Topic 718 utilizing the assumptions discussed in Note 15 of our consolidated financial statements in the 2023 Form 10-K filed with the SEC on March 12, 2024. (d) For 2023, includes (i) Company matching contributions according to the fact that they are 100 percent time-based. For Messrs. Tyson, Norona and Shermanterms of the maximum value does not include RSUs granted in 2014 and 2015 due to fact that they are 100 percent time-based. More information is providedCompany's 401(k) plan in the "2016 amounts of $12,200 for Mr. Greco, $3,787 for Mr. Iskander, $4,689 for Mr. Shepherd, $9,962 for Mr. Word, $13,200 for Ms. Finley, $12,200 for Mr. Cushing and $12,200 for Mr. McDonell; and (ii) life insurance premiums paid by the Company for each executive as follows: $70 for Mr. O'Kelly; $1,823 for Mr. Greco; $42 for Mr. Grimsland; $597 for Mr. Iskander; $808 for Mr. Shepherd; $963 for Mr. Word; $834 for Ms. Finley; $857 for Mr. Szilagyi; $680 for Mr. Cushing; and $928 for Mr. McDonell; relocation benefits of $12,433 for Mr. O'Kelly and $10,683 for Mr. Grimsland; gross-up of relocation expenses of $6,595 for Mr. O'Kelly and $7,767 for Mr. Grimsland; and severance compensation paid pursuant to their respective employment agreements in the amount of $1,408,421 for Mr. Shepherd and $1,123,250 for Mr. McDonell.
Grants of Plan-Based Awards Table" in this Proxy Statement. | | (e) | Represents payout to Mr. Cushing under the Worldpac Management Incentive Plan for Fiscal 2016, based on results versus target Operating Income for our Worldpac business. |
| | (f) | Includes Company matching contributions according to the terms of the Company's 401(k) plan in the amounts of $297 for Mr. Cushing and $3,975 for each of Mr. Tyson, Mr. Norona and Mr. Sherman, |
| | (g) | Includes life insurance premiums paid by the Company for each executive as follows: $1,680 for Mr. Greco; $161 for Mr. Okray; $265 for Mr. Cushing; $1,999 for Mr. Tyson; $479 for Ms. Schechtman; $2,305 for Mr. Norona and $2,175 for Mr. Sherman. |
| | (h) | Includes relocation benefits and related tax gross-up payments for Messrs. Greco, Okray and Cushing and Ms. Schechtman with respect to their relocation to Raleigh, NC, pursuant to the terms of the relocation policy approved by the Compensation Committee. As is common for relocation packages of this nature, their relocation packages included full reimbursement for any taxable payments related to the relocation. Reportable compensation for Mr. Greco includes relocation and temporary living expenses in the amount of $263,093 and $17,008 for related tax reimbursement payments. Reportable compensation for Mr. Okray includes relocation expenses and temporary living expenses in the amount of $77,814, and $33,730 for related tax reimbursement payments. Reportable compensation for Mr. Cushing includes relocation and temporary living expenses in the amount of $50,132, and $2,341 for related tax reimbursement payments. Reportable compensation for Ms. Schechtman includes relocation and temporary living expenses in the amount of $146,438, and $32,449 for related tax reimbursement payments. |
| | (i) | Includes payment of legal fees in the amount of $50,000 for Mr. Greco and $2,748 for Mr. Okray incurred by them in connection with the negotiation of their terms of employment with us. |
| | (j) | Includes a severance cash payment for Mr. Norona of $698,421 and a COBRA premium offset for twelve months of $9,596, and a severance cash payment for Mr. Sherman of $857,849 and a COBRA premium offset for twelve months of $9,596, pursuant to the terms of their respective employment agreements with us. |
2023
2016 Grants of Plan-Based Awards Table
The following table sets forth information concerning grants of cash and stock-basedstock based awards made under our annual and long-termlong term incentive plans during 2016.2023. The threshold, target and maximum non-equity incentive award amounts shown in the table represent the amounts to be paid if our performance had met the respective levels of the applicable performance measures. The performance measures are more fully described under the heading "Annual Incentive Plan" in the Compensation Discussion and Analysis section of this Proxy Statement.CD&A. The threshold, target and maximum equity incentive award amounts shown in the table represent the amounts to be paid if our performance meets the respective level of applicable performance measures as more fully described in CD&A. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (a) | | Estimated Future Payouts Under Equity Incentive Plan Awards (b) | | All Other Stock Awards: Number of Shares of Stock or Units
(#) (c) | | All Other Option Awards: Number of Securities Underlying Options
(#) | | Exercise or Base Price of Option Award ($/share) | | Grant Date Fair Value of Stock and Option Awards
($) (d) | | Name | Grant Date | Approval Date | Threshold
($) | | Target
($) | | Maximum
($) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | | | | | Mr. O'Kelly | 9/18/2023 | 8/13/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 78,982 | | | — | | | — | | | $ | 4,593,593 | | | 9/18/2023 | 8/13/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 150,000 | | | $ | 58.16 | | | $ | 3,523,500 | | | Mr. Greco | | | $ | 590,625 | | | $ | 1,687,500 | | | $ | 3,375,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | 7,700 | | | 22,201 | | | 44,402 | | | — | | | — | | | — | | | $ | 3,000,021 | | | Mr. Grimsland | 12/4/2023 | 11/29/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 28,762 | | | — | | | — | | | $ | 1,600,030 | | | 12/4/2023 | 11/29/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 18,149 | | | $ | 55.63 | | | $ | 400,004 | | | Mr. Iskander | | | $ | 84,610 | | | $ | 241,744 | | | $ | 483,487 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | 259 | | | 740 | | | 1,480 | | | — | | | — | | | — | | | $ | 99,996 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 370 | | | — | | | — | | | $ | 49,998 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,414 | | | $ | 135.13 | | | $ | 50,027 | | | 6/12/2023 | 6/11/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 3,738 | | | — | | | — | | | $ | 250,035 | | | 8/28/2023 | 8/13/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 7,619 | | | — | | | — | | | $ | 500,035 | | | Mr. Shepherd | | | $ | 226,695 | | | $ | 647,700 | | | $ | 1,295,400 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | 2,461 | | | 7,030 | | | 14,060 | | | — | | | — | | | — | | | $ | 949,964 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 3,515 | | | — | | | — | | | $ | 474,982 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,428 | | | $ | 135.13 | | | $ | 475,083 | | | Mr. Word | | | $ | 177,070 | | | $ | 505,913 | | | $ | 1,011,827 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | 1,489 | | | 4,255 | | | 8,510 | | | — | | | — | | | — | | | $ | 574,978 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 2,128 | | | — | | | — | | | $ | 287,557 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,126 | | | $ | 135.13 | | | $ | 287,498 | | | Ms. Finley | | | $ | 153,270 | | | $ | 437,913 | | | $ | 875,827 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | 1,425 | | | 4,070 | | | 8,140 | | | — | | | — | | | — | | | $ | 549,979 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 2,035 | | | — | | | — | | | $ | 274,990 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,774 | | | $ | 135.13 | | | $ | 275,044 | | | Mr. Szilagyi | | | $ | 154,185 | | | $ | 440,529 | | | $ | 881,058 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | 1,036 | | | 2,960 | | | 5,920 | | | — | | | — | | | — | | | $ | 399,985 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 1,480 | | | — | | | — | | | $ | 199,992 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,645 | | | $ | 135.13 | | | $ | 200,039 | | | Mr. Cushing | | | $ | 191,888 | | | $ | 548,250 | | | $ | 1,096,500 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | 1,295 | | | 3,700 | | | 7,400 | | | — | | | — | | | — | | | $ | 499,981 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 1,850 | | | — | | | — | | | $ | 249,991 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,067 | | | $ | 135.13 | | | $ | 250,030 | | | Mr. McDonell | | | $ | 188,913 | | | $ | 539,750 | | | $ | 1,079,500 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | 1,619 | | | 4,625 | | | 9,250 | | | — | | | — | | | — | | | $ | 624,976 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | 2,313 | | | — | | | — | | | $ | 312,556 | | | 3/6/2023 | 3/2/2023 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,832 | | | $ | 135.13 | | | $ | 312,476 | |
(a)Amounts shown represent possible cash payouts under our 2023 short-term incentive program. See "CD&A" for a discussion of threshold, target and maximum cash incentive plan payouts. (b)Amounts shown represent the heading "Long-Term Incentive Compensation"shares of our common stock issuable assuming achievement of the specific threshold, target or maximum levels of performance established by the Compensation Committee for performance-based RSU grants to our executives. These PSU grants were part of our annual long-term equity grants made in 2023 and related to the 2023 through 2025 three-year performance period. See "CD&A" for more information regarding our PSU grants. (c)Amounts shown represent the number of time based RSUs granted to our executives for 2023. For more information regarding awards of time based RSUs, see "CD&A."
(d)Amounts shown represent the aggregate grant date fair value of the equity awards calculated in accordance with ASC Topic 718 utilizing the assumptions discussed in Note 15 of our consolidated financial statements in the Compensation Discussion and Analysis section2023 Form 10-K filed with the SEC on March 12, 2024. The attainment of this Proxy Statement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (a) | | Estimated Future Payouts Under Equity Incentive Plan Awards (b) | | All Other Stock Awards: Number of Shares of Stock or Units (#) (c) | | All Other Stock Awards: Number of Securities Underlying Options (#) (c) | | Exercise Price of Option Awards ($/sh) (d) | | Grant Date Fair Value of Stock and Option Awards ($) (e) | | Name | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | | | | | Mr. Greco | 1/1/2016 | | 1,485,000 |
| | 1,485,000 |
| | 2,970,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | 4/14/2016 | (f) | — |
| | — |
| | — |
| | 16,663 |
| | 66,649 |
| | 133,298 |
| | — |
| | — |
| | 160.94 |
| | 2,500,004 |
| | | 4/14/2016 | (f) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 15,534 |
| | — |
| | — |
| | 2,500,042 |
| | | 4/14/2016 | (g) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 68,745 |
| | 160.94 |
| | 3,000,032 |
| | | 4/14/2016 | (h) | — |
| | — |
| | — |
| | 49,708 |
| | 49,708 |
| | 49,708 |
| | — |
| | — |
| | — |
| | 8,000,006 |
| | | 4/14/2016 | (h) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 13,670 |
| | — |
| | — |
| | 2,200,050 |
| | Mr. Okray | 11/21/2016 | (i) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 11,984 |
| | — |
| | — |
| | 2,000,130 |
| | Mr. Cushing | 1/1/2016 | | 84,010 |
| | 336,040 |
| | 672,079 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | 8/22/2016 | (f) | — |
| | — |
| | — |
| | 209 |
| | 835 |
| | 1,670 |
| | — |
| | — |
| | 158.47 |
| | 28,866 |
| | | 8/22/2016 | (f) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 183 |
| | — |
| | — |
| | 29,000 |
| | | 9/7/2016 | (j) | — |
| | — |
| | — |
| | 1,263 |
| | 2,525 |
| | 2,525 |
| | — |
| | — |
| | — |
| | 408,747 |
| | Mr. Tyson | 1/1/2016 | | 65,625 |
| | 262,500 |
| | 525,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | Ms. Schechtman | 1/1/2016 | | 262,500 |
| | 262,500 |
| | 262,500 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5/23/2016 | (f) | — |
| | — |
| | — |
| | 442 |
| | 1,768 |
| | 3,536 |
| | — |
| | — |
| | 145.87 |
| | 62,216 |
| | | 5/23/2016 | (f) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 866 |
| | — |
| | — |
| | 126,323 |
| | Mr. Norona | 1/1/2016 | | 127,127 |
| | 508,510 |
| | 1,017,019 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | Mr. Sherman | 1/1/2016 | | 198,558 |
| | 794,233 |
| | 1,588,465 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | (a) | The non-equity incentive plan information represents our 2016 annual incentive plan. |
| | (b) | These columns include performance-based SAR and RSU grants to our executives. |
| | (c) | These columns include the number of time-based RSUs and SARs awarded to our executives. |
| | (d) | Stock prices shown are the exercise price of any SAR grants based on the closing price of our common stock on the date of grant. |
| | (e) | The aggregate grant date fair value of the awards was computed in accordance with ASC Topic 718. The attainment of target level for performance awards was deemed probable at the date of grant for the each of the performance awards granted during 2016.target level for performance awards was deemed probable at the date of grant for the each of the performance awards granted during 2023. Accordingly, the grant date fair value was calculated at target level for these awards. |
| | (f) | For Mr. Greco and Ms. Schechtman, represents off-cycle grants upon the commencement of their employment with the Company. For Mr. Cushing, represents an off-cycle grant as the result of his promotion and increase in his job responsibilities. The terms of the awards are consistent with the annual awards previously granted to executives in December 2015. Messrs. Greco and Cushing received 50 percent of the target award value granted in the form of performance-based SARs and the remaining 50 percent granted in the form of time-based RSUs, which are shown in separate rows, respectively. Ms. Schechtman received 33 percent of the target award value granted in the form of performance-based SARs and the remaining 67 percent granted in the form of time-based RSUs, which are shown in separate rows, respectively. The performance-based SARs may be earned on the third anniversary of the grant date, following certification by the Committee of the performance vesting achievement level during fiscal years 2016 through 2018. Our financial performance must meet the threshold level for executives to become eligible to receive any performance-based SARs. At the threshold level of performance, executives receive 25 percent of the target level of performance-based SARs. In order for the executive officers to earn the full performance-based SARs, our financial performance must equal the target level. If our financial performance exceeds the target level, executive officers may receive additional SARs up to a maximum of an additional 100 percent of the performance-based SARs. The time-based RSUs will vest in three approximately equal annual installments commencing on the first anniversary date of the grant. |
| | (g) | Represents a sign-on grant of time-based SARs and may vest in approximately three equal installments on the third, fourth and fifth anniversaries of the grant date, subject to Mr. Greco's continued employment through the applicable vesting date. |
| | (h) | Represents performance-based and time-based RSUs granted to replace unvested performance shares and pension benefits from his prior employment. The performance-based RSUs may vest in three approximately equal annual installments beginning on the first anniversary of the grant date subject to (i) Mr. Greco’s continued employment through the applicable vesting date, and (ii) Mr. Greco having a leadership team in place for the Company and presenting a good faith, preliminary five-year business plan to the Board prior to the first anniversary of his first day of employment with the Company. The time-based RSUs will vest in three equal, annual installments on the |
second, third and fourth anniversaries of the grant date subject to Mr. Greco’s continued employment through the applicable vesting date.
| | (i) | Represents a sign-on grant of time-based RSUs, of which 70 percent will vest on the first anniversary of the grant date and the remaining 30 percent will vest on the second anniversary of the grant date, subject to his continued employment with the Company through the applicable vesting date |
| | (j) | Represents performance-based RSUs that may vest on the third anniversary of the grant date subject to the following performance conditions: (i) 50% may vest based on the Company's 2017 relative commercial sales growth performance to the overall commercial automotive aftermarket industry as reported by the Auto Care Association (ACA) and (ii) 50% may vest based on the Company's 2018 relative commercial sales growth performance to the overall commercial automotive aftermarket industry as reported by the ACA. |
fair value was calculated at target level for these awards.
The time-vested portions of the RSU awards granted in 20162023 include rights to receive dividend equivalent payments in the same amount as paid to our stockholders, but do not include voting rights. The performance-based RSUs granted to Mr. Greco on April 14, 2016 include rights to receive dividends, but do not include voting rights. The performance-based RSUs granted to Mr. Cushing on September 7, 2016in 2023 do not include dividend or voting rights. We paid quarterly cash dividends of $0.06$1.50 per share in 2016. All SAR grants have a termfor the first fiscal quarter of seven years2023 and must be settled in shares$0.25 per share for the other three fiscal quarters of our common stock.
2023.
Outstanding Equity Awards at 20162023 Fiscal Year-End Table | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards (a) | | | | | | | | | | | | Equity Incentive Plan Awards: | | Name | | Grant Date | | Securities Underlying Unexercised Options Exercisable (#) | | Securities Underlying Unexercised Options Unexercisable (#) | | Equity Incentive Plan Awards: Shares Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Unearned Shares, Units, or Other Rights That Have Not Vested (#) | | Market Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) | | Mr. O'Kelly | | 9/18/2023 (b) | | — | | | 150,000 | | | — | | | $ | 58.16 | | | 9/18/2033 | | — | | | — | | | — | | | — | | | | 9/18/2023 (b) | | — | | | — | | | — | | | — | | | | | 78,982 | | | 4,820,271 | | | — | | | — | | | Mr. Greco | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | — | | | — | | | 7,770 | | | 474,224 | | | | 2/28/2022 | | 10,034 | | | 20,070 | | | — | | | 204.48 | | | 2/28/2032 | | — | | | — | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | 5,298 | | | 323,337 | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 5,563 | | | 339,504 | | | | 3/8/2021 | | 21,190 | | | 10,596 | | | — | | | 176.5 | | | 3/8/2031 | | — | | | — | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | 2,833 | | | 172,898 | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 5,949 | | | 363,064 | | | Mr. Grimsland | | 12/4/2023 (b) | | — | | | 18,149 | | | — | | | 55.63 | | | 12/4/2033 | | — | | | — | | | — | | | — | | | | 12/4/2023 (b) | | — | | | — | | | — | | | — | | | | | 28,762 | | | 1,755,345 | | | — | | | — | | | Mr. Iskander | | 8/28/2023 (b) | | — | | | — | | | — | | | — | | | | | 7,619 | | | 464,988 | | | — | | | — | | | | 6/12/2023 (b) | | — | | | — | | | — | | | — | | | | | 3,738 | | | 228,130 | | | — | | | — | | | | 3/6/2023 (b) | | — | | | 1,414 | | | — | | | 135.13 | | | 3/6/2033 | | — | | | — | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | 370 | | | 22,581 | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | — | | | — | | | 259 | | | 15,807 | | | | 2/28/2022 | | 308 | | | 617 | | | — | | | 204.48 | | | 2/28/2032 | | — | | | — | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | 164 | | | 10,009 | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 171 | | | 10,445 | | | | 3/8/2021 | | 706 | | | 354 | | | — | | | 176.5 | | | 3/8/2031 | | — | | | — | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | 95 | | | 5,798 | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 198 | | | 12,111 | | | Mr. Shepherd | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | — | | | — | | | 342 | | | 20,869 | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 647 | | | 39,474 | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 799 | | | 48,766 | | | Mr. Word | | 3/6/2023 (b) | | — | | | 8,126 | | | — | | | 135.13 | | | 3/6/2033 | | — | | | — | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | 2,128 | | | 129,872 | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | — | | | — | | | 1,489 | | | 90,889 | | | | 11/21/2022 | | — | | | — | | | — | | | — | | | | | 2,249 | | | 137,256 | | | — | | | — | | | | 2/28/2022 | | 618 | | | 1,236 | | | — | | | 204.48 | | | 2/28/2032 | | — | | | — | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | 326 | | | 19,896 | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 342 | | | 20,891 | | | | 3/8/2021 | | 968 | | | 530 | | | — | | | 176.5 | | | | | — | | | — | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | 142 | | | 8,666 | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 298 | | | 18,156 | | | | 2/22/2021 | | — | | | — | | | — | | | — | | | | | 497 | | | 30,332 | | | — | | | — | | | Ms. Finley | | 3/6/2023 (b) | | — | | | 7,774 | | | — | | | 135.13 | | | 3/6/2033 | | — | | | — | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | 2,035 | | | 124,196 | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | — | | | — | | | 1,425 | | | 86,937 | | | | 2/28/2022 | | 1,158 | | | 2,316 | | | — | | | 204.48 | | | 2/28/2032 | | — | | | — | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | 612 | | | 37,350 | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 642 | | | 39,175 | | | | 3/8/2021 | | 2,471 | | | 1,236 | | | — | | | 176.5 | | | 3/7/2031 | | — | | | — | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | 331 | | | 20,201 | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 694 | | | 42,358 | | | Mr. Szilagyi | | 3/6/2023 (b) | | — | | | 5,654 | | | — | | | 135.13 | | | 3/6/2033 | | — | | | — | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | 1,480 | | | 90,324 | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | — | | | — | | | 1,036 | | | 63,227 | | | Mr. McDonell | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | — | | | — | | | 360 | | | 21,959 | | | | 2/28/2022 | | 1,389 | | | — | | | — | | | 204.48 | | | 2/28/2032 | | — | | | — | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 449 | | | 27,427 | | | | 3/8/2021 | | 3,002 | | | — | | | — | | | 176.5 | | | 3/8/2031 | | — | | | — | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 749 | | | 45,733 | | | Mr. Cushing | | 3/6/2023 (b) | | — | | | 7,067 | | | — | | | 135.13 | | | 3/6/2033 | | — | | | — | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | 1,850 | | | 112,906 | | | — | | | — | | | | 3/6/2023 (b) | | — | | | — | | | — | | | — | | | | | — | | | — | | | 1,295 | | | 79,034 | | | | 2/28/2022 | | 1,543 | | | 3,088 | | | — | | | 204.48 | | | 2/28/2032 | | — | | | — | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | 816 | | | 49,800 | | | — | | | — | | | | 2/28/2022 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 856 | | | 52,226 | | | | 3/8/2021 | | 3,177 | | | 1,589 | | | — | | | 176.5 | | | 3/8/2031 | | — | | | — | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | 425 | | | 25,938 | | | — | | | — | | | | 3/8/2021 | | — | | | — | | | — | | | — | | | | | — | | | — | | | 893 | | | 54,469 | |
(a)Includes awards of RSUs. Generally, awards of time-based RSUs vest in three approximately equal annual installments commencing on the first anniversary date of the grant. The followingmarket value of the stock awards is reflective of the closing price of our common stock as of December 29, 2023 ($61.03), the last day that our common stock was traded during 2023. Amounts shown for PSUs granted in 2021, 2022 and 2023 are shown at threshold level, representing a 30 percent payout of the PSUs. (b)See the "Grants of Plan-Based Awards in 2023" table providesin this Proxy Statement for more information concerning stock-basedon awards granted to our NEOs that were outstanding at the end of our last fiscal year.executive officers in 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards (a) | | Stock Awards (b) | | | | | | | | | | | | Equity Incentive Plan Awards: | | Name | | Grant Date | | Number of Securities Underlying Unexercised Options Exercisable (#) | | Number of Securities Underlying Unexercised Options Unexercisable (#) | | Equity Incentive Plan Awards: Number of Shares Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | 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 ($) | | Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | | Market Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) | | Mr. Greco | | 4/14/2016 (c) | | — |
| | — |
| | 16,663 |
| | 160.94 |
| | 4/14/2023 | | — |
| | — |
| | — |
| | — |
| | | | 4/14/2016 (c) | | — |
| | — |
| | — |
| | — |
| | | | 15,534 |
| | 2,627,110 |
| | — |
| | — |
| | | | 4/14/2016 (c) | | — |
| | 68,745 |
| | — |
| | 160.94 |
| | 4/14/2023 | | — |
| | — |
| | — |
| | — |
| | | | 4/14/2016 (c) | | — |
| | — |
| | — |
| | — |
| | | | — |
| | — |
| | 49,708 |
| | 8,406,617 |
| | | | 4/14/2016 (c) | | — |
| | — |
| | — |
| | — |
| | | | 13,670 |
| | 2,311,870 |
| | — |
| | — |
| | Mr. Okray | | 11/21/2016 (c) | | — |
| | — |
| | — |
| | — |
| | | | 11,984 |
| | 2,026,734 |
| | — |
| | — |
| | Mr. Cushing | | 2/10/2014 (d) | | — |
| | — |
| | 711 |
| | 123.32 |
| | 2/10/2021 | | — |
| | — |
| | — |
| | — |
| | | 2/10/2014 (d) | | — |
| | — |
| | — |
| | — |
| | | | 634 |
| | 107,222 |
| | — |
| | — |
| | | 2/10/2014 (d) | | — |
| | — |
| | — |
| | — |
| | | | — |
| | — |
| | 497 |
| | 84,053 |
| | | | 12/1/2014 | | — |
| | — |
| | 861 |
| | 147.07 |
| | 12/1/2021 | | — |
| | — |
| | — |
| | — |
| | | | 12/1/2014 | | — |
| | — |
| | — |
| | — |
| | | | 532 |
| | 89,972 |
| | — |
| | — |
| | | | 12/10/2015 | | — |
| | — |
| | 792 |
| | 151.76 |
| | 12/10/2022 | | — |
| | — |
| | — |
| | — |
| | | | 12/10/2015 | | — |
| | — |
| | — |
| | — |
| | | | 1,031 |
| | 174,363 |
| | — |
| | — |
| | | | 8/22/2016 (c) | | — |
| | — |
| | 209 |
| | 158.47 |
| | | | — |
| | — |
| | — |
| | — |
| | | | 8/22/2016 (c) | | — |
| | — |
| | — |
| | — |
| | | | 183 |
| | 30,949 |
| | — |
| | — |
| | | | 9/7/2016 (c) | | — |
| | — |
| | — |
| | — |
| | | | — |
| | — |
| | 1,263 |
| | 213,599 |
| | Mr. Tyson | | 12/3/2012 | | 14,876 |
| | — |
| | — |
| | 73.17 |
| | 12/3/2019 | | — |
| | — |
| | — |
| | — |
| | | | 5/28/2013 | | 5,315 |
| | — |
| | — |
| | 83.63 |
| | 5/28/2020 | | — |
| | — |
| | — |
| | — |
| | | | 12/12/2013 | | — |
| | — |
| | 1,811 |
| | 107.93 |
| | 12/12/2020 | | — |
| | — |
| | — |
| | — |
| | | | 2/10/2014 (d) | | — |
| | — |
| | 308 |
| | 123.32 |
| | 2/10/2021 | | — |
| | — |
| | — |
| | — |
| | | | 2/10/2014 (d) | | — |
| | — |
| | — |
| | — |
| |
| | 136 |
| | 23,000 |
| | — |
| | — |
| | | | 12/1/2014 | | — |
| | — |
| | 2,235 |
| | 147.07 |
| | 12/1/2021 | | — |
| | — |
| | — |
| | — |
| | | | 12/1/2014 | | — |
| | — |
| | — |
| | — |
| |
| | 680 |
| | 115,002 |
| | — |
| | — |
| | | | 12/10/2015 | | — |
| | — |
| | 2,055 |
| | 151.76 |
| | 12/10/2022 | | — |
| | — |
| | — |
| | — |
| | | | 12/10/2015 | | — |
| | — |
| | — |
| | — |
| |
| | 1,318 |
| | 222,900 |
| | — |
| | — |
| | Ms. Schechtman | | 5/23/2016 (c) | | — |
| | — |
| | 442 |
| | 145.87 |
| | 5/23/2023 | | — |
| | — |
| | — |
| | — |
| | | 5/23/2016 (c) | | — |
| | — |
| | — |
| | — |
| | | | 866 |
| | 146,458 |
| | — |
| | — |
| | Mr. Norona (e) | | 12/1/2010 | | 23,270 |
| | — |
| | — |
| | 66.15 |
| | 3/30/2017 | | — |
| | — |
| | — |
| | — |
| | | | 12/1/2011 | | 15,962 |
| | — |
| | — |
| | 68.75 |
| | 3/30/2017 | | — |
| | — |
| | — |
| | — |
| | | | 12/3/2012 | | 34,083 |
| | — |
| | — |
| | 73.17 |
| | 3/30/2017 | | — |
| | — |
| | — |
| | — |
| | | | 12/12/2013 | | — |
| | — |
| | 2,898 |
| | 107.93 |
| | 3/30/2017 | | — |
| | — |
| | — |
| | — |
| | | | 2/10/2014 (d) | | — |
| | — |
| | 154 |
| | 123.32 |
| | 3/30/2017 | | — |
| | — |
| | — |
| | — |
| Mr.
Sherman (e) | | 5/28/2013 | | 23,668 |
| | — |
| | — |
| | 83.63 |
| | 3/30/2017 | | — |
| | — |
| | — |
| | — |
| | | 12/12/2013 | | — |
| | — |
| | 3,622 |
| | 107.93 |
| | 3/30/2017 | | — |
| | — |
| | — |
| | — |
| | | | 2/10/2014 (d) | | — |
| | — |
| | 308 |
| | 123.32 |
| | 3/30/2017 | | — |
| | — |
| | — |
| | — |
|
| | (a) | Includes grants of SARs. Generally, the time-based SARs vest in three approximately equal annual installments commencing on the first anniversary date of the grant. The amounts shown for SARs granted in December 2010 and December 2011 represent the time-based portion of the grants only since there was no payout for the performance-based portion of the grants because our relative EVA results for the 2011-2013 and 2012-2014 performance periods did not meet the minimum threshold level of performance. The amounts shown for SARs granted in December 2012 and May 2013 represent the time-based portion of the grants and the performance-based portion of the grants at slightly above the target level. The April 2016 grant of 68,745 SARs to Mr. Greco represent time-based awards that may vest in three equal portions on the third, fourth and fifth anniversary of the grant date. |
The amounts shown for SARs granted in December 2013 and February 2014 represent performance-based SARs at a zero percent payout for operating income and 35 percent payout for comparable store sales growth - or a weighted 17.5 percent payout of the performance SARs. The amounts shown for SARs granted in December 2014, December 2015, April 2016, May 2016 and August 2016 represent performance-based SARs at the threshold level - a 25 percent payout of the performance-based SARs. The performance-based SAR awards shown in this table as Equity Incentive Plan Awards granted in December 2014 and December 2015, may be eligible for exercise on March 1, 2018 and March 1, 2019 respectively, following certification by the Committee of the performance vesting achievement level. The February 2014 grants to Messrs. Cushing, Tyson, Norona, and Sherman vested and were eligible for exercise on March 1, 2017. The April 2016 equity incentive grant to Mr. Greco, May 2016 grant to Ms. Schechtman and August 2016 grant to Mr. Cushing may vest on the third anniversary of the respective grant dates, following certification by the Committee of the performance vesting achievement level.
| | (b) | Includes awards of RSUs. Generally, all awards of time-based RSUs listed in the table vest in three approximately equal annual installments commencing on the first anniversary date of the grant. Mr. Okray's November 2016 award may vest in 70 percent and 30 percent portions on the first and second anniversary of the grant date, respectively. The market value of the stock awards is reflective of the closing price of our common stock as of December 30, 2016 ($169.12), the last day that our common stock was traded during Fiscal 2016. The amounts shown for the February 2014 equity incentive awards to Mr. Cushing represent a zero percent payout for operating income and 35 percent payout for comparable store sales growth - or a weighted 17.5 percent payout of the performance RSUs. The amounts shown for the September 2016 equity incentive grant to Mr. Cushing represents performance RSUs a the threshold level - a 50 percent payout of the performance RSUs. The amounts shown for the April 2016 equity incentive grant to Mr. Greco represent a 100 percent payout of the performance RSUs due to meeting the performance conditions of (1) presenting a good-faith preliminary five year business plan to the Board of Directors and (2) hired a leadership team of executive officers before the first anniversary of the grant date. The Compensation Committee certified these conditions as complete on February 16, 2017 and the award may vest in three approximately equal annual installments commencing on the first anniversary of the grant date. |
| | (c) | See the "2016 Grants of Plan-Based Awards Table" in this Proxy Statement and the footnotes above for more information on awards granted to our executive officers in 2016. |
| | (d) | On February 10, 2014, Messrs. Tyson, Norona and Sherman received additional target annual equity grants under our 2004 LTIP. Additionally, Mr. Cushing received his annual equity grant on the same date following the acquisition of GPI on January 2, 2014. These grants were based on the same structure and performance measures as the December 2013 grants. |
| | (e) | Outstanding awards to Mr. Norona and Mr. Sherman have been adjusted for their respective termination provisions. All outstanding time-based RSUs granted on December 1, 2014 and December 10, 2015 were forfeited on December 31, 2016. In addition, all performance SARs granted on December 1, 2014 and December 10, 2015 were forfeited on December 31, 2016 as these awards did not meet the minimum threshold level of performance through the termination date. |
2016Option Exercises and Stock Vested Tablein 2023
The following table sets forth information with respect to our NEOs who exercised stock options or SARs and vested in stock awards or exercised options during 2016.2023. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Options | | Stock Awards | | | | | | | | | Name | | | Number of
Shares Acquired
on Exercise (#) | | Value
Realized on
Exercise ($) | | Number of
Shares Acquired
on Vesting (#) | | Value Realized on Vesting ($)(a) | | | | | | | | | Mr. O'Kelly | | | — | | | $ | — | | | — | | | $ | — | | | | | | | | | | Mr. Greco | | | — | | | — | | | 45,323 | | | 6,304,816 | | | | | | | | | | Mr. Grimsland | | | — | | | — | | | — | | | — | | | | | | | | | | Mr. Iskander | | | — | | | — | | | 788 | | | 107,937 | | | | | | | | | | Mr. Shepherd | | | — | | | — | | | 7,644 | | | 1,064,566 | | | | | | | | | | Mr. Word | | | — | | | — | | | 4,101 | | | 473,876 | | | | | | | | | | Ms. Finley | | | — | | | — | | | 4,985 | | | 693,399 | | | | | | | | | | Mr. Szilagyi | | | — | | | — | | | — | | | — | | | | | | | | | | Mr. McDonell | | | — | | | — | | | 7,099 | | | 974,804 | | | | | | | | | | Mr. Cushing | | | — | | | — | | | 8,726 | | | 1,166,374 | | | | | | | | |
(a) The value realized on vesting is based on the closing price of our common stock on the NYSE on the vesting date. If a vesting date occurs on a day on which the NYSE is closed, the value realized is based on the closing price on the last trading day prior to the vesting date.
| | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) | | Mr. Greco | | — |
| | — |
| | — |
| | — |
| | Mr. Okray | | — |
| | — |
| | — |
| | — |
| | Mr. Cushing | | — |
| | — |
| | 1,681 |
| | 269,121 |
| | Mr. Tyson | | 20,210 |
| | 3,043,711 |
| | 8,652 |
| | 1,367,097 |
| | Ms. Schechtman | | — |
| | — |
| | — |
| | — |
| | Mr. Norona | | 28,799 |
| | 4,725,340 |
| | 11,866 |
| | 1,880,440 |
| | Mr. Sherman | | — |
| | — |
| | 12,501 |
| | 2,014,660 |
|
2016Non-Qualified Deferred Compensation Tablefor 2023
The following table sets forth information with respect to our NEOs concerning executive contributions to non-qualified deferred compensation plans during 2016.2023. We do not make any contributions to these deferred compensation plans. Aggregate earnings information includes changes in market value of the investments plus any dividends received by the executive for their DSUs.
| | | | | | | | | | | | | | | Name | | Executive
Contributions ($)(a) | | Aggregate
Earnings ($)(b) | | Aggregate
Withdrawals/
Distributions ($) | | Aggregate
Balance at
December 31, 2016 ($) | | Mr. Greco | | — |
| | — |
| | — |
| | — |
| | Mr. Okray | | — |
| | — |
| | — |
| | — |
| | Mr. Cushing | | — |
| | — |
| | — |
| | — |
| | Mr. Tyson | | — |
| | — |
| | — |
| | — |
| | Ms. Schechtman | | — |
| | — |
| | — |
| | — |
| | Mr. Norona | | 254,255 |
| | 31,538 |
| | (252,381 | ) | | 797,277 |
| | Mr. Sherman | | 180,031 |
| | 96,050 |
| | — |
| | 960,348 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Executive
Contributions ($)(a) | | Aggregate
Earnings ($)(b) | | Aggregate
Withdrawals/
Distributions ($) | | Aggregate
Balance at
December 30, 2023 ($) | | | | | | Mr. O'Kelly | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | Mr. Greco | | — | | | — | | | — | | | — | | | Mr. Grimsland | | — | | | — | | | — | | | — | | | Mr. Iskander | | — | | | 126 | | | — | | | 775 | | | Mr. Shepherd | | — | | | — | | | — | | | — | | | Mr. Word | | — | | | 8,342 | | | — | | | 49,999 | | | Ms. Finley | | 256,442 | | | 299,906 | | | (60,080) | | | 1,854,665 | | | Mr. Szilagyi | | — | | | — | | | — | | | — | | | Mr. McDonell | | — | | | — | | | — | | | — | | | Mr. Cushing | | — | | | — | | | — | | | — | |
| | (a) | Additional information is provided under "Retirement Savings Programs" in the CD&A section of this Proxy Statement. Any amounts reported as Executive Contributions are also reported in the Salary column of the "Summary Compensation Table" of this Proxy Statement. |
| | (b) | Represents realized and unrealized gains or losses on market-based investments selected and dividends earned by executives for their deferred compensation balances. For Mr. Sherman, the amounts reported also include the value of dividends earned on DSUs and converted to additional DSUs and the change in overall value of DSUs based on our stock price. |
(a)Additional information is provided under "Other Compensation and Benefit Programs" in the CD&A section of this Proxy Statement. Any amounts reported as Executive Contributions are also reported in the Salary column of the "Summary Compensation Table" of this Proxy Statement.
(b)Represents realized and unrealized gains or losses on market-based investments selected and dividends earned by executives for their deferred compensation balances.
Potential Payments Upon Termination of Employment or Change in Control Table
The following table provides an estimate of the inherent value of the severance payments, stock incentives and benefits provided for in each named executive officer’sNEO’s employment agreement or other compensation arrangements described above, assuming termination of employment or change in control occurred on December 31, 2016,30, 2023, the last day of our 20162023 fiscal year. | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive | | Voluntary Termination without Good Reason or Involuntary Termination for Due Cause (a) | | Retirement | | Disability | | Death | | Involuntary Termination without Due Cause or Voluntary Termination for Good Reason not related to a Change in Control (b) (i) | | Involuntary Termination without Due Cause or Voluntary Termination for Good Reason related to a Change in Control (c) | | Mr. Greco | | | | | | | | | | | | | | Cash Severance (d) | | $ | — |
| | $ | — |
| | $ | 1,815,000 |
| | $ | 2,585,000 |
| | $ | 3,877,500 |
| | $ | 5,170,000 |
| | Stock Incentives (e) (f) | | — |
| | — |
| | 13,450,555 |
| | 13,450,555 |
| | 10,823,444 |
| | 13,907,932 |
| | Cont'd Medical Coverage (g) | | — |
| | — |
| | 14,956 |
| | — |
| | 14,956 |
| | 14,956 |
| | Outplacement | | — |
| | — |
| | — |
| | — |
| | 12,000 |
| | 12,000 |
| | Life Insurance | | — |
| | — |
| | — |
| | 1,100,000 |
| | — |
| | — |
| | Disability Insurance Payout (h) | | — |
| | — |
| | 660,000 |
| | — |
| | — |
| | — |
| | | | $ | — |
| | $ | — |
| | $ | 15,940,511 |
| | $ | 17,135,555 |
| | $ | 14,727,900 |
| | $ | 19,104,888 |
| | Mr. Okray | | | | | | | | | | | | | | Cash Severance (d) | | $ | — |
| | $ | — |
| | $ | 600,000 |
| | $ | 950,000 |
| | $ | 950,000 |
| | $ | 1,900,000 |
| | Stock Incentives (e) (f) | | — |
| | — |
| | 2,026,734 |
| | 2,026,734 |
| | — |
| | 2,026,734 |
| | Cont'd Medical Coverage (g) | | — |
| | — |
| | 9,971 |
| | — |
| | 9,971 |
| | 9,971 |
| | Outplacement | | — |
| | — |
| | — |
| | — |
| | 12,000 |
| | 12,000 |
| | Life Insurance | | — |
| | — |
| | — |
| | 500,000 |
| | — |
| | — |
| | Disability Insurance Payout (h) | | — |
| | — |
| | 300,000 |
| | — |
| | — |
| | — |
| | | | $ | — |
| | $ | — |
| | $ | 2,936,705 |
| | $ | 3,476,734 |
| | $ | 971,971 |
| | $ | 3,948,705 |
| | Mr. Cushing | | | | | | | | | | | | | | Cash Severance (d) | | $ | — |
| | $ | — |
| | $ | 540,500 |
| | $ | 869,500 |
| | $ | 856,332 |
| | $ | 1,739,000 |
| | Stock Incentives (e) (f) | | 519,122 |
| | 519,122 |
| | 519,122 |
| | 519,122 |
| | 116,616 |
| | 519,122 |
| | Cont'd Medical Coverage (g) | | — |
| | — |
| | 9,971 |
| | — |
| | 9,971 |
| | 9,971 |
| | Outplacement | | — |
| | — |
| | — |
| | — |
| | 12,000 |
| | 12,000 |
| | Life Insurance | | — |
| | — |
| | — |
| | 470,000 |
| | — |
| | — |
| | Disability Insurance Payout (h) | | — |
| | — |
| | 282,000 |
| | — |
| | — |
| | — |
| | | | $ | 519,122 |
| | $ | 519,122 |
| | $ | 1,351,593 |
| | $ | 1,858,622 |
| | $ | 994,919 |
| | $ | 2,280,093 |
| | Mr. Tyson | | | | | | | | | | | | | | Cash Severance (d) | | $ | — |
| | $ | — |
| | $ | 563,500 |
| | $ | 906,500 |
| | $ | 688,073 |
| | $ | 1,813,000 |
| | Stock Incentives (e) (f) | | — |
| | — |
| | 485,824 |
| | 485,824 |
| | 124,921 |
| | 485,824 |
| | Cont'd Medical Coverage (g) | | — |
| | — |
| | 9,971 |
| | — |
| | 9,971 |
| | 9,971 |
| | Outplacement | | — |
| | — |
| | — |
| | — |
| | 12,000 |
| | 12,000 |
| | Life Insurance | | — |
| | — |
| | — |
| | 490,000 |
| | — |
| | — |
| | Disability Insurance Payout (h) | | — |
| | — |
| | 294,000 |
| | — |
| | — |
| | — |
| | | | $ | — |
| | $ | — |
| | $ | 1,353,295 |
| | $ | 1,882,324 |
| | $ | 834,965 |
| | $ | 2,320,795 |
| | Ms. Schechtman | | | | | | | | | | | | | | Cash Severance (d) | | $ | — |
| | $ | — |
| | $ | 367,500 |
| | $ | 612,500 |
| | $ | 612,500 |
| | $ | 612,500 |
| | Stock Incentives (e) (f) | | — |
| | — |
| | 146,458 |
| | 146,458 |
| | — |
| | 146,458 |
| | Cont'd Medical Coverage (g) | | — |
| | — |
| | 9,971 |
| | — |
| | 9,971 |
| | 9,971 |
| | Outplacement | | — |
| | — |
| | — |
| | — |
| | 12,000 |
| | 12,000 |
| | Life Insurance | | — |
| | — |
| | — |
| | 350,000 |
| | — |
| | — |
| | Disability Insurance Payout (h) | | — |
| | — |
| | 210,000 |
| | — |
| | — |
| | — |
| | | | $ | — |
| | $ | — |
| | $ | 733,929 |
| | $ | 1,108,958 |
| | $ | 634,471 |
| | $ | 780,929 |
|
Mr. Shepherd's employment with the Company ended August 18, 2023, and he received compensation for separation without cause pursuant to Section 4(d) of the Employment Agreement between Mr. Shepherd and the Company dated September 17, 2018. See "—Summary Compensation Table" for the total of amounts paid to Mr. Shepherd pursuant to that agreement.
| | (a) | Voluntary termination without Good Reason or termination for Due Cause makes an executive ineligible for any employment agreement benefits other than any rights the executive 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 breach of the executive’s obligations under the agreement or a material violation of any code or standard of conduct applicable to our officers that is willful and deliberate and committed in bad faith and that has not been cured; (ii) a material violation of the loyalty obligations as provided in the agreement; (iii) the executive’s willful engagement in bad faith conduct that is demonstrably and materially injurious to us; (iv) a conviction of a crime of moral turpitude or a felony involving fraud, breach of trust, or misappropriation; or (v) a determination that the executive is in material violation of our Substance Abuse Policy. |
Mr. Greco voluntarily retired from his position as Chief Executive Officer and from the Board of Directors effective September 10, 2023. Pursuant to Section 4(g) of the Employment Agreement between Mr. Greco and the Company dated March 28, 2016, Mr. Greco did not receive any compensation in connection with his retirement.
Mr. McDonell's employment with the Company ended December 1, 2023, and he received compensation for separation without cause pursuant to Section 4(d) of the Employment Agreement between Mr. McDonell and the Company dated March 15, 2022. See "--Summary Compensation Table" for the total of amounts paid to Mr. McDonell pursuant to that agreement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive | | Voluntary
Termination without Good Reason or
Involuntary
Termination for Due
Cause (a) | | Retirement | | Disability | | Death | | Involuntary Termination
without Due Cause or
Voluntary Termination
for Good Reason not related to a Change in
Control (b) | | Involuntary
Termination without
Due Cause or Voluntary
Termination for Good Reason related to a
Change in Control (c) | | Mr. O'Kelly | | | | | | | | | | | | | | Cash Severance (d) | | $ | — | | | $ | — | | | $ | 2,812,500 | | | $ | 2,812,500 | | | $ | 4,218,750 | | | $ | 5,625,000 | | | Stock Incentives (e) (f) | | — | | | — | | | 13,974,771 | | | 13,974,771 | | | 13,974,771 | | | 13,974,771 | | | Other Benefits (g) | | — | | | — | | | 285,000 | | | 1,125,000 | | | 62,550 | | | 62,550 | | | | | $ | — | | | $ | — | | | $ | 17,072,271 | | | $ | 17,912,271 | | | $ | 18,256,071 | | | $ | 19,662,321 | | | Mr. Grimsland | | | | | | | | | | | | | | Cash Severance (d) | | $ | — | | | $ | — | | | $ | 776,250 | | | $ | 1,248,750 | | | $ | 675,000 | | | $ | 2,497,500 | | | Stock Incentives (e) (f) | | — | | | — | | | 2,862,978 | | | 2,862,978 | | | 2,862,978 | | | 2,862,978 | | | Other Benefits (g) | | — | | | — | | | 285,000 | | | 675,000 | | | 50,033 | | | 50,033 | | | | | $ | — | | | $ | — | | | $ | 3,924,228 | | | $ | 4,786,728 | | | $ | 3,588,011 | | | $ | 5,410,511 | | | Mr. Iskander | | | | | | | | | | | | | | Cash Severance (d) | | $ | — | | | $ | — | | | $ | 385,700 | | | $ | 669,900 | | | $ | 406,000 | | | $ | 406,000 | | | Stock Incentives (e) (f) | | — | | | — | | | 792,780 | | | 792,780 | | | 61,274 | | | 938,336 | | | Other Benefits (g) | | — | | | — | | | 285,000 | | | 406,000 | | | 15,000 | | | 15,000 | | | | | $ | — | | | $ | — | | | $ | 1,463,480 | | | $ | 1,868,680 | | | $ | 482,274 | | | $ | 1,359,336 | | | Mr. Word | | | | | | | | | | | | | | Cash Severance (d) | | $ | — | | | $ | — | | | $ | 690,000 | | | $ | 1,100,000 | | | $ | 1,030,545 | | | $ | 2,220,000 | | | Stock Incentives (e) (f) | | — | | | — | | | 474,996 | | | 474,966 | | | 148,974 | | | 1,078,705 | | | Other Benefits (g) | | — | | | — | | | 285,000 | | | 600,000 | | | 50,033 | | | 50,033 | | | | $ | — | | | $ | — | | | $ | 1,449,996 | | | $ | 2,174,966 | | | $ | 1,229,552 | | | $ | 3,348,738 | | | Ms. Finley | | | | | | | | | | | | | | Cash Severance (d) | | $ | — | | | $ | — | | | $ | 598,000 | | | $ | 962,000 | | | $ | 975,971 | | | $ | 1,924,000 | | | Stock Incentives (e) (f) | | — | | | — | | | 423,243 | | | 423,243 | | | 241,496 | | | 1,114,496 | | | Other Benefits (g) | | — | | | — | | | 285,000 | | | 520,000 | | | 38,175 | | | 38,175 | | | | $ | — | | | $ | — | | | $ | 1,306,243 | | | $ | 1,905,243 | | | $ | 1,255,642 | | | $ | 3,076,671 | | | Mr. Szilagyi | | | | | | | | | | | | | | Cash Severance (d) | | $ | — | | | $ | — | | | $ | 632,500 | | | $ | 1,017,500 | | | $ | 550,000 | | | $ | 2,035,000 | | | Stock Incentives (e) (f) | | — | | | — | | | 135,487 | | | 135,487 | | | 45,162 | | | 480,550 | | | Other Benefits (g) | | — | | | — | | | 285,000 | | | 550,000 | | | 41,415 | | | 41,415 | | | | $ | — | | | $ | — | | | $ | 1,052,987 | | | $ | 1,702,987 | | | $ | 636,577 | | | $ | 2,556,965 | | | Mr. Cushing | | | | | | | | | | | | | | Cash Severance (d) | | $ | — | | | $ | — | | | $ | 741,750 | | | $ | 1,193,250 | | | $ | 1,239,312 | | | $ | 2,386,500 | | | Stock Incentives (e) (f) | | — | | | 290,320 | | | 478,963 | | | 478,963 | | | 290,320 | | | 1,195,700 | | | Other Benefits (g) | | — | | | — | | | 285,000 | | | 645,000 | | | 45,266 | | | 45,266 | | | | $ | — | | | $ | — | | | $ | 1,505,713 | | | $ | 2,317,213 | | | $ | 1,574,898 | | | $ | 3,627,466 | |
(a)Voluntary termination without Good Reason or termination for Due Cause makes an executive ineligible for any employment agreement benefits other than any rights the executive may have under the normal terms of other benefit plans and receipt of accrued but unpaid base salary. 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 breach of the executive’s obligations under the agreement or a material violation of any code or standard of conduct applicable to our officers that has not been cured following notice if applicable; (ii) a material violation of the loyalty obligations as provided in the agreement; (iii) the executive’s willful engagement in bad faith conduct that is demonstrably and materially injurious to us; (iv) the commission or indictment of a crime of moral turpitude or a felony involving fraud, breach of trust, or misappropriation; or (v) a determination that the executive is in violation of our Substance Abuse Policy.
| | (b) | The employment agreements of our NEOs, except for Ms. Schechtman, provide that the executive’s employment is deemed to be terminated by us without Due Cause if the executive elects to terminate his employment for Good Reason. The term "Good Reason" is defined in the agreements as: (i) a material diminution in the executive’s total direct compensation; (ii) a material diminution in the executive’s authority, duties or responsibilities or those of the executive’s supervisors; (iii) the termination of the Executive Incentive Plan without a replacement plan or the material reduction of the executive’s benefits without a similar reduction for other executives;(b)The employment agreements of our NEOs employed on the last day of fiscal 2023, other than Mr. Iskander, provide that the executive’s employment is deemed to be terminated by us without Due Cause if the executive elects to terminate his employment for Good Reason. The term "Good Reason" is defined in the agreements as: (i) a material diminution in the executive’s base salary or target bonus amount for Mr. O'Kelly and total direct compensation, as defined in the employment agreements, for other executives; (ii) a material diminution in the executive’s authority, duties or responsibilities or for executives other than Mr. O'Kelly, those of the executive’s supervisors; (iii) for Mr. O'Kelly, if he no longer reports directly to the Board; (iv) except for Mr. O'Kelly, the termination of the Executive Incentive Plan without a replacement plan or the material reduction of the executive’s benefits without a similar reduction for other executives; (v) requiring the executive to be based more than 60 miles from our office at which the executive was principally employed immediately prior to the date of the relocation; and (vi) for Mr. O'Kelly, delivery by the Company of a notice of non-renewal of the agreement, failure to grant sign-on equity in accordance with the terms of the agreement, a material reduction in duties or responsibilities that is inconsistent with his position within a public company, including if he does not report to the board of directors of the highest parent of the surviving entity following a Change in Control, and any other action or inaction that constitutes a material breach by the Company of the terms of the agreement. Upon termination by us without Due Cause, Mr. Iskander is entitled to receive a cash "termination payment" which equals the sum of his annual base salary plus the pro rata portion of any annual bonus that would have been payable to him provided that criteria for such bonus other than continued employment are satisfied. For other executives, except for Mr. O'Kelly, upon termination of employment by us other than for Due Cause or by the executive for Good Reason the executive is entitled to receive a cash "termination payment" which equals the sum of the executive’s annual base salary and an amount equal to the average annual bonus payment over the past three years (or shorter period of employment as applicable). Mr. O'Kelly is entitled to an amount equal to one and one half times his annual base salary and an amount equal to one and one half times his average annual bonus payment over the past three years, provided that if the date of such termination occurs prior to the payment of bonuses with respect to fiscal year 2024, if any, he shall receive an amount equal to one and one half times the target annual bonus payment provided in his agreement. The value of the bonus amount included for each executive in the cash severance payment is the average bonus paid for 2020, 2021 and 2022 (or shorter period of employment as applicable, or for Mr. O'Kelly, one and one half times the target bonus payment). In addition, the executive will receive outplacement services and certain medical benefits coverage as described in note (g) below. (c)If, for Mr. O'Kelly within 3 months prior to or within 12 months following, and for the other executives, within 12 months following a Change in Control (as defined in the employment agreements), the executive’s employment is terminated by us other than for Due Cause or by the executive for Good Reason, the executive will be entitled to a Change in Control Termination Payment equal to, for Mr. Iskander (i) his annual base salary plus (ii) the pro rata portion of any annual bonus that would have been payable to him provided that criteria for such bonus other than continued employment are satisfied and, for the other executives, (a) two times the executive’s base salary plus (b) two times the amount equal to the executive’s target bonus. The cash severance amount would be subject to a downward adjustment pursuant to the “net best” provisions of his employment agreement, and the benefits also apply to involuntary termination or termination with Good Reason within three months prior to a Change in Control in contemplation of the Change in Control. (d)In the case of voluntary termination without Good Reason or termination for Due Cause, the executive would be ineligible to receive a cash severance payment. In accordance with the employment agreements, if the executive’s employment is terminated on account of death, the executive’s beneficiary or estate is entitled to receive a lump sum payment equivalent to the executive’s annual base salary and target bonus amount. In the event that the executive is terminated on account of disability, the employment agreements provide that the executive is entitled to receive a cash severance amount equivalent to 30 percent of the executive’s annual base salary and an amount equal to the executive’s annual target bonus severance payments are contingent upon execution and non-revocation of a release as provided in the agreements. (e)Amounts shown here are calculated as the differences between the exercise price, if any, of the outstanding stock-based incentives and the closing price of our stock on the last day our stock was traded during 2023. (f)The terms of the executives’ restricted stock unit agreements provide that in the event of termination of employment due to death or disability, any remaining previously unvested time based more than 60 miles from our office at which the executive was principally employed immediately prior to the date of the relocation. Except for Mr. Greco and Ms. Schechtman, upon termination of employment by us other than for Due Cause or by the executive for Good Reason the executive is entitled to receive a cash "termination payment" which equals the sum of the executive’s annual base salary and an amount equal to the average annual bonus payment over the past three years. Mr. Greco is entitled to an amount equal to one and one half times his annual base salary and an amount equal to one and one half times his average annual bonus payment over the past three years, in addition to a pro-rated annual bonus for the year in which his employment is terminated. The value of the bonus amount included for each executive in the cash severance payment is the average bonus paid for fiscal years 2014, 2015 and 2016. For termination of employment by us without Due Cause, Ms. Schechtman is entitled to an amount equal to one year of base salary plus an amount equal to the pro rata portion of any bonus that would have been payable for the fiscal quarters prior to her termination of employment. In addition, the executive will receive outplacement services and certain medical benefits coverage. |
| | (c) | If, within 12 months of a Change in Control (as defined in our 2014 LTIP or the 2004 LTIP in the case of Mr. Tyson), the executive’s employment is terminated by us other than for Due Cause or by the executive for Good Reason, the executive will be entitled to a Change in Control Termination Payment equal to (i) two times the executive’s base salary plus (ii) two times the amount equal to the executive’s target bonus ( or, in the case of Ms. Schechtman, an amount equal to one year of base salary plus an amount equal to the pro rata portion of any bonus that would have been payable for the fiscal quarters prior to her termination of employment.) |
| | (d) | In the case of voluntary termination without Good Reason or termination for Due Cause, the executive would be ineligible to receive a cash severance payment. In accordance with the employment agreements, if the executive’s employment is terminated on account of death, the executive’s beneficiary or estate is entitled to receive a lump sum payment equivalent to the executive’s annual base salary and target bonus amount (or an amount equal to the pro rata portion of any bonus that would have been payable for the fiscal quarters prior to her termination of employment in the case of Ms. Schechtman.) In the event that the executive is terminated on account of disability, the employment agreements provide that the executive is entitled to receive a cash severance amount equivalent to 30 percent of the executive’s annual base salary and an amount equal to the executive’s annual target bonus (or an amount equal to the pro rata portion of any bonus that would have been payable for the fiscal quarters prior to her termination of employment in the case of Ms. Schechtman.) |
| | (e) | Amounts shown here are calculated as the differences between the exercise price, if any, of the outstanding stock-based incentives and the closing price of our stock on the last day our stock was traded during Fiscal 2016 ($169.12). |
| | (f) | Except in the case of Mr. Greco's April 2016 Inducement SARs, the terms of the executives’ SAR and restricted stock unit agreements provide that upon termination of employment due to death or disability, any remaining previously unvested time-based SARs and RSUs will vest immediately. Mr. Greco's April 2016 Inducement SARs will vest on a pro-rata basis commensurate with the time employed prior to death or disability during the vesting period. Performance-based SARs and RSUs will vest immediately. PSUs will vest based on our performance at the end of the applicable performance period on a pro-rata basis commensurate with the time employed prior to death or disability during the performance period. In the event of retirement, which requires 10 years of service and a minimum age of 55 years, time based shares will be forfeited. PSUs vest based on our performance at the end of the applicable performance period on a pro rata basis commensurate with the time employed prior to retirement during the performance period, subject to certain noncompete restrictions. In the event of involuntary termination without Due Cause, or voluntary termination for Good Reason, a pro rata portion of the performance based RSUs will vest at the performance vesting date on a pro rata basis based on the amount of time employed during the performance period. In the event of such termination following a Change in Control, all time based RSUs will vest and become exercisable if the acquiring entity does not assume, convert or replace the LTI grants or upon termination of employment without Due Cause within 24 months following the Change in Control event. Performance based RSUs will vest at the same time on a pro rata basis based on the amount of time employed during the performance period and our actual performance as of the most recent termination date.(g)For Disability, Other Benefits consist of the amount the executives would receive under our qualified plan. For Death, Other Benefits represent life insurance benefits. For Involuntary Termination, Other Benefits include $15,000 outplacement costs and the cost of providing one year of health care coverage (18 months in the case of Mr. O'Kelly) to the executive at the same cost as active employees.
CEO Pay Ratio As a result of certain regulations adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following disclosure of the ratio of our CEO’s compensation to that of our median employee. Our CEO to median employee pay ratio is calculated in accordance with the guidelines established by the SEC. We identified our median employee using total annual cash compensation of all associates employed with us on December 30, 2023. We included all U.S. associates in our analysis of the median employee, including part time, full time, and seasonal associates. After identifying our median employee, we then calculated annual total compensation in accordance with the same methodology as used to calculate total compensation for our CEO in the Summary Compensation table. During 2023, we had a change in the individual serving in the CEO role. We selected the CEO who was in role for the majority of year and did not have atypical items such as sign-on compensation or severance impacting his 2023 compensation. As we had two CEOs serve during 2023, we have aggregated their 2023 compensation for purposes of this calculation. This calculation includes non-recurring items such as sign-on compensation. Annual Total Compensation for the CEO was $13,579,380 for 2023 and the median team member compensation was $23,923. The result of this analysis is a ratio of approximately 568:1. The Compensation Committee continuously reviews both the compensation of our CEO, our NEOs and our pay practices for all associates to ensure internal equity is appropriate. A significant portion of our CEO’s compensation is performance based and thus the ratio may vary each year consistent with the Company’s ultimate performance outcomes and how those outcomes connect to our performance-based compensation programs. Pay Versus Performance Disclosure Provided below is the Company’s “pay versus performance” disclosure as required pursuant to Item 402(v) of Regulation S-K promulgated under the Exchange Act. This disclosure has been prepared in accordance with Item 402(v) and does not necessarily reflect value actually realized by the executives or how the Compensation Committee evaluates compensation decisions in light of Company or individual performance. Please refer to CD&A for a discussion of our executive compensation program objectives and the ways in which we align executive compensation pay with performance.
There is one primary difference between the calculation of the components of "compensation actually paid" (or "CAP") and "summary compensation table" (or "SCT") total compensation: | | | | | | | | | | SCT Total | CAP | | Stock and Option Awards | Grant date fair value of stock and option awards granted during the year | Year over year change in the fair value of stock and option awards that are unvested as of the end of the applicable performance period on a pro-rata basis commensurate with the time employed prior to deathyear, or disabilityvested or were forfeited during the performance period, except for Mr. Greco's equity incentive RSUs which will vest immediately. In the event of retirement, which requires 10 years of service and a minimum age of 55 years, time-based shares will continue to vest commensurate with the vesting period of the award. Performance-based SARs and RSUs vest based on our performance at the end of theyear, including dividend equivalents, as applicable performance period on a pro-rata basis commensurate with the time employed prior to retirement during the performance period, except for Mr. Cushing's September 2016 RSUs which will forfeit. In the event of involuntary termination without Due Cause, or voluntary termination for Good Reason, a pro rata portion of the performance-based SARs and RSUs will vest immediately as of the date of the executive's termination of employment based on the amount of time employed during the performance period and our performance as of the most recently completed fiscal quarter, except for Mr. Cushing's September 2016 RSUs which will still vest on the original vesting date, in an amount based on the achievement of the performance goals for any entirely completed 2017 and 2018 performance periods. All time-based SARs and RSUs will vest and become exercisable only if the acquiring entity does not exchange or replace the LTI grants or upon termination of employment without Due Cause within 24 months following the Change in Control event. Performance-based SARs and RSUs will vest at the same time on a pro rata basis based on the amount of time employed during the performance period and our performance as of the most recently completed fiscal quarter, except for Mr. Cushing's September 2016 RSUs which will vest based on the following: (i) if the Change in Control event occurs prior to the end of the 2017 performance period, the number of awards will be calculated based on the amount of time he was employed during the performance period, (ii) if the Change in Control event occurs during the 2018 performance period, the number of awards will be calculated based on actual 2017 performance and the amount of time he was employed during the 2018 performance period, and (iii) if the Change in Control event occurs after the 2018 performance period but before the vesting date, the number of awards will be calculated based on actual 2017 and 2018 performance. |
Metrics Used for Linking Pay and Performance The following is a list of performance measures, which in our assessment represent the most important performance measures used by the Company to link compensation actually paid to the NEOs for 2023. Each metric below is used for purposes of determining payouts under either our short-term incentive program or vesting of our PSU awards. Please see CD&A for a further description of these metrics and how they are used in the Company’s executive compensation program. | | | | Comparable Store Sales Growth | (g) | Amounts provided for continued medical coverage represent our cost of providing one year of health care coverage to the executive at the same cost as active employees. |
| GAAP Operating Income | (h) | Disability amounts shown consist of the amount the executives would receive under our qualified plan. |
| Free Cash Flow | (i) | The employment of Messrs. Norona and Sherman terminated on December 31, 2016. According to the terms of their employment agreements, Mr. Norona received total severance benefits valued at $904,399, consisting of cash severance of $698,421, stock incentives valued at $184,382, a COBRA premium offset for one year in the amount of $9,596, and outplacement services valued at $12,000; and Mr. Sherman received total severance benefits valued at $1,115,182, consisting of cash severance of $857,849, stock incentives valued at $235,737, a COBRA premium offset for one year in the amount of $9,596, and outplacement services valued at $12,000.
Relative Total Shareholder Return (RTSR) |
Comparable Store Sales Growth and GAAP Operating Income were selected as the Company-selected measures for the Pay versus Performance table that follows because these metrics have the strongest alignment with the key attributes of strategic and operating plans and help drive the creation of long-term shareholder value.
Pay Versus Performance Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | SCT Total for CEO (1) | SCT Total for Former CEO (1) | CAP to Current CEO (2) | CAP to Former CEO (2) | Average SCT Total for Other NEOs (1) | Average CAP to Other NEOs (2) | Value of Initial Fixed $100 Investment Based on: | GAAP Net Income ($m) | Company Selected Measure | | Total Share-holder Return | Peer Group Total Share-holder Return (3) | Comp. Store Sales Growth | GAAP Operating Income ($m) | | 2023 | $9,439,086 | $ | 4,139,044 | | $ | 9,853,745 | | $(3,934,421) | $2,163,565 | $875,625 | $41.73 | $162.36 | $30 | (0.3) | % | $114 | | 2022 | – | $ | 8,384,948 | | – | $(7,267,775) | $2,008,124 | $(169,402) | $98.46 | $114.02 | $502 | 0.3 | % | $754 | | 2021 | – | $ | 10,052,271 | | – | $24,632,043 | $2,684,996 | $4,775,021 | $155.06 | $173.50 | $616 | 10.7 | % | $902 | | 2020 | – | $ | 8,056,454 | | – | $7,289,919 | $1,975,014 | $2,044,128 | $100.25 | $145.42 | $493 | 2.4 | % | $750 |
PROPOSAL NO. 2(1) 2023 CEOs are Shane O’Kelly (current) and Thomas R. Greco (former); other NEOs are Ryan P. Grimsland, Anthony A. Iskander, Jeffrey W. Shepherd, Herman L. Word, Jr., Tammy M. Finley, Stephen Szilagyi, Robert B. Cushing, and Jason B. McDonell; 2022 CEO is Thomas R. Greco; other NEOs are Jeffrey W. Shepherd, Robert B. Cushing, Herman Word and Reuben E. Slone; 2021 CEO is Thomas R. Greco; other NEOs are Jeffrey W. Shepherd, Robert B. Cushing, Reuben E. Slone, and Jason B. McDonell; 2020 CEO is Thomas R. Greco; other NEOs are Jeffrey W. Shepherd, Robert B. Cushing, Michael T. Broderick, and Reuben E. Slone.
STOCKHOLDER ADVISORY VOTE TO APPROVE THE COMPENSATION(2) The dollar amounts reported represent CAP, as computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. In accordance with SEC rules, the following adjustments were made to SCT total compensation to determine the CAP values:
OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
Reconciliation of SCT to CAP for CEO:
At | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal Year 2023 | Fiscal Year 2022 | Fiscal Year 2021 | Fiscal Year 2020 | CEO (O’Kelly) | CEO (Greco) | Avg. Other NEOs | CEO (Greco) | Avg. Other NEOs | CEO (Greco) | Avg. Other NEOs | CEO (Greco) | Avg. Other NEOs | | SCT Total | $9,439,086 | $4,139,044 | $2,163,565 | $8,384,948 | $2,008,124 | $10,052,271 | $2,684,996 | $8,056,454 | $1,975,014 | Minus SCT Equity | $8,117,093 | $3,000,021 | $1,268,778 | $6,500,022 | $1,087,542 | $6,000,025 | $987,593 | $5,559,210 | $922,388 | Plus End of Year Fair Value of Equity Granted During FY Outstanding and Unvested at End of Year | $8,530,502 | – | $517,216 | $3,443,902 | $635,235 | $10,501,631 | $1,685,480 | $8,192,754 | $1,359,352 | Plus (Minus) Change in Fair Value from End of Prior Year to End of Year of Awards Granted in Any Prior Fiscal Year Outstanding and Unvested at End of Year | – | $(4,557,437) | $(328,064) | $(10,813,511) | $(1,485,175) | $10,287,185 | $1,381,805 | $(2,693,536) | $(313,257) | Plus (Minus) Change in Fair Value from End of Prior Year to Vesting Date of Awards Granted in Any Prior Fiscal Year that Vested During the Fiscal Year | – | $(516,006) | $(65,622) | $(1,783,092) | $(240,045) | $(209,019) | $10,333 | $(706,543) | $(54,593) | Minus Fair Value at End of Prior Year of Awards Granted in Prior Year that were Forfeited During the Fiscal Year | – | – | $142,692 | – | – | – | – | – | – | | Compensation Actually Paid | $9,853,745 | $(3,934,421) | $875,625 | $(7,267,775) | $(169,402) | $24,632,043 | $4,775,021 | $7,289,919 | $2,044,128 |
EOY = End of Year; BOY = Beginning of Year, SCT = Summary Compensation Table, CAP = Compensation Actually Paid
The fair value of option awards was determined using a Black-Scholes option-pricing model. The fair value of RSUs used to calculate CAP was based on the 2016 Annual MeetingCompany's closing stock price on each valuation date, including accrued dividend equivalent units. The fair value of Stockholders, nearly 83 percentPSUs used to calculate CAP assumes estimated performance results as of the shares votedend of each reporting year for financial metrics (average annual comparable store sales growth and return on invested capital, which were castperformance measures in supportour 2018, 2019, 2020, and 2021 PSU awards) and a Monte Carlo simulation valuation model for market metrics (which were relative TSR vs. a peer group for the 2018, 2019, and 2020 PSUs and relative TSR vs. the constituents of our compensation programthe S&P 500 for executive officers. Stockholders previously votedthe 2021, 2022, and 2023 PSUs), in accordance with FASB ASC 718. Fair values include accrued dividend equivalent units.
(3) Reflects total shareholder return indexed to conduct$100 for the S&P 500 Retailing Index, which is an advisory vote annually as a means for us to obtain information on investor sentiment about our executive compensation philosophy and practices. We encourage you to review the Compensation Discussion and Analysis section of this Proxy Statement and vote to approve the compensation of our named executive officers as disclosed therein andindustry line peer group reported in the accompanying tablesperformance graph included in the Company’s 2023 Annual Report on Form 10-K.
Relationship between Company TSR and narrative discussion contained in this Proxy Statement. We are providing this opportunity to vote onPeer Group TSR; CAP and Company TSR The graphs below illustrate the compensation ofrelationship between our named executive officers as required by Section 14A of the Securities Exchange Act of 1934. Although your vote is advisory and not binding on our Board, our Compensation Committee or us, the BoardTSR and the Board’s Compensation Committee will carefully consider the voting results and take them into consideration when making future decisions regarding executive compensation policies and procedures. It is expected that the next say-on-pay vote will occur at the 2018 annual meeting of stockholders. We have a long history of delivering solid strategic and financial results for our stockholders and serving our customers and the community. The executive compensation programs have played a key role in our ability to attract and retain a highly experienced, successful team to manage our Company and drive these strategic and financial results. We believe our executive compensation programs are structured in the best manner possible to support us and our business objectives,Peer Group TSR, as well as to supportthe relationship between CAP and our cultureTSR for the CEO and traditions. Weother NEOs. For reference, SCT total compensation values for each year are poised to provide an engaged work force and to deliver strong resultsalso shown. As the graphs below illustrate, CAP amounts for our stockholders, our customersCEO and other NEOs are strongly aligned with the communities in which we operate.Company's TSR, as intended.
We believe our executive compensation programs strike the appropriate balance
Relationship between utilizing responsible, measured pay practicesCAP and effectively incentivizing our executives to dedicate themselves fully to value creation for our stockholders. This balance is evidenced by the following:GAAP Net Income
The compensationgraph below reflects the relationship between the CEO and Average Other NEO CAP and our GAAP Net Income. GAAP net income is not used as a metric in either our short-term or long-term incentive plans.
Relationship between CAP and Company-Selected Measures
The graph below reflects the relationship between CEO and Average Other NEO CAP versus Comp Store Sales Growth and GAAP Operating Income. Each of our executives is based on a designthese measures determined one third of 2023 AIP and are important top-line and profitability measures that aims to align pay with both the attainment of annual operational and financial goals, which the Compensation Committee establishes, and sustainedsupport long-term shareholder value creation. Our compensation programs are substantially tied into
Information Concerning our key business objectives and the success of our stockholders. If the value we deliver to our stockholders declines, so does the value of the compensation we deliver to our executives.Executive Officers We maintain high levels of corporate governance oversight over our executive pay programs.
We closely monitor the compensation programs and pay levels of executives from companies of similar size and complexity so that we may ensure that our compensation programs are within the norm of a range of market practices.
Our Compensation Committee, in conjunction with our Nominating and Corporate Governance Committee and senior management, engages in a talent review process annually to address succession and executive development for our Chief Executive Officer and other key executives.
The Board strongly endorses our executive compensation programs and recommends that the stockholders vote in favor of the following resolution:
"RESOLVED, that the compensation of our named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the "Compensation Discussion and Analysis," compensation tables and narrative discussion contained in this Proxy Statement, is hereby APPROVED."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS SECTION, THE ACCOMPANYING COMPENSATION TABLES AND NARRATIVE DISCUSSION CONTAINED IN THIS PROXY STATEMENT.
INFORMATION CONCERNING OUR EXECUTIVE OFFICERS
The following table provides information about our executive officers as of March 20, 2017. | | | | | | | | | | | | | | | | Name | | Age | | Position | | Shane M. O'Kelly | | 55 | | | | Name | | Age | | Position | Thomas R. Greco | | 58 | | President and Chief Executive Officer | Robert B. CushingElizabeth E. Dreyer | | 61 | | 63 | ExecutiveSenior Vice President, ProfessionalController and Chief Accounting Officer | | Tammy M. Finley | | 57 | | 50 | Executive Vice President, General Counsel and Corporate Secretary | Thomas B. OkrayRyan P. Grimsland | | 46 | | 54 | Executive Vice President, Chief Financial Officer | Charles E. TysonKristen L. Soler | | 47 | | 55 | Executive Vice President, Merchandising, Marketing and ReplenishmentChief Human Resources Officer | William H. CarterStephen J. Szilagyi | | 60 | | 46 | SeniorExecutive Vice President, Independent BusinessChief Supply Chain Officer | Natalie S. SchechtmanHerman L. Word, Jr. | | 49 | | 46 | SeniorExecutive Vice President, Human Resources | Jeffrey W. Shepherd | | 44 | | Senior Vice President, ControllerU.S. Stores and Chief Accounting OfficerIndependents |
Our executive officers are elected by and serve at the discretion of our Board. There are no family relationships among any of our executive officers. Set forth below is a brief description of the business experience of our executive officers other than Mr. Greco,O'Kelly, who is also a director and whose business experience is set forth in the “Nominees for Election to Our Board” section of this Proxy Statement.
Mr. Cushing, ExecutiveMs. Dreyer
Senior Vice President, Professional,Controller and Chief Accounting Officer Ms. Dreyer joined usAdvance in January 2014 via the acquisition of GPI, which included its wholly owned subsidiary Worldpac,2024 from Amyris, Inc. ("Worldpac"), a public biotechnology company, where she had served since October 2022 as Chief Accounting Officer and has held his current position since August 2016. Mr. Cushing is responsible for the operations of our professional sales team in addition to Worldpac and wholly owned subsidiary Autopart International, Inc. Mr. Cushing joined Worldpac via the acquisition of Metrix Parts Warehouse in 1999 and was named Worldpac'sController. She previously served as Senior Vice President and CEO inChief Accounting Officer of Travel + Leisure Co., a public vacation ownership and exchange company, from March 2018 to October 2022, and as Vice President, Controller and Chief Accounting Officer of Edgewell Personal Care Company, a public multinational consumer products company (formerly Energizer Holdings) from January 2008. Prior2015 to serving as President and CEO, Mr. CushingMarch 2018. Ms. Dreyer also served as Executive Vice President, SalesInterim Chief Financial Officer of Edgewell from December 2017 to February 2018. Ms. Dreyer has over 30 years of experience, having begun her career at Deloitte, a provider of audit, consulting, tax and Operations for the U.S.advisory services, and Canada from 1999 to 2007. Prior to joining Worldpac, Mr. Cushing held executive-level sales, marketinghaving served in a variety of senior roles in accounting, finance and operations positions with Metrix Parts Warehouse, Inc., Interco Parts Corporationinternal audit. She holds a B.S. in Business and Robert Bosch Corporation.is a Certified Public Accountant.
Ms. Finley, Executive Vice President, General Counsel and Corporate Secretary Ms. Finley joined usAdvance in 1998 and has held her current positionserved as Executive Vice President, General Counsel and Corporate Secretary since May 2016. From January 2015 to May 2016, she served as Executive Vice President, Human Resources, General Counsel and Corporate Secretary. From March 2013 to January 2015, shePreviously, Ms. Finley served as Senior Vice President, Human Resources. From March 2010 toResources, from March 2013 she servedto January 2015, and as Vice President, Employment Counsel and Government Affairs. From September 2007Affairs from March 2010 to March 2010, she served as Vice President, Employment Counsel. From January 2003 to September 2007, she served as Vice President, Staffing2013. Earlier in her career with Advance, Ms. Finley held leadership roles in legal, human resources and Team Member Relations. From March 1998 to January 2003, she served as Assistant Vice President, Human Resources.communications. Prior to joining Advance, Ms. Finley worked as a labor and employment attorney with The Center for Employment Law, PC, and as a Staff Attorney with the Virginia Supreme Court. Ms. Finley has also served on the board of directors of American National Bankshares Inc., a publicly traded bank holding company, since September 2017.
Mr. Okray, Grimsland Executive Vice President, Chief Financial Officer Mr. Grimsland joined usAdvance in October 2016.November 2023 as Executive Vice President, Chief Financial Officer. Prior to joining Advance, Mr. OkrayGrimsland served at Lowe’s Companies, Inc. (“Lowe’s”), a leading home improvement retailer, in a variety of senior finance roles since 2006, most recently as Senior Vice President, Strategy and Transformation since January 2023 and Senior Vice President Finance – Corporate Finance, Enterprise Strategy & Treasurer from February 2021 until January 2023. Previously, Mr. Grimsland served at Lowe’s as Vice President Finance – Global Customer Fulfillment, of Amazon.com, Inc. (“Amazon”), an Internet retailer,FP&A from January 2016March 2020 to October 2016, and asFebruary 2021, Vice President Finance North American– U.S. Retail Operations of Amazon, from June 2015November 2018 to January 2016.February 2020 and Vice President Finance – International & Business Development from August 2017 to October 2019. Prior to joining Amazon,Lowe’s, Mr. Okray was employed by General Motors Company,Grimsland held positions in operations and finance at Haverty’s Furniture Companies Inc., a global automotive company, from July 1989 to June 2015, infurniture retailer, and UBS Group AG, a variety of financemultinational investment bank and supply chain related roles, culminating in his position as CFO, Global Product Development, Purchasing & Supply Chain, from January 2010 to June 2015.financial services company.
Mr. Tyson,Ms. Soler
Executive Vice President, Merchandising, Marketing and ReplenishmentChief Human Resources Officer Ms. Soler joined usAdvance in March 2008July 2017 and has served in his currentheld the position since June 2016. From April 2013 to June 2016, he served asof Executive Vice President, Merchandising, Marketing and Supply Chain. From August 2011 to April 2013, heChief Human Resources Officer since May 2023. Previously, Ms. Soler served recently as Senior Vice President, Merchandising and Marketing. From March 2008 to August 2011, he served as Senior Vice President, Merchandising. Prior to joining Advance, Mr. Tyson was the Senior Vice President, Merchandising and Technology with OfficeMax, Inc., from March 2005 to February 2008. Prior to joining OfficeMax, Mr. Tyson was President of Diversitech Group, an importer of hand and power tools from September 2001 to March 2005. He worked for Office Depot, Inc., from October 1997 to September 2001, where he held multiple positions with increasing responsibilities, including Senior Vice President, Merchandising and General Merchandising Manager; Senior Vice President, World Wide Global Sourcing; and Vice President, Divisional Merchandise Manager.
Mr. Carter, Senior Vice President, Independent Business, joined us in April 2011 and has served in his current role since February 2017. From April 2016 to February 2017, he served as Senior Vice President, Commercial and Operations Support. From December 2013 to April 2016, he served as Senior Vice President, Business Development and Integration. From July
2012 to December 2013, he served as Senior Vice President, Commercial and Operations Support. From July 2011 to July 2012, he served as Senior Vice President, Commercial and Field Operations Support. From April 2011 to July 2011, Mr. Carter served as Senior Vice President, DIY and Commercial Operations Support. Prior to joining Advance, Mr. Carter served as a partner at Bain & Company, a global management consulting firm, where he worked for more than 11 years. As a member of Bain's Global Industrial Goods and Retail practices, he led growth strategy, operations improvement and organizational projects. Prior to joining Bain, Mr. Carter served in the United States Navy.
Ms. Schechtman,Senior Vice President, Human Resources, joined us inwith human resources responsibility for Advance’s field and commercial teams from March 2019 to May 2016.2023 and responsibility for Advance’s supply chain and corporate functions from July 2017 to March 2019. Prior to joining Advance, Ms. SchechtmanSoler served in human resources leadership roles at PepsiCo Inc., a global food and beverage company, for almost 10four years, including Senior Director, Human Resources for Global Foodservice, a division of PepsiCo. She was responsible for the foodservice division’s talent strategy, recruitment, training and development, organizational health, and employee relations. She also held human resources leadership and business operation roles in PepsiCo’s Retail Beverages, Pepsi-Cola North America and within PepsiCo's Corporate division. She also worked as an employment attorney with the law firm Brown Raysman in New York from 2003 to 2006, handling corporate labor and employment legal issuesat Procter & Gamble, a consumer packaged goods company, for a variety of clients, including several large international corporations. Prior to Brown Raysman, she served in recruiting and talent management roles with The Estee Lauder Companies, FreeRide.com, LLC and Gundersen Partners, LLC.over 13 years.
Mr. Shepherd,SeniorSzilagyi Executive Vice President, Controller and Chief AccountingSupply Chain Officer Mr. Szilagyi joined us on March 1, 2017.Advance in January 2023 as Executive Vice President, Chief Supply Chain Officer. Prior to joining Advance, Mr. ShepherdSzilagyi most recently did freelance executive supply chain consulting work and served as Senior Vice President, Customer Solutions for MSC Industrial Supply Co., a large publicly traded industrial equipment distributor from May 2018 to November 2021. Prior to this role, Mr. Szilagyi served as a Principal of LogistiPoint Consulting, a consulting agency, and served for 15 years at Lowe’s Companies, Inc., a large publicly traded retailer specializing in home improvement, including as Senior Vice President of Distribution from August 2001 to January 2013 and Chief Supply Chain Officer from February 2013 to June 2016.
Mr. Word Executive Vice President, U.S. Stores and Independents Mr. Word joined Advance in February 2003 and has held a variety of leadership operational roles with the organization. He has served as Executive Vice President, U.S. Stores & Carquest Independents since September 2022. Prior to that role, he served as Division President, Carquest North America, where he was employed by General Motors Company from September 2010 to February 2017 in various accounting and finance roles, including Controller - General Motors Europe from July 2015 to February 2017, Director - Consolidation and SEC Reportingresponsible for leading Advance's independent business, from June 2013 to July 2015 and Director - Analysis and Reporting2019 through September 2022. Previously, Mr. Word served as a Regional Vice President from September 2010June 2014 to June 2013. Prior to joining2019. Earlier in his career with Advance, Mr. Word served as Regional Asset Protection Manager, a District Manager and a Store General Motors,Manager. Mr. Shepherd worked for ErnstWord began his career with Goodyear Tire & Young,Rubber Company, a public accounting firm, from October 1994 to September 2010. Mr. Shepherd is a certified public accountant.multinational tire manufacturer.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSecurity 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 20, 201725, 2024 by:
•each person or entity 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 20, 201725, 2024 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 Airport4200 Six Forks Road, Roanoke, Virginia 24012.Raleigh, North Carolina 27609. 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 73,818,77759,609,471 shares of our common stock outstanding at the Record Date,as of March 25, 2024 plus shares that may be issued or acquired within 60 days of March 20, 201725, 2024 through the exercise of vested stock awards.
| | | | | | | | | | | | | | | | | Shares beneficially owned | | Name of Beneficial Owner | | Number | | Percentage | | The Vanguard Group(a) | | 6,828,927 | | | 11.4 | % | | 100 Vanguard Blvd. | | | | | | Malvern, PA 19355 | | | | | | T. Rowe Price Associates, Inc. (b) | | 3,958,241 | | | 6.6 | % | | 100 East Pratt Street | | | | | | Baltimore, MD 21202 | | | | | | D.E. Shaw & Co., L.L.C.(c) | | 3,798,552 | | | 6.4 | % | | 1166 Avenue of the Americas, 9th Floor | | | | | | New York, NY 10036 | | | | | Directors, Executive Officers and Others(d) | | | | | | Carla J. Bailo | | 6,295 | | | * | | John F. Ferraro | | 18,617 | | | * | | Joan M. Hilson | | 3,926 | | | * | | Jeffrey J. Jones II | | 9,214 | | | * | | Eugene I. Lee, Jr. | | 85,719 | | | * | | Shane M. O'Kelly | | — | | | — | | | Douglas A. Pertz | | 17,178 | | | * | | Thomas W. Seboldt | | 3,000 | | | * | | Gregory L. Smith | | — | | | — | | | Sherice R. Torres | | 3,873 | | | * | | Arthur L. Valdez Jr. | | 5,085 | | | * | | A. Brent Windom | | 5,300 | | | * | | Thomas R. Greco | | 232,005 | | | * | | Ryan P. Grimsland | | — | | | — | | | Anthony A. Iskander | | 4,161 | | | * | | Jeffrey W. Shepherd | | 17,616 | | | * | | Herman L. Word, Jr. | | 10,494 | | | * | | Tammy M. Finley | | 29,423 | | | * | | Stephen J. Szilagyi | | 2,208 | | | * | | Robert B. Cushing | | 32,760 | | | * | | Jason B. McDonell | | 8,084 | | | * | | All executive officers and directors as a group (18 persons) | | 209,942 | | | * |
| | | | | | | | | | | Shares beneficially owned | | Name of Beneficial Owner | | Number | | Percentage | | | | | | | The Vanguard Group(a) | | 6,567,574 |
| | 8.9 | % | | 100 Vanguard Blvd. | | | | | | Malvern, PA 19355 | | | | | | | | | | | Wellington Management Company, LLP(b) | | 5,775,605 |
| | 7.8 | % | | 280 Congress Street | | | | | | Boston, MA 02210 | | | | | | | | | | | BlackRock, Inc.(c) | | 4,248,678 |
| | 5.7 | % | | 55 East 52nd Street | | | | | | New York, NY 10022 | | | | | | | | | | | | | | | | | Executive Officers, Directors and Others(d) | | | | | | John F. Bergstrom | | 16,166 |
| | * |
| | John C. Brouillard | | 26,953 |
| | * |
| | Brad W. Buss | | 988 |
| | * |
| | Fiona P. Dias | | 10,512 |
| | * |
| | John F. Ferraro | | 2,943 |
| | * |
| | Thomas R. Greco | | 41,197 |
| | * |
| | Adriana Karaboutis | | 1,860 |
| | * |
| | Eugene I. Lee, Jr. | | 2,502 |
| | * |
| | William S. Oglesby | | 19,743 |
| | * |
| | Reuben E. Slone | | 1,620 |
| | * |
| Jeffrey C. Smith (e) | | 2,826,272 |
| | 3.8 | % | | Thomas B. Okray | | — |
| | * |
| | Robert C. Cushing | | 5,058 |
| | * |
| | Charles E. Tyson | | 3,023 |
| | * |
| | Natalie S. Schechtman | | — |
| | * |
| | Michael A. Norona | | 60,740 |
| | * |
| | George E. Sherman | | 18,716 |
| | * |
| | All executive officers and directors as a group (20 persons) | | 3,058,129 |
| | 4.1 | % |
* Less than 1% | | (a) | Based solely on a Schedule 13G filed with the SEC on February 8, 2017 by The Vanguard Group, The Vanguard Group is the beneficial owner of 6,567,574 shares and has sole dispositive power of 6,439,561 shares and voting power of 114,279 shares. |
| | (b) | Based solely on a Schedule 13G filed with the SEC on February 9, 2017 by Wellington Management Company, LLP ("Wellington Management"), Wellington Management, in its capacity as investment advisor, may be deemed to beneficially own 5,775,605 shares which are held of record by clients of Wellington Management. |
| | (c) | Based solely on a Schedule 13G filed with the SEC on January 19, 2017 by BlackRock, Inc., BlackRock, Inc. is the beneficial owner of 4,248,678 shares and has sole dispositive power of 4,244,743 shares and voting power of 3,622,013 shares. |
(a)Based solely on a Schedule 13G/A filed with the SEC on February 13, 2024 by The Vanguard Group, The Vanguard Group is the beneficial owner of 6,828,927 shares and has sole dispositive power of 6,741,663 shares, shared dispositive power of 87,264 and shared voting power of 23,659.
(b)Based solely on a Schedule 13G filed with the SEC on February 14, 2024 by T. Rowe Price Associates, Inc.. T. Rowe Price Associates, Inc. is the beneficial owner of 3,958,241 shares and has sole dispositive power of 3,958,241 shares and sole voting power of 1,626,055 shares. (c)Based solely on a Schedule 13G/A filed with the SEC on March 4, 2024 D.E. Shaw & Co., L.L.C. D.E. Shaw & Co., L.L.C. is the beneficial owner of 3,798,552 shares and has shared dispositive and voting power of 2,989,506 shares; D.E. Shaw & Co. L.P. has shared dispositive power of 3,798,552 shares and shared voting power of 3,751,806 shares; and David E. Shaw has shared dispositive power of 3,798,552 shares and shared voting power of 3,751,806 shares. (d) The following table provides further detail regarding the shares beneficially owned by our directors and executive officers:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Shares beneficially owned | | | | Shares of our common stock issuable with respect to | | Name of Beneficial Owner | | DSUs | | Options exercisable
within 60 days of March 25, 2024 | | RSUs vesting
within 60 days of March 25, 2024 | | SARs exercisable
within 60 days of
March 25, 2024 | | Carla J. Bailo | | 5,085 | | | — | | | — | | | — | | | John F. Ferraro | | 16,592 | | | — | | | — | | | — | | | Joan M. Hilson | | 3,538 | | | — | | | — | | | — | | | Jeffrey J. Jones II | | 7,689 | | | — | | | — | | | — | | | Eugene I. Lee, Jr. | | 66,289 | | | — | | | — | | | — | | | Shane M. O'Kelly | | — | | | — | | | — | | | — | | | Douglas A. Pertz | | 9,833 | | | — | | | — | | | — | | | Thomas W. Seboldt | | — | | | — | | | — | | | — | | | Gregory L. Smith | | — | | | — | | | — | | | — | | | Sherice R. Torres | | 3,873 | | | — | | | — | | | — | | | Arthur L. Valdez Jr. | | 5,085 | | | — | | | — | | | — | | | A. Brent Windom | | — | | | — | | | — | | | — | | | Thomas R. Greco | | — | | | 51,855 | | | — | | | — | | | Ryan P. Grimsland | | — | | | — | | | — | | | — | | | Anthony A. Iskander | | — | | | 2,147 | | | — | | | — | | | Jeffrey W. Shepherd | | — | | | — | | | — | | | — | | | Herman L. Word, Jr. | | — | | | 5,442 | | | — | | | — | | | Tammy M. Finley | | — | | | 8,614 | | | — | | | — | | | Stephen J. Szilagyi | | — | | | 1,884 | | | — | | | — | | | Robert B. Cushing | | — | | | 10,208 | | | — | | | — | | | Jason B. McDonell | | — | | | — | | | — | | | — | | | All executive officers and directors as a group (18 persons) | | 117,984 | | | 18,626 | | | — | | | — | |
| | (d) | The following table provides further detail regarding the shares beneficially owned by our directors and executive officers: |
| | | | | | | | | | | | | | Shares beneficially owned | | | | Shares of our common stock issuable with respect to | | Name of Beneficial Owner | | DSUs | | RSUs to lapse within 60 days of March 20, 2017 | | SARs exercisable within 60 days of March 20, 2017 | | | | | | | | | | John F. Bergstrom | | 11,001 |
| | — |
| | — |
| | John C. Brouillard | | 15,727 |
| | — |
| | — |
| | Brad W. Buss | | 988 |
| | — |
| | — |
| | Fiona P. Dias | | 10,512 |
| | — |
| | — |
| | John F. Ferraro | | 2,443 |
| | — |
| | — |
| | Thomas R. Greco | | — |
| | 21,747 |
| | — |
| | Adriana Karaboutis | | 1,860 |
| | — |
| | — |
| | Eugene I. Lee, Jr. | | 1,272 |
| | — |
| | — |
| | William S. Oglesby | | 15,038 |
| | — |
| | — |
| | Reuben E. Slone | | 988 |
| | — |
| | — |
| | Jeffrey C. Smith | | 1,272 |
| | — |
| | — |
| | Thomas B. Okray | | — |
| | — |
| | — |
| | Robert B. Cushing | | — |
| | — |
| | 711 |
| | Charles E. Tyson | | — |
| | — |
| | — |
| | Natalie S. Schechtman | | — |
| | — |
| | — |
| | Michael A. Norona | | — |
| | — |
| | — |
| | George E. Sherman | | 580 |
| | — |
| | — |
| | All executive officers and directors as a group (20 persons) | | 61,681 |
| | 21,747 |
| | 6,653 |
|
| | (e) | Includes common shares owned directly by Starboard Value LP through certain managed accounts (the “Managed Accounts”), Starboard Value and Opportunity Master Fund LTD (“Starboard V&O Fund”), Starboard Value and Opportunity S LLC (“Starboard S LLC”), Starboard Value and Opportunity C LP (“Starboard C LP”), Starboard T Fund LP ("Starboard T LP"), Starboard Leaders Select I LP (Starboard Leaders Select I") and Starboard Leaders India LLC ("Starboard India LLC"). Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP LLC (“Starboard Value GP”), the general partner of Starboard Value LP, and as a member and member of the Management Committee of Starboard Principal Co GP LLC (“Principal GP”), the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities held in the Managed Accounts. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of the investment manager of Starboard V&O Fund, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities directly held by Starboard V&O Fund. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of the manager of Starboard S LLC, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities directly held by Starboard S LLC. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of the investment manager of Starboard T LP, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities directly held by Starboard T LP. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of the investment manager of Starboard Leaders Select I, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities directly held by Starboard Leaders Select I. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of the investment manager of Starboard India LLC, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities owned directly by Starboard India LLC. Mr. Smith expressly disclaims beneficial ownership of 2,825,000 shares in total, except to the extent of his pecuniary interest therein. |
STOCK OWNERSHIP GUIDELINES FOR DIRECTORS AND EXECUTIVE OFFICERS
Stock Ownership Guidelines for Directors and Executive Officers The following table summarizes the stock ownership guidelines are in place for our directors, NEOs and other key employees intended to further align the interests of our directors and members of management with the interests of our stockholders. | | | | | | | Title | Holding Requirements | | Chief Executive Officer | Stock valued at 6 times base salary | | Chief Financial Officer and/or President | Stock valued at 3 times base salary | | Executive Vice President / Senior Vice President | Stock valued at 2 times base salary | | Non-employee Director | Stock valued at 6 times their annual cash retainers |
The ownership requirement may be satisfied through beneficialthe following equity holdings:
•All vested stock holdings/shares owned outright that are currently held by a director or an executive •Unvested, time based RSUs •Shares or units held by a director or an executive in any deferral plan
Neither vested nor unvested stock options or SARs will count towards the ownership of our stock, DSUs, time-based restricted stock and RSUs, and vested but unexercised SARs. The ownership requirement for our CEO is six times his annual base pay. The ownership requirement for our President and CFO is three times their annual base pay and two times annual base pay for our Executive Vice Presidents and Senior Vice Presidents. Executives are expected to achieve their respective levels of stock ownership within five years of the date they enter the listed positions.threshold requirements. Individuals who do not achieve the required levels of ownership within the prescribed amount of time will be required to retain 50 percent
of the net shares received upon the exercise of any stock options or SARs or the vesting of any RSUs until the guideline ownership levels have been reached. Shares or units held by 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.
The Compensation Committee reviews the stock ownership guidelines and reviews progress toward meeting ownership requirements at least annually. Based on current ownership and anticipated future stock vesting, all executives have satisfied or are projected to satisfy their respective stock ownership requirements by their requisite ownership requirement dates. In order to further align the interests of directors with interests of our stockholders, each of our non-employee directors receives a portion of his or her annual retainer in the form of DSUs, which are held and deferred until his or her service as a director ceases. In addition, directors have the opportunity to defer all or part of their cash retainerretainers in the form of DSUs. Directors and executive officers are subject to our insider trading policy, which prohibits hedging with our stock and prohibits the pledging of our stock unless specified stringent requirements are met.
SECTIONDelinquent Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Reports 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.NYSE. Based solely on our review of copies of such forms received by us, orreports and 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 2016,2023, except that for each of George E. Sherman, Tammy M. Finleyone award to Mr. Lee and Charles E. Tyson, one purchase by Ms. Soler was not timely reported on Form 4 to report the satisfaction of performance conditions for a grant of performance-based SARs was filed late; and for Thomas B. Okray, one Form 4 to report the grant of RSUs was filed late.4.
EQUITY COMPENSATION PLAN INFORMATION TABLEEquity Compensation Plan Information
The following table sets forth our shares authorized for issuance under our equity compensation plans on December 31, 2016.30, 2023. | | | | | | | | | | | | | | | Number of shares to be issued upon exercise of outstanding options, warrants, and rights (a) | | Weighted-average exercise price of outstanding options, warrants, and rights (b) | | Number of securities remaining available for future issuance under equity compensation plans(c) | | Equity compensation plans | | |
| | | | | approved by stockholders (d) | | 495,275 |
| | $ | 91.86 |
| | 5,044,931 |
| | | | | | | | | | Equity compensation plans | | | | | | | | not approved by stockholders | | — |
| | — |
| | — |
| | | | | | | | | | Total | | 495,275 |
| | $ | 91.86 |
| | 5,044,931 |
|
| | | | | | | | | | | | | | | | | | | | | | | | Number of shares to be
issued upon exercise of
outstanding options,
warrants, and rights (a) | | Weighted-average
exercise price of
outstanding options,
warrants, and rights (b) | | Number of securities
remaining available
for future issuance
under equity
compensation plans (c) | | Equity compensation plans approved by stockholders (d) | | 1,021,282 | | | $ | 186.22 | | | 2,351,027 | | | Equity compensation plans not approved by stockholders | | — | | | — | | | — | | | Total | | 1,021,282 | | | $ | 186.22 | | | 2,351,027 | |
| | (a)
| Includes the shares that would be issued upon exercise of outstanding RSUs, performance-based RSUs and DSUs and the net shares that would be issued upon exercise of outstanding SARs and performance-based(a)Includes the shares that would be issued upon exercise of outstanding RSUs, PSUs and DSUs and the net shares that would be issued upon exercise of outstanding options, SARs and performance based SARs and is based on management's estimate of the probable vesting outcome for performance-based awards. The gross number of awards expected to vest based on management's estimate of the probable vesting outcome for performance-based awards is 746,353. |
| | (b) | Includes weighted average exercise price of outstanding SARs only based on management's estimate of the probable vesting outcome for performance-based awards. |
| | (c) | Excludes shares reflected in the first column and is based on management's estimate of the probable vesting outcome for outstanding performance-based awards. |
| | (d) | Includes the 2014 LTIP and remaining awards outstanding under the 2004 LTIP. |
PROPOSAL NO. 3
STOCKHOLDER ADVISORY VOTE ON THE FREQUENCY OF THE STOCKHOLDER ADVISORY
VOTE ON THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
Our Company is also giving you the opportunity to provide your advisory vote, pursuant to the executive compensation and proxy solicitation disclosure requirements of the Securities and Exchange Commission,probable vesting outcome for performance based awards. The gross number of awards expected to vest based on how frequently our stockholders should have an advisory, non-binding, vote on the compensation of our named executive officers. You may choose from the following alternatives: every year, every two years, every three years or you may abstain. The Board currently provides this opportunity on an annual basis and asks that you support an annual frequency period for future non-binding stockholder votes on the compensation of our named executive officers.
We believe an annual stockholder advisory vote on compensation of our NEOs has served both our Company and our stockholders well by ensuring a direct alignment between executive compensation and financial performance results. The Board believes an annual stockholder vote will continue to enhance stockholder communication by providing a clear, simple means for the Board to obtain information on investor sentiment about our NEO compensation philosophy and practices and enables us to implement more quickly any modifications that the Board determines to be appropriate.
The Board endorses an annual stockholder advisory vote on our executive compensation program and recommends the stockholders vote in favormanagement's estimate of the following resolution:probable vesting outcome for performance based awards is 1,021,282.
“RESOLVED, that the stockholders determine,(b)Includes weighted average exercise price of outstanding SARs only based on an advisory basis, that the preferred frequencymanagement's estimate of the advisory voteprobable vesting outcome for performance based awards.
(c)Excludes shares reflected in the first column and is based on the compensationmanagement's estimate of the Company’s named executive officers should be every year.”probable vesting outcome for outstanding performance based awards.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR A STOCKHOLDER ADVISORY
VOTE EVERY YEAR (“ONE-YEAR”) TO APPROVE THE COMPENSATION OF
THE COMPANY'S NAMED EXECUTIVE OFFICERS.
PROPOSAL NO. 4
APPROVAL OF ADVANCE AUTO PARTS, INC. 2017
AMENDED AND RESTATED EXECUTIVE INCENTIVE PLAN
The Board believes that a well-designed incentive compensation plan for our executives is a significant factor in improving our performance, thereby enhancing shareholder value. The Board also believes that all amounts paid pursuant to such a plan should be deductible by us as a business expense. The Board is asking you to approve(d)Includes the Advance Auto Parts 2017 Executive2023 Omnibus Incentive Plan (the “Plan”) so we can continue to deduct from our U.S. federal corporate income taxes the full amount of the bonusand remaining awards paidoutstanding under the Plan as allowed by Section 162(m)2014 LTIP.
Proposal No. 3 Ratification of the Internal Revenue Code. The disclosure below is a summary only. The full text of the Plan is attached as Appendix A.
Section 162(m) limits our ability to deduct from our federal corporate income taxes compensation in excess of $1 million per year paid to “covered employees” unless the compensation qualifies as “performance-based.” Compensation cannot qualify as “performance-based” unless the Plan under which it is paid is approved by stockholders. “Covered employees” include our Chief Executive Officer and our other four most highly-compensated executive officers.
Any bonuses paid to “covered employees” in accordance with the terms of the Plan will be fully tax deductible by us if this Plan is approved at the Annual Meeting and if we comply with certain other requirements set forth in Section 162(m) of the Internal Revenue Code. If this Plan is not approved at the Annual Meeting, then any bonuses paid to our “covered employees” will not qualify as “performance-based” and will count against the $1 million deductible compensation limit otherwise imposed by Section 162(m).
The Compensation Committee of the Board determines who is eligible to participate in the Plan. Any of our executive officers or the executive officers of any of our subsidiaries may be selectedAppointment by the CompensationAudit Committee to participate in the Plan. We currently have eight executive officers.of
Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for 2024
As more fully described in the Compensation Discussion and Analysis section of this Proxy Statement, our annual incentive compensation is designed to attract and retain executives and to motivate those executives to enhance our profitability and growth through performance-based annual cash bonuses. The Plan authorizes the payment of cash bonuses based on our actual performance measured against established business and/or financial performance measures. Within 90 days of the start of each fiscal year, the Compensation Committee will determine the executives who will be Participants in the Plan and will approve the performance measure or measures upon which performance goals will be based, the performance goal or goals applicable to each chosen performance measure, the relative weight of each performance measure if more than one is selected, and each Participant’s target bonus percentage. The performance goals must be objectively determinable and may not be established after 25 percent of the performance period has elapsed. No Participant may receive a bonus under the Plan in excess of the lesser of $5 million or 500 percent of the Participant’s base salary in any fiscal year. The Compensation Committee can base performance goals on one or any combination of the following performance measures related to the Company, a subsidiary or an operating unit:
Revenues
Operating earnings or margin
Earnings before or after taxes, interest, depreciation, and/or amortization
Inventory productivity measures such as inventory turns
Share price (including, but not limited to, growth measures and total shareholder return)
Earnings per share
Economic profit or value created
Return measures (including, but not limited to, return on assets, capital, invested capital or revenue)
Strategic business criteria (including, but not limited to, meeting specified goals relating to available capital, cash or cash flow, market penetration, geographic business expansion, cost targets, customer or employee satisfaction, store sales growth or acquisitions or divestitures of subsidiaries, affiliates or joint ventures)
No bonus may be paid under the Plan unless and until the Compensation Committee certifies that a previously established performance goal or goals have been satisfied. The Compensation Committee may reduce or eliminate any bonus in its discretion despite achievement of the performance goal or goals, but the Compensation Committee may not exercise discretion to increase the amount of bonus payable to a “covered employee.”
The Plan allows a Participant to elect to defer the payment of his or her award in accordance with the terms of our Advance Auto Parts Deferred Compensation Plan (“AAPDC”) as it exists. The Plan does not limit our ability to make payments or
awards to employees (including executive officers) under any other plan or arrangement. The Compensation Committee selected adjusted enterprise operating income and enterprise comparable store sales as the performance measures for 2016. The Compensation Committee has selected enterprise operating income, enterprise comparable stores sales and free cash flow as the performance measures for 2017.
Payments made under the Plan will be taxable to the recipients when paid. If a Participant properly elects to defer a portion of the bonus award to our AAPDC Plan, or any successor plan, the Participant will generally be entitled to defer the recognition of income in accordance with the terms of the deferred compensation plan. As described above, we intend payments under the Plan to qualify as “performance-based” compensation under Section 162(m). As a result, we will generally be entitled to a federal income tax deduction corresponding to the amount of income recognized by the Participant.
The Compensation Committee will have full authority to interpret the Plan, to establish rules and regulations relating to the Plan’s operation, to select the Plan’s Participants, to determine amounts of awards under the Plan and to make all other determinations with respect to the Plan. The Compensation Committee may terminate or amend the Plan at any time. However, any amendment that would require stockholder approval pursuant to Section 162(m), the NYSE listing rules, or any other applicable law, rule or regulation will not be effective without stockholder approval (for example, an amendment to change the approved performance measures or to increase the maximum bonus that may be awarded to an individual Participant in any given year).
The amount that may be paid in the future to any particular person or group under the Plan is not currently determinable. No amount was paid to the Plan's Participants for the last completed fiscal year. Information regarding our recent practices with respect to annual incentive awards under the current programs is presented in the “Summary Compensation Table.”
The Plan will be effective as of January 1, 2017, the commencement of the current fiscal year, subject to stockholder approval at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE 2017 EXECUTIVE INCENTIVE PLAN.
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT BY THE AUDIT COMMITTEE OF
DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR 2017
Our Audit Committee is directly responsible for the appointment, retention, fees and oversight of the independent registered public accounting firm retained to audit our financial statements. Deloitte has continuously served as our independent registered public accounting firm since 2002. The lead engagement partner from Deloitte is required to be rotated every five years, and in 20162021, a new lead engagement partner was selected in connection with this rotation process. The process for selection of the new lead engagement partner included a meeting between the Chair of the Audit Committee and the candidate for this role, as well as discussion by the full Audit Committee and meetings with senior management. In addition, our Audit Committee periodically considers whether there should be a rotation of the independent registered public accounting firm in conjunction with its review of Deloitte’s independence, qualifications and performance.
Our Audit Committee has appointed Deloitte as our independent registered public accounting firm for fiscal year 20172024 because our Audit Committee believes the continued retention of Deloitte to serve as our independent registered public accounting firm is in the best interest of us and our stockholders. You are being asked to ratify the appointment by our Audit Committee of Deloitte as our independent registered public accounting firm for fiscal year 20172024 although your ratification of the selection of Deloitte as our independent registered public accounting firm is not required by our Bylawsby-laws or otherwise. If our stockholders do not ratify the selection of Deloitte, the Audit Committee will reconsider whether or not to retain Deloitte in the future. However, the Audit Committee is not bound by a vote either for or against the firm. MembersRepresentatives 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 year 2017.2024.
20162023 and 20152022 Audit Fees
The following table summarizes the aggregate fees billed by Deloitte for 2016 and 2015 for the following professional services: | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | | | ($ in thousands) | Audit Fees (a) | | $ | 6,847 | | | $ | 4,364 | | Audit-Related Fees (b) | | 218 | | | 0 | Tax Fees (c) | | 33 | | | 38 | | | Total | | $ | 7,099 | | | $ | 4,506 | |
| | | | | | | | | | | | | 2016 | | 2015 | | | | ($ in thousands) | | Audit Fees (a) | | $ | 4,629 |
| | $ | 4,434 |
| | Audit-Related Fees (b) | | — |
| | 139 |
| | Tax Fees (c) | | 23 |
| | 20 |
| | All Other Fees | | — |
| | — |
| | Total | | $ | 4,652 |
| | $ | 4,593 |
|
| | (a) | Fees for audit services billed for 2016 and 2015 consisted of fees for: |
•the audit of our annual financial statements; •the attestation of management’s assessment andthe effectiveness of internal controls as required by Section 404 of the Sarbanes-Oxley Act of 2002; •reviews of our quarterly financial statements; and •statutory and regulatory audits, consents and other services related to SEC matters. | | (b) | Fees for audit-related services billed in 2015 consisted primarily of advisory services pertaining to GPI's accounting processes and procedures. |
| | (c) | Tax fees billed in 2016 and 2015 were primarily related to an international subsidiary. |
(b)Fees for audit-related services billed in 2022 consisted of services pertaining to our $350 million senior unsecured notes.
(c)Tax fees billed in 2023 and December 30, 2023 were related to tax planning services.
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 audit and permitted non-audit services provided by Deloitte during 2016.
2023. In considering the nature of the non-audit services provided by Deloitte, the Audit Committee determined that such services are compatible with maintaining the independent accountant's independence. The Audit Committee discussed these
non-audit 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. | | | | | | THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2024. |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2017.
AUDIT COMMITTEE REPORTAudit Committee Report
We are responsible for providing independent, objective oversight of the Company's accounting functions and internal controls and operate pursuant to a written charter approved by the Company’s Board. We are comprised entirely of at least threefour 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. The Company’s Board has determined the Audit Committee’s chair, Mr. BussFerraro, Ms. Bailo and Audit Committee member John Ferraro,Ms. Hilson, by virtue of their education, training and professional experience, qualify as the Audit Committee "financial"audit committee financial experts," as defined by SEC rules. Management is responsible for the Company’s financial reporting process, including the Company’s system of internal controls, and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States. The Company’s independent registered public accounting firm, or "independent accountants," is responsible for auditing itsthe Company's 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 itsthe Company's 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 the Company’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 the independent accountants included in their report on the Company’s financial statements. During 20162023, we met twelve times, including eight times via conference call.eleven times. We schedule our meetings to ensure we have sufficient time to devote attention to all of our tasks. During 20162023, and subsequent to the end of the year, we: •appointed Deloitte as the independent registered public accounting firm for fiscal year 2016;2023; •met with management and the independent accountants to review and discuss the Company’s critical accounting policies and significant estimates; •met with management and the independent accountants to review and approve the fiscal year 20162023 audit plan; •met regularly with both the independent accountants and the Chief Internal Audit Executive outside the presence of management; •met with management and the independent accountants to review the audited financial statements for the year ended December 31, 2016,30, 2023, and internal controls over financial reporting as of December 31, 2016;30, 2023; •met with management and the independent accountants to discuss and oversee the development and implementation of a plan to remediate the material weakness in internal control identified during 2023; •reviewed and discussed the quarterly and annual reports prior to filing with the SEC; •reviewed and discussed the quarterly earnings press releases; reviewed the Company's response to the SEC's comment letter;
•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, including cyber security risk, is assessed and mitigated; •reviewed and amended the Audit Committee charter; and •completed all other responsibilities under the Audit Committee charter. In the course of preparing interim financial statements for the period ended April 22, 2023, management identified a material weakness in our internal control over financial reporting that existed due to turnover of key accounting positions during the first quarter. The Company was not able to attract, develop and retain sufficient resources to fulfill internal control responsibilities during the first quarter, resulting in the lack of a sufficient complement of personnel with an appropriate degree of knowledge and experience as of April 22, 2023. The Company, under the oversight of the Audit Committee, took quick and decisive action in developing and implementing a remediation plan as further described in our periodic reports on Form 10-Q filed June 6, 2023, August 23, 2023 and November 21, 2023 and our annual report on Form 10-K filed on March 12, 2024. We consider the remediation of the material weakness to be a top priority. We have discussed with the independent accountants the matters required by PCAOB Auditing Standards and related Rules, including Auditing Standard 1301, Communications with Audit Committees, and SEC Regulation S-X Rule 2-07, Communication With Audit and Finance Committees (Rule(Rule 2-07), which includes a review of significant accounting estimates and the Company’s accounting practices. In addition, we have received written disclosures and the letter from the independent accountants required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence, and discussed with the 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 the Company’s annual report on Form 10-K for the year ended December 31, 2016.30, 2023. We considered whether the independent accountants’ provision of non-audit services to the Company is compatible with maintaining the independent accountants’ independence and have determined the provision of the non-audit services is compatible with the independent accountants’ independence. Accordingly, we have approved retention of Deloitte as the Company’s independent registered public accounting firm for fiscal year 2017.2024.
We reviewed and reassessed the adequacy of the Audit Committee Charter and recommended no changes.Charter.
| | | | THE AUDIT COMMITTEE | | John F. Ferraro, Chair | | Carla J. Bailo | | Joan M. Hilson | | Arthur L. Valdez Jr. |
Brad W. Buss, Chair Adriana Karaboutis
John F. Ferraro Reuben E. Slone
Proposal No. 4
PROPOSAL NO. 6
AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO REDUCE
THE THRESHOLD STOCK OWNERSHIP REQUIREMENT FROM 25 PERCENT TO 10 PERCENT
FOR STOCKHOLDERS TO CALL A SPECIAL MEETING
After discussion and consideration, and upon recommendation of the Nominating and Corporate Governance Committee, our Board recommends that stockholders vote “FOR” the proposalAmendment to amend ourOur Restated Certificate of Incorporation to reduceEliminate or Limit the threshold ownership requirement forPersonal Liability of Officers
Background
The Board is recommending that stockholders to call a special meeting. This amendment would permit stockholders who own at least 10 percent of the voting power of our common stock in the aggregate to call a special meeting of stockholders. The current minimum stock ownership requirement to call a special meeting is 25 percent of the voting power of our common stock.
Our Current Special Meeting Provisions and Proposed Amendments
Our Certificate of Incorporation and Amended and Restated Bylaws permit stockholders who hold 25 percent in the aggregate of the outstanding common stock of the Company to call a special meeting of stockholders, irrespective of the length of time they have held such stock. We are asking our stockholders to approve an amendment to our Certificaterestated certificate of Incorporationincorporation to reduceextend, to the threshold stock ownership requirement for calling a special meeting from 25 percentfullest extent possible, the limitations of personal liability applicable to 10 percent.
Article VII.B.our directors to certain of our Certificateofficers, including our executive officers. Section 102(b)(7) of Incorporation currently provides that “Special meetingsthe General Corporation Law of the State of Delaware, or the DGCL, was recently amended to permit a Delaware corporation to include in its certificate of incorporation a provision to eliminate or limit the personal liability of certain officers to a corporation's stockholders may be called onlyfor monetary damages resulting from certain breaches of the officer's fiduciary duty of care, providing some parity with existing protections available for directors of Delaware corporations. The Board has adopted a resolution to amend our restated certificate of incorporation to eliminate personal liability of such an officer to our stockholders for monetary damages to the fullest extent permitted by the BoardDGCL (the “Amendment”).
The DGCL already permits Delaware corporations to include a provision in their certificate of Directors,incorporation to provide that a corporation’s directors are not personally liable to pay monetary damages to the Chairmancorporation or its stockholders for a breach of fiduciary duty as a director, except for:
•a breach of the Boarddirectors’ duty of Directors,loyalty to the Chief Executive Officer,corporation or its stockholders;
•acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•any transaction from which the directors derive an improper personal benefit; or
•unlawful dividends or unlawful stock repurchases or redemptions under Section 174 of the DGCL.
Our restated certificate of incorporation already contains a provision providing for the above protections to the fullest extent permitted by law, for the members of the Board. The Amendment is intended to extend certain of those protections to certain of our officers, including our executive officers, as now permitted by the DGCL, such that these officers will not be personally liable to our stockholders who hold at least 25 percent,for monetary damages for breach of the fiduciary duty of care. However, unlike the existing protections for directors, the Amendment does not protect executive officers from personal liability to the Company for claims of breach of the fiduciary duty of care brought by or in the aggregate,right of the Company, including in the case of derivative claims.
To be effective, the Amendment must be approved by our stockholders in the manner described in this Proxy Statement. The affirmative vote of a majority of the outstanding shares of our common stock is required to adopt the Amendment to eliminate or limit the personal liability of certain of our officers to our stockholders for monetary damages resulting from certain breaches of the Corporation,officer’s fiduciary duty of care.
The form of the Amendment is set forth as Appendix A to this proxy statement.
Reasons for the Amendment
The Board believes it is appropriate for public corporations incorporated in states that allow for the limitation of liability of directors and mayofficers to have such a provision in their certificates of incorporation. The nature of the role of directors and officers often requires them to make decisions in response to time-sensitive opportunities and challenges, which can create substantial risk of investigations, claims, actions, suits or proceedings seeking to impose liability on the basis of hindsight, especially in the current litigious environment and regardless of merit. Limiting concern about personal risk would empower officers to best exercise their business judgment in furtherance of stockholder interests. The Board also believes that the adoption of the Amendment would reduce the costs and risks related to serving as an officer, increase our ability to continue to attract and retain qualified individuals to serve as officers, and potentially lower the cost of being a public company. We expect our peers and other companies with whom we compete for officer talent to adopt exculpation clauses that limit the personal liability of officers in their certificates of incorporation, and we believe failing to adopt the proposed Amendment could impact our recruitment and retention of exceptional officer candidates.
Effect and Timing of the Amendment
The Amendment would protect certain of our officers, including our executive officers, against personal liability to our stockholders for monetary damages for certain breaches of the duty of care. However, as indicated above, our officers would remain liable for breaches of their duty of care brought by or in the right of the Company, including in the case of derivative claims. Accordingly, the Amendment would not be called byprevent the Board from pursuing claims against our officers in the name of the Company, nor would it prevent our stockholders from bringing derivative claims in which our officers are alleged to have breached their duty of care. Additionally, consistent with the limits on exculpation of liability for directors, our officers would remain liable for breaches of their duty of loyalty, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, and for transactions from which an executive officer derives an improper personal benefit. The Amendment would not eliminate or limit the liability of our officers arising from causes of action brought under federal laws, including federal securities laws.
While the Amendment would protect certain of our officers, including executive officers, from awards of monetary damages for certain breaches of the duty of care, it would not eliminate any of our officers’ fiduciary duties. In other personwords, our officers are still required to exercise appropriate diligence, act in good faith, and otherwise comply with the standards of Delaware law in carrying out their duties. Accordingly, the Amendment would have no effect on the availability of equitable remedies such as an injunction or persons.” The proposed Certificaterescission based on an officer’s breach of fiduciary duty.
Also, under Section 102(b)(7) of the DGCL, adoption of the Amendment would not eliminate or limit the liability of an officer for any act or omission occurring prior to the Certificate of Incorporation (“Special Meeting Certificate Amendment”) will provide that Article VII.B. of the Certificate of Incorporation be amended as follows:
“Special meetings of stockholders may be called only by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer,Amendment becoming effective, so officers would remain potentially liable for monetary damages in connection with any acts or stockholders who hold at least 25 10 percent, in the aggregate, of the outstanding common stock of the Corporation, and may not be called by any other person or persons.”
Likewise, Section 2.03 of our Amended and Restated By-laws currently provides that “A special meeting of stockholders, for any purpose or purposes, may be called only by the Chief Executive Officer, the Chair of the Board of Directors, the Board of Directors, or stockholders who hold at least 25 percent, in the aggregate, of the outstanding common stock of the Corporation, and may not be called by any other person or persons.” Subjectomissions occurring prior to the approval of the Special Meeting Certificate Amendment by the stockholders, the Board has approved conforming changes to our Amended and Restated By-Laws, which will become effective upon the effectiveness of the Special Meeting CertificateAmendment.
Finally, the Amendment soclarifies that Section 2.03 of the Amended and Restated By-Laws will be amended as follows:
“A special meeting of stockholders, for any purpose or purposes, may be called only by the Chief Executive Officer, the Chair of the Board of Directors, the Board of Directors, or stockholders who hold at least 25 10 percent, in the aggregate, of the outstanding common stock of the Corporation, and may not be called by any other person or persons.”
The Nominating and Governance Committee and the Board have reviewed the special meeting provisions in our current Certificate of Incorporation and Amended and Restated By-laws and have considered the implications of amending such provisions to reduce the minimum threshold stock ownership requirements for stockholders to call a special meeting. After reviewing the relevant facts, including the views expressed by certain of our stockholdersofficers, including our executive officers, would receive the benefit of any future amendments to the DGCL that further limit the personal liability of officers (so that if the DGCL were to be amended to further limit the personal liability of officers, our amended and restated certificate of incorporation would not have to be further amended or modified to conform to any revisions of such section), and that any repeal or modification of the policiesprovisions added to our amended and restated certificate of a numberincorporation by the Amendment would be prospective only and would not adversely affect any limitation on the personal liability of an officer existing at the time of any such repeal or modification. This is consistent with the existing provisions of our peer companies,restated certificate of incorporation as they relate to director exculpation as permitted by the DGCL and based uponis designed to increase the flexibility of the amended and restated certificate of incorporation to allow it to change automatically with changes in the DGCL over time.
When considering the recommendation of the NominatingBoard that our stockholders approve this proposal, our stockholders should be aware that certain directors and Corporate Governance Committee,executive officers of the Company, specifically our Chief Executive Officer and the other actively employed named executive officers, have interests in the proposal that may be different from, or in addition to, the interests of our stockholders more generally because they will receive the liability exculpation protections afforded by the proposed Amendment if it is adopted. The Board was aware of these interests and considered them, among other matters in reaching its decision to approve the proposed Amendment. The proposed Amendment is not being proposed in response to any specific resignation, threat of resignation or refusal to serve by any officer.
If the proposed Amendment is approved and declared advisable the Special Meeting Certificate Amendment at its meeting on February 15, 2017. The Special Meeting Certificate Amendment willby our stockholders, it would become effective following the requisite stockholder vote andimmediately upon the filing of the Special Meeting Certificate Amendment with the Delaware Secretary of State. We planState of the State of Delaware, which we would expect to file the Special Meeting Certificate Amendment promptly after the requisite stockholder vote is obtained.
As a resultAnnual Meeting. After effectiveness of this amendment, the minimum stock ownership threshold for calling a special meeting imposedAmendment, the new officer exculpation provision would apply only with respect to acts or omissions by our current Certificate of Incorporation and Amended and Restated By-laws will be reduced from 25 percent, and stockholders holding 10 percent or more inofficers occurring after the aggregate of our outstanding common stock will be able to call special meetings of stockholders. In lightdate of the greatly reduced ownership threshold,Amendment.
If the proposed Amendment is not approved by our stockholders, our restated certificate of incorporation would remain unchanged.
In accordance with the DGCL, the Board has adopted related procedural by-law provisions which are intendedmay elect to curb potential abuseabandon the proposed Amendment without further action by our stockholders at any time prior to the effectiveness of the special meeting process. The Amended and Restated By-Laws that will be adopted commensuratefiling of the Amendment with obtainingthe Secretary of State of the State of Delaware, notwithstanding stockholder approval of the Special Meeting Certificateproposed Amendment will provide that (i)at the Annual Meeting.
| | | THE BOARD RECOMMENDS A VOTE FORTHE AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE OR LIMIT THE PERSONAL LIABILITY OF OFFICERS |
Other Matters
the Board of Directors shall call the Special Meeting within 90 days of the receipt of the request to call a Special Meeting (or 120 days if called in connection with the nomination of a director), and (ii) the Board of Directors shall not be required to call a special meeting if the request notice is received within 90 days prior to the first anniversary of last years’ annual stockholders meeting or the request notice contains an item of business substantially similar to an item of business presented to the stockholders within 90 days of the receipt of such request notice.
Reasons for Amendment and Restatement
Our Board of Directors has carefully reviewed the appropriate ownership threshold within our governance framework to apply to our stockholders’ ability to call a special meeting. Specifically, the Board sought to ensure that the ability to call a special meeting is a meaningful tool for our stockholders as a whole to bring matters before our stockholders without allowing the right to be used to promote special-interest agendas of a minority of stockholders. After careful consideration, our Board has concluded that it would be in the best interests of our stockholders to reduce the current 25 percent threshold to ten percent.
Our Board understands that allowing stockholders to call special meetings is consistent with evolving corporate governance practices and further recognizes that reducing the share ownership threshold for stockholders to call a special meeting will enhance stockholder rights and Board accountability. As always, we strive to promote the rights of all of our stockholders and to protect their interests in the Company. In light of these current practices and beliefs, our Board believes it to be in the best interest of the stockholders to reduce the stock ownership threshold to permit stockholders who own at least ten percent of the voting power of our common stock to call a special meeting.
Vote Required
The Special Meeting Certificate Amendment has been adopted by the Board, and according to our current Certificate of Incorporation, approval of the Special Meeting Certificate Amendment requires the affirmative vote of holders of at least a majority of the outstanding voting power of the capital stock of the Company entitled to vote.
Subject to the approval of the Special Meeting Certificate Amendment by the stockholders, the Board has approved conforming changes to our Amended and Restated By-Laws, which will become effective upon the effectiveness of the Special Meeting Certificate Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO
THE CERTIFICATE OF INCORPORATION TO REDUCE THE THRESHOLD STOCK OWNERSHIP REQUIREMENTFROM 25 PERCENT TO 10 PERCENT FOR STOCKHOLDERS TO CALL A SPECIAL MEETING.
OTHER MATTERS
A copy of our 20162023 annual report to stockholders is being sent to each stockholder of record together with this Proxy Statement.record. The annual report is not part of our proxy soliciting material but it can be accessed at www.AdvanceAutoParts.comir.advanceautoparts.com under "Financials." Who is soliciting my vote? Our Board is soliciting your proxy to vote at the Annual Meeting. Who is paying the costs of this proxy solicitation? Our Company is paying the costs of the solicitation of proxies. We will reimburse brokers, banks or other custodians, nominees and fiduciaries for their charges and expenses in forwarding proxy materials to beneficial owners. In addition, certain of our directors, officers and regular employees, without additional compensation, may solicit proxies on our behalf in person, by telephone or by electronic communication. 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 Tammy M. Finley and Ryan P. Grimsland as proxies, with full power of substitution ("Proxies"), to vote on such matters in their discretion in accordance with their best judgment. Who is entitled to vote? Stockholders of record as of the close of business on March 25, 2024 are entitled to vote at the Annual Meeting. Each share of our common stock is entitled to one vote. How many votes do I have? For every matter acted on, 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 votes. 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 our transfer agent, Computershare, you are considered, with respect to those shares, the stockholder of record, and 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 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 provided a voting instruction card to provide you 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 voting live at the virtual Annual Meeting. If you vote by Internet or telephone, your vote must be received by 11:59 P.M. (EDT) on May 21, 2024, the day before the Annual Meeting. Your shares will be voted as you indicate. If you sign and return your proxy card but you do not indicate your voting preferences, the Proxies will vote your shares FOR Proposal Nos. 1, 2, 3 and 4. 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. AS A RESULT OF THE NYSE'S RULES,YOUR BANK OR BROKER CANNOT VOTE WITH RESPECT TO ANY PROPOSAL, EXCEPT FOR PROPOSAL NO. 3, UNLESS IT RECEIVES VOTING INSTRUCTIONS FROM YOU. You will have the opportunity to vote live at the virtual Annual Meeting if you choose to do so. If you hold your shares in street name, you must request a legal proxy from your bank or broker to vote live at the virtual Annual Meeting.
Can I change my vote or revoke my proxy? 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 by 11:59 P.M. (EDT) on May 21, 2024; •Returning a later-dated proxy card; •Sending written notice of revocation to Tammy M. Finley, Executive Vice President, General Counsel and Corporate Secretary at the Company’s address of record, which is 4200 Six Forks Road, Raleigh, North Carolina 27609; or •Voting live at the virtual 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 our policy that all proxies, ballots, voting instructions and tabulations that identify the vote of a stockholder will be kept confidential from the Company and 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. What is the quorum requirement of the Annual Meeting? A majority of the outstanding shares of our common stock on the Record Date, represented live or by proxy at the Annual Meeting, constitutes a quorum for voting on proposals 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, and broker non-votes will be counted in determining the quorum. On the Record Date, there were 59,609,471 shares outstanding and 1,072 stockholders of record. A majority of our common stock, or 29,804,736 shares, will constitute a quorum. A majority of the shares present at the Annual Meeting may adjourn the meeting even if the number of shares present do not 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 by the date specified in the statement requesting voting instructions that has been provided by the bank or broker. If that happens, the bank or broker may vote those shares only on matters as permitted by the NYSE. The NYSE prohibits banks and brokers from voting uninstructed shares in, among other things, the election of directors and matters related to executive compensation; accordingly, banks and brokers cannot vote with respect to any Proposal presented for consideration in this Proxy Statement except for Proposal No. 3 unless they receive voting instructions from the beneficial owners. Broker non-votes are not treated as votes cast under Delaware law. What vote is required to approve each proposal? Proposal No. 1. For the election of directors, the eleven nominees for director will be elected if they receive a majority of the votes cast at the Annual Meeting for the election of directors. For purposes of the election of directors, a majority of votes cast means that the number of shares voted "for" a director’s election exceeds 50 percent of the number of votes cast with respect to that director’s election, and votes cast include votes against and exclude abstentions and broker non-votes. Accordingly, abstentions and broker non-votes will have no effect on the outcome of this proposal. Proposal No. 2. The advisory vote to approve the compensation of the Company’s named executive officers requires the affirmative vote of a majority of the shares of our common stock that are present, or represented by proxy, at the Annual Meeting and entitled to vote on this proposal. Abstentions will count as present and entitled to vote for purposes of this proposal and will therefore have the effect of a vote against this proposal. Broker non-votes will not count as present and entitled to vote for purposes of this proposal and will therefore have no effect on the outcome of this proposal. Although the advisory vote to approve the compensation of the Company’s named executive officers is non-binding, the Board and the Compensation Committee will review the voting results and consider them in making future decisions about executive compensation programs. Proposal No. 3. Ratification of our independent registered public accounting firm requires the affirmative vote of a majority of the shares of our common stock that are present, or represented by proxy, at the Annual Meeting and entitled to vote on this proposal. Abstentions will count as present and entitled to vote for purposes of this proposal and will therefore have the effect of a vote against this proposal. Proposal No. 4. Approval of the amendment to our restated certificate of incorporation to eliminate or limit the personal liability to the fullest extent permitted by the Delaware General Corporation Law requires the affirmative vote of a majority of the outstanding shares of our common stock. Abstentions and broker non-votes will therefore have the effect of a vote against this proposal.
Who can attend the Annual Meeting? Only Advance Auto Parts stockholders as of the close of business on the Record Date may attend the Annual Meeting. What do I need to do to attend the Annual Meeting and how will it be conducted? The Annual Meeting will be conducted online in a manner similar to an in person meeting. You will be able to attend the Annual Meeting online, vote your shares electronically and submit questions related to the proposals during the meeting by visiting www.virtualshareholdermeeting.com/AAP2024 and following the instructions on your proxy or notice card. Please note that you are also able to submit questions in advance of the meeting by visiting www.virtualshareholdermeeting.com/AAP2024 and following the instructions posted there. Rules of Conduct for the Annual Meeting will be available at the virtual forum site. The Annual Meeting will begin promptly at 8:30 a.m. Eastern Time. The Company encourages you to access the Annual Meeting prior to the start time to allow time to complete check in procedures. 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, Computershare, toll-free at (866) 865-6327 or at P.O. Box 505000, Louisville, KY 40233-5000, 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 common 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, Proxy Statement and other mailings 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 Computershare toll-free at (866) 865-6327 or at P.O. Box 505000, Louisville, KY 40233-5000, Attention: Shareholder Correspondence, and request that action. Promptly 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 Computershare 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 the documents for the Annual Meeting in May? You may download copies from our Internet website, ir.advanceautoparts.com (click on the home page link to 2024 Annual Meeting materials). If you want copies mailed to you and you are a beneficial owner, you must request them from your broker, bank, or other nominee. If you want copies mailed to you and you are a stockholder of record, we will promptly mail additional copies to you, at no charge, if you request them from Investor Relations section.by phone at (919) 227-5466 or by mail to 4200 Six Forks Road, Raleigh, 27609, 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 a Report on Form 8-K within four business days following the Annual Meeting. What is the deadline for consideration of stockholder proposals or director nominations for the 2025 annual meeting of stockholders? If you are a stockholder and you want to present a proposal at the 2025 annual meeting and have it included in our proxy statement for that meeting, you must submit the proposal in writing to our corporate offices at 4200 Six Forks Road, Raleigh, North Carolina, 27609, Attention: Corporate Secretary, on or before December [•], 2024. Applicable SEC rules and regulations govern the submission of stockholder proposals and our consideration of them for inclusion in next year’s proxy statement.
If you want to present a proposal at the 2025 annual meeting (other than pursuant to SEC rules and regulations) or to nominate a person for election as a director, you 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 stockholder of intent to present such proposal or nomination no less than 120 days and no more than 150 days prior to the first anniversary of the date of the preceding year’s annual meeting. Therefore, we must receive notice of such proposal no earlier than December 23, 2024, and no later than January 22, 2025. The notice must contain the information required by our by-laws. You may obtain a print copy of our by-laws by submitting a request to: Advance Auto Parts, 4200 Six Forks Road, Raleigh, North Carolina 27609, Attention: Corporate Secretary. Our by-laws are also available on our website at ir.advanceautoparts.com under "Governance." Our Chair of the Board or any other person presiding at the meeting may exclude any matter that is not properly presented in accordance with these requirements. What is the deadline for director nominations for the 2025 annual meeting of stockholders using proxy access? A shareholder, or group of up to 20 stockholders, that has owned continuously for at least three years shares of our common stock representing an aggregate of at least three percent of the outstanding shares of our common stock may nominate and include in our proxy materials director nominees constituting the greater of (i) two individuals and (ii) 20% of our Board. All director nominees must satisfy the requirements included in the Company’s by-laws. If you are a stockholder and want to nominate a director to be included in our proxy for our 2025 annual meeting of stockholders, we must receive notice of the nomination no earlier than November [•], 2024 and no later than December [•], 2024. The notice of nomination using process access should be submitted in writing to our offices at 4200 Six Forks Road, Raleigh, North Carolina 27609, Attention: Corporate Secretary. The notice of nomination must include the information required for director nominations using proxy access required by our by-laws. Proxy access nominees who do not receive at least a 25% vote in favor of election or withdraw their nomination will be ineligible as a nominee for the following two years. You may obtain a print copy of our by-laws by submitting a request to: Advance Auto Parts, 4200 Six Forks Road, Raleigh, North Carolina 27609, Attention: Corporate Secretary. Our by-laws are also available on our website at ir.advanceautoparts.com under "Governance."
We look forward to you joining us at our Annual Meeting. Regardless of whether you expect to attend the meeting, please vote your shares in one of the ways outlined in the Notice of Annual Meeting.
By order of the Board of Directors,
Tammy Moss Finley Executive Vice President, General Counsel and Corporate Secretary
Raleigh, North Carolina
Roanoke, Virginia
April 6, 2017
[•], 2024
APPENDIX A
CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION OF ADVANCE AUTO PARTS, INC. 2017 Amended and Restated Executive Incentive Plan
ARTICLE I
INTRODUCTION AND PURPOSE
Advance Auto Parts adopted the Advance Auto Parts, Inc. Executive Incentive Plan (the “Original Plan”), which expired by its terms asArticle VIII of the close of business on December 30, 2016. The Company wishes to adopt this AmendedCertificate is hereby amended and Restated Executive Incentive Plan, effectiverestated in its entirety as of the Effective Date. The purpose of the Plan is to permit the Company to make cash incentive awards to eligible employees of the Company based on the satisfaction of specific performance objectives.follows:
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following meanings:
(a) “Award” means an incentive award which, subject to such terms and conditions as may be prescribed by the Committee, entitles a Participant to receive a cash payment from the Company“No director or a Subsidiary pursuant to Article IV.
(b) “Board” means the Board of Directors of the Company.
(c) “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute, and applicable regulations.
(d) “Committee” means the Compensation Committee of the Board or such other committee or subcommittee as may be designated by the Board. The Committee shall be comprised of not fewer than two members who shall be “outside directors” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.
(e) “Company” means Advance Auto Parts, Inc., a Delaware corporation.
(f) “Covered Employee” means a Participant who the Committee determines meets the definition of a Covered Employee as defined in Code Section 162(m)(3) and the regulations promulgated thereunder, which definition generally includes the chief executive officer of the Company andCorporation shall be personally liable to the four highest compensated officersCorporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, as applicable, except for liability (i) of any director or officer for any breach of the Company other than the chief executive officer.
(g) “Effective Date” means January 1, 2017, subject to approval by stockholders as presented in Article VIII, on May 17, 2017. The effective datedirector's or officer’s duty of the Original Plan was December 31, 2006, subject to approval by the stockholders on May 16, 2007.
(h) “Employee” means any person, including a member of the Board, who is employed by the Company or a Subsidiary.
(i) “Fair Market Value” means, on any given date, the closing price of a share of common stock of the Company as reported on the New York Stock Exchange composite tape on such date, or if such common stock was not traded on the New York Stock Exchange on such day, then on the next preceding day that such common stock was traded on such exchange, all as reported by such source as the Committee may select.
(j) “Original Plan” has the meaning set forth in Article I.
(k) “Participant” means an Employee who is granted an Award by the Committee.
(l) “Performance-Based Compensation” means an Award that is intended to constitute “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.
(m) “Performance Objective” is defined in Section 4.2.
(n) “Performance Period” is defined in Section 4.2.
(o) “Plan” means the 2017 Amended and Restated Advance Auto Parts, Inc. Executive Incentive Plan, as set forth herein and as amended from time to time.
(p) “Subsidiary” means any corporation (other than the Company), limited liability company, partnership, or other business organization of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
ARTICLE III
ELIGIBILITY
Awards may be granted to any Employee who is designated as a Participant from time to time by the Committee. The Committee shall determine which Employees shall be Participants and the terms, conditions, and limitations applicable to each Award not inconsistent with the Plan. Designation by the Committee as a Participant for an Award in one period shall not confer on a Participant the right to participate in the Plan for any other period.
ARTICLE IV
INCENTIVE AWARDS
Section 4.1 General. Awards may be granted to a Participant in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. The Committee, at the time an Award is made, shall specify the terms and conditions which govern the Award, which terms and conditions shall prescribe that the Award shall be earned only upon, andloyalty to the extent that, Performance Objectives as described in Section 4.2, are satisfied within a designated time. Different terms and conditions may be established by the Committee for different Awards and for different Participants.
Section 4.2 Performance Objectives. The vesting and payment of Awards shall be contingent upon the degree of attainment of such objectively determinable performance goals (the “Performance Objectives”) over such period (the “Performance Period”) as shall be specified by the Committee at the time the Award is granted. Performance Objectives will be established prior toCorporation or within the first ninety (90) days of each Performance Period, provided that the outcome is substantially uncertain at the time the Committee actually established the goal, or by such earlier time as is prescribed by Section 162(m) of the Code or the regulations thereunder in order for them to be considered “pre-established.” However, in no event will a Performance Objective be considered pre-established if it is established after 25% of the Performance Period (as scheduled in good faith at the time the goal is established) has elapsed. The Performance Objectives may be stated with respect to one or any combination of the following measures based on the Company, a Subsidiary, or an operating unit: (i) revenues;its stockholders, (ii) operating earnings or margin; (iii) earnings before or after taxes, interest, depreciation, and/or amortization; (iv) inventory productivity measures such as inventory turns; (v) share price (including, but not limited to, growth measures and total stockholder return); (vi) earnings per share; (vii) economic profit or value created; (viii) return measures (including, but not limited to, return on assets, capital, invested capital, or revenue); (viii) strategic business criteria (including, but not limited to, meeting specified goals relating to available capital, cash or cash flow, market penetration, geographic business expansion, cost targets, customer or employee satisfaction, store sales growth or acquisitions or divestitures of subsidiaries, affiliates, or joint ventures). The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods (e.g., earnings per share growth), or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. Performance Objectives may be measured on a cumulative basis, or in the alternative on an annual, quarterly or other periodic basis, or in the form of a matrix combining various Performance Objectives and weighting them in any manner that the Committee may determine, in its sole discretion.
Section 4.3 Payment of Awards. Awards shall be made to Participants in a single lump sum in cash at a time determined by the Committee, but in no event later than two and one-half months after the end of the fiscal year in which the Performance Period ends. The actual amount of payment under an Award will be calculated by applying the degree of attainment of Performance Objectives. The Committee shall make all calculation of payments and shall certify in writing the extent, if any, to which the Performance Objectives have been met. In no event shall a Covered Employee receive an Award payment in any fiscal year that exceeds the lesser of (i) $5,000,000 or (ii) 500% of the Covered Employee’s base salary (prior to any salary reduction or deferral elections) as of the date of the Award. The Committee shall not have any discretion to determine that an Award will be paid to a Covered Employee if the Performance Objective for such Award is not attained. The Committee shall, however, have the authority to reduce or eliminate any Award under the Plan.
Section 4.4 Disability, Death, or Other Circumstances. The Committee may provide that an Award shall be payable, in whole or in part, in the event of the Participant’s disability or death, a change in control or under other circumstances consistent with the Treasury regulations and rulings under Section 162(m) of the Code.
Section 4.5 Adjustments. To the extent applicable, subject to the following sentence and unless the Committee determines otherwise, the determination of the achievement of Performance Objectives shall be based on the relevant financial measure, computed in accordance with U.S. generally accepted accounting principles (“GAAP”), and in a manner consistent with the methods used in the Company’s audited financial statements. In setting the Performance Objectives for Performance-Based Compensation within the period prescribed in Section 4.2, the Committee may provide for such adjustments as it deems appropriate, to the extent consistent with the requirements of Section 162(m) of the Code.
ARTICLE V
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have all of the powers necessary to enable it to properly carry out its duties under the Plan. Not in limitation of the foregoing, the Committee shall have the power to construe and interpret the Plan and to determine all questions that shall arise thereunder. The Committee shall have such other and further specified duties, powers, authority, and discretion as are elsewhere in the Plan either expressly or by necessary implication conferred upon it. The Committee may appoint such agents, who need not be members of the Committee, as it may deem necessary for the effective performance of its duties, and may delegate to such agents such powers and duties as the Committee may deem expedient or appropriate that are not inconsistent with the intent of the Plan to the fullest extent permitted under applicable law. The decision of the Committee or any agent of the Committee upon all matters within the scope of its authority shall be final and conclusive on all persons.
ARTICLE VI
AMENDMENT AND TERMINATION
Section 6.1 Amendment of Plan. The Company has the right, at any time and from time to time, to amend in whole or in part any of the terms and provisions of the Plan to the extent permitted by law for whatever reason(s) the Company may deem appropriate. No amendment that would increase the maximum amount payable to a Covered Employee as specified in Section 4.3 shall be effective without approval of the stockholders of the Company.
Section 6.2 Termination of Plan. The Company expressly reserves the right, at any time, to suspend or terminate the Plan in whole or in part to the extent permitted by law for whatever reason(s) the Company may deem appropriate, including, without limitation, suspension or termination as to any Subsidiary, Employee, or class of Employees.
Section 6.3 Procedure for Amendment or Termination. Any amendment to the Plan or termination of the Plan shall be made by the Company by resolution of the Committee and shall not require the approval or consent of any Subsidiarydirector or Participant to be effective to the extent permitted by law. Any amendment to the Planofficer for acts or termination of the Plan may be retroactive to the extent not prohibited by applicable law.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Rights of Employees. Status as an eligible Employee shall not be construed as a commitment that any Award will be made under the Plan to such eligible Employee or to eligible Employees generally. Nothing contained in the Plan (or in any other documents related to this Plan or to any Award) shall confer upon any Employee any right to continue in the employ or service of the Company or any Subsidiary or constitute any contract or limit in any way the right of the Company to change such person’s compensation or other benefits or to terminate the employment or service of such person with or without cause.
Section 7.2 Unfunded Status. The Plan shall be unfunded. Neither the Company, any Subsidiary, the Committee, nor the Board shall be required to segregate any assets that may at any time be represented by Awards made pursuant to the Plan. Neither the Company, any Subsidiary, the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under the Plan.
Section 7.3 Limits on Liability. Any liability of the Company or any Subsidiary to any Participant with respect to an Award shall be based solely upon contractual obligations created by the Plan. Neither the Company nor any Subsidiary nor any member of the Board or the Committee, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration, or application of the Plan, shall have any liability to any party for any action taken or not taken in good faith under the Plan. To the extent permitted by applicable law, the Company shall indemnify and hold harmless each member of the Board and the Committee from and against any and all liability, claims, demands, costs, and
expenses (including the costs and expenses of attorneys incurred in connection with the investigation or defense of claims) in any manner connected with or arising out of any actions or inactions in connection with the administration of the Plan except for such actions or inactions which areomissions not in good faith or which constitute willful misconduct.
involve intentional misconduct or a knowing violation of law, (iii) of any director under Section 7.4 Interpretation. Unless otherwise expressly stated174 of the Delaware General Corporation Law, as the same exists or hereafter may be amended, (iv) of any director or officer for any transaction from which the director or officer derived any improper personal benefit, or (v) of any officer in any action by or in the right of the Corporation. If the Delaware General Corporation Law hereafter is amended to authorize the further elimination or limitation of the liability of directors or officers, then the liability of a director or officer of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the Committeeamended Delaware Corporation Law. No amendment to or repeal of this Article Eighth shall apply to or have any effect on the liability or alleged liability of any director or officer of the Corporation for or with respect to an Award, each Award grantedany acts or omissions of such director or officer occurring prior to a Covered Employee under the Plan is intended to be Performance-Based Compensation that is fully deductible by the Company for federal income taxes and not subject to the deduction limitation of Section 162(m) of the Code, and the Plan shall be construedsuch amendment or deemed amended to the extent possible to conform any Award to effect such intent. The Plan is intended to meet the short-term deferral exception under Code Section 409A such that payments made to Participants under the Plan are not deferred compensation subject to the provisions of Code Section 409A.
Section 7.5 Tax Withholding. The Company shall be entitled to withhold from any payment made under the Plan the full amount of any required federal, state, or local taxes.
Section 7.6 Nontransferability of Benefits. A Participant may not assign or transfer any interest in an Award. Notwithstanding the foregoing, upon the death of a Participant, the Participant’s rights and benefits under the Plan shall pass by will or by the laws of descent and distribution.
Section 7.7 Governing Law. To the extent not governed by federal law, the Plan shall be construed in accordance with and governed by the laws of the State of Delaware.
ARTICLE VIII
EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective as of the Effective Date, subject to approval and ratification of the Plan by the stockholders of the Company to the extent necessary to satisfy the requirements of the Code, the New York Stock Exchange or other applicable federal or state law. If not sooner terminated by the Board, this Plan shall terminate at the close of business on December 31, 2026. Notwithstanding the foregoing, if Awards are granted as Performance-Based Compensation, the Plan must be reapproved by the Company’s stockholders no later than the first stockholders meeting that occurs in the fifth year following the year in which the stockholders previously approved the Plan, if additional Performance-Based Compensation will be granted, and if required by Section 162(m) of the Code or the regulations thereunder.
repeal.”
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