AutoZone (AZO) 10-K risk factor changes: FY2020 vs FY2019

If we are unable to continue to manage readily-available inventory demand and competitive delivery options as well as develop successful competitive strategies, including the maintenance of effective promotions, advertising and loyalty [removed: card] programs, or if our competitors develop more effective strategies, we could lose customers and our sales and profits may decline.

We have increased our store count in the past five fiscal years, growing from [removed: 5,391] [added: 5,609] stores at August [removed: 30, 2014,] [added: 29, 2015,] to [removed: 6,411] [added: 6,549] stores at August [removed: 31, 2019,] [added: 29, 2020,] an average store increase per year of [removed: 4%.][added: three percent.]

Additionally, we have increased annual revenues in the past five fiscal years from [removed: $9.475] [added: $10.187] billion in fiscal [removed: 2014] [added: 2015] to [removed: $11.864] [added: $12.632] billion in fiscal [removed: 2019,] [added: 2020,] an average increase per year of [removed: 5%.][added: five percent.]

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

Continued distress in global credit markets, business failures, inflation, foreign exchange rate fluctuations, significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy [removed: prices] [added: prices, the impact of a public health crisis or pandemic (such as COVID-19)] and other factors continue to affect the global economy.

[removed: Over the short-term,] [added: It is unclear how] such factors could [removed: positively] impact our [removed: business.][added: business in the short term.]

We believe that much of our brand value lies in the quality of the approximately [removed: 96,000] [added: 100,000] 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 related to minimum [removed: wage] [added: wage, benefits] and [removed: benefits.][added: scheduling requirements.]

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

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

If we do not maintain competitive [removed: wages,] [added: wages or benefit packages,] our customer service could suffer due to a declining quality of our workforce or, alternatively, our earnings could decrease if we increase our wage rates.

We are dependent upon our domestic and international vendors continuing to supply us with quality merchandise at [removed: favorable] [added: competitive] prices and payment terms.

Credit market and other macroeconomic [removed: conditions] [added: conditions, including disruption to the global supply chain,] could have a material adverse effect on the ability of our suppliers to finance and operate their businesses, resulting in increased product costs and difficulties in meeting our inventory demands.

We directly imported approximately [removed: 14%] [added: 13%] of our purchases in fiscal [removed: 2019,] [added: 2020,] but many of our domestic vendors directly import their products or components of their products.

Changes to the price or flow of these goods for any reason, such as [removed: political] [added: civil] 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, 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, often are beyond our control and could adversely affect our operations and profitability.

These and other [removed: factors] [added: factors, such as the COVID-19 pandemic,] affecting our suppliers and our access to products could adversely affect our business and financial performance.

The methods used to obtain unauthorized access are constantly [removed: evolving,] [added: evolving] and may be difficult to anticipate or detect for long periods of time.

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

[removed: Governments may issue guidance or enact tax laws which could result in changes to] [added: As a result,] our [removed: tax position and] [added: self-insurance costs could increase which may] adversely [removed: impact] [added: affect] our [added: business,] results of operations, financial condition and cash flows.

[removed: Our business, financial condition,] [added: Our business,] results of [removed: operations] [added: operations, financial condition] and cash flows may be [added: adversely] affected by [removed: litigation.][added: the adoption of new laws, changes to existing laws, increased enforcement activity or other governmental actions.]

We are involved in lawsuits, regulatory investigations, governmental and other legal [removed: procedures,] [added: proceedings,] arising out of the ordinary course of business.

[removed: Legal action] [added: The damages sought against us in these proceedings] may be material and may adversely affect our business, results of operations, financial condition and cash flows.

Our systems and the third-party systems we rely on are subject to damage or interruption from power outages, [added: facility damage, physical theft,] telecommunications failures, computer viruses, security breaches, malicious cyber-attacks, catastrophic events, and design or usage errors by our AutoZoners, contractors or third-party service providers.

[removed: Our business is] [added: We are] 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 [removed: our business] [added: we] may experience significant delays, costs increases and other obstacles with these projects.

War or acts of terrorism, political [added: or civil] unrest, unusual weather conditions, hurricanes, tornadoes, windstorms, fires, earthquakes, [removed: floods] [added: floods, global health epidemics (such as COVID-19)] and other natural or other disasters or the threat of any of them, may result in certain of our locations being closed for a period of time or permanently or have a negative impact on our ability to obtain merchandise available for sale in our locations.

The ongoing outbreak of COVID-19 has been declared a pandemic by the World Health Organization, continues to spread within the United States and many other parts of the world and may have a material adverse effect on our business operations, financial condition, liquidity and cash flow.

As the outbreak of COVID-19 continues to grow both in the U.S. and globally, there has been significant volatility in financial market indices and the adoption of emergency legislation aimed to address the negative impacts of the pandemic.

While sales were initially negatively impacted and we have incurred significant expenses, following the U.S. federal government stimulus, our sales rebounded, reaching record levels.

We are unable to accurately predict the impact that COVID-19 will have on our business and financial condition due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, the likelihood of a resurgence of the outbreak, actions that may be taken by governmental authorities in response to the disease and unintended consequences of the foregoing.

In particular, it is unclear what near-term and long-term impact these factors will have on the number of vehicle miles driven, traffic to our stores, as well as demand for our products from our retail and commercial customers.

Continued business disruption caused by COVID-19 may require significant actions to mitigate the impact, including but not limited to employee furloughs, reductions in store hours and store closings as well as ongoing increases in expenses.

Further, the continuing pandemic and related economic uncertainty may result in prolonged disruption to our business, additional negative impacts of which we are not currently aware and may also magnify other risks associated with our business and operations, including risks associated with sourcing quality merchandise domestically and outside the U.S.; our ability to promptly adjust inventory levels to meet fluctuations in customer demand; our ability to comply with complex and evolving laws and regulations related to customers’ and AutoZoners’ health and safety; our ability to open new store locations and expand or remodel existing stores; and our ability to hire and train qualified employees to address temporary or sustained labor shortages.

Accordingly, the COVID-19 pandemic could have a material adverse effect on demand for our products, workforce availability and our results of operations, financial condition, liquidity and cash flows.

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We maintain insurance coverage that may protect us from certain cyber-attack claims; however, our insurance coverage may not be sufficient to cover significant losses in any particular situation.

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We are self-insured for certain costs associated with our operations and an increase in our insurance claims and expenses may have a material negative impact on us.

We are self-insured up to certain limits for workers’ compensation, employee group medical, general liability, product liability, property and automobile.

The types and amounts of insurance may vary from time to time based on our decisions with respect to risk retention and regulatory requirements.

Our reserves are established using historical trends and where appropriate, using a third party actuary, to estimate costs to settle reported claims and claims incurred but not yet reported.

Estimated costs are subject to a variety of assumptions and other factors including the severity, duration and frequency of claims, legal costs associated with claims, healthcare trends and projected inflation of related factors.

Material increases in the number of insurance claims, changes to healthcare costs, accident frequency and severity, legal expenses and other factors could result in unfavorable difference between actual self-insurance costs and our reserve estimates.

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General Risk Factors

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We are subject to numerous federal, state and local laws and regulations, many of which are complex, frequently revised and subject to varying interpretations.

These include laws governing employment and labor, wage and hour, environmental matters, proper handling and disposal of hazardous materials and waste, healthcare, data privacy, cybersecurity, the pricing and sale of goods, import and export compliance and transportation and logistics, among others.

These laws may differ substantially in the areas where we operate.

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

During brief time intervals, there was limited liquidity in the commercial paper markets, resulting in an absence of commercial paper buyers and extraordinarily high interest rates.

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.

We began operations in 1979 and at August [removed: 31, 2019,] [added: 29, 2020,] operated [removed: 5,772] [added: 5,885] stores in the U.S., [removed: including Puerto Rico and Saint Thomas; 604] [added: 621] stores in [removed: Mexico;] [added: Mexico] and [removed: 35] [added: 43] stores in Brazil.

At August [removed: 31, 2019,] [added: 29, 2020,] in [removed: 4,893] [added: 5,007] 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.

We also have commercial programs in [added: all] stores in Mexico and Brazil.

[removed: Executive Summary][added: Executive Summary]

For fiscal [removed: 2019,] [added: 2020,] we achieved record net income of [removed: $1.617] [added: $1.733] billion, a [removed: 20.9%] [added: 7.2%] increase over the prior year, and sales growth of [removed: $642.7] [added: $768.2] million, a [removed: 5.7%] [added: 6.5%] increase over the prior year.

Both our retail sales and commercial sales grew this past [removed: year,] [added: year] as we continue to make progress on our initiatives that are aimed at improving our ability to say [removed: yes] [added: “Yes”] to our customers more frequently, drive traffic to our stores and accelerate our commercial growth.

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 rates and other economic [removed: conditions.][added: conditions, including for fiscal 2020, COVID-19.]

One macroeconomic factor affecting our customers and our industry during fiscal [removed: 2019] [added: 2020] was gas prices.

During fiscal [removed: 2019,] [added: 2020,] the average price per gallon of unleaded gasoline in the U.S. was [removed: $2.63] [added: $2.32] per gallon, compared to [removed: $2.67] [added: $2.63] per gallon during fiscal [removed: 2018.][added: 2019.]

We have also experienced [added: continued] accelerated pressure on wages in the U.S. during fiscal [removed: 2019.][added: 2020.]

Some of this is attributed to regulatory changes in certain states and municipalities, while the larger portion is being driven by general market pressures [removed: with lower unemployment rates] and some specific actions taken in recent years by other retailers.

The regulatory changes are [removed: going] [added: expected] to continue, as evidenced by the areas that have passed legislation to increase [removed: their] [added: employees’] wages substantially over the next few years, but we are still assessing to what degree these changes will impact our earnings growth in future periods.

During fiscal [removed: 2019,] [added: 2020,] failure and maintenance related categories represented the largest portion of our sales mix, at approximately [removed: 85%] [added: 84%] of total sales, with failure related categories continuing to comprise our largest set of categories.

While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in our domestic stores we did experience a slight increase in mix of sales of the [removed: failure] [added: discretionary] category as compared to last year.

[removed: _Miles Driven_][added: Miles Driven]

During the periods of minimal correlation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including [added: macroeconomic factors and] the number of seven year old or older vehicles on the road.

Since the beginning of the fiscal year and through July [removed: 2019] [added: 2020] (latest publicly available information), miles driven in the U.S. [removed: increased] [added: decreased] by [removed: 0.8%] [added: 8.8%] compared to the same period in the prior year.

[removed: _Seven] [added: Seven] Year Old or Older [removed: Vehicles_][added: Vehicles]

New vehicles sales [removed: increased 0.2%] [added: decreased 0.8%] during [removed: 2019] [added: 2020] as compared to the prior calendar year.

According to the latest data provided by the Auto Care Association, as of January 1, [removed: 2019,] [added: 2020,] the average age of vehicles on the road was [removed: 11.8] [added: 11.9] years.

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

[removed: Results] [added: Results] of [removed: Operations][added: Operations]

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

For the fiscal year ended August [removed: 31, 2019,] [added: 29, 2020,] we reported net sales of [removed: $11.864] [added: $12.632] billion compared with [removed: $11.221] [added: $11.864] billion for the year ended August [removed: 25, 2018,] [added: 31, 2019,] a [removed: 5.7%] [added: 6.5%] increase from fiscal [removed: 2018.][added: 2019.]

This growth was driven primarily by [removed: net sales of $410.5 million from new domestic stores, the additional 53rd week sales of $238.6 million and] a domestic same store sales increase of [removed: 3.0% partially offset by the impact of the sale] [added: 7.4% and net sales] of [removed: two businesses in the prior year.][added: $244.7 million from new stores.]

At August [removed: 31, 2019,] [added: 29, 2020,] we operated [removed: 5,772] [added: 5,885] domestic stores, [removed: 604] [added: 621] in Mexico and [removed: 35] [added: 43] in Brazil, compared with [removed: 5,618] [added: 5,772] domestic stores, [removed: 564] [added: 604] in Mexico and [removed: 20] [added: 35] in Brazil at August [removed: 25, 2018.][added: 31, 2019.]

We reported a total auto parts segment (domestic, [removed: Mexico, Brazil] [added: Mexico] and [removed: IMC through April 4, 2018)] [added: Brazil)] sales increase of [removed: 6.3%] [added: 6.5%] for fiscal [removed: 2019.][added: 2020.]

Gross profit for fiscal [removed: 2019] [added: 2020] was [removed: $6.365] [added: $6.771] billion, or [removed: 53.7%] [added: 53.6%] of net sales, a [removed: 41] [added: 5] basis point [removed: increase] [added: decrease] compared with [removed: $5.974] [added: $6.365] billion, or [removed: 53.2%] [added: 53.7%] of net sales for fiscal [removed: 2018.][added: 2019.]

Operating, selling, general and administrative expenses for fiscal [removed: 2019 decreased] [added: 2020 increased] to [removed: $4.149] [added: $4.353] billion, or [removed: 35.0%] [added: 34.5%] of net sales, from [removed: $4.163] [added: $4.149] billion, or [removed: 37.1%] [added: 35.0%] of net sales for fiscal [removed: 2018.][added: 2019.]

Interest expense, net for fiscal [removed: 2019] [added: 2020] was [removed: $184.8] [added: $201.2] million compared with [removed: $174.5] [added: $184.8] million during fiscal [removed: 2018.][added: 2019.]

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

Average borrowings for fiscal [removed: 2019] [added: 2020] were [removed: $5.097] [added: $5.393] billion, compared with [removed: $4.997] [added: $5.097] billion for fiscal [removed: 2018, and weighted average borrowing rates were 3.2% for fiscal 2019 and fiscal 2018.][added: 2019.]

Our effective income tax rate was [removed: 20.4%] [added: 21.8%] of pre-tax income for fiscal [removed: 2019] [added: 2020] compared to [removed: 18.3%] [added: 20.4%] for fiscal [removed: 2018.][added: 2019.]

Net income for fiscal [removed: 2019] [added: 2020] increased by [removed: 20.9%] [added: 7.2%] to [removed: $1.617] [added: $1.733] billion, and diluted earnings per share increased [removed: 30.1%] [added: 13.4%] to [removed: $63.43] [added: $71.93] from [removed: $48.77] [added: $63.43] in fiscal [removed: 2018.][added: 2019.]

The impact on the fiscal [removed: 2019] [added: 2020] diluted earnings per share from stock repurchases was an increase of [removed: $1.83.][added: $1.59.]

[removed: _Fiscal 2018] [added: Fiscal 2020] Compared with Fiscal [removed: 2017_][added: 2019]

A discussion of changes in our results of operations from fiscal [removed: 2017] [added: 2018] to fiscal [removed: 2018] [added: 2019] 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 [removed: 25, 2018,] [added: 31, 2019,] filed with the SEC on October [removed: 24, 2018,] [added: 28, 2019,] 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.

[removed: Quarterly Periods][added: Quarterly Periods]

Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of [added: 16 weeks in 2020,] 17 weeks in 2019 and 16 weeks in [removed: 2018 and 2017.][added: 2018.]

We also provide product information on our Duralast branded products through www.duralastparts.com.

COVID-19 Impact

The outbreak of a novel strain of the coronavirus (“COVID-19”), which was declared a global pandemic on March 11, 2020 by the World Health Organization, has led to adverse impacts on the national and global economy.

We have been able to keep our stores open and operating in the U.S. Initially, we reduced the hours of operation in most stores, but subsequently have returned to more normal operating hours.

We have also taken numerous measures to ensure the health, safety and well-being of our customers and employees.

We provided new Emergency Time-Off benefit enhancements for both full-time and part-time eligible hourly employees in the U.S. We invested in supplies for the protection of our employees and customers, increased the frequency of cleaning and disinfecting, and introduced new service options for customers, such as curbside pickup, among other things.

These expanded benefits, supply costs and other COVID-19 related costs resulted in approximately $83.9 million of expense included in Operating, selling, general and administrative expenses in the Condensed Consolidated Statements of Income for the year ended August 29, 2020.

In March 2020, we issued $1.250 billion in Senior Notes and closed on a new 364-day Senior unsecured revolving credit facility to strengthen our financial position and our ability to be responsive during this ever-changing environment.

We have also experienced challenges in recruiting and hiring employees in certain of our retail stores and distribution centers.

While sales were initially negatively impacted, they have since increased to record levels.

However, we are unable to accurately predict the impact that COVID-19 will have due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic or to stimulate the economy or other unintended consequences.

Accordingly, continued business disruption related to the COVID-19 outbreak may continue to cause significant fluctuations in our business, unusually impacting demand for our products, our store hours and our workforce availability and magnify risks associated with sourcing quality merchandise domestically and outside the U.S. at competitive prices, some of which would adversely impact our business and results of operations.

Further, a resurgence of the outbreak or other unforeseen developments may impede our ability to complete construction and open new stores at our desired pace.

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Domestic commercial sales increased 6.4%, which represents 21.6% of our total sales.

Fiscal 2020 consisted of 52 weeks whereas fiscal 2019 consisted of 53 weeks.

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 rates and other economic conditions, including for fiscal 2020, the effects of, and responses to, COVID-19.

Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.

We believe the improvement in this sales category resulted from the pandemic as many of our customers had more time to work on projects.

We believe this decrease is a result of the pandemic, but we are unable to predict if this decline will continue and are uncertain if it continues the impact it will have to our business.

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Domestic commercial sales increased $164.9 million, or 6.4%, over domestic commercial sales for fiscal 2019.

The decrease in gross margin was primarily attributable to lower merchandise margins driven primarily by a shift in mix.

The decrease in operating expenses, as a percentage of sales, was primarily due to leverage from higher sales growth, partially offset by $83.9 million of costs incurred in response to COVID-19.

Weighted average borrowing rates were 3.3% for fiscal 2020 and 3.2% for fiscal 2019.

The increase in the tax rate was primarily attributable to a reduced benefit from stock options exercised during fiscal 2020 compared to fiscal 2019.

The benefit of stock options exercised for fiscal 2020 was $20.9 million compared to $46.0 million for fiscal 2019 (see “Note D – Income Taxes” in the Notes to Consolidated Financial Statements).

Net income and diluted earnings per share for fiscal 2019 benefitted from an additional week of sales.

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The increase in net cash used in investing activities in fiscal 2020, compared to fiscal 2019, was the result of an investment in a tax credit equity investment, partially offset by a decrease in capital expenditures.

The decrease in capital expenditures from fiscal 2019 to fiscal 2020 was attributable to delayed store openings in response to COVID-19.

The decrease in purchases of treasury stock for fiscal 2020 was due to the temporary suspension of the share repurchase program in order to conserve liquidity in response to the uncertainty related to COVID-19.

The expected increase is driven by delays in capital spending for the third and fourth quarter of fiscal 2020 related to COVID-19.

The terms of these agreements are between the vendor and the financial institution.

Upon request from the vendor, we confirm to the vendor’s financial institution the balances owed to the vendor, the due date and agree to waive any right of offset to the confirmed balances.

A downgrade in our credit or changes in the financial markets may limit the financial institutions’ willingness to participate in these arrangements, which may result in the vendor wanting to renegotiate payment terms.

A reduction in payment terms would increase the working capital required to fund future inventory investments.

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For fiscal 2020, ROIC was presented net of average excess cash of $374.2 million.

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We believe the improvement in this sales category was driven by differences in regional weather patterns and improved merchandise assortments due to the products we have added over the last year.

Our sales mix can be impacted by severe or unusual weather over a short term period.

Over the long term, we believe the impact of the weather on our sales mix is not significant.

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 increase in gross margin was primarily attributable to the favorable impact of the sale of two businesses completed in the prior year (+37 basis points).

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.

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

The higher tax rate resulted primarily from net impacts of the enactment of Tax Reform (see “Note D - Income Taxes” in the Notes to Consolidated Financial Statements).

Our primary capital requirement has been the funding of our continued new-location development program and the building of new distribution centers.

The decrease in capital expenditures from fiscal 2018 to fiscal 2019 was attributable to one distribution center opening in fiscal 2018 and none constructed in fiscal 2019.

We opened two distribution centers in fiscal 2017.

In fiscal 2017, our capital expenditures increased by approximately 13% as compared to the prior year.

In recent years, we initiated a variety of strategic tests focused on increasing inventory availability, which increased our inventory per location.

Many of our vendors have supported our initiative to update our product assortments by providing extended payment terms.

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, 2017, we issued $600 million in 3.750% Senior Notes due June 2027 under our shelf registration statement filed with the SEC on April 15, 2015 (the “2015 Shelf Registration”).

For fiscal 2018, net income was adjusted to exclude impairment charges and pension termination charges before tax impact as these charges are not reflective of ongoing operations.

On September 26, 2018, the Board voted to increase the authorization by $1.25 billion.

On March 20, 2019, the Board voted to increase the authorization by $1.0 billion.

This raised the total value of shares authorized to be repurchased to $21.9 billion.

If we allowed these funds to accumulate on our balance sheet instead of repurchasing our shares, we believe our earnings per share and stock price would be negatively impacted.

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

| 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 | |

| _(3)_ | _Operating lease obligations are inclusive of amounts accrued within deferred rent and closed store obligations reflected in our Consolidated Balance Sheets._ |

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| | | $ | 137,857 | |

| _(1)_ | _The Company adopted the provisions of ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting, as of August 28, 2016. We have applied ASU 2016-09 relating to the presentation of the excess tax benefits on the Consolidated Statements of Cash Flows retrospectively. Prior period amounts for net cash provided by operating and financing activities for fiscal 2015 presented above were restated to conform to the current period presentation._ |

| _(4)_ | _For fiscal 2018 and 2019, after-tax operating profit was adjusted for the impact of the revaluation of deferred tax liabilities, net of repatriation tax._ |

| _(2)_ | _For fiscal 2018, net income was adjusted to exclude impairment charges and pension termination charges before tax._ |

Our liability for health benefits is classified as current, as the historical average duration of claims is approximately six weeks.

[removed: _Interest] [added: Interest] Rate [removed: Risk_][added: Risk]

The fair value of our debt was estimated at [removed: $5.419] [added: $6.081] billion as of August [removed: 31, 2019,] [added: 29, 2020,] and [removed: $4.948] [added: $5.419] billion as of August [removed: 25, 2018,] [added: 31, 2019,] 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 greater than the carrying value of debt by [removed: $212.7] [added: $567.5] million at August [removed: 31, 2019,] [added: 29, 2020,] which reflects its face amount, adjusted for any unamortized debt issuance costs and discounts.

At August [removed: 25, 2018,] [added: 31, 2019,] the fair value was [removed: less] [added: greater] than the carrying value of debt by [removed: $57.5] [added: $212.7] million.

We had [removed: $1.030 billion of] [added: no] variable rate debt outstanding at August [removed: 31, 2019,] [added: 29, 2020,] and [removed: $1.325] [added: $1.030] billion of variable rate debt outstanding at August [removed: 25, 2018.][added: 31, 2019.]

We had outstanding fixed rate debt of [removed: $4.176] [added: $5.513] billion, net of unamortized debt issuance costs of [removed: $23.7] [added: $36.6] million, at August [removed: 31, 2019,] [added: 29, 2020,] and [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.]

A one percentage point increase in interest rates would have reduced the fair value of our fixed rate debt by approximately [removed: $190.3] [added: $318.7] million at August [removed: 31, 2019.][added: 29, 2020.]

[removed: _Foreign] [added: Foreign] Currency [removed: Risk_][added: Risk]

The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end exchange rates was [removed: $328.8] [added: $293.1] million at August [removed: 31, 2019] [added: 29, 2020] and [removed: $590.7] [added: $328.8] million at August [removed: 25, 2018.][added: 31, 2019.]

The year-end exchange rates with respect to the Mexican peso decreased by approximately [removed: 7%] [added: 10%] and approximately [removed: 6%] [added: 7%] with respect to the U.S. dollar during fiscal [removed: 2019] [added: 2020] and fiscal [removed: 2018.][added: 2019, respectively.]

The 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: 31, 2019] [added: 29, 2020] and August [removed: 25, 2018,] [added: 31, 2019,] would have been approximately [removed: $29.9] [added: $26.6] million and approximately [removed: $53.7] [added: $29.9] million, respectively.

‌ ​

‌ ​

In fiscal 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 $10.3 million.

The primary interest rate exposure on variable rate debt is based on LIBOR.

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

[removed: Introduction][added: Introduction]

We began operations in 1979 and at August [removed: 31, 2019,] [added: 29, 2020,] operated [removed: 5,772] [added: 5,885] stores in the United States [removed: (U.S.), including Puerto Rico and Saint Thomas; 604] [added: (“U.S.”), 621] stores in [removed: Mexico;] [added: Mexico] and [removed: 35] [added: 43] stores in Brazil.

At August [removed: 31, 2019,] [added: 29, 2020,] in [removed: 4,893] [added: 5,007] 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.

We also have commercial programs in [added: all] stores in Mexico and Brazil.

[removed: Additionally, on www.duralastparts.com we] [added: We also] provide product information on our Duralast branded [removed: product.][added: products through www.duralastparts.com.]

At August [removed: 31, 2019,] [added: 29, 2020,] our stores were in the following locations:

| [added: ​] | | Store [removed: Count] | [removed: | |]

| Alaska | | [removed: |] 8 | [removed: |]

| Arkansas | | [removed: | 66 |] [added: 67] |

| Colorado | | [removed: | 91 |] [added: 93] |

| Connecticut | | [removed: |] 49 | [removed: |]

| Delaware | | [removed: |] 16 | [removed: |]

| Hawaii | | [removed: |] 11 | [removed: |]

| Idaho | | [removed: | 30 |] [added: 31] |

| Iowa | | [removed: |] 32 | [removed: |]

| Kansas | | [removed: |] 54 | [removed: |]

| Kentucky | | [removed: | 98 |] [added: 100] |

| Maine | | [removed: |] 14 | [removed: |]

| Maryland | | [removed: | 80 |] [added: 81] |

| Massachusetts | | [removed: |] 82 | [removed: |]

| Minnesota | | [removed: | 57 |] [added: 58] |

| Mississippi | | [removed: |] 95 | [removed: |]

| Missouri | | [removed: |] 116 | [removed: |]

| Montana | | [removed: | 14 |] [added: 15] |

| Nebraska | | [removed: |] 23 | [removed: |]

| Nevada | | [removed: | 65 |] [added: 66] |

| New Hampshire | | [removed: |] 23 | [removed: |]

| New Jersey | | [removed: | 108 |] [added: 111] |

| New Mexico | | [removed: | 62 |] [added: 63] |

| New York | | [removed: | 201 |] [added: 204] |

| North Carolina | | [removed: | 221 |] [added: 226] |

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

| Oklahoma | | [removed: | 78 |] [added: 82] |

| Oregon | | [removed: | 48 |] [added: 50] |

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

| Rhode Island | | [removed: |] 17 | [removed: |]

| Saint Thomas | | [removed: |] 1 | [removed: |]

| South Carolina | | [removed: | 90 |] [added: 95] |

| South Dakota | | [removed: | 8 |] [added: 9] |

| Utah | | [removed: |] 61 | [removed: |]

‌ ​

| ​ | ​ | ​ |

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

| ​ | ​ | Count |

| Alabama | | 118 |

| Arizona | | 159 |

| California | | 631 |

| Florida | | 379 |

| Georgia | | 204 |

| Illinois | | 241 |

| Indiana | | 158 |

| Louisiana | | 127 |

| Michigan | | 203 |

| Ohio | | 274 |

| Pennsylvania | | 205 |

| Tennessee | | 169 |

| Texas | | 637 |

| Virginia | | 141 |

| Mexico | | 621 |

‌ ​

| ​ | ​ | ​ | ​ | ​ |

‌ ​

‌ ​

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

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

​

‌ ​

A majority of these 5,700 stores currently receive their service same day.

‌ ​

‌ ​

Giles was named Chief Financial Officer during May 2006 and has notified the Company of his intent to retire, effective December 31, 2020.

_Jamere Jackson, 51—Chief Financial Officer and Executive Vice President – Finance and Store Development-Elect, Customer Satisfaction_

Jamere Jackson was named Executive Vice President and Chief Financial Officer-Elect on September 13, 2020 and Chief Financial Officer and Executive Vice President – Finance and Store Development effective January 1, 2021.

Mr. Jackson served as Executive Vice President and Chief Financial Officer of Hertz Global Holdings, Inc., a worldwide rental company, since 2018.

Hertz Global Holdings, Inc. filed Chapter 11 bankruptcy on May 22, 2020.

From 2014 to 2018, Mr. Jackson served as Chief Financial Officer of Nielsen Holdings plc, an information, data and measurement company.

Prior to 2014, Mr. Jackson held a variety of leadership roles at General Electric Company, including Vice President and Chief Financial Officer of a division of General Electric Oil and Gas.

Mr. Jackson serves on the Board of Directors for Eli Lilly & Co. and Hibbett Sports, Inc.

‌ ​

Hackney was named Senior Vice President, Merchandising in October 2015 and has notified the Company of his intent to retire, effective December 31, 2020.

| | | | | |

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

| Alabama | | | 116 | |

| Arizona | | | 150 | |

| California | | | 624 | |

| Florida | | | 362 | |

| Georgia | | | 202 | |

| Illinois | | | 240 | |

| Indiana | | | 156 | |

| Louisiana | | | 126 | |

| Michigan | | | 198 | |

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

| Ohio | | | 270 | |

| Pennsylvania | | | 198 | |

| Tennessee | | | 166 | |

| Texas | | | 630 | |

| Virginia | | | 134 | |

| Mexico | | | 604 | |

| | | | | | | | | | | | | | | | | | | | | |

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

| Acquired(1) | | | — | | | | — | | | | — | | | | — | | | | 17 | |

| _(1)_ | _17 Interamerican Motor Corporation (“IMC”) branches acquired on September 27, 2014._ |

| --- | --- |

A majority of these 5,500 stores currently receive their service on an overnight basis, but as we expand our mega hubs, more of them will receive this service same day and many will receive it multiple times per day.

Giles was named Chief Financial Officer during May 2006.

Mr. Finestone also serves as Chairman of the Auto Care Association.

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

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

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

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.

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 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 the assets, net of assumed liabilities related to our AutoAnything operations.

As part of the sale, we retained the liability related to this lawsuit.

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.

[removed: 10-K 1 d771460d10k.htm FORM 10-K][added: FORM 10-K]

[removed: ##### [Table of Contents](#toc)][added: TABLE OF CONTENTS]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: (Mark One)][added: (Mark One)]

| [removed: ☒] [added: ☒] | [removed: Annual] [added: Annual] Report pursuant to section 13 or 15(d) of the Securities Exchange Act of [removed: 1934] [added: 1934] |

[removed: For] [added: | For] the fiscal year ended August [removed: 31, 2019.][added: 29, 2020. | |]

| [removed: ☐] [added: ☐] | [removed: Transition] [added: Transition] report pursuant to section 13 or 15(d) of the Securities Exchange Act of [removed: 1934] [added: 1934] |

[removed: For] [added: | For] the transition period from [added: ______] to [removed: .][added: ______. | |]

[removed: Commission] [added: | Commission] file number [removed: 1-10714][added: 1-10714 | |]

[removed: ][added: ]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| Nevada | [removed: |] 62-1482048 |

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

| [removed: incorporation] [added: incorporation] or [removed: organization) |] [added: organization)] | [added: ​] |

| 123 South Front [removed: Street, Memphis, Tennessee |] [added: Street, Memphis, Tennessee] | 38103 |

| [removed: (Address] [added: (Address] of principal executive [removed: offices) |] [added: offices)] | [removed: (Zip Code)] [added: (Zip Code)] |

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

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

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

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

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

Yes [removed: ☒] [added: ⌧] No [removed: ☐][added: ◻]

Yes [removed: ☐] [added: ◻] No [removed: ☒][added: ⌧]

| [removed: Non-accelerated] [added: Large accelerated] filer [removed: |] [added: ⌧] | [removed: ☐] [added: Accelerated filer ◻] | [added: Non-accelerated filer ◻] | Smaller reporting company [removed: |] [added: ☐] | [added: Emerging growth company] ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange [removed: Act.][added: 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: $21,723,299,587.][added: $24,661,503,822.]

The number of shares of Common Stock outstanding as of October [removed: 21, 2019,] [added: 19, 2020,] was [removed: 23,827,496.][added: 23,175,554.]

[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: 31, 2019,] [added: 29, 2020,] pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting of Stockholders to be held December [removed: 18, 2019,] [added: 16, 2020,] are incorporated by reference into Part III.

[removed: | [PART I](#tx771460_1) | | | 4 | |][added: PART I]

| [Item [removed: 1. Business](#tx771460_2) |] [added: 1.](#Item1Business_775746)] | [added: [Business](#Item1Business_775746)] | 4 | [removed: |]

| [added: ​ |] [Marketing and Merchandising [removed: Strategy](#tx771460_4) | | | 5] [added: Strategy](#MarketingandMerchandisingStrategy_311942)] | [added: 6] |

| [removed: [Store Operations](#tx771460_6) |] [added: ​] | [added: [Store Operations](#StoreOperations_66614)] | 7 | [removed: |]

| [removed: [Store Development](#tx771460_7) |] [added: ​] | [added: [Store Development](#StoreDevelopment_337399)] | 8 | [removed: |]

| [added: ​ |] [Purchasing and Supply [removed: Chain](#tx771460_8) | | | 8] [added: Chain](#PurchasingandSupplyChain_301199)] | [added: 9] |

| [added: ​ |] [Trademarks and [removed: Patents](#tx771460_10) | | | 9] [added: Patents](#TrademarksandPatents_374286)] | [added: 10] |

| [removed: [AutoZone Websites](#tx771460_13) | |] [added: ​] | [removed: 9] [added: [AutoZone Websites](#AutoZoneWebsites_139280)] | [added: 10] |

| [added: ​ |] [Information about our Executive [removed: Officers](#tx771460_14) | |] [added: Officers](#InformationaboutourExecutiveOfficers_691)] | 10 | [removed: |]

| [Item [removed: 1A. Risk Factors](#tx771460_15) | |] [added: 1A.](#Item1ARiskFactors_38338)] | [removed: 12] [added: [Risk Factors](#Item1ARiskFactors_38338)] | [added: 13] |

| [Item [removed: 1B. Unresolved Staff Comments](#tx771460_16) | |] [added: 1B.](#Item1BUnresolvedStaffComments_805543)] | [removed: 19] [added: [Unresolved Staff Comments](#Item1BUnresolvedStaffComments_805543)] | [added: 22] |

‌ ​

​

​

| ​ | ​ |

| ​ | ​ |

| ​ | ​ |

| ​ | ​ |

| OR | |

| ​ | ​ |

| ​ | ​ |

| ​ | ​ |

AUTOZONE, INC.

| ​ | ​ |

| ​ | ​ |

Yes ⌧ No ◻

Yes ⌧ No ◻

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ⌧ No ◻

Yes ☐ No ⌧

‌ ​

| ​ | ​ | ​ |

| [PART I](#PARTI_773810) | ​ | 4 |

| ​ | [Introduction](#Introduction_58178) | 4 |

| ​ | [Commercial](#Commercial_758352) | 7 |

| ​ | [Competition](#Competition_974800) | 9 |

| ​ | [Employees](#Employees_668167) | 10 |

| ​ | [Seasonality](#Seasonality_291101) | 10 |

| ​ | ​ | ​ |

| [PART II](#PARTII_588024) | ​ | 24 |

| ​ | ​ | ​ |

| ​ | ​ | ​ |

| [PART IV](#PARTIV_397719) | ​ | 81 |

‌ ​

However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements.

‌ ​

FORM 10-K

OR

AUTOZONE, INC.

| | | |

| | | | | |

| | | | | | | |

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

| Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |

| | | | | Emerging growth company | | ☐ |

TABLE OF CONTENTS

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

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

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

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

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

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

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

Actual results may materially differ from anticipated results.

PART I

‌ ​

The following table reflects the square footage and number of leased and owned properties for our stores as of August [removed: 31, 2019:][added: 29, 2020:]

| [added: ​] | | No. [removed: of Stores | |] [added: of] | | Store [removed: Square Footage | |] [added: Square] |

We have approximately [removed: 5.7] [added: 5.9] million square feet in distribution centers servicing our stores, of which approximately [removed: 1.8] [added: 1.9] million square feet is leased and the remainder is owned.

Our [removed: Internal] [added: International] Sourcing Office is located in Shanghai, China.

| ​ | ​ | ​ | ​ | ​ |

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

| ​ | ​ | Stores | ​ | Footage |

| Leased | | 3,489 | | 22,811,306 |

| Owned | | 3,060 | | 20,690,477 |

| Total | | 6,549 | | 43,501,783 |

| | | | | | | | | |

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

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

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

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

[removed: PART II][added: PART II]

‌ ​

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

Our common stock is listed on the New York Stock Exchange under the symbol “AZO.” On October [removed: 21, 2019,] [added: 19, 2020,] there were [removed: 2,112] [added: 2,021] 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 October 7, 2019, to increase the repurchase authorization by $1.250 billion, bringing total value of authorized share repurchases to [removed: $23.2] [added: $23.15] billion.

The Company also repurchased, at market value, an additional [removed: 17,201, 11,816] [added: 8,287, 17,201] and [removed: 12,455] [added: 11,816] shares in fiscal years [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] 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: 11,011, 14,523] [added: 10,525, 11,011] and [removed: 14,205] [added: 14,523] shares were sold to employees in fiscal [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] respectively.

At August [removed: 31, 2019, 152,766] [added: 29, 2020, 142,241] shares of common stock were reserved for future issuance under the Employee Plan.

Purchases by executives under the Executive Plan were [removed: 1,483, 1,840] [added: 1,204, 1,483] and [removed: 1,865] [added: 1,840] shares in fiscal [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] respectively.

At August [removed: 31, 2019, 236,565] [added: 29, 2020, 235,361] shares of common stock were reserved for future issuance under the Executive Plan.

[removed: Stock] [added: Stock] Performance [removed: Graph][added: Graph]

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: 30, 2014] [added: 29, 2015] and ending August [removed: 31, 2019.][added: 29, 2020.]

[removed: ][added: ]

During fiscal 2020, we temporarily ceased share repurchases under our share repurchase program to conserve liquidity in response to the uncertainty related to COVID-19.

While we have restarted share repurchases during the first quarter of fiscal year 2021, we will continue to evaluate current and expected business conditions and adjust the level of share repurchases under our share repurchase program as we deem appropriate.

The Company did not purchase any shares during the quarter ended August 29, 2020.

‌ ​

‌ ​

Shares of common stock repurchased by the Company during the quarter ended August 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 Dollar Value that May Yet Be Purchased Under the Plans or Programs | | |

| 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 | |

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

| _(in thousands, except per share data, same store sales and [removed: selected_ _operating] [added: selected operating] data)_ | | [removed: Fiscal Year Ended August | | | |] [added: 2020(1)] | | | [added: 2019(2)] | | | [added: 2018(3)] | | | [added: 2017] | | | [added: 2016] | | |

| Income Statement Data | | [removed: | | | |] [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | | |

| Net sales | [added: ​] | $ | [removed: 11,863,743 |] [added: 12,631,967] | [added: ​] | $ | [removed: 11,221,077 |] [added: 11,863,743] | [added: ​] | $ | [removed: 10,888,676 |] [added: 11,221,077] | [added: ​] | $ | [removed: 10,635,676 |] [added: 10,888,676] | [added: ​] | $ | [removed: 10,187,340] [added: 10,635,676] | [added: ​] |

| Cost of sales, including warehouse and delivery expenses | [added: ​] | | [removed: 5,498,742] [added: 5,861,214] | [added: ​] | | [added: 5,498,742] | [removed: 5,247,331] [added: ​] | | [added: 5,247,331] | [added: ​] | [removed: 5,149,056] | [added: 5,149,056] | [added: ​] | | 5,026,940 | [removed: | | | 4,860,309 |] [added: ​] |

| Gross profit | [added: ​] | | [removed: 6,365,001] [added: 6,770,753] | [added: ​] | | [added: 6,365,001] | [removed: 5,973,746] [added: ​] | | [added: 5,973,746] | [added: ​] | [removed: 5,739,620] | [added: 5,739,620] | [added: ​] | | 5,608,736 | [removed: | | | 5,327,031 |] [added: ​] |

| Operating, selling, general and administrative expenses | [added: ​] | | [removed: 4,148,864] [added: 4,353,074] | [added: ​] | | [added: 4,148,864] | [removed: 4,162,890] [added: ​] | | [added: 4,162,890] | [added: ​] | [removed: 3,659,551] | [added: 3,659,551] | [added: ​] | | 3,548,341 | [removed: | | | 3,373,980 |] [added: ​] |

| Operating profit | [added: ​] | | [removed: 2,216,137] [added: 2,417,679] | [added: ​] | | [added: 2,216,137] | [removed: 1,810,856] [added: ​] | | [added: 1,810,856] | [added: ​] | [removed: 2,080,069] | [added: 2,080,069] | [added: ​] | | 2,060,395 | [removed: | | | 1,953,051 |] [added: ​] |

| Interest expense, net | [added: ​] | | [removed: 184,804] [added: 201,165] | [added: ​] | | [added: 184,804] | [removed: 174,527] [added: ​] | | [added: 174,527] | [added: ​] | [removed: 154,580] | [added: 154,580] | [added: ​] | | 147,681 | [removed: | | | 150,439 |] [added: ​] |

| Income before income taxes | [added: ​] | | [removed: 2,031,333] [added: 2,216,514] | [added: ​] | | [added: 2,031,333] | [removed: 1,636,329] [added: ​] | | [added: 1,636,329] | [added: ​] | [removed: 1,925,489] | [added: 1,925,489] | [added: ​] | | 1,912,714 | [removed: | | | 1,802,612 |] [added: ​] |

| Income tax [removed: expense(3)] [added: expense(4)] | [added: ​] | | [removed: 414,112] [added: 483,542] | [added: ​] | | [added: 414,112] | [removed: 298,793] [added: ​] | | [added: 298,793] | [added: ​] | [removed: 644,620] | [added: 644,620] | [added: ​] | | 671,707 | [removed: | | | 642,371 |] [added: ​] |

| Net [removed: income(3)] [added: income(4)] | [added: ​] | $ | [removed: 1,617,221 |] [added: 1,732,972] | [added: ​] | $ | [removed: 1,337,536 |] [added: 1,617,221] | [added: ​] | $ | [removed: 1,280,869 |] [added: 1,337,536] | [added: ​] | $ | [removed: 1,241,007 |] [added: 1,280,869] | [added: ​] | $ | [removed: 1,160,241] [added: 1,241,007] | [added: ​] |

| Diluted earnings per [removed: share(3)] [added: share(4)] | [added: ​] | $ | [removed: 63.43 |] [added: 71.93] | [added: ​] | $ | [removed: 48.77 |] [added: 63.43] | [added: ​] | $ | [removed: 44.07 |] [added: 48.77] | [added: ​] | $ | [removed: 40.70 |] [added: 44.07] | [added: ​] | $ | [removed: 36.03] [added: 40.70] | [added: ​] |

| Weighted average shares for diluted earnings per [removed: share(3)] [added: share(4)] | [added: ​] | | [removed: 25,498] [added: 24,093] | [added: ​] | | [added: 25,498] | [removed: 27,424] [added: ​] | | [added: 27,424] | [added: ​] | [removed: 29,065] | [added: 29,065] | [added: ​] | | 30,488 | [removed: | | | 32,206 |] [added: ​] |

| Same Store Sales | [removed: | | | |] [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] |

| Increase in domestic comparable store net [removed: sales(4)] [added: sales(5)] | [added: ​] | | [removed: 3.0] [added: 7.4] | % | | [removed: | 1.8] [added: 3.0] | % | | [removed: | 0.5] [added: 1.8] | % | | [removed: | 2.4] [added: 0.5] | % | | [removed: | 3.8] [added: 2.4] | % |

| Balance Sheet Data | [removed: | | | |] [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] |

| Current assets | [added: ​] | $ | [removed: 5,028,685 |] [added: 6,811,872] | [added: ​] | $ | [removed: 4,635,869 |] [added: 5,028,685] | [added: ​] | $ | [removed: 4,611,255 |] [added: 4,635,869] | [added: ​] | $ | [removed: 4,239,573 |] [added: 4,611,255] | [added: ​] | $ | [removed: 3,970,294] [added: 4,239,573] | [added: ​] |

| Working capital (deficit) | [removed: | | (483,456 | ) |] [added: ​] | | [removed: (392,812] [added: 528,781] | [removed: )] [added: ​] | | [added: (483,456)] | [removed: (155,046] [added: ​] | [removed: )] | [added: (392,812)] | [added: ​] | [removed: (450,747] | [removed: )] [added: (155,046)] | [added: ​] | | [removed: (742,579] [added: (450,747)] | [removed: )] [added: ​] |

| Total assets | [added: ​] | | [removed: 9,895,913] [added: 14,423,872] | [added: ​] | | [added: 9,895,913] | [removed: 9,346,980] [added: ​] | | [added: 9,346,980] | [added: ​] | [removed: 9,259,781] | [added: 9,259,781] | [added: ​] | | 8,599,787 | [removed: | | | 8,102,349 |] [added: ​] |

| Current liabilities | [added: ​] | | [removed: 5,512,141] [added: 6,283,091] | [added: ​] | | [added: 5,512,141] | [removed: 5,028,681] [added: ​] | | [added: 5,028,681] | [added: ​] | [removed: 4,766,301] | [added: 4,766,301] | [added: ​] | | 4,690,320 | [removed: | | | 4,712,873 |] [added: ​] |

| Debt | [added: ​] | | [removed: 5,206,344] [added: 5,513,371] | [added: ​] | | [added: 5,206,344] | [removed: 5,005,930] [added: ​] | | [added: 5,005,930] | [added: ​] | [removed: 5,081,238] | [added: 5,081,238] | [added: ​] | | 4,924,119 | [removed: | | | 4,624,876 |] [added: ​] |

| Stockholders’ [removed: (deficit) | | | (1,713,851 | )] [added: deficit] | [added: ​] | | [removed: (1,520,355] [added: (877,977)] | [removed: )] [added: ​] | | [added: (1,713,851)] | [removed: (1,428,377] [added: ​] | [removed: )] | [added: (1,520,355)] | [added: ​] | [removed: (1,787,538] | [removed: )] [added: (1,428,377)] | [added: ​] | | [removed: (1,701,390] [added: (1,787,538)] | [removed: )] [added: ​] |

| Selected Operating Data | [removed: | | | |] [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] |

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

| Sold [removed: locations(6)] [added: locations(7)] | [added: ​] | | — | [removed: | | | 26] [added: ​] | | [added: —] | [added: ​] | [removed: —] | [added: 26] | [added: ​] | | — | [removed: |] [added: ​] | | — | [added: ​] |

| New locations | [added: ​] | | [removed: 209] [added: 138] | [added: ​] | | [added: 209] | [removed: 201] [added: ​] | | [added: 201] | [added: ​] | [removed: 215] | [added: 215] | [added: ​] | | 205 | [removed: | | | 202 |] [added: ​] |

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

| Net new locations | [added: ​] | | [removed: 209] [added: 138] | [added: ​] | | [added: 209] | [removed: 199] [added: ​] | | [added: 199] | [added: ​] | [removed: 215] | [added: 215] | [added: ​] | | 205 | [removed: | | | 201 |] [added: ​] |

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

| Number of locations at end of year | [added: ​] | | [removed: 6,411] [added: 6,549] | [added: ​] | | [added: 6,411] | [removed: 6,202] [added: ​] | | [added: 6,202] | [added: ​] | [removed: 6,029] | [added: 6,029] | [added: ​] | | 5,814 | [removed: | | | 5,609 |] [added: ​] |

| AutoZone domestic commercial programs | [added: ​] | | [removed: 4,893] [added: 5,007] | [added: ​] | | [added: 4,893] | [removed: 4,741] [added: ​] | | [added: 4,741] | [added: ​] | [removed: 4,592] | [added: 4,592] | [added: ​] | | 4,390 | [removed: | | | 4,141 |] [added: ​] |

| Inventory per location (in thousands) | [added: ​] | $ | [removed: 674 |] [added: 683] | [added: ​] | $ | [removed: 636 |] [added: 674] | [added: ​] | $ | [removed: 644 |] [added: 636] | [added: ​] | $ | [removed: 625 |] [added: 644] | [added: ​] | $ | [removed: 610] [added: 625] | [added: ​] |

| Total AutoZone store square footage (in thousands) | [added: ​] | | [removed: 42,526] [added: 43,502] | [added: ​] | | [added: 42,526] | [removed: 41,066] [added: ​] | | [added: 41,066] | [added: ​] | [removed: 39,684] | [added: 39,684] | [added: ​] | | 38,198 | [removed: | | | 36,815 |] [added: ​] |

| Average square footage per AutoZone store | [added: ​] | | [removed: 6,633] [added: 6,643] | [added: ​] | | [added: 6,633] | [removed: 6,621] [added: ​] | | [added: 6,621] | [added: ​] | [removed: 6,611] | [added: 6,611] | [added: ​] | | 6,600 | [removed: | | | 6,587 |] [added: ​] |

| Increase in AutoZone store square footage | [added: ​] | | [removed: 3.6] [added: 2.3] | % | | [removed: | 3.5] [added: 3.6] | % | | [removed: | 3.9] [added: 3.5] | % | | [removed: | 3.8] [added: 3.9] | % | | [removed: | 3.9] [added: 3.8] | % |

| Average net sales per AutoZone store (in thousands) | [added: ​] | $ | [removed: 1,847 |] [added: 1,914] | [added: ​] | $ | [removed: 1,778 |] [added: 1,847] | [added: ​] | $ | [removed: 1,756 |] [added: 1,778] | [added: ​] | $ | [removed: 1,773 |] [added: 1,756] | [added: ​] | $ | [removed: 1,761] [added: 1,773] | [added: ​] |

| Net sales per AutoZone store average square foot | [added: ​] | $ | [removed: 279 |] [added: 288] | [added: ​] | $ | [removed: 269 |] [added: 279] | [added: ​] | $ | [removed: 266 |] [added: 269] | [added: ​] | $ | [removed: 269 |] [added: 266] | [added: ​] | $ | [removed: 268] [added: 269] | [added: ​] |

| Total employees at end of year (in thousands) | [added: ​] | | [removed: 96] [added: 100] | [added: ​] | | [added: 96] | [removed: 89] [added: ​] | | [added: 89] | [added: ​] | [removed: 87] | [added: 87] | [added: ​] | | 84 | [removed: | | | 81 |] [added: ​] |

| Accounts payable to inventory ratio | [added: ​] | | [removed: 112.6] [added: 115.3] | % | | [removed: | 111.8] [added: 112.6] | % | | [removed: | 107.4] [added: 111.8] | % | | [removed: | 112.8] [added: 107.4] | % | | [removed: | 112.9] [added: 112.8] | % |

| After-tax return on invested [removed: capital(8)] [added: capital(9)] | [added: ​] | | [removed: 35.7] [added: 38.1] | % | | [removed: | 32.1] [added: 35.7] | % | | [removed: | 29.9] [added: 32.1] | % | | [removed: | 31.3] [added: 29.9] | % | | [removed: | 31.2] [added: 31.3] | % |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

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

| ​ | ​ | Fiscal Year Ended August | | | | | | | | | | | | | | |

| *​* | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| Operating lease right-of-use assets(6) | ​ | ​ | 2,581,677 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ |

| Finance lease liabilities, less current portion(6) | ​ | | 155,855 | ​ | | 123,659 | ​ | | 102,013 | ​ | | 102,322 | ​ | | 102,451 | ​ |

| Operating lease liabilities, less current portion(6) | ​ | ​ | 2,501,560 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ |

| Inventory turnover(8) | ​ | | 1.3x | ​ | | 1.3x | ​ | | 1.3x | ​ | | 1.4x | ​ | | 1.4x | ​ |

‌ ​

*(1)* _The 52 weeks ended August 29, 2020 was negatively impacted by the charges for additional Emergency-Time Off ("ETO") benefit enhancement for eligible part-time and full-time hourly employees and other expenses in response to COVID-19 of $83.9 million (pre-tax), recognized in the third and fourth quarters._

Fiscal 2018 also includes a benefit to net income related to the Tax Cuts and Jobs Act (“Tax Reform”).

See “Note D – Income Taxes” of the Notes to Consolidated Financial Statements for more information._

The Company adopted ASU 2016-09 effective August 28, 2016 and applied the recognition of excess tax deficiencies and tax benefits in the income statement on a prospective basis.

Income tax expense, net income and diluted earnings per share amounts presented for prior periods were not restated.

The Company applied ASU 2016-09 relating to the presentation of the excess tax benefits on the Consolidated Statements of Cash Flows retrospectively.

Prior period amounts for net cash provided by operating activities for all years presented above were restated to conform to the current period presentation._

*(5)* _The domestic comparable sales increases are based on sales for all AutoZone domestic stores open at least one year.

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

Relocated stores are included in the same store sales computation based on the year the original store was opened.

Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing.

All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation._

*(6)* _The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset (“ROU asset”) and a corresponding lease liability on the balance sheet.

See “Note A – Significant Accounting Policies”._

*(7)* _26 IMC branches were sold on April 4, 2018.

*(9)* _After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize leases).

For fiscal 2020, average debt is presented net of excess cash of $374.2 million.

For fiscal 2019, after-tax operating profit was adjusted for the impact of the average revaluation of deferred tax liabilities, net of repatriation tax.

See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations._

For Fiscal 2020, adjusted debt is presented net of excess cash of $1.6 billion.

For fiscal 2018, net income was adjusted for impairment charges and pension termination charges before tax impact.

See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations._

See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations_*.*

_(12) During the third quarter of fiscal 2020, the Company temporarily ceased share repurchases under the share repurchase program in response to COVID-19._

‌ ​

| | | | | | | | | | | | | | | | | | | | | |

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

| | 2019(1) | | | | 2018(2) | | | | 2017 | | | | 2016 | | | | 2015 | | | |

| Long-term capital leases | | | 123,659 | | | | 102,013 | | | | 102,322 | | | | 102,451 | | | | 87,639 | |

| Acquired locations(5) | | | — | | | | — | | | | — | | | | — | | | | 17 | |

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

| --- | --- |

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

| _(4)_ | _The domestic comparable sales increases are based on sales for all AutoZone domestic stores open at least one year. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation._ |

| _(5)_ | _17 IMC branches were acquired on September 27, 2014._ |

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

| [Reports of Independent Registered Public Accounting [removed: Firm](#tx771460_40) | | | 40] [added: Firm](#ReportOfIndependentRegisteredPublicAcct)] | [added: 45] |

| [Consolidated Statements of [removed: Income](#tx771460_41) | | | 44] [added: Income](#AutoZoneIncConsolidatedStatementsofIncom)] | [added: 48] |

| [Consolidated Statements of Comprehensive [removed: Income](#tx771460_42) | | | 44] [added: Income](#AutoZoneIncConsolidatedStatementsofCompr)] | [added: 48] |

| [Consolidated Balance [removed: Sheets](#tx771460_43) | | | 45] [added: Sheets](#ConsolidatedBalanceSheets_880763)] | [added: 49] |