AutoZone 2010 Annual Report Download - page 138

chooses. Directors who elect to be paid only the base retainer receive, on January 1 during their first two years
of services as a director, an option to purchase 3,000 shares of AutoZone common stock. After the first two
years, such directors receive, on January 1 of each year, an option to purchase 1,500 shares of common stock,
and each such director who owns common stock or Director Units worth at least five times the base retainer
receive an additional option to purchase 1,500 shares. Directors electing to be paid a supplemental retainer in
addition to the base retainer receive, on January 1 during their first two years of service as a director, an
option to purchase 2,000 shares of AutoZone common stock. After the first two years, such directors receive
an option to purchase 500 shares of common stock, and each such director who owns common stock or
Director Units worth at least five times the base retainer receive an additional option to purchase 1,500 shares.
These stock option grants are made at the fair market value as of the grant date. At August 28, 2010, there are
137,016 outstanding options with 210,484 shares of common stock reserved for future issuance under this
plan.
The Company recognized $1.0 million in expense related to the discount on the selling of shares to employees
and executives under various share purchase plans in fiscal 2010, $0.9 million in fiscal 2009 and $0.7 million
in fiscal 2008. The employee stock purchase plan, which is qualified under Section 423 of the Internal
Revenue Code, permits all eligible employees to purchase AutoZone’s common stock at 85% of the lower of
the market price of the common stock on the first day or last day of each calendar quarter through payroll
deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation,
whichever is less. Under the plan, 26,620 shares were sold to employees in fiscal 2010, 29,147 shares were
sold to employees in fiscal 2009, and 36,147 shares were sold to employees in fiscal 2008. The Company
repurchased 30,617 shares at fair value in fiscal 2010, 37,190 shares at fair value in fiscal 2009, and
39,235 shares at fair value in fiscal 2008 from employees electing to sell their stock. Issuances of shares under
the employee stock purchase plans are netted against repurchases and such repurchases are not included in
share repurchases disclosed in “Note K — Stock Repurchase Program.” At August 28, 2010, 293,983 shares of
common stock were reserved for future issuance under this plan. Once executives have reached the maximum
under the employee stock purchase plan, the Amended and Restated Executive Stock Purchase Plan permits all
eligible executives to purchase AutoZone’s common stock up to 25 percent of his or her annual salary and
bonus. Purchases under this plan were 1,483 shares in fiscal 2010, 1,705 shares in fiscal 2009, and 1,793 shares
in fiscal 2008. At August 28, 2010, 258,056 shares of common stock were reserved for future issuance under
this plan.
Note C — Accrued Expenses and Other
Accrued expenses and other consisted of the following:
(in thousands)
August 28,
2010
August 29,
2009
Medical and casualty insurance claims (current portion)............................................ $ 60,955 $ 65,024
Accrued compensation, related payroll taxes and benefits ......................................... 134,830 121,192
Property, sales, and other taxes .................................................................................... 102,364 92,065
Accrued interest ............................................................................................................ 31,091 32,448
Accrued gift cards ......................................................................................................... 22,013 16,337
Accrued sales and warranty returns ............................................................................. 14,679 12,432
Capital lease obligations ............................................................................................... 21,947 16,735
Other .............................................................................................................................. 44,489 25,038
$432,368 $381,271
The Company retains a significant portion of the insurance risks associated with workers’ compensation,
employee health, general, products liability, property and vehicle insurance. A portion of these self-insured
losses is managed through a wholly owned insurance captive. The Company maintains certain levels for stop-
loss coverage for each self-insured plan in order to limit its liability for large claims. The limits are per claim
and are $1.5 million for workers’ compensation and property, $0.5 million for employee health, and
$1.0 million for general, products liability, and vehicle.
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10-K