Share-Based Payments

3 Months Ended

Nov. 17, 2012

Share-Based Payments

Note B – Share-Based Payments

AutoZone recognizes compensation expense for share-based payments based on the fair value of the awards at the grant date. Share-based payments include stock option grants, restricted stock grants, restricted stock unit grants and the discount on shares sold to employees under share purchase plans. Additionally, directors’ fees are paid in restricted stock units with value equivalent to the value of shares of common stock as of the grant date. The change in fair value of liability-based stock awards is also recognized in share-based compensation expense.

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $8.1 million for the twelve week period ended November 17, 2012, and was $7.6 million for the comparable prior year period.

During the twelve week period ended November 17, 2012, 298,983 shares of stock options were exercised at a weighted average exercise price of $131.54. In the comparable prior year period, 162,510 shares of stock options were exercised at a weighted average exercise price of $118.12.

The Company made stock option grants of 349,560 shares during the twelve week period ended November 17, 2012, and granted options to purchase 375,630 shares during the comparable prior year period. The weighted average fair value of the stock option awards granted during the twelve week periods ended November 17, 2012, and November 19, 2011, using the Black-Scholes-Merton multiple-option pricing valuation model, was $98.09 and $93.04 per share, respectively, using the following weighted average key assumptions:

	Twelve Weeks Ended
	November 17, 2012			November 19, 2011
Expected price volatility		29	%		31	%
Risk-free interest rate		0.5	%		0.7	%
Weighted average expected lives (in years)		5.2			5.3
Forfeiture rate		10	%		10	%
Dividend yield		0	%		0	%

See AutoZone’s Annual Report on Form 10-K for the year ended August 25, 2012, for a discussion regarding the methodology used in developing AutoZone’s assumptions to determine the fair value of the option awards and a description of AutoZone’s 2011 Equity Incentive Award Plan and the 2011 Director Compensation Program.

For the twelve week period ended November 17, 2012, 368,580 stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive. For the comparable prior year period, 372,170 anti-dilutive shares were excluded from the dilutive earnings per share computation.