AutoZone 2004 Annual Report Download - page 39
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NotestoConsolidatedFinancialStatements
(continued)
Optionstopurchase1.7millionsharesatAugust28,2004,1.5millionsharesatAugust30,2003,and2.1millionsharesatAugust31,
2002,wereexercisable.Sharesreservedforfuturegrantswere3.1millionatAugust28,2004.
TheCompanyalsohasanemployeestockpurchaseplan,qualifiedunderSection423oftheInternalRevenueCode,underwhichalleligible
employeesmaypurchaseAutoZone’scommonstockat85%ofthelowerofthemarketpriceofthecommonstockonthefirstdayorlast
dayofeachcalendarquarterthroughpayrolldeductions.Maximumpermittedannualpurchasesare$15,000peremployeeor10percent
ofcompensation,whicheverisless.Undertheplan,66,572sharesweresoldtoemployeesinfiscal2004,84,310 sharesweresoldin
fiscal2003,and112,922weresoldinfiscal2002.TheCompanyrepurchased,atfairvalue,102,084sharesinfiscal2004,134,972
shares infiscal2003, and260,805shares infiscal 2002fromemployees electingto selltheirstock.At August 28, 2004, 535,682
sharesofcommonstockwerereservedforfutureissuanceunderthisplan.
TheAmendedandRestatedExecutiveStockPurchasePlanpermitsseniorCompanyexecutivestopurchasecommonstockupto25per-
centoftheirannualsalaryandbonusafterthelimitsundertheemployeestockpurchaseplanhavebeenexceeded.Purchasesunderthis
planwere11,005sharesinfiscal2004and18,524sharesinfiscal2003.AtAugust28,2004,270,471sharesofcommonstockwere
reservedforfutureissuanceunderthisplan.
UndertheAutoZone,Inc.2003DirectorCompensationPlan,anon-employeedirectormayreceivenomorethanone-halfoftheannualand
meetingfeesimmediatelyincash,andtheremainderofthefeesmustbetakenincommonstockormaybedeferredinunitswithvalue
equivalent to the value of shares of common stock as of the grant date. At August 28, 2004, 94,204 shares of common stock were
reservedforfutureissuanceunderthisplan.
UndertheAutoZone,Inc.2003DirectorStockOptionPlan,onJanuary1ofeachyear,eachnon-employeedirectorreceivesanoptionto
purchase1,500sharesofcommonstock,andeachnon-employeedirectorthatownscommonstockworthatleastfivetimestheannualfee
paidtoeachnon-employeedirectoronanannualbasiswillreceiveanadditionaloptiontopurchase1,500sharesofcommonstock.In
addition,each newdirectorreceives anoptionto purchase3,000sharesupon electiontotheBoardofDirectors, plusa portionof the
annualdirectors’optiongrantproratedfortheportionoftheyearactuallyservedinoffice.Thesestockoptiongrantsaremadeatthefair
marketvalueasofthegrantdate.AtAugust28,2004,therewere42,902outstandingoptionswith355,598sharesofcommonstock
reservedforfutureissuanceunderthisplan.
NoteI—PensionandSavingsPlans
Prior toJanuary1,2003,substantially allfull-time employees were coveredbya definedbenefitpensionplan.The benefits under the
planwerebasedonyearsofserviceandtheemployee’shighestconsecutivefive-yearaveragecompensation.OnJanuary1,2003,theplan
wasfrozen.Accordingly,pensionplanparticipantswillearnnonewbenefitsundertheplanformulaandnonewparticipantswilljointhe
pensionplan.
OnJanuary1,2003,theCompany’ssupplementaldefinedbenefitpensionplanforcertainhighlycompensatedemployeeswasalsofrozen.
Accordingly,planparticipantswillearnnonewbenefitsundertheplanformulaandnonewparticipantswilljointhepensionplan.
Theinvestmentstrategyforpensionplanassetsistoutilizeadiversifiedmixofdomesticandinternationalequityportfolios,togetherwith
otherinvestments,toearnalong-terminvestmentreturnthatmeetstheCompany’spensionplanobligations.Activemanagementandalter-
nativeinvestmentstrategiesareutilizedwithintheplaninanefforttominimizerisk,whilerealizinginvestmentreturnsinexcessofmarket
indices.Theweightedaverageassetallocationforourpensionplanassetswasasfollows:
Current
Target
Domesticequities 51.2% 50.0%
Internationalequities 34.6 30.0
Alternativeinvestments 10.9 13.0
Realestate 3.1 5.0
Cashandcashequivalents 0.2
2.0
100.0%
100.0%
TheCompanymakesannualcontributionsinamountsat leastequaltotheminimum fundingrequirements of theEmployeeRetirement
IncomeSecurityActof1974.TheCompanymadenocontributionstotheplansinfiscal2004andcontributed$6.3milliontotheplansin
fiscal2003.Nocontributionsareexpectedtoberequiredormadeduringfiscal2005.Achangeininterestratesorexpectedreturnonplan
assets may result in a cash funding requirement in fiscal 2006 or beyond. The measurement date for the Company’s defined benefit
pensionplanwasMay31ofeachfiscalyear.