What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-10-28 compared with 2023-10-24 · 347 added, 304 removed, 638 unchanged (51% of the section changed)

26 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2024, 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 26, 2023 and August 27, 2022, 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 26, 2023, and the related notes and our report dated October 24, 2023 expressed an unqualified opinion thereon.

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 31, 2024 and August 26, 2023, the related consolidated statements of income, comprehensive income, stockholders’ deficit and cash flows for each of the three years in the period ended August 31, 2024, and the related notes and our report dated October 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

37 unchanged sentences

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:

The critical audit matter communicated below is a matter arising from the current period audit of the 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.

35 unchanged sentences

(in thousands)

Other comprehensive income:

Other comprehensive (loss) income:

Foreign currency translation adjustments

1 unchanged sentence

Net derivative activities, net of taxes

Total other comprehensive income

Total other comprehensive (loss) income

Comprehensive income

58 unchanged sentences

Depreciation and amortization of property and equipment

Other non-cash charges

Other non-cash (income) charges

Amortization of debt origination fees

9 unchanged sentences

Capital expenditures

( 1,072,696 )

Purchase of marketable debt securities

1 unchanged sentence

Investment in tax credit equity investments

Proceeds from disposal of capital assets and other, net

Net cash used in investing activities

( 1,286,506 )

Cash flows from financing activities:

Net proceeds from commercial paper

Net (payments of)/proceeds from commercial paper

Proceeds from issuance of debt

26 unchanged sentences

( 2,535,620 )

( 1,797,536 )

Total other comprehensive income

9 unchanged sentences

( 3,262,769 )

( 3,538,913 )

Total other comprehensive income

10 unchanged sentences

( 4,349,894 )

Total other comprehensive income

Total other comprehensive loss

Purchase of 1,149 shares of treasury stock

9 unchanged sentences

( 4,749,614 )

(1) Inclusive of excise tax of $ 23.7 million for the year ended August 26, 2023.

The excise tax is assessed at one percent of the fair market value of net stock repurchases after December 31, 2022.

See Notes to Consolidated Financial Statements.

5 unchanged sentences

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

At the end of fiscal 2023, in 5,682 of the domestic stores as well as the vast majority of our stores in Mexico and Brazil, we had a commercial sales program that provided commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations, fleet owners and other accounts.

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

At the end of fiscal 2024, in 5,898 of the domestic stores as well as the vast majority of our stores in Mexico and Brazil, we had a commercial sales program that provided prompt delivery of parts and other products and commercial credit to local, regional and national repair garages, dealers, service stations, fleet owners and other accounts.

We also sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and our commercial customers can make purchases through www.autozonepro.com.

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

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

1 unchanged sentence

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

Fiscal 2024 represented 53 weeks.

Fiscal 2023 and 2022 represented 52 weeks.

6 unchanged sentences

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 considers its investment in these tax credit funds as investments in variable interest entities (“VIEs”).

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 26, 2023, 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.

As of August 31, 2024, the Company held tax credit equity investments that were deemed to be VIEs 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 generally limited to its net investment, which was $ 53.9 million as of August 31, 2024 and $ 29.6 million as of August 26, 2023 and was included within the Other long-term assets caption in the accompanying Consolidated Balance Sheets.

11 unchanged sentences

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.

In accordance with ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , the Company estimates 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.

11 unchanged sentences

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 31, 2024 and August 26, 2023.

Vendor receivables are included in “Accounts receivable” on the accompanying Consolidated Balance Sheets as of August 31, 2024 and August 26, 2023.

Merchandise Inventories:

1 unchanged sentence

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 recent price inflation on the Company’s merchandise purchases, primarily driven by increased freight costs, the Company’s LIFO credit reserve balance was $ 59.0 million at August 26, 2023 and $ 15.0 million at August 27, 2022.

The Company’s policy is not to write up inventory in excess of replacement cost.

Due to recent price changes on the Company’s merchandise purchases, primarily driven by fluctuating freight costs, the Company’s LIFO credit reserve balance was $ 19.0 million at August 31, 2024 and $ 59.0 million at August 26, 2023.

Increases to the Company’s LIFO credit reserve balance are recorded as a non-cash charge to cost of sales and decreases are recorded as a non-cash benefit to cost of sales.

2 unchanged sentences

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.)

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

Property and Equipment:

13 unchanged sentences

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 26, 2023 and August 27, 2022.

The Company had approximately $ 302.6 million of goodwill, which is allocated to the Domestic Auto Parts operating segment at August 31, 2024 and August 26, 2023.

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

9 unchanged sentences

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.

(Refer to “Note L – 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.

2 unchanged sentences

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.)

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

Self-Insurance Reserves:

10 unchanged sentences

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.

The Company leases certain real estate and vehicles under various non-callable leases.

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

2 unchanged sentences

The leases have varying terms and expire at various dates through 2044.

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.

Real estate operating leases typically have initial terms between one and 20 years, and real estate finance leases typically have terms of 20 or more years, with multiple optional renewal periods of one to five years each.

Vehicle finance leases typically have original terms between one and five years .

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

9 unchanged sentences

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.)

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

Financial Instruments:

1 unchanged sentence

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.)

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

Income Taxes:

11 unchanged sentences

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.)

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

Sales and Use Taxes:

29 unchanged sentences

Revenue related to unfulfilled performance obligations as of August 31, 2024 and August 26, 2023 is not significant.

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

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

Vendor Allowances and Advertising Costs:

24 unchanged sentences

● Self-insurance;

● Technology;

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

9 unchanged sentences

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 140,071 , 142,887 and 171,652 stock options excluded for the year ended August 26, 2023, August 27, 2022 and August 28, 2021, respectively, because they would have been anti-dilutive.

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 118,771 , 140,071 and 142,887 stock

options excluded for the year ended August 31, 2024, August 26, 2023 and August 27, 2022, respectively, because they would have been anti-dilutive.

Share-Based Payments:

3 unchanged sentences

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.)

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

Risk and Uncertainties:

In fiscal 2023, one class of similar products accounted for approximately 14 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 .

In fiscal 2024, one class of similar products accounted for approximately 15 percent of the Company’s total revenues and one individual vendor provided 12 percent of our total purchases.

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

Recently Adopted Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (“FASB”) 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 governmental assistance to provide more transparency.

This ASU is effective for fiscal years beginning after December 15, 2021.

The Company adopted this ASU with its first quarter ended November 19, 2022 on a prospective basis.

The adoption of this guidance did not have a material impact on the Company's consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements:

In September 2022, the FASB issued ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50) .

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50) .

This ASU requires buyers in a supplier finance program to disclose sufficient qualitative and quantitative information about the program to allow a reader of the financial statements to understand the program’s nature, activity during the period, changes from period to period and the program’s potential magnitude.

This ASU is effective for all companies for fiscal years beginning after December 15, 2022, including interim periods within those years, and requires retrospective adoption.

The Company adopted this standard on a retrospective basis beginning with its first quarter ended November 18, 2023.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Refer to “Note F – Supplier Financing Programs.”

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) .

The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (CODM), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss.

This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss.

Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption.

Early adoption is permitted.

The Company expects to adopt this standard beginning with its first quarter ending November 18, 2023.

The Company will adopt this standard with our fiscal 2025 annual filing.

The Company is currently evaluating these new disclosure requirements and the impact of adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) .

The amendments in this ASU are intended to enhance the transparency of income tax information by updating income tax disclosure requirements.

The guidance is effective for public entities for annual periods beginning after December 15, 2024, and early adoption is permitted.

The amendments in this ASU should be applied on a prospective basis;

however, retrospective application is permitted.

The Company will adopt this standard with our fiscal 2026 annual filing.

The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.

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 $ 93.1 million, $ 70.6 million and $ 56.1 million for fiscal 2023, 2022 and 2021, respectively.

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 the 2020 Omnibus 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 $ 764.68 , $ 463.45 and $ 304.31 during fiscal 2023, 2022 and 2021, respectively.

The intrinsic value of options exercised was $ 424.6 million, $ 282.7 million and $ 280.1 million in fiscal 2023, 2022 and 2021, respectively.

The total fair value of options vested was $ 47.9 million, $ 39.3 million and $ 44.7 million in fiscal 2023, 2022 and 2021, respectively.

The Company generally issues new shares when options are exercised.

The following table summarizes information about stock option activity for the year ended August 26, 2023:

Exercise Price

Note B – 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 31, 2024

(in thousands)

Outstanding – August 27, 2022

Forfeited/Cancelled

Outstanding – August 26, 2023

Expected to vest

Available for future grants

As of August 26, 2023, total unrecognized share-based compensation expense related to stock options, net of estimated forfeitures, was approximately $ 90.1 million, before income taxes, and will be recognized over an estimated weighted average period of 2.9 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 26, 2023, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 8.2 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.4 years.

Transactions related to restricted stock units for the fiscal year ended August 26, 2023 are as follows:

Average Grant

Date Fair Value

Nonvested at August 27, 2022

Nonvested at August 26, 2023

Stock Appreciation Rights

At August 26, 2023 and August 27, 2022, the Company had $ 11.8 million and $ 10.4 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 $ 2.5 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 2023, $ 3.2 million in fiscal 2022 and $ 2.5 million in fiscal 2021.

Under the Employee Plan, 5,183 , 6,238 and 8,479 shares were sold to employees in fiscal 2023, 2022 and 2021, respectively.

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

Purchases under the Executive Plan were 689 , 709 and 997 shares in fiscal 2023, 2022 and 2021, 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 26, 2023, 122,341 shares of common stock were reserved for future issuance under the Employee Plan, and 232,966 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:

Other current assets

Other long-term assets

August 26, 2023

(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, $ 7.5 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:

Other current assets

Other long-term assets

At August 31, 2024, the fair value measurement amounts for assets and liabilities recorded in the accompanying Consolidated Balance Sheet consisted of short-term marketable debt securities of $ 38.4 million, which are included within Other current assets and long-term marketable debt securities of $ 83.7 million, which are included within 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 L – Derivative Financial Instruments,” while the fair values of the marketable debt securities by asset class are described in “Note C – 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 31, 2024, 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 C – 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 31, 2024

(in thousands)

Corporate debt securities

Government bonds

Mortgage-backed securities

Asset-backed securities and other

August 26, 2023

(in thousands)

Corporate debt securities

Government bonds

Mortgage-backed securities

Asset-backed securities and other

The marketable debt securities held at August 31, 2024, had effective maturities ranging from less than one year to approximately twenty-nine years .

At August 31, 2024, the Company held 45 securities that are in an unrealized loss position of approximately $ 0.7 million.

In evaluating whether a credit loss exists for the 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 until recovery of fair value.

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

The Company did not realize any material gains or losses on its marketable debt securities during fiscal 2024, 2023 or 2022.

Included above in total marketable debt securities are $ 111.5 million and $ 105.0 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 31, 2024 and August 26, 2023, respectively.

Note D – Leases

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

(in thousands)

Classification

August 31, 2024

August 26, 2023

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 $ 132.1 million as of August 31, 2024 and $ 132.5 million as of August 26, 2023.

Lease costs for finance and operating leases for the 53 weeks ended August 31, 2024 and 52 weeks ended August 26, 2023 are as follows:

For the year ended

(in thousands)

Statement of Income Location

August 31, 2024

August 26, 2023

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 31, 2024 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 31, 2024

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 $ 362.5 million and $ 335.2 million was reflected in cash flows from operating activities in the consolidated statement of cash flows for fiscal years 2024 and 2023, respectively.

As of August 31, 2024, 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 $ 58.9 million and $ 26.0 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 2025 to fiscal 2026 .

Note E – Income Taxes

The components of operating income before income taxes are as follows:

(in thousands)

International

1 unchanged sentence

(in thousands)

Current tax provision (benefit):

International

Purchased tax credits

Deferred tax provision (benefit):

International

Purchased tax credits

Income tax expense

6 unchanged sentences

US Tax on Non-U.S.

Income (GILTI and Subpart F)

Income (Subpart F)

US Tax on Non-U.S.

Income (GILTI)

Permanent Differences

Non-US Rate Differences

Foreign Tax Credits

9 unchanged sentences

Operating lease liabilities

Federal credit carryforwards

Total deferred tax assets

13 unchanged sentences

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

The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15 % intended to be effective for our tax periods ending August 30, 2025 and forward.

While the U.S.

has not yet adopted the Pillar Two rules, various other governments around the world are enacting similar legislation.

As currently designed, Pillar Two will ultimately apply to our worldwide operations.

There remains uncertainty as to the final Pillar Two model rules.

We are continuing to evaluate the Pillar Two rules and their potential impact on future periods, but we do not expect the rules to have a material impact on our effective tax rate.

At August 31, 2024 and August 26, 2023, the Company had net operating loss (“NOL”) carryforwards totaling approximately $ 309.8 million ($ 37.2 million tax effected) and $ 314.6 million ($ 37.2 million tax effected), respectively.

2 unchanged sentences

Income tax credit carryforwards will expire, if not utilized, in various years from fiscal 2025 through 2051 .

Pursuant to provisions under the Inflation Reduction Act, enacted in August of 2022, the Company purchased transferable federal tax credits during fiscal year 2024 from various counterparties.

Such federal tax credits were purchased at negotiated discounts, resulting in an income tax benefit recorded during the year ended August 31,

Receivables associated with transferable federal tax credits are recorded (netted) within taxes payable and deferred tax liabilities

At August 31, 2024 and August 26, 2023, the Company had a valuation allowance of $ 26.9 million and $ 24.9 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.

Management believes it is more likely than not that the remaining deferred tax assets will be fully realized given the extended carryforward periods referenced.

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

26 unchanged sentences

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.

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 26, 2023

(in thousands)

Other current assets

Other long-term assets

August 27, 2022

(in thousands)

Other current assets

Other long-term assets

At August 26, 2023, the fair value measurement amounts for assets and liabilities recorded in the accompanying Consolidated Balance Sheet consisted of short-term marketable debt securities of $ 39.6 million, which are included within Other current assets and long-term marketable debt securities of $ 81.9 million, which are included within Other long-term assets.

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.

At August 26, 2023, 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 available-for-sale marketable debt securities consisted of the following:

August 26, 2023

(in thousands)

Corporate debt securities

Government bonds

Mortgage-backed securities

Asset-backed securities and other

August 27, 2022

(in thousands)

Corporate debt securities

Government bonds

Mortgage-backed securities

Asset-backed securities and other

The marketable debt securities held at August 26, 2023, had effective maturities ranging from less than one year to approximately three years .

At August 26, 2023, the Company held 75 securities that are in an unrealized loss position of approximately $ 2.4 million.

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

The Company did not realize any material gains or losses on its marketable debt securities during fiscal 2023, 2022 or 2021.

Included above in total marketable debt securities are $ 105.0 million and $ 91.1 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 26, 2023 and August 27, 2022, 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:

Note F – Supplier Financing Programs

The Company has arrangements with third-party financial institutions to confirm invoice balances owed by the Company to certain suppliers and pay the financial institutions the confirmed amounts on the invoice due dates.

These arrangements allow the Company’s inventory suppliers, at their sole discretion, to enter into agreements directly with these financial institutions to finance the Company’s obligations to the suppliers at terms negotiated between the suppliers and the financial institutions.

Supplier participation is optional and our obligations to our suppliers, including the amount and dates due, are not impacted by our suppliers’ decision to enter into an agreement with a third-party financial institution.

As of August 31, 2024 and August 26, 2023, the Company had supplier obligations outstanding that had been confirmed under these arrangements of $ 4.9 billion and $ 4.8 billion, respectively, which are included in Accounts payable and $ 226.7 million and $ 224.8 million, respectively, which are included in Other long-term liabilities in the Condensed Consolidated Balance Sheets.

Note G – Accrued Expenses and Other

Accrued expenses and other consisted of the following:

(in thousands)

on Securities

Balance at August 28, 2021

Other Comprehensive Income (Loss) before reclassifications

Amounts reclassified from Accumulated Other Comprehensive Loss (2)

Balance at August 27, 2022

Other Comprehensive Income before reclassifications

Amounts reclassified from Accumulated Other Comprehensive Loss (2)

Balance at August 26, 2023

(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 26, 2023, the Company had $ 16.3 million (excluding the impact of deferred taxes) 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 2023, the Company reclassified $ 2.8 million of net losses from Accumulated Other Comprehensive Loss to Interest expense.

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

The Company expects to reclassify $ 2.3 million of net losses from Accumulated Other Comprehensive Loss to Interest expense over the next 12 months.

Accrued compensation, related payroll taxes and benefits

Property, sales and other taxes

Finance lease liabilities

Medical and casualty insurance claims (current portion)

Accrued interest

Accrued gift cards

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, $ 7.5 million for auto liability, $ 21.5 million for property and $ 2.0 million for general and product liability.

Note H – Litigation

The Company is involved in various legal proceedings incidental to the conduct of its business, including, but not limited to, claims and allegations related to wage and hour violations, unlawful termination, employment practices, product liability, privacy and cybersecurity, environmental matters, intellectual property rights or regulatory compliance.

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 I – Financing

1 unchanged sentence

(in thousands)

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

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

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

5 unchanged sentences

4.500 % Senior Notes due February 2028 , effective interest rate 4.43 %

6.250 % Senior Notes due November 2028 , effective interest rate 6.46 %

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

5.100 % Senior Notes due July 2029 , effective interest rate 5.30 %

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

3 unchanged sentences

5.200 % Senior Notes due August 2033 , effective interest rate 5.22 %

Commercial paper, weighted average interest rate 5.43 % and 2.43 % at August 26, 2023 and August 27, 2022, respectively

6.550 % Senior Notes due November 2033 , effective interest rate 6.71 %

5.400 % Senior Notes due July 2034 , effective interest rate 5.54 %

Commercial paper, weighted average interest rate 5.40 % at August 31, 2024 and 5.43 % at August 26, 2023

Total debt before discounts and debt issuance costs

11 unchanged sentences

The Company’s consolidated interest coverage ratio as of August 31, 2024 was 5.4 :1.

As of August 26, 2023, the $ 1.2 billion of commercial paper borrowings and the $ 300 million 3.125 % Senior Notes due April 2024 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 26, 2023, 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 July 17, 2023, the Company repaid its outstanding $ 500 million 3.125 % Senior Notes due July 2023, which were callable at par in April 2023.

On January 17, 2023, the Company repaid its outstanding $ 300 million 2.875 % Senior Notes due January 2023, which were callable at par in October 2022.

As of August 31, 2024, the $ 580 million of commercial paper borrowings, the $ 400 million 3.250 % Senior Notes due April 2025 and the $ 500 million 3.625 % Senior Notes due April 2025 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 31, 2024, 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 April 18, 2024, the Company repaid its outstanding $ 300 million 3.125 % Senior Notes due April 2024.

On July 17, 2023, the Company repaid its outstanding $ 500 million 3.125 % Senior Notes due July 2023.

On January 17, 2023, the Company repaid its outstanding $ 300 million 2.875 % Senior Notes due January 2023.

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

On July 21, 2023, the Company issued $ 450 million in 5.050 % Senior Notes due July 2026 and $ 300 million 5.200 % Senior Notes due August 2033 under the automatic shelf registration statement on Form S-3, filed with the SEC on July 19, 2022 (File No.

On June 28, 2024, the Company issued $ 600 million in 5.100 % Senior Notes due July 2029 and $ 700 million 5.400 % Senior Notes due July 2034 under the 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 us 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 our outstanding commercial paper borrowings and for other general corporate purposes.

On October 25, 2023, the Company issued $ 500 million in 6.250 % Senior Notes due November 2028 and $ 500 million 6.550 % Senior Notes due November 2033 under the 2022 Shelf Registration Statement.

Proceeds from the debt issuance were used for general corporate purposes.

On July 21, 2023, the Company issued $ 450 million in 5.050 % Senior Notes due July 2026 and $ 300 million in 5.200 % Senior Notes due August 2033 under the 2022 Shelf Registration Statement.

Proceeds from the debt issuance were used for general corporate purposes.

On January 27, 2023, the Company issued $ 450 million in 4.500 % Senior Notes due February 2028 and $ 550 million in 4.750 % Senior Notes due February 2033 under the 2022 Shelf Registration Statement.

8 unchanged sentences

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 26, 2023, the Company had $ 25 million in letters of credit outstanding under the letter of credit facility.

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 31, 2024, the Company had no 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 $ 141.6 million in letters of credit outstanding as of August 31, 2024.

2 unchanged sentences

The fair value of the Company’s debt was estimated at $ 9.0 billion as of August 31, 2024, and $ 7.3 billion as of August 26, 2023, 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 $ 406.6 million and $ 182.8 million at August 26, 2023 and August 27, 2022, respectively.

Such fair value is greater than the carrying value of debt by $ 3.5 million and less than the carrying value of debt by $ 406.6 million at August 31, 2024 and August 26, 2023, respectively.

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

11 unchanged sentences

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.

The Board voted to increase the repurchase authorization by $ 1.5 billion on October 5, 2021, $ 1.5 billion on December 15, 2021, $ 2.0 billion on March 22, 2022, $ 2.5 billion on October 4, 2022 and $ 2.0 billion on June 14, 2023 bringing the total authorization to $ 35.7 billion.

The Board voted to increase the repurchase authorization by $ 2.0 billion on December 20, 2023 and $ 1.5 billion on June 19, 2024, bringing the total authorization to $ 39.2 billion.

Previously, the Board voted to increase the authorization by $ 4.5 billion in fiscal 2023 and $ 5.0 billion in fiscal 2022.

The Company has $ 2.2 billion remaining under the Board’s authorization to repurchase its common stock.

1 unchanged sentence

(in thousands)

(1) Inclusive of excise tax of $ 23.7 million for the year ended August 26, 2023.

The excise tax is assessed at one percent of the fair market value of net stock repurchases after December 31, 2022.

During fiscal year 2024, the Company retired 1.7 million shares of treasury stock which had previously been repurchased under the Company’s share repurchase program.

3 unchanged sentences

Considering the cumulative repurchases through October 21, 2024, the Company has $ 2.0 billion remaining under the Board’s authorization to repurchase its common stock.

Note L – 401(k) Savings Plan

Note L – 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.

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

At August 31, 2024, the Company had $ 10.6 million (excluding the impact of deferred taxes) 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 2024 and 2023, the Company reclassified $ 2.3 million and $ 2.8 million of net losses from Accumulated Other Comprehensive Loss to Interest expense, respectively.

The Company expects to reclassify $ 2.3 million of net losses from Accumulated Other Comprehensive Loss to Interest expense over the next 12 months.

Note M – Accumulated Other Comprehensive Loss

Changes in Accumulated Other Comprehensive Loss consisted of the following:

(in thousands)

on Securities

Balance at August 27, 2022

Other Comprehensive Income before reclassifications

Amounts reclassified from Accumulated Other Comprehensive Loss (2)

Balance at August 26, 2023

Other Comprehensive (Loss) Income before reclassifications

Amounts reclassified from Accumulated Other Comprehensive Loss (2)

Balance at August 31, 2024

(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 N – 401(k) Savings Plan

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

2 unchanged sentences

The Company made matching contributions to employee accounts in connection with the 401(k) plan of $ 39.0 million in fiscal 2024, $ 37.3 million in fiscal 2023 and $ 37.9 million in fiscal 2022.

Note M – Leases

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

(in thousands)

Classification

August 26, 2023

August 27, 2022

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 $ 132.5 million as of August 26, 2023 and $ 97.2 million as of August 27, 2022.

Lease costs for finance and operating leases for the 52 weeks ended August 26, 2023 and August 27, 2022 are as follows:

For the year ended

(in thousands)

Statement of Income Location

August 26, 2023

August 27, 2022

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 26, 2023 having initial or remaining lease terms in excess of one year are as follows:

Note O – Share-Based 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.

Amended and Restated AutoZone, Inc.

2011 Equity Incentive Award 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.

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.

AutoZone, Inc.

Director Compensation Program

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 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 $ 106.2 million, $ 93.1 million and $ 70.6 million for fiscal 2024, 2023 and 2022, respectively.

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 the 2020 Omnibus 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.

Option-vesting periods range from four to five years , with the vast majority of options vesting ratably over four years .

Options 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 over the requisite service period, less estimated forfeitures.

Employees who meet the qualified retirement provisions under the 2020 Omnibus Plan are assumed to have a 0 % forfeiture rate.

All other employee grants assume a 10 % forfeiture rate, which is based on historical experience.

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 $ 922.10 , $ 764.68 and $ 463.45 during fiscal 2024, 2023 and 2022, respectively.

The intrinsic value of options exercised was $ 424.5 million, $ 424.6 million and $ 282.7 million in fiscal 2024, 2023 and 2022, respectively.

The total fair value of options vested was $ 67.0 million, $ 47.9 million and $ 39.3 million in fiscal 2024, 2023 and 2022, respectively.

The Company generally issues new shares when options are exercised.

The following table summarizes information about stock option activity for the year ended August 31, 2024:

Exercise Price

(in thousands)

Total lease payments

Present value of lease liabilities

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

August 26, 2023

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 $ 335.2 million and $ 316.0 million was reflected in cash flows from operating activities in the consolidated statement of cash flows for fiscal years 2023 and 2022, respectively.

As of August 26, 2023, 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 $ 56.9 million for real estate and will commence when the Company obtains possession of the underlying leased asset.

Commencement dates are expected to be from fiscal 2024 to fiscal 2025 .

Note N – Commitments and Contingencies

Outstanding – August 26, 2023

Forfeited/Cancelled

Outstanding – August 31, 2024

Expected to vest

Available for future grants

As of August 31, 2024, total unrecognized share-based compensation expense related to stock options, net of estimated forfeitures, was approximately $ 103.6 million, before income taxes, and will be recognized over an estimated weighted average period of 2.9 years.

Restricted Stock Units

As of August 31, 2024, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 6.8 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.4 years.

Transactions related to restricted stock units for the fiscal year ended August 31, 2024 are as follows:

Average Grant

Date Fair Value

Nonvested at August 26, 2023

Nonvested at August 31, 2024

Stock Appreciation Rights

At August 31, 2024 and August 26, 2023, the Company had $ 15.3 million and $ 11.8 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 $ 3.1 million, $ 2.5 million and $ 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 2024, 2023 and 2022, respectively.

Under the Employee Plan, 5,000 , 5,183 and 6,238 shares were sold to employees in fiscal 2024, 2023 and 2022, respectively.

The Company repurchased 4,886 shares in fiscal 2022 at market value from employees electing to sell their stock.

Purchases under the Executive Plan were 540 , 689 and 709 shares in fiscal 2024, 2023 and 2022, 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 31, 2024, 117,341 shares of common stock were reserved for future issuance under the Employee Plan, and 232,426 shares of common stock were reserved for future issuance under the Executive Plan.

Note P – Commitments and Contingencies

Construction commitments, primarily for new stores, totaled approximately $ 103.8 million at August 31, 2024.

3 unchanged sentences

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

The Company has entered into agreements to make capital contributions to certain tax credit equity investments upon the completion of project milestones.

As of August 26, 2023, the Company had commitments to make certain additional capital contributions to one of its tax credit funds totaling $ 9.3 million in fiscal 2024.

Note O – Litigation

Note P – Segment Reporting

The Company has entered into agreements to make capital contributions to certain tax credit instruments upon the completion of project milestones.

As of August 31, 2024, the Company had commitments to make certain additional capital contributions to these tax credit instruments totaling $ 49.3 million in fiscal 2025.

Note Q – Segment Reporting

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

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United States

Brazil and all other

The Company’s long-lived assets, consisting primarily of property and equipment, net and operating lease right-of-use assets, within the United States were 89 %, 88 % and 91 % in fiscal years 2024, 2023 and 2022, respectively.

No individual country outside of the United States had long-lived assets that were material to the consolidated totals.

Note Q – Subsequent Events

Subsequent to year end, the Company initiated the process of issuing Senior Notes under the 2022 Shelf Registration Statement.

Proceeds from the debt issuance are projected to be received at the end of October 2023 and will be used for general corporate purposes.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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 8. Financial Statements and Supplementary Data