What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-10-24 compared with 2021-10-25 · 1039 added, 59 removed, 195 unchanged (85% of the section changed)

Controls and Procedures Error!

Bookmark not defined.

Other Information Error!

Bookmark not defined.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Error!

Bookmark not defined.

PART III Error!

Bookmark not defined.

Directors, Executive Officers and Corporate Governance Error!

Bookmark not defined.

Executive Compensation Error!

Bookmark not defined.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Error!

Bookmark not defined.

Certain Relationships and Related Transactions, and Director Independence ‌ Error!

Bookmark not defined.

Principal Accounting Fees and Services Error!

Bookmark not defined.

PART IV Error!

Bookmark not defined.

Exhibits and Financial Statement Schedules ‌ 76

(a) Financial Statements ‌ 76

(b) Exhibits ‌ 76

Form of 3.250% Senior Notes due 2025.

Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K dated April 29, 2015.

Bookmark not defined.

Officers’ Certificate dated April 21, 2016, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 3.125% Senior Notes due 2026.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated April 21, 2016.

Bookmark not defined.

Form 3.125% Senior Notes due 2026.

Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K dated April 21, 2016.

Bookmark not defined.

Officers’ Certificate dated April 18, 2017, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 3.750% Senior Notes due 2027.

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8K dated April 18, 2017.

Bookmark not defined.

Officers’ Certificate dated April 18, 2019, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 3.125% Senior Notes due 2024.

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8K dated April 18, 2019.

Bookmark not defined.

Officers’ Certificate dated April 18, 2019, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 3.750% Senior Notes due 2029.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8K dated April 18, 2019.

Bookmark not defined.

Form of 3.125% Senior Notes due 2024.

Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8K dated April 18, 2019.

Bookmark not defined.

Form of 3.750% Senior Notes due 2029.

Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8K dated April 18, 2019.

Bookmark not defined.

Officers’ Certificate dated March 30, 2020, pursuant to Section 3.2 of the Indenture, dated August 8, 2003, setting forth the terms of the 3.625% Senior Notes due 2025.

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated March 30, 2020.

Bookmark not defined.

Officers’ Certificate dated March 30, 2020, pursuant to Section 3.2 of the Indenture, dated August 8, 2003, setting forth the terms of the 4.000% Senior Notes due 2030.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated March 30, 2020.

Bookmark not defined.

Form of 3.625% Senior Notes due 2025.

Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K dated March 30, 2020.

Bookmark not defined.

Form of 4.000% Senior Notes due 2030.

Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K dated March 30, 2020.

Bookmark not defined.

Form of 4.000% Senior Notes due 2030.

Incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K dated March 30, 2020.

Bookmark not defined.

Form of 1.650% Senior Notes due 2031.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated August 14, 2020.

Bookmark not defined.

Form of 1.650% Senior Notes due 2031.

Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K dated August 14, 2020.

Bookmark not defined.

Officers’ Certificate dated August 14, 2020, pursuant to Section 3.2 of the Indenture, dated August 8, 2003, setting forth the terms of the 1.650% Senior Notes due 2031.

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated August 14, 2020.

Bookmark not defined.

Officers’ Certificate dated August 1, 2022, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 4.750% Senior Notes due 2032.

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8K dated August 1, 2022.

Bookmark not defined.

Form of 4.750% Senior Notes due 2032.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated August 1, 2022.

Bookmark not defined.

Description of Securities of AutoZone, Inc.

Incorporated by reference to Exhibit 4.24 to the Annual Report on Form 10-K dated October 28, 2019.

Bookmark not defined.

AutoZone, Inc.

Sixth Amended and Restated Executive Stock Purchase Plan.

Incorporated by reference to Exhibit A to the definitive proxy statement dated October 24, 2016, for the Annual Meeting of Stockholders held December 14, 2016.

Bookmark not defined.

Form 10K Summary Error!

Bookmark not defined.

SIGNATURES Error!

Bookmark not defined.

Management’s Report on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders’ Deficit

Notes to Consolidated Financial Statements

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended).

Our internal control over financial reporting includes, among other things, defined policies and procedures for conducting and governing our business, sophisticated information systems for processing transactions and properly trained staff.

Mechanisms are in place to monitor the effectiveness of our internal control over financial reporting, including regular testing performed by the Company’s internal audit team.

Actions are taken to correct deficiencies as they are identified.

Our procedures for financial reporting include the active involvement of senior management, our Audit Committee and a staff of highly qualified financial and legal professionals.

Management, with the participation of our principal executive and financial officers, assessed our internal control over financial reporting as of August 27, 2022, the end of our fiscal year.

Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework.

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of August 27, 2022.

Our independent registered public accounting firm, Ernst & Young LLP (PCAOB ID:

42 ), audited the effectiveness of our internal control over financial reporting.

Ernst & Young LLP’s attestation report on the Company’s internal control over financial reporting as of August 27, 2022 is included in this Annual Report on Form 10-K.

Report of Independent Reg istered Public Accounting Firm

To the Stockholders and the Board of Directors of AutoZone, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited AutoZone Inc.’s internal control over financial reporting as of August 27, 2022, 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 27, 2022, 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 the Company as of August 27, 2022 and August 28, 2021, 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 27, 2022, and the related notes and our report dated October 24, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Memphis, Tennessee

October 24, 2022

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of AutoZone, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of AutoZone, Inc.

(the Company) as of August 27, 2022 and August 28, 2021, the related consolidated statements of income, comprehensive income, stockholders' deficit, and cash flows for each of the three years in the period ended August 27, 2022, 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 27, 2022 and August 28, 2021, and the results of its operations and its cash flows for each of the three years in the period ended August 27, 2022, 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 27, 2022, 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 24, 2022, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Valuation of Self-insurance Reserves

Description of the Matter

At August 27, 2022, the Company’s self-insurance reserve estimate was $264.3 million.

As more fully described in Note A of the consolidated financial statements, the Company retains a significant portion of the risks associated with workers’ compensation, general liability, product liability, property and vehicle insurance.

Accordingly, the Company utilizes various methods, including analyses of historical trends and actuarial methods, to estimate the costs of these risks.

Auditing the self-insurance reserve is complex and required the involvement of specialists due to the judgmental nature of estimating the costs to settle reported claims and claims incurred but not yet reported.

There are a number of factors and/or assumptions (e.g., severity, duration and frequency of claims, projected inflation of related factors, and the risk-free rate) used in the measurement process which have a significant effect on the estimated self-insurance reserve.

How We Addressed the Matter in Our Audit

We evaluated the design and tested the operating effectiveness of the Company’s controls over the self-insurance reserve process.

For example, we tested controls over management’s review of the self-insurance reserve calculations, the significant actuarial assumptions and the data inputs provided to the actuary.

To evaluate the self-insurance reserve, our audit procedures included, among others, assessing the methodologies used, evaluating the significant actuarial assumptions discussed above and testing the completeness and the accuracy of the underlying claims data used by the Company.

We compared the actuarial assumptions used by management to historical trends and evaluated the change in the self-insurance reserve from the prior year due to changes in these assumptions.

In addition, we involved our actuarial specialists to assist in assessing the valuation methodologies and significant assumptions used in the valuation analysis, we evaluated management’s methodology for determining the risk-free interest rate utilized in measuring the net present value of the long-term portion of the self-insurance reserve, we compared the significant assumptions used by management to industry accepted actuarial assumptions and we compared the Company’s reserve to a range developed by our actuarial specialists based on assumptions developed by the specialists.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1988.

Memphis, Tennessee

October 24, 2022

AutoZone, Inc.

Consolidated Statements of Income

(in thousands, except per share data)

Cost of sales, including warehouse and delivery expenses

Operating, selling, general and administrative expenses

Operating profit

Interest expense, net

Income before income taxes

Income tax expense

Weighted average shares for basic earnings per share

Effect of dilutive stock equivalents

Weighted average shares for diluted earnings per share

Basic earnings per share

Diluted earnings per share

See Notes to Consolidated Financial Statements.

AutoZone, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

Other comprehensive income (loss):

Foreign currency translation adjustments

Unrealized (losses) gains on marketable debt securities, net of taxes

Net derivative activities, net of taxes

Total other comprehensive income (loss)

Comprehensive income

See Notes to Consolidated Financial Statements.

AutoZone, Inc.

Consolidated Balance Sheets

(in thousands)

Current assets:

Cash and cash equivalents

Accounts receivable

Merchandise inventories

Other current assets

Total current assets

Property and equipment:

Buildings and improvements

Leasehold improvements

Construction in progress

Property and equipment

Accumulated depreciation and amortization

( 4,282,752 )

( 3,950,287 )

Operating lease right-of-use assets

Deferred income taxes

Other long-term assets

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable

Current portion of operating lease liabilities

Accrued expenses and other

Income taxes payable

Total current liabilities

Long-term debt

Operating lease liabilities, less current portion

Deferred income taxes

Other long-term liabilities

Commitments and contingencies

Stockholders’ deficit:

Preferred stock, authorized 1,000 shares;

no shares issued

Common stock, par value $ .01 per share, authorized 200,000 shares;

20,732 shares issued and 19,126 shares outstanding as of August 27, 2022;

23,007 shares issued and 21,138 shares outstanding as of August 28, 2021

Additional paid-in capital

Retained deficit

( 1,330,067 )

Accumulated other comprehensive loss

Treasury stock, at cost

( 3,262,769 )

( 2,535,620 )

Total stockholders’ deficit

( 3,538,913 )

( 1,797,536 )

Total liabilities and stockholders' deficit

See Notes to Consolidated Financial Statements.

AutoZone, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of property and equipment and intangibles

Amortization of debt origination fees

Deferred income taxes

Share-based compensation expense

Changes in operating assets and liabilities:

Accounts receivable

Merchandise inventories

Accounts payable and accrued expenses

Income taxes payable

Net cash provided by operating activities

Cash flows from investing activities:

Capital expenditures

Purchase of marketable debt securities

Proceeds from sale of marketable debt securities

Investment in tax credit equity investments

Proceeds from disposal of capital assets and other, net

Net cash used in investing activities

Cash flows from financing activities:

Net proceeds from/(payments of) commercial paper

( 1,030,000 )

Proceeds from issuance of debt

Repayment of debt

Net proceeds from sale of common stock

Purchase of treasury stock

( 4,359,991 )

( 3,378,321 )

Repayment of principal portion of finance lease liabilities

Net cash used in financing activities

( 3,470,497 )

( 3,500,417 )

Effect of exchange rate changes on cash

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental cash flow information:

Interest paid, net of interest cost capitalized

Income taxes paid

Leased assets obtained in exchange for new finance lease liabilities

Leased assets obtained in exchange for new operating lease liabilities

See Notes to Consolidated Financial Statements.

AutoZone, Inc.

Consolidated Statements of Stockholders’ Deficit

Comprehensive

(in thousands)

Balance at August 31, 2019

( 1,305,347 )

( 1,403,884 )

( 1,713,851 )

Total other comprehensive income

Purchase of 826 shares of treasury stock

Retirement of treasury shares

( 1,878,595 )

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at August 29, 2020

( 1,450,970 )

Total other comprehensive income

Purchase of 2,592 shares of treasury stock

( 3,378,321 )

Retirement of treasury shares

( 1,139,173 )

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at August 28, 2021

( 2,535,620 )

( 1,797,536 )

Total other comprehensive income

Purchase of 2,220 shares of treasury stock

( 4,359,991 )

Retirement of treasury shares

( 3,339,842 )

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at August 27, 2022

( 1,330,067 )

( 3,262,769 )

( 3,538,913 )

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

Note A – Significant Accounting Policies

AutoZone, Inc.

(“AutoZone” or the “Company”) is the leading retailer and distributor of automotive replacement parts and accessories in the Americas.

At the end of fiscal 2022, the Company operated 6,168 stores in the U.S., 703 stores in Mexico and 72 stores in Brazil.

Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products.

At the end of fiscal 2022, 5,342 of the domestic stores 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.

The Company also had commercial programs in all stores in Mexico and Brazil.

The Company sells the ALLDATA brand automotive diagnostic, repair and shop management software through www.alldata.com.

Additionally, the Company sells automotive hard parts, maintenance items, accessories, and non-automotive products through www.autozone.com, and its commercial customers can make purchases through www.autozonepro.com.

The Company also provides product information on its Duralast branded products through www.duralastparts.com.

The Company does not derive revenue from automotive repair or installation services.

The Company’s fiscal year consists of 52 or 53 weeks ending on the last Saturday in August.

Fiscal 2022, 2021 and 2020 represented 52 weeks.

Basis of Presentation:

The Consolidated Financial Statements include the accounts of AutoZone, Inc.

and its wholly owned subsidiaries.

All significant intercompany transactions and balances have been eliminated in consolidation.

Variable Interest Entities:

The Company invests in certain tax credit funds that promote renewable energy and generate a return primarily through the realization of federal tax credits.

The deferral method is used to account for the tax attributes of these investments.

The Company considers its investment in these tax credit funds as an investment in a variable interest entity (“VIE”).

The Company evaluates the investment in any VIE to determine whether it is the primary beneficiary.

The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities.

As of August 27, 2022, the Company held tax credit equity investments that were deemed to be VIE’s and determined that it was not the primary beneficiary of the entities, as it did not have the power to direct the activities that most significantly impacted the entity and accounted for this investment using the equity method.

The Company’s maximum exposure to losses is limited to its net investment, which was $ 14.1 million as of August 27, 2022 and $ 11.8 million as of August 28, 2021 and was included within the Other long-term assets caption in the accompanying Consolidated Balance Sheets.

Use of Estimates:

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities to prepare these financial statements.

Actual results could differ from those estimates.

Cash and Cash Equivalents:

Cash equivalents consist of investments with original maturities of 90 days or less at the date of purchase.

Cash equivalents include proceeds due from credit and debit card transactions with settlement terms of less than five days .

Credit and debit card receivables included within cash and cash equivalents were $ 78.4 million at August 27, 2022 and $ 70.5 million at August 28, 2021.

Cash balances are held in various locations around the world.

Cash and cash equivalents of $ 86.8 million and $ 80.4 million were held outside of the U.S.

as of August 27, 2022, and August 28, 2021, respectively, and were generally utilized to support the liquidity needs in foreign operations.

Accounts Receivable:

Effective in fiscal 2021, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , which requires the Company to estimate all expected credit losses for financial assets measured at amortized cost basis, including trade receivables, based on historical experience, current market conditions and supportable forecasts.

The Company’s accounts receivable primarily consists of receivables from commercial customers.

The Company routinely grants credit to certain commercial customers on a short-term basis consisting primarily of daily, weekly or monthly terms.

The risk of credit loss in its trade receivables is substantially mitigated by the Company’s credit evaluation process, short collection terms and diversification of customers, as well as the low dollar value for its typical sales transaction.

Receivables are presented net of an allowance for credit losses.

Allowances for expected credit losses are determined based on historical experience, the current economic environment, our expectations of future economic conditions and the current evaluation of the composition of accounts receivable.

The Company will apply adjustments for specific factors and current economic conditions as needed at each reporting date.

The Company’s allowance for credit losses are included in “Accounts receivable” on the accompanying Consolidated Balance Sheets as of August 27, 2022 and August 28, 2021.

The balance of the allowance for credit losses was $ 9.5 million at August 27, 2022, and $ 11.4 million at August 28, 2021.

Vendor Receivables:

The Company’s vendor receivables primarily consist of balances arising from its vendors through a variety of programs and arrangements, including rebates, allowances, promotional funds and reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendors’ products.

The amounts to be received are prescribed by the terms of the vendor agreements and therefore collection of such amounts is generally not at risk.

The Company regularly reviews vendor receivables for collectability and assesses the need for an allowance for credit losses based on an evaluation of the vendors’ financial positions and corresponding abilities to meet financial obligations.

Management does not believe there is a reasonable likelihood that the Company will be unable to collect the receivables from vendors and did not record a reserve for expected credit losses from vendors in the Consolidated Financial Statements as of August 27, 2022 and August 28, 2021.

Merchandise Inventories:

Merchandise inventories include related purchasing, storage and handling costs.

Inventory cost has been determined using the last-in, first-out (“LIFO”) method stated at the lower of cost or market for domestic inventories and the weighted average cost method stated at the lower of cost or net realizable value for Mexico and Brazil inventories.

Due to historical price deflation on the Company’s merchandise purchases prior to the current fiscal year, the Company had previously exhausted its LIFO credit reserve balance.

As the Company’s policy is to not write up inventory in excess of replacement cost, the difference between LIFO cost and replacement cost was disclosed at $ 335.3 million at August 28, 2021.

Due to recent price inflation on the Company’s merchandise purchases, primarily driven by increased freight costs, the Company recorded a LIFO credit reserve balance of $ 15.0 million at August 27, 2022, which resulted in a non-cash charge to cost of sales.

Marketable Debt Securities:

The Company invests a portion of its assets held by the Company’s wholly owned insurance captive in marketable debt securities and classifies them as available-for-sale.

The Company includes these marketable debt securities within the Other current assets and Other long-term assets captions in the accompanying Consolidated Balance Sheets and records the amounts at fair market value, which is determined using quoted market prices at the end of the reporting period.

(Refer to “Note E – Fair Value Measurements” and “Note F – Marketable Debt Securities” for a discussion of marketable debt securities.)

Property and Equipment:

Property and equipment is stated at cost.

Property consists of land, which includes finance leases – real estate, buildings and improvements, equipment, which includes finance leases – vehicles, and construction in progress.

Depreciation and amortization are computed principally using the straight-line method over the following estimated useful lives:

buildings, 40 to 50 years ;

building improvements, 5 to 15 years ;

equipment, including software, 3 to 10 years ;

and leasehold improvements, over the shorter of the asset’s estimated useful life or the remaining lease term, which includes any reasonably assured renewal periods.

Depreciation and amortization include amortization of assets under finance leases.

Impairment of Long-Lived Assets:

The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

When such an event occurs, the Company compares the sum of the undiscounted expected future cash flows of the asset (asset group) with the carrying amounts of the asset.

If the undiscounted expected future cash flows are less than the carrying value of the assets, the Company measures the amount of impairment loss as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

The cost in excess of fair value of identifiable net assets of businesses acquired is recorded as goodwill.

Goodwill has not been amortized since fiscal 2001, but an analysis is performed at least annually to compare the fair value of the reporting unit to the carrying amount to determine if any impairment exists.

The Company had approximately $ 302.6 million of goodwill, which is allocated to the Auto Parts Stores operating segment at August 27, 2022 and August 28, 2021.

The Company performs its annual impairment assessment in the fourth quarter of each fiscal year, unless circumstances dictate more frequent assessments.

In the fourth quarter of fiscal 2022 and 2021, the Company concluded its remaining goodwill was not impaired.

Derivative Instruments and Hedging Activities:

AutoZone is exposed to market risk from, among other things, changes in interest rates, foreign exchange rates and fuel prices.

From time to time, the Company uses various derivative instruments to reduce such risks.

To date, based upon the Company’s current level of foreign operations, no derivative instruments have been utilized to reduce foreign exchange rate risk.

All of the Company’s hedging activities are governed by guidelines that are authorized by AutoZone’s Board of Directors (the “Board”).

Further, the Company does not buy or sell derivative instruments for trading purposes.

AutoZone’s financial market risk results primarily from changes in interest rates.

At times, AutoZone reduces its exposure to changes in interest rates by entering into various interest rate hedge instruments such as interest rate swap contracts, treasury lock agreements and forward-starting interest rate swaps.

All of the Company’s interest rate hedge instruments are designated as cash flow hedges.

(Refer to “Note H – Derivative Financial Instruments” for additional disclosures regarding the Company’s derivative instruments and hedging activities.) Cash flows related to these instruments designated as qualifying hedges are reflected in the accompanying Consolidated Statements of Cash Flows in the same categories as the cash flows from the items being hedged.

The resulting gain or loss from such settlement is deferred to Accumulated Other Comprehensive Loss and reclassified to interest expense over the term of the underlying debt.

This reclassification of the deferred gains and losses impacts the interest expense recognized on the underlying debt that was hedged.

Foreign Currency:

The Company accounts for its foreign operations using the local market currency and converts its financial statements from these currencies to U.S.

The cumulative loss on currency translation is recorded as a component of Accumulated Other Comprehensive Loss (Refer to “Note G – Accumulated Other Comprehensive Loss” for additional information regarding the Company’s Accumulated Other Comprehensive Loss.)

Self-Insurance Reserves:

The Company retains a significant portion of the risks associated with workers’ compensation, general liability, product liability, property and vehicle insurance.

The Company obtains third party insurance to limit the exposure related to certain of these risks.

The reserve for the Company’s liability associated with these risks totaled $ 264.3 million and $ 284.0 million at August 27, 2022 and August 28, 2021, respectively.

The assumptions made by management in estimating its self-insurance reserves include consideration of historical cost experience, judgments about the present and expected levels of cost per claim and retention levels.

The Company utilizes various methods, including analyses of historical trends and use of a specialist, to estimate the costs to settle reported claims and claims incurred but not yet reported.

The actuarial methods develop estimates of the future ultimate claim costs based on claims incurred as of the balance sheet date.

When estimating these liabilities, the Company considers factors, such as the severity, duration and frequency of claims, legal costs associated with claims, healthcare trends and projected inflation of related factors.

The Company’s liabilities for workers’ compensation, general and product liability, property and vehicle claims do not have scheduled maturities;

however, the timing of future payments is predictable based on historical patterns and

is relied upon in determining the current portion of these liabilities.

Accordingly, the Company reflects the net present value of the obligations it determines to be long-term using the risk-free interest rate as of the balance sheet date.

The Company leases certain retail stores, distribution centers and vehicles under various non-callable leases.

Leases are categorized at their commencement date, which is the date the Company takes possession or control of the underlying asset.

Most of the Company’s leases are operating leases;

however, certain land and vehicles are leased under finance leases.

The leases have varying terms and expire at various dates through 2046.

Retail leases typically have initial terms between one and 20 years, with one to six optional renewal periods of one to five years each.

Finance leases for vehicles typically have original terms between one and five years , and finance leases for real estate typically have terms of 20 or more years.

The Company subleases certain properties that are not used in its operations.

Sublease income was not significant for the periods presented.

Lease-related assets and liabilities are recognized for all leases with an initial term of 12 months or greater.

The exercise of lease renewal options is at the Company’s sole discretion.

The Company evaluates renewal options at commencement and on an ongoing basis and includes options that are reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities.

Certain lease agreements require variable payments based upon actual costs of common-area maintenance, real estate taxes and insurance.

Lease components are not separated from the non-lease components (typically fixed common-area maintenance costs at its retail store locations) for all classes of leased assets, except vehicles which contain variable non-lease components that are expensed as incurred.

The Company uses the stated borrowing rate in determining the present value of the lease payments over the lease term for vehicles.

The Company’s incremental borrowing rate is used to determine the present value of the lease payments over the lease term for substantially all the operating and financing leases for retail stores, distribution centers and other real estate, as these leases typically do not have a stated borrowing rate.

For operating leases that commenced prior to the date of adoption of ASU 2016-02 – Leases (Topic 842), the Company used the incremental borrowing rate that corresponded to the remaining lease term as of the date of adoption.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

(Refer to “Note M – Leases” for additional disclosures regarding the Company’s leases.)

Financial Instruments:

The Company has financial instruments, including cash and cash equivalents, accounts receivable, other current assets and accounts payable.

The carrying amounts of these financial instruments approximate fair value because of their short maturities.

(Refer to “Note I – Financing” for a discussion of the carrying values and fair values of the Company’s debt, “Note F – Marketable Debt Securities” for additional disclosures related to marketable debt securities and “Note H – Derivative Financial Instruments” for additional information regarding derivatives.)

Income Taxes:

The Company accounts for income taxes under the liability method.

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Our effective tax rate is based on income by tax jurisdiction, statutory rates and tax saving initiatives available to the Company in the various jurisdictions in which we operate.

The Company recognizes liabilities for uncertain income tax positions based on a two-step process.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.

The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.

The Company reevaluates these uncertain tax positions on a quarterly basis or when new information becomes available to management.

These reevaluations are based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, successfully settled issues under audit, expirations due to statutes and new audit activity.

Such a change in recognition or measurement could result in the recognition of a tax benefit or an increase to the tax accrual.

The Company classifies interest related to income tax liabilities, and if applicable, penalties, as a component of Income tax expense.

The income tax liabilities and accrued interest and penalties are expected to be payable within one year of the balance sheet date are presented within the Accrued expenses and other caption in the accompanying Consolidated Balance Sheets.

The remaining portion of the income tax liabilities and accrued interest and penalties are presented within the Other long-term liabilities caption in the accompanying Consolidated Balance Sheets because payment of cash is not anticipated within one year of the balance sheet date.

(Refer to “Note D – Income Taxes” for additional disclosures regarding the Company’s income taxes.)

Sales and Use Taxes:

Governmental authorities assess sales and use taxes on the sale of goods and services.

The Company excludes taxes collected from customers in its reported sales results;

such amounts are included within the Accrued expenses and other caption until remitted to the taxing authorities.

The Company currently does not pay a dividend on its common stock.

The ability to pay dividends is subject to limitations imposed by Nevada law.

Under Nevada law, any future payment of dividends would be dependent upon the Company’s financial condition, capital requirements, earnings and cash flow.

Revenue Recognition:

The Company’s primary source of revenue is derived from the sale of automotive aftermarket parts and merchandise to its retail and commercial customers.

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, in an amount representing the consideration the Company expects to receive in exchange for selling products to its customers.

Shipping and handling activities are considered activities to fullfill the order, and therefore are not evaluated as a separate performance oligation.

Sales are recorded net of variable consideration in the period incurred, including discounts, sales incentives and rebates, sales taxes and estimated sales returns.

Sales returns are based on historical return rates.

The Company may enter into contracts that include multiple combinations of products and services, which are accounted for as separate performance obligations and do not require significant judgment.

The Company’s performance obligations are typically satisfied when the customer takes possession of the merchandise.

Revenue from retail customers is recognized when the customer leaves our store with the purchased products, typically at the point of sale or for E-commerce orders when the product is shipped.

Revenue from commercial customers is recognized upon delivery, typically same-day.

Payment from retail customers is at the point of sale and payment terms for commercial customers are based on the Company’s pre-established credit requirements and generally range from 1 to 30 days.

Discounts, sales incentives and rebates are treated as separate performance obligations, and revenue allocated to these performance obligations is recognized as the obligations to the customer are satisfied.

Additionally, the Company estimates and records gift card breakage as redemptions occur.

The Company offers diagnostic and repair information software used in the automotive repair industry through ALLDATA.

This revenue is recognized as services are provided.

Revenue from these services are recognized over the life of the contract.

A portion of the Company’s transactions include the sale of auto parts that contain a core component.

The core component represents the recyclable portion of the auto part.

Customers are not charged for the core component of the new part if a used core is returned at the point of sale of the new part;

otherwise the Company charges customers a specified amount for the core component.

The Company refunds that same amount in the event the customer returns a used core to the store at a later date.

The Company does not recognize sales or cost of sales for the core component of these transactions when a used part is returned or expected to be returned from the customer.

There were no material contract assets, liabilities or deferred costs recorded on the Consolidated Balance Sheet as of August 27, 2022 and August 28, 2021.

Revenue related to unfulfilled performance obligations as of August 27, 2022 and August 28, 2021 is not significant.

(Refer to “Note P – Segment Reporting” for additional information related to revenue recognized during the period.)

Vendor Allowances and Advertising Costs:

The Company receives various payments and allowances from its vendors through a variety of programs and arrangements.

Monies received from vendors include rebates, allowances and promotional funds.

The amounts to be received are subject to the terms of the vendor agreements, which generally do not state an expiration date, but are subject to ongoing negotiations that may be impacted in the future

based on changes in market conditions, vendor marketing strategies and changes in the profitability or sell-through of the related merchandise.

Rebates and other miscellaneous incentives are earned based on purchases or product sales and are accrued ratably over the purchase or sale of the related product.

These monies are generally recorded as a reduction of merchandise inventories and are recognized as a reduction to cost of sales as the related inventories are sold.

For arrangements that provide for reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendors’ products, the vendor funds are recorded as a reduction to Operating, selling, general and administrative expenses in the period in which the specific costs were incurred.

The Company expenses advertising costs as incurred.

Advertising expense, net of vendor promotional funds, was $ 97.1 million in fiscal 2022, $ 85.9 million in fiscal 2021 and $ 77.6 million in fiscal 2020.

Vendor promotional funds, which reduced advertising expense, amounted to $ 52.1 million in fiscal 2022, $ 53.2 million in fiscal 2021 and $ 39.4 million in fiscal 2020.

Cost of Sales and Operating, Selling, General and Administrative Expenses:

The following illustrates the primary costs classified in each major expense category:

Cost of Sales

● Total cost of merchandise sold, including:

o Freight expenses associated with moving merchandise inventories from the Company’s vendors to the distribution centers;

o Vendor allowances that are not reimbursements for specific, incremental and identifiable costs

● Costs associated with operating the Company’s supply chain, including payroll and benefits, warehouse occupancy, transportation and depreciation;

● Inventory shrinkage

Operating, Selling, General and Administrative Expenses

● Payroll and benefits for store, field leadership and store support employees;

● Occupancy of store and store support facilities;

● Depreciation and amortization related to store and store support assets;

● Transportation associated with field leadership, commercial sales force and deliveries from stores;

● Advertising;

● Self-insurance;

● Other administrative costs, such as credit card transaction fees, legal costs, supplies and travel and lodging

Warranty Costs:

The Company or the vendors supplying its products provides the Company’s customers limited warranties on certain products that range from 30 days to lifetime.

In most cases, the Company’s vendors are primarily responsible for warranty claims.

Warranty costs relating to merchandise sold under warranty not covered by vendors are estimated and recorded as warranty obligations at the time of sale based on each product’s historical return rate.

These obligations, which are often funded by vendor allowances, are recorded within the Accrued expenses and other caption in the Consolidated Balance Sheets.

For vendor allowances in excess of the related estimated warranty expense for the vendor’s products, the excess is recorded in inventory and recognized as a reduction to cost of sales as the related inventory is sold.

Pre-opening Expenses:

Pre-opening expenses, which consist primarily of payroll and occupancy costs, are expensed as incurred.

Earnings per Share :

Basic earnings per share is based on the weighted average outstanding common shares.

Diluted earnings per share is based on the weighted average outstanding common shares adjusted for the effect of

common stock equivalents, which are primarily stock options.

There were 142,887 , 171,652 and 169,460 stock options excluded for the year ended August 27, 2022, August 28, 2021 and August 29, 2020, respectively because they would have been anti-dilutive.

Share-Based Payments:

Share-based payments include stock option grants, restricted stock, restricted stock units, stock appreciation rights and other transactions under the Company’s equity incentive plans.

The Company recognizes compensation expense for its share-based payments over the requisite service period based on the fair value of the awards.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options.

The value of restricted stock is based on the stock price of the award on the grant date.

(Refer to “Note B – Share-Based Payments” for further discussion.)

Risk and Uncertainties:

In fiscal 2022, one class of similar products accounted for approximately 13 percent of the Company’s total revenues.

No other class of similar products accounted for 10 percent or more of total revenues , and no individual vendor provided more than 10 percent of total purchases .

Recently Issued Accounting Pronouncements:

In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2021-10, Government Assistance (Topic 832) – Disclosures by Business Entities about Government Assistance , which requires annual disclosures for entities receiving government assistance to provide more transparency.This ASU is effective for fiscal years beginning after December 15, 2021 and will be effective for the Company for fiscal 2023.

The Company is currently evaluating the new guidance to determine the impact the adoption will have on the Company's consolidated financial statements and related disclosures.

Note B – Share-Based Payments

Overview of Share-Based Payment Plans

The Company has several active and inactive equity incentive plans under which the Company has been authorized to grant share-based awards to key employees and non-employee directors.

Awards under these plans have been in the form of restricted stock, restricted stock units, stock options, stock appreciation rights and other awards as defined by the plans.

The Company also has an Employee Stock Purchase Plan that allows employees to purchase Company shares at a discount subject to certain limitations.

The Company also has an Executive Stock Purchase Plan which permits all eligible executives to purchase AutoZone’s common stock using up to twenty-five percent of his or her annual salary and bonus.

Amended and Restated AutoZone, Inc.

2011 Equity Incentive Award Plan

On December 15, 2010, the Company’s stockholders approved the 2011 Equity Incentive Award Plan (the “2011 Plan”), allowing the Company to provide equity-based compensation to non-employee directors and employees for their service to AutoZone or its subsidiaries or affiliates.

Prior to the Company’s adoption of the 2011 Plan, equity-based compensation was provided to employees under the 2006 Stock Option Plan and to non-employee directors under the 2003 Director Compensation Plan (the “2003 Comp Plan”).

During fiscal 2016, the Company’s stockholders approved the Amended and Restated AutoZone, Inc.

2011 Equity Incentive Award Plan (the “Amended 2011 Equity Plan”).

The Amended 2011 Equity Plan imposes a maximum limit on the compensation, measured as the sum of any cash compensation and the aggregate grant date fair value of awards granted under the Amended 2011 Equity Plan, which may be paid to non-employee directors for such service during any calendar year.

The Amended 2011 Equity Plan also applies a ten-year term on the Amended 2011 Equity Plan through December 16, 2025 and extends the Company’s ability to grant incentive stock options under the Amended 2011 Equity Plan through October 7, 2025.

AutoZone, Inc.

2020 Omnibus Incentive Award Plan

On December 16, 2020, the Company’s stockholders approved the AutoZone, Inc.

2020 Omnibus Incentive Award Plan (the “2020 Omnibus Plan”), which serves as the successor to the Amended 2011 Equity Plan.

The 2020 Omnibus Plan provides equity-based compensation to our non-employee directors and employees for their service to AutoZone or our subsidiaries or affiliates.

Under the 2020 Omnibus Plan, participants may receive equity-based

compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, deferred stock, stock payments, performance based awards, cash based awards and other incentive awards structured by the Compensation Committee and the Board within parameters set forth in the 2020 Omnibus Plan.

AutoZone, Inc.

Director Compensation Program

Under the Company’s Director Compensation Program (the “Program”), non-employee directors will receive their compensation in awards of restricted stock units under the 2020 Omnibus Plan, with an option for a certain portion of a director’s compensation to be paid in cash at the non- employee director’s election.

Under the Program, restricted stock units are granted on January 1 of each year (the “Grant Date”).

The number of restricted stock units is determined by dividing the amount of the annual retainer by the fair market value of the shares of common stock as of the Grant Date.

The restricted stock units are fully vested on the date of grant and are paid in shares of the Company’s common stock on the first or the fifth anniversary of the Grant Date (at the Director’s election) or if sooner, the date the non-employee director ceases to be a member of the Board (“Separation from Service”).

The cash portion of the award, if elected, is paid ratably over each calendar quarter.

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $ 70.6 million for fiscal 2022, $ 56.1 million for fiscal 2021 and $ 44.8 million for fiscal 2020.

General terms and methods of valuation for the Company’s share-based awards are as follows:

Stock Options

The Company grants options to purchase common stock to certain of its employees under its plan at prices equal to the market value of the stock on the date of grant.

Options have a term of ten years from grant date.

Employee options generally vest in equal annual installments on the first, second, third and fourth anniversaries of the grant date and generally have 90 days after the service relationship ends, or one year after death, to exercise all vested options, unless retirement provisions are met.

The fair value of each option grant is separately estimated for each vesting date.

The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the award and each vesting date.

The Company has estimated the fair value of all stock option awards as of the date of the grant by applying the Black-Scholes-Merton multiple-option pricing valuation model.

The following table presents the weighted average for key assumptions used in determining the fair value of options granted and the related share-based compensation expense:

Expected price volatility

Risk-free interest rate

Weighted average expected lives (in years)

Forfeiture rate

Dividend yield

The following methodologies were applied in developing the assumptions used in determining the fair value of options granted:

Expected price volatility – This is a measure of the amount by which a price has fluctuated or is expected to fluctuate.

The Company uses actual historical changes in the market value of its stock to calculate the volatility assumption as it is management’s belief that this is the best indicator of future volatility.

The Company calculates daily market value changes from the date of grant over a past period representative of the expected life of the options to determine volatility.

An increase in the expected volatility will increase compensation expense.

Risk-free interest rate – This is the U.S.

Treasury rate for the week of the grant having a term equal to the expected life of the option.

An increase in the risk-free interest rate will increase compensation expense.

Expected lives – This is the period of time over which the options granted are expected to remain outstanding and is based on historical experience.

Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.

Options granted have a maximum term of ten years .

An increase in the expected life will increase compensation expense.

Forfeiture rate – This is the estimated percentage of options granted that are expected to be forfeited or canceled before becoming fully vested.

This estimate is based on historical experience at the time of valuation and reduces expense ratably over the vesting period.

An increase in the forfeiture rate will decrease compensation expense.

This estimate is evaluated periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

Dividend yield – The Company has not made any dividend payments nor does it have plans to pay dividends in the foreseeable future.

An increase in the dividend yield will decrease compensation expense.

The weighted average grant date fair value per share of options granted was $ 463.45 during fiscal 2022, $ 304.31 during fiscal 2021 and $ 252.54 during fiscal 2020.

The intrinsic value of options exercised was $ 282.7 million in fiscal 2022, $ 280.1 million in fiscal 2021 and $ 101.9 million in fiscal 2020.

The total fair value of options vested was $ 39.3 million in fiscal 2022, $ 44.7 million in fiscal 2021 and $ 39.1 million in fiscal 2020.

The Company generally issues new shares when options are exercised.

The following table summarizes information about stock option activity for the year ended August 27, 2022:

Exercise Price

(in thousands)

Outstanding – August 28, 2021

Forfeited/Cancelled

Outstanding – August 27, 2022

Expected to vest

Available for future grants

As of August 27, 2022, total unrecognized share-based compensation expense related to stock options, net of estimated forfeitures, was approximately $ 59.0 million, before income taxes, and will be recognized over an estimated weighted average period of 2.8 years.

Restricted Stock Units

Restricted stock unit awards are valued at the market price of a share of the Company’s stock on the date of grant and vest ratably on an annual basis over a four-year service period and are payable in shares of common stock on the vesting date.

Compensation expense for grants of employee restricted stock units is recognized on a straight-line basis over the four-year service period, less estimated forfeitures, which are consistent with stock option forfeiture assumptions.

As of August 27, 2022, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 10.1 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.5 years.

Transactions related to restricted stock units for the fiscal year ended August 27, 2022 are as follows:

Average Grant

Date Fair Value

Nonvested at August 28, 2021

Nonvested at August 27, 2022

Stock Appreciation Rights

At August 27, 2022 and August 28, 2021, the Company had $ 10.4 million and $ 7.5 million, respectively of accrued compensation expense.

There were 4,822 outstanding units issued under the 2003 Comp Plan and prior plans.

As directors retire, this balance will be reduced.

No additional shares of stock or units will be issued in future years under the 2003 Comp Plan or prior plans.

Employee Stock Purchase Plan and Executive Stock Purchase Plan

The Company recognized $ 3.2 million in compensation expense related to the discount on the selling of shares to employees and executives under the various share purchase plans in fiscal 2022, $ 2.5 million in fiscal 2021 and $ 3.1 million in fiscal 2020.

Under the Employee Plan, 6,238 , 8,479 and 10,525 shares were sold to employees in fiscal 2022, 2021 and 2020, respectively.

The Company repurchased 4,886 , 7,611 and 8,287 shares in fiscal 2022, 2021 and 2020, respectively, all at market value from employees electing to sell their stock.

Purchases under the Executive Plan were 709 , 997 and 1,204 shares in fiscal 2022, 2021 and 2020, respectively.

Issuances of shares under the Employee Plan are netted against repurchases and such repurchases are not included in share repurchases disclosed in “Note K – Stock Repurchase Program.” At August 27, 2022, 127,524 shares of common stock were reserved for future issuance under the Employee Plan, and 233,655 shares of common stock were reserved for future issuance under the Executive Plan.

Note C – Accrued Expenses and Other

Accrued expenses and other consisted of the following:

(in thousands)

Accrued compensation, related payroll taxes and benefits

Property, sales and other taxes

Medical and casualty insurance claims (current portion)

Finance lease liabilities

Accrued gift cards

Accrued interest

Accrued sales and warranty returns

The Company retains a significant portion of the insurance risks associated with workers’ compensation, general, product liability, property and vehicle insurance.

A portion of these self-insured losses is managed through a wholly owned insurance captive.

The Company maintains certain levels for stop-loss coverage for each self-insured plan in order to limit its liability for large claims.

The retained limits per claim type are $ 2.0 million for workers’ compensation, $ 5.0 million for auto liability, $ 21.5 million for property and $ 2.0 million for general and product liability.

Note D – Income Taxes

The components of income from continuing operations before income taxes are as follows:

(in thousands)

International

The provision for income tax expense consisted of the following:

(in thousands)

International

Income tax expense

A reconciliation of the provision for income taxes to the amount computed by applying the federal statutory tax rate to income before income taxes is as follows:

(in thousands)

Federal tax at statutory U.S.

income tax rate

State income taxes, net

Share-based compensation

US Tax on Non-US Income (GILTI and Subpart F)

Non-US Permanent Differences

Foreign Tax Credits

Effective tax rate

For the year ended August 27, 2022, August 28, 2021, and August 29, 2020, the Company recognized excess tax benefits from stock option exercises of $ 63.2 million, $ 56.4 million, and $ 20.9 million, respectively.

The Company is subject to a new tax on global intangible low-taxed income (“GILTI”) which is imposed on foreign earnings.

The Company has made the election to record this tax as a period cost, thus has not adjusted the deferred tax assets or liabilities of its foreign subsidiaries for the new tax.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA creates new tax provisions while only three are applicable to the Company:

1) Corporate Alternative Minimum Tax (“CAMT”);

2) Excise Tax on Stock Buybacks;

and 3) Increased Investment Tax Credit.

The CAMT will be effective for the Company’s year beginning August 27, 2023, while the excise tax on stock buybacks will be effective for shares repurchased after December 31, 2022.

The Investment Tax Credit for solar assets has increased from 26% to 30% for assets placed in service after December 31, 2021, and before January 1, 2033.

The Company does not expect any material impacts from these provisions.

Significant components of the Company's deferred tax assets and liabilities were as follows:

(in thousands)

Deferred tax assets:

Net operating loss and credit carryforwards

Accrued benefits

Operating lease liabilities

Total deferred tax assets

Valuation allowances

Net deferred tax assets

Deferred tax liabilities:

Property and equipment

Operating lease assets

Deferred tax liabilities

( 1,321,111 )

( 1,149,173 )

Net deferred tax liabilities

For the years ended August 28, 2021, and August 27, 2022, the Company asserts indefinite reinvestment for basis differences and accumulated earnings through fiscal 2020 with respect to its foreign subsidiaries.

The Company does not assert permanent reinvestment of fiscal 2021 or current year earnings with respect to its Mexican subsidiaries while maintaining its assertion of indefinite reinvestment of fiscal 2021 and current year earnings of other foreign subsidiaries.

Where necessary, taxes resulting from foreign distributions of current and accumulated earnings (e.g., withholding taxes) have been considered in the Company’s provision for income taxes.

As of August 27, 2022, we have not recorded incremental income taxes for outside basis differences of $ 416.2 million in our investments in foreign subsidiaries, as these amounts are indefinitely reinvested in foreign operations.

Determining the amount of unrecognized deferred tax liability related to the outside basis differences in these entities is not practicable.

At August 27, 2022 and August 28, 2021, the Company had net operating loss (“NOL”) carryforwards totaling approximately $ 241.2 million ($ 28.9 million tax effected) and $ 259.1 million ($ 35.9 million tax effected), respectively.

Certain NOLs have no expiration date and others will expire, if not utilized, in various years from fiscal 2023 through 2042 .

At August 27, 2022 and August 28, 2021, the Company had deferred tax assets for income tax credit carryforwards of $ 5.0 and $ 6.0 million, respectively.

Income tax credit carryforwards will expire, if not utilized, in various years from fiscal 2023 through 2037 .

At August 27, 2022 and August 28, 2021, the Company had a valuation allowance of $ 27.8 million and $ 31.1 million, respectively, on deferred tax assets associated with NOL and tax credit carryforwards for which management has determined it is more likely than not that the deferred tax asset will not be realized.

Management believes it is more likely than not that the remaining deferred tax assets will be fully realized.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in thousands)

Beginning balance

Additions based on tax positions related to the current year

Additions for tax positions of prior years

Reductions for tax positions of prior years

Reductions due to settlements

Reductions due to statute of limitations

Ending balance

Included in the August 27, 2022 and the August 28, 2021 balances are $ 32.4 million and $ 25.8 million, respectively, of unrecognized tax benefits that, if recognized, would reduce the Company’s effective tax rate.

The balances above also include amounts of $ 11.5 million and $ 10.4 million for August 27, 2022 and the August 28, 2021, respectively, that are accounted for as reductions to deferred tax assets for NOL carryforwards and tax credit carryforwards.

It is anticipated that in the event the associated uncertain tax positions are disallowed, the NOL carryforwards and tax credit carryforwards would be utilized to settle the liability.

The Company accrues interest on unrecognized tax benefits as a component of income tax expense.

Penalties, if incurred, would be recognized as a component of income tax expense.

The Company had $ 5.7 million and $ 2.4 million accrued for the payment of interest and penalties associated with unrecognized tax benefits at August 27, 2022 and August 28, 2021, respectively.

The Company files U.S.

federal, U.S.

state and local, and international income tax returns.

With few exceptions, the Company is no longer subject to U.S.

federal, U.S.

state and local, or Non-U.S.

examinations by tax authorities for fiscal year 2018 and prior.

The Company is typically engaged in various tax examinations at any given time by U.S.

federal, U.S.

state and local, and Non-U.S.

taxing jurisdictions.

As of August 27, 2022, the Company estimates that the amount of unrecognized tax benefits could be reduced by approximately $ 2.4 million over the next twelve months as a result of tax audit settlements.

While the Company believes that it is adequately accrued for possible audit adjustments, the final resolution of these examinations cannot be determined at this time and could result in final settlements that differ from current estimates.

Note E – Fair Value Measurements

The Company defines fair value as the price received to transfer an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In accordance with ASC 820, Fair Value Measurements and Disclosures , the Company uses the fair value hierarchy, which prioritizes the inputs used to measure fair value.

The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The three levels of the fair value hierarchy are set forth below:

Level 1 inputs — unadjusted quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2 inputs — inputs other than quoted market prices included within Level 1 that are observable, either directly or indirectly, for the asset or liability.

Level 3 inputs — unobservable inputs for the asset or liability, which are based on the Company’s own assumptions as there is little, if any, observable activity in identical assets or liabilities.

Marketable Debt Securities Measured at Fair Value on a Recurring Basis

The Company’s marketable debt securities measured at fair value on a recurring basis were as follows:

August 27, 2022

(in thousands)

Other current assets

Other long-term assets

August 28, 2021

(in thousands)

Other current assets

Other long-term assets

At August 27, 2022, the fair value measurement amounts for assets and liabilities recorded in the accompanying Consolidated Balance Sheet consisted of short-term marketable debt securities of $ 49.8 million, which are included within Other current assets and long-term marketable debt securities of $ 62.8 million, which are included in Other long-term assets.

The Company’s marketable debt securities are typically valued at the closing price in the principal active market as of the last business day of the quarter or through the use of other market inputs relating to the debt securities, including benchmark yields and reported trades.

A discussion on how the Company’s cash flow hedges are valued is included in “Note H – Derivative Financial Instruments,” while the fair values of the marketable debt securities by asset class are described in “Note F – Marketable Debt Securities.”

Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

Certain non-financial assets and liabilities are required to be measured at fair value on a non-recurring basis in certain circumstances, including the event of impairment.

These non-financial assets and liabilities could include assets and liabilities acquired in an acquisition as well as goodwill, intangible assets and property, plant and equipment that are determined to be impaired.

At August 27, 2022, the Company did not have any other significant non-financial assets or liabilities that had been measured at fair value on a non-recurring basis subsequent to initial recognition.

Financial Instruments not Recognized at Fair Value

The Company has financial instruments, including cash and cash equivalents, accounts receivable, other current assets and accounts payable.

The carrying amounts of these financial instruments approximate fair value because of their short maturities.

A discussion of the carrying values and fair values of the Company’s debt is included in “Note I – Financing.”

Note F – Marketable Debt Securities

The Company’s basis for determining the cost of a security sold is the “Specific Identification Model.” Unrealized gains (losses) on marketable debt securities are recorded in Accumulated Other Comprehensive Loss.

The Company’s available-for-sale marketable debt securities consisted of the following:

August 27, 2022

(in thousands)

Corporate debt securities

Government bonds

Mortgage-backed securities

Asset-backed securities and other

August 28, 2021

(in thousands)

Corporate debt securities

Government bonds

Mortgage-backed securities

Asset-backed securities and other

The marketable debt securities held at August 27, 2022, had effective maturities ranging from less than one year to approximately three years .

The Company did not realize any material gains or losses on its marketable debt securities during fiscal 2022, 2021 or 2020.

In evaluating whether a credit loss exists for the marketable debt securities, the Company considers factors such as the severity of the loss position, the credit worthiness of the investee, the term to maturity and the intent and ability to hold the investments until maturity or recovery of fair value.

An allowance for credit losses was deemed unnecessary given consideration of the factors above.

Included above in total marketable debt securities are $ 91.1 million and $ 62.5 million of marketable debt securities transferred by the Company’s insurance captive to a trust account to secure its obligations to an insurance company related to future workers’ compensation and casualty losses as of August 27, 2022 and August 28, 2021, respectively.

Note G – Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss includes certain adjustments to foreign currency translation adjustments, certain activity for interest rate swaps and treasury rate locks that qualify as cash flow hedges and unrealized gains (losses) on available-for-sale marketable debt securities.

Changes in Accumulated Other Comprehensive Loss consisted of the following:

(in thousands)

on Securities

Balance at August 29, 2020

Other Comprehensive Income (Loss) before reclassifications

Amounts reclassified from Accumulated Other Comprehensive Income (2)

Balance at August 28, 2021

Other Comprehensive Income (Loss) before reclassifications

Amounts reclassified from Accumulated Other Comprehensive Income (2)

Balance at August 27, 2022

(1) Foreign currency is shown net of U.S.

tax to account for foreign currency impacts of certain undistributed non-U.S.

subsidiaries earnings.

Other foreign currency is not shown net of additional U.S.

tax as other basis differences of non-U.S.

subsidiaries are intended to be permanently reinvested

(2) Amounts shown are net of taxes/tax benefits.

Note H – Derivative Financial Instruments

The Company periodically uses derivatives to hedge exposures to interest rates.

The Company does not hold or issue financial instruments for trading purposes.

For transactions that meet the hedge accounting criteria, the Company formally designates and documents the instrument as a hedge at inception and quarterly thereafter assesses the hedges to ensure they are effective in offsetting changes in the cash flows of the underlying exposures.

Derivatives are recorded in the Company’s Consolidated Balance Sheet at fair value, determined using available market information or other appropriate valuation methodologies.

In accordance with ASC Topic 815, Derivatives and Hedging , to the extent our derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value are not included in current earnings but are included in Accumulated Other Comprehensive Loss, net of tax.

At August 27, 2022, the Company had $ 23.9 million recorded in Accumulated Other Comprehensive Loss related to net realized losses associated with terminated interest rate swap and treasury rate lock derivatives which were designated as hedging instruments.

Net losses are amortized into Interest expense over the remaining life of the associated debt.

During fiscal 2022, the Company reclassified $ 3.6 million of net losses from Accumulated Other Comprehensive Loss to Interest expense.

During fiscal 2021, the Company reclassified $ 3.7 million of net losses from Accumulated Other Comprehensive Loss to Interest expense.

The Company expects to reclassify $ 3.2 million of net losses from Accumulated Other Comprehensive Loss to Interest expense over the next 12 months.

Note I – Financing

The Company’s debt consisted of the following:

(in thousands)

3.700 % Senior Notes due April 2022 , effective interest rate of 3.85 %

2.875 % Senior Notes due January 2023 , effective interest rate of 3.21 %

3.125 % Senior Notes due July 2023 , effective interest rate of 3.26 %

3.125 % Senior Notes due April 2024 , effective interest rate 3.32 %

3.250 % Senior Notes due April 2025 , effective interest rate 3.36 %

3.625 % Senior Notes due April 2025 , effective interest rate 3.78 %

3.125 % Senior Notes due April 2026 , effective interest rate of 3.28 %

3.750 % Senior Notes due June 2027 , effective interest rate of 3.83 %

3.750 % Senior Notes due April 2029 , effective interest rate of 3.86 %

4.000 % Senior Notes due April 2030 , effective interest rate 4.09 %

1.650 % Senior Notes due January 2031 , effective interest rate of 2.19 %

4.750 % Senior Notes due August 2032 , effective interest rate of 4.76 %

Commercial paper, weighted average interest rate of 2.43 % at August 27, 2022

Total debt before discounts and debt issuance costs

Discounts and debt issuance costs

Long-term Debt

On November 15, 2021, the Company amended and restated its existing revolving credit facility (the “Revolving Credit Agreement”) pursuant to which the Company’s borrowing capacity was increased from $ 2.0 billion to $ 2.25 billion and the maximum borrowing under the Revolving Credit Agreement may, at the Company’s option, subject to lenders approval, be increased from $ 2.25 billion to $ 3.25 billion.

The Revolving Credit Agreement will terminate, and all amounts borrowed will be due and payable on November 15, 2026 , but AutoZone may make up to two requests to extend the termination date for an additional period of one year each.

Revolving borrowings under the Revolving Credit Agreement may be base rate loans, Eurodollar loans, or a combination of both, at AutoZone’s election.

The Revolving Credit Agreement includes (i) a $ 75 million sublimit for swingline loans, (ii) a $ 50 million individual issuer letter of credit sublimit and (iii) a $ 250 million aggregate sublimit for all letters of credit.

Under the Company’s Revolving Credit Agreement, covenants include restrictions on liens, a maximum debt to earnings ratio, a minimum fixed charge coverage ratio and a change of control provision that may require acceleration of the repayment obligations under certain circumstances.

As of August 27, 2022, the Company had no outstanding borrowings and $ 1.8 million of outstanding letters of credit under the Revolving Credit Agreement.

The Revolving Credit Agreement requires that the Company’s consolidated interest coverage ratio as of the last day of each quarter shall be no less than 2.5 :1.

This ratio is defined as the ratio of (i) consolidated earnings before interest, taxes and rents to (ii) consolidated interest expense plus consolidated rents.

The Company’s consolidated interest coverage ratio as of August 27, 2022 was 7.4 :1.

As of August 27, 2022, the commercial paper borrowings, the $ 300 million 2.875 % Senior Notes due January 2023 and the $ 500 million 3.125 % Senior Notes due July 2023 were classified as long-term in the accompanying Consolidated Balance Sheets as the Company currently has the ability and intent to refinance them on a long-term basis through available capacity in its Revolving Credit Agreement.

As of August 27, 2022, the Company had $ 2.2 billion of availability under its Revolving Credit Agreement, without giving effect to commercial paper borrowings, which would allow the Company to replace these short-term obligations with a long-term financing facility.

On January 18, 2022, the Company repaid the $ 500 million 3.700 % Senior Notes due April 2022, which were callable at par in January 2022.

On March 15, 2021, we repaid the $ 250 million 2.500 % Senior Notes due April 2021 which were callable at par in March 2021.

On August 1, 2022, the Company issued $ 750 million in 4.750 % Senior Notes due August 2032 under its automatic shelf registration statement on Form S-3, filed with the SEC on July 19, 2022 (File No.

333-266209) (the “2022 Shelf Registration Statement”).

The 2022 Shelf Registration Statement allows the Company to sell an indeterminate amount in debt securities to fund general corporate purposes, including repaying, redeeming or repurchasing outstanding debt and for working capital, capital expenditures, new store or distribution center openings, stock repurchases and acquisitions.

Proceeds from the debt issuance were used to repay a portion of the outstanding commercial paper borrowings and for other general corporate purposes.

On August 14, 2020, the Company issued $ 600 million in 1.650 % Senior Notes due January 2031 under its automatic shelf registration statement on Form S-3, filed with the SEC on April 4, 2019 (File No.

333-230719) (the “2019 Shelf Registration Statement”).

The 2019 Shelf Registration Statement allowed the Company to sell an indeterminate amount in debt securities to fund general corporate purposes, including repaying, redeeming or repurchasing outstanding debt and for working capital, capital expenditures, new store openings, stock repurchases and acquisitions.

Proceeds from the debt issuance were used for general corporate purposes, including the repayment of the $ 500 million in 4.000 % Senior Notes due in November 2020 that were callable at par in August 2020.

On March 30, 2020, the Company issued $ 500 million in 3.625 % Senior Notes due April 2025 and $ 750 million in 4.000 % Senior Notes due April 2030 under the 2019 Shelf Registration Statement.

Proceeds from the debt issuance were used to repay a portion of the outstanding commercial paper borrowings and for other general corporate purposes.

The Senior Notes contain a provision that repayment of the Senior Notes may be accelerated if the Company experiences a change in control (as defined in the agreements).

The Company’s borrowings under its senior notes contain minimal covenants, primarily restrictions on liens.

All of the repayment obligations under its borrowing arrangements may be accelerated and come due prior to the scheduled payment date if covenants are breached or an event of default occurs.

Interest for Senior Notes is paid on a semi-annual basis.

The Company also maintains a letter of credit facility that allows it to request the participating bank to issue letters of credit on its behalf up to an aggregate amount of $ 25 million.

The letter of credit facility is in addition to the letters of credit that may be issued under the Revolving Credit Agreement and expired in June 2022.

On May 16, 2022, the Company amended and restated the letter of credit facility to, among other things, extend the facility through June 2025.

As of August 27, 2022, the Company had $ 23.6 million in letters of credit outstanding under the letter of credit facility.

In addition to the outstanding letters of credit issued under the committed facility discussed above, the Company had $ 105.1 million in letters of credit outstanding as of August 27, 2022.

These letters of credit have various maturity dates and were issued on an uncommitted basis.

As of August 27, 2022, the Company was in compliance with all covenants related to its borrowing arrangements.

The fair value of the Company’s debt was estimated at $ 5.9 billion as of August 27, 2022, and $ 5.7 billion as of August 28, 2021, based on the quoted market prices for the same or similar issues or on the current rates available to the Company for debt of the same terms (Level 2).

Such fair value is less than the carrying value of debt by $ 182.8 million and greater than the carrying value of debt by $ 413.1 million at August 27, 2022 and August 28, 2021, respectively.

This amount reflects face amount, adjusted for any unamortized debt issuance costs and discounts.

All of the Company’s debt is unsecured.

Scheduled maturities of debt are as follows:

(in thousands)

Discount and debt issuance costs

Note J – Interest Expense

Net interest expense consisted of the following:

(in thousands)

Interest expense

Interest income

Capitalized interest

Note K – Stock Repurchase Program

During 1998, the Company announced a program permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company’s Board of Directors.

On March 23, 2021, the Board voted to increase the repurchase authorizartion from $ 24.7 to $ 26.2 billion.

The Board voted to increase the repurchase authorization by $ 1.5 billion on October 5, 2021, $ 1.5 billion on December 15, 2021 and $ 2.0 billion on March 22, 2022, bringing the total authorization to $ 31.2 billion.

The Company has $ 1.1 billion remaining under the Board’s authorization to repurchase its common stock.

The Company’s share repurchase activity consisted of the following:

(in thousands)

During fiscal year 2022, the Company retired 2.5 million shares of treasury stock which had previously been repurchased under the Company’s share repurchase program.

The retirement increased Retained deficit by $ 3.3 billion and decreased Additional paid-in capital by $ 293.0 million.

During the comparable prior year period, the Company retired 1.0 million shares of treasury stock, which increased Retained deficit by $ 1.1 billion and decreased Additional paid-in capital by $ 60.0 million.

On October 4, 2022, the Board voted to authorize the repurchase of an additional $ 2.5 billion of the Company’s common stock in connection with the Company’s ongoing share repurchase program.

Since the inception of the repurchase program in 1998, the Board has authorized $ 33.7 billion in share repurchases.

Subsequent to August 27, 2022 and through October 17, 2022, the Company has repurchased 203,856 shares of common stock at an aggregate cost of $ 442.6 million.

Considering the cumulative repurchases and the increase in authorization subsequent to August 27, 2022 and through October 17, 2022, the Company has $ 3.1 billion remaining under the Board’s authorization to repurchase its common stock.

Note L – 401(k) Savings Plan

The Company has a 401(k) plan that covers all domestic employees who meet the plan’s participation requirements.

The plan features include Company matching contributions, immediate 100 % vesting of Company contributions and a savings option up to 25 % of qualified earnings.

The Company makes matching contributions, per pay period, up to a specified percentage of employees’ contributions as approved by the Board.

The Company made matching contributions to employee accounts in connection with the 401(k) plan of $ 37.9 million in fiscal 2022, $ 34.1 million in fiscal 2021 and $ 29.8 million in fiscal 2020.

Note M – Leases

Lease-related assets and liabilities recorded on the Consolidated Balance Sheets are as follows:

(in thousands)

Classification

August 27, 2022

August 28, 2021

Operating lease right-of-use assets

Property and equipment

Total lease assets

Current portion of operating lease liabilities

Accrued expenses and other

Operating lease liabilities, less current portion

Other long-term liabilities

Total lease liabilities

Accumulated amortization related to finance lease assets was $ 97.2 million as of August 27, 2022 and $ 107.0 million as of August 28, 2021.

Lease costs for finance and operating leases for the 52 weeks ended August 27, 2022 and August 28, 2021 are as follows:

For the year ended

(in thousands)

Statement of Income Location

August 27, 2022

August 28, 2021

Finance lease cost:

Amortization of lease assets

Depreciation and amortization

Interest on lease liabilities

Interest expense, net

Operating lease cost (1)

Selling, general and administrative expenses

Total lease cost

(1) Includes short-term leases, variable lease costs and sublease income, which are immaterial.

The future rental payments, inclusive of renewal options that have been included in defining the expected lease term, of our operating and finance lease obligations as of August 27, 2022 having initial or remaining lease terms in excess of one year are as follows:

(in thousands)

Total lease payments

Present value of lease liabilities

The following table summarizes the Company’s lease term and discount rate assumptions:

August 27, 2022

Weighted-average remaining lease term in years, inclusive of renewal options that are reasonably certain to be exercised:

Finance leases – real estate

Finance leases – vehicles

Operating leases

Weighted-average discount rate:

Finance leases – real estate

Finance leases – vehicles

Operating leases

Cash paid for amounts included in the measurement of operating lease liabilities of $ 316.0 million and $ 300.6 million was reflected in cash flows from operating activities in the consolidated statement of cash flows for fiscal years 2022 and 2021, respectively.

As of August 27, 2022, the Company has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability.

These leases have undiscounted future payments of approximately $ 27.2 million and $ 48.1 million for real estate and vehicles, respectively, and will commence when the Company obtains possession of the underlying leased asset.

Commencement dates are expected to be from fiscal 2023 to fiscal 2024 .

Note N – Commitments and Contingencies

Construction commitments, primarily for new stores, totaled approximately $ 91.5 million at August 27, 2022.

The Company had $ 130.5 million in outstanding standby letters of credit and $ 46.0 million in surety bonds as of August 27, 2022, which all have expiration periods of less than one year .

A substantial portion of the outstanding standby letters of credit (which are primarily renewed on an annual basis) and surety bonds are used to cover reimbursement obligations to our workers’ compensation carriers.

There are no additional contingent liabilities associated with these instruments as the underlying liabilities are already reflected in the Consolidated Balance Sheets.

The standby letters of credit and surety bonds arrangements have automatic renewal clauses.

Note O – Litigation

The Company is involved in various legal proceedings incidental to the conduct of its business, including, but not limited to, several lawsuits containing class-action allegations in which the plaintiffs are current and former hourly and salaried employees who allege various wage and hour violations and unlawful termination practices.

The Company does not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to the Company’s financial condition, results of operations or cash flows.

Note P – Segment Reporting

The Company’s operating segments (Domestic Auto Parts, Mexico and Brazil) are aggregated as one reportable segment:

Auto Parts Stores.

The criteria the Company used to identify the reportable segment are primarily the nature of the products the Company sells and the operating results that are regularly reviewed by the Company’s chief operating decision maker to make decisions about the resources to be allocated to the business units and to assess performance.

The accounting policies of the Company’s reportable segment are the same as those described in “Note A – Significant Accounting Policies.”

The Auto Parts Stores segment is the leading retailer and distributor of automotive parts and accessories through the Company’s 6,943 stores in the U.S., Mexico and Brazil.

The Other category reflects business activities of two operating segments that are not separately reportable due to the materiality of these operating segments.

The operating segments include ALLDATA, which produces, sells and maintains diagnostic, repair and shop management software used in the automotive repair industry and E-commerce, which includes direct sales to customers through www.autozone.com for sales that are not fulfilled by local stores.

The Company evaluates its reportable segment primarily on the basis of net sales and segment profit, which is defined as gross profit.

The following table shows segment results for the following fiscal years :

(in thousands)

Auto Parts Stores

Segment Profit

Auto Parts Stores

Operating, selling, general and administrative expenses

( 5,201,921 )

( 4,773,258 )

( 4,353,074 )

Interest expense, net

Income before income taxes

Segment Assets:

Auto Parts Stores

Capital Expenditures:

Auto Parts Stores

Auto Parts Stores Sales by Product Grouping:

Maintenance items

Discretionary

Auto Parts Stores net sales

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Controls and Procedures

45 unchanged sentences

333-107828) filed August 11, 2003.

Officers’ Certificate dated April 24, 2012, pursuant to Section 3.2 of the indenture dated August 8, 2003, setting forth the terms of the 3.700% Senior Notes due 2022.

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated April 24, 2012.

Form of 3.700% Senior Notes due 2022.

Incorporated by reference from the Form 8-K dated April 24, 2012 .

Agreement of Resignation, Appointment and Acceptance by and among AutoZone, Inc., The Bank of New York Mellon Trust Company, N.A., as prior Trustee, and Regions Bank, as successor Trustee, dated January 29, 2019.

Incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-3 (No.

333-230719), filed April 4, 2019).

Officers’ Certificate dated November 13, 2012, pursuant to Section 3.2 of the indenture dated August 8, 2003, setting forth the terms of the 2.875% Senior Notes due 2023.

1 unchanged sentence

Form of 2.875% Senior Notes due 2023.

Incorporated by reference from the Form 8-K dated November 13, 2012.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated November 13, 2012.

Officers’ Certificate dated April 29, 2013, pursuant to Section 3.2 of the indenture dated August 8, 2003, setting forth the terms of the 3.125% Senior Notes due 2023.

1 unchanged sentence

Form of 3.125% Senior Notes due 2023.

Incorporated by reference to Exhibit 4.2 to the Form 8-K dated April 29, 2013.

Officers’ Certificate dated April 29, 2015, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 2.500% Senior Notes due 2021.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated April 29, 2013.

Form of 2.500% Senior Notes dated 2021.

Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K dated April 29, 2015.

Officers’ Certificate dated April 29, 2015, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 3.250% Senior Notes due 2025.

18 unchanged sentences

Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K dated April 18, 2019.

Officers’ Certificate dated March 30, 2020, pursuant to Section 3.2 of the Indenture, dated March 30, 2020, setting forth the terms of the 3.625% Senior Notes due 2025.

Officers’ Certificate dated March 30, 2020, pursuant to Section 3.2 of the Indenture, dated August 8, 2003, setting forth the terms of the 3.625% Senior Notes due 2025.

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated March 30, 2020.

Officers’ Certificate dated March 30, 2020, pursuant to Section 3.2 of the Indenture, dated March 30, 2020, setting forth the terms of the 4.000% Senior Notes due 2030.

Officers’ Certificate dated March 30, 2020, pursuant to Section 3.2 of the Indenture, dated August 8, 2003, setting forth the terms of the 4.000% Senior Notes due 2030.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated March 30, 2020.

Form of 3.625% Note due 2025.

Form of 3.625% Senior Notes due 2025.

Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K dated March 30, 2020.

Form of 4.000% Note due 2030.

Form of 4.000% Senior Notes due 2030.

Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K dated March 30, 2020.

Form of 4.000% Note due 2030.

Form of 4.000% Senior Notes due 2030.

Incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K dated March 30, 2020.

Form of 1.650% Note due 2031.

Form of 1.650% Senior Notes due 2031.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated August 14, 2020.

Form of 1.650% Note due 2031.

Form of 1.650% Senior Notes due 2031.

Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K dated August 14, 2020.

1 unchanged sentence

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated August 14, 2020.

Officers’ Certificate dated August 1, 2022, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 4.750% Senior Notes due 2032.

Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated August 1, 2022.

Form of 4.750% Senior Notes due 2032.

Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated August 1, 2022.

Description of Securities of AutoZone, Inc.

8 unchanged sentences

Incorporated by reference to Exhibit 10.1 to the Form 8-K dated December 12, 2012.

AutoZone, Inc.

2006 Stock Option Plan.

Incorporated by reference to Appendix A to the definitive proxy statement dated October 25, 2006, for the Annual Meeting of Stockholders held December 13, 2006.

Form of Stock Option Agreement.

Incorporated by reference to Exhibit 10.26 to the Annual Report on Form 10-K for the fiscal year ended August 25, 2007.

Amended and Restated AutoZone, Inc.

2 unchanged sentences

Form of non-compete and non-solicitation agreement for Section 16 executive officers and by AutoZone, Inc.

Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K dated February 15, 2008.

Agreement dated February 14, 2008, between AutoZone, Inc.

5 unchanged sentences

2011 Equity Incentive Award Plan, incorporated by reference to Exhibit A to the definitive proxy statement dated October 25, 2010, for the Annual Meeting of Stockholders held December 15, 2010.

Form of Stock Option Agreement under the 2006 Stock Option Plan, effective September 2010.

Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q dated December 16, 2010.

Form of Stock Option Agreement under the 2006 Stock Option Plan for certain executive officers, effective September 2010.

Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q dated December 16, 2010.

Form of Letter Agreement dated as of December 14, 2010, amending certain Stock Option Agreements of executive officers.

4 unchanged sentences

Incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K for the fiscal year ended August 27, 2011.

First Amended and Restated AutoZone, Inc.

AutoZone, Inc.

Enhanced Severance Pay Plan.

Incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q dated March 17, 2011.

Form of Stock Option Agreement under the 2011 Equity Incentive Award Plan for certain executive officers effective September 27, 2011.

10 unchanged sentences

Director Compensation Program effective January 1, 2022 .

Incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q date March 19, 2021.

Amended and Restated AutoZone, Inc.

1 unchanged sentence

Incorporated by reference to Exhibit A to the definitive proxy statement dated October 26, 2015, for the Annual Meeting of Stockholders held December 16, 2015.

Third Amended and Restated Credit Agreement dated as of November 18, 2016, among AutoZone, Inc., as Borrower, the lenders party thereto and Bank of America, N.A.

as Administrative Agent, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated November 21, 2016.

AutoZone, Inc.

1 unchanged sentence

Incorporated by reference to Exhibit A to the definitive proxy statement dated October 24, 2016, for the Annual Meeting of Stockholders held December 14, 2016.

Master Extension, New Commitment and Amendment Agreement dated as of November 18, 2017 among AutoZone, Inc.

Bank of America, N.A.

as Administrative Agent and Swingline Lender;

JPMorgan Chase Bank, N.A.

as Syndication Agent;

Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.

Morgan Chase Bank, N.A.

as Joint Lead Arrangers;

Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P.

Morgan Chase Bank, N.A., SunTrust Robinson Humphrey, Inc., U.S.

Bank National Association, Wells Fargo Securities, LLC and Barclay’s Capital as Joint Book Runners;

SunTrust Bank, U.S.

Bank National Association, Wells Fargo Bank, National Association and Barclay’s Bank PLC as Documentation Agents;

and the several lenders party thereto.

Incorporated by reference to Exhibit 10.1 to the Current Report on the Form 8-K dated November 22, 2017.

Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the 2011 Equity Incentive Award Plan for officers effective September 27, 2011.

Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q dated December 17, 2018.

364-Day Credit Agreement dated April 3, 2020, by and among the Company, as borrower, the several lenders from time to time party thereto, and U.S.

Bank, National Association., as administrative agent for the lenders.

Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated April 7, 2020.

AutoZone, Inc.

10 unchanged sentences

Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K dated December 17, 2020.

AutoZone, Inc.

Director Compensation Program.

Incorporated by reference to Exhibit 10.5 to the Current Report on Form 10-Q dated March 19, 2021.

Fourth Amended and Restated Credit Agreement dated as of November 15, 2021, among AutoZone, Inc.

as Borrower, the lenders party thereto and Bank of America, N.A.

as Administrative Agent, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated November 16, 2021.

Amendment No.

1 unchanged sentence

2020 Omnibus Incentive Award Plan.

Incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K for the fiscal year ended August 28, 2021.

Form of Grant Notice and Award Agreement for Stock Options granted to Officers under the AutoZone, Inc.

2020 Omnibus Incentive Award Plan.

Form of Grant Notice and Award Agreement for Restricted Stock Units granted to Officers under the AutoZone, Inc.

2020 Omnibus Incentive Award Plan.

Subsidiaries of the Registrant.

12 unchanged sentences

Inline XBRL Taxonomy Extension Definition Document

Cover Page XBRL File

Cover Page Inline XBRL File

Management contract or compensatory plan or arrangement.

15 unchanged sentences

/s/ JAMERE JACKSON

Chief Financial Officer and Executive Vice

Executive Vice President, Chief Financial

October 24, 2022

Jamere Jackson

President – Finance and Store Development

Officer and Store Development

(Principal Financial Officer)

/s/ CHARLIE PLEAS, III

Senior Vice President and Controller

Vice President and Controller

October 24, 2022

Charlie Pleas, III

J Scott Murphy

(Principal Accounting Officer)

1 unchanged sentence

October 24, 2022

/s/ MICHAEL M.

/s/ MICHAEL A.

October 24, 2022

4 unchanged sentences

Enderson Guimaraes

/s/ BRIAN HANNASCH

October 24, 2022

Brian Hannasch

October 24, 2022

/s/ GEORGE R.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures