i need 5 balance sheets for Auto Zone company from the resources "attachments and the link below" for the last 5 years, 2011-2012-2013-2014-2015 with the sixth page including the total income and everythingfor the last5 years in total

10-K 1 c22621e10vk.htm FORM 10-K Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended August 27, 2011, or Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission file number 1-10714 AUTOZONE, INC. (Exact name of registrant as specified in its charter) Nevada (State or other jurisdiction of incorporation or organization) 62-1482048 (I.R.S. Employer Identification No.) 123 South Front Street, Memphis, Tennessee 38103 (Address of principal executive offices) (Zip Code) (901) 495-6500 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange Common Stock on which registered ($.01 par value) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of \"large accelerated filer,\" \"accelerated filer\" and \"smaller reporting company\" in Rule 12b-2 of the Exchange Act. Smaller reporting company Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter was $7,312,576,491. The number of shares of Common Stock outstanding as of October 17, 2011, was 39,888,099. Documents Incorporated By Reference Portions of the definitive Proxy Statement to be filed within 120 days of August 27, 2011, pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting of Stockholders to be held December 14, 2011, are incorporated by reference into Part III. Large accelerated filer Accelerated filer Non-accelerated filer TABLE OF CONTENTS PART I. Item 1. Business Introduction Marketing and Merchandising Strategy Commercial Store Operations Store Development Purchasing and Supply Chain Competition Trademarks and Patents Employees AutoZone Website Executive Officers of the Registrant Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Reserved 4 4 4 5 6 7 8 8 8 9 9 9 9 11 14 15 15 16 PART II. 17 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information 17 19 20 32 34 65 65 65 PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services 66 66 66 PART IV Item 15. Exhibits and Financial Statement Schedules 67 67 66 66 66 Exhibit 10.37 Exhibit 10.38 Exhibit 10.39 Exhibit 10.40 Exhibit 12.1 Exhibit 21.1 Exhibit 23.1 Exhibit 31.1 Exhibit 31.2 Exhibit 32.1 Exhibit 32.2 EX-101 INSTANCE DOCUMENT EX-101 SCHEMA DOCUMENT EX-101 CALCULATION LINKBASE DOCUMENT EX-101 LABELS LINKBASE DOCUMENT EX-101 PRESENTATION LINKBASE DOCUMENT EX-101 DEFINITION LINKBASE DOCUMENT 2 Table of Contents Forward-Looking Statements Certain statements contained in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements typically use words such as \"believe,\" \"anticipate,\" \"should,\" \"intend,\" \"plan,\" \"will,\" \"expect,\" \"estimate,\" \"project,\" \"positioned,\" \"strategy,\" and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: credit market conditions; the impact of recessionary conditions; competition; product demand; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; energy prices; war and the prospect of war, including terrorist activity; construction delays; access to available and feasible financing; and changes in laws or regulations. Certain of these risks are discussed in more detail in the Risk Factors section contained in Item 1A under Part I of this Annual Report on Form 10-K for the year ended August 27, 2011, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results; developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the Risk Factors could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results. 3 Table of Contents PART I Item 1. Business Introduction AutoZone, Inc. (\"AutoZone,\" the \"Company,\" \"we,\" \"our\" or \"us\") is the nation's leading retailer and a leading distributor of automotive replacement parts and accessories. We began operations in 1979 and at August 27, 2011 operated 4,534 stores in the United States, including Puerto Rico, and 279 in Mexico. Each of our stores 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, 2011, in 2,659 of our domestic stores, we also have 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 sell the ALLDATA brand automotive diagnostic and repair software through www.alldata.com and www.alldatadiy.com. Additionally, we sell automotive hard parts, maintenance items, accessories and nonautomotive products through www.autozone.com, and our commercial customers can make purchases through www.autozonepro.com. We do not derive revenue from automotive repair or installation services. At August 27, 2011, our stores were in the following locations: Alabama Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Store Count 98 119 59 478 67 37 13 233 180 19 221 144 23 38 84 112 6 Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island 45 71 155 30 85 104 1 14 53 20 70 62 129 181 1 233 67 34 121 27 15 4 Table of Contents Store Count South Carolina 79 South Dakota 2 Tennessee 157 Texas 547 Utah 40 Vermont 1 Virginia 101 Washington 69 Washington, DC 6 West Virginia 26 Wisconsin 52 Wyoming 5 Total Domestic 4,534 Mexico 279 Total 4,813 Marketing and Merchandising Strategy We are dedicated to providing customers with superior service and trustworthy advice as well as quality automotive parts and products at a great value in conveniently located, well-designed stores. Key elements of this strategy are: Customer Service Customer service is the most important element in our marketing and merchandising strategy, which is based upon consumer marketing research. We emphasize that our AutoZoners (employees) should always put customers first by providing prompt, courteous service and trustworthy advice. Our electronic parts catalog assists in the selection of parts and warranties that are offered by us or our vendors on many of the parts that we sell. The wide area network in our stores helps us expedite credit or debit card and check approval processes, locate parts at neighboring AutoZone stores, including our hub stores, and in some cases, place special orders directly with our vendors. Our stores generally open at 7:30 or 8 a.m. and close between 8 and 10 p.m. Monday through Saturday and typically open at 9 a.m. and close between 6 and 9 p.m. on Sunday. However, some stores are open 24 hours, and some have extended hours of 6 or 7 a.m. until midnight seven days a week. We also provide specialty tools through our Loan-A-Tool program. Customers can borrow a specialty tool, such as a steering wheel puller, for which a do-it-yourself (\"DIY\") customer or a repair shop would have little or no use other than for a single job. AutoZoners also provide other free services, including check engine light readings where allowed by law, battery charging, the collection of used oil for recycling, and the testing of starters, alternators, batteries, sensors and actuators. 5 Table of Contents Merchandising The following tables show some of the types of products that we sell by major category of items: Failure Maintenance Discretionary A/C Compressors Antifreeze & Windshield Washer Air Fresheners Batteries & Accessories Fluid Cell Phone Accessories Belts & Hoses Brake Drums, Rotors, Shoes & Drinks & Snacks Carburetors Pads Floor Mats & Seat Covers Chassis Chemicals, including Brake & Mirrors Clutches Power Performance Products CV Axles Steering Fluid, Oil & Fuel Protectants & Cleaners Engines Additives Seat Covers Fuel Pumps Oil & Transmission Fluid Sealants & Adhesives Fuses Oil, Air, Fuel & Transmission Steering Wheel Covers Ignition Filters Stereos & Radios Lighting Oxygen Sensors Tools Mufflers Paint & Accessories Wash & Wax Starters & Alternators Refrigerant & Accessories Water Pumps Shock Absorbers & Struts Radiators Spark Plugs & Wires Thermostats Windshield Wipers We believe that the satisfaction of DIY customers and professional technicians is often impacted by our ability to provide specific automotive products as requested. Each store carries the same basic products, but we tailor our inventory to the makes and models of the vehicles in each store's trade area. Our hub stores carry a larger assortment of products that are delivered to local satellite stores. We are constantly updating the products we offer to ensure that our inventory matches the products our customers need or desire. Pricing We want to be perceived by our customers as the value leader in our industry, by consistently providing quality merchandise at the right price, backed by a satisfactory warranty and outstanding customer service. For many of our products, we offer multiple value choices in a good/better/best assortment, with appropriate price and quality differences from the \"good\" products to the \"better\" and \"best\" products. A key differentiating component versus our competitors is our exclusive line of in-house brands, which includes the Valucraft, AutoZone, Duralast and Duralast Gold brands. We believe that our overall value compares favorably to that of our competitors. Brand Marketing: Advertising and Promotions We believe that targeted advertising and promotions play important roles in succeeding in today's environment. We are constantly working to understand our customers' wants and needs so that we can build long-lasting, loyal relationships. We utilize promotions, advertising, and loyalty card programs primarily to advise customers about the overall importance of vehicle maintenance, our great value and the availability of high quality parts. Broadcast and internet media are our primary advertising methods of driving traffic to our stores. We utilize in-store signage, creative product placement and promotions to help educate customers about products that they need. Store Design and Visual Merchandising We design and build stores for high visual impact. The typical AutoZone store utilizes colorful exterior and interior signage, exposed beams and ductwork and brightly lit interiors. Maintenance products, accessories and nonautomotive items are attractively displayed for easy browsing by customers. In-store signage and special displays promote products on floor displays, end caps and shelves. Commercial Our commercial sales program operates in a highly fragmented market, and we are one of the leading distributors of automotive parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts in the United States and Puerto Rico. As a part of the program, we offer credit and delivery to our commercial customers, as well as direct commercial sales through www.autozonepro.com. The program operated out of 2,659 domestic stores as of August 27, 2011. Through our hub stores, we offer a greater range of parts and products desired by professional technicians. We have dedicated sales teams focused on national, regional and public sector commercial accounts. 6 Table of Contents Store Operations Store Formats Substantially all AutoZone stores are based on standard store formats, resulting in generally consistent appearance, merchandising and product mix. Approximately 85% to 90% of each store's square footage is selling space, of which approximately 40% to 45% is dedicated to hard parts inventory. The hard parts inventory area is generally fronted by counters or pods that run the depth or length of the store, dividing the hard parts area from the remainder of the store. The remaining selling space contains displays of maintenance, accessories and non-automotive items. We believe that 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. Store Personnel and Training Each store typically employs from 10 to 16 AutoZoners, including a manager and, in some cases, an assistant manager. We provide on-the-job training as well as formal training programs, including an annual national sales meeting, regular store meetings on specific sales and product issues, standardized training manuals and a specialist program that provides training to AutoZoners in several areas of technical expertise from the Company, our vendors and independent certification agencies. All AutoZoners are encouraged to complete tests resulting in certifications by the National Institute for Automotive Service Excellence (\"ASE\"), which is broadly recognized for training certification in the automotive industry. Training is supplemented with frequent store visits by management. Store managers, sales representatives and commercial specialists receive financial incentives through performancebased bonuses. In addition, our growth has provided opportunities for the promotion of qualified AutoZoners. We believe these opportunities are important to attract, motivate and retain high quality AutoZoners. All store support functions are centralized in our store support centers located in Memphis, Tennessee; Monterrey, Mexico and Chihuahua, Mexico. 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. Store Automation All of our stores have Z-net, our proprietary electronic catalog that enables our AutoZoners to efficiently look up the parts that our customers need and to provide complete job solutions, advice and information for customer vehicles. Z-net provides parts information based on the year, make, model and engine type of a vehicle and also tracks inventory availability at the store, at other nearby stores and through special order. The Z-net display screens are placed on the hard parts counter or pods, where both the AutoZoner and customer can view the screen. Our stores utilize our computerized proprietary Store Management System, which includes bar code scanning and point-of-sale data collection terminals. The Store Management System provides administrative assistance and improved personnel scheduling at the store level, as well as enhanced merchandising information and improved inventory control. We believe the Store Management System also enhances customer service through faster processing of transactions and simplified warranty and product return procedures. In addition, our wide area network enables the stores to expedite credit or debit card and check approval processes, to access national warranty data, to implement real-time inventory controls and to locate and hold parts at neighboring AutoZone stores. 7 Table of Contents Store Development The following table reflects our store development during the past five fiscal years: Fiscal Year 2011 2010 2009 2008 2007 Beginning stores 4,627 4,417 4,240 4,056 3,871 New stores 188 213 180 185 186 Closed stores 2 3 3 1 1 Net new stores 186 210 177 184 185 Relocated stores 10 3 9 14 18 Ending stores 4,813 4,627 4,417 4,240 4,056 We believe that expansion opportunities exist both in markets that we do not currently serve, as well as in markets where we can achieve a larger presence. We attempt to obtain high visibility sites in high traffic locations and undertake substantial research prior to entering new markets. The most important criteria for opening a new store are the projected future profitability and the ability to achieve our required investment hurdle rate. Key factors in selecting new site and market locations include population, demographics, vehicle profile, customer buying trends, commercial businesses, number and strength of competitors' stores and the cost of real estate. In reviewing the vehicle profile, we also consider the number of vehicles that are seven years old and older, or \"our kind of vehicles\"; these vehicles are generally no longer under the original manufacturers' warranties and require more maintenance and repair than younger vehicles. We generally seek to open new stores within or contiguous to existing market areas and attempt to cluster development in markets in a relatively short period of time. In addition to continuing to lease or develop our own stores, we evaluate and may make strategic acquisitions. Purchasing and Supply Chain Merchandise is selected and purchased for all stores through our store support centers located in Memphis, Tennessee and Monterrey, Mexico. In fiscal 2011, one class of similar products accounted for 10 percent of our total sales, and one vendor supplied more than 10 percent of our purchases. No other class of similar products accounted for 10 percent or more of our total sales, and no other individual vendor provided more than 10 percent of our total purchases. We believe that we have good relationships with our suppliers. We also believe that alternative sources of supply exist, at similar cost, for most types of product sold. Most of our merchandise flows through our distribution centers to our stores by our fleet of tractors and trailers or by third-party trucking firms. Our hub stores have increased our ability to distribute products on a timely basis to many of our stores and to expand our product assortment. A hub store generally has a larger assortment of products as well as regular replenishment items that can be delivered to a store in its network within 24 hours. Hub stores are generally replenished from distribution centers multiple times per week. Competition The sale of automotive parts, accessories and maintenance items is highly competitive in many areas, including name recognition, product availability, customer service, store location and price. AutoZone competes in both the retail DIY and commercial do-it-for-me (\"DIFM\") auto parts and products markets. Competitors include national, regional and local auto parts chains, independently owned parts stores, on-line parts stores, jobbers, repair shops, car washes and auto dealers, in addition to discount and mass merchandise stores, department stores, hardware stores, supermarkets, drugstores, convenience stores and home stores that sell aftermarket vehicle parts and supplies, chemicals, accessories, tools and maintenance parts. AutoZone competes on the basis of customer service, including the trustworthy advice of our AutoZoners; merchandise quality, selection and availability; price; product warranty; store layouts, location and convenience; and the strength of our AutoZone brand name, trademarks and service marks. 8 Table of Contents Trademarks and Patents We have registered several service marks and trademarks in the United States Patent and Trademark office as well as in certain other countries, including our service marks, \"AutoZone\" and \"Get in the Zone,\" and trademarks, \"AutoZone,\" \"Duralast,\" \"Duralast Gold,\" \"Valucraft,\" \"ALLDATA,\" \"Loan-A-Tool\" and \"Z-net.\" We believe that these service marks and trademarks are important components of our marketing and merchandising strategies. Employees As of August 27, 2011, we employed over 65,000 persons, approximately 57 percent of whom were employed fulltime. About 91 percent of our AutoZoners were employed in stores or in direct field supervision, approximately 5 percent in distribution centers and approximately 4 percent in store support and other functions. Included in the above numbers are approximately 3,500 persons employed in our Mexico operations. We have never experienced any material labor disruption and believe that relations with our AutoZoners are generally good. AutoZone Website AutoZone's primary website is at http://www.autozone.com. We make available, free of charge, at our investor relations website, http://www.autozoneinc.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10Q, Current Reports on Form 8-K, proxy statements, registration statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended, as soon as reasonably feasible after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Executive Officers of the Registrant The following list describes our executive officers. The title of each executive officer includes the words \"Customer Satisfaction\" which reflects our commitment to customer service. Officers are elected by and serve at the discretion of the Board of Directors. William C. Rhodes, III, 46Chairman, President and Chief Executive Officer, Customer Satisfaction William C. Rhodes, III, was named Chairman of AutoZone during fiscal 2007 and has been President, Chief Executive Officer and a director since March 2005. Prior to his appointment as President and Chief Executive Officer, Mr. Rhodes was Executive Vice President Store Operations and Commercial. Previously, he held several key management positions with the Company. Prior to 1994, Mr. Rhodes was a manager with Ernst & Young LLP. Mr. Rhodes is currently a member of the Board of Directors for Dollar General Corporation. William T. Giles, 52Chief Financial Officer and Executive Vice President Finance, Information Technology and Store Development, Customer Satisfaction William T. Giles was elected Chief Financial Officer and Executive Vice President Finance, Information Technology and Store Development during fiscal 2007. Prior to that, he was Executive Vice President, Chief Financial Officer and Treasurer from June 2006 to December 2006 and Executive Vice President, Chief Financial Officer since May 2006. From 1991 to May 2006, he held several positions with Linens N' Things, Inc., most recently as the Executive Vice President and Chief Financial Officer. Prior to 1991, he was with Melville, Inc. and PricewaterhouseCoopers. Harry L. Goldsmith, 60Executive Vice President, General Counsel and Secretary, Customer Satisfaction Harry L. Goldsmith was elected Executive Vice President, General Counsel and Secretary during fiscal 2006. Previously, he was Senior Vice President, General Counsel and Secretary since 1996 and was Vice President, General Counsel and Secretary from 1993 to 1996. 9 Table of Contents Jon A. Bascom, 54Senior Vice President and Chief Information Officer, Customer Satisfaction Jon A. Bascom was elected Senior Vice President and Chief Information Officer during fiscal 2008. Previously, he was Vice President Information Technology since 1996. Since 1989, Mr. Bascom has worked in a variety of leadership roles in applications development, infrastructure, and technology support. Prior to joining AutoZone, Mr. Bascom worked for Malone & Hyde, AutoZone's predecessor company, for 9 years. Timothy W. Briggs, 50Senior Vice President Human Resources, Customer Satisfaction Timothy W. Briggs was elected Senior Vice President Human Resources during fiscal 2006. Prior to that, he was Vice President Field Human Resources since March 2005. From 2002 to 2005, Mr. Briggs was Vice President Organization Development. Prior to 1996, Mr. Briggs worked in various capacities at The Limited, Inc., Marshalls, and The Broadway Department Stores. Mark A. Finestone, 50Senior Vice President Merchandising, Customer Satisfaction Mark A. Finestone was elected Senior Vice President Merchandising during fiscal 2008. Previously, he was Vice President Merchandising since 2002. Prior to joining AutoZone in 2002, Mr. Finestone worked for May Department Stores for 19 years where he held a variety of leadership roles which included Divisional Vice President, Merchandising. William W. Graves, 51Senior Vice President Supply Chain, Customer Satisfaction William W. Graves was elected Senior Vice President Supply Chain during fiscal 2006. Prior thereto, he was Vice President Supply Chain since 2000. From 1992 to 2000, Mr. Graves served in various capacities with the Company. Lisa R. Kranc, 58Senior Vice President Marketing, Customer Satisfaction Lisa R. Kranc was elected Senior Vice President Marketing during fiscal 2001. Previously, she was Vice President Marketing for Hannaford Bros. Co., a Maine-based grocery chain, since 1997, and was Senior Vice President Marketing for Bruno's, Inc., from 1996 to 1997. Prior to 1996, she was Vice President-Marketing for Giant Eagle, Inc. since 1992. Thomas B. Newbern, 49Senior Vice President Store Operations, Customer Satisfaction Thomas B. Newbern was elected Senior Vice President Store Operations during fiscal 2007. Previously, Mr. Newbern held the title Vice President Store Operations for AutoZone since 1998. Previously, he has held several key management positions with the Company. Charlie Pleas, III, 46Senior Vice President and Controller, Customer Satisfaction Charlie Pleas, III, was elected Senior Vice President and Controller during fiscal 2007. Prior to that, he was Vice President and Controller since 2003. Previously, he was Vice President Accounting since 2000, and Director of General Accounting since 1996. Prior to joining AutoZone, Mr. Pleas was a Division Controller with Fleming Companies, Inc. where he served in various capacities from 1988. Larry M. Roesel, 54Senior Vice President Commercial, Customer Satisfaction Larry M. Roesel joined AutoZone as Senior Vice President Commercial during fiscal 2007. Mr. Roesel came to AutoZone with more than thirty years of experience with OfficeMax, Inc. and its predecessor, where he served in operations, sales and general management. Robert D. Olsen, 58Corporate Development Officer, Customer Satisfaction Robert D. Olsen was elected Corporate Development Officer as of November 1, 2009, with primary responsibility for Mexico, ALLDATA, and other strategic initiatives. Previously, he was Executive Vice President Store Operations, Commercial, ALLDATA, and Mexico since fiscal 2007. Prior to that time, he was Executive Vice President Supply Chain, Information Technology, Mexico and Store Development since fiscal 2006 and before that, Senior Vice President since fiscal 2000 with primary responsibility for store development and Mexico operations. From 1993 to 2000, Mr. Olsen was Executive Vice President and Chief Financial Officer of Leslie's Poolmart. From 1985 to 1989, Mr. Olsen held several positions with AutoZone, including Senior Vice President and Chief Financial Officer and Vice President Finance and Controller. 10 Table of Contents Item 1A. Risk Factors Our business is subject to a variety of risks. Set forth below are certain of the important risks that we face, the occurrence of which could have a material, adverse effect on our business. These risks are not the only ones we face. Our business could also be affected by additional factors that are presently unknown to us or that we currently believe to be immaterial to our business. If demand for our products slows, then our business may be materially affected. Demand for products sold by our stores depends on many factors, including: the number of vehicles in current service, including those that are seven years old and older. These vehicles are generally no longer under the original vehicle manufacturers' warranties and tend to need more maintenance and repair than younger vehicles. rising energy prices. Increases in energy prices may cause our customers to defer purchases of certain of our products as they use a higher percentage of their income to pay for gasoline and other energy costs. the economy. In periods of rapidly declining economic conditions, both retail (DIY) and commercial (DIFM) customers may defer vehicle maintenance or repair. Additionally, such conditions may affect our customers' ability to obtain credit. During periods of expansionary economic conditions, more of our DIY customers may pay others to repair and maintain their cars instead of working on their own vehicles or they may purchase new vehicles. the weather. Mild weather conditions may lower the failure rates of automotive parts, while wet conditions may cause our customers to defer maintenance and repair on their vehicles. Extremely hot or cold conditions may enhance demand for our products due to increased failure rates of our customers' automotive parts. technological advances. Advances in automotive technology and parts design could result in cars needing maintenance less frequently and parts lasting longer. For the long term, demand for our products may be affected by: the number of miles vehicles are driven annually. Higher vehicle mileage increases the need for maintenance and repair. Mileage levels may be affected by gas prices and other factors. the quality of the vehicles manufactured by the original vehicle manufacturers and the length of the warranties or maintenance offered on new vehicles; and restrictions on access to diagnostic tools and repair information imposed by the original vehicle manufacturers or by governmental regulation. All of these factors could result in immediate and longer term declines in the demand for our products, which could adversely affect our sales, cash flows and overall financial condition. If we are unable to compete successfully against other businesses that sell the products that we sell, we could lose customers and our sales and profits may decline. The sale of automotive parts, accessories and maintenance items is highly competitive and is based on many factors, including name recognition, product availability, customer service, store location and price. Competitors are opening locations near our existing stores. AutoZone competes as a provider in both the DIY and DIFM auto parts and accessories markets. Competitors include national, regional and local auto parts chains, independently owned parts stores, on-line parts stores, jobbers, repair shops, car washes and auto dealers, in addition to discount and mass merchandise stores, hardware stores, supermarkets, drugstores, convenience stores and home stores that sell aftermarket vehicle parts and supplies, chemicals, accessories, tools and maintenance parts. Although we believe we compete effectively on the basis of customer service, including the knowledge and expertise of our AutoZoners; merchandise quality, selection and availability; product warranty; store layout, location and convenience; price; and the strength of our AutoZone brand name, trademarks and service marks; some competitors may gain competitive advantages, such as greater financial and marketing resources allowing them to sell automotive products at lower prices, larger stores with more merchandise, longer operating histories, more frequent customer visits and more effective advertising. If we are unable to continue to develop successful competitive strategies, or if our competitors develop more effective strategies, we could lose customers and our sales and profits may decline. 11 Table of Contents We may not be able to sustain our recent rate of sales growth. We have increased our store count in the past five fiscal years, growing from 3,871 stores at August 26, 2006, to 4,813 stores at August 27, 2011, an average store count increase per year of 5%. Additionally, we have increased annual revenues in the past five fiscal years from $5.948 billion in fiscal 2006 to $8.073 billion in fiscal 2011, an average increase per year of 7%. Annual revenue growth is driven by the opening of new stores and increases in same-store sales. We open new stores only after evaluating customer buying trends and market demandeeds, all of which could be adversely affected by continued job losses, wage cuts, small business failures and microeconomic conditions unique to the automotive industry. Same store sales are impacted both by customer demand levels and by the prices we are able to charge for our products, which can also be negatively impacted by continued recessionary pressures. We cannot provide any assurance that we will continue to open stores at historical rates or continue to achieve increases in same-store sales. If we cannot profitably increase our market share in the commercial auto parts business, our sales growth may be limited. Although we are one of the largest sellers of auto parts in the commercial market, to increase commercial sales we must compete against national and regional auto parts chains, independently owned parts stores, wholesalers and jobbers and auto dealers. Although we believe we compete effectively on the basis of customer service, merchandise quality, selection and availability, price, product warranty, distribution locations, and the strength of our AutoZone brand name, trademarks and service marks, some automotive aftermarket jobbers have been in business for substantially longer periods of time than we have, have developed long-term customer relationships and have large available inventories. If we are unable to profitably develop new commercial customers, our sales growth may be limited. Deterioration in the global credit markets, changes in our credit ratings and macroeconomic factors could adversely affect our financial condition and results of operations. Our short-term and long-term debt is rated investment grade by the major rating agencies. These investment-grade credit ratings have historically allowed us to take advantage of lower interest rates and other favorable terms on our short-term credit lines, in our senior debt offerings and in the commercial paper markets. To maintain our investment-grade ratings, we are required to meet certain financial performance ratios. An increase in our debt and/or a decline in our earnings could result in downgrades in our credit ratings. A downgrade in our credit ratings could limit our access to public debt markets, limit the institutions willing to provide credit facilities to us, result in more restrictive financial and other covenants in our public and private debt and would likely significantly increase our overall borrowing costs and adversely affect our earnings. Moreover, significant deterioration in the financial condition of large financial institutions in calendar years 2008 and 2009 resulted in a severe loss of liquidity and availability of credit in global credit markets and in more stringent borrowing terms. During brief time intervals in the fourth quarter of calendar 2008 and the first quarter of calendar 2009, there was no liquidity in the commercial paper markets, resulting in an absence of commercial paper buyers and extraordinarily high interest rates on commercial paper. We can provide no assurance that credit market events such as those that occurred in the fourth quarter of 2008 and the first quarter of 2009 will not occur again in the foreseeable future. Conditions and events in the global credit market could have a material adverse effect on our access to short-term debt and the terms and cost of that debt. Macroeconomic conditions also impact both our customers and our suppliers. Job growth in the United States has stagnated and unemployment has remained at historically high levels during the past three years. Continued recessionary conditions could result in additional job losses and business failures, which could result in our loss of certain small business customers and curtailment of spending by our retail customers. In addition, continued distress in global credit markets, business failures and other recessionary conditions could have a material adverse effect on the ability of our suppliers to obtain necessary short and long-term financing to meet our inventory demands. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. All of these macroeconomic conditions could adversely affect our sales growth, margins and overhead, which could adversely affect our financial condition and operations. 12 Table of Contents Our business depends upon hiring and retaining qualified employees. We believe that much of our brand value lies in the quality of the more than 65,000 AutoZoners employed in our stores, distribution centers, store support centers and ALLDATA. We cannot be assured that we can continue to hire and retain qualified employees at current wage rates. If we are unable to hire, properly train and/or retain qualified employees, we could experience higher employment costs, reduced sales, losses of customers and diminution of our brand, which could adversely affect our earnings. If we do not maintain competitive wages, 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. Inability to acquire and provide quality merchandise could adversely affect our sales and results of operations. We are dependent upon our vendors continuing to supply us with quality merchandise. If our merchandise offerings do not meet our customers' expectations regarding quality and safety, we could experience lost sales, increased costs and exposure to legal and reputational risk. 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 and result in costly product recalls and other liabilities. In addition, negative customer perceptions regarding the safety or quality of the products we sell could cause our customers to seek alternative sources for their needs, resulting in lost sales. In those circumstances, it may be difficult and costly for us to regain the confidence of our customers. Moreover, if any of our significant vendors 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. Our largest stockholder, as a result of its voting ownership, may have the ability to exert substantial influence over actions to be taken or approved by our stockholders. As of October 17, 2011, ESL Investments, Inc. and certain of its affiliates (together, \"ESL\") beneficially owned approximately 29.3% of our outstanding common stock. As a result, ESL may have the ability to exert substantial influence over actions to be taken or approved by our stockholders, including the election of directors and potential change of control transactions. In the future, ESL may acquire or sell shares of common stock and thereby increase or decrease its ownership stake in us. Significant fluctuations in their level of ownership could have an impact on our share price. In June 2008, we entered into an agreement with ESL (the \"ESL Agreement\"), in which ESL has agreed to vote shares of our common stock owned by ESL in excess of 37.5% in the same proportion as all non-ESL-owned shares are voted. Additionally, under the terms of the ESL Agreement, the Company added two directors in August 2008 that were identified by ESL. William C. Crowley, one of the two directors identified by ESL, is the President and Chief Operating Officer of ESL Investments, Inc. 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, particularly at the store management level, 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 hub stores, our supply chain and logistics management techniques to efficiently stock our stores. If we fail to effectively utilize our existing hubs and/or supply chains, we could experience inappropriate inventory levels in our stores, which could adversely affect our sales volume and/or our margins. 13 Table of Contents Our failure to protect our reputation could have a material adverse effect on our brand name. We believe our continued strong sales growth is driven in significant part by our brand name. The value in our brand name and its continued effectiveness in driving our sales growth are dependent to a significant degree on our ability to maintain our reputation for safety, high product quality, friendliness, service, trustworthy advice, integrity and business ethics. Any negative publicity about these types of concerns may reduce demand for our merchandise. Failure to comply with ethical, social, product, labor and environmental standards, or related political considerations, could also jeopardize our reputation and potentially lead to various adverse consumer actions. Failure to comply with local laws and regulations, to maintain an effective system of internal controls or to provide accurate and timely financial statement information could also hurt our reputation. Failure to protect the security of our customers' personal information could subject us to costly regulatory enforcement actions, expose us to litigation and our reputation could suffer. 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. Business interruptions may negatively impact our store hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business. War or acts of terrorism, political unrest, hurricanes, windstorms, fires, earthquakes and other natural or other disasters or the threat of any of them, may result in certain of our stores being closed for a period of time or permanently or have a negative impact on our ability to obtain merchandise available for sale in our stores. Some of our merchandise is imported from other countries. If imported goods become difficult or impossible to bring into the United States, and if we cannot obtain such merchandise from other sources at similar costs, our sales and profit margins may be negatively affected. In the event that commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping 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. We rely extensively on our computer systems to manage inventory, process transactions and summarize results. Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches and catastrophic events. If our systems are damaged or fail to function properly, we may incur substantial costs to repair or replace them, and may experience loss of critical data and interruptions or delays in our ability to manage inventories or process transactions, which could result in lost sales, inability to process purchase orders and/or a potential loss of customer loyalty, which could adversely affect our results of operations. Healthcare reform legislation could have a negative impact on our business. The Patient Protection and Affordable Care Act (the \"Patient Act\") as well as other healthcare reform legislation being considered by Congress and state legislatures may have an impact on our business. Based on the current form of the Patient Act, the impact could be extensive and could increase our employee healthcare-related costs. While the significant costs of the recent healthcare legislation enacted will occur after 2013 due to provisions of the legislation being phased in over time, changes to our healthcare costs structure could have a significant, negative impact on our business. Item 1B. Unresolved Staff Comments None. 14 Table of Contents Item 2. Properties The following table reflects the square footage and number of leased and owned properties for our stores as of August 27, 2011: No. of Stores Square Footage Leased 2,433 15,357,127 Owned 2,380 15,979,414 Total 4,813 31,336,541 We have approximately 4.0 million square feet in distribution centers servicing our stores, of which approximately 1.3 million square feet is leased and the remainder is owned. Our distribution centers are located in Arizona, California, Georgia, Illinois, Ohio, Pennsylvania, Tennessee, Texas and Mexico. Our primary store support center is located in Memphis, Tennessee, and consists of approximately 260,000 square feet. We also have two additional store support centers located in Monterrey, Mexico and Chihuahua, Mexico. The ALLDATA headquarters building in Elk Grove, California, is leased, and we also own or lease other properties that are not material in the aggregate. Item 3. Legal Proceedings We were a defendant in a lawsuit entitled \"Coalition for a Level Playing Field, L.L.C., et al., v. AutoZone, Inc. et al.,\" filed in the U.S. District Court for the Southern District of New York in October 2004. The case was originally filed by more than 200 plaintiffs, which are principally automotive aftermarket warehouse distributors and jobbers, against a number of defendants, including automotive aftermarket retailers and aftermarket automotive parts manufacturers. In the amended complaint, the plaintiffs alleged,inter alia, that some or all of the automotive aftermarket retailer defendants had knowingly received, in violation of the Robinson-Patman Act (the \"Act\"), from various of the manufacturer defendants benefits such as volume discounts, rebates, early buy allowances and other allowances, fees, inventory without payment, sham advertising and promotional payments, a share in the manufacturers' profits, benefits of pay-on-scan purchases, implementation of radio frequency identification technology, and excessive payments for services purportedly performed for the manufacturers. Additionally, a subset of plaintiffs alleged a claim of fraud against the automotive aftermarket retailer defendants based on discovery issues in a prior litigation involving similar claims under the Act. In the prior litigation, the discovery dispute, as well as the underlying claims, was decided in favor of AutoZone and the other automotive aftermarket retailer defendants who proceeded to trial, pursuant to a unanimous jury verdict which was affirmed by the Second Circuit Court of Appeals. In the current litigation, the plaintiffs sought an unspecified amount of damages (including statutory trebling), attorneys' fees, and a permanent injunction prohibiting the aftermarket retailer defendants from inducing and/or knowingly receiving discriminatory prices from any of the aftermarket manufacturer defendants and from opening up any further stores to compete with the plaintiffs as long as the defendants allegedly continue to violate the Act. In an order dated September 7, 2010, and issued on September 16, 2010, the court granted motions to dismiss all claims against AutoZone and its co-defendant competitors and suppliers. Based on the record in the prior litigation, the court dismissed with prejudice all overlapping claims that is, those covering the same time periods covered by the prior litigation and brought by the judgment plaintiffs in the prior litigation. The court also dismissed with prejudice the plaintiffs' attempt to revisit discovery disputes from the prior litigation. Further, with respect to the other claims under the Act, the court found that the factual statements contained in the complaint fall short of what would be necessary to support a plausible inference of unlawful price discrimination. Finally, the court held that the AutoZone pay-on-scan program is a difference in non-price terms that are not governed by the Act. The court ordered the case closed, but also stated that \"in an abundance of caution the Court [was] defer[ring] decision on whether to grant leave to amend to allow plaintiff an opportunity to propose curative amendments.\" The plaintiffs filed a motion for leave to amend their complaint and attached a proposed Third Amended and Supplemental Complaint (the \"Third Amended Complaint\") on behalf of four plaintiffs. The Third Amended Complaint repeated and expanded certain allegations from previous complaints, asserting two claims under the Act, but stated that all other plaintiffs have withdrawn their claims, and that, inter alia, Chief Auto Parts, Inc. had been dismissed as a defendant. AutoZone and the co-defendants filed an opposition to the motion seeking leave to amend. 15 Table of Contents In an order dated September 28, 2011, the court denied the four remaining plaintiffs' motion for leave to file a Third Amended Complaint because the proposed Third Amended Complaint failed to address deficiencies previously identified by the court. We believe this suit to be without merit and are vigorously defending against it. We are unable to estimate a loss or possible range of loss. In 2004, AutoZone acquired a store site in Mount Ephraim, New Jersey that had previously been the site of a gasoline service station and contained evidence of groundwater contamination. Upon acquisition, we voluntarily reported the groundwater contamination issue to the New Jersey Department of Environmental Protection and entered into a Voluntary Remediation Agreement providing for the remediation of the contamination associated with the property. AutoZone has conducted and paid for (at an immaterial cost to us) remediation of visible contamination on the property and is investigating and will be addressing potential vapor intrusion impacts in downgradient residences and businesses. Pursuant to the Voluntary Remediation Agreement, upon completion of all remediation required by the agreement, we are eligible to be reimbursed up to 75 percent of its remediation costs by the State of New Jersey. Although the aggregate amount of additional costs that we may incur pursuant to the Voluntary Remediation Agreement cannot currently be ascertained, we do not currently believe that fulfillment of our obligations under the agreement will result in costs that are material to our financial condition, results of operations or cash flow. We are involved in various legal proceedings incidental to the conduct of our business, including 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. Reserved 16 Table of Contents PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange under the symbol \"AZO.\" On October 17, 2011, there were 3,023 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. The following table sets forth the high and low sales prices per share of common stock, as reported by the New York Stock Exchange, for the periods indicated: Price Range of Common Stock High Low Fiscal Year Ended August 27, 2011: Fourth quarter Third quarter Second quarter First quarter $ $ $ $ 306.00 287.00 276.00 253.50 $ $ $ $ 266.25 247.36 246.26 209.53 Fiscal Year Ended August 28, 2010: Fourth quarter $ 215.21 $ 177.66 Third quarter $ 187.94 $ 160.20 Second quarter $ 161.33 $ 146.17 First quarter $ 154.69 $ 135.13 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 September 28, 2011, to increase the repurchase authorization by $750 million to raise the cumulative share repurchase authorization to $11.15 billion from $10.4 billion. The program does not have an expiration date. Shares of common stock repurchased by the Company during the quarter ended August 27, 2011, were as follows: Period May 8, 2011, to June 4, 2011 June 5, 2011, to July 2, 2011 July 3, 2011, to July 30, 2011 July 31, 2011, to August 27, 2011 Total Total Number of Shares Purchased 466,899 509,097 521,928 1,497,924 Average Price Paid per Share $ 290.75 296.45 280.97 $ 289.28 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 466,899 509,097 521,928 1,497,924 Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs $ 651,940,767 516,191,982 365,271,573 218,626,605 $ 218,626,605 The Company also repurchased, at fair value, an additional 30,864 shares in fiscal 2011, 30,617 shares in fiscal 2010, and 37,190 shares in fiscal 2009 from employees electing to sell their stock under the Company's Sixth Amended and Restated Employee Stock Purchase Plan (the \"Employee Plan\"), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 21,608 shares were sold to employees in fiscal 2011, 26,620 shares were sold to employees in fiscal 2010, and 29,147 shares were sold to employees in fiscal 2009. At August 27, 2011, 272,375 shares of common stock were reserved for future issuance under the Employee Plan. 17 Table of Contents Once executives have reached the maximum purchases under the Employee Plan, the Fourth 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 1,719 shares in fiscal 2011, 1,483 shares in fiscal 2010, and 1,705 shares in fiscal 2009. At August 27, 2011, 256,337 shares of common stock were reserved for future issuance under the Executive Plan. Stock Performance Graph The graph below presents changes in the value of AutoZone's stock as compared to Standard & Poor's 500 Composite Index (\"S&P 500\") and to Standard & Poor's Retail Index (\"S&P Retail Index\") for the five-year period beginning August 26, 2006 and ending August 27, 2011. 18 Table of Contents Item 6. Selected Financial Data (in thousands, except per share data, same store sales and selected operating data) Income Statement Data Fiscal Year Ended August 2010 2009 2008(1) 2011 Income before income taxes Income tax expense Net income 1,324,246 475,272 $ 848,974 7,362,61 8 3,650,87 4 3,711,74 4 2,392,33 0 1,319,41 4 158,909 1,160,50 5 422,194 $ 738,311 Diluted earnings per share $ $ Net sales Cost of sales, including warehouse and delivery expenses $8,072,973 3,953,510 Gross profit Operating, selling, general and administrative expenses 2,624,660 Operating profit Interest expense, net 1,494,803 170,557 Adjusted weighted average shares for diluted earnings per share Same Store Sales Increase in domestic comparable store net sales(2) 4,119,463 19.47 43,603 6.3% $ 14.97 49,304 5.4% 6,816,82 4 3,400,37 5 3,416,44 9 2,240,38 7 1,176,06 2 142,316 1,033,74 6 376,697 $ 657,049 $ $ 11.73 55,992 4.4% 6,522,70 6 3,254,64 5 3,268,06 1 2,143,92 7 1,124,13 4 116,745 1,007,38 9 365,783 $ 641,606 $ $ 10.04 2007 $ 6,169,80 4 3,105,55 4 3,064,25 0 2,008,98 4 1,055,26 6 119,116 936,150 340,478 $ 595,672 $ 63,875 8.53 69,844 0.4% 0.1% Balance Sheet Data Current assets Working (deficit) capital Total assets Current liabilities Debt Long-term capital leases Stockholders' (deficit) equity Selected Operating Data Number of stores at beginning of year New stores 2,611,82 2,561,73 2,586,30 $2,792,425 $ 1 $ 0 $ 1 (638,471) (452,139) (145,022) 66,981 5,571,59 5,318,40 5,257,11 5,869,602 4 5 2 3,063,96 2,706,75 2,519,32 3,430,896 0 2 0 2,908,48 2,726,90 2,250,00 3,351,682 6 0 0 61,360 66,333 38,029 48,144 (1,254,23 $ 2) $ (738,765) $ (433,074) $ 229,687 4,627 188 4,417 213 4,240 180 4,056 185 $ 2,270,45 5 (15,439) 4,804,70 9 2,285,89 5 1,935,61 8 39,073 $ 403,200 3,871 186 Closed stores Net new stores Relocated stores Number of stores at end of year Total store square footage (in thousands) Average square footage per store Increase in store square footage Inventory per store (in thousands) Average net sales per store (in thousands) Net sales per store square foot Total employees at end of year (in thousands) Inventory turnover(3) Accounts payable to inventory ratio After-tax return on invested capital (4) Adjusted debt to EBITDAR (5) Net cash provided by operating activities (in thousands) Cash flow before share repurchases and changes in debt (in thousands)(6) 2 186 10 4,813 3 210 3 4,627 3 177 9 4,417 1 184 14 4,240 1 185 18 4,056 31,337 30,027 28,550 27,291 26,044 6,511 6,490 6,464 6,437 6,421 4% 5% 5% 5% 5% $ 512 $ 498 $ 500 $ 507 $ 495 $ 1,675 $ 1,595 $ 1,541 $ 1,539 $ 1,525 $ 258 $ 246 $ 239 $ 239 $ 238 65 63 60 57 55 1.6x 1.6x 1.5x 1.6x 1.6x 112% 106% 96% 95% 93% 31.3% 27.6% 24.4% 23.9% 23.2% 2.4 2.4 2.5 2.2 2.1 1,196,25 $1,291,538 $ 2 $ 923,808 $ 921,100 $ 845,194 $1,023,927 $ 947,643 $ 673,347 $ 690,621 $ 678,522 (1) The fiscal year ended August 30, 2008 consisted of 53 weeks. (2) The domestic comparable sales increases are based on sales for all domestic stores open at least one year. 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. (3) Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters. 19 Table of Contents (4) After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by average invested capital (which includes a factor to capitalize operating leases). See Reconciliation of NonGAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations. (5) Adjusted debt to EBITDAR is defined as the sum of total debt, capital 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. (6) 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. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations We are the nation's leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. We began operations in 1979 and at August 27, 2011, operated 4,534 stores in the United States, including Puerto Rico, and 279 in Mexico. Each of our stores 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, 2011, in 2,659 of our domestic stores, we also have 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 sell t