DEF 14A 1 aap_proxyx2015.htm DEF 14A AAP_Proxy_2015


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.           )
 
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Definitive Proxy Statement 
 
 
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Definitive Additional Materials 
 
 
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Soliciting Material Pursuant to §240.14a-12 

ADVANCE AUTO PARTS, INC.
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
 
 
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ADVANCE AUTO PARTS, INC.
5008 AIRPORT ROAD
ROANOKE, VIRGINIA 24012
______________

 NOTICE OF 2015 ANNUAL MEETING OF STOCKHOLDERS 
May 20, 2015
_____________
 
It is my pleasure to invite you to attend the 2015 Annual Meeting of the Stockholders (the "Annual Meeting") of Advance Auto Parts, Inc. (the "Company"), a Delaware corporation, on Wednesday, May 20, 2015 at 8:30 a.m. Eastern Daylight Time (EDT).  The meeting will be held at Advance Auto Parts, Inc., 5008 Airport Road, Roanoke, Virginia 24012.
 
At the Annual Meeting, stockholders will vote on the following matters, which are further described in the attached proxy statement (the "Proxy Statement"):

1.
Election of the twelve nominees named in the Proxy Statement to the Board of Directors to serve until the 2016 annual meeting of stockholders;

2.Advisory vote to approve the compensation of the Company’s named executive officers;

3.
Ratification of the appointment by the Audit Committee of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2015;

4.
Advisory vote on a stockholder proposal, if presented at our Annual Meeting, regarding the ability of stockholders to act by written consent; and

5.
Action upon such other matters, if any, as may properly come before the meeting.
       
The Board of Directors recommends a vote FOR Proposal Nos. 1 through 3 and AGAINST Proposal No. 4. The persons named as proxies will use their discretion to vote on other matters that may properly arise at the Annual Meeting.

The Board of Directors set March 25, 2015 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 attend our Annual Meeting and vote.  We urge you, after reading 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, you may vote in person, even if you previously voted by proxy.
By order of the Board of Directors,
Tammy Moss Finley
Executive Vice President, Human Resources,
General Counsel and Corporate Secretary
Roanoke, Virginia
April 6, 2015





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
 
 
 
 
2014 Grants of Plan-Based Awards Table
 
 
 
 
Outstanding Equity Awards at 2014 Fiscal Year-End Table 
 
 
 
 
2014 Option Exercises and Stock Vested Table 
 
 
 
 
2014 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 RATIFICATION OF APPOINTMENT BY THE AUDIT COMMITTEE OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2015
 
 
AUDIT COMMITTEE REPORT
 
 
PROPOSAL NO. 4  STOCKHOLDER ADVISORY VOTE ON A STOCKHOLDER PROPOSAL
 
 
 
OTHER MATTERS





______________

ADVANCE AUTO PARTS, INC.
PROXY STATEMENT
FOR 2015 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 20, 2015.

This Proxy Statement and the 2014 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 twelve nominees named below as directors, an advisory vote to approve the compensation of our named executive officers, ratification of our independent registered public accounting firm (the "independent auditors"), and an advisory vote on a stockholder proposal, if presented at the Annual Meeting, regarding the ability of stockholders to act by written consent. 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, 2015.
 
When and where will the Meeting be held?

The 2015 Annual Meeting will be held on Wednesday, May 20, 2015 at 8:30 a.m. (EDT), at the Advance Auto Parts Store Support Center located at 5008 Airport Road, Roanoke, Virginia 24012.  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 Board of Directors ("Board") is soliciting your proxy to vote at the Annual Meeting.

Will a proxy solicitor be used?
 
Yes, we have engaged MacKenzie Partners, Inc. ("MacKenzie Partners") to assist in the solicitation of proxies for the Annual Meeting and we estimate we will pay MacKenzie Partners a fee of approximately $25,000. We have also agreed to reimburse MacKenzie Partners for reasonable administrative and out-of-pocket expenses incurred in connection with the proxy solicitation and indemnify MacKenzie Partners against certain losses, costs and expenses.

What will I be voting on?

At the Annual Meeting, stockholders will vote on the following matters:
 
1.
The election of the following nominees to the Board to serve until the 2016 annual meeting of stockholders:
 
•  John F. Bergstrom
•  William S. Oglesby
• John C. Brouillard
•  J. Paul Raines
•  Fiona P. Dias
•  Gilbert T. Ray
•  John F. Ferraro
• Carlos A. Saladrigas
•  Darren R. Jackson
•  O. Temple Sloan, III
•  Adriana Karaboutis
•  Jimmie L. Wade
 
2.
Advisory vote to approve the compensation of the Company’s named executive officers;


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3.
Ratification of the appointment of Deloitte & Touche LLP ("Deloitte") as our independent registered public accounting firm for 2015;
4.
Advisory vote on a stockholder proposal, if presented at our Annual Meeting, regarding the ability of stockholders to act by written consent; and
5.
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 twelve director nominees to the Board ("Proposal No. 1");
2.
FOR the advisory vote on the approval of the compensation of the Company’s named executive officers ("Proposal No. 2");
3.
FOR the ratification of the appointment of Deloitte as our independent registered public accounting firm for 2015 ("Proposal No. 3"); and
4.
AGAINST the advisory stockholder proposal regarding the ability of stockholders to act by written consent, if presented at our Annual Meeting ("Proposal No. 4").

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 Michael A. Norona 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, 2015 (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 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 these proxy materials are being sent directly to you by the Company.

Beneficial Owner
If your shares are held in a stock brokerage account or by a bank, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your bank or broker, which is considered the stockholder of record of these shares.  As the beneficial owner, you have the right to direct your bank or broker how to vote and are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you bring with you a legal proxy from the stockholder of record.  Your bank or broker has enclosed a voting instruction card for you to use for providing directions for how to vote your shares.

How do I vote?

If you are a stockholder of record, there are four ways to vote:



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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 19, 2015, 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 through 3 and AGAINST Proposal No. 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 NEW YORK STOCK EXCHANGE’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.

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 19, 2015;
Returning a later-dated proxy card;
Sending written notice of revocation to Tammy M. Finley, Executive Vice President, Human Resources, 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 the Annual Meeting.

If your shares are held in street name, you must follow the specific directions provided to you by your bank or broker to change or revoke any instructions you have already provided to your bank or broker.

Is my vote confidential?

It is the policy of the Company that all proxies, ballots, 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 those of MacKenzie 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 73,155,613 shares outstanding and 536 stockholders of


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record.  A majority of our common stock, or 36,577,807 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. 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 twelve 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.  For the advisory vote to approve the compensation of the Company’s named executive officers, the vote is non-binding and, therefore, no specific vote is required to approve the proposal.  However, 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 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. 4. For the advisory vote on the stockholder proposal regarding the ability of stockholders to act by written consent, the vote is non-binding and, therefore, no specific vote is required to approve 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?

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 43006, Providence, RI 02940-3006, Attention: Shareholder Correspondence.



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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 43006, Providence, RI 02940-3006, 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 2015 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 mail additional copies to you promptly, at no charge, if you request them from our corporate office by phone at (919) 573-3826 or by mail to 5008 Airport Road, Roanoke, VA 24102, Attention: Investor Relations.  We cannot guarantee you will receive mailed copies before the Annual Meeting.

Where can I find the voting results of the Annual Meeting?

We plan to announce preliminary voting results at the Annual Meeting and publish final results in 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 2016 annual meeting of stockholders?

If you are a stockholder and you want to present a proposal at the 2016 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 8, 2015.  Applicable Securities and Exchange Commission ("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 2016 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 22, 2015, and no later than January 21, 2016.  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.


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PROPOSAL NO. 1
 
ELECTION OF DIRECTORS
 
At the Annual Meeting, you will vote to elect as directors the twelve nominees listed below to serve until our 2016 Annual Meeting of stockholders or until their respective successors are elected and qualified.  Our Board has nominated John F. Bergstrom, John C. Brouillard, Fiona P. Dias, John F. Ferraro, Darren R. Jackson, Adriana Karaboutis, William S. Oglesby, J. Paul Raines, Gilbert T. Ray, Carlos A. Saladrigas, O. Temple Sloan, III and Jimmie L. Wade 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, our 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.
 
The persons named as Proxies 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 Proxies may vote for the election of any substitute nominees that our Board may propose.  The persons named as Proxies may not vote for a greater number of persons than the number of nominees named above. 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 about our nominees for director as of the Record Date, March 25, 2015.
 
Name
 
Age
 
Position
John F. Bergstrom (2)
 
68
 
Director
John C. Brouillard(1)(4)
 
66
 
Chair
Fiona P. Dias(2)
 
49
 
Director
John F. Ferraro(1)
 
59
 
Director
Darren R. Jackson
 
50
 
Director and Chief Executive Officer
Adriana Karaboutis(1)
 
52
 
Director
William S. Oglesby(3)
 
55
 
Director
J. Paul Raines(3)(4)
 
50
 
Director
Gilbert T. Ray(2)(4)
 
70
 
Director
Carlos A. Saladrigas(1)
 
66
 
Director
O. Temple Sloan, III(3)
 
54
 
Director
Jimmie L. Wade(3)
 
60
 
Director
_______________
(1)
Member of Audit Committee
(2)
Member of Compensation Committee
(3)
Member of Finance Committee
(4)
Member of Nominating and Corporate Governance Committee


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Mr. Bergstrom, Director, became a member of our Board in May 2008.  Mr. Bergstrom is the Chairman 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 Wisconsin Energy Corporation, a diversified energy company, since 1987.

Bergstrom Corporation has been cited as the number one quality automotive dealer in the country 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. Bergstrom brings a unique and valuable point of view to our Board. In addition, as a result of his service as a director of several other public companies, including membership on the compensation committees of Associated Banc-Corp and Wisconsin Energy, he is in a position to share with the Board his experience with governance issues facing public companies.

Mr. Brouillard, Chair, became a member of our Board in May 2004 and was appointed Lead Director on February 14, 2007. Mr. Brouillard served as the interim Chair, President and Chief Executive Officer of the Company from May 2007 until January 2008, when he became the non-executive Chair of the Board. Mr. Brouillard retired as Chief Administrative and Financial Officer of H.E. Butt Grocery Company, a regional food retailer, in June 2005, a position that he had held since February 1991. From 1977 to 1991, Mr. Brouillard held various positions with Hills Department Stores, 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 having served on our Board for over ten years, including seven years as the independent Board Chair and eight months as the interim Chief Executive Officer of the Company, Mr. Brouillard is uniquely situated to understand the inner workings of Advance's Board and management processes. His considerable experience in finance and accounting matters are particularly valuable to the deliberations of the Audit Committee, and his past service on the board of another public company has strengthened his understanding of the governance concerns facing public companies.
Ms. Dias, Director, 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. (now eBay Enterprise), 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 Realogy Holdings Corp., a real estate brokerage company, since June 2013, and she served as a director of Choice Hotels, Inc., a hotel franchisor, from November 2004 to April 2012.

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, including membership on the compensation committee of Realogy Holdings and past membership on the compensation committee of Choice Hotels, also enables her to share with the Board her experience with governance issues facing public companies.


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Mr. Ferraro, Director, became a member of our Board on February 10, 2015. 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. Prior to his COO role, Mr. Ferraro served in several senior leadership positions at EY, including Global Vice Chair Audit. He joined EY in 1976 and has served a variety of global companies. Mr. Ferraro is a CPA and a member of the American Institute of Certified Public Accountants.

Mr. Ferraro has had extensive financial, corporate management, governance and public policy experience which is expected to assist the Board in identifying trends and developments that affect public companies. In addition, the Board expects to capitalize on his experience in the areas of marketing and the development of corporate strategy.
Mr. Jackson, Director and Chief Executive Officer, became a member of our Board in July 2004. Since January 2008, Mr. Jackson has continuously served as our Chief Executive Officer. During that time period, Mr. Jackson also served as President from January 2008 to January 2009 and from January 1, 2012 to April 21, 2013, when George E. Sherman became our President. Prior to becoming our Chief Executive Officer, Mr. Jackson served in various executive positions with Best Buy Co., Inc., a specialty retailer of consumer electronics, office products, appliances and software, ultimately serving from July 2007 to December 2007 as Executive Vice President of Customer Operating Groups. He joined Best Buy in 2000 and was appointed as its Executive Vice President-Finance and Chief Financial Officer in February of 2001. Prior to 2000, he served as Vice President and Chief Financial Officer of Nordstrom, Inc., Full-line Stores, a fashion specialty retailer, and held various senior positions, including Chief Financial Officer of Carson Pirie Scott & Company, a regional department store company. He began his career at KPMG. Mr. Jackson has served as a director of Fastenal Company, which sells industrial and construction supplies, since July 2012.

Mr. Jackson has served as a member of our Board for over ten years and as the Company's Chief Executive Officer for over seven years. Mr. Jackson's experience in customer service and high growth with large retail companies (including both organic growth and growth by means of strategic acquisitions) and his experience in leading the Company provide him with unique insights into the challenges and opportunities of overseeing the operations, expansion and management of the Company.
Ms. Karaboutis, Director, became a member of our Board on February 10, 2015. Ms. Karaboutis has served as Executive Vice President, Technology and Business Solutions of Biogen Idec, an independent biotechnology company, since September 24, 2014. Prior to joining Biogen, she served as Vice President and Global Chief Information Officer for Dell, Inc. from November 2011 to September 2014, with responsibility for the company’s overall IT enterprise and customer experience.  Previously, Ms. Karaboutis served as Dell’s Vice President of IT, Global Operations and Technology supporting the product groups, manufacturing, procurement and supply chain operations. Prior to joining Dell in 2010, Ms. Karaboutis spent over 20 years at General Motors Corporation and Ford Motor Company in various global IT and business operations leadership positions.

Ms. Karaboutis possesses extensive experience in corporate management, manufacturing, logistics and technology. In addition, her experience with corporate strategy and change management will allow the Board to benefit from her insights as the Company continues the process of integrating General Parts International, Inc. ("GPI") and growing of the Company's Commercial and e-commerce businesses.


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Mr. Oglesby, Director, became a member of our Board in December 2004. Mr. Oglesby is currently Senior Managing Director for The Blackstone Group, L.P., a global investment and advisory firm, and has held this position since April 2004. Mr. Oglesby has over 30 years of investment banking experience as a result of his current 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. Oglesby has served on our Board for over ten years. With his broad experience in the investment banking business, Mr. Oglesby is uniquely equipped to provide the Board with insights into capitalization strategies, capital markets mechanics and strategic expansion opportunities. His experience with us and in the automotive aftermarket industry enables him to provide critical insights into strategic opportunities for our Company, including our recent acquisition of GPI.
Mr. Raines, Director, became a member of our Board in February 2010. Mr. Raines is Chief Executive Officer of GameStop Corporation, the world's largest multichannel retailer of video games, and has held this position since June 2010. From September 2008 to June 2010 he served as Chief Operating Officer of GameStop. Mr. Raines has served as a director of GameStop since June 2012. Prior to joining GameStop, Mr. Raines spent eight years with The Home Depot, Inc., a home improvement specialty retailer, in various management positions in retail operations, including serving as Executive Vice President for U. S. Stores and President of the Southern Division for the Atlanta-based company. He also has extensive international expertise covering Latin America, Asia and Europe.

Under Mr. Raines’ leadership, GameStop has undergone a transformation to become a global hybrid physical and digital specialty retailer in the video game, consumer electronics and technology space. The company has operations in 15 countries across Europe, Canada, Australia and the United States, and is a Fortune 500 and S&P 500 company, employing more than 40,000 people.  The Board draws on Mr. Raines’ insights gained from his expertise in the areas of retail strategy, store operations, customer service, merchandising, manufacturing, marketing, loss prevention, real estate, supply chain and global sourcing.

Mr. Ray, Director, became a member of our Board in December 2002. Mr. Ray was a partner of the law firm of O'Melveny & Myers LLP until his retirement in February 2000. Mr. Ray has been a member of the boards of Towers Watson & Co., formerly Wyatt Worldwide, Inc., a professional services company, since 2000; Dine Equity, Inc., the restaurant holding company of Applebee's and IHOP, since 2004; and Diamond Rock Hospitality Company, a lodging-focused real estate company, since 2004.

Mr. Ray's service on our Board provides institutional knowledge and continuity to our Board. His experience as an attorney allows Mr. Ray to provide guidance to the Company on legal and fiduciary matters. He has extensive experience with conventional corporate and tax-exempt transactions, as well as international finance. In addition, Mr. Ray's service as a director on the boards of other public companies provides the Company with valuable insights on corporate governance issues that face the Board and the Company.




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Mr. Saladrigas, Director, became a member of our Board in May 2003. Mr. Saladrigas has been the Chairman and Chief Executive Officer of Regis HR Group, a Professional Employee Organization, since July 2009. Also, Mr. Saladrigas founded and has been the Chairman and Chief Executive Officer of Concordia Behavioral Health, a privately held managed behavioral health care organization, since January 2011. Mr. Saladrigas served as Chairman of the Premier American Bank in Miami, Florida from September 2001 until June 2007. Mr. Saladrigas served as the Vice Chairman of Premier American Bank until his resignation in July 2008. A receiver was appointed for Premier American Bank in January 2010. From November 1984 to May 2002, he was the Chief Executive Officer of ADP TotalSource (previously The Vincam Group, Inc.), a human resources outsourcing company that provides human resource functions to small and mid-sized businesses. Mr. Saladrigas has served as a director of Progress Energy, Inc., an energy utility company, from 2001 to July 2012, when he became a director of Duke Energy Corporation, an electric power holding company following its acquisition of Progress Energy; Carolina Power & Light Company, an energy utility company, since 2001; and Florida Progress Corporation, a diversified holding company whose primary businesses are fuel supply and power, since 2001. From June 2006 to April 2009, Mr. Saladrigas served as a director of MBF Healthcare Acquisition Corporation, an acquisition company focused in the healthcare industry. He has also served as a member of the Latino/Hispanic Advisory Board for PepsiCo.

Mr. Saladrigas provides stability and continuity to the Board as well as valuable leadership related to his experience in financial management and as a human resources professional. He has been designated by the Board as an Audit Committee financial expert consistent with SEC regulations. Mr. Saladrigas provides the Board with relevant insights into the Latino/Hispanic segment of the Company's customer base.
Mr. Sloan, Director and former President of GPI, became a member of our Board on January 2, 2014. He served as President of GPI from 2001 to 2008 and from January 2, 2014 to January 3, 2015. Prior to our acquisition of GPI, he served as President and Chief Executive Officer of GPI from 2008 to January 2, 2014. Mr. Sloan has over 30 years of experience in the automotive aftermarket. He currently serves as a director of Trail Creek Investments, Inc. and as a member of a Wells Fargo Bank Regional Advisory Board and the National Association of Chief Executive Officers. Mr. Sloan is also a member of the Board of Trustees of Northwood University.

Mr. Sloan’s extensive experience in the automotive aftermarket industry is an invaluable asset to the Company. He has particular expertise in the Commercial business, which is a key focus of the Company, and will continue to assist with our integration of GPI. Mr. Sloan's experience in acquisitions and the subsequent integration of businesses equips him to serve a key role in our future success and in the Board's analysis of steps to achieve the full integration of GPI.


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Mr. Wade, Director and Past President, became a member of our Board in September 2011. Mr. Wade served as our President from January 2009 to January 1, 2012 and from October 1999 to May 2005. He continues to provide strategic leadership to the Company, such as playing an integral role in the Company's acquisitions of B.W.P. Distributors, Inc. ("BWP") and GPI. Mr. Wade joined us in February 1994 and has held several key senior executive roles with the Company including Executive Vice President from May 2005 until January 2009 and Chief Financial Officer from March 2000 through August 2003. Prior to 1993, Mr. Wade was Vice President, Finance and Operations of S.H. Heironimus, Inc., a regional department store company. Mr. Wade has served as a director of Tuesday Morning Corporation, a closeout retailer of upscale home accessories and related merchandise, since September 2014; Lumber Liquidators, a specialty retailer of hardwood flooring, since September 2011; and various non-profit boards.

Mr. Wade has 21 years of experience with the Company in various business, finance and strategic leadership roles and has broad expertise and knowledge of the automotive aftermarket industry, as well as experience in retail finance and operations prior to joining the Company in 1994. During his career, he has gained and developed extensive business, finance, supply chain, marketing and leadership skills, as well as solid instincts and understanding regarding acquisition opportunities, challenges and processes. Further, he possesses an understanding of strategic business planning, risk assessment and store operations that makes him uniquely suited to serve as a member of the Board. Mr. Wade's experience and expertise in business integration and in the automotive aftermarket industry are critical to our successful integration of GPI and the Board's evaluation of key milestones in the GPI integration process.

THE BOARD OF DIRECTORS RECOMMENDS 
A VOTE FOR EACH OF OUR BOARD’S NOMINEES.


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CORPORATE GOVERNANCE
 
Overview
 
Our Company believes that good corporate governance practices reflect our values and support our strong 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").  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.  Each standing committee of the Board has a charter, which can be found at www.AdvanceAutoParts.com, that spells out the committee’s roles and responsibilities assigned to it by the Board.  In addition, the Board has established policies and procedures that address matters such as chief executive officer succession planning, transactions with related persons, risk oversight, communications with the Board by stockholders and other interested parties, and the independence and qualifications of our directors.  This "Corporate Governance" section provides insights into how the Board has implemented these policies 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 monitor 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, compensation and assessment of performance of our Board;
Board procedural matters, including, among other things, selection of the chair of the Board, Board meetings, Board communications, retention of counsel and advisers and our expectations regarding the performance of our directors;
committee matters, including, among other things, the types of committees, charters of committees, independence of committee members, chairs of committees, service of committee members, committee agendas and committee minutes and reports;
chief executive officer evaluation, management development and succession planning;
codes of conduct; and
other matters, including 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 with and upon the recommendation of the Nominating and Corporate Governance Committee, determined that Messrs. Bergstrom, Brouillard, Ferraro, Oglesby, Raines, Ray and Saladrigas and Mses. Dias and Karaboutis are each “independent” directors under the listing standards of the New York Stock Exchange ("NYSE"), because each of these directors: (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 subsidiaries and (2) satisfies the “bright line independence” criteria set forth in Section 303A.02(b) of the NYSE’s listing standards.  In addition, based on such standards, the Board determined that Mr. Jackson is not independent because he is our Chief Executive Officer, that Mr. Sloan is not independent because he is a former executive officer of the Company having served as the President of the Company’s subsidiary GPI through the end of the 2014 fiscal year, and that Mr. Wade is not independent because he is currently employed by the Company. Given the increased size and complexity of the Company resulting from the acquisition of GPI, and consistent with the Board's previously disclosed goal of no less than 75 percent of the Board being determined to be independent, the Board recently increased its size from ten to twelve and achieved its goal regarding independence with the appointment of Mr. Ferraro and Ms. Karaboutis, each of whom have been determined by the Board to be independent under applicable standards. To determine whether a director was qualified to be considered independent, 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. In assessing the materiality of other relationships to determine the independence of Mr. Ferraro, the Board evaluated the services that were provided to the Company by Ernst & Young LLP, the U. S. member firm of EY, during the 2014 fiscal year, and described in greater detail in the "Related Party


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Transactions" section of this Proxy Statement. The Board noted that the services were not provided by Mr. Ferraro personally and that the nature and extent of the services provided should not impair his independence. Based upon such assessment and all facts and circumstances known to the Board, including, among other things, a review of questionnaires submitted by these directors and a review of a recent resume or biography of each director, the Board made a determination of independence.  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 Independent Directors
 
During 2014, the independent directors on our Board met a total of 4 times.  During 2014, these meetings were presided over by Mr. Brouillard, the non-executive Chair of the Board.  For 2015, our independent directors are scheduled to meet separately in conjunction with each of the four scheduled non-telephonic meetings of the Board.  Mr. Brouillard is expected to preside over these meetings during 2015.

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.  Immediately prior to Mr. Jackson’s appointment as President and Chief Executive Officer, Mr. Brouillard served as the Company’s interim Chair, President and Chief Executive Officer.  At the time of Mr. Jackson’s appointment, his prior experience had primarily been in financial management and leadership roles at various retail companies. The Board decided to retain Mr. Brouillard as the independent Chair of the Board in order to provide Mr. Jackson with an opportunity to lead the Company’s management with the support and guidance of an experienced chief executive officer serving in the role of the independent Board Chair.  The Board regularly considers whether to maintain the separation of the roles of Chair and Chief Executive Officer.  The Board believes that Mr. Brouillard has continued to serve a valuable role in supporting Mr. Jackson and providing leadership to the Board as a whole and has decided to maintain the separation of those roles at this time.  In the event that the Board chooses to combine these roles, the Company’s governance guidelines provide for the selection of an independent lead director.  The responsibilities of the independent Chair or independent lead director include presiding over meetings of the Board or of the independent directors and 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 are heard and considered.

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 Board Chair, including on an anonymous or confidential basis, may do so by delivering a written communication to the Board, the independent directors, the non-management directors as a group or to our Board Chair, c/o Advance Auto Parts, Inc., 5008 Airport Road, Roanoke, Virginia  24012, Attention: General Counsel.  The general counsel will not open a communication that is conspicuously marked "Confidential" or is addressed to one or more of our independent directors, our non-management directors as a group or our Board Chair and will forward each such communication to the appropriate individual director or group of directors, as specified in the communication.  Such communications will not be disclosed to the non-independent or management members of our Board or to management unless so instructed by the independent or non-management directors. Communications will be forwarded by the general counsel on a bi-monthly basis.  The general counsel will ensure the timely delivery of 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.  Nine directors were in attendance at our 2014 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 2014, the Committee retained an executive search firm to assist in identifying potential director candidates. Immediately following our acquisition of GPI in January 2014, Mr. O. Temple Sloan, III, the former Chief Executive Officer and President of GPI, was elected to serve as a director. As discussed in the "Director Independence" section of this Proxy Statement, in conjunction with the GPI acquisition we decided to increase the size of the Board. 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


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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.

In addition to determining whether a candidate for director possesses the qualifications and experience that are a prerequisite for nomination, the Nominating and Corporate Governance Committee considers whether a candidate’s background and experience would complement the skills and experience of the existing Board members.  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, ethnic background and experience) in the composition of the Board although the Nominating and Corporate Governance Committee strives to compose a Board that reflects sensitivity to the need for an appreciation of such diversity. After completing its evaluation, the Committee recommended that Mr. Ferraro and Ms. Karaboutis be elected by the Board to serve as independent directors commencing in February 2015.

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 the Company’s books, the number and type of shares or other equitable interests that are beneficially owned by the stockholder and additional information required by the Company’s 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.

Code of Ethics and Business Conduct
 
We expect and require all of our Team Members, our officers and our directors, and any parties with whom we do business to conduct themselves in accordance with the highest ethical standards.  Accordingly, we have adopted a Code of Ethics and Business Conduct, which outlines our commitment to, and expectations for, honest and ethical conduct by all of these persons and parties in their business dealings.  A complete copy of our Code of Ethics and Business Conduct is available on our website at www.AdvanceAutoParts.com under the Investor Relations section.
 
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 chief executive officer, chief financial officer, chief accounting officer, controller and any other person performing similar functions.  We expect all of these finance professionals to act in accordance with the highest standards of professional integrity, to provide full and accurate disclosure in 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 on our website at www.AdvanceAutoParts.com under the Investor Relations section.
 
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 make a determination of whether to ratify or approve the transaction.  In the case of a transaction


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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 Audit 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 Director and Officer Questionnaire which requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest. The annual Director and Officer Questionnaire is prepared and distributed by our general counsel’s office, and each director or 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.

During 2013 the Company retained Blackstone Advisory Partners, L.P., to provide financial advisory services and assist with negotiations related to the potential acquisition of GPI by the Company. The Company agreed to pay certain fees upon the execution of a definitive acquisition agreement and additional fees upon the closing of the acquisition by the Company. As a result of the successful completion of the GPI acquisition, the Company paid Blackstone Advisory Partners a total of $8 million for its services, a portion of which was paid upon the closing of the transaction, which occurred on January 2, 2014. Mr. Oglesby, who is a member of our Board, is a partner of Blackstone Advisory Partners and Blackstone Holdings and an equity owner of The Blackstone Group, L.P. Mr. Oglesby did not receive any compensation directly from us or from The Blackstone Group for the services provided. Mr. Oglesby will share in the profit of The Blackstone Group, L.P. generated by the fees we paid to Blackstone Advisory Partners to the extent of his ownership interest in The Blackstone Group, L.P. The terms of the engagement agreement and Mr. Oglesby's role in the project were reviewed and approved by the Board prior to the execution of the agreement by the Company. Neither The Blackstone Group nor Mr. Oglesby in his role with The Blackstone Group provided investment banking or financial advisory services to the Company during fiscal year 2014. No other investment banking fees have been paid by us to Mr. Oglesby or to The Blackstone Group during Mr. Oglesby's tenure on the Board, and Mr. Oglesby has not served as a member of any independent committee of the Board since December 2009.

Prior to our acquisition of GPI in early 2014, GPI was a privately held company controlled by Mr. Sloan and his family. Since the commencement of Fiscal Year 2014, 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 $298,000 for Fiscal 2014 through March 25, 2015, from a Sloan-related Party for multiple real property subleases.
GPI Entities paid aggregate rent of approximately $860,000 for Fiscal 2014 through March 25, 2015, 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 since the beginning of Fiscal 2014 is approximately $1,168,000. 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 year 2014 through March 25, 2015, these Sloan-related Parties, as customers, paid GPI Entities approximately $60,000 and, as suppliers, received approximately $509,000 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% of the purchase price the Company paid to acquire GPI. For more information regarding the GPI acquisition, see the "Acquisitions" footnote to the Company's Consolidated Financial Statements contained in the Company's 2014 Annual Report on Form 10-K filed with the SEC on March 3, 2015.

Since the outset of Fiscal 2014, car dealerships owned by Bergstrom Corporation, where Mr. Bergstrom is the Chairman and Chief Executive Officer, paid us a total of approximately $400,000 to purchase automotive parts. Such purchases were made in the ordinary course of business upon terms available to similarly situated Commercial customers of the Company.

Since the beginning of Fiscal 2014, the Company paid Ernst & Young LLP, the U. S. member firm of EY, approximately $565,000 in integration, tax and accounting-related fees. During Fiscal 2014, Mr. Ferraro was a partner in EYEA LLP ("EY


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Global"), which is owned in part by Ernst & Young LLP. The Board evaluated the types and value of the services that were expected to be provided to the Company by Ernst & Young LLP prior to the appointment of Mr. Ferraro as a director.

Succession Planning

In light of the critical importance of executive leadership to the Company’s success and consistent with the Company’s Guidelines for Significant Governance Issues, the Board has adopted a chief executive officer succession planning process that is led by the Compensation Committee.  The Compensation Committee, working in consultation with 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 officer and to report 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.


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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 5 times during 2014.  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 Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which is comprised of independent directors in accordance with the listing standards of the 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 2014 and the primary responsibilities of each committee.

 Name of Committee and Members
Primary Responsibilities
Audit
(met 11 times)
 
Carlos A. Saladrigas (Chair)
John C. Brouillard
John F. Ferraro
Adriana Karaboutis










monitors the integrity of our financial statements, reporting processes, internal controls, risk management 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, independence and performance of our independent registered public accounting firm;

monitors and reviews applicable enterprise risks identified as part of our enterprise risk management program; and

oversees our internal audit function.
Compensation
(met 5 times)
 
John F. Bergstrom (Chair)
Fiona P. Dias
Gilbert T. Ray














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;

oversees development and implementation of executive succession plans, including identifying the CEO's successor and reporting annually to the Board;

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;

reviews compensation-related risks; and

reviews applicable enterprise risks identified as part of our enterprise risk management program as they relate to our human resources, compensation and employment programs and practices.


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 Name of Committee and Members
Primary Responsibilities
Finance 
(met 4 times)

William S. Oglesby (Chair)
J. Paul Raines
O. Temple Sloan, III
Jimmie L. Wade








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

keeps apprised of applicable enterprise risks as part of the Company's enterprise risk management program as they relate to financial matters.
Nominating and Corporate Governance
(met 4 times)

Gilbert T. Ray (Chair)
John C. Brouillard
J. Paul Raines
 








assists the Board in identifying, evaluating and recommending candidates for election to the Board;

establishes procedures and provides oversight for evaluating the Board and management;

develops, recommends and reassesses our corporate governance guidelines;

evaluates the size, structure and composition of the Board and its committees; and

keeps apprised of applicable enterprise risks as part of the Company's enterprise risk management program as they relate to corporate governance matters.

Effective with the appointment of Mr. Ferraro and Ms. Karaboutis on February 10, 2015, to serve as members of the Audit Committee, Mr. Raines was reassigned from the Compensation Committee, where he served during Fiscal 2014, to the Finance Committee, and Mr. Ray, was reassigned from the Audit Committee, where he served during Fiscal 2014, to the Compensation Committee.

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 the Company’s financial matters and regulatory compliance, the Audit Committee is charged with discussing the guidelines and policies with respect to risk assessment and risk management.  The Company’s 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.  After reviewing the enterprise risks identified by management in consultation with senior management, the Audit Committee may approve management’s recommendation to assign certain risk areas for oversight to appropriate committees of the Board or to the full Board.  The Company has 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.  The Company’s senior internal audit professional also reviews risk areas with senior management on a regular basis.


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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 shown in the "Total Compensation Mix" table, the compensation of our executives is primarily based on performance over a long-term period.  We believe the performance-based vesting of our stock appreciation rights ("SARs"), restricted stock and restricted stock units ("RSUs") drives long-term decision making and 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 senior executives. 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 the Company’s 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 the Company's 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 comprised of a combination of cash and equity-based compensation.  Management directors do not receive any additional compensation for services as a director.  Non-management directors receive an annual retainer of $85,000 and all 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 chair receives $20,000, and the Compensation Committee chair receives $15,000.  Each chair of the other Board committees receives $10,000.  The Board chair receives an additional $100,000 retainer.

Each non-management director may elect to receive all or a portion of his or her annual retainer on a deferred basis in the form of deferred stock units, or DSUs.  Each DSU is equivalent to one share of our common stock.  Dividends paid by the Company are credited toward the purchase of additional DSUs.  DSUs are payable in the form of common stock to participating directors over a specified period of time as elected by the participating director, or whenever their Board service ends, whichever is sooner.

In addition, each non-management director receives long-term equity incentives valued at $125,000 per year.  The long-term incentives are awarded annually in the form of DSUs.  Directors’ annual stock-based compensation is granted to them shortly after the date of the annual stockholder meeting.  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. The long-term equity incentives are delivered in the form of DSUs which are fully vested after one year of board service and are distributed in common shares after the director’s service on the Board ends.  In May 2014, each non-management director received long-term incentives valued at $125,000, which were granted in the form of 1,018 DSUs.


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2014 Director Summary Compensation Table

Information provided in the following table reflects the compensation delivered to our directors who are not named executive officers for our last fiscal year:
Name (a)
 
Fees Earned or
Paid in Cash (b) 
($)
 
Stock
Awards (c) 
($)
 
All Other Compensation ($)
 
Total 
($)
John F. Bergstrom
 
$
100,000

 
$
125,000

 
$ —
 
$
225,000

John C. Brouillard
 
185,000

 
125,000

 
               —
 
310,000

Fiona P. Dias 
 
85,000

 
125,000

 
               —
 
210,000

William S. Oglesby
 
95,000

 
125,000

 
               —
 
220,000

J. Paul Raines
 
85,000

 
125,000

 
               —
 
210,000

Gilbert T. Ray
 
95,000

 
125,000

 
               —
 
220,000

Carlos A. Saladrigas
 
105,000

 
125,000

 
               —
 
230,000

Jimmie L. Wade (d)
 

 
779,758

 
639,532

 
1,419,290


(a)
Mr. Ferraro and Ms. Karaboutis joined our Board in February 2015 and received no director compensation during Fiscal 2014.
(b)
Information includes paid or deferred board annual retainers and chair retainers during Fiscal 2014.
(c)
Except in the case of Mr. Wade, represents the grant date fair value of DSUs granted during Fiscal 2014.  The grant date fair value is calculated using the closing price of the Company’s stock on the date of grant.  For additional information regarding the valuation assumptions of this award, refer to Note 19 of the Company’s consolidated financial statements in the 2014 Form 10-K filed with the SEC on March 3, 2015.  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.
(d)
Mr. Wade did not receive any compensation pursuant to the non-management director compensation program. For Mr. Wade, the value of "Stock Awards" represents the grant date fair value of an annual grant of 850 time-based RSUs granted to him on December 1, 2014, pursuant to the terms of his Employment Agreement with the Company, which is described in the "CD&A" section of this Proxy Statement, and a conversion of the performance-based portion of his December 2011 LTI grant at target level to 5,273 time-based RSUs effective June 1, 2014. Due to the Company’s desire to retain Mr. Wade’s expertise to assist with certain strategic and leadership development matters, the vesting terms of his performance-based RSU grant made in December 2011 were adjusted such that the vesting would be at no less than target and tied to continued employment rather than continue being performance-based. The amended vesting terms were approved by the Compensation Committee in May 2014. As a result of these amended terms, 5,273 RSUs, representing Mr. Wade’s performance-based award at target level for the December 2011 grant, vested and were converted to shares of common stock on December 1, 2014. Mr. Wade was not eligible for enhanced vesting of this award based on Company performance. The terms of Mr. Wade's December 1, 2014 RSU grant are consistent with the terms of the time-based portion of the December 1, 2014 LTI grant to NEOs described in the "Grants of Plan-Based Awards Table" of this Proxy Statement. The grant date fair value is calculated using the closing price of the Company’s stock on the date of grant.  For additional information regarding the valuation assumptions of this award, refer to Note 19 of the Company’s consolidated financial statements in the 2014 Form 10-K filed with the SEC on March 3, 2015.  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 Mr. Wade. "All Other Compensation" includes Mr. Wade's 2014 fiscal year annual salary of $254,803, pursuant to the terms of his Employment Agreement with the Company, which is described in the "CD&A" section of this Proxy Statement, as well as Company matching contributions according to the terms of the Company’s 401(k) plan, life insurance premiums paid by the Company for Mr. Wade, realized and unrealized gains with respect to his deferred compensation balance and a one-time cash payment in the amount of $350,000 as part of a separate agreement reached between the Company and Mr. Wade related to his continued service with the Company.



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Directors’ Outstanding Equity Awards at 2014 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 directors who are not also named executive officers:
Name
 
Outstanding Stock Options
and SARs
 
Outstanding
Deferred
Stock Units
Outstanding
Restricted Stock and RSUs
John F. Bergstrom
 

 
9,319


John C. Brouillard
 

 
14,894


Fiona P. Dias 
 

 
9,696


William S. Oglesby
 

 
14,207


J. Paul Raines
 

 
10,847


Gilbert T. Ray
 
5,709

 
12,966


Carlos A. Saladrigas
 

 
16,990


Jimmie L. Wade(a)
 

 

3,166


(a)
Outstanding RSUs for Mr. Wade reflect equity awards granted to him as an executive of the Company. Outstanding RSUs that are subject to performance conditions are shown at the threshold level, described further in the "CD&A" section of this Proxy Statement.


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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. 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.

We have relied on management’s representation that the compensation discussion and analysis presented in this Proxy Statement has been prepared with integrity and objectivity 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.
THE COMPENSATION COMMITTEE
John F. Bergstrom (Chair)
Fiona P. Dias
J. Paul Raines
Gilbert T. Ray


COMPENSATION DISCUSSION AND ANALYSIS
This section describes the compensation packages of the Company’s principal executive officer, principal financial officer, President and two other most highly compensated officers who were employed by us on January 3, 2015 (we refer to such individuals as the named executive officers, or "NEOs," in this proxy statement). The Company’s NEOs and their positions are identified below:
Darren R. Jackson, Chief Executive Officer
Michael A. Norona, Executive Vice Present, Chief Financial Officer
George E. Sherman, President
O. Temple Sloan, III, Former President, General Parts International, Inc.*
Charles E. Tyson, Executive Vice President, Merchandising, Marketing and Supply Chain
* Mr. Sloan served as President, General Parts International, Inc. through the end of Fiscal 2014.
Executive Summary
Performance Highlights
Advance Auto Parts is a customer-focused company that has a track record of delivering value to our stockholders. Our management team’s execution of customer-focused programs and services has made it possible to grow stockholder value over time. In Fiscal 2014, our executive team led us through a good year of business performance. The key business priorities centered on methodically improving our business while successfully executing on our integration of GPI. We achieved solid improvements in our earnings per diluted share ("Comparable Cash EPS") and operating income ("Comparable Operating Income") on a comparable operating basis and increased comparable store sales over the prior year. Our Comparable Cash EPS and Comparable Operating Income results for Fiscal 2014 and Fiscal 2013 reported below are on a comparable basis to exclude the following items:
2014
$73.2 million of GPI integration expenses ($0.61 impact to EPS);
$42.7 million of amortization related to the acquired assets from GPI ($0.36 impact to EPS);
$9.0 million of BWP integration expenses ($0.08 impact to EPS); and
$21.1 million of operating income from the 53rd week partially offsetting the above expenses ($0.17 impact to EPS).

2013
$27.0 million of transaction expenses related to our acquisition of GPI, of which $2.0 million was interest related ($0.27 impact to EPS); and
$8.0 million of BWP integration expenses ($0.08 impact to EPS).


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Our overall financial results, including a detailed reconciliation of our comparable (non-GAAP) financial results to the most comparable GAAP financial results, are more fully described in our current Report on Form 8-K filed with the SEC on February 12, 2015 and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the SEC on March 3, 2015. Below is a summary of our financial performance in Fiscal 2014:
Net sales for Fiscal 2014 were $9,843.9 million, an increase of $3,350.0 million, or 51.6%, over net sales for Fiscal 2013. This growth was primarily due to sales of $3,040.5 million from the acquired GPI operations, $150.4 million in sales from the 53rd week, comparable store sales of 2.0% and sales from new stores opened during Fiscal 2014.
Comparable Operating Income for Fiscal 2014 increased 37.8% (or $262.3 million) to $955.6 million as compared to Fiscal 2013.
Comparable Cash EPS was $7.59, an increase of 33.9% from Fiscal 2013.
The increase in both Comparable Operating Income and Comparable Cash EPS was driven primarily by the acquired GPI operations and the increase in comparable store sales.
 
During Fiscal 2014, we maintained our strategic focus and achieved several important strategic and operational milestones that we believe position us well for the future, including:
Achievement of strong base business sales and earnings growth highlighted above.
Completion of the acquisition and significant progress toward the integration of GPI.
Opening of 143 new stores and 8 branches in Fiscal 2014, in addition to the acquisition of 1,223 Carquest stores and 103 Worldpac branches as a result of our acquisition of GPI.

Despite delivering good financial and strategic results in Fiscal 2014, our performance with respect to Operating Income and Sales fell below incrementally higher targets established by the Committee, commensurate with our commitment to grow our sales and operating income, for our NEOs to earn annual bonus payments.  Accordingly, our NEOs received no annual cash bonus payments for Fiscal 2014.

The pay-for-performance philosophy of our executive compensation programs described in this Proxy Statement has played a significant role in our ability to drive strong financial results by enabling us to attract and retain a highly experienced and successful team to manage our business.  Our pay programs strongly support our key business objectives and are targeted to drive comparable store sales and operating income growth which align with the value provided to our stockholders. Accordingly, if our stockholder value declines, so does the compensation delivered in the form of equity to our executives. Further, as an executive’s level of responsibility within our organization increases, so does the percentage of his or her total compensation that we link to performance (see sections entitled "Compensation Philosophy and Objectives" and "Executive Compensation Components"). At our 2014 Annual Meeting, we received overwhelming stockholder support of our executive compensation programs as evidenced by a favorable vote by nearly 98 percent of the shares voted. The Compensation Committee of the Board ("Committee") considered last year's voting results as they reviewed our compensation practices.

We believe our executive compensation programs, as more fully described in this CD&A and accompanying tables contained in this Proxy Statement, are structured in the best manner possible to support us and grow our business profitably for many years, as well as to support our culture and the traditions that have guided us for more than 80 years.

Fiscal 2014 Executive Officer Compensation Program Highlights
The following table summarizes the compensation elements provided for our NEOs in Fiscal 2014, as well as the rationale for the key actions and decisions made by the Committee with respect to each element.  Executives’ compensation consisted primarily of the following components in addition to limited perquisites and the retirement, health and welfare plans and programs in which all of our full-time U.S. Team Members participate.  More information is provided about each compensation element later in this CD&A.



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Compensation Element
Key Features and Purpose
Fiscal 2014 Actions
Base Salary
 
• 


• 
Fixed annual cash compensation to attract and retain talented executives.

Base pay increases are considered on a calendar year basis to align within the median range of our peer group (as described on pages 26 and 27 of this Proxy Statement) and to reflect the scope and complexity of each executive’s position.  Actual positioning varies to reflect each officer’s skills, experience, time in job and contribution to our success.
• 





The Committee increased the base salary of the CEO, President, and EVP, Merchandising, Marketing and Supply Chain in 2014 to better align base pay for these individuals with comparable positions in peer companies of similar size following the GPI acquisition.

The Committee established the base salary of the President of GPI consistent with his compensation as the former CEO of GPI and in consideration of the key role he was expected to play in the integration of GPI.
Annual Incentive Plan ("AIP") Cash Incentive Award
• 








• 







• 






Performance-based variable pay is tied to achievement of key annual financial and operating objectives.  Primary measures for 2014 included:
     • Enterprise operating income, including synergy
        savings and integration costs in connection with the
        integration of GPI into the Company (weighted 80
        percent)
     • Enterprise sales (weighted 20 percent)

Individual AIP opportunities are expressed as a percent of base salary and can vary for executives based on their positions. Target AIP award opportunities are generally established so that total annual cash compensation (base salary plus target AIP) approximates the median of our peer group. The range of potential payouts is zero to 200 percent of target.

AIP amount earned is determined based on the results achieved as determined by the Committee after evaluating our performance against pre-established, short-term financial and operating goals. We must achieve a minimum level of operating income or sales in order for any executive to receive a payment under the AIP.
• 





 • 
For Fiscal 2014, achievement of a minimum of 94.5 percent of the target level operating income or 99 percent of the target level enterprise sales in Fiscal 2014 was required for named executive officers to receive any 2014 AIP payments.

While enterprise operating income growth and sales were strong, 2014 operating income and sales performance fell below the thresholds required for a payout and resulted in zero AIP payments for the NEOs.
Long-Term Incentive ("LTI") Compensation
 






















Stock-based compensation awards are granted annually to create incentives for long-term creation of stockholder value, to reward achievement of multi-year financial objectives, and to promote retention of key talent.

Annual awards to our executive officers were in the form of time-based restricted stock units, or RSUs (50 percent of the award value), and performance-based stock appreciation rights, or SARs (50 percent of the award value).

Time-based vesting: The time-based RSUs vest in three approximately equal annual installments commencing on the first anniversary date of the grant based on continuing service.

Performance-based vesting: The total number of performance-based SARs earned by named executive officers can range from 0 to 200 percent of the target number of performance-based SARs based on achievement of three-year operating income and comparable store sales growth objectives established by the Committee.

Prior to December 2013, we used a comparison of our Economic Value Added ("EVA") (as described on page 30 of this Proxy Statement) compared with the EVA performance of the compensation peer group selected by the Committee as the performance metric for our annual LTI awards. The relative EVA metric provided a market-based indication of our relative EVA success; however, it was not easily understood by or readily accessible to LTI participants. Therefore, beginning with the December 2013 grants, the Committee changed the performance measures to cumulative operating income and comparable same store sales growth to provide participants with a clearer line of sight to the Company’s growth objectives.

• 




















 
For the 2015-2017 performance period, the Committee granted the named executive officers time-based RSUs and performance-based SARs on December 1, 2014. For the 2014-2016 performance period, the Committee granted time-based RSUs and performance-based SARs on December 12, 2013. Messrs. Jackson, Norona, Sherman, and Tyson received additional grants of time-based RSUs and performance-based SARs in February 2014, subject to the same goals for the 2014-2016 performance period, so that each executive’s target total direct compensation would be competitive with our revised peer group of companies listed on page 26 of this Proxy Statement.

In February 2014, certain senior executives of GPI, including the former President of GPI, received a new hire grant of performance-based RSUs that may vest on March 1, 2017, based on our performance during the 2014-2016 performance period utilizing the same metrics as the December 2013 annual LTI grants for the 2014-2016 performance period.

The performance-based portion of the annual equity award granted in December 2011 for the 2012-2014 performance period was based on our relative EVA performance for the 2012 through 2014 performance period. Our relative EVA performance result was below a threshold level for payout, resulting in our NEOs receiving no payout for the performance-based portions of the annual grants awarded in December 2011.






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Compensation Governance Highlights

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. Consistent with this belief, we have adopted the following practices:

Incentive Compensation Clawback Policy - During Fiscal 2012 our Board adopted an Incentive Compensation Clawback Policy, which provides that the Incentive Compensation of a Covered Employee, as those terms are defined in the policy, may be required to be repaid if the Covered Employee's fraud or willful misconduct caused us to prepare an accounting restatement due to our material non-compliance with financial reporting requirements. The policy applies to our current and former executive officers and any other employee that the Committee or the Board may designate. As discussed in the "Employment Agreements" section of this CD&A, the employment agreements with each of our NEOs provide that their incentive compensation is subject to the clawback policy.

No Excise Tax Gross-Ups for Change in Control Payments - 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. Rather, the agreements provide for the reduction of payments to an executive if a reduction would provide the executive with a greater after tax amount than if payments were not reduced.

Double-Trigger Vesting - Commencing in December 2012, the LTI awards granted to our NEOs provide for "double-trigger" vesting acceleration in the event of a Change in Control, as defined in the Advance Auto Parts 2004 Long-Term Incentive Plan, as amended ("2004 LTIP") or in the Advance Auto Parts 2014 Long-Term Plan ("2014 LTIP"). That is, immediate vesting of outstanding awards will not occur unless either the awards are not replaced or the executive's employment is terminated without Due Cause (as defined in the Executive's employment agreement) within 24 months following the Change in Control.

Stock Ownership Guidelines - 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 better alignment with the interests of our stockholders. In addition, LTI awards granted to our CEO during the four most recent fiscal years include a one-year holding period for shares acquired from the exercise of SARs or the vesting of restricted stock or RSUs.

Hedging and Pledging Prohibited - Our Insider Trading Policy prohibits directors and certain employees, including executive officers, from transactions in our stock except during specified window periods and prohibits directors and all employees from engaging in hedging of our common stock and prohibits pledging of our common stock unless certain stringent requirements are met.

Independent Compensation Consultant - As discussed in the "Compensation Decision Roles" section of this CD&A, the Committee has exercised its authority to retain the services of an independent compensation consultant.

Compensation Decision Roles

The Committee has final approval on the determination of all compensation recommendations for our NEOs and other executive officers, authorizes all awards under the 2004 and 2014 LTIPs, recommends or reports its decisions to the Board and oversees the administration of the compensation programs for executive officers, including the NEOs.  Decisions regarding non-equity compensation of other employees are made by management.  The chief executive officer annually reviews the performance of each NEO and other executive officers and makes recommendations with respect to salary adjustments and incentive amounts to the Committee.  The Committee’s annual review of the chief executive officer’s performance includes feedback from the Board and members of our senior management team.  Management is responsible for developing and maintaining an effective compensation program throughout the Company.  The Committee’s charter lists the specific responsibilities of the Committee and can be found under the Investor Relations section of our website at www.AdvanceAutoParts.com.

The Committee has engaged Frederic W. Cook & Co., Inc. ("Cook"), an independent consulting firm, to provide advice and assistance to the Committee when making compensation decisions for our NEOs, as well as for other senior executives.  Cook reports directly to the Committee, and all services provided by Cook are provided on behalf of the Committee.  Cook provides information regarding market compensation levels and practices, assists the Committee in the review and evaluation of such compensation levels and practices and advises the Committee regarding compensation decisions, particularly with respect to the compensation of our chief executive officer.  Cook also provides information and advice on non-employee director


25



compensation.  A principal of Cook attends meetings of the Committee, as requested, and communicates with the Chair of the Committee, as necessary or advisable, between meetings.  Cook does not provide any non-executive compensation services to us directly or indirectly through affiliates.  In 2014, Cook did not provide any services to us other than those requested by the Committee Chair and those related to Cook’s engagement as independent consultant to the Committee. The Committee has considered the independence factors in applicable SEC rules and NYSE Listing Standards and other facts and circumstances and concluded that the services performed by Cook did not raise any conflict of interest.

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.  Our executive compensation programs are designed to attract and retain top executive talent and motivate them to achieve outstanding operational and financial performance.  This performance, in turn, builds value for our stockholders.  Our programs aim to ensure that:

compensation is linked to annual and long-term performance goals that are structured to align the interests of executive officers with those of our stockholders;
our executive officers are rewarded for achieving sustainable, profitable growth;
our executive officers are rewarded for growing and retaining customer relationships;
a significant portion of total compensation is stock-based, thereby further aligning the interests of executive officers and of our stockholders; and
compensation opportunities are competitively positioned with compensation opportunities for executive officers of our peer group so we can attract, retain and motivate the superior management talent essential to our long-term success.

Setting Executive Compensation

In determining appropriate compensation opportunities for our NEOs, the Committee reviews competitive market data provided by Cook on compensation practices among a peer group of other specialty retailers.  On behalf of the Committee, Cook conducts an annual review, which includes an annual competitive review of the compensation practices of our peer companies, including named executive officer pay levels and compensation mix.  This review also includes the aggregate long-term incentive grant practices of our peer companies, including potential share dilution from equity compensation grants, annual share usage and aggregate long-term incentive compensation costs.

The Committee considers information from the peer group regarding executive compensation levels and practices and our relative performance against peer companies.  Peer group companies are selected based on their similarity to us with respect to several factors, including sales, store and employee count, market capitalization, customer profile, and business-to-business and direct-to-customer business models.  Following the completion of our acquisition of GPI in early January 2014, the Committee adopted a revised peer group that includes several of our direct competitors as well as other specialty retailers with both commercial distribution and retail businesses more similar to our current size. The companies selected by the Committee to comprise the peer group used in competitive comparisons of executive compensation levels to help the Committee evaluate compensation opportunities for 2014 were:
AutoZone, Inc.
Genuine Parts Company
The Sherwin-Williams Company
Dollar General Corporation
LKQ Corporation
Staples, Inc.
Dollar Tree, Inc.
Office Depot, Inc.
Tractor Supply Company
Family Dollar Stores, Inc.
O’Reilly Automotive, Inc.
Wesco International, Inc.
Fastenal Company
PetSmart, Inc.
W.W. Grainger, Inc.

In August 2014, Cook completed its annual review of our comparative peer group to ensure the companies remained appropriate and relevant for use in competitive compensation analyses as well as to measure our relative performance.  No changes were made to the peer group at that time.

A similar, historically relevant peer group of companies is used for determination of our relative EVA performance for our annual performance-based long-term incentive awards granted prior to December 2013. The companies selected by the Committee to comprise the peer group for determination of our relative EVA performance ("EVA Peer Group") were:



26



AutoZone, Inc.
LKQ Corporation
The Sherwin-Williams Company
Bed Bath & Beyond Inc.
OfficeMax Incorporated
Tractor Supply Company
Dollar General Corporation
O’Reilly Automotive, Inc.
Uni-Select Inc.
Dollar Tree, Inc.
Pep Boys-Manny Moe & Jack
Wesco International, Inc.
Family Dollar Stores, Inc.
PetSmart, Inc.
Williams-Sonoma, Inc.
Fastenal Company
RadioShack Corporation
W.W. Grainger, Inc.
Genuine Parts Company
 
 

The Committee also utilized the 2014 National Retail Industry database provided by Hay Group, an independent consulting firm retained by management, as another reference point for executive compensation decisions in 2014.  Hay Group collected data from a broad group of over 140 retail companies with which we compete for key management and executive talent.  After adjusting the data using standard statistical methods based on revenue to make the information more comparable for a company of our size, Hay Group provided the compensation data to the Committee and Cook in a summary form.  The Hay Group compensation data provides a frame of reference for the Committee to consider as it makes decisions each year about base salary, annual incentives and long-term incentives for our NEOs as well as other employees.  Due to the number of companies comprising the compensation data provided by Hay Group, the manner in which this data has been adjusted and the additional factors taken into consideration in determining the compensation for each executive, we believe that describing components of the compensation database in summary form better serves our investors’ understanding of our compensation policies than listing the more than 140 companies in the database.

Competitive Positioning of Executive Compensation Levels

For 2014, the Committee established base salary, annual incentive opportunities and long-term incentive target grants for our NEOs primarily with reference to the peer group data provided by Cook.  The Hay Group compensation data was used as a secondary reference point.  In general, we try to position total compensation, as well as each component of compensation for the NEOs, at the competitive median. Some of our NEOs may have some components of total compensation below the competitive median, for example, in the case where the executive is new to his or her position. The target annual cash compensation of our chief executive officer is between the 25th and 50th percentile in order to more strongly emphasize the long-term incentive component of his compensation. Executives have the potential to earn significantly higher compensation when our performance significantly exceeds performance goals or significantly lower compensation if our performance falls short of performance goals.

Executive Compensation Components

The principal components of compensation for our executive officers are:
 
base salary, which is intended to compensate executives for their primary responsibilities and individual contributions;
performance-based cash incentives, which are intended to link annual incentive compensation with our annual performance achievements and operating results;
long-term equity incentives, which are intended to link long-term incentive compensation with our long-term value creation; and
retirement savings and other compensation.

Although there is no pre-established policy or target for the 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 annual and long-term incentive plans. We believe this approach reflects our objective of aligning the interests of our executives and stockholders without encouraging excessive or unnecessary risk-taking.

The table below illustrates how total compensation for our NEOs for Fiscal 2014 was allocated between performance-based and fixed components, how performance-based compensation is allocated between annual and long-term incentive components and how total compensation is allocated between cash and equity components.  








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2014 Total Compensation Mix Table (a) 
 
 
 
Percentage of Total
Compensation that is:
 
Percentage of Performance-
Based Total that is:
 
Percentage of Total
Compensation that is:
Name
 
Performance-
Based
 
Fixed
 
Annual
 
Long-Term
 
Cash
 
Equity
Darren R. Jackson
 
83%
 
17%
 
28%
 
72%
 
40%
 
60%
Michael A. Norona
 
71%
 
29%
 
35%
 
65%
 
54%
 
46%
George E. Sherman
 
74%
 
26%
 
36%
 
64%
 
53%
 
47%
O. Temple Sloan, III
 
79%
 
21%
 
24%
 
76%
 
40%
 
60%
Charles E. Tyson
 
70%
 
30%
 
36%
 
64%
 
56%
 
44%
 
(a)
Only amounts for base salary, annual incentive compensation and long-term incentive compensation (SARs and RSUs) were included in calculating the percentages in this table.  Other forms of compensation shown in the "Summary Compensation Table" are not included. These percentages are based on annualized target total compensation values and do not necessarily correspond to, and are not a substitute for, the values disclosed in the “Summary Compensation Table” and supplemental tables provided later in this Proxy Statement.

Base Salary

The Committee reviews the information provided by Cook regarding executive officers’ base salary levels compared to the base salaries of executives of companies in our peer group as presented in their latest available proxy statements.  The Committee also reviews the chief executive officer’s assessment of each executive officer’s individual performance and responsibilities to determine appropriate compensation for each executive officer.  The Committee has determined that, in order to enable us to attract and retain the executive talent important to our long-term growth, the compensation strategy should generally aim to position base salaries at or slightly below the median of the Cook peer group data as described in the "Competitive Positioning of Executive Compensation Levels" section above.

In determining base salaries for executive officers, as well as in determining incentive compensation opportunities, the Committee reviews each executive officer’s performance on both an objective and subjective basis.  The Committee considers the chief executive officer’s most recent evaluation of an executive’s performance, along with the executive’s scope of responsibilities and our performance.  All executives have goals established near the beginning of the fiscal year.  Each executive officer’s specific annual goals are related to our business strategy of focusing on improving financial and operational results.  Individual goals for Fiscal 2014 included sales growth, profit growth and customer and Team Member retention, as well as integration-related objectives.  These measures, as well as leadership expectations and professional development goals, are intended to drive improved business results during the fiscal year while increasing the long-term viability of the business.  Further, the Committee reviews the competitive compensation data and exercises its judgment regarding base salary decisions for each executive.  Thus, if we have performed well as measured against our strategic goals, but an individual executive has fallen short of achieving his or her individual performance goals, the Committee may exercise its judgment in maintaining the executive’s base salary at a constant level from one year to the next, or the Committee may approve a smaller salary increase than would have been the case if the executive had achieved his or her individual performance goals.  Conversely, if the executive’s individual performance has been outstanding, he or she may receive a salary increase even when our performance may have fallen short. The base salaries of Messrs. Jackson, Sherman and Tyson were increased in Fiscal 2014, as shown in the table below, in recognition of their key roles in the acquisition and integration of GPI and in light of their respective expanded roles and responsibilities with the increased scope and size of the Company following the GPI acquisition.

NEO Salary Increases in Fiscal 2014 Table
NEO
Base Salary Before Change
Base Salary After Change
Darren Jackson
$700,000
$975,000
George Sherman
$600,000
$675,000
Charles Tyson
$450,000
$475,000

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


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upon our performance in relation to predetermined financial targets established during the first quarter of the fiscal year.  For Fiscal 2014, 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.  For Fiscal 2014, Mr. Jackson's AIP target increased from 125 percent to 135 percent of base salary. Despite this increase, Mr. Jackson's target total annual cash compensation continues to be below the Cook peer group median. This target pay mix maintains the strong link of the CEO's compensation to longer-term performance and alignment with stockholders' interests through a higher proportion of equity compensation. AIP targets as a percentage of base salary for other NEOs were as follows: Mr. Sherman—100 percent; Mr. Norona—90 percent; Mr. Sloan—90 percent; and Mr. Tyson—85 percent.  The range of potential AIP payouts for 2014 ranged from zero to 200 percent of each executive officer’s incentive target, so that executives could earn above-target payouts when performance significantly exceeded our fiscal year financial plan, or would receive below-target or no payouts when performance fell short of our goals.  All AIP target opportunities for our NEOs are issued under the stockholder-approved 2007 Executive Incentive Plan.

The Committee approved our executives’ 2014 AIP design and financial targets in March 2014 as part of the annual financial and operating planning process established by the Board.  Under the AIP approved by the Committee for Fiscal 2014, performance measures included achieving targeted enterprise operating income and sales results. These performance measures were selected based on their alignment with our key strategies, and they were weighted to reflect the significance of the key performance indicators in driving stockholder value.  Enterprise operating income was weighted 80 percent and enterprise sales was weighted 20 percent in the evaluation of performance used to determine the executives’ annual incentive compensation opportunities. The enterprise operating income performance target for the NEOs included synergy targets and integration costs associated with integration of GPI into the Company, reflecting the importance of achieving the desired outcomes of the GPI acquisition. We needed to achieve a minimum of 94.5 percent of the target level of operating income or 99 percent of the target level of sales in Fiscal 2014 for NEOs to receive any 2014 AIP payments.

2014 Annual Incentive Plan Performance Results Table

The following table shows the actual performance results for Fiscal 2014, as well as the threshold and target performance levels for Fiscal 2014.
 
 
 
 
2014 Potential Payout Levels
 
 
 
 
Measure 
 
Performance Weight
 
Threshold(a)
 
100% of Target
 
200% of Target (Maximum)
 
Actual 
 
Payout Percentage
Enterprise Operating Income ($ in millions)
 
80
%
 
$
901.1

 
$
953.5

 
$
1,006.0

 
$
894.4

 
0.0
%
Enterprise Sales
($ in millions)
 
20
%
 
$
9,855.0

 
$
9,955.0

 
$
10,054.0

 
$
9,844.0

 
0.0
%

(a) Threshold payout levels were 25 percent of target level for Enterprise Operating Income and 75 percent of target
level for Enterprise Sales.

The target level Enterprise Operating Income and Enterprise Sales shown in the table above were established on a 53-week fiscal year basis, and target level and actual Enterprise Operating Income results exclude the impact of amortization related to the acquisition of GPI intangibles.  Despite delivering good financial results in Fiscal 2014, our performance with respect to Enterprise Operating Income and Enterprise Sales fell below the incrementally higher threshold levels established by the Committee. Accordingly, our NEOs received no 2014 AIP bonus payments.

For additional information about our AIP, please refer to the "2014 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 2014 performance.

Long-Term Incentive Compensation

Our executives receive long-term incentive compensation intended to link their compensation to our long-term financial success.  We typically grant awards in December prior to the start of each three-year vesting and performance period.




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December 2011 (2012-2014 Performance Period) and December 2012 (2013-2015 Performance Period) Awards

For the annual awards made in December 2011 and 2012, 50 percent of the target awards granted to Messrs. Jackson and Norona and 25 percent of the target awards to Mr. Tyson were awarded in the form of performance-based SARs and RSUs (restricted stock in 2011), which may vest based on our three-year EVA performance relative to a defined peer group. In May 2013, Mr. Sherman received a pro-rated annual award consistent with the terms of the awards granted to Messrs. Jackson and Norona in December 2012. The remaining portions of the target awards were awarded in the form of time-based SARs and RSUs (restricted stock in 2011), which vest in three approximately equal annual installments on the first three anniversaries of the date of grant, subject to the named executive officer’s continued employment. Commencing in December 2010, the terms of Mr. Jackson’s annual LTI awards require him to hold the shares realized upon the exercise of the SARs and the lapse of the restrictions on the restricted stock awards and RSUs, net of shares withheld to satisfy the applicable withholding tax requirements, for a period of one year.

The performance-based portion of each of the December 2011 and 2012 awards may vest in whole or in part as of March 1 of the calendar year following the end of the 2012-2014 and 2013-2015 performance periods, respectively, after certification by the Committee of our EVA performance as compared to the EVA performance of the companies in the EVA compensation peer group described in the "Setting Executive Compensation" section of this Proxy Statement. EVA was adopted as the performance measure for these awards because it is a measure that is strongly aligned with the creation of long-term stockholder value.  For purposes of this program, EVA is defined as net operating profit after taxes ("After-Tax Operating Earnings"), less a charge for cost of capital as calculated on our total debt and equity ("Total Invested Capital") during the three-year performance period.  We utilize an independent consultant to prepare objective EVA performance calculations for us and our peer group companies for each performance period. The use of a peer group for these grants serves as a measurement of alignment of long-term incentive compensation earned by executives with stockholder value created relative to that of the peer companies.  

The table below provides a summary of the performance vesting criteria of the December 2011 (performance period 2012-2014) and 2012 (performance period 2013-2015) long-term incentive grants to our NEOs.

2012-2014 and 2013-2015 Performance Vesting Table
 
Long-Term Incentive Shares
Vested as Percent of Target
-CEO and CFO (a)
Long-Term Incentive Shares
Vested as Percent of Target
-Senior Vice Presidents (a)(b)
Company EVA Performance
Compared To EVA Peer Group (c)
200% 
200%
80th  Percentile or more
100% 
100%
50th  Percentile
50%
75%
40th  Percentile or lower
(a)
Represents the percent of SARs, restricted stock and RSUs issued compared to the executive's target grant, inclusive of the time-based portion.  For example, 1,000 SARs at target can increase to 2,000 SARs at maximum vesting. Vesting levels are pro-rated on a graduated scale between the minimum (50%) and maximum (200%) vesting levels, or between the minimum (75%) and maximum (200%) vesting levels in the case of Senior Vice Presidents. Neither Mr. Sherman nor Mr. Sloan were employed by us at the time of the December 2011 and 2012 grants.
(b)
Mr. Tyson, who is currently an Executive Vice President, was a Senior Vice President at the time of the December 2011 and 2012 grants.
(c)    Companies comprising our EVA Peer Group are listed in the "Setting Executive Compensation" section of this Proxy Statement.

Settlement of December 2011 Awards (2012-2014 Performance Period)

Our relative EVA did not meet the required minimum threshold of performance; accordingly, this portion of the 2011 award did not vest for any of our NEOs.

December 2013 (2014-2016 Performance Period) and December 2014 (2015-2017 Performance Period) Awards

Beginning with the December 2013 annual award, the Committee modified both the composition of the award and the performance measures used to determine the amount of performance-based value that may be earned. In order to simplify the long-term incentive program and improve understanding of the program by all participants, the December 2013 and December 2014 awards reduced the number of LTI vehicles from four (time and performance-based RSUs and time and performance-based SARs) to two (time-based RSUs and performance-based SARs). Fifty percent of target grant value for Messrs. Jackson,


30



Sherman, Norona and Tyson was awarded in the form of stock-settled performance-based SARs, and 50 percent was granted in the form of time-based RSUs under the 2004 LTIP and the 2014 LTIP.

Messrs. Jackson, Norona, Sherman and Tyson were granted the majority of their awards for the 2014-2016 performance period in December 2013. Following the completion of our acquisition of GPI in early January 2014, on February 10, 2014, they each received additional equity grants under the 2004 LTIP, subject to the same goals for the 2014-2016 performance period. These additional grants were intended to bring each executive's target total direct compensation opportunity to a level competitive with our revised peer group of companies listed on page 26 of this Proxy Statement given our larger post-acquisition size. Mr. Sloan received a similar grant in February 2014 for the 2014-2016 performance period. In addition, he was awarded a new hire grant in February 2014 comprised solely of performance-based RSUs that will vest based on our performance during the 2014-2016 performance period based on the same performance criteria as the December 2013 annual grants. Mr. Sloan did not receive an LTI grant in December 2014.

In order to focus the efforts of our Team Members on two critical factors that consistently drive stockholder value, the Committee chose three-year cumulative operating income and three-year average comparable store sales growth, weighted equally, as the performance measures for the 2014-2016 and 2015-2017 performance periods. We believe the use of these performance measures will continue to focus management's efforts on generating business results that will grow stockholder value and provide long-term incentive plan participants with performance measures that are familiar, understandable and easily communicated. The use of operating income as a primary performance metric for our AIP and LTI programs provides for consistency and alignment between short-term and long-term decision-making.

2015-2017 Performance-Based SARs Vesting Table

The table below provides a summary of the performance vesting criteria for the December 2014 long-term incentive grants to our NEOs.
 
One half of the performance-based SARs may vest according to our operating income results during the performance period, according to the following schedule:
Potential Plan Payout Levels
Cumulative Operating Income Achieved
During the Performance Period ($)
Potential Payout % of This Portion of LTI Award (a)
Maximum
109.7% of target level Operating Income
200%
Target
Target level Operating Income
100%
Threshold
90.9% of target level Operating Income
25%
Below Threshold
Below 90.9% of target level Operating Income
0%

The remaining 50 percent of the performance-based SARs may vest based upon our average annual comparable store sales growth during the performance period calculated in a manner consistent with our current comparable store sales policy, according to the following schedule:

Potential Plan Payout Levels
Average Annual Comparable
Store Sales Growth During the Performance Period
Potential Payout % of This Portion of LTI Award (a)
Maximum
150% of target level growth
200%
Target
Target level growth
100%
Threshold
Threshold level growth
25%
Below Threshold
Below threshold level growth
0%

(a)
Represents the portion of performance-based SARs that may be earned as compared to the target level of the performance-based SARs granted to each executive.  For example, 1,000 SARs at target can increase to 2,000 SARs at maximum vesting. Vesting levels are pro-rated on graduated scales between the threshold (25%) and target (100%) vesting levels and between the target (100%) and maximum (200%) vesting levels.




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The Committee established long-term incentive guidelines for each executive level after considering competitive long-term incentive grant values provided to similarly-positioned executives of the Cook peer group companies.  The Committee also considers the individual executive’s potential impact on our future performance and most recent performance evaluation when awarding individual grants.  The "Base Salary" section of this Proxy Statement provides more information regarding the factors considered to determine whether each individual executive’s award should be adjusted as compared to the guideline level previously established for the executive.

All equity awards to executive officers are approved by the Committee.  The Committee approved the guidelines for the December 2014 annual long-term incentive awards and the final performance metrics prior to the December 1, 2014 grant date. The approved grant values were converted into a number of SARs and RSUs based on the closing price of our common stock on the date of grant and for the SARs, the Black-Scholes value.  Executives who are hired or promoted during the fiscal year are generally eligible to receive prorated long-term incentive grants shortly after their hire or promotion date based on the long-term grant guidelines approved by the Committee for the fiscal year.  For newly hired executive officers, the Committee approves compensation arrangements containing equity awards as deemed appropriate.  The "2014 Grants of Plan-Based Awards" and "Outstanding Equity Awards at 2014 Fiscal Year-End" tables contained in this Proxy Statement provide additional information about NEOs’ 2014 long-term incentive awards.

Retirement Savings Programs

Executives are eligible to participate in our 401(k) plan, along with our other eligible employees, once they meet eligibility requirements. We provide the same match offered to all our employees.  During 2014, we matched 75 percent of each dollar up to five percent of executives’ contributions or the maximum contributions permitted by Internal Revenue Service ("IRS") plan testing limitations, whichever is lower.  Commencing in 2015, we will match the lower of 50 percent of each dollar up to six percent of executives' contributions or the maximum contributions permitted by IRS plan testing limitations. 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.  Consequently, 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 2014.  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 following 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 of our stock 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 "2014 Non-Qualified Deferred Compensation Table" contained in this Proxy Statement.

Other Compensation

Taxable perquisite allowances are provided to NEOs and certain other executives under our Executive Choice Plan.  In 2014 at the Committee’s recommendation, the Company changed the Executive Choice Plan from a paid allowance to a reimbursement program supporting executives’ personal financial planning, to enable executives to take full advantage of the Company’s compensation programs and encourage Team Members to take appropriate action relative to their financial affairs. Eligible executives receive reimbursement for services they receive for financial/estate planning, tax planning/preparation, and associated legal fees. The Committee believes the reimbursement amounts provided are reasonable and consistent with the objectives of the overall compensation program and better enable us to attract and retain superior employees for key positions.  The Committee periodically reviews the levels of Executive Choice for NEOs.  For 2014, the maximum reimbursement amounts available were unchanged from the 2013 paid allowances provided: $15,000 for our Chief Executive Officer and $10,000 for our other NEOs, except Mr. Sloan, who was not eligible to receive reimbursement. Reimbursement amounts for NEOs are included in the "Summary Compensation Table" contained in this Proxy Statement.  





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Our NEOs are also eligible for personal use of our aircraft on a limited basis subject to certain limitations set forth in the aircraft use policy approved by the Committee, which limits the maximum value to $100,000 for personal use by our Chief Executive Officer on an annual basis.  Personal use of our aircraft by other NEOs must be approved by the Chief Executive Officer.  Executives do not receive tax gross-ups with respect to their perquisite allowances or personal use of our aircraft.

In order to take advantage of synergies following the acquisition of GPI, in June 2014 the Board approved plans to close our Minneapolis, Minnesota and Campbell, California offices and relocate their operations to existing offices in Newark, California, Roanoke, Virginia and Raleigh, North Carolina. During 2014, the Company also began relocating various corporate functions between its existing offices in Roanoke and Raleigh. In connection with these office relocations and closings, the Company relocated several employees during 2014, including Messrs. Norona, Sherman and Tyson. In connection with these relocations, the Board approved the establishment of a relocation program which includes moving expense reimbursement, home sale assistance and tax reimbursements.

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. Jackson, Sherman, Norona 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. Jackson on January 7, 2008, when he became our President and Chief Executive Officer.  We entered into an employment agreement with Mr. Norona on June 4, 2008. We entered into employment agreements with Messrs. Sherman and Tyson effective April 29, 2013. During Fiscal 2014, the employment agreements of Messrs. Norona, Sherman and Tyson 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.

The respective agreements for Messrs. Jackson, Sherman, Norona 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 Committee annually and are consistent with the measures applied to other senior executives.  Each NEO is eligible to participate in all of our applicable benefit plans and programs pursuant to the terms of such programs.

If the executive’s employment is terminated 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. Jackson, Norona, Sherman and Tyson, an amount equal to the executive’s target level bonus in effect at the time of the executive's death.

In the event of termination of employment due to disability as defined in the agreement, 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 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.

In addition, under the terms of the long-term incentive awards, if the executive’s employment is terminated on account of death or disability, all time-based restricted stock, RSUs and SARs granted to the executive pursuant to our 2004 and 2014 LTIPs 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 to the vesting date of the executive’s performance-based SARs or restricted shares or RSUs, the performance-based SARs and restricted shares 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.  For grants awarded prior to December 3, 2012, the pro rata amount of performance SARs or restricted shares that will become eligible for exercise or issuance will be no fewer than the total number of shares at target level less the previously vested portion of the time-based SARs and restricted shares. For grants awarded on or after December 3, 2012, 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.

For Messrs. Jackson, Norona, Sherman and Tyson, 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 2004 LTIP, the executive 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. Mr. Jackson is also entitled to the prorated value, if any, of the annual Executive Choice Plan.  In addition, Messrs. Jackson, Sherman and Tyson will be entitled to receive an amount equal to an


33



average of the past three years’ annual bonus payments, and Mr. Norona will be entitled to receive an amount equal to an average of the past five years' annual bonus payments. For grants awarded prior to December 3, 2012, any performance-based grants of SARs and restricted stock will vest immediately as of the date of the executive’s termination of employment at the target level and in the same ratio as the executive’s time-vested SARs and restricted shares.  For grants awarded on or after December 3, 2012, 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.

If, within twelve months after a Change in Control, we terminate the executive officer’s employment other than for Due Cause, death or disability, or the executive terminates the executive officer’s employment for Good Reason, Messrs. Jackson, Norona, Sherman and Tyson will be entitled to receive a lump sum severance payment in an amount equal to two times base salary at the rate then in effect, plus two times the target annual bonus amount then in effect. Mr. Jackson is also entitled to receive the prorated value, if any, of the annual Executive Choice Plan.  In addition, we will provide the executive certain outplacement services for a period of up to one year.  In the event of a Change in Control, all time-based restricted stock, SARs and stock options granted to the executive prior to December 3, 2012, pursuant to our 2004 LTIP will vest and become exercisable if not then vested or exercisable.  Performance-based SARs and restricted stock will vest immediately on a pro rata basis based on our actual performance over the completed portion of the performance period prior to the Change in Control event.  However, the pro rata amount of performance SARs and restricted stock that will vest will be no fewer than the total shares at target level less the previously vested portion of the time-vested share awards. For grants made on or after December 3, 2012, 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 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 our performance for the amount of time the executive was employed during the performance period measured as of the most recently completed fiscal quarter prior to the Change in Control event. 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.

In the event of a Change in Control, the employment agreements with Messrs. Jackson, Norona, Sherman 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 him (after taking into consideration the payment of all income and excise taxes that would be owed as a result of the Change in Control payments), we will reduce the Change in Control payments by the amount necessary to maximize the benefits received by him, 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.  Each executive has also agreed not to compete 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.  Mr. Jackson has agreed that he will not compete with us for two years following his termination of employment.  In order to receive any payments or benefits under the employment agreement after termination of employment, the executive or his legal representative must execute a release that is satisfactory to us. Information regarding applicable potential payments under such agreements for the NEOs is provided under the heading "Potential Payments Upon Termination of Employment or Change in Control Table" contained in this Proxy Statement.

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. Our Board adopted an Incentive Compensation Clawback Policy in November 2012. The policy provides that the Incentive Compensation of a Covered Employee, as those terms are defined in the policy, may be required to be repaid if the Covered Employee's fraud or willful misconduct caused us to prepare an accounting restatement due to material non-compliance with financial reporting requirements.

Effective immediately following the closing of the GPI acquisition on January 2, 2014, the Board appointed O. Temple Sloan, III to serve as a director and member of the Board's Finance Committee. We also entered into an employment agreement with Mr. Sloan, who continued to be employed by us as the President of GPI through fiscal year 2014. The agreement provided for an initial term of one year that would automatically renew for an additional one-year term unless either party provided notice of non-renewal at least 60 days prior to the end of the then effective term.  Mr. Sloan's agreement provided for an annual base salary of $550,000 and an annual performance-based cash target bonus of 90 percent of his base salary. The agreement provided benefits upon termination of employment consistent with the agreements of Messrs. Sherman and Tyson except that if Mr. Sloan's employment was terminated at the end of a then-current employment term following a notice of non-renewal, he


34



would be entitled to the equivalent benefits he would receive if his employment was terminated by us other than for Due Cause.  We agreed to this term as part of his negotiated employment agreement because we believed it was important to retain Mr. Sloan post-closing to facilitate a successful and efficient integration of GPI due to his integral knowledge and understanding of GPI's history, business, customers and employees. Upon termination of employment, Mr. Sloan is bound by standard confidentiality, non-disparagement, and non-compete provisions for a period of 24 months and similar obligations arising in connection with the GPI acquisition. Mr. Sloan did not receive non-management director compensation in 2014. He was eligible to and did receive LTI awards as a member of management during his tenure as President of GPI, but he did not receive an annual LTI grant in December 2014.

Effective January 4, 2015, Mr. Sloan’s employment agreement was not renewed for 2015, but he has continued his service with the Company as a member of the Board of Directors. He has received payments in conjunction with his termination of employment consistent with the terms of his employment agreement, and the LTI awards he received during his employment will continue to vest so long as he continues to serve as a director. Commencing with fiscal year 2015, Mr. Sloan will be compensated as a non-management director.

Effective September 15, 2011, our Board appointed Mr. Jimmie L. Wade, who previously served as our President, to serve as a director and a member of the Board's Finance Committee. Effective January 1, 2012, Mr. Wade transitioned from his role as our President. He continues to be employed by us reporting to the Chief Executive Officer and continues to provide us with strategic leadership. Mr. Wade entered into a new employment agreement effective January 1, 2012, which replaced his prior employment agreement and provided for an annual base salary of $150,000 and a reduced lump sum severance payment equal to $300,000 if his employment with us ends as the result of death or if we terminate his employment without "Due Cause" or if Mr. Wade terminates his employment for "Good Reason," as defined in the agreement, or following a Change in Control, as defined in the 2004 LTIP. Mr. Wade's employment agreement also provides for a reduction in Change in Control payments in the manner described above with regard to our NEOs' employment agreements. In the event of termination of employment due to disability as defined in the agreement, Mr. Wade will receive a lump sum payment amount equal to 30 percent of base salary at the rate then in effect in addition to the benefits payable under our qualified group disability plan.  Mr. Wade's agreement continues to contain standard confidentiality, non-disparagement, non-interference and non-compete provisions. Mr. Wade does not receive non-management director compensation, but he is eligible to receive an annual grant of restricted stock awards with a value of at least $100,000. On March 4, 2014, his agreement was amended, effective January 1, 2014, to increase his annual base salary to $250,000 and to provide that he is entitled to receive an annual grant of time-based restricted stock or RSU awards with a value of at least $250,000 in conjunction with his agreement to assume additional strategic and leadership responsibilities related to the GPI integration and talent development of our senior leadership. The amended agreement also permits Mr. Wade to elect continued medical coverage following termination of employment until age 65 in the event that the medical coverage benefit provided by his agreement would otherwise expire before that time. On March 12, 2015, his agreement was amended, effective January 1, 2015, to decrease his annual base salary to $185,000 and to provide that he is entitled to receive an annual grant of time-based restricted stock or RSU awards with a value of at least $125,000 to compensate him for the ongoing strategic leadership he will provide in 2015 as well as more closely align his compensation with the non-management members of the Board. His agreement remains unchanged in all other respects.

Special Bonuses
Following the completion of our acquisition of GPI in January 2014, the Compensation Committee approved the payment of special bonuses in an aggregate amount of $1,520,000, to be allocated among certain executive officers and other Team Members, including Mr. Norona, for such officers’ and employees’ extraordinary efforts in connection with the acquisition.

Ownership Guidelines

We have had stock ownership guidelines in place since 2006 that prescribe required levels of stock ownership and the timeline for achieving the required levels of stock ownership by NEOs and members of our Board.  These guidelines are designed to further strengthen and align our leadership with stockholders’ interests and to enhance stockholder value over the long term.  Details of the current guidelines are included in the "Stock Ownership Guidelines for Directors and Executive Officers" section of this Proxy Statement and are posted on our website.  As of the end of our 2014 fiscal year, Messrs. Jackson, Norona and Tyson have achieved their required ownership levels.  All other executives are currently progressing toward meeting the required ownership guidelines.

The terms of Mr. Jackson’s awards commencing in December 2010 and continuing through December 2014 require him to hold the shares realized upon the exercise of the SARs and the lapse of the restrictions on the restricted stock awards, net of shares withheld to satisfy the applicable withholding tax requirements, for a period of one year.




35



Tax Deductibility 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 2014 annual incentives available to our NEOs and all performance-based long-term incentives awarded in 2014, were subject to performance measures established and certified by the Committee consistent with the provisions of the Executive Incentive Plan.  The stockholder-approved 2004 and 2014 LTIPs 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-based portion of our restricted shares and RSUs meet the tax-deductibility requirements of Section 162(m) of the Internal Revenue Code.  We intend to structure compensation programs to meet the requirements of Section 162(m), other than time-based restricted stock or RSUs, which are not considered performance-based under Section 162(m) of the Internal Revenue Code.  Accordingly, awards of time-vested restricted stock or RSUs are generally not deductible by us to 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 objectives for the 2007 Executive Incentive Plan and the 2004 LTIP 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.


36



ADDITIONAL INFORMATION REGARDING EXECUTIVE 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 compensated executive officers as of the end of each of the last three completed fiscal years. Fiscal year 2014 was comprised of 53 weeks. 
 
 
 
 
 
 
Bonus
 
Stock Awards
 
Option or
SAR Awards
 
 Non-Equity
 Incentive Plan
Compensation
 
All Other
Compensation
(g) (h) (i)
 
 
Name and
Principal Position
 
 
 
Salary
 
(a)
 
(b) (d) (e)
 
(c) (d) (e)
 
(f)
 
(j) (k)
 
Total
 
Year
 
($)
 
($)
 
($)
 
($)
 
($)
 
($)
 
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Darren R. Jackson
 
2014
 
$
930,288

 

 
$
1,625,160

 
$
1,625,031

 
$

 
$
123,232

 
$
4,303,711

Chief Executive Officer
 
2013
 
700,000

 

 
1,375,028

 
1,375,018

 
774,962

 
57,926

 
4,282,934

 
2012
 
700,000

 

 
687,505

 
2,062,503

 

 
56,726

 
3,506,734

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michael A. Norona
 
2014
 
560,570

 
150,000

 
450,066

 
450,057

 

 
395,815

 
2,006,508

EVP, Chief Financial Officer
 
2013
 
528,847

 

 
400,097

 
400,017

 
425,120

 
16,750

 
1,770,831

 
2012
 
494,242

 

 
199,974

 
600,033

 

 
20,638

 
1,314,887

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
George E. Sherman
 
2014
 
670,674

 

 
600,110

 
600,037

 

 
581,962

 
2,452,783

President
 
2013
 
415,382

 

 
634,684

 
903,877

 
398,548

 
190,725

 
2,543,216

 
2012
 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
O. Temple Sloan, III (l)
 
2014
 
553,022

 

 
1,200,150

 
400,009

 

 
2,845

 
2,156,026

Former President, GPI
 
2013
 

 

 

 

 

 

 

 
2012
 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles E. Tyson
 
2014
 
478,375

 

 
350,091

 
350,041

 

 
447,406

 
1,625,913

EVP, Merchandising, Marketing & Supply Chain
 
2013
 
436,779

 

 
280,348

 
340,906

 
312,658

 
15,924

 
1,386,615

 
2012
 
398,475

 

 
87,511

 
262,500

 

 
14,008

 
762,494

 
(a)
Represents a special cash bonus of $150,000 Mr. Norona 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 19 of our consolidated financial statements in the 2014 Form 10-K filed with the SEC on March 3, 2015. See the "2014 Grants of Plan-Based Awards Table" and "Outstanding Equity Awards at 2014 Fiscal Year-End Table" in this Proxy Statement for information on stock awards granted in 2014 and prior years.  These amounts reflect the aggregate grant date fair value computed in accordance with 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 19 of our consolidated financial statements in the 2014 Form 10-K filed with the SEC on March 3, 2015. See the "2014 Grants of Plan-Based Awards Table" and "Outstanding Equity Awards at 2014 Fiscal Year-End Table" in this Proxy Statement for information on SARs awards granted in 2014 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.
(d)
The maximum value for 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.


37



Name
 
Year
 
RSUs
Maximum Grant-Date Fair Value
($)
 
SARs
Maximum Grant-Date Fair Value
($)
 
Maximum Grant-Date Fair Value of Stock Awards and SARs
($)
 
 
 
 
 
 
 
 
 
Mr. Jackson
 
2014
 
$

 
$
3,250,061

 
$
3,250,061

 
 
2013
 
700,007

 
2,750,036

 
3,450,044

 
 
2012
 
1,375,011

 
4,125,006

 
5,500,017

 
 
 
 
 
 
 
 
 
Mr. Norona
 
2014
 

 
900,114

 
900,114

 
 
2013
 
541,790

 
800,034

 
1,341,825

 
 
2012
 
399,874

 
1,200,066

 
1,599,940

 
 
 
 
 
 
 
 
 
Mr. Sherman
 
2014
 

 
1,200,074

 
1,200,074

 
 
2013
 
802,680

 
1,807,755

 
2,610,435

 
 
2012
 

 

 

 
 
 
 
 
 
 
 
 
Mr. Sloan
 
2014
 
800,100

 
800,017

 
1,600,117

 
 
2013
 

 

 

 
 
2012
 

 

 

 
 
 
 
 
 
 
 
 
Mr. Tyson
 
2014
 

 
700,082

 
700,082

 
 
2013
 
505,903

 
681,811

 
1,187,714

 
 
2012
 
175,023

 
524,942

 
699,965

 
For 2013, amounts for RSUs represent the maximum value of the special long-term incentive grants and any off-cycle grants that executives received. Beginning with the December 2013 grant, the target award for purposes of calculating performance vesting consists solely of the performance award granted.  Therefore, except for the RSU amount shown for Mr. Sloan, the maximum value does not include RSUs granted to executives between December 2013 and December 2014 due to fact that they are 100 percent time-based. For Mr. Sloan, the 2014 amount represents the grant of performance-based RSUs that he received in February 2014 following the GPI acquisition. More information is provided in the "2014 Grants of Plan-Based Awards Table" in this Proxy Statement.
(e)
Messrs. Jackson, Norona, Sherman and Tyson received an off-cycle grant of RSUs and SARs in February 2014 in recognition of their increased job responsibilities after the GPI acquisition. Mr. Sloan received an off-cycle grant of RSUs and SARs in February 2014 following the GPI acquisition. More information is provided in the "2014 Grants of Plan-Based Awards Table" in this Proxy Statement.
(f)
For 2013, amounts in this column were paid to the named executives in February 2014, for the preceding fiscal year’s performance according to the terms of the annual incentive plans in effect for each respective year. No annual incentive awards were earned for 2012 and 2014 performance.
(g)
Includes Company matching contributions according to the terms of the Company's 401(k) plan.
(h)
Includes life insurance premiums paid by the Company for each executive.
(i)
Includes executive allowances reimbursed for each executive in 2014. Information about these taxable perquisites is discussed under the heading "Other Compensation" in the Compensation Discussion and Analysis section of this Proxy Statement.
(j)
Includes relocation benefits and related tax gross-up payments for Messrs. Jackson, Norona, Sherman and Tyson with respect to their relocation to Raleigh in 2014, 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. Jackson includes reimbursement of $14,043 for temporary living expenses. Reportable compensation for Mr. Norona includes relocation benefits in the amount of $75,244, the incremental cost to the Company of the purchase and subsequent sale of Mr. Norona's home in the amount of $237,500, calculated as the difference between the amount paid to him for his home and the subsequent value received by the Company upon the sale of the property (subject to closing), and $66,165 for related tax reimbursement payments. Reportable compensation for Mr. Sherman includes relocation benefits in the amount of $88,939, the incremental cost to the Company of the purchase and subsequent sale of Mr. Sherman's home in the amount of $340,000, calculated as the difference between the amount paid to him for his home and the subsequent value received by the Company upon the sale of the property, and $147,639 for related tax reimbursement payments. Reportable compensation for Mr. Tyson includes relocation benefits in the amount of $264,506 and $174,037 for related tax reimbursement payments.
(k)
This column also includes the value of any personal use of the Company aircraft calculated at the incremental cost to the Company related to personal use of the Company aircraft.  Individual expenses related to aircraft use for 2012, 2013 and 2014 are provided in accordance with the Company's aircraft use policy. For 2014, reportable compensation for Mr. Jackson is $86,499 related to Company aircraft use.  The incremental cost to the Company for personal use of Company aircraft is calculated based on our primary variable operating costs, including fuel, maintenance and other miscellaneous variable costs.  All personal use of the Company aircraft is reportable as taxable wages for executives and no tax reimbursements are provided by the Company.
(l)
Mr. Sloan received his first annual grant of time-based RSUs and performance-based SARs in February 2014 and a new hire grant of performance-based RSUs after he joined the company following the GPI acquisition.


38



2014 Grants of Plan-Based Awards Table
The following table sets forth information concerning grants of cash and stock-based awards made under our annual and long-term incentive plans during 2014.  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.  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 under the heading "Long-Term Incentive Compensation" in the Compensation Discussion and Analysis section of this Proxy Statement.
 
 
 
 
Estimated Future Payouts Under
Non-Equity Incentive Plan Award
 
Estimated Future Payouts Under Equity Incentive Plan Awards
 
All Other Stock Awards: Number of Shares of Stock or Units (#)
 
Exercise
Price of Option Awards
($/sh) (e)
 
Grant Date Fair Value of Stock and Option Awards
($) (f)
Name
 
Grant Date
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Threshold
(#)
 
Target
(#)
 
Maximum
(#)
 
 
 
Mr. Jackson
 
1/1/2014 (a)
 
431,731

 
$
1,233,516

 
$
2,467,033

 

 

 

 

 
$

 
$

 
 
2/10/2014 (b)
 

 

 

 
1,099

 
4,396

 
8,792

 

 
123.32

 
125,022

 
 
2/10/2014 (b)
 

 

 

 

 

 

 
1,014

 

 
125,046

 
 
12/1/2014 (c)
 

 

 

 
11,171

 
44,683

 
89,366

 

 
147.07

 
1,500,008

 
 
12/1/2014 (c)
 

 

 

 

 

 

 
10,200

 

 
1,500,114

Mr. Norona
 
1/1/2014 (a)
 
173,248

 
494,994

 
989,988

 

 

 

 

 

 

 
 
2/10/2014 (b)
 

 

 

 
220

 
880

 
1,760

 

 
123.32

 
25,027

 
 
2/10/2014 (b)
 

 

 

 

 

 

 
203

 

 
25,034

 
 
12/1/2014 (c)
 

 

 

 
3,165

 
12,661

 
25,322

 

 
147.07

 
425,030

 
 
12/1/2014 (c)
 

 

 

 

 

 

 
2,890

 

 
425,032

Mr. Sherman
 
1/1/2014 (a)
 
231,328

 
660,938

 
1,321,876

 

 

 

 

 

 

 
 
2/10/2014 (b)
 

 

 

 
440

 
1,759

 
3,518

 

 
123.32

 
50,026

 
 
2/10/2014 (b)
 

 

 

 

 

 

 
406

 

 
50,068

 
 
12/1/2014 (c)
 

 

 

 
4,096

 
16,384

 
32,768

 

 
147.07

 
550,011

 
 
12/1/2014 (c)
 

 

 

 

 

 

 
3,740

 

 
550,042

Mr. Sloan
 
1/1/2014 (a)
 
173,250

 
495,000

 
990,000

 

 

 

 

 

 

 
 
2/10/2014 (b)
 

 

 

 
3,516

 
14,065

 
28,130

 

 
123.32

 
400,009

 
 
2/10/2014 (d)
 

 

 

 
1,622

 
6,488

 
6,488

 

 

 
800,100

 
 
2/10/2014 (b)
 

 

 

 

 

 

 
3,244

 

 
400,050

Mr. Tyson
 
1/1/2014 (a)
 
139,921

 
399,774

 
799,547

 

 

 

 

 

 

 
 
2/10/2014 (b)
 

 

 

 
440

 
1,759

 
3,518

 

 
123.32

 
50,026

 
 
2/10/2014 (b)
 

 

 

 

 

 

 
406

 

 
50,068

 
 
12/1/2014 (c)
 

 

 

 
2,234

 
8,937

 
17,874

 

 
147.07

 
300,015

 
 
12/1/2014 (c)
 

 

 

 

 

 

 
2,040

 

 
300,023

(a)
The non-equity incentive plan information represents our 2014 annual incentive plan.
(b)
In February 2014, except in the case for Mr. Sloan who received his first annual grant, our executives received additional target grants for the 2014-2016 performance period according to approved LTI guidelines of executive compensation following the closing of the GPI acquisition. 50 percent of their award value was granted in the form of performance-based SARs and the remaining 50 percent granted in the form of time-based RSUs. The performance-based SARs may be earned on March 1, 2017, following certification by the Committee of the performance vesting achievement level during fiscal years 2014 through 2016. 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 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 awarded to each executive for the February 2014 grants will vest in three approximately equal annual installments commencing on the first anniversary date of the grant.
(c)
For the December 2014 grants, Messrs. Jackson, Norona, Sherman and Tyson received 50 percent of their target annual 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.  The performance-based SARs may be earned on March 1, 2018, following certification by the Committee of the performance vesting achievement level during fiscal years 2015 through 2017. 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


39



awarded to each executive for the December 2014 grants will vest in three approximately equal annual installments commencing on the first anniversary date of the grant.
(d)
In February 2014, shortly after his becoming an employee of the Company, Mr. Sloan received a special new hire grant in the form of 100 percent performance-based RSUs. The performance-based RSUs may be earned on March 1, 2017, following certification by the Committee of the performance vesting achievement level during fiscal years 2014 through 2016. Our financial performance must meet the threshold level for Mr. Sloan to become eligible to receive any performance-based RSUs. At the threshold level of performance, Mr. Sloan receives 25 percent of the target level of performance-based RSUs. In order to earn the full performance-based RSUs, our financial performance must meet or exceed the target level.
(e)
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.
(f)
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 December 1, 2014 annual grant and for the February 10, 2014 off-cycle grant. Accordingly, the grant date fair value was calculated at target level for these awards.

The time-vested portions of the RSU awards granted in 2014 include rights to receive dividend payments in the same amount as paid to our stockholders, but do not include voting rights. Performance-based RSUs do not include dividend or voting rights. We paid quarterly cash dividends of $0.06 per share in 2014. All SAR grants have a term of seven years and must be settled in shares of our common stock.


40



Outstanding Equity Awards at 2014 Fiscal Year-End Table

The following table provides information concerning stock-based awards granted to our NEOs that were outstanding at the end of our last fiscal year.
 
 
 
 
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. Jackson
 
12/1/2009
 
91,674

 

 

 
$
40.38

 
12/1/2016
 

 
$

 

 
$

 
 
12/1/2010
 
82,893

 

 

 
66.15

 
12/1/2017
 

 

 

 

 
 
12/1/2011
 
51,640

 

 

 
68.75

 
12/1/2018
 

 

 

 

 
 
12/3/2012
 
35,826

 
17,913

 
11,285

 
73.17

 
12/3/2019
 

 

 

 

 
 
12/3/2012
 

 

 

 

 
 
 
1,566

 
248,305

 
987

 
156,432

 
 
3/1/2013 (c)
 

 

 

 

 
 
 

 

 
4,583

 
726,680

 
 
12/12/2013
 

 

 
64,027

 
107.93

 
12/12/2020
 

 

 

 

 
 
12/12/2013
 

 

 

 

 
 
 
8,494

 
1,346,809

 

 

 
 
2/10/2014 (d)
 

 

 
4,946

 
123.32

 
2/10/2021
 

 

 

 

 
 
2/10/2014 (d)
 

 

 

 

 
 
 
1,014

 
160,780

 

 

 
 
12/1/2014
 

 

 
11,171

 
147.07

 
12/1/2021
 

 

 

 

 
 
12/1/2014
 

 

 

 

 
 
 
10,200

 
1,617,312

 

 

Mr. Norona
 
12/1/2009
 
38,200

 

 

 
40.38

 
12/1/2016
 

 

 

 

 
 
12/1/2010
 
23,270

 

 

 
66.15

 
12/1/2017
 

 

 

 

 
 
12/1/2011
 
15,962

 

 

 
68.75

 
12/1/2018
 

 

 

 

 
 
12/3/2012
 
10,422

 
5,212

 
3,283

 
73.17

 
12/3/2019
 

 

 

 

 
 
12/3/2012
 

 

 

 

 
 
 
456

 
72,303

 
287

 
45,485

 
 
3/1/2013 (c)
 

 

 

 

 
 
 

 

 
3,274

 
519,125

 
 
8/12/2013 (c)
 

 

 

 

 
 
 

 

 
253

 
40,116

 
 
12/12/2013
 

 

 
18,627

 
107.93

 
12/12/2020
 

 

 

 

 
 
12/12/2013
 

 

 

 

 
 
 
2,472

 
391,960

 

 

 
 
2/10/2014 (d)
 

 

 
990

 
123.32

 
2/10/2021
 

 

 

 

 
 
2/10/2014 (d)
 

 

 

 

 
 
 
203

 
32,188

 

 

 
 
12/1/2014
 

 

 
3,165

 
147.07

 
12/1/2021
 

 

 

 

 
 
12/1/2014
 

 

 

 

 
 
 
2,890

 
458,238

 

 

Mr. Sherman
 
5/28/2013 (e)
 
3,619

 
7,238

 
2,280

 
83.63

 
5/28/2020
 

 

 

 

 
 
5/28/2013 (e)
 

 

 

 

 
 
 
537

 
85,147

 
169

 
26,805