AutoZone (AZO) 10-K risk factor changes: FY2019 vs FY2018

Our business is subject to a variety of [removed: risks.][added: risks and uncertainties.]

The risks and uncertainties described below could materially and adversely affect our business, financial condition, operating [removed: results] [added: results, cash flows] and stock price.

These risks [added: and uncertainties] are not the only ones we face.

| | • | | the number of miles vehicles are driven annually. Higher vehicle mileage increases the need for maintenance and repair. Mileage levels may be affected by gas [removed: prices] [added: prices, ride sharing] and other factors. |

[removed: All of these] [added: These] factors could result in a decline in the demand for our products, which could adversely affect our business and overall financial condition.

With the increasing use of digital tools and social media, and our competitors’ increased focus on optimizing customers’ online experience, our customers are quickly able to compare prices, product [removed: assortment,] [added: assortment] and feedback from other customers before purchasing our products either online, in the physical [removed: stores,] [added: stores] or through a combination of both offerings.

We have increased our store count in the past five fiscal years, growing from [removed: 5,201 locations] [added: 5,391 stores] at August [removed: 31, 2013,] [added: 30, 2014,] to [removed: 6,202 locations] [added: 6,411 stores] at August [removed: 25, 2018,] [added: 31, 2019,] an average store increase per year of 4%.

Additionally, we have increased annual revenues in the past five fiscal years from [removed: $9.148] [added: $9.475] billion in fiscal [removed: 2013] [added: 2014] to [removed: $11.221] [added: $11.864] billion in fiscal [removed: 2018,] [added: 2019,] an average increase per year of 5%.

Same store sales are impacted both by customer demand levels and by the prices we are able to charge for our products, which can also be negatively impacted by [removed: the] economic pressures.

Although we believe we compete effectively in the commercial market on the basis of customer service, merchandise quality, selection and availability, price, product warranty, distribution [removed: locations,] [added: locations] and the strength of our AutoZone brand name, trademarks and service marks, some automotive aftermarket participants have been in business for substantially longer periods of time than we have, and as a result have developed long-term customer relationships and have large available inventories.

A downgrade in our credit ratings or a general disruption in the credit markets could make it more difficult for us to access funds, refinance our debt, obtain new funding or issue [added: debt] securities.

Job growth in the [removed: United States] [added: U.S.] was stagnated and unemployment was at historically high levels during the Great Recession; however, in recent years, the unemployment rate has improved to below pre-recession levels.

Moreover, the [removed: United States] [added: U.S.] government continues to operate under historically large deficits and debt burden.

Continued distress in global credit markets, business failures, inflation, foreign exchange rate fluctuations, significant geo-political conflicts, [added: proposed or additional tariffs,] continued volatility in energy prices and other factors continue to affect the global economy.

Over a longer period of time, [removed: all of] these macroeconomic and geo-political conditions could adversely affect our sales growth, margins and [removed: overhead, which could adversely affect our financial condition and operations.][added: overhead.]

Our business depends upon [removed: hiring] [added: hiring, training] and retaining qualified employees.

We believe that much of our brand value lies in the quality of the approximately [removed: 90,000] [added: 96,000] AutoZoners employed in our stores, distribution centers, store support centers and ALLDATA.

Our workforce costs represent our largest operating expense, and our business is subject to employment laws and regulations, including requirements [added: related to minimum wage and benefits.]

We cannot be assured that we can continue to [removed: hire] [added: hire, train] and retain qualified employees at current wage rates since we operate in a competitive labor market and there is a risk of market increases in compensation.

If we are unable to hire, properly train [removed: and/or] [added: and] retain qualified employees, we could experience higher employment costs, reduced sales, [added: regulatory noncompliance,] losses of customers and diminution of our brand, which could adversely affect our earnings.

A violation or change in employment [added: and labor] laws [removed: and/or regulations] [added: (including changes in existing employment benefit programs such as health insurance)] could have a material adverse effect on our results of operations, financial condition and cash flows.

We directly imported approximately [removed: 13%] [added: 14%] of our purchases in fiscal [removed: 2018,] [added: 2019,] but many of our domestic vendors directly import their products or components of their products.

[removed: Disruptions in] [added: Changes to] the price or flow of these goods for any reason, such as political unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes and economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, [removed: suppliers’] failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise quality or safety issues, transport availability and cost, increases in wage rates and taxes, transport security, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, [added: often] are beyond our control and could adversely affect our operations and profitability.

In addition, the [removed: United States’] foreign trade policies, tariffs and other impositions on imported goods, trade sanctions imposed on certain countries, [removed: the limitation] [added: import limitations] on [removed: the importation of] certain types of goods or of goods containing certain materials from other countries and other factors relating to foreign trade and port labor agreements are beyond our control.

As we [added: or our domestic vendors] increase our imports of merchandise from foreign vendors, the risks associated with these imports will also increase.

Accomplishing our new and existing location expansion goals will depend upon a number of factors, including the ability to [added: partner with developers and landlords to obtain suitable sites for new and expanded locations at acceptable costs, the hiring and training of qualified personnel and the integration of new locations into existing operations.]

If we fail to effectively utilize our existing hubs and/or supply chains or if our investments in our supply chain initiatives, including directly sourcing some products from outside the [removed: United States,] [added: U.S.,] do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our locations or increases in our operating costs, which could adversely affect our sales volume and/or our margins.

Failure to comply with ethical, social, product, labor, [removed: environmental,] [added: environmental] and anti-corruption standards could also jeopardize our reputation and potentially lead to various adverse actions by consumer or environmental groups, employees or regulatory bodies.

While we and our third-party service providers and vendors take significant steps to protect customer, supplier, employee and other confidential information, including maintaining compliance with payment card industry [removed: standards,] [added: standards and a security program that includes updating technology and security policies, employee training and monitoring and routine testing of our systems,] these security measures may be breached in the future due to cyber-attack, employee error, system compromises, fraud, trickery, hacking or other intentional or unintentional acts, and unauthorized parties may obtain access to this data.

We accept payments using a variety of methods, including cash, checks, credit, debit, electronic payments [added: (such as PayPal, Apple Pay, etc.)] and gift cards, and we may offer new payment options over time, which may have information security risk implications.

If imported goods become difficult or impossible to bring into the [removed: United States,] [added: U.S.,] and if we cannot obtain such merchandise from other sources at similar costs, our sales and profit margins may be negatively affected.

In the event that commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty [removed: shipping] [added: transporting] merchandise to our distribution centers and locations resulting in lost sales and/or a potential loss of customer loyalty.

These could adversely affect our financial condition and operations.

Risks associated with products sourced outside the U.S.

We consider information security to be a top priority and undertake cyber-security planning and activities throughout the Company.

Senior management and the Board of Directors are actively engaged in cyber-security risk management.

We believe that our preventative actions provide adequate measures of protection against security breaches and generally reduce our cyber-security risks.

However, our business or our third party providers, with which we share sensitive information, may not discover a security breach or loss of information for a significant period after the security breach occurs.

To date, we have not experienced a material breach of cyber-security; however, our computer systems have been, and will likely continue to be, subjected to unauthorized access or phishing attempts, computer viruses, malware, ransomware or other malicious codes.

There can be no assurance that our security measures will prevent or limit the impact of a future incident.

The cost to remediate damages to our systems suffered as a result of a cyber-attack could be significant.

We have invested in information-technology risk management and disaster recovery plans.

Although these plans are in place, we must provide ongoing monitoring and consistently revise our plans as technologies change rapidly and our efforts to overcome security risks continue to become increasingly more complex and concentrated.

Our business, results of operations, financial condition and cash flows may be affected by environmental, tax and employment laws or other governmental actions.

We are subject to various laws and governmental regulations which may impact our business.

We could be impacted by environmental laws and regulations, including initiatives to limit greenhouse gas emissions and bills related to climate change.

Although we are not certain that these initiatives will become regulations, if the regulations become enacted, they could adversely impact our costs.

Our business is subject to changes in tax laws and regulations which could impact our overall tax liability.

Governments may issue guidance or enact tax laws which could result in changes to our tax position and adversely impact our results of operations, financial condition and cash flows.

Our business, financial condition, results of operations and cash flows may be affected by litigation.

We are involved in lawsuits, regulatory investigations, governmental and other legal procedures, arising out of the ordinary course of business.

Legal action may be material and may adversely affect our business, results of operations, financial condition and cash flows.

Our business is in the process of developing and implementing various information systems, as well as modifying existing systems.

These technological changes will require significant investment of human and financial resources, and our business may experience significant delays, costs increases and other obstacles with these projects.

Although we have invested significant resources during our planning, project management and training, implementation issues may arise which may disrupt our operations and negatively impact our business operations, financial condition and cash flows.

##### [Table of Contents](#toc)

related to minimum wage and benefits.

partner with developers and landlords to obtain suitable sites for new and expanded locations at acceptable costs, the hiring and training of qualified personnel and the integration of new locations into existing operations.

We are the [removed: nation’s] leading retailer, and a leading distributor, of automotive replacement parts and accessories in the [removed: United States.][added: Americas.]

We began operations in 1979 and at August [removed: 25, 2018,] [added: 31, 2019,] operated [removed: 5,618] [added: 5,772] stores in the [removed: United States,] [added: U.S.,] including Puerto [removed: Rico; 564] [added: Rico and Saint Thomas; 604] stores in Mexico; and [removed: 20] [added: 35] stores in Brazil.

At August [removed: 25, 2018,] [added: 31, 2019,] in [removed: 4,741] [added: 4,893] of our domestic stores, we also had a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts.

For fiscal [removed: 2018,] [added: 2019,] we achieved record net income of [removed: $1.338] [added: $1.617] billion, a [removed: 4.4%] [added: 20.9%] increase over the prior year, and sales growth of [removed: $332.4] [added: $642.7] million, a [removed: 3.1%] [added: 5.7%] increase over the prior year.

Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to fuel costs, wage [removed: rates,] [added: rates] and other economic conditions.

One macroeconomic factor affecting our customers and our industry during fiscal [removed: 2018] [added: 2019] was gas prices.

During fiscal [removed: 2018,] [added: 2019,] the average price per gallon of unleaded gasoline in the [removed: United States] [added: U.S.] was [removed: $2.67] [added: $2.63] per gallon, compared to [removed: $2.31] [added: $2.67] per gallon during fiscal [removed: 2017.][added: 2018.]

With approximately 12 billion gallons of unleaded gas consumption each month across the U.S., each $1 [removed: increase] [added: decrease] at the pump [removed: reduces] [added: contributes] approximately $12 billion of additional spending capacity to consumers each month.

We have also experienced accelerated pressure on wages in the [removed: United States] [added: U.S.] during fiscal [removed: 2018.][added: 2019.]

During fiscal [removed: 2018,] [added: 2019,] failure and maintenance related categories represented the largest portion of our sales mix, at approximately [removed: 84%] [added: 85%] of total sales, with failure related categories continuing to comprise our largest set of categories.

Since the beginning of the fiscal year and through July [removed: 2018] [added: 2019] (latest publicly available information), miles driven in the U.S. increased by [removed: 0.5%] [added: 0.8%] compared to the same period in the prior year.

According to the latest data provided by the Auto Care Association, as of January 1, [removed: 2018,] [added: 2019,] the average age of vehicles on the road was [removed: 11.7] [added: 11.8] years.

For the [removed: seventh] [added: eighth] consecutive year, the average age of vehicles has exceeded 11 years.

For the fiscal year ended August [removed: 25, 2018,] [added: 31, 2019,] we reported net sales of [removed: $11.221] [added: $11.864] billion compared with [removed: $10.889] [added: $11.221] billion for the year ended August [removed: 26, 2017,] [added: 25, 2018,] a [removed: 3.1%] [added: 5.7%] increase from fiscal [removed: 2017.][added: 2018.]

This growth was driven primarily by net sales of [removed: $196.5] [added: $410.5] million from new domestic [removed: stores] [added: stores, the additional 53rd week sales of $238.6 million] and a domestic same store sales increase of [removed: 1.8%.][added: 3.0% partially offset by the impact of the sale of two businesses in the prior year.]

At August [removed: 25, 2018,] [added: 31, 2019,] we operated [removed: 5,618] [added: 5,772] domestic stores, [removed: 564] [added: 604] in Mexico and [removed: 20] [added: 35] in Brazil, compared with [removed: 5,465] [added: 5,618] domestic stores, [removed: 524] [added: 564] in [removed: Mexico, 14] [added: Mexico and 20] in Brazil [removed: and 26 IMC branches] at August [removed: 26, 2017.][added: 25, 2018.]

We reported a total auto parts segment (domestic, Mexico, Brazil and IMC through April 4, 2018) sales increase of [removed: 4.1%] [added: 6.3%] for fiscal [removed: 2018.][added: 2019.]

Gross profit for fiscal [removed: 2018] [added: 2019] was [removed: $5.974] [added: $6.365] billion, or [removed: 53.2%] [added: 53.7%] of net sales, a [removed: 53] [added: 41] basis point increase compared with [removed: $5.740] [added: $5.974] billion, or [removed: 52.7%] [added: 53.2%] of net sales for fiscal [removed: 2017.][added: 2018.]

The increase in gross margin was [added: primarily] attributable to the favorable impact of the sale of two businesses [removed: (+34] [added: completed in the prior year (+37] basis [removed: points) and higher merchandise margins, partially offset by higher supply chain costs.][added: points).]

Operating, selling, general and administrative expenses for fiscal [removed: 2018 increased] [added: 2019 decreased] to [removed: $4.163] [added: $4.149] billion, or [removed: 37.1%] [added: 35.0%] of net sales, from [removed: $3.660] [added: $4.163] billion, or [removed: 33.6%] [added: 37.1%] of net sales for fiscal [removed: 2017.][added: 2018.]

See “Note [removed: M – Sale of Assets” and “Note] L – Pension and Savings Plan” [added: and “Note M – Sale of Assets”] in the Notes to Consolidated Financial Statements.

Interest expense, net for fiscal [removed: 2018] [added: 2019] was [removed: $174.5] [added: $184.8] million compared with [removed: $154.6] [added: $174.5] million during fiscal [removed: 2017.][added: 2018.]

Average borrowings for fiscal [removed: 2018] [added: 2019] were [removed: $4.997] [added: $5.097] billion, compared with [removed: $5.070] [added: $4.997] billion for fiscal [removed: 2017,] [added: 2018,] and weighted average borrowing rates were 3.2% for fiscal [removed: 2018, compared to 2.8% for] [added: 2019 and] fiscal [removed: 2017.][added: 2018.]

Our effective income tax rate was [removed: 18.3%] [added: 20.4%] of pre-tax income for fiscal [removed: 2018] [added: 2019] compared to [removed: 33.5%] [added: 18.3%] for fiscal [removed: 2017.][added: 2018.]

The [removed: lower] [added: higher] tax rate resulted primarily from [added: net impacts of] the enactment of Tax Reform [removed: during the second quarter ended February 10, 2018] (see “Note [removed: D—Income] [added: D - Income] Taxes” in the Notes to Consolidated Financial Statements).

Net income for fiscal [removed: 2018] [added: 2019] increased by [removed: 4.4%] [added: 20.9%] to [removed: $1.338] [added: $1.617] billion, and diluted earnings per share increased [removed: 10.7%] [added: 30.1%] to [removed: $48.77] [added: $63.43] from [removed: $44.07] [added: $48.77] in fiscal [removed: 2017.][added: 2018.]

The impact on the fiscal [removed: 2018] [added: 2019] diluted earnings per share from stock repurchases was an increase of [removed: $1.36.][added: $1.83.]

_Fiscal [removed: 2017] [added: 2019] Compared with Fiscal [removed: 2016_][added: 2018_]

This increase was primarily due to higher [removed: borrowing] [added: debt] levels and [removed: rates.][added: an additional week of interest incurred due to the 53rd week.]

[removed: Seasonality and Quarterly] [added: Quarterly] Periods

Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of [added: 17 weeks in 2019 and] 16 weeks in [removed: 2018, 2017] [added: 2018] and [removed: 2016.][added: 2017.]

Because the fourth quarter contains seasonally high sales volume and consists of 16 [added: or 17] weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of the annual net sales and net income.

The fourth quarter of fiscal year [removed: 2018] [added: 2019] represented [removed: 31.7%] [added: 33.6%] of annual sales and [removed: 29.9%] [added: 35.0%] of net income; [added: and] the fourth quarter of fiscal year [removed: 2017] [added: 2018] represented [removed: 32.3%] [added: 31.7%] of annual sales and [removed: 33.9%] [added: 29.9%] of net income; and the fourth quarter of fiscal [removed: 2016] [added: year 2017] represented [removed: 32.0%] [added: 32.3%] of annual sales and [removed: 34.4%] [added: 33.9%] of net income.

On December 22, 2017, the U.S. government enacted [removed: the] Tax [removed: Cuts and Jobs Act (“Tax Reform”)] [added: Reform] into law.

[removed: The Securities and Exchange Commission (SEC) staff] [added: Also in December 2017, the SEC] issued Staff Accounting Bulletin No. 118 [removed: (SAB 118)] [added: (“SAB 118”)] to address the application of [removed: U.S.] GAAP in situations [removed: where a] [added: when the] registrant does not have the necessary information available, [removed: prepared, or] [added: prepared and] analyzed [removed: (including computations)] in reasonable detail to complete the accounting for certain income tax effects of Tax Reform.

Net cash provided by operating activities was [removed: $2.080] [added: $2.129] billion in [removed: 2018, $1.571] [added: 2019, $2.080] billion in [removed: 2017,] [added: 2018] and [removed: $1.641 billion] [added: $1.571] in [removed: fiscal 2016.][added: 2017.]

Cash flows from operations are favorable compared to last year primarily due to the timing of payment of accounts payable and growth in net income [added: partially] due to the [removed: benefits] [added: additional week] of [removed: Tax Reform.][added: sales in the current year.]

We opened two distribution centers in fiscal [removed: 2017 and one in fiscal 2018.][added: 2017.]

Net cash flows used in investing activities were [removed: $521.9] [added: $491.8] million in fiscal [removed: 2018,] [added: 2019,] compared to [removed: $553.6] [added: $521.9] million in fiscal [removed: 2017] [added: 2018] and [removed: $505.8] [added: $553.6] million in fiscal [removed: 2016.][added: 2017.]

We invested [removed: $521.8] [added: $496.1] million in capital assets in fiscal [removed: 2018,] [added: 2019,] compared to [removed: $553.8] [added: $521.8] million in fiscal [removed: 2017] [added: 2018] and [removed: $488.8] [added: $553.8] million in fiscal [removed: 2016.][added: 2017.]

New vehicles sales increased 0.2% during 2019 as compared to the prior calendar year.

Same store sales are computed on a 52-week basis.

Domestic commercial sales increased $348.6 million, or 15.7%, over domestic commercial sales for fiscal 2018 which benefited $51.3 million from the additional week of sales.

The decrease in operating expenses, as a percentage of sales, was primarily due to last year’s impairment charges of $193.2 million related to the sale of two businesses and pension plan termination charges of $130.3 million, partially offset by increased domestic store payroll (-66 basis points) in 2019.

A discussion of changes in our results of operations from fiscal 2017 to fiscal 2018 has been omitted from this Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended August 25, 2018, filed with the SEC on October 24, 2018, which is available free of charge on the SECs website at www.sec.gov and at www.autozone.com, by clicking “Investor Relations” located at the bottom of the page.

Tax Reform significantly revises the U.S. federal corporate income tax by, among other things, lowering the statutory federal corporate rate from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time transition tax on accumulated earnings of foreign subsidiaries, and changing how foreign earnings are subject to U.S. federal tax.

During the year ended August 25, 2018, we recorded provisional tax benefit of $131.5 million related to Tax Reform, comprised of a $157.3 million remeasurement of our net Deferred Tax Asset (“DTA”), offset by $25.8 million of transition tax.

During the year ended August 31, 2019, the Company completed its analysis of Tax Reform and recorded adjustments to the previously-recorded provisional amounts, resulting in an $8.8 million tax benefit, primarily related to transition tax on accumulated earnings of foreign subsidiaries.

Beginning with the year ending August 31, 2019, we are subject to a new tax on global intangible low-taxed income (“GILTI”) that is imposed on foreign earnings.

We have made the election to record this tax as a period cost, thus we have not adjusted the deferred tax assets or liabilities of our foreign subsidiaries for the new tax.

Net impacts for GILTI were immaterial and are included in the provision for income taxes for the year ending August 31, 2019.

In fiscal 2019 the proceeds from the issuance of debt were used to repay a portion of our outstanding commercial paper borrowings and our $250 million Senior Notes due in April 2019 and for other general corporate purposes.

For fiscal 2019, after-tax operating profit was adjusted for the Tax Reform’s impact on the revaluation of deferred tax liabilities, net of the repatriation tax.

The increase in ROIC in fiscal 2019 is primarily due to the increase in net income due to the additional week of operations.

In fiscal 2019, we amended our existing letter of credit facility to decrease the amount that can be requested in letters of credit from $75 million to $25 million effective June 2019.

This amendment also extended the maturity date from June 2019 to June 2022.

On April 18, 2019, we issued $300 million in 3.125% Senior Notes due April 2024 and $450 million in 3.750% Senior Notes due April 2029 under our automatic shelf registration statement on Form S-3, filed with the SEC on April 4, 2019 (File No. 333-230719) (the “2019 Shelf Registration”).

Proceeds from the debt issuance were used to repay a portion of our outstanding commercial paper borrowings, the $250 million in 1.625% Senior Notes due in April 2019 and for other general corporate purposes.

On October 7, 2019, the Board voted to authorize the repurchase of an additional $1.25 billion of our common stock in connection with our ongoing share repurchase program.

Since the inception of the repurchase program in 1998, the Board has authorized $23.2 billion in share repurchases.

| Debt(1) | | $ | 5,230,000 | | | $ | 1,030,000 | | | $ | 1,250,000 | | | $ | 1,100,000 | | | $ | 1,850,000 | |

| Interest payments(2) | | | 751,813 | | | | 143,250 | | | | 250,250 | | | | 168,438 | | | | 189,875 | |

| Operating leases(3) | | | 2,197,092 | | | | 315,424 | | | | 583,343 | | | | 474,081 | | | | 824,244 | |

| Capital leases(4) | | | 182,720 | | | | 56,246 | | | | 90,773 | | | | 35,701 | | | | — | |

| Self-insurance reserves(5) | | | 242,991 | | | | 89,250 | | | | 77,508 | | | | 34,393 | | | | 41,840 | |

| | | $ | 8,642,585 | | | $ | 1,672,139 | | | $ | 2,251,874 | | | $ | 1,812,613 | | | $ | 2,905,959 | |

| | | $ | 137,857 | |

The ROIC percentages are presented in “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”:

| _(1)_ | _The fiscal year ended August 31, 2019 consisted of 53 weeks._ |

| _(2)_ | _For fiscal 2018, after-tax operating profit was adjusted for impairment charges and pension settlement charges._ |

| _(5)_ | _All averages are computed based on trailing five quarters._ |

| --- | --- |

| Net income | | $ | 1,617,221 | | | $ | 1,337,536 | | | $ | 1,280,869 | | | $ | 1,241,007 | | | $ | 1,160,241 | |

| Pension termination charges before tax | | | — | | | | 130,263 | | | | — | | | | — | | | | — | |

| Interest expense | | | 184,804 | | | | 174,527 | | | | 154,580 | | | | 147,681 | | | | 150,439 | |

| Rent expense | | | 332,726 | | | | 315,580 | | | | 302,928 | | | | 280,490 | | | | 269,458 | |

| _(1)_ | _The fiscal year ended August 31, 2019 consisted of 53 weeks._ |

| --- | --- |

| --- | --- |

##### [Table of Contents](#toc)

Our primary response to fluctuations in the demand for the products we sell is to adjust our advertising message, store staffing and product assortment.

In recent years, we closely studied our hub distribution model, store inventory levels and product assortment, which led to strategic tests on increased frequency of delivery to our domestic stores and significantly expanding parts assortment in select domestic stores we call mega hubs.

During fiscal 2018, we completed our testing and implemented new frequencies resulting in approximately 25% of our stores, representing 40% of our retail sales volume and nearly 50% of our commercial sales volume, receiving distribution center deliveries three or more times per week.

New vehicles sales declined 1.5% during 2018 as compared to the prior year, which is the first year-over-year decrease since 2009.

Domestic commercial sales increased $151.4 million, or 7.3%, over domestic commercial sales for fiscal 2017.

The increase in operating expenses, as a percentage of sales, was primarily due to second quarter impairment charges (-172 basis points), and fourth quarter charges related to the termination of our pension plans (-116 basis points).

This increase was primarily due to higher borrowing rates.

For the fiscal year ended August 26, 2017, we reported net sales of $10.889 billion compared with $10.636 billion for the year ended August 27, 2016, a 2.4% increase from fiscal 2016.

This growth was driven primarily by net sales of $172.5 million from new domestic AutoZone stores and domestic same store sales increase of 0.5%.

Domestic commercial sales increased $110.9 million, or 5.7%, over domestic commercial sales for fiscal 2016.

At August 26, 2017, we operated 5,465 domestic AutoZone stores, 524 in Mexico, 14 in Brazil, and 26 IMC branches compared with 5,297 domestic AutoZone stores, 483 in Mexico, eight in Brazil and 26 IMC branches at August 27, 2016.

We reported a total auto parts (domestic, Mexico, Brazil and IMC) sales increase of 2.6% for fiscal 2017.

Gross profit for fiscal 2017 was $5.740 billion, or 52.7% of net sales, a 2 basis point decrease compared with $5.609 billion, or 52.7% of net sales for fiscal 2016.

The slight decline in gross margin was attributable to higher supply chain costs (-20 basis points) associated with current year inventory initiatives, partially offset by higher merchandise margins.

Operating, selling, general and administrative expenses for fiscal 2017 increased to $3.660 billion, or 33.6% of net sales, from $3.548 billion, or 33.4% of net sales for fiscal 2016.

The increase in operating expenses, as a percentage of sales, was primarily due to deleverage on occupancy costs (-23 basis points) and domestic store payroll driven by higher wage pressure.

Interest expense, net for fiscal 2017 was $154.6 million compared with $147.7 million during fiscal 2016.

Average borrowings for fiscal 2017 were $5.070 billion, compared with $4.860 billion for fiscal 2016, and weighted average borrowing rates were 2.8% for fiscal 2017, compared to 2.7% for fiscal 2016.

Our effective income tax rate was 33.5% of pre-tax income for fiscal 2017 compared to 35.1% for fiscal 2016.

The decrease in the tax rate was primarily due to the Company’s adoption of the new accounting guidance for share-based payments, which lowered the effective tax rate by 162 basis points.

Net income for fiscal 2017 increased by 3.2% to $1.281 billion, and diluted earnings per share increased 8.3% to $44.07 from $40.70 in fiscal 2016.

The impact of the fiscal 2017 stock repurchases on diluted earnings per share in fiscal 2017 was an increase of approximately $1.03.

Our business is somewhat seasonal in nature, with the highest sales typically occurring in the spring and summer months of February through September, in which average weekly per-store sales historically have been about 10% to 20% higher than in the slower months of December and January.

During short periods of time, a store’s sales can be affected by weather conditions.

Extremely hot or extremely cold weather may enhance sales by causing parts to fail; thereby increasing sales of seasonal products.

Mild or rainy weather tends to soften sales, as parts failure rates are lower in mild weather and elective maintenance is deferred during periods of rainy weather.

Over the longer term, the effects of weather balance out, as we have locations throughout the United States, Puerto Rico, Mexico and Brazil.

Tax Reform contains several key provisions that affected the Company during fiscal 2018.

The enacted provisions impacting the current financial statements include a mandatory one-time transition tax on certain earnings of foreign subsidiaries and a permanent reduction of the U.S. corporate income tax rate from 35 to 21%, effective January 1, 2018.

As the Company has an August 25th fiscal year-end, the impact of the lower rate will be blended resulting in a U.S. statutory federal tax rate of approximately 25.9% for the fiscal year ending August 25, 2018, and a 21% U.S. statutory federal rate for fiscal years thereafter.

Other enacted provisions which may impact the Company beginning in fiscal 2019 include: eliminating U.S. federal taxation of future remitted foreign earnings; other new international provisions requiring current inclusion of certain earnings of controlled foreign corporations; immediate expensing of capital assets; and limitations on other tax deductions such as deductibility of executive compensation, interest expense, lobbying expenses, meals and entertainment expenses, and the domestic production activities deduction.

The Company has withdrawn its assertion regarding the permanent reinvestment of current and accumulated earnings of non-U.S. subsidiaries, but maintained its permanent reinvestment assertion on other basis differences related to non-U.S. subsidiaries.

To the extent that a company’s accounting for certain income tax effects of Tax Reform is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of Tax Reform.

The ultimate impact may differ from provisional amounts recorded, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, and additional regulatory guidance that may be issued.

The accounting is expected to be completed within one year from the enactment date of Tax Reform.

Based on our current analysis, we recorded a provisional income tax benefit of $131.5 million in our Consolidated Financial Statements for the year ended August 25, 2018.

We were able to determine a reasonable estimate for the mandatory one-time transition tax as an increase tax expense of $25.8 million and for the re-measurement of our net U.S. federal deferred tax liability at the lower rate, a reduction to tax expense of $157.3 million.

Our analysis of these items is incomplete at this time.

The fair value of our debt was estimated at [removed: $4.948] [added: $5.419] billion as of August [removed: 25, 2018,] [added: 31, 2019,] and [removed: $5.171] [added: $4.948] billion as of August [removed: 26, 2017,] [added: 25, 2018,] based on the quoted market prices for the same or similar debt issues or on the current rates available to us for debt having the same remaining maturities.

Such fair value is [removed: less] [added: greater] than the carrying value of debt by [removed: $57.5] [added: $212.7] million at August [removed: 25, 2018,] [added: 31, 2019,] which reflects its face amount, adjusted for any unamortized debt issuance costs and discounts.

At August [removed: 26, 2017,] [added: 25, 2018,] the fair value was [removed: greater] [added: less] than the carrying value of debt by [removed: $90.3] [added: $57.5] million.

We had [removed: $1.325] [added: $1.030] billion of variable rate debt outstanding at August [removed: 25, 2018,] [added: 31, 2019,] and [removed: $1.155] [added: $1.325] billion of variable rate debt outstanding at August [removed: 26, 2017.][added: 25, 2018.]

In fiscal [removed: 2018,] [added: 2019,] at this borrowing level for variable rate debt, a one percentage point increase in interest rates would have had an unfavorable impact on our pre-tax earnings and cash flows of approximately [removed: $13.3] [added: $10.3] million.

We had outstanding fixed rate debt of [removed: $3.681] [added: $4.176] billion, net of unamortized debt issuance costs of [removed: $19.4] [added: $23.7] million, at August [removed: 25, 2018,] [added: 31, 2019,] and [removed: $3.926] [added: $3.681] billion, net of unamortized debt issuance costs of [removed: $23.9] [added: $19.4] million, at August [removed: 26, 2017.][added: 25, 2018.]

A one percentage point increase in interest rates would [removed: reduce] [added: have reduced] the fair value of our fixed rate debt by approximately [removed: $153.6] [added: $190.3] million at August [removed: 25, 2018.][added: 31, 2019.]

The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end exchange rates was [removed: $590.7] [added: $328.8] million at August [removed: 25, 2018] [added: 31, 2019] and [removed: $519.3] [added: $590.7] million at August [removed: 26, 2017.][added: 25, 2018.]

The year-end exchange rates with respect to the Mexican peso decreased by approximately [added: 7% and approximately] 6% with respect to the U.S. dollar during fiscal [removed: 2018] [added: 2019] and [removed: increased by approximately 4% during] fiscal [removed: 2017.][added: 2018.]

The [removed: potential] loss in value of our net assets in the Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at August [removed: 25, 2018] [added: 31, 2019] and August [removed: 26, 2017,] [added: 25, 2018,] would [removed: be] [added: have been] approximately [removed: $53.7] [added: $29.9] million and approximately [removed: $47.2] [added: $53.7] million, respectively.

AutoZone, Inc. (“AutoZone,” the “Company,” “we,” “our” or “us”) is the [removed: nation’s] leading retailer, and a leading distributor, of automotive replacement parts and accessories in the [removed: United States.][added: Americas.]

We began operations in 1979 and at August [removed: 25, 2018,] [added: 31, 2019,] operated [removed: 5,618] [added: 5,772] stores in the United [removed: States,] [added: States (U.S.),] including Puerto [removed: Rico; 564] [added: Rico and Saint Thomas; 604] stores in Mexico; and [removed: 20] [added: 35] stores in Brazil.

At August [removed: 25, 2018,] [added: 31, 2019,] in [removed: 4,741] [added: 4,893] of our domestic stores, we also had a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts.

At August [removed: 25, 2018,] [added: 31, 2019,] our stores were in the following locations:

| Colorado | | | [removed: 90] [added: 91] | |

| Hawaii | | | [removed: 8] [added: 11] | |

| Idaho | | | [removed: 29] [added: 30] | |

| Kansas | | | [removed: 53] [added: 54] | |

| Kentucky | | | [removed: 97] [added: 98] | |

| Maine | | | [removed: 13] [added: 14] | |

| Maryland | | | [removed: 78] [added: 80] | |

| Minnesota | | | [removed: 54] [added: 57] | |

| Montana | | | [removed: 13] [added: 14] | |

| Nebraska | | | [removed: 21] [added: 23] | |

| New Jersey | | | [removed: 102] [added: 108] | |

| New York | | | [removed: 198] [added: 201] | |

| North Dakota | | | [removed: 5] [added: 7] | |

| Oklahoma | | | [removed: 74] [added: 78] | |

| Oregon | | | [removed: 47] [added: 48] | |

| Puerto Rico | | | [removed: 45] [added: 48] | |

| South Carolina | | | [removed: 88] [added: 90] | |

| Utah | | | [removed: 59] [added: 61] | |

| Washington | | | [removed: 92] [added: 94] | |

| Wisconsin | | | [removed: 69] [added: 72] | |

| Total Domestic stores | | | [removed: 5,618] [added: 5,772] | |

| Brazil | | | [removed: 20] [added: 35] | |

| Total stores | | | [removed: 6,202] [added: 6,411] | |

We sell automotive hard parts, maintenance items, accessories and non-automotive parts through www.autozone.com for pick-up in store or to be shipped directly to a customer’s home or [removed: business.][added: business, with next day delivery covering approximately 85% of the U.S. population.]

Additionally, we offer a smartphone [removed: app] [added: application] that provides customers with store locations, driving directions, operating hours, [added: product availability and] ability to purchase [removed: products and product availability.][added: products.]

AutoZoners also provide [removed: other] free services, including check engine light readings where allowed by law, battery charging, the collection of used oil for [removed: recycling,] [added: recycling] and the testing of starters, alternators and batteries.

| A/C Compressors Batteries & Accessories Bearings Belts & Hoses Calipers Carburetors Chassis Clutches CV Axles Engines Fuel Pumps Fuses Ignition Lighting Mufflers Radiators Starters & Alternators Thermostats Tire Repair Water Pumps | | Antifreeze & Windshield Washer Fluid Brake Drums, Rotors, Shoes & Pads Chemicals, including Brake & Power Steering Fluid, Oil & Fuel Additives Oil & Transmission Fluid Oil, Air, Fuel & Transmission Filters Oxygen Sensors Paint & Accessories Refrigerant & Accessories Shock Absorbers & Struts Spark Plugs & Wires Windshield Wipers | | Air Fresheners Cell Phone Accessories Drinks & Snacks Floor Mats & Seat Covers Interior & Exterior Accessories Mirrors Performance Products Protectants & Cleaners Sealants & Adhesives Steering Wheel Covers Stereos & Radios Tools [added: Towing] Wash & Wax |

A key differentiating component versus our competitors is our exclusive line of in-house brands, which includes [removed: the] AutoZone, Duralast, Duralast Max, Duralast Gold, Duralast Platinum, Duralast ProPower, Duralast GT, Valucraft, [removed: SureBilt] [added: SureBilt, ProElite] and [removed: ProElite.][added: TruGrade.]

Our commercial sales program operates in a highly fragmented market, and we are [removed: one of the] [added: a] leading [removed: distributors] [added: distributor] of automotive parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts in the [removed: United States, Puerto Rico, Mexico and Brazil.][added: Americas.]

Store managers, [removed: sales representatives,] commercial sales [removed: managers,] [added: managers] and managers at various levels across the organization receive financial incentives through performance-based bonuses.

The Store Management System provides administrative [removed: assistance and improved personnel scheduling at the store level,] [added: assistance,] as well as enhanced merchandising information and improved inventory control.

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Beginning | | | [removed: 6,029] [added: 6,202] | | | | [removed: 5,814] [added: 6,029] | | | | [removed: 5,609] [added: 5,814] | | | | [removed: 5,391] [added: 5,609] | | | | [removed: 5,201] [added: 5,391] | |

| Acquired(1) | | | — | | | | — | | | | — | | | | [removed: 17] [added: —] | | | | [removed: —] [added: 17] | |

| Sold(2) | | | [removed: 26] [added: —] | | | | [removed: —] [added: 26] | | | | — | | | | — | | | | — | |

| New | | | [removed: 201] [added: 209] | | | | [removed: 215] [added: 201] | | | | [removed: 205] [added: 215] | | | | [removed: 202] [added: 205] | | | | [removed: 190] [added: 202] | |

Additionally, on www.duralastparts.com we provide product information on our Duralast branded product.

| Alabama | | | 116 | |

| Arizona | | | 150 | |

| California | | | 624 | |

| Florida | | | 362 | |

| Georgia | | | 202 | |

| Illinois | | | 240 | |

| Louisiana | | | 126 | |

| Michigan | | | 198 | |

| Missouri | | | 116 | |

| Ohio | | | 270 | |

| Pennsylvania | | | 198 | |

| Saint Thomas | | | 1 | |

| Texas | | | 630 | |

| Virginia | | | 134 | |

| Mexico | | | 604 | |

The distribution centers replenish all stores up to multiple times per week depending on store sales volumes.

Mega hubs work in concert with our hubs to drive customer satisfaction through improved local parts availability and expanded product assortments.

Seasonality

Our business is somewhat seasonal in nature, with the highest sales typically occurring in the spring and summer months of February through September, in which average weekly per-store sales historically have been about 10% to 20% higher than in the slower months of December and January.

During short periods of time, a store’s sales can be affected by weather conditions.

Extremely hot or extremely cold weather may enhance sales by causing parts to fail; thereby increasing sales of seasonal products.

Mild or rainy weather tends to soften sales, as parts failure rates are lower in mild weather and elective maintenance is deferred during periods of rainy weather.

Over the longer term, the effects of weather balance out, as we have locations throughout the Americas.

Information about our Executive Officers

_Preston B.

Preston B.

Prior to that he was Vice President, Stores and Store Operations Support since 2018 and Vice President, Loss Prevention from 2015 to 2018.

Previously, he was Vice President, Internal Audit from 2010 to 2015.

Prior to joining AutoZone, Mr. Frazer was a senior manager with KPMG, LLP.

_Domingo J.

_Mitchell C.

Mitchell C.

Previously, he served as Vice President – Commercial Support since September 2016 and prior to that he held the title of President, ALLDATA.

Mr. Major joined AutoZone in 2005.

Prior to AutoZone, Mr. Major worked for Family Dollar, Inc.

| Alabama | | | 113 | |

| Arizona | | | 142 | |

| California | | | 602 | |

| Florida | | | 334 | |

| Georgia | | | 201 | |

| Illinois | | | 238 | |

| Louisiana | | | 124 | |

| Michigan | | | 194 | |

| Missouri | | | 113 | |

| Ohio | | | 266 | |

| Pennsylvania | | | 189 | |

| Texas | | | 610 | |

| Virginia | | | 131 | |

| Mexico | | | 564 | |

Our stores generally open at 7:30 or 8 a.m.

and close between 8 and 10 p.m.

Monday through Saturday and typically open at 9 a.m.

and close between 6 and 9 p.m.

on Sunday.

However, some stores are open 24 hours, and some have extended hours of 6 or 7 a.m.

until midnight seven days a week.

In recent years, we closely studied our hub distribution model, store inventory levels and product assortment, which led to strategic tests on increased frequency of delivery to our domestic stores and significantly expanding parts assortment in select domestic stores we call mega hubs.

During fiscal 2018, we completed our testing and implemented new frequencies resulting in approximately 25% of our stores, representing 40% of our retail sales volume and nearly 50% of our commercial sales volume, receiving distribution center deliveries three or more times per week.

Executive Officers of the Registrant

The following list describes our executive officers.

_William W.

William W.

Graves was named Executive Vice President _–_ Mexico, Brazil and Store Development during October 2015.

Prior thereto, he was Senior Vice President – Supply Chain from 2006 to 2012 and Vice President – Supply Chain from 2000 to 2006.

On September 27, 2018, Mr. Graves announced his retirement from the Company, which will be effective early January 2019.

_Rodney C.

Rodney C.

Prior to that, he was Vice President – Distribution since 2005.

From 1985 to 2005, he held several management positions and served in various capacities within the Company.

On August 27, 2018, Mr. Halsell announced his retirement from the Company, which will be effective November 10, 2018.

We have contested, and will continue to contest, any such assertions due to the existence of other entities/sources of [added: contamination, some of which are named in the Directives and the April 23, 2015 Demand, in the area of the property.]

In July 2014, we received a subpoena from the District Attorney of the County of Alameda, along with other environmental prosecutorial offices in the [removed: state] [added: State] of California, seeking documents and information related to the handling, storage and disposal of hazardous [removed: waste.][added: waste; a Complaint regarding the matter was subsequently filed by the District Attorney and the State Attorney General’s Office.]

Arising out of an April 2016 letter from the California Air Resources Board (“CARB”), one of our formerly-owned subsidiaries was sued in March 2018 by CARB [added: and the State of California] seeking penalties, among other relief, for alleged violations of the California Health and Safety Code, Title 13 of the California Code of Regulations and the California Vehicle Code related to the sale and advertisement of certain aftermarket motor vehicle pollution control parts in the State of California.

On February 26, 2018, we completed our transaction to sell substantially all [removed: of] the assets, net of assumed liabilities related to our AutoAnything operations.

The Company cooperated fully with the District Attorney and the State Attorney General’s Office to resolve the matter in fiscal 2019 without a finding of liability on the part of the Company.

The amount the Company agreed to pay was within the amount previously accrued by the Company for the matter.

The Company cooperated fully with CARB and the State Attorney General’s Office to resolve the matter in fiscal 2019 without a finding of liability on the part of the Company.

The amount the Company agreed to pay was within the amount previously accrued by the Company for the matter.

contamination, some of which are named in the Directives and the April 23, 2015 Demand, in the area of the property.

We received notice that the District Attorney will seek injunctive and monetary relief.

We are cooperating fully with the request and cannot predict the ultimate outcome of these efforts, although we have accrued all amounts we believe to be probable and reasonably estimable.

We do not believe the ultimate resolution of this matter will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We are cooperating fully with the lawsuit and cannot predict the ultimate outcome of these efforts.

We do not believe that any resolution of the matter will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

For the fiscal year ended August [removed: 25, 2018, or][added: 31, 2019.]

[removed: ][added: ]

| (State or other jurisdiction of [removed: incorporation or organization)] | | (I.R.S. [removed: Employer Identification] [added: Employer Identification] No.) |

[removed: (Registrant’s] [added: Registrant’s] telephone number, including area [removed: code)][added: code : (901) 495-6500]

| Title of [removed: each class] [added: Each Class] | | [added: Trading Symbol(s) | |] Name of [removed: each exchange on] [added: Each Exchange on] which [removed: registered] [added: Registered] |

| Common [removed: Stock ($.01] [added: Stock ($0.01] par value) | | [added: AZO | |] New York Stock Exchange |

Securities registered pursuant to Section 12(g) of the [removed: Act:][added: Act: None]

Indicate by [removed: check mark] [added: checkmark] if the [removed: Registrant] [added: registrant] is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark whether the [removed: Registrant] [added: registrant] (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter [removed: period] [added: periods] that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the [removed: Registrant] [added: registrant] has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T [removed: (§ 232.405] [added: (§232.405] of this chapter) during the preceding 12 months (or for such shorter period that the [removed: Registrant] [added: registrant] was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [added: a] smaller reporting [removed: company,] [added: company] or an emerging growth company.

| [removed: Emerging growth company] | | [removed: ☐] | | [added: Emerging growth company] | | [added: ☐] |

Indicate by check mark whether the [removed: Registrant] [added: registrant] is a shell company (as defined in Rule 12b-2 of the [added: Exchange] Act).

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was [removed: $19,597,989,296.][added: $21,723,299,587.]

The number of shares of Common Stock outstanding as of October [removed: 22, 2018,] [added: 21, 2019,] was [removed: 25,559,353.][added: 23,827,496.]

[removed: Documents] [added: Documents] Incorporated By [removed: Reference][added: Reference]

Portions of the definitive Proxy Statement to be filed within 120 days of August [removed: 25, 2018,] [added: 31, 2019,] pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting of Stockholders to be held December [removed: 19, 2018,] [added: 18, 2019,] are incorporated by reference into Part III.

| [removed: Item] [added: [Item] 1. [removed: | | [Business](#tx597971_2)] [added: Business](#tx771460_2)] | | | [removed: 5] [added: 4] | |

| [removed: | |] [Marketing and Merchandising [removed: Strategy](#tx597971_4)] [added: Strategy](#tx771460_4)] | | | [removed: 6] [added: 5] | |

| [removed: | |] [Store [removed: Operations](#tx597971_6)] [added: Operations](#tx771460_6)] | | | [removed: 8] [added: 7] | |

| [removed: | |] [Store [removed: Development](#tx597971_7)] [added: Development](#tx771460_7)] | | | [removed: 9] [added: 8] | |

| [removed: | |] [Purchasing and Supply [removed: Chain](#tx597971_8)] [added: Chain](#tx771460_8)] | | | [removed: 9] [added: 8] | |

| [removed: | |] [Trademarks and [removed: Patents](#tx597971_10)] [added: Patents](#tx771460_10)] | | | [removed: 10] [added: 9] | |

| [removed: | |] [AutoZone [removed: Websites](#tx597971_12)] [added: Websites](#tx771460_13)] | | | [removed: 10] [added: 9] | |

| [removed: Item] [added: [Item] 1A. [removed: | | [Risk Factors](#tx597971_14)] [added: Risk Factors](#tx771460_15)] | | | [removed: 13] [added: 12] | |

| [removed: Item] [added: [Item] 1B. [removed: | | [Unresolved] [added: Unresolved] Staff [removed: Comments](#tx597971_15)] [added: Comments](#tx771460_16)] | | | 19 | |

| [removed: Item] [added: [Item] 2. [removed: | | [Properties](#tx597971_16)] [added: Properties](#tx771460_17)] | | | 19 | |

| [removed: Item] [added: [Item] 3. [removed: | | [Legal Proceedings](#tx597971_17)] [added: Legal Proceedings](#tx771460_18)] | | | 19 | |

| [removed: Item] [added: [Item] 4. [removed: | | [Mine] [added: Mine] Safety [removed: Disclosures](#tx597971_18)] [added: Disclosures](#tx771460_19)] | | | 20 | |

| [removed: Item] [added: [Item] 5. [removed: | | [Market] [added: Market] for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#tx597971_20)] [added: Securities](#tx771460_21)] | | | 21 | |

| [removed: Item] [added: [Item] 6. [removed: | | [Selected] [added: Selected] Financial [removed: Data](#tx597971_21)] [added: Data](#tx771460_22)] | | | 23 | |

| [removed: Item] [added: [Item] 7. [removed: | | [Management’s] [added: Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx597971_22)] [added: Operations](#tx771460_23)] | | | 24 | |

| [removed: Item] [added: [Item] 7A. [removed: | | [Quantitative] [added: Quantitative] and Qualitative Disclosures About Market [removed: Risk](#tx597971_23)] [added: Risk](#tx771460_24)] | | | [removed: 38] [added: 36] | |

| [removed: Item] [added: [Item] 8. [removed: | | [Financial] [added: Financial] Statements and Supplementary [removed: Data](#tx597971_24)] [added: Data](#tx771460_25)] | | | [removed: 40] [added: 38] | |

| [removed: Item] [added: [Item] 9. [removed: | | [Changes] [added: Changes] In and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx597971_25)] [added: Disclosure](#tx771460_26)] | | | [removed: 75] [added: 74] | |

| [removed: Item] [added: [Item] 9A. [removed: | | [Controls] [added: Controls] and [removed: Procedures](#tx597971_26)] [added: Procedures](#tx771460_27)] | | | [removed: 75] [added: 74] | |

| [removed: Item] [added: [Item] 9B. [removed: | | [Other Information](#tx597971_27)] [added: Other Information](#tx771460_28)] | | | [removed: 75] [added: 74] | |

| [PART [removed: III](#tx597971_28) | |] [added: III](#tx771460_29)] | | | [removed: 76] [added: 75] | |

| [removed: Item] [added: [Item] 10. [removed: | | [Directors,] [added: Directors,] Executive Officers and Corporate [removed: Governance](#tx597971_29)] [added: Governance](#tx771460_30)] | | | [removed: 76] [added: 75] | |

| [removed: Item] [added: [Item] 11. [removed: | | [Executive Compensation](#tx597971_30)] [added: Executive Compensation](#tx771460_31)] | | | [removed: 76] [added: 75] | |

10-K 1 d771460d10k.htm FORM 10-K

(Mark One)

OR

| incorporation or organization) | | |

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

| --- | --- | --- | --- | --- |

| [PART I](#tx771460_1) | | | 4 | |

| [Introduction](#tx771460_3) | | | 4 | |

| [Commercial](#tx771460_5) | | | 7 | |

| [Competition](#tx771460_9) | | | 9 | |

| [Employees](#tx771460_11) | | | 9 | |

| [Seasonality](#tx771460_12) | | | 9 | |

| [Information about our Executive Officers](#tx771460_14) | | | 10 | |

| | | | | |

| [PART II](#tx771460_20) | | | 21 | |

| | | | | |

| | | | | |

| [PART IV](#tx771460_35) | | | 76 | |

10-K 1 d597971d10k.htm FORM 10-K

##### [Table of Contents](#toc)

| | | |

| --- | --- | --- |

(901) 495-6500

None

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| [PART I](#tx597971_1) | | | | | 5 | |

| | | [Introduction](#tx597971_3) | | | 5 | |

| | | [Commercial](#tx597971_5) | | | 8 | |

| | | [Competition](#tx597971_9) | | | 10 | |

| | | [Employees](#tx597971_11) | | | 10 | |

| | | [Executive Officers of the Registrant](#tx597971_13) | | | 11 | |

| [PART II](#tx597971_19) | | | | | 21 | |

| [PART IV](#tx597971_34) | | | | | 77 | |

None.

None.

The following table reflects the square footage and number of leased and owned properties for our stores as of August [removed: 25, 2018:][added: 31, 2019:]

We have approximately [removed: 5.8] [added: 5.7] million square feet in distribution centers servicing our stores, of which approximately 1.8 million square feet is leased and the remainder is owned.

Our primary store support center is located in Memphis, Tennessee, and consists of approximately [removed: 260,000] [added: 320,000] square feet.

| Leased | | | 3,398 | | | | 22,160,926 | |

| Owned | | | 3,013 | | | | 20,365,525 | |

| Total | | | 6,411 | | | | 42,526,451 | |

Our Internal Sourcing Office is located in Shanghai, China.

| Leased | | | 3,251 | | | | 21,124,799 | |

| Owned | | | 2,951 | | | | 19,941,207 | |

| Total | | | 6,202 | | | | 41,066,006 | |

Our common stock is listed on the New York Stock Exchange under the symbol “AZO.” On October [removed: 22, 2018,] [added: 21, 2019,] there were [removed: 2,233] [added: 2,112] stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings.

The program was most recently amended on [removed: September 26, 2018] [added: October 7, 2019,] to increase the repurchase authorization by [removed: $1.25] [added: $1.250] billion, bringing total value of authorized share repurchases to [removed: $20.9] [added: $23.2] billion.

Shares of common stock repurchased by the Company during the quarter ended August [removed: 25, 2018,] [added: 31, 2019,] were as follows:

| Period | | Total Number of Shares Purchased | | | | Average Price Paid per Share | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | | Maximum [removed: Dollar Value] [added: Dollar Value] that [removed: May Yet] [added: May Yet] Be Purchased Under the Plans or Programs | | |

The Company also repurchased, at market value, an additional [removed: 11,816, 12,455] [added: 17,201, 11,816] and [removed: 12,460] [added: 12,455] shares in fiscal years [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively, from employees electing to sell their stock under the Company’s Sixth Amended and Restated Employee Stock Purchase Plan (the “Employee Plan”), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone’s common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions.

Under the Employee Plan, [removed: 14,523, 14,205] [added: 11,011, 14,523] and [removed: 12,662] [added: 14,205] shares were sold to employees in fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

At August [removed: 25, 2018, 163,777] [added: 31, 2019, 152,766] shares of common stock were reserved for future issuance under the Employee Plan.

Once executives have reached the maximum purchases under the Employee Plan, the [removed: Fifth] [added: Sixth] Amended and Restated Executive Stock Purchase Plan (the “Executive Plan”) permits all eligible executives to purchase AutoZone’s common stock up to 25 percent of his or her annual salary and bonus.

Purchases by executives under the Executive Plan were [removed: 1,840, 1,865] [added: 1,483, 1,840] and [removed: 1,943] [added: 1,865] shares in fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

At August [removed: 25, 2018, 238,048] [added: 31, 2019, 236,565] shares of common stock were reserved for future issuance under the Executive Plan.

The graph below presents changes in the value of AutoZone’s stock as compared to Standard & Poor’s 500 Composite Index (“S&P 500”) and to Standard & Poor’s Retail Index (“S&P Retail Index”) for the five-year period beginning August [removed: 31, 2013] [added: 30, 2014] and ending August [removed: 25, 2018.][added: 31, 2019.]

[removed: ][added: ]

| May 5, 2019, to June 1, 2019 | | | 108,418 | | | $ | 1,014.58 | | | | 108,418 | | | $ | 1,058,574,234 | |

| June 2, 2019, to June 29, 2019 | | | 103,332 | | | | 1,093.45 | | | | 103,332 | | | | 945,586,095 | |

| June 30, 2019, to July 27, 2019 | | | 136,426 | | | | 1,147.37 | | | | 136,426 | | | | 789,054,681 | |

| July 28, 2019, to August 31, 2019 | | | 285,688 | | | | 1,093.02 | | | | 285,688 | | | | 476,792,875 | |

| Total | | | 633,864 | | | $ | 1,091.37 | | | | 633,864 | | | $ | 476,792,875 | |

The following table sets forth the high and low sales prices per share of common stock, as reported by the New York Stock Exchange, for the periods indicated:

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Price Range of Common Stock | | | | | | |

| | | High | | | | Low | | |

| Fiscal Year ended August 25, 2018: | | | | | | | | |

| Fourth quarter | | $ | 771.37 | | | $ | 602.00 | |

| Third quarter | | $ | 735.90 | | | $ | 595.84 | |

| Second quarter | | $ | 796.95 | | | $ | 632.40 | |

| First quarter | | $ | 629.43 | | | $ | 522.38 | |

| Fiscal Year Ended August 26, 2017: | | | | | | | | |

| Fourth quarter | | $ | 709.98 | | | $ | 493.15 | |

| Third quarter | | $ | 741.05 | | | $ | 682.99 | |

| Second quarter | | $ | 809.87 | | | $ | 714.99 | |

| First quarter | | $ | 779.61 | | | $ | 722.44 | |

| May 6, 2018, to June 2, 2018 | | | 228,067 | | | $ | 646.72 | | | | 228,067 | | | $ | 749,051,559 | |

| June 3, 2018, to June 30, 2018 | | | 264,892 | | | | 676.58 | | | | 264,892 | | | | 569,831,573 | |

| July 1, 2018, to July 28, 2018 | | | 283,073 | | | | 691.25 | | | | 283,073 | | | | 374,157,362 | |

| July 29, 2018, to August 25, 2018 | | | 198,036 | | | | 719.41 | | | | 198,036 | | | | 231,688,900 | |

| Total | | | 974,068 | | | $ | 682.56 | | | | 974,068 | | | $ | 231,688,900 | |

| _(in thousands, except per share data, same store sales and [removed: selected operating] [added: selected_ _operating] data)_ | | Fiscal Year Ended August | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019(1)] | | | | [removed: 2017] [added: 2018(2)] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | |

| Net sales | | $ | [removed: 11,221,077] [added: 11,863,743] | | | $ | [removed: 10,888,676] [added: 11,221,077] | | | $ | [removed: 10,635,676] [added: 10,888,676] | | | $ | [removed: 10,187,340] [added: 10,635,676] | | | $ | [removed: 9,475,313] [added: 10,187,340] | |

| Cost of sales, including warehouse and delivery expenses | | | [removed: 5,247,331] [added: 5,498,742] | | | | [removed: 5,149,056] [added: 5,247,331] | | | | [removed: 5,026,940] [added: 5,149,056] | | | | [removed: 4,860,309] [added: 5,026,940] | | | | [removed: 4,540,406] [added: 4,860,309] | |

| Gross profit | | | [removed: 5,973,746] [added: 6,365,001] | | | | [removed: 5,739,620] [added: 5,973,746] | | | | [removed: 5,608,736] [added: 5,739,620] | | | | [removed: 5,327,031] [added: 5,608,736] | | | | [removed: 4,934,907] [added: 5,327,031] | |

| Operating, selling, general and administrative [removed: expenses(1)] [added: expenses] | | | [removed: 4,162,890] [added: 4,148,864] | | | | [removed: 3,659,551] [added: 4,162,890] | | | | [removed: 3,548,341] [added: 3,659,551] | | | | [removed: 3,373,980] [added: 3,548,341] | | | | [removed: 3,104,684] [added: 3,373,980] | |

| Operating [removed: profit(1)] [added: profit] | | | [removed: 1,810,856] [added: 2,216,137] | | | | [removed: 2,080,069] [added: 1,810,856] | | | | [removed: 2,060,395] [added: 2,080,069] | | | | [removed: 1,953,051] [added: 2,060,395] | | | | [removed: 1,830,223] [added: 1,953,051] | |

| Interest expense, net | | | [removed: 174,527] [added: 184,804] | | | | [removed: 154,580] [added: 174,527] | | | | [removed: 147,681] [added: 154,580] | | | | [removed: 150,439] [added: 147,681] | | | | [removed: 167,509] [added: 150,439] | |

| Income before income taxes | | | [removed: 1,636,329] [added: 2,031,333] | | | | [removed: 1,925,489] [added: 1,636,329] | | | | [removed: 1,912,714] [added: 1,925,489] | | | | [removed: 1,802,612] [added: 1,912,714] | | | | [removed: 1,662,714] [added: 1,802,612] | |

| Income tax [removed: expense(2)(3)] [added: expense(3)] | | | [removed: 298,793] [added: 414,112] | | | | [removed: 644,620] [added: 298,793] | | | | [removed: 671,707] [added: 644,620] | | | | [removed: 642,371] [added: 671,707] | | | | [removed: 592,970] [added: 642,371] | |

| Net [removed: income(2)(3)] [added: income(3)] | | $ | [removed: 1,337,536] [added: 1,617,221] | | | $ | [removed: 1,280,869] [added: 1,337,536] | | | $ | [removed: 1,241,007] [added: 1,280,869] | | | $ | [removed: 1,160,241] [added: 1,241,007] | | | $ | [removed: 1,069,744] [added: 1,160,241] | |

| Diluted earnings per [removed: share(2)] [added: share(3)] | | $ | [removed: 48.77] [added: 63.43] | | | $ | [removed: 44.07] [added: 48.77] | | | $ | [removed: 40.70] [added: 44.07] | | | $ | [removed: 36.03] [added: 40.70] | | | $ | [removed: 31.57] [added: 36.03] | |

| Weighted average shares for diluted earnings per [removed: share(2)] [added: share(3)] | | | [removed: 27,424] [added: 25,498] | | | | [removed: 29,065] [added: 27,424] | | | | [removed: 30,488] [added: 29,065] | | | | [removed: 32,206] [added: 30,488] | | | | [removed: 33,882] [added: 32,206] | |

| Increase in domestic comparable store net sales(4) | | | [removed: 1.8] [added: 3.0] | % | | | [removed: 0.5] [added: 1.8] | % | | | [removed: 2.4] [added: 0.5] | % | | | [removed: 3.8] [added: 2.4] | % | | | [removed: 2.8] [added: 3.8] | % |

| Current assets | | $ | [removed: 4,635,869] [added: 5,028,685] | | | $ | [removed: 4,611,255] [added: 4,635,869] | | | $ | [removed: 4,239,573] [added: 4,611,255] | | | $ | [removed: 3,970,294] [added: 4,239,573] | | | $ | [removed: 3,580,612] [added: 3,970,294] | |

| Working capital (deficit) | | | [removed: (392,812] [added: (483,456] | ) | | | [removed: (155,046] [added: (392,812] | ) | | | [removed: (450,747] [added: (155,046] | ) | | | [removed: (742,579] [added: (450,747] | ) | | | [removed: (960,482] [added: (742,579] | ) |

| Total assets | | | [removed: 9,346,980] [added: 9,895,913] | | | | [removed: 9,259,781] [added: 9,346,980] | | | | [removed: 8,599,787] [added: 9,259,781] | | | | [removed: 8,102,349] [added: 8,599,787] | | | | [removed: 7,497,163] [added: 8,102,349] | |

| Current liabilities | | | [removed: 5,028,681] [added: 5,512,141] | | | | [removed: 4,766,301] [added: 5,028,681] | | | | [removed: 4,690,320] [added: 4,766,301] | | | | [removed: 4,712,873] [added: 4,690,320] | | | | [removed: 4,541,094] [added: 4,712,873] | |

| Debt | | | [removed: 5,005,930] [added: 5,206,344] | | | | [removed: 5,081,238] [added: 5,005,930] | | | | [removed: 4,924,119] [added: 5,081,238] | | | | [removed: 4,624,876] [added: 4,924,119] | | | | [removed: 4,323,106] [added: 4,624,876] | |

| Long-term capital leases | | | [removed: 102,013] [added: 123,659] | | | | [removed: 102,322] [added: 102,013] | | | | [removed: 102,451] [added: 102,322] | | | | [removed: 87,639] [added: 102,451] | | | | [removed: 83,098] [added: 87,639] | |

| Stockholders’ (deficit) | | | [removed: (1,520,355] [added: (1,713,851] | ) | | | [removed: (1,428,377] [added: (1,520,355] | ) | | | [removed: (1,787,538] [added: (1,428,377] | ) | | | [removed: (1,701,390] [added: (1,787,538] | ) | | | [removed: (1,621,857] [added: (1,701,390] | ) |

| Number of locations at beginning of year | | | [removed: 6,029] [added: 6,202] | | | | [removed: 5,814] [added: 6,029] | | | | [removed: 5,609] [added: 5,814] | | | | [removed: 5,391] [added: 5,609] | | | | [removed: 5,201] [added: 5,391] | |

| Acquired locations(5) | | | — | | | | — | | | | — | | | | [removed: 17] [added: —] | | | | [removed: —] [added: 17] | |

| Sold locations(6) | | | [removed: 26] [added: —] | | | | [removed: —] [added: 26] | | | | — | | | | — | | | | — | |

| New locations | | | [removed: 201] [added: 209] | | | | [removed: 215] [added: 201] | | | | [removed: 205] [added: 215] | | | | [removed: 202] [added: 205] | | | | [removed: 190] [added: 202] | |

| Closed locations | | | [removed: 2] [added: —] | | | | [removed: —] [added: 2] | | | | — | | | | [removed: 1] [added: —] | | | | [removed: —] [added: 1] | |

| Net new locations | | | [removed: 199] [added: 209] | | | | [removed: 215] [added: 199] | | | | [removed: 205] [added: 215] | | | | [removed: 201] [added: 205] | | | | [removed: 190] [added: 201] | |

| Relocated locations | | | [removed: 7] [added: 2] | | | | [removed: 5] [added: 7] | | | | [removed: 6] [added: 5] | | | | [removed: 5] [added: 6] | | | | [removed: 8] [added: 5] | |

| Number of locations at end of year | | | [removed: 6,202] [added: 6,411] | | | | [removed: 6,029] [added: 6,202] | | | | [removed: 5,814] [added: 6,029] | | | | [removed: 5,609] [added: 5,814] | | | | [removed: 5,391] [added: 5,609] | |

| AutoZone domestic commercial programs | | | [removed: 4,741] [added: 4,893] | | | | [removed: 4,592] [added: 4,741] | | | | [removed: 4,390] [added: 4,592] | | | | [removed: 4,141] [added: 4,390] | | | | [removed: 3,845] [added: 4,141] | |

| Inventory per location (in thousands) | | $ | [removed: 636] [added: 674] | | | $ | [removed: 644] [added: 636] | | | $ | [removed: 625] [added: 644] | | | $ | [removed: 610] [added: 625] | | | $ | [removed: 582] [added: 610] | |

| Total AutoZone store square footage (in thousands) | | | [removed: 41,066] [added: 42,526] | | | | [removed: 39,684] [added: 41,066] | | | | [removed: 38,198] [added: 39,684] | | | | [removed: 36,815] [added: 38,198] | | | | [removed: 35,424] [added: 36,815] | |

| Average square footage per AutoZone store | | | [removed: 6,621] [added: 6,633] | | | | [removed: 6,611] [added: 6,621] | | | | [removed: 6,600] [added: 6,611] | | | | [removed: 6,587] [added: 6,600] | | | | [removed: 6,571] [added: 6,587] | |

| Increase in AutoZone store square footage | | | [removed: 3.5] [added: 3.6] | % | | | [removed: 3.9] [added: 3.5] | % | | | [removed: 3.8] [added: 3.9] | % | | | [removed: 3.9] [added: 3.8] | % | | | [removed: 4.0] [added: 3.9] | % |

| Average net sales per AutoZone store (in thousands) | | $ | [removed: 1,778] [added: 1,847] | | | $ | [removed: 1,756] [added: 1,778] | | | $ | [removed: 1,773] [added: 1,756] | | | $ | [removed: 1,761] [added: 1,773] | | | $ | [removed: 1,724] [added: 1,761] | |

| Net sales per AutoZone store [added: average] square foot | | $ | [removed: 269] [added: 279] | | | $ | [removed: 266] [added: 269] | | | $ | [removed: 269] [added: 266] | | | $ | [removed: 268] [added: 269] | | | $ | [removed: 263] [added: 268] | |

| Total employees at end of year (in thousands) | | | [removed: 89] [added: 96] | | | | [removed: 87] [added: 89] | | | | [removed: 84] [added: 87] | | | | [removed: 81] [added: 84] | | | | [removed: 76] [added: 81] | |

| Accounts payable to inventory ratio | | | [removed: 111.8] [added: 112.6] | % | | | [removed: 107.4] [added: 111.8] | % | | | [removed: 112.8] [added: 107.4] | % | | | [removed: 112.9] [added: 112.8] | % | | | [removed: 114.9] [added: 112.9] | % |

| After-tax return on invested capital(8) | | | [removed: 32.1] [added: 35.7] | % | | | [removed: 29.9] [added: 32.1] | % | | | [removed: 31.3] [added: 29.9] | % | | | [removed: 31.2] [added: 31.3] | % | | | [removed: 32.1] [added: 31.2] | % |

| Adjusted debt to EBITDAR(9) | | | 2.5 | | | | [removed: 2.6] [added: 2.5] | | | | [removed: 2.5] [added: 2.6] | | | | 2.5 | | | | 2.5 | |

| Inventory turnover(7) | | | 1.3 | x | | | 1.3 | x | | | 1.4 | x | | | 1.4 | x | | | 1.4 | x |

| _(1)_ | _The fiscal year ended August 31, 2019 consisted of 53 weeks._ |

| Inventory turnover(7) | | | 1.3x | | | | 1.4x | | | | 1.4x | | | | 1.4x | | | | 1.5x | |

| _(3)_ | _Fiscal 2018 includes a benefit to net income related to Tax Reform. See “Note D – Income Taxes” of the Notes to Consolidated Financial Statements for more information._ |

| [Management’s Report on Internal Control Over Financial [removed: Reporting](#tx597971_37)] [added: Reporting](#tx771460_38)] | | | [removed: 41] [added: 39] | |

| [Reports of Independent Registered Public Accounting [removed: Firm](#tx597971_39)] [added: Firm](#tx771460_40)] | | | [removed: 42] [added: 40] | |

| [Consolidated Statements of [removed: Income](#tx597971_40)] [added: Income](#tx771460_41)] | | | [removed: 45] [added: 44] | |

| [Consolidated Statements of Comprehensive [removed: Income](#tx597971_41)] [added: Income](#tx771460_42)] | | | [removed: 45] [added: 44] | |

| [Consolidated Balance [removed: Sheets](#tx597971_42)] [added: Sheets](#tx771460_43)] | | | [removed: 46] [added: 45] | |

| [Consolidated Statements of Cash [removed: Flows](#tx597971_43)] [added: Flows](#tx771460_44)] | | | [removed: 47] [added: 46] | |

| [Consolidated Statements of Stockholders’ [removed: Deficit](#tx597971_44)] [added: Deficit](#tx771460_45)] | | | [removed: 48] [added: 47] | |

| [Notes to Consolidated Financial [removed: Statements](#tx597971_45)] [added: Statements](#tx771460_46)] | | | [removed: 49] [added: 48] | |

Management, with the participation of our principal executive and financial officers, assessed our internal control over financial reporting as of August [removed: 25, 2018,] [added: 31, 2019,] the end of our fiscal year.

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of August [removed: 25, 2018.][added: 31, 2019.]

Ernst & Young LLP’s attestation report on the Company’s internal control over financial reporting as of August [removed: 25, 2018] [added: 31, 2019] is included in this Annual Report on Form 10-K.

| Vice President – [removed: Finance and] [added: Finance,] Information |

On [removed: January 3,] [added: December 20,] 2018, the Company submitted to the New York Stock Exchange the Annual CEO Certification required pursuant to Section 303A.12(a) of the New York Stock Exchange Listed Company Manual.

The Company has filed, as exhibits to its Annual Report on Form 10-K for the fiscal year ended August [removed: 25, 2018,] [added: 31, 2019,] the certifications of its Principal Executive Officer and Principal Financial Officer required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

[removed: The] [added: To the] Board of Directors and Stockholders of AutoZone, Inc.

Opinion on [removed: the] Internal Control Over Financial Reporting

We have audited AutoZone Inc.’s internal control over financial reporting as of August [removed: 25, 2018,] [added: 31, 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, AutoZone, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of August [removed: 25, 2018,] [added: 31, 2019,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of AutoZone, Inc. as of August [removed: 25, 2018] [added: 31, 2019] and August [removed: 26, 2017,] [added: 25, 2018,] and the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for each of the three years in the period ended August [removed: 25, 2018,] [added: 31, 2019,] and the related notes and our report dated October [removed: 24, 2018,] [added: 28, 2019,] expressed an unqualified opinion thereon.

[added: |] /s/ Ernst & Young LLP [added: |]

We have audited the accompanying consolidated balance sheets of AutoZone, Inc. (the Company) as of August [removed: 25, 2018] [added: 31, 2019] and August [removed: 26, 2017,] [added: 25, 2018,] the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for each of the three years in the period ended August [removed: 25, 2018,] [added: 31, 2019,] and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August [removed: 25, 2018] [added: 31, 2019] and August [removed: 26, 2017,] [added: 25, 2018,] and the results of its operations and its cash flows for each of the three years in the period ended August [removed: 25, 2018,] [added: 31, 2019,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August [removed: 25, 2018,] [added: 31, 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated October [removed: 24, 2018,] [added: 28, 2019,] expressed an unqualified opinion thereon.

[removed: Consolidated] [added: AutoZone, Inc. Consolidated] Statements of Income

| | | Year Ended | | | | | | | [removed: | | | |]

| _(in thousands, except per share data)_ | | August [removed: 25, 2018 (52] [added: 31, 2019 (53] weeks) | | | | August [removed: 26, 2017] [added: 25, 2018] (52 weeks) | | | | August [removed: 27, 2016] [added: 26, 2017] (52 weeks) | | |

| Net sales | | $ | [removed: 11,221,077] [added: 11,863,743] | | | $ | [removed: 10,888,676] [added: 11,221,077] | | | $ | [removed: 10,635,676] [added: 10,888,676] | |

| Cost of sales, including warehouse and delivery expenses | | | [removed: 5,247,331] [added: 5,498,742] | | | | [removed: 5,149,056] [added: 5,247,331] | | | | [removed: 5,026,940] [added: 5,149,056] | |

| Gross profit | | | [removed: 5,973,746] [added: 6,365,001] | | | | [removed: 5,739,620] [added: 5,973,746] | | | | [removed: 5,608,736] [added: 5,739,620] | |

| Operating, selling, general and administrative expenses | | | [removed: 4,162,890] [added: 4,148,864] | | | | [removed: 3,659,551] [added: 4,162,890] | | | | [removed: 3,548,341] [added: 3,659,551] | |

| Operating profit | | | [removed: 1,810,856] [added: 2,216,137] | | | | [removed: 2,080,069] [added: 1,810,856] | | | | [removed: 2,060,395] [added: 2,080,069] | |