UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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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.
4200 SIX FORKS ROAD
RALEIGH, NORTH CAROLINA 27609

Notice of 2022 Annual Meeting of Stockholders of
Advance Auto Parts, Inc. (the "Company")

Logistics
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DATE AND TIME PLACE RECORD DATE
Thursday, May 19, 2022
at 8:30 a.m. Eastern Time
www.virtualshareholdermeeting.com/AAP2022
There will be no physical location for this year's meeting.
Holders of record of our common stock at the close of business on March 24, 2022, are entitled to vote at our Annual Meeting.
Voting Items
Board Recommendation
1 Election of the ten nominees named in the Proxy Statement to the Board of Directors ("Board") to serve until the 2023 annual meeting of stockholders
FOR
each director nominee
2 Advisory vote to approve the compensation of the Company’s named executive officers FOR
3 Ratification of the appointment by the Audit Committee of Deloitte & Touche LLP ("Deloitte") as the Company’s independent registered public accounting firm for 2022 FOR
4 Consideration of and vote upon a stockholder proposal, if properly presented at our Annual Meeting, regarding amending proxy access rights to remove the shareholder aggregation limit AGAINST
5 Action upon such other matters, if any, as may properly come before the meeting

Advance Voting Methods
(Your vote must be received by 11:59 p.m. (EDT) on May 18, 2022, the day before the Annual Meeting)
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INTERNET
www.proxyvote.com
TOLL FREE TELEPHONE
1-800-690-6903
MAIL
Complete and sign your proxy card

We invite you to join our Annual Meeting and vote. We urge you, after reading the attached proxy statement (the "Proxy Statement"), to vote your proxy by Internet or telephone by following the instructions on the form of proxy or by signing and returning the enclosed proxy card in the enclosed postage prepaid envelope as promptly as possible. You may vote live at the virtual meeting even if you previously voted by proxy. If you have a disability, we can provide reasonable assistance to help you participate in the meeting upon request.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held May 19, 2022:
The Notice of 2022 Annual Stockholders' Meeting and Proxy Statement and the 2021 Annual Report on Form 10-K,
are available at www.proxyvote.com.

The Notice of Annual Meeting and the accompanying Proxy Statement are being distributed or made available, as the case may be, on or about April 1, 2022.

By order of the Board of Directors,
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Tammy Moss Finley
Executive Vice President, General Counsel and Corporate Secretary
Raleigh, North Carolina
April 1, 2022



Proxy Statement Summary
Voting Roadmap
Proposal 1 Board Recommendation
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Election of the ten nominees named in the Proxy Statement to the Board of Directors ("Board") to serve until the 2023 annual meeting of stockholders
The Board recommends a vote FOR each director nominee
See page 1
Director Nominees
Name and Age
Director
Since
Occupation Current Committees
Other Current Public
Company Boards
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Carla J. Bailo, 61
Independent
2020 President and Chief Executive Officer of The Center for Automotive Research Nominating & Corporate Governance Audit SM Energy Company
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John F. Ferraro, 66
Independent
2015 Past Global Chief Operating Officer, Ernst & Young
Audit (Chair)
International Flavors & Fragrances Inc.
ManpowerGroup, Inc.
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Thomas R. Greco, 63
2016 President and Chief Executive Officer, Advance Auto Parts, Inc. Tapestry, Inc.
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Joan M. Hilson, 62
Independent
2022 Chief Financial & Strategy Officer, Signet Jewelers Ltd.
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Jeffrey J. Jones II, 54
Independent
2019 President, Chief Executive Officer, H&R Block, Inc. Compensation (Chair) Nominating & Corporate Governance H&R Block, Inc.
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Eugene I. Lee, Jr., 60
Independent Chair of the Board
2015 Chairman and Chief Executive Officer, Darden Restaurants, Inc. Darden Restaurants, Inc.
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Douglas A. Pertz, 67
  Independent
2018 President and Chief Executive Officer, The Brink's Company Nominating & Corporate Governance Compensation The Brink's Company
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Sherice R. Torres, 48
  Independent
2021 Chief Marketing Officer, Circle Internet Financial, LLC Compensation Nxt-ID, Inc.
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Nigel Travis, 72
Independent
2018 Retired Chief Executive Officer and Former Chairman of the Board, Dunkin' Brands Group, Inc. Nominating & Corporate Governance (Chair) Compensation Abercrombie & Fitch Co.
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Arthur L. Valdez Jr., 51
Independent
2020 Executive Vice President, Chief Supply Chain & Logistics Officer, Target Corporation Audit

i


Director Skills, Core Competencies and Characteristics
In 2021, the Nominating and Corporate Governance Committee reviewed the core competencies that it believes should be represented on our Board. The Committee regularly evaluates the composition and diversity of the Board with respect to qualifications and skill sets that are important in consideration of the Company's long term strategic plan and with respect to providing effective leadership and diverse viewpoints on matters considered by the Board. The following shows certain key skills, competencies and characteristics of our director nominees.
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*A-Asian; B-Black or African American; H-Hispanic or Latino; W-White; O-Other
Of the ten director nominees that compose our Board:
9 of 10
are independent
4 of 10
are diverse with respect to gender (3) or race/ethnicity (2)

ii


Stockholder Engagement
Outreach
We value dialogue with our stockholders and regularly conduct stockholder governance outreach. Feedback from stockholders is shared with the Board and applicable Committees periodically.
Participants
Outreach discussions with our stockholders generally include our Chief Executive Officer (“CEO”) and management representatives from Investor Relations, Human Resources and the office of the General Counsel and Corporate Secretary.
Topics discussed
This year, discussions with stockholders primarily focused on Environmental, Social and Governance (“ESG”) issues and actions, including our first ESG Materiality Assessment to focus our ESG priorities on topics relevant to our stakeholders that have high potential to contribute value to our business, publication of our Corporate Sustainability and Social Report, diversity, equity and inclusion and environmental sustainability, the impact of the global pandemic on our business and our response to it, executive compensation matters and Board composition.

Corporate Governance Highlights
ü
Annual election of all directors
ü
Strong Guidelines on Significant Governance Issues
ü
Directors elected by majority voting
ü
Annual evaluation of the Board, Committees and individual directors
ü
Independent Chair of the Board
ü
New director searches focused on key skills for the Company's long term strategic plan and diversity characteristics
ü
90 percent of our director nominees are independent
ü
Board policy on CEO succession planning
ü
All NYSE required Board committees consist solely of independent directors
ü
Policies prohibiting hedging and (unless certain stringent requirements are met) prohibiting pledging for all employees and directors
ü Regular executive sessions of independent directors ü Robust stock ownership guidelines for directors and Executive Officers
ü
Proxy Access right for up to 20 person groups of stockholders owning 3% of our stock for 3 years to nominate up to 20% of our Board
ü Direct oversight by the Nominating and Corporate Governance Committee of ESG matters
ü Right for stockholders of 10% or more of the Company's stock to call a special meeting ü Average tenure of 3.4 years for our director nominees

Proposal 2 Board Recommendation
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Advisory vote to approve the compensation of the Company’s named executive officers.
The Board recommends a vote FOR this Proposal
See page 16
Executive Compensation Highlights
Our compensation programs continue to center on a pay for performance philosophy. Compensation actions in 2021 were directly aligned with this philosophy to ensure our leadership’s interests are aligned with those of our stockholders. During 2021, we introduced a modifier to our annual incentive plan ("AIP"), which modifies payouts to executives under the AIP by up to +/- 10% based on achievement of individual goals related to diversity, equity and inclusion ("DEI"), to incentivize and reward performance in a prioritized ESG area; simplified our long term incentive program by moving to a single performance metric for our performance share units, relative total shareholder return as compared to the S&P 500 over a three year period, to strengthen the focus of our executives on delivering our long term of objective of achieving top quartile total shareholder return; and introduced stock options as a component of our long term incentive compensation to more directly align the interests of our executives with those of our stockholders.

iii


Compensation Framework
The following table summarizes the compensation elements provided for our Named Executive Officers ("NEOs") in 2021:
Element Purpose Metrics
Base Salary
Fixed annual cash compensation to attract and retain executives Established after review of base salaries of executives of companies in our peer group and the performance of each executive officer
Annual Incentive
Plan (“AIP”)(1)
Performance based variable pay that delivers cash incentives when executives meet or exceed key financial and operating targets

1/3 Enterprise Comparable Store Sales
1/3 Enterprise Adjusted Operating Income
1/3 Free Cash Flow Payouts modified up to +/- 10% based on achievement of individual DEI related goals
Long Term Incentive ("LTI") Equity Compensation Performance and service based equity compensation to reward executives for a balanced combination of meeting or exceeding key financial and operating targets and creating long term stockholder value
50% Performance based Restricted Stock Units ("PSUs")
25% Time based Restricted Stock Units ("RSUs")
25% Nonqualified stock options
(1) Enterprise Comparable Stores Sales represents revenue generated by stores, branches and e-commerce in 2021 relative to the revenue generated by stores, branches and e-commerce in 2020, not including new stores and branches and independently owned Carquest branded stores. Enterprise Adjusted Operating Income represents the Company’s earnings before interest and taxes, adjusted for non-operational/non-recurring items. Free Cash Flow represents the amount of cash the Company generates from operations less purchases of property and equipment.

2021 Performance Plan Payouts
2021 Annual Incentive Plan Payout
Threshold Target Maximum
Enterprise Adjusted Operating Income a 195%
Enterprise Comparable Store Sales a
Free Cash Flow a

2019-2021 Long Term Incentive Plan Payout
Threshold Target Maximum
Return on Invested Captial ("ROIC") a 117%
Relative Total Shareholder Return x
Average Annual Comparable Store Sales Growth a
For additional information about 2021 results achieved and corresponding plan payouts, please see the discussion beginning on page 20 in Compensation Discussion & Analysis ("CD&A").

iv


Strong Compensation Governance
STOCKHOLDER FRIENDLY PRACTICES WE EMPLOY STOCKHOLDER UNFRIENDLY PRACTICES WE AVOID
ü
Pay for Performance with rigorous objective financial and operational metrics that are closely tied to our success and delivery of stockholder value
û
Excise tax gross ups for Change in Control payments
ü
Incentive Compensation Clawback Policy
û
Repricing or exchange of underwater stock options
ü
“Double Trigger” vesting
û
Dividends on unearned annual performance based equity awards
ü
Robust Stock Ownership Guidelines
û
Hedging
ü
Independence requirements for our Compensation Consultant
û
Pledging unless certain stringent requirements are met

For a detailed discussion of our executive compensation program, including the correlation to our comprehensive strategic plan focused on creating long term stockholder value, please see CD&A beginning on page 16.

Proposal 3 Board Recommendation
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Ratification of the appointment by the Audit Committee of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2022
The Board recommends a vote FOR this Proposal
See page 43

Proposal 4 Board Recommendation
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Consideration of and vote upon a stockholder proposal, if properly presented at the Annual Meeting, regarding amending proxy access rights to remove the shareholder aggregation limit
The Board recommends a vote AGAINST this Proposal
See page 46


v


Table of Contents
Proposal No. 1 Election of Directors 1  Compensation Committee Report 27 
Nominees for Election to Our Board Compensation Program Risk Assessment 28 
Corporate Governance 7  Additional Information Regarding Executive Compensation 29 
Overview Summary Compensation Table 29 
Board Composition and Refreshment Grants of Plan-Based Awards in 2021 31 
Nominations for Directors Outstanding Equity Awards at 2021 Fiscal Year End 32 
Board Independence and Structure Option Exercises and Stock Vested in 2021 34 
Board's Role in Risk Oversight 10  Non-Qualified Deferred Compensation for 2021 34 
Board Evaluation 10  Potential Payments Upon Termination of Employment or Change in Control 35 
Stockholder and Interested Party Communications with our Board 10  CEO Pay Ratio 37 
Code of Ethics and Business Conduct 11  Information Concerning our Executive Officers 38 
Code of Ethics for Finance Professionals 11  Security Ownership of Certain Beneficial Owners and Management 40 
Related Party Transactions 11  Stock Ownership Guidelines for Directors and Executive Officers 41 
Succession Planning 12  Delinquent Section 16(a) Reports 42 
Director Compensation 13  Equity Compensation Plan Information 42 
2021 Director Summary Compensation 13  Proposal No. 3 Ratification of Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for 2022 43 
Directors' Outstanding Equity Awards at 2021 Fiscal-Year End 14  2021 and 2020 Audit Fees 43 
Proposal No. 2 Stockholder Advisory Vote to Approve the Compensation of the Company's Named Executive Officers 15  Audit Committee Report 44 
Compensation Discussion and Analysis 16  Proposal No. 4 Stockholder Proposal Entitled "Proxy Access" 45 
Executive Summary 16  Board of Directors' Statement in Opposition to Proposal No. 4 46 
Compensation Governance 18  Other Matters 49 
Framework for Executive Compensation 21 
Other Compensation and Benefit Programs 25 

Note:  Unless otherwise indicated in the text, any reference to a year is intended to refer to the Company’s fiscal year of the same date as described in the Company’s 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 15, 2022 (the "2021 Form 10-K").



Proposal No. 1
Election of Directors
At the 2022 annual meeting of stockholders (the "Annual Meeting"), you will vote to elect as directors the ten nominees listed below to serve until our 2023 annual meeting of stockholders or until their respective successors are elected and qualified. Our Board has nominated Carla J. Bailo, John F. Ferraro, Thomas R. Greco, Joan M. Hilson, Jeffrey J. Jones II, Eugene I. Lee, Jr., Douglas A. Pertz, Sherice R. Torres, Nigel Travis and Arthur L. Valdez Jr. 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. The Board does not currently have any vacancies.
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.


1


Nominees for Election to Our Board
The following information is provided about our nominees for director effective as of the record date, March 24, 2022 (the "Record Date").
CARLA J. BAILO Independent
President and Chief Executive Officer, The Center for Automotive Research
carlabailo_bw.jpg Age: 61
Director Since:
August 2020
Committee:
Audit; Nominating and Corporate Governance
Other Current Public Company Boards:
SM Energy Company
Key Experience and Skills
With an accomplished career in the automotive industry, including several leadership roles in both corporate and academic settings, Ms. Bailo brings a unique and valuable point of view to our Board. She also has significant experience in the environmental sustainability space and brings a differentiated perspective on ESG matters to our Board. She has been designated by the Board as an audit committee financial expert consistent with SEC regulations.

Professional Experience
Ms. Bailo is currently the President and Chief Executive Officer of The Center for Automotive Research, an independent, non-profit research organization that engages with leaders in the global automotive industry to support technology advancements and improve the competitiveness of the U.S. automotive industry, a position she has held since October 2017. Ms. Bailo has also been President and Chief Executive Officer of ECOS Consulting, LLC, an energy efficiency solutions provider, since 2014. Previously, Ms. Bailo served as Assistant Vice President, Mobility Research and Business Development of The Ohio State University, a public research university, from 2015 to October 2017. Prior to 2015, Ms. Bailo held various leadership roles with Nissan Motor Co. Ltd., a multinational automobile manufacturer, and began her career with General Motors Company, a multinational vehicle and financial services corporation. Ms. Bailo has served on the board of directors for SM Energy Company, a company engaged in hydrocarbon exploration, since October 2018.
JOHN F. FERRARO Independent
Past Global Chief Operating Officer, Ernst & Young
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Age: 66
Director Since:
February 2015
Committee:
Audit (Chair)
Other Current Public Company Boards:
International Flavors & Fragrances Inc.
ManpowerGroup Inc.
Key Experience and Skills
Mr. Ferraro has extensive financial, corporate management, governance and public policy experience which enables him to assist the Board in identifying trends and developments that affect public companies. In addition, the Board benefits from his experience in the areas of marketing and the development of corporate strategy. He has been designated by the Board as an audit committee financial expert consistent with SEC regulations.

Professional Experience
Mr. Ferraro served as our independent Lead Director from November 2015 to May 2016. Mr. Ferraro served as Executive Vice President, Strategy and Sales of Aquilon Energy Services, a software and services company for the energy industry from February 2019 to July 2019. He served as Global Chief Operating Officer ("COO") of Ernst & Young ("EY"), a leading professional services firm, from 2007 to December 2014 and retired as a partner of EY at the end of January 2015. In addition, Mr. Ferraro served as a member of EY’s Global Executive Board for more than 10 years. Mr. Ferraro joined EY in 1976 and prior to his COO role he served in several senior leadership positions at EY, including Global Vice Chair Audit. Mr. Ferraro practiced as a Certified Public Accountant for 35 years. Mr. Ferraro has served as a director for ManpowerGroup Inc., a provider of workforce solutions, since January 2016, and for International Flavors & Fragrances Inc., a manufacturer of flavors and fragrances, since May 2015.

2


THOMAS R. GRECO
President and Chief Executive Officer, Advance Auto Parts, Inc.
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Age: 63
Director Since:
April 2016
Committee:
None
Other Current Public Company Boards:
Tapestry, Inc.
Key Experience and Skills
Mr. Greco has served as our President and Chief Executive Officer and a member of our Board since 2016. Previously, Mr. Greco was the Chief Executive Officer of Frito-Lay North America, where he worked to grow revenue and increase profits, providing him with important experience in the consumer retail industry. Mr. Greco brings to the Board significant experience and leadership in the areas of corporate strategy, marketing, supply chain and logistics. 

Professional Experience
Mr. Greco became our President and Chief Executive Officer in August 2016, having served as Chief Executive Officer since April 2016. From September 2014 until April 2016, Mr. Greco served as Chief Executive Officer, Frito-Lay North America, a unit of PepsiCo, Inc. (“PepsiCo”), a leading global food and beverage company. As Chief Executive Officer, Frito-Lay North America, Mr. Greco was responsible for overseeing PepsiCo’s snack and convenient foods business in the U.S. and Canada. Mr. Greco previously served as Executive Vice President, PepsiCo and President, Frito-Lay North America from September 2011 until September 2014 and as Executive Vice President and Chief Commercial Officer for Pepsi Beverages Company from 2009 to September 2011. Mr. Greco joined PepsiCo in Canada in 1986 and served in a variety of leadership positions, including Region Vice President, Midwest; President, Frito-Lay Canada; Senior Vice President, Sales, Frito-Lay North America; President, Global Sales, PepsiCo; and Executive Vice President, Sales, North America Beverages. Before joining PepsiCo, Mr. Greco worked at The Proctor & Gamble Company, a consumer packaged goods company. He has served as a director of Tapestry, Inc., an American multinational luxury fashion holding company, since December 2020.
JOAN M. HILSON Independent
Chief Financial & Strategy Officer, Signet Jewelers Ltd.
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Age: 62
Director Since:
March 2022
Committees:
None
Other Current Public Company Boards:
None

Key Experience and Skills
Ms. Hilson brings more than 35 years of finance experience and deep specialty retail experience to our Board. In her role as Chief Financial & Strategy Officer of Signet Jewelers, she has strong experience with leading transformation on a strategy intended to drive profitable growth through innovation, capital management, real estate optimization and expansion of market share, which brings valuable perspective to our Board.

Professional Experience
Ms. Hilson has served as Chief Financial & Strategy Officer of Signet Jewelers, Ltd., the world's largest retailer of diamond jewelry, since March 2021, and she has served as Signet's Chief Financial Officer since April 2019. Prior to joining Signet, Ms. Hilson served as Chief Financial Officer of David’s Bridal Inc., a large specialty clothing retailer from 2014 to 2019; Executive Vice President and Chief Financial Officer and other executive financial leadership roles at American Eagle Outfitters, Inc., a lifestyle, clothing and accessories retailer from 2005 to 2012; and in several financial reporting, financial planning and merchandise planning positions at Limited Brands, Inc., a specialty retailer, including as Executive Vice President and Chief Financial Officer for Victoria’s Secret Stores division. Ms. Hilson served as the Controller of Sterling Jewelers (now Signet Jewelers) from 1985 to 1992. She began her career as an auditor at Coopers & Lybrand LLP, one of the oldest professional financial and consulting services firms in the United States (which subsequently merged with PricewaterhouseCoopers).





3


JEFFREY J. JONES II Independent
President and Chief Executive Officer, H&R Block, Inc.
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Age: 54
Director Since:
February 2019
Committees:
Compensation (Chair); Nominating and Corporate Governance
Other Current Public Company Boards:
H&R Block, Inc.

Key Experience and Skills
Mr. Jones brings to the Board nearly 30 years of executive management, innovative leadership and operational excellence experience while holding key roles with top companies in the retail, consumer products, agency and technology industries, where he has had substantial experience with launching initiatives to drive traffic, brand affinity and loyalty. His position as a director of another public company also enables him to share with the Board his experience with governance issues facing public companies.

Professional Experience
Mr. Jones is currently President and Chief Executive Officer of H&R Block, Inc., a global consumer tax services provider, a position he has held since October 2017. Prior to October 2017, Mr. Jones served as H&R Block’s President and Chief Executive Officer-Designate beginning in August 2017. Previously, Mr. Jones served as President, Ride Sharing at Uber Technologies Inc., an on-demand car service company, from September 2016 until March 2017 and Executive Vice President and Chief Marketing Officer at Target Corporation, a retail sales company, from April 2012 to September 2016. Prior to his time at Target Corporation, Mr. Jones held various executive and leadership roles related to sales, agency and marketing with iconic brands such as The Coca-Cola Company and The Gap, Inc. He has served as a director of H&R Block, Inc. since 2017.

EUGENE I. LEE, JR. Independent (Chair of the Board)
Chairman and Chief Executive Officer, Darden Restaurants, Inc.
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Age: 60
Director Since:
November 2015
Committee:
None
Other Current Public Company Boards:
Darden Restaurants, Inc.

Key Experience and Skills
Mr. Lee’s experience as the Chief Executive Officer of a national group of chain restaurants provides him with strong insights into customer service and the types of management issues that face companies with large numbers of employees in numerous locations throughout the country. In addition, he brings experience in marketing, real estate, strategic planning and change management.

Professional Experience
Mr. Lee is currently serving, and until May 29, 2022, will continue to serve, as the Chairman and Chief Executive Officer of Darden Restaurants, Inc. ("Darden"), the owner and operator of Olive Garden, LongHorn Steakhouse, Bahama Breeze, Cheddar's Scratch Kitchen, Seasons 52, The Capital Grille, Eddie V’s and Yard House restaurants in North America, positions he has held since January 2021. On May 29, 2022, Mr. Lee will be retiring as Chief Executive Officer but will continue to serve on the Darden Board of Directors in a non-executive capacity. Previously, Mr. Lee served as Darden’s President and Chief Executive Officer from February 2015 to January 2021, President and Interim Chief Executive Officer from October 2014 to February 2015, and President and Chief Operating Officer from September 2013 to October 2014. He served as President of Darden’s Specialty Restaurant Group from October 2007 to September 2013 following Darden’s acquisition of RARE Hospitality International, Inc., where he had served as President and a member of the Board of Directors since 2001. Mr. Lee has served as a member of the Darden Board of Directors since February 2015.





4


DOUGLAS A. PERTZ Independent
President and Chief Executive Officer, The Brink's Company
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Age: 67
Director Since:
May 2018
Committee:
Compensation; Nominating and Corporate Governance
Other Current Public Company Boards:
The Brink's Company
Key Experience and Skills
Mr. Pertz has led several global companies as Chief Executive Officer over the past 20 years and throughout his career has guided multinational organizations through both operational turnaround and growth acceleration. Mr. Pertz’s leadership positions have honed his operational expertise in branch and route-based logistics, business-to-business services, channel and brand marketing and growth through acquisition.

Professional Experience
Mr. Pertz is currently, and through May 6, 2022 will be, the President and Chief Executive Officer of The Brink’s Company (“Brink’s”), the world’s largest cash management company including cash-in-transit, ATM services, international transportation of valuables, cash management and payment services. He has held these positions since June 2016. On May 6, 2022, Mr. Pertz will transition to executive chairman of the board of Brink's. Prior to joining Brink’s, Mr. Pertz was the President and Chief Executive Officer of Recall Holdings Limited (“Recall”), a global provider of digital and physical information management and security services, from 2013 to 2016. Prior to joining Recall, Mr. Pertz served as a partner with Bolder Capital, LLC, a private equity firm specializing in acquisitions and investments in middle market companies and as a partner with One Equity Partners, the private equity arm of JPMorgan Chase & Co. He also served as Chief Executive Officer and on the Board of Directors of IMC Global, the predecessor company to The Mosaic Company, Culligan Water Technologies and Clipper Windpower, and as a Group Executive and Corporate Vice President at Danaher Corporation. Mr. Pertz has served as a member of Brink’s Board of Directors since June 2016 and in the past has served on the board of directors of numerous other public companies, including Recall, Nalco Holdings, The Mosaic Company and Bowater.

SHERICE R. TORRES Independent
Chief Marketing Officer, Circle Internet Financial, LLC
hiresheadshot_bw-145.jpg
Age: 48
Director Since:
September 2021
Committee:
Compensation
Other Current Public Company Boards:
Nxt-ID, Inc.


Key Experience and Skills
Ms. Torres has nearly 25 years of executive management experience with top companies in marketing, brand management, strategic planning and social responsibility. This deep experience in digital marketing is complemented by her experience with and commitment to enhancing diversity, equity and inclusion.

Professional
Ms. Torres has served as the Chief Marketing Officer of Circle Internet Financial, LLC, a global internet finance firm since January 2022. From November 2020 until January 2022, she served as Vice President, Marketing at F2 - Facebook Financial, a division of Facebook, Inc. (now Meta), a leading technology company, where she led all aspects of global marketing across Facebook's payment products. From August 2014 to May 2020, Ms. Torres served as Global Marketing Director for Google, Inc., a leading technology company, and from May 2020 to October 2020, she served as Global Inclusion Director for Google. Prior to 2014, Ms. Torres served in a variety of leadership roles at Viacom (now ViacomCBS Inc.), a media and entertainment company, across consumer products, strategic planning and digital. She began her career in the change management consulting practice of Deloitte Touche Tohmatsu Limited, a multinational professional services provider. Ms. Torres also serves on the board of directors of Nxt-ID, Inc., a publicly traded software company.




5



NIGEL TRAVIS Independent
Former Chairman of the Board and Retired Chief Executive Officer, Dunkin' Brands Group, Inc.
image33.jpg
Age: 72
Director Since:
August 2018
Committee:
Nominating and Corporate Governance (Chair); Compensation
Other Current Public Company Boards:
Abercrombie & Fitch Co.
Key Experience and Skills
Mr. Travis's experience in executive leadership roles at several global companies within the retail and restaurant industries, including his experience as an architect of the turnaround of Dunkin' Brands provides the Board with valuable insights for the Company's continued transformation. In addition, as a result of his service as a director of several other public companies, he is in an excellent position to share with the Board his experience with governance issues facing public companies.

Professional Experience
Mr. Travis served as the Executive Chairman of the Board for Dunkin’ Brands Group, Inc., a quick-service restaurant franchisor, from July 2018 to January 2019 when he transitioned to Chairman until December 2020. Previously, he served as Chief Executive Officer of Dunkin’ Brands from January 2009 to July 2018, where he assumed the additional responsibility of Chairman of the Board in May 2013. Mr. Travis has also served in executive leadership roles at various companies within the retail and restaurant industries. He has served as a director of Abercrombie & Fitch Co., a global multi-brand specialty retailer, since January 2019 and formerly served as a director of Office Depot, Inc., an office supply company, from March 2012 to May 2020.

ARTHUR L. VALDEZ JR. Independent
Executive Vice President, Chief Supply Chain & Logistics Officer, Target Corporation
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Age: 51
Director Since:
August 2020
Committee:
Audit
Other Current Public Company Boards:
None
Key Experience and Skills
Mr. Valdez's executive experience provides the Board with valuable insights in a key component of the Company's continued transformation. In particular, Mr. Valdez's deep experience with supply chain throughout its growth at Amazon and his leadership of global supply chain and logistics for Target provide highly relevant subject matter expertise. Additionally, the Board believes that Mr. Valdez brings important diversity of thought and experience to the Board that is particularly relevant to retailers serving a broad array of consumers.

Professional Experience
Mr. Valdez is currently Executive Vice President, Chief Supply Chain & Logistics Officer of Target Corporation, a retail corporation, a position he has held since March 2016, where he leads all functions of Target’s global supply chain and logistics network. Mr. Valdez has spent his career building supply chain and fulfillment networks across Asia, Europe and North and South America. Prior to his time at Target Corporation, Mr. Valdez spent 17 years in a variety of leadership roles with Amazon.com Inc., an online retailer, including Vice President, Operations, International Expansion, Vice President, Worldwide Transportation, and Vice President, Operations, Amazon.co.uk Ltd.

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

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Corporate Governance
Overview
We believe that our strong corporate governance practices reflect our values and support our strategic and financial performance. The compass of our corporate governance practices can be found in our by-laws, our Guidelines on Significant Governance Issues and our Code of Ethics and Business Conduct, which were adopted by our Board to guide our Company, our Board and our employees (“team members”) and are available on our website at ir.advanceautoparts.com under "Governance." Each standing committee of the Board has a charter, available at ir.advanceautoparts.com under "Governance," that spells out the roles and responsibilities assigned to it by the Board. In addition, the Board has established policies and procedures that address matters such as risk oversight, stockholder and interested party communications with the Board, transactions with related persons, executive officer succession planning and other matters. For additional information about corporate governance highlights, please see "Proxy Summary - Corporate Governance Highlights."

Board Composition and Refreshment
Of the ten director nominees that compose our Board:
9 of 10
are independent
4 of 10
are diverse with respect to gender (3) or race/ethnicity (2)
Our directors possess a breadth of skills and depth of experience relevant to being able to provide effective oversight for the execution of the Company's transformation agenda and creation of long term value. For additional information about the skills, experiences and characteristics of our Board, please see "Proxy Summary - Director Skills, Core Competencies and Characteristics."
We believe the Board benefits from a balance of newer directors, who bring fresh perspectives, and longer serving directors, who have contributed to our strategy over time and have deep understanding of our operations. We continually assess the composition of the Board, including the Board's size and the diversity, skills and experience of our directors, to ensure continued alignment with the strategic direction of the Company.
As part of this evaluation during 2021, the Nominating and Corporate Governance Committee identified digital expertise, current financial executive experience and gender and racial/ethnic diversity as areas it would like to augment on the Board. Using a third party search firm, the Committee identified and evaluated several excellent candidates, ultimately recommending to the Board the appointment of Mses. Torres and Hilson. The Board does not currently have any vacancies.
4 new directors
have joined our Board in the past 3 years
3.4 years
average tenure of our director nominees
Nominations for Directors
Identifying Director Candidates
The Nominating and Corporate Governance Committee is responsible for leading the search for and evaluating qualified individuals, including those of diverse backgrounds, to become nominees for election as directors. The Committee is authorized to retain a search firm to assist in identifying, screening and attracting director candidates. After a director candidate has been identified, the Committee evaluates each candidate for director within the context of the needs of the Board in its composition as a whole. The Committee considers such factors as the candidate’s business experience, skills, independence, judgment, diversity and ability and willingness to commit sufficient time and attention to the activities of the Board. At a minimum, recommended candidates for nomination must possess the highest personal and professional ethics, integrity and values, and commit to representing the long term interests of our stockholders. Although the Board has not adopted a formal policy with regard to diversity (including, but not limited to, with respect to gender, race, ethnicity, sexual orientation, disability and age) in the composition of the Board, the Committee is committed to considering candidates of diverse backgrounds in every director search it leads and strives to compose a Board that reflects diverse viewpoints that will actively and constructively contribute to the Board’s discourse and deliberations.
Stockholder Recommendations for Director Candidates and Proxy Access
The Nominating and Corporate Governance Committee will consider stockholder suggestions for nominees for directors. Any stockholder who desires to recommend a candidate for director must submit the recommendation in writing and follow the procedures set forth in our by-laws. Our by-laws require that a stockholder’s nomination be received by the corporate secretary

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not less than 120 days nor more than 150 days prior to the first anniversary of the date of the preceding year’s annual meeting. The notice should include the following information about the proposed nominee: name, age, business and residence addresses, principal occupation or employment, the number of shares of Company stock owned by the nominee and additional information required by our by-laws as well as any information that may be required by the SEC’s regulations. In addition, the stockholder providing the notice should provide his or her name and address as they appear on our books, the number and type of shares or other equitable interests that are beneficially owned by the stockholder and additional information required by our by-laws. The Committee does not evaluate any candidate for nomination as a director any differently solely because the candidate was recommended by a stockholder. A copy of our by-laws may be obtained by submitting a request to: Advance Auto Parts, Inc., 4200 Six Forks Road, Raleigh, North Carolina 27609, Attention: Corporate Secretary. Our by-laws also are available on our website at ir.advanceautoparts.com under "Governance."

Additionally, our by-laws provide that a stockholder, or group of 20 or fewer stockholders, owning at least three percent of our outstanding shares continuously for at least three years may nominate candidates to serve on the Board and have those candidates included in our annual meeting materials. The maximum number of proxy access candidates that a stockholder or stockholder group may propose as nominees is the greater of (i) two or (ii) 20 percent of the Board. This process is subject to additional eligibility, procedural and disclosure requirements as provided in our by-laws, including the requirements that the nominee must be deemed to be independent under applicable stock exchange listing requirements and that notice of such nominations must be delivered to us neither later than 120 days nor earlier than 150 days prior to the first anniversary of the date on which we mailed the proxy statement for the preceding year’s annual meeting of stockholders.
Board Independence and Structure
Independence
Our Board reviews each director's independence at least annually with the assistance of the Nominating and Corporate Governance Committee and has determined that each of our directors other than Mr. Greco is “independent” under the listing standards of the New York Stock Exchange (“NYSE”) because each of these individuals:
(1)    has no material relationship with us or our subsidiaries, either directly or indirectly, as a partner, stockholder or officer of an organization that has a relationship with us or our subsidiaries; and
(2)    satisfies the “bright line independence” criteria set forth in Section 303A.02(b) of the NYSE’s listing standards.
The Board determined that Mr. Greco is not independent because he is employed as our President and Chief Executive Officer.
In the independence determination, the Board assessed the issue of materiality of any relationship not merely from the standpoint of each director or nominee, but also from that of persons or organizations with which the director or nominee may have an affiliation. 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.
Leadership Structure

Our Guidelines on Significant Governance Issues and by-laws allow the Board to combine or separate the roles of the Chair of the Board and the Chief Executive Officer. The Board regularly considers whether to maintain the separation of the roles of Chair and Chief Executive Officer. In the event that the Board chooses to combine these roles, or in the event that the Chair of the Board is not an independent director, our Guidelines on Significant Governance Issues provide for the selection of an independent Lead Director. Mr. Lee currently serves as the independent Chair of the Board. Although the Board believes this structure is appropriate under the present circumstances, the Board has also not adopted a policy on whether the roles of Chairman and Chief Executive Officer should be separated or combined because the Board believes that there is no single best blueprint for structuring Board leadership and that, as circumstances change, the optimal leadership structure may change.

The responsibilities of the independent Chair or independent Lead Director include participating in development of the Board’s agenda, as well as facilitating the discussions and interactions of the Board to ensure that every director's viewpoint is heard and considered. The Chair presides over meetings of the Board and, if independent, also over meetings of the independent directors. When the Chair is not independent, the independent Lead Director is expected to preside over meetings of the independent directors. Where an Independent Lead Director exists, he or she also has the responsibility to act as principal liaison among the Chair, the Chief Executive Officer and the full Board.
Committees and Meetings

Our Board met four times during 2021 and received periodic written updates from management throughout the year. Each incumbent director attended 75 percent or more of the total number of meetings of the Board and meetings of the committees of the Board on which he or she served during his or her tenure. Our Guidelines on Significant Governance Issues provide that our directors should attend annual meetings of stockholders, and all of our current directors who were serving at the time attended our 2021 annual meeting of stockholders and were available for questions from our stockholders. In accordance with applicable NYSE listing requirements, our independent directors hold regular executive sessions at which management, including the Chief

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Executive Officer, is not present. During 2021, these meetings were presided over by Mr. Lee, our independent Chair of the Board.

We currently have an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which consists of entirely of independent directors in accordance with the listing standards of the NYSE and whose members satisfy the board committee qualification requirements of the NYSE and SEC. The following table sets forth the names of each current committee member, the number of times each committee met in 2021 and the primary responsibilities of each committee.
AUDIT COMMITTEE
Members:
     
Primary Responsibilities
John F. Ferraro (Chair)
Carla J. Bailo
Arthur L. Valdez Jr.

Meetings in 2021: 7
monitors the integrity of our financial statements, reporting processes, internal controls and legal and regulatory compliance;
appoints, determines the compensation of, evaluates and, when appropriate, replaces our independent registered public accounting firm;
pre-approves all audit and permitted non-audit services to be performed by our independent registered public accounting firm;
monitors the qualifications and independence and oversees performance of our independent registered public accounting firm;
reviews and makes recommendations to the Board regarding our financial policies, including investment guidelines, deployment of capital and short term and long term financing; and
reviews with management the implementation and effectiveness of the Company’s compliance programs, discusses guidelines and policies with respect to risk assessment and risk management and oversees our internal audit function.
COMPENSATION COMMITTEE
Members:
     
Primary Responsibilities
Jeffrey J. Jones II (Chair)
Douglas A. Pertz
Sherice R. Torres
Nigel Travis

Meetings in 2021: 6
reviews and approves our executive compensation philosophy;
annually reviews and approves corporate goals and objectives relevant to the compensation of the CEO and evaluates the CEO’s performance in light of these goals;
determines and approves the compensation of our executive officers;
oversees our incentive and equity based compensation plans, reviews and approves our peer companies and data sources for purposes of evaluating our compensation competitiveness and establishing the appropriate competitive positioning of the levels and mix of compensation elements;
oversees development and implementation of the succession plans for executive management (other than the CEO), including identifying successors and reporting annually to the Board;
oversees the Company’s executive compensation recovery (“clawback”) policy; and
recommends to the Board compensation guidelines for determining the form and amount of compensation for outside directors.
NOMINATING and CORPORATE GOVERNANCE COMMITTEE
Members:
     
Primary Responsibilities
Nigel Travis (Chair)
Carla J. Bailo
Jeffrey J. Jones II
Douglas A. Pertz

Meetings in 2021: 7
assists the Board in identifying, evaluating and recommending candidates for election to the Board;
establishes procedures and provides oversight for evaluating the Board and management;
oversees development and implementation of the CEO succession plan, including identifying the CEO's successor and reporting annually to the Board;
develops, recommends and reassesses our corporate governance guidelines;
reviews and recommends retirement and other policies for directors and recommends to the Board whether to accept or reject a director's resignation;
reviews the development and communication of our ESG programs;
evaluates the size, structure and composition of the Board and its committees; and
establishes procedures for stockholders to recommend candidates for nomination as directors and to send communications to the Board.

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Our Board has adopted written charters for each committee setting forth the roles and responsibilities of each committee. Each of the charters is available on our website at ir.advanceautoparts.com under "Governance."

Board’s Role in Risk Oversight
One of our Board’s responsibilities is the oversight of the enterprise-wide risk management activities of the Company. Risk is inherent in any business, and the Board’s oversight, assessment and decisions regarding risks occur in the context of, and in conjunction with, the other activities of the Board and its committees that are comprised solely of non-management directors. As further described below, the Board, directly and through its committees, regularly engages in risk dialogue with management.
Our management retains primary responsibility for identifying risks and risk controls related to significant business activities and mapping those risks to our long term strategy. On an annual basis, our management executes a comprehensive risk identification and analysis process and reports and discusses its findings with the Board. In addition to the comprehensive annual review, management provides regular updates to the Audit Committee, or as appropriate, the full Board, on risk exposure and mitigation efforts, as well as discusses any recommendations with respect to risk management.
Each committee of the Board is responsible for oversight of areas of risk related to its delegated responsibilities as follows, and each of the committees regularly reports on its discussions and activities to the Board:
Audit Committee: financial reporting; capital structure and financial policies; independent audit; enterprise risk management process and assessment; Internal Audit; internal controls and compliance (including ethics hotline reporting); cybersecurity and data privacy
Compensation Committee: compensation programs, policies and practices, including with respect to confirmation that they do not encourage unnecessary or excessive risk taking and the relationship between them and the relationship among our risk management policies and practices
Nominating and Corporate Governance Committee: corporate governance; director candidate selection; Board and CEO succession; Board evaluation; ESG programs; related party transactions and potential conflicts of interest; insider trading; and political and charitable contributions

Board Evaluation
The Board recognizes that a robust and constructive evaluation process is an essential component of good corporate governance and Board effectiveness.
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Board Evaluation Objectives
Evaluations are designed to assess the qualifications, attributes, skills and experience represented on the Board and whether the Board, its committees and individual directors are functioning effectively.
     
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Role of the Board
The Board is responsible for annually conducting an evaluation of the Board and individual directors.
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Role of the Board’s Committees
The Nominating and Corporate Governance Committee coordinates each Committee's annual evaluation of its performance and reporting of the results to the Board.
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2021 Evaluation Process
The evaluation process included live interviews with each director conducted by an independent third party, who compiled the results and discussed them with the Chair of the Board and the Chair of the Nominating and Corporate Governance Committee. The results of the assessment were then reported to and discussed by the full Board.
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Topics Addressed in 2021
Topics addressed in the evaluation process included, among others: the role and functioning of the Board and Board committees; interpersonal dynamics of the Board and committees; diversity of the Board; qualifications of directors; Board succession; director preparedness; Board interaction with management and management succession; Board committee structure and governance; and representation of stockholder interests.

Stockholder and Interested Party Communications with our Board
Any interested party, including any stockholder, who desires to communicate with our Board generally or directly with a specific director, one or more of the independent directors, our non-management directors as a group or our Chair of the Board, including on an anonymous or confidential basis, may do so by delivering a written communication to the Board, a specific director, the independent directors, the non-management directors as a group or to our Chair of the Board, c/o Advance Auto Parts, Inc., 4200

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Six Forks Road, Raleigh, North Carolina 27609, Attention: General Counsel. The general counsel will not open a communication that is conspicuously marked "Confidential" and is addressed to one or more of our independent directors, our non-management directors as a group or our Chair of the Board and will forward each such communication to the appropriate individual director or group of directors. Such communications will not be disclosed to the non-independent members of our Board or management unless so instructed by the independent or non-management directors.

Code of Ethics and Business Conduct
We expect 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. Our Code of Ethics and Business Conduct includes provisions with respect to the human rights standards for our company and those with whom we do business. Our team members, officers and directors are expected to review and acknowledge our Code of Ethics and Business Conduct annually. In addition, our team members and our officers are expected to participate in training on our Code of Ethics and Business Conduct on an annual basis. A complete copy of our Code of Ethics and Business Conduct is available at ir.advanceautoparts.com under "Governance." The Company will disclose within four business days any substantive changes in or waivers of the Code of Ethics and Business Conduct granted to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website rather than by filing a Form 8-K.

Code of Ethics for Finance Professionals
We have also adopted a Code of Ethics for Finance Professionals to promote and provide for ethical conduct by our finance professionals, as well as for full, fair and accurate financial management and reporting. Our finance professionals include our principal executive officer, principal financial officer, principal accounting officer or controller and any other person performing similar functions. We expect all of these finance professionals to act in accordance with the highest standards of professional integrity, to provide full and accurate disclosure in any public communications as well as reports and other documents filed with the SEC and other regulators, to comply with all applicable laws, rules and regulations and to deter wrongdoing. Our Code of Ethics for Finance Professionals is intended to supplement our Code of Ethics and Business Conduct. A complete copy of the Code of Ethics for Finance Professionals is available at ir.advanceautoparts.com under "Governance." The Company will disclose within four business days any substantive changes in or waivers of the Code of Ethics for Finance Professionals granted to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website rather than by filing a Form 8-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Related Party Transactions
Pursuant to our Code of Ethics and Business Conduct and the Board’s policy with respect to related party transactions, officers and directors are required to disclose to the Chair of the Nominating and Corporate Governance Committee of the Board or to our general counsel any transaction or relationship that may create an actual or perceived conflict of interest. Pursuant to the Board’s policy, our general counsel’s office reviews such transactions or relationships and advises the Nominating and Corporate Governance Committee in the event that a transaction or relationship is determined to be a related party transaction. The Nominating and Corporate Governance Committee then reviews the transaction in light of the relevant facts and circumstances and makes a determination of whether to approve the transaction. In the case of a transaction involving a director, the Nominating and Corporate Governance Committee would also review the transaction to determine whether it might have an effect on the independence of the director. The Nominating and Corporate Governance Committee reports its conclusions and recommendations to the Board for its consideration.
In addition, our Guidelines on Significant Governance Issues require each director to disclose to the Board (or the Nominating and Corporate Governance Committee) any interest that he or she has in any contract or transaction that is being considered by the Board 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 questionnaire that requires identification of Related Persons as defined by the Company's Related Persons Policy and 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 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.

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Since the outset of 2021, car dealerships owned by Bergstrom Corporation, where John F. Bergstrom, who served on our Board until May 2021, is the Chairman and Chief Executive Officer, paid or will pay a total of approximately $2.36 million for the purchase of automotive parts, and we paid or will pay them a total of approximately $336,000 to purchase auto parts. Such purchases were made in the ordinary course of business upon terms available to our similarly situated Professional customers and suppliers.

Succession Planning
In light of the critical importance of executive leadership to our success and consistent with our Guidelines on Significant Governance Issues, the Board has adopted a chief executive officer succession planning process that is led by the Nominating and Corporate Governance Committee. The Guidelines on Significant Governance Issues and the Nominating and Corporate Governance Committee Charter provide that the Nominating and Corporate Governance Committee is charged with the responsibility of developing a process for identifying and evaluating candidates to succeed the Chief Executive 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. Our Guidelines on Significant Governance Issues also provide that in the event the Board undertakes to name a successor to the Chief Executive Officer, the independent directors shall name a Succession Committee to identify, assess and make recommendations to the Board regarding candidates for that position.


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Director Compensation
Under our director compensation program, each non-management director receives annual compensation consisting of a combination of cash and equity based compensation. Management directors do not receive any additional compensation for services as a director. Each non-management director receives an annual retainer of $95,000 and additional applicable retainers or fees as set forth in the following paragraph.

Directors who chair Board committees receive additional retainer amounts annually for their committee chair responsibilities. The Audit Committee Chair receives $20,000, the Compensation Committee Chair receives $15,000 and the Nominating and Corporate Governance Chair receives $10,000. The independent Board Chair (or the independent Lead Director in the event the Board Chair is not independent) receives an additional $150,000 annual retainer.

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

In addition, each non-management director receives equity compensation valued at $155,000 per year. The equity compensation is awarded annually in the form of DSUs, granted to directors shortly after the date of the annual stockholder meeting, and will be distributed in common shares after the director’s service on the Board ends. Board members who are appointed at any time other than at the annual meeting receive a prorated DSU award with a grant value based upon the number of months from their election date until the next annual stockholder meeting. The annual grant of DSUs may vest pro-rata based upon the number of months the director has served during the current term in the event that a director's service as a member of the Board ends before May 1 of the calendar year following the Company's most recent annual meeting. On May 27, 2021, each non-management director serving at the time received 822 DSUs valued at $155,000 on the date of grant. On November 22, 2021, Ms. Torres received 446 DSUs valued at $103,333 on the date of grant.

2021 Director Summary Compensation
Information provided in the following table reflects the compensation delivered to our non-management directors for 2021:
Name      
Fees Earned or
Paid in Cash(a)
     
Stock
Awards(b)
     
Total
Carla J. Bailo $ 116,250  $ 155,000  $ 271,250 
John F. Bergstrom 25,000  —  25,000 
Brad W. Buss 26,250  —  26,250 
John F. Ferraro 138,750  155,000  293,750 
Jeffrey J. Jones II 131,250  155,000  286,250 
Eugene I. Lee, Jr. 303,750  155,000  458,750 
Sharon L. McCollam 116,250  155,000  271,250 
Douglas A. Pertz 116,250  155,000  271,250 
Nigel Travis 126,250  155,000  281,250 
Sherice R. Torres 63,333  103,333  166,666 
Arthur L. Valdez Jr. 116,250  155,000  271,250 

(a)Includes earned or deferred board and chair retainers for 2021. Effective for the second quarter 2021, the annual cash retainer increased from $85,000 to $95,000, and cash retainers became payable annually in advance rather than quarterly in arrears. Accordingly, amounts for 2021 reflect payment for first quarter Board service as well as the entire annual retainer amount applicable for the Board term commencing May 2021. Messrs. Bergstrom and Buss ceased serving on the Board immediately following our 2021 annual meeting and did not receive any annual retainer for the Board term commencing May 2021. Ms. Torres joined the Board in September 2021 and earned during 2021 a pro-rated portion of the annual retainer based on the number of months of service for the current Board term.
(b)Represents the grant date fair value of DSUs granted during 2021. The grant date fair value is calculated in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 ("ASC Topic 718") based on the closing price of the Company’s stock on the date of grant. For additional information regarding the valuation assumptions of these awards, refer to Note 15 of the Company’s consolidated financial statements in the 2021 Form 10-K filed with the SEC on February 15, 2022. These amounts reflect the aggregate grant date fair value. Neither Mr. Bergstrom nor Mr. Buss received an equity grant during 2021, and Ms. Torres received a pro-rated equity grant based on the number of months of service for the current Board term.

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Directors’ Outstanding Equity Awards at 2021 Fiscal-Year End
The following table provides information about the equity awards outstanding as of the end of our last fiscal year for our non-management directors who served during fiscal 2021. Individuals with zero outstanding DSUs as fiscal year end ceased serving on our Board during fiscal 2021.
Name Outstanding Deferred
Stock Units (#)
Carla J. Bailo 1,584 
John F. Bergstrom — 
Brad W. Buss — 
John F. Ferraro 10,497 
Jeffrey J. Jones II 3,929 
Eugene I. Lee, Jr   10,072 
Sharon L. McCollam — 
Douglas A. Pertz 4,371 
Sherice R. Torres 446 
Nigel Travis 3,750 
Arthur L. Valdez Jr. 1,584 



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Proposal No. 2
Stockholder Advisory Vote to Approve the Compensation
of the Company's Named Executive Officers
 
At the 2021 Annual Meeting of Stockholders, over 97 percent of the shares voted were cast in support of our compensation program for executive officers. We encourage you to review the CD&A section of this Proxy Statement and vote to approve the compensation of our named executive officers as disclosed therein and in the accompanying tables and narrative discussion contained in this Proxy Statement. We are providing this opportunity to vote on the compensation of our named executive officers as required by Section 14A of the Securities Exchange Act of 1934. Although your vote is advisory and not binding on our Board, our Compensation Committee or the Board will carefully consider the voting results and take them into consideration when making future decisions regarding executive compensation policies and procedures. It is expected that the next say-on-pay vote and say-on-pay frequency vote will occur at the 2023 annual meeting of stockholders.
 
Our executive compensation programs have played a key role in our ability to attract and retain a highly experienced, successful team to manage our Company and drive strategic and financial results for our stockholders. We believe our executive compensation programs are well structured to further our business objectives and support our culture. We believe that our compensation programs help further engage our workforce and position us to deliver strong results for our stockholders, our customers and the communities in which we operate.
 
We believe our executive compensation programs strike the appropriate balance between utilizing responsible, measured pay practices and effectively incentivizing our executives to dedicate themselves fully to value creation for our stockholders. This balance is evidenced by the following:
 
The compensation of our executives is based on a design that aims to align pay with both the attainment of annual operational and financial goals, which the Compensation Committee establishes, and sustained long term value creation;
Our compensation programs are substantially tied into our key business objectives and the success of our stockholders. If the value we deliver to our stockholders declines, so does the value of the compensation we deliver to our executives;
We maintain high levels of corporate governance oversight over our executive pay programs;
We closely monitor the compensation programs and pay levels of executives from companies of similar size and complexity to help ensure that our compensation programs are within the norm of a range of market practices; and
Our Compensation Committee, in conjunction with our Nominating and Corporate Governance Committee and senior management, engages in a talent review process annually to address succession and executive development for our Chief Executive Officer and other key executives.

The Board strongly endorses our executive compensation programs and recommends that our stockholders vote in favor of the following resolution:
 
"RESOLVED, that the compensation of our named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the "Compensation Discussion and Analysis," compensation tables and narrative discussion contained in this Proxy Statement, is hereby APPROVED."
 

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS SECTION, THE ACCOMPANYING COMPENSATION TABLES AND NARRATIVE DISCUSSION CONTAINED IN THIS PROXY STATEMENT.



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Compensation Discussion and Analysis
This section describes the compensation packages of our principal executive officer, principal financial officer and three other most highly compensated executive officers for the fiscal year ended January 1, 2022. We refer to these executives as our “Named Executive Officers” or “NEOs.”
Thomas R. Greco
President and Chief Executive Officer
     
Jeffrey W. Shepherd
Executive Vice President, Chief Financial Officer
     
Robert B. Cushing
Executive Vice President, Professional
     
Reuben E. Slone
Executive Vice President, Supply Chain
     
Jason B. McDonell
Executive Vice President, Merchandising, Marketing and e-Commerce

1 Executive Summary
Corporate Highlights

Passion for Customers…Passion for Yes! We have an unwavering focus on helping motorists advance. Recent years have brought new challenges to saying "yes" to our customers, but in 2021, the commitment of our team members and our independent Carquest partners to our mission helped deliver record net sales for a second consecutive year and record annual comparable store sales growth.

Continued volatility during 2021 in several areas such as supply chain, inflationary pressures and availability of labor created a challenging operating environment. Nonetheless, we remained focused on key initiatives to our transformation agenda, re-prioritized through a post-Covid lens with the goal of delivering top quartile total shareholder return over a three year period.

Investments in strategic sourcing, owned brand expansion and new pricing tools helped us rapidly respond to changes in the operating environment and keep saying "yes" to our customers. We expanded our DieHard® brand offerings, delivering over $1 billion in aggregate DieHard® sales during 2021, and made progress on our initiatives to implement a new warehouse management system, roll out cross-banner replenishment and increase sales and profit per store. We developed new employee value propositions for our corporate, stores and distribution center team members, focusing on creating a work environment that fully engages all of our team members and a total rewards construct that incentivizes and helps retain our key talent. In addition, for the first time since beginning our transformation, we pursued a new store opening strategy, including through a leasing transaction for 109 locations in California, and proudly opened 31 new Advance and Carquest locations and eight Worldpac branches and added 40 net new Carquest independently owned locations.

We remain committed to the disciplined execution of our capital allocation priorities, including maintaining an investment grade rating, investing in high return capital projects that will enable our successful transformation and returning cash to our stockholders. During 2021, we also took the opportunity to replace our existing revolving credit facility, increasing our borrowing capacity from $1 billion to $1.2 billion and improving certain financing terms. Consistent with our commitment to return excess cash to shareholders in a balanced manner, we repurchased approximately $886.7 million of our stock and increased our quarterly dividend from $0.25 per share to $1.00 per share during 2021.

As we continue to mature our ESG initiatives and reporting, we conducted our first "ESG Materiality Assessment" during 2021 to help us prioritize those areas of ESG that are most relevant in the eyes of our stakeholders and that we believe have the potential to deliver the most value to our business. The full results of the assessment will be described in our Corporate Sustainability and Social Report published in 2022. Of particular relevance to executive compensation, DEI was identified as one of the top five most relevant and valuable ESG priorities for our business. Champion Inclusion remains a pillar of our cultural beliefs, and during 2021, we reinforced our commitment to improving diversity, equity and inclusion throughout our workforce by introducing a modifier to our short term incentive plan based on our executives' achievement of DEI goals applicable to their respective functions.

2021 Plan Payouts

The strong results we delivered in 2021 translated to strong payouts for our executives under our incentive plans. Our long term incentive plan for the 2019 through 2021 performance period ("2019-2021 LTIP") and our 2021 annual incentive plan ("2021 AIP") utilized a subset of the following measures: Relative Total Shareholder Return, Comparable Store Sales, Adjusted Operating Income and Return on Invested Capital. Based on the Company's performance results, our NEOs earned the following incentive payouts:

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2021 AIP
195% Payout

NEOs received a payout under the 2021 AIP because our performance on Adjusted Operating Income exceeded the target level under the plan, and the Company's record Comparable Store Sales performance and strong Free Cash Flow performance exceeded the maximum levels under the plan. This payout was modified for each NEO (within a range of -10 to +10 percentage points) based upon individual performance against applicable DEI goals. See "--Framework for Executive Compensation--Annual Incentive Plan."
2019-2021 LTIP
117% Payout

Each of our NEOs received a payout under the 2019-2021 LTIP because our performance for the Return on Invested Capital and Comparable Store Sales metrics exceeded the targets. Performance for the other metric, Relative Total Shareholder Return, did not reach the threshold level.

Investor Outreach: Connecting with Our Stockholders
We believe it is extremely important to provide an open forum for stockholder discussion and feedback. We proactively reach out to our stockholders to discuss key issues in our business, provide updates on our performance and priorities and otherwise engage with our investors. For 2021, we participated in discussions with stockholders on a variety of topics, including, among others, the design of our short term and long term incentive plans, including structural changes made for 2021 compensation such as inclusion of the DEI modifier for our short term incentive plan and inclusion of stock options in our long term incentive vehicle mix, our ESG assessment to help us prioritize actions on the highest value areas of ESG for our business, recent Board refreshment and overall Board composition and our ability to attract and retain talent. In April 2021, we also hosted a virtual Investor Event to share additional detail about our updated long term strategic plan and our focus on creating long term shareholder value.

We believe that fostering an open forum with our stockholders helps us better align our governance framework and compensation programs with long term stockholder interests. At our 2021 annual meeting of stockholders, our stockholders demonstrated an overwhelming level of support for our executive compensation programs, with over 97 percent of shares voted cast in favor of our executive compensation program, and our stockholders expressed support for the changes made to our program during 2021 during our annual outreach calls with them. Particularly with respect to the DEI modifier on our short term incentive plan, our shareholders expressed support for incorporating a key area of ESG for our company into our incentive program in a way that retained core structure focused on objective corporate performance metrics but also provided meaningful incentive and reward to help drive performance in DEI.

2021 Executive Officer Compensation Program Highlights
Our compensation programs continue to center on a pay for performance philosophy. The compensation actions we took in 2021 are directly aligned with this belief to help ensure our management’s interests are aligned with those of our stockholders and reflect our focus on delivering total shareholder return and improving DEI at Advance.
Compensation Element       Purpose       2021 Actions
Base Salary
Fixed annual cash compensation to attract and retain executives
In 2021, we increased base compensation for all NEOs other than Mr. Greco to bring their base pay closer to the median of the Company's peer group and in support of internal pay equity.
2021 AIP Cash Incentive Plan
Performance based variable pay that delivers cash incentives when executives meet or exceed key financial results For 2021, each NEO received a payout of 195% of their bonus target, modified plus or minus up to 10 percentage points depending on their achievement of individual DEI goals. See "--Framework for Executive Compensation--Annual Incentive Plan."
LTI Equity Compensation
Performance and time based equity compensation to reward executives for a balanced combination of meeting or exceeding key financial results and creating long term stockholder value
For 2021, we introduced stock options to the vehicle mix of our LTI awards and moved to a single metric for our PSUs, narrowing focus to solely Total Shareholder Return relative to the S&P 500. We increased LTI awards for each of Messrs. Cushing and Shepherd to bring target compensation closer to the median of the Company's peer group and help ensure retention of top performing leaders. In March 2021, NEOs were granted annual LTI awards that consisted of 50% PSUs (covering a 2021-2023 performance period), 25% RSUs and 25% stock options.


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2 Compensation Governance
We believe good corporate governance practices that reflect our values and support our strong strategic and financial performance must include policies and procedures related to our compensation practices. We regularly review our compensation programs to ensure that our incentives are aligned with stockholder value.
Compensation Framework Highlights
WE DO HOW DO WE DO IT
ü
Pay for performance
A significant portion of our compensation package is performance based for our NEOs.
ü
Have a Clawback Policy
Our Board adopted an Incentive Compensation Clawback Policy that provides incentives may be required to be paid back if the covered executive’s fraud or willful misconduct results in an accounting restatement.
ü
Incorporate double trigger vesting
In the event of a change in control, vesting only accelerates if awards are not replaced or an executive is terminated.
ü
Have Stock Ownership Guidelines
All directors and NEOs are required to maintain meaningful levels of stock to ensure alignment with stockholder interests.
ü
Ensure independence requirements are met for compensation consultant
Our Compensation Committee has exercised authority to engage and retain the services of an independent compensation consultant.
WE DO NOT HOW DO WE ENFORCE IT
û
Provide excise tax gross-ups for change-in-control payments
Our executive employment agreements provide for “net best” payment limitations for change-in-control payments.
û
Provide significant perquisites or benefits Our Executive Officers participate in the same benefit and retirement plans as our employees and we do not offer any additional programs.
û
Reprice or exchange underwater stock options
Our 2014 LTI Plan precludes repricing.
û
Permit hedging
Our insider trading policy (i) prohibits directors and certain employees, including NEOs, from trading our stock except during specified windows, (ii) prohibits directors and all employees from pledging our common stock unless certain stringent requirements are met, and (iii) prohibits directors and all employees from engaging in hedging of our common stock. We do not permit hedging or pledging of our LTI awards.
û
Permit pledging unless certain stringent requirements are met
Compensation Decision Roles
The Compensation Committee has final approval of all compensation recommendations for our NEOs except for the CEO, for whom the Compensation Committee’s recommendations are subject to review and approval by the full Board. The Committee has engaged Frederic W. Cook & Co., Inc. (“FW Cook”), an independent consulting firm, to provide advice and assistance to the Committee when making decisions. FW Cook reports to the Committee, and all services provided by FW Cook are on behalf of the Committee.

Compensation Committee FW Cook CEO and Management
ü
Review and approve annual performance and compensation of CEO and NEOs
ü
Provide advice and assistance to the Compensation Committee when making compensation decisions
ü
CEO annually reviews performance of all executives
ü
Review, recommend and approve compensation plans
ü
Assist with reviews and updates on compensation best practices and provide benchmarking for salary and incentive compensation
ü
Management develops the strategic plan and business goals that are incorporated into incentives for performance measures
ü
Periodically review the Company's peer group
ü
Provide the Compensation Committee with updates on regulatory and compliance changes related to executive compensation as applicable
ü
CEO makes recommendations for salary and incentive compensation of other executives commensurate with executive and Company performance
ü
Oversee the Incentive Clawback Policy and Stock Ownership Guidelines
ü
Provide the Compensation Committee with analysis for peer group selection

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Setting Executive Compensation
In determining appropriate compensation opportunities for our NEOs, the Compensation Committee reviews competitive market data provided by FW Cook on compensation practices among a peer group of other specialty retailers. On behalf of the Committee, FW Cook conducts an annual review of the compensation practices of our peer group.
Our peer group is established using a set of guiding principles:
ü    Limit consideration to companies with revenues between approximately $3 billion and $30 billion, generally equivalent to a minimum of one-third and a maximum of three times our revenues;
ü    Include domestic, publicly traded companies that have a targeted focus of similar industries (including, but not limited to, Automotive Retail, General Merchandise Stores and Specialty Stores); and
ü    Consider alignment to companies with similar customers and/or business operations.

In August 2020, the Compensation Committee, with the assistance of FW Cook, reviewed our executive compensation peer group based on these principles and recommended making no changes to the peer group at that time. The following companies comprised our executive compensation peer group for 2020, which was used in competitive analyses to inform the Compensation Committee’s decisions on setting 2021 target pay opportunities for our NEOs:

AutoZone, Inc. Genuine Parts Company Office Depot, Inc.
CarMax, Inc. HD Supply Holdings, Inc. The Sherwin-Williams Company
Dick's Sporting Goods, Inc. LKQ Corporation Tractor Supply Company
Dollar General Corporation The Michaels Companies, Inc. W.W. Grainger, Inc.
Dollar Tree, Inc. O’Reilly Automotive, Inc. WESCO International, Inc.
Fastenal Company

In August 2021, the Compensation Committee again reviewed our executive compensation peer group. To move the Company closer to the median of the peer group with respect to revenues and market capitalization, and in consideration of recent merger and acquisition activity of its existing peers, the Committee decided to remove HD Supply Holdings, Inc., which was acquired during 2020, and The Michaels Companies, Inc., which was taken private during 2021, and to add Academy Sports & Outdoor, Inc., Ulta Beauty, Inc., Bed Bath & Beyond Inc. and Williams-Sonoma Inc. We will continue to monitor and review our peer group on an annual basis.

Compensation Positioning
The Compensation Committee considers multiple sources of information when determining executive pay. Generally speaking, we target the market median for annual compensation at target. The Committee reviews compensation data from our peer group as well as from other available external sources to ensure we are considering market best practices.


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3 Framework for Executive Compensation
Compensation Philosophy and Objectives
Our executive compensation philosophy is straightforward - we pay for performance.
Our executives are accountable for the performance of the business and are compensated based on that performance.
To ensure we are effectively fulfilling our pay for performance philosophy, we strive to deliver a significant portion of our executive compensation through incentive compensation. Although there is no pre-established policy or target allocation between specific compensation components, our compensation philosophy is that a majority of executives' compensation ties to performance outcomes. Our executive compensation program comprises three principal elements: base salary, which is paid in cash, annual incentive, which is paid in cash based on achievement against performance measures, and long term incentive, which is paid in equity. The following charts depict the current balance of total target compensation for our NEOs:
barcharts.gif

During 2021, we made changes to the structure of each of the annual incentive and long term incentive components of our executive compensation program. For the annual incentive, we introduced a modifier of up to +/- 10 percentage points to payout depending on achievement against individual DEI goals to encourage and reward performance in an area of high priority for our business. The maximum payout of our annual incentive remains capped at 200% of target. For the long term incentive, we introduced stock options as a form of equity to further align the interests of our executives with the creation of long term shareholder value. Each of these changes is depicted below and described further under "--Annual Incentive Plan" and "--Long Term Incentive Compensation," respectively.
structure.gif
Base Salary
The Committee reviews the information provided by FW Cook regarding executive officers’ base salary levels compared to the base salaries of executives of our peer group companies as presented in their latest available proxy statements. The Committee also reviews the assessment of the performance of each executive officer. Performance reviews generally include assessing outcomes compared to specific business and strategic objectives that are established and reviewed annually. Strategic

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objectives are related to each executive officer’s role and may include objectives linked to environmental, health and safety, inclusion and diversity, and Customer and team member engagement and retention.

The table below summarizes 2021 base salaries compared to 2020 as of the end of the year. Other than with respect to Mr. Greco, the Committee determined to increase salaries as shown, principally to bring base pay closer to the median of the Company's peer group and promote internal pay equity. Following the departure of the Company's Senior Vice President, Chief Accounting Officer and Controller in April 2021, Mr. Shepherd performed the duties of the Company's Principal Accounting Officer in addition to performing his duties as Chief Financial Officer for the duration of 2021. In addition, the Committee determined a base salary increase for Mr. Shepherd was appropriate in consideration of median pay for comparable positions and to promote retention of a high-performing executive with deep Company and automotive industry experience in a highly competitive talent market. Mr. McDonell's base salary was increased in connection with additional responsibilities undertaken upon his promotion to Executive Vice President, Merchandising, Marketing and e-Commerce.
NEOs       2020 Salary       2021 Salary       % Change
Mr. Greco $1,100,000 $1,100,000 0.0  %
Mr. Shepherd $600,000 $725,000 20.8  %
Mr. Cushing $600,000 $625,000 4.2  %
Mr. Slone $625,000 $650,000 4.0  %
Mr. McDonell $433,500 $550,000 26.9  %

Annual Incentive Plan
Our compensation philosophy connects our executives’ potential annual earnings to the achievement of performance objectives designed to support successful execution of our business strategies. We seek to ensure that our executives are rewarded for meeting or exceeding the goals that we set and strive to deliver each year.

Our AIP provides for the payment of cash bonuses based upon our performance in relation to predetermined financial and operational targets established during the first quarter of the fiscal year. Each NEO’s AIP target as a percentage of his base salary is established so that the NEO’s total annual cash compensation at target is aligned with the Committee’s desired positioning relative to the market.
NEOs Base Salary AIP Target (%) AIP Target ($)
Mr. Greco $1,100,000 135  % $1,485,000
Mr. Shepherd $725,000 85  % $616,250
Mr. Cushing $625,000 85  % $531,250
Mr. Slone $650,000 85  % $552,500
Mr. McDonell $550,000 85  % $467,500
2021 Annual Incentive Plan Design

In February 2021, the Committee reviewed the design of the AIP. The Committee again decided to retain the financial metrics and weightings of the AIP, such that each of Adjusted Operating Income, Comparable Store Sales and Free Cash Flow contributed one third of the AIP results for 2021. We believe the consistency in our plan structure has been important in building a pay for performance culture at the Company. We also believe that the alignment between metrics of our AIP and key attributes of our strategic operating plan helps ensure that our leaders are focused on important areas driving creation of long term stockholder value and that the AIP metrics are driving behavior required to achieve objectives of our strategic plan.

Our methodology for establishing the targets for the AIP centers on alignment with our annual operating plan. Each year, we establish an operating plan that reflects targeted performance levels for a variety of metrics that we believe will support our achievement of longer-term business objectives. We believe that aligning our AIP targets to our annual operating plan supports our pay for performance philosophy and incentivizes our executives to achieve the components of our annual operating plan. This methodology for establishing AIP targets resulted in lower target levels for 2021 compared to 2020. Our annual operating plan reflects our expectations and assumptions at the start of any given year regarding a variety of elements that impact our business. During 2021, our 2021 AIP target for Adjusted Operating Income was slightly lower than our 2020 target (by $3 million), but notably exceeded our full year 2020 performance (by $119 million). Our annual operating plan targeted a lower Free Cash Flow amount than prior year due to a variety of factors, including, as one example, payment of deferred payroll tax. Similarly, 2021 AIP target level for Comparable Store Sales was lower than prior year but reflected our performance objectives under our annual operating plan to continue delivering against our long-term goals. With respect to Comparable Store Sales, the threshold payout amount was set at flat to ensure that any payout would only be earned for growth in store sales. With respect to Adjusted Operating Income and Free Cash Flow, threshold payout amounts were set to approximately 88% and 85%, respectively, of the target levels to establish a reasonable threshold performance level to be achieved for any AIP payment to be earned. Maximum payout levels were set as significant stretch goals.

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While we retained the metrics and weightings from previous plan designs, for the 2021 AIP, we introduced a modifier for Company performance applicable to team members at the Vice President level and above, including our named executive officers, based on individual performance against DEI goals. Champion Inclusion is one of our cultural beliefs, and we believe that tying a portion of our officers’ incentive compensation to performance against these goals helps ensure focus on our non-financial priorities that we believe are important to creation of long term value. Each of our executives had DEI goals included in their 2021 business objectives, including with respect to diversity representation within their functions and involvement of their team members in our internal team member networks, which are designed to promote connectivity and inclusivity among our team members.

Each executive officer, including our named executive officers, had goals for each of female and people of color representation across his or her entire function and at leadership levels within his function, and goals related to team member network membership and participation for leaders within his or her function. Our Compensation Committee reviewed information provided by management about each executive officer's performance with respect to his or her goals, as well as a recommendation from the Chief Executive Officer for a modifier for each officer (other than himself). Based on its review of the recommendations and an assessment of progress made against the totality of each officer's DEI goals, our Compensation Committee assigned a modifier ranging between minus 10 percentage points to plus 10 percentage points for each executive officer. For each person for whom the DEI modifier was applicable, including our named executive officers, final payout for the 2021 AIP equaled the 2021 AIP payout level based on performance against Company targets plus or minus the applicable individual modifier based on performance against DEI goals.

2021 Annual Incentive Plan Performance Results

The following table shows performance results for 2021, as well as the goals that would have resulted in threshold, target and maximum level payouts for 2021. To the extent that performance fell between the applicable threshold, target or maximum performance levels for each of the three performance metrics, payouts were determined using linear interpolation.
Actual vs. Potential Payout Results
Metric
Performance
Weight
35% of Target (Threshold) 100% of Target 200% of Target (Maximum) Final Payout
Enterprise Adjusted Operating Income
($ in million)
1/3 185%
$1,051.4
 
$807.0 $913.0 $1,076.0
Enterprise Comparable
Store Sales (%)
1/3 200%
10.7%
 
0.0% 2.0% 5.0%
Free Cash Flow
($ in millions)
1/3 200%
$822.6
   
$510.0 $600.0 $738.0
195%
As noted above in "2021 Annual Incentive Plan Design," these payout results were modified by a modifier ranging from minus 10 percentage points to plus 10 percentage points for each of our named executive officers based on aggregate performance against individual DEI goals. In no event can total payout under the AIP exceed 200% of target. Modifiers applied to our named executive officers in 2021 ranged from plus two percentage points to plus four percentage points. Factors considered in determining 2021 DEI modifiers included, for each executive, how many of the individual goals with respect to representation and team member network participation were achieved, how many of the goals were missed by a significant margin and other DEI achievements of the executive and his or her function (such as development and promotion of diverse talent, leading of mentorship circles, executive sponsorships of team member networks and other engagement items that were outside of the officers' DEI goals) as indicia of progress towards achievement of the goals. Information about each named executive officer's ultimate payout can be found in the non-equity incentive plan compensation column of the "Summary Compensation Table."


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Long Term Incentive Compensation
Our executives receive long term incentive compensation intended to link their compensation to delivery of long term shareholder value.
Our annual LTI awards to executives comprise three elements:
Grant Type % of Total Award Description Purpose
PSUs 50% Restricted stock units that vest, if at all, upon completion of a three year term based upon the Company's Total Shareholder Return relative to the S&P 500 ("Relative TSR") Motivate executives to execute on our strategies to drive long term shareholder value and outperform other large-cap companies
RSUs 25% Restricted stock units that vest annually over a three-year term subject to continued employment Align the interests of our executives with those of our shareholders and retain key talent
Stock Options 25% Nonqualified stock options that vest annually over a three-year term subject to continued employment Motivate executives to build long term shareholder value and reward executives for stock price growth
2021 Annual Long Term LTI Grant Summary Table
The table below summarizes the annual LTI grants applicable to our NEOs for 2021:
Value Allocation
NEOs Annual LTI Grant PSUs RSUs Options
Mr. Greco $6,000,000 $3,000,000 $1,500,000 $1,500,000
Mr. Shepherd $1,000,000 $500,000 $250,000 $250,000
Mr. Cushing $900,000 $450,000 $225,000 $225,000
Mr. Slone $850,000 $425,000 $212,500 $212,500
Mr. McDonell $850,000 $425,000 $212,500 $212,500

In 2021, the Compensation Committee increased the annual LTI grant for Mr. Greco by $500,000 to reward significant progress made in pursuing the company's long term objectives and encourage continued execution, increased Mr. Shepherd's LTI to $1,000,000 to bring his target compensation closer to the median of the Company's peer group. In addition, the Committee made an LTI grant of $250,000 consisting of time based RSUs vesting equally over two years to Mr. Cushing during 2021 to promote retention.

Generally, our RSUs and stock options vest in equal installments over three years, beginning on the first anniversary of the grant date. Our PSUs may vest at the end of the three year performance period based on the company’s actual performance for 2021 through 2023 as compared to the performance goals established by the Compensation Committee in 2021. The payout ultimately earned can range from zero to 200% of the target number of shares based on the Company's percentile rank in TSR relative to the companies in the S&P 500, as shown in the table below. During 2021, the payout metrics for PSUs moved from three different metrics (Comparable Store Sales, Return on Invested Capital and Relative TSR) to a single metric (Relative TSR) to increase executives' focus on delivering the Company's stated long-term strategic objective of delivering top quartile TSR and reduce overlap between factors contributing to the short-term and long-term incentive plans. The three year performance period for the Relative TSR commences on the grant date and ends on the third anniversary of the grant date.

Company's Three-Year Relative TSR
Threshold Target Maximum
Achievement 35th percentile 55th percentile 80th percentile
Payout (% of target shares) 35% 100% 200%

Target payout was set to reward above average relative stock performance. In addition, in the event TSR is negative, PSU cannot exceed 100% even if Relative TSR exceeds the levels shown in the table.


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Historical Performance Based LTI Awards
In March 2019, annual LTI grants were made in the form of PSUs for the 2019 to 2021 performance period. The metrics selected for these awards were the Company’s three year ROIC, Relative TSR and Average Annual Comparable Stores Sales Growth, each weighted one third.

2019 through 2021 LTI Performance Vesting Table
The following table shows the actual performance results for 2019 to 2021, as well as the threshold, target and maximum performance levels for the annual LTI grant for the 2019 to 2021 performance period.
Actual Payout Results
Metric
Performance
Weight
25% of Target (Threshold) 100% of Target 200% of Target
(Maximum)
Final Payout % by Metric
Return on Invested Capital
(%)
1/3 150.0%
15.6%
14.1% 15.1% 16.1%
Relative Total Shareholder Return (%)
1/3 0.0%
21.0%
 
35.0% 55.0% 80.0%
Average Annual Comparable
Store Sales Growth (%)
1/3 200.0%
4.7%
2.5% 3.0% 4.5%
117.0%

Stock Ownership Guidelines
Since 2006, we have had stock ownership guidelines in place that prescribe required levels of stock ownership and the timeline for achieving the required levels. These guidelines are designed to further strengthen and align our leadership with stockholders’ interests. Additional information about our stock ownership guidelines is presented in the "Stock Ownership Guidelines for Directors and Executive Officers" section of this Proxy Statement. As of March 2022, all NEOs are either meeting or on track to meet the required holdings based on the ownership levels required. 
Role Ownership Guideline
CEO 6 times base salary
CFO and/or President 3 times base salary
Executive Vice President/Senior Vice President 2 times base salary
Incentive Compensation Clawback Policy
In 2012, our Board adopted an Incentive Compensation Clawback Policy that covers all forms of incentive compensation paid to current and former executive officers. Under the terms of the policy, incentive compensation may be required to be paid back if the covered executive’s fraud or willful misconduct results in an accounting restatement, and it is determined that such misconduct resulted in an overpayment of incentive compensation.

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4 Other Compensation and Benefit Programs
We offer the following retirement savings programs to our NEOs as a part of our overall compensation strategy. Other than providing an executive physical benefit to our NEOs, we do not offer any enhanced or additional benefits to our NEOs that our team members do not also receive.
401(k) plan, with company match, which is available to all team members over age 21. There are no enhanced benefits for NEOs.
Deferred Compensation Plan, which permits all team members who meet the definition of a Highly Compensated Employee (as defined in the plan) to defer up to 50 percent of their annual salary and up to 50 percent of their bonus earnings and is ultimately settled in cash. The Company does not provide matching contributions on employee deferrals.
Deferred Stock Unit Plan, which is available to NEOs and executive/senior vice presidents of the Company. Eligible executives can voluntarily defer up to 50 percent of their base salaries in this program, which is ultimately settled in our stock. The Company does not provide matching contributions on employee deferrals.
Detailed information about deferrals made by NEOs into the Deferred Compensation Plan and Deferred Stock Unit Plan is presented in the "Non-Qualified Deferred Compensation for 2021" table contained in this Proxy Statement.
Employment Agreements
We have entered into employment agreements with all NEOs and other selected senior executives. The Committee has determined that these agreements are beneficial to us because they contain restrictive covenants relating to confidential information, non-competition and non-solicitation of our employees. We compete for executive talent, and we believe that providing severance protection plays an important role in attracting and retaining key executives and enabling them to focus on the Company’s strategic goals. The agreements provide for severance payments under certain circumstances, which are discussed in more detail in the “Potential Payments Upon Termination 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, and none of the severance agreements provides tax gross-ups on any compensation or perquisite.

Following the initial one year term, the agreements for Messrs. Greco (effective April 11, 2016), Shepherd (effective September 17, 2018), Cushing (effective August 21, 2016), Slone (effective October 3, 2018) and McDonell (effective July 29, 2019) automatically renew for an additional one year term unless either the executive or the Company provides notice of non-renewal at least 90 days (or, in the case of Mr. Slone, 120 days) prior to the end of the then effective term.

The employment agreements with our NEOs specify annual base salary and annual performance based cash target bonus amounts for each executive, calculated as a specified percentage of the executive’s base salary. The performance measures are determined by the Compensation Committee annually and are consistent with the measures applied to other senior executives.

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 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 agreements, the executive will receive a lump sum payment amount equal to 30 percent of base salary at the rate then in effect, plus an amount equal to the executive’s target level annual bonus then in effect in addition to the benefits payable under our qualified group disability plan. 

In addition, under the terms of the executives' long term incentive awards, if the executive’s employment is terminated on account of death or disability, all time based RSUs and SARs granted to the executive pursuant to our 2014 LTIP 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 RSUs, the performance based SARs or RSUs will become eligible for exercise or issuance on the normal vesting date for performance based awards on a pro-rata basis for the time that the executive was employed during the performance period. The pro rata amount of performance SARs or RSUs that will become eligible for exercise or issuance will be based on our actual performance through the end of the performance period. If we terminate the executive’s employment without "Due Cause" or if the executive terminates his or her employment for "Good Reason," as defined in the agreements, other than following a Change in Control, as defined in the 2014 LTIP, our executive officers other than Mr. Greco will be entitled to a lump sum severance payment in an amount equal to one year of base salary at the rate then in effect, plus an amount equal to an average of the past three years' annual bonus payments. Mr. Greco is entitled to an amount equal to one and one half times his annual base salary at the rate then in effect and an amount equal to one and one half times the average value of the annual bonuses paid to him for the three completed fiscal years immediately prior to the date of such termination, as well as an annual bonus for the fiscal year of termination of employment, based on actual full year performance, prorated to reflect the time of service for such fiscal year through the date of termination. Any performance based grants of SARs and RSUs will vest immediately on a pro rata basis

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based on our performance for the amount of time the executive was employed during the performance period measured as of the most recently completed fiscal quarter. Executives are also granted a right to continue their medical benefits for one year post termination at the same cost as active employees and to receive outplacement services for a period of up to one year, except for Mr. Greco who may continue his medical benefits for 18 months post termination at such cost.

If, within 12 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’s employment for Good Reason, the executive 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. Greco is also entitled to these benefits in the event his employment is terminated in contemplation of a Change in Control within three months prior to the consummation of a Change in Control. 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 RSUs will vest and become exercisable or issued only if the acquiring entity does not exchange or replace the LTI grants or upon termination of employment without Due Cause within 24 months following the Change in Control event. Performance based SARs and RSUs will vest at the same time on a pro rata basis based on 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, except for Mr. Greco who may continue his medical benefits for 18 months post termination at such cost.

In the event of a Change in Control, the employment agreements 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 or her (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 or her, determined on an after-tax basis. The Change in Control payments are not eligible for tax gross up payments.


26


Compensation Committee Report
Our Compensation Committee is comprised entirely of four independent directors who meet independence, experience and other qualification requirements of the NYSE listing standards, and the rules and regulations of the SEC. Mr. Jones is the chair of our Compensation Committee. The Compensation Committee operates under a written charter adopted by the Board. Our charter can be viewed on our website at ir.advanceautoparts.com under the "Governance" section.

We have relied on management’s representation that the CD&A 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 CD&A be included in this Proxy Statement and incorporated by reference into our 2021 Annual Report on Form 10-K.

THE COMPENSATION COMMITTEE
Jeffrey J. Jones II (Chair)
Douglas A. Pertz
Sherice R. Torres
Nigel Travis


27


Compensation Program Risk Assessment
We assess our executive and broad-based compensation and benefits programs to determine whether the programs' provisions and operation create undesired or unintentional material risk. The risk assessment process includes a review of our compensation program policies and practices, such as our performance-based executive compensation programs and stock ownership guidelines, to ensure that the interests of our executives are aligned with those of our stockholders by encouraging long-term superior performance without encouraging excessive or unnecessary risk-taking. We take into consideration compensation terms and practices, such as performance-based vesting of a substantial portion of our executives' long-term incentive compensation, to drive long-term decision making and mitigate adverse risk-taking that may occur due to year-over-year performance measurements, and rewards growth over the long term. We regularly review and audit our bonus plans to ensure short-term incentives are appropriately linked to business outcomes, and such reviews are shared with the Compensation Committee.
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 CD&A, 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. We believe that our long standing compensation philosophy discussed in CD&A is a key component of our history of consistent growth, which demonstrates an alignment of the interests of participants and stockholders and rewards each with increased value over the long term. As illustrated in the "Framework for Executive Compensation" section of CD&A, the compensation of our executives is primarily based on performance over a long term period. We believe the performance based vesting of a substantial portion of our executives' long term incentive compensation drives long term decision making, mitigates adverse risk taking that may occur due to year over year performance measurements, and rewards growth over the long term. The Compensation Committee, with the guidance and assistance of its independent compensation consultant, reviews and approves compensation components for all named executive officers and other executive officers. Annual incentives are reviewed each year and payments are subject to Compensation Committee discretion. The bonus plans for other team members are linked to financial, customer or operating measures. All team members, including officers, and our directors are subject to our Insider Trading Policy, which prohibits hedging existing ownership positions in the Company's securities, short selling the Company's stock, purchasing or selling derivative securities, and, unless certain stringent requirements are met, pledging Company stock.

28


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.
Bonus Stock Awards Option Awards  Non-Equity
 Incentive Plan
Compensation
All Other
Compensation
Name and
Principal Position
  Salary  (b) (c) (d) (e) Total
Year ($) ($) ($) ($) ($) ($) ($)
Thomas R. Greco 2021 $ 1,100,008  $ —  $ 4,500,044  $ 1,499,981  $ 2,940,300  $ 11,938  $ 10,052,271 
President and
Chief Executive Officer
2020 1,100,008  —  5,559,210  —  1,386,990  10,246  8,056,454 
2019 1,100,008  —  5,547,466  —  1,033,560  10,479  7,691,513 
Jeffrey W. Shepherd 2021 667,740  —  749,949  250,060  1,214,013  5,690  2,887,452 
Executive Vice President, Chief Financial Officer 2020 595,890  —  909,756  —  476,340  4,945  1,986,931 
2019 566,646  —  857,333  —  340,170  3,896  1,768,045 
Robert B. Cushing 2021 621,027  —  925,253  224,908  1,046,563  12,253  2,830,004 
Executive Vice President, Professional 2020 600,000  —  1,010,831  —  476,340  11,832  2,099,003 
2019 587,468  —  1,008,674  —  354,960  11,571  1,962,673 
Reuben E. Slone 2021 646,027  —  637,518  212,497  1,093,950  12,645  2,602,637 
Executive Vice President, Supply Chain 2020 624,998  —  909,756  —  496,188  15,440  2,046,382 
2019 491,645  —  857,333  —  295,800  4,248  1,649,026 
Jason B. McDonell 2021 526,967  —  737,690  212,497  930,325  12,412  2,419,891 
Executive Vice President, Merchandising, Marketing and e-Commerce (since April 2021)
 
(a)Represents the grant date fair value of performance and time based RSUs granted during each of the years presented. 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 15 of our consolidated financial statements in the 2021 Form 10-K filed with the SEC on February 15, 2022. See the "2021 Grants of Plan-Based Awards Table" and "Outstanding Equity Awards at 2021 Fiscal Year-End Table" in this Proxy Statement for information on stock awards granted in 2021 and prior years. Any performance awards included in these amounts have been valued based on the probable outcome of the performance conditions as of the grant date.
(b)The maximum value for performance awards (as of the grant date), assuming the highest level of performance is achieved for performance awards granted, is provided for each executive in the table below.
Name Year PSUs
Maximum Grant Date Fair Value
($)
Mr. Greco 2021 $ 5,999,941 
2020 7,699,855 
2019 7,794,834 
Mr. Shepherd 2021 1,000,049 
2020 1,259,947 
2019 1,204,536 
Mr. Cushing 2021 900,150 
2020 1,400,119 
2019 1,417,274 
Mr. Slone 2021 850,024 
2020 1,189,995 
2019 1,204,536 
Mr. McDonell 2021 850,024 


29


(c)    These nonqualified stock option awards were granted as part of the annual long term incentive program in 2021. These awards will vest in equal thirds commencing on the first anniversary of the grant date, with an exercise period of 10 years from the date of grant. The aggregate grant date fair value of the equity awards calculated in accordance with ASC Topic 718 utilizing the assumptions discussed in Note 15 of our consolidated financial statements in the 2021 Form 10-K filed with the SEC on February 15, 2022.
(d) For 2021, represents amounts paid to our NEOs in March 2022 under our 2021 AIP. See the "Annual Incentive Plan" section of this Proxy Statement for additional information regarding our 2021 AIP.
(e)    For 2021, includes (i) Company matching contributions according to the terms of the Company's 401(k) plan in the amounts of $10,154 for Mr. Greco, $4,615 for Mr. Shepherd, $11,600 for Mr. Cushing, $11,600 for Mr. Slone and $11,600 for Mr. McDonell; and (ii) life insurance premiums paid by the Company for each executive as follows: $1,784 for Mr. Greco; $1075 for Mr. Shepherd; $653 for Mr. Cushing; $1,045 for Mr. Slone and $812 for Mr. McDonell.


30


Grants of Plan-Based Awards in 2021
The following table sets forth information concerning grants of cash and stock based awards made under our annual and long term incentive plans during 2021. 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 CD&A. The threshold, target and maximum equity incentive award amounts shown in the table represent the amounts to be paid if our performance meets the respective level of applicable performance measures as more fully described under the heading "Long Term Incentive Compensation" in CD&A.
    Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (a)
Estimated Future Payouts Under Equity Incentive Plan Awards (b) All Other Stock Awards: Number of Shares of Stock or Units
(#) (c)
Grant Date Fair Value of Stock and Option Awards
($) (d)
Name Grant Date Approval Date Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Mr. Greco $ 371,250  $ 1,485,000  $ 2,970,000  —  —  —  —  $ — 
3/8/2021 2/9/2021 —  —  —  4,249  16,997  33,994  —  2,999,971 
3/8/2021 2/9/2021 —  —  —  —  —  —  8.499  1,500,074 
3/8/2021 2/9/2021 —  —  —  —  —  —  —  1,499,981 
Mr. Shepherd 154,063  616,250  1,232,500  —  —  —  —  — 
3/8/2021 2/9/2021 —  —  —  708  2,833  5,666  —  500,025 
3/8/2021 2/9/2021 —  —  —  —  —  —  1,416  249,924 
3/8/2021 2/9/2021 —  —  —  —  —  —  —  250,060 
Mr. Cushing 132,813  531,250  1,062,500  —  —  —  —  — 
3/8/2021 2/9/2021 —  —  —  638  2,550  5,100  —  450.075 
3/8/2021 2/9/2021 —  —  —  —  —  —  1,275  225,038 
3/8/2021 2/9/2021 —  —  —  —  —  —  —  224,098 
6/7/2021 3/9/2021 —  —  —  —  —  —  1,296  250,141 
Mr. Slone 138,125  552,500  1,105,000  —  —  —  —  — 
3/8/2021 2/9/2021 —  —  —  602  2,408  4,816  —  425,012 
3/8/2021 2/9/2021 —  —  —  —  —  —  1,204  212,506 
3/8/2021 2/9/2021 —  —  —  —  —  —  —  212,497 
Mr. McDonell 116,875  467,500  935,000  —  —  —  —  — 
3/8/2021 2/9/2021 —  —  —  602  2,408  4,816  —  425,012 
3/8/2021 2/9/2021 —  —  —  —  —  —  1,204  212,506 
3/8/2021 2/9/2021 —  —  —  —  —  —  —  212,497 
6/7/2021 5/25/2021 —  —  —  —  —  —  519  100,172 
(a)Amounts shown represent possible cash payouts under our 2021 AIP. See the "Annual Incentive Plan" section of this Proxy Statement for a discussion of threshold, target and maximum cash incentive plan payouts.
(b)Amounts shown represent the shares of our common stock issuable assuming achievement of the specific threshold, target or maximum levels of performance established by the Compensation Committee for performance based RSU grants to our executives. These PSU grants were part of our annual long term equity grants made in 2021 and related to the 2021 through 2023 three year performance period. See the "Long Term Incentive Compensation" section of this Proxy Statement for more information regarding our PSU grants.
(c)Amounts shown represent the number of time based RSUs granted to our executives for 2021. For more information regarding awards of time based RSUs, see the "Long Term Incentive Compensation" section of this Proxy Statement.
(d)Amounts shown represent the aggregate grant date fair value of the equity awards calculated in accordance with ASC Topic 718 utilizing the assumptions discussed in Note 15 of our consolidated financial statements in the 2021 Form 10-K filed with the SEC on February 15, 2022. The attainment of target level for performance awards was deemed probable at the date of grant for the each of the performance awards granted during 2021. Accordingly, the grant date fair value was calculated at target level for these awards.

The time vested portions of the RSU awards granted in 2021 include rights to receive dividend equivalent payments in the same amount as paid to our stockholders, but do not include voting rights. The performance based RSUs granted in 2021 do not include dividend or voting rights. We paid quarterly cash dividends of $0.25 per share for the first quarter of 2021 and $1.00 per share for the second through fourth quarters of 2021.

31



Outstanding Equity Awards at 2021 Fiscal Year-End

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. Greco 3/8/2021 (c) —  31,786  —  $ 176.5  3/8/2031 —  $ —  —  $ — 
3/8/2021 (c) —  —  —  —  —  —  33,994  8,154,480 
3/8/2021 (c) —  —  —  —  8,499  2,038,740  —  — 
3/2/2020 —  —  —  —  —  —  19,298  4,629,204 
3/2/2020 —  —  —  —  8,272  1,984,287  —  — 
3/2/2020 —  —  —  —  —  —  38,600  9,259,368 
3/1/2019 —  —  —  —  —  —  8,024  1,924,797 
3/1/2019 —  —  —  —  3,425  821,589  —  — 
3/1/2019 —  —  —  —  —  —  16,049  3,849,834 
4/14/2016 68,745  —  —  160.94  4/14/2023 —  —  —  — 
Mr. Shepherd 3/8/2021 (c) —  5,299  —  176.5  3/8/2031 —  —  —  — 
3/8/2021 (c) —  —  —  —  1,416  339,670  —  — 
3/8/2021 (c) —  —  —  —  —  —  5,666  1,359,160 
3/2/2020 —  —  —  —  —  —  3,158  757,542 
3/2/2020 —  —  —  —  1,354  324,798  —  — 
3/2/2020 —  —  —  —  —  —  6,316  1,515,082 
3/1/2019 —  —  —  —  —  —  1,240  297,451 
3/1/2019 —  —  —  —  530  127,136  —  — 
3/1/2019 —  —  —  —  —  —  2,480  594,902 
Mr. Cushing 6/7/2021 (c) —  —  —  —  1,296  310,884  —  — 
3/8/2021 (c) —  4,766  —  176.5  3/8/2031 —  —  —  — 
3/8/2021 (c) —  —  —  —  1,275  305,847  —  — 
3/8/2021 (c) —  —  —  —  —  —  5,100  1,223,388 
3/2/2020 —  —  —  —  —  —  3,508  841,500 
3/2/2020 —  —  —  —  1,504  360,780  —  — 
3/2/2020 —  —  —  —  —  —  7,020  1,683,958 
3/1/2019 —  —  —  —  —  —  1,459  349,985 
3/1/2019 —  —  —  —  623  149,445  —  — 
3/1/2019 —  —  —  —  —  —  2,918  699,970 
Mr. Slone 3/8/2021 (c) —  4,503  —  176.5  3/8/2031 —  —  —  — 
3/8/2021 (c) —  —  —  —  —  —  4,816  1,155,262 
3/8/2021 (c) —  —  —  —  1,204  288,816  —  — 
3/2/2020 —  —  —  —  —  —  3,158  757,542 
3/2/2020 —  —  —  —  1,354  324,798  —  — 
3/2/2020 —  —  —  —  —  —  6,316  1,515,082 
3/1/2019 —  —  —  —  —  —  1,240  297,451 
3/1/2019 —  —  —  —  530  127,136  —  — 
3/1/2019 —  —  —  —  —  —  2,480  594,902 
11/19/2018 —  —  —  —  —  —  3,615  867,166 
Mr. McDonell 6/4/2021(c) —  —  —  —  519  124,498  —  — 
3/8/2021(c) —  4,503  —  176.5  3/8/2031 —  —  —  — 
3/8/2021(c) —  —  —  —  —  —  4,816  1,155,262 
3/8/2021(c) —  —  —  —  1,204  288,816  —  — 
3/2/2020 —  —  —  —  —  —  2,982  715,322 
3/2/2020 —  —  —  —  1,279  306,807  —  — 
3/2/2020 —  —  —  —  —  —  5,966  1,431,124 
8/19/2019 —  —  —  —  978  234,603  —  — 

32



(a)The April 2016 grant of 68,745 SARs to Mr. Greco represents time based awards that vested in three equal portions on the third, fourth and fifth anniversary of the grant date.
(b)Includes awards of RSUs. Generally, awards of time-based RSUs vest in three approximately equal annual installments commencing on the first anniversary date of the grant. The market value of the stock awards is reflective of the closing price of our common stock as of December 31, 2021 ($239.88), the last day that our common stock was traded during 2021. Amounts shown for PSUs granted in 2019 are shown at target level, representing a 100 percent payout of the PSUs, and amounts shown for PSUs granted in 2020 and 2021 are shown at maximum level, representing a 200 percent payout of the PSUs.
(c)See the "Grants of Plan-Based Awards in 2021" table in this Proxy Statement for more information on awards granted to our executive officers in 2021.



33


Option Exercises and Stock Vested in 2021
 
The following table sets forth information with respect to our NEOs who vested in stock awards or exercised SARs or options during 2021.
 
  SARs Options Stock Awards
Name Number of
Shares Acquired
on Exercise (#)
Value
Realized on
Exercise ($)(a)
Number of
Shares Acquired
on Exercise (#)
Value
Realized on
Exercise ($)
Number of
Shares Acquired
on Vesting (#)
Value
Realized on
Vesting ($)(b)
Mr. Greco —  —  —  —  37,482  6,105,839 
Mr. Shepherd —  —  —  —  4,390  733,771 
Mr. Cushing 711  32,180  —  —  4,967  809,571 
Mr. Slone —  —  —  —  2,144  413,384 
Mr. McDonell —  —  —  —  1,617  309,119 

(a) The value realized on exercise is based on the closing price of our common stock on the NYSE on the exercise date. If an exercise date occurs on a day on which the NYSE is closed, the value realized is based on the closing price on the last trading day prior to the exercise date.
(b) The value realized on vesting is based on the closing price of our common stock on the NYSE on the vesting date. If a vesting date occurs on a day on which the NYSE is closed, the value realized is based on the closing price on the last trading day prior to the vesting date.

Non-Qualified Deferred Compensation for 2021

The following table sets forth information with respect to our NEOs concerning executive contributions to non-qualified deferred compensation plans during 2021.  We do not make any contributions to these deferred compensation plans. Aggregate earnings information includes changes in market value of the investments plus any dividends received by the executive for their DSUs. 

Name Executive
Contributions ($)(a)
Aggregate
Earnings ($)(b)
Aggregate
Withdrawals/
Distributions ($)
Aggregate
Balance at
January 1, 2022 ($)
Mr. Greco $ —  $ —  $ —  $ — 
Mr. Shepherd —  —  —  — 
Mr. Cushing —  —  —  — 
Mr. Slone 213,375  77,408  —  683,482 
Mr. McDonell —  —  —  — 
 
(a)Additional information is provided under "Other Compensation and Benefit Programs" in the CD&A section of this Proxy Statement. Any amounts reported as Executive Contributions are also reported in the Salary column of the "Summary Compensation Table" of this Proxy Statement.
(b)Represents realized and unrealized gains or losses on market-based investments selected and dividends earned by executives for their deferred compensation balances.

34


Potential Payments Upon Termination of Employment or Change in Control
The following table provides an estimate of the inherent value of the severance payments, stock incentives and benefits provided for in each NEO’s employment agreement or other compensation arrangements described above, assuming termination of employment or change in control occurred on January 1, 2022, the last day of our 2021 year.
Executive Voluntary
Termination without Good Reason or
Involuntary
Termination for Due
Cause (a)
Retirement Disability Death Involuntary Termination
without Due Cause or
Voluntary Termination
for Good Reason not related to a Change in
Control (b)
Involuntary
Termination without
Due Cause or Voluntary
Termination for Good Reason related to a
Change in Control (c)
Mr. Greco            
Cash Severance (d) $ —  $ —  $ 1,815,013  $ 2,585,081  $ 4,109,177  $ 5,170,038 
Stock Incentives (e) (f) —  —  15,208,152  15,208,152  10,363,536  29,265,600 
Other Benefits (g) —  —  195,000  1,100,008  37,024  37,024 
  $ —  $ —  $ 17,218,165  $ 18,893,241  $ 14,509,737  $ 34,472,662 
Mr. Shepherd            
Cash Severance (d) $ —  $ —  $ 833,750  $ 1,341,250  $ 1,247,374  $ 2,682,500 
Stock Incentives (e) (f) —  —  2,442,218  2,442,218  1,650,614  4,770,973 
Other Benefits (g) —  —  135,000  725,000  32,374  32,374 
  $ —  $ —  $ 3,410,968  $ 4,508,468  $ 2,930,362  $ 7,485,847 
Mr. Cushing            
Cash Severance (d) $ —  $ —  $ 718,750  $ 1,156,250  $ 1,152,304  $ 2,312,500 
Stock Incentives (e) (f) —  1,852,113  2,979,070  2,979,070  1,852,113  5,194,601 
Other Benefits (g) —  —  195,000  625,000  39,195  39,195 
  $ —  $ 1,852,113  $ 3,892,820  $ 4,760,320  $ 3,043,612  $ 7,546,296 
Mr. Slone            
Cash Severance (d) $ —  $ —  $ 747,500  $ 1,202,500  $ 1,152,304  $ 2,312,500 
Stock Incentives (e) (f) —  —  3,034,482  3,034,482  2,293,733  5,294,391 
Other Benefits (g) —  —  195,000  650,000  29,289  29,289 
  $ —  $ —  $ 3,976,982  $ 4,886,982  $ 3,475,326  $ 7,636,180 
Mr. McDonell            
Cash Severance (d) $ —  $ —  $ 632,500  $ 1,017,500  $ 781,181  $ 2,035,000 
Stock Incentives (e) (f) —  —  1,628,785  1,628,785  770,495  3,685,516 
Other Benefits (g) —  —  135,000  550,000  29,289  29,289 
  $ —  $ —  $ 2,396,285  $ 3,196,285  $ 1,580,965  $ 5,749,805 



35



(a)Voluntary termination without Good Reason or termination for Due Cause makes an executive ineligible for any employment agreement benefits other than any rights the executive may have under the normal terms of other benefit plans and receipt of accrued but unpaid base salary. Executives must exercise vested long term incentives within 90 days after the date of termination. The term "Due Cause" is defined in the agreements as (i) a material breach of the executive’s obligations under the agreement or a material violation of any code or standard of conduct applicable to our officers that has not been cured following notice if applicable; (ii) a material violation of the loyalty obligations as provided in the agreement; (iii) the executive’s willful engagement in bad faith conduct that is demonstrably and materially injurious to us; (iv) the commission or indictment of a crime of moral turpitude or a felony involving fraud, breach of trust, or misappropriation; or (v) a determination that the executive is in violation of our Substance Abuse Policy.
(b)The employment agreements of our NEOs provide that the executive’s employment is deemed to be terminated by us without Due Cause if the executive elects to terminate his employment for Good Reason. The term "Good Reason" is defined in the agreements as: (i) a material diminution in the executive’s base salary or target bonus amount for Mr. Greco and total direct compensation, as defined in the employment agreements, for other executives; (ii) a material diminution in the executive’s authority, duties or responsibilities or for executives other than Mr. Greco, those of the executive’s supervisors; (iii) for Mr. Greco, if he no longer reports directly to the Board; (iv) except for Mr. Greco, the termination of the Executive Incentive Plan without a replacement plan or the material reduction of the executive’s benefits without a similar reduction for other executives; (v) requiring the executive to be based more than 60 miles from our office at which the executive was principally employed immediately prior to the date of the relocation; or (vi) for Mr. Greco, any other material breach of the Agreement including failure of the Nominating and Corporate Governance Committee to re-nominate him to the Board. Except for Mr. Greco, upon termination of employment by us other than for Due Cause or by the executive for Good Reason the executive is entitled to receive a cash "termination payment" which equals the sum of the executive’s annual base salary and an amount equal to the average annual bonus payment over the past three years (or shorter period of employment as applicable). Mr. Greco is entitled to an amount equal to one and one half times his annual base salary and an amount equal to one and one half times his average annual bonus payment over the past three years, in addition to a pro-rated annual bonus for the year in which his employment is terminated. The value of the bonus amount included for each executive in the cash severance payment is the average bonus paid for 2018, 2019 and 2020 (or shorter period of employment as applicable). In addition, the executive will receive outplacement services and certain medical benefits coverage as described in note (g) below.
(c)If, within 12 months of a Change in Control (as defined in the employment agreements), the executive’s employment is terminated by us other than for Due Cause or by the executive for Good Reason, the executive will be entitled to a Change in Control Termination Payment equal to (i) two times the executive’s base salary plus (ii) two times the amount equal to the executive’s target bonus. The cash severance amount would be subject to a downward adjustment pursuant to the “net best” provisions of his employment agreement, and the benefits also apply to involuntary termination or termination with Good Reason within three months prior to a Change in Control in contemplation of the Change in Control.
(d)In the case of voluntary termination without Good Reason or termination for Due Cause, the executive would be ineligible to receive a cash severance payment. In accordance with the employment agreements, if the executive’s employment is terminated on account of death, the executive’s beneficiary or estate is entitled to receive a lump sum payment equivalent to the executive’s annual base salary and target bonus amount. In the event that the executive is terminated on account of disability, the employment agreements provide that the executive is entitled to receive a cash severance amount equivalent to 30 percent of the executive’s annual base salary and an amount equal to the executive’s annual target bonus severance payments are contingent upon execution and non-revocation of a release as provided in the agreements.
(e)Amounts shown here are calculated as the differences between the exercise price, if any, of the outstanding stock-based incentives and the closing price of our stock on the last day our stock was traded during 2021.
(f)The terms of the executives’ restricted stock unit agreements provide that in the event of termination of employment due to death or disability, any remaining previously unvested time based RSUs will vest immediately. PSUs will vest based on our performance at the end of the applicable performance period on a pro-rata basis commensurate with the time employed prior to death or disability during the performance period. In the event of retirement, which requires 10 years of service and a minimum age of 55 years, time based shares will be forfeited. PSUs vest based on our performance at the end of the applicable performance period on a pro rata basis commensurate with the time employed prior to retirement during the performance period, subject to certain noncompete restrictions. In the event of involuntary termination without Due Cause, or voluntary termination for Good Reason, a pro rata portion of the time based RSUs will vest immediately as of the date of the executive's termination of employment based on the amount of time employed during the performanc