--- ticker: AZO company: AZO filing_type: 10-K year_current: 2023 year_prior: 2022 risks_added: 8 risks_removed: 129 risks_modified: 44 risks_unchanged: 41 source: SEC EDGAR url: https://riskdiff.com/azo/2023-vs-2022/ markdown_url: https://riskdiff.com/azo/2023-vs-2022/index.md generated: 2026-06-01 --- # AZO: 10-K Risk Factor Changes 2023 vs 2022 > Source: U.S. Securities and Exchange Commission (EDGAR) > Generated: 2026-06-01 > All data extracted directly from official filings. No hallucinated content. ## Summary | Status | Count | |--------|-------| | New risks added | 8 | | Risks removed | 129 | | Risks modified | 44 | | Unchanged | 41 | --- ## New in Current Filing: Our failure to protect our brand and reputation could have an adverse effect on our relationships with our customers, employees, suppliers, vendors and other stakeholders, thereby negatively impacting sales and profitability. ​ We believe our continued strong sales growth is driven in significant part by our AutoZone and private label brand names and our positive reputation with customers, employees, suppliers, vendors and other stakeholders. The value in our brand names and reputation, and their continued effectiveness in driving our sales growth is dependent to a significant degree on our ability to maintain our reputation for safety, high product quality, friendliness, WOW! Customer service, trustworthy advice, integrity and business ethics. Negative incidents can erode trust and confidence quickly, and adverse publicity about us could damage our brand and reputation, undermine our customers' confidence in us, reduce demand for our products and services, affect our ability to recruit and retain employees, attract regulatory scrutiny, and impact our relationships with suppliers and vendors. Further, our actual or perceived response or lack of response to social, political, environmental or other sensitive issues, whether or not based in fact, could damage our reputation and may result in reduced demand for our merchandise. Customers are also increasingly using social media to provide feedback and information about our Company, our products and services in a manner that is rapidly and broadly disseminated. Our brand and reputation could be negatively impacted if negative sentiment about the Company, whether or not based on fact, is shared and distributed in such a manner. ​ Failure to comply with ethical, social, product, labor, environmental and anti-corruption standards could also jeopardize our reputation and potentially lead to various adverse actions by consumer or environmental groups, employees or regulatory bodies. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation. ​ --- ## New in Current Filing: Failure to maintain the security of sensitive personal information or other confidential information in our possession could subject us to litigation or regulatory enforcement action, cause reputational harm and cause us to incur substantial costs or have a material adverse impact on our business and financial condition. ​ Our business, like that of most retailers, involves the collection, processing, storage and transmission of large amounts of personal information relating to our customers, suppliers and AutoZoners and confidential business information relating to AutoZone or other parties with which we do business. This information is handled by us as well as third-party service providers and vendors that provide us with various technology, systems, services and other resources that we use in connection with the handling of this information and in furtherance of our business objectives. Furthermore, we accept payments using a variety of methods, including credit, debit, electronic payments and gift cards, which present information security risks, and we may offer new payment options in the future presenting new risks of which we are currently unaware. ​ While addressing vulnerabilities is a priority for us, the methods used to obtain unauthorized access are constantly evolving, increasing in frequency and sophistication, and can be difficult to anticipate or detect for long periods of time. The security measures we or our third-party service providers and vendors have in place today in an effort to keep up with growing and evolving risks do not always prevent or mitigate the impact of a cyber incident or provide us with sufficient visibility to determine if a cyber incident has occurred, and there can be no assurance that such measures we introduce in the future will be sufficiently effective either. Failure to maintain the security of the personal and other confidential information to which we have access could lead to private litigation, regulatory enforcement actions and reputational harm, all of which would require extensive time and financial resources to resolve and could have a material adverse impact on our business and financial condition. ​ While we have not experienced a material breach of our information systems or data to date, unauthorized parties have in the past gained access and exfiltrated data, and will continue to attempt to do so as the result of a cyber-attack, employee misconduct, employee error, system vulnerabilities or compromises, fraud, hacking, phishing attempts, malware, ransomware, other malicious codes or other intentional or unintentional acts. Furthermore, hardware, software or other IT applications that we or a third party develop for our use have contained and may contain exploitable vulnerabilities, bugs or design defects or may involve other problems that could unexpectedly compromise information security. ​ The cost to remediate and respond to a cyber incident involving unauthorized use, access, damage or loss of systems, data or other information could be significant. To the extent any cyber incident involving our or one of our third-party service provider's information systems results in the unauthorized access, loss, damage or misappropriation of information, we may be required by law to notify impacted individuals and face substantial liability due to claims arising from customers, financial institutions, regulatory authorities, payment card issuers and others. We maintain insurance coverage that may protect us from losses or claims in connection with certain incidents; however, our insurance coverage may not be sufficient to cover significant losses in any particular situation. ​ --- ## New in Current Filing: Significant changes in macroeconomic and geo-political factors could adversely affect our financial condition and results of operations. ​ Macroeconomic conditions impact both our customers and our suppliers. Moreover, the U.S. government continues to operate under historically large deficits and debt burden. Continued distress in global credit markets, business failures, civil unrest, inflation, rising interest rates, foreign exchange rate fluctuations, significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a public health crisis or pandemic (such as the COVID-19 pandemic), constraints on the global supply chain and other factors continue to affect the global economy. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. It is unclear how such factors could impact our business in the short term. Over a longer period of time, these macroeconomic and geo-political conditions could adversely affect our sales growth, margins and overhead. These could adversely affect our financial condition and operations. ​ Item 1B. Unresolved Staff Comments None. Item 2. Properties The following table reflects the square footage and number of leased and owned properties for our stores as of August 26, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ No. of --- ## New in Current Filing: Constant Currency (1) ​ 2023 ​ 2023 ​ 2022 ​ 2022 ​ Domestic ​ 3.4 % ​ 3.4 % ​ 8.4 % ​ 8.4 % International 29.3 % 17.5 % 19.1 % 19.2 % Total Company 5.6 % 4.6 % 9.2 % 9.2 % ​ ​ At August 26, 2023, we operated 6,300 domestic stores, 740 in Mexico and 100 in Brazil, compared with 6,168 domestic stores, 703 in Mexico and 72 in Brazil at August 27, 2022. We reported a total auto parts segment (domestic, Mexico and Brazil) sales increase of 7.4% for fiscal 2023. ​ Gross profit for fiscal 2023 was $9.1 billion, or 52.0% of net sales, a 17 basis point decrease compared with $8.5 billion, or 52.1% of net sales for fiscal 2022. The deleverage in gross margin was impacted by a non-cash LIFO charge of $44.0 million in fiscal 2023 versus a $15.0 million charge in fiscal 2022. Operating, selling, general and administrative expenses for fiscal 2023 increased to $5.6 billion, or 32.1% of net sales, from $5.2 billion, or 32.0% of net sales for fiscal 2022. Interest expense, net for fiscal 2023 was $306.4 million compared with $191.6 million during fiscal 2022. Average borrowings for fiscal 2023 were $7.0 billion, compared with $5.8 billion for fiscal 2022. Weighted average borrowing rates were 3.78% and 3.29% for fiscal 2023 and 2022, respectively. Our effective income tax rate was 20.2% and 21.1% of pre-tax income for fiscal 2023 and fiscal 2022, respectively. The benefit from stock options exercised in fiscal 2023 was $92.2 million compared to $63.2 million in fiscal 2022 (see "Note D - Income Taxes" in the Notes to Consolidated Financial Statements). Net income for fiscal 2023 increased by 4.1% to $2.5 billion, and diluted earnings per share increased 12.9% to $132.36 from $117.19 in fiscal 2022. The impact on the fiscal 2023 diluted earnings per share from stock repurchases was an increase of $1.15. Fiscal 2022 Compared with Fiscal 2021 A discussion of changes in our results of operations from fiscal 2022 to fiscal 2021 has been omitted from this Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended August 27, 2022, filed with the SEC on October 24, 2022, which is available free of charge on the SECs website at www.sec.gov and at www.autozone.com, by clicking "Investor Relations" located at the bottom of the page. --- ## New in Current Filing: Recently Issued Accounting Pronouncements: In September 2022, the FASB issued 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. Early adoption is permitted. The Company expects to adopt this standard beginning with its first quarter ending November 18, 2023. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact. --- ## New in Current Filing: 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Number --- ## New in Current Filing: August 26, 2023 (in thousands) Level 1 Level 2 Level 3 Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other current assets ​ $ 35,349 ​ $ 4,290 ​ $ - ​ $ 39,639 Other long-term assets ​ 71,028 ​ ​ 10,846 ​ - ​ 81,874 ​ ​ $ 106,377 ​ $ 15,136 ​ $ - ​ $ 121,513 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## New in Current Filing: August 26, 2023 (in thousands) Level 1 Level 2 Level 3 Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other current assets ​ $ 35,349 ​ $ 4,290 ​ $ - ​ $ 39,639 Other long-term assets ​ 71,028 ​ ​ 10,846 ​ - ​ 81,874 ​ ​ $ 106,377 ​ $ 15,136 ​ $ - ​ $ 121,513 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## No Match in Current: Business interruptions may negatively impact our operating hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business. *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* ​ Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions (including due to the impacts of climate change or otherwise) such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crises and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S. on favorable terms. ​ In the event commercial transportation is curtailed or substantially delayed, we may have difficulty transporting merchandise to our distribution centers and stores resulting in lost sales and/or a potential loss of customer loyalty. Transportation issues could also cause us to cancel purchase orders if we are unable to receive merchandise in our distribution centers. It is not possible to predict all events or circumstances which may negatively disrupt our business in a significant manner, and the near-term and long-term impacts of such disruptions on our business, demand for our products and our growth initiatives will vary significantly based on the facts and circumstances of each such disruption. Furthermore, such business interruptions could cause additional negative impacts of which we are not currently aware or magnify other risks associated with our business and operations. --- ## No Match in Current: Information Technology, Cybersecurity and Data Privacy Risks *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* ​ ‌We rely heavily on information technology systems for our key business processes. Any damage to, failure of, or interruption in these systems could have a material adverse impact on our business and operating results. ​ We rely extensively on information technology systems, some of which are managed or provided by third-party service providers, to collect, analyze, process, store, manage, transmit and protect key business processes, transactions and data, such as sales data, customer data, employee data, demand forecasting, merchandise ordering, inventory replenishment, supply chain management, payment processing, order fulfillment and more. Delays in the maintenance, updates, upgrading, or patching of these systems, applications or processes could adversely impact their effectiveness or could expose us to security and other risks. Our systems and the third-party systems with which we interact are subject to damage, failure or interruption due to various reasons such as: power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, malicious cyber-attacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware, natural disasters and catastrophic events, inadequate or ineffective redundancy measures; and design or usage errors by AutoZoners, contractors or third-party service providers. Although we seek to effectively maintain and safeguard our systems and our data and we seek to ensure our third-party service providers effectively maintain and safeguard their systems and our data, such efforts are not always successful. As a result, we or our service providers could experience, and on occasion have experienced, one or more errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure. While such incidents have not been material to date, any future incident could significantly disrupt our operations and key business processes, result in the impairment or loss of critical data, be costly and resource-intensive to remedy; harm our reputation and relationship with customers, AutoZoners, vendors and other stakeholders; and have a material adverse impact on our business and operating results. ​ In addition, our information technology systems, infrastructure and personnel require substantial investments, such as replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or designing or cost-effectively acquiring new systems with new functionality. These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, cost overruns, or implementation delays or errors, and may result in operational challenges, security control failures, reputational harm, and increased costs that could adversely affect our business operations and results of operations. ​ --- ## No Match in Current: Our reputation may be adversely affected if we are not able to achieve our Environmental, Social, and Governance (ESG) goals. *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* ​ Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, and disclosure topics such as climate change, sustainability (including with respect to our supply chain), natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. We strive to deliver shared value through our business and our diverse stakeholders expect us to make progress in certain ESG priority issue areas. A failure or perceived failure to meet these expectations could adversely affect public perception of our business, employee morale or customer or shareholder support. ​ --- ## No Match in Current: Error! Bookmark not defined. *This section from the 2022 filing does not have a high-confidence textual match in 2023. 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BusinessError! Bookmark not defined. Item 1. Business --- ## No Match in Current: Error! Bookmark not defined. *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* Item 1. BusinessError! Bookmark not defined. Item 1. Business --- ## No Match in Current: Error! Bookmark not defined. *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* Item 1. BusinessError! Bookmark not defined. Item 1. Business --- ## No Match in Current: Error! Bookmark not defined. *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* Item 1. BusinessError! Bookmark not defined. Item 1. Business --- ## No Match in Current: Error! 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BusinessError! Bookmark not defined. Item 1. Business --- ## No Match in Current: Error! Bookmark not defined. *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* Item 1. BusinessError! Bookmark not defined. Item 1. Business --- ## No Match in Current: Error! Bookmark not defined. *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* Item 1. BusinessError! Bookmark not defined. Item 1. Business --- ## No Match in Current: Error! Bookmark not defined. *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* Item 1. BusinessError! Bookmark not defined. Item 1. Business --- ## No Match in Current: Stock Appreciation Rights *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* 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. --- ## No Match in Current: August 27, 2022 *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* (in thousands) Level 1 Level 2 Level 3 Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other current assets ​ $ 49,659 ​ $ 109 ​ $ - ​ $ 49,768 Other long-term assets ​ 57,301 ​ 5,476 ​ - ​ 62,777 ​ ​ $ 106,960 ​ $ 5,585 ​ $ - ​ $ 112,545 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## No Match in Current: August 27, 2022 *This section from the 2022 filing does not have a high-confidence textual match in 2023. It may have been removed, merged, or substantially reworded.* (in thousands) Level 1 Level 2 Level 3 Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other current assets ​ $ 49,659 ​ $ 109 ​ $ - ​ $ 49,768 Other long-term assets ​ 57,301 ​ 5,476 ​ - ​ 62,777 ​ ​ $ 106,960 ​ $ 5,585 ​ $ - ​ $ 112,545 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## Modified: Note A - Significant Accounting Policies **Key changes:** - Reworded sentence: "At the end of fiscal 2023, the Company operated 6,300 stores in the U.S., 740 stores in Mexico and 100 stores in Brazil." **Prior (2022):** Business: 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. **Current (2023):** Business: 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 2023, the Company operated 6,300 stores in the U.S., 740 stores in Mexico and 100 stores in Brazil. 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. 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. --- ## Modified: Our business depends upon hiring, training and retaining qualified employees, including members of management and other key personnel. **Key changes:** - Reworded sentence: "​ We believe much of our brand value lies in the quality of the approximately 119,000 AutoZoners employed in our stores, distribution centers, store support centers and ALLDATA." - Reworded sentence: "​ We compete with other retail businesses for many of our associates in hourly positions, and these positions have historically had high turnover rates, which can lead to increased training and retention costs, particularly in a competitive labor market." - Reworded sentence: "​ In the U.S., there has been an increase in workers exercising their right to form or join a union, both generally and in the retail industry." - Reworded sentence: "Further, our labor costs could increase, and our business could be negatively affected by other requirements and expectations that could change our company culture, decrease our flexibility and disrupt our business." - Reworded sentence: "​ If we are unable to hire, properly train and retain qualified AutoZoners, we could experience higher employment costs, reduced sales, losses of customers and diminution of our brand or company culture, which could adversely affect our earnings." **Prior (2022):** ​ We believe much of our brand value lies in the quality of the approximately 112,000 AutoZoners employed in our stores, distribution centers, store support centers and ALLDATA. Our workforce costs represent our largest operating expense, and our ability to meet our labor needs while controlling labor costs is subject to numerous external factors, including market pressures with respect to prevailing wage rates and unemployment levels. Our business is also subject to employment laws and regulations, including those related to minimum wage, benefits and scheduling requirements. In addition, the implementation of potential regulatory changes relating to overtime exemptions and benefits for certain employees under federal and state laws could result in increased labor costs to our business and negatively impact our operating results. We compete with other retail businesses for many of our associates in hourly positions, and these positions have historically had high turnover rates, which can lead to increased training and retention costs, particularly in a competitive labor market. We cannot be assured that we can continue to hire, train and retain qualified employees at current wage rates since we operate in a competitive labor market, and there are currently significant inflationary and other pressures on wages. In the U.S., there has been an increase in workers exercising their right to form or join a union, both generally and in the retail industry. Although none of our employees are currently covered by collective bargaining agreements, there can be no assurance that our employees will not elect to be represented by labor unions in the future. If a significant portion of our work force were to become unionized, our culture and operating model could be challenged by inserting a third party between our current terrific relationships between our leaders and hourly AutoZoners. Further, our labor costs could increase and our business could be negatively affected by other requirements and expectations that could change our company culture, decrease our flexibility and disrupt our business. Further, our responses to any union organizing efforts could negatively impact how our brand is perceived by customers and AutoZoners and have adverse effects on our business and financial results. If we are unable to hire, properly train and retain qualified AutoZoners, we could experience higher employment costs, reduced sales, losses of customers and diminution of our brand or company culture, which could adversely affect our earnings. If we do not maintain competitive wages or benefit packages, our customer service could suffer due to a declining quality of our workforce or, alternatively, our earnings could decrease if we increase our wage rates. A violation or change in employment and labor laws (including changes in existing employment benefit programs such as health insurance) could have a material adverse effect on our results of operations, financial condition and cash flows. ​ **Current (2023):** ​ We believe much of our brand value lies in the quality of the approximately 119,000 AutoZoners employed in our stores, distribution centers, store support centers and ALLDATA. Our workforce costs represent our largest operating expense, and our ability to meet our labor needs while controlling labor costs is subject to numerous external factors, including market pressures with respect to prevailing wage rates and unemployment levels. Our business is also subject to employment laws and regulations, including those related to minimum wage, benefits and scheduling requirements. In addition, the implementation of potential regulatory changes relating to overtime exemptions and benefits for certain employees under federal and state laws could result in increased labor costs to our business and negatively impact our operating results. ​ We compete with other retail businesses for many of our associates in hourly positions, and these positions have historically had high turnover rates, which can lead to increased training and retention costs, particularly in a competitive labor market. We cannot be assured that we can continue to hire, train and retain qualified employees at current wage rates since we operate in a competitive labor market, and there are currently significant inflationary and other pressures on wages. ​ In the U.S., there has been an increase in workers exercising their right to form or join a union, both generally and in the retail industry. Further, the National Labor Relations Board (NLRB) has issued decisions making it easier for employees to organize. Although none of our employees are currently covered by collective bargaining agreements, there can be no assurance that our employees will not elect to be represented by labor unions in the future. If a significant portion of our work force were to become unionized, our culture and operating model could be challenged by inserting a third party between our current terrific relationships between our leaders and hourly AutoZoners. Further, our labor costs could increase, and our business could be negatively affected by other requirements and expectations that could change our company culture, decrease our flexibility and disrupt our business. Further, our responses to any union organizing efforts could negatively impact how our brand is perceived by customers and AutoZoners and have adverse effects on our business and financial results. ​ If we are unable to hire, properly train and retain qualified AutoZoners, we could experience higher employment costs, reduced sales, losses of customers and diminution of our brand or company culture, which could adversely affect our earnings. If we do not maintain competitive wages or benefit packages, our customer service could suffer due to a declining quality of our workforce, or, alternatively, our earnings could decrease if we increase our wage rates. A violation or change in employment and labor laws (including changes in existing employment benefit programs such as health insurance) could have a material adverse effect on our results of operations, financial condition and cash flows. ​ Our future success depends on the skills and experience of our management and other key personnel. The unexpected loss of the services of any such persons could adversely affect our operations. There can be no assurance that our succession planning, retention or hiring efforts will be successful. Failure to attract and retain qualified personnel in key roles could adversely affect our operations. ​ --- ## Modified: Opinion on the Financial Statements **Key changes:** - Reworded sentence: "(the Company) as of August 26, 2023 and August 27, 2022, 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 (collectively referred to as the "consolidated financial statements")." - Reworded sentence: "​ 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 26, 2023, 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, 2023, expressed an unqualified opinion thereon." **Prior (2022):** 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. ​ **Current (2023):** We have audited the accompanying consolidated balance sheets of AutoZone, Inc. (the Company) as of August 26, 2023 and August 27, 2022, 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 (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 26, 2023 and August 27, 2022, and the results of its operations and its cash flows for each of the three years in the period ended August 26, 2023, 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 26, 2023, 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, 2023, expressed an unqualified opinion thereon. ​ --- ## Modified: Overview of Share-Based Payment Plans **Key changes:** - Reworded sentence: "58 58 Table of ContentsDuring fiscal 2016, the Company's stockholders approved the Amended and Restated AutoZone, Inc." - Reworded sentence: "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." - Reworded sentence: "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." **Prior (2022):** 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 57 57 Table of Contentscompensation 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 ProgramUnder 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 OptionsThe 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:​​​​​​​​​​Year Ended ​ August 27,​August 28,​August 29, ​ 2022​2021​2020​​​​​​​​​Expected price volatility 28%28% 22%Risk-free interest rate 1.1%0.4% 1.4%Weighted average expected lives (in years) 5.6​5.6​ 5.5​Forfeiture rate 10%10% 10%Dividend yield 0%0% 0%​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.58 Table of Contents Table of Contents Table of Contents 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 ProgramUnder 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 OptionsThe 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:​​​​​​​​​​Year Ended ​ August 27,​August 28,​August 29, ​ 2022​2021​2020​​​​​​​​​Expected price volatility 28%28% 22%Risk-free interest rate 1.1%0.4% 1.4%Weighted average expected lives (in years) 5.6​5.6​ 5.5​Forfeiture rate 10%10% 10%Dividend yield 0%0% 0%​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. 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: **Current (2023):** 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"). 58 58 Table of ContentsDuring 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 PlanOn 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 ProgramUnder 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 OptionsThe 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 59 Table of Contents Table of Contents Table of Contents 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 PlanOn 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 ProgramUnder 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 OptionsThe 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 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: --- ## Modified: Inability to acquire and provide quality merchandise at competitive prices could adversely affect our sales and results of operations. **Key changes:** - Reworded sentence: "​ All of our vendors must comply with applicable product safety laws, and we are dependent on them to ensure that the products we buy comply with all safety and quality standards." - Reworded sentence: "​ If any of our significant vendors experience financial difficulties, business disruptions or are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers' perceptions of us and cause us to lose customers and sales." **Prior (2022):** ​ We are dependent upon our domestic and international vendors continuing to supply us with quality merchandise at competitive prices and payment terms. If our merchandise offerings do not meet our customers' expectations, or our customers have a negative perception of our merchandise regarding quality, innovation and safety, we could experience lost sales, increased costs and exposure to legal and reputational risk. In those circumstances, it may be difficult and costly for us to rebuild our reputation and regain the confidence of our customers. All of our vendors must comply with applicable product safety laws, and we are dependent on them to ensure that the products we buy comply with all safety and quality standards. Events that give rise to actual, potential or perceived product safety concerns could expose us to government enforcement action or private litigation, result in costly product recalls and other liabilities and lead to reputational harm and loss of customer confidence. To the extent our suppliers are subject to added government regulation of their product design and/or manufacturing processes, the cost of the merchandise we purchase may rise. ​ Furthermore, our vendors are impacted by global economic conditions which in turn impact our ability to source merchandise at competitive prices. For example, inflation, rising interest rates and disruption to the global supply chain have negatively impacted costs and inventory availability and may continue to have a negative impact on future results and profitability. Credit market and other macroeconomic conditions could also have a material adverse effect on the ability of our global and domestic suppliers to finance and operate their businesses. ​ 16 16 Table of ContentsIf we experience transitions with any of our significant vendors, or if they experience financial difficulties or otherwise are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers' perceptions of us and cause us to lose customers and sales.​Disruptions in our supply chain and other factors affecting the distribution of our merchandise could adversely impact our business.​A disruption to our supply chain and distribution network could adversely affect our ability to receive and distribute inventory in a timely manner, which could result in low inventory availability, lost sales, increased supply chain costs and loss of customer loyalty, among other things. Such disruptions may result from damage or destruction of our distribution centers or may be the result of macroeconomic conditions impacting the broader supply chain industry at large. For example, in recent years, ports, rails and domestic long-hauls in the U.S. and elsewhere have been negatively impacted by capacity constraints, congestion and delays, periodic labor disputes, security issues, weather-related events, and natural disasters, which have been further exacerbated by the COVID-19 pandemic and other factors beyond our control. Our business and competitive position may be negatively impacted if we are unable to successfully mitigate the impacts of such disruption to our supply chain or if we are unable to manage such disruptions more effectively than our competitors.​Risks associated with products sourced outside the U.S.​We directly imported approximately 15% of our purchases in fiscal 2022, but many of our domestic vendors directly import their products or components of their products. Changes to the price or flow of these goods for any reason, such as civil unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes , economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers' failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, often are beyond our control and could adversely affect our operations and profitability. In addition, the foreign trade policies, tariffs and other impositions on imported goods, trade sanctions imposed on certain countries, import limitations on certain types of goods or of goods containing certain materials from other countries and other factors relating to foreign trade and port labor agreements are beyond our control. These and other factors affecting our suppliers and our access to products could adversely affect our business and financial performance. As we or our domestic vendors increase our imports of merchandise from foreign vendors, the risks associated with these imports will also increase.​Our ability to grow depends in part on new store openings, existing store remodels and expansions and effective utilization of our existing supply chain and hub network.​Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores to meet customers' needs on a timely and profitable basis. Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably.In addition, we extensively utilize our hub network, our supply chain and our logistics management techniques to efficiently stock our stores. We have made, and plan to continue to make, significant investments in our supply chain to improve product availability and product assortment, fulfill evolving consumer product demands and keep up with our long-term store expansion goals. If we fail to effectively utilize our existing hubs and/or supply chains, or if our investments in our supply chain initiatives, including directly sourcing some products from outside the U.S., do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores or increases in our operating costs, which could adversely affect our sales volume and/or our margins.17 Table of Contents Table of Contents Table of Contents If we experience transitions with any of our significant vendors, or if they experience financial difficulties or otherwise are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers' perceptions of us and cause us to lose customers and sales.​Disruptions in our supply chain and other factors affecting the distribution of our merchandise could adversely impact our business.​A disruption to our supply chain and distribution network could adversely affect our ability to receive and distribute inventory in a timely manner, which could result in low inventory availability, lost sales, increased supply chain costs and loss of customer loyalty, among other things. Such disruptions may result from damage or destruction of our distribution centers or may be the result of macroeconomic conditions impacting the broader supply chain industry at large. For example, in recent years, ports, rails and domestic long-hauls in the U.S. and elsewhere have been negatively impacted by capacity constraints, congestion and delays, periodic labor disputes, security issues, weather-related events, and natural disasters, which have been further exacerbated by the COVID-19 pandemic and other factors beyond our control. Our business and competitive position may be negatively impacted if we are unable to successfully mitigate the impacts of such disruption to our supply chain or if we are unable to manage such disruptions more effectively than our competitors.​Risks associated with products sourced outside the U.S.​We directly imported approximately 15% of our purchases in fiscal 2022, but many of our domestic vendors directly import their products or components of their products. Changes to the price or flow of these goods for any reason, such as civil unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes , economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers' failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, often are beyond our control and could adversely affect our operations and profitability. In addition, the foreign trade policies, tariffs and other impositions on imported goods, trade sanctions imposed on certain countries, import limitations on certain types of goods or of goods containing certain materials from other countries and other factors relating to foreign trade and port labor agreements are beyond our control. These and other factors affecting our suppliers and our access to products could adversely affect our business and financial performance. As we or our domestic vendors increase our imports of merchandise from foreign vendors, the risks associated with these imports will also increase.​Our ability to grow depends in part on new store openings, existing store remodels and expansions and effective utilization of our existing supply chain and hub network.​Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores to meet customers' needs on a timely and profitable basis. Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably.In addition, we extensively utilize our hub network, our supply chain and our logistics management techniques to efficiently stock our stores. We have made, and plan to continue to make, significant investments in our supply chain to improve product availability and product assortment, fulfill evolving consumer product demands and keep up with our long-term store expansion goals. If we fail to effectively utilize our existing hubs and/or supply chains, or if our investments in our supply chain initiatives, including directly sourcing some products from outside the U.S., do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores or increases in our operating costs, which could adversely affect our sales volume and/or our margins. If we experience transitions with any of our significant vendors, or if they experience financial difficulties or otherwise are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers' perceptions of us and cause us to lose customers and sales. ​ **Current (2023):** ​ We are dependent upon our domestic and international vendors continuing to supply us with quality merchandise at competitive prices and payment terms. If our merchandise offerings do not meet our customers' expectations, or our customers have a negative perception of our merchandise regarding quality, innovation and safety, we could experience lost sales, increased costs and exposure to legal and reputational risk. In those circumstances, it may be difficult and costly for us to rebuild our reputation and regain the confidence of our customers. ​ All of our vendors must comply with applicable product safety laws, and we are dependent on them to ensure that the products we buy comply with all safety and quality standards. Events that give rise to actual, potential or perceived product safety concerns could expose us to government enforcement action or private litigation, result in 16 16 Table of Contentscostly product recalls and other liabilities and lead to reputational harm and loss of customer confidence. To the extent our suppliers are subject to added government regulation of their product design and/or manufacturing processes, the cost of the merchandise we purchase may rise. ​Furthermore, our vendors are impacted by global economic conditions which in turn impact our ability to source merchandise at competitive prices. For example, inflation, rising interest rates and disruption to the global supply chain have negatively impacted costs and inventory availability and may continue to have a negative impact on future results and profitability. Credit market and other macroeconomic conditions could also have a material adverse effect on the ability of our global and domestic suppliers to finance and operate their businesses. ​If any of our significant vendors experience financial difficulties, business disruptions or are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers' perceptions of us and cause us to lose customers and sales.​Disruptions in our supply chain and other factors affecting the distribution of our merchandise could adversely impact our business.​A disruption to our supply chain or distribution network could adversely affect our ability to receive and distribute inventory in a timely manner, which could result in low inventory availability, lost sales, increased supply chain costs and loss of customer loyalty, among other things. Such disruptions may result from damage or destruction of our distribution centers, our ability to attract and retain qualified drivers, costs associated with maintaining or operating our fleet or macroeconomic conditions impacting the broader supply chain industry at large. For example, in recent years, ports, rails and domestic long-hauls in the U.S. and elsewhere have been negatively impacted by capacity constraints, congestion and delays, periodic labor disputes, security issues, weather-related events, and natural disasters, which have been further exacerbated by the COVID-19 pandemic and other factors beyond our control. Our business and competitive position may be negatively impacted if we are unable to successfully mitigate the impacts of such disruption to our supply chain or if we are unable to manage such disruptions more effectively than our competitors.​We are subject to risks associated with products sourced outside the U.S.​We directly imported approximately 16% of our purchases in fiscal 2023, but many of our domestic vendors directly import their products or components of their products. Changes to the price or flow of these goods for any reason, such as civil unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes, economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers' failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, foreign trade policies, trade sanctions, import limitations on certain types of goods or of goods containing certain materials from other countries, port labor agreements, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, often are beyond our control and could adversely affect our operations and profitability. These and other factors affecting our suppliers and our access to products could adversely affect our business and financial performance. As we or our domestic vendors increase the importation of merchandise or components from foreign vendors, these risks are likely to increase.​Our ability to grow depends in part on new store openings, existing store remodels and expansions and effective utilization of our existing supply chain and hub network.​Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores to meet customers' needs on a timely and profitable basis. Accomplishing store development and expansion goals will depend upon a number of factors, including the ability to identify and obtain suitable sites for new and expanded stores in a timely manner and at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to 17 Table of Contents Table of Contents Table of Contents costly product recalls and other liabilities and lead to reputational harm and loss of customer confidence. To the extent our suppliers are subject to added government regulation of their product design and/or manufacturing processes, the cost of the merchandise we purchase may rise. ​Furthermore, our vendors are impacted by global economic conditions which in turn impact our ability to source merchandise at competitive prices. For example, inflation, rising interest rates and disruption to the global supply chain have negatively impacted costs and inventory availability and may continue to have a negative impact on future results and profitability. Credit market and other macroeconomic conditions could also have a material adverse effect on the ability of our global and domestic suppliers to finance and operate their businesses. ​If any of our significant vendors experience financial difficulties, business disruptions or are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers' perceptions of us and cause us to lose customers and sales.​Disruptions in our supply chain and other factors affecting the distribution of our merchandise could adversely impact our business.​A disruption to our supply chain or distribution network could adversely affect our ability to receive and distribute inventory in a timely manner, which could result in low inventory availability, lost sales, increased supply chain costs and loss of customer loyalty, among other things. Such disruptions may result from damage or destruction of our distribution centers, our ability to attract and retain qualified drivers, costs associated with maintaining or operating our fleet or macroeconomic conditions impacting the broader supply chain industry at large. For example, in recent years, ports, rails and domestic long-hauls in the U.S. and elsewhere have been negatively impacted by capacity constraints, congestion and delays, periodic labor disputes, security issues, weather-related events, and natural disasters, which have been further exacerbated by the COVID-19 pandemic and other factors beyond our control. Our business and competitive position may be negatively impacted if we are unable to successfully mitigate the impacts of such disruption to our supply chain or if we are unable to manage such disruptions more effectively than our competitors.​We are subject to risks associated with products sourced outside the U.S.​We directly imported approximately 16% of our purchases in fiscal 2023, but many of our domestic vendors directly import their products or components of their products. Changes to the price or flow of these goods for any reason, such as civil unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes, economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers' failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, foreign trade policies, trade sanctions, import limitations on certain types of goods or of goods containing certain materials from other countries, port labor agreements, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, often are beyond our control and could adversely affect our operations and profitability. These and other factors affecting our suppliers and our access to products could adversely affect our business and financial performance. As we or our domestic vendors increase the importation of merchandise or components from foreign vendors, these risks are likely to increase.​Our ability to grow depends in part on new store openings, existing store remodels and expansions and effective utilization of our existing supply chain and hub network.​Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores to meet customers' needs on a timely and profitable basis. Accomplishing store development and expansion goals will depend upon a number of factors, including the ability to identify and obtain suitable sites for new and expanded stores in a timely manner and at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to costly product recalls and other liabilities and lead to reputational harm and loss of customer confidence. To the extent our suppliers are subject to added government regulation of their product design and/or manufacturing processes, the cost of the merchandise we purchase may rise. ​ Furthermore, our vendors are impacted by global economic conditions which in turn impact our ability to source merchandise at competitive prices. For example, inflation, rising interest rates and disruption to the global supply chain have negatively impacted costs and inventory availability and may continue to have a negative impact on future results and profitability. Credit market and other macroeconomic conditions could also have a material adverse effect on the ability of our global and domestic suppliers to finance and operate their businesses. ​ If any of our significant vendors experience financial difficulties, business disruptions or are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers' perceptions of us and cause us to lose customers and sales. ​ --- ## Modified: We are subject to risks associated with products sourced outside the U.S. **Key changes:** - Reworded sentence: "​ We directly imported approximately 16% of our purchases in fiscal 2023, but many of our domestic vendors directly import their products or components of their products." - Reworded sentence: "As we or our domestic vendors increase the importation of merchandise or components from foreign vendors, these risks are likely to increase." **Prior (2022):** ​ We directly imported approximately 15% of our purchases in fiscal 2022, but many of our domestic vendors directly import their products or components of their products. Changes to the price or flow of these goods for any reason, such as civil unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes , economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers' failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, often are beyond our control and could adversely affect our operations and profitability. In addition, the foreign trade policies, tariffs and other impositions on imported goods, trade sanctions imposed on certain countries, import limitations on certain types of goods or of goods containing certain materials from other countries and other factors relating to foreign trade and port labor agreements are beyond our control. These and other factors affecting our suppliers and our access to products could adversely affect our business and financial performance. As we or our domestic vendors increase our imports of merchandise from foreign vendors, the risks associated with these imports will also increase. ​ **Current (2023):** ​ We directly imported approximately 16% of our purchases in fiscal 2023, but many of our domestic vendors directly import their products or components of their products. Changes to the price or flow of these goods for any reason, such as civil unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes, economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers' failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, foreign trade policies, trade sanctions, import limitations on certain types of goods or of goods containing certain materials from other countries, port labor agreements, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, often are beyond our control and could adversely affect our operations and profitability. These and other factors affecting our suppliers and our access to products could adversely affect our business and financial performance. As we or our domestic vendors increase the importation of merchandise or components from foreign vendors, these risks are likely to increase. ​ --- ## Modified: Stock Performance Graph **Key changes:** - Reworded sentence: "The graph below presents changes in the value of AutoZone's stock as compared to Standard & Poor's 500 Composite Index ("S&P 500") and to Standard & Poor's Retail Index ("S&P Retail Index") for the five-year period beginning August 25, 2018 and ending August 26, 2023." - Reworded sentence: "​ 26 26 Table of ContentsItem 7." - Reworded sentence: "We began operations in 1979 and at August 26, 2023, operated 6,300 stores in the U.S., 740 stores in Mexico and 100 stores in Brazil." - Reworded sentence: "We do not derive revenue from automotive repair or installation services.Executive SummaryFor fiscal 2023, we achieved record net income of $2.5 billion, a 4.1% increase over the prior year, and sales growth of $1.2 billion, a 7.4% increase over the prior year." - Reworded sentence: "Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods.​We have also experienced continued pressure on average hourly wages in the U.S." **Prior (2022):** The graph below presents changes in the value of AutoZone's stock as compared to Standard & Poor's 500 Composite Index ("S&P 500") and to Standard & Poor's Retail Index ("S&P Retail Index") for the five-year period beginning August 26, 2017 and ending August 27, 2022. ​ Item 6. Reserved Not required. ​ 25 25 Table of ContentsItem 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsWe are the leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at August 27, 2022, 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 August 27, 2022, in 5,342 of our domestic stores, we also had a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. We also sell the ALLDATA brand automotive diagnostic, repair and shop management software through www.alldata.com. Additionally, we 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. We also provide product information on our Duralast branded products through www.duralastparts.com. We do not derive revenue from automotive repair or installation services.Executive SummaryFor fiscal 2022, we achieved record net income of $2.4 billion, an 11.9% increase over the prior year, and sales growth of $1.6 billion, an 11.1% increase over the prior year. Domestic commercial sales increased 26.5%, which represents 28.8% of our domestic auto parts sales. Both our retail sales and commercial sales grew this past year as we made progress on our initiatives aimed at improving our ability to say "Yes" to our customers more frequently and accelerating our commercial growth.​Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.​One macroeconomic factor affecting our customers and our industry during fiscal 2022 was gas prices. During fiscal 2022, the average price per gallon of unleaded gasoline in the U.S. was $3.83, compared to $2.62 during fiscal 2021. We believe fluctuations in gas prices impact our customers' level of disposable income. With approximately 11 billion gallons of unleaded gas consumption each month across the U.S., each $1 increase at the pump reduces approximately $11 billion of additional spending capacity to consumers each month. Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods.​We have also experienced continued accelerated pressure on wages in the U.S. during fiscal 2022. Some of this is attributed to regulatory changes in certain states and municipalities, while the larger portion is being driven by general market pressures and some specific actions taken recently by other retailers. The regulatory changes are expected to continue, as evidenced by the areas that have passed legislation to increase employees' wages substantially over the next few years.During fiscal 2022, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 84% of total sales categories continuing to comprise our largest set of categories. While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in our domestic stores we see a slight decrease in mix of sales of the discretionary category and a slight increase in the maintence category compared to last year.The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road.26 Table of Contents Table of Contents Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsWe are the leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at August 27, 2022, 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 August 27, 2022, in 5,342 of our domestic stores, we also had a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. We also sell the ALLDATA brand automotive diagnostic, repair and shop management software through www.alldata.com. Additionally, we 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. We also provide product information on our Duralast branded products through www.duralastparts.com. We do not derive revenue from automotive repair or installation services.Executive SummaryFor fiscal 2022, we achieved record net income of $2.4 billion, an 11.9% increase over the prior year, and sales growth of $1.6 billion, an 11.1% increase over the prior year. Domestic commercial sales increased 26.5%, which represents 28.8% of our domestic auto parts sales. Both our retail sales and commercial sales grew this past year as we made progress on our initiatives aimed at improving our ability to say "Yes" to our customers more frequently and accelerating our commercial growth.​Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.​One macroeconomic factor affecting our customers and our industry during fiscal 2022 was gas prices. During fiscal 2022, the average price per gallon of unleaded gasoline in the U.S. was $3.83, compared to $2.62 during fiscal 2021. We believe fluctuations in gas prices impact our customers' level of disposable income. With approximately 11 billion gallons of unleaded gas consumption each month across the U.S., each $1 increase at the pump reduces approximately $11 billion of additional spending capacity to consumers each month. Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods.​We have also experienced continued accelerated pressure on wages in the U.S. during fiscal 2022. Some of this is attributed to regulatory changes in certain states and municipalities, while the larger portion is being driven by general market pressures and some specific actions taken recently by other retailers. The regulatory changes are expected to continue, as evidenced by the areas that have passed legislation to increase employees' wages substantially over the next few years.During fiscal 2022, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 84% of total sales categories continuing to comprise our largest set of categories. While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in our domestic stores we see a slight decrease in mix of sales of the discretionary category and a slight increase in the maintence category compared to last year.The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations We are the leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at August 27, 2022, 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 August 27, 2022, in 5,342 of our domestic stores, we also had a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. We also sell the ALLDATA brand automotive diagnostic, repair and shop management software through www.alldata.com. Additionally, we 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. We also provide product information on our Duralast branded products through www.duralastparts.com. We do not derive revenue from automotive repair or installation services. **Current (2023):** The graph below presents changes in the value of AutoZone's stock as compared to Standard & Poor's 500 Composite Index ("S&P 500") and to Standard & Poor's Retail Index ("S&P Retail Index") for the five-year period beginning August 25, 2018 and ending August 26, 2023. ​ Item 6. Reserved Not required. ​ 26 26 Table of ContentsItem 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsWe are the leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at August 26, 2023, operated 6,300 stores in the U.S., 740 stores in Mexico and 100 stores in Brazil. 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 August 26, 2023, in 5,682 of our 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. 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, we sell the ALLDATA brand of automotive diagnostic, repair, collision and shop management software through www.alldata.com. We also provide product information on our Duralast branded products through www.duralastparts.com. We do not derive revenue from automotive repair or installation services.Executive SummaryFor fiscal 2023, we achieved record net income of $2.5 billion, a 4.1% increase over the prior year, and sales growth of $1.2 billion, a 7.4% increase over the prior year. Our retail sales and commercial sales in our domestic and international markets grew this past year as we made progress on our initiatives aimed at improving our ability to say "Yes" to our customers more frequently.​Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.​One macroeconomic factor affecting our customers and our industry is gas prices. We believe fluctuations in gas prices impact our customers' level of disposable income. With approximately 11 billion gallons of unleaded gas consumption each month across the U.S., each $1 increase at the pump reduces approximately $11 billion of additional spending capacity to consumers each month. Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods.​We have also experienced continued pressure on average hourly wages in the U.S. during fiscal 2023. Some of this is attributed to regulatory changes in certain states and municipalities, while the larger portion is being driven by general market pressures and some specific actions taken recently by other retailers. The regulatory changes are expected to continue, as evidenced by the areas that have passed legislation to increase employees' wages substantially over the next few years.During fiscal 2023, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 85% of total sales categories continuing to comprise our largest set of categories. While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in our domestic stores we see a slight decrease in mix of sales of the discretionary category and a slight increase in the maintenance category compared to last year.The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road.Miles DrivenWe believe as the number of miles driven increases, consumers' vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items. While over the long-term we have seen a close correlation between our net sales and the number of miles driven, we have also seen certain time frames of minimal correlation in sales performance and miles driven. During the periods of minimal 27 Table of Contents Table of Contents Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsWe are the leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at August 26, 2023, operated 6,300 stores in the U.S., 740 stores in Mexico and 100 stores in Brazil. 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 August 26, 2023, in 5,682 of our 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. 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, we sell the ALLDATA brand of automotive diagnostic, repair, collision and shop management software through www.alldata.com. We also provide product information on our Duralast branded products through www.duralastparts.com. We do not derive revenue from automotive repair or installation services.Executive SummaryFor fiscal 2023, we achieved record net income of $2.5 billion, a 4.1% increase over the prior year, and sales growth of $1.2 billion, a 7.4% increase over the prior year. Our retail sales and commercial sales in our domestic and international markets grew this past year as we made progress on our initiatives aimed at improving our ability to say "Yes" to our customers more frequently.​Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.​One macroeconomic factor affecting our customers and our industry is gas prices. We believe fluctuations in gas prices impact our customers' level of disposable income. With approximately 11 billion gallons of unleaded gas consumption each month across the U.S., each $1 increase at the pump reduces approximately $11 billion of additional spending capacity to consumers each month. Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods.​We have also experienced continued pressure on average hourly wages in the U.S. during fiscal 2023. Some of this is attributed to regulatory changes in certain states and municipalities, while the larger portion is being driven by general market pressures and some specific actions taken recently by other retailers. The regulatory changes are expected to continue, as evidenced by the areas that have passed legislation to increase employees' wages substantially over the next few years.During fiscal 2023, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 85% of total sales categories continuing to comprise our largest set of categories. While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in our domestic stores we see a slight decrease in mix of sales of the discretionary category and a slight increase in the maintenance category compared to last year.The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road.Miles DrivenWe believe as the number of miles driven increases, consumers' vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items. While over the long-term we have seen a close correlation between our net sales and the number of miles driven, we have also seen certain time frames of minimal correlation in sales performance and miles driven. During the periods of minimal Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations We are the leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at August 26, 2023, operated 6,300 stores in the U.S., 740 stores in Mexico and 100 stores in Brazil. 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 August 26, 2023, in 5,682 of our 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. 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, we sell the ALLDATA brand of automotive diagnostic, repair, collision and shop management software through www.alldata.com. We also provide product information on our Duralast branded products through www.duralastparts.com. We do not derive revenue from automotive repair or installation services. --- ## Modified: Fiscal Year Ended August **Key changes:** - Reworded sentence: "(in thousands, except ratio) ​ 2023 2022 2021 2020 2019(1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income $ 2,528,426 $ 2,429,604 $ 2,170,314 $ 1,732,972 $ 1,617,221 Add: Interest expense ​ 306,372 ​ 191,638 ​ 195,337 ​ 201,165 ​ 184,804 Income tax expense ​ ​ 639,188 ​ ​ 649,487 ​ ​ 578,876 ​ ​ 483,542 ​ ​ 414,112 EBIT ​ 3,473,986 ​ 3,270,729 ​ 2,944,527 ​ 2,417,679 ​ 2,216,137 Add: Depreciation and amortization expense ​ 497,577 ​ 442,223 ​ 407,683 ​ 397,466 ​ 369,957 Rent expense(2) ​ 406,398 ​ 373,278 ​ 345,380 ​ 329,783 ​ 332,726 Share-based expense ​ 93,087 ​ 70,612 ​ 56,112 ​ 44,835 ​ 43,255 EBITDAR ​ $ 4,471,048 ​ $ 4,156,842 ​ $ 3,753,702 ​ $ 3,189,763 ​ $ 2,962,075 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Debt ​ $ 7,668,549 ​ $ 6,122,092 ​ $ 5,269,820 ​ $ 5,513,371 ​ $ 5,206,344 Financing lease liabilities ​ 287,618 ​ 310,305 ​ 276,054 ​ 223,353 ​ 179,905 Add: Rent x 6(2)(6) ​ 2,438,388 ​ 2,239,668 ​ 2,072,280 ​ 1,978,696 ​ 1,996,358 Adjusted debt ​ $ 10,394,555 ​ $ 8,672,065 ​ $ 7,618,154 ​ $ 7,715,420 ​ $ 7,382,607 Adjusted debt to EBITDAR ​ 2.3 ​ 2.1 ​ 2.0 ​ 2.4 ​ 2.5 ​ ​ 38 38 Table of Contents(1)The fiscal year ended August 31, 2019 consisted of 53 weeks.(2)Effective September 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), the new lease accounting standard that required the Company to recognize operating lease assets and liabilities in the balance sheet." - Reworded sentence: "Our senior management has identified self-insurance reserves as a critical accounting estimate that is materially impacted by assumptions while income taxes and valuation allowances have been identified as critical accounting policies." - Reworded sentence: "When estimating these liabilities, we consider factors, such as the severity, duration and frequency of claims, legal costs associated with claims, healthcare trends and projected inflation of related factors." - Reworded sentence: "Our senior management has identified self-insurance reserves as a critical accounting estimate that is materially impacted by assumptions while income taxes and valuation allowances have been identified as critical accounting policies." - Reworded sentence: "When estimating these liabilities, we consider factors, such as the severity, duration and frequency of claims, legal costs associated with claims, healthcare trends and projected inflation of related factors." **Prior (2022):** (in thousands, except per share data, same store sales and selected operating data) 2022 2021(1) 2020(1) 2019(2)(3) 2018(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ **Current (2023):** (in thousands, except per share data, same store sales and selected operating data) 2023 2022 2021(1) 2020(1) 2019(2)(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## Modified: August 27, 2022 **Key changes:** - Reworded sentence: "(in thousands) Level 1 Level 2 Level 3 Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other current assets ​ $ 49,659 ​ $ 109 ​ $ - ​ $ 49,768 Other long-term assets ​ 57,301 ​ 5,476 ​ - ​ 62,777 ​ ​ $ 106,960 ​ $ 5,585 ​ $ - ​ $ 112,545 ​ 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." - Reworded sentence: "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." - Reworded sentence: "A discussion of the carrying values and fair values of the Company's debt is included in "Note I - Financing." ​ ​ 66 66 Table of ContentsNote F - Marketable Debt SecuritiesThe 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." - Reworded sentence: "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.​​67 Table of Contents Table of Contents Table of Contents Note F - Marketable Debt SecuritiesThe 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." - Reworded sentence: "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.​​" **Prior (2022):** (in thousands) Level 1 Level 2 Level 3 Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other current assets ​ $ 46,007 ​ $ - ​ $ - ​ $ 46,007 Other long-term assets ​ 54,105 ​ 13,806 ​ - ​ 67,911 ​ ​ $ 100,112 ​ $ 13,806 ​ $ - ​ $ 113,918 ​ 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." ​ ​ 64 64 Table of ContentsNote F - Marketable Debt SecuritiesThe 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​ Amortized Gross Gross ​​​Cost​Unrealized​Unrealized​Fair(in thousands)​Basis​Gains​Losses​Value​​​​​​​​​​​​​Corporate debt securities​$ 15,293​$ 1​$ (298)​$ 14,996Government bonds​ 88,903​ - ​ (1,963)​ 86,940Mortgage-backed securities​ 4,600​ - ​ (243)​ 4,357Asset-backed securities and other​ 6,531​ - ​ (279)​ 6,252​​$ 115,327​$ 1​$ (2,783)​$ 112,545​​​​​​​​​​​​​​​​August 28, 2021​ Amortized Gross Gross ​​​Cost​Unrealized​Unrealized​Fair(in thousands)​Basis​Gains​Losses​Value​​​​​​​​​​​​​Corporate debt securities​$ 23,650​$ 329​$ (2)​$ 23,977Government bonds​ 65,416​ 338​ (2)​ 65,752Mortgage-backed securities​ 6,552​ 58​ (8)​ 6,602Asset-backed securities and other​ 17,551​ 43​ (7)​ 17,587​​$ 113,169​$ 768​$ (19)​$ 113,918​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 $62.5 million of marketable debt securities transferred by the Company's insurance captive to a trust account to secure its obligations to an insurance company related to future workers' compensation and casualty losses as of August 27, 2022 and August 28, 2021, respectively.​​65 Table of Contents Table of Contents Table of Contents Note F - Marketable Debt SecuritiesThe Company's basis for determining the cost of a security sold is the "Specific Identification Model." Unrealized gains (losses) on marketable debt securities are recorded in Accumulated Other Comprehensive Loss. The Company's available-for-sale marketable debt securities consisted of the following:​​​​​​​​​​​​​​​August 27, 2022​ Amortized Gross Gross ​​​Cost​Unrealized​Unrealized​Fair(in thousands)​Basis​Gains​Losses​Value​​​​​​​​​​​​​Corporate debt securities​$ 15,293​$ 1​$ (298)​$ 14,996Government bonds​ 88,903​ - ​ (1,963)​ 86,940Mortgage-backed securities​ 4,600​ - ​ (243)​ 4,357Asset-backed securities and other​ 6,531​ - ​ (279)​ 6,252​​$ 115,327​$ 1​$ (2,783)​$ 112,545​​​​​​​​​​​​​​​​August 28, 2021​ Amortized Gross Gross ​​​Cost​Unrealized​Unrealized​Fair(in thousands)​Basis​Gains​Losses​Value​​​​​​​​​​​​​Corporate debt securities​$ 23,650​$ 329​$ (2)​$ 23,977Government bonds​ 65,416​ 338​ (2)​ 65,752Mortgage-backed securities​ 6,552​ 58​ (8)​ 6,602Asset-backed securities and other​ 17,551​ 43​ (7)​ 17,587​​$ 113,169​$ 768​$ (19)​$ 113,918​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.​​ **Current (2023):** (in thousands) Level 1 Level 2 Level 3 Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other current assets ​ $ 49,659 ​ $ 109 ​ $ - ​ $ 49,768 Other long-term assets ​ 57,301 ​ 5,476 ​ - ​ 62,777 ​ ​ $ 106,960 ​ $ 5,585 ​ $ - ​ $ 112,545 ​ 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. 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 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." ​ ​ 66 66 Table of ContentsNote F - Marketable Debt SecuritiesThe 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 26, 2023​ Amortized Gross Gross ​​​Cost​Unrealized​Unrealized​Fair(in thousands)​Basis​Gains​Losses​Value​​​​​​​​​​​​​Corporate debt securities​$ 31,683​$ 17​$ (504)​$ 31,196Government bonds​ 63,747​ - ​ (1,440)​ 62,307Mortgage-backed securities​ 3,215​ - ​ (213)​ 3,002Asset-backed securities and other​ 25,242​ - ​ (234)​ 25,008​​$ 123,887​$ 17​$ (2,391)​$ 121,513​​​​​​​​​​​​​​​​August 27, 2022​ Amortized Gross Gross ​​​Cost​Unrealized​Unrealized​Fair(in thousands)​Basis​Gains​Losses​Value​​​​​​​​​​​​​Corporate debt securities​$ 15,293​$ 1​$ (298)​$ 14,996Government bonds​ 88,903​ - ​ (1,963)​ 86,940Mortgage-backed securities​ 4,600​ - ​ (243)​ 4,357Asset-backed securities and other​ 6,531​ - ​ (279)​ 6,252​​$ 115,327​$ 1​$ (2,783)​$ 112,545​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. 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 2023, 2022 or 2021.Included above in total marketable debt securities are $105.0 million and $91.1 million of marketable debt securities transferred by the Company's insurance captive to a trust account to secure its obligations to an insurance company related to future workers' compensation and casualty losses as of August 26, 2023 and August 27, 2022, respectively.​​67 Table of Contents Table of Contents Table of Contents Note F - Marketable Debt SecuritiesThe Company's basis for determining the cost of a security sold is the "Specific Identification Model." Unrealized gains (losses) on marketable debt securities are recorded in Accumulated Other Comprehensive Loss. The Company's available-for-sale marketable debt securities consisted of the following:​​​​​​​​​​​​​​​August 26, 2023​ Amortized Gross Gross ​​​Cost​Unrealized​Unrealized​Fair(in thousands)​Basis​Gains​Losses​Value​​​​​​​​​​​​​Corporate debt securities​$ 31,683​$ 17​$ (504)​$ 31,196Government bonds​ 63,747​ - ​ (1,440)​ 62,307Mortgage-backed securities​ 3,215​ - ​ (213)​ 3,002Asset-backed securities and other​ 25,242​ - ​ (234)​ 25,008​​$ 123,887​$ 17​$ (2,391)​$ 121,513​​​​​​​​​​​​​​​​August 27, 2022​ Amortized Gross Gross ​​​Cost​Unrealized​Unrealized​Fair(in thousands)​Basis​Gains​Losses​Value​​​​​​​​​​​​​Corporate debt securities​$ 15,293​$ 1​$ (298)​$ 14,996Government bonds​ 88,903​ - ​ (1,963)​ 86,940Mortgage-backed securities​ 4,600​ - ​ (243)​ 4,357Asset-backed securities and other​ 6,531​ - ​ (279)​ 6,252​​$ 115,327​$ 1​$ (2,783)​$ 112,545​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. 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 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.​​ --- ## Modified: Our ability to grow depends in part on new store openings, existing store remodels and expansions and effective utilization of our existing supply chain and hub network. **Key changes:** - Reworded sentence: "Accomplishing store development and expansion goals will depend upon a number of factors, including the ability to identify and obtain suitable sites for new and expanded stores in a timely manner and at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations." - Reworded sentence: "If we fail to effectively utilize our existing hubs and/or supply chains, or if our investments in our supply chain initiatives, including directly sourcing some products from outside the U.S., do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores or increases in our operating costs, which could adversely affect our sales volume and/or our margins.​Our success in international operations is dependent on our ability to manage the unique challenges presented by international markets.​The various risks we face in our U.S." - Reworded sentence: "laws applicable to foreign operations, and political and socio-economic conditions as well as our general ability to compete effectively and provide superior customer service regardless of distance, language and cultural differences.​Risks inherent in international operations also include potential adverse tax consequences, potential changes to trade policies and trade agreements, compliance with the Foreign Corrupt Practices Act and local anti-bribery and anti-corruption laws, greater difficulty in obtaining and enforcing intellectual property rights, challenges to identify and gain access to local suppliers, and possibly misjudging the response of consumers in foreign countries to our product assortment and marketing strategy.​In addition, our operations in international markets are conducted primarily in the local currency of those countries." - Reworded sentence: "As a result, foreign currency exchange rates and fluctuations in those rates may adversely impact our financial performance.​Business interruptions may negatively impact our operating hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business.​Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crises and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S." - Reworded sentence: "​It is not possible to predict all events or circumstances which may negatively disrupt our business in a significant manner, and the near-term and long-term impacts of such disruptions on our business, demand for our products and our growth initiatives will vary significantly based on the facts and circumstances of each such disruption." **Prior (2022):** ​ Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores to meet customers' needs on a timely and profitable basis. Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably. In addition, we extensively utilize our hub network, our supply chain and our logistics management techniques to efficiently stock our stores. We have made, and plan to continue to make, significant investments in our supply chain to improve product availability and product assortment, fulfill evolving consumer product demands and keep up with our long-term store expansion goals. If we fail to effectively utilize our existing hubs and/or supply chains, or if our investments in our supply chain initiatives, including directly sourcing some products from outside the U.S., do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores or increases in our operating costs, which could adversely affect our sales volume and/or our margins. 17 17 Table of Contents​Our success in international operations is dependent on our ability to manage the unique challenges presented by international markets.​The various risks we face in our U.S. operations generally also exist when conducting operations in and sourcing products and materials from outside of the U.S., in addition to the unique costs, risks and difficulties of managing international operations. Our expansion into international markets may be adversely affected by local laws and customs, U.S. laws applicable to foreign operations, and political and socio-economic conditions.​Risks inherent in international operations also include potential adverse tax consequences, potential changes to trade policies and trade agreements, compliance with the Foreign Corrupt Practices Act and local anti-bribery and anti-corruption laws, greater difficulty in enforcing intellectual property rights, challenges to identify and gain access to local suppliers, and possibly misjudging the response of consumers in foreign countries to our product assortment and marketing strategy.​In addition, our operations in international markets are conducted primarily in the local currency of those countries. Since our Consolidated Financial Statements are denominated in U.S. dollars, amounts of assets, liabilities, net sales, and other revenues and expenses denominated in local currencies must be translated into U.S. dollars using exchange rates for the current period. As a result, foreign currency exchange rates and fluctuations in those rates may adversely impact our financial performance.​Business interruptions may negatively impact our operating hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business.​Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions (including due to the impacts of climate change or otherwise) such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crises and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S. on favorable terms.​In the event commercial transportation is curtailed or substantially delayed, we may have difficulty transporting merchandise to our distribution centers and stores resulting in lost sales and/or a potential loss of customer loyalty. Transportation issues could also cause us to cancel purchase orders if we are unable to receive merchandise in our distribution centers. It is not possible to predict all events or circumstances which may negatively disrupt our business in a significant manner, and the near-term and long-term impacts of such disruptions on our business, demand for our products and our growth initiatives will vary significantly based on the facts and circumstances of each such disruption. Furthermore, such business interruptions could cause additional negative impacts of which we are not currently aware or magnify other risks associated with our business and operations.Our failure to protect our reputation could have a material adverse effect on our brand name and profitability.​We believe our continued strong sales growth is driven in significant part by our AutoZone and private label brand names. The value in our brand names and their continued effectiveness in driving our sales growth is dependent to a significant degree on our ability to maintain our reputation for safety, high product quality, friendliness, WOW! Customer service, trustworthy advice, integrity and business ethics. Any negative publicity about these or other areas involving our business, including our response or lack thereof to external events involving civil unrest, social justice, and political issues, whether or not based in fact, could damage our reputation and may result in reduced demand for our merchandise. The increasing use of technology also poses a risk as customers are able to quickly compare products and prices and use social media to provide feedback in a manner that is rapidly and broadly disseminated. Our brand and reputation could be negatively impacted if negative sentiment about the Company, whether or not based on fact, is shared over social media.18 Table of Contents Table of Contents Table of Contents ​Our success in international operations is dependent on our ability to manage the unique challenges presented by international markets.​The various risks we face in our U.S. operations generally also exist when conducting operations in and sourcing products and materials from outside of the U.S., in addition to the unique costs, risks and difficulties of managing international operations. Our expansion into international markets may be adversely affected by local laws and customs, U.S. laws applicable to foreign operations, and political and socio-economic conditions.​Risks inherent in international operations also include potential adverse tax consequences, potential changes to trade policies and trade agreements, compliance with the Foreign Corrupt Practices Act and local anti-bribery and anti-corruption laws, greater difficulty in enforcing intellectual property rights, challenges to identify and gain access to local suppliers, and possibly misjudging the response of consumers in foreign countries to our product assortment and marketing strategy.​In addition, our operations in international markets are conducted primarily in the local currency of those countries. Since our Consolidated Financial Statements are denominated in U.S. dollars, amounts of assets, liabilities, net sales, and other revenues and expenses denominated in local currencies must be translated into U.S. dollars using exchange rates for the current period. As a result, foreign currency exchange rates and fluctuations in those rates may adversely impact our financial performance.​Business interruptions may negatively impact our operating hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business.​Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions (including due to the impacts of climate change or otherwise) such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crises and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S. on favorable terms.​In the event commercial transportation is curtailed or substantially delayed, we may have difficulty transporting merchandise to our distribution centers and stores resulting in lost sales and/or a potential loss of customer loyalty. Transportation issues could also cause us to cancel purchase orders if we are unable to receive merchandise in our distribution centers. It is not possible to predict all events or circumstances which may negatively disrupt our business in a significant manner, and the near-term and long-term impacts of such disruptions on our business, demand for our products and our growth initiatives will vary significantly based on the facts and circumstances of each such disruption. Furthermore, such business interruptions could cause additional negative impacts of which we are not currently aware or magnify other risks associated with our business and operations.Our failure to protect our reputation could have a material adverse effect on our brand name and profitability.​We believe our continued strong sales growth is driven in significant part by our AutoZone and private label brand names. The value in our brand names and their continued effectiveness in driving our sales growth is dependent to a significant degree on our ability to maintain our reputation for safety, high product quality, friendliness, WOW! Customer service, trustworthy advice, integrity and business ethics. Any negative publicity about these or other areas involving our business, including our response or lack thereof to external events involving civil unrest, social justice, and political issues, whether or not based in fact, could damage our reputation and may result in reduced demand for our merchandise. The increasing use of technology also poses a risk as customers are able to quickly compare products and prices and use social media to provide feedback in a manner that is rapidly and broadly disseminated. Our brand and reputation could be negatively impacted if negative sentiment about the Company, whether or not based on fact, is shared over social media. ​ **Current (2023):** ​ Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores to meet customers' needs on a timely and profitable basis. Accomplishing store development and expansion goals will depend upon a number of factors, including the ability to identify and obtain suitable sites for new and expanded stores in a timely manner and at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to 17 17 Table of Contentsachieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably.​In addition, we extensively utilize our hub network, our supply chain and our logistics management techniques to efficiently stock our stores. We have made, and plan to continue to make, significant investments in our supply chain to improve product availability and product assortment, fulfill evolving consumer product demands and keep up with our long-term store expansion goals. If we fail to effectively utilize our existing hubs and/or supply chains, or if our investments in our supply chain initiatives, including directly sourcing some products from outside the U.S., do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores or increases in our operating costs, which could adversely affect our sales volume and/or our margins.​Our success in international operations is dependent on our ability to manage the unique challenges presented by international markets.​The various risks we face in our U.S. operations generally also exist when conducting operations in and sourcing products and materials from outside of the U.S., in addition to the unique costs, risks and difficulties of managing international operations. Our expansion into international markets may be adversely affected by local laws and customs, U.S. laws applicable to foreign operations, and political and socio-economic conditions as well as our general ability to compete effectively and provide superior customer service regardless of distance, language and cultural differences.​Risks inherent in international operations also include potential adverse tax consequences, potential changes to trade policies and trade agreements, compliance with the Foreign Corrupt Practices Act and local anti-bribery and anti-corruption laws, greater difficulty in obtaining and enforcing intellectual property rights, challenges to identify and gain access to local suppliers, and possibly misjudging the response of consumers in foreign countries to our product assortment and marketing strategy.​In addition, our operations in international markets are conducted primarily in the local currency of those countries. Since our Consolidated Financial Statements are denominated in U.S. dollars, amounts of assets, liabilities, net sales, and other revenues and expenses denominated in local currencies must be translated into U.S. dollars using exchange rates for the current period. As a result, foreign currency exchange rates and fluctuations in those rates may adversely impact our financial performance.​Business interruptions may negatively impact our operating hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business.​Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crises and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S. on favorable terms.​In the event commercial transportation is curtailed or substantially delayed, we may have difficulty transporting merchandise to our distribution centers and stores resulting in lost sales and/or a potential loss of customer loyalty. Transportation issues could also cause us to cancel purchase orders if we are unable to receive merchandise in our distribution centers. ​It is not possible to predict all events or circumstances which may negatively disrupt our business in a significant manner, and the near-term and long-term impacts of such disruptions on our business, demand for our products and our growth initiatives will vary significantly based on the facts and circumstances of each such disruption. Furthermore, such business interruptions could cause additional negative impacts of which we are not currently aware or magnify other risks associated with our business and operations.18 Table of Contents Table of Contents Table of Contents achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably.​In addition, we extensively utilize our hub network, our supply chain and our logistics management techniques to efficiently stock our stores. We have made, and plan to continue to make, significant investments in our supply chain to improve product availability and product assortment, fulfill evolving consumer product demands and keep up with our long-term store expansion goals. If we fail to effectively utilize our existing hubs and/or supply chains, or if our investments in our supply chain initiatives, including directly sourcing some products from outside the U.S., do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores or increases in our operating costs, which could adversely affect our sales volume and/or our margins.​Our success in international operations is dependent on our ability to manage the unique challenges presented by international markets.​The various risks we face in our U.S. operations generally also exist when conducting operations in and sourcing products and materials from outside of the U.S., in addition to the unique costs, risks and difficulties of managing international operations. Our expansion into international markets may be adversely affected by local laws and customs, U.S. laws applicable to foreign operations, and political and socio-economic conditions as well as our general ability to compete effectively and provide superior customer service regardless of distance, language and cultural differences.​Risks inherent in international operations also include potential adverse tax consequences, potential changes to trade policies and trade agreements, compliance with the Foreign Corrupt Practices Act and local anti-bribery and anti-corruption laws, greater difficulty in obtaining and enforcing intellectual property rights, challenges to identify and gain access to local suppliers, and possibly misjudging the response of consumers in foreign countries to our product assortment and marketing strategy.​In addition, our operations in international markets are conducted primarily in the local currency of those countries. Since our Consolidated Financial Statements are denominated in U.S. dollars, amounts of assets, liabilities, net sales, and other revenues and expenses denominated in local currencies must be translated into U.S. dollars using exchange rates for the current period. As a result, foreign currency exchange rates and fluctuations in those rates may adversely impact our financial performance.​Business interruptions may negatively impact our operating hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business.​Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crises and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S. on favorable terms.​In the event commercial transportation is curtailed or substantially delayed, we may have difficulty transporting merchandise to our distribution centers and stores resulting in lost sales and/or a potential loss of customer loyalty. Transportation issues could also cause us to cancel purchase orders if we are unable to receive merchandise in our distribution centers. ​It is not possible to predict all events or circumstances which may negatively disrupt our business in a significant manner, and the near-term and long-term impacts of such disruptions on our business, demand for our products and our growth initiatives will vary significantly based on the facts and circumstances of each such disruption. Furthermore, such business interruptions could cause additional negative impacts of which we are not currently aware or magnify other risks associated with our business and operations. achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably. ​ In addition, we extensively utilize our hub network, our supply chain and our logistics management techniques to efficiently stock our stores. We have made, and plan to continue to make, significant investments in our supply chain to improve product availability and product assortment, fulfill evolving consumer product demands and keep up with our long-term store expansion goals. If we fail to effectively utilize our existing hubs and/or supply chains, or if our investments in our supply chain initiatives, including directly sourcing some products from outside the U.S., do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores or increases in our operating costs, which could adversely affect our sales volume and/or our margins. ​ --- ## Modified: Employee Stock Purchase Plan and Executive Stock Purchase Plan **Key changes:** - Reworded sentence: "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." **Prior (2022):** 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. **Current (2023):** 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. --- ## Modified: August 29, 2020 **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total lease cost, per ASC 842 ​ $ 524,283 ​ $ 470,563 ​ $ 427,443 ​ $ 415,505 Less: Finance lease interest and amortization ​ (86,521) ​ ​ (69,564) ​ ​ (56,334) ​ ​ (60,275) Less: Variable operating lease components, related to insurance and common area maintenance ​ (31,364) ​ ​ (27,721) ​ ​ (25,729) ​ ​ (25,447) Rent expense ​ $ 406,398 ​ $ 373,278 ​ $ 345,380 ​ $ 329,783 ​ ​" **Prior (2022):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total lease cost, per ASC 842 ​ $ 470,563 ​ $ 427,443 ​ $ 415,505 Less: Finance lease interest and amortization ​ (69,564) ​ ​ (56,334) ​ ​ (60,275) Less: Variable operating lease components, related to insurance and common area maintenance ​ (27,721) ​ ​ (25,729) ​ ​ (25,447) Rent expense ​ $ 373,278 ​ $ 345,380 ​ $ 329,783 ​ ​ **Current (2023):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total lease cost, per ASC 842 ​ $ 524,283 ​ $ 470,563 ​ $ 427,443 ​ $ 415,505 Less: Finance lease interest and amortization ​ (86,521) ​ ​ (69,564) ​ ​ (56,334) ​ ​ (60,275) Less: Variable operating lease components, related to insurance and common area maintenance ​ (31,364) ​ ​ (27,721) ​ ​ (25,729) ​ ​ (25,447) Rent expense ​ $ 406,398 ​ $ 373,278 ​ $ 345,380 ​ $ 329,783 ​ ​ --- ## Modified: Stock Options **Key changes:** - Reworded sentence: "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." - Reworded sentence: "The following table presents the weighted average 59 59 Table of Contentsfor key assumptions used in determining the fair value of options granted and the related share-based compensation expense:​​​​​​​​​​​​​Year Ended ​ ​August 26,​August 27,​August 28, ​ ​2023​2022​2021​​​​​​​​​​Expected price volatility ​29%28% 28%Risk-free interest rate ​3.8%1.1% 0.4%Weighted average expected lives (in years) ​5.5​5.6​ 5.6​Forfeiture rate ​10%10% 10%Dividend yield ​0%0% 0%​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." - Reworded sentence: "An increase in the expected volatility will increase compensation expense.Risk-free interest rate - This is the U.S." - Reworded sentence: "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." - Reworded sentence: "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." **Prior (2022):** 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ August 27, ​ August 28, ​ August 29, ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Expected price volatility 28 % 28 % 22 % Risk-free interest rate 1.1 % 0.4 % 1.4 % Weighted average expected lives (in years) 5.6 ​ 5.6 ​ 5.5 ​ Forfeiture rate 10 % 10 % 10 % Dividend yield 0 % 0 % 0 % ​ 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. 58 58 Table of ContentsRisk-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 $39.1 million in fiscal 2020.The Company generally issues new shares when options are exercised. The following table summarizes information about stock option activity for the year ended August 27, 2022:​​​​​​​​​​​​ ​ ​​ Weighted ​​​​​​​​​Average​​​​​​​​​​Remaining​Aggregate​​​​Weighted​Contractual​Intrinsic​​Number​Average​Term​Value​​of Shares​Exercise Price​(in years)​(in thousands)​​​​​​​​​​​Outstanding - August 28, 2021 1,208,054​$ 790.41 ​​​​Granted 164,532​​ 1,652.86 ​ Exercised (203,310)​​ 582.42 ​ Forfeited/Cancelled (30,176)​​ 1,198.93 ​ Outstanding - August 27, 2022 1,139,100​ 941.28 5.88​$ 1,391,686​​​​​​​​​​​Exercisable 739,757​​ 746.60​ 4.64​​ 1,047,804Expected to vest 380,857​​ 1,296.02​ 8.15​​ 330,203Available for future grants 1,023,688​​​​​​​​​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 UnitsRestricted 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.59 Table of Contents Table of Contents Table of Contents 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 $39.1 million in fiscal 2020.The Company generally issues new shares when options are exercised. The following table summarizes information about stock option activity for the year ended August 27, 2022:​​​​​​​​​​​​ ​ ​​ Weighted ​​​​​​​​​Average​​​​​​​​​​Remaining​Aggregate​​​​Weighted​Contractual​Intrinsic​​Number​Average​Term​Value​​of Shares​Exercise Price​(in years)​(in thousands)​​​​​​​​​​​Outstanding - August 28, 2021 1,208,054​$ 790.41 ​​​​Granted 164,532​​ 1,652.86 ​ Exercised (203,310)​​ 582.42 ​ Forfeited/Cancelled (30,176)​​ 1,198.93 ​ Outstanding - August 27, 2022 1,139,100​ 941.28 5.88​$ 1,391,686​​​​​​​​​​​Exercisable 739,757​​ 746.60​ 4.64​​ 1,047,804Expected to vest 380,857​​ 1,296.02​ 8.15​​ 330,203Available for future grants 1,023,688​​​​​​​​​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 UnitsRestricted 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ Aggregate ​ ​ ​ ​ Weighted ​ **Current (2023):** 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 59 59 Table of Contentsfor key assumptions used in determining the fair value of options granted and the related share-based compensation expense:​​​​​​​​​​​​​Year Ended ​ ​August 26,​August 27,​August 28, ​ ​2023​2022​2021​​​​​​​​​​Expected price volatility ​29%28% 28%Risk-free interest rate ​3.8%1.1% 0.4%Weighted average expected lives (in years) ​5.5​5.6​ 5.6​Forfeiture rate ​10%10% 10%Dividend yield ​0%0% 0%​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.60 Table of Contents Table of Contents Table of Contents for key assumptions used in determining the fair value of options granted and the related share-based compensation expense:​​​​​​​​​​​​​Year Ended ​ ​August 26,​August 27,​August 28, ​ ​2023​2022​2021​​​​​​​​​​Expected price volatility ​29%28% 28%Risk-free interest rate ​3.8%1.1% 0.4%Weighted average expected lives (in years) ​5.5​5.6​ 5.6​Forfeiture rate ​10%10% 10%Dividend yield ​0%0% 0%​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. for key assumptions used in determining the fair value of options granted and the related share-based compensation expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expected price volatility ​ 29 % 28 % 28 % Risk-free interest rate ​ 3.8 % 1.1 % 0.4 % Weighted average expected lives (in years) ​ 5.5 ​ 5.6 ​ 5.6 ​ Forfeiture rate ​ 10 % 10 % 10 % Dividend yield ​ 0 % 0 % 0 % ​ 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 $44.7 million in fiscal 2023, 2022 and 2021, respectively. 60 60 Table of ContentsThe Company generally issues new shares when options are exercised. The following table summarizes information about stock option activity for the year ended August 26, 2023:​​​​​​​​​​​​ ​ ​​ Weighted ​​​​​​​​​Average​​​​​​​​​​Remaining​Aggregate​​​​Weighted​Contractual​Intrinsic​​Number​Average​Term​Value​​of Shares​Exercise Price​(in years)​(in thousands)​​​​​​​​​​​Outstanding - August 27, 2022 1,139,100​$ 941.28 ​​​​Granted 161,510​​ 2,218.35 ​ Exercised (242,920)​​ 708.46 ​ Forfeited/Cancelled (30,102)​​ 1,504.17 ​ Outstanding - August 26, 2023 1,027,588​ 1,180.39 5.97​$ 1,308,493​​​​​​​​​​​Exercisable 651,032​​ 862.98​ 4.71​​ 1,035,417Expected to vest 359,109​​ 1,719.64​ 8.13​​ 263,838Available for future grants 862,178​​​​​​​​​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 UnitsRestricted 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 $8.2 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.4 years.Transactions related to restricted stock units for the fiscal year ended August 26, 2023 are as follows:​​​​​​​​​​Weighted-​ Number Average Grant​​of Shares​Date Fair Value​​​​​​Nonvested at August 27, 2022 12,731​$ 1,223.61Granted 3,584​​ 2,267.41Vested (6,643)​​ 1,276.36Forfeited (1,539)​​ 1,581.25Nonvested at August 26, 2023 8,133​$ 1,572.87​Stock Appreciation RightsAt August 26, 2023 and August 27, 2022, the Company had $11.8 million and $10.4 million, respectively of accrued compensation expense. There were 4,822 outstanding units issued under the 2003 Comp Plan and prior plans. As directors retire, this balance will be reduced. No additional shares of stock or units will be issued in future years under the 2003 Comp Plan or prior plans.61 Table of Contents Table of Contents Table of Contents The Company generally issues new shares when options are exercised. The following table summarizes information about stock option activity for the year ended August 26, 2023:​​​​​​​​​​​​ ​ ​​ Weighted ​​​​​​​​​Average​​​​​​​​​​Remaining​Aggregate​​​​Weighted​Contractual​Intrinsic​​Number​Average​Term​Value​​of Shares​Exercise Price​(in years)​(in thousands)​​​​​​​​​​​Outstanding - August 27, 2022 1,139,100​$ 941.28 ​​​​Granted 161,510​​ 2,218.35 ​ Exercised (242,920)​​ 708.46 ​ Forfeited/Cancelled (30,102)​​ 1,504.17 ​ Outstanding - August 26, 2023 1,027,588​ 1,180.39 5.97​$ 1,308,493​​​​​​​​​​​Exercisable 651,032​​ 862.98​ 4.71​​ 1,035,417Expected to vest 359,109​​ 1,719.64​ 8.13​​ 263,838Available for future grants 862,178​​​​​​​​​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 UnitsRestricted 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 $8.2 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.4 years.Transactions related to restricted stock units for the fiscal year ended August 26, 2023 are as follows:​​​​​​​​​​Weighted-​ Number Average Grant​​of Shares​Date Fair Value​​​​​​Nonvested at August 27, 2022 12,731​$ 1,223.61Granted 3,584​​ 2,267.41Vested (6,643)​​ 1,276.36Forfeited (1,539)​​ 1,581.25Nonvested at August 26, 2023 8,133​$ 1,572.87​Stock Appreciation RightsAt 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ Aggregate ​ ​ ​ ​ Weighted ​ --- ## Modified: Note D - Income Taxes **Key changes:** - Reworded sentence: "The components of income from continuing operations before income taxes are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands) ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 2,621,714 ​ $ 2,429,262 ​ $ 2,436,548 International ​ 545,900 ​ 649,829 ​ 312,642 ​ ​ $ 3,167,614 ​ $ 3,079,091 $ 2,749,190 ​ 62 62 Table of ContentsThe provision for income tax expense consisted of the following:​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands) 2023​2022​2021​​​​​​​​​​Current: ​ ​ ​ Federal​$ 423,301​$ 293,022​$ 438,686State​ 86,687​ 48,490​ 79,271International​ 154,907​ 122,381​ 95,351​​ 664,895​ 463,893​ 613,308Deferred:​ ​ ​ Federal​ 20,266​ 160,749​ (21,366)State​ (21,847)​ 34,564​ (1,707)International​ (24,126)​ (9,719)​ (11,359)​​ (25,707)​ 185,594​ (34,432)Income tax expense​$ 639,188​$ 649,487​$ 578,876​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:​​​​​​​​​​Year Ended​ August 26,​August 27,​August 28,​(in thousands)​2023​2022​2021​​​​​​​​ Federal tax at statutory U.S." - Reworded sentence: "​At August 26, 2023 and August 27, 2022, the Company had net operating loss ("NOL") carryforwards totaling approximately $314.6 million ($37.2 million tax effected) and $241.2 million ($28.9 million tax effected), respectively." - Reworded sentence: "​At August 26, 2023 and August 27, 2022, the Company had net operating loss ("NOL") carryforwards totaling approximately $314.6 million ($37.2 million tax effected) and $241.2 million ($28.9 million tax effected), respectively." - Reworded sentence: "​ As of August 26, 2023, we have not recorded incremental income taxes for outside basis differences of $383.7 million in our investments in foreign subsidiaries, as these amounts are indefinitely reinvested in foreign operations." - Reworded sentence: "​ At August 26, 2023 and August 27, 2022, the Company had net operating loss ("NOL") carryforwards totaling approximately $314.6 million ($37.2 million tax effected) and $241.2 million ($28.9 million tax effected), respectively." **Prior (2022):** The components of income from continuing operations before income taxes are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 27, ​ August 28, ​ August 29, (in thousands) ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 2,429,262 ​ $ 2,436,548 ​ $ 1,960,320 International ​ 649,829 ​ 312,642 ​ 256,194 ​ ​ $ 3,079,091 ​ $ 2,749,190 $ 2,216,514 ​ The provision for income tax expense consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 27, ​ August 28, ​ August 29, (in thousands) 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current: ​ ​ ​ Federal ​ $ 293,022 ​ $ 438,686 ​ $ 324,156 State ​ 48,490 ​ 79,271 ​ 47,880 International ​ 122,381 ​ 95,351 ​ 60,429 ​ ​ 463,893 ​ 613,308 ​ 432,465 Deferred: ​ ​ ​ Federal ​ 160,749 ​ (21,366) ​ 43,706 State ​ 34,564 ​ (1,707) ​ 12,544 International ​ (9,719) ​ (11,359) ​ (5,173) ​ ​ 185,594 ​ (34,432) ​ 51,077 Income tax expense ​ $ 649,487 ​ $ 578,876 ​ $ 483,542 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ August 27, ​ August 28, ​ August 29, ​ (in thousands) ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ Federal tax at statutory U.S. income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net 2.1 % 2.2 % 2.2 % Share-based compensation (1.6) % (1.7) % (0.7) % US Tax on Non-US Income (GILTI and Subpart F) ​ 3.1 % 2.8 % 3.2 % Non-US Permanent Differences ​ (1.5) % (0.4) % (0.5) % Foreign Tax Credits ​ (1.9) % (1.7) % (1.1) % Other (0.1) % (1.1) % (2.3) % Effective tax rate 21.1 % 21.1 % 21.8 % ​ 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 $20.9 million, respectively. 61 61 Table of ContentsThe Company is subject to a new tax on global intangible low-taxed income ("GILTI") which is imposed on foreign earnings. The Company has made the election to record this tax as a period cost, thus has not adjusted the deferred tax assets or liabilities of its foreign subsidiaries for the new tax.On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. The IRA creates new tax provisions while only three are applicable to the Company: 1) Corporate Alternative Minimum Tax ("CAMT"); 2) Excise Tax on Stock Buybacks; and 3) Increased Investment Tax Credit. The CAMT will be effective for the Company's year beginning August 27, 2023, while the excise tax on stock buybacks will be effective for shares repurchased after December 31, 2022. The Investment Tax Credit for solar assets has increased from 26% to 30% for assets placed in service after December 31, 2021, and before January 1, 2033. The Company does not expect any material impacts from these provisions.​Significant components of the Company's deferred tax assets and liabilities were as follows:​​​​​​​​​ August 27, August 28,(in thousands)​2022​2021​​​​​​​Deferred tax assets: ​ ​ Net operating loss and credit carryforwards​$ 33,924​$ 41,825Accrued benefits​ 60,561​ 126,086Operating lease liabilities​​ 692,730​​ 646,938Other​ 79,850​ 69,340Total deferred tax assets​ 867,065​ 884,189Valuation allowances​ (27,790)​ (31,098)Net deferred tax assets​ 839,275​ 853,091​​​​​​​Deferred tax liabilities:​ ​ Property and equipment​ (197,482)​ (185,985)Inventory​ (448,273)​ (316,736)Operating lease assets​​ (650,145)​​ (609,336)Other​ (25,211)​ (37,116)Deferred tax liabilities​ (1,321,111)​ (1,149,173)​​​​​​​Net deferred tax liabilities​$ (481,836)​$ (296,082)​​​​​​​​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 $6.0 million, respectively. Income tax credit carryforwards will expire, if not utilized, in various years from fiscal 2023 through 2037.​62 Table of Contents Table of Contents Table of Contents The Company is subject to a new tax on global intangible low-taxed income ("GILTI") which is imposed on foreign earnings. The Company has made the election to record this tax as a period cost, thus has not adjusted the deferred tax assets or liabilities of its foreign subsidiaries for the new tax.On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. The IRA creates new tax provisions while only three are applicable to the Company: 1) Corporate Alternative Minimum Tax ("CAMT"); 2) Excise Tax on Stock Buybacks; and 3) Increased Investment Tax Credit. The CAMT will be effective for the Company's year beginning August 27, 2023, while the excise tax on stock buybacks will be effective for shares repurchased after December 31, 2022. The Investment Tax Credit for solar assets has increased from 26% to 30% for assets placed in service after December 31, 2021, and before January 1, 2033. The Company does not expect any material impacts from these provisions.​Significant components of the Company's deferred tax assets and liabilities were as follows:​​​​​​​​​ August 27, August 28,(in thousands)​2022​2021​​​​​​​Deferred tax assets: ​ ​ Net operating loss and credit carryforwards​$ 33,924​$ 41,825Accrued benefits​ 60,561​ 126,086Operating lease liabilities​​ 692,730​​ 646,938Other​ 79,850​ 69,340Total deferred tax assets​ 867,065​ 884,189Valuation allowances​ (27,790)​ (31,098)Net deferred tax assets​ 839,275​ 853,091​​​​​​​Deferred tax liabilities:​ ​ Property and equipment​ (197,482)​ (185,985)Inventory​ (448,273)​ (316,736)Operating lease assets​​ (650,145)​​ (609,336)Other​ (25,211)​ (37,116)Deferred tax liabilities​ (1,321,111)​ (1,149,173)​​​​​​​Net deferred tax liabilities​$ (481,836)​$ (296,082)​​​​​​​​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.​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, August 28, (in thousands) ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Deferred tax assets: ​ ​ Net operating loss and credit carryforwards ​ $ 33,924 ​ $ 41,825 Accrued benefits ​ 60,561 ​ 126,086 Operating lease liabilities ​ ​ 692,730 ​ ​ 646,938 Other ​ 79,850 ​ 69,340 Total deferred tax assets ​ 867,065 ​ 884,189 Valuation allowances ​ (27,790) ​ (31,098) Net deferred tax assets ​ 839,275 ​ 853,091 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ Property and equipment ​ (197,482) ​ (185,985) Inventory ​ (448,273) ​ (316,736) Operating lease assets ​ ​ (650,145) ​ ​ (609,336) Other ​ (25,211) ​ (37,116) Deferred tax liabilities ​ (1,321,111) ​ (1,149,173) ​ ​ ​ ​ ​ ​ ​ Net deferred tax liabilities ​ $ (481,836) ​ $ (296,082) ​ ​ ​ ​ ​ ​ ​ ​ 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. ​ 62 62 Table of ContentsAt August 27, 2022 and August 28, 2021, the Company had a valuation allowance of $27.8 million and $31.1 million, respectively, on deferred tax assets associated with NOL and tax credit carryforwards for which management has determined it is more likely than not that the deferred tax asset will not be realized. Management believes it is more likely than not that the remaining deferred tax assets will be fully realized.​A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:​​​​​​​​ August 27, August 28,(in thousands)​2022​2021​​​​​​​Beginning balance​$ 39,797​$ 31,942Additions based on tax positions related to the current year​ 17,488​ 10,806Additions for tax positions of prior years​ 3,008​ 4,009Reductions for tax positions of prior years​ (6,806)​ (886)Reductions due to settlements​ (1,539)​ (2,204)Reductions due to statute of limitations​ (2,632)​ (3,870)​​​​​​​Ending balance​$ 49,316​$ 39,797​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 MeasurementsThe 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.63 Table of Contents Table of Contents Table of Contents At August 27, 2022 and August 28, 2021, the Company had a valuation allowance of $27.8 million and $31.1 million, respectively, on deferred tax assets associated with NOL and tax credit carryforwards for which management has determined it is more likely than not that the deferred tax asset will not be realized. Management believes it is more likely than not that the remaining deferred tax assets will be fully realized.​A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:​​​​​​​​ August 27, August 28,(in thousands)​2022​2021​​​​​​​Beginning balance​$ 39,797​$ 31,942Additions based on tax positions related to the current year​ 17,488​ 10,806Additions for tax positions of prior years​ 3,008​ 4,009Reductions for tax positions of prior years​ (6,806)​ (886)Reductions due to settlements​ (1,539)​ (2,204)Reductions due to statute of limitations​ (2,632)​ (3,870)​​​​​​​Ending balance​$ 49,316​$ 39,797​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 MeasurementsThe 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, August 28, (in thousands) ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 39,797 ​ $ 31,942 Additions based on tax positions related to the current year ​ 17,488 ​ 10,806 Additions for tax positions of prior years ​ 3,008 ​ 4,009 Reductions for tax positions of prior years ​ (6,806) ​ (886) Reductions due to settlements ​ (1,539) ​ (2,204) Reductions due to statute of limitations ​ (2,632) ​ (3,870) ​ ​ ​ ​ ​ ​ ​ Ending balance ​ $ 49,316 ​ $ 39,797 ​ 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. ​ **Current (2023):** The components of income from continuing operations before income taxes are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands) ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 2,621,714 ​ $ 2,429,262 ​ $ 2,436,548 International ​ 545,900 ​ 649,829 ​ 312,642 ​ ​ $ 3,167,614 ​ $ 3,079,091 $ 2,749,190 ​ 62 62 Table of ContentsThe provision for income tax expense consisted of the following:​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands) 2023​2022​2021​​​​​​​​​​Current: ​ ​ ​ Federal​$ 423,301​$ 293,022​$ 438,686State​ 86,687​ 48,490​ 79,271International​ 154,907​ 122,381​ 95,351​​ 664,895​ 463,893​ 613,308Deferred:​ ​ ​ Federal​ 20,266​ 160,749​ (21,366)State​ (21,847)​ 34,564​ (1,707)International​ (24,126)​ (9,719)​ (11,359)​​ (25,707)​ 185,594​ (34,432)Income tax expense​$ 639,188​$ 649,487​$ 578,876​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:​​​​​​​​​​Year Ended​ August 26,​August 27,​August 28,​(in thousands)​2023​2022​2021​​​​​​​​ Federal tax at statutory U.S. income tax rate 21.0% 21.0% 21.0%State income taxes, net 1.6% 2.1% 2.2%Share-based compensation (2.3)% (1.6)% (1.7)% US Tax on Non-U.S. Income (GILTI and Subpart F)​ 3.3% 3.1% 2.8% Non-U.S. Permanent Differences​ (1.4)% (1.5)% (0.4)% Foreign Tax Credits​ (2.3)% (1.9)% (1.7)% Other 0.3% (0.1)% (1.1)% Effective tax rate 20.2% 21.1% 21.1%​For the year ended August 26, 2023, August 27, 2022, and August 28, 2021, the Company recognized excess tax benefits from stock option exercises of $92.2 million, $63.2 million, and $56.4 million, respectively.The Company is subject to a tax on global intangible low-taxed income ("GILTI") which is imposed on foreign earnings. The Company has made the election to record this tax as a period cost, thus has not adjusted the deferred tax assets or liabilities of its foreign subsidiaries for this tax.63 Table of Contents Table of Contents Table of Contents The provision for income tax expense consisted of the following:​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands) 2023​2022​2021​​​​​​​​​​Current: ​ ​ ​ Federal​$ 423,301​$ 293,022​$ 438,686State​ 86,687​ 48,490​ 79,271International​ 154,907​ 122,381​ 95,351​​ 664,895​ 463,893​ 613,308Deferred:​ ​ ​ Federal​ 20,266​ 160,749​ (21,366)State​ (21,847)​ 34,564​ (1,707)International​ (24,126)​ (9,719)​ (11,359)​​ (25,707)​ 185,594​ (34,432)Income tax expense​$ 639,188​$ 649,487​$ 578,876​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:​​​​​​​​​​Year Ended​ August 26,​August 27,​August 28,​(in thousands)​2023​2022​2021​​​​​​​​ Federal tax at statutory U.S. income tax rate 21.0% 21.0% 21.0%State income taxes, net 1.6% 2.1% 2.2%Share-based compensation (2.3)% (1.6)% (1.7)% US Tax on Non-U.S. Income (GILTI and Subpart F)​ 3.3% 3.1% 2.8% Non-U.S. Permanent Differences​ (1.4)% (1.5)% (0.4)% Foreign Tax Credits​ (2.3)% (1.9)% (1.7)% Other 0.3% (0.1)% (1.1)% Effective tax rate 20.2% 21.1% 21.1%​For the year ended August 26, 2023, August 27, 2022, and August 28, 2021, the Company recognized excess tax benefits from stock option exercises of $92.2 million, $63.2 million, and $56.4 million, respectively.The Company is subject to a 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 this tax. The provision for income tax expense consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands) 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current: ​ ​ ​ Federal ​ $ 423,301 ​ $ 293,022 ​ $ 438,686 State ​ 86,687 ​ 48,490 ​ 79,271 International ​ 154,907 ​ 122,381 ​ 95,351 ​ ​ 664,895 ​ 463,893 ​ 613,308 Deferred: ​ ​ ​ Federal ​ 20,266 ​ 160,749 ​ (21,366) State ​ (21,847) ​ 34,564 ​ (1,707) International ​ (24,126) ​ (9,719) ​ (11,359) ​ ​ (25,707) ​ 185,594 ​ (34,432) Income tax expense ​ $ 639,188 ​ $ 649,487 ​ $ 578,876 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ August 26, ​ August 27, ​ August 28, ​ (in thousands) ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ Federal tax at statutory U.S. income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net 1.6 % 2.1 % 2.2 % Share-based compensation (2.3) % (1.6) % (1.7) % US Tax on Non-U.S. Income (GILTI and Subpart F) ​ 3.3 % 3.1 % 2.8 % Non-U.S. Permanent Differences ​ (1.4) % (1.5) % (0.4) % Foreign Tax Credits ​ (2.3) % (1.9) % (1.7) % Other 0.3 % (0.1) % (1.1) % Effective tax rate 20.2 % 21.1 % 21.1 % ​ For the year ended August 26, 2023, August 27, 2022, and August 28, 2021, the Company recognized excess tax benefits from stock option exercises of $92.2 million, $63.2 million, and $56.4 million, respectively. The Company is subject to a tax on global intangible low-taxed income ("GILTI") which is imposed on foreign earnings. The Company has made the election to record this tax as a period cost, thus has not adjusted the deferred tax assets or liabilities of its foreign subsidiaries for this tax. 63 63 Table of Contents​Significant components of the Company's deferred tax assets and liabilities were as follows:​​​​​​​​​ August 26, August 27,(in thousands)​2023​2022​​​​​​​Deferred tax assets: ​ ​ Net operating loss and credit carryforwards​$ 45,081​$ 33,924Accrued benefits​ 82,318​ 60,561Operating lease liabilities​​ 698,728​​ 692,730Other​ 90,897​ 79,850Total deferred tax assets​ 917,024​ 867,065Valuation allowances​ (24,940)​ (27,790)Net deferred tax assets​ 892,084​ 839,275​​​​​​​Deferred tax liabilities:​ ​ Property and equipment​ (194,686)​ (197,482)Inventory​ (451,360)​ (448,273)Operating lease assets​​ (652,652)​​ (650,145)Other​ (43,662)​ (25,211)Deferred tax liabilities​ (1,342,360)​ (1,321,111)​​​​​​​Net deferred tax liabilities​$ (450,276)​$ (481,836)​​​​​​​​For the year ended August 26, 2023, 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 through current year earnings with respect to its Mexican subsidiaries while maintaining its assertion of indefinite reinvestment of fiscal 2021 through 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 26, 2023, we have not recorded incremental income taxes for outside basis differences of $383.7 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 26, 2023 and August 27, 2022, the Company had net operating loss ("NOL") carryforwards totaling approximately $314.6 million ($37.2 million tax effected) and $241.2 million ($28.9 million tax effected), respectively. Certain NOLs have no expiration date and others will expire, if not utilized, in various years from fiscal 2024 through 2043. At August 26, 2023 and August 27, 2022, the Company had deferred tax assets for income tax credit carryforwards of $7.9 million and $5.0 million, respectively. Income tax credit carryforwards will expire, if not utilized, in various years from fiscal 2024 through 2033.​At August 26, 2023 and August 27, 2022, the Company had a valuation allowance of $24.9 million and $27.8 million, respectively, on deferred tax assets associated with NOL and tax credit carryforwards for which management has determined it is more likely than not that the deferred tax asset will not be realized. Management believes it is more likely than not that the remaining deferred tax assets will be fully realized.​64 Table of Contents Table of Contents Table of Contents ​Significant components of the Company's deferred tax assets and liabilities were as follows:​​​​​​​​​ August 26, August 27,(in thousands)​2023​2022​​​​​​​Deferred tax assets: ​ ​ Net operating loss and credit carryforwards​$ 45,081​$ 33,924Accrued benefits​ 82,318​ 60,561Operating lease liabilities​​ 698,728​​ 692,730Other​ 90,897​ 79,850Total deferred tax assets​ 917,024​ 867,065Valuation allowances​ (24,940)​ (27,790)Net deferred tax assets​ 892,084​ 839,275​​​​​​​Deferred tax liabilities:​ ​ Property and equipment​ (194,686)​ (197,482)Inventory​ (451,360)​ (448,273)Operating lease assets​​ (652,652)​​ (650,145)Other​ (43,662)​ (25,211)Deferred tax liabilities​ (1,342,360)​ (1,321,111)​​​​​​​Net deferred tax liabilities​$ (450,276)​$ (481,836)​​​​​​​​For the year ended August 26, 2023, 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 through current year earnings with respect to its Mexican subsidiaries while maintaining its assertion of indefinite reinvestment of fiscal 2021 through 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 26, 2023, we have not recorded incremental income taxes for outside basis differences of $383.7 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 26, 2023 and August 27, 2022, the Company had net operating loss ("NOL") carryforwards totaling approximately $314.6 million ($37.2 million tax effected) and $241.2 million ($28.9 million tax effected), respectively. Certain NOLs have no expiration date and others will expire, if not utilized, in various years from fiscal 2024 through 2043. At August 26, 2023 and August 27, 2022, the Company had deferred tax assets for income tax credit carryforwards of $7.9 million and $5.0 million, respectively. Income tax credit carryforwards will expire, if not utilized, in various years from fiscal 2024 through 2033.​At August 26, 2023 and August 27, 2022, the Company had a valuation allowance of $24.9 million and $27.8 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.​ ​ Significant components of the Company's deferred tax assets and liabilities were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ August 26, August 27, (in thousands) ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Deferred tax assets: ​ ​ Net operating loss and credit carryforwards ​ $ 45,081 ​ $ 33,924 Accrued benefits ​ 82,318 ​ 60,561 Operating lease liabilities ​ ​ 698,728 ​ ​ 692,730 Other ​ 90,897 ​ 79,850 Total deferred tax assets ​ 917,024 ​ 867,065 Valuation allowances ​ (24,940) ​ (27,790) Net deferred tax assets ​ 892,084 ​ 839,275 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ Property and equipment ​ (194,686) ​ (197,482) Inventory ​ (451,360) ​ (448,273) Operating lease assets ​ ​ (652,652) ​ ​ (650,145) Other ​ (43,662) ​ (25,211) Deferred tax liabilities ​ (1,342,360) ​ (1,321,111) ​ ​ ​ ​ ​ ​ ​ Net deferred tax liabilities ​ $ (450,276) ​ $ (481,836) ​ ​ ​ ​ ​ ​ ​ ​ For the year ended August 26, 2023, 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 through current year earnings with respect to its Mexican subsidiaries while maintaining its assertion of indefinite reinvestment of fiscal 2021 through 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 26, 2023, we have not recorded incremental income taxes for outside basis differences of $383.7 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 26, 2023 and August 27, 2022, the Company had net operating loss ("NOL") carryforwards totaling approximately $314.6 million ($37.2 million tax effected) and $241.2 million ($28.9 million tax effected), respectively. Certain NOLs have no expiration date and others will expire, if not utilized, in various years from fiscal 2024 through 2043. At August 26, 2023 and August 27, 2022, the Company had deferred tax assets for income tax credit carryforwards of $7.9 million and $5.0 million, respectively. Income tax credit carryforwards will expire, if not utilized, in various years from fiscal 2024 through 2033. ​ At August 26, 2023 and August 27, 2022, the Company had a valuation allowance of $24.9 million and $27.8 million, respectively, on deferred tax assets associated with NOL and tax credit carryforwards for which management has determined it is more likely than not that the deferred tax asset will not be realized. Management believes it is more likely than not that the remaining deferred tax assets will be fully realized. ​ 64 64 Table of ContentsA reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:​​​​​​​​ August 26, August 27,(in thousands)​2023​2022​​​​​​​Beginning balance​$ 49,316​$ 39,797Additions based on tax positions related to the current year​ 9,416​ 17,488Additions for tax positions of prior years​ 8,012​ 3,008Reductions for tax positions of prior years​ (5,336)​ (6,806)Reductions due to settlements​ (6,800)​ (1,539)Reductions due to statute of limitations​ (5,121)​ (2,632)Ending balance​$ 49,487​$ 49,316​Included in the August 26, 2023 and the August 27, 2022 balances are $37.0 million and $32.4 million, respectively, of unrecognized tax benefits that, if recognized, would reduce the Company's effective tax rate. The balances above also include amounts of $8.6 million and $11.5 million for August 26, 2023 and August 27, 2022, 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 $10.1 million and $5.7 million accrued for the payment of interest and penalties associated with unrecognized tax benefits at August 26, 2023 and August 27, 2022, 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 2019 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 26, 2023, the Company estimates that the amount of unrecognized tax benefits could be reduced by approximately $6.2 million over the next twelve months as a result of tax audit settlements. While the Company believes that it is adequately accrued for possible audit adjustments, the final resolution of these examinations cannot be determined at this time and could result in final settlements that differ from current estimates.​Note E - Fair Value MeasurementsThe Company defines fair value as the price received to transfer an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with ASC 820, Fair Value Measurements and Disclosures, the Company uses the fair value hierarchy, which prioritizes the inputs used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy are set forth below:Level 1 inputs - unadjusted quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.Level 2 inputs - inputs other than quoted market prices included within Level 1 that are observable, either directly or indirectly, for the asset or liability.Level 3 inputs - unobservable inputs for the asset or liability, which are based on the Company's own assumptions as there is little, if any, observable activity in identical assets or liabilities.65 Table of Contents Table of Contents Table of Contents A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:​​​​​​​​ August 26, August 27,(in thousands)​2023​2022​​​​​​​Beginning balance​$ 49,316​$ 39,797Additions based on tax positions related to the current year​ 9,416​ 17,488Additions for tax positions of prior years​ 8,012​ 3,008Reductions for tax positions of prior years​ (5,336)​ (6,806)Reductions due to settlements​ (6,800)​ (1,539)Reductions due to statute of limitations​ (5,121)​ (2,632)Ending balance​$ 49,487​$ 49,316​Included in the August 26, 2023 and the August 27, 2022 balances are $37.0 million and $32.4 million, respectively, of unrecognized tax benefits that, if recognized, would reduce the Company's effective tax rate. The balances above also include amounts of $8.6 million and $11.5 million for August 26, 2023 and August 27, 2022, 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 $10.1 million and $5.7 million accrued for the payment of interest and penalties associated with unrecognized tax benefits at August 26, 2023 and August 27, 2022, 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 2019 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 26, 2023, the Company estimates that the amount of unrecognized tax benefits could be reduced by approximately $6.2 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 MeasurementsThe 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. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 26, August 27, (in thousands) ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 49,316 ​ $ 39,797 Additions based on tax positions related to the current year ​ 9,416 ​ 17,488 Additions for tax positions of prior years ​ 8,012 ​ 3,008 Reductions for tax positions of prior years ​ (5,336) ​ (6,806) Reductions due to settlements ​ (6,800) ​ (1,539) Reductions due to statute of limitations ​ (5,121) ​ (2,632) Ending balance ​ $ 49,487 ​ $ 49,316 ​ Included in the August 26, 2023 and the August 27, 2022 balances are $37.0 million and $32.4 million, respectively, of unrecognized tax benefits that, if recognized, would reduce the Company's effective tax rate. The balances above also include amounts of $8.6 million and $11.5 million for August 26, 2023 and August 27, 2022, 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 $10.1 million and $5.7 million accrued for the payment of interest and penalties associated with unrecognized tax benefits at August 26, 2023 and August 27, 2022, 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 2019 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 26, 2023, the Company estimates that the amount of unrecognized tax benefits could be reduced by approximately $6.2 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. ​ --- ## Modified: Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future. **Key changes:** - Reworded sentence: "​ One macroeconomic factor affecting our customers and our industry is gas prices." - Reworded sentence: "​ We have also experienced continued pressure on average hourly wages in the U.S." - Reworded sentence: "During fiscal 2023, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 85% of total sales categories continuing to comprise our largest set of categories." - Reworded sentence: "Miles Driven We believe as the number of miles driven increases, consumers' vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items." - Reworded sentence: "During the periods of minimal 27 27 Table of Contentscorrelation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including macroeconomic factors and the number of seven year old or older vehicles on the road." **Prior (2022):** ​ One macroeconomic factor affecting our customers and our industry during fiscal 2022 was gas prices. During fiscal 2022, the average price per gallon of unleaded gasoline in the U.S. was $3.83, compared to $2.62 during fiscal 2021. We believe fluctuations in gas prices impact our customers' level of disposable income. With approximately 11 billion gallons of unleaded gas consumption each month across the U.S., each $1 increase at the pump reduces approximately $11 billion of additional spending capacity to consumers each month. Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods. ​ We have also experienced continued accelerated pressure on wages in the U.S. during fiscal 2022. Some of this is attributed to regulatory changes in certain states and municipalities, while the larger portion is being driven by general market pressures and some specific actions taken recently by other retailers. The regulatory changes are expected to continue, as evidenced by the areas that have passed legislation to increase employees' wages substantially over the next few years. During fiscal 2022, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 84% of total sales categories continuing to comprise our largest set of categories. While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in our domestic stores we see a slight decrease in mix of sales of the discretionary category and a slight increase in the maintence category compared to last year. The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road. 26 26 Table of Contents​Miles DrivenWe believe as the number of miles driven increases, consumers' vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items. While over the long-term we have seen a close correlation between our net sales and the number of miles driven, we have also seen certain time frames of minimal correlation in sales performance and miles driven. During the periods of minimal correlation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including macroeconomic factors and the number of seven year old or older vehicles on the road. Since the beginning of the fiscal year and through July 2022 (latest publicly available information), miles driven in the U.S. increased by 4.6% compared to the same period in the prior year. We believe this increase is due to the nation returning to pre-pandemic levels, but we are unable to predict if this increase will continue, due to rising fuel prices, general macroeconomic conditions, or otherwise, or the extent of the impact it will have on our business.Seven Year Old or Older VehiclesAs the number of seven year old or older vehicles on the road increases, we expect an increase in demand for the products we sell. We expect the aging vehicle population to continue to increase as consumers keep their cars longer in an effort to save money. Additionally, there is increased demand for used vehicles as a result of new vehicle inventory shortages. We estimate vehicles are driven an average of approximately 12,500 miles each year. In seven years, the average miles driven equates to approximately 87,500 miles. Our experience is that at this point in a vehicle's life, most vehicles are not covered by warranties and increased maintenance is needed to keep the vehicle operating.According to the latest data provided by the Auto Care Association, as of January 1, 2022, the average age of light vehicles on the road was 12.2 years and these vehicles account for more than 40% of U.S. vehicles. The average age of light vehicles has exceeded 11 years since 2012.​27 Table of Contents Table of Contents Table of Contents ​Miles DrivenWe believe as the number of miles driven increases, consumers' vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items. While over the long-term we have seen a close correlation between our net sales and the number of miles driven, we have also seen certain time frames of minimal correlation in sales performance and miles driven. During the periods of minimal correlation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including macroeconomic factors and the number of seven year old or older vehicles on the road. Since the beginning of the fiscal year and through July 2022 (latest publicly available information), miles driven in the U.S. increased by 4.6% compared to the same period in the prior year. We believe this increase is due to the nation returning to pre-pandemic levels, but we are unable to predict if this increase will continue, due to rising fuel prices, general macroeconomic conditions, or otherwise, or the extent of the impact it will have on our business.Seven Year Old or Older VehiclesAs the number of seven year old or older vehicles on the road increases, we expect an increase in demand for the products we sell. We expect the aging vehicle population to continue to increase as consumers keep their cars longer in an effort to save money. Additionally, there is increased demand for used vehicles as a result of new vehicle inventory shortages. We estimate vehicles are driven an average of approximately 12,500 miles each year. In seven years, the average miles driven equates to approximately 87,500 miles. Our experience is that at this point in a vehicle's life, most vehicles are not covered by warranties and increased maintenance is needed to keep the vehicle operating.According to the latest data provided by the Auto Care Association, as of January 1, 2022, the average age of light vehicles on the road was 12.2 years and these vehicles account for more than 40% of U.S. vehicles. The average age of light vehicles has exceeded 11 years since 2012.​ ​ Miles Driven We believe as the number of miles driven increases, consumers' vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items. While over the long-term we have seen a close correlation between our net sales and the number of miles driven, we have also seen certain time frames of minimal correlation in sales performance and miles driven. During the periods of minimal correlation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including macroeconomic factors and the number of seven year old or older vehicles on the road. Since the beginning of the fiscal year and through July 2022 (latest publicly available information), miles driven in the U.S. increased by 4.6% compared to the same period in the prior year. We believe this increase is due to the nation returning to pre-pandemic levels, but we are unable to predict if this increase will continue, due to rising fuel prices, general macroeconomic conditions, or otherwise, or the extent of the impact it will have on our business. Seven Year Old or Older Vehicles As the number of seven year old or older vehicles on the road increases, we expect an increase in demand for the products we sell. We expect the aging vehicle population to continue to increase as consumers keep their cars longer in an effort to save money. Additionally, there is increased demand for used vehicles as a result of new vehicle inventory shortages. We estimate vehicles are driven an average of approximately 12,500 miles each year. In seven years, the average miles driven equates to approximately 87,500 miles. Our experience is that at this point in a vehicle's life, most vehicles are not covered by warranties and increased maintenance is needed to keep the vehicle operating. According to the latest data provided by the Auto Care Association, as of January 1, 2022, the average age of light vehicles on the road was 12.2 years and these vehicles account for more than 40% of U.S. vehicles. The average age of light vehicles has exceeded 11 years since 2012. ​ 27 27 Table of ContentsResults of OperationsThe following table highlights selected financial information over the past 5 years:​​​​​​​​​​​​​​​​​​​Fiscal Year Ended August (in thousands, except per share data, same store sales and selected operating data) 2022 2021(1) 2020(1) 2019(2)(3) 2018(3) ​​​​​​​​​​​​​​​​​Income Statement Data ​ ​ ​ ​ ​ Net sales​$ 16,252,230​$ 14,629,585​$ 12,631,967​$ 11,863,743​$ 11,221,077​Cost of sales, including warehouse and delivery expenses​ 7,779,580​ 6,911,800​ 5,861,214​ 5,498,742​ 5,247,331​Gross profit​ 8,472,650​ 7,717,785​ 6,770,753​ 6,365,001​ 5,973,746​Operating, selling, general and administrative expenses​ 5,201,921​ 4,773,258​ 4,353,074​ 4,148,864​ 4,162,890​Operating profit​ 3,270,729​ 2,944,527​ 2,417,679​ 2,216,137​ 1,810,856​Interest expense, net​ 191,638​ 195,337​ 201,165​ 184,804​ 174,527​Income before income taxes​ 3,079,091​ 2,749,190​ 2,216,514​ 2,031,333​ 1,636,329​Income tax expense(4)​ 649,487​ 578,876​ 483,542​ 414,112​ 298,793​Net income(4)​$ 2,429,604​$ 2,170,314​$ 1,732,972​$ 1,617,221​$ 1,337,536​Diluted earnings per share(4)​$ 117.19​$ 95.19​$ 71.93​$ 63.43​$ 48.77​Weighted average shares for diluted earnings per share(4)​ 20,733​ 22,799​ 24,093​ 25,498​ 27,424​Same Store Sales​ ​ ​ ​ ​ ​Increase in domestic comparable store net sales(5)​ 8.4% 13.6% 7.4% 3.0% 1.8% Balance Sheet Data​ ​ ​ ​ ​ ​Current assets​$ 6,627,984​$ 6,415,303​$ 6,811,872​$ 5,028,685​$ 4,635,869​Operating lease right-of-use assets(6)​​ 2,918,817​​ 2,718,712​​ 2,581,677​​ - ​​ - ​Working capital (deficit)(12)​ (1,960,409)​ (954,451)​ 528,781​ (483,456)​ (392,812)​Total assets​ 15,275,043​ 14,516,199​ 14,423,872​ 9,895,913​ 9,346,980​Current liabilities​ 8,588,393​ 7,369,754​ 6,283,091​ 5,512,141​ 5,028,681​Debt​ 6,122,092​ 5,269,820​ 5,513,371​ 5,206,344​ 5,005,930​Finance lease liabilities, less current portion(6)​ 217,428​ 186,122​ 155,855​ 123,659​ 102,013​Operating lease liabilities, less current portion(6)​​ 2,837,973​​ 2,632,842​​ 2,501,560​​ - ​​ - ​Stockholders' deficit​ (3,538,913)​ (1,797,536)​ (877,977)​ (1,713,851)​ (1,520,355)​Selected Operating Data​ ​ ​ ​ ​ ​Number of locations at beginning of year​ 6,767​ 6,549​ 6,411​ 6,202​ 6,029​Sold locations(7)​ - ​ - ​ - ​ - ​ 26​New locations​ 177​ 219​ 138​ 209​ 201​Closed locations​ 1​ 1​ - ​ - ​ 2​Net new locations​ 176​ 218​ 138​ 209​ 199​Relocated locations​ 13​ 12​ 5​ 2​ 7​Number of locations at end of year​ 6,943​ 6,767​ 6,549​ 6,411​ 6,202​AutoZone domestic commercial programs​ 5,342​ 5,179​ 5,007​ 4,893​ 4,741​Inventory per location (in thousands)​$ 812​$ 686​$ 683​$ 674​$ 636​Total AutoZone store square footage (in thousands)​ 46,435​ 45,057​ 43,502​ 42,526​ 41,066​Average square footage per AutoZone store​ 6,688​ 6,658​ 6,643​ 6,633​ 6,621​Increase in AutoZone store square footage​ 3.1% 3.6% 2.3% 3.6% 3.5% Average net sales per AutoZone store (in thousands)​$ 2,329​$ 2,160​$ 1,914​$ 1,847​$ 1,778​Net sales per AutoZone store average square foot​$ 349​$ 325​$ 288​$ 279​$ 269​Total employees at end of year (in thousands)​ 112​ 105​ 100​ 96​ 89​Inventory turnover(8)​ 1.5x​ 1.5x​ 1.3x​ 1.3x​ 1.3x​Accounts payable to inventory ratio​ 129.5% 129.6% 115.3% 112.6% 111.8% After-tax return on invested capital(9)​ 52.9% 41.0% 35.7% 35.7% 32.1% Adjusted debt to EBITDAR(10)​ 2.1​ 2.0​ 2.4​ 2.5​ 2.5​Net cash provided by operating activities (in thousands)(4)​$ 3,211,135​$ 3,518,543​$ 2,720,108​$ 2,128,513​$ 2,080,292​Cash flow before share repurchases and changes in debt (in thousands)(11)​$ 2,599,636​$ 3,048,841​$ 2,185,418​$ 1,758,672​$ 1,596,367​Share repurchases (in thousands)(12)​$ 4,359,991​$ 3,378,321​$ 930,903​$ 2,004,896​$ 1,592,013​Number of shares repurchased (in thousands)(12)​ 2,220​ 2,592​ 826​ 2,182​ 2,398​28 Table of Contents Table of Contents Table of Contents Results of OperationsThe following table highlights selected financial information over the past 5 years:​​​​​​​​​​​​​​​​​​​Fiscal Year Ended August (in thousands, except per share data, same store sales and selected operating data) 2022 2021(1) 2020(1) 2019(2)(3) 2018(3) ​​​​​​​​​​​​​​​​​Income Statement Data ​ ​ ​ ​ ​ Net sales​$ 16,252,230​$ 14,629,585​$ 12,631,967​$ 11,863,743​$ 11,221,077​Cost of sales, including warehouse and delivery expenses​ 7,779,580​ 6,911,800​ 5,861,214​ 5,498,742​ 5,247,331​Gross profit​ 8,472,650​ 7,717,785​ 6,770,753​ 6,365,001​ 5,973,746​Operating, selling, general and administrative expenses​ 5,201,921​ 4,773,258​ 4,353,074​ 4,148,864​ 4,162,890​Operating profit​ 3,270,729​ 2,944,527​ 2,417,679​ 2,216,137​ 1,810,856​Interest expense, net​ 191,638​ 195,337​ 201,165​ 184,804​ 174,527​Income before income taxes​ 3,079,091​ 2,749,190​ 2,216,514​ 2,031,333​ 1,636,329​Income tax expense(4)​ 649,487​ 578,876​ 483,542​ 414,112​ 298,793​Net income(4)​$ 2,429,604​$ 2,170,314​$ 1,732,972​$ 1,617,221​$ 1,337,536​Diluted earnings per share(4)​$ 117.19​$ 95.19​$ 71.93​$ 63.43​$ 48.77​Weighted average shares for diluted earnings per share(4)​ 20,733​ 22,799​ 24,093​ 25,498​ 27,424​Same Store Sales​ ​ ​ ​ ​ ​Increase in domestic comparable store net sales(5)​ 8.4% 13.6% 7.4% 3.0% 1.8% Balance Sheet Data​ ​ ​ ​ ​ ​Current assets​$ 6,627,984​$ 6,415,303​$ 6,811,872​$ 5,028,685​$ 4,635,869​Operating lease right-of-use assets(6)​​ 2,918,817​​ 2,718,712​​ 2,581,677​​ - ​​ - ​Working capital (deficit)(12)​ (1,960,409)​ (954,451)​ 528,781​ (483,456)​ (392,812)​Total assets​ 15,275,043​ 14,516,199​ 14,423,872​ 9,895,913​ 9,346,980​Current liabilities​ 8,588,393​ 7,369,754​ 6,283,091​ 5,512,141​ 5,028,681​Debt​ 6,122,092​ 5,269,820​ 5,513,371​ 5,206,344​ 5,005,930​Finance lease liabilities, less current portion(6)​ 217,428​ 186,122​ 155,855​ 123,659​ 102,013​Operating lease liabilities, less current portion(6)​​ 2,837,973​​ 2,632,842​​ 2,501,560​​ - ​​ - ​Stockholders' deficit​ (3,538,913)​ (1,797,536)​ (877,977)​ (1,713,851)​ (1,520,355)​Selected Operating Data​ ​ ​ ​ ​ ​Number of locations at beginning of year​ 6,767​ 6,549​ 6,411​ 6,202​ 6,029​Sold locations(7)​ - ​ - ​ - ​ - ​ 26​New locations​ 177​ 219​ 138​ 209​ 201​Closed locations​ 1​ 1​ - ​ - ​ 2​Net new locations​ 176​ 218​ 138​ 209​ 199​Relocated locations​ 13​ 12​ 5​ 2​ 7​Number of locations at end of year​ 6,943​ 6,767​ 6,549​ 6,411​ 6,202​AutoZone domestic commercial programs​ 5,342​ 5,179​ 5,007​ 4,893​ 4,741​Inventory per location (in thousands)​$ 812​$ 686​$ 683​$ 674​$ 636​Total AutoZone store square footage (in thousands)​ 46,435​ 45,057​ 43,502​ 42,526​ 41,066​Average square footage per AutoZone store​ 6,688​ 6,658​ 6,643​ 6,633​ 6,621​Increase in AutoZone store square footage​ 3.1% 3.6% 2.3% 3.6% 3.5% Average net sales per AutoZone store (in thousands)​$ 2,329​$ 2,160​$ 1,914​$ 1,847​$ 1,778​Net sales per AutoZone store average square foot​$ 349​$ 325​$ 288​$ 279​$ 269​Total employees at end of year (in thousands)​ 112​ 105​ 100​ 96​ 89​Inventory turnover(8)​ 1.5x​ 1.5x​ 1.3x​ 1.3x​ 1.3x​Accounts payable to inventory ratio​ 129.5% 129.6% 115.3% 112.6% 111.8% After-tax return on invested capital(9)​ 52.9% 41.0% 35.7% 35.7% 32.1% Adjusted debt to EBITDAR(10)​ 2.1​ 2.0​ 2.4​ 2.5​ 2.5​Net cash provided by operating activities (in thousands)(4)​$ 3,211,135​$ 3,518,543​$ 2,720,108​$ 2,128,513​$ 2,080,292​Cash flow before share repurchases and changes in debt (in thousands)(11)​$ 2,599,636​$ 3,048,841​$ 2,185,418​$ 1,758,672​$ 1,596,367​Share repurchases (in thousands)(12)​$ 4,359,991​$ 3,378,321​$ 930,903​$ 2,004,896​$ 1,592,013​Number of shares repurchased (in thousands)(12)​ 2,220​ 2,592​ 826​ 2,182​ 2,398​ **Current (2023):** ​ One macroeconomic factor affecting our customers and our industry is gas prices. We believe fluctuations in gas prices impact our customers' level of disposable income. With approximately 11 billion gallons of unleaded gas consumption each month across the U.S., each $1 increase at the pump reduces approximately $11 billion of additional spending capacity to consumers each month. Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods. ​ We have also experienced continued pressure on average hourly wages in the U.S. during fiscal 2023. Some of this is attributed to regulatory changes in certain states and municipalities, while the larger portion is being driven by general market pressures and some specific actions taken recently by other retailers. The regulatory changes are expected to continue, as evidenced by the areas that have passed legislation to increase employees' wages substantially over the next few years. During fiscal 2023, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 85% of total sales categories continuing to comprise our largest set of categories. While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in our domestic stores we see a slight decrease in mix of sales of the discretionary category and a slight increase in the maintenance category compared to last year. The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road. Miles Driven We believe as the number of miles driven increases, consumers' vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items. While over the long-term we have seen a close correlation between our net sales and the number of miles driven, we have also seen certain time frames of minimal correlation in sales performance and miles driven. During the periods of minimal 27 27 Table of Contentscorrelation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including macroeconomic factors and the number of seven year old or older vehicles on the road. Since the beginning of the fiscal year and through July 2023 miles driven in the U.S. increased by 1.3% compared to the same period in the prior year based on the latest information available from the U.S. Department of Transportation.Seven Year Old or Older VehiclesAs the number of seven year old or older vehicles on the road increases, we expect an increase in demand for the products we sell. We expect the aging vehicle population to continue to increase as consumers keep their cars longer in an effort to save money. According to the U.S. Department of Transportation - Federal Highway Administration, vehicles are driven an average of approximately 13,500 miles each year. In seven years, the average miles driven equates to approximately 94,500 miles. Our experience is that at this point in a vehicle's life, most vehicles are not covered by warranties and increased maintenance and repairs are needed to keep the vehicle operating.According to the latest data provided by the Auto Care Association, as of January 1, 2023, the average age of light vehicles on the road was 12.5 years and these vehicles account for more than 40% of U.S. vehicles. The average age of light vehicles has exceeded 12 years since 2012.​28 Table of Contents Table of Contents Table of Contents correlation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including macroeconomic factors and the number of seven year old or older vehicles on the road. Since the beginning of the fiscal year and through July 2023 miles driven in the U.S. increased by 1.3% compared to the same period in the prior year based on the latest information available from the U.S. Department of Transportation.Seven Year Old or Older VehiclesAs the number of seven year old or older vehicles on the road increases, we expect an increase in demand for the products we sell. We expect the aging vehicle population to continue to increase as consumers keep their cars longer in an effort to save money. According to the U.S. Department of Transportation - Federal Highway Administration, vehicles are driven an average of approximately 13,500 miles each year. In seven years, the average miles driven equates to approximately 94,500 miles. Our experience is that at this point in a vehicle's life, most vehicles are not covered by warranties and increased maintenance and repairs are needed to keep the vehicle operating.According to the latest data provided by the Auto Care Association, as of January 1, 2023, the average age of light vehicles on the road was 12.5 years and these vehicles account for more than 40% of U.S. vehicles. The average age of light vehicles has exceeded 12 years since 2012.​ correlation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including macroeconomic factors and the number of seven year old or older vehicles on the road. Since the beginning of the fiscal year and through July 2023 miles driven in the U.S. increased by 1.3% compared to the same period in the prior year based on the latest information available from the U.S. Department of Transportation. Seven Year Old or Older Vehicles As the number of seven year old or older vehicles on the road increases, we expect an increase in demand for the products we sell. We expect the aging vehicle population to continue to increase as consumers keep their cars longer in an effort to save money. According to the U.S. Department of Transportation - Federal Highway Administration, vehicles are driven an average of approximately 13,500 miles each year. In seven years, the average miles driven equates to approximately 94,500 miles. Our experience is that at this point in a vehicle's life, most vehicles are not covered by warranties and increased maintenance and repairs are needed to keep the vehicle operating. According to the latest data provided by the Auto Care Association, as of January 1, 2023, the average age of light vehicles on the road was 12.5 years and these vehicles account for more than 40% of U.S. vehicles. The average age of light vehicles has exceeded 12 years since 2012. ​ 28 28 Table of ContentsResults of OperationsThe following table highlights selected financial information over the past 5 years:​​​​​​​​​​​​​​​​​​​Fiscal Year Ended August (in thousands, except per share data, same store sales and selected operating data) 2023 2022 2021(1) 2020(1) 2019(2)(3) ​​​​​​​​​​​​​​​​​Income Statement Data ​ ​ ​ ​ ​ Net sales​$ 17,457,209​$ 16,252,230​$ 14,629,585​$ 12,631,967​$ 11,863,743​Cost of sales, including warehouse and delivery expenses​ 8,386,787​ 7,779,580​ 6,911,800​ 5,861,214​ 5,498,742​Gross profit​ 9,070,422​ 8,472,650​ 7,717,785​ 6,770,753​ 6,365,001​Operating, selling, general and administrative expenses​ 5,596,436​ 5,201,921​ 4,773,258​ 4,353,074​ 4,148,864​Operating profit​ 3,473,986​ 3,270,729​ 2,944,527​ 2,417,679​ 2,216,137​Interest expense, net​ 306,372​ 191,638​ 195,337​ 201,165​ 184,804​Income before income taxes​ 3,167,614​ 3,079,091​ 2,749,190​ 2,216,514​ 2,031,333​Income tax expense(4)​ 639,188​ 649,487​ 578,876​ 483,542​ 414,112​Net income(4)​$ 2,528,426​$ 2,429,604​$ 2,170,314​$ 1,732,972​$ 1,617,221​Diluted earnings per share(4)​$ 132.36​$ 117.19​$ 95.19​$ 71.93​$ 63.43​Weighted average shares for diluted earnings per share(4)​ 19,103​ 20,733​ 22,799​ 24,093​ 25,498​Same Store Sales​ ​ ​​ ​ ​ ​Increase in domestic comparable store net sales(5)​ 3.4% 8.4% 13.6% ​ 7.4% ​ 3.0% Increase in international comparable store net sales(5)​​ 29.3% ​ 19.1% ​ 22.5% ​(2.8)%​ 4.6% Increase in international comparable store net sales (constant currency)(5)​​ 17.5% ​ 19.2% ​ 20.7% ​ 4.7% ​ 7.2% Increase in total company comparable store net sales(5)​​ 5.6% ​ 9.2% ​ 14.3% ​ 6.6% ​ 3.2% Increase in total company comparable store net sales (constant currency)(5)​​ 4.6% ​ 9.2% ​ 14.1% ​ 7.2% ​ 3.4% Balance Sheet Data​ ​ ​ ​ ​ ​Current assets​$ 6,779,426​$ 6,627,984​$ 6,415,303​$ 6,811,872​$ 5,028,685​Operating lease right-of-use assets(6)​​ 2,998,097​​ 2,918,817​​ 2,718,712​​ 2,581,677​​ - ​Working capital (deficit)(7)​ (1,732,430)​ (1,960,409)​ (954,451)​ 528,781​ (483,456)​Total assets​ 15,985,878​ 15,275,043​ 14,516,199​ 14,423,872​ 9,895,913​Current liabilities​ 8,511,856​ 8,588,393​ 7,369,754​ 6,283,091​ 5,512,141​Debt​ 7,668,549​ 6,122,092​ 5,269,820​ 5,513,371​ 5,206,344​Finance lease liabilities, less current portion(6)​ 200,702​ 217,428​ 186,122​ 155,855​ 123,659​Operating lease liabilities, less current portion(6)​​ 2,917,046​​ 2,837,973​​ 2,632,842​​ 2,501,560​​ - ​Stockholders' deficit​ (4,349,894)​ (3,538,913)​ (1,797,536)​ (877,977)​ (1,713,851)​Selected Operating Data​ ​ ​ ​ ​ ​Number of stores at beginning of year​ 6,943​ 6,767​ 6,549​ 6,411​ 6,202​New stores​ 198​ 177​ 219​ 138​ 209​Closed stores​ 1​ 1​ 1​ - ​ - ​Net new stores​ 197​ 176​ 218​ 138​ 209​Relocated stores​ 12​ 13​ 12​ 5​ 2​Number of stores at end of year​ 7,140​ 6,943​ 6,767​ 6,549​ 6,411​AutoZone domestic commercial programs​ 5,682​ 5,342​ 5,179​ 5,007​ 4,893​Total Company Store Data​​​​​​​​​​​​​​​​Inventory per store (in thousands)​$ 807​$ 812​$ 686​$ 683​$ 674​Total AutoZone store square footage (in thousands)​ 47,899​ 46,435​ 45,057​ 43,502​ 42,526​Average square footage per AutoZone store​ 6,709​ 6,688​ 6,658​ 6,643​ 6,633​Increase in AutoZone store square footage​ 3.2% 3.1% 3.6% 2.3% 3.6% Average net sales per AutoZone store (in thousands)​$ 2,435​$ 2,329​$ 2,160​$ 1,914​$ 1,847​Net sales per AutoZone store average square foot​$ 363​$ 349​$ 325​$ 288​$ 279​Total employees at end of year (in thousands)​ 119​ 112​ 105​ 100​ 96​Inventory turnover(8)​ 1.5x​ 1.5x​ 1.5x​ 1.3x​ 1.3x​Accounts payable to inventory ratio​ 124.9% 129.5% 129.6% 115.3% 112.6% After-tax return on invested capital(9)​ 55.4% 52.9% 41.0% 35.7% 35.7% Adjusted debt to EBITDAR(10)​ 2.3​ 2.1​ 2.0​ 2.4​ 2.5​Net cash provided by operating activities (in thousands)(4)​$ 2,940,788​$ 3,211,135​$ 3,518,543​$ 2,720,108​$ 2,128,513​Cash flow before share repurchases and changes in debt (in thousands)(11)​$ 2,156,026​$ 2,599,636​$ 3,048,841​$ 2,185,418​$ 1,758,672​Share repurchases (in thousands)(7)​$ 3,723,289​$ 4,359,991​$ 3,378,321​$ 930,903​$ 2,004,896​Number of shares repurchased (in thousands)(7)​ 1,524​ 2,220​ 2,592​ 826​ 2,182​29 Table of Contents Table of Contents Table of Contents Results of OperationsThe following table highlights selected financial information over the past 5 years:​​​​​​​​​​​​​​​​​​​Fiscal Year Ended August (in thousands, except per share data, same store sales and selected operating data) 2023 2022 2021(1) 2020(1) 2019(2)(3) ​​​​​​​​​​​​​​​​​Income Statement Data ​ ​ ​ ​ ​ Net sales​$ 17,457,209​$ 16,252,230​$ 14,629,585​$ 12,631,967​$ 11,863,743​Cost of sales, including warehouse and delivery expenses​ 8,386,787​ 7,779,580​ 6,911,800​ 5,861,214​ 5,498,742​Gross profit​ 9,070,422​ 8,472,650​ 7,717,785​ 6,770,753​ 6,365,001​Operating, selling, general and administrative expenses​ 5,596,436​ 5,201,921​ 4,773,258​ 4,353,074​ 4,148,864​Operating profit​ 3,473,986​ 3,270,729​ 2,944,527​ 2,417,679​ 2,216,137​Interest expense, net​ 306,372​ 191,638​ 195,337​ 201,165​ 184,804​Income before income taxes​ 3,167,614​ 3,079,091​ 2,749,190​ 2,216,514​ 2,031,333​Income tax expense(4)​ 639,188​ 649,487​ 578,876​ 483,542​ 414,112​Net income(4)​$ 2,528,426​$ 2,429,604​$ 2,170,314​$ 1,732,972​$ 1,617,221​Diluted earnings per share(4)​$ 132.36​$ 117.19​$ 95.19​$ 71.93​$ 63.43​Weighted average shares for diluted earnings per share(4)​ 19,103​ 20,733​ 22,799​ 24,093​ 25,498​Same Store Sales​ ​ ​​ ​ ​ ​Increase in domestic comparable store net sales(5)​ 3.4% 8.4% 13.6% ​ 7.4% ​ 3.0% Increase in international comparable store net sales(5)​​ 29.3% ​ 19.1% ​ 22.5% ​(2.8)%​ 4.6% Increase in international comparable store net sales (constant currency)(5)​​ 17.5% ​ 19.2% ​ 20.7% ​ 4.7% ​ 7.2% Increase in total company comparable store net sales(5)​​ 5.6% ​ 9.2% ​ 14.3% ​ 6.6% ​ 3.2% Increase in total company comparable store net sales (constant currency)(5)​​ 4.6% ​ 9.2% ​ 14.1% ​ 7.2% ​ 3.4% Balance Sheet Data​ ​ ​ ​ ​ ​Current assets​$ 6,779,426​$ 6,627,984​$ 6,415,303​$ 6,811,872​$ 5,028,685​Operating lease right-of-use assets(6)​​ 2,998,097​​ 2,918,817​​ 2,718,712​​ 2,581,677​​ - ​Working capital (deficit)(7)​ (1,732,430)​ (1,960,409)​ (954,451)​ 528,781​ (483,456)​Total assets​ 15,985,878​ 15,275,043​ 14,516,199​ 14,423,872​ 9,895,913​Current liabilities​ 8,511,856​ 8,588,393​ 7,369,754​ 6,283,091​ 5,512,141​Debt​ 7,668,549​ 6,122,092​ 5,269,820​ 5,513,371​ 5,206,344​Finance lease liabilities, less current portion(6)​ 200,702​ 217,428​ 186,122​ 155,855​ 123,659​Operating lease liabilities, less current portion(6)​​ 2,917,046​​ 2,837,973​​ 2,632,842​​ 2,501,560​​ - ​Stockholders' deficit​ (4,349,894)​ (3,538,913)​ (1,797,536)​ (877,977)​ (1,713,851)​Selected Operating Data​ ​ ​ ​ ​ ​Number of stores at beginning of year​ 6,943​ 6,767​ 6,549​ 6,411​ 6,202​New stores​ 198​ 177​ 219​ 138​ 209​Closed stores​ 1​ 1​ 1​ - ​ - ​Net new stores​ 197​ 176​ 218​ 138​ 209​Relocated stores​ 12​ 13​ 12​ 5​ 2​Number of stores at end of year​ 7,140​ 6,943​ 6,767​ 6,549​ 6,411​AutoZone domestic commercial programs​ 5,682​ 5,342​ 5,179​ 5,007​ 4,893​Total Company Store Data​​​​​​​​​​​​​​​​Inventory per store (in thousands)​$ 807​$ 812​$ 686​$ 683​$ 674​Total AutoZone store square footage (in thousands)​ 47,899​ 46,435​ 45,057​ 43,502​ 42,526​Average square footage per AutoZone store​ 6,709​ 6,688​ 6,658​ 6,643​ 6,633​Increase in AutoZone store square footage​ 3.2% 3.1% 3.6% 2.3% 3.6% Average net sales per AutoZone store (in thousands)​$ 2,435​$ 2,329​$ 2,160​$ 1,914​$ 1,847​Net sales per AutoZone store average square foot​$ 363​$ 349​$ 325​$ 288​$ 279​Total employees at end of year (in thousands)​ 119​ 112​ 105​ 100​ 96​Inventory turnover(8)​ 1.5x​ 1.5x​ 1.5x​ 1.3x​ 1.3x​Accounts payable to inventory ratio​ 124.9% 129.5% 129.6% 115.3% 112.6% After-tax return on invested capital(9)​ 55.4% 52.9% 41.0% 35.7% 35.7% Adjusted debt to EBITDAR(10)​ 2.3​ 2.1​ 2.0​ 2.4​ 2.5​Net cash provided by operating activities (in thousands)(4)​$ 2,940,788​$ 3,211,135​$ 3,518,543​$ 2,720,108​$ 2,128,513​Cash flow before share repurchases and changes in debt (in thousands)(11)​$ 2,156,026​$ 2,599,636​$ 3,048,841​$ 2,185,418​$ 1,758,672​Share repurchases (in thousands)(7)​$ 3,723,289​$ 4,359,991​$ 3,378,321​$ 930,903​$ 2,004,896​Number of shares repurchased (in thousands)(7)​ 1,524​ 2,220​ 2,592​ 826​ 2,182​ --- ## Modified: Business interruptions may negatively impact our operating hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business. **Key changes:** - Reworded sentence: "​ Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crises and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S." - Reworded sentence: "Negative incidents can erode trust and confidence quickly, and adverse publicity about us could damage our brand and reputation, undermine our customers' confidence in us, reduce demand for our products and services, affect our ability to recruit and retain employees, attract regulatory scrutiny, and impact our relationships with suppliers and vendors." - Reworded sentence: "As a result, we or our service providers have experienced and are likely to again experience one or more errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure." - Reworded sentence: "As a result, we or our service providers have experienced and are likely to again experience one or more errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure." **Prior (2022):** ​ We believe our continued strong sales growth is driven in significant part by our AutoZone and private label brand names. The value in our brand names and their continued effectiveness in driving our sales growth is dependent to a significant degree on our ability to maintain our reputation for safety, high product quality, friendliness, WOW! Customer service, trustworthy advice, integrity and business ethics. Any negative publicity about these or other areas involving our business, including our response or lack thereof to external events involving civil unrest, social justice, and political issues, whether or not based in fact, could damage our reputation and may result in reduced demand for our merchandise. The increasing use of technology also poses a risk as customers are able to quickly compare products and prices and use social media to provide feedback in a manner that is rapidly and broadly disseminated. Our brand and reputation could be negatively impacted if negative sentiment about the Company, whether or not based on fact, is shared over social media. 18 18 Table of Contents​Failure to comply with ethical, social, product, labor, environmental and anti-corruption standards could also jeopardize our reputation and potentially lead to various adverse actions by consumer or environmental groups, employees or regulatory bodies. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation.​Information Technology, Cybersecurity and Data Privacy Risks​‌We rely heavily on information technology systems for our key business processes. Any damage to, failure of, or interruption in these systems could have a material adverse impact on our business and operating results.​We rely extensively on information technology systems, some of which are managed or provided by third-party service providers, to collect, analyze, process, store, manage, transmit and protect key business processes, transactions and data, such as sales data, customer data, employee data, demand forecasting, merchandise ordering, inventory replenishment, supply chain management, payment processing, order fulfillment and more. Delays in the maintenance, updates, upgrading, or patching of these systems, applications or processes could adversely impact their effectiveness or could expose us to security and other risks. Our systems and the third-party systems with which we interact are subject to damage, failure or interruption due to various reasons such as: power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, malicious cyber-attacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware, natural disasters and catastrophic events, inadequate or ineffective redundancy measures; and design or usage errors by AutoZoners, contractors or third-party service providers. Although we seek to effectively maintain and safeguard our systems and our data and we seek to ensure our third-party service providers effectively maintain and safeguard their systems and our data, such efforts are not always successful. As a result, we or our service providers could experience, and on occasion have experienced, one or more errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure. While such incidents have not been material to date, any future incident could significantly disrupt our operations and key business processes, result in the impairment or loss of critical data, be costly and resource-intensive to remedy; harm our reputation and relationship with customers, AutoZoners, vendors and other stakeholders; and have a material adverse impact on our business and operating results.​In addition, our information technology systems, infrastructure and personnel require substantial investments, such as replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or designing or cost-effectively acquiring new systems with new functionality. These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, cost overruns, or implementation delays or errors, and may result in operational challenges, security control failures, reputational harm, and increased costs that could adversely affect our business operations and results of operations.​Failure to maintain the security of sensitive personal information or other confidential information in our possession could subject us to litigation or regulatory enforcement action, cause reputational harm and cause us to incur substantial costs or have a material adverse impact on our business and financial condition.​Our business, like that of most retailers, involves the collection, processing, storage and transmission of personal information relating to our customers, suppliers and AutoZoners and confidential business information relating to AutoZone or other parties with which we do business. This information is handled by us as well as third-party service providers and vendors that provide us with various technology, systems, services and other resources that we use in connection with the handling of this information and in furtherance of our business objectives. Furthermore, we accept payments using a variety of methods, including credit, debit, electronic payments and gift cards, which present information security risks, and we may offer new payment options in the future presenting new risks of which we are currently unaware. ​19 Table of Contents Table of Contents Table of Contents ​Failure to comply with ethical, social, product, labor, environmental and anti-corruption standards could also jeopardize our reputation and potentially lead to various adverse actions by consumer or environmental groups, employees or regulatory bodies. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation.​Information Technology, Cybersecurity and Data Privacy Risks​‌We rely heavily on information technology systems for our key business processes. Any damage to, failure of, or interruption in these systems could have a material adverse impact on our business and operating results.​We rely extensively on information technology systems, some of which are managed or provided by third-party service providers, to collect, analyze, process, store, manage, transmit and protect key business processes, transactions and data, such as sales data, customer data, employee data, demand forecasting, merchandise ordering, inventory replenishment, supply chain management, payment processing, order fulfillment and more. Delays in the maintenance, updates, upgrading, or patching of these systems, applications or processes could adversely impact their effectiveness or could expose us to security and other risks. Our systems and the third-party systems with which we interact are subject to damage, failure or interruption due to various reasons such as: power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, malicious cyber-attacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware, natural disasters and catastrophic events, inadequate or ineffective redundancy measures; and design or usage errors by AutoZoners, contractors or third-party service providers. Although we seek to effectively maintain and safeguard our systems and our data and we seek to ensure our third-party service providers effectively maintain and safeguard their systems and our data, such efforts are not always successful. As a result, we or our service providers could experience, and on occasion have experienced, one or more errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure. While such incidents have not been material to date, any future incident could significantly disrupt our operations and key business processes, result in the impairment or loss of critical data, be costly and resource-intensive to remedy; harm our reputation and relationship with customers, AutoZoners, vendors and other stakeholders; and have a material adverse impact on our business and operating results.​In addition, our information technology systems, infrastructure and personnel require substantial investments, such as replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or designing or cost-effectively acquiring new systems with new functionality. These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, cost overruns, or implementation delays or errors, and may result in operational challenges, security control failures, reputational harm, and increased costs that could adversely affect our business operations and results of operations.​Failure to maintain the security of sensitive personal information or other confidential information in our possession could subject us to litigation or regulatory enforcement action, cause reputational harm and cause us to incur substantial costs or have a material adverse impact on our business and financial condition.​Our business, like that of most retailers, involves the collection, processing, storage and transmission of personal information relating to our customers, suppliers and AutoZoners and confidential business information relating to AutoZone or other parties with which we do business. This information is handled by us as well as third-party service providers and vendors that provide us with various technology, systems, services and other resources that we use in connection with the handling of this information and in furtherance of our business objectives. Furthermore, we accept payments using a variety of methods, including credit, debit, electronic payments and gift cards, which present information security risks, and we may offer new payment options in the future presenting new risks of which we are currently unaware. ​ ​ Failure to comply with ethical, social, product, labor, environmental and anti-corruption standards could also jeopardize our reputation and potentially lead to various adverse actions by consumer or environmental groups, employees or regulatory bodies. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation. ​ **Current (2023):** ​ Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crises and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S. on favorable terms. ​ In the event commercial transportation is curtailed or substantially delayed, we may have difficulty transporting merchandise to our distribution centers and stores resulting in lost sales and/or a potential loss of customer loyalty. Transportation issues could also cause us to cancel purchase orders if we are unable to receive merchandise in our distribution centers. ​ It is not possible to predict all events or circumstances which may negatively disrupt our business in a significant manner, and the near-term and long-term impacts of such disruptions on our business, demand for our products and our growth initiatives will vary significantly based on the facts and circumstances of each such disruption. Furthermore, such business interruptions could cause additional negative impacts of which we are not currently aware or magnify other risks associated with our business and operations. 18 18 Table of ContentsOur failure to protect our brand and reputation could have an adverse effect on our relationships with our customers, employees, suppliers, vendors and other stakeholders, thereby negatively impacting sales and profitability.​We believe our continued strong sales growth is driven in significant part by our AutoZone and private label brand names and our positive reputation with customers, employees, suppliers, vendors and other stakeholders. The value in our brand names and reputation, and their continued effectiveness in driving our sales growth is dependent to a significant degree on our ability to maintain our reputation for safety, high product quality, friendliness, WOW! Customer service, trustworthy advice, integrity and business ethics. Negative incidents can erode trust and confidence quickly, and adverse publicity about us could damage our brand and reputation, undermine our customers' confidence in us, reduce demand for our products and services, affect our ability to recruit and retain employees, attract regulatory scrutiny, and impact our relationships with suppliers and vendors. Further, our actual or perceived response or lack of response to social, political, environmental or other sensitive issues, whether or not based in fact, could damage our reputation and may result in reduced demand for our merchandise. Customers are also increasingly using social media to provide feedback and information about our Company, our products and services in a manner that is rapidly and broadly disseminated. Our brand and reputation could be negatively impacted if negative sentiment about the Company, whether or not based on fact, is shared and distributed in such a manner.​Failure to comply with ethical, social, product, labor, environmental and anti-corruption standards could also jeopardize our reputation and potentially lead to various adverse actions by consumer or environmental groups, employees or regulatory bodies. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation.​Information Technology, Cybersecurity and Data Privacy Risks​‌We rely heavily on information technology systems for our key business processes. Any damage to, failure of, or interruption in these systems could have a material adverse impact on our business and operating results.​We rely extensively on information technology systems, some of which are managed or provided by third-party service providers, to collect, analyze, process, store, manage, transmit and protect key business processes, transactions and data, such as sales data, customer data, employee data, demand forecasting, merchandise ordering, inventory replenishment, supply chain management, payment processing, order fulfillment and more. Delays in the maintenance, updates, upgrading, or patching of these systems, applications or processes could adversely impact their effectiveness or could expose us to security and other risks. Our systems and the third-party systems with which we interact are subject to damage, failure or interruption due to various reasons such as: power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, malicious cyber-attacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware, natural disasters and catastrophic events, inadequate or ineffective redundancy measures; and design or usage errors by AutoZoners, contractors or third-party service providers. Although we seek to effectively maintain and safeguard our systems and our data and we seek to ensure our third-party service providers effectively maintain and safeguard their systems and our data, such efforts are not always successful. As a result, we or our service providers have experienced and are likely to again experience one or more errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure. While such incidents have not been material to date, any future incident could significantly disrupt our operations and key business processes, result in the impairment or loss of critical data, be costly and resource-intensive to remedy; harm our reputation and relationship with customers, AutoZoners, vendors and other stakeholders; and have a material adverse impact on our business and operating results.​In addition, our information technology systems, infrastructure and personnel require substantial investments, such as replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or designing or cost-effectively 19 Table of Contents Table of Contents Table of Contents Our failure to protect our brand and reputation could have an adverse effect on our relationships with our customers, employees, suppliers, vendors and other stakeholders, thereby negatively impacting sales and profitability.​We believe our continued strong sales growth is driven in significant part by our AutoZone and private label brand names and our positive reputation with customers, employees, suppliers, vendors and other stakeholders. The value in our brand names and reputation, and their continued effectiveness in driving our sales growth is dependent to a significant degree on our ability to maintain our reputation for safety, high product quality, friendliness, WOW! Customer service, trustworthy advice, integrity and business ethics. Negative incidents can erode trust and confidence quickly, and adverse publicity about us could damage our brand and reputation, undermine our customers' confidence in us, reduce demand for our products and services, affect our ability to recruit and retain employees, attract regulatory scrutiny, and impact our relationships with suppliers and vendors. Further, our actual or perceived response or lack of response to social, political, environmental or other sensitive issues, whether or not based in fact, could damage our reputation and may result in reduced demand for our merchandise. Customers are also increasingly using social media to provide feedback and information about our Company, our products and services in a manner that is rapidly and broadly disseminated. Our brand and reputation could be negatively impacted if negative sentiment about the Company, whether or not based on fact, is shared and distributed in such a manner.​Failure to comply with ethical, social, product, labor, environmental and anti-corruption standards could also jeopardize our reputation and potentially lead to various adverse actions by consumer or environmental groups, employees or regulatory bodies. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation.​Information Technology, Cybersecurity and Data Privacy Risks​‌We rely heavily on information technology systems for our key business processes. Any damage to, failure of, or interruption in these systems could have a material adverse impact on our business and operating results.​We rely extensively on information technology systems, some of which are managed or provided by third-party service providers, to collect, analyze, process, store, manage, transmit and protect key business processes, transactions and data, such as sales data, customer data, employee data, demand forecasting, merchandise ordering, inventory replenishment, supply chain management, payment processing, order fulfillment and more. Delays in the maintenance, updates, upgrading, or patching of these systems, applications or processes could adversely impact their effectiveness or could expose us to security and other risks. Our systems and the third-party systems with which we interact are subject to damage, failure or interruption due to various reasons such as: power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, malicious cyber-attacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware, natural disasters and catastrophic events, inadequate or ineffective redundancy measures; and design or usage errors by AutoZoners, contractors or third-party service providers. Although we seek to effectively maintain and safeguard our systems and our data and we seek to ensure our third-party service providers effectively maintain and safeguard their systems and our data, such efforts are not always successful. As a result, we or our service providers have experienced and are likely to again experience one or more errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure. While such incidents have not been material to date, any future incident could significantly disrupt our operations and key business processes, result in the impairment or loss of critical data, be costly and resource-intensive to remedy; harm our reputation and relationship with customers, AutoZoners, vendors and other stakeholders; and have a material adverse impact on our business and operating results.​In addition, our information technology systems, infrastructure and personnel require substantial investments, such as replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or designing or cost-effectively --- ## Modified: Selected Operating Data **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ Number of stores at beginning of year ​ 6,943 ​ 6,767 ​ 6,549 ​ 6,411 ​ 6,202 ​ New stores ​ 198 ​ 177 ​ 219 ​ 138 ​ 209 ​ Closed stores ​ 1 ​ 1 ​ 1 ​ - ​ - ​ Net new stores ​ 197 ​ 176 ​ 218 ​ 138 ​ 209 ​ Relocated stores ​ 12 ​ 13 ​ 12 ​ 5 ​ 2 ​ Number of stores at end of year ​ 7,140 ​ 6,943 ​ 6,767 ​ 6,549 ​ 6,411 ​ AutoZone domestic commercial programs ​ 5,682 ​ 5,342 ​ 5,179 ​ 5,007 ​ 4,893 ​ Total Company Store Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inventory per store (in thousands) ​ $ 807 ​ $ 812 ​ $ 686 ​ $ 683 ​ $ 674 ​ Total AutoZone store square footage (in thousands) ​ 47,899 ​ 46,435 ​ 45,057 ​ 43,502 ​ 42,526 ​ Average square footage per AutoZone store ​ 6,709 ​ 6,688 ​ 6,658 ​ 6,643 ​ 6,633 ​ Increase in AutoZone store square footage ​ 3.2 % 3.1 % 3.6 % 2.3 % 3.6 % Average net sales per AutoZone store (in thousands) ​ $ 2,435 ​ $ 2,329 ​ $ 2,160 ​ $ 1,914 ​ $ 1,847 ​ Net sales per AutoZone store average square foot ​ $ 363 ​ $ 349 ​ $ 325 ​ $ 288 ​ $ 279 ​ Total employees at end of year (in thousands) ​ 119 ​ 112 ​ 105 ​ 100 ​ 96 ​ Inventory turnover(8) ​ 1.5x ​ 1.5x ​ 1.5x ​ 1.3x ​ 1.3x ​ Accounts payable to inventory ratio ​ 124.9 % 129.5 % 129.6 % 115.3 % 112.6 % After-tax return on invested capital(9) ​ 55.4 % 52.9 % 41.0 % 35.7 % 35.7 % Adjusted debt to EBITDAR(10) ​ 2.3 ​ 2.1 ​ 2.0 ​ 2.4 ​ 2.5 ​ Net cash provided by operating activities (in thousands)(4) ​ $ 2,940,788 ​ $ 3,211,135 ​ $ 3,518,543 ​ $ 2,720,108 ​ $ 2,128,513 ​ Cash flow before share repurchases and changes in debt (in thousands)(11) ​ $ 2,156,026 ​ $ 2,599,636 ​ $ 3,048,841 ​ $ 2,185,418 ​ $ 1,758,672 ​ Share repurchases (in thousands)(7) ​ $ 3,723,289 ​ $ 4,359,991 ​ $ 3,378,321 ​ $ 930,903 ​ $ 2,004,896 ​ Number of shares repurchased (in thousands)(7) ​ 1,524 ​ 2,220 ​ 2,592 ​ 826 ​ 2,182 ​ 29 29 Table of Contents(1) The 52 weeks ended August 28, 2021 and August 29, 2020 were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0 million (pre-tax) and $83.9 million (pre-tax), respectively.(2) The fiscal year ended August 31, 2019 consisted of 53 weeks.(3) Fiscal 2019 includes a benefit to net income related to the Tax Cuts and Jobs Act of $6.3 million, net of repatriation tax." - Reworded sentence: "All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation." - Reworded sentence: "See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(10)Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense." - Reworded sentence: "All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation." - Reworded sentence: "See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(10)Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense." **Prior (2022):** ​ ​ ​ ​ ​ ​ Number of locations at beginning of year ​ 6,767 ​ 6,549 ​ 6,411 ​ 6,202 ​ 6,029 ​ Sold locations(7) ​ - ​ - ​ - ​ - ​ 26 ​ New locations ​ 177 ​ 219 ​ 138 ​ 209 ​ 201 ​ Closed locations ​ 1 ​ 1 ​ - ​ - ​ 2 ​ Net new locations ​ 176 ​ 218 ​ 138 ​ 209 ​ 199 ​ Relocated locations ​ 13 ​ 12 ​ 5 ​ 2 ​ 7 ​ Number of locations at end of year ​ 6,943 ​ 6,767 ​ 6,549 ​ 6,411 ​ 6,202 ​ AutoZone domestic commercial programs ​ 5,342 ​ 5,179 ​ 5,007 ​ 4,893 ​ 4,741 ​ Inventory per location (in thousands) ​ $ 812 ​ $ 686 ​ $ 683 ​ $ 674 ​ $ 636 ​ Total AutoZone store square footage (in thousands) ​ 46,435 ​ 45,057 ​ 43,502 ​ 42,526 ​ 41,066 ​ Average square footage per AutoZone store ​ 6,688 ​ 6,658 ​ 6,643 ​ 6,633 ​ 6,621 ​ Increase in AutoZone store square footage ​ 3.1 % 3.6 % 2.3 % 3.6 % 3.5 % Average net sales per AutoZone store (in thousands) ​ $ 2,329 ​ $ 2,160 ​ $ 1,914 ​ $ 1,847 ​ $ 1,778 ​ Net sales per AutoZone store average square foot ​ $ 349 ​ $ 325 ​ $ 288 ​ $ 279 ​ $ 269 ​ Total employees at end of year (in thousands) ​ 112 ​ 105 ​ 100 ​ 96 ​ 89 ​ Inventory turnover(8) ​ 1.5x ​ 1.5x ​ 1.3x ​ 1.3x ​ 1.3x ​ Accounts payable to inventory ratio ​ 129.5 % 129.6 % 115.3 % 112.6 % 111.8 % After-tax return on invested capital(9) ​ 52.9 % 41.0 % 35.7 % 35.7 % 32.1 % Adjusted debt to EBITDAR(10) ​ 2.1 ​ 2.0 ​ 2.4 ​ 2.5 ​ 2.5 ​ Net cash provided by operating activities (in thousands)(4) ​ $ 3,211,135 ​ $ 3,518,543 ​ $ 2,720,108 ​ $ 2,128,513 ​ $ 2,080,292 ​ Cash flow before share repurchases and changes in debt (in thousands)(11) ​ $ 2,599,636 ​ $ 3,048,841 ​ $ 2,185,418 ​ $ 1,758,672 ​ $ 1,596,367 ​ Share repurchases (in thousands)(12) ​ $ 4,359,991 ​ $ 3,378,321 ​ $ 930,903 ​ $ 2,004,896 ​ $ 1,592,013 ​ Number of shares repurchased (in thousands)(12) ​ 2,220 ​ 2,592 ​ 826 ​ 2,182 ​ 2,398 ​ 28 28 Table of Contents(1) The 52 weeks ended August 28, 2021 and August 29, 2020 were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0 million (pre-tax) and $83.9 million (pre-tax), respectively.(2) The fiscal year ended August 31, 2019 consisted of 53 weeks.(3) Fiscal 2018 was negatively impacted by pension termination charges of $130.3 million (pre-tax) recognized in the fourth quarter and asset impairments of $193.2 million (pre-tax) recognized in the second quarter of fiscal 2018. Fiscal 2019 and 2018 also includes a benefit to net income related to the Tax Cuts and Jobs Act of $6.3 million and $132.1 million, net of repatriation tax, respectively. (4) Fiscal 2022, 2021, 2020, 2019 and 2018 include excess tax benefits from stock option exercises of $63.2 million, $56.4 million, $20.9 million, $46.0 million, and $31.3 million, respectively.(5) The domestic comparable sales increases are based on sales for all AutoZone domestic stores open at least one year. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation.(6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset ("ROU asset") and a corresponding lease liability on the balance sheet. (7) 26 IMC branches were sold on April 4, 2018. (8) Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters.(9) After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize leases). For fiscal 2019, after-tax operating profit was adjusted for the impact of the average revaluation of deferred tax liabilities, net of repatriation tax. For fiscal 2018, after-tax operating profit was adjusted for impairment charges, pension termination charges and the impact of the revaluation of deferred tax liabilities, net of repatriation tax. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(10) Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense. For fiscal 2018, net income was adjusted for impairment charges and pension termination charges before tax impact. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(11) Cash flow before share repurchases and changes in debt is defined as the change in cash and cash equivalents less the change in debt plus treasury stock purchases. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(12) During the third quarter of fiscal 2020, the Company temporarily suspended share repurchases under the share repurchase program in response to COVID-19 which was restarted beginning in the first quarter of fiscal 2021. ​29 Table of Contents Table of Contents Table of Contents (1) The 52 weeks ended August 28, 2021 and August 29, 2020 were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0 million (pre-tax) and $83.9 million (pre-tax), respectively.(2) The fiscal year ended August 31, 2019 consisted of 53 weeks.(3) Fiscal 2018 was negatively impacted by pension termination charges of $130.3 million (pre-tax) recognized in the fourth quarter and asset impairments of $193.2 million (pre-tax) recognized in the second quarter of fiscal 2018. Fiscal 2019 and 2018 also includes a benefit to net income related to the Tax Cuts and Jobs Act of $6.3 million and $132.1 million, net of repatriation tax, respectively. (4) Fiscal 2022, 2021, 2020, 2019 and 2018 include excess tax benefits from stock option exercises of $63.2 million, $56.4 million, $20.9 million, $46.0 million, and $31.3 million, respectively.(5) The domestic comparable sales increases are based on sales for all AutoZone domestic stores open at least one year. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation.(6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset ("ROU asset") and a corresponding lease liability on the balance sheet. (7) 26 IMC branches were sold on April 4, 2018. (8) Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters.(9) After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize leases). For fiscal 2019, after-tax operating profit was adjusted for the impact of the average revaluation of deferred tax liabilities, net of repatriation tax. For fiscal 2018, after-tax operating profit was adjusted for impairment charges, pension termination charges and the impact of the revaluation of deferred tax liabilities, net of repatriation tax. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(10) Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense. For fiscal 2018, net income was adjusted for impairment charges and pension termination charges before tax impact. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(11) Cash flow before share repurchases and changes in debt is defined as the change in cash and cash equivalents less the change in debt plus treasury stock purchases. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(12) During the third quarter of fiscal 2020, the Company temporarily suspended share repurchases under the share repurchase program in response to COVID-19 which was restarted beginning in the first quarter of fiscal 2021. ​ (1) The 52 weeks ended August 28, 2021 and August 29, 2020 were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0 million (pre-tax) and $83.9 million (pre-tax), respectively. (2) The fiscal year ended August 31, 2019 consisted of 53 weeks. (3) Fiscal 2018 was negatively impacted by pension termination charges of $130.3 million (pre-tax) recognized in the fourth quarter and asset impairments of $193.2 million (pre-tax) recognized in the second quarter of fiscal 2018. Fiscal 2019 and 2018 also includes a benefit to net income related to the Tax Cuts and Jobs Act of $6.3 million and $132.1 million, net of repatriation tax, respectively. (4) Fiscal 2022, 2021, 2020, 2019 and 2018 include excess tax benefits from stock option exercises of $63.2 million, $56.4 million, $20.9 million, $46.0 million, and $31.3 million, respectively. (5) The domestic comparable sales increases are based on sales for all AutoZone domestic stores open at least one year. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation. (6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset ("ROU asset") and a corresponding lease liability on the balance sheet. (7) 26 IMC branches were sold on April 4, 2018. (8) Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters. (9) After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize leases). For fiscal 2019, after-tax operating profit was adjusted for the impact of the average revaluation of deferred tax liabilities, net of repatriation tax. For fiscal 2018, after-tax operating profit was adjusted for impairment charges, pension termination charges and the impact of the revaluation of deferred tax liabilities, net of repatriation tax. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations. (10) Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense. For fiscal 2018, net income was adjusted for impairment charges and pension termination charges before tax impact. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations. (11) Cash flow before share repurchases and changes in debt is defined as the change in cash and cash equivalents less the change in debt plus treasury stock purchases. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations. (12) During the third quarter of fiscal 2020, the Company temporarily suspended share repurchases under the share repurchase program in response to COVID-19 which was restarted beginning in the first quarter of fiscal 2021. ​ 29 29 Table of ContentsFiscal 2022 Compared with Fiscal 2021For the fiscal year ended August 27, 2022, we reported net sales of $16.3 billion compared with $14.6 billion for the year ended August 28, 2021, a 11.1% increase from fiscal 2021. This growth was driven primarily by a domestic same store sales increase of 8.4% and net sales of $290.7 million from new stores. Domestic commercial sales increased $885.0 million, or 26.5%, over domestic commercial sales for fiscal 2021.At August 27, 2022, we operated 6,168 domestic stores, 703 in Mexico and 72 in Brazil, compared with 6,051 domestic stores, 664 in Mexico and 52 in Brazil at August 28, 2021. We reported a total auto parts segment (domestic, Mexico and Brazil) sales increase of 11.0% for fiscal 2022.Gross profit for fiscal 2022 was $8.5 billion, or 52.1% of net sales, a 62 basis point decrease compared with $7.7 billion, or 52.8% of net sales for fiscal 2021. The decrease in gross margin was primarily driven by the initiatives to accelerate growth in our commercial business.Operating, selling, general and administrative expenses for fiscal 2022 increased to $5.2 billion, or 32.0% of net sales, from $4.8 billion, or 32.6% of net sales for fiscal 2021. The increase in operating expenses as a percentage of sales was driven by strong sales growth and a decrease in pandemic related expenses.Interest expense, net for fiscal 2022 was $191.6 million compared with $195.3 million during fiscal 2021. Average borrowings for fiscal 2022 were $5.8 billion, compared with $5.4 billion for fiscal 2021. Weighted average borrowing rates were 3.29% and 3.28% for fiscal 2022 and 2021, respectively.Our effective income tax rate was 21.1% of pre-tax income for fiscal 2022 and fiscal 2021. The benefit of stock options exercised for fiscal 2022 was $63.2 million compared to $56.4 million for fiscal 2021 (see "Note D - Income Taxes" in the Notes to Consolidated Financial Statements). Net income for fiscal 2022 increased by 11.9% to $2.4 billion, and diluted earnings per share increased 23.1% to $117.19 from $95.19 in fiscal 2021. The impact on the fiscal 2022 diluted earnings per share from stock repurchases was an increase of $5.27.Fiscal 2021 Compared with Fiscal 2020A discussion of changes in our results of operations from fiscal 2020 to fiscal 2021 has been omitted from this Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended August 28, 2021, filed with the SEC on October 25, 2021, which is available free of charge on the SECs website at www.sec.gov and at www.autozone.com, by clicking "Investor Relations" located at the bottom of the page.Quarterly PeriodsEach of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2022, 2021 and 2020. Because the fourth quarter contains seasonally high sales volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of our annual net sales and net income. The fourth quarter of fiscal year 2022 represented 32.9% of annual sales and 33.3% of net income; the fourth quarter of fiscal year 2021 represented 33.6% of annual sales and 36.2% of net income; and the fourth quarter of fiscal year 2020 represented 36.0% of annual sales and 42.7% of net income.30 Table of Contents Table of Contents Table of Contents Fiscal 2022 Compared with Fiscal 2021For the fiscal year ended August 27, 2022, we reported net sales of $16.3 billion compared with $14.6 billion for the year ended August 28, 2021, a 11.1% increase from fiscal 2021. This growth was driven primarily by a domestic same store sales increase of 8.4% and net sales of $290.7 million from new stores. Domestic commercial sales increased $885.0 million, or 26.5%, over domestic commercial sales for fiscal 2021.At August 27, 2022, we operated 6,168 domestic stores, 703 in Mexico and 72 in Brazil, compared with 6,051 domestic stores, 664 in Mexico and 52 in Brazil at August 28, 2021. We reported a total auto parts segment (domestic, Mexico and Brazil) sales increase of 11.0% for fiscal 2022.Gross profit for fiscal 2022 was $8.5 billion, or 52.1% of net sales, a 62 basis point decrease compared with $7.7 billion, or 52.8% of net sales for fiscal 2021. The decrease in gross margin was primarily driven by the initiatives to accelerate growth in our commercial business.Operating, selling, general and administrative expenses for fiscal 2022 increased to $5.2 billion, or 32.0% of net sales, from $4.8 billion, or 32.6% of net sales for fiscal 2021. The increase in operating expenses as a percentage of sales was driven by strong sales growth and a decrease in pandemic related expenses.Interest expense, net for fiscal 2022 was $191.6 million compared with $195.3 million during fiscal 2021. Average borrowings for fiscal 2022 were $5.8 billion, compared with $5.4 billion for fiscal 2021. Weighted average borrowing rates were 3.29% and 3.28% for fiscal 2022 and 2021, respectively.Our effective income tax rate was 21.1% of pre-tax income for fiscal 2022 and fiscal 2021. The benefit of stock options exercised for fiscal 2022 was $63.2 million compared to $56.4 million for fiscal 2021 (see "Note D - Income Taxes" in the Notes to Consolidated Financial Statements). Net income for fiscal 2022 increased by 11.9% to $2.4 billion, and diluted earnings per share increased 23.1% to $117.19 from $95.19 in fiscal 2021. The impact on the fiscal 2022 diluted earnings per share from stock repurchases was an increase of $5.27.Fiscal 2021 Compared with Fiscal 2020A discussion of changes in our results of operations from fiscal 2020 to fiscal 2021 has been omitted from this Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended August 28, 2021, filed with the SEC on October 25, 2021, which is available free of charge on the SECs website at www.sec.gov and at www.autozone.com, by clicking "Investor Relations" located at the bottom of the page.Quarterly PeriodsEach of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2022, 2021 and 2020. Because the fourth quarter contains seasonally high sales volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of our annual net sales and net income. The fourth quarter of fiscal year 2022 represented 32.9% of annual sales and 33.3% of net income; the fourth quarter of fiscal year 2021 represented 33.6% of annual sales and 36.2% of net income; and the fourth quarter of fiscal year 2020 represented 36.0% of annual sales and 42.7% of net income. Fiscal 2022 Compared with Fiscal 2021 For the fiscal year ended August 27, 2022, we reported net sales of $16.3 billion compared with $14.6 billion for the year ended August 28, 2021, a 11.1% increase from fiscal 2021. This growth was driven primarily by a domestic same store sales increase of 8.4% and net sales of $290.7 million from new stores. Domestic commercial sales increased $885.0 million, or 26.5%, over domestic commercial sales for fiscal 2021. At August 27, 2022, we operated 6,168 domestic stores, 703 in Mexico and 72 in Brazil, compared with 6,051 domestic stores, 664 in Mexico and 52 in Brazil at August 28, 2021. We reported a total auto parts segment (domestic, Mexico and Brazil) sales increase of 11.0% for fiscal 2022. Gross profit for fiscal 2022 was $8.5 billion, or 52.1% of net sales, a 62 basis point decrease compared with $7.7 billion, or 52.8% of net sales for fiscal 2021. The decrease in gross margin was primarily driven by the initiatives to accelerate growth in our commercial business. Operating, selling, general and administrative expenses for fiscal 2022 increased to $5.2 billion, or 32.0% of net sales, from $4.8 billion, or 32.6% of net sales for fiscal 2021. The increase in operating expenses as a percentage of sales was driven by strong sales growth and a decrease in pandemic related expenses. Interest expense, net for fiscal 2022 was $191.6 million compared with $195.3 million during fiscal 2021. Average borrowings for fiscal 2022 were $5.8 billion, compared with $5.4 billion for fiscal 2021. Weighted average borrowing rates were 3.29% and 3.28% for fiscal 2022 and 2021, respectively. Our effective income tax rate was 21.1% of pre-tax income for fiscal 2022 and fiscal 2021. The benefit of stock options exercised for fiscal 2022 was $63.2 million compared to $56.4 million for fiscal 2021 (see "Note D - Income Taxes" in the Notes to Consolidated Financial Statements). Net income for fiscal 2022 increased by 11.9% to $2.4 billion, and diluted earnings per share increased 23.1% to $117.19 from $95.19 in fiscal 2021. The impact on the fiscal 2022 diluted earnings per share from stock repurchases was an increase of $5.27. Fiscal 2021 Compared with Fiscal 2020 A discussion of changes in our results of operations from fiscal 2020 to fiscal 2021 has been omitted from this Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended August 28, 2021, filed with the SEC on October 25, 2021, which is available free of charge on the SECs website at www.sec.gov and at www.autozone.com, by clicking "Investor Relations" located at the bottom of the page. **Current (2023):** ​ ​ ​ ​ ​ ​ Number of stores at beginning of year ​ 6,943 ​ 6,767 ​ 6,549 ​ 6,411 ​ 6,202 ​ New stores ​ 198 ​ 177 ​ 219 ​ 138 ​ 209 ​ Closed stores ​ 1 ​ 1 ​ 1 ​ - ​ - ​ Net new stores ​ 197 ​ 176 ​ 218 ​ 138 ​ 209 ​ Relocated stores ​ 12 ​ 13 ​ 12 ​ 5 ​ 2 ​ Number of stores at end of year ​ 7,140 ​ 6,943 ​ 6,767 ​ 6,549 ​ 6,411 ​ AutoZone domestic commercial programs ​ 5,682 ​ 5,342 ​ 5,179 ​ 5,007 ​ 4,893 ​ Total Company Store Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inventory per store (in thousands) ​ $ 807 ​ $ 812 ​ $ 686 ​ $ 683 ​ $ 674 ​ Total AutoZone store square footage (in thousands) ​ 47,899 ​ 46,435 ​ 45,057 ​ 43,502 ​ 42,526 ​ Average square footage per AutoZone store ​ 6,709 ​ 6,688 ​ 6,658 ​ 6,643 ​ 6,633 ​ Increase in AutoZone store square footage ​ 3.2 % 3.1 % 3.6 % 2.3 % 3.6 % Average net sales per AutoZone store (in thousands) ​ $ 2,435 ​ $ 2,329 ​ $ 2,160 ​ $ 1,914 ​ $ 1,847 ​ Net sales per AutoZone store average square foot ​ $ 363 ​ $ 349 ​ $ 325 ​ $ 288 ​ $ 279 ​ Total employees at end of year (in thousands) ​ 119 ​ 112 ​ 105 ​ 100 ​ 96 ​ Inventory turnover(8) ​ 1.5x ​ 1.5x ​ 1.5x ​ 1.3x ​ 1.3x ​ Accounts payable to inventory ratio ​ 124.9 % 129.5 % 129.6 % 115.3 % 112.6 % After-tax return on invested capital(9) ​ 55.4 % 52.9 % 41.0 % 35.7 % 35.7 % Adjusted debt to EBITDAR(10) ​ 2.3 ​ 2.1 ​ 2.0 ​ 2.4 ​ 2.5 ​ Net cash provided by operating activities (in thousands)(4) ​ $ 2,940,788 ​ $ 3,211,135 ​ $ 3,518,543 ​ $ 2,720,108 ​ $ 2,128,513 ​ Cash flow before share repurchases and changes in debt (in thousands)(11) ​ $ 2,156,026 ​ $ 2,599,636 ​ $ 3,048,841 ​ $ 2,185,418 ​ $ 1,758,672 ​ Share repurchases (in thousands)(7) ​ $ 3,723,289 ​ $ 4,359,991 ​ $ 3,378,321 ​ $ 930,903 ​ $ 2,004,896 ​ Number of shares repurchased (in thousands)(7) ​ 1,524 ​ 2,220 ​ 2,592 ​ 826 ​ 2,182 ​ 29 29 Table of Contents(1) The 52 weeks ended August 28, 2021 and August 29, 2020 were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0 million (pre-tax) and $83.9 million (pre-tax), respectively.(2) The fiscal year ended August 31, 2019 consisted of 53 weeks.(3) Fiscal 2019 includes a benefit to net income related to the Tax Cuts and Jobs Act of $6.3 million, net of repatriation tax. (4) Fiscal 2023, 2022, 2021, 2020 and 2019 include excess tax benefits from stock option exercises of $92.2 million, $63.2 million, $56.4 million, $20.9 million, and $46.0 million, respectively.(5) The domestic and international comparable sales increases are based on sales for all AutoZone stores open at least one year. Constant currency same store sales exclude impacts from fluctuations of foreign exchange rates by converting both the current year and prior year international results at the prior year foreign currency exchange rate. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation. (6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset ("ROU asset") and a corresponding lease liability on the balance sheet.(7)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 the third quarter of fiscal 2020, the Company temporarily suspended share repurchases under the share repurchase program in response to the COVID-19 pandemic which was restarted beginning in the first quarter of fiscal 2021.(8)Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters.(9)After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize leases). For fiscal 2019, after-tax operating profit was adjusted for the impact of the average revaluation of deferred tax liabilities, net of repatriation tax. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(10)Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations (11)Cash flow before share repurchases and changes in debt is defined as the change in cash and cash equivalents less the change in debt plus treasury stock purchases. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.​30 Table of Contents Table of Contents Table of Contents (1) The 52 weeks ended August 28, 2021 and August 29, 2020 were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0 million (pre-tax) and $83.9 million (pre-tax), respectively.(2) The fiscal year ended August 31, 2019 consisted of 53 weeks.(3) Fiscal 2019 includes a benefit to net income related to the Tax Cuts and Jobs Act of $6.3 million, net of repatriation tax. (4) Fiscal 2023, 2022, 2021, 2020 and 2019 include excess tax benefits from stock option exercises of $92.2 million, $63.2 million, $56.4 million, $20.9 million, and $46.0 million, respectively.(5) The domestic and international comparable sales increases are based on sales for all AutoZone stores open at least one year. Constant currency same store sales exclude impacts from fluctuations of foreign exchange rates by converting both the current year and prior year international results at the prior year foreign currency exchange rate. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation. (6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset ("ROU asset") and a corresponding lease liability on the balance sheet.(7)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 the third quarter of fiscal 2020, the Company temporarily suspended share repurchases under the share repurchase program in response to the COVID-19 pandemic which was restarted beginning in the first quarter of fiscal 2021.(8)Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters.(9)After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize leases). For fiscal 2019, after-tax operating profit was adjusted for the impact of the average revaluation of deferred tax liabilities, net of repatriation tax. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.(10)Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations (11)Cash flow before share repurchases and changes in debt is defined as the change in cash and cash equivalents less the change in debt plus treasury stock purchases. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations.​ (1) The 52 weeks ended August 28, 2021 and August 29, 2020 were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0 million (pre-tax) and $83.9 million (pre-tax), respectively. (2) The fiscal year ended August 31, 2019 consisted of 53 weeks. (3) Fiscal 2019 includes a benefit to net income related to the Tax Cuts and Jobs Act of $6.3 million, net of repatriation tax. (4) Fiscal 2023, 2022, 2021, 2020 and 2019 include excess tax benefits from stock option exercises of $92.2 million, $63.2 million, $56.4 million, $20.9 million, and $46.0 million, respectively. (5) The domestic and international comparable sales increases are based on sales for all AutoZone stores open at least one year. Constant currency same store sales exclude impacts from fluctuations of foreign exchange rates by converting both the current year and prior year international results at the prior year foreign currency exchange rate. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation. (6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset ("ROU asset") and a corresponding lease liability on the balance sheet. ​ 30 30 Table of ContentsFiscal 2023 Compared with Fiscal 2022For the fiscal year ended August 26, 2023, we reported net sales of $17.5 billion compared with $16.3 billion for the year ended August 27, 2022, a 7.4% increase from fiscal 2022. This growth was driven primarily by a domestic same store sales increase of 3.4% and net sales of $327.8 million from new domestic and international stores. Domestic commercial sales increased $368.0 million, or 8.7%, over domestic commercial sales for fiscal 2022. Same store sales, or sales for our domestic and international stores open at least one year, are as follows:​​​​​​​​​​​​​​Fiscal Year Ended August​​​​​​​​​​​​​​​​ Constant Currency (1) ​​ Constant Currency (1) ​2023​2023​2022​2022​Domestic​ 3.4% ​ 3.4% ​ 8.4% ​ 8.4% International 29.3% 17.5% 19.1% 19.2% Total Company 5.6% 4.6% 9.2% 9.2% ​(1)Constant currency same store sales exclude impacts from fluctuations of foreign exchange rates by converting both the current year and prior year international results at the prior year foreign currency exchange rate.​At August 26, 2023, we operated 6,300 domestic stores, 740 in Mexico and 100 in Brazil, compared with 6,168 domestic stores, 703 in Mexico and 72 in Brazil at August 27, 2022. We reported a total auto parts segment (domestic, Mexico and Brazil) sales increase of 7.4% for fiscal 2023. ​Gross profit for fiscal 2023 was $9.1 billion, or 52.0% of net sales, a 17 basis point decrease compared with $8.5 billion, or 52.1% of net sales for fiscal 2022. The deleverage in gross margin was impacted by a non-cash LIFO charge of $44.0 million in fiscal 2023 versus a $15.0 million charge in fiscal 2022.Operating, selling, general and administrative expenses for fiscal 2023 increased to $5.6 billion, or 32.1% of net sales, from $5.2 billion, or 32.0% of net sales for fiscal 2022.Interest expense, net for fiscal 2023 was $306.4 million compared with $191.6 million during fiscal 2022. Average borrowings for fiscal 2023 were $7.0 billion, compared with $5.8 billion for fiscal 2022. Weighted average borrowing rates were 3.78% and 3.29% for fiscal 2023 and 2022, respectively.Our effective income tax rate was 20.2% and 21.1% of pre-tax income for fiscal 2023 and fiscal 2022, respectively. The benefit from stock options exercised in fiscal 2023 was $92.2 million compared to $63.2 million in fiscal 2022 (see "Note D - Income Taxes" in the Notes to Consolidated Financial Statements). Net income for fiscal 2023 increased by 4.1% to $2.5 billion, and diluted earnings per share increased 12.9% to $132.36 from $117.19 in fiscal 2022. The impact on the fiscal 2023 diluted earnings per share from stock repurchases was an increase of $1.15.Fiscal 2022 Compared with Fiscal 2021A discussion of changes in our results of operations from fiscal 2022 to fiscal 2021 has been omitted from this Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended August 27, 2022, filed with the SEC on October 24, 2022, which is available free of charge on the SECs website at www.sec.gov and at www.autozone.com, by clicking "Investor Relations" located at the bottom of the page.Quarterly PeriodsEach of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2023, 2022 and 2021. Because the fourth quarter contains seasonally high sales volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of our annual net sales and net income. The fourth quarter of fiscal year 2023 represented 32.6% of annual sales and 34.2% of net income; the fourth quarter of fiscal year 2022 represented 32.9% of annual sales and 33.3% 31 Table of Contents Table of Contents Table of Contents Fiscal 2023 Compared with Fiscal 2022For the fiscal year ended August 26, 2023, we reported net sales of $17.5 billion compared with $16.3 billion for the year ended August 27, 2022, a 7.4% increase from fiscal 2022. This growth was driven primarily by a domestic same store sales increase of 3.4% and net sales of $327.8 million from new domestic and international stores. Domestic commercial sales increased $368.0 million, or 8.7%, over domestic commercial sales for fiscal 2022. Same store sales, or sales for our domestic and international stores open at least one year, are as follows:​​​​​​​​​​​​​​Fiscal Year Ended August​​​​​​​​​​​​​​​​ Constant Currency (1) ​​ Constant Currency (1) ​2023​2023​2022​2022​Domestic​ 3.4% ​ 3.4% ​ 8.4% ​ 8.4% International 29.3% 17.5% 19.1% 19.2% Total Company 5.6% 4.6% 9.2% 9.2% ​(1)Constant currency same store sales exclude impacts from fluctuations of foreign exchange rates by converting both the current year and prior year international results at the prior year foreign currency exchange rate.​At August 26, 2023, we operated 6,300 domestic stores, 740 in Mexico and 100 in Brazil, compared with 6,168 domestic stores, 703 in Mexico and 72 in Brazil at August 27, 2022. We reported a total auto parts segment (domestic, Mexico and Brazil) sales increase of 7.4% for fiscal 2023. ​Gross profit for fiscal 2023 was $9.1 billion, or 52.0% of net sales, a 17 basis point decrease compared with $8.5 billion, or 52.1% of net sales for fiscal 2022. The deleverage in gross margin was impacted by a non-cash LIFO charge of $44.0 million in fiscal 2023 versus a $15.0 million charge in fiscal 2022.Operating, selling, general and administrative expenses for fiscal 2023 increased to $5.6 billion, or 32.1% of net sales, from $5.2 billion, or 32.0% of net sales for fiscal 2022.Interest expense, net for fiscal 2023 was $306.4 million compared with $191.6 million during fiscal 2022. Average borrowings for fiscal 2023 were $7.0 billion, compared with $5.8 billion for fiscal 2022. Weighted average borrowing rates were 3.78% and 3.29% for fiscal 2023 and 2022, respectively.Our effective income tax rate was 20.2% and 21.1% of pre-tax income for fiscal 2023 and fiscal 2022, respectively. The benefit from stock options exercised in fiscal 2023 was $92.2 million compared to $63.2 million in fiscal 2022 (see "Note D - Income Taxes" in the Notes to Consolidated Financial Statements). Net income for fiscal 2023 increased by 4.1% to $2.5 billion, and diluted earnings per share increased 12.9% to $132.36 from $117.19 in fiscal 2022. The impact on the fiscal 2023 diluted earnings per share from stock repurchases was an increase of $1.15.Fiscal 2022 Compared with Fiscal 2021A discussion of changes in our results of operations from fiscal 2022 to fiscal 2021 has been omitted from this Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended August 27, 2022, filed with the SEC on October 24, 2022, which is available free of charge on the SECs website at www.sec.gov and at www.autozone.com, by clicking "Investor Relations" located at the bottom of the page.Quarterly PeriodsEach of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2023, 2022 and 2021. Because the fourth quarter contains seasonally high sales volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of our annual net sales and net income. The fourth quarter of fiscal year 2023 represented 32.6% of annual sales and 34.2% of net income; the fourth quarter of fiscal year 2022 represented 32.9% of annual sales and 33.3% Fiscal 2023 Compared with Fiscal 2022 For the fiscal year ended August 26, 2023, we reported net sales of $17.5 billion compared with $16.3 billion for the year ended August 27, 2022, a 7.4% increase from fiscal 2022. This growth was driven primarily by a domestic same store sales increase of 3.4% and net sales of $327.8 million from new domestic and international stores. Domestic commercial sales increased $368.0 million, or 8.7%, over domestic commercial sales for fiscal 2022. Same store sales, or sales for our domestic and international stores open at least one year, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## Modified: Information Technology, Cybersecurity and Data Privacy Risks **Key changes:** - Reworded sentence: "​ ‌We rely heavily on information technology systems for our key business processes." - Reworded sentence: "​While addressing vulnerabilities is a priority for us, the methods used to obtain unauthorized access are constantly evolving, increasing in frequency and sophistication, and can be difficult to anticipate or detect for long periods of time." - Reworded sentence: "have passed, and continue to pass, data protection laws designed to provide new rights to consumers and, in some cases, employees." - Reworded sentence: "have passed, and continue to pass, data protection laws designed to provide new rights to consumers and, in some cases, employees." **Prior (2022):** ​ Our business, like that of most retailers, involves the collection, processing, storage and transmission of personal information relating to our customers, suppliers and AutoZoners and confidential business information relating to AutoZone or other parties with which we do business. This information is handled by us as well as third-party service providers and vendors that provide us with various technology, systems, services and other resources that we use in connection with the handling of this information and in furtherance of our business objectives. Furthermore, we accept payments using a variety of methods, including credit, debit, electronic payments and gift cards, which present information security risks, and we may offer new payment options in the future presenting new risks of which we are currently unaware. ​ 19 19 Table of ContentsWhile addressing vulnerabilities is a priority for us, the methods used to obtain unauthorized access are constantly evolving, increasing in frequency and sophistication, and may be difficult to anticipate or detect for long periods of time. There can be no assurance that the security measures we or our third-party service providers and vendors have in place today or introduce in the future in an effort to keep up with growing and evolving risks will prevent or mitigate the impact of a cyber incident or provide us with sufficient visibility to determine if a cyber incident has occurred. Failure to maintain the security of the personal and other confidential information to which we have access could lead to private litigation, regulatory enforcement actions and reputational harm, all of which would require extensive time and financial resources to resolve and could have a material adverse impact our business and financial condition. ​While we have not experienced a material breach of our information systems or data to date, unauthorized parties have in the past attempted, and will continue to attempt, to gain access to, or disrupt the effectiveness of, these systems and data as the result of a cyber-attack, employee misconduct, employee error, system compromises, fraud, hacking, phishing attempts, malware, ransomware, other malicious codes or other intentional or unintentional acts. Furthermore, hardware, software or other IT applications that we or a third party develop for our use may contain exploitable vulnerabilities, bugs or design defects or may involve other problems that could unexpectedly compromise information security. For example, in connection with the COVID-19 pandemic, public reports indicated there was a spike in cybersecurity attacks as shelter-in-place orders and work-from-home measures led businesses to increase reliance on virtual environments and communications systems, which had been the subject of increasing third-party vulnerabilities and security risks.​The cost to remediate and respond to a cyber incident involving unauthorized use, access, damage or loss of systems, data or other information could be significant. To the extent any cyber-attack or intrusion in our or one of our third-party service provider's information systems results in the unauthorized access, loss, damage or misappropriation of information, we may be required under federal and state privacy laws to notify impacted individuals and face substantial liability due to claims arising from customers, financial institutions, regulatory authorities, payment card issuers and others. We maintain insurance coverage that may protect us from losses or claims in connection with certain incidents; however, our insurance coverage may not be sufficient to cover significant losses in any particular situation.​We are subject to a complex and evolving body of laws and regulations regarding data privacy and may face increased costs as a result of changes in, enforcement of, or the adoption of new laws and regulations. These costs may have a material adverse impact on our business and results of operations. ​The regulatory environment related to information security, data collection, processing and use, and data privacy is becoming increasingly rigorous and complex. Multiple states in the U.S. have passed data protection laws designed to provide new rights to consumers and, in some cases, employees. The potential effects of the various laws regulating the collection, processing, transfer and use of personal or protected information are far-reaching and may require significant time, resources and costs to comply, may require changes to our existing practices and processes that are not advantageous to our business, and otherwise limit our ability to use data to provide a more personalized customer experience or as otherwise desired. In addition, failure to comply with applicable requirements by us or our business partners or third-party service providers or vendors could subject us to fines, sanctions, governmental investigations, lawsuits or reputational damage.​Additionally, while we seek to comply with these various laws as they take effect, many of the concepts are novel and rulemaking is not finalized. Given the short amount of time between finalized rulemaking and the dates these laws become effective and enforceable, there can be no assurance that compliance efforts taken by us in good faith will be sufficient, and we may be the subject of an investigation or enforcement action instituted by a state agency or other regulatory body.​20 Table of Contents Table of Contents Table of Contents While addressing vulnerabilities is a priority for us, the methods used to obtain unauthorized access are constantly evolving, increasing in frequency and sophistication, and may be difficult to anticipate or detect for long periods of time. There can be no assurance that the security measures we or our third-party service providers and vendors have in place today or introduce in the future in an effort to keep up with growing and evolving risks will prevent or mitigate the impact of a cyber incident or provide us with sufficient visibility to determine if a cyber incident has occurred. Failure to maintain the security of the personal and other confidential information to which we have access could lead to private litigation, regulatory enforcement actions and reputational harm, all of which would require extensive time and financial resources to resolve and could have a material adverse impact our business and financial condition. ​While we have not experienced a material breach of our information systems or data to date, unauthorized parties have in the past attempted, and will continue to attempt, to gain access to, or disrupt the effectiveness of, these systems and data as the result of a cyber-attack, employee misconduct, employee error, system compromises, fraud, hacking, phishing attempts, malware, ransomware, other malicious codes or other intentional or unintentional acts. Furthermore, hardware, software or other IT applications that we or a third party develop for our use may contain exploitable vulnerabilities, bugs or design defects or may involve other problems that could unexpectedly compromise information security. For example, in connection with the COVID-19 pandemic, public reports indicated there was a spike in cybersecurity attacks as shelter-in-place orders and work-from-home measures led businesses to increase reliance on virtual environments and communications systems, which had been the subject of increasing third-party vulnerabilities and security risks.​The cost to remediate and respond to a cyber incident involving unauthorized use, access, damage or loss of systems, data or other information could be significant. To the extent any cyber-attack or intrusion in our or one of our third-party service provider's information systems results in the unauthorized access, loss, damage or misappropriation of information, we may be required under federal and state privacy laws to notify impacted individuals and face substantial liability due to claims arising from customers, financial institutions, regulatory authorities, payment card issuers and others. We maintain insurance coverage that may protect us from losses or claims in connection with certain incidents; however, our insurance coverage may not be sufficient to cover significant losses in any particular situation.​We are subject to a complex and evolving body of laws and regulations regarding data privacy and may face increased costs as a result of changes in, enforcement of, or the adoption of new laws and regulations. These costs may have a material adverse impact on our business and results of operations. ​The regulatory environment related to information security, data collection, processing and use, and data privacy is becoming increasingly rigorous and complex. Multiple states in the U.S. have passed data protection laws designed to provide new rights to consumers and, in some cases, employees. The potential effects of the various laws regulating the collection, processing, transfer and use of personal or protected information are far-reaching and may require significant time, resources and costs to comply, may require changes to our existing practices and processes that are not advantageous to our business, and otherwise limit our ability to use data to provide a more personalized customer experience or as otherwise desired. In addition, failure to comply with applicable requirements by us or our business partners or third-party service providers or vendors could subject us to fines, sanctions, governmental investigations, lawsuits or reputational damage.​Additionally, while we seek to comply with these various laws as they take effect, many of the concepts are novel and rulemaking is not finalized. Given the short amount of time between finalized rulemaking and the dates these laws become effective and enforceable, there can be no assurance that compliance efforts taken by us in good faith will be sufficient, and we may be the subject of an investigation or enforcement action instituted by a state agency or other regulatory body.​ While addressing vulnerabilities is a priority for us, the methods used to obtain unauthorized access are constantly evolving, increasing in frequency and sophistication, and may be difficult to anticipate or detect for long periods of time. There can be no assurance that the security measures we or our third-party service providers and vendors have in place today or introduce in the future in an effort to keep up with growing and evolving risks will prevent or mitigate the impact of a cyber incident or provide us with sufficient visibility to determine if a cyber incident has occurred. Failure to maintain the security of the personal and other confidential information to which we have access could lead to private litigation, regulatory enforcement actions and reputational harm, all of which would require extensive time and financial resources to resolve and could have a material adverse impact our business and financial condition. ​ While we have not experienced a material breach of our information systems or data to date, unauthorized parties have in the past attempted, and will continue to attempt, to gain access to, or disrupt the effectiveness of, these systems and data as the result of a cyber-attack, employee misconduct, employee error, system compromises, fraud, hacking, phishing attempts, malware, ransomware, other malicious codes or other intentional or unintentional acts. Furthermore, hardware, software or other IT applications that we or a third party develop for our use may contain exploitable vulnerabilities, bugs or design defects or may involve other problems that could unexpectedly compromise information security. For example, in connection with the COVID-19 pandemic, public reports indicated there was a spike in cybersecurity attacks as shelter-in-place orders and work-from-home measures led businesses to increase reliance on virtual environments and communications systems, which had been the subject of increasing third-party vulnerabilities and security risks. ​ The cost to remediate and respond to a cyber incident involving unauthorized use, access, damage or loss of systems, data or other information could be significant. To the extent any cyber-attack or intrusion in our or one of our third-party service provider's information systems results in the unauthorized access, loss, damage or misappropriation of information, we may be required under federal and state privacy laws to notify impacted individuals and face substantial liability due to claims arising from customers, financial institutions, regulatory authorities, payment card issuers and others. We maintain insurance coverage that may protect us from losses or claims in connection with certain incidents; however, our insurance coverage may not be sufficient to cover significant losses in any particular situation. ​ **Current (2023):** ​ ‌We rely heavily on information technology systems for our key business processes. Any damage to, failure of, or interruption in these systems could have a material adverse impact on our business and operating results. ​ We rely extensively on information technology systems, some of which are managed or provided by third-party service providers, to collect, analyze, process, store, manage, transmit and protect key business processes, transactions and data, such as sales data, customer data, employee data, demand forecasting, merchandise ordering, inventory replenishment, supply chain management, payment processing, order fulfillment and more. Delays in the maintenance, updates, upgrading, or patching of these systems, applications or processes could adversely impact their effectiveness or could expose us to security and other risks. Our systems and the third-party systems with which we interact are subject to damage, failure or interruption due to various reasons such as: power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, malicious cyber-attacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware, natural disasters and catastrophic events, inadequate or ineffective redundancy measures; and design or usage errors by AutoZoners, contractors or third-party service providers. Although we seek to effectively maintain and safeguard our systems and our data and we seek to ensure our third-party service providers effectively maintain and safeguard their systems and our data, such efforts are not always successful. As a result, we or our service providers have experienced and are likely to again experience one or more errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure. While such incidents have not been material to date, any future incident could significantly disrupt our operations and key business processes, result in the impairment or loss of critical data, be costly and resource-intensive to remedy; harm our reputation and relationship with customers, AutoZoners, vendors and other stakeholders; and have a material adverse impact on our business and operating results. ​ In addition, our information technology systems, infrastructure and personnel require substantial investments, such as replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or designing or cost-effectively 19 19 Table of Contentsacquiring new systems with new functionality. These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, cost overruns, or implementation delays or errors, and may result in operational challenges, security control failures, reputational harm, and increased costs that could adversely affect our business operations and results of operations.​Failure to maintain the security of sensitive personal information or other confidential information in our possession could subject us to litigation or regulatory enforcement action, cause reputational harm and cause us to incur substantial costs or have a material adverse impact on our business and financial condition.​Our business, like that of most retailers, involves the collection, processing, storage and transmission of large amounts of personal information relating to our customers, suppliers and AutoZoners and confidential business information relating to AutoZone or other parties with which we do business. This information is handled by us as well as third-party service providers and vendors that provide us with various technology, systems, services and other resources that we use in connection with the handling of this information and in furtherance of our business objectives. Furthermore, we accept payments using a variety of methods, including credit, debit, electronic payments and gift cards, which present information security risks, and we may offer new payment options in the future presenting new risks of which we are currently unaware. ​While addressing vulnerabilities is a priority for us, the methods used to obtain unauthorized access are constantly evolving, increasing in frequency and sophistication, and can be difficult to anticipate or detect for long periods of time. The security measures we or our third-party service providers and vendors have in place today in an effort to keep up with growing and evolving risks do not always prevent or mitigate the impact of a cyber incident or provide us with sufficient visibility to determine if a cyber incident has occurred, and there can be no assurance that such measures we introduce in the future will be sufficiently effective either. Failure to maintain the security of the personal and other confidential information to which we have access could lead to private litigation, regulatory enforcement actions and reputational harm, all of which would require extensive time and financial resources to resolve and could have a material adverse impact on our business and financial condition. ​While we have not experienced a material breach of our information systems or data to date, unauthorized parties have in the past gained access and exfiltrated data, and will continue to attempt to do so as the result of a cyber-attack, employee misconduct, employee error, system vulnerabilities or compromises, fraud, hacking, phishing attempts, malware, ransomware, other malicious codes or other intentional or unintentional acts. Furthermore, hardware, software or other IT applications that we or a third party develop for our use have contained and may contain exploitable vulnerabilities, bugs or design defects or may involve other problems that could unexpectedly compromise information security.​The cost to remediate and respond to a cyber incident involving unauthorized use, access, damage or loss of systems, data or other information could be significant. To the extent any cyber incident involving our or one of our third-party service provider's information systems results in the unauthorized access, loss, damage or misappropriation of information, we may be required by law to notify impacted individuals and face substantial liability due to claims arising from customers, financial institutions, regulatory authorities, payment card issuers and others. We maintain insurance coverage that may protect us from losses or claims in connection with certain incidents; however, our insurance coverage may not be sufficient to cover significant losses in any particular situation.​We are subject to a complex and evolving body of laws and regulations regarding data privacy and may face increased costs as a result of changes in, enforcement of, or the adoption of new laws and regulations. These costs may have a material adverse impact on our business and results of operations. ​The regulatory environment related to information security, data collection, processing and use, and data privacy is becoming increasingly rigorous and complex. Multiple states in the U.S. have passed, and continue to pass, data protection laws designed to provide new rights to consumers and, in some cases, employees. The potential effects of the various laws regulating the collection, processing, transfer and use of personal or protected information are far-reaching and may require significant time, resources and costs to comply, may require changes to our existing 20 Table of Contents Table of Contents Table of Contents acquiring new systems with new functionality. These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, cost overruns, or implementation delays or errors, and may result in operational challenges, security control failures, reputational harm, and increased costs that could adversely affect our business operations and results of operations.​Failure to maintain the security of sensitive personal information or other confidential information in our possession could subject us to litigation or regulatory enforcement action, cause reputational harm and cause us to incur substantial costs or have a material adverse impact on our business and financial condition.​Our business, like that of most retailers, involves the collection, processing, storage and transmission of large amounts of personal information relating to our customers, suppliers and AutoZoners and confidential business information relating to AutoZone or other parties with which we do business. This information is handled by us as well as third-party service providers and vendors that provide us with various technology, systems, services and other resources that we use in connection with the handling of this information and in furtherance of our business objectives. Furthermore, we accept payments using a variety of methods, including credit, debit, electronic payments and gift cards, which present information security risks, and we may offer new payment options in the future presenting new risks of which we are currently unaware. ​While addressing vulnerabilities is a priority for us, the methods used to obtain unauthorized access are constantly evolving, increasing in frequency and sophistication, and can be difficult to anticipate or detect for long periods of time. The security measures we or our third-party service providers and vendors have in place today in an effort to keep up with growing and evolving risks do not always prevent or mitigate the impact of a cyber incident or provide us with sufficient visibility to determine if a cyber incident has occurred, and there can be no assurance that such measures we introduce in the future will be sufficiently effective either. Failure to maintain the security of the personal and other confidential information to which we have access could lead to private litigation, regulatory enforcement actions and reputational harm, all of which would require extensive time and financial resources to resolve and could have a material adverse impact on our business and financial condition. ​While we have not experienced a material breach of our information systems or data to date, unauthorized parties have in the past gained access and exfiltrated data, and will continue to attempt to do so as the result of a cyber-attack, employee misconduct, employee error, system vulnerabilities or compromises, fraud, hacking, phishing attempts, malware, ransomware, other malicious codes or other intentional or unintentional acts. Furthermore, hardware, software or other IT applications that we or a third party develop for our use have contained and may contain exploitable vulnerabilities, bugs or design defects or may involve other problems that could unexpectedly compromise information security.​The cost to remediate and respond to a cyber incident involving unauthorized use, access, damage or loss of systems, data or other information could be significant. To the extent any cyber incident involving our or one of our third-party service provider's information systems results in the unauthorized access, loss, damage or misappropriation of information, we may be required by law to notify impacted individuals and face substantial liability due to claims arising from customers, financial institutions, regulatory authorities, payment card issuers and others. We maintain insurance coverage that may protect us from losses or claims in connection with certain incidents; however, our insurance coverage may not be sufficient to cover significant losses in any particular situation.​We are subject to a complex and evolving body of laws and regulations regarding data privacy and may face increased costs as a result of changes in, enforcement of, or the adoption of new laws and regulations. These costs may have a material adverse impact on our business and results of operations. ​The regulatory environment related to information security, data collection, processing and use, and data privacy is becoming increasingly rigorous and complex. Multiple states in the U.S. have passed, and continue to pass, data protection laws designed to provide new rights to consumers and, in some cases, employees. The potential effects of the various laws regulating the collection, processing, transfer and use of personal or protected information are far-reaching and may require significant time, resources and costs to comply, may require changes to our existing acquiring new systems with new functionality. These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, cost overruns, or implementation delays or errors, and may result in operational challenges, security control failures, reputational harm, and increased costs that could adversely affect our business operations and results of operations. ​ --- ## Modified: Quarterly Periods **Key changes:** - Reworded sentence: "Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2023, 2022 and 2021." - Reworded sentence: "The fourth quarter of fiscal year 2023 represented 32.6% of annual sales and 34.2% of net income; the fourth quarter of fiscal year 2022 represented 32.9% of annual sales and 33.3% 31 31 Table of Contentsof net income; and the fourth quarter of fiscal year 2021 represented 33.6% of annual sales and 36.2% of net income.Liquidity and Capital ResourcesThe primary source of our liquidity is our cash flows realized through the sale of automotive parts, products and accessories." - Reworded sentence: "We believe that our cash generated from operating activities, available cash reserves and available credit, supplemented with our long-term borrowings will provide ample liquidity to fund our operations while allowing us to make strategic investments to support growth initiatives and return excess cash to shareholders in the form of share repurchases." - Reworded sentence: "Net cash provided by operating activities was $2.9 billion in 2023, $3.2 billion in 2022 and $3.5 billion in 2021." - Reworded sentence: "We purchased marketable debt securities of $66.9 million, $56.0 million and $63.7 million in fiscal 2023, 2022 and 2021, respectively." **Prior (2022):** Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2022, 2021 and 2020. Because the fourth quarter contains seasonally high sales volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of our annual net sales and net income. The fourth quarter of fiscal year 2022 represented 32.9% of annual sales and 33.3% of net income; the fourth quarter of fiscal year 2021 represented 33.6% of annual sales and 36.2% of net income; and the fourth quarter of fiscal year 2020 represented 36.0% of annual sales and 42.7% of net income. 30 30 Table of ContentsLiquidity and Capital ResourcesThe primary source of our liquidity is our cash flows realized through the sale of automotive parts, products, and accessories. Continued progress on our initiatives improved our operating performance for the fiscal year. We believe that our cash generated from operating activities, available cash reserves and available credit, supplemented with our long-term borrowings will provide ample liquidity to fund our operations while allowing us to make strategic investments to support long-term growth initiatives and return excess cash to shareholders in the form of share repurchases. As of August 27, 2022, we held $264.4 million of cash and cash equivalents, as well as $2.2 billion in undrawn capacity on our revolving credit facility, without giving effect to commercial paper borrowings. We believe our sources of liquidity will continue to be adequate to fund our operations and investments to grow our business, repay our debt as it becomes due and fund our share repurchases over the short-term and long-term. In addition, we believe we have the ability to obtain alternative sources of financing, if necessary. Net cash provided by operating activities was $3.2 billion in 2022, $3.5 billion in 2021 and $2.7 billion in 2020. Cash flows from operations are unfavorable compared to last year primarily due to higher inventory purchase volume.Our net cash flows used in investing activities were $648.1 million, $601.8 million and $497.9 million in fiscal 2022, 2021 and 2020, respectively. The increase in net cash used in investing activities in fiscal 2022 was primarily due to an increase in capital expenditures. We invested $672.4 million, $621.8 million and $457.7 million in capital assets in fiscal 2022, 2021 and 2020, respectively. The increase in capital expenditures from fiscal 2021 to fiscal 2022 was primarily driven by our growth initiatives, including hub and mega hub expansion projects and new stores. We had net new store openings of 176, 218 and 138 for fiscal 2022, 2021 and 2020, respectively. We invest a portion of our assets held by our wholly owned insurance captive in marketable debt securities. We purchased marketable debt securities of $56.0 million, $63.7 million and $90.9 million in fiscal 2022, 2021 and 2020, respectively. We had proceeds from the sale of marketable debt securities of $53.9 million, $95.4 million and $84.2 million in fiscal 2022, 2021 and 2020, respectively.Net cash used in financing activities was $3.5 billion in fiscal 2022 and fiscal 2021 and $643.6 million in fiscal 2020. The net cash used in financing activities reflected purchases of treasury stock, which totaled $4.4 billion, $3.4 billion and $930.9 million for fiscal 2022, 2021 and 2020, respectively. The treasury stock purchases in fiscal 2022, 2021 and 2020 were primarily funded by cash flows from operations. During the year ended August 27, 2022, we repaid our $500 million 3.700% Senior Notes due April 2022 and issued $750 million of new debt compared to none in 2021 and $1.850 billion in 2020. In fiscal years 2022 and 2020 the proceeds from the issuance of debt were used for general corporate purposes.The Company had net proceeds from the issuance of commercial paper and short term borrowing of $603.4 million during fiscal 2022. We did not have any commercial paper or short term borrowing activity during fiscal 2021 and the Company had net repayments of commercial paper and short term borrowings of $1.0 billion for 2020.During fiscal 2023, we expect to increase the investment in our business as compared to fiscal 2022. Our investments are expected to be directed primarily to our supply chain initiatives, which includes expanded hub and mega hubs, as well as distribution center expansions and new stores. The amount of investments in our new stores is impacted by different factors, including whether the building and land are purchased (requiring higher investment) or leased (generally lower investment) and whether such buildings are located in the U.S., Mexico or Brazil, or located in urban or rural areas.During fiscal 2022, 2021 and 2020 our capital expenditures increased by approximately 8% and 36% and decreased 8%, respectively. Fiscal 2021 capital expenditures increased due to delays in capital spending for the third and fourth quarter of fiscal 2020 related to COVID-19.​31 Table of Contents Table of Contents Table of Contents Liquidity and Capital ResourcesThe primary source of our liquidity is our cash flows realized through the sale of automotive parts, products, and accessories. Continued progress on our initiatives improved our operating performance for the fiscal year. We believe that our cash generated from operating activities, available cash reserves and available credit, supplemented with our long-term borrowings will provide ample liquidity to fund our operations while allowing us to make strategic investments to support long-term growth initiatives and return excess cash to shareholders in the form of share repurchases. As of August 27, 2022, we held $264.4 million of cash and cash equivalents, as well as $2.2 billion in undrawn capacity on our revolving credit facility, without giving effect to commercial paper borrowings. We believe our sources of liquidity will continue to be adequate to fund our operations and investments to grow our business, repay our debt as it becomes due and fund our share repurchases over the short-term and long-term. In addition, we believe we have the ability to obtain alternative sources of financing, if necessary. Net cash provided by operating activities was $3.2 billion in 2022, $3.5 billion in 2021 and $2.7 billion in 2020. Cash flows from operations are unfavorable compared to last year primarily due to higher inventory purchase volume.Our net cash flows used in investing activities were $648.1 million, $601.8 million and $497.9 million in fiscal 2022, 2021 and 2020, respectively. The increase in net cash used in investing activities in fiscal 2022 was primarily due to an increase in capital expenditures. We invested $672.4 million, $621.8 million and $457.7 million in capital assets in fiscal 2022, 2021 and 2020, respectively. The increase in capital expenditures from fiscal 2021 to fiscal 2022 was primarily driven by our growth initiatives, including hub and mega hub expansion projects and new stores. We had net new store openings of 176, 218 and 138 for fiscal 2022, 2021 and 2020, respectively. We invest a portion of our assets held by our wholly owned insurance captive in marketable debt securities. We purchased marketable debt securities of $56.0 million, $63.7 million and $90.9 million in fiscal 2022, 2021 and 2020, respectively. We had proceeds from the sale of marketable debt securities of $53.9 million, $95.4 million and $84.2 million in fiscal 2022, 2021 and 2020, respectively.Net cash used in financing activities was $3.5 billion in fiscal 2022 and fiscal 2021 and $643.6 million in fiscal 2020. The net cash used in financing activities reflected purchases of treasury stock, which totaled $4.4 billion, $3.4 billion and $930.9 million for fiscal 2022, 2021 and 2020, respectively. The treasury stock purchases in fiscal 2022, 2021 and 2020 were primarily funded by cash flows from operations. During the year ended August 27, 2022, we repaid our $500 million 3.700% Senior Notes due April 2022 and issued $750 million of new debt compared to none in 2021 and $1.850 billion in 2020. In fiscal years 2022 and 2020 the proceeds from the issuance of debt were used for general corporate purposes.The Company had net proceeds from the issuance of commercial paper and short term borrowing of $603.4 million during fiscal 2022. We did not have any commercial paper or short term borrowing activity during fiscal 2021 and the Company had net repayments of commercial paper and short term borrowings of $1.0 billion for 2020.During fiscal 2023, we expect to increase the investment in our business as compared to fiscal 2022. Our investments are expected to be directed primarily to our supply chain initiatives, which includes expanded hub and mega hubs, as well as distribution center expansions and new stores. The amount of investments in our new stores is impacted by different factors, including whether the building and land are purchased (requiring higher investment) or leased (generally lower investment) and whether such buildings are located in the U.S., Mexico or Brazil, or located in urban or rural areas.During fiscal 2022, 2021 and 2020 our capital expenditures increased by approximately 8% and 36% and decreased 8%, respectively. Fiscal 2021 capital expenditures increased due to delays in capital spending for the third and fourth quarter of fiscal 2020 related to COVID-19.​ **Current (2023):** Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2023, 2022 and 2021. Because the fourth quarter contains seasonally high sales volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of our annual net sales and net income. The fourth quarter of fiscal year 2023 represented 32.6% of annual sales and 34.2% of net income; the fourth quarter of fiscal year 2022 represented 32.9% of annual sales and 33.3% 31 31 Table of Contentsof net income; and the fourth quarter of fiscal year 2021 represented 33.6% of annual sales and 36.2% of net income.Liquidity and Capital ResourcesThe primary source of our liquidity is our cash flows realized through the sale of automotive parts, products and accessories. Continued progress on our initiatives improved our operating performance for the fiscal year. We believe that our cash generated from operating activities, available cash reserves and available credit, supplemented with our long-term borrowings will provide ample liquidity to fund our operations while allowing us to make strategic investments to support growth initiatives and return excess cash to shareholders in the form of share repurchases. As of August 26, 2023, we held $277.1 million of cash and cash equivalents, as well as $2.2 billion in undrawn capacity on our revolving credit facility, without giving effect to commercial paper borrowings. We believe our sources of liquidity will continue to be adequate to fund our operations and investments to grow our business, repay our debt as it becomes due and fund our share repurchases over the short-term and long-term. In addition, we believe we have the ability to obtain alternative sources of financing, if necessary. Net cash provided by operating activities was $2.9 billion in 2023, $3.2 billion in 2022 and $3.5 billion in 2021. Cash flows from operations are below last year primarily due to unfavorable changes in accounts payable and accrued expenses.Our net cash flows used in investing activities were $876.2 million, $648.1 million and $601.8 million in fiscal 2023, 2022 and 2021, respectively. The increase in net cash used in investing activities in fiscal 2023 was primarily due to an increase in capital expenditures. We invested $796.7 million, $672.4 million and $621.8 million in capital assets in fiscal 2023, 2022 and 2021, respectively. The increase in capital expenditures from fiscal 2022 to fiscal 2023 was primarily driven by our growth initiatives, including new stores, hub and mega hub expansion initiatives and supply chain projects. We had net new store openings of 197, 176 and 218 for fiscal 2023, 2022 and 2021, respectively. We invest a portion of our assets held by our wholly owned insurance captive in marketable debt securities. We purchased marketable debt securities of $66.9 million, $56.0 million and $63.7 million in fiscal 2023, 2022 and 2021, respectively. We had proceeds from the sale of marketable debt securities of $58.4 million, $53.9 million and $95.4 million in fiscal 2023, 2022 and 2021, respectively.Net cash used in financing activities was $2.1 billion in fiscal 2023 and $3.5 billion in fiscal 2022 and fiscal 2021. The net cash used in financing activities reflected purchases of treasury stock, which totaled $3.7 billion, $4.4 billion and $3.4 billion for fiscal 2023, 2022 and 2021, respectively. The treasury stock purchases in fiscal 2023, 2022 and 2021 were primarily funded by cash flows from operations. During the year ended August 26, 2023, we repaid our $300 million 2.875% Senior Notes due January 2023 and our $500 million 3.125% Senior Notes due July 2023 and issued $1.8 billion of new debt compared to $750 million in 2022 and none in 2021. In fiscal years 2023 and 2022 the proceeds from the issuance of debt were used for general corporate purposes.The Company had net proceeds from the issuance of commercial paper and short term borrowing of $606.2 million and $603.4 million during fiscal 2023 and fiscal 2022, respectively. We did not have any commercial paper or short-term borrowing activity during fiscal 2021.During fiscal 2024, we expect to increase the investment in our business as compared to fiscal 2023. Our investments are expected to be directed primarily to our supply chain initiatives, which includes expanded hub and mega hubs, as well as distribution center expansions and new stores. The amount of investments in our new stores is impacted by different factors, including whether the building and land are purchased (requiring higher investment) or leased (generally lower investment) and whether such buildings are located in the U.S., Mexico or Brazil, or located in urban or rural areas.During fiscal 2023, 2022 and 2021 our capital expenditures increased by approximately 18%, 8% and 36%, respectively. Fiscal 2021 capital expenditures increased due to delays in capital spending for the third and fourth quarter of fiscal 2020 related to the COVID-19 pandemic.32 Table of Contents Table of Contents Table of Contents of net income; and the fourth quarter of fiscal year 2021 represented 33.6% of annual sales and 36.2% of net income.Liquidity and Capital ResourcesThe primary source of our liquidity is our cash flows realized through the sale of automotive parts, products and accessories. Continued progress on our initiatives improved our operating performance for the fiscal year. We believe that our cash generated from operating activities, available cash reserves and available credit, supplemented with our long-term borrowings will provide ample liquidity to fund our operations while allowing us to make strategic investments to support growth initiatives and return excess cash to shareholders in the form of share repurchases. As of August 26, 2023, we held $277.1 million of cash and cash equivalents, as well as $2.2 billion in undrawn capacity on our revolving credit facility, without giving effect to commercial paper borrowings. We believe our sources of liquidity will continue to be adequate to fund our operations and investments to grow our business, repay our debt as it becomes due and fund our share repurchases over the short-term and long-term. In addition, we believe we have the ability to obtain alternative sources of financing, if necessary. Net cash provided by operating activities was $2.9 billion in 2023, $3.2 billion in 2022 and $3.5 billion in 2021. Cash flows from operations are below last year primarily due to unfavorable changes in accounts payable and accrued expenses.Our net cash flows used in investing activities were $876.2 million, $648.1 million and $601.8 million in fiscal 2023, 2022 and 2021, respectively. The increase in net cash used in investing activities in fiscal 2023 was primarily due to an increase in capital expenditures. We invested $796.7 million, $672.4 million and $621.8 million in capital assets in fiscal 2023, 2022 and 2021, respectively. The increase in capital expenditures from fiscal 2022 to fiscal 2023 was primarily driven by our growth initiatives, including new stores, hub and mega hub expansion initiatives and supply chain projects. We had net new store openings of 197, 176 and 218 for fiscal 2023, 2022 and 2021, respectively. We invest a portion of our assets held by our wholly owned insurance captive in marketable debt securities. We purchased marketable debt securities of $66.9 million, $56.0 million and $63.7 million in fiscal 2023, 2022 and 2021, respectively. We had proceeds from the sale of marketable debt securities of $58.4 million, $53.9 million and $95.4 million in fiscal 2023, 2022 and 2021, respectively.Net cash used in financing activities was $2.1 billion in fiscal 2023 and $3.5 billion in fiscal 2022 and fiscal 2021. The net cash used in financing activities reflected purchases of treasury stock, which totaled $3.7 billion, $4.4 billion and $3.4 billion for fiscal 2023, 2022 and 2021, respectively. The treasury stock purchases in fiscal 2023, 2022 and 2021 were primarily funded by cash flows from operations. During the year ended August 26, 2023, we repaid our $300 million 2.875% Senior Notes due January 2023 and our $500 million 3.125% Senior Notes due July 2023 and issued $1.8 billion of new debt compared to $750 million in 2022 and none in 2021. In fiscal years 2023 and 2022 the proceeds from the issuance of debt were used for general corporate purposes.The Company had net proceeds from the issuance of commercial paper and short term borrowing of $606.2 million and $603.4 million during fiscal 2023 and fiscal 2022, respectively. We did not have any commercial paper or short-term borrowing activity during fiscal 2021.During fiscal 2024, we expect to increase the investment in our business as compared to fiscal 2023. Our investments are expected to be directed primarily to our supply chain initiatives, which includes expanded hub and mega hubs, as well as distribution center expansions and new stores. The amount of investments in our new stores is impacted by different factors, including whether the building and land are purchased (requiring higher investment) or leased (generally lower investment) and whether such buildings are located in the U.S., Mexico or Brazil, or located in urban or rural areas.During fiscal 2023, 2022 and 2021 our capital expenditures increased by approximately 18%, 8% and 36%, respectively. Fiscal 2021 capital expenditures increased due to delays in capital spending for the third and fourth quarter of fiscal 2020 related to the COVID-19 pandemic. of net income; and the fourth quarter of fiscal year 2021 represented 33.6% of annual sales and 36.2% of net income. --- ## Modified: 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 **Key changes:** - Reworded sentence: "57 57 Table of Contentscommon stock equivalents, which are primarily stock options." - Reworded sentence: "(Refer to "Note B - 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." - Reworded sentence: "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").58 Table of Contents Table of Contents Table of Contents common stock equivalents, which are primarily stock options." - Reworded sentence: "(Refer to "Note B - 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." - Reworded sentence: "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")." **Prior (2022):** 56 56 Table of Contentscommon 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 PaymentsOverview of Share-Based Payment PlansThe 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 PlanOn 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 PlanOn 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 57 Table of Contents Table of Contents Table of Contents 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 PaymentsOverview of Share-Based Payment PlansThe 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 PlanOn 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 PlanOn 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 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.) **Current (2023):** 57 57 Table of Contentscommon 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.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 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.Recently Adopted Accounting PronouncementsIn 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). 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. Early adoption is permitted. The Company expects to adopt this standard beginning with its first quarter ending November 18, 2023. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact. Note B - Share-Based PaymentsOverview of Share-Based Payment PlansThe 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 PlanOn 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").58 Table of Contents Table of Contents Table of Contents 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.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 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.Recently Adopted Accounting PronouncementsIn 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). 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. Early adoption is permitted. The Company expects to adopt this standard beginning with its first quarter ending November 18, 2023. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact. Note B - Share-Based PaymentsOverview of Share-Based Payment PlansThe 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 PlanOn 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"). 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. 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.) --- ## Modified: AutoZone, Inc. Consolidated Statements of Cash Flows **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands) ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 2,528,426 ​ $ 2,429,604 ​ $ 2,170,314 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization of property and equipment ​ ​ 497,577 ​ ​ 442,223 ​ 407,683 Other non-cash charges ​ ​ 44,000 ​ ​ 15,000 ​ - Amortization of debt origination fees ​ ​ 9,264 ​ ​ 11,276 ​ 12,858 Deferred income taxes ​ ​ (25,707) ​ ​ 185,594 ​ (34,432) Share-based compensation expense ​ ​ 93,087 ​ ​ 70,612 ​ 56,112 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ (6,674) ​ ​ (125,732) ​ (11,039) Merchandise inventories ​ ​ (89,180) ​ ​ (1,005,686) ​ (138,517) Accounts payable and accrued expenses ​ ​ (183,679) ​ ​ 1,224,692 ​ 1,029,912 Income taxes ​ ​ 92,832 ​ ​ (10,517) ​ 29,467 Other, net ​ ​ (19,158) ​ ​ (25,931) ​ (3,815) Net cash provided by operating activities ​ ​ 2,940,788 ​ ​ 3,211,135 ​ 3,518,543 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ Capital expenditures ​ ​ (796,657) ​ ​ (672,391) ​ (621,767) Purchase of marketable debt securities ​ ​ (66,917) ​ ​ (56,040) ​ (63,676) Proceeds from sale of marketable debt securities ​ ​ 58,357 ​ ​ 53,882 ​ 95,393 Investment in tax credit equity investments ​ ​ (98,003) ​ ​ (31,537) ​ ​ (41,712) Proceeds from disposal of capital assets and other, net ​ ​ 27,042 ​ ​ 57,987 ​ 29,984 Net cash used in investing activities ​ ​ (876,178) ​ ​ (648,099) ​ (601,778) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ Net proceeds from commercial paper ​ ​ 606,200 ​ ​ 603,400 ​ - Proceeds from issuance of debt ​ ​ 1,750,000 ​ ​ 750,000 ​ - Repayment of debt ​ ​ (800,000) ​ ​ (500,000) ​ ​ (250,000) Net proceeds from sale of common stock ​ ​ 182,494 ​ ​ 113,934 ​ 187,757 Purchase of treasury stock ​ ​ (3,699,552) ​ ​ (4,359,991) ​ (3,378,321) Repayment of principal portion of finance lease liabilities ​ ​ (81,055) ​ ​ (67,182) ​ (59,853) Other, net ​ ​ (18,169) ​ ​ (10,658) ​ - Net cash used in financing activities ​ ​ (2,060,082) ​ ​ (3,470,497) ​ (3,500,417) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash ​ ​ 8,146 ​ ​ 506 ​ 4,172 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net increase/(decrease) in cash and cash equivalents ​ ​ 12,674 ​ ​ (906,955) ​ (579,480) Cash and cash equivalents at beginning of period ​ ​ 264,380 ​ ​ 1,171,335 ​ 1,750,815 Cash and cash equivalents at end of period ​ $ 277,054 ​ $ 264,380 ​ $ 1,171,335 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information: ​ ​ ​ ​ ​ ​ ​ Interest paid, net of interest cost capitalized ​ $ 260,866 ​ $ 178,561 ​ $ 187,948 Income taxes paid ​ $ 570,250 ​ $ 461,232 ​ $ 574,854 Leased assets obtained in exchange for new finance lease liabilities ​ $ 58,316 ​ $ 100,711 ​ $ 112,095 Leased assets obtained in exchange for new operating lease liabilities ​ $ 428,150 ​ $ 527,966 ​ $ 444,626 ​ See Notes to Consolidated Financial Statements." **Prior (2022):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 27, ​ August 28, ​ August 29, (in thousands) ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 2,429,604 ​ $ 2,170,314 ​ $ 1,732,972 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization of property and equipment and intangibles ​ ​ 442,223 ​ ​ 407,683 ​ 397,466 Amortization of debt origination fees ​ ​ 11,276 ​ ​ 12,858 ​ 10,730 Deferred income taxes ​ ​ 185,594 ​ ​ (34,432) ​ 51,077 Share-based compensation expense ​ ​ 70,612 ​ ​ 56,112 ​ 44,835 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ (125,732) ​ ​ (11,039) ​ (58,564) Merchandise inventories ​ ​ (990,686) ​ ​ (138,517) ​ (184,174) Accounts payable and accrued expenses ​ ​ 1,224,692 ​ ​ 1,029,912 ​ 531,131 Income taxes payable ​ ​ (10,517) ​ ​ 29,467 ​ 90,172 Other, net ​ ​ (25,931) ​ ​ (3,815) ​ 104,463 Net cash provided by operating activities ​ ​ 3,211,135 ​ ​ 3,518,543 ​ 2,720,108 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ Capital expenditures ​ ​ (672,391) ​ ​ (621,767) ​ (457,736) Purchase of marketable debt securities ​ ​ (56,040) ​ ​ (63,676) ​ (90,949) Proceeds from sale of marketable debt securities ​ ​ 53,882 ​ ​ 95,393 ​ 84,237 Investment in tax credit equity investments ​ ​ (31,537) ​ ​ (41,712) ​ ​ (45,190) Proceeds from disposal of capital assets and other, net ​ ​ 57,987 ​ ​ 29,984 ​ 11,763 Net cash used in investing activities ​ ​ (648,099) ​ ​ (601,778) ​ (497,875) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ Net proceeds from/(payments of) commercial paper ​ ​ 603,400 ​ ​ - ​ (1,030,000) Proceeds from issuance of debt ​ ​ 750,000 ​ ​ - ​ 1,850,000 Repayment of debt ​ ​ (500,000) ​ ​ (250,000) ​ (500,000) Net proceeds from sale of common stock ​ ​ 113,934 ​ ​ 187,757 ​ 68,392 Purchase of treasury stock ​ ​ (4,359,991) ​ ​ (3,378,321) ​ (930,903) Repayment of principal portion of finance lease liabilities ​ ​ (67,182) ​ ​ (59,853) ​ (52,158) Other, net ​ ​ (10,658) ​ ​ - ​ (48,967) Net cash used in financing activities ​ ​ (3,470,497) ​ ​ (3,500,417) ​ (643,636) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash ​ ​ 506 ​ ​ 4,172 ​ (4,082) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (decrease)/increase in cash and cash equivalents ​ ​ (906,955) ​ ​ (579,480) ​ 1,574,515 Cash and cash equivalents at beginning of period ​ ​ 1,171,335 ​ ​ 1,750,815 ​ 176,300 Cash and cash equivalents at end of period ​ $ 264,380 ​ $ 1,171,335 ​ $ 1,750,815 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information: ​ ​ ​ ​ ​ ​ ​ Interest paid, net of interest cost capitalized ​ $ 178,561 ​ $ 187,948 ​ $ 161,864 Income taxes paid ​ $ 461,232 ​ $ 574,854 ​ $ 339,486 Leased assets obtained in exchange for new finance lease liabilities ​ $ 100,711 ​ $ 112,095 ​ $ 115,867 Leased assets obtained in exchange for new operating lease liabilities ​ $ 527,966 ​ $ 444,626 ​ $ 425,018 ​ See Notes to Consolidated Financial Statements. ​ 49 49 Table of ContentsAutoZone, Inc. Consolidated Statements of Stockholders' Deficit​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Accumulated​​​​​​​​Common​​​​Additional​​​​Other​​​​​​​ Shares Common Paid-in Retained Comprehensive Treasury ​​(in thousands)​Issued​Stock​Capital​Deficit​Loss​Stock​Total​​​​​​​​​​​​​​​​​​​​​Balance at August 31, 2019 25,445​$ 254​$ 1,264,448​$ (1,305,347)​$ (269,322)​$ (1,403,884)​$ (1,713,851)Net income - ​ - ​ - ​ 1,732,972​ - ​ - ​ 1,732,972Total other comprehensive income - ​ - ​ - ​ - ​ (84,930)​​ - ​ (84,930)Purchase of 826 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (930,903)​ (930,903)Retirement of treasury shares (1,912)​ (19)​ (99,686)​ (1,878,595)​ - ​ 1,978,300​ - Issuance of common stock under stock options and stock purchase plans 164​ 2​ 74,985​​ - ​​ - ​​ - ​ 74,987Share-based compensation expense - ​ - ​ 43,748​ - ​ - ​ - ​ 43,748Balance at August 29, 2020 23,697​ 237​ 1,283,495​ (1,450,970)​ (354,252)​ (356,487)​ (877,977)Net income - ​ - ​ - ​ 2,170,314​ - ​ - ​ 2,170,314Total other comprehensive income - ​ - ​ - ​ - ​ 46,266​ - ​ 46,266Purchase of 2,592 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (3,378,321)​ (3,378,321)Retirement of treasury shares (1,044)​ (10)​ (60,005)​ (1,139,173)​ - ​ 1,199,188​ - Issuance of common stock under stock options and stock purchase plans 354​ 3​ 187,754​​ - ​​ - ​​ - ​ 187,757Share-based compensation expense - ​ - ​ 54,425​ - ​ - ​ - ​ 54,425Balance at August 28, 2021 23,007​ 230​ 1,465,669​ (419,829)​ (307,986)​ (2,535,620)​ (1,797,536)Net income - ​ - ​ - ​ 2,429,604​ - ​ - ​ 2,429,604Total other comprehensive income - ​ - ​ - ​ - ​ 7,450​ - ​ 7,450Purchase of 2,220 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (4,359,991)​ (4,359,991)Retirement of treasury shares (2,484)​ (25)​ (292,975)​ (3,339,842)​ - ​ 3,632,842​ - Issuance of common stock under stock options and stock purchase plans 209​ 2​ 113,932​​ - ​​ - ​​ - ​ 113,934Share-based compensation expense - ​ - ​ 67,626​ - ​ - ​ - ​ 67,626Balance at August 27, 2022 20,732​$ 207​$ 1,354,252​$ (1,330,067)​$ (300,536)​$ (3,262,769)​$ (3,538,913)​See Notes to Consolidated Financial Statements.​50 Table of Contents Table of Contents Table of Contents AutoZone, Inc. Consolidated Statements of Stockholders' Deficit​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Accumulated​​​​​​​​Common​​​​Additional​​​​Other​​​​​​​ Shares Common Paid-in Retained Comprehensive Treasury ​​(in thousands)​Issued​Stock​Capital​Deficit​Loss​Stock​Total​​​​​​​​​​​​​​​​​​​​​Balance at August 31, 2019 25,445​$ 254​$ 1,264,448​$ (1,305,347)​$ (269,322)​$ (1,403,884)​$ (1,713,851)Net income - ​ - ​ - ​ 1,732,972​ - ​ - ​ 1,732,972Total other comprehensive income - ​ - ​ - ​ - ​ (84,930)​​ - ​ (84,930)Purchase of 826 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (930,903)​ (930,903)Retirement of treasury shares (1,912)​ (19)​ (99,686)​ (1,878,595)​ - ​ 1,978,300​ - Issuance of common stock under stock options and stock purchase plans 164​ 2​ 74,985​​ - ​​ - ​​ - ​ 74,987Share-based compensation expense - ​ - ​ 43,748​ - ​ - ​ - ​ 43,748Balance at August 29, 2020 23,697​ 237​ 1,283,495​ (1,450,970)​ (354,252)​ (356,487)​ (877,977)Net income - ​ - ​ - ​ 2,170,314​ - ​ - ​ 2,170,314Total other comprehensive income - ​ - ​ - ​ - ​ 46,266​ - ​ 46,266Purchase of 2,592 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (3,378,321)​ (3,378,321)Retirement of treasury shares (1,044)​ (10)​ (60,005)​ (1,139,173)​ - ​ 1,199,188​ - Issuance of common stock under stock options and stock purchase plans 354​ 3​ 187,754​​ - ​​ - ​​ - ​ 187,757Share-based compensation expense - ​ - ​ 54,425​ - ​ - ​ - ​ 54,425Balance at August 28, 2021 23,007​ 230​ 1,465,669​ (419,829)​ (307,986)​ (2,535,620)​ (1,797,536)Net income - ​ - ​ - ​ 2,429,604​ - ​ - ​ 2,429,604Total other comprehensive income - ​ - ​ - ​ - ​ 7,450​ - ​ 7,450Purchase of 2,220 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (4,359,991)​ (4,359,991)Retirement of treasury shares (2,484)​ (25)​ (292,975)​ (3,339,842)​ - ​ 3,632,842​ - Issuance of common stock under stock options and stock purchase plans 209​ 2​ 113,932​​ - ​​ - ​​ - ​ 113,934Share-based compensation expense - ​ - ​ 67,626​ - ​ - ​ - ​ 67,626Balance at August 27, 2022 20,732​$ 207​$ 1,354,252​$ (1,330,067)​$ (300,536)​$ (3,262,769)​$ (3,538,913)​See Notes to Consolidated Financial Statements.​ **Current (2023):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands) ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 2,528,426 ​ $ 2,429,604 ​ $ 2,170,314 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization of property and equipment ​ ​ 497,577 ​ ​ 442,223 ​ 407,683 Other non-cash charges ​ ​ 44,000 ​ ​ 15,000 ​ - Amortization of debt origination fees ​ ​ 9,264 ​ ​ 11,276 ​ 12,858 Deferred income taxes ​ ​ (25,707) ​ ​ 185,594 ​ (34,432) Share-based compensation expense ​ ​ 93,087 ​ ​ 70,612 ​ 56,112 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ (6,674) ​ ​ (125,732) ​ (11,039) Merchandise inventories ​ ​ (89,180) ​ ​ (1,005,686) ​ (138,517) Accounts payable and accrued expenses ​ ​ (183,679) ​ ​ 1,224,692 ​ 1,029,912 Income taxes ​ ​ 92,832 ​ ​ (10,517) ​ 29,467 Other, net ​ ​ (19,158) ​ ​ (25,931) ​ (3,815) Net cash provided by operating activities ​ ​ 2,940,788 ​ ​ 3,211,135 ​ 3,518,543 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ Capital expenditures ​ ​ (796,657) ​ ​ (672,391) ​ (621,767) Purchase of marketable debt securities ​ ​ (66,917) ​ ​ (56,040) ​ (63,676) Proceeds from sale of marketable debt securities ​ ​ 58,357 ​ ​ 53,882 ​ 95,393 Investment in tax credit equity investments ​ ​ (98,003) ​ ​ (31,537) ​ ​ (41,712) Proceeds from disposal of capital assets and other, net ​ ​ 27,042 ​ ​ 57,987 ​ 29,984 Net cash used in investing activities ​ ​ (876,178) ​ ​ (648,099) ​ (601,778) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ Net proceeds from commercial paper ​ ​ 606,200 ​ ​ 603,400 ​ - Proceeds from issuance of debt ​ ​ 1,750,000 ​ ​ 750,000 ​ - Repayment of debt ​ ​ (800,000) ​ ​ (500,000) ​ ​ (250,000) Net proceeds from sale of common stock ​ ​ 182,494 ​ ​ 113,934 ​ 187,757 Purchase of treasury stock ​ ​ (3,699,552) ​ ​ (4,359,991) ​ (3,378,321) Repayment of principal portion of finance lease liabilities ​ ​ (81,055) ​ ​ (67,182) ​ (59,853) Other, net ​ ​ (18,169) ​ ​ (10,658) ​ - Net cash used in financing activities ​ ​ (2,060,082) ​ ​ (3,470,497) ​ (3,500,417) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash ​ ​ 8,146 ​ ​ 506 ​ 4,172 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net increase/(decrease) in cash and cash equivalents ​ ​ 12,674 ​ ​ (906,955) ​ (579,480) Cash and cash equivalents at beginning of period ​ ​ 264,380 ​ ​ 1,171,335 ​ 1,750,815 Cash and cash equivalents at end of period ​ $ 277,054 ​ $ 264,380 ​ $ 1,171,335 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information: ​ ​ ​ ​ ​ ​ ​ Interest paid, net of interest cost capitalized ​ $ 260,866 ​ $ 178,561 ​ $ 187,948 Income taxes paid ​ $ 570,250 ​ $ 461,232 ​ $ 574,854 Leased assets obtained in exchange for new finance lease liabilities ​ $ 58,316 ​ $ 100,711 ​ $ 112,095 Leased assets obtained in exchange for new operating lease liabilities ​ $ 428,150 ​ $ 527,966 ​ $ 444,626 ​ See Notes to Consolidated Financial Statements. 50 50 Table of ContentsAutoZone, Inc. Consolidated Statements of Stockholders' Deficit​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Accumulated​​​​​​​​Common​​​​Additional​​​​Other​​​​​​​ Shares Common Paid-in Retained Comprehensive Treasury ​​(in thousands)​Issued​Stock​Capital​Deficit​Loss​Stock​Total​​​​​​​​​​​​​​​​​​​​​Balance at August 29, 2020 23,697​$ 237​$ 1,283,495​$ (1,450,970)​$ (354,252)​$ (356,487)​$ (877,977)Net income - ​ - ​ - ​ 2,170,314​ - ​ - ​ 2,170,314Total other comprehensive income - ​ - ​ - ​ - ​ 46,266​​ - ​ 46,266Purchase of 2,592 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (3,378,321)​ (3,378,321)Retirement of treasury shares (1,044)​ (10)​ (60,005)​ (1,139,173)​ - ​ 1,199,188​ - Issuance of common stock under stock options and stock purchase plans 354​ 3​ 187,754​​ - ​​ - ​​ - ​ 187,757Share-based compensation expense - ​ - ​ 54,425​ - ​ - ​ - ​ 54,425Balance at August 28, 2021 23,007​ 230​ 1,465,669​ (419,829)​ (307,986)​ (2,535,620)​ (1,797,536)Net income - ​ - ​ - ​ 2,429,604​ - ​ - ​ 2,429,604Total other comprehensive income - ​ - ​ - ​ - ​ 7,450​ - ​ 7,450Purchase of 2,220 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (4,359,991)​ (4,359,991)Retirement of treasury shares (2,484)​ (25)​ (292,975)​ (3,339,842)​ - ​ 3,632,842​ - Issuance of common stock under stock options and stock purchase plans 209​ 2​ 113,932​​ - ​​ - ​​ - ​ 113,934Share-based compensation expense - ​ - ​ 67,626​ - ​ - ​ - ​ 67,626Balance at August 27, 2022 20,732​ 207​ 1,354,252​ (1,330,067)​ (300,536)​ (3,262,769)​ (3,538,913)Net income - ​ - ​ - ​ 2,528,426​ - ​ - ​ 2,528,426Total other comprehensive income - ​ - ​ - ​ - ​ 109,700​ - ​ 109,700Purchase of 1,524 shares of treasury stock(1) - ​​ - ​​ - ​​ - ​​ - ​​ (3,723,289)​ (3,723,289)Retirement of treasury shares (2,051)​ (20)​ (143,440)​ (4,157,637)​ - ​ 4,301,097​ - Issuance of common stock under stock options and stock purchase plans 255​ 2​ 182,492​​ - ​​ - ​​ - ​ 182,494Share-based compensation expense - ​ - ​ 91,688​ - ​ - ​ - ​ 91,688Balance at August 26, 2023 18,936​$ 189​$ 1,484,992​$ (2,959,278)​$ (190,836)​$ (2,684,961)​$ (4,349,894)​(1)Inclusive of excise tax of $23.7 million for the year ended August 26, 2023. The excise tax is assessed at one percent of the fair market value of net stock repurchases after December 31, 2022.​See Notes to Consolidated Financial Statements.​51 Table of Contents Table of Contents Table of Contents AutoZone, Inc. Consolidated Statements of Stockholders' Deficit​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Accumulated​​​​​​​​Common​​​​Additional​​​​Other​​​​​​​ Shares Common Paid-in Retained Comprehensive Treasury ​​(in thousands)​Issued​Stock​Capital​Deficit​Loss​Stock​Total​​​​​​​​​​​​​​​​​​​​​Balance at August 29, 2020 23,697​$ 237​$ 1,283,495​$ (1,450,970)​$ (354,252)​$ (356,487)​$ (877,977)Net income - ​ - ​ - ​ 2,170,314​ - ​ - ​ 2,170,314Total other comprehensive income - ​ - ​ - ​ - ​ 46,266​​ - ​ 46,266Purchase of 2,592 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (3,378,321)​ (3,378,321)Retirement of treasury shares (1,044)​ (10)​ (60,005)​ (1,139,173)​ - ​ 1,199,188​ - Issuance of common stock under stock options and stock purchase plans 354​ 3​ 187,754​​ - ​​ - ​​ - ​ 187,757Share-based compensation expense - ​ - ​ 54,425​ - ​ - ​ - ​ 54,425Balance at August 28, 2021 23,007​ 230​ 1,465,669​ (419,829)​ (307,986)​ (2,535,620)​ (1,797,536)Net income - ​ - ​ - ​ 2,429,604​ - ​ - ​ 2,429,604Total other comprehensive income - ​ - ​ - ​ - ​ 7,450​ - ​ 7,450Purchase of 2,220 shares of treasury stock - ​ - ​ - ​ - ​ - ​ (4,359,991)​ (4,359,991)Retirement of treasury shares (2,484)​ (25)​ (292,975)​ (3,339,842)​ - ​ 3,632,842​ - Issuance of common stock under stock options and stock purchase plans 209​ 2​ 113,932​​ - ​​ - ​​ - ​ 113,934Share-based compensation expense - ​ - ​ 67,626​ - ​ - ​ - ​ 67,626Balance at August 27, 2022 20,732​ 207​ 1,354,252​ (1,330,067)​ (300,536)​ (3,262,769)​ (3,538,913)Net income - ​ - ​ - ​ 2,528,426​ - ​ - ​ 2,528,426Total other comprehensive income - ​ - ​ - ​ - ​ 109,700​ - ​ 109,700Purchase of 1,524 shares of treasury stock(1) - ​​ - ​​ - ​​ - ​​ - ​​ (3,723,289)​ (3,723,289)Retirement of treasury shares (2,051)​ (20)​ (143,440)​ (4,157,637)​ - ​ 4,301,097​ - Issuance of common stock under stock options and stock purchase plans 255​ 2​ 182,492​​ - ​​ - ​​ - ​ 182,494Share-based compensation expense - ​ - ​ 91,688​ - ​ - ​ - ​ 91,688Balance at August 26, 2023 18,936​$ 189​$ 1,484,992​$ (2,959,278)​$ (190,836)​$ (2,684,961)​$ (4,349,894)​(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.​ --- ## Modified: Our business, results of operations, financial condition and cash flows may be adversely affected by the adoption of new laws, changes to existing laws, increased enforcement activity or other governmental actions. **Key changes:** - Reworded sentence: "These include laws governing employment and labor, wage and hour, environmental matters, proper handling and disposal of hazardous materials and waste, employee benefits, data privacy, cybersecurity, safety, the pricing and sale of goods, import and export compliance, transportation and logistics, consumer protection and advertising, among others." - Reworded sentence: "If we fail to comply with these laws, rules and regulations, or the manner in which they are interpreted or applied, we may be subject to governmental enforcement action or private litigation resulting in restrictions on our business, monetary penalties, reputational harm and increased costs of regulatory compliance." - Reworded sentence: "to consider the enactment of legislative and regulatory proposals that would impose mandatory requirements for reductions of greenhouse gas (GHG) emissions." - Reworded sentence: "Our inability to appropriately respond to such changes could adversely impact our business, financial condition, results of operations or cash flows​We may be unable to achieve the goals and aspirations set forth in our environmental, social and governance (ESG) report, particularly with respect to the reduction of greenhouse gas (GHG) emissions, or otherwise meet the expectations of our stakeholders with respect to ESG matters.​Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, and disclosure topics such as climate change, sustainability, natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report." - Reworded sentence: "A failure or perceived failure to meet these expectations could adversely affect public perception of our business, employee morale or customer or shareholder support.​We have announced certain aspirations and goals related to ESG matters, such as plans to reduce certain GHG emissions over time." **Prior (2022):** ​ We are subject to numerous federal, state and local laws and regulations, many of which are complex, frequently revised and subject to varying interpretations. These include laws governing employment and labor, wage and hour, environmental matters, proper handling and disposal of hazardous materials and waste, healthcare, data privacy, cybersecurity, the pricing and sale of goods, import and export compliance, transportation and logistics, consumer protection and advertising, among others. These laws may differ substantially in the areas where we operate. Although we have implemented policies and procedures to help ensure compliance with these laws, there can be no certainty that our employees and third parties with whom we do business will not take actions in violation of our policies or applicable laws. If we fail to comply with these laws, rules and regulations, or the manner in which they are interpreted or applied, we may be subject to governmental enforcement action or private litigation resulting in monetary penalties, reputational harm and increased costs of regulatory compliance. Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation, including tax legislation such as the Inflation Reduction Act of 2022, could have an adverse impact, directly or indirectly, on our financial condition and results of operations. We may also be subject to investigations or audits by governmental authorities and regulatory agencies as a result of enforcing existing laws and regulations or changes in enforcement priorities, which can occur in the ordinary course of business or may result from increased scrutiny from a particular agency or toward a particular industry. 21 21 Table of Contents​We may be adversely affected by legal, regulatory or market responses to global climate change.​Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations. For example, we have significant operations in California, where serious drought has made water less available and more costly and has increased the risk of wildfires. Changes in climate patterns leading to extreme heat waves or unusual cold weather at some of our locations can lead to increased energy usage and costs, or otherwise adversely impact our facilities and operations and disrupt our supply chains and distribution systems. Growing concern over climate change has led policy makers in the U.S. to consider the enactment of legislative and regulatory proposals that would impose mandatory requirements on greenhouse gas emissions. Such laws, if enacted, are likely to impact our business in a number of ways. For example, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell. We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers. Our inability to appropriately respond to such changes could adversely impact our business, financial condition, results of operations or cash flows. ​Our reputation may be adversely affected if we are not able to achieve our Environmental, Social, and Governance (ESG) goals.​Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, and disclosure topics such as climate change, sustainability (including with respect to our supply chain), natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. We strive to deliver shared value through our business and our diverse stakeholders expect us to make progress in certain ESG priority issue areas. A failure or perceived failure to meet these expectations could adversely affect public perception of our business, employee morale or customer or shareholder support.​Our business, financial condition, results of operations and cash flows may be affected by litigation.​We are involved in lawsuits, regulatory investigations, governmental and other legal proceedings arising out of the ordinary course of business. Such matters involve significant expense and divert management's attention and resources from other matters. The damages sought against us in these proceedings may be material and may adversely affect our business, results of operations, financial condition and cash flows.​General Risks​Significant changes in macroeconomic and geo-political factors could adversely affect our financial condition and results of operations.​Macroeconomic conditions impact both our customers and our suppliers. Moreover, the U.S. government continues to operate under historically large deficits and debt burden. Continued distress in global credit markets, business failures, civil unrest, inflation, rising interest rates, foreign exchange rate fluctuations, significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a public health crisis or pandemic (such as COVID-19), constraints on the global supply chain and other factors continue to affect the global economy. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. It is unclear how such factors could impact our business in the short term. Over a longer period of time, these macroeconomic and geo-political conditions could adversely affect our sales growth, margins and overhead. These could adversely affect our financial condition and operations.​​22 Table of Contents Table of Contents Table of Contents ​We may be adversely affected by legal, regulatory or market responses to global climate change.​Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations. For example, we have significant operations in California, where serious drought has made water less available and more costly and has increased the risk of wildfires. Changes in climate patterns leading to extreme heat waves or unusual cold weather at some of our locations can lead to increased energy usage and costs, or otherwise adversely impact our facilities and operations and disrupt our supply chains and distribution systems. Growing concern over climate change has led policy makers in the U.S. to consider the enactment of legislative and regulatory proposals that would impose mandatory requirements on greenhouse gas emissions. Such laws, if enacted, are likely to impact our business in a number of ways. For example, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell. We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers. Our inability to appropriately respond to such changes could adversely impact our business, financial condition, results of operations or cash flows. ​Our reputation may be adversely affected if we are not able to achieve our Environmental, Social, and Governance (ESG) goals.​Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, and disclosure topics such as climate change, sustainability (including with respect to our supply chain), natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. We strive to deliver shared value through our business and our diverse stakeholders expect us to make progress in certain ESG priority issue areas. A failure or perceived failure to meet these expectations could adversely affect public perception of our business, employee morale or customer or shareholder support.​Our business, financial condition, results of operations and cash flows may be affected by litigation.​We are involved in lawsuits, regulatory investigations, governmental and other legal proceedings arising out of the ordinary course of business. Such matters involve significant expense and divert management's attention and resources from other matters. The damages sought against us in these proceedings may be material and may adversely affect our business, results of operations, financial condition and cash flows.​General Risks​Significant changes in macroeconomic and geo-political factors could adversely affect our financial condition and results of operations.​Macroeconomic conditions impact both our customers and our suppliers. Moreover, the U.S. government continues to operate under historically large deficits and debt burden. Continued distress in global credit markets, business failures, civil unrest, inflation, rising interest rates, foreign exchange rate fluctuations, significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a public health crisis or pandemic (such as COVID-19), constraints on the global supply chain and other factors continue to affect the global economy. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. It is unclear how such factors could impact our business in the short term. Over a longer period of time, these macroeconomic and geo-political conditions could adversely affect our sales growth, margins and overhead. These could adversely affect our financial condition and operations.​​ ​ **Current (2023):** ​ We are subject to numerous federal, state and local laws and regulations, many of which are complex, frequently revised and subject to varying interpretations. These include laws governing employment and labor, wage and hour, environmental matters, proper handling and disposal of hazardous materials and waste, employee benefits, data privacy, cybersecurity, safety, the pricing and sale of goods, import and export compliance, transportation and logistics, consumer protection and advertising, among others. These laws may change over time and may differ 21 21 Table of Contentssubstantially across the areas where we operate. Although we have implemented policies and procedures to help ensure compliance with these laws, there can be no certainty that our employees and third parties with whom we do business will not take actions in violation of our policies or applicable laws. If we fail to comply with these laws, rules and regulations, or the manner in which they are interpreted or applied, we may be subject to governmental enforcement action or private litigation resulting in restrictions on our business, monetary penalties, reputational harm and increased costs of regulatory compliance. Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation, including tax legislation, could have an adverse impact, directly or indirectly, on our financial condition and results of operations. We may also be subject to investigations or audits by governmental authorities and regulatory agencies as a result of enforcing existing laws and regulations or changes in enforcement priorities, which can occur in the ordinary course of business or may result from increased scrutiny from a particular agency or toward a particular industry.​We may be adversely affected by legal, regulatory or market responses to global climate change.​Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations. For example, we have significant operations in California, where serious drought has made water less available and more costly and has increased the risk of wildfires. Changes in climate patterns leading to extreme heat waves or unusual cold weather at some of our locations can lead to increased energy usage and costs, or otherwise adversely impact our facilities and operations and disrupt our supply chains and distribution systems. Growing concern over climate change has led policy makers in the U.S. to consider the enactment of legislative and regulatory proposals that would impose mandatory requirements for reductions of greenhouse gas (GHG) emissions. Such laws, if enacted, are likely to impact our business in a number of ways. For example, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell. We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers. Our inability to appropriately respond to such changes could adversely impact our business, financial condition, results of operations or cash flows​We may be unable to achieve the goals and aspirations set forth in our environmental, social and governance (ESG) report, particularly with respect to the reduction of greenhouse gas (GHG) emissions, or otherwise meet the expectations of our stakeholders with respect to ESG matters.​Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, and disclosure topics such as climate change, sustainability, natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. We strive to deliver shared value through our business and our diverse stakeholders expect us to make progress in certain ESG priority issue areas. A failure or perceived failure to meet these expectations could adversely affect public perception of our business, employee morale or customer or shareholder support.​We have announced certain aspirations and goals related to ESG matters, such as plans to reduce certain GHG emissions over time. Achievement of these aspirations, targets, plans and goals is subject to numerous risks and uncertainties, many of which are outside of our control. These risks and uncertainties include, but are not limited to: our ability to successfully identify and implement relevant strategies on a timely and cost-effective basis; our ability to achieve the anticipated benefits and cost savings of such strategies and actions; and the availability and cost of existing and future technologies, such as alternative fuel vehicles, off-site renewable energy, and other materials and components. It is possible that we may be unsuccessful in the achievement of our ESG goals, on a timely basis or at all, or that the costs to achieve those goals become prohibitively expensive. Furthermore, our stakeholders may not be satisfied with our efforts or the speed at which we are progressing towards any such aspirations and goals. A delay, failure or perceived failure or delay to meet our goals and aspirations could adversely affect public perception of our business, or we may lose shareholder support. Certain challenges we face in the achievement of our ESG 22 Table of Contents Table of Contents Table of Contents substantially across the areas where we operate. Although we have implemented policies and procedures to help ensure compliance with these laws, there can be no certainty that our employees and third parties with whom we do business will not take actions in violation of our policies or applicable laws. If we fail to comply with these laws, rules and regulations, or the manner in which they are interpreted or applied, we may be subject to governmental enforcement action or private litigation resulting in restrictions on our business, monetary penalties, reputational harm and increased costs of regulatory compliance. Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation, including tax legislation, could have an adverse impact, directly or indirectly, on our financial condition and results of operations. We may also be subject to investigations or audits by governmental authorities and regulatory agencies as a result of enforcing existing laws and regulations or changes in enforcement priorities, which can occur in the ordinary course of business or may result from increased scrutiny from a particular agency or toward a particular industry.​We may be adversely affected by legal, regulatory or market responses to global climate change.​Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations. For example, we have significant operations in California, where serious drought has made water less available and more costly and has increased the risk of wildfires. Changes in climate patterns leading to extreme heat waves or unusual cold weather at some of our locations can lead to increased energy usage and costs, or otherwise adversely impact our facilities and operations and disrupt our supply chains and distribution systems. Growing concern over climate change has led policy makers in the U.S. to consider the enactment of legislative and regulatory proposals that would impose mandatory requirements for reductions of greenhouse gas (GHG) emissions. Such laws, if enacted, are likely to impact our business in a number of ways. For example, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell. We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers. Our inability to appropriately respond to such changes could adversely impact our business, financial condition, results of operations or cash flows​We may be unable to achieve the goals and aspirations set forth in our environmental, social and governance (ESG) report, particularly with respect to the reduction of greenhouse gas (GHG) emissions, or otherwise meet the expectations of our stakeholders with respect to ESG matters.​Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, and disclosure topics such as climate change, sustainability, natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. We strive to deliver shared value through our business and our diverse stakeholders expect us to make progress in certain ESG priority issue areas. A failure or perceived failure to meet these expectations could adversely affect public perception of our business, employee morale or customer or shareholder support.​We have announced certain aspirations and goals related to ESG matters, such as plans to reduce certain GHG emissions over time. Achievement of these aspirations, targets, plans and goals is subject to numerous risks and uncertainties, many of which are outside of our control. These risks and uncertainties include, but are not limited to: our ability to successfully identify and implement relevant strategies on a timely and cost-effective basis; our ability to achieve the anticipated benefits and cost savings of such strategies and actions; and the availability and cost of existing and future technologies, such as alternative fuel vehicles, off-site renewable energy, and other materials and components. It is possible that we may be unsuccessful in the achievement of our ESG goals, on a timely basis or at all, or that the costs to achieve those goals become prohibitively expensive. Furthermore, our stakeholders may not be satisfied with our efforts or the speed at which we are progressing towards any such aspirations and goals. A delay, failure or perceived failure or delay to meet our goals and aspirations could adversely affect public perception of our business, or we may lose shareholder support. Certain challenges we face in the achievement of our ESG substantially across the areas where we operate. Although we have implemented policies and procedures to help ensure compliance with these laws, there can be no certainty that our employees and third parties with whom we do business will not take actions in violation of our policies or applicable laws. If we fail to comply with these laws, rules and regulations, or the manner in which they are interpreted or applied, we may be subject to governmental enforcement action or private litigation resulting in restrictions on our business, monetary penalties, reputational harm and increased costs of regulatory compliance. Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation, including tax legislation, could have an adverse impact, directly or indirectly, on our financial condition and results of operations. We may also be subject to investigations or audits by governmental authorities and regulatory agencies as a result of enforcing existing laws and regulations or changes in enforcement priorities, which can occur in the ordinary course of business or may result from increased scrutiny from a particular agency or toward a particular industry. ​ --- ## Modified: Fiscal Year Ended August **Key changes:** - Reworded sentence: "​ (in thousands, except percentage) 2023 2022 2021 2020 2019(1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income $ 2,528,426 $ 2,429,604 $ 2,170,314 $ 1,732,972 $ 1,617,221 ​ Adjustments: ​ ​ ​ ​ ​ ​ ​ Interest expense 306,372 ​ 191,638 ​ 195,337 ​ 201,165 ​ 184,804 ​ Rent expense(2) 406,398 ​ 373,278 ​ 345,380 ​ 329,783 ​ 332,726 ​ Tax effect(3) (143,980) ​ (119,197) ​ (114,091) ​ (115,747) ​ (105,576) ​ Deferred tax liabilities, net of repatriation tax(4) - ​ - ​ - ​ - ​ (6,340) ​ Adjusted after-tax return $ 3,097,216 ​ $ 2,875,323 ​ $ 2,596,940 ​ $ 2,148,173 ​ $ 2,022,835 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average debt(5) $ 6,900,354 ​ $ 5,712,301 ​ $ 5,416,471 ​ $ 5,375,356 ​ $ 5,126,286 ​ Average stockholders' deficit(5) (4,042,495) ​ (2,797,181) ​ (1,397,892) ​ (1,542,355) ​ (1,615,339) ​ Add: Rent x 6(2)(6) 2,438,388 ​ 2,239,668 ​ 2,072,280 ​ 1,978,696 ​ 1,996,358 ​ Average finance lease liabilities(5) 296,599 ​ 284,453 ​ 237,267 ​ 203,998 ​ 162,591 ​ Invested capital $ 5,592,846 ​ $ 5,439,241 ​ $ 6,328,126 ​ $ 6,015,695 ​ $ 5,669,896 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted after-tax ROIC 55.4 % 52.9 % 41.0 % 35.7 % 35.7 % ​ Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to EBITDAR The following table calculates the ratio of adjusted debt to EBITDAR." **Prior (2022):** (in thousands, except per share data, same store sales and selected operating data) 2022 2021(1) 2020(1) 2019(2)(3) 2018(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ **Current (2023):** (in thousands, except per share data, same store sales and selected operating data) 2023 2022 2021(1) 2020(1) 2019(2)(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## Modified: Balance Sheet Data **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ Current assets ​ $ 6,779,426 ​ $ 6,627,984 ​ $ 6,415,303 ​ $ 6,811,872 ​ $ 5,028,685 ​ Operating lease right-of-use assets(6) ​ ​ 2,998,097 ​ ​ 2,918,817 ​ ​ 2,718,712 ​ ​ 2,581,677 ​ ​ - ​ Working capital (deficit)(7) ​ (1,732,430) ​ (1,960,409) ​ (954,451) ​ 528,781 ​ (483,456) ​ Total assets ​ 15,985,878 ​ 15,275,043 ​ 14,516,199 ​ 14,423,872 ​ 9,895,913 ​ Current liabilities ​ 8,511,856 ​ 8,588,393 ​ 7,369,754 ​ 6,283,091 ​ 5,512,141 ​ Debt ​ 7,668,549 ​ 6,122,092 ​ 5,269,820 ​ 5,513,371 ​ 5,206,344 ​ Finance lease liabilities, less current portion(6) ​ 200,702 ​ 217,428 ​ 186,122 ​ 155,855 ​ 123,659 ​ Operating lease liabilities, less current portion(6) ​ ​ 2,917,046 ​ ​ 2,837,973 ​ ​ 2,632,842 ​ ​ 2,501,560 ​ ​ - ​ Stockholders' deficit ​ (4,349,894) ​ (3,538,913) ​ (1,797,536) ​ (877,977) ​ (1,713,851) ​" **Prior (2022):** ​ ​ ​ ​ ​ ​ Current assets ​ $ 6,627,984 ​ $ 6,415,303 ​ $ 6,811,872 ​ $ 5,028,685 ​ $ 4,635,869 ​ Operating lease right-of-use assets(6) ​ ​ 2,918,817 ​ ​ 2,718,712 ​ ​ 2,581,677 ​ ​ - ​ ​ - ​ Working capital (deficit)(12) ​ (1,960,409) ​ (954,451) ​ 528,781 ​ (483,456) ​ (392,812) ​ Total assets ​ 15,275,043 ​ 14,516,199 ​ 14,423,872 ​ 9,895,913 ​ 9,346,980 ​ Current liabilities ​ 8,588,393 ​ 7,369,754 ​ 6,283,091 ​ 5,512,141 ​ 5,028,681 ​ Debt ​ 6,122,092 ​ 5,269,820 ​ 5,513,371 ​ 5,206,344 ​ 5,005,930 ​ Finance lease liabilities, less current portion(6) ​ 217,428 ​ 186,122 ​ 155,855 ​ 123,659 ​ 102,013 ​ Operating lease liabilities, less current portion(6) ​ ​ 2,837,973 ​ ​ 2,632,842 ​ ​ 2,501,560 ​ ​ - ​ ​ - ​ Stockholders' deficit ​ (3,538,913) ​ (1,797,536) ​ (877,977) ​ (1,713,851) ​ (1,520,355) ​ **Current (2023):** ​ ​ ​ ​ ​ ​ Current assets ​ $ 6,779,426 ​ $ 6,627,984 ​ $ 6,415,303 ​ $ 6,811,872 ​ $ 5,028,685 ​ Operating lease right-of-use assets(6) ​ ​ 2,998,097 ​ ​ 2,918,817 ​ ​ 2,718,712 ​ ​ 2,581,677 ​ ​ - ​ Working capital (deficit)(7) ​ (1,732,430) ​ (1,960,409) ​ (954,451) ​ 528,781 ​ (483,456) ​ Total assets ​ 15,985,878 ​ 15,275,043 ​ 14,516,199 ​ 14,423,872 ​ 9,895,913 ​ Current liabilities ​ 8,511,856 ​ 8,588,393 ​ 7,369,754 ​ 6,283,091 ​ 5,512,141 ​ Debt ​ 7,668,549 ​ 6,122,092 ​ 5,269,820 ​ 5,513,371 ​ 5,206,344 ​ Finance lease liabilities, less current portion(6) ​ 200,702 ​ 217,428 ​ 186,122 ​ 155,855 ​ 123,659 ​ Operating lease liabilities, less current portion(6) ​ ​ 2,917,046 ​ ​ 2,837,973 ​ ​ 2,632,842 ​ ​ 2,501,560 ​ ​ - ​ Stockholders' deficit ​ (4,349,894) ​ (3,538,913) ​ (1,797,536) ​ (877,977) ​ (1,713,851) ​ --- ## Modified: Fiscal Year Ended August **Key changes:** - Reworded sentence: "(in thousands) ​ 2023 2022 2021 2020 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash provided by/(used in): ​ ​ ​ ​ ​ Operating activities ​ $ 2,940,788 ​ $ 3,211,135 ​ $ 3,518,543 ​ $ 2,720,108 ​ $ 2,128,513 Investing activities ​ (876,178) ​ (648,099) ​ (601,778) ​ (497,875) ​ (491,846) Financing activities ​ (2,060,082) ​ (3,470,497) ​ (3,500,417) ​ (643,636) ​ (1,674,088) Effect of exchange rate changes on cash ​ ​ 8,146 ​ 506 ​ 4,172 ​ (4,082) ​ (4,103) Net (decrease)/increase in cash and cash equivalents ​ ​ 12,674 ​ (906,955) ​ (579,480) ​ 1,574,515 ​ (41,524) Less: increase/(decrease) in debt, excluding deferred financing costs ​ ​ 1,556,200 ​ 853,400 ​ (250,000) ​ 320,000 ​ 204,700 Plus: Share repurchases ​ 3,699,552 ​ 4,359,991 ​ 3,378,321 ​ 930,903(1) ​ 2,004,896 Cash flow before share repurchases and changes in debt ​ $ 2,156,026 ​ $ 2,599,636 ​ $ 3,048,841 ​ $ 2,185,418 ​ $ 1,758,672 ​ ​ ​ ​ ​ ​ ​ 37 37 Table of ContentsReconciliation of Non-GAAP Financial Measure: Adjusted After-tax ROICThe following table calculates the percentage of ROIC." - Reworded sentence: "The ROIC percentages are presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations": ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ ​​​​​​​​​​​​​​​​​Fiscal Year Ended August​(in thousands, except percentage)2023 2022 2021 2020 2019(1) ​​​​​​​​​​​​​​​​Net income$ 2,528,426 $ 2,429,604 $ 2,170,314 $ 1,732,972 $ 1,617,221​Adjustments: ​​ ​​ ​ ​ ​Interest expense 306,372​ 191,638​ 195,337​ 201,165​ 184,804​Rent expense(2) 406,398​ 373,278​ 345,380​ 329,783​ 332,726​Tax effect(3) (143,980)​ (119,197)​ (114,091)​ (115,747)​ (105,576)​Deferred tax liabilities, net of repatriation tax(4) - ​ - ​ - ​ - ​ (6,340)​Adjusted after-tax return$ 3,097,216​$ 2,875,323​$ 2,596,940​$ 2,148,173​$ 2,022,835​​​​​​​​​​​​​​​​​Average debt(5)$ 6,900,354​$ 5,712,301​$ 5,416,471​$ 5,375,356​$ 5,126,286​Average stockholders' deficit(5) (4,042,495)​ (2,797,181)​ (1,397,892)​ (1,542,355)​ (1,615,339)​Add: Rent x 6(2)(6) 2,438,388​ 2,239,668​ 2,072,280​ 1,978,696​ 1,996,358​Average finance lease liabilities(5) 296,599​ 284,453​ 237,267​ 203,998​ 162,591​Invested capital$ 5,592,846​$ 5,439,241​$ 6,328,126​$ 6,015,695​$ 5,669,896​​​​​​​​​​​​​​​​​Adjusted after-tax ROIC 55.4% 52.9% 41.0% 35.7% 35.7%​Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to EBITDARThe following table calculates the ratio of adjusted debt to EBITDAR." - Reworded sentence: "The adjusted debt to EBITDAR ratios are presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations":​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Fiscal Year Ended August(in thousands, except ratio)​2023 2022 2021 2020 2019(1)​​​​​​​​​​​​​​​​Net income $ 2,528,426 $ 2,429,604 $ 2,170,314 $ 1,732,972 $ 1,617,221Add: Interest expense​ 306,372​ 191,638​ 195,337​ 201,165​ 184,804Income tax expense​​ 639,188​​ 649,487​​ 578,876​​ 483,542​​ 414,112EBIT​ 3,473,986​ 3,270,729​ 2,944,527​ 2,417,679​ 2,216,137Add: Depreciation and amortization expense​ 497,577​ 442,223​ 407,683​ 397,466​ 369,957Rent expense(2)​ 406,398​ 373,278​ 345,380​ 329,783​ 332,726Share-based expense​ 93,087​ 70,612​ 56,112​ 44,835​ 43,255EBITDAR​$ 4,471,048​$ 4,156,842​$ 3,753,702​$ 3,189,763​$ 2,962,075​​​​​​​​​​​​​​​​Debt​$ 7,668,549​$ 6,122,092​$ 5,269,820​$ 5,513,371​$ 5,206,344Financing lease liabilities​ 287,618​ 310,305​ 276,054​ 223,353​ 179,905Add: Rent x 6(2)(6)​ 2,438,388​ 2,239,668​ 2,072,280​ 1,978,696​ 1,996,358Adjusted debt​$ 10,394,555​$ 8,672,065​$ 7,618,154​$ 7,715,420​$ 7,382,607Adjusted debt to EBITDAR​ 2.3​ 2.1​ 2.0​ 2.4​ 2.5​​38 Table of Contents Table of Contents Table of Contents Reconciliation of Non-GAAP Financial Measure: Adjusted After-tax ROICThe following table calculates the percentage of ROIC." - Reworded sentence: "The ROIC percentages are presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations": ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ ​​​​​​​​​​​​​​​​​Fiscal Year Ended August​(in thousands, except percentage)2023 2022 2021 2020 2019(1) ​​​​​​​​​​​​​​​​Net income$ 2,528,426 $ 2,429,604 $ 2,170,314 $ 1,732,972 $ 1,617,221​Adjustments: ​​ ​​ ​ ​ ​Interest expense 306,372​ 191,638​ 195,337​ 201,165​ 184,804​Rent expense(2) 406,398​ 373,278​ 345,380​ 329,783​ 332,726​Tax effect(3) (143,980)​ (119,197)​ (114,091)​ (115,747)​ (105,576)​Deferred tax liabilities, net of repatriation tax(4) - ​ - ​ - ​ - ​ (6,340)​Adjusted after-tax return$ 3,097,216​$ 2,875,323​$ 2,596,940​$ 2,148,173​$ 2,022,835​​​​​​​​​​​​​​​​​Average debt(5)$ 6,900,354​$ 5,712,301​$ 5,416,471​$ 5,375,356​$ 5,126,286​Average stockholders' deficit(5) (4,042,495)​ (2,797,181)​ (1,397,892)​ (1,542,355)​ (1,615,339)​Add: Rent x 6(2)(6) 2,438,388​ 2,239,668​ 2,072,280​ 1,978,696​ 1,996,358​Average finance lease liabilities(5) 296,599​ 284,453​ 237,267​ 203,998​ 162,591​Invested capital$ 5,592,846​$ 5,439,241​$ 6,328,126​$ 6,015,695​$ 5,669,896​​​​​​​​​​​​​​​​​Adjusted after-tax ROIC 55.4% 52.9% 41.0% 35.7% 35.7%​Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to EBITDARThe following table calculates the ratio of adjusted debt to EBITDAR." - Reworded sentence: "The adjusted debt to EBITDAR ratios are presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations":​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Fiscal Year Ended August(in thousands, except ratio)​2023 2022 2021 2020 2019(1)​​​​​​​​​​​​​​​​Net income $ 2,528,426 $ 2,429,604 $ 2,170,314 $ 1,732,972 $ 1,617,221Add: Interest expense​ 306,372​ 191,638​ 195,337​ 201,165​ 184,804Income tax expense​​ 639,188​​ 649,487​​ 578,876​​ 483,542​​ 414,112EBIT​ 3,473,986​ 3,270,729​ 2,944,527​ 2,417,679​ 2,216,137Add: Depreciation and amortization expense​ 497,577​ 442,223​ 407,683​ 397,466​ 369,957Rent expense(2)​ 406,398​ 373,278​ 345,380​ 329,783​ 332,726Share-based expense​ 93,087​ 70,612​ 56,112​ 44,835​ 43,255EBITDAR​$ 4,471,048​$ 4,156,842​$ 3,753,702​$ 3,189,763​$ 2,962,075​​​​​​​​​​​​​​​​Debt​$ 7,668,549​$ 6,122,092​$ 5,269,820​$ 5,513,371​$ 5,206,344Financing lease liabilities​ 287,618​ 310,305​ 276,054​ 223,353​ 179,905Add: Rent x 6(2)(6)​ 2,438,388​ 2,239,668​ 2,072,280​ 1,978,696​ 1,996,358Adjusted debt​$ 10,394,555​$ 8,672,065​$ 7,618,154​$ 7,715,420​$ 7,382,607Adjusted debt to EBITDAR​ 2.3​ 2.1​ 2.0​ 2.4​ 2.5​​ Reconciliation of Non-GAAP Financial Measure: Adjusted After-tax ROIC The following table calculates the percentage of ROIC." **Prior (2022):** (in thousands, except per share data, same store sales and selected operating data) 2022 2021(1) 2020(1) 2019(2)(3) 2018(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ **Current (2023):** (in thousands, except per share data, same store sales and selected operating data) 2023 2022 2021(1) 2020(1) 2019(2)(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## Modified: Income Statement Data **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ Net sales ​ $ 17,457,209 ​ $ 16,252,230 ​ $ 14,629,585 ​ $ 12,631,967 ​ $ 11,863,743 ​ Cost of sales, including warehouse and delivery expenses ​ 8,386,787 ​ 7,779,580 ​ 6,911,800 ​ 5,861,214 ​ 5,498,742 ​ Gross profit ​ 9,070,422 ​ 8,472,650 ​ 7,717,785 ​ 6,770,753 ​ 6,365,001 ​ Operating, selling, general and administrative expenses ​ 5,596,436 ​ 5,201,921 ​ 4,773,258 ​ 4,353,074 ​ 4,148,864 ​ Operating profit ​ 3,473,986 ​ 3,270,729 ​ 2,944,527 ​ 2,417,679 ​ 2,216,137 ​ Interest expense, net ​ 306,372 ​ 191,638 ​ 195,337 ​ 201,165 ​ 184,804 ​ Income before income taxes ​ 3,167,614 ​ 3,079,091 ​ 2,749,190 ​ 2,216,514 ​ 2,031,333 ​ Income tax expense(4) ​ 639,188 ​ 649,487 ​ 578,876 ​ 483,542 ​ 414,112 ​ Net income(4) ​ $ 2,528,426 ​ $ 2,429,604 ​ $ 2,170,314 ​ $ 1,732,972 ​ $ 1,617,221 ​ Diluted earnings per share(4) ​ $ 132.36 ​ $ 117.19 ​ $ 95.19 ​ $ 71.93 ​ $ 63.43 ​ Weighted average shares for diluted earnings per share(4) ​ 19,103 ​ 20,733 ​ 22,799 ​ 24,093 ​ 25,498 ​" **Prior (2022):** ​ ​ ​ ​ ​ Net sales ​ $ 16,252,230 ​ $ 14,629,585 ​ $ 12,631,967 ​ $ 11,863,743 ​ $ 11,221,077 ​ Cost of sales, including warehouse and delivery expenses ​ 7,779,580 ​ 6,911,800 ​ 5,861,214 ​ 5,498,742 ​ 5,247,331 ​ Gross profit ​ 8,472,650 ​ 7,717,785 ​ 6,770,753 ​ 6,365,001 ​ 5,973,746 ​ Operating, selling, general and administrative expenses ​ 5,201,921 ​ 4,773,258 ​ 4,353,074 ​ 4,148,864 ​ 4,162,890 ​ Operating profit ​ 3,270,729 ​ 2,944,527 ​ 2,417,679 ​ 2,216,137 ​ 1,810,856 ​ Interest expense, net ​ 191,638 ​ 195,337 ​ 201,165 ​ 184,804 ​ 174,527 ​ Income before income taxes ​ 3,079,091 ​ 2,749,190 ​ 2,216,514 ​ 2,031,333 ​ 1,636,329 ​ Income tax expense(4) ​ 649,487 ​ 578,876 ​ 483,542 ​ 414,112 ​ 298,793 ​ Net income(4) ​ $ 2,429,604 ​ $ 2,170,314 ​ $ 1,732,972 ​ $ 1,617,221 ​ $ 1,337,536 ​ Diluted earnings per share(4) ​ $ 117.19 ​ $ 95.19 ​ $ 71.93 ​ $ 63.43 ​ $ 48.77 ​ Weighted average shares for diluted earnings per share(4) ​ 20,733 ​ 22,799 ​ 24,093 ​ 25,498 ​ 27,424 ​ **Current (2023):** ​ ​ ​ ​ ​ Net sales ​ $ 17,457,209 ​ $ 16,252,230 ​ $ 14,629,585 ​ $ 12,631,967 ​ $ 11,863,743 ​ Cost of sales, including warehouse and delivery expenses ​ 8,386,787 ​ 7,779,580 ​ 6,911,800 ​ 5,861,214 ​ 5,498,742 ​ Gross profit ​ 9,070,422 ​ 8,472,650 ​ 7,717,785 ​ 6,770,753 ​ 6,365,001 ​ Operating, selling, general and administrative expenses ​ 5,596,436 ​ 5,201,921 ​ 4,773,258 ​ 4,353,074 ​ 4,148,864 ​ Operating profit ​ 3,473,986 ​ 3,270,729 ​ 2,944,527 ​ 2,417,679 ​ 2,216,137 ​ Interest expense, net ​ 306,372 ​ 191,638 ​ 195,337 ​ 201,165 ​ 184,804 ​ Income before income taxes ​ 3,167,614 ​ 3,079,091 ​ 2,749,190 ​ 2,216,514 ​ 2,031,333 ​ Income tax expense(4) ​ 639,188 ​ 649,487 ​ 578,876 ​ 483,542 ​ 414,112 ​ Net income(4) ​ $ 2,528,426 ​ $ 2,429,604 ​ $ 2,170,314 ​ $ 1,732,972 ​ $ 1,617,221 ​ Diluted earnings per share(4) ​ $ 132.36 ​ $ 117.19 ​ $ 95.19 ​ $ 71.93 ​ $ 63.43 ​ Weighted average shares for diluted earnings per share(4) ​ 19,103 ​ 20,733 ​ 22,799 ​ 24,093 ​ 25,498 ​ --- ## Modified: Valuation of Self-insurance Reserves **Key changes:** - Reworded sentence: "Description of the Matter At August 26, 2023, the Company's self-insurance reserve estimate was $268.8 million." - Reworded sentence: "​ Memphis, Tennessee October 24, 2023 ​ 47 47 Table of ContentsAutoZone, Inc." **Prior (2022):** 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 ​ 46 46 Table of ContentsAutoZone, Inc. Consolidated Statements of Income​​​​​​​​​​​​Year Ended​​August 27,​August 28,​August 29,(in thousands, except per share data)​2022​2021​2020​​​​​​​​​​Net sales $ 16,252,230 $ 14,629,585 $ 12,631,967Cost of sales, including warehouse and delivery expenses​​ 7,779,580​​ 6,911,800​​ 5,861,214Gross profit​​ 8,472,650​ 7,717,785​ 6,770,753Operating, selling, general and administrative expenses​​ 5,201,921​​ 4,773,258​​ 4,353,074Operating profit​​ 3,270,729​​ 2,944,527​​ 2,417,679Interest expense, net​​ 191,638​​ 195,337​​ 201,165Income before income taxes​​ 3,079,091​ 2,749,190​ 2,216,514Income tax expense​​ 649,487​​ 578,876​​ 483,542Net income​$ 2,429,604​$ 2,170,314​$ 1,732,972​​​​​​​​​​Weighted average shares for basic earnings per share​ 20,107​ 22,237​ 23,540Effect of dilutive stock equivalents​​ 626​​ 562​​ 553Weighted average shares for diluted earnings per share​ 20,733​ 22,799​ 24,093​​​​​​​​​​Basic earnings per share​$ 120.83​$ 97.60​$ 73.62Diluted earnings per share​$ 117.19​$ 95.19​$ 71.93​See Notes to Consolidated Financial Statements.AutoZone, Inc. Consolidated Statements of Comprehensive Income​​​​​​​​​​​​​Year Ended​​August 27,​August 28,​August 29,(in thousands) 2022​2021​2020​​​​​​​​​​Net income​$ 2,429,604​$ 2,170,314​$ 1,732,972Other comprehensive income (loss):​ ​ ​ Foreign currency translation adjustments​ 7,448​ 44,683​ (66,723)Unrealized (losses) gains on marketable debt securities, net of taxes​ (2,760)​ (1,256)​ 1,254Net derivative activities, net of taxes​ 2,762​ 2,839​ (19,461)Total other comprehensive income (loss)​ 7,450​ 46,266​ (84,930)Comprehensive income​$ 2,437,054​$ 2,216,580​$ 1,648,042​(1)See Notes to Consolidated Financial Statements.​​47 Table of Contents Table of Contents Table of Contents AutoZone, Inc. Consolidated Statements of Income​​​​​​​​​​​​Year Ended​​August 27,​August 28,​August 29,(in thousands, except per share data)​2022​2021​2020​​​​​​​​​​Net sales $ 16,252,230 $ 14,629,585 $ 12,631,967Cost of sales, including warehouse and delivery expenses​​ 7,779,580​​ 6,911,800​​ 5,861,214Gross profit​​ 8,472,650​ 7,717,785​ 6,770,753Operating, selling, general and administrative expenses​​ 5,201,921​​ 4,773,258​​ 4,353,074Operating profit​​ 3,270,729​​ 2,944,527​​ 2,417,679Interest expense, net​​ 191,638​​ 195,337​​ 201,165Income before income taxes​​ 3,079,091​ 2,749,190​ 2,216,514Income tax expense​​ 649,487​​ 578,876​​ 483,542Net income​$ 2,429,604​$ 2,170,314​$ 1,732,972​​​​​​​​​​Weighted average shares for basic earnings per share​ 20,107​ 22,237​ 23,540Effect of dilutive stock equivalents​​ 626​​ 562​​ 553Weighted average shares for diluted earnings per share​ 20,733​ 22,799​ 24,093​​​​​​​​​​Basic earnings per share​$ 120.83​$ 97.60​$ 73.62Diluted earnings per share​$ 117.19​$ 95.19​$ 71.93​See Notes to Consolidated Financial Statements.AutoZone, Inc. Consolidated Statements of Comprehensive Income​​​​​​​​​​​​​Year Ended​​August 27,​August 28,​August 29,(in thousands) 2022​2021​2020​​​​​​​​​​Net income​$ 2,429,604​$ 2,170,314​$ 1,732,972Other comprehensive income (loss):​ ​ ​ Foreign currency translation adjustments​ 7,448​ 44,683​ (66,723)Unrealized (losses) gains on marketable debt securities, net of taxes​ (2,760)​ (1,256)​ 1,254Net derivative activities, net of taxes​ 2,762​ 2,839​ (19,461)Total other comprehensive income (loss)​ 7,450​ 46,266​ (84,930)Comprehensive income​$ 2,437,054​$ 2,216,580​$ 1,648,042​(1)See Notes to Consolidated Financial Statements.​​ **Current (2023):** Description of the Matter At August 26, 2023, the Company's self-insurance reserve estimate was $268.8 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, 2023 ​ 47 47 Table of ContentsAutoZone, Inc. Consolidated Statements of Income​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands, except per share data)​2023​2022​2021​​​​​​​​​​Net sales $ 17,457,209 $ 16,252,230 $ 14,629,585Cost of sales, including warehouse and delivery expenses​​ 8,386,787​​ 7,779,580​​ 6,911,800Gross profit​​ 9,070,422​ 8,472,650​ 7,717,785Operating, selling, general and administrative expenses​​ 5,596,436​​ 5,201,921​​ 4,773,258Operating profit​​ 3,473,986​​ 3,270,729​​ 2,944,527Interest expense, net​​ 306,372​​ 191,638​​ 195,337Income before income taxes​​ 3,167,614​ 3,079,091​ 2,749,190Income tax expense​​ 639,188​​ 649,487​​ 578,876Net income​$ 2,528,426​$ 2,429,604​$ 2,170,314​​​​​​​​​​Weighted average shares for basic earnings per share​ 18,510​ 20,107​ 22,237Effect of dilutive stock equivalents​​ 593​​ 626​​ 562Weighted average shares for diluted earnings per share​ 19,103​ 20,733​ 22,799​​​​​​​​​​Basic earnings per share​$ 136.60​$ 120.83​$ 97.60Diluted earnings per share​$ 132.36​$ 117.19​$ 95.19​See Notes to Consolidated Financial Statements.AutoZone, Inc. Consolidated Statements of Comprehensive Income​​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands) 2023​2022​2021​​​​​​​​​​Net income​$ 2,528,426​$ 2,429,604​$ 2,170,314Other comprehensive income:​ ​ ​ Foreign currency translation adjustments​ 103,633​ 7,448​ 44,683Unrealized gains (losses) on marketable debt securities, net of taxes​ 320​ (2,760)​ (1,256)Net derivative activities, net of taxes​ 5,747​ 2,762​ 2,839Total other comprehensive income​ 109,700​ 7,450​ 46,266Comprehensive income​$ 2,638,126​$ 2,437,054​$ 2,216,580​(1)See Notes to Consolidated Financial Statements.​​48 Table of Contents Table of Contents Table of Contents AutoZone, Inc. Consolidated Statements of Income​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands, except per share data)​2023​2022​2021​​​​​​​​​​Net sales $ 17,457,209 $ 16,252,230 $ 14,629,585Cost of sales, including warehouse and delivery expenses​​ 8,386,787​​ 7,779,580​​ 6,911,800Gross profit​​ 9,070,422​ 8,472,650​ 7,717,785Operating, selling, general and administrative expenses​​ 5,596,436​​ 5,201,921​​ 4,773,258Operating profit​​ 3,473,986​​ 3,270,729​​ 2,944,527Interest expense, net​​ 306,372​​ 191,638​​ 195,337Income before income taxes​​ 3,167,614​ 3,079,091​ 2,749,190Income tax expense​​ 639,188​​ 649,487​​ 578,876Net income​$ 2,528,426​$ 2,429,604​$ 2,170,314​​​​​​​​​​Weighted average shares for basic earnings per share​ 18,510​ 20,107​ 22,237Effect of dilutive stock equivalents​​ 593​​ 626​​ 562Weighted average shares for diluted earnings per share​ 19,103​ 20,733​ 22,799​​​​​​​​​​Basic earnings per share​$ 136.60​$ 120.83​$ 97.60Diluted earnings per share​$ 132.36​$ 117.19​$ 95.19​See Notes to Consolidated Financial Statements.AutoZone, Inc. Consolidated Statements of Comprehensive Income​​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands) 2023​2022​2021​​​​​​​​​​Net income​$ 2,528,426​$ 2,429,604​$ 2,170,314Other comprehensive income:​ ​ ​ Foreign currency translation adjustments​ 103,633​ 7,448​ 44,683Unrealized gains (losses) on marketable debt securities, net of taxes​ 320​ (2,760)​ (1,256)Net derivative activities, net of taxes​ 5,747​ 2,762​ 2,839Total other comprehensive income​ 109,700​ 7,450​ 46,266Comprehensive income​$ 2,638,126​$ 2,437,054​$ 2,216,580​(1)See Notes to Consolidated Financial Statements.​​ --- ## Modified: Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs **Key changes:** - Reworded sentence: "May 7, 2023 to June 3, 2023 86,678 ​ $ 2,560.49 ​ 86,678 ​ $ 621,625,545 June 4, 2023 to July 1, 2023 94,541 ​ 2,416.71 ​ 94,541 ​ ​ 2,393,147,061 July 2, 2023 to July 29, 2023 107,560 ​ 2,532.00 ​ 107,560 ​ ​ 2,120,805,558 July 30, 2023 to August 26, 2023 114,620 ​ ​ 2,499.71 ​ 114,620 ​ ​ 1,834,288,894 Total 403,399 ​ $ 2,501.93 ​ 403,399 ​ $ 1,834,288,894 ​ ​ 24 24 Table of ContentsThe Company also repurchased, at market value, an additional 4,886 and 7,611 shares in fiscal years 2022 and 2021, respectively, from employees electing to sell their stock under the Company's Eighth Amended and Restated Employee Stock Purchase Plan (as amended from time to time, the "Employee Plan"), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions." - Reworded sentence: "Under the Employee Plan, 5,183, 6,238 and 8,479 shares were sold to employees in fiscal 2023, 2022 and 2021, respectively." - Reworded sentence: "Purchases by executives under the Executive Plan were 689, 709 and 997 shares in fiscal 2023, 2022 and 2021, respectively." **Prior (2022):** May 8, 2022 to June 4, 2022 104,375 ​ $ 1,950.47 ​ 104,375 ​ $ 1,853,994,652 June 5, 2022 to July 2, 2022 124,813 ​ 2,091.49 ​ 124,813 ​ ​ 1,592,949,614 July 3, 2022 to July 30, 2022 145,865 ​ 2,158.08 ​ 145,865 ​ ​ 1,278,161,281 July 31, 2022 to August 27, 2022 98,751 ​ ​ 2,233.73 ​ 98,751 ​ ​ 1,057,578,284 Total 473,804 ​ $ 2,110.57 ​ 473,804 ​ $ 1,057,578,284 ​ The Company also repurchased, at market value, an additional 4,886, 7,611 and 8,287 shares in fiscal years 2022, 2021 and 2020, respectively, from employees electing to sell their stock under the Company's Eighth Amended and Restated Employee Stock Purchase Plan (as amended from time to time, the "Employee Plan"), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 6,238, 8,479 and 10,525 shares were sold to employees in fiscal 2022, 2021 and 2020, respectively. At August 27, 2022, 127,524 shares of common stock were reserved for future issuance under the Employee Plan. Once executives have reached the maximum purchases under the Employee Plan, the Sixth Amended and Restated Executive Stock Purchase Plan (the "Executive Plan") permits all eligible executives to purchase AutoZone's common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under the Executive Plan were 709, 997 and 1,204 shares in fiscal 2022, 2021 and 2020, respectively. At August 27, 2022, 233,655 shares of common stock were reserved for future issuance under the Executive Plan. 24 24 Table of ContentsStock Performance GraphThe graph below presents changes in the value of AutoZone's stock as compared to Standard & Poor's 500 Composite Index ("S&P 500") and to Standard & Poor's Retail Index ("S&P Retail Index") for the five-year period beginning August 26, 2017 and ending August 27, 2022.​Item 6. ReservedNot required.​25 Table of Contents Table of Contents Table of Contents Stock Performance GraphThe graph below presents changes in the value of AutoZone's stock as compared to Standard & Poor's 500 Composite Index ("S&P 500") and to Standard & Poor's Retail Index ("S&P Retail Index") for the five-year period beginning August 26, 2017 and ending August 27, 2022.​Item 6. ReservedNot required.​ **Current (2023):** May 7, 2023 to June 3, 2023 86,678 ​ $ 2,560.49 ​ 86,678 ​ $ 621,625,545 June 4, 2023 to July 1, 2023 94,541 ​ 2,416.71 ​ 94,541 ​ ​ 2,393,147,061 July 2, 2023 to July 29, 2023 107,560 ​ 2,532.00 ​ 107,560 ​ ​ 2,120,805,558 July 30, 2023 to August 26, 2023 114,620 ​ ​ 2,499.71 ​ 114,620 ​ ​ 1,834,288,894 Total 403,399 ​ $ 2,501.93 ​ 403,399 ​ $ 1,834,288,894 ​ ​ 24 24 Table of ContentsThe Company also repurchased, at market value, an additional 4,886 and 7,611 shares in fiscal years 2022 and 2021, respectively, from employees electing to sell their stock under the Company's Eighth Amended and Restated Employee Stock Purchase Plan (as amended from time to time, the "Employee Plan"), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 5,183, 6,238 and 8,479 shares were sold to employees in fiscal 2023, 2022 and 2021, respectively. At August 26, 2023, 122,341 shares of common stock were reserved for future issuance under the Employee Plan.Once executives have reached the maximum purchases under the Employee Plan, the Sixth Amended and Restated Executive Stock Purchase Plan (the "Executive Plan") permits all eligible executives to purchase AutoZone's common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under the Executive Plan were 689, 709 and 997 shares in fiscal 2023, 2022 and 2021, respectively. At August 26, 2023, 232,966 shares of common stock were reserved for future issuance under the Executive Plan.​25 Table of Contents Table of Contents Table of Contents The Company also repurchased, at market value, an additional 4,886 and 7,611 shares in fiscal years 2022 and 2021, respectively, from employees electing to sell their stock under the Company's Eighth Amended and Restated Employee Stock Purchase Plan (as amended from time to time, the "Employee Plan"), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 5,183, 6,238 and 8,479 shares were sold to employees in fiscal 2023, 2022 and 2021, respectively. At August 26, 2023, 122,341 shares of common stock were reserved for future issuance under the Employee Plan.Once executives have reached the maximum purchases under the Employee Plan, the Sixth Amended and Restated Executive Stock Purchase Plan (the "Executive Plan") permits all eligible executives to purchase AutoZone's common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under the Executive Plan were 689, 709 and 997 shares in fiscal 2023, 2022 and 2021, respectively. At August 26, 2023, 232,966 shares of common stock were reserved for future issuance under the Executive Plan.​ The Company also repurchased, at market value, an additional 4,886 and 7,611 shares in fiscal years 2022 and 2021, respectively, from employees electing to sell their stock under the Company's Eighth Amended and Restated Employee Stock Purchase Plan (as amended from time to time, the "Employee Plan"), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 5,183, 6,238 and 8,479 shares were sold to employees in fiscal 2023, 2022 and 2021, respectively. At August 26, 2023, 122,341 shares of common stock were reserved for future issuance under the Employee Plan. Once executives have reached the maximum purchases under the Employee Plan, the Sixth Amended and Restated Executive Stock Purchase Plan (the "Executive Plan") permits all eligible executives to purchase AutoZone's common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under the Executive Plan were 689, 709 and 997 shares in fiscal 2023, 2022 and 2021, respectively. At August 26, 2023, 232,966 shares of common stock were reserved for future issuance under the Executive Plan. ​ 25 25 Table of ContentsStock Performance GraphThe graph below presents changes in the value of AutoZone's stock as compared to Standard & Poor's 500 Composite Index ("S&P 500") and to Standard & Poor's Retail Index ("S&P Retail Index") for the five-year period beginning August 25, 2018 and ending August 26, 2023. ​Item 6. ReservedNot required.​26 Table of Contents Table of Contents Table of Contents Stock Performance GraphThe graph below presents changes in the value of AutoZone's stock as compared to Standard & Poor's 500 Composite Index ("S&P 500") and to Standard & Poor's Retail Index ("S&P Retail Index") for the five-year period beginning August 25, 2018 and ending August 26, 2023. ​Item 6. ReservedNot required.​ --- ## Modified: Derivatives **Key changes:** - Reworded sentence: "​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at August 28, 2021 ​ $ (287,638) ​ $ 589 ​ $ (20,937) ​ $ (307,986) Other Comprehensive Income (Loss) before reclassifications ​ 7,448 ​ (2,760) ​ - ​ 4,688 Amounts reclassified from Accumulated Other Comprehensive Loss(2) ​ - ​ - ​ 2,762 ​ 2,762 Balance at August 27, 2022 ​ ​ (280,190) ​ ​ (2,171) ​ ​ (18,175) ​ ​ (300,536) Other Comprehensive Income before reclassifications ​ 103,633 ​ ​ 472 ​ ​ 3,635 ​ 107,740 Amounts reclassified from Accumulated Other Comprehensive Loss(2) ​ - ​ ​ (152) ​ ​ 2,112 ​ 1,960 Balance at August 26, 2023 ​ $ (176,557) ​ $ (1,851) ​ $ (12,428) ​ $ (190,836) ​ ​" **Prior (2022):** ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at August 29, 2020 ​ $ (332,321) ​ ​ 1,845 ​ ​ (23,776) ​ $ (354,252) Other Comprehensive Income (Loss) before reclassifications ​ 44,683 ​ (1,379) ​ - ​ 43,304 Amounts reclassified from Accumulated Other Comprehensive Income(2) ​ - ​ 123 ​ 2,839 ​ 2,962 Balance at August 28, 2021 ​ ​ (287,638) ​ ​ 589 ​ ​ (20,937) ​ ​ (307,986) Other Comprehensive Income (Loss) before reclassifications ​ 7,448 ​ ​ (2,760) ​ ​ - ​ 4,688 Amounts reclassified from Accumulated Other Comprehensive Income(2) ​ - ​ ​ - ​ ​ 2,762 ​ 2,762 Balance at August 27, 2022 ​ $ (280,190) ​ $ (2,171) ​ $ (18,175) ​ $ (300,536) ​ ​ **Current (2023):** ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at August 28, 2021 ​ $ (287,638) ​ $ 589 ​ $ (20,937) ​ $ (307,986) Other Comprehensive Income (Loss) before reclassifications ​ 7,448 ​ (2,760) ​ - ​ 4,688 Amounts reclassified from Accumulated Other Comprehensive Loss(2) ​ - ​ - ​ 2,762 ​ 2,762 Balance at August 27, 2022 ​ ​ (280,190) ​ ​ (2,171) ​ ​ (18,175) ​ ​ (300,536) Other Comprehensive Income before reclassifications ​ 103,633 ​ ​ 472 ​ ​ 3,635 ​ 107,740 Amounts reclassified from Accumulated Other Comprehensive Loss(2) ​ - ​ ​ (152) ​ ​ 2,112 ​ 1,960 Balance at August 26, 2023 ​ $ (176,557) ​ $ (1,851) ​ $ (12,428) ​ $ (190,836) ​ ​ --- ## Modified: Liabilities and Stockholders' Deficit **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 7,201,281 ​ $ 7,301,347 Current portion of operating lease liabilities ​ ​ 257,256 ​ ​ 243,407 Accrued expenses and other ​ 1,000,841 ​ 1,008,701 Income taxes payable ​ 52,478 ​ 34,938 Total current liabilities ​ 8,511,856 ​ 8,588,393 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 7,668,549 ​ 6,122,092 Operating lease liabilities, less current portion ​ ​ 2,917,046 ​ ​ 2,837,973 Deferred income taxes ​ 536,278 ​ 533,884 Other long-term liabilities ​ 702,043 ​ 731,614 ​ ​ ​ ​ ​ ​ ​ 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; 18,936 shares issued and 17,857 shares outstanding as of August 26, 2023; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022 ​ 189 ​ 207 Additional paid-in capital ​ 1,484,992 ​ 1,354,252 Retained deficit ​ (2,959,278) ​ (1,330,067) Accumulated other comprehensive loss ​ (190,836) ​ (300,536) Treasury stock, at cost ​ (2,684,961) ​ (3,262,769) Total stockholders' deficit ​ (4,349,894) ​ (3,538,913) Total liabilities and stockholders' deficit ​ $ 15,985,878 ​ $ 15,275,043 ​ See Notes to Consolidated Financial Statements." **Prior (2022):** ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 7,301,347 ​ $ 6,013,924 Current portion of operating lease liabilities ​ ​ 243,407 ​ ​ 236,568 Accrued expenses and other ​ 1,008,701 ​ 1,039,788 Income taxes payable ​ 34,938 ​ 79,474 Total current liabilities ​ 8,588,393 ​ 7,369,754 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 6,122,092 ​ 5,269,820 Operating lease liabilities, less current portion ​ ​ 2,837,973 ​ ​ 2,632,842 Deferred income taxes ​ 533,884 ​ 337,125 Other long-term liabilities ​ 731,614 ​ 704,194 ​ ​ ​ ​ ​ ​ ​ 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 ​ 207 ​ 230 Additional paid-in capital ​ 1,354,252 ​ 1,465,669 Retained deficit ​ (1,330,067) ​ (419,829) Accumulated other comprehensive loss ​ (300,536) ​ (307,986) Treasury stock, at cost ​ (3,262,769) ​ (2,535,620) Total stockholders' deficit ​ (3,538,913) ​ (1,797,536) Total liabilities and stockholders' deficit ​ $ 15,275,043 ​ $ 14,516,199 ​ See Notes to Consolidated Financial Statements. 48 48 Table of ContentsAutoZone, Inc. Consolidated Statements of Cash Flows​​​​​​​​​​​​Year Ended​ ​August 27,​August 28,​August 29,(in thousands)​​2022​2021​2020​​​​​​​​​​Cash flows from operating activities: ​​​​ ​​ Net income​$2,429,604 ​$2,170,314​$ 1,732,972Adjustments to reconcile net income to net cash provided by operating activities:​​​​​​​ ​Depreciation and amortization of property and equipment and intangibles​​442,223 ​​407,683 ​ 397,466Amortization of debt origination fees​​11,276 ​​12,858 ​ 10,730Deferred income taxes​​185,594 ​​(34,432)​ 51,077Share-based compensation expense​​70,612 ​​56,112 ​ 44,835Changes in operating assets and liabilities:​​​​​​​ Accounts receivable​​(125,732)​​(11,039)​ (58,564)Merchandise inventories​​(990,686)​​(138,517)​ (184,174)Accounts payable and accrued expenses​​1,224,692 ​​1,029,912 ​ 531,131Income taxes payable​​(10,517)​​29,467 ​ 90,172Other, net​​(25,931)​​ (3,815)​ 104,463Net cash provided by operating activities​​ 3,211,135​​ 3,518,543​ 2,720,108​​​​​​​​​​Cash flows from investing activities:​​​​​​​ Capital expenditures​​(672,391)​​ (621,767)​ (457,736)Purchase of marketable debt securities​​(56,040)​​ (63,676)​ (90,949)Proceeds from sale of marketable debt securities​​53,882 ​​ 95,393​ 84,237Investment in tax credit equity investments​​(31,537)​​ (41,712)​​ (45,190)Proceeds from disposal of capital assets and other, net​​57,987 ​​ 29,984​ 11,763Net cash used in investing activities​​ (648,099)​​ (601,778)​ (497,875)​​​​​​​​​​Cash flows from financing activities:​​​​​​​ Net proceeds from/(payments of) commercial paper​​ 603,400​​ - ​ (1,030,000)Proceeds from issuance of debt​​ 750,000​​ - ​ 1,850,000Repayment of debt​​ (500,000)​​ (250,000)​ (500,000)Net proceeds from sale of common stock​​ 113,934​​ 187,757​ 68,392Purchase of treasury stock​​ (4,359,991)​​ (3,378,321)​ (930,903)Repayment of principal portion of finance lease liabilities​​ (67,182)​​ (59,853)​ (52,158)Other, net​​ (10,658)​​ - ​ (48,967)Net cash used in financing activities​​ (3,470,497)​​ (3,500,417)​ (643,636)​​​​​​​​​​Effect of exchange rate changes on cash​​ 506​​ 4,172​ (4,082)​​​​​​​​​​Net (decrease)/increase in cash and cash equivalents​​ (906,955)​​ (579,480)​ 1,574,515Cash and cash equivalents at beginning of period​​ 1,171,335​​ 1,750,815​ 176,300Cash and cash equivalents at end of period​$ 264,380​$ 1,171,335​$ 1,750,815​​​​​​​​​​Supplemental cash flow information:​​​​​​​ Interest paid, net of interest cost capitalized​$ 178,561​$ 187,948​$ 161,864Income taxes paid​$ 461,232​$ 574,854​$ 339,486Leased assets obtained in exchange for new finance lease liabilities​$ 100,711​$ 112,095​$ 115,867Leased assets obtained in exchange for new operating lease liabilities​$ 527,966​$ 444,626​$ 425,018​See Notes to Consolidated Financial Statements.​49 Table of Contents Table of Contents Table of Contents AutoZone, Inc. Consolidated Statements of Cash Flows​​​​​​​​​​​​Year Ended​ ​August 27,​August 28,​August 29,(in thousands)​​2022​2021​2020​​​​​​​​​​Cash flows from operating activities: ​​​​ ​​ Net income​$2,429,604 ​$2,170,314​$ 1,732,972Adjustments to reconcile net income to net cash provided by operating activities:​​​​​​​ ​Depreciation and amortization of property and equipment and intangibles​​442,223 ​​407,683 ​ 397,466Amortization of debt origination fees​​11,276 ​​12,858 ​ 10,730Deferred income taxes​​185,594 ​​(34,432)​ 51,077Share-based compensation expense​​70,612 ​​56,112 ​ 44,835Changes in operating assets and liabilities:​​​​​​​ Accounts receivable​​(125,732)​​(11,039)​ (58,564)Merchandise inventories​​(990,686)​​(138,517)​ (184,174)Accounts payable and accrued expenses​​1,224,692 ​​1,029,912 ​ 531,131Income taxes payable​​(10,517)​​29,467 ​ 90,172Other, net​​(25,931)​​ (3,815)​ 104,463Net cash provided by operating activities​​ 3,211,135​​ 3,518,543​ 2,720,108​​​​​​​​​​Cash flows from investing activities:​​​​​​​ Capital expenditures​​(672,391)​​ (621,767)​ (457,736)Purchase of marketable debt securities​​(56,040)​​ (63,676)​ (90,949)Proceeds from sale of marketable debt securities​​53,882 ​​ 95,393​ 84,237Investment in tax credit equity investments​​(31,537)​​ (41,712)​​ (45,190)Proceeds from disposal of capital assets and other, net​​57,987 ​​ 29,984​ 11,763Net cash used in investing activities​​ (648,099)​​ (601,778)​ (497,875)​​​​​​​​​​Cash flows from financing activities:​​​​​​​ Net proceeds from/(payments of) commercial paper​​ 603,400​​ - ​ (1,030,000)Proceeds from issuance of debt​​ 750,000​​ - ​ 1,850,000Repayment of debt​​ (500,000)​​ (250,000)​ (500,000)Net proceeds from sale of common stock​​ 113,934​​ 187,757​ 68,392Purchase of treasury stock​​ (4,359,991)​​ (3,378,321)​ (930,903)Repayment of principal portion of finance lease liabilities​​ (67,182)​​ (59,853)​ (52,158)Other, net​​ (10,658)​​ - ​ (48,967)Net cash used in financing activities​​ (3,470,497)​​ (3,500,417)​ (643,636)​​​​​​​​​​Effect of exchange rate changes on cash​​ 506​​ 4,172​ (4,082)​​​​​​​​​​Net (decrease)/increase in cash and cash equivalents​​ (906,955)​​ (579,480)​ 1,574,515Cash and cash equivalents at beginning of period​​ 1,171,335​​ 1,750,815​ 176,300Cash and cash equivalents at end of period​$ 264,380​$ 1,171,335​$ 1,750,815​​​​​​​​​​Supplemental cash flow information:​​​​​​​ Interest paid, net of interest cost capitalized​$ 178,561​$ 187,948​$ 161,864Income taxes paid​$ 461,232​$ 574,854​$ 339,486Leased assets obtained in exchange for new finance lease liabilities​$ 100,711​$ 112,095​$ 115,867Leased assets obtained in exchange for new operating lease liabilities​$ 527,966​$ 444,626​$ 425,018​See Notes to Consolidated Financial Statements.​ **Current (2023):** ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 7,201,281 ​ $ 7,301,347 Current portion of operating lease liabilities ​ ​ 257,256 ​ ​ 243,407 Accrued expenses and other ​ 1,000,841 ​ 1,008,701 Income taxes payable ​ 52,478 ​ 34,938 Total current liabilities ​ 8,511,856 ​ 8,588,393 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 7,668,549 ​ 6,122,092 Operating lease liabilities, less current portion ​ ​ 2,917,046 ​ ​ 2,837,973 Deferred income taxes ​ 536,278 ​ 533,884 Other long-term liabilities ​ 702,043 ​ 731,614 ​ ​ ​ ​ ​ ​ ​ 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; 18,936 shares issued and 17,857 shares outstanding as of August 26, 2023; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022 ​ 189 ​ 207 Additional paid-in capital ​ 1,484,992 ​ 1,354,252 Retained deficit ​ (2,959,278) ​ (1,330,067) Accumulated other comprehensive loss ​ (190,836) ​ (300,536) Treasury stock, at cost ​ (2,684,961) ​ (3,262,769) Total stockholders' deficit ​ (4,349,894) ​ (3,538,913) Total liabilities and stockholders' deficit ​ $ 15,985,878 ​ $ 15,275,043 ​ See Notes to Consolidated Financial Statements. 49 49 Table of ContentsAutoZone, Inc. Consolidated Statements of Cash Flows​​​​​​​​​​​​Year Ended​ ​August 26,​August 27,​August 28,(in thousands)​​2023​2022​2021​​​​​​​​​​Cash flows from operating activities: ​​​​ ​​ Net income​$2,528,426 ​$2,429,604​$ 2,170,314Adjustments to reconcile net income to net cash provided by operating activities:​​​​​​​ ​Depreciation and amortization of property and equipment​​497,577 ​​442,223 ​ 407,683 Other non-cash charges​​44,000 ​​15,000 ​ - Amortization of debt origination fees​​9,264 ​​11,276 ​ 12,858 Deferred income taxes​​(25,707)​​185,594 ​ (34,432)Share-based compensation expense​​93,087 ​​70,612 ​ 56,112 Changes in operating assets and liabilities:​​​​​​​ ​Accounts receivable​​(6,674)​​(125,732)​ (11,039)Merchandise inventories​​(89,180)​​(1,005,686)​ (138,517)Accounts payable and accrued expenses​​(183,679)​​1,224,692 ​ 1,029,912 Income taxes​​92,832 ​​(10,517)​ 29,467 Other, net​​(19,158)​​(25,931)​ (3,815)Net cash provided by operating activities​​ 2,940,788​​ 3,211,135​ 3,518,543​​​​​​​​​​Cash flows from investing activities:​​​​​​​ ​Capital expenditures​​(796,657)​​(672,391)​ (621,767)Purchase of marketable debt securities​​(66,917)​​(56,040)​ (63,676)Proceeds from sale of marketable debt securities​​58,357 ​​53,882 ​ 95,393Investment in tax credit equity investments​​(98,003)​​(31,537)​​ (41,712)Proceeds from disposal of capital assets and other, net​​27,042 ​​57,987 ​ 29,984Net cash used in investing activities​​ (876,178)​​ (648,099)​ (601,778)​​​​​​​​​​Cash flows from financing activities:​​​​​​​ ​Net proceeds from commercial paper​​ 606,200​​ 603,400​ - Proceeds from issuance of debt​​ 1,750,000​​ 750,000​ - Repayment of debt​​ (800,000)​​ (500,000)​​ (250,000)Net proceeds from sale of common stock​​ 182,494​​ 113,934​ 187,757Purchase of treasury stock​​ (3,699,552)​​ (4,359,991)​ (3,378,321)Repayment of principal portion of finance lease liabilities​​ (81,055)​​ (67,182)​ (59,853)Other, net​​ (18,169)​​ (10,658)​ - Net cash used in financing activities​​ (2,060,082)​​ (3,470,497)​ (3,500,417)​​​​​​​​​​Effect of exchange rate changes on cash​​ 8,146​​ 506​ 4,172​​​​​​​​​​Net increase/(decrease) in cash and cash equivalents​​ 12,674​​ (906,955)​ (579,480)Cash and cash equivalents at beginning of period​​ 264,380​​ 1,171,335​ 1,750,815Cash and cash equivalents at end of period​$ 277,054​$ 264,380​$ 1,171,335​​​​​​​​​​Supplemental cash flow information:​​​​​​​ Interest paid, net of interest cost capitalized​$ 260,866​$ 178,561​$ 187,948Income taxes paid​$ 570,250​$ 461,232​$ 574,854Leased assets obtained in exchange for new finance lease liabilities​$ 58,316​$ 100,711​$ 112,095Leased assets obtained in exchange for new operating lease liabilities​$ 428,150​$ 527,966​$ 444,626​See Notes to Consolidated Financial Statements.50 Table of Contents Table of Contents Table of Contents AutoZone, Inc. Consolidated Statements of Cash Flows​​​​​​​​​​​​Year Ended​ ​August 26,​August 27,​August 28,(in thousands)​​2023​2022​2021​​​​​​​​​​Cash flows from operating activities: ​​​​ ​​ Net income​$2,528,426 ​$2,429,604​$ 2,170,314Adjustments to reconcile net income to net cash provided by operating activities:​​​​​​​ ​Depreciation and amortization of property and equipment​​497,577 ​​442,223 ​ 407,683 Other non-cash charges​​44,000 ​​15,000 ​ - Amortization of debt origination fees​​9,264 ​​11,276 ​ 12,858 Deferred income taxes​​(25,707)​​185,594 ​ (34,432)Share-based compensation expense​​93,087 ​​70,612 ​ 56,112 Changes in operating assets and liabilities:​​​​​​​ ​Accounts receivable​​(6,674)​​(125,732)​ (11,039)Merchandise inventories​​(89,180)​​(1,005,686)​ (138,517)Accounts payable and accrued expenses​​(183,679)​​1,224,692 ​ 1,029,912 Income taxes​​92,832 ​​(10,517)​ 29,467 Other, net​​(19,158)​​(25,931)​ (3,815)Net cash provided by operating activities​​ 2,940,788​​ 3,211,135​ 3,518,543​​​​​​​​​​Cash flows from investing activities:​​​​​​​ ​Capital expenditures​​(796,657)​​(672,391)​ (621,767)Purchase of marketable debt securities​​(66,917)​​(56,040)​ (63,676)Proceeds from sale of marketable debt securities​​58,357 ​​53,882 ​ 95,393Investment in tax credit equity investments​​(98,003)​​(31,537)​​ (41,712)Proceeds from disposal of capital assets and other, net​​27,042 ​​57,987 ​ 29,984Net cash used in investing activities​​ (876,178)​​ (648,099)​ (601,778)​​​​​​​​​​Cash flows from financing activities:​​​​​​​ ​Net proceeds from commercial paper​​ 606,200​​ 603,400​ - Proceeds from issuance of debt​​ 1,750,000​​ 750,000​ - Repayment of debt​​ (800,000)​​ (500,000)​​ (250,000)Net proceeds from sale of common stock​​ 182,494​​ 113,934​ 187,757Purchase of treasury stock​​ (3,699,552)​​ (4,359,991)​ (3,378,321)Repayment of principal portion of finance lease liabilities​​ (81,055)​​ (67,182)​ (59,853)Other, net​​ (18,169)​​ (10,658)​ - Net cash used in financing activities​​ (2,060,082)​​ (3,470,497)​ (3,500,417)​​​​​​​​​​Effect of exchange rate changes on cash​​ 8,146​​ 506​ 4,172​​​​​​​​​​Net increase/(decrease) in cash and cash equivalents​​ 12,674​​ (906,955)​ (579,480)Cash and cash equivalents at beginning of period​​ 264,380​​ 1,171,335​ 1,750,815Cash and cash equivalents at end of period​$ 277,054​$ 264,380​$ 1,171,335​​​​​​​​​​Supplemental cash flow information:​​​​​​​ Interest paid, net of interest cost capitalized​$ 260,866​$ 178,561​$ 187,948Income taxes paid​$ 570,250​$ 461,232​$ 574,854Leased assets obtained in exchange for new finance lease liabilities​$ 58,316​$ 100,711​$ 112,095Leased assets obtained in exchange for new operating lease liabilities​$ 428,150​$ 527,966​$ 444,626​See Notes to Consolidated Financial Statements. --- ## Modified: AutoZone, Inc. Consolidated Statements of Income **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands, except per share data) ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales $ 17,457,209 $ 16,252,230 $ 14,629,585 Cost of sales, including warehouse and delivery expenses ​ ​ 8,386,787 ​ ​ 7,779,580 ​ ​ 6,911,800 Gross profit ​ ​ 9,070,422 ​ 8,472,650 ​ 7,717,785 Operating, selling, general and administrative expenses ​ ​ 5,596,436 ​ ​ 5,201,921 ​ ​ 4,773,258 Operating profit ​ ​ 3,473,986 ​ ​ 3,270,729 ​ ​ 2,944,527 Interest expense, net ​ ​ 306,372 ​ ​ 191,638 ​ ​ 195,337 Income before income taxes ​ ​ 3,167,614 ​ 3,079,091 ​ 2,749,190 Income tax expense ​ ​ 639,188 ​ ​ 649,487 ​ ​ 578,876 Net income ​ $ 2,528,426 ​ $ 2,429,604 ​ $ 2,170,314 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares for basic earnings per share ​ 18,510 ​ 20,107 ​ 22,237 Effect of dilutive stock equivalents ​ ​ 593 ​ ​ 626 ​ ​ 562 Weighted average shares for diluted earnings per share ​ 19,103 ​ 20,733 ​ 22,799 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share ​ $ 136.60 ​ $ 120.83 ​ $ 97.60 Diluted earnings per share ​ $ 132.36 ​ $ 117.19 ​ $ 95.19 ​ See Notes to Consolidated Financial Statements." **Prior (2022):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 27, ​ August 28, ​ August 29, (in thousands, except per share data) ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales $ 16,252,230 $ 14,629,585 $ 12,631,967 Cost of sales, including warehouse and delivery expenses ​ ​ 7,779,580 ​ ​ 6,911,800 ​ ​ 5,861,214 Gross profit ​ ​ 8,472,650 ​ 7,717,785 ​ 6,770,753 Operating, selling, general and administrative expenses ​ ​ 5,201,921 ​ ​ 4,773,258 ​ ​ 4,353,074 Operating profit ​ ​ 3,270,729 ​ ​ 2,944,527 ​ ​ 2,417,679 Interest expense, net ​ ​ 191,638 ​ ​ 195,337 ​ ​ 201,165 Income before income taxes ​ ​ 3,079,091 ​ 2,749,190 ​ 2,216,514 Income tax expense ​ ​ 649,487 ​ ​ 578,876 ​ ​ 483,542 Net income ​ $ 2,429,604 ​ $ 2,170,314 ​ $ 1,732,972 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares for basic earnings per share ​ 20,107 ​ 22,237 ​ 23,540 Effect of dilutive stock equivalents ​ ​ 626 ​ ​ 562 ​ ​ 553 Weighted average shares for diluted earnings per share ​ 20,733 ​ 22,799 ​ 24,093 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share ​ $ 120.83 ​ $ 97.60 ​ $ 73.62 Diluted earnings per share ​ $ 117.19 ​ $ 95.19 ​ $ 71.93 ​ See Notes to Consolidated Financial Statements. **Current (2023):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands, except per share data) ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales $ 17,457,209 $ 16,252,230 $ 14,629,585 Cost of sales, including warehouse and delivery expenses ​ ​ 8,386,787 ​ ​ 7,779,580 ​ ​ 6,911,800 Gross profit ​ ​ 9,070,422 ​ 8,472,650 ​ 7,717,785 Operating, selling, general and administrative expenses ​ ​ 5,596,436 ​ ​ 5,201,921 ​ ​ 4,773,258 Operating profit ​ ​ 3,473,986 ​ ​ 3,270,729 ​ ​ 2,944,527 Interest expense, net ​ ​ 306,372 ​ ​ 191,638 ​ ​ 195,337 Income before income taxes ​ ​ 3,167,614 ​ 3,079,091 ​ 2,749,190 Income tax expense ​ ​ 639,188 ​ ​ 649,487 ​ ​ 578,876 Net income ​ $ 2,528,426 ​ $ 2,429,604 ​ $ 2,170,314 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares for basic earnings per share ​ 18,510 ​ 20,107 ​ 22,237 Effect of dilutive stock equivalents ​ ​ 593 ​ ​ 626 ​ ​ 562 Weighted average shares for diluted earnings per share ​ 19,103 ​ 20,733 ​ 22,799 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share ​ $ 136.60 ​ $ 120.83 ​ $ 97.60 Diluted earnings per share ​ $ 132.36 ​ $ 117.19 ​ $ 95.19 ​ See Notes to Consolidated Financial Statements. --- ## Modified: Recently Adopted Accounting Pronouncements **Key changes:** - Reworded sentence: "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." **Prior (2022):** 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. **Current (2023):** 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. --- ## Modified: Same Store Sales **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ ​ Increase in domestic comparable store net sales(5) ​ 3.4 % 8.4 % 13.6 % ​ 7.4 % ​ 3.0 % Increase in international comparable store net sales(5) ​ ​ 29.3 % ​ 19.1 % ​ 22.5 % ​ (2.8) % ​ 4.6 % Increase in international comparable store net sales (constant currency)(5) ​ ​ 17.5 % ​ 19.2 % ​ 20.7 % ​ 4.7 % ​ 7.2 % Increase in total company comparable store net sales(5) ​ ​ 5.6 % ​ 9.2 % ​ 14.3 % ​ 6.6 % ​ 3.2 % Increase in total company comparable store net sales (constant currency)(5) ​ ​ 4.6 % ​ 9.2 % ​ 14.1 % ​ 7.2 % ​ 3.4 %" **Prior (2022):** ​ ​ ​ ​ ​ ​ Increase in domestic comparable store net sales(5) ​ 8.4 % 13.6 % 7.4 % 3.0 % 1.8 % **Current (2023):** ​ ​ ​ ​ ​ ​ ​ Increase in domestic comparable store net sales(5) ​ 3.4 % 8.4 % 13.6 % ​ 7.4 % ​ 3.0 % Increase in international comparable store net sales(5) ​ ​ 29.3 % ​ 19.1 % ​ 22.5 % ​ (2.8) % ​ 4.6 % Increase in international comparable store net sales (constant currency)(5) ​ ​ 17.5 % ​ 19.2 % ​ 20.7 % ​ 4.7 % ​ 7.2 % Increase in total company comparable store net sales(5) ​ ​ 5.6 % ​ 9.2 % ​ 14.3 % ​ 6.6 % ​ 3.2 % Increase in total company comparable store net sales (constant currency)(5) ​ ​ 4.6 % ​ 9.2 % ​ 14.1 % ​ 7.2 % ​ 3.4 % --- ## Modified: We may be unable to achieve the goals and aspirations set forth in our environmental, social and governance (ESG) report, particularly with respect to the reduction of greenhouse gas (GHG) emissions, or otherwise meet the expectations of our stakeholders with respect to ESG matters. **Key changes:** - Reworded sentence: "​ Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, and disclosure topics such as climate change, sustainability, natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report." - Reworded sentence: "Continued distress in global credit markets, business failures, civil unrest, inflation, rising interest rates, foreign exchange rate fluctuations, significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a public health crisis or pandemic (such as the COVID-19 pandemic), constraints on the global supply chain and other factors continue to affect the global economy." - Reworded sentence: "These could adversely affect our financial condition and operations.​Item 1B." - Reworded sentence: "PropertiesThe following table reflects the square footage and number of leased and owned properties for our stores as of August 26, 2023:​​​​​​ No." - Reworded sentence: "The ALLDATA headquarters in Elk Grove, California is leased, and we also own or lease other properties which are not material individually or in the aggregate.23 Table of Contents Table of Contents Table of Contents objectives are also captured within our ESG reporting, which is not incorporated by reference into and does not form any part of this report.​Our business, financial condition, results of operations and cash flows may be affected by litigation.​We are involved in lawsuits, regulatory investigations, governmental and other legal proceedings arising out of the ordinary course of business." **Prior (2022):** ​ Macroeconomic conditions impact both our customers and our suppliers. Moreover, the U.S. government continues to operate under historically large deficits and debt burden. Continued distress in global credit markets, business failures, civil unrest, inflation, rising interest rates, foreign exchange rate fluctuations, significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a public health crisis or pandemic (such as COVID-19), constraints on the global supply chain and other factors continue to affect the global economy. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. It is unclear how such factors could impact our business in the short term. Over a longer period of time, these macroeconomic and geo-political conditions could adversely affect our sales growth, margins and overhead. These could adversely affect our financial condition and operations. ​ ​ 22 22 Table of Contents​Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesThe following table reflects the square footage and number of leased and owned properties for our stores as of August 27, 2022:​​​​​​ No. of Store Square​​Stores​ Footage(1)Leased 3,786 25,063,509Owned 3,157 21,371,930Total 6,943 46,435,439​(1)Square footage excludes store support centers, regional offices, distribution centers and the areas that hold the local mega hub and hub expanded assortment.We have approximately 6.4 million square feet in distribution centers servicing our stores, of which approximately 1.5 million square feet is leased and the remainder is owned. Our 13 distribution centers are located in Arizona, California, Florida, Georgia, Illinois, Ohio, Pennsylvania, Tennessee, Texas, Washington, two in Mexico and one in Brazil. Our primary store support center is located in Memphis, Tennessee, and consists of approximately 320,000 square feet. We also have three additional store support centers located in Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. Our primary International Sourcing Office is located in Shanghai, China. The ALLDATA headquarters in Elk Grove, California is leased, and we also own or lease other properties which are not material in the aggregate.Item 3. Legal Proceedings Item 103 of Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will exceed an applied threshold of $1 million. Applying this threshold, there are no environmental matters to disclose for this period.We are involved in various other legal proceedings incidental to the conduct of our 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. We do not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to our financial condition, results of operations or cash flows.Item 4. Mine Safety DisclosuresNot applicable.23 Table of Contents Table of Contents Table of Contents ​Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesThe following table reflects the square footage and number of leased and owned properties for our stores as of August 27, 2022:​​​​​​ No. of Store Square​​Stores​ Footage(1)Leased 3,786 25,063,509Owned 3,157 21,371,930Total 6,943 46,435,439​(1)Square footage excludes store support centers, regional offices, distribution centers and the areas that hold the local mega hub and hub expanded assortment.We have approximately 6.4 million square feet in distribution centers servicing our stores, of which approximately 1.5 million square feet is leased and the remainder is owned. Our 13 distribution centers are located in Arizona, California, Florida, Georgia, Illinois, Ohio, Pennsylvania, Tennessee, Texas, Washington, two in Mexico and one in Brazil. Our primary store support center is located in Memphis, Tennessee, and consists of approximately 320,000 square feet. We also have three additional store support centers located in Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. Our primary International Sourcing Office is located in Shanghai, China. The ALLDATA headquarters in Elk Grove, California is leased, and we also own or lease other properties which are not material in the aggregate.Item 3. Legal Proceedings Item 103 of Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will exceed an applied threshold of $1 million. Applying this threshold, there are no environmental matters to disclose for this period.We are involved in various other legal proceedings incidental to the conduct of our 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. We do not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to our financial condition, results of operations or cash flows.Item 4. Mine Safety DisclosuresNot applicable. ​ Item 1B. Unresolved Staff Comments None. Item 2. Properties The following table reflects the square footage and number of leased and owned properties for our stores as of August 27, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ No. of **Current (2023):** ​ Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, and disclosure topics such as climate change, sustainability, natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. We strive to deliver shared value through our business and our diverse stakeholders expect us to make progress in certain ESG priority issue areas. A failure or perceived failure to meet these expectations could adversely affect public perception of our business, employee morale or customer or shareholder support. ​ We have announced certain aspirations and goals related to ESG matters, such as plans to reduce certain GHG emissions over time. Achievement of these aspirations, targets, plans and goals is subject to numerous risks and uncertainties, many of which are outside of our control. These risks and uncertainties include, but are not limited to: our ability to successfully identify and implement relevant strategies on a timely and cost-effective basis; our ability to achieve the anticipated benefits and cost savings of such strategies and actions; and the availability and cost of existing and future technologies, such as alternative fuel vehicles, off-site renewable energy, and other materials and components. It is possible that we may be unsuccessful in the achievement of our ESG goals, on a timely basis or at all, or that the costs to achieve those goals become prohibitively expensive. Furthermore, our stakeholders may not be satisfied with our efforts or the speed at which we are progressing towards any such aspirations and goals. A delay, failure or perceived failure or delay to meet our goals and aspirations could adversely affect public perception of our business, or we may lose shareholder support. Certain challenges we face in the achievement of our ESG 22 22 Table of Contentsobjectives are also captured within our ESG reporting, which is not incorporated by reference into and does not form any part of this report.​Our business, financial condition, results of operations and cash flows may be affected by litigation.​We are involved in lawsuits, regulatory investigations, governmental and other legal proceedings arising out of the ordinary course of business. Such matters involve significant expense and divert management's attention and resources from other matters. The damages sought against us in these proceedings may be material and may adversely affect our business, results of operations, financial condition and cash flows.​General Risks​Significant changes in macroeconomic and geo-political factors could adversely affect our financial condition and results of operations.​Macroeconomic conditions impact both our customers and our suppliers. Moreover, the U.S. government continues to operate under historically large deficits and debt burden. Continued distress in global credit markets, business failures, civil unrest, inflation, rising interest rates, foreign exchange rate fluctuations, significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a public health crisis or pandemic (such as the COVID-19 pandemic), constraints on the global supply chain and other factors continue to affect the global economy. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. It is unclear how such factors could impact our business in the short term. Over a longer period of time, these macroeconomic and geo-political conditions could adversely affect our sales growth, margins and overhead. These could adversely affect our financial condition and operations.​Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesThe following table reflects the square footage and number of leased and owned properties for our stores as of August 26, 2023:​​​​​​ No. of Store Square​​Stores​ Footage(1)Leased 3,931 26,158,259Owned 3,209 21,741,090Total 7,140 47,899,349​(1)Square footage excludes store support centers, regional offices, distribution centers and the areas that hold the local mega hub and hub expanded assortment.We have approximately 6.9 million square feet in distribution centers servicing our stores, of which approximately 2.0 million square feet is leased and the remainder is owned. We have 11 distribution centers located throughout the U.S., two in Mexico, and one in Brazil. Our primary store support center is located in Memphis, Tennessee, and consists of approximately 325,000 square feet. We also have three additional store support centers located in Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. Our primary International Sourcing Office is located in Shanghai, China. The ALLDATA headquarters in Elk Grove, California is leased, and we also own or lease other properties which are not material individually or in the aggregate.23 Table of Contents Table of Contents Table of Contents objectives are also captured within our ESG reporting, which is not incorporated by reference into and does not form any part of this report.​Our business, financial condition, results of operations and cash flows may be affected by litigation.​We are involved in lawsuits, regulatory investigations, governmental and other legal proceedings arising out of the ordinary course of business. Such matters involve significant expense and divert management's attention and resources from other matters. The damages sought against us in these proceedings may be material and may adversely affect our business, results of operations, financial condition and cash flows.​General Risks​Significant changes in macroeconomic and geo-political factors could adversely affect our financial condition and results of operations.​Macroeconomic conditions impact both our customers and our suppliers. Moreover, the U.S. government continues to operate under historically large deficits and debt burden. Continued distress in global credit markets, business failures, civil unrest, inflation, rising interest rates, foreign exchange rate fluctuations, significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a public health crisis or pandemic (such as the COVID-19 pandemic), constraints on the global supply chain and other factors continue to affect the global economy. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. It is unclear how such factors could impact our business in the short term. Over a longer period of time, these macroeconomic and geo-political conditions could adversely affect our sales growth, margins and overhead. These could adversely affect our financial condition and operations.​Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesThe following table reflects the square footage and number of leased and owned properties for our stores as of August 26, 2023:​​​​​​ No. of Store Square​​Stores​ Footage(1)Leased 3,931 26,158,259Owned 3,209 21,741,090Total 7,140 47,899,349​(1)Square footage excludes store support centers, regional offices, distribution centers and the areas that hold the local mega hub and hub expanded assortment.We have approximately 6.9 million square feet in distribution centers servicing our stores, of which approximately 2.0 million square feet is leased and the remainder is owned. We have 11 distribution centers located throughout the U.S., two in Mexico, and one in Brazil. Our primary store support center is located in Memphis, Tennessee, and consists of approximately 325,000 square feet. We also have three additional store support centers located in Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. Our primary International Sourcing Office is located in Shanghai, China. The ALLDATA headquarters in Elk Grove, California is leased, and we also own or lease other properties which are not material individually or in the aggregate. objectives are also captured within our ESG reporting, which is not incorporated by reference into and does not form any part of this report. ​ --- ## Modified: Results of Operations **Key changes:** - Reworded sentence: "The following table highlights selected financial information over the past 5 years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​" **Prior (2022):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ **Current (2023):** The following table highlights selected financial information over the past 5 years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ --- ## Modified: Stock Appreciation Rights **Key changes:** - Reworded sentence: "At August 26, 2023 and August 27, 2022, the Company had $11.8 million and $10.4 million, respectively of accrued compensation expense." - Reworded sentence: "No additional shares of stock or units will be issued in future years under the 2003 Comp Plan or prior plans." **Prior (2022):** 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. 59 59 Table of ContentsAs of August 27, 2022, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $10.1 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.5 years.Transactions related to restricted stock units for the fiscal year ended August 27, 2022 are as follows:​​​​​​​​​​Weighted-​ Number Average Grant​​of Shares​Date Fair Value​​​​​​Nonvested at August 28, 2021 15,751​$ 1,005.41Granted 5,551​​ 1,740.19Vested (6,572)​​ 1,159.53Forfeited (1,999)​​ 1,149.97Nonvested at August 27, 2022 12,731​$ 1,223.61​Stock Appreciation RightsAt 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 PlanThe 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 $3.1 million in fiscal 2020. Under the Employee Plan, 6,238, 8,479 and 10,525 shares were sold to employees in fiscal 2022, 2021 and 2020, respectively. The Company repurchased 4,886, 7,611 and 8,287 shares in fiscal 2022, 2021 and 2020, respectively, all at market value from employees electing to sell their stock. Purchases under the Executive Plan were 709, 997 and 1,204 shares in fiscal 2022, 2021 and 2020, respectively. Issuances of shares under the Employee Plan are netted against repurchases and such repurchases are not included in share repurchases disclosed in "Note K - Stock Repurchase Program." At August 27, 2022, 127,524 shares of common stock were reserved for future issuance under the Employee Plan, and 233,655 shares of common stock were reserved for future issuance under the Executive Plan.Note C - Accrued Expenses and OtherAccrued expenses and other consisted of the following:​​​​​​​​ August 27, August 28,(in thousands)​2022​2021​​​​​​​Accrued compensation, related payroll taxes and benefits​$ 414,892​$ 470,561Property, sales and other taxes​ 153,305​ 135,831Medical and casualty insurance claims (current portion)​ 115,201​ 121,237Finance lease liabilities​ 92,877​ 89,932Accrued gift cards​ 52,237​ 50,369Accrued interest​ 50,696​ 55,435Accrued sales and warranty returns​ 35,696​ 32,418Other​ 93,797​ 84,005​​$ 1,008,701​$ 1,039,788​​​​​​​​60 Table of Contents Table of Contents Table of Contents As of August 27, 2022, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $10.1 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.5 years.Transactions related to restricted stock units for the fiscal year ended August 27, 2022 are as follows:​​​​​​​​​​Weighted-​ Number Average Grant​​of Shares​Date Fair Value​​​​​​Nonvested at August 28, 2021 15,751​$ 1,005.41Granted 5,551​​ 1,740.19Vested (6,572)​​ 1,159.53Forfeited (1,999)​​ 1,149.97Nonvested at August 27, 2022 12,731​$ 1,223.61​Stock Appreciation RightsAt 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 PlanThe 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 $3.1 million in fiscal 2020. Under the Employee Plan, 6,238, 8,479 and 10,525 shares were sold to employees in fiscal 2022, 2021 and 2020, respectively. The Company repurchased 4,886, 7,611 and 8,287 shares in fiscal 2022, 2021 and 2020, respectively, all at market value from employees electing to sell their stock. Purchases under the Executive Plan were 709, 997 and 1,204 shares in fiscal 2022, 2021 and 2020, respectively. Issuances of shares under the Employee Plan are netted against repurchases and such repurchases are not included in share repurchases disclosed in "Note K - Stock Repurchase Program." At August 27, 2022, 127,524 shares of common stock were reserved for future issuance under the Employee Plan, and 233,655 shares of common stock were reserved for future issuance under the Executive Plan.Note C - Accrued Expenses and OtherAccrued expenses and other consisted of the following:​​​​​​​​ August 27, August 28,(in thousands)​2022​2021​​​​​​​Accrued compensation, related payroll taxes and benefits​$ 414,892​$ 470,561Property, sales and other taxes​ 153,305​ 135,831Medical and casualty insurance claims (current portion)​ 115,201​ 121,237Finance lease liabilities​ 92,877​ 89,932Accrued gift cards​ 52,237​ 50,369Accrued interest​ 50,696​ 55,435Accrued sales and warranty returns​ 35,696​ 32,418Other​ 93,797​ 84,005​​$ 1,008,701​$ 1,039,788​​​​​​​​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Number **Current (2023):** 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. 61 61 Table of ContentsEmployee Stock Purchase Plan and Executive Stock Purchase PlanThe 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 $2.5 million in fiscal 2021. Under the Employee Plan, 5,183, 6,238 and 8,479 shares were sold to employees in fiscal 2023, 2022 and 2021, respectively. The Company repurchased 4,886 and 7,611 shares in fiscal 2022 and 2021, respectively, all at market value from employees electing to sell their stock. Purchases under the Executive Plan were 689, 709 and 997 shares in fiscal 2023, 2022 and 2021, respectively. Issuances of shares under the Employee Plan are netted against repurchases and such repurchases are not included in share repurchases disclosed in "Note K - Stock Repurchase Program." At August 26, 2023, 122,341 shares of common stock were reserved for future issuance under the Employee Plan, and 232,966 shares of common stock were reserved for future issuance under the Executive Plan.Note C - Accrued Expenses and OtherAccrued expenses and other consisted of the following:​​​​​​​​ August 26, August 27,(in thousands)​2023​2022​​​​​​​Accrued compensation, related payroll taxes and benefits​$ 343,379​$ 414,892Property, sales and other taxes​ 165,731​ 153,305Medical and casualty insurance claims (current portion)​ 127,624​ 115,201Finance lease liabilities​ 86,916​ 92,877Accrued gift cards​ 59,254​ 52,237Accrued interest​ 54,493​ 50,696Accrued sales and warranty returns​ 43,355​ 35,696Other​ 120,089​ 93,797​​$ 1,000,841​$ 1,008,701​​​​​​​​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 $2.0 million for general and product liability.​Note D - Income Taxes The components of income from continuing operations before income taxes are as follows:​​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands)​2023​2022​2021​​​​​​​​​​Domestic​$ 2,621,714​$ 2,429,262​$ 2,436,548International​ 545,900​ 649,829​ 312,642​​$ 3,167,614​$ 3,079,091 $ 2,749,190​62 Table of Contents Table of Contents Table of Contents Employee Stock Purchase Plan and Executive Stock Purchase PlanThe 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 $2.5 million in fiscal 2021. Under the Employee Plan, 5,183, 6,238 and 8,479 shares were sold to employees in fiscal 2023, 2022 and 2021, respectively. The Company repurchased 4,886 and 7,611 shares in fiscal 2022 and 2021, respectively, all at market value from employees electing to sell their stock. Purchases under the Executive Plan were 689, 709 and 997 shares in fiscal 2023, 2022 and 2021, respectively. Issuances of shares under the Employee Plan are netted against repurchases and such repurchases are not included in share repurchases disclosed in "Note K - Stock Repurchase Program." At August 26, 2023, 122,341 shares of common stock were reserved for future issuance under the Employee Plan, and 232,966 shares of common stock were reserved for future issuance under the Executive Plan.Note C - Accrued Expenses and OtherAccrued expenses and other consisted of the following:​​​​​​​​ August 26, August 27,(in thousands)​2023​2022​​​​​​​Accrued compensation, related payroll taxes and benefits​$ 343,379​$ 414,892Property, sales and other taxes​ 165,731​ 153,305Medical and casualty insurance claims (current portion)​ 127,624​ 115,201Finance lease liabilities​ 86,916​ 92,877Accrued gift cards​ 59,254​ 52,237Accrued interest​ 54,493​ 50,696Accrued sales and warranty returns​ 43,355​ 35,696Other​ 120,089​ 93,797​​$ 1,000,841​$ 1,008,701​​​​​​​​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 $2.0 million for general and product liability.​Note D - Income Taxes The components of income from continuing operations before income taxes are as follows:​​​​​​​​​​​​​Year Ended​​August 26,​August 27,​August 28,(in thousands)​2023​2022​2021​​​​​​​​​​Domestic​$ 2,621,714​$ 2,429,262​$ 2,436,548International​ 545,900​ 649,829​ 312,642​​$ 3,167,614​$ 3,079,091 $ 2,749,190​ --- ## Modified: Store Square **Key changes:** - Reworded sentence: "​ ​ Stores ​ Footage(1) Leased 3,931 26,158,259 Owned 3,209 21,741,090 Total 7,140 47,899,349 ​ We have approximately 6.9 million square feet in distribution centers servicing our stores, of which approximately 2.0 million square feet is leased and the remainder is owned." - Reworded sentence: "The ALLDATA headquarters in Elk Grove, California is leased, and we also own or lease other properties which are not material individually or in the aggregate." - Added sentence: "Additionally, we are not involved in any environmental proceeding in which a governmental authority is a party, and such proceeding involves potential monetary sanctions that we reasonably believe will exceed an applied threshold of $1 million." - Reworded sentence: "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market on which our common stock is traded is the New York Stock Exchange under the symbol "AZO." On October 16, 2023, there were 1,703 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings." - Removed sentence: "Our ability to pay dividends is subject to limitations imposed by Nevada law." **Prior (2022):** ​ ​ Stores ​ Footage(1) Leased 3,786 25,063,509 Owned 3,157 21,371,930 Total 6,943 46,435,439 ​ We have approximately 6.4 million square feet in distribution centers servicing our stores, of which approximately 1.5 million square feet is leased and the remainder is owned. Our 13 distribution centers are located in Arizona, California, Florida, Georgia, Illinois, Ohio, Pennsylvania, Tennessee, Texas, Washington, two in Mexico and one in Brazil. Our primary store support center is located in Memphis, Tennessee, and consists of approximately 320,000 square feet. We also have three additional store support centers located in Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. Our primary International Sourcing Office is located in Shanghai, China. The ALLDATA headquarters in Elk Grove, California is leased, and we also own or lease other properties which are not material in the aggregate. Item 3. Legal Proceedings Item 103 of Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will exceed an applied threshold of $1 million. Applying this threshold, there are no environmental matters to disclose for this period. We are involved in various other legal proceedings incidental to the conduct of our 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. We do not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to our financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures Not applicable. 23 23 Table of ContentsPART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesThe principal market on which our common stock is traded is the New York Stock Exchange under the symbol "AZO." On October 17, 2022, there were 1,829 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings.We currently do not pay a dividend on our common stock. Our ability to pay dividends is subject to limitations imposed by Nevada law. Any future payment of dividends would be dependent upon our financial condition, capital requirements, earnings and cash flow.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 program was most recently amended on October 4, 2022, to increase the repurchase authorization by $2.5 billion, bringing the total value of authorized share repurchases to $33.7 billion.Shares of common stock repurchased by the Company during the quarter ended August 27, 2022 were as follows:​​​​​​​​​​​PeriodTotal Number of Shares Purchased​​Average Price Paid per Share​Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs​​Maximum Dollar Value that May Yet Be Purchased Under the Plans or ProgramsMay 8, 2022 to June 4, 2022 104,375​$ 1,950.47​ 104,375​$1,853,994,652June 5, 2022 to July 2, 2022 124,813​ 2,091.49​ 124,813​​1,592,949,614July 3, 2022 to July 30, 2022 145,865​ 2,158.08​ 145,865​​1,278,161,281July 31, 2022 to August 27, 2022 98,751​​ 2,233.73​ 98,751​​1,057,578,284Total 473,804​$ 2,110.57​ 473,804​$1,057,578,284​The Company also repurchased, at market value, an additional 4,886, 7,611 and 8,287 shares in fiscal years 2022, 2021 and 2020, respectively, from employees electing to sell their stock under the Company's Eighth Amended and Restated Employee Stock Purchase Plan (as amended from time to time, the "Employee Plan"), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 6,238, 8,479 and 10,525 shares were sold to employees in fiscal 2022, 2021 and 2020, respectively. At August 27, 2022, 127,524 shares of common stock were reserved for future issuance under the Employee Plan.Once executives have reached the maximum purchases under the Employee Plan, the Sixth Amended and Restated Executive Stock Purchase Plan (the "Executive Plan") permits all eligible executives to purchase AutoZone's common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under the Executive Plan were 709, 997 and 1,204 shares in fiscal 2022, 2021 and 2020, respectively. At August 27, 2022, 233,655 shares of common stock were reserved for future issuance under the Executive Plan.24 Table of Contents Table of Contents Table of Contents PART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesThe principal market on which our common stock is traded is the New York Stock Exchange under the symbol "AZO." On October 17, 2022, there were 1,829 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings.We currently do not pay a dividend on our common stock. Our ability to pay dividends is subject to limitations imposed by Nevada law. Any future payment of dividends would be dependent upon our financial condition, capital requirements, earnings and cash flow.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 program was most recently amended on October 4, 2022, to increase the repurchase authorization by $2.5 billion, bringing the total value of authorized share repurchases to $33.7 billion.Shares of common stock repurchased by the Company during the quarter ended August 27, 2022 were as follows:​​​​​​​​​​​PeriodTotal Number of Shares Purchased​​Average Price Paid per Share​Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs​​Maximum Dollar Value that May Yet Be Purchased Under the Plans or ProgramsMay 8, 2022 to June 4, 2022 104,375​$ 1,950.47​ 104,375​$1,853,994,652June 5, 2022 to July 2, 2022 124,813​ 2,091.49​ 124,813​​1,592,949,614July 3, 2022 to July 30, 2022 145,865​ 2,158.08​ 145,865​​1,278,161,281July 31, 2022 to August 27, 2022 98,751​​ 2,233.73​ 98,751​​1,057,578,284Total 473,804​$ 2,110.57​ 473,804​$1,057,578,284​The Company also repurchased, at market value, an additional 4,886, 7,611 and 8,287 shares in fiscal years 2022, 2021 and 2020, respectively, from employees electing to sell their stock under the Company's Eighth Amended and Restated Employee Stock Purchase Plan (as amended from time to time, the "Employee Plan"), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 6,238, 8,479 and 10,525 shares were sold to employees in fiscal 2022, 2021 and 2020, respectively. At August 27, 2022, 127,524 shares of common stock were reserved for future issuance under the Employee Plan.Once executives have reached the maximum purchases under the Employee Plan, the Sixth Amended and Restated Executive Stock Purchase Plan (the "Executive Plan") permits all eligible executives to purchase AutoZone's common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under the Executive Plan were 709, 997 and 1,204 shares in fiscal 2022, 2021 and 2020, respectively. At August 27, 2022, 233,655 shares of common stock were reserved for future issuance under the Executive Plan. PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market on which our common stock is traded is the New York Stock Exchange under the symbol "AZO." On October 17, 2022, there were 1,829 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings. We currently do not pay a dividend on our common stock. Our ability to pay dividends is subject to limitations imposed by Nevada law. Any future payment of dividends would be dependent upon our financial condition, capital requirements, earnings and cash flow. 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 program was most recently amended on October 4, 2022, to increase the repurchase authorization by $2.5 billion, bringing the total value of authorized share repurchases to $33.7 billion. Shares of common stock repurchased by the Company during the quarter ended August 27, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period **Current (2023):** ​ ​ Stores ​ Footage(1) Leased 3,931 26,158,259 Owned 3,209 21,741,090 Total 7,140 47,899,349 ​ We have approximately 6.9 million square feet in distribution centers servicing our stores, of which approximately 2.0 million square feet is leased and the remainder is owned. We have 11 distribution centers located throughout the U.S., two in Mexico, and one in Brazil. Our primary store support center is located in Memphis, Tennessee, and consists of approximately 325,000 square feet. We also have three additional store support centers located in Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. Our primary International Sourcing Office is located in Shanghai, China. The ALLDATA headquarters in Elk Grove, California is leased, and we also own or lease other properties which are not material individually or in the aggregate. 23 23 Table of ContentsItem 3. Legal Proceedings We are involved in various other legal proceedings incidental to the conduct of our 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. We do not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to our financial condition, results of operations or cash flows.Additionally, we are not involved in any environmental proceeding in which a governmental authority is a party, and such proceeding involves potential monetary sanctions that we reasonably believe will exceed an applied threshold of $1 million.Item 4. Mine Safety DisclosuresNot applicable.PART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesThe principal market on which our common stock is traded is the New York Stock Exchange under the symbol "AZO." On October 16, 2023, there were 1,703 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings.We currently do not pay a dividend on our common stock. Any future payment of dividends would be dependent upon our financial condition, capital requirements, earnings and cash flow.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 June 14, 2023, the Board of Directors authorized the repurchase of an additional $2.0 billion of the Company's common stock, bringing the total value of authorized share repurchases to $35.7 billion.Shares of common stock repurchased by the Company during the quarter ended August 26, 2023 were as follows:​​​​​​​​​​​PeriodTotal Number of Shares Purchased​​Average Price Paid per Share (1)​Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs​​Maximum Dollar Value that May Yet Be Purchased Under the Plans or ProgramsMay 7, 2023 to June 3, 2023 86,678​$ 2,560.49​ 86,678​$621,625,545June 4, 2023 to July 1, 2023 94,541​ 2,416.71​ 94,541​​2,393,147,061July 2, 2023 to July 29, 2023 107,560​ 2,532.00​ 107,560​​2,120,805,558July 30, 2023 to August 26, 2023 114,620​​ 2,499.71​ 114,620​​1,834,288,894Total 403,399​$ 2,501.93​ 403,399​$ 1,834,288,894​(1)Average price per share includes excise tax assessed at one percent of the fair market value of net stock repurchases.​24 Table of Contents Table of Contents Table of Contents Item 3. Legal Proceedings We are involved in various other legal proceedings incidental to the conduct of our 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. We do not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to our financial condition, results of operations or cash flows.Additionally, we are not involved in any environmental proceeding in which a governmental authority is a party, and such proceeding involves potential monetary sanctions that we reasonably believe will exceed an applied threshold of $1 million.Item 4. Mine Safety DisclosuresNot applicable.PART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesThe principal market on which our common stock is traded is the New York Stock Exchange under the symbol "AZO." On October 16, 2023, there were 1,703 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings.We currently do not pay a dividend on our common stock. Any future payment of dividends would be dependent upon our financial condition, capital requirements, earnings and cash flow.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 June 14, 2023, the Board of Directors authorized the repurchase of an additional $2.0 billion of the Company's common stock, bringing the total value of authorized share repurchases to $35.7 billion.Shares of common stock repurchased by the Company during the quarter ended August 26, 2023 were as follows:​​​​​​​​​​​PeriodTotal Number of Shares Purchased​​Average Price Paid per Share (1)​Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs​​Maximum Dollar Value that May Yet Be Purchased Under the Plans or ProgramsMay 7, 2023 to June 3, 2023 86,678​$ 2,560.49​ 86,678​$621,625,545June 4, 2023 to July 1, 2023 94,541​ 2,416.71​ 94,541​​2,393,147,061July 2, 2023 to July 29, 2023 107,560​ 2,532.00​ 107,560​​2,120,805,558July 30, 2023 to August 26, 2023 114,620​​ 2,499.71​ 114,620​​1,834,288,894Total 403,399​$ 2,501.93​ 403,399​$ 1,834,288,894​(1)Average price per share includes excise tax assessed at one percent of the fair market value of net stock repurchases.​ Item 3. Legal Proceedings We are involved in various other legal proceedings incidental to the conduct of our 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. We do not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to our financial condition, results of operations or cash flows. Additionally, we are not involved in any environmental proceeding in which a governmental authority is a party, and such proceeding involves potential monetary sanctions that we reasonably believe will exceed an applied threshold of $1 million. Item 4. Mine Safety Disclosures Not applicable. PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market on which our common stock is traded is the New York Stock Exchange under the symbol "AZO." On October 16, 2023, there were 1,703 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings. We currently do not pay a dividend on our common stock. Any future payment of dividends would be dependent upon our financial condition, capital requirements, earnings and cash flow. 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 June 14, 2023, the Board of Directors authorized the repurchase of an additional $2.0 billion of the Company's common stock, bringing the total value of authorized share repurchases to $35.7 billion. Shares of common stock repurchased by the Company during the quarter ended August 26, 2023 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period --- ## Modified: Date Fair Value **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ Nonvested at August 27, 2022 12,731 ​ $ 1,223.61 Granted 3,584 ​ ​ 2,267.41 Vested (6,643) ​ ​ 1,276.36 Forfeited (1,539) ​ ​ 1,581.25 Nonvested at August 26, 2023 8,133 ​ $ 1,572.87 ​" **Prior (2022):** ​ ​ ​ ​ ​ ​ Nonvested at August 28, 2021 15,751 ​ $ 1,005.41 Granted 5,551 ​ ​ 1,740.19 Vested (6,572) ​ ​ 1,159.53 Forfeited (1,999) ​ ​ 1,149.97 Nonvested at August 27, 2022 12,731 ​ $ 1,223.61 ​ **Current (2023):** ​ ​ ​ ​ ​ ​ Nonvested at August 27, 2022 12,731 ​ $ 1,223.61 Granted 3,584 ​ ​ 2,267.41 Vested (6,643) ​ ​ 1,276.36 Forfeited (1,539) ​ ​ 1,581.25 Nonvested at August 26, 2023 8,133 ​ $ 1,572.87 ​ --- ## Modified: AutoZone, Inc. Consolidated Balance Sheets **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 26, ​ August 27, (in thousands) ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ Current assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 277,054 ​ $ 264,380 Accounts receivable ​ 520,385 ​ 504,886 Merchandise inventories ​ 5,764,143 ​ 5,638,004 Other current assets ​ 217,844 ​ 220,714 Total current assets ​ 6,779,426 ​ 6,627,984 ​ ​ ​ ​ ​ ​ ​ Property and equipment: ​ ​ ​ ​ ​ ​ Land ​ 1,367,391 ​ 1,299,981 Buildings and improvements ​ 4,860,216 ​ 4,486,676 Equipment ​ 2,972,879 ​ 2,650,831 Leasehold improvements ​ 831,508 ​ 724,095 Construction in progress ​ 305,896 ​ 291,588 Property and equipment ​ 10,337,890 ​ 9,453,171 Less: Accumulated depreciation and amortization ​ (4,741,342) ​ (4,282,752) ​ ​ 5,596,548 ​ 5,170,419 ​ ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets ​ ​ 2,998,097 ​ ​ 2,918,817 Goodwill ​ 302,645 ​ 302,645 Deferred income taxes ​ 86,002 ​ 52,047 Other long-term assets ​ 223,160 ​ 203,131 Total long-term assets ​ 3,609,904 ​ 3,476,640 Total assets ​ $ 15,985,878 ​ $ 15,275,043 ​ ​ ​ ​ ​ ​ ​" **Prior (2022):** ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, ​ August 28, (in thousands) ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ Current assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 264,380 ​ $ 1,171,335 Accounts receivable ​ 504,886 ​ 378,392 Merchandise inventories ​ 5,638,004 ​ 4,639,813 Other current assets ​ 220,714 ​ 225,763 Total current assets ​ 6,627,984 ​ 6,415,303 ​ ​ ​ ​ ​ ​ ​ Property and equipment: ​ ​ ​ ​ ​ ​ Land ​ 1,299,981 ​ 1,261,509 Buildings and improvements ​ 4,486,676 ​ 4,277,593 Equipment ​ 2,650,831 ​ 2,407,046 Leasehold improvements ​ 724,095 ​ 644,345 Construction in progress ​ 291,588 ​ 216,685 Property and equipment ​ 9,453,171 ​ 8,807,178 Less: Accumulated depreciation and amortization ​ (4,282,752) ​ (3,950,287) ​ ​ 5,170,419 ​ 4,856,891 ​ ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets ​ ​ 2,918,817 ​ ​ 2,718,712 Goodwill ​ 302,645 ​ 302,645 Deferred income taxes ​ 52,047 ​ 41,043 Other long-term assets ​ 203,131 ​ 181,605 ​ ​ 3,476,640 ​ 3,244,005 Total assets ​ $ 15,275,043 ​ $ 14,516,199 ​ ​ ​ ​ ​ ​ ​ **Current (2023):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 26, ​ August 27, (in thousands) ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ Current assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 277,054 ​ $ 264,380 Accounts receivable ​ 520,385 ​ 504,886 Merchandise inventories ​ 5,764,143 ​ 5,638,004 Other current assets ​ 217,844 ​ 220,714 Total current assets ​ 6,779,426 ​ 6,627,984 ​ ​ ​ ​ ​ ​ ​ Property and equipment: ​ ​ ​ ​ ​ ​ Land ​ 1,367,391 ​ 1,299,981 Buildings and improvements ​ 4,860,216 ​ 4,486,676 Equipment ​ 2,972,879 ​ 2,650,831 Leasehold improvements ​ 831,508 ​ 724,095 Construction in progress ​ 305,896 ​ 291,588 Property and equipment ​ 10,337,890 ​ 9,453,171 Less: Accumulated depreciation and amortization ​ (4,741,342) ​ (4,282,752) ​ ​ 5,596,548 ​ 5,170,419 ​ ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets ​ ​ 2,998,097 ​ ​ 2,918,817 Goodwill ​ 302,645 ​ 302,645 Deferred income taxes ​ 86,002 ​ 52,047 Other long-term assets ​ 223,160 ​ 203,131 Total long-term assets ​ 3,609,904 ​ 3,476,640 Total assets ​ $ 15,985,878 ​ $ 15,275,043 ​ ​ ​ ​ ​ ​ ​ --- ## Modified: AutoZone, Inc. Consolidated Statements of Comprehensive Income **Key changes:** - Reworded sentence: "​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands) 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 2,528,426 ​ $ 2,429,604 ​ $ 2,170,314 Other comprehensive income: ​ ​ ​ Foreign currency translation adjustments ​ 103,633 ​ 7,448 ​ 44,683 Unrealized gains (losses) on marketable debt securities, net of taxes ​ 320 ​ (2,760) ​ (1,256) Net derivative activities, net of taxes ​ 5,747 ​ 2,762 ​ 2,839 Total other comprehensive income ​ 109,700 ​ 7,450 ​ 46,266 Comprehensive income ​ $ 2,638,126 ​ $ 2,437,054 ​ $ 2,216,580 ​ See Notes to Consolidated Financial Statements." **Prior (2022):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 27, ​ August 28, ​ August 29, (in thousands) 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 2,429,604 ​ $ 2,170,314 ​ $ 1,732,972 Other comprehensive income (loss): ​ ​ ​ Foreign currency translation adjustments ​ 7,448 ​ 44,683 ​ (66,723) Unrealized (losses) gains on marketable debt securities, net of taxes ​ (2,760) ​ (1,256) ​ 1,254 Net derivative activities, net of taxes ​ 2,762 ​ 2,839 ​ (19,461) Total other comprehensive income (loss) ​ 7,450 ​ 46,266 ​ (84,930) Comprehensive income ​ $ 2,437,054 ​ $ 2,216,580 ​ $ 1,648,042 ​ See Notes to Consolidated Financial Statements. ​ ​ 47 47 Table of ContentsAutoZone, Inc. Consolidated Balance Sheets​​​​​​​​​August 27,​August 28, (in thousands)​2022​2021​​​​​​​Assets​​​ ​ Current assets:​​​ ​ Cash and cash equivalents​$ 264,380​$1,171,335Accounts receivable​ 504,886​ 378,392Merchandise inventories​ 5,638,004​ 4,639,813Other current assets​ 220,714​ 225,763Total current assets​ 6,627,984​ 6,415,303​​​​​​​Property and equipment:​​​​​​Land​ 1,299,981​ 1,261,509Buildings and improvements​ 4,486,676​ 4,277,593Equipment​ 2,650,831​ 2,407,046Leasehold improvements​ 724,095​ 644,345Construction in progress​ 291,588​ 216,685Property and equipment​ 9,453,171​ 8,807,178Less: Accumulated depreciation and amortization​ (4,282,752)​ (3,950,287)​​ 5,170,419​ 4,856,891​​​​​​​Operating lease right-of-use assets​​ 2,918,817​​ 2,718,712Goodwill​ 302,645​ 302,645Deferred income taxes​ 52,047​ 41,043Other long-term assets​ 203,131​ 181,605​​ 3,476,640​ 3,244,005Total assets​$ 15,275,043​$ 14,516,199​​​​​​​Liabilities and Stockholders' Deficit​​​​​​Current liabilities:​​​​​​Accounts payable​$ 7,301,347​$ 6,013,924Current portion of operating lease liabilities​​ 243,407​​ 236,568Accrued expenses and other​ 1,008,701​ 1,039,788Income taxes payable​ 34,938​ 79,474Total current liabilities​ 8,588,393​ 7,369,754​​​​​​​Long-term debt​ 6,122,092​ 5,269,820Operating lease liabilities, less current portion​​ 2,837,973​​ 2,632,842Deferred income taxes​ 533,884​ 337,125Other long-term liabilities​ 731,614​ 704,194​​​​​​​Commitments and contingencies​​​​​​​​​​​​​Stockholders' deficit:​​​​​​Preferred stock, authorized 1,000 shares; no shares issued​ - ​ - Common stock, par value $.01 per share, authorized 200,000 shares; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022; 23,007 shares issued and 21,138 shares outstanding as of August 28, 2021​ 207​ 230Additional paid-in capital​ 1,354,252​ 1,465,669Retained deficit​ (1,330,067)​ (419,829)Accumulated other comprehensive loss​ (300,536)​ (307,986)Treasury stock, at cost​ (3,262,769)​ (2,535,620)Total stockholders' deficit​ (3,538,913)​ (1,797,536)Total liabilities and stockholders' deficit​$ 15,275,043​$ 14,516,199​See Notes to Consolidated Financial Statements.48 Table of Contents Table of Contents Table of Contents AutoZone, Inc. Consolidated Balance Sheets​​​​​​​​​August 27,​August 28, (in thousands)​2022​2021​​​​​​​Assets​​​ ​ Current assets:​​​ ​ Cash and cash equivalents​$ 264,380​$1,171,335Accounts receivable​ 504,886​ 378,392Merchandise inventories​ 5,638,004​ 4,639,813Other current assets​ 220,714​ 225,763Total current assets​ 6,627,984​ 6,415,303​​​​​​​Property and equipment:​​​​​​Land​ 1,299,981​ 1,261,509Buildings and improvements​ 4,486,676​ 4,277,593Equipment​ 2,650,831​ 2,407,046Leasehold improvements​ 724,095​ 644,345Construction in progress​ 291,588​ 216,685Property and equipment​ 9,453,171​ 8,807,178Less: Accumulated depreciation and amortization​ (4,282,752)​ (3,950,287)​​ 5,170,419​ 4,856,891​​​​​​​Operating lease right-of-use assets​​ 2,918,817​​ 2,718,712Goodwill​ 302,645​ 302,645Deferred income taxes​ 52,047​ 41,043Other long-term assets​ 203,131​ 181,605​​ 3,476,640​ 3,244,005Total assets​$ 15,275,043​$ 14,516,199​​​​​​​Liabilities and Stockholders' Deficit​​​​​​Current liabilities:​​​​​​Accounts payable​$ 7,301,347​$ 6,013,924Current portion of operating lease liabilities​​ 243,407​​ 236,568Accrued expenses and other​ 1,008,701​ 1,039,788Income taxes payable​ 34,938​ 79,474Total current liabilities​ 8,588,393​ 7,369,754​​​​​​​Long-term debt​ 6,122,092​ 5,269,820Operating lease liabilities, less current portion​​ 2,837,973​​ 2,632,842Deferred income taxes​ 533,884​ 337,125Other long-term liabilities​ 731,614​ 704,194​​​​​​​Commitments and contingencies​​​​​​​​​​​​​Stockholders' deficit:​​​​​​Preferred stock, authorized 1,000 shares; no shares issued​ - ​ - Common stock, par value $.01 per share, authorized 200,000 shares; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022; 23,007 shares issued and 21,138 shares outstanding as of August 28, 2021​ 207​ 230Additional paid-in capital​ 1,354,252​ 1,465,669Retained deficit​ (1,330,067)​ (419,829)Accumulated other comprehensive loss​ (300,536)​ (307,986)Treasury stock, at cost​ (3,262,769)​ (2,535,620)Total stockholders' deficit​ (3,538,913)​ (1,797,536)Total liabilities and stockholders' deficit​$ 15,275,043​$ 14,516,199​See Notes to Consolidated Financial Statements. **Current (2023):** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ August 26, ​ August 27, ​ August 28, (in thousands) 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 2,528,426 ​ $ 2,429,604 ​ $ 2,170,314 Other comprehensive income: ​ ​ ​ Foreign currency translation adjustments ​ 103,633 ​ 7,448 ​ 44,683 Unrealized gains (losses) on marketable debt securities, net of taxes ​ 320 ​ (2,760) ​ (1,256) Net derivative activities, net of taxes ​ 5,747 ​ 2,762 ​ 2,839 Total other comprehensive income ​ 109,700 ​ 7,450 ​ 46,266 Comprehensive income ​ $ 2,638,126 ​ $ 2,437,054 ​ $ 2,216,580 ​ See Notes to Consolidated Financial Statements. ​ ​ 48 48 Table of ContentsAutoZone, Inc. Consolidated Balance Sheets​​​​​​​​​August 26,​August 27,(in thousands)​2023​2022​​​​​​​Assets​​​ ​ Current assets:​​​ ​ Cash and cash equivalents​$ 277,054​$ 264,380Accounts receivable​ 520,385​ 504,886Merchandise inventories​ 5,764,143​ 5,638,004Other current assets​ 217,844​ 220,714Total current assets​ 6,779,426​ 6,627,984​​​​​​​Property and equipment:​​​​​​Land​ 1,367,391​ 1,299,981Buildings and improvements​ 4,860,216​ 4,486,676Equipment​ 2,972,879​ 2,650,831Leasehold improvements​ 831,508​ 724,095Construction in progress​ 305,896​ 291,588Property and equipment​ 10,337,890​ 9,453,171Less: Accumulated depreciation and amortization​ (4,741,342)​ (4,282,752)​​ 5,596,548​ 5,170,419​​​​​​​Operating lease right-of-use assets​​ 2,998,097​​ 2,918,817Goodwill​ 302,645​ 302,645Deferred income taxes​ 86,002​ 52,047Other long-term assets​ 223,160​ 203,131Total long-term assets​ 3,609,904​ 3,476,640Total assets​$ 15,985,878​$ 15,275,043​​​​​​​Liabilities and Stockholders' Deficit​​​​​​Current liabilities:​​​​​​Accounts payable​$ 7,201,281​$ 7,301,347Current portion of operating lease liabilities​​ 257,256​​ 243,407Accrued expenses and other​ 1,000,841​ 1,008,701Income taxes payable​ 52,478​ 34,938Total current liabilities​ 8,511,856​ 8,588,393​​​​​​​Long-term debt​ 7,668,549​ 6,122,092Operating lease liabilities, less current portion​​ 2,917,046​​ 2,837,973Deferred income taxes​ 536,278​ 533,884Other long-term liabilities​ 702,043​ 731,614​​​​​​​Commitments and contingencies​​​​​​​​​​​​​Stockholders' deficit:​​​​​​Preferred stock, authorized 1,000 shares; no shares issued​ - ​ - Common stock, par value $.01 per share, authorized 200,000 shares; 18,936 shares issued and 17,857 shares outstanding as of August 26, 2023; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022​ 189​ 207Additional paid-in capital​ 1,484,992​ 1,354,252Retained deficit​ (2,959,278)​ (1,330,067)Accumulated other comprehensive loss​ (190,836)​ (300,536)Treasury stock, at cost​ (2,684,961)​ (3,262,769)Total stockholders' deficit​ (4,349,894)​ (3,538,913)Total liabilities and stockholders' deficit​$ 15,985,878​$ 15,275,043​See Notes to Consolidated Financial Statements.49 Table of Contents Table of Contents Table of Contents AutoZone, Inc. Consolidated Balance Sheets​​​​​​​​​August 26,​August 27,(in thousands)​2023​2022​​​​​​​Assets​​​ ​ Current assets:​​​ ​ Cash and cash equivalents​$ 277,054​$ 264,380Accounts receivable​ 520,385​ 504,886Merchandise inventories​ 5,764,143​ 5,638,004Other current assets​ 217,844​ 220,714Total current assets​ 6,779,426​ 6,627,984​​​​​​​Property and equipment:​​​​​​Land​ 1,367,391​ 1,299,981Buildings and improvements​ 4,860,216​ 4,486,676Equipment​ 2,972,879​ 2,650,831Leasehold improvements​ 831,508​ 724,095Construction in progress​ 305,896​ 291,588Property and equipment​ 10,337,890​ 9,453,171Less: Accumulated depreciation and amortization​ (4,741,342)​ (4,282,752)​​ 5,596,548​ 5,170,419​​​​​​​Operating lease right-of-use assets​​ 2,998,097​​ 2,918,817Goodwill​ 302,645​ 302,645Deferred income taxes​ 86,002​ 52,047Other long-term assets​ 223,160​ 203,131Total long-term assets​ 3,609,904​ 3,476,640Total assets​$ 15,985,878​$ 15,275,043​​​​​​​Liabilities and Stockholders' Deficit​​​​​​Current liabilities:​​​​​​Accounts payable​$ 7,201,281​$ 7,301,347Current portion of operating lease liabilities​​ 257,256​​ 243,407Accrued expenses and other​ 1,000,841​ 1,008,701Income taxes payable​ 52,478​ 34,938Total current liabilities​ 8,511,856​ 8,588,393​​​​​​​Long-term debt​ 7,668,549​ 6,122,092Operating lease liabilities, less current portion​​ 2,917,046​​ 2,837,973Deferred income taxes​ 536,278​ 533,884Other long-term liabilities​ 702,043​ 731,614​​​​​​​Commitments and contingencies​​​​​​​​​​​​​Stockholders' deficit:​​​​​​Preferred stock, authorized 1,000 shares; no shares issued​ - ​ - Common stock, par value $.01 per share, authorized 200,000 shares; 18,936 shares issued and 17,857 shares outstanding as of August 26, 2023; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022​ 189​ 207Additional paid-in capital​ 1,484,992​ 1,354,252Retained deficit​ (2,959,278)​ (1,330,067)Accumulated other comprehensive loss​ (190,836)​ (300,536)Treasury stock, at cost​ (2,684,961)​ (3,262,769)Total stockholders' deficit​ (4,349,894)​ (3,538,913)Total liabilities and stockholders' deficit​$ 15,985,878​$ 15,275,043​See Notes to Consolidated Financial Statements. --- ## Modified: Note C - Accrued Expenses and Other **Key changes:** - Reworded sentence: "Accrued expenses and other consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 26, August 27, (in thousands) ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Accrued compensation, related payroll taxes and benefits ​ $ 343,379 ​ $ 414,892 Property, sales and other taxes ​ 165,731 ​ 153,305 Medical and casualty insurance claims (current portion) ​ 127,624 ​ 115,201 Finance lease liabilities Finance lease liabilities ​ 86,916 ​ 92,877 Accrued gift cards ​ 59,254 ​ 52,237 Accrued interest ​ 54,493 ​ 50,696 Accrued sales and warranty returns ​ 43,355 ​ 35,696 Other ​ 120,089 ​ 93,797 ​ ​ $ 1,000,841 ​ $ 1,008,701 ​ ​ ​ ​ ​ ​ ​ ​ The Company retains a significant portion of the insurance risks associated with workers' compensation, general, product liability, property and vehicle insurance." - Reworded sentence: "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." **Prior (2022):** Accrued expenses and other consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ August 27, August 28, (in thousands) ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Accrued compensation, related payroll taxes and benefits ​ $ 414,892 ​ $ 470,561 Property, sales and other taxes ​ 153,305 ​ 135,831 Medical and casualty insurance claims (current portion) ​ 115,201 ​ 121,237 Finance lease liabilities Finance lease liabilities ​ 92,877 ​ 89,932 Accrued gift cards ​ 52,237 ​ 50,369 Accrued interest ​ 50,696 ​ 55,435 Accrued sales and warranty returns ​ 35,696 ​ 32,418 Other ​ 93,797 ​ 84,005 ​ ​ $ 1,008,701 ​ $ 1,039,788 ​ ​ ​ ​ ​ ​ ​ ​ 60 60 Table of ContentsThe 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 $2.0 million for general and product liability.​Note D - Income Taxes The components of income from continuing operations before income taxes are as follows:​​​​​​​​​​​​​Year Ended​​August 27,​August 28,​August 29,(in thousands)​2022​2021​2020​​​​​​​​​​Domestic​$ 2,429,262​$ 2,436,548​$ 1,960,320International​ 649,829​ 312,642​ 256,194​​$ 3,079,091​$ 2,749,190 $ 2,216,514​The provision for income tax expense consisted of the following:​​​​​​​​​​​​Year Ended​​August 27,​August 28,​August 29,(in thousands) 2022​2021​2020​​​​​​​​​​Current: ​ ​ ​ Federal​$ 293,022​$ 438,686​$ 324,156State​ 48,490​ 79,271​ 47,880International​ 122,381​ 95,351​ 60,429​​ 463,893​ 613,308​ 432,465Deferred:​ ​ ​ Federal​ 160,749​ (21,366)​ 43,706State​ 34,564​ (1,707)​ 12,544International​ (9,719)​ (11,359)​ (5,173)​​ 185,594​ (34,432)​ 51,077Income tax expense​$ 649,487​$ 578,876​$ 483,542​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:​​​​​​​​​​Year Ended​ August 27,​August 28,​August 29,​(in thousands)​2022​2021​2020​​​​​​​​ Federal tax at statutory U.S. income tax rate 21.0% 21.0% 21.0%State income taxes, net 2.1% 2.2% 2.2%Share-based compensation (1.6)% (1.7)% (0.7)% US Tax on Non-US Income (GILTI and Subpart F)​ 3.1% 2.8% 3.2% Non-US Permanent Differences​ (1.5)% (0.4)% (0.5)% Foreign Tax Credits​ (1.9)% (1.7)% (1.1)% Other (0.1)% (1.1)% (2.3)% Effective tax rate 21.1% 21.1% 21.8%​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.61 Table of Contents Table of Contents Table of Contents 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 $2.0 million for general and product liability.​Note D - Income Taxes The components of income from continuing operations before income taxes are as follows:​​​​​​​​​​​​​Year Ended​​August 27,​August 28,​August 29,(in thousands)​2022​2021​2020​​​​​​​​​​Domestic​$ 2,429,262​$ 2,436,548​$ 1,960,320International​ 649,829​ 312,642​ 256,194​​$ 3,079,091​$ 2,749,190 $ 2,216,514​The provision for income tax expense consisted of the following:​​​​​​​​​​​​Year Ended​​August 27,​August 28,​August 29,(in thousands) 2022​2021​2020​​​​​​​​​​Current: ​ ​ ​ Federal​$ 293,022​$ 438,686​$ 324,156State​ 48,490​ 79,271​ 47,880International​ 122,381​ 95,351​ 60,429​​ 463,893​ 613,308​ 432,465Deferred:​ ​ ​ Federal​ 160,749​ (21,366)​ 43,706State​ 34,564​ (1,707)​ 12,544International​ (9,719)​ (11,359)​ (5,173)​​ 185,594​ (34,432)​ 51,077Income tax expense​$ 649,487​$ 578,876​$ 483,542​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:​​​​​​​​​​Year Ended​ August 27,​August 28,​August 29,​(in thousands)​2022​2021​2020​​​​​​​​ Federal tax at statutory U.S. income tax rate 21.0% 21.0% 21.0%State income taxes, net 2.1% 2.2% 2.2%Share-based compensation (1.6)% (1.7)% (0.7)% US Tax on Non-US Income (GILTI and Subpart F)​ 3.1% 2.8% 3.2% Non-US Permanent Differences​ (1.5)% (0.4)% (0.5)% Foreign Tax Credits​ (1.9)% (1.7)% (1.1)% Other (0.1)% (1.1)% (2.3)% Effective tax rate 21.1% 21.1% 21.8%​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 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. ​ **Current (2023):** Accrued expenses and other consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 26, August 27, (in thousands) ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Accrued compensation, related payroll taxes and benefits ​ $ 343,379 ​ $ 414,892 Property, sales and other taxes ​ 165,731 ​ 153,305 Medical and casualty insurance claims (current portion) ​ 127,624 ​ 115,201 Finance lease liabilities Finance lease liabilities ​ 86,916 ​ 92,877 Accrued gift cards ​ 59,254 ​ 52,237 Accrued interest ​ 54,493 ​ 50,696 Accrued sales and warranty returns ​ 43,355 ​ 35,696 Other ​ 120,089 ​ 93,797 ​ ​ $ 1,000,841 ​ $ 1,008,701 ​ ​ ​ ​ ​ ​ ​ ​ 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. ​ --- ## Modified: Obligations **Key changes:** - Reworded sentence: "1 year 1‑3 years 3‑5 years 5 years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Debt(1) $ 7,709,600 ​ $ 1,509,600 ​ $ 1,750,000 ​ $ 1,050,000 ​ $ 3,400,000 Interest payments(2) ​ 1,468,738 ​ ​ 252,600 ​ ​ 455,325 ​ ​ 321,125 ​ ​ 439,688 Operating leases(3) ​ 4,097,510 ​ ​ 372,849 ​ ​ 781,663 ​ ​ 682,165 ​ ​ 2,260,833 Finance leases(3) ​ 319,186 ​ ​ 88,284 ​ ​ 143,106 ​ ​ 44,568 ​ ​ 43,228 Self-insurance reserves(4) ​ 279,407 ​ ​ 96,795 ​ ​ 95,288 ​ ​ 38,757 ​ ​ 48,567 Construction commitments ​ 198,926 ​ 198,926 ​ ​ - ​ ​ - ​ ​ - Other(5) ​ ​ 9,326 ​ ​ 9,326 ​ ​ - ​ ​ - ​ ​ - ​ ​ $ 14,082,693 ​ $ 2,528,380 ​ $ 3,225,382 ​ $ 2,136,615 ​ $ 6,192,316 ​ Our tax liability for uncertain tax positions, including interest and penalties, was $51.0 million at August 26, 2023." - Reworded sentence: "​ Off-Balance Sheet Arrangements The following table reflects outstanding letters of credit and surety bonds as of August 26, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Other (in thousands) ​" **Prior (2022):** 1 year 1‑3 years 3‑5 years 5 years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Debt(1) $ 6,153,400 ​ $ 1,403,400 ​ $ 1,200,000 ​ $ 1,000,000 ​ $ 2,550,000 Interest payments(2) ​ 1,093,088 ​ ​ 187,838 ​ ​ 326,425 ​ ​ 242,300 ​ ​ 336,525 Operating leases(3) ​ 3,950,359 ​ ​ 344,900 ​ ​ 733,201 ​ ​ 635,840 ​ ​ 2,236,418 Finance leases(3) ​ 336,709 ​ ​ 94,226 ​ ​ 137,509 ​ ​ 60,281 ​ ​ 44,693 Self-insurance reserves(4) ​ 262,347 ​ ​ 88,655 ​ ​ 80,608 ​ ​ 34,922 ​ ​ 58,162 Construction commitments ​ 91,526 ​ 91,526 ​ - ​ - ​ - ​ ​ $ 11,887,429 ​ $ 2,210,545 ​ $ 2,477,743 ​ $ 1,973,343 ​ $ 5,225,798 ​ Our tax liability for uncertain tax positions, including interest and penalties, was $43.5 million at August 27, 2022. Approximately $3.3 million is classified as current liabilities and $40.2 million is classified as long-term liabilities. We did not reflect these obligations in the table above as we are unable to make an estimate of the timing of payments of the long-term liabilities due to uncertainties in the timing and amounts of the settlement of these tax positions. ​ Off-Balance Sheet Arrangements The following table reflects outstanding letters of credit and surety bonds as of August 27, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Other (in thousands) ​ **Current (2023):** 1 year 1‑3 years 3‑5 years 5 years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Debt(1) $ 7,709,600 ​ $ 1,509,600 ​ $ 1,750,000 ​ $ 1,050,000 ​ $ 3,400,000 Interest payments(2) ​ 1,468,738 ​ ​ 252,600 ​ ​ 455,325 ​ ​ 321,125 ​ ​ 439,688 Operating leases(3) ​ 4,097,510 ​ ​ 372,849 ​ ​ 781,663 ​ ​ 682,165 ​ ​ 2,260,833 Finance leases(3) ​ 319,186 ​ ​ 88,284 ​ ​ 143,106 ​ ​ 44,568 ​ ​ 43,228 Self-insurance reserves(4) ​ 279,407 ​ ​ 96,795 ​ ​ 95,288 ​ ​ 38,757 ​ ​ 48,567 Construction commitments ​ 198,926 ​ 198,926 ​ ​ - ​ ​ - ​ ​ - Other(5) ​ ​ 9,326 ​ ​ 9,326 ​ ​ - ​ ​ - ​ ​ - ​ ​ $ 14,082,693 ​ $ 2,528,380 ​ $ 3,225,382 ​ $ 2,136,615 ​ $ 6,192,316 ​ Our tax liability for uncertain tax positions, including interest and penalties, was $51.0 million at August 26, 2023. Approximately $11.2 million is classified as current liabilities and $39.8 million is classified as long-term liabilities. We did not reflect these obligations in the table above as we are unable to make an estimate of the timing of payments of the long-term liabilities due to uncertainties in the timing and amounts of the settlement of these tax positions. ​ Off-Balance Sheet Arrangements The following table reflects outstanding letters of credit and surety bonds as of August 26, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Other (in thousands) ​ --- ## Modified: Exercise Price **Key changes:** - Reworded sentence: "​ (in years) ​ (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding - August 27, 2022 1,139,100 ​ $ 941.28 ​ ​ ​ ​ Granted 161,510 ​ ​ 2,218.35 ​ Exercised (242,920) ​ ​ 708.46 ​ Forfeited/Cancelled (30,102) ​ ​ 1,504.17 ​ Outstanding - August 26, 2023 1,027,588 ​ 1,180.39 5.97 ​ $ 1,308,493 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable 651,032 ​ ​ 862.98 ​ 4.71 ​ ​ 1,035,417 Expected to vest 359,109 ​ ​ 1,719.64 ​ 8.13 ​ ​ 263,838 Available for future grants 862,178 ​ ​ ​ ​ ​ ​ ​ ​ ​ 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." **Prior (2022):** ​ (in years) ​ (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding - August 28, 2021 1,208,054 ​ $ 790.41 ​ ​ ​ ​ Granted 164,532 ​ ​ 1,652.86 ​ Exercised (203,310) ​ ​ 582.42 ​ Forfeited/Cancelled (30,176) ​ ​ 1,198.93 ​ Outstanding - August 27, 2022 1,139,100 ​ 941.28 5.88 ​ $ 1,391,686 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable 739,757 ​ ​ 746.60 ​ 4.64 ​ ​ 1,047,804 Expected to vest 380,857 ​ ​ 1,296.02 ​ 8.15 ​ ​ 330,203 Available for future grants 1,023,688 ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. **Current (2023):** ​ (in years) ​ (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding - August 27, 2022 1,139,100 ​ $ 941.28 ​ ​ ​ ​ Granted 161,510 ​ ​ 2,218.35 ​ Exercised (242,920) ​ ​ 708.46 ​ Forfeited/Cancelled (30,102) ​ ​ 1,504.17 ​ Outstanding - August 26, 2023 1,027,588 ​ 1,180.39 5.97 ​ $ 1,308,493 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable 651,032 ​ ​ 862.98 ​ 4.71 ​ ​ 1,035,417 Expected to vest 359,109 ​ ​ 1,719.64 ​ 8.13 ​ ​ 263,838 Available for future grants 862,178 ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. --- ## Modified: Critical Accounting Policies and Estimates **Key changes:** - Reworded sentence: "Our senior management has identified self-insurance reserves as a critical accounting estimate that is materially impacted by assumptions while income taxes and valuation allowances have been identified as critical accounting policies." - Reworded sentence: "When estimating these liabilities, we consider factors, such as the severity, duration and frequency of claims, legal costs associated with claims, healthcare trends and projected inflation of related factors." - Reworded sentence: "A 10% change in our self-insurance liability would have affected net income by approximately $19.3 million for fiscal 2023." - Reworded sentence: "Accordingly, we reflect the net present value of the obligations we determine to be long-term using the risk-free interest rate as of the balance sheet date.If the discount rate used to calculate the present value of these reserves changed by 25 basis points, net income would have been affected by approximately $1.1 million for fiscal 2023." - Reworded sentence: "As of August 26, 2023, we had approximately $51.0 million reserved for uncertain tax positions.We evaluate exposures associated with our various tax filings by estimating a liability for uncertain tax positions based on a two-step process." **Prior (2022):** Preparation of our Consolidated Financial Statements requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements, reported amounts of revenues and expenses during the reporting period and related disclosures of contingent liabilities. In the Notes to our Consolidated Financial Statements, we describe our significant accounting policies used in preparing the Consolidated Financial Statements. Our policies are evaluated on an ongoing basis and are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results could differ under different assumptions or conditions. Our senior management has identified the critical accounting policies for the areas that are materially impacted by estimates and assumptions and have discussed such policies with the Audit Committee of our Board. The following items in our Consolidated Financial Statements represent our critical accounting policies that require significant estimation or judgment by management: Self-Insurance Reserves We retain a significant portion of the risks associated with workers' compensation, general, product liability, property and vehicle liability; and we obtain third party insurance to limit the exposure related to certain of these risks. Our self-insurance reserve estimates totaled $264.3 million at August 27, 2022, and $284.0 million at August 28, 2021. Where estimates are possible, losses covered by insurance are recognized on a gross basis with a corresponding insurance receivable. The assumptions made by management in estimating our self-insurance reserves include consideration of historical cost experience, judgments about the present and expected levels of cost per claim and retention levels. We utilize various methods, including analyses of historical trends and use of a specialist, to estimate the cost to settle reported claims and claims incurred but not yet reported. The actuarial methods develop estimates of the future ultimate claim costs based on the claims incurred as of the balance sheet date. When estimating these liabilities, we consider factors, such as the severity, duration and frequency of claims, legal costs associated with claims, healthcare trends 38 38 Table of Contentsand projected inflation of related factors. In recent history, our methods for determining our exposure have remained consistent, and our historical trends have been appropriately factored into our reserve estimates. As we obtain additional information and refine our methods regarding the assumptions and estimates we use to recognize liabilities incurred, we will adjust our reserves accordingly.Management believes that the various assumptions developed and actuarial methods used to determine our self- insurance reserves are reasonable and provide meaningful data and information that management uses to make its best estimate of our exposure to these risks. Arriving at these estimates, however, requires a significant amount of subjective judgment by management, and as a result these estimates are uncertain and our actual exposure may be different from our estimates. For example, changes in our assumptions about healthcare costs, the severity of accidents and the incidence of illness, the average size of claims and other factors could cause actual claim costs to vary from our assumptions and estimates, causing our reserves to be overstated or understated. For instance, a 10% change in our self-insurance liability would have affected net income by approximately $18.2 million for fiscal 2022. Our 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, we reflect the net present value of the obligations we determine to be long-term using the risk-free interest rate as of the balance sheet date.If the discount rate used to calculate the present value of these reserves changed by 25 basis points, net income would have been affected by approximately $1.2 million for fiscal 2022. Income TaxesOur income tax returns are audited by state, federal and foreign tax authorities, and we are typically engaged in various tax examinations at any given time. Tax contingencies often arise due to uncertainty or differing interpretations of the application of tax rules throughout the various jurisdictions in which we operate. The contingencies are influenced by items such as tax audits, changes in tax laws, litigation, appeals and prior experience with similar tax positions.We regularly review our tax reserves for these items and assess the adequacy of the amount we have recorded. As of August 27, 2022, we had approximately $43.5 million reserved for uncertain tax positions.We evaluate exposures associated with our various tax filings by estimating a liability for uncertain 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 us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.We believe our estimates to be reasonable and have not experienced material adjustments to our reserves in the previous three years; however, actual results could differ from our estimates, and we may be exposed to gains or losses. Specifically, management has used judgment and made assumptions to estimate the likely outcome of uncertain tax positions. Additionally, to the extent we prevail in matters for which a liability has been established, or must pay in excess of recognized reserves, our effective tax rate in any particular period could be affected.​Vendor AllowancesWe receive various payments and allowances from our vendors through a variety of programs and arrangements, including allowances for warranties, advertising and general promotion of vendor products. Vendor allowances are treated as a reduction of the cost of inventory, unless they are provided as a reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendor's products. Approximately 86% of the vendor funds received during fiscal 2022 were recorded as a reduction of the cost of inventories and recognized as a reduction to cost of sales as these inventories are sold.39 Table of Contents Table of Contents Table of Contents and projected inflation of related factors. In recent history, our methods for determining our exposure have remained consistent, and our historical trends have been appropriately factored into our reserve estimates. As we obtain additional information and refine our methods regarding the assumptions and estimates we use to recognize liabilities incurred, we will adjust our reserves accordingly.Management believes that the various assumptions developed and actuarial methods used to determine our self- insurance reserves are reasonable and provide meaningful data and information that management uses to make its best estimate of our exposure to these risks. Arriving at these estimates, however, requires a significant amount of subjective judgment by management, and as a result these estimates are uncertain and our actual exposure may be different from our estimates. For example, changes in our assumptions about healthcare costs, the severity of accidents and the incidence of illness, the average size of claims and other factors could cause actual claim costs to vary from our assumptions and estimates, causing our reserves to be overstated or understated. For instance, a 10% change in our self-insurance liability would have affected net income by approximately $18.2 million for fiscal 2022. Our 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, we reflect the net present value of the obligations we determine to be long-term using the risk-free interest rate as of the balance sheet date.If the discount rate used to calculate the present value of these reserves changed by 25 basis points, net income would have been affected by approximately $1.2 million for fiscal 2022. Income TaxesOur income tax returns are audited by state, federal and foreign tax authorities, and we are typically engaged in various tax examinations at any given time. Tax contingencies often arise due to uncertainty or differing interpretations of the application of tax rules throughout the various jurisdictions in which we operate. The contingencies are influenced by items such as tax audits, changes in tax laws, litigation, appeals and prior experience with similar tax positions.We regularly review our tax reserves for these items and assess the adequacy of the amount we have recorded. As of August 27, 2022, we had approximately $43.5 million reserved for uncertain tax positions.We evaluate exposures associated with our various tax filings by estimating a liability for uncertain 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 us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.We believe our estimates to be reasonable and have not experienced material adjustments to our reserves in the previous three years; however, actual results could differ from our estimates, and we may be exposed to gains or losses. Specifically, management has used judgment and made assumptions to estimate the likely outcome of uncertain tax positions. Additionally, to the extent we prevail in matters for which a liability has been established, or must pay in excess of recognized reserves, our effective tax rate in any particular period could be affected.​Vendor AllowancesWe receive various payments and allowances from our vendors through a variety of programs and arrangements, including allowances for warranties, advertising and general promotion of vendor products. Vendor allowances are treated as a reduction of the cost of inventory, unless they are provided as a reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendor's products. Approximately 86% of the vendor funds received during fiscal 2022 were recorded as a reduction of the cost of inventories and recognized as a reduction to cost of sales as these inventories are sold. and projected inflation of related factors. In recent history, our methods for determining our exposure have remained consistent, and our historical trends have been appropriately factored into our reserve estimates. As we obtain additional information and refine our methods regarding the assumptions and estimates we use to recognize liabilities incurred, we will adjust our reserves accordingly. Management believes that the various assumptions developed and actuarial methods used to determine our self- insurance reserves are reasonable and provide meaningful data and information that management uses to make its best estimate of our exposure to these risks. Arriving at these estimates, however, requires a significant amount of subjective judgment by management, and as a result these estimates are uncertain and our actual exposure may be different from our estimates. For example, changes in our assumptions about healthcare costs, the severity of accidents and the incidence of illness, the average size of claims and other factors could cause actual claim costs to vary from our assumptions and estimates, causing our reserves to be overstated or understated. For instance, a 10% change in our self-insurance liability would have affected net income by approximately $18.2 million for fiscal 2022. Our 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, we reflect the net present value of the obligations we determine to be long-term using the risk-free interest rate as of the balance sheet date. If the discount rate used to calculate the present value of these reserves changed by 25 basis points, net income would have been affected by approximately $1.2 million for fiscal 2022. Income Taxes Our income tax returns are audited by state, federal and foreign tax authorities, and we are typically engaged in various tax examinations at any given time. Tax contingencies often arise due to uncertainty or differing interpretations of the application of tax rules throughout the various jurisdictions in which we operate. The contingencies are influenced by items such as tax audits, changes in tax laws, litigation, appeals and prior experience with similar tax positions. We regularly review our tax reserves for these items and assess the adequacy of the amount we have recorded. As of August 27, 2022, we had approximately $43.5 million reserved for uncertain tax positions. We evaluate exposures associated with our various tax filings by estimating a liability for uncertain 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 us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We believe our estimates to be reasonable and have not experienced material adjustments to our reserves in the previous three years; however, actual results could differ from our estimates, and we may be exposed to gains or losses. Specifically, management has used judgment and made assumptions to estimate the likely outcome of uncertain tax positions. Additionally, to the extent we prevail in matters for which a liability has been established, or must pay in excess of recognized reserves, our effective tax rate in any particular period could be affected. ​ Vendor Allowances We receive various payments and allowances from our vendors through a variety of programs and arrangements, including allowances for warranties, advertising and general promotion of vendor products. Vendor allowances are treated as a reduction of the cost of inventory, unless they are provided as a reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendor's products. Approximately 86% of the vendor funds received during fiscal 2022 were recorded as a reduction of the cost of inventories and recognized as a reduction to cost of sales as these inventories are sold. 39 39 Table of ContentsBased on our vendor agreements, a significant portion of vendor funding we receive is earned as we purchase inventory. Therefore, we record receivables for funding earned but not yet received as we purchase inventory. During the year, we regularly review the receivables from vendors to ensure vendors are able to meet their obligations. We generally have not recorded a reserve against these receivables as we have not experienced significant losses and typically have a legal right of offset with our vendors for payments owed them. We have had write-offs less than $1 million in each of the last three years.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are exposed to market risk from, among other things, changes in interest rates, foreign exchange rates and fuel prices. From time to time, we use various derivative instruments to reduce interest rate and fuel price risks. To date, based upon our current level of foreign operations, no derivative instruments have been utilized to reduce foreign exchange rate risk. All of our hedging activities are governed by guidelines that are authorized by the Board. Further, we do not buy or sell derivative instruments for trading purposes.Interest Rate RiskOur financial market risk results primarily from changes in interest rates. At times, we reduce our 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.We have historically utilized interest rate swaps to convert variable rate debt to fixed rate debt and to lock in fixed rates on future debt issuances. We reflect the current fair value of all interest rate hedge instruments as a component of either other current assets or accrued expenses and other. Our interest rate hedge instruments are designated as cash flow hedges. As of August 27, 2022 and August 28, 2021, no such interest rate swaps were outstanding. Unrealized gains and losses on interest rate hedges are deferred in stockholders' deficit as a component of Accumulated Other Comprehensive Loss. These deferred gains and losses are recognized in income as a decrease or increase to interest expense in the period in which the related cash flows being hedged are recognized in expense. However, to the extent that the change in value of an interest rate hedge instrument does not perfectly offset the change in the value of the cash flow being hedged, that ineffective portion is immediately recognized in earnings.The fair value of our 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 debt issues or on the current rates available to us for debt having the same remaining maturities. 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, which reflects its face amount, adjusted for any unamortized debt issuance costs and discounts. We had $603.4 million in variable rate debt outstanding at August 27, 2022 and none in August 28, 2021. We had outstanding fixed rate debt of $5.5 billion, net of unamortized debt issuance costs of $31.3 million, at August 27, 2022, and $5.3 billion, net of unamortized debt issuance costs of $30.2 million, at August 28, 2021. A one percentage point increase in interest rates would have reduced the fair value of our fixed rate debt by approximately $230.5 million at August 27, 2022.Foreign Currency RiskForeign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than our entities' functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective functional currencies. We are exposed to Brazilian reals, Canadian dollars, euros, Chinese yuan renminbi and British pounds, but our primary foreign currency exposure arises from Mexican peso-denominated revenues and profits and their translation into U.S. dollars. Foreign currency exposures arising from transactions denominated in currencies other than the functional currency are not material.We view our investments in Mexican subsidiaries as long-term. As a result, we generally do not hedge these net investments. The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end 40 Table of Contents Table of Contents Table of Contents Based on our vendor agreements, a significant portion of vendor funding we receive is earned as we purchase inventory. Therefore, we record receivables for funding earned but not yet received as we purchase inventory. During the year, we regularly review the receivables from vendors to ensure vendors are able to meet their obligations. We generally have not recorded a reserve against these receivables as we have not experienced significant losses and typically have a legal right of offset with our vendors for payments owed them. We have had write-offs less than $1 million in each of the last three years.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are exposed to market risk from, among other things, changes in interest rates, foreign exchange rates and fuel prices. From time to time, we use various derivative instruments to reduce interest rate and fuel price risks. To date, based upon our current level of foreign operations, no derivative instruments have been utilized to reduce foreign exchange rate risk. All of our hedging activities are governed by guidelines that are authorized by the Board. Further, we do not buy or sell derivative instruments for trading purposes.Interest Rate RiskOur financial market risk results primarily from changes in interest rates. At times, we reduce our 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.We have historically utilized interest rate swaps to convert variable rate debt to fixed rate debt and to lock in fixed rates on future debt issuances. We reflect the current fair value of all interest rate hedge instruments as a component of either other current assets or accrued expenses and other. Our interest rate hedge instruments are designated as cash flow hedges. As of August 27, 2022 and August 28, 2021, no such interest rate swaps were outstanding. Unrealized gains and losses on interest rate hedges are deferred in stockholders' deficit as a component of Accumulated Other Comprehensive Loss. These deferred gains and losses are recognized in income as a decrease or increase to interest expense in the period in which the related cash flows being hedged are recognized in expense. However, to the extent that the change in value of an interest rate hedge instrument does not perfectly offset the change in the value of the cash flow being hedged, that ineffective portion is immediately recognized in earnings.The fair value of our 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 debt issues or on the current rates available to us for debt having the same remaining maturities. 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, which reflects its face amount, adjusted for any unamortized debt issuance costs and discounts. We had $603.4 million in variable rate debt outstanding at August 27, 2022 and none in August 28, 2021. We had outstanding fixed rate debt of $5.5 billion, net of unamortized debt issuance costs of $31.3 million, at August 27, 2022, and $5.3 billion, net of unamortized debt issuance costs of $30.2 million, at August 28, 2021. A one percentage point increase in interest rates would have reduced the fair value of our fixed rate debt by approximately $230.5 million at August 27, 2022.Foreign Currency RiskForeign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than our entities' functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective functional currencies. We are exposed to Brazilian reals, Canadian dollars, euros, Chinese yuan renminbi and British pounds, but our primary foreign currency exposure arises from Mexican peso-denominated revenues and profits and their translation into U.S. dollars. Foreign currency exposures arising from transactions denominated in currencies other than the functional currency are not material.We view our investments in Mexican subsidiaries as long-term. As a result, we generally do not hedge these net investments. The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end Based on our vendor agreements, a significant portion of vendor funding we receive is earned as we purchase inventory. Therefore, we record receivables for funding earned but not yet received as we purchase inventory. During the year, we regularly review the receivables from vendors to ensure vendors are able to meet their obligations. We generally have not recorded a reserve against these receivables as we have not experienced significant losses and typically have a legal right of offset with our vendors for payments owed them. We have had write-offs less than $1 million in each of the last three years. Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk from, among other things, changes in interest rates, foreign exchange rates and fuel prices. From time to time, we use various derivative instruments to reduce interest rate and fuel price risks. To date, based upon our current level of foreign operations, no derivative instruments have been utilized to reduce foreign exchange rate risk. All of our hedging activities are governed by guidelines that are authorized by the Board. Further, we do not buy or sell derivative instruments for trading purposes. Interest Rate Risk Our financial market risk results primarily from changes in interest rates. At times, we reduce our 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. We have historically utilized interest rate swaps to convert variable rate debt to fixed rate debt and to lock in fixed rates on future debt issuances. We reflect the current fair value of all interest rate hedge instruments as a component of either other current assets or accrued expenses and other. Our interest rate hedge instruments are designated as cash flow hedges. As of August 27, 2022 and August 28, 2021, no such interest rate swaps were outstanding. Unrealized gains and losses on interest rate hedges are deferred in stockholders' deficit as a component of Accumulated Other Comprehensive Loss. These deferred gains and losses are recognized in income as a decrease or increase to interest expense in the period in which the related cash flows being hedged are recognized in expense. However, to the extent that the change in value of an interest rate hedge instrument does not perfectly offset the change in the value of the cash flow being hedged, that ineffective portion is immediately recognized in earnings. The fair value of our 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 debt issues or on the current rates available to us for debt having the same remaining maturities. 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, which reflects its face amount, adjusted for any unamortized debt issuance costs and discounts. We had $603.4 million in variable rate debt outstanding at August 27, 2022 and none in August 28, 2021. We had outstanding fixed rate debt of $5.5 billion, net of unamortized debt issuance costs of $31.3 million, at August 27, 2022, and $5.3 billion, net of unamortized debt issuance costs of $30.2 million, at August 28, 2021. A one percentage point increase in interest rates would have reduced the fair value of our fixed rate debt by approximately $230.5 million at August 27, 2022. Foreign Currency Risk Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than our entities' functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective functional currencies. We are exposed to Brazilian reals, Canadian dollars, euros, Chinese yuan renminbi and British pounds, but our primary foreign currency exposure arises from Mexican peso-denominated revenues and profits and their translation into U.S. dollars. Foreign currency exposures arising from transactions denominated in currencies other than the functional currency are not material. We view our investments in Mexican subsidiaries as long-term. As a result, we generally do not hedge these net investments. The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end 40 40 Table of Contentsexchange rates was $270.2 million at August 27, 2022 and $310.1 million at August 28, 2021. The year-end exchange rates with respect to the Mexican peso decreased less than 1.0% with respect to the U.S. dollar during fiscal 2022 and increased by approximately 10% with respect to the U.S. dollar during fiscal 2021. The potential loss in value of our net assets in the Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at August 27, 2022 and August 28, 2021, would have been approximately $24.6 million and approximately $28.2 million, respectively. Any changes in our net assets in the Mexican subsidiaries relating to foreign currency exchange rates would be reflected in the foreign currency translation component of Accumulated Other Comprehensive Loss, unless the Mexican subsidiaries are sold or otherwise disposed. A hypothetical 10 percent adverse change in average exchange rates would not have a material impact on our results of operations.​41 Table of Contents Table of Contents Table of Contents exchange rates was $270.2 million at August 27, 2022 and $310.1 million at August 28, 2021. The year-end exchange rates with respect to the Mexican peso decreased less than 1.0% with respect to the U.S. dollar during fiscal 2022 and increased by approximately 10% with respect to the U.S. dollar during fiscal 2021. The potential loss in value of our net assets in the Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at August 27, 2022 and August 28, 2021, would have been approximately $24.6 million and approximately $28.2 million, respectively. Any changes in our net assets in the Mexican subsidiaries relating to foreign currency exchange rates would be reflected in the foreign currency translation component of Accumulated Other Comprehensive Loss, unless the Mexican subsidiaries are sold or otherwise disposed. A hypothetical 10 percent adverse change in average exchange rates would not have a material impact on our results of operations.​ exchange rates was $270.2 million at August 27, 2022 and $310.1 million at August 28, 2021. The year-end exchange rates with respect to the Mexican peso decreased less than 1.0% with respect to the U.S. dollar during fiscal 2022 and increased by approximately 10% with respect to the U.S. dollar during fiscal 2021. The potential loss in value of our net assets in the Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at August 27, 2022 and August 28, 2021, would have been approximately $24.6 million and approximately $28.2 million, respectively. Any changes in our net assets in the Mexican subsidiaries relating to foreign currency exchange rates would be reflected in the foreign currency translation component of Accumulated Other Comprehensive Loss, unless the Mexican subsidiaries are sold or otherwise disposed. A hypothetical 10 percent adverse change in average exchange rates would not have a material impact on our results of operations. ​ 41 41 Table of ContentsItem 8. Financial Statements and Supplementary DataIndexTABLE OF CONTENTSError! Bookmark not defined.PART IError! Bookmark not defined.Item 1. BusinessError! Bookmark not defined.IntroductionError! Bookmark not defined.Human Capital ResourcesError! Bookmark not defined.Store OperationsError! Bookmark not defined.Store FormatsError! Bookmark not defined.We believe our stores are "destination stores," generating their own traffic rather than relying on traffic created by adjacent stores. Therefore, we situate most stores on major thoroughfares with easy access and good parking.Error! Bookmark not defined.Store Personnel and TrainingError! Bookmark not defined.Store Support CentersError! Bookmark not defined.All store support functions are centralized in our store support centers located in Memphis, Tennessee; Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. We believe that this centralization enhances consistent execution of our merchandising and marketing strategies at the store level, while reducing expenses and cost of sales.Error! Bookmark not defined.Store AutomationError! Bookmark not defined.CommercialError! Bookmark not defined.Store DevelopmentError! Bookmark not defined.Marketing and Merchandising StrategyError! Bookmark not defined.Customer ServiceError! Bookmark not defined.MerchandisingError! Bookmark not defined.PricingError! Bookmark not defined.Brand Marketing: Marketing and LoyaltyError! Bookmark not defined.Purchasing and Supply ChainError! Bookmark not defined.CompetitionError! Bookmark not defined.Government RelationsError! Bookmark not defined.Trademarks and PatentsError! Bookmark not defined.SeasonalityError! Bookmark not defined.AutoZone WebsitesError! Bookmark not defined.Information about our Executive OfficersError! Bookmark not defined.William C. Rhodes, III, 57 - Chairman, President and Chief Executive Officer, Customer Satisfaction‌Error! Bookmark not defined.Preston B. Frazer, 46 - Executive Vice President - Store Operations, Commercial and Loss Prevention, Customer SatisfactionError! Bookmark not defined.Thomas B. Newbern, 60 - Executive Vice President - International, Information Technology and ALLDATA, Customer SatisfactionError! Bookmark not defined.Domingo J. Hurtado, 61 - Senior Vice President - International, Customer Satisfaction‌Error! Bookmark not defined.Kristen C. Wright, 46 - Senior Vice President - General Counsel & Secretary, Customer SatisfactionError! Bookmark not defined.Item 1B. Unresolved Staff CommentsError! Bookmark not defined.Item 2. PropertiesError! Bookmark not defined.Item 3. Legal ProceedingsError! Bookmark not defined.Item 4. Mine Safety DisclosuresError! Bookmark not defined.PART II‌24Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities‌24Stock Performance Graph‌25Item 6. ReservedError! Bookmark not defined.Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations‌Error! Bookmark not defined.Executive SummaryError! Bookmark not defined.For fiscal 2022, we achieved record net income of $2.4 billion, an 11.9% increase over the prior year, and sales growth of $1.6 billion, an 11.1% increase over the prior year. Domestic commercial sales increased 26.5%, which represents 28.8% of our domestic auto parts sales. Both our retail sales and commercial sales grew this past year as we made progress on our initiatives aimed at improving our ability to say "Yes" to our customers more frequently and accelerating our commercial growth.Error! Bookmark not defined.Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.‌Error! Bookmark not defined.Miles DrivenError! Bookmark not defined.Seven Year Old or Older VehiclesError! Bookmark not defined.Results of OperationsError! Bookmark not defined.The following table highlights selected financial information over the past 5 years:‌Error! Bookmark not defined.Fiscal 2022 Compared with Fiscal 2021Error! Bookmark not defined.Fiscal 2021 Compared with Fiscal 2020Error! Bookmark not defined.Quarterly PeriodsError! Bookmark not defined.Liquidity and Capital ResourcesError! Bookmark not defined.Debt FacilitiesError! Bookmark not defined.Stock RepurchasesError! Bookmark not defined.Financial CommitmentsError! Bookmark not defined.Reconciliation of Non-GAAP Financial MeasuresError! Bookmark not defined.Reconciliation of Non-GAAP Financial Measure: Cash Flow Before Share Repurchases and Changes in DebtError! Bookmark not defined.Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to EBITDAR‌Error! Bookmark not defined.(1)The fiscal year ended August 31, 2019 consisted of 53 weeks.Error! Bookmark not defined.Recent Accounting PronouncementsError! Bookmark not defined.Critical Accounting Policies and EstimatesError! Bookmark not defined.Self-Insurance ReservesError! Bookmark not defined.Income TaxesError! Bookmark not defined.Vendor AllowancesError! Bookmark not defined.Item 7A. Quantitative and Qualitative Disclosures about Market RiskError! Bookmark not defined.Interest Rate RiskError! Bookmark not defined.Foreign Currency RiskError! Bookmark not defined.Item 8. Financial Statements and Supplementary Data‌42Management's Report on Internal Control Over Financial ReportingError! Bookmark not defined.AutoZone, Inc. Consolidated Statements of IncomeError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Balance SheetsError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Statements of Cash FlowsError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Statements of Stockholders' DeficitError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.Notes to Consolidated Financial StatementsError! Bookmark not defined.Note A - Significant Accounting PoliciesError! Bookmark not defined.Cost of SalesError! Bookmark not defined.Operating, Selling, General and Administrative ExpensesError! Bookmark not defined.Recently Issued Accounting Pronouncements:Error! Bookmark not defined. Note B - Share-Based PaymentsError! Bookmark not defined.Overview of Share-Based Payment PlansError! Bookmark not defined.Amended and Restated AutoZone, Inc. 2011 Equity Incentive Award PlanError! Bookmark not defined.AutoZone, Inc. Director Compensation ProgramError! Bookmark not defined.Stock OptionsError! Bookmark not defined.Restricted Stock UnitsError! Bookmark not defined.Stock Appreciation RightsError! Bookmark not defined.Employee Stock Purchase Plan and Executive Stock Purchase PlanError! Bookmark not defined.Note C - Accrued Expenses and OtherError! Bookmark not defined.Note D - Income TaxesError! Bookmark not defined.Note E - Fair Value MeasurementsError! Bookmark not defined.Marketable Debt Securities Measured at Fair Value on a Recurring BasisError! Bookmark not defined.Non-Financial Assets Measured at Fair Value on a Non-Recurring BasisError! Bookmark not defined.Financial Instruments not Recognized at Fair ValueError! Bookmark not defined.Note F - Marketable Debt SecuritiesError! Bookmark not defined.Note G - Accumulated Other Comprehensive LossError! Bookmark not defined.(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 reinvestedError! Bookmark not defined.Note H - Derivative Financial InstrumentsError! Bookmark not defined.Note J - Interest ExpenseError! Bookmark not defined.Note K - Stock Repurchase ProgramError! Bookmark not defined.Note L - 401(k) Savings PlanError! Bookmark not defined.Note M - LeasesError! Bookmark not defined.Note N - Commitments and ContingenciesError! Bookmark not defined.Note O - LitigationError! Bookmark not defined.Note P - Segment ReportingError! Bookmark not defined.Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure‌Error! Bookmark not defined.Item 9A. Controls and ProceduresError! Bookmark not defined.Item 9B. Other InformationError! Bookmark not defined.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsError! Bookmark not defined.PART IIIError! Bookmark not defined.Item 10. Directors, Executive Officers and Corporate GovernanceError! Bookmark not defined.Item 11. Executive CompensationError! Bookmark not defined.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersError! Bookmark not defined.Item 13. Certain Relationships and Related Transactions, and Director Independence‌Error! Bookmark not defined.Item 14. Principal Accounting Fees and ServicesError! Bookmark not defined.PART IVError! Bookmark not defined.Item 15. Exhibits and Financial Statement Schedules‌76(a) Financial Statements‌76(b) Exhibits‌76Form 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! Bookmark not defined.Item 16. Form 10K SummaryError! Bookmark not defined.SIGNATURESError! Bookmark not defined.​​Management's Report on Internal Control Over Financial Reporting43Reports of Independent Registered Public Accounting Firm44Consolidated Statements of Income47Consolidated Statements of Comprehensive Income47Consolidated Balance Sheets48Consolidated Statements of Cash Flows49Consolidated Statements of Stockholders' Deficit50Notes to Consolidated Financial Statements51​​​42 Table of Contents Table of Contents Table of Contents Item 8. Financial Statements and Supplementary DataIndexTABLE OF CONTENTSError! Bookmark not defined.PART IError! Bookmark not defined.Item 1. BusinessError! Bookmark not defined.IntroductionError! Bookmark not defined.Human Capital ResourcesError! Bookmark not defined.Store OperationsError! Bookmark not defined.Store FormatsError! Bookmark not defined.We believe our stores are "destination stores," generating their own traffic rather than relying on traffic created by adjacent stores. Therefore, we situate most stores on major thoroughfares with easy access and good parking.Error! Bookmark not defined.Store Personnel and TrainingError! Bookmark not defined.Store Support CentersError! Bookmark not defined.All store support functions are centralized in our store support centers located in Memphis, Tennessee; Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. We believe that this centralization enhances consistent execution of our merchandising and marketing strategies at the store level, while reducing expenses and cost of sales.Error! Bookmark not defined.Store AutomationError! Bookmark not defined.CommercialError! Bookmark not defined.Store DevelopmentError! Bookmark not defined.Marketing and Merchandising StrategyError! Bookmark not defined.Customer ServiceError! Bookmark not defined.MerchandisingError! Bookmark not defined.PricingError! Bookmark not defined.Brand Marketing: Marketing and LoyaltyError! Bookmark not defined.Purchasing and Supply ChainError! Bookmark not defined.CompetitionError! Bookmark not defined.Government RelationsError! Bookmark not defined.Trademarks and PatentsError! Bookmark not defined.SeasonalityError! Bookmark not defined.AutoZone WebsitesError! Bookmark not defined.Information about our Executive OfficersError! Bookmark not defined.William C. Rhodes, III, 57 - Chairman, President and Chief Executive Officer, Customer Satisfaction‌Error! Bookmark not defined.Preston B. Frazer, 46 - Executive Vice President - Store Operations, Commercial and Loss Prevention, Customer SatisfactionError! Bookmark not defined.Thomas B. Newbern, 60 - Executive Vice President - International, Information Technology and ALLDATA, Customer SatisfactionError! Bookmark not defined.Domingo J. Hurtado, 61 - Senior Vice President - International, Customer Satisfaction‌Error! Bookmark not defined.Kristen C. Wright, 46 - Senior Vice President - General Counsel & Secretary, Customer SatisfactionError! Bookmark not defined.Item 1B. Unresolved Staff CommentsError! Bookmark not defined.Item 2. PropertiesError! Bookmark not defined.Item 3. Legal ProceedingsError! Bookmark not defined.Item 4. Mine Safety DisclosuresError! Bookmark not defined.PART II‌24Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities‌24Stock Performance Graph‌25Item 6. ReservedError! Bookmark not defined.Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations‌Error! Bookmark not defined.Executive SummaryError! Bookmark not defined.For fiscal 2022, we achieved record net income of $2.4 billion, an 11.9% increase over the prior year, and sales growth of $1.6 billion, an 11.1% increase over the prior year. Domestic commercial sales increased 26.5%, which represents 28.8% of our domestic auto parts sales. Both our retail sales and commercial sales grew this past year as we made progress on our initiatives aimed at improving our ability to say "Yes" to our customers more frequently and accelerating our commercial growth.Error! Bookmark not defined.Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.‌Error! Bookmark not defined.Miles DrivenError! Bookmark not defined.Seven Year Old or Older VehiclesError! Bookmark not defined.Results of OperationsError! Bookmark not defined.The following table highlights selected financial information over the past 5 years:‌Error! Bookmark not defined.Fiscal 2022 Compared with Fiscal 2021Error! Bookmark not defined.Fiscal 2021 Compared with Fiscal 2020Error! Bookmark not defined.Quarterly PeriodsError! Bookmark not defined.Liquidity and Capital ResourcesError! Bookmark not defined.Debt FacilitiesError! Bookmark not defined.Stock RepurchasesError! Bookmark not defined.Financial CommitmentsError! Bookmark not defined.Reconciliation of Non-GAAP Financial MeasuresError! Bookmark not defined.Reconciliation of Non-GAAP Financial Measure: Cash Flow Before Share Repurchases and Changes in DebtError! Bookmark not defined.Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to EBITDAR‌Error! Bookmark not defined.(1)The fiscal year ended August 31, 2019 consisted of 53 weeks.Error! Bookmark not defined.Recent Accounting PronouncementsError! Bookmark not defined.Critical Accounting Policies and EstimatesError! Bookmark not defined.Self-Insurance ReservesError! Bookmark not defined.Income TaxesError! Bookmark not defined.Vendor AllowancesError! Bookmark not defined.Item 7A. Quantitative and Qualitative Disclosures about Market RiskError! Bookmark not defined.Interest Rate RiskError! Bookmark not defined.Foreign Currency RiskError! Bookmark not defined.Item 8. Financial Statements and Supplementary Data‌42Management's Report on Internal Control Over Financial ReportingError! Bookmark not defined.AutoZone, Inc. Consolidated Statements of IncomeError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Balance SheetsError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Statements of Cash FlowsError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Statements of Stockholders' DeficitError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.Notes to Consolidated Financial StatementsError! Bookmark not defined.Note A - Significant Accounting PoliciesError! Bookmark not defined.Cost of SalesError! Bookmark not defined.Operating, Selling, General and Administrative ExpensesError! Bookmark not defined.Recently Issued Accounting Pronouncements:Error! Bookmark not defined. Note B - Share-Based PaymentsError! Bookmark not defined.Overview of Share-Based Payment PlansError! Bookmark not defined.Amended and Restated AutoZone, Inc. 2011 Equity Incentive Award PlanError! Bookmark not defined.AutoZone, Inc. Director Compensation ProgramError! Bookmark not defined.Stock OptionsError! Bookmark not defined.Restricted Stock UnitsError! Bookmark not defined.Stock Appreciation RightsError! Bookmark not defined.Employee Stock Purchase Plan and Executive Stock Purchase PlanError! Bookmark not defined.Note C - Accrued Expenses and OtherError! Bookmark not defined.Note D - Income TaxesError! Bookmark not defined.Note E - Fair Value MeasurementsError! Bookmark not defined.Marketable Debt Securities Measured at Fair Value on a Recurring BasisError! Bookmark not defined.Non-Financial Assets Measured at Fair Value on a Non-Recurring BasisError! Bookmark not defined.Financial Instruments not Recognized at Fair ValueError! Bookmark not defined.Note F - Marketable Debt SecuritiesError! Bookmark not defined.Note G - Accumulated Other Comprehensive LossError! Bookmark not defined.(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 reinvestedError! Bookmark not defined.Note H - Derivative Financial InstrumentsError! Bookmark not defined.Note J - Interest ExpenseError! Bookmark not defined.Note K - Stock Repurchase ProgramError! Bookmark not defined.Note L - 401(k) Savings PlanError! Bookmark not defined.Note M - LeasesError! Bookmark not defined.Note N - Commitments and ContingenciesError! Bookmark not defined.Note O - LitigationError! Bookmark not defined.Note P - Segment ReportingError! Bookmark not defined.Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure‌Error! Bookmark not defined.Item 9A. Controls and ProceduresError! Bookmark not defined.Item 9B. Other InformationError! Bookmark not defined.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsError! Bookmark not defined.PART IIIError! Bookmark not defined.Item 10. Directors, Executive Officers and Corporate GovernanceError! Bookmark not defined.Item 11. Executive CompensationError! Bookmark not defined.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersError! Bookmark not defined.Item 13. Certain Relationships and Related Transactions, and Director Independence‌Error! Bookmark not defined.Item 14. Principal Accounting Fees and ServicesError! Bookmark not defined.PART IVError! Bookmark not defined.Item 15. Exhibits and Financial Statement Schedules‌76(a) Financial Statements‌76(b) Exhibits‌76Form 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! Bookmark not defined.Item 16. Form 10K SummaryError! Bookmark not defined.SIGNATURESError! Bookmark not defined.​​Management's Report on Internal Control Over Financial Reporting43Reports of Independent Registered Public Accounting Firm44Consolidated Statements of Income47Consolidated Statements of Comprehensive Income47Consolidated Balance Sheets48Consolidated Statements of Cash Flows49Consolidated Statements of Stockholders' Deficit50Notes to Consolidated Financial Statements51​​​ Item 8. Financial Statements and Supplementary Data Index TABLE OF CONTENTSError! Bookmark not defined.PART IError! Bookmark not defined.Item 1. BusinessError! Bookmark not defined.IntroductionError! Bookmark not defined.Human Capital ResourcesError! Bookmark not defined.Store OperationsError! Bookmark not defined.Store FormatsError! Bookmark not defined.We believe our stores are "destination stores," generating their own traffic rather than relying on traffic created by adjacent stores. Therefore, we situate most stores on major thoroughfares with easy access and good parking.Error! Bookmark not defined.Store Personnel and TrainingError! Bookmark not defined.Store Support CentersError! Bookmark not defined.All store support functions are centralized in our store support centers located in Memphis, Tennessee; Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. We believe that this centralization enhances consistent execution of our merchandising and marketing strategies at the store level, while reducing expenses and cost of sales.Error! Bookmark not defined.Store AutomationError! Bookmark not defined.CommercialError! Bookmark not defined.Store DevelopmentError! Bookmark not defined.Marketing and Merchandising StrategyError! Bookmark not defined.Customer ServiceError! Bookmark not defined.MerchandisingError! Bookmark not defined.PricingError! Bookmark not defined.Brand Marketing: Marketing and LoyaltyError! Bookmark not defined.Purchasing and Supply ChainError! Bookmark not defined.CompetitionError! Bookmark not defined.Government RelationsError! Bookmark not defined.Trademarks and PatentsError! Bookmark not defined.SeasonalityError! Bookmark not defined.AutoZone WebsitesError! Bookmark not defined.Information about our Executive OfficersError! Bookmark not defined.William C. Rhodes, III, 57 - Chairman, President and Chief Executive Officer, Customer Satisfaction‌Error! Bookmark not defined.Preston B. Frazer, 46 - Executive Vice President - Store Operations, Commercial and Loss Prevention, Customer SatisfactionError! Bookmark not defined.Thomas B. Newbern, 60 - Executive Vice President - International, Information Technology and ALLDATA, Customer SatisfactionError! Bookmark not defined.Domingo J. Hurtado, 61 - Senior Vice President - International, Customer Satisfaction‌Error! Bookmark not defined.Kristen C. Wright, 46 - Senior Vice President - General Counsel & Secretary, Customer SatisfactionError! Bookmark not defined.Item 1B. Unresolved Staff CommentsError! Bookmark not defined.Item 2. PropertiesError! Bookmark not defined.Item 3. Legal ProceedingsError! Bookmark not defined.Item 4. Mine Safety DisclosuresError! Bookmark not defined.PART II‌24Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities‌24Stock Performance Graph‌25Item 6. ReservedError! Bookmark not defined.Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations‌Error! Bookmark not defined.Executive SummaryError! Bookmark not defined.For fiscal 2022, we achieved record net income of $2.4 billion, an 11.9% increase over the prior year, and sales growth of $1.6 billion, an 11.1% increase over the prior year. Domestic commercial sales increased 26.5%, which represents 28.8% of our domestic auto parts sales. Both our retail sales and commercial sales grew this past year as we made progress on our initiatives aimed at improving our ability to say "Yes" to our customers more frequently and accelerating our commercial growth.Error! Bookmark not defined.Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.‌Error! Bookmark not defined.Miles DrivenError! Bookmark not defined.Seven Year Old or Older VehiclesError! Bookmark not defined.Results of OperationsError! Bookmark not defined.The following table highlights selected financial information over the past 5 years:‌Error! Bookmark not defined.Fiscal 2022 Compared with Fiscal 2021Error! Bookmark not defined.Fiscal 2021 Compared with Fiscal 2020Error! Bookmark not defined.Quarterly PeriodsError! Bookmark not defined.Liquidity and Capital ResourcesError! Bookmark not defined.Debt FacilitiesError! Bookmark not defined.Stock RepurchasesError! Bookmark not defined.Financial CommitmentsError! Bookmark not defined.Reconciliation of Non-GAAP Financial MeasuresError! Bookmark not defined.Reconciliation of Non-GAAP Financial Measure: Cash Flow Before Share Repurchases and Changes in DebtError! Bookmark not defined.Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to EBITDAR‌Error! Bookmark not defined.(1)The fiscal year ended August 31, 2019 consisted of 53 weeks.Error! Bookmark not defined.Recent Accounting PronouncementsError! Bookmark not defined.Critical Accounting Policies and EstimatesError! Bookmark not defined.Self-Insurance ReservesError! Bookmark not defined.Income TaxesError! Bookmark not defined.Vendor AllowancesError! Bookmark not defined.Item 7A. Quantitative and Qualitative Disclosures about Market RiskError! Bookmark not defined.Interest Rate RiskError! Bookmark not defined.Foreign Currency RiskError! Bookmark not defined.Item 8. Financial Statements and Supplementary Data‌42Management's Report on Internal Control Over Financial ReportingError! Bookmark not defined.AutoZone, Inc. Consolidated Statements of IncomeError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Balance SheetsError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Statements of Cash FlowsError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Statements of Stockholders' DeficitError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.Notes to Consolidated Financial StatementsError! Bookmark not defined.Note A - Significant Accounting PoliciesError! Bookmark not defined.Cost of SalesError! Bookmark not defined.Operating, Selling, General and Administrative ExpensesError! Bookmark not defined.Recently Issued Accounting Pronouncements:Error! Bookmark not defined. Note B - Share-Based PaymentsError! Bookmark not defined.Overview of Share-Based Payment PlansError! Bookmark not defined.Amended and Restated AutoZone, Inc. 2011 Equity Incentive Award PlanError! Bookmark not defined.AutoZone, Inc. Director Compensation ProgramError! Bookmark not defined.Stock OptionsError! Bookmark not defined.Restricted Stock UnitsError! Bookmark not defined.Stock Appreciation RightsError! Bookmark not defined.Employee Stock Purchase Plan and Executive Stock Purchase PlanError! Bookmark not defined.Note C - Accrued Expenses and OtherError! Bookmark not defined.Note D - Income TaxesError! Bookmark not defined.Note E - Fair Value MeasurementsError! Bookmark not defined.Marketable Debt Securities Measured at Fair Value on a Recurring BasisError! Bookmark not defined.Non-Financial Assets Measured at Fair Value on a Non-Recurring BasisError! Bookmark not defined.Financial Instruments not Recognized at Fair ValueError! Bookmark not defined.Note F - Marketable Debt SecuritiesError! Bookmark not defined.Note G - Accumulated Other Comprehensive LossError! Bookmark not defined.(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 reinvestedError! Bookmark not defined.Note H - Derivative Financial InstrumentsError! Bookmark not defined.Note J - Interest ExpenseError! Bookmark not defined.Note K - Stock Repurchase ProgramError! Bookmark not defined.Note L - 401(k) Savings PlanError! Bookmark not defined.Note M - LeasesError! Bookmark not defined.Note N - Commitments and ContingenciesError! Bookmark not defined.Note O - LitigationError! Bookmark not defined.Note P - Segment ReportingError! Bookmark not defined.Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure‌Error! Bookmark not defined.Item 9A. Controls and ProceduresError! Bookmark not defined.Item 9B. Other InformationError! Bookmark not defined.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsError! Bookmark not defined.PART IIIError! Bookmark not defined.Item 10. Directors, Executive Officers and Corporate GovernanceError! Bookmark not defined.Item 11. Executive CompensationError! Bookmark not defined.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersError! Bookmark not defined.Item 13. Certain Relationships and Related Transactions, and Director Independence‌Error! Bookmark not defined.Item 14. Principal Accounting Fees and ServicesError! Bookmark not defined.PART IVError! Bookmark not defined.Item 15. Exhibits and Financial Statement Schedules‌76(a) Financial Statements‌76(b) Exhibits‌76Form 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! Bookmark not defined.Item 16. Form 10K SummaryError! Bookmark not defined.SIGNATURESError! Bookmark not defined.​ TABLE OF CONTENTSError! Bookmark not defined.PART IError! Bookmark not defined.Item 1. BusinessError! Bookmark not defined.IntroductionError! Bookmark not defined.Human Capital ResourcesError! Bookmark not defined.Store OperationsError! Bookmark not defined.Store FormatsError! Bookmark not defined.We believe our stores are "destination stores," generating their own traffic rather than relying on traffic created by adjacent stores. Therefore, we situate most stores on major thoroughfares with easy access and good parking.Error! Bookmark not defined.Store Personnel and TrainingError! Bookmark not defined.Store Support CentersError! Bookmark not defined.All store support functions are centralized in our store support centers located in Memphis, Tennessee; Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil. We believe that this centralization enhances consistent execution of our merchandising and marketing strategies at the store level, while reducing expenses and cost of sales.Error! Bookmark not defined.Store AutomationError! Bookmark not defined.CommercialError! Bookmark not defined.Store DevelopmentError! Bookmark not defined.Marketing and Merchandising StrategyError! Bookmark not defined.Customer ServiceError! Bookmark not defined.MerchandisingError! Bookmark not defined.PricingError! Bookmark not defined.Brand Marketing: Marketing and LoyaltyError! Bookmark not defined.Purchasing and Supply ChainError! Bookmark not defined.CompetitionError! Bookmark not defined.Government RelationsError! Bookmark not defined.Trademarks and PatentsError! Bookmark not defined.SeasonalityError! Bookmark not defined.AutoZone WebsitesError! Bookmark not defined.Information about our Executive OfficersError! Bookmark not defined.William C. Rhodes, III, 57 - Chairman, President and Chief Executive Officer, Customer Satisfaction‌Error! Bookmark not defined.Preston B. Frazer, 46 - Executive Vice President - Store Operations, Commercial and Loss Prevention, Customer SatisfactionError! Bookmark not defined.Thomas B. Newbern, 60 - Executive Vice President - International, Information Technology and ALLDATA, Customer SatisfactionError! Bookmark not defined.Domingo J. Hurtado, 61 - Senior Vice President - International, Customer Satisfaction‌Error! Bookmark not defined.Kristen C. Wright, 46 - Senior Vice President - General Counsel & Secretary, Customer SatisfactionError! Bookmark not defined.Item 1B. Unresolved Staff CommentsError! Bookmark not defined.Item 2. PropertiesError! Bookmark not defined.Item 3. Legal ProceedingsError! Bookmark not defined.Item 4. Mine Safety DisclosuresError! Bookmark not defined.PART II‌24Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities‌24Stock Performance Graph‌25Item 6. ReservedError! Bookmark not defined.Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations‌Error! Bookmark not defined.Executive SummaryError! Bookmark not defined.For fiscal 2022, we achieved record net income of $2.4 billion, an 11.9% increase over the prior year, and sales growth of $1.6 billion, an 11.1% increase over the prior year. Domestic commercial sales increased 26.5%, which represents 28.8% of our domestic auto parts sales. Both our retail sales and commercial sales grew this past year as we made progress on our initiatives aimed at improving our ability to say "Yes" to our customers more frequently and accelerating our commercial growth.Error! Bookmark not defined.Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.‌Error! Bookmark not defined.Miles DrivenError! Bookmark not defined.Seven Year Old or Older VehiclesError! Bookmark not defined.Results of OperationsError! Bookmark not defined.The following table highlights selected financial information over the past 5 years:‌Error! Bookmark not defined.Fiscal 2022 Compared with Fiscal 2021Error! Bookmark not defined.Fiscal 2021 Compared with Fiscal 2020Error! Bookmark not defined.Quarterly PeriodsError! Bookmark not defined.Liquidity and Capital ResourcesError! Bookmark not defined.Debt FacilitiesError! Bookmark not defined.Stock RepurchasesError! Bookmark not defined.Financial CommitmentsError! Bookmark not defined.Reconciliation of Non-GAAP Financial MeasuresError! Bookmark not defined.Reconciliation of Non-GAAP Financial Measure: Cash Flow Before Share Repurchases and Changes in DebtError! Bookmark not defined.Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to EBITDAR‌Error! Bookmark not defined.(1)The fiscal year ended August 31, 2019 consisted of 53 weeks.Error! Bookmark not defined.Recent Accounting PronouncementsError! Bookmark not defined.Critical Accounting Policies and EstimatesError! Bookmark not defined.Self-Insurance ReservesError! Bookmark not defined.Income TaxesError! Bookmark not defined.Vendor AllowancesError! Bookmark not defined.Item 7A. Quantitative and Qualitative Disclosures about Market RiskError! Bookmark not defined.Interest Rate RiskError! Bookmark not defined.Foreign Currency RiskError! Bookmark not defined.Item 8. Financial Statements and Supplementary Data‌42Management's Report on Internal Control Over Financial ReportingError! Bookmark not defined.AutoZone, Inc. Consolidated Statements of IncomeError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Balance SheetsError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Statements of Cash FlowsError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.AutoZone, Inc. Consolidated Statements of Stockholders' DeficitError! Bookmark not defined.See Notes to Consolidated Financial Statements.Error! Bookmark not defined.Notes to Consolidated Financial StatementsError! Bookmark not defined.Note A - Significant Accounting PoliciesError! Bookmark not defined.Cost of SalesError! Bookmark not defined.Operating, Selling, General and Administrative ExpensesError! Bookmark not defined.Recently Issued Accounting Pronouncements:Error! Bookmark not defined. Note B - Share-Based PaymentsError! Bookmark not defined.Overview of Share-Based Payment PlansError! Bookmark not defined.Amended and Restated AutoZone, Inc. 2011 Equity Incentive Award PlanError! Bookmark not defined.AutoZone, Inc. Director Compensation ProgramError! Bookmark not defined.Stock OptionsError! Bookmark not defined.Restricted Stock UnitsError! Bookmark not defined.Stock Appreciation RightsError! Bookmark not defined.Employee Stock Purchase Plan and Executive Stock Purchase PlanError! Bookmark not defined.Note C - Accrued Expenses and OtherError! Bookmark not defined.Note D - Income TaxesError! Bookmark not defined.Note E - Fair Value MeasurementsError! Bookmark not defined.Marketable Debt Securities Measured at Fair Value on a Recurring BasisError! Bookmark not defined.Non-Financial Assets Measured at Fair Value on a Non-Recurring BasisError! Bookmark not defined.Financial Instruments not Recognized at Fair ValueError! Bookmark not defined.Note F - Marketable Debt SecuritiesError! Bookmark not defined.Note G - Accumulated Other Comprehensive LossError! Bookmark not defined.(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 reinvestedError! Bookmark not defined.Note H - Derivative Financial InstrumentsError! Bookmark not defined.Note J - Interest ExpenseError! Bookmark not defined.Note K - Stock Repurchase ProgramError! Bookmark not defined.Note L - 401(k) Savings PlanError! Bookmark not defined.Note M - LeasesError! Bookmark not defined.Note N - Commitments and ContingenciesError! Bookmark not defined.Note O - LitigationError! Bookmark not defined.Note P - Segment ReportingError! Bookmark not defined.Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure‌Error! Bookmark not defined.Item 9A. Controls and ProceduresError! Bookmark not defined.Item 9B. Other InformationError! Bookmark not defined.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsError! Bookmark not defined.PART IIIError! Bookmark not defined.Item 10. Directors, Executive Officers and Corporate GovernanceError! Bookmark not defined.Item 11. Executive CompensationError! Bookmark not defined.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersError! Bookmark not defined.Item 13. Certain Relationships and Related Transactions, and Director Independence‌Error! Bookmark not defined.Item 14. Principal Accounting Fees and ServicesError! Bookmark not defined.PART IVError! Bookmark not defined.Item 15. Exhibits and Financial Statement Schedules‌76(a) Financial Statements‌76(b) Exhibits‌76Form 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! 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.Error! Bookmark not defined.Item 16. Form 10K SummaryError! Bookmark not defined.SIGNATURESError! Bookmark not defined.​ TABLE OF CONTENTSError! Bookmark not defined. TABLE OF CONTENTS **Current (2023):** Preparation of our Consolidated Financial Statements requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements, reported amounts of revenues and expenses during the reporting period and related disclosures of contingent liabilities. In the Notes to our Consolidated Financial Statements, we describe our significant accounting policies used in preparing the Consolidated Financial Statements. Our policies are evaluated on an ongoing basis and are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results could differ under different assumptions or conditions. Our senior management has identified self-insurance reserves as a critical accounting estimate that is materially impacted by assumptions while income taxes and valuation allowances have been identified as critical accounting policies. These policies have been discussed with the Audit Committee of our Board. The following items in our Consolidated Financial Statements represent our critical accounting policies and estimates by management: Self-Insurance Reserves We retain a significant portion of the risks associated with workers' compensation, general, product liability, property and vehicle liability; and we obtain third party insurance to limit the exposure related to certain of these risks. Our self-insurance reserve estimates totaled $268.8 million at August 26, 2023, and $264.3 million at August 27, 2022. Where estimates are possible, losses covered by insurance are recognized on a gross basis with a corresponding insurance receivable. The assumptions made by management in estimating our self-insurance reserves include consideration of historical cost experience, judgments about the present and expected levels of cost per claim and retention levels. We utilize various methods, including analyses of historical trends and use of a specialist, to estimate the cost to settle reported claims and claims incurred but not yet reported. The actuarial methods develop estimates of the future ultimate claim costs based on the claims incurred as of the balance sheet date. When estimating these liabilities, we consider factors, such as the severity, duration and frequency of claims, legal costs associated with claims, healthcare trends and projected inflation of related factors. In recent history, our methods for determining our exposure have remained 39 39 Table of Contentsconsistent, and our historical trends have been appropriately factored into our reserve estimates. As we obtain additional information and refine our methods regarding the assumptions and estimates we use to recognize liabilities incurred, we will adjust our reserves accordingly.Management believes that the various assumptions developed and actuarial methods used to determine our self- insurance reserves are reasonable and provide meaningful data and information that management uses to make its best estimate of our exposure to these risks. Arriving at these estimates, however, requires a significant amount of subjective judgment by management, and as a result these estimates are uncertain and our actual exposure may be different from our estimates. For example, changes in our assumptions about healthcare costs, the severity of accidents and the incidence of illness, the average size of claims and other factors could cause actual claim costs to vary from our assumptions and estimates, causing our reserves to be overstated or understated. A 10% change in our self-insurance liability would have affected net income by approximately $19.3 million for fiscal 2023. Our 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, we reflect the net present value of the obligations we determine to be long-term using the risk-free interest rate as of the balance sheet date.If the discount rate used to calculate the present value of these reserves changed by 25 basis points, net income would have been affected by approximately $1.1 million for fiscal 2023. Income TaxesOur income tax returns are audited by state, federal and foreign tax authorities, and we are typically engaged in various tax examinations at any given time. Tax contingencies often arise due to uncertainty or differing interpretations of the application of tax rules throughout the various jurisdictions in which we operate. The contingencies are influenced by items such as tax audits, changes in tax laws, litigation, appeals and prior experience with similar tax positions.We regularly review our tax reserves for these items and assess the adequacy of the amount we have recorded. As of August 26, 2023, we had approximately $51.0 million reserved for uncertain tax positions.We evaluate exposures associated with our various tax filings by estimating a liability for uncertain 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 us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.We believe our estimates to be reasonable and have not experienced material adjustments to our reserves in the previous three years; however, actual results could differ from our estimates, and we may be exposed to gains or losses. Specifically, management has used judgment and made assumptions to estimate the likely outcome of uncertain tax positions. Additionally, to the extent we prevail in matters for which a liability has been established, or must pay in excess of recognized reserves, our effective tax rate in any particular period could be affected.Vendor AllowancesWe receive various payments and allowances from our vendors through a variety of programs and arrangements, including allowances for warranties, advertising and general promotion of vendor products. Vendor allowances are treated as a reduction of the cost of inventory, unless they are provided as a reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendor's products. Approximately 88% of the vendor funds received during fiscal 2023 were recorded as a reduction of the cost of inventories and recognized as a reduction to cost of sales as these inventories are sold.Based on our vendor agreements, a significant portion of vendor funding we receive is earned as we purchase inventory. Therefore, we record receivables for funding earned but not yet received as we purchase inventory. During the year, we regularly review the receivables from vendors to ensure vendors are able to meet their 40 Table of Contents Table of Contents Table of Contents consistent, and our historical trends have been appropriately factored into our reserve estimates. As we obtain additional information and refine our methods regarding the assumptions and estimates we use to recognize liabilities incurred, we will adjust our reserves accordingly.Management believes that the various assumptions developed and actuarial methods used to determine our self- insurance reserves are reasonable and provide meaningful data and information that management uses to make its best estimate of our exposure to these risks. Arriving at these estimates, however, requires a significant amount of subjective judgment by management, and as a result these estimates are uncertain and our actual exposure may be different from our estimates. For example, changes in our assumptions about healthcare costs, the severity of accidents and the incidence of illness, the average size of claims and other factors could cause actual claim costs to vary from our assumptions and estimates, causing our reserves to be overstated or understated. A 10% change in our self-insurance liability would have affected net income by approximately $19.3 million for fiscal 2023. Our 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, we reflect the net present value of the obligations we determine to be long-term using the risk-free interest rate as of the balance sheet date.If the discount rate used to calculate the present value of these reserves changed by 25 basis points, net income would have been affected by approximately $1.1 million for fiscal 2023. Income TaxesOur income tax returns are audited by state, federal and foreign tax authorities, and we are typically engaged in various tax examinations at any given time. Tax contingencies often arise due to uncertainty or differing interpretations of the application of tax rules throughout the various jurisdictions in which we operate. The contingencies are influenced by items such as tax audits, changes in tax laws, litigation, appeals and prior experience with similar tax positions.We regularly review our tax reserves for these items and assess the adequacy of the amount we have recorded. As of August 26, 2023, we had approximately $51.0 million reserved for uncertain tax positions.We evaluate exposures associated with our various tax filings by estimating a liability for uncertain 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 us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.We believe our estimates to be reasonable and have not experienced material adjustments to our reserves in the previous three years; however, actual results could differ from our estimates, and we may be exposed to gains or losses. Specifically, management has used judgment and made assumptions to estimate the likely outcome of uncertain tax positions. Additionally, to the extent we prevail in matters for which a liability has been established, or must pay in excess of recognized reserves, our effective tax rate in any particular period could be affected.Vendor AllowancesWe receive various payments and allowances from our vendors through a variety of programs and arrangements, including allowances for warranties, advertising and general promotion of vendor products. Vendor allowances are treated as a reduction of the cost of inventory, unless they are provided as a reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendor's products. Approximately 88% of the vendor funds received during fiscal 2023 were recorded as a reduction of the cost of inventories and recognized as a reduction to cost of sales as these inventories are sold.Based on our vendor agreements, a significant portion of vendor funding we receive is earned as we purchase inventory. Therefore, we record receivables for funding earned but not yet received as we purchase inventory. During the year, we regularly review the receivables from vendors to ensure vendors are able to meet their consistent, and our historical trends have been appropriately factored into our reserve estimates. As we obtain additional information and refine our methods regarding the assumptions and estimates we use to recognize liabilities incurred, we will adjust our reserves accordingly. Management believes that the various assumptions developed and actuarial methods used to determine our self- insurance reserves are reasonable and provide meaningful data and information that management uses to make its best estimate of our exposure to these risks. Arriving at these estimates, however, requires a significant amount of subjective judgment by management, and as a result these estimates are uncertain and our actual exposure may be different from our estimates. For example, changes in our assumptions about healthcare costs, the severity of accidents and the incidence of illness, the average size of claims and other factors could cause actual claim costs to vary from our assumptions and estimates, causing our reserves to be overstated or understated. A 10% change in our self-insurance liability would have affected net income by approximately $19.3 million for fiscal 2023. Our 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, we reflect the net present value of the obligations we determine to be long-term using the risk-free interest rate as of the balance sheet date. If the discount rate used to calculate the present value of these reserves changed by 25 basis points, net income would have been affected by approximately $1.1 million for fiscal 2023. Income Taxes Our income tax returns are audited by state, federal and foreign tax authorities, and we are typically engaged in various tax examinations at any given time. Tax contingencies often arise due to uncertainty or differing interpretations of the application of tax rules throughout the various jurisdictions in which we operate. The contingencies are influenced by items such as tax audits, changes in tax laws, litigation, appeals and prior experience with similar tax positions. We regularly review our tax reserves for these items and assess the adequacy of the amount we have recorded. As of August 26, 2023, we had approximately $51.0 million reserved for uncertain tax positions. We evaluate exposures associated with our various tax filings by estimating a liability for uncertain 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 us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We believe our estimates to be reasonable and have not experienced material adjustments to our reserves in the previous three years; however, actual results could differ from our estimates, and we may be exposed to gains or losses. Specifically, management has used judgment and made assumptions to estimate the likely outcome of uncertain tax positions. Additionally, to the extent we prevail in matters for which a liability has been established, or must pay in excess of recognized reserves, our effective tax rate in any particular period could be affected. Vendor Allowances We receive various payments and allowances from our vendors through a variety of programs and arrangements, including allowances for warranties, advertising and general promotion of vendor products. Vendor allowances are treated as a reduction of the cost of inventory, unless they are provided as a reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendor's products. Approximately 88% of the vendor funds received during fiscal 2023 were recorded as a reduction of the cost of inventories and recognized as a reduction to cost of sales as these inventories are sold. Based on our vendor agreements, a significant portion of vendor funding we receive is earned as we purchase inventory. Therefore, we record receivables for funding earned but not yet received as we purchase inventory. During the year, we regularly review the receivables from vendors to ensure vendors are able to meet their 40 40 Table of Contentsobligations. We generally have not recorded a reserve against these receivables as we have not experienced significant losses and typically have a legal right of offset with our vendors for payments owed them. We have had write-offs less than $1 million in each of the last three years.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are exposed to market risk from, among other things, changes in interest rates, foreign exchange rates and fuel prices. From time to time, we use various derivative instruments to reduce interest rate and fuel price risks. To date, based upon our current level of foreign operations, no derivative instruments have been utilized to reduce foreign exchange rate risk. All of our hedging activities are governed by guidelines that are authorized by the Board. Further, we do not buy or sell derivative instruments for trading purposes.Interest Rate RiskOur financial market risk results primarily from changes in interest rates. At times, we reduce our 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.We have historically utilized interest rate swaps to convert variable rate debt to fixed rate debt and to lock in fixed rates on future debt issuances. We reflect the current fair value of all interest rate hedge instruments as a component of either other current assets or accrued expenses and other. Our interest rate hedge instruments are designated as cash flow hedges. As of August 26, 2023 and August 27, 2022, no such interest rate swaps were outstanding. Unrealized gains and losses on interest rate hedges are deferred in stockholders' deficit as a component of Accumulated Other Comprehensive Loss. These deferred gains and losses are recognized in income as a decrease or increase to interest expense in the period in which the related cash flows being hedged are recognized in expense. However, to the extent that the change in value of an interest rate hedge instrument does not perfectly offset the change in the value of the cash flow being hedged, that ineffective portion is immediately recognized in earnings.The fair value of our debt was estimated at $7.3 billion as of August 26, 2023, and $5.9 billion as of August 27, 2022, based on the quoted market prices for the same or similar debt issues or on the current rates available to us for debt having the same remaining maturities. Such fair value is less than the carrying value of debt by $406.6 million and $182.8 million at August 26, 2023 and August 27, 2022, respectively, which reflects its face amount, adjusted for any unamortized debt issuance costs and discounts. We had $1.2 billion in variable rate debt outstanding at August 26, 2023 and $603.4 million in August 27, 2022. We had outstanding fixed rate debt of $6.5 billion, net of unamortized debt issuance costs of $41.1 million, at August 26, 2023, and $5.5 billion, net of unamortized debt issuance costs of $31.3 million, at August 27, 2022. A one percentage point increase in interest rates would have reduced the fair value of our fixed rate debt by approximately $264.7 million at August 26, 2023.Foreign Currency RiskForeign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than our entities' functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective functional currencies. We are exposed to Brazilian reals, Canadian dollars, euros, Chinese yuan renminbi and British pounds, but our primary foreign currency exposure arises from Mexican peso-denominated revenues and profits and their translation into U.S. dollars. Foreign currency exposures arising from transactions denominated in currencies other than the functional currency are not material.We view our investments in Mexican subsidiaries as long-term. As a result, we generally do not hedge these net investments. The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end exchange rates was $409.8 million at August 26, 2023 and $270.2 million at August 27, 2022. The year-end exchange rates with respect to the Mexican peso increased by 15.7% with respect to the U.S. dollar during fiscal 2023 and decreased by less than 1.0% with respect to the U.S. dollar during fiscal 2022. The potential loss in value 41 Table of Contents Table of Contents Table of Contents obligations. We generally have not recorded a reserve against these receivables as we have not experienced significant losses and typically have a legal right of offset with our vendors for payments owed them. We have had write-offs less than $1 million in each of the last three years.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are exposed to market risk from, among other things, changes in interest rates, foreign exchange rates and fuel prices. From time to time, we use various derivative instruments to reduce interest rate and fuel price risks. To date, based upon our current level of foreign operations, no derivative instruments have been utilized to reduce foreign exchange rate risk. All of our hedging activities are governed by guidelines that are authorized by the Board. Further, we do not buy or sell derivative instruments for trading purposes.Interest Rate RiskOur financial market risk results primarily from changes in interest rates. At times, we reduce our 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.We have historically utilized interest rate swaps to convert variable rate debt to fixed rate debt and to lock in fixed rates on future debt issuances. We reflect the current fair value of all interest rate hedge instruments as a component of either other current assets or accrued expenses and other. Our interest rate hedge instruments are designated as cash flow hedges. As of August 26, 2023 and August 27, 2022, no such interest rate swaps were outstanding. Unrealized gains and losses on interest rate hedges are deferred in stockholders' deficit as a component of Accumulated Other Comprehensive Loss. These deferred gains and losses are recognized in income as a decrease or increase to interest expense in the period in which the related cash flows being hedged are recognized in expense. However, to the extent that the change in value of an interest rate hedge instrument does not perfectly offset the change in the value of the cash flow being hedged, that ineffective portion is immediately recognized in earnings.The fair value of our debt was estimated at $7.3 billion as of August 26, 2023, and $5.9 billion as of August 27, 2022, based on the quoted market prices for the same or similar debt issues or on the current rates available to us for debt having the same remaining maturities. Such fair value is less than the carrying value of debt by $406.6 million and $182.8 million at August 26, 2023 and August 27, 2022, respectively, which reflects its face amount, adjusted for any unamortized debt issuance costs and discounts. We had $1.2 billion in variable rate debt outstanding at August 26, 2023 and $603.4 million in August 27, 2022. We had outstanding fixed rate debt of $6.5 billion, net of unamortized debt issuance costs of $41.1 million, at August 26, 2023, and $5.5 billion, net of unamortized debt issuance costs of $31.3 million, at August 27, 2022. A one percentage point increase in interest rates would have reduced the fair value of our fixed rate debt by approximately $264.7 million at August 26, 2023.Foreign Currency RiskForeign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than our entities' functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective functional currencies. We are exposed to Brazilian reals, Canadian dollars, euros, Chinese yuan renminbi and British pounds, but our primary foreign currency exposure arises from Mexican peso-denominated revenues and profits and their translation into U.S. dollars. Foreign currency exposures arising from transactions denominated in currencies other than the functional currency are not material.We view our investments in Mexican subsidiaries as long-term. As a result, we generally do not hedge these net investments. The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end exchange rates was $409.8 million at August 26, 2023 and $270.2 million at August 27, 2022. The year-end exchange rates with respect to the Mexican peso increased by 15.7% with respect to the U.S. dollar during fiscal 2023 and decreased by less than 1.0% with respect to the U.S. dollar during fiscal 2022. The potential loss in value obligations. We generally have not recorded a reserve against these receivables as we have not experienced significant losses and typically have a legal right of offset with our vendors for payments owed them. We have had write-offs less than $1 million in each of the last three years. Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk from, among other things, changes in interest rates, foreign exchange rates and fuel prices. From time to time, we use various derivative instruments to reduce interest rate and fuel price risks. To date, based upon our current level of foreign operations, no derivative instruments have been utilized to reduce foreign exchange rate risk. All of our hedging activities are governed by guidelines that are authorized by the Board. Further, we do not buy or sell derivative instruments for trading purposes. Interest Rate Risk Our financial market risk results primarily from changes in interest rates. At times, we reduce our 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. We have historically utilized interest rate swaps to convert variable rate debt to fixed rate debt and to lock in fixed rates on future debt issuances. We reflect the current fair value of all interest rate hedge instruments as a component of either other current assets or accrued expenses and other. Our interest rate hedge instruments are designated as cash flow hedges. As of August 26, 2023 and August 27, 2022, no such interest rate swaps were outstanding. Unrealized gains and losses on interest rate hedges are deferred in stockholders' deficit as a component of Accumulated Other Comprehensive Loss. These deferred gains and losses are recognized in income as a decrease or increase to interest expense in the period in which the related cash flows being hedged are recognized in expense. However, to the extent that the change in value of an interest rate hedge instrument does not perfectly offset the change in the value of the cash flow being hedged, that ineffective portion is immediately recognized in earnings. The fair value of our debt was estimated at $7.3 billion as of August 26, 2023, and $5.9 billion as of August 27, 2022, based on the quoted market prices for the same or similar debt issues or on the current rates available to us for debt having the same remaining maturities. Such fair value is less than the carrying value of debt by $406.6 million and $182.8 million at August 26, 2023 and August 27, 2022, respectively, which reflects its face amount, adjusted for any unamortized debt issuance costs and discounts. We had $1.2 billion in variable rate debt outstanding at August 26, 2023 and $603.4 million in August 27, 2022. We had outstanding fixed rate debt of $6.5 billion, net of unamortized debt issuance costs of $41.1 million, at August 26, 2023, and $5.5 billion, net of unamortized debt issuance costs of $31.3 million, at August 27, 2022. A one percentage point increase in interest rates would have reduced the fair value of our fixed rate debt by approximately $264.7 million at August 26, 2023. Foreign Currency Risk Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than our entities' functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective functional currencies. We are exposed to Brazilian reals, Canadian dollars, euros, Chinese yuan renminbi and British pounds, but our primary foreign currency exposure arises from Mexican peso-denominated revenues and profits and their translation into U.S. dollars. Foreign currency exposures arising from transactions denominated in currencies other than the functional currency are not material. We view our investments in Mexican subsidiaries as long-term. As a result, we generally do not hedge these net investments. The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end exchange rates was $409.8 million at August 26, 2023 and $270.2 million at August 27, 2022. The year-end exchange rates with respect to the Mexican peso increased by 15.7% with respect to the U.S. dollar during fiscal 2023 and decreased by less than 1.0% with respect to the U.S. dollar during fiscal 2022. The potential loss in value 41 41 Table of Contentsof our net assets in the Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at August 26, 2023 and August 27, 2022, would have been approximately $37.3 million and approximately $24.6 million, respectively. Any changes in our net assets in the Mexican subsidiaries relating to foreign currency exchange rates would be reflected in the foreign currency translation component of Accumulated Other Comprehensive Loss, unless the Mexican subsidiaries are sold or otherwise disposed. A hypothetical 10 percent adverse change in average exchange rates would not have a material impact on our results of operations.​42 Table of Contents Table of Contents Table of Contents of our net assets in the Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at August 26, 2023 and August 27, 2022, would have been approximately $37.3 million and approximately $24.6 million, respectively. Any changes in our net assets in the Mexican subsidiaries relating to foreign currency exchange rates would be reflected in the foreign currency translation component of Accumulated Other Comprehensive Loss, unless the Mexican subsidiaries are sold or otherwise disposed. A hypothetical 10 percent adverse change in average exchange rates would not have a material impact on our results of operations.​ of our net assets in the Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at August 26, 2023 and August 27, 2022, would have been approximately $37.3 million and approximately $24.6 million, respectively. Any changes in our net assets in the Mexican subsidiaries relating to foreign currency exchange rates would be reflected in the foreign currency translation component of Accumulated Other Comprehensive Loss, unless the Mexican subsidiaries are sold or otherwise disposed. A hypothetical 10 percent adverse change in average exchange rates would not have a material impact on our results of operations. ​ 42 42 Table of ContentsItem 8. Financial Statements and Supplementary DataIndexManagement's Report on Internal Control Over Financial Reporting44Reports of Independent Registered Public Accounting Firm45Consolidated Statements of Income48Consolidated Statements of Comprehensive Income48Consolidated Balance Sheets49Consolidated Statements of Cash Flows50Consolidated Statements of Stockholders' Deficit51Notes to Consolidated Financial Statements52​​​43 Table of Contents Table of Contents Table of Contents Item 8. Financial Statements and Supplementary DataIndexManagement's Report on Internal Control Over Financial Reporting44Reports of Independent Registered Public Accounting Firm45Consolidated Statements of Income48Consolidated Statements of Comprehensive Income48Consolidated Balance Sheets49Consolidated Statements of Cash Flows50Consolidated Statements of Stockholders' Deficit51Notes to Consolidated Financial Statements52​​​ Item 8. Financial Statements and Supplementary Data Index Management's Report on Internal Control Over Financial Reporting Management's Report on Internal Control Over Financial Reporting 44 Reports of Independent Registered Public Accounting Firm Reports of Independent Registered Public Accounting Firm 45 Consolidated Statements of Income Consolidated Statements of Income 48 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 48 Consolidated Balance Sheets Consolidated Balance Sheets 49 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 50 Consolidated Statements of Stockholders' Deficit Consolidated Statements of Stockholders' Deficit 51 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 52 ​ ​ ​ 43 43 Table of Contents​Management's Report on Internal Control Over Financial ReportingOur 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 26, 2023, 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 26, 2023.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 26, 2023 is included in this Annual Report on Form 10-K.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​44 Table of Contents Table of Contents Table of Contents ​Management's Report on Internal Control Over Financial ReportingOur 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 26, 2023, 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 26, 2023.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 26, 2023 is included in this Annual Report on Form 10-K.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ ​ --- *Data sourced from SEC EDGAR. Last updated 2026-06-01.*