2020 ANNUAL REPORT
Notice of Annual Meeting of Stockholders and Proxy Statement
Corporate Profile
AutoZone, Inc. is the leading retailer, and a leading distributor,
of automotive replacement parts and accessories in the
Americas. We began operations in 1979 and at August 29,
2020, operated 5,885 stores in the United States (“U.S.”);
621 stores in Mexico; and 43 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 29, 2020, in 5,007 of our
domestic stores, we also had a commercial sales program that
provides commercial credit and prompt delivery of parts and
other products to local, regional and national repair garages,
dealers, service stations and public sector accounts. We
also have commercial programs in all stores in Mexico and
Brazil. 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 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.
• 6,549 stores (5,885 stores in 50 states in the U.S.
621 stores in Mexico, and 43 stores in Brazil)
• 5,007 domestic Commercial programs
• 12 Distribution centers
(10 in the United States and two in Mexico)
• 100,000 AutoZoners
Selected Financial Highlights
(Dollars in millions, except per share data)
2016
2017
2018
Net Sales
Operating Profit
Diluted Earnings per Share
After-Tax Return on Invested Capital
Domestic Same Store Sales Growth
Operating Margin
Cash Flow from Operations
$10,636
$10,889
$11,221
$2,060
$40.70
31.3%
2.4%
19.4%
$1,641
$2,080
$44.07
29.9%
0.5%
19.1%
$1,571
$1,811
$48.77
32.1%
1.8%
16.1%
$2,080
2019*
$11,864
$2,216
$63.43
35.7%
3.0%
18.7%
$2,129
2020
$12,632
$2,418
$71.93
38.1%
7.4%
19.1%
$2,720
* FY2019 includes a 53rd week of results
AutoZone’s Pledge, est. 1986
AutoZoners always put customers first!
We know our parts and products.
Our stores look great!
We’ve got the best merchandise at the right price.
Dear Customers, AutoZoners and Stockholders,
Our company proudly exists to serve the needs of our customers, the motoring public. Whether during times of natural
disasters, in the midst of a global pandemic, or as we go about our day-to-day lives, our ability to ensure that our customers
can safely and responsibly operate their vehicles is and will always be essential. And, the health, safety and well being of our
AutoZoners and customers remains our most important priority.
I give special thanks to our incredible AutoZoners across the company for their commitment, sacrifice and passion for always
putting our customers first. On behalf of our 100,000 AutoZoners, I am honored to update you on our record-setting progress
during fiscal 2020 and to review our opportunities for 2021 and beyond. The operating theme for AutoZone in 2021 is
“AutoZone Strong” and it’s all about our ability, as 1Team, to build upon our many successes and enduring culture to deliver
second-to-none customer service, high quality parts and products and tremendous value for all our customers.
From the first store we opened in Forrest City, Arkansas, over 41 years ago, to now 6,549 stores spanning the Americas,
our AutoZoners have been and will always be committed to providing WOW! Customer Service! and treating every customer
like they are our only customer. Even though much has changed during our 41-year journey, our commitment to Customer
Satisfaction has, is, and will forever remain the key to our success. I continue to be enthusiastic about our growing consumer
demand, the health of our business and remarkable strength of the automotive aftermarket industry. I remain very bullish
about our near and long-term future.
Summary of 2020 Results
In no uncertain terms, the spread of COVID-19 served
During fiscal 2020, we also continued to make significant
as the defining moment in 2020. It forced us all to make
investments in technology, ecommerce, digital, and benefits.
tough decisions and real sacrifices. Yet, the unquestionable
In FY20, we began rolling out our new point-of sale systems
character of our AutoZoners, customers and
the
with touch-screen capabilities. We also launched our new
communities we serve have never been so readily apparent.
www.autozone.com website, which is more intuitive and
Our historic financial performance was a direct result of
brings the store experience and our website closer together
our AutoZoners embodying our FY20 operating theme: “40
for a better overall customer experience.
Years of WOW! Customer Service!”
For fiscal 2020, we achieved significant growth in both
shopping experience and reduce non-customer facing
our U.S. Retail and Commercial businesses — which were
tasks for our AutoZoners.
We continued to invest in technology to improve the overall
major points of emphasis for us.
In FY20, we grew domestic same store sales by 7.4% and
2020, I am most proud of our decision to invest in and
reached a record $12.6 billion in sales. We also recorded
provide support for our AutoZoners on the front lines with
record average net sales per store, record Commercial
an Emergency Time Off (ETO) benefit.
But, of all the decisions our leadership team made in fiscal
sales per program, record earnings per share, and record
cash flow from operations.
We made this decision in mid-March, during a period
of tremendous uncertainty, and at a time when many
We opened 138 net new stores and 114 net new domestic
businesses and organizations were forced to layoff and
Commercial programs. Now, over 85% of our U.S. stores
furlough hardworking people. While the world was facing
have a Commercial program along with every store in
all these challenges, our Executive Committee and Board
Mexico and Brazil. For fiscal year 2020, we also averaged
of Directors unanimously decided to provide up to 80 hours
$10,600 in weekly sales per Commercial program in
of ETO for eligible full-time hourly AutoZoners and up to
the U.S. as compared to $10,000 for fiscal 2019. We
40 hours of ETO for eligible part-time AutoZoners – along
continued to enhance our local market inventory availability
with other pandemic related expenses, these expenses
by building new and expanding existing facilities, and
amounted to an $84 million decision to support many of
ended the year with 44 Mega Hubs and 180 regular Hub
our most vulnerable AutoZoners on the front lines.
stores domestically.
As our business strengthened into the summer months, we
were fortunate to not have to layoff, nor furlough, a single
AutoZoner due to the impacts of COVID-19.
Our Future
Our operating theme for 2021, “AutoZone Strong” builds upon our unique and powerful culture and our commitment, as
1Team, to always go the extra mile for our customers. This means performing GOTTChA (Going Out to the Customer’s
Automobile); providing trustworthy advice; adding value; and absolutely practicing WITTDTJR (What It Takes To Do The Job
Right). We remain committed to staying connected to the customer.
For fiscal 2021, we will build upon our many lessons learned and successes to focus on accelerating growth in both our
Retail and Commercial businesses. This upcoming year we are putting a tremendous effort into pushing for growth in our
most “mature” business, our Do-It-Yourself (DIY) business. While we have always managed the DIY business well, we believe
we can do it better. We are focusing on improving store and online product assortments and doubling down on our in-store
AutoZoner efforts to drive sales. While purchasing products online and shipping to home is not a large business for us, we are
seeing the buy online and pick up in store option we have in place growing rapidly. We believe this trajectory will only continue
in fiscal 2021. We believe our DIY initiatives for fiscal 2021 represent a great opportunity for us to grow sales and take market
share at a faster pace than we have in many years. And, regarding our Commercial business, with only 4% market share,
we believe that Commercial remains our company’s single largest sales growth opportunity. We are proud of our Commercial
share gains this past year, and believe we can build on that success for fiscal 2021.
Regarding international growth in fiscal 2021, we plan to return to a more normalized store opening pace. In fiscal 2020, we
opened only 17 stores in Mexico and 8 stores in Brazil for total of 25 new international stores. Our target for FY21 is to double
the pace and open approximately 50 stores.
Again, I want to thank all AutoZoners for their dedication and tireless efforts in 2020. The company’s success is entirely due
to our AutoZoners solving problems and helping our customers with their needs. I would also like to thank our vendors for
their ongoing commitment to our success. Additionally, I would like to thank you, our stockholders, for the confidence you have
placed in our team by your decision to invest in AutoZone. We remain committed to managing your capital wisely, achieving
an appropriate return on incremental projects and returning excess cash through an orderly share repurchase program.
I would also like to take a moment to give special thanks to Bill Giles, Executive Vice President and Chief Financial Officer,
Finance, Information Technology and Store Development, and Bill Hackney, Senior Vice President, Merchandising, for their
many contributions and exceptional service to our customers and organization.
After a 14-year AutoZone career for Bill Giles and a 37-year AutoZone career for Bill Hackney, they have decided to retire at the
end of December. AutoZone has truly benefited from their innovation, guidance, passion for serving our customers and deep
understanding of our businesses. While we will certainly miss them both, they have built organizations that are well prepared
to continue moving our company forward into the future. I wish them and their families the very best in their retirements.
I would also like to welcome Jamere Jackson, Executive Vice President and Chief Financial Officer, Finance and Store
Development-Elect, and Seong Ohm, Senior Vice President, Merchandising-Elect to the AutoZone family. Both have exceptional
backgrounds and experiences and are very well-suited for their positions and contributing to the ongoing success of our
company.
We have a wonderful culture that has been built over the past 41 years and counting. We remain passionate about Living our
Pledge and Values to earn our customers’ trust and business every day. I continue to believe that our best days are ahead.
Thank you for staying in the Zone with us for all these years!
Sincerely,
Bill Rhodes
Chairman, President and CEO
Customer Satisfaction
Notice of Annual Meeting of Stockholders
and Proxy Statement
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AUTOZONE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 16, 2020
What:
When:
Where:
Stockholders will vote
regarding:
Annual Meeting of Stockholders
December 16, 2020, 8:00 a.m. Central Standard Time
In light of health and safety concerns regarding the continuing
coronavirus (COVID-19) pandemic and related restrictions, the
annual meeting will be held online via live webcast at
www.meetingcenter.io/276027987.
• Election of ten directors
• Ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the 2021
fiscal year
• Approval of advisory vote on executive compensation
• Approval of AutoZone, Inc. 2020 Omnibus Incentive Award
Plan
• The transaction of other business that may be properly
brought before the meeting
Record Date:
Stockholders of record as of October 19, 2020, may vote at the
meeting.
By order of the Board of Directors,
/s/ Kristen C. Wright
Kristen C. Wright
Secretary
Memphis, Tennessee
October 26, 2020
We encourage you to vote by telephone or Internet, both of which are convenient,
cost-effective and reliable alternatives to returning your proxy card by mail.
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The Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
About this Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Information about Voting and Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Corporate Governance Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Board Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Corporate Governance Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Meetings and Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Committees of the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Audit Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Nominating and Corporate Governance Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Director Nomination Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Procedure for Communication with the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Security Ownership of Management and Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Security Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PROPOSAL 1 – Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PROPOSAL 2 – Ratification of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . 20
PROPOSAL 3 – Advisory Vote on Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PROPOSAL 4 – Approval of AutoZone, Inc. 2020 Omnibus Incentive Award Plan . . . . . . . . . . . . . . . . . . . . . 22
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Compensation Committee Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Compensation Program Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Grants of Plan-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Outstanding Equity Awards at Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Option Exercises and Stock Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Potential Payments upon Termination or Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Ratio of the Annual Total Compensation of the Median-Paid Employee to the CEO . . . . . . . . . . . . . . . . . . . . . . . . 55
Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Equity Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Delinquent Section 16(a) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Stockholder Proposals for 2021 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Appendix A: AutoZone, Inc. 2020 Omnibus Incentive Award Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A - 1
AutoZone, Inc.
123 South Front Street
Memphis, Tennessee 38103
Proxy Statement
for
Annual Meeting of Stockholders
December 16, 2020
The Meeting
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The Annual Meeting of Stockholders of AutoZone, Inc. will be held online via live webcast at
www.meetingcenter.io/276027987, at 8:00 a.m. CST on December 16, 2020.
About this Proxy Statement
Our Board of Directors has sent you this Proxy Statement to solicit your vote at the Annual Meeting. This
Proxy Statement contains important information for you to consider when deciding how to vote on the matters
brought before the Meeting. Please read it carefully.
In this Proxy Statement:
• “AutoZone,” “we,” “us,” “our” and “the Company” mean AutoZone, Inc.
• “Annual Meeting” or “Meeting” means the Annual Meeting of Stockholders to be held online via live
webcast at www.meetingcenter.io/276027987, at 8:00 a.m. CST on December 16, 2020.
• “Board” means the Board of Directors of AutoZone, Inc.
AutoZone will pay all expenses incurred in this proxy solicitation. We also may make additional solicitations in
person, by telephone, facsimile, e-mail, or other forms of communication. Brokers, banks, and others who hold our
stock for beneficial owners will be reimbursed by us for their expenses related to forwarding our proxy materials to
the beneficial owners.
This Proxy Statement is first being sent or given to security holders on or about October 26, 2020.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON DECEMBER 16, 2020. This Proxy Statement and the
annual report to security holders are available at Investors.AutoZone.com.
1
INFORMATION ABOUT VOTING AND ATTENDANCE
How do I attend the Annual Meeting?
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Due to health and safety concerns regarding the continuing coronavirus (COVID-19) pandemic and related
restrictions, the Annual Meeting will be held entirely online via live webcast at www.meetingcenter.io/276027987.
There will be no physical meeting location. Registered shareholders can attend the meeting by accessing the meeting
site at www.meetingcenter.io/276027987 and entering the 15-digit control number that can be found on your proxy
card mailed with the proxy materials and the meeting password: AZO2020.
If you hold your shares through an intermediary, such as a bank or broker or other nominee, you must register
in advance to attend the Annual Meeting. To register, you must obtain a legal proxy from your bank, broker or other
nominee and submit your name and a copy of your legal proxy to Computershare. Requests for registration may be
submitted by email to legalproxy@computershare.com with “Legal Proxy” in the subject line, or by mail to
Computershare, AutoZone, Inc. Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration
must be received no later than 5:00 p.m. (ET) on December 10, 2020. You will receive a confirmation of your
registration by email from Computershare. At the time of the Annual Meeting, go to
www.meetingcenter.io/276027987 and enter your control number and the meeting password: AZO2020.
What matters will be voted on at the Annual Meeting?
At the Annual Meeting, stockholders will be asked to vote on the following proposals:
1. to elect ten directors;
2. to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm
for the 2021 fiscal year;
3. to approve an advisory vote on executive compensation; and
4. to approve the AutoZone, Inc. 2020 Omnibus Incentive Award Plan.
Stockholders also will transact any other business that may be properly brought before the Meeting.
Who is entitled to vote at the Annual Meeting?
The record date for the Annual Meeting is October 19, 2020. Only stockholders of record at the close of
business on that date are entitled to attend and vote at the Annual Meeting. The only class of stock that can be voted
at the Meeting is our common stock. Each share of common stock is entitled to one vote on all matters that come
before the Meeting. At the close of business on the record date, October 19, 2020, we had 23,175,554 shares of
common stock outstanding.
How do I vote my shares?
You may vote your shares by proxy or during the meeting:
By Proxy: You can vote by telephone, on the Internet or by mail. We encourage you to vote by telephone
or Internet, both of which are convenient, cost-effective, and reliable alternatives to returning your proxy card
by mail.
2
1. By Telephone: You may submit your voting instructions by telephone by following the instructions
printed on the enclosed proxy card. If you submit your voting instructions by telephone, you do not have to
mail in your proxy card.
2. On the Internet: You may vote on the Internet by following the instructions printed on the enclosed
proxy card. If you vote on the Internet, you do not have to mail in your proxy card.
3. By Mail: If you properly complete and sign the enclosed proxy card and return it in the enclosed
envelope, it will be voted in accordance with your instructions. The enclosed envelope requires no additional
postage if mailed in the United States.
During the Meeting: If you are a registered shareholder with a control number or a beneficial shareholder
that has submitted a legal proxy and has received a control number from Computershare, you will be able to
vote your shares electronically during the Annual Meeting by clicking on the “Cast Your Vote” link on the
Meeting Center site. The electronic voting procedures are designed to authenticate your identity, to allow you
to vote your shares and to confirm that your voting instructions have been properly recorded. If you hold your
shares through an intermediary, such as a bank or broker or other nominee, you must register in advance as
described above to attend and vote at the Annual Meeting.
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How will my vote be counted?
Your vote for your shares will be cast as you indicate on your proxy card. If you sign your card without
indicating how you wish to vote, your shares will be voted FOR our nominees for director, FOR Ernst & Young
LLP as independent registered public accounting firm, FOR the advisory vote on executive compensation, FOR the
AutoZone, Inc. 2020 Omnibus Incentive Award Plan, and in the proxies’ discretion on any other matter that may
properly be brought before the Meeting or any adjournment of the Meeting. The votes will be tabulated and certified
by our transfer agent, Computershare Inc. A representative of Computershare will serve as the inspector of election.
Can I change my vote after I submit my proxy?
Yes, you may revoke your proxy at any time before it is voted at the Meeting by:
• giving written notice to our Secretary that you have revoked the proxy, or
• providing a later-dated proxy.
Any written notice should be sent to the Secretary at 123 South Front Street, Dept. 8074, Memphis, Tennessee
38103 and received no later than 5:00 p.m. Central Standard Time on December 15, 2020.
How many shares must be present to constitute a quorum for the Meeting?
Holders of a majority of the shares of the voting power of the Company’s stock must be present in person or by
proxy in order for a quorum to be present. Shares abstaining from voting and shares as to which a broker non-vote
occurs are considered present for purposes of determining whether a quorum exists. If a quorum is not present at the
scheduled time of the Annual Meeting, we may adjourn the Meeting, without notice other than announcement at the
Meeting, until a quorum is present or represented. Any business which could have been transacted at the Meeting as
originally scheduled can be conducted at the adjourned meeting.
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What are broker non-votes?
Broker non-votes occur when shares held by a brokerage firm are not voted with respect to a proposal because
the firm has not received voting instructions from the beneficial owner of the shares and the firm does not have the
authority to vote the shares in its discretion.
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Independence
CORPORATE GOVERNANCE MATTERS
How many independent directors does AutoZone have?
Our Board has determined that nine of our current ten directors are independent: Douglas H. Brooks, Michael
M. Calbert, Linda A. Goodspeed, Earl G. Graves, Jr., Enderson Guimaraes, D. Bryan Jordan, Gale V. King, W.
George R. Mrkonic, Jr and Jill A. Soltau. All of these directors meet the independence standards of our Corporate
Governance Principles and the New York Stock Exchange listing standards.
How does AutoZone determine whether a director is independent?
In accordance with AutoZone’s Corporate Governance Principles, a director is considered independent if the
director meets the independence requirements of the applicable New York Stock Exchange listing standards, and,
with respect to the Audit Committee, the applicable Securities and Exchange Commission rules.
In determining the independence of our directors, the Board considers relationships involving directors and
their immediate family members that are relevant under applicable laws and regulations, the listing standards of the
New York Stock Exchange, and the standards contained in our Corporate Governance Principles. The Board relies
on information from Company records and questionnaires completed annually by each director.
As part of its most recent independence determinations, the Board noted that AutoZone does not have, and did
not have during fiscal 2020, significant commercial relationships with companies at which Board members served as
officers or directors, or in which Board members or their immediate family members held an aggregate of 10% or
more direct or indirect interest.
The Board considered the fact that Mr. Jordan is the Chief Executive Officer and a member of the board of
directors of First Horizon National Corporation, parent company of First Tennessee Bank, which:
• participates in one of AutoZone’s supplier confirmed receivables programs (under which some AutoZone
vendors are borrowers, but AutoZone is not);
• has established a Daylight Overdraft line which allows AutoZone to make large payments early in the
morning creating a “daylight” overdraft which is rectified at the end of the day;
• acted as Trustee for AutoZone’s pension plan;
• offers brokerage services to AutoZone employees exercising stock options, and
• holds various AutoZone deposit accounts.
During fiscal 2020, First Horizon National Corporation did business with AutoZone in arm’s length
transactions which were not, individually or cumulatively, material to either AutoZone or First Horizon National
Corporation and which did not materially benefit Mr. Jordan, either directly or indirectly.
The Board also considered the fact that Mr. Brooks is a member of the board of directors of Southwest
Airlines. During fiscal 2020, AutoZone purchased airline tickets from Southwest Airlines which were not,
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individually or cumulatively, material to either AutoZone or Southwest Airlines and which did not materially benefit
Mr. Brooks, either directly or indirectly.
Additionally, AutoZone did business with J.B. Hunt Transport Services, Inc., for which Ms. King is a member
of the board of directors, during fiscal 2020 in arm’s length transactions which were not, individually or
cumulatively, material to either AutoZone or J.B. Hunt and which did not materially benefit Ms. King, either
directly or indirectly.
The Board also reviewed donations made by the Company to not-for-profit organizations with which Board
members or their immediate family members were affiliated by membership or service or as directors or trustees.
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Based on its review of the above matters, the Board determined that none of Messrs., Brooks, Calbert, Graves,
Guimaraes, Jordan, Mrkonic, or Mses. Goodspeed, King, or Soltau has a material relationship with the Company
other than in their capacity as a Board member and that all of them are independent within the meaning of the
AutoZone Corporate Governance Principles and applicable law and listing standards. The Board also determined
that Mr. Rhodes is not independent since he is an employee of the Company.
Board Leadership Structure
Our Board believes that having a combined Chairman/CEO, independent members and chairs for each of our
Board committees, and an independent Lead Director currently provides the best board leadership structure for
AutoZone. This structure, together with our other corporate governance practices, provides strong independent
oversight of management while ensuring clear strategic alignment throughout the Company. Our Lead Director is a
non-employee director who is elected by the Board. Earl G. Graves, Jr., a director since 2002, currently serves as our
Lead Director.
Our Lead Director:
• Chairs Board meetings when the Chairman is not present, including presiding at all executive sessions of the
Board (without management present) at every regularly scheduled Board meeting;
• Works with management to determine the information and materials to be provided to Board members;
• Approves Board meeting agendas, schedules, and other information to be provided to the Board;
• Consults with the Chairman on such other matters as are pertinent to the Board and the Company;
• Has the authority to call meetings of the independent directors;
• Is available for direct communication and consultation with major shareholders upon request; and
• Serves as a liaison between the Chairman and the independent directors.
Board Risk Oversight
Oversight of risk management is a responsibility of the Board and is an integral part of the Board’s oversight of
AutoZone’s business. AutoZone’s management takes a variety of calculated risks in order to enhance Company
performance and shareholder value. The primary responsibility for the identification, assessment and management of
the various risks resides with AutoZone’s management. The Board is primarily responsible for ensuring that
management has established and adequately resourced processes for identifying and preparing the Company to
manage risks effectively. Additionally, the Board reviews the Company’s principal strategic and operating risks as
part of its regular discussion and consideration of AutoZone’s strategy and operating results. The Board also
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regularly reviews with the General Counsel legal matters that may have a material adverse impact on the Company’s
financial statements, the Company’s compliance with laws, and any material reports received from regulatory
agencies.
The Audit Committee is involved in the Board’s oversight of risk management. At each of its regular meetings,
the Audit Committee reviews the Company’s major financial exposures and the steps management has taken to
identify, assess, monitor, control, remediate and report such exposures. The Audit Committee, along with
management, also evaluates the effectiveness of the risk avoidance and mitigation processes in place. Such risk-
related information is then summarized, reported and discussed at each quarterly Board meeting.
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To assist with risk management and oversight, AutoZone has adopted the concept of Enterprise Risk
Management (“ERM”) using the framework issued in 2004 by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company’s Vice President of Internal Audit, who reports directly to the Audit
Committee, has been charged with leading the Company’s ERM processes with the assistance of Company
management. The Vice President of Internal Audit presents to the Audit Committee a comprehensive review of the
Company’s ERM processes quarterly. This presentation includes an overview of all significant risks that have been
identified and assessed and the strategies developed by management for managing such risks. The Vice President of
Internal Audit leads open discussions with the Audit Committee members to analyze the significance of the risks
identified and seeks to verify that the list is all-inclusive. Company management is also involved in these
discussions to ensure that the Board gains a full understanding of the risks and the strategies that management has
implemented to manage the risks.
Other Board committees also consider significant risks within their areas of oversight responsibility. The
Compensation Committee considers risk in connection with the design of AutoZone’s compensation programs. The
Nominating and Corporate Governance Committee oversees risks related to the Company’s governance policies and
practices.
Corporate Governance Documents
Our Board has adopted Corporate Governance Principles; charters for its Audit, Compensation, and
Nominating & Corporate Governance Committees; a Code of Conduct for directors, officers and employees of
AutoZone; and a Code of Ethical Conduct for Financial Executives. Each of these documents is available on our
corporate website at Investors.AutoZone.com and is also available, free of charge, in print to any stockholder who
requests it. We have also published a Corporate Social Responsibility Report, and the most current version of this
report is available on our website. Our website and the information contained therein or linked thereto are not
intended to be incorporated into this Proxy Statement.
Meetings and Attendance
How many times did AutoZone’s Board meet during the last fiscal year?
During the 2020 fiscal year, the Board held six meetings.
Did any of AutoZone’s directors attend fewer than 75% of the meetings of the Board and their assigned
committees?
All of our directors attended at least 75% of the meetings of the Board and their assigned committees during
the fiscal year.
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What is AutoZone’s policy with respect to directors’ attendance at the Annual Meeting?
As a general matter, all directors are expected to attend our Annual Meetings. At our 2019 Annual Meeting, all
directors were present.
Do AutoZone’s non-management directors meet regularly in executive session?
The non-management members of our Board regularly meet in executive sessions in conjunction with each
regularly scheduled Board meeting. Our Lead Director, Mr. Graves, presides at these sessions.
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Committees of the Board
What are the standing committees of AutoZone’s Board?
AutoZone’s Board has three standing committees: Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee, each consisting only of independent directors.
Audit Committee
What is the function of the Audit Committee?
The Audit Committee assists the Board in fulfilling its oversight responsibility of:
• the integrity of the Company’s financial statements,
• the independent auditor’s qualification, independence and performance,
• the performance of the Company’s internal audit function, and
• the Company’s compliance with legal and regulatory requirements.
The Audit Committee performs its duties by:
• evaluating, appointing or dismissing, determining compensation for, and overseeing the work of the
independent public accounting firm employed to conduct the annual audit, which reports to the Audit
Committee;
• pre-approving all audit and permitted non-audit services performed by the independent auditor, considering
issues of auditor independence;
• conducting periodic reviews with Company officers, management, independent auditors, and the internal
audit function;
• reviewing and discussing with management and the independent auditor the Company’s annual audited
financial statements, quarterly financial statements, internal controls report and the independent auditor’s
attestation thereof, and other matters related to the Company’s financial statements and disclosures;
• overseeing the Company’s internal audit function;
• reporting periodically to the Board and making appropriate recommendations; and
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• preparing the report of the Audit Committee required to be included in the annual proxy statement.
Who are the members of the Audit Committee?
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The Audit Committee consists of Mr. Calbert, Ms. Goodspeed, Mr. Jordan (Chair), and Mr. Mrkonic.
Are all of the members of the Audit Committee independent?
Yes, the Audit Committee consists entirely of independent directors under the standards of AutoZone’s
Corporate Governance Principles, the listing standards of the New York Stock Exchange and the applicable rules of
the Securities and Exchange Commission.
Does the Audit Committee have an Audit Committee Financial Expert?
The Board has determined that Mr. Calbert, Ms. Goodspeed, Mr. Jordan, and Mr. Mrkonic each meet the
qualifications of an audit committee financial expert as defined by the Securities and Exchange Commission. All
members of the Audit Committee meet the New York Stock Exchange definition of financial literacy.
How many times did the Audit Committee meet during the last fiscal year?
During the 2020 fiscal year, the Audit Committee held ten meetings.
Where can I find the charter of the Audit Committee?
The Audit Committee’s charter is available on our corporate website at Investors.AutoZone.com and is also
available, free of charge, in print to any stockholder who requests it.
Audit Committee Report
The Audit Committee of the Board (the “Audit Committee”) of AutoZone, Inc. has reviewed and discussed
AutoZone’s audited financial statements for the year ended August 29, 2020, with AutoZone’s management. In
addition, we have discussed with Ernst & Young LLP, AutoZone’s independent registered public accounting firm,
the matters required to be discussed by the Statement on Auditing Standards No.1301, Communications with Audit
Committees, as amended and as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in
Rule 3200T, the Sarbanes-Oxley Act of 2002, and the charter of the Audit Committee.
The Audit Committee also has received the written disclosures and the letter from Ernst & Young LLP required
by the applicable requirements of the PCAOB regarding the firm’s communications with the Audit Committee
concerning independence, and we have discussed with Ernst & Young LLP their independence from the Company
and its management. The Audit Committee has discussed with AutoZone’s management and the auditing firm such
other matters and received such assurances from them as we deemed appropriate.
As a result of our review and discussions, we have recommended to the Board the inclusion of AutoZone’s
audited financial statements in the annual report on Form 10 - K for the fiscal year ended August 29, 2020 for filing
with the Securities and Exchange Commission.
While the Audit Committee has the responsibilities and powers set forth in its charter, the Audit Committee
does not have the duty to plan or conduct audits or to determine that AutoZone’s financial statements are complete,
accurate, or in accordance with generally accepted accounting principles; AutoZone’s management and the
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independent auditor have this responsibility. Nor does the Audit Committee have the duty to assure compliance with
laws and regulations and the policies of the Board.
Michael M. Calbert
Linda A. Goodspeed
D. Bryan Jordan (Chair)
George R. Mrkonic, Jr.
Compensation Committee
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What is the function of the Compensation Committee?
The Compensation Committee has the authority, based on its charter and the AutoZone Corporate Governance
Principles, to:
• review and approve AutoZone’s compensation philosophy, strategy and objectives;
• review and approve the compensation programs, plans, policies and awards for executive officers, including
recommending equity-based plans for stockholder approval;
• lead the independent directors in the evaluation of the performance of the Chief Executive Officer (“CEO”)
in meeting established goals and objectives relevant to the compensation of the CEO;
• act as administrator as may be required by AutoZone’s short- and long-term incentive plans and stock or
stock-based plans; and
• review the compensation of AutoZone’s non-employee directors from time to time and recommend to the
full Board any changes that the Compensation Committee deems necessary.
The Compensation Committee may appoint subcommittees from time to time with such responsibilities as it
may deem appropriate; however, the Compensation Committee may not delegate its authority to any other persons.
AutoZone’s processes and procedures for the consideration and determination of executive compensation,
including the role of the Compensation Committee and compensation consultants, are described in the
“Compensation Discussion and Analysis” on page 30.
Who are the members of the Compensation Committee?
The Compensation Committee consists of Mr. Brooks, Ms. Goodspeed, Ms. King, and Mr. Mrkonic (Chair), all
of whom are independent directors under the standards of AutoZone’s Corporate Governance Principles and the
listing standards of the New York Stock Exchange, including the additional independence requirements specific to
compensation committee membership.
How many times did the Compensation Committee meet during the last fiscal year?
During the 2020 fiscal year, the Compensation Committee held six meetings.
Where can I find the charter of the Compensation Committee?
The Compensation Committee’s charter is available on our corporate website at Investors.AutoZone.com and is
also available, free of charge, in print to any stockholder who requests it.
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Nominating and Corporate Governance Committee
What is the function of the Nominating and Corporate Governance Committee?
The Nominating and Corporate Governance Committee ensures that:
• qualified candidates are presented to the Board for election as directors;
• the Board has adopted appropriate corporate governance principles that best serve the practices and
objectives of the Board; and
• AutoZone’s Articles of Incorporation and By-Laws are structured to best serve the interests of the
stockholders.
Who are the members of the Nominating and Corporate Governance Committee?
The Nominating and Corporate Governance Committee consists of Messrs. Graves (Chair), Guimaraes, Jordan,
and Ms. Soltau, all of whom are independent directors under the standards of AutoZone’s Corporate Governance
Principles and the listing standards of the New York Stock Exchange.
How many times did the Nominating and Corporate Governance Committee meet during the last fiscal year?
During the 2020 fiscal year, the Nominating and Corporate Governance Committee held three meetings.
Where can I find the charter of the Nominating and Corporate Governance Committee?
The Nominating and Corporate Governance Committee’s charter is available on our corporate website at
Investors.AutoZone.com and is also available, free of charge, in print to any stockholder who requests it.
Director Nomination Process
What is the Nominating and Corporate Governance Committee’s policy regarding consideration of director
candidates recommended by stockholders? How do stockholders submit such recommendations?
The Nominating and Corporate Governance Committee’s policy is to consider director candidate
recommendations from stockholders if they are submitted in writing to AutoZone’s Secretary in accordance with the
procedure set forth in Article III, Section 1 of AutoZone’s Seventh Amended and Restated By-Laws (“By-Laws”),
including biographical and business experience, information regarding the nominee and other information required
by said Article III, Section 1. Copies of the By-Laws will be provided upon written request to AutoZone’s Secretary
and are also available on AutoZone’s corporate website at Investors.AutoZone.com.
What qualifications must a nominee have in order to be recommended by the Nominating and Corporate
Governance Committee for a position on the Board?
The Board believes each individual director should possess certain personal characteristics, and that the Board
as a whole should possess certain core competencies. Such personal characteristics are integrity and accountability,
informed judgment, financial literacy, mature confidence, high performance standards, and passion. They should
also have demonstrated the confidence to be truly independent, as well as be business savvy, have an owner
orientation and have a genuine interest in AutoZone. Core competencies of the Board as a whole are accounting and
finance, business judgment, management expertise, crisis response, industry knowledge, international markets,
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strategy and vision. These characteristics and competencies are set forth in more detail in AutoZone’s Corporate
Governance Principles, which are available on AutoZone’s corporate website at Investors.AutoZone.com.
How does the Nominating and Corporate Governance Committee identify and evaluate nominees for director?
Prior to each annual meeting of stockholders at which directors are to be elected, the Nominating and Corporate
Governance Committee considers incumbent directors and other qualified individuals, if necessary, as potential
director nominees. In evaluating a potential nominee, the Nominating and Corporate Governance Committee
considers the personal characteristics described above, and also reviews the composition of the full Board to
determine the areas of expertise and core competencies needed to enhance the function of the Board. The
Nominating and Corporate Governance Committee may also consider other factors such as the size of the Board,
whether a candidate is independent, how many other public company directorships a candidate holds and the listing
standards requirements of the New York Stock Exchange.
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The Nominating and Corporate Governance Committee recognizes the importance of selecting directors from
various backgrounds and professions in order to ensure that the Board as a whole has a variety of experiences and
perspectives which contribute to a more effective decision-making process. The Board does not have a specific
diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional
experiences in evaluating candidates for Board membership.
The Nominating and Corporate Governance Committee uses a variety of methods for identifying potential
nominees for director. Candidates may come to the attention of the Nominating and Corporate Governance
Committee through current Board members, stockholders or other persons. The Nominating and Corporate
Governance Committee may retain a search firm or other consulting firm from time to time to identify potential
nominees. Nominees recommended by stockholders in accordance with the procedure described above, i.e.,
submitted in writing to AutoZone’s Secretary, accompanied by the biographical and business experience
information regarding the nominee and the other information required by Article III, Section 1 of the By-Laws, will
receive the same consideration as the Nominating and Corporate Governance Committee’s other potential nominees.
Procedure for Communication with the Board of Directors
How can stockholders and other interested parties communicate with the Board?
Stockholders and other interested parties may communicate with the Board by writing to the Board, to any
individual director or to the non-management directors as a group c/o Corporate Secretary, AutoZone, Inc., 123
South Front Street, Dept. 8074, Memphis, Tennessee 38103. The Company’s General Counsel and Secretary will
review all such correspondence and will forward correspondence that, in her opinion, deals with the function of the
Board or that she otherwise determines requires the attention of any member, group or committee of the Board.
Communications addressed to the Board or to the non-management directors as a group, and determined by the
Company’s General Counsel and Secretary to merit their attention, will be forwarded to the Chair of the Nominating
and Corporate Governance Committee, and communications addressed to a committee of the Board, and determined
by the Company’s General Counsel and Secretary to merit their attention, will be forwarded to the chair of that
committee.
Compensation of Directors
AutoZone’s current director compensation program became effective January 1, 2020 (the “Director
Compensation Program”).
Annual Retainer Fees. Non-employee directors receive an annual retainer fee (the “Annual Retainer”).
Furthermore, each director is eligible to receive an additional fee (“Additional Fee”), the amount of which varies
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depending on his or her role. The Additional Fees and the Annual Retainer, enumerated below, together comprise
the “Director Compensation”. There are no meeting fees.
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Director compensation components
Annual Retainer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Fees
Lead Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Chair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Chair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nominating & Corporate Governance Committee Chair . . . . . . . . . . . . . . . . . . . . . . . . . . . .
($)
225,000
30,000
25,000
12,500
20,000
15,000
Under the Amended and Restated AutoZone, Inc. 2011 Equity Incentive Award Plan (the “Amended 2011
Equity Plan”) and Director Compensation Program, non-employee directors receive Director Compensation in the
form of Restricted Stock Units, which are contractual rights to receive in the future a share of AutoZone common
stock. A non-employee director may elect to receive a fixed portion of the Annual Retainer plus any Additional Fees
in the form of cash, paid in quarterly installments (the “Cash Election”), with the remainder of the Annual Retainer
paid in the form of Restricted Stock Units. The Cash Election during calendar year 2019 and 2020 was $85,000 and
$95,000, respectively. All Restricted Stock Units are granted on January 1 of the applicable calendar year.
If a non-employee director is elected to the Board, or assumes a different position, after January 1 of the
applicable year, he or she will receive the Annual Retainer and/or Additional Fees, prorated based on the number
of days remaining in the calendar year, for Restricted Stock Units or quarter, for cash, as appropriate.
Restricted Stock Units granted to non-employee directors are fully vested on the date of grant and become
payable, or are settled, on the earlier to occur of (1) the fifth anniversary of the grant date, or (2) the date on which
the non-employee director ceases to be a director (the “Payment Date”). Upon timely delivery of an election form, a
non-employee director may elect to receive payment on the date on which he or she ceases to be a director.
Restricted Stock Units are payable in shares of AutoZone common stock no later than the fifteenth day of the
third month following the end of the tax year in which such Payment Date occurs.
Compensation-Setting Process. The Compensation Committee reviews the Board’s compensation on a regular
basis to ensure that non-employee directors are reasonably compensated in relation to AutoZone’s peer group
companies (discussed in detail under Benchmarking) and to comparable U.S. companies in general. AutoZone’s
Amended 2011 Equity Plan contains a dollar limit of $500,000 on the total amount of annual compensation payable
to its non-employee directors. As discussed below, the AutoZone, Inc. 2020 Omnibus Incentive Award Plan, if
approved by stockholders, will increase such limit on the total amount of compensation payable to non-employee
directors in a calendar year to $750,000, provided that the Board may make exceptions to this limit under
extraordinary circumstances.
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Director Compensation Table
This table shows the compensation paid to our non-employee directors during the 2020 fiscal year.
Name (1)
Douglas H. Brooks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael M. Calbert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Linda A. Goodspeed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earl G. Graves, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enderson Guimaraes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Bryan Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gale King . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
W. Andrew McKenna (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
George R. Mrkonic, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Luis P. Nieto (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jill A. Soltau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees
Paid in Cash
($)
(2)
Total
($)
Stock
Awards
($)
(3)(4)
92,500 129,996 222,496
— 237,500 237,500
— 237,500 237,500
— 269,999 269,999
— 224,991 224,991
— 249,996 249,996
— 224,991 224,991
—
—
—
— 257,490 257,490
—
24,375
— 224,991 224,991
24,375
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(1) William C. Rhodes, III, our Chairman, President and Chief Executive Officer, serves on the Board but does not
receive any compensation for his service as a director. His compensation as an employee of the Company is
shown in the Summary Compensation Table on page 45.
(2) This column represents the portion of the Director Compensation that was paid in cash and earned in fiscal year
2020 pursuant to the Cash Election, as described above. Amounts shown for Mr. Nieto relates to his final
quarterly cash payment in 2019, during the Company’s first quarter of fiscal 2020.
(3) The “Stock Awards” column represents the aggregate grant date fair value computed in accordance with FASB
ASC Topic 718 for awards of Restricted Stock Units under the Amended 2011 Equity Plan during fiscal 2020.
See Note B Share-Based Payments, to our consolidated financial statements in our Annual Report on
Form 10-K for the fiscal year ended August 29, 2020 (the “FY2020 Form 10-K”) for a discussion of our
accounting for share-based awards and the assumptions used. The aggregate number of outstanding awards of
common stock under the AutoZone, Inc. 2003 Director Compensation Plan (“Stock Units”) and Restricted
Stock Units held by each director at the end of fiscal 2020 are shown in the following footnote 4. See “Security
Ownership of Management and Board of Directors” on page 15 for more information about our directors’ stock
ownership.
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(4) As of August 29, 2020, each current non-employee director had the following aggregate number of outstanding
Restricted Stock Units and Stock Units:
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Name
Douglas H. Brooks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael M. Calbert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Linda A. Goodspeed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earl G. Graves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enderson Guimaraes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Bryan Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gale V. King . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
W. Andrew McKenna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
George R. Mrkonic, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Luis P. Nieto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jill A. Soltau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted
Stock
Units
(#)
1,396
335
2,256
4,333
2,639
2,282
653
—
3,645
—
571
18,110
Stock
Units
(#)
—
—
—
3,417
—
—
—
—
1,405
—
—
4,822
(5) As Messrs. McKenna’s and Nieto’s last date of service on the Board was December 18, 2019, they did not earn
any stock awards during fiscal 2020.
Stock Ownership Requirement
The Board has established a stock ownership requirement for non-employee directors. Each director is required
to own AutoZone common stock and/or restricted stock units having a cumulative fair market value in an amount
equal to three times the value of the base Annual Retainer payable pursuant to the Director Compensation Program
within five years of joining the Board, and to maintain such ownership level thereafter. Exceptions to this
requirement may only be made by the Board under compelling mitigating circumstances. Shares, Stock Units and
Restricted Stock Units issued under the AutoZone, Inc. Second Amended and Restated Director Compensation Plan,
the 2003 Director Compensation Plan, the 2011 Equity Plan and the Amended 2011 Equity Plan count toward this
requirement. As of the date of this Proxy Statement, each director meets or exceeds his or her obligations under the
requirement.
Other Predecessor Plans
The AutoZone, Inc. Second Amended and Restated Director Compensation Plan was terminated in
December 2002 and was replaced by the AutoZone, Inc. First Amended and Restated 2003 Director Compensation
Plan (the “2003 Director Compensation Plan”) and the AutoZone, Inc. First Amended and Restated 2003 Director
Stock Option Plan (the “2003 Director Stock Option Plan”). The 2003 Director Compensation Plan and the 2003
Director Stock Option Plan were terminated in December 2010 and replaced by the 2011 Equity Plan. The 2011
Equity Plan was terminated in December 2015 and replaced with the Amended 2011 Equity Plan. However, grants
made under those plans continue in effect under the terms of the grant made and are included in the aggregate
awards outstanding shown above.
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Security Ownership of Management and Board of Directors
OTHER INFORMATION
This table shows the beneficial ownership of common stock by each director, the Principal Executive Officer,
the Principal Financial Officer and the other three most highly compensated executive officers, and all current
directors and executive officers as a group as of October 19, 2020. Unless stated otherwise in the notes to the table,
each person named below has sole authority to vote and invest the shares shown.
Deferred
Stock
Option
Restricted
Stock
Name of Beneficial Owner
772
Douglas H. Brooks . . . . . . . . . . . . . . . .
2,000
Michael M. Calbert . . . . . . . . . . . . . . .
Linda A. Goodspeed . . . . . . . . . . . . . . .
—
—
Earl G. Graves, Jr. . . . . . . . . . . . . . . . . .
—
Enderson Guimaraes . . . . . . . . . . . . . . .
240
D. Bryan Jordan . . . . . . . . . . . . . . . . . . .
—
Gale King . . . . . . . . . . . . . . . . . . . . . . . .
—
George R. Mrkonic, Jr. . . . . . . . . . . . . .
Jill A. Soltau . . . . . . . . . . . . . . . . . . . . .
—
William C. Rhodes III (4) . . . . . . . . . . . 42,070
9,438
William T. Giles (5) . . . . . . . . . . . . . . .
4,387
Mark A. Finestone (6) . . . . . . . . . . . . . .
3,206
Thomas B. Newbern . . . . . . . . . . . . . . .
Philip B. Daniele . . . . . . . . . . . . . . . . . .
270
All current directors and executive
officers as a group (24) persons . . . . . . 73,579
Shares Units (1) Awards (2) Units (3)
1,396
335
2,256
4,333
2,639
2,282
653
3,645
571
—
—
—
—
—
—
—
3,417
—
—
—
—
—
—
—
1,405
—
—
— 152,825
—
68,073
46,603
—
—
32,282
—
27,581
Total
(#)
2,168
2,335
2,256
7,750
2,639
2,522
653
5,050
571
— 194,895
77,511
—
50,990
—
35,488
—
27,851
—
Ownership
Percentage
*
*
*
*
*
*
*
*
*
*
*
*
*
*
4,822 551,417
18,110 647,928
2.8%
* Less than 1%.
(1) Includes shares that may be acquired immediately upon termination as a director by conversion of Stock Units.
(2) Includes shares that may be acquired upon exercise of stock options either immediately or within sixty
(60) days of October 19, 2020.
(3) Includes fully-vested Restricted Stock Units that may be settled within sixty (60) days of, or five years after,
termination of service as a director.
(4) Includes 847 shares held as custodian for Mr. Rhodes’ son, 1,719 shares held as trustee of a trust for
Mr. Rhodes’ son, 1,720 shares held as trustee of a trust for Mr. Rhodes’ daughter, 1,043 shares held as trustee of
trusts for Mr. Rhodes’ nieces and nephews, 200 shares held as co-trustee of trusts for Mr. Rhodes’ siblings,
8,685 shares owned by a trust for Mr. Rhodes’ wife and 10,000 shares owned by grantor retained annuity trusts.
Also includes 1,911 shares held by a charitable foundation for which Mr. Rhodes is president and a director and
for which he shares investment and voting power.
(5) Includes 4,000 shares owned by a grantor retained annuity trust.
(6) Includes 86 shares held as trustee of a trust for Mr. Finestone’s son, 87 shares held as trustee of a trust for
Mr. Finestone’s daughter and 1,449 shares owned by a grantor retained annuity trust.
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Security Ownership of Certain Beneficial Owners
The following entities are known by us to own more than five percent of our outstanding common stock:
Name and Address
of Beneficial Owner
Vanguard Group, Inc. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,220,274
Shares
Ownership
Percentage (1)
9.58%
100 Vanguard Blvd.
Malvern, PA 19355
BlackRock, Inc. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,774,341
7.66%
55 East 52nd Street
New York, NY 10055
(1) The ownership percentages are calculated based on the number of shares of AutoZone common stock
outstanding as of October 19, 2020.
(2) Amounts reported in the table are based on information contained in a Form 13F filed by Vanguard Group Inc.
on August 14, 2020 for the quarter ending June 30, 2020. Based on information contained in a Schedule 13G/A
filed on February 12, 2020 by The Vanguard Group (“Vanguard”), as of December 31, 2019, Vanguard
beneficially owned 2,270,528 shares of common stock, including (a) 37,251 shares over which it had sole
voting power, (b) 8,141 shares over which it had shared voting power, (c) 2,227,503 shares over which it had
sole dispositive power and (d) 43,025 shares over which it had shared dispositive power.
(3) Amounts reported in the table are based on information contained in a Form 13F filed by BlackRock, Inc.
(“BlackRock”) on August 14, 2020 for the quarter ending June 30, 2020. Based on information contained in a
Schedule 13G/A filed on February 5, 2020 by BlackRock, Inc. (“BlackRock”), as of December 31, 2019,
BlackRock beneficially owned 1,945,850 shares of common stock, including (a) 1,716,141 shares over which it
had sole voting power and (b) 1,945,850 shares over which it had sole dispositive power.
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PROPOSAL 1 — Election of Directors
THE PROPOSALS
Ten directors will be elected at the Annual Meeting to serve until the next annual meeting of stockholders in
2021. Pursuant to AutoZone’s Seventh Amended and Restated By-Laws, in an uncontested election of directors, a
nominee for director is elected to the Board if the number of votes cast for such nominee’s election exceed the
number of votes cast against such nominee’s election. (If the number of nominees were to exceed the number of
directors to be elected, i.e., a contested election, directors would be elected by a plurality of the votes cast at the
Annual Meeting.) Pursuant to AutoZone’s Corporate Governance Principles, incumbent directors must agree to
tender their resignation if they fail to receive the required number of votes for re-election, and in such event the
Board will act within 90 days following certification of the shareholder vote to determine whether to accept the
director’s resignation. These procedures are described in more detail in our Corporate Governance Principles, which
are available on our corporate website Investors.AutoZone.com. The Board may consider any factors it deems
relevant in deciding whether to accept a director’s resignation. If a director’s resignation offer is not accepted by the
Board, that director will continue to serve until AutoZone’s next annual meeting of stockholders or until his or her
successor is duly elected and qualified, or until the director’s earlier death, resignation, or removal.
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Any director nominee who is not an incumbent director and who does not receive a majority vote in an
uncontested election will not be elected as a director, and a vacancy will be left on the Board. The Board, in its sole
discretion, may either fill a vacancy resulting from a director nominee not receiving a majority vote pursuant to the
By-Laws or decrease the size of the Board to eliminate the vacancy.
Shares abstaining from voting and shares as to which a broker non-vote occurs are not considered votes cast or
shares entitled to vote with respect to such matter. Accordingly, abstentions and broker non-votes will have no effect
on the outcome of Proposal 1.
The Board recommends that the stockholders vote FOR each of these nominees. These nominees have
consented to serve if elected. Should any nominee be unavailable to serve, your proxy will be voted for a substitute
nominee recommended by the Board, or the Board may reduce the number of directors on the Board.
Each of the nominees named below was elected a director at the 2019 annual meeting.
Nominees
The nominees are:
Douglas H. Brooks, 68, has been a director since 2013. He is retired. Until his retirement in 2013, he had
held various positions with Brinker International, including serving as Non-Executive Chairman of the Board
of Brinker International from January 2013 until December 2013; Chairman, President and Chief Executive
Officer of Brinker from 2004 until January 2013, and President and Chief Operating Officer from 1999 to
2004. He served on the Brinker board of directors from 1999 through 2013 and on the Club Corp. board of
directors from 2013 through 2017. Mr. Brooks is also a director of Southwest Airlines.
Experience, Skills and Qualifications: The Board believes Mr. Brooks is qualified to serve as a director
of the Company based on his strategic and operational business background, his knowledge of international
operations, his experience as a chief executive officer of a public company, his experience managing a
company with a focus on customer service, his owner orientation, and his board experience as well as his
integrity, energy, and willingness to spend time on and interest in AutoZone.
Michael M. Calbert, 58, has been a director since 2019. He has served as Chairman of the Board of Dollar
General Corporation since January 2016 and previously served as Chairman of the Board of Dollar General
from July 2007 until December 2008 and as Lead Director from March 2013 until his re-appointment as
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Chairman in January 2016. Mr. Calbert joined the private equity firm KKR & Co. L.P. (“KKR”) in
January 2000. He was directly involved with several KKR portfolio companies until his retirement in
January 2014, and served as a consultant to KKR from his retirement until June 2015. Mr. Calbert joined
Randall’s Food Markets beginning in 1994 and served as the Chief Financial Officer from 1997 until it was
sold in September 1999. Mr. Calbert also previously worked as a certified public accountant and consultant
with Arthur Andersen Worldwide from 1985 to 1994, where his primary focus was the retail and consumer
industry.
Experience, Skills and Qualifications: The Board believes Mr. Calbert is qualified to serve as a director of
the Company based on his executive experience in the retail and consumer industry, his background in finance
while serving as a Chief Financial Officer, his board experience, his experience with mergers and acquisitions
and capital markets as well as his integrity, energy, and willingness to spend time on and interest in AutoZone.
Linda A. Goodspeed, 58, has been a director since 2013. She retired in 2017 as the Chief Operating
Officer and a Managing Partner at WealthStrategies Financial Advisors, positions she had held since 2007. She
had served as Senior Vice President and Chief Information Officer of ServiceMaster from 2011 to 2014. From
2008 to September 2011, Ms. Goodspeed served as Vice President, Information Systems and Chief Information
Officer for Nissan North America, Inc., a subsidiary of Nissan Motor Company, a global manufacturer of
vehicles. From 2001 to 2008, Ms. Goodspeed served as Executive Vice President at Lennox International, Inc.,
a global manufacturer of air conditioning, heating and commercial refrigeration equipment. She is also a
director of American Electric Power Co., Inc., and Darling Ingredients Inc., and was a director of Global Power
Equipment Group through April 2018 and Columbus McKinnon Corp. through 2017.
Experience, Skills and Qualifications: The Board believes Ms. Goodspeed is qualified to serve as a
director of the Company based on her experience in key strategic and operational roles with several large
global companies, her expertise in information technology and previous position as the chief information
officer of a service company, her owner orientation, her board experience and her executive management skills,
as well as her integrity, energy, and willingness to spend time on and interest in AutoZone.
Earl G. Graves, Jr., 58, has been a director since 2002 and was elected Lead Director in January 2009. He
has been the President and Chief Executive Officer of Black Enterprise, publisher of Black Enterprise
Magazine, since January 2006, and was President and Chief Operating Officer from 1998 to 2006. Mr. Graves
has been employed by the same company in various capacities since 1988.
Experience, Skills and Qualifications: The Board believes Mr. Graves is qualified to serve as a director of
the Company based on his business, management and strategic planning experience, his knowledge of
advertising and marketing, his owner orientation, and his board experience, as well as his integrity, energy, and
willingness to spend time on and interest in AutoZone.
Enderson Guimaraes, 61, has been a director since 2012. In 2017, he retired as the President and Chief
Operating Officer for Laureate Education, Inc., positions he had held since 2015. He was Executive Vice
President, Global Categories and Operations of PepsiCo, Inc. from January 2015 through July 2015. He served
as Chief Executive Officer of PepsiCo Europe and Sub-Sahara Africa from September 2012 through
January 2015. He was also President of PepsiCo Global Operations from October 2011 to September 2012.
Mr. Guimaraes previously had served as Executive Vice President of Electrolux and Chief Executive Officer of
its major appliances business in Europe, Africa and the Middle East from 2008 to 2011. Prior to this,
Mr. Guimaraes held various leadership positions during his 10 years at Philips Electronics and also worked in
various marketing positions at Danone and Johnson & Johnson. He is also a director of Refresco Group B.V.
and Sunshine Top B.V.
Experience, Skills and Qualifications: The Board believes Mr. Guimaraes is qualified to serve as a
director of the Company based on his business, management and strategic planning experience, his knowledge
of advertising, marketing and international operations, and his owner orientation as well as his integrity,
energy, and willingness to spend time on and interest in AutoZone.
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D. Bryan Jordan, 58, has been a director since 2013. Since 2008, Mr. Jordan has served as Chief
Executive Officer and a director of First Horizon National Corporation, where he also served as Chairman of
the Board from 2012 through July 1, 2020 and held the additional position of President from 2008 through
July 1, 2020. From May 2007 until September 2008, Mr. Jordan was Executive Vice President and Chief
Financial Officer of First Horizon and First Tennessee Bank National Association, and prior to that he served in
various positions at Regions Financial Corporation and its subsidiary Regions Bank, including (beginning in
2002) as Chief Financial Officer.
Experience, Skills and Qualifications: The Board believes Mr. Jordan is qualified to serve as a director of
the Company based on his extensive experience in the banking and financial services industry, his experience
serving as the chief executive officer and the chief financial officer of public companies, his knowledge of
corporate finance and management, and his owner orientation, as well as his integrity, energy, and willingness
to spend time on and interest in AutoZone.
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Gale V. King, 64, has been a director since 2018. She has been the Executive Vice President and Chief
Administrative Officer for Nationwide Insurance Company since 2012 and served as the Executive Vice
President – Chief Human Resources Officer from 2009 to 2012. Ms. King is also a director of J.B. Hunt
Transport Services, Inc.
Experience, Skills and Qualifications: The Board believes Ms. King is qualified to serve as a director of
the Company based on her extensive experience in human resources, her owner orientation and her executive
management skills, as well as her integrity, energy, and willingness to spend time on and interest in AutoZone.
George R. Mrkonic, Jr., 68, has been a director since 2006. He is the non-Executive Chairman of Maru
Group, a London, UK based research, insight and advisory services firm. Previously, he was the Non-Executive
Chairman of Paperchase Products Limited, London, UK, a retailer of cards, stationery, wraps and gifts in the
UK, Europe and the Middle East, since 2005, and had been a director since 1999. Prior to that, he was
President of Borders Group, Inc. from 1994 to 1997 and Vice Chairman of Borders Group, Inc. from 1994 to
2002. He is also a director of Brinker International, Inc., and Ulta Salon, Cosmetics & Fragrance, Inc.
Mr. Mrkonic was a director of Syntel, Inc. from 2009 to May 2016.
Experience, Skills and Qualifications: The Board believes Mr. Mrkonic is qualified to serve as a director
of the Company based on his experience as a senior executive in retail companies, his knowledge of corporate
strategy, finance, and management, his owner orientation, and his board experience, as well as his integrity,
energy, and willingness to spend time on and interest in AutoZone.
William C. Rhodes, III, 55, was elected Chairman in June 2007. He has been President, Chief Executive
Officer, and a director since 2005. Prior to his appointment as President and Chief Executive Officer,
Mr. Rhodes was Executive Vice President–Store Operations and Commercial. Prior to fiscal 2005, he had been
Senior Vice President–Supply Chain and Information Technology since fiscal 2002, and prior thereto had been
Senior Vice President–Supply Chain since 2001. Prior to that time, he served in various capacities within the
Company since 1994. Prior to 1994, Mr. Rhodes was a manager with Ernst & Young LLP. Mr. Rhodes is also a
director of Dollar General Corporation.
Experience, Skills and Qualifications: The Board believes Mr. Rhodes, AutoZone’s Chairman, President
and Chief Executive Officer, is qualified to serve as a director of the Company based on his 25 plus years’
experience with the Company, which have included responsibility for corporate strategy, executive
management, operations, finance, supply chain and information technology; his knowledge and understanding
of the automotive aftermarket and retail industries; his financial background and his owner orientation, as well
as his integrity and energy.
Jill A. Soltau, 53, has been a director since 2018. She has been the Chief Executive Officer and a member
of the Board of Directors of the J.C. Penney Company, Inc., since October 2018. J.C. Penney Company, Inc.
filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on May 15, 2020.
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She previously served as President and Chief Executive Officer of JOANN Stores from February 2015 to
October 2018. Prior to joining JOANN, Ms. Soltau served as President of Shopko Stores and has held senior
level positions in national and regional retailers, including Kohl’s and former Saks Inc. subsidiaries.
Experience, Skills and Qualifications: The Board believes Ms. Soltau is qualified to serve as a director of
the Company based on her experience as a chief executive officer in the retail industry, her owner orientation,
her board experience and her executive management skills, as well as her integrity, energy, and willingness to
spend time on and interest in AutoZone.
PROPOSAL 2 — Ratification of Independent Registered Public Accounting Firm
Ernst & Young LLP, our independent auditor for the past thirty-three fiscal years, has been selected by the
Audit Committee to be AutoZone’s independent registered public accounting firm for the 2021 fiscal year.
Representatives of Ernst & Young LLP will be present at the Annual Meeting to make a statement if they so desire
and to answer any appropriate questions.
The Audit Committee recommends that you vote FOR ratification of Ernst & Young LLP as AutoZone’s
independent registered public accounting firm.
Under Nevada law and the Company’s By-Laws, if a quorum is present, Ernst & Young LLP will be ratified as
AutoZone’s independent registered public accounting firm if the number of votes cast in favor of the matter exceeds
the number of votes cast in opposition to the matter. Shares abstaining from voting and shares as to which a broker
non-vote occurs are not considered votes cast or shares entitled to vote with respect to such matter. Accordingly,
abstentions and broker non-votes will have no effect on the outcome of Proposal 2. The Audit Committee is not
bound by a vote either for or against the firm. The Audit Committee will consider a vote against the firm by the
stockholders in selecting our independent registered public accounting firm in the future.
During the past two fiscal years, the aggregate fees for professional services rendered by Ernst & Young LLP
were as follows:
Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,291,387 $ 2,088,947
Audit-Related Fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
Tax and other Non-Audit-Related Fees (3) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 234,813 $ 390,851
12,000 $
2020 (1)
2019
(1) Includes amounts estimated to be billed for services rendered.
(2) Audit-Related Fees for 2020 were for attest services rendered for compliance purposes for the Company’s
operations in Mexico.
(3) Tax and other Non-Audit-Related Fees for 2020 and 2019 were for state, local and international tax services.
The Audit Committee pre-approves all services performed by the independent registered public accounting
firm under the terms contained in the Audit Committee charter, a copy of which can be obtained at our website at
Investors.AutoZone.com. The Audit Committee pre-approved 100% of the services provided by Ernst & Young
LLP during the 2020 and 2019 fiscal years. The Audit Committee considers the services listed above to be
compatible with maintaining Ernst & Young LLP’s independence.
PROPOSAL 3 — Advisory Vote on Executive Compensation – “Say-on-Pay”
In accordance with Section 14A of the Securities Exchange Act, we are asking stockholders to approve the
following advisory resolution on the compensation of our Principal Executive Officer, our Principal Financial
20
Officer and our other three most highly paid executive officers (collectively, the “Named Executive Officers”) at the
Annual Meeting:
“RESOLVED, that the compensation paid to AutoZone’s Named Executive Officers, as disclosed in this
Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission,
including the Compensation Discussion and Analysis, the accompanying compensation tables and the related
narrative discussion, is hereby APPROVED.”
This advisory vote, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to
endorse or not endorse our executive pay program. The Board recommends a vote “FOR” this resolution because it
believes that AutoZone’s executive compensation program, described in the Compensation Discussion and Analysis,
is effective in achieving the Company’s goals of rewarding financial and operating performance and the creation of
stockholder value.
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Our Board and Compensation Committee believe that there should be a strong relationship between pay and
corporate performance, and our executive compensation program reflects this belief. While the overall level and
balance of compensation elements in our compensation program are designed to ensure that AutoZone can retain
key executives and, when necessary, attract qualified new executives to the organization, the emphasis of
AutoZone’s compensation program is linking executive compensation to business results and intrinsic value
creation, which is ultimately reflected in increases in stockholder value.
AutoZone sets appropriate financial and operating goals, and a significant amount of an executive’s annual
cash compensation is tied to these objectives and therefore “at risk”—payment is earned only if performance
warrants it.
AutoZone’s compensation program is intended to support long-term focus on stockholder value, so it
emphasizes long-term rewards. At target levels, the majority of an executive officer’s total compensation package
each year is the potential value of his or her stock options, which yield value to the executive only if the stock price
appreciates.
Our management stock ownership requirement effectively promotes meaningful and significant stock
ownership by our Named Executive Officers and further aligns their interests with those of our stockholders.
We urge you to read the Compensation Discussion and Analysis, as well as the Summary Compensation Table
and related compensation tables and narrative, beginning on page 30, which provide detailed information on our
compensation philosophy, policies and practices and the compensation of our Named Executive Officers.
Because the vote on this proposal is advisory in nature, it is not binding on AutoZone, the Board or the
Compensation Committee. The vote on this proposal will, therefore, not affect any compensation already paid or
awarded to any Named Executive Officer and will not overrule any decisions made by the Board or the
Compensation Committee. Because we highly value the opinions of our stockholders, however, the Board and the
Compensation Committee will consider the results of this advisory vote when making future executive
compensation decisions.
Under Nevada law and the Company’s By-Laws, if a quorum is present, this matter will be approved if the
number of votes cast in favor of the matter exceeds the number of votes cast in opposition to the matter. Shares
abstaining from voting and shares as to which a broker non-vote occurs are not considered votes cast or shares
entitled to vote with respect to such matter. Accordingly, abstentions and broker non-votes will have no effect on the
outcome of Proposal 3.
The Board recommends that the stockholders vote FOR this proposal.
21
PROPOSAL 4 — Approval of AutoZone, Inc. 2020 Omnibus Incentive Award Plan
Introduction
We are asking our stockholders to approve the 2020 Omnibus Incentive Award Plan (the “Plan”), which was
adopted, subject to stockholder approval, by our Board of Directors on October 7, 2020. The Plan is designed to
promote the success and enhance the value of AutoZone by linking the individual interests of Plan participants to
those of AutoZone’s stockholders by providing incentive for appropriate performance to generate positive returns to
AutoZone’s stockholders.
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The Plan will serve as the successor to the Amended and Restated AutoZone, Inc. 2011 Equity Incentive
Award Plan (the “Prior Plan”). We are requesting approval of 1,400,000 shares to be available for issuance under the
Plan. If approved by stockholders at the 2020 Annual Meeting of Stockholders, the Plan will be effective upon such
approval (the “Effective Date”). Following the Effective Date, no further grants will be made under the Prior Plan.
However, each outstanding award under the Prior Plan will remain outstanding under such plan and will continue to
be governed under the Prior Plan’s terms and any applicable award agreement. If the Plan is not approved by our
stockholders, the Plan will not become effective, and the Prior Plan will remain in effect in accordance with its
present terms. If the Plan is not approved by our stockholders, we will continue to grant awards under the Prior Plan,
subject to its terms, conditions and limitations, using the shares available for issuance thereunder.
A copy of the Plan is attached to this proxy statement as Appendix A and is incorporated herein by reference. A
summary of the material terms of the Plan is set forth below. Such summary does not purport to be a complete
description of the Plan and is qualified in its entirety by reference to the complete copy of the Plan in Appendix A.
Rationale
AutoZone is seeking stockholder approval of the Plan at its Annual Meeting. The authorization of additional
shares is critical to our ability to continue to issue equity-based awards, which play a key role in attracting,
incentivizing, and retaining the high-quality talent we need to successfully execute against the Company’s financial
and operating goals and growth strategy.
We grant a significant portion of the compensation paid to our Chief Executive Officer and to our other NEOs
and executives in the form of equity. We believe that equity-based awards support our pay-for-performance
philosophy by (i) linking executive compensation to business results and intrinsic value creation, which is ultimately
reflected in increases in stockholder value, (ii) attracting and retaining talented AutoZoners, (iii) driving high
performance by payment being earned only if performance goals and objections are met, and (iv) motivating our
executives to create long-term stockholder value.
We believe that the number of shares requested will be adequate to maintain our equity award program for
approximately five years based on historical grant levels and potentially longer due to our share repurchase program.
We believe that such request is reasonable and consistent with general market practices.
We believe that our compensation practices are competitive and consistent with market practices and that our
historical share utilization has been responsible and mindful of stockholder interests. Without the availability of the
additional shares of common stock requested by this Plan, the Company will be at a significant competitive
disadvantage and we expect that the equity-based components of our compensation program would need to be
supplemented with additional cash incentives which we believe may not offer the same benefits with respect to
stockholder alignment.
Therefore, the Board believes that the Plan is in the best interests of our stockholders and the Company and
recommends that you vote to approve the Plan.
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Share Overhang and Availability
Upon approval of the Plan, AutoZone’s share overhang and availability may be summarized as follows:
Total shares of common stock outstanding as of
October 19, 2020, the record date:
23,175,554
Shares of AutoZone common stock requested for
issuance under the Plan:
1,400,000 (or, assuming all Awards are issued as
Full-Value Awards, 700,000)
Shares subject to awards other than Full Value
Awards under the Prior Plan:
1,542,222; weighted average exercise price of
$630.41 and weighted average remaining term of
6.25 years
Shares subject to Full Value Awards under the
Prior Plan:
34,798 shares
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Upon stockholder approval of the Plan, no shares will be available for grant under the Prior Plan.
Summary of Material Features of the Plan
The material features of the Plan are:
• The Share Limit (as defined below) under the Plan is 1,400,000 (or, assuming all Awards are issued as Full-
Value Awards, 700,000);
• The award of stock options (both incentive and non-qualified options), stock appreciation rights, restricted
stock, restricted stock units, deferred stock, unrestricted stock, cash-based awards, performance-based
awards, stock payment awards, dividend equivalent rights, and other incentive awards is permitted;
• Shares tendered or held back for taxes or withheld by AutoZone in payment of the exercise price of an
option will not be added back to the Share Limit. Upon the exercise of a stock appreciation right that is
settled in shares of common stock, the full number of shares underlying the award will be charged to the
Share Limit. Additionally, shares we reacquire on the open market with the cash proceeds from the exercise
of options will not be added to the Share Limit;
• Stock options and stock appreciation rights will not be repriced without stockholder approval;
• The value of all awards awarded under the Plan and all other cash compensation paid by us to any non-
employee director in any calendar year may not exceed $750,000. The Board may make exceptions to this
limit but only under extraordinary circumstances.
• The Plan maintains a fungible Share Limit, whereby Full-Value Awards (as defined below) reduce the Share
Limit by two shares for every share delivered in settlement of a Full-Value Award;
• Awards are subject to AutoZone’s clawback policy as in effect from time to time and any recoupment
required by applicable law or the terms of an individual award agreement; and
• No award may be granted or awarded after the ten-year anniversary of the Effective Date.
Based solely on the closing price of our common stock as reported by the New York Stock Exchange on
October 19, 2020 and the maximum number of shares that would have been available for awards as of such date
under the Plan, the maximum aggregate market value of the common stock that could potentially be issued under the
Plan is $823,494,000. The shares of common stock underlying any awards that are forfeited, canceled or otherwise
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terminated, other than by exercise, under the Plan will be added back to the shares of common stock available for
issuance under the Plan, as described in greater detail below.
What is the Plan?
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The Plan, like the Prior Plan, will continue to allow us to provide equity-based compensation to our non-
employee directors and employees for their service to AutoZone or our subsidiaries or affiliates. Under the 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 of
Directors within parameters set forth in the Plan.
Who is eligible to participate in the Plan?
The Plan allows employees and non-employee directors to participate in the Plan. The actual number of
individuals who will receive awards cannot be determined in advance because the Compensation Committee retains
the discretion to select the participants. In fiscal year 2020, approximately 294 individuals (including 14 executive
officers and 9 non-employee directors) received awards under the Prior Plan.
How will the Plan be administered?
The Plan generally will be administered by the Compensation Committee (which we also refer to as the
“Administrator”). The Compensation Committee consists solely of non-employee directors, each of whom is a “non-
employee director” as defined in Rule 16b - 3 under the Exchange Act and an “independent director” under the
rules of the New York Stock Exchange. The Compensation Committee will have the authority to administer the
Plan, including the power to determine eligibility, the types and sizes of awards, the price and timing of awards and
the acceleration or waiver of any vesting restriction.
Except with respect to awards granted to our senior executives who are subject to Section 16 of the Exchange
Act, the Plan allows the Compensation Committee to delegate the authority to grant or amend awards under the Plan
to a committee of one or more members of the Board of Directors or one or more of our officers. The full Board of
Directors, acting by a majority of its members in office, will conduct the general administration of the Plan with
respect to awards granted to non-employee directors.
How many shares of AutoZone common stock will be available for awards under the Plan?
The aggregate number of shares of our common stock available for equity grants pursuant to the Plan is equal
to 1,400,000 (the “Share Limit”). Following the Effective Date, no further grants shall be made under the Prior Plan.
Any awards under the Prior Plan shall continue to be subject to the terms and conditions of the Prior Plan. The
number of shares that may be issued as incentive stock options is an amount of shares equal to the Share Limit.
The Share Limit will be reduced by two shares for every share delivered in settlement of an award other than
(i) a stock option, (ii) a stock appreciation right, (iii) a cash-based award or (iv) any other award for which the holder
pays the intrinsic value existing as of the date of grant (collectively, “Full Value Awards”). If any shares subject to
an award that is not a Full Value Award are forfeited, cancelled, are settled in cash (in whole or in part), or are
otherwise terminated without the delivery of shares then the number of shares subject to such forfeiture, cancellation
or cash settlement will again be available for future grants under the Plan; if such forfeited, expired or cash-settled
award is a Full Value Award, then the number of shares available under the Plan will be increased by two shares for
each share subject to such forfeiture, cancellation or cash settlement. In addition, any shares of restricted stock
repurchased by AutoZone at the same price paid by the participant, so that such shares are returned to AutoZone,
will again be available for awards granted pursuant to the Plan. The payment of dividend equivalents in cash in
conjunction with any outstanding awards will not be counted against the shares available for issuance under the
Plan.
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However, shares tendered by or withheld in payment of the exercise price of an option or in satisfaction of any
tax withholding obligations with respect to an award, shares subject to a stock appreciation right that are not issued
in connection with the stock settlement of the stock appreciation right on exercise thereof, and shares purchased on
the open market with cash proceeds from the exercise of options will not again be available for grant of an award
under the Plan.
In the event of a corporate transaction, such as a merger, combination, consolidation or acquisition of property
or stock, any awards granted under the Plan upon the assumption of, or in substitution for, outstanding equity awards
previously granted by another entity, will not reduce the shares authorized for grant under the Plan. Additionally, in
the event that AutoZone or our subsidiaries or affiliates acquire or combine with a company that has shares available
under a pre-existing plan approved by stockholders (and not in contemplation of such acquisition or combination),
the shares available for grant pursuant to the terms of such pre-existing plan may be used for awards under the Plan
in certain circumstances and will not reduce the shares authorized for grant under the Plan.
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What types of awards are available under the Plan?
Stock Options. The Plan provides for the grant of incentive stock options, as defined under Section 422 of the
Code (“ISOs”), and non-qualified stock options (each, an “option”). The option exercise price of all stock options
granted pursuant to the Plan may not be less than 100% of the fair market value of our common stock on the date of
grant. Stock options may be exercised as determined by the Administrator, but may not have a term beyond the tenth
anniversary of the date of grant. ISOs granted to any person who owns, as of the date of grant, more than ten percent
of the total combined voting power of all classes of our stock, however, shall have an exercise price not less than
110% of the fair market value of our common stock on the date of grant and may not have a term beyond the fifth
anniversary of the date of grant. The Plan prohibits, without stockholder approval: (i) the amendment of options to
reduce the exercise price, and (ii) the replacement of an option with cash or any other award when the price per
share of the option exceeds the fair market value of the underlying shares.
Restricted Stock. A restricted stock award is the grant of shares of our common stock at a price (if any)
determined by the Administrator that may be subject to substantial risk of forfeiture, i.e., certain restrictions or other
vesting requirements including continued service or the achievement of certain performance goals. Restricted stock
is nontransferable and may not be sold or encumbered until all restrictions are terminated or expire.
Dividend Equivalents. A dividend equivalent is the right to receive the equivalent value of dividends paid on
shares of our common stock. If granted, they are credited as of dividend payment dates occurring between the date
an award is granted and the date it vests, is exercised, is distributed or expires. Dividend equivalents may be
converted to cash or additional shares of our common stock subject to limitations as may be determined by the
Administrator. No award may provide for payment of dividend equivalent rights unless and until the underlying
award becomes fully vested.
Stock Payments. A stock payment is a payment in the form of shares of our common stock or an option or
other right to purchase shares, as part of a bonus, deferred compensation or other arrangement. The number or value
of shares of any stock payment will be determined by the Administrator and may be subject to the achievement of
performance criteria or other specific criteria determined by the Administrator. Stock payments may, but are not
required to, be made in lieu of cash compensation otherwise payable to any individual who is eligible to receive
awards under the Plan.
Deferred Stock. Deferred stock is a right to receive shares of our common stock in the future. The number of
shares of any deferred stock award will be determined by the Administrator and may be based on the achievement of
performance or other specific criteria on a specified date or dates or over any period or periods determined by the
Administrator. Deferred stock may constitute or provide for a deferral of compensation subject to Section 409A of
the Code and there may be certain tax consequences if the requirements of Section 409A of the Code are not met.
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Restricted Stock Units. A restricted stock unit is a contractual right that provides for the issuance of our
common stock at a future date upon the satisfaction of specific conditions. The Administrator will specify in an
award agreement the dates or conditions under which the restricted stock units will become fully vested and
nonforfeitable, and may specify other conditions to vesting. The Administrator will also specify, or permit the holder
to elect, the conditions and dates upon which the shares underlying the restricted stock units will be issued, which
may not be earlier than the date as of which the restricted stock units vest and which conditions and dates will be
subject to compliance with Section 409A of the Code. Restricted stock units may be paid in cash, shares or both, as
determined by the Administrator. On the distribution dates, AutoZone will transfer to the holder one unrestricted,
fully transferable share of our common stock (or the fair market value of one share in cash) for each restricted stock
unit scheduled to be paid out on such date and not previously forfeited. The Administrator may specify a purchase
price to be paid by the holder for such shares of our common stock. Restricted stock units may constitute or provide
for a deferral of compensation subject to Section 409A of the Code and there may be certain tax consequences if the
requirements of Section 409A of the Code are not met.
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Stock Appreciation Rights. A stock appreciation right (“SAR”) entitles its holder, upon exercise, to receive
from us an amount equal to the difference between the exercise price of the SAR and the fair market value of a share
of our common stock on the exercise date, multiplied by the number of shares with respect to which the SAR is
being exercised, subject to any limitations imposed by the Administrator. The exercise price per share may not be
less than 100% of the fair market value on the date the SAR is granted. The Administrator will determine the vesting
period of the SAR and SARs may not have a term beyond ten years from the date of grant. Payment of a SAR may
be in cash, shares or a combination of both. The Plan prohibits, without stockholder approval: (i) the amendment of
SARs to reduce the exercise price, and (ii) the replacement of a SAR with cash or any other award when the price
per share of the SAR exceeds the fair market value of the underlying shares.
Performance Based Awards. Performance based awards are rights to receive a number of shares of our
common stock or the cash value of such shares based on the attainment of specified performance goals or other
criteria determined by the Administrator.
Cash Based Awards. The Administrator may grant cash-based awards under the Plan to participants. The cash
based awards may be subject to the achievement of certain performance goals. At the Administrator’s discretion,
cash based awards may be settled in shares.
Other Incentive Awards. The Plan also authorizes the grant of awards other than those enumerated in this
summary that are denominated in, linked to or derived from shares of our common stock or value metrics related to
our shares, and may remain forfeitable unless and until specified conditions are met.
What are performance awards?
Performance awards include any of the awards above that are granted subject to vesting and/or payment based
on the attainment of specified performance goals. The Plan also permits the Administrator to provide for objectively
determinable adjustments to the applicable performance criteria in setting performance goals for qualified
performance-based compensation awards.
How does vesting of awards occur under the Plan?
The award agreement governing an award under the Plan will specify when the award will vest, in whole or in
part, and will denote any events or conditions upon which vesting is contingent or which may accelerate vesting.
In addition, at the time an award is granted or at any time after such grant, the Administrator may specify
events, including a change in control, that will accelerate the vesting or exercise date of all or part of the award.
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Are awards under the Plan transferable?
With limited exceptions for estate planning, domestic relations orders, certain beneficiary designations and the
laws of descent and distribution, awards under the Plan are generally nontransferable prior to vesting and are
exercisable (as applicable) only by the participant.
How are tax withholding and payment obligations handled under the Plan?
The Administrator may, in its discretion, accept cash or check, shares of our common stock that meet specified
conditions, a “market sell order” or such other consideration as it deems suitable in order to satisfy tax withholding,
exercise price and purchase price obligations arising in connection with awards granted under the Plan.
What happens in the event of corporate transactions affecting the common stock?
The Administrator has broad discretion to equitably adjust the provisions of the Plan, as well as the terms and
conditions of existing and future awards, to prevent the dilution or enlargement of intended benefits and facilitate
necessary or desirable changes in the event of certain transactions and events affecting our common stock, such as
stock dividends, stock splits, mergers, acquisitions, consolidations and other corporate transactions. In addition, in
the event of certain non-reciprocal transactions with our stockholders known as “equity restructurings,” the
Administrator will make equitable adjustments to the Plan and outstanding awards to reflect such transaction. In the
event of a change in control (as defined in the Plan) and except as may be determined otherwise by the Board, the
surviving entity must assume, continue or substitute with equivalent awards all outstanding awards under the Plan
(each, “Assumed Awards”); provided, however, that if a participant’s service with the surviving entity is terminated
without cause by the surviving entity, for good reason by the participant, or on account of the participant’s death or
disability, in each case within 12 months following the change in control, each then-outstanding and unvested
Assumed Award held by the participant shall become fully vested and, as applicable, exercisable, and all forfeiture
restrictions on such Assumed Awards shall lapse at such time. If the surviving entity declines to assume, continue or
substitute some or all of the outstanding awards, then all such awards will vest in full and be deemed exercised (as
applicable) immediately prior to the consummation of such change in control. Notwithstanding the forgoing, cash-
based awards and performance-based awards will be vested and nonforfeitable in the Administrator’s discretion
upon a change in control. Individual award agreements may provide for additional accelerated vesting and payment
provisions if the Administrator so determines.
Are awards under the Plan subject to clawback?
Each participant’s rights, payments, and benefits pursuant to any grant will be subject to mandatory repayment
by the participant to AutoZone (i) to the extent set forth in any award agreement, or (ii) to the extent that such
participant is, or in the future becomes, subject to (a) any “clawback” or recoupment policy adopted by the
Committee, including policies adopted to comply with the requirements of any applicable laws, rules or regulations,
including pursuant to final rules adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank
Wall Street Reform and Consumer Protection Act, or otherwise, or (b) any applicable laws which impose mandatory
recoupment, under circumstances set forth in such applicable laws, including the Sarbanes-Oxley Act of 2002.
Does the Plan contain limits on director compensation?
The Plan provides that the value of all awards awarded under the Plan and all other cash compensation paid by
AutoZone to any non-employee director in any calendar year shall not exceed $750,000.
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Can the Plan be amended or terminated?
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The Board may terminate, amend, or modify the Plan at any time; however, except to the extent permitted by
the Plan in connection with certain changes in capital structure, stockholder approval must be obtained for any
amendment to (i) increase the number of shares available for issuance under the Plan, (ii) reduce the per share
exercise price of the shares subject to any option or SAR below the per share exercise price as of the date the option
or SAR was granted, and (iii) cancel any option or SAR in exchange for cash or another award when the option or
SAR price per share exceeds the fair market value of the underlying shares.
In no event may an award be granted pursuant to the Plan after the tenth anniversary of the date the plan is
approved by our stockholders, and no ISO may be granted pursuant to the Plan after the tenth anniversary of the date
the plan was adopted by the Board of Directors.
New Plan Benefits
The terms and number of awards to be granted in the future under the Plan are to be determined at the
discretion of the Board or Compensation Committee. Except with respect to grants of equity awards that we expect
to grant to our non-employee directors on January 1, 2021, our Board or Compensation Committee has not made
any determination to make future grants to any persons under the Plan as of the date of this Proxy Statement and
therefore, except as set forth below, the benefits that will be awarded or paid under the Plan are not currently
determinable.
We expect to grant $2,152,500 in restricted stock units to our non-employee directors as a group, assuming
such directors do not elect to receive any compensation in cash. The number of restricted stock units will be
determined based on the closing price per share of our common stock on January 1, 2021.
What are the U.S. federal income tax consequences of the Plan?
The following is a general summary under current law of the principal United States federal income tax
consequences related to certain awards under the Plan. This summary deals with the general federal income tax
principles that apply and is provided only for general information. Some kinds of taxes, such as state, local and
foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice
to participants, who should consult their own tax advisors. This summary assumes that all awards granted under the
Plan are exempt from or comply with the rules under Section 409A of the Internal Revenue Code relating to
nonqualified deferred compensation.
Non-Qualified Stock Options. If an optionee is granted a non-qualified stock option under the Plan, the
optionee should not have taxable income on the grant of the option. Generally, the optionee should recognize
ordinary income at the time of exercise in an amount equal to the fair market value of the shares acquired on the date
of exercise, less the exercise price paid for the shares. The optionee’s basis in the common stock for purposes of
determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of
our common stock on the date the optionee exercises such option. Any subsequent gain or loss will be taxable as a
long-term or short-term capital gain or loss, depending on the duration for which the shares are held. We or our
subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same
amount as the optionee recognizes ordinary income.
Incentive Stock Options. A participant receiving ISOs should not recognize taxable income upon grant.
Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income
at the time of exercise. However, the excess of the fair market value of the shares of our common stock received
over the option exercise price is an item of tax preference income potentially subject to the alternative minimum tax.
If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of the ISO grant and
one year from the date of exercise and otherwise satisfies the ISO requirements, the gain or loss (in an amount equal
to the difference between the fair market value on the date of disposition and the exercise price) upon disposition of
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the stock will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the
holding period requirements are not met, the ISO will be treated as one that does not meet the requirements of the
Internal Revenue Code for ISOs and the participant will recognize ordinary income at the time of the disposition
equal to the excess of the amount realized over the exercise price, but not more than the excess of the fair market
value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being
treated as capital gain or capital loss. We are not entitled to a tax deduction upon either the exercise of an ISO or
upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes
ordinary income on disposition of the shares.
Other Awards. AutoZone generally will be entitled to a tax deduction in connection with other awards under
the Plan in an amount equal to the ordinary income realized by the participant at the time the participant recognizes
such income. Participants typically are subject to income tax and recognize such tax at the time that an award is
exercised, vests or becomes non-forfeitable, unless the award provides for a further deferral.
Section 162(m) of the Internal Revenue Code. Section 162(m) denies a deduction to any publicly held
corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation
to such covered employee exceeds $1,000,000. It is possible that compensation attributable to awards under the
Plan, whether alone or combined with other types of compensation received by a covered employee from us, may
cause this limitation to be exceeded in any particular year.
Section 409A of the Internal Revenue Code. Certain types of awards under the Plan may constitute, or provide
for, a deferral of compensation subject to Section 409A of the Internal Revenue Code. Unless certain requirements
set forth in Section 409A of the Internal Revenue Code are satisfied, holders of such awards may be taxed earlier
than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to
an additional 20% penalty tax (and, potentially, certain interest penalties and additional state taxes). To the extent
applicable, the Plan and awards granted under the Plan are intended to be structured and interpreted in a manner
intended to either comply with or be exempt from Section 409A of the Internal Revenue Code and the Department
of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Internal
Revenue Code. To the extent determined necessary or appropriate by the plan administrator, the Plan and applicable
award agreements may be amended to further comply with Section 409A of the Internal Revenue Code or to exempt
the applicable awards from Section 409A of the Internal Revenue Code.
Parachute Payments. The vesting of any portion of an award that is accelerated due to the occurrence of a
change in control may cause a portion of the payments with respect to such accelerated awards to be treated as
“parachute payments” as defined in the Code. Any such parachute payments may be non-deductible to AutoZone, in
whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such
payment (in addition to other taxes ordinarily payable).
Required Vote
Under Nevada law and AutoZone’s By-Laws, the Plan will be adopted, so long as a quorum is present, if the
number of votes cast in favor of adoption of the Plan exceeds the number of votes cast in opposition. Shares
abstaining from the voting and shares as to which a broker non-vote occurs are considered present for purposes of
determining whether a quorum exists but are not considered votes cast with respect to such matter. Accordingly,
abstentions and broker non-votes will have no effect on the outcome of Proposal.
The Board of Directors recommends that the stockholders vote FOR the approval of the AutoZone, Inc.
2020 Omnibus Incentive Award Plan.
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Other Matters
We do not know of any matters to be presented at the Annual Meeting other than those discussed in this Proxy
Statement. If, however, other matters are properly brought before the Annual Meeting, your proxies will be able to
vote those matters in their discretion.
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Compensation Discussion and Analysis
EXECUTIVE COMPENSATION
This Compensation Discussion and Analysis provides a principles-based overview of AutoZone’s executive
compensation program. It discusses our rationale for the types and amounts of compensation that our executive
officers receive and how compensation decisions affecting these officers are made. It also discusses AutoZone’s
total rewards philosophy, the key principles governing our compensation program, and the objectives we seek to
achieve with each element of our compensation program.
Our fiscal 2020 Named Executive Officers are (i) our CEO, (ii) our CFO and (iii) each of our three other most
highly compensated executive officers who were employed as of the last day of fiscal 2020:
William C. Rhodes III Chairman, President and Chief Executive Officer
William T. Giles
Mark A. Finestone
Thomas B. Newbern
Philip B. Daniele
Executive Vice President, Chief Financial Officer, Finance, IT & Store Development
Executive Vice President, Merchandising, Supply Chain, Marketing and eCommerce
Executive Vice President, Store Operations, Commercial, Loss Prevention & ALLDATA
Senior Vice President, Commercial
The Company’s 2020 fiscal year was from September 1, 2019 through August 29, 2020 and therefore this
Compensation Discussion and Analysis covers that time period. Mr. Rhodes, Mr. Giles, Mr. Finestone and
Mr. Newbern were NEOs for fiscal 2019 and remain NEOs in fiscal 2020. Mr. Daniele is a new NEO for fiscal
2020, however Mr. Daniele was appointed to the position of Senior Vice President, Commercial effective
November 1, 2015.
Compensation Principles and Objectives
Pay for performance. The primary emphasis of AutoZone’s compensation program is linking executive
compensation to business results and intrinsic value creation, which is ultimately reflected in increases in
stockholder value. Base salary levels are intended to be competitive in the U.S. marketplace for executives, but the
more potentially valuable components of executive compensation are annual cash incentives, which depend on the
achievement of pre-determined business goals, and to a greater extent, long-term compensation, which is based on
the value of our stock.
The primary driver of long-term compensation is our stock option program. AutoZone grants stock options due
to their inherent sensitivity to stock price appreciation. Stock options only have value when AutoZone’s stock price
rises above the grant date price; therefore, our executives can realize gains only when the price rises over time.
Attract and retain talented AutoZoners. The overall level and balance of compensation elements in our
compensation program are designed to ensure that AutoZone can retain key executives and, when necessary, attract
qualified new executives to the organization. We believe that a company which provides quality products and
services to its customers, and delivers solid financial results, will generate long-term stockholder returns, and that
this is the most important component of attracting and retaining executive talent.
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Drive high performance. AutoZone sets appropriate financial and operating goals to advance progress on key
strategic initiatives and to position us for future success, and a significant amount of an executive’s annual cash
compensation is tied to these objectives and therefore “at risk”—payment is earned only if performance goals and
objectives are met.
Drive long-term stockholder value. AutoZone’s compensation program is intended to support long-term focus
on stockholder value, so it emphasizes long-term rewards. At target levels, the majority of an executive officer’s
total compensation package each year is the potential value of his or her stock options.
The table below illustrates how AutoZone’s compensation program weights the base salary and “at-risk”
components of its NEOs’ fiscal 2020 target total compensation. See the Summary Compensation Table for
additional details about fiscal 2020 compensation for all of the NEOs.
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Executive
William C. Rhodes III . . . . . . . . . . . . . . . . . . . . . .
Average of all Other NEOs . . . . . . . . . . . . . . . . .
Base Salary Annual Incentive Long-Term Incentive Total At-Risk
10%
22%
14%
16%
76%
62%
90%
78%
Key Elements of Compensation
The Chief Executive Officer and the other NEOs, as well as the other senior executives comprising AutoZone’s
Executive Committee, participate in the compensation program outlined in this Compensation Discussion and
Analysis. However, many elements of the compensation program also apply to other levels of AutoZone
management. The intent is to ensure that management is motivated to pursue, and is rewarded for achieving, the
same financial, operating and stockholder objectives.
The table below summarizes the key elements of AutoZone’s executive compensation program and the
objectives they are designed to achieve. More details on these elements follow throughout the Compensation
Discussion and Analysis and this Proxy Statement, as appropriate.
Compensation Element
Description
Objectives
Base salary
• Annual fixed cash compensation.
• Attract and retain talented executives.
• Recognize differences in relative size,
scope and complexity of positions as
well as individual performance over
the long term.
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Compensation Element
Description
Objectives
Annual cash incentive
• Annual variable pay tied to the
• Communicate key financial and
operating objectives.
• Drive high levels of performance by
ensuring that executives’ total cash
compensation is linked to
achievement of financial and
operating objectives.
• Support and reward consistent,
balanced growth and returns
performance with links to stockholder
returns.
• Drive cross-functional collaboration
and a total-company perspective.
achievement of short-term economic
profit objectives, as operationalized
by our primary measures:
• Earnings before interest and taxes,
and
• Return on invested capital.
• Actual payout depends on the results
achieved. Individual potential payout
is capped at $4 million; however,
payout is zero if threshold targets are
not achieved.
• The Compensation Committee may
reduce payouts in its discretion when
indicated by individual performance
or other reasons but does not have
discretion to increase payouts beyond
established individual Performance
Goals and Company incentive payout
matrix.
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Compensation Element
Description
Objectives
Stock options and
other equity
compensation
• Senior executives receive non-
• Align long-term compensation with
qualified stock options (NQSOs).
• All stock options are granted at fair
market value on the grant date
(discounted options are prohibited).
• AutoZone’s equity compensation plan
prohibits re-pricing of stock options.
• AutoZone may grant awards of stock
or units with either performance or
time-based restrictions.
stockholder results. Opportunities for
significant wealth accumulation by
executives are tightly linked to
stockholder returns.
• Provide retention incentives to ensure
business continuity and facilitate
succession planning and executive
knowledge transfer.
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• Allow all AutoZoners to participate in
the growth of AutoZone’s stock.
• Encourage ownership, and therefore
alignment of executive and
stockholder interests.
• Align with stockholders by requiring
executive officers to meet specified
levels of ownership.
• Alignment of executive and
stockholder interests.
Stock purchase plans
• AutoZone maintains a broad-based
employee stock purchase plan (ESPP)
which is qualified under Section 423
of the Internal Revenue Code. The
Employee Stock Purchase Plan allows
AutoZoners to make quarterly
purchases of AutoZone shares at 85%
of the fair market value on the first or
last day of the calendar quarter,
whichever is lower. The annual
contribution limit under the ESPP is
10% of annual earnings up to a max
of $15,000.
• The Company has implemented an
Executive Stock Purchase Plan so that
executives may continue to purchase
AutoZone shares beyond the limit the
IRS and the Company set for the
Employee Stock Purchase Plan. An
executive may make purchases using
up to 25% of their prior fiscal year’s
eligible compensation.
• Executive officers must meet
specified minimum levels of
ownership, using a multiple of base
salary approach.
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Management stock
ownership requirement
Compensation Element
Description
Objectives
Retirement plans
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Health and other
benefits
• Provide competitive executive
retirement benefits.
• The non-qualified plan enables
executives to defer 25% of base
salary and 75% of annual cash
incentives, independent of the IRS
limitations set for the qualified
401(k) plan.
• Retirees’ vested stock options remain
subject to original term to motivate
successful succession planning.
• Provide competitive benefits.
• Minimize perquisites while ensuring a
competitive overall rewards package.
The Company maintains two retirement
plans:
• 401(k) defined contribution plan,
• Non-qualified deferred compensation
plan
Stock options:
• Retired executives, who meet the
definition of retirement, do not
receive any additional vesting of their
long-term incentives but may hold
vested options for the full original
term of any given grant.
Executives are eligible for a variety of
benefits, including:
• Medical, dental and vision plans;
• Life and disability insurance plans;
and
• Charitable contribution match
program.
Senior executives are permitted to use
the Company’s private aircraft for
personal travel as long as they reimburse
the Company for the direct, incremental
cost of such usage.
Annual cash compensation. Annual cash compensation consists of base salary and annual cash incentives.
Base Salary. Salaries are determined within the context of a targeted total cash compensation level for each
position. Base salary is a fixed portion of the targeted annual cash compensation, with the specific portion varying
based on differences in the size, scope or complexity of the jobs as well as the tenure and individual performance
level of incumbents in the positions. AutoZone utilizes a variety of survey data to monitor the market.
The survey data used to periodically adjust salary ranges is broad-based, including data submitted by hundreds
of companies. Examples of the types of information contained in salary surveys include summary statistics (e.g.,
mean, median, 25th percentile, etc.) related to:
• base salaries
• variable compensation
• total annual cash compensation
• long-term incentive compensation
• total direct compensation
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The salary ranges which apply to the NEOs, including the Principal Executive Officer, are part of the structure
applicable to thousands of AutoZone’s employees. Each grade in the current salary structure has a salary range
associated with it. This range has a midpoint, to which we compare summary market salary data (generally median
pay level) of the types discussed above.
Over time, as the median pay levels in the competitive market change, as evidenced by the salary survey data,
AutoZone will make appropriate adjustments to salary range midpoints so that on average, these midpoints are
positioned at roughly 100% of the market median value for base salaries as revealed by the surveys. This positioning
relative to the market allows for competitive base salary levels. This maintains our stated philosophy of delivering
competitive total rewards at or above the market median through our performance-based variable compensation. The
Compensation Committee, together with its independent compensation consultant, periodically conducts a detailed
review of the overall executive compensation program to determine if the program supports the company’s strategic
objectives.
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In making decisions related to compensation of the NEOs, the Compensation Committee uses the survey data
and salary ranges as context in reviewing compensation levels and approving pay actions. Other elements that the
Compensation Committee considers are individual performance, Company performance, individual tenure, internal
equity, position tenure, and succession planning.
Annual Cash Incentive. Executive officers and certain other employees are eligible to receive annual cash
incentives each fiscal year based on the Company’s attainment of certain performance objectives set by the
Compensation Committee at the beginning of the fiscal year. The annual cash incentive target for each position,
expressed as a percentage of base salary, is based on both salary range and level within the organization, and
therefore does not change annually. As a general rule, as an executive’s level of management responsibility
increases, the portion of his or her total compensation dependent on Company performance increases.
The threshold and target percentage amounts for the NEOs for fiscal 2020 are shown in the table below.
Principal Position
Chairman, President & CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Threshold
Target
65 %
37.5 %
30 %
130 %
75 %
60 %
Annual cash incentives for executive officers are paid pursuant to the AutoZone, Inc. 2015 Executive Incentive
Compensation Plan (“EICP”), our performance-based short-term incentive plan. Pursuant to the plan, the
Compensation Committee establishes incentive objectives at the beginning of each fiscal year. For more information
about the EICP, see Discussion of Grants of Plan-Based Awards Table on page 42.
The actual incentive amount paid depends on Company performance relative to the target objectives and
individual achievement of performance goals established at the beginning of the fiscal year. A minimum pre-
established Company goal must be met in order for any incentive award to be paid, and the incentive award as
a percentage of annual salary will increase as the Company achieves higher levels of performance. Payouts are
further adjusted for individual performance, which this component can range from 0% to 130% based on
achievement of performance goals.
The EICP provides that the goal may be different for different executives. The goals can change annually to
support our business objectives. After the end of each fiscal year, the Compensation Committee must certify the
attainment of goals and direct the amount to be paid to each participant in cash. .
The EICP was designed to be a performance-based compensation plan. The Company’s executive officers, as
determined by the Compensation Committee of the Board, are eligible to participate in the EICP. At the beginning
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of each fiscal year, the Compensation Committee establishes a goal, which may be a range from a minimum to a
maximum attainable bonus, based on one or more of the following measures:
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• Earnings
• Earnings per share
• Sales
• Market share
• Operating or net cash flows
• Pre-tax profits
• Earnings before interest and taxes (EBIT)
• Return on invested capital
• Economic value added
• Return on inventory
• EBIT margin
• Sales per square foot
• Comparable store sales
The Compensation Committee may in its sole discretion reduce the calculated incentive awards paid to NEOs.
Under the EICP, the Compensation Committee may not exercise discretion in granting awards in cases where no
awards are indicated, nor may the Compensation Committee increase any calculated awards. Any such “positive”
discretionary changes, were they to occur, would be paid outside of the EICP and to the extent required, reported
under the Bonus column in the Summary Compensation Table on page 40; however, the Compensation Committee
has not historically exercised this discretion.
The Compensation Committee, as described in the EICP, may (but is not required to) disregard the effect of
one-time charges and extraordinary events such as asset write-downs, litigation judgments or settlements, changes in
tax laws, accounting principles or other laws or provisions affecting reported results, accruals for reorganization or
restructuring, and any other extraordinary non-recurring items, acquisitions or divestitures and any foreign exchange
gains or losses on the calculation of performance.
The incentive objectives for fiscal 2020 were set during a Compensation Committee meeting held in
October 2019 and were based on the achievement of specified levels of earnings before interest and taxes (“EBIT”)
and return on invested capital (“ROIC”). The total incentive award is determined based on the impact of EBIT and
ROIC on AutoZone’s economic profit for the year, rather than by a simple allocation of a portion of the award to
achievement of the EBIT target and a portion to achievement of the ROIC target. EBIT and ROIC are key inputs to
the calculation of economic profit (sometimes referred to as “economic value added”) and have been determined by
our Compensation Committee to be important factors in enhancing stockholder value. The specific targets are tied to
achievement of the Company’s operating plan for the fiscal year. If both the EBIT and ROIC targets are achieved,
the result will be a 100%, or target, payout. However, the payout cannot exceed 100% unless the EBIT target is
exceeded (i.e., unless there is “excess EBIT” to fund the additional incentive payout). It is possible to earn EBIT
below target but exceed ROIC target to achieve 100% payout. Additionally, when the aggregate incentive amount is
calculated, if the resulting payout amount in excess of target exceeds a specified percentage of excess EBIT
(currently 20%), then the incentive payout will be reduced until the total amount of the incentive payment in excess
of target is within that specified percentage of excess EBIT limit. For purposes of the EICP, ROIC is defined as
after-tax operating profit (excluding rent) divided by invested capital (which includes a factor to capitalize operating
leases). EBIT is defined as net income plus interest and taxes.
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The fiscal 2020 annual incentive payout matrix is as follows:
AutoZone FY20 Incentive Payout Matrix
EBIT (MMS)
$2,011.8
90%
$2,123.5
95%
$2,235.3
100%
$2,347.1
105%
$2,458.8
110%
32.3%
32.8%
33.3%
R . . . . 33.8%
O . . . . 34.3%
I . . . . . 34.8%
C . . . . 35.3%
35.8%
36.3%
51%
54%
57%
59%
62%
65%
68%
65%
69%
72%
75%
78%
81%
84%
87%
90%
86%
90%
93%
97%
100%
100%
100%
100%
100%
107%
111%
115%
118%
122%
125%
128%
131%
134%
129%
132%
136%
140%
143%
147%
150%
153%
157%
Note: not discrete steps; values are interpolated based on economic value added.
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The COVID-19 crisis had a significant impact on sales, SG&A, EBIT and ROIC. Very early in the crisis, we
announced that all eligible hourly full- and part-time AutoZoners across the U.S. would receive emergency time off
benefits. In addition, all Store Managers and DC Advisors received emergency time off benefits. We felt it was
imperative to act swiftly in support of our AutoZoners on the front lines. We provided them with two additional
weeks of time off, including for the first time in our history, providing part-timers with paid time off up to 40 hours.
This benefit was added back for purposes of calculating the EICP attainment. The 2020 incentive awards for each
NEO were based on the following performance:
EICP Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual (as adjusted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBIT Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
($MMs)
2,235.3
2,489.9
254.6
11.4%
ROIC
34.3 %
38.8 %
4.50 %
EBIT
Accordingly, the incentive payout for fiscal year 2020, before adjusting for the individual performance
component, was 179.6%.
Effect of Performance on Total Annual Cash Compensation. Because AutoZone emphasizes pay for
performance, it is only when the Company exceeds its target objectives that an executive’s total annual cash
compensation begins to climb relative to the median market level.
Stock compensation. To emphasize achievement of long-term stockholder value, AutoZone’s senior executives
receive a significant portion of their targeted total compensation in the form of non-qualified stock options. Stock
Options are granted with an exercise price equal to the closing stock price on the grant date, typically vest 25%
annually on October 1 of each of the four fiscal years following the fiscal year in which the grant is made and have a
maximum term of ten (10) years and one (1) day. We believe that meeting our long-term strategic goals will
increase our stock price.
Although stock options have potential worth at the time they are granted, they only confer actual value if
AutoZone’s stock price appreciates between the grant date and the exercise date. For this reason, we believe stock
options are a highly effective long-term compensation vehicle to reward executives for creating stockholder value.
We want our executives to realize total compensation levels well above the market norm, because when they do,
such success is the result of achievement of Company financial and operating objectives that leads to growth in the
per-share value of AutoZone common stock.
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AutoZone grants stock options annually, typically made near the beginning of the fiscal year and makes a
limited number of promotional or new hire grants during the fiscal year. Currently, the annual grants are reviewed
and approved by the Compensation Committee in the meeting (typically in late September or early October) at
which it reviews prior year results, determines incentive payouts, and takes other compensation actions affecting its
executive officers. The Compensation Committee has not delegated its authority to grant stock options; all grants are
directly approved by the Compensation Committee. Option grant amounts for the Chief Executive Officer’s direct
reports and other senior executives are recommended to the Compensation Committee by the Chief Executive
Officer, based on individual performance and the size and scope of the position held.
Newly promoted or hired officers may receive an option or restricted stock grant shortly after their hire or
promotion. New hire or promotional grants are individually approved at a regularly scheduled meeting of the
Compensation Committee, or via a special called meeting, or by unanimous written consent of the Compensation
Committee. The grants are recommended to the Compensation Committee by the Chief Executive Officer based on
individual circumstances (e.g., what may be required in order to attract a new executive). Internal promotional
grants are prorated based on the time elapsed since the officer received a regular annual grant of stock options or
restricted stock.
Stock purchase plans. AutoZone maintains the Seventh Amended and Restated AutoZone, Inc. Employee
Stock Purchase Plan (“Employee Stock Purchase Plan”) which enables all employees to purchase AutoZone
common stock at a discount, subject to IRS-determined limitations. Based on IRS rules, we limit the annual
purchases in the Employee Stock Purchase Plan to no more than $15,000, and no more than 10% of eligible
compensation. To support and encourage stock ownership by our executives, AutoZone also established a non-
qualified stock purchase plan. The AutoZone, Inc. Sixth Amended and Restated Executive Stock Purchase Plan
(“Executive Stock Purchase Plan”) permits participants to acquire AutoZone common stock in excess of the
purchase limits contained in AutoZone’s Employee Stock Purchase Plan. Because the Executive Stock Purchase
Plan is not required to comply with the requirements of Section 423 of the Internal Revenue Code of 1986, as
amended, or any successor statute thereto and the regulations thereunder (the “Internal Revenue Code”), it has a
higher limit on the percentage of a participant’s compensation that may be used to purchase shares (25%) and places
no dollar limit on the amount of a participant’s compensation that may be used to purchase shares under the plan.
The Executive Stock Purchase Plan operates in a similar manner to the tax-qualified Employee Stock Purchase
Plan, in that it allows executives to contribute after-tax compensation for use in making quarterly purchases of
AutoZone common stock. Options are granted under the Executive Stock Purchase Plan each calendar quarter and
consist of two parts: a restricted share option and an unvested share option. Shares are purchased under the restricted
share option at 100% of the closing price of AutoZone stock at the end of the calendar quarter (i.e., not at a
discount), and a number of shares are issued under the unvested share option at no cost to the executive, so that the
total number of shares acquired upon exercise of both options is equivalent to the number of shares that could have
been purchased with the contributions at a price equal to 85% of the stock price at the end of the quarter. The
unvested shares are subject to forfeiture if the executive does not remain with the company for one year after the
grant date. After one year, the shares vest, and the executive owes taxes based on the share price on the vesting date
(unless a so-called 83(b) election was made on the date of grant).
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The table below can be used to compare and contrast the stock purchase plans. For more information about our
stock-based plans, including the Executive Stock Purchase Plan, see Grants of Plan-Based Awards Table on
page 42.
Contributions
Discount
Vesting
Company Aircraft
Employee Stock Purchase Plan
Executive Stock Purchase Plan
After tax, limited to lower of 10%
of eligible compensation or
$15,000
15% discount based on lowest
price at beginning or end of the
quarter
None (one-year holding period
only)
After tax, limited to 25% of
eligible compensation
15% discount based on quarter-end
price
Shares granted to represent 15%
discount vest after one year; one-
year holding period for shares
purchased at fair market value
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Senior Executives may periodically use AutoZone’s private aircraft for personal travel pursuant to an
agreement with the Company. Under the agreement, the Company must be reimbursed for the direct, incremental
cost to the Company arising from the personal use of the aircraft. These expenses include the cost of fuel, aircraft
maintenance plan costs related to the trip, ramp fees, pilot expenses (if contract pilots are used on the trip), any
special insurance for the trip, and other smaller direct costs to the Company. All of the fixed costs related to the use
of the private aircraft, such as regular insurance premiums, hangar fees, depreciation and subscription costs, are paid
by the Company, and reimbursement is not required for such costs.
Oversight of the Compensation Program
The Company’s executive compensation program is administered and overseen by the Compensation
Committee with assistance from the CEO, the Senior Vice President, Human Resources and other senior leaders, as
appropriate. The Compensation Committee in fiscal year 2020 selected and retained an independent compensation
consultant, Pearl Meyer, who reports directly to the Compensation Committee to assist it in the performance of its
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duties. The following table identifies the roles and responsibilities of the Compensation Committee and management
in the oversight of the Company’s executive compensation program:
Compensation Committee
Management
• Sets policies and gives direction to management on
all aspects of the executive compensation program
• Based upon performance, evaluates, determines and
approves compensation (salary, bonus and equity
awards) for each executive officer
• Determines the terms and conditions of equity
incentive awards for all award recipients
• Reviews succession planning to mitigate the risk of
executive departure and to help ensure individual
development and bench-strength through different
tiers of Company leadership
• Evaluates and considers regulatory and legal
perspectives on compensation matters, rating
agency opinions on executive pay and published
investor compensation policies and position
parameters.
• Coordinates with the other committees of the Board
to identify, evaluate and address potential
compensation risks, where they exist
• Analyzes competitive information supplied by the
independent compensation consultant and others in
light of the Company’s financial and operational
circumstances
• Evaluates market data for each executive position
within the context of:
• Importance of each role to the Company’s
business model;
• The Company’s organizational structure;
• Expected contribution of each executive in light
of the responsibilities inherent in his or her
position
• The risks inherent in the annual operating plan
• Considers how other factors may affect pay
decision-making, such as the Company’s annual
operating plan, targeted earnings, internal pay
equity, overall financial performance and the
Company’s ability to absorb increases in
compensation costs
• Uses the data and analysis referenced above to
formulate recommendations for the Compensation
Committee’s review and consideration
Most of the year’s significant compensation decisions (those pertaining to the setting of base salaries, bonus
targets and equity award percentages) are typically made at the meetings of the Compensation Committee and Board
that follow the end of the prior fiscal year. In reaching its decisions regarding pay levels, the Compensation
Committee does not aim to mirror any other company’s compensation levels or practices. Nonetheless, the
Compensation Committee does consider other companies’ practices that might be pertinent to a company with
similar margins and to the fact that we operate in multiple geographic locations with differing regulatory obligations
and market considerations.
The Compensation Committee selects and engages a compensation consulting firm and authorizes its work.
Reports and advice from the consultant may be requested by and are shared between the Compensation Committee,
the Board, and management. In June 2020, the Compensation Committee evaluated Pearl Meyer’s independence
using the factors set forth in NYSE Rule 303A.05(c) and confirmed Pearl Meyer’s independence.
The Chief Executive Officer attends most meetings of the Compensation Committee and participates in the
process by answering Compensation Committee questions about pay philosophy and by ensuring that the
Compensation Committee’s requests for information are fulfilled. He also assists the Compensation Committee in
determining the compensation of the executive officers by providing recommendations and input about such matters
as individual performance, tenure, and size, scope and complexity of their positions. The Chief Executive Officer
makes specific recommendations to the Compensation Committee concerning the compensation of his direct reports
and other senior executives, including the executive officers. These recommendations usually relate to base salary
increases, changes to annual incentive targets and stock option grants. The Chief Executive Officer also
recommends pay packages for newly hired executives. Management provides the Compensation Committee with
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data, analyses and perspectives on market trends and annually prepares information to assist the Compensation
Committee in its consideration of such recommendations. Annual incentive awards are based on achievement of
business objectives set by the Compensation Committee, but the Compensation Committee may exercise negative
discretion, and if it does so, it is typically in reliance on the Chief Executive Officer’s assessment of an individual’s
performance.
The Chief Executive Officer is not a party to the deliberations of the Compensation Committee regarding his
own compensation. The Senior Vice President, Human Resources has direct discussions with the Compensation
Committee Chair regarding the Compensation Committee’s recommendations on the Chief Executive Officer’s
compensation. The Compensation Committee also receives input from the independent consultant regarding Chief
Executive Officer compensation.
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Chief Executive Officer. The Compensation Committee establishes the compensation level for the Chief
Executive Officer, including base salary, annual cash incentive compensation, and stock-based awards. The Chief
Executive Officer’s compensation is reviewed annually by the Compensation Committee in conjunction with a
review of his individual performance by the non-management directors, taking into account all forms of
compensation, including base salary, annual cash incentive, stock options and other stock-based awards, and the
value of other benefits received.
Other Executive Officers. The Compensation Committee reviews and approves base salaries for AutoZone’s
executive officers (other than the Chief Executive Officer) based on each executive officer’s individual performance
during the past fiscal year and on the recommendations of the Chief Executive Officer. The Compensation
Committee approves the annual cash incentive amounts for the executive officers, which are determined by
objectives approved by the Compensation Committee at the beginning of each fiscal year as discussed above. The
actual incentive amount paid depends on their annual performance.
The Compensation Committee approves stock-based compensation to many levels of management, including
executive officers. Stock options are granted to executive officers upon initial hire or promotion, and thereafter are
typically granted annually in accordance with guidelines established by the Compensation Committee as discussed
above. The actual grant is determined by the Compensation Committee based on the guidelines and the performance
of the individual in the position. The Compensation Committee considers the recommendations of the Chief
Executive Officer. Other than grants of stock made pursuant to the stock purchase plans discussed above, from time
to time the Compensation Committee has sole authority to approve any other individual awards of stock-based
compensation for executive officers.
Management Stock Ownership Requirement. To further reinforce AutoZone’s objective of driving long-term
stockholder results, AutoZone maintains a stock ownership requirement for all Executive Committee members.
Covered executives must attain a specified minimum level of stock ownership, based on a multiple of their base
salary, within 5 years of the executive’s placement into a covered position. Executives who are promoted into a
position with a higher multiple will have an additional 3 years to attain the increased required ownership level. In
order to calculate whether each executive meets the ownership requirement, we total the value of each executive’s
holdings of whole shares of stock, and sixty percent of the intrinsic (or “in-the-money”) value of vested stock
options, based on the fiscal year-end closing price of AutoZone stock, and compare that value to the appropriate
multiple of fiscal year-end base salary. Without giving effect to recently hired executives who are permitted 5 years
to comply with stock ownership guidelines, the average EC multiple of base compensation is 27 and all EC
members are in compliance with stock ownership requirements.
To encourage full participation in our equity plans, all AutoZone stock acquired under those plans is included
in the executive’s holdings for purposes of calculating his or her ownership. This includes vested stock options and
vested shares which have restrictions on sale.
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Key features of the stock ownership requirement are summarized in the table below:
Ownership Requirement
Holding Requirements
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Ownership Definition
7 times base salary
• Chief Executive Officer
• Executive Vice President
• Senior Vice President
• Individuals who have not achieved the ownership requirement within the specified
period will be required to hold 50% of net after-tax shares upon exercise of any
stock option and may not sell any shares of AZO.
3 times base salary
2 times base salary
• Guidelines will no longer apply after an executive reaches age 62, in order to
facilitate appropriate financial planning as potential retirement approaches. The
Compensation Committee may waive the guidelines for any other executive at its
discretion.
• Shares of stock directly owned;
• Indirectly held shares reportable as beneficial holdings;
• Unvested Shares acquired via the Executive Stock Purchase Plan; and
• 60% of vested stock options (based on the “after tax in-the-money” value).
AutoZone has adopted comprehensive and detailed policies that regulate trading in our securities by our
officers, directors and employees, including blackout periods when trading in our securities is not permitted.
AutoZone’s officers, directors, and employees are strictly prohibited from hedging our securities. Directors, NEOs
and other senior executives are strictly prohibited from pledging our securities as collateral.
Incentive Compensation Recovery Policy. AutoZone maintains an incentive compensation recovery, or
“clawback”, policy. The purpose of the policy is to enable AutoZone’s Board, at its discretion, to recover excess
incentive compensation in the event that the Company is required to prepare an accounting restatement to correct an
error that is material to previously issued financial statements. “Excess” compensation is generally the amount of
performance-based compensation paid above what would have been received had the statements in question been
accurate. The Company will revise and administer this policy in compliance with the Dodd-Frank Act provisions,
once the rules implementing those provisions become effective.
Benchmarking
AutoZone reviews publicly-available data from a peer group of companies to help us ensure that our overall
compensation remains competitive. The peer group data we use is from proxy filings and other published
sources – it is not prepared or compiled especially for AutoZone. AutoZone does not engage in strict benchmarking
of compensation levels, i.e., we do not use specific data to support precise targeting of compensation, such as setting
an executive’s base pay at the 50th percentile of an identified group of companies.
We periodically review the appropriateness of this peer group. It typically has changed when such events as
acquisitions and spin-offs have occurred, and in the event a member company experiences significant performance
challenges. The criteria used to select the peer group companies include:
• Direct competitors;
• Companies with which we compete for talent, customers and capital; and
• Companies with key financial measures within a reasonable range compared to those same measures for
AutoZone (e.g., revenues between 50% and 200% of AutoZone’s).
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Advance Auto Parts
Bed Bath & Beyond
Darden Restaurants
Dick’s Sporting Goods
Dollar General
Dollar Tree
Foot Locker
AutoZone FY2020 Peer Group
Gamestop
Gap Stores
Genuine Parts
L Brands
LKQ Corporation
O’Reilly Automotive
Ross Stores
Sherwin Williams
Starbucks
Tractor Supply Company
W.W. Grainger
Yum! Brands
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AutoZone reviews peer group compensation data as a point of reference but we do not use information from the
peer group or other published sources to set precise compensation targets or make individual compensation
decisions. We use such data as context in reviewing AutoZone’s overall compensation levels and approving
recommendations. Broad survey data and peer group information are just two elements that we find useful in
maintaining a reasonable and competitive compensation program. Other elements that we consider are individual
performance, Company performance, individual tenure, position tenure, and succession planning.
During fiscal 2020, recognizing the continued growth of the Company, the Compensation Committee reviewed
the peer group for fiscal 2021 compensation programs, and upon the recommendation of management and Pearl
Meyer, made the following changes for fiscal year 2021
Deleted:
Bed, Bath & Beyond
Gamestop
Starbucks
Added:
Ulta Beauty
FY21 AutoZone Peer Group
Advance Auto Parts
Darden Restaurants
Dick’s Sporting Goods
Dollar General
Dollar Tree
Foot Locker
Gap Stores
Genuine Parts
L Brands
LKQ Corporation
O’Reilly Automotive
Ross Stores
Sherwin Williams
Tractor Supply Company
Ulta Beauty
W.W. Grainger
Yum! Brands
Our new peer group reflects a median market capitalization of $11.5 billion and corporate revenue of $12.6
billion each as of March 2020.
Taxation of Compensation
Prior to the Tax Cuts and Jobs Act (“Tax Reform”) that was signed into law December 22, 2017, the
Compensation Committee considered the provisions of Section 162(m) of the Internal Revenue Code which allowed
the Company to take an income tax deduction for compensation up to $1 million and for certain compensation
exceeding $1 million paid in any taxable year to a “covered employee” as that term is defined in the Code. There
was an exception for qualified performance-based compensation, and AutoZone’s compensation program was
designed to maximize the tax deductibility of compensation paid to executive officers, where possible. The Tax
Reform includes substantial changes to Section 162(m), which generally eliminate tax deductions for any
compensation in excess of $1 million paid to covered employees.
43
Section 409A of the Internal Revenue Code was created with the passage of the American Jobs Creation Act of
2004. These tax regulations create strict rules related to non-qualified deferred compensation earned and vested on
or after January 1, 2005. The Internal Revenue Service periodically releases Notices and other guidance related to
Section 409A, and AutoZone continues to take actions necessary to comply with the Section’s requirements by the
deadlines established by the Internal Revenue Service.
P
r
o
x
y
Compensation Committee Report
The Compensation Committee of the Board (the “Committee”) has reviewed and discussed with management
the Compensation Discussion and Analysis (“CD&A”). Based on the review and discussions, the Committee
recommended to the Board of Directors that the CD&A be included in this proxy statement.
Members of the Compensation Committee:
George R. Mrkonic, Jr. (Chair)
Douglas H. Brooks
Linda A. Goodspeed
Gale V. King
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed solely of independent, non-employee directors. None of the
members of the Compensation Committee (i) was an officer or employee of the Company at any time during or prior
to fiscal 2020 or (ii) is or was a participant in a “related person” transaction with the Company since the beginning
of fiscal 2020. No executive officer of the Company served on the compensation committee or board of any
company that employed any member of the Compensation Committee or Board.
Compensation Program Risk Assessment
AutoZone’s management conducts periodic assessments of the compensation plans and programs that apply
throughout the Company, including those plans and programs in which our executives participate. The assessments
are performed by key members of AutoZone’s human resources, finance, operations, and legal teams, and entails
thorough discussions of each plan’s or program’s design and operation. Significant findings are reviewed by senior
management prior to being reviewed and discussed with the Compensation Committee.
Plan elements which are reviewed include participants, performance measures, performance and payout curves
or formulas, how target level performance is determined (including whether any thresholds and caps exist), how
frequently payouts occur, and the mix of fixed and variable compensation which the plan delivers. The plans and
programs are also reviewed from the standpoint of reasonableness (e.g., how target and above-target pay levels
compare to similar plans for similar populations at other companies, and how payout amounts relate to the results
which generate the payment), how well the plans and programs are aligned with AutoZone’s goals and objectives,
and from an overall standpoint, whether these plans and programs represent an appropriate mix of short- and long-
term compensation.
The purpose of these reviews is to determine whether the risks related to the design and operation of these
plans and programs, if present, are reasonably likely to have a material adverse effect on the Company. We believe
that our compensation plans, policies and practices do not encourage excessive risk-taking and are not reasonably
likely to have a material adverse effect on the Company. The various mitigating factors which support this
conclusion include:
• Oversight of the management incentive plan and all stock-based compensation by the Compensation
Committee of the Board;
44
• Senior management oversight of key plans and programs, including approving target level payouts, setting
financial and operating goals, and approving payouts;
• Administration and oversight of plans and programs by multiple functions within the Company (e.g.,
finance, operations, legal and human resources);
• Existence of an incentive compensation recovery (“clawback”) policy;
• Interrelationship between measures (e.g., correlation between economic profit performance and appreciation
in the per-share price of AutoZone’s stock);
• Vesting and stock ownership requirements for executive officers which encourage long-term perspectives
among participants; and
• A preference for performance measures which result in payments only upon achievement of ultimate
financial results.
SUMMARY COMPENSATION TABLE
This table shows the compensation paid to the NEOs during the 2020, 2019 and 2018 fiscal years.
P
r
o
x
y
Stock
Option
Non-Equity
Incentive Plan
All Other
Bonus Awards Awards Compensation Compensation
Year
Name and Principal Position
William C. Rhodes III . . . . . . . . . . 2020
Chairman, President & . . . . . . . 2019
Chief Executive Officer . . . . . . . 2018
William T. Giles . . . . . . . . . . . . . . 2020
CFO/Executive Vice President, . 2019
Finance & IT . . . . . . . . . . . . . . . 2018
Thomas B. Newbern . . . . . . . . . . . 2020
Executive Vice President, . . . . . . 2019
Store Operations, Commercial, . 2018
Loss Prevention & ALLDATA
Mark A. Finestone . . . . . . . . . . . . . 2020
Executive Vice President, . . . . . . 2019
Merchandising, Supply Chain, . 2018
Marketing and eCommerce
Salary
($)(1)
1,050,000
1,062,500
1,000,000
678,538
674,711
641,923
576,154
562,058
528,962
($)(2)
—
—
—
—
—
—
—
—
—
($) (3)(4)
89,399
90,187
89,621
28,321
28,230
26,717
—
—
—
($) (4)
7,269,523
5,888,287
1,735,439
2,031,501
1,822,036
1,259,639
2,246,944
1,733,156
1,068,741
568,538
562,058
528,962
—
—
—
28,321
24,352
13,663
1,925,763
1,733,156
1,068,741
($) (5)
2,941,849
1,401,417
1,250,000
1,096,790
513,422
481,443
776,080
513,229
396,722
765,823
427,698
396,722
($) (6)
180,590
175,171
145,559
125,013
103,223
98,400
68,750
56,137
56,346
Total
($)
11,531,361
8,617,562
4,220,619
3,960,163
3,141,622
2,508,122
3,667,928
2,864,580
2,050,771
108,687
109,267
90,291
3,397,132
2,856,531
2,098,379
Philip B. Daniele . . . . . . . . . . . . . . 2020
383,615
—
4,250
1,749,973
413,385
47,107
2,598,330
Senior Vice President,
Commercial
(1) Fiscal year 2019 was a 53 - week fiscal year, so the 2019 salary and bonus amounts reflect an extra week of pay.
(2) Annual incentive awards were paid pursuant to the EICP and therefore appear in the “non-equity incentive plan
compensation” column of the table.
(3) Represents shares acquired pursuant to the Executive Stock Purchase Plan. See “Compensation Discussion and
Analysis” on page 30 for more information about the Executive Stock Purchase Plan. See Note B, Share-Based
Payments, to our consolidated financial statements in our 2020 Annual Report for a description of the Executive
Stock Purchase Plan and the accounting and assumptions used in calculating expenses in accordance with
FASB ASC Topic 718.
(4) The value of stock awards and option awards was determined as required by FASB ASC Topic 718. There is no
assurance that these values will be realized. See Note B, Share-Based Payments, to our consolidated financial
statements in our 2020 Annual Report for details on assumptions used in the valuation.
45
(5) Incentive amounts were earned for the 2020 fiscal year pursuant to the EICP and were paid in October 2020.
See “Compensation Discussion and Analysis” on page 30 for more information about this plan. Messrs Rhodes
and Giles received an individual rating of “Exceeds Expectations” based on their individual achievement of
performance goals established at the beginning of the fiscal year. This rating resulted in their bonus being
increased by 20%.
(6) All Other Compensation includes the following:
P
r
o
x
y
Name
William C. Rhodes III . . . . . . . . . . . . . . . . 2020
William T. Giles . . . . . . . . . . . . . . . . . . . . . 2020
Thomas B. Newbern . . . . . . . . . . . . . . . . . 2020
Mark A. Finestone . . . . . . . . . . . . . . . . . . . 2020
Philip B. Daniele . . . . . . . . . . . . . . . . . . . . . 2020
Perquisites and
Personal
Benefits
($)(A)
Life
ups
($)(C)
Company
Contributions
to Defined
Tax Gross- Contribution Insurance
Premiums
Plans
($)
($)(D)
3,253
99,072
1,571
48,004
1,425
43,610
1,311
40,133
658
27,062
56,989 (B) 21,276
57,233 (B) 18,205
14,833
8,882
9,817
57,426 (B)
2,622
16,765
(A) Perquisites and personal benefits for all NEOs include matching charitable contributions under the
AutoZone Matching Gift Program, Company-provided home security system and/or monitoring services,
airline club memberships and status upgrades, Company-paid spouse business-related travel, and
Company-paid long-term disability insurance premiums.
(B) The perquisites or personal benefits which exceeded the greater of $25,000 or 10% of the total amount of
perquisites and personal benefits for an executive officer, consisted of matching charitable contributions
made under the AutoZone Matching Gift program, under which executives may contribute to qualified
charitable organizations and AutoZone provides a matching contribution to the charities in an equal
amount, up to $50,000 in the aggregate for each executive officer annually, are as follows:
Name
William C. Rhodes III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
William T. Giles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mark A. Finestone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 ($)
50,000
50,000
50,000
(C) Represents amounts related to imputed earnings on taxable life insurance or Company-paid spouse
business-related travel.
(D) Represents employer contributions to the AutoZone, Inc. 401(k) Plan and the AutoZone, Inc. Executive
Deferred Compensation Plan.
46
GRANTS OF PLAN-BASED AWARDS
The following table sets forth information regarding plan-based awards granted to the Company’s NEOs during
the 2020 fiscal year.
Name
William C. Rhodes III . . . . . . .
Equity Plans Threshold
Grant Date
Estimated Future Payments
Under Non-equity Incentive
Plans (1)
Target
($)
1,365,000
Maximum
($)
N/A
($)
682,500
All other All other
Stock
Option
Number of Number of
shares of
securities
Stock or underlying
Awards: Awards: Exercise
or base
price of
option
awards
($)
options
(#) (3)
Units
(#) (2)
10/7/2019
9/30/2019
12/31/2019
3/31/2020
6/30/2020
William T. Giles . . . . . . . . . . .
254,452
508,904
N/A
10/7/2019
9/30/2019
12/31/2019
3/31/2020
6/30/2020
Thomas B. Newbern . . . . . . . .
216,058
432,116
N/A
10/7/2019
Mark A. Finestone . . . . . . . . .
213,202
426,404
N/A
10/7/2019
9/30/2019
12/31/2019
3/31/2020
6/30/2020
Philip B. Daniele . . . . . . . . . . .
115,085
230,169
N/A
10/7/2019
9/30/2019
12/31/2019
3/31/2020
6/30/2020
27,500
1,060.81
7,685
1,060.81
8,500
1,060.81
7,285
1,060.81
6,620
1,060.81
10
47
12
11
6
6
8
7
6
6
8
7
1
1
1
1
P
r
o
x
y
Grant
date fair
value of
stock and
option
awards
($)
7,269,523
10,846
55,992
10,152
12,409
7,358,922
2,031,501
6,508
7,148
6,768
7,897
2,059,822
2,246,944
2,246,944
1,925,763
6,508
7,148
6,768
7,897
1,954,084
1,749,973
1,085
1,191
846
1,128
1,754,223
(1) Represents potential threshold, target and maximum incentive compensation for the 2020 fiscal year under the
EICP based on each officer’s salary on the date the 2020 fiscal year targets were approved. The amounts
actually paid for the 2020 fiscal year are described in the “Non-Equity Incentive Plan Compensation” column in
the Summary Compensation Table. The “threshold” is the minimum payment level under the EICP which is
50% of the target amount. There is no overall percentage maximum; however, awards paid to any individual
pursuant to the EICP may not exceed $4 million. See “Compensation Discussion and Analysis” at page 30 and
the discussion following this table for more information on the EICP.
(2) Represents shares awarded pursuant to the Executive Stock Purchase Plan. See “Compensation Discussion and
Analysis” at page 30 and the discussion following this table for more information on the Executive Stock
Purchase Plan.
(3) Represents options awarded pursuant to the Amended 2011 Equity Plan. See “Compensation Discussion and
Analysis” at page 30 and the discussion following this table for more information on equity plans.
47
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information regarding outstanding stock option awards under the Amended 2011
Equity Plan, the 2011 Equity Plan, other outstanding equity awards under the Amended 2011 Equity Plan and the
2011 Equity Plan, and unvested shares under the Executive Stock Purchase Plan for the Company’s NEOs as of
August 29, 2020:
Option Awards
P
r
o
x
y
Name
William C. Rhodes III . . . . . . . . . . . . . . .
Number of securities
underlying unexercised options
(1)
Grant Date Exercisable Unexercisable
9/27/2012
10/1/2013
9/23/2014
10/6/2015
10/7/2015
9/23/2016
9/26/2017
9/25/2018
10/7/2019
9/30/2019
12/31/2019
3/31/2020
6/30/2020
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . .
William T. Giles . . . . . . . . . . . . . . . . . . .
9/27/2012
10/1/2013
9/23/2014
10/6/2015
9/23/2016
9/26/2017
9/25/2018
10/7/2019
9/30/2019
12/31/2019
3/31/2020
6/30/2020
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas B. Newbern . . . . . . . . . . . . . . . .
9/23/2014
10/6/2015
9/23/2016
9/26/2017
9/25/2018
10/7/2019
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mark A. Finestone . . . . . . . . . . . . . . . . . .
10/1/2013
9/23/2014
10/6/2015
9/23/2016
9/26/2017
9/25/2018
10/7/2019
9/30/2019
12/31/2019
3/31/2020
6/30/2020
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philip B. Daniele . . . . . . . . . . . . . . . . . . .
9/27/2012
10/1/2013
9/23/2014
10/6/2015
11/1/2015
9/23/2016
9/26/2017
9/25/2018
10/7/2019
9/30/2019
12/31/2019
3/31/2020
6/30/2020
22,500
19,200
17,400
7,850
25,000
5,062
6,000
6,625
—
109,637
13,600
11,600
10,600
10,600
6,840
4,354
2,050
—
59,644
1,975
11,000
5,805
3,694
1,950
—
24,424
8,700
7,900
11,000
5,805
3,694
1,950
—
39,049
740
3,060
2,360
2,100
4,320
4,642
2,954
1,362
—
Option
Exercise
Price
371.47
— $
425.11
— $
507.79
— $
744.62
— $
736.00
25,000 (4) $
744.85
1,688 $
587.13
6,000 $
19,875 $
772.80
27,500 $ 1,060.81
Option
Expiration Date
9/28/2022
10/2/2023
9/24/2024
10/7/2025
10/8/2025
9/24/2026
9/27/2027
9/26/2028
10/8/2020
80,063
371.47
— $
425.11
— $
507.79
— $
744.62
— $
744.85
2,280 $
587.13
4,356 $
6,150 $
772.80
7,685 $ 1,060.81
20,471
507.79
— $
744.62
— $
744.85
1,935 $
587.13
3,696 $
5,850 $
772.80
8,500 $ 1,060.81
19,981
— $
425.11
507.79
— $
744.62
— $
744.85
1,935 $
587.13
3,696 $
5,850 $
772.80
7,285 $ 1,060.81
18,766
371.47
$
425.11
— $
507.79
— $
— $
744.62
784.41
— $
744.85
1,548 $
587.13
2,956 $
4,088 $
772.80
6,620 $ 1,060.81
9/28/2022
10/2/2023
9/24/2024
10/7/2025
9/24/2026
9/27/2027
9/26/2028
10/8/2020
9/24/2024
10/7/2025
9/24/2026
9/27/2027
9/26/2028
10/8/2020
10/2/2023
9/24/2024
10/7/2025
9/24/2026
9/27/2027
9/26/2028
10/8/2020
9/28/2022
10/2/2023
9/24/2024
10/7/2025
11/2/2025
9/24/2026
9/27/2027
9/26/2028
10/8/2020
Number of
shares of
Market
value of
stock that Shares of stock
have not
vested (2) not vested (3)
that have
10 $
47 $
12 $
11 $
80 $
11,891
55,889
14,269
13,080
95,130
6 $
6 $
8 $
7 $
27 $
7,135
7,135
9,513
8,324
32,106
6 $
6 $
8 $
7 $
27 $
7,135
7,135
9,513
8,324
32,106
1 $
1 $
1 $
1 $
4 $
1,189
1,189
1,189
1,189
4,756
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,538
15,212
(1) Unless indicated otherwise, stock options vest annually in one-fourth increments over a four-year period.
48
(2) Represents shares acquired pursuant to unvested shares granted under the Executive Stock Purchase Plan. Such
shares vest on the first anniversary of the date the option was exercised under the plan and will vest
immediately upon a participant’s termination of employment without cause or the participant’s death or
disability.
(3) Based on the closing price of AutoZone common stock on August 29, 2020 ($1,189.12 per share).
(4) Represents a one-time grant of non-qualified stock options pursuant to the 2011 Equity Plan. Fifty percent
(50%) of the shares vested on the fourth anniversary of the grant, and the other fifty percent (50%) vest on the
fifth anniversary of the grant.
P
r
o
x
y
49
P
r
o
x
y
OPTION EXERCISES AND STOCK VESTED
The following table sets forth information regarding stock option exercises and vested stock awards for the
Company’s NEOs during the fiscal year ended August 29, 2020:
Option Awards
Stock Awards
Name
William C. Rhodes III. . . . . . . . . . . . . . . . . . . . . . . . . . .
William T. Giles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas B. Newbern . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mark A. Finestone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philip B. Daniele . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number
of shares
acquired
on exercise
(#)
Number
Value
realized
on exercise
($) (1)
of shares Value
realized
on vesting on vesting
acquired
(#) (2)
($) (3)
20,800 19,044,840
12,125 10,886,303
8,217,010
10,650
—
—
—
—
103 116,222
33,067
—
27,644
4,250
31
—
26
4
(1) If the shares were sold immediately upon exercise, the value realized on exercise of the option is the difference
between the actual sales price and the exercise price of the option. Otherwise, the value realized is the
difference between the closing price of AutoZone common stock on the New York Stock Exchange on the date
of exercise and the exercise price of the option.
(2) Represents shares acquired pursuant to the Executive Stock Purchase Plan. See “Compensation Discussion and
Analysis” on page 30 for more information about this plan.
(3) Based on the closing price of AutoZone common stock on the vesting date.
NONQUALIFIED DEFERRED COMPENSATION
The following table sets forth information regarding nonqualified deferred compensation for the Company’s
NEOs as of and for the year ended August 29, 2020.
Executive
Contributions Contributions Earnings in withdrawals /
distributions
Aggregate Aggregate
Registrant
Name
William C. Rhodes III. . . . . . . . .
William T. Giles . . . . . . . . . . . . . .
Thomas B. Newbern . . . . . . . . . .
Mark A. Finestone . . . . . . . . . . . .
Philip B. Daniele . . . . . . . . . . . . .
in Last FY
($) (1)
574,897
191,107
215,359
122,536
66,536
Last FY
($) (3)
in Last FY
($) (2)
87,664 3,191,354
228,301
36,547
153,660
32,110
383,092
28,633
25,635
15,435
Aggregate
Balance at
Last FYE
($)
($)
— 18,344,113
1,642,567
2,168,967
2,026,694
347,657
(149,265)
(6,296)
—
—
(1) Represents contributions by the NEOs under the AutoZone, Inc. Executive Deferred Compensation Plan (the
“EDCP”). Such contributions are included under the appropriate “Salary” and “Non-Equity Incentive Plan
Compensation” columns for the NEOs in the Summary Compensation Table.
(2) Represents matching contributions by the Company under the EDCP. Such contributions are included under the
“All Other Compensation” column for the NEOs in the Summary Compensation Table.
(3) Represents the difference between the aggregate balance at end of fiscal 2020 and the end of fiscal 2019,
excluding (i) contributions made by the executive officer and the Company during fiscal 2020 and (ii) any
withdrawals or distributions during fiscal 2020. None of the earnings in this column were included in the
Summary Compensation Table because they were not preferential or above market.
50
Officers of the Company with the title of vice president or higher based in the United States are eligible to
participate in the EDCP after their first year of employment with the Company. As of August 29, 2020, there were
54 such officers of the Company. The EDCP is a nonqualified plan that allows officers to make a pretax deferral of
base salary and bonus compensation. Officers may defer up to 25% of base salary and up to 75% of bonus
compensation. The Company match is calculated based on 100% of the first 3% of deferred compensation and 50%
of the next 2% deferred, less the maximum value of the Company match available generally to participants in
AutoZone’s 401(k) Plan. Participants may select among various mutual funds in which to invest their deferral
accounts. Participants may elect to receive distribution of their deferral accounts at retirement or starting in a
specific future year of choice before or after anticipated retirement (but not later than the year in which the
participant reaches age 75). If a participant’s employment with AutoZone terminates other than by retirement or
death, the account balance will be paid in a lump sum payment six months after termination of employment. There
are provisions in the EDCP for withdrawal of all or part of the deferral account balance in the event of an extreme
and unforeseen financial hardship.
P
r
o
x
y
51
P
r
o
x
y
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Our NEOs may receive certain benefits if their employment terminates under specified circumstances. These
benefits derive from Company policies, plans, agreements and arrangements described below.
Agreement with Mr. Rhodes
In 2008, Mr. Rhodes and AutoZone entered into an agreement (the “Agreement”) providing that if Mr. Rhodes’
employment is terminated by the Company without cause, he will receive severance benefits consisting of an
amount equal to 2.99 times his then-current base salary, a lump sum prorated share of any unpaid annual bonus
incentive for periods during which he was employed, and AutoZone will pay the cost of COBRA premiums to
continue his medical, dental and vision insurance benefits for up to 18 months to the extent such premiums exceed
the amount Mr. Rhodes had been paying for such coverage during his employment. The Agreement further provides
that Mr. Rhodes will not compete with AutoZone or solicit its employees for a three-year period after his
employment with AutoZone terminates.
Executive Officer Agreements (Messrs. Giles, Finestone, Newbern, and Daniele)
AutoZone’s executive officers who do not have written employment agreements, including Messrs. Giles,
Finestone, Newbern and Daniele, have entered into agreements (“Severance and Non-Compete Agreements”) with
the Company providing that if their employment is involuntarily terminated without cause, and if they sign an
agreement waiving certain legal rights, they will receive severance benefits in the form of salary continuation for a
period of time ranging from 12 to 24 months, depending on their length of service at the time of termination. The
aforementioned executives all have greater than 5 years of service.
Years of Service
Less than 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 months
2 – less than 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 months
5 or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 months
Severance
Period
The executives will also receive a lump sum prorated share of their annual bonus incentive when such
incentives are paid to similarly-situated executives. Medical, dental and vision insurance benefits generally continue
through the severance period up to a maximum of 18 months, with the Company paying the cost of COBRA
premiums to the extent such premiums exceed the amount the executive had been paying for such coverage. An
appropriate level of outplacement services may be provided based on individual circumstances.
The Severance and Non-Compete Agreement further provides that the executive will not compete with
AutoZone or solicit its employees for a two-year period after his or her employment with AutoZone terminates.
Equity Plans
All outstanding, unvested stock options, including those held by the NEOs, will vest immediately upon the
option holder’s death pursuant to the terms of the stock option agreements.
Unvested shares under our Executive Stock Purchase Plan, which normally are subject to forfeiture if a
participant’s employment terminates prior to the first anniversary of their acquisition, will vest immediately if the
termination is by reason of the participant’s death, disability, termination by the Company without cause, or
retirement on or after the participant’s normal retirement date. The plan defines “disability,” “cause,” and “normal
retirement date.”
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Life Insurance
AutoZone provides all salaried employees in active full-time employment in the United States a company-paid
life insurance benefit in the amount of two times annual earnings. “Annual earnings” exclude stock compensation
and gains realized from stock option exercises but include salary and incentive compensation received. Additionally,
salaried employees are eligible to purchase additional life insurance subject to insurability above certain amounts.
The maximum benefit of the company-paid and the additional coverage combined is $5,000,000. All the NEOs are
eligible for this benefit.
Disability Insurance
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All full-time officers at the level of vice president and above are eligible to participate in two executive long-
term disability plans, until age 65. Accordingly, AutoZone purchases individual disability policies for its executive
officers that pay 70% of the first $7,143 of insurable monthly earnings in the event of disability. Additionally, the
executive officers are eligible to receive an executive long-term disability plan benefit in the amount of 70% of the
next $35,714 of insurable monthly earnings to a maximum benefit of $25,000 per month. AutoZone purchases
insurance to cover this plan benefit. These two benefits combined provide a maximum benefit of $30,000 per month.
The benefit payment for these plans may be reduced by deductible sources of income and disability earnings.
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The following table shows the amounts that the NEOs would have received if their employment had been
terminated under specified circumstances on August 29, 2020. This table does not include amounts related to the
NEOs’ vested benefits under our deferred compensation and pension plans or pursuant to stock option awards, all of
which are described in the tables above.
Name
William C. Rhodes, III (1)
Voluntary Involuntary
or For Cause Termination
Termination Not For Cause
($)
($)
Change in
Control
($)
Disability
($)
Death
($)
Normal
Retirement
($)
Severance Pay . . . . . . . . . . . . . . . . . . . . . . .
Annual Incentive . . . . . . . . . . . . . . . . . . . .
Benefits Continuation . . . . . . . . . . . . . . . . .
Unvested Stock Options . . . . . . . . . . . . . . .
Unvested Stock Awards . . . . . . . . . . . . . . .
Disability Benefits . . . . . . . . . . . . . . . . . . .
Life Insurance Benefits . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
William T. Giles (2)
Severance Pay . . . . . . . . . . . . . . . . . . . . . . .
Annual Incentive . . . . . . . . . . . . . . . . . . . .
Benefits Continuation . . . . . . . . . . . . . . . . .
Unvested Stock Options . . . . . . . . . . . . . . .
Unvested Stock Awards . . . . . . . . . . . . . . .
Disability Benefits . . . . . . . . . . . . . . . . . . .
Life Insurance Benefits . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas B. Newbern (2)
Severance Pay . . . . . . . . . . . . . . . . . . . . . . .
Annual Incentive . . . . . . . . . . . . . . . . . . . .
Benefits Continuation . . . . . . . . . . . . . . . . .
Unvested Stock Options . . . . . . . . . . . . . . .
Disability Benefits . . . . . . . . . . . . . . . . . . .
Life Insurance Benefits . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mark A. Finestone (2)
Severance Pay . . . . . . . . . . . . . . . . . . . . . . .
Annual Incentive . . . . . . . . . . . . . . . . . . . .
Benefits Continuation . . . . . . . . . . . . . . . . .
Unvested Stock Options . . . . . . . . . . . . . . .
Unvested Stock Awards . . . . . . . . . . . . . . .
Disability Benefits . . . . . . . . . . . . . . . . . . .
Life Insurance Benefits . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philip B. Daniele (2)
Severance Pay . . . . . . . . . . . . . . . . . . . . . . .
Annual Incentive . . . . . . . . . . . . . . . . . . . .
Benefits Continuation . . . . . . . . . . . . . . . . .
Unvested Stock Options . . . . . . . . . . . . . . .
Unvested Stock Awards . . . . . . . . . . . . . . .
Disability Benefits . . . . . . . . . . . . . . . . . . .
Life Insurance Benefits . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,139,500
2,941,849
31,099
—
95,130
—
—
6,207,578
1,357,076
1,096,790
29,293
—
32,106
—
—
2,515,265
1,152,308
776,080
33,597
—
—
—
1,961,985
1,137,076
765,823
19,608
—
32,106
—
—
1,954,613
767,230
413,385
18,162
4,756
1,203,533
—
—
—
—
2,941,849 2,941,849
— 2,941,849
—
—
—
3,966
—
— 27,492,753
—
—
95,130
—
95,130
—
—
— 3,480,000
—
—
4,944,000
—
— 6,516,979 35,477,698 2,941,849
—
—
—
—
— 1,096,790
1,096,790 1,096,790
—
—
—
—
—
—
—
32,106
—
— 1,440,000
—
—
—
—
— 2,568,896 10,702,179 1,096,790
3,649
7,181,634
32,106
—
2,388,000
—
—
776,080
—
—
—
—
—
— 2,490,000
—
—
— 3,266,080
—
—
765,823
—
—
—
—
—
—
32,106
— 1,950,000
—
—
— 2,747,929
—
—
413,385
—
—
—
—
—
—
4,756
— 4,860,000
—
—
— 5,278,141
—
776,080
3,649
6,610,724
—
2,166,000
9,556,453
—
765,823
1,896
6,454,828
32,106
—
1,992,000
9,246,653
—
413,385
3,966
5,018,541
4,756
—
1,000,000
6,440,648
—
776,080
—
—
—
—
776,080
—
765,823
—
—
—
—
—
765,823
—
413,385
—
—
—
—
—
413,385
(1) Severance Pay, Annual Incentive and Benefits Continuation amounts shown under the “Involuntary
Termination Not for Cause” column reflect the terms of Mr. Rhodes’ Agreement described above. Unvested
stock options are those outstanding, unvested stock options which will vest immediately upon the option
holder’s death. Unvested stock awards are shares under the Executive Stock Purchase Plan, which vest upon
involuntary termination not for cause, disability, or death. Annual Incentive is shown at actual annual incentive
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amount for the 2020 fiscal year; it would be prorated if the triggering event occurred other than on the last day
of the fiscal year. Disability Benefits are benefits under a Company-paid individual long-term disability
insurance policy. Life Insurance Benefits are benefits under a Company-paid life insurance policy.
(2) Severance Pay, Annual Incentive and Benefits Continuation amounts shown under the “Involuntary
Termination Not for Cause” column reflect payments to Mr. Giles, Mr. Finestone, Mr. Newbern and
Mr. Daniele under the Severance and Non-Compete Agreements described above. Annual Incentive is shown at
actual annual incentive amount for the 2020 fiscal year; it would be prorated if the triggering event occurred
other than on the last day of the fiscal year. Benefits Continuation refers to medical, dental and vision benefits.
Unvested stock options are those outstanding, unvested stock options which will vest immediately upon the
option holder’s death. Unvested stock awards are share options under the Executive Stock Purchase Plan, which
vest upon involuntary termination not for cause, disability, or death. Disability Benefits are benefits under
Company-paid individual long-term disability insurance policy. Life Insurance Benefits are benefits under a
Company-paid life insurance policy.
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Ratio of the Annual Total Compensation of the Median-Paid Employee to the CEO
Pursuant to Item 402(u) of Regulation S-K, we have conducted an analysis of our global employee population
in order to estimate and disclose the total compensation paid to our median paid employee, not including our CEO,
as well as the ratio of the total compensation paid to said median employee as compared to the total compensation
paid to our CEO. The analysis, which is described below, yielded the following results:
Total compensation for the median employee
for fiscal 2020 (not including the CEO): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
26,759
Total compensation for the CEO* : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,531,361
Resulting CEO-to-median employee pay ratio: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
431:1
* See Summary Compensation Table for details
Measurement date. We identified the median employee from our population as of June 30, 2020.
Compensation measure. The regulations require us to use a “consistently applied compensation measure”, or
CACM, to identify the median employee. Based on an analysis of the AutoZone workforce, we determined that
fixed or guaranteed compensation, including overtime and earnings for paid time off, plus variable compensation
(e.g., bonus or commission pay) closely approximate the annual total direct compensation of our employees. We
converted the earnings paid in local (non-U.S.) currency to U.S. dollars using published exchange rates as of
June 30, 2020. We did not apply pay adjustments allowed by the rules in order to ensure a conservative estimate
(i.e., it is unlikely that the estimate could have been higher than that calculated).
Excluded population. We excluded from the analysis AutoZone employees in Brazil, Canada, China, Germany
and the United Kingdom, pursuant to the de minimus exemption under the rules. The 571 employees in these
locations represent less than 5% of the total employee population of 96,690 as of June 30, 2020.
Related Party Transactions
Our Board has adopted a Related Person Transaction Policy (the “Policy”) which requires the Audit Committee
of the Board to review and approve or ratify all Related Person Transactions. The Audit Committee is to consider all
of the available relevant facts and circumstances of each transaction, including but not limited to the benefits to the
Company; the impact on a director’s independence in the event the Related Person is a director, an immediate family
member of a director or an entity in which a director is a partner, shareholder or executive officer; the availability of
other sources for comparable products or services; the terms of the transaction; and the terms available to unrelated
third parties generally. Related Person Transactions must also comply with the policies and procedures specified in
our Code of Conduct and Corporate Governance Principles, as described below.
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The Policy also requires disclosure of all Related Person Transactions that are required to be disclosed in
AutoZone’s filings with the Securities and Exchange Commission, in accordance with all applicable legal and
regulatory requirements.
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A “Related Person Transaction” is defined in the Policy as a transaction, arrangement or relationship (or any
series of similar transactions, arrangements or relationships) that occurred since the beginning of the Company’s
most recent fiscal year in which the Company (including any of its subsidiaries) was, is or will be a participant and
the amount involved exceeds $120,000 and in which any Related Person had, has or will have a direct or indirect
material interest. “Related Persons” include a director or executive officer of the Company, a nominee to become a
director of the Company, any person known to be the beneficial owner of more than 5% of any class of the
Company’s voting securities, any immediate family member of any of the foregoing persons, and any firm,
corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in a
similar position or in which such person has a 5% or greater beneficial ownership interest.
Our Board has adopted a Code of Conduct (the “Code of Conduct”) that applies to the Company’s directors,
officers and employees. The Code of Conduct prohibits directors and executive officers from engaging in activities
that create conflicts of interest, taking corporate opportunities for personal use or competing with the Company,
among other things. Our Board has also adopted a Code of Ethical Conduct for Financial Executives (the “Financial
Code of Conduct”) that applies to the Company’s officers and employees who hold the position of principal
executive officer, principal financial officer, principal accounting officer or controller as well as to the Company’s
officers and employees who perform similar functions (“Financial Executives”). The Financial Code of Conduct
requires the Financial Executives to, among other things, report any actual or apparent conflicts of interest between
personal or professional relationships involving the Company’s management or any other Company employee with
a role in financial reporting disclosures or internal controls. Additionally, our Corporate Governance Principles
require each director who is faced with an issue that presents, or may give the appearance of presenting, a conflict of
interest to disclose that fact to the Chairman of the Board and the Secretary, and to refrain from participating in
discussions or votes on such issue unless a majority of the Board determines, after consultation with counsel, that no
conflict of interest exists as to such matter.
We have concluded there are no material Related Party Transactions or agreements that were entered into
during the fiscal year ended August 29, 2020, and through the date of this proxy statement requiring disclosure
under these policies.
Equity Compensation Plans
The following table sets forth certain information as of August 29, 2020, with respect to compensation plans
under which shares of AutoZone common stock may be issued.
Plan Category
Equity compensation plans approved
by security holders (1) . . . . . . . . . . . . . . .
Equity compensation plans not
approved by security holders (2) . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of securities to
be issued upon exercise Weighted-average
of outstanding
options, warrants
and rights
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected
in the first column)
1,379,461 $
677.17
725,895
438
1,379,899 $
74.21
676.98
—
725,895
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(1) Consists of the Amended 2011 Equity Plan, the Employee Stock Purchase Plan, the Executive Stock
Purchase Plan and the 2003 Director Compensation Plan. Column (a) consists of shares of common stock
issuable upon exercise of outstanding options and upon vesting and payment of outstanding restricted stock
units, stock appreciation rights and deferred shares under each of the foregoing plans. Restricted stock units
and deferred shares are settled for shares of common stock on a one-for-one basis and have no exercise
price. Accordingly, they have been excluded for purposes of computing the weighted-average exercise
price in column (b). Column (c) consists of shares available for issuance pursuant to the Amended 2011
Equity Plan, the Employee Stock Purchase Plan and the Executive Stock Purchase Plan. As described
above, following the stockholder approval of the AutoZone, Inc. 2020 Omnibus Incentive Award Plan, no
further grants may be made under Amended 2011 Equity Plan.
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(2) Consists of the AutoZone, Inc. Second Amended and Restated Director Compensation Plan, which was
approved by the Board but was not submitted for approval by the stockholders as then permitted under the
rules of the New York Stock Exchange. This plan was terminated in December 2002. Any outstanding
awards consist of stock appreciation rights that may be converted into shares immediately upon termination
as a director.
Delinquent Section 16(a) Reports
Securities laws require our executive officers, directors, and beneficial owners of more than ten percent of our
common stock to file insider trading reports (Forms 3, 4, and 5) with the Securities and Exchange Commission and
the New York Stock Exchange relating to the number of shares of common stock that they own, and any changes in
their ownership. To our knowledge, based solely on our records and certain written representations received from
our executive officers and directors, during the fiscal year ended August 29, 2020, all persons related to AutoZone
that are required to file these insider trading reports have filed them in a timely manner, except for a Form 4 filed on
June 1, 2020 for each of Kristen C. Wright and Mitch Major relating to two and four transactions, respectively, each
dated May 27, 2020, and a Form 5 filed on October 21, 2020, for William C. Rhodes, III, relating to two
transactions dated June 12, 2020 arising out of the settlement of an estate. Copies of the insider trading reports can
be found on the AutoZone corporate website at Investors.AutoZone.com.
STOCKHOLDER PROPOSALS FOR 2021 ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement for the Annual Meeting in 2021 must be received
by June 28, 2021. In accordance with our By-Laws, stockholder proposals received after August 18, 2021, but
before September 17, 2021, may be presented at the Annual Meeting, but will not be included in the Proxy
Statement. Any stockholder proposal received on or after September 17, 2021, will not be eligible to be presented
for a vote to the stockholders in accordance with our By-Laws. Any proposals must be mailed to AutoZone, Inc.,
Attention: Secretary, Post Office Box 2198, Dept. 8074, Memphis, Tennessee 38101 - 2198.
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A copy of our Annual Report is being mailed with this Proxy Statement to all stockholders of record.
ANNUAL REPORT
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Memphis, Tennessee
October 26, 2020
By order of the Board of Directors,
/s/ Kristen C. Wright
Kristen C. Wright
Secretary
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AUTOZONE, INC.
2020 OMNIBUS INCENTIVE AWARD PLAN
ARTICLE 1.
PURPOSE
APPENDIX A
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The purpose of the AutoZone, Inc. 2020 Omnibus Incentive Award Plan (as may be amended from time to
time, the “Plan”) is to promote the success and enhance the value of AutoZone, Inc., a Nevada corporation, (the
“Company”) by linking the individual interests of the members of the Board and Employees to those of the Company’s
stockholders and by providing such individuals with an incentive for outstanding performance to generate superior
returns to the Company’s stockholders. The Plan is further intended to provide flexibility to the Company in its ability
to motivate, attract, and retain the services of members of the Board and Employees upon whose judgment, interest,
and special effort the successful conduct of the Company’s operation is largely dependent.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the
context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1
“Administrator” shall mean the entity that conducts the general administration of the Plan as
provided in Article 12 hereof. With reference to the duties of the Committee under the Plan which have been delegated
to one or more persons pursuant to Section 12.6 hereof, or which the Board has assumed, the term “Administrator”
shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has
terminated the assumption of such duties.
2.2
“Affiliate” shall mean any Parent or Subsidiary.
2.3
“Applicable Accounting Standards” shall mean Generally Accepted Accounting Principles in the
United States, International Financial Reporting Standards or such other accounting principles or standards as may
apply to the Company’s financial statements under United States federal securities laws from time to time.
2.4
“Award” shall mean an Option, a Restricted Stock award, a Restricted Stock Unit award, a
Dividend Equivalent award, a Deferred Stock award, a Stock Payment award, a Stock Appreciation Right, an Other
Incentive Award, Cash-Based Award, or a Performance-Based Award, which may be awarded or granted under the
Plan.
2.5
“Award Agreement” shall mean any written notice, agreement, contract or other instrument or
document evidencing an Award, including through electronic medium, which shall contain such terms and conditions
with respect to an Award as the Administrator shall determine, consistent with the Plan.
2.6
2.7
payment.
“Board” shall mean the Board of Directors of the Company.
“Cash-Based Award” means an award entitling the recipient to receive a cash-denominated
2.8
“Cause” means, unless otherwise defined in an applicable Award Agreement or other contractual
agreement between the Participant and the Company, the willful engagement by Participant in conduct which is
demonstrably or materially injurious to the Company, monetarily or otherwise. For this purpose, no act or failure to
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act by the Participant shall be considered “willful” unless done, or omitted to be done, by the Participant not in good
faith and without reasonable belief that his action or omission was in the best interest of the Company.
2.9
“Change in Control” shall mean the occurrence of any of the following events:
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(a)
The consummation of a reorganization, merger, consolidation, or other business
combination pursuant to which the holders of the Company’s outstanding voting power and outstanding stock
immediately prior to such transaction do not (either directly or indirectly) own a majority of the outstanding voting
power and outstanding stock or other equity interests of the resulting or successor entity (or its ultimate parent, if
applicable) immediately upon completion of such transaction;
the Company in complete liquidation or dissolution of the Company;
(b)
The sale, transfer, exchange or other disposition of all or substantially all of the assets of
(c)
During any period of twelve (12) months, individuals who at the beginning of such period
constituted the Board (together with any new directors whose election by such Board or whose nomination for election
by the shareholders of the Company was approved by a vote of a majority of the directors of the Company, then still
in office, who were either directors on the Effective Date or whose election or nomination for election was previously
so approved, excluding any new directors if such individual’s election or appointment to the Board occurs as a result
of an actual or threatened election contest as described in Rule 14a-12(c) of the Exchange Act with respect to the
election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board) cease for any reason to constitute a majority of the Board then in office; or
(d)
Any “person” (as such term is used in Section 13(d) and 14(d) of the Exchange Act) shall
have acquired or obtained “beneficial ownership” (as determined for purposes of Rule 13d-3 of the Exchange Act),
directly or indirectly, of securities of the Company representing more than twenty five percent (25%) of the total
voting power represented by the Company’s then-outstanding voting securities.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award
which provides for the deferral of compensation that is subject to Section 409A of the Code, to the extent required to
avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in
subsection (a), (b) or (c) with respect to such Award shall only constitute a Change in Control for purposes of the
payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury
Regulation §1.409A-3(i)(5).
Consistent with the terms of this Section 2.9, the Administrator shall have full and final authority to determine
conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, the date of
the occurrence of such Change in Control and any incidental matters relating thereto. A transaction the principal
purpose of which is to change the state in which the Company is incorporated, form a holding company or effect a
similar reorganization as to form whereupon this Plan and all Awards are assumed by the successor entity shall not be
deemed to be a Change in Control.
2.10
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together
with the regulations and official guidance promulgated thereunder, whether issued prior or subsequent to the grant of
any Award.
2.11
“Committee” shall mean the Compensation Committee of the Board, or another committee or
subcommittee of the Board described in Article 12 hereof.
2.12
“Common Stock” shall mean the common stock of the Company, par value $0.01 per share.
2.13
“Company” shall mean AutoZone, Inc., a Nevada corporation.
2.14
“Deferred Stock” shall mean a right to receive Shares awarded under Section 9.3 hereof.
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2.15
“Director” shall mean a member of the Board, as constituted from time to time.
2.16
“Disability” means, unless otherwise defined in an applicable Award Agreement or other
contractual agreement between the Participant and the Company, a determination by the Company that the Participant
is “totally disabled,” within its meaning in the Company’s long term disability plan as in effect from time to time.
2.17
“Dividend Equivalent” shall mean a right to receive the equivalent value (in cash or Shares) of
dividends paid on Shares, awarded under Section 9.1 hereof.
2.18
“DRO” shall mean a “domestic relations order” as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.
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2.19
“Effective Date” shall mean the date the Plan is approved by the Company’s stockholders.
Notwithstanding the forgoing, the Prior Plan shall remain in effect on its existing terms unless and until the Plan is
approved by the Company’s stockholders.
2.20
“Eligible Individual” shall mean any person who is an Employee or a Non-Employee Director, as
determined by the Administrator.
2.21
“Employee” shall mean any officer or other employee (as determined in accordance with Section
3401(c) of the Code) of the Company or of any Affiliate.
2.22
“Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its
stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large,
nonrecurring cash dividend, that affects the number or kind of shares of Common Stock (or other securities of the
Company) or the share price of Common Stock (or other securities) and causes a change in the per share value of the
Common Stock underlying outstanding Awards.
2.23
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
2.24
“Fair Market Value” shall mean, as of any given date, the value of a Share determined as follows:
(a)
If the Common Stock is (i) listed on any established securities exchange (such as the New
York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) listed on any
national market system or (iii) listed, quoted or traded on any automated quotation system, its Fair Market Value shall
be the closing sales price for a share of Common Stock as quoted on such exchange or system for such date or, if there
is no closing sales price for a share of Common Stock on the date in question, the closing sales price for a share of
Common Stock on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(b)
If the Common Stock is not listed on an established securities exchange, national market
system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer,
its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid
and low asked prices for a share of Common Stock on such date, the high bid and low asked prices for a share of
Common Stock on the last preceding date for which such information exists, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable; or
(c)
If the Common Stock is neither listed on an established securities exchange, national
market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market
Value shall be established by the Administrator in good faith in a manner that is consistent with applicable tax and
accounting rules.
2.25
“Full Value Award” shall mean any Award other than (i) an Option, (ii) a Stock Appreciation
Right, (iii) a Cash-Based Award or (iv) any other Award for which a Participant pays the intrinsic value existing as of
the date of grant (whether directly or by forgoing a right to receive a payment from the Company or any Affiliate).
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2.26
“Good Reason” means, unless otherwise defined in an applicable Award Agreement or other
contractual agreement between the Participant and the Company, (i) a material diminution in the Participant’s base
salary except for across-the-board salary reductions similarly affecting all or substantially all similarly situated
employees of the Company, (ii) a material diminution in the Participant’s duties and responsibilities, or (iii) a change
of more than 50 miles in the geographic location at which the Participant provides services to the Company, so long
as the Participant provides at least 90 days’ notice to the Company following the initial occurrence of any such event
and the Company fails to cure such event within 30 days thereafter.
2.27
“Greater Than 10% Stockholder” shall mean an individual then-owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company
or any “parent corporation” or “subsidiary corporation” (as defined in Sections 424(e) and 424(f) of the Code,
respectively).
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2.28
“Incentive Stock Option” shall mean an Option that is intended to qualify as an incentive stock
option and conforms to the applicable provisions of Section 422 of the Code.
2.29
“Non-Employee Director” shall mean a Director of the Company who is not an Employee.
2.30
“Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option or
which is designated as an Incentive Stock Option but does not meet the applicable requirements of Section 422 of the
Code.
2.31
“Option” shall mean a right to purchase Shares at a specified exercise price, granted under Article
6 hereof. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however,
that Options granted to Non-Employee Directors shall only be Non-Qualified Stock Options.
2.32
“Other Incentive Award” shall mean an Award denominated in, linked to or derived from Shares
or value metrics related to Shares, granted pursuant to Section 9.6 hereof.
2.33
“Parent” shall mean any entity (other than the Company), whether domestic or foreign, in an
unbroken chain of entities ending with the Company if each of the entities other than the Company beneficially owns,
at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined
voting power of all classes of securities or interests in one of the other entities in such chain.
2.34
“Participant” shall mean a person who has been granted an Award.
2.35
“Performance-Based Awards” shall have the meaning assigned to in Section 5.1.
2.36
“Performance Criteria” means the performance objective or objectives established pursuant to this
Plan for Participants who have received grants of Performance-Based Awards. The potential Performance Criteria
that may be used for Awards under this Plan may be any objective, metric, or goal established by the Committee. If
the Committee determines that a change in the business, operations, corporate structure or capital structure of the
Company, the manner in which it conducts its business, the economy or any other events or circumstances deemed
relevant by the Committee render the Performance Criteria unsuitable, including but not limited to force majeure
events such as Acts of God, acts of terrorism, natural disasters, epidemics or pandemics, the Committee may in its
discretion modify such Performance Criteria or the acceptable levels of achievement, in whole or in part, as the
Committee deems appropriate and equitable.
2.37
“Performance Period” shall mean one or more periods of time, which may be of varying and
overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Criteria
will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance-Based
Award.
“Permitted Transferee” shall mean, with respect to a Participant, any “family member” of the
Participant, as defined under the instructions to use of the Form S-8 Registration Statement under the Securities Act,
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or any other transferee specifically approved by the Administrator after taking into account any state, federal, local or
foreign tax and securities laws applicable to transferable Awards. In addition, the Administrator, in its sole discretion,
may determine to permit a Participant to transfer Incentive Stock Options to a trust that constitutes a Permitted
Transferee if, under Section 671 of the Code and applicable state law, the Participant is considered the sole beneficial
owner of the Incentive Stock Option while it is held in the trust.
2.39
“Plan” shall mean this AutoZone, Inc. 2020 Omnibus Incentive Award Plan, as it may be amended
from time to time.
2.40
“Prior Plan” shall mean the Amended and Restated AutoZone, Inc. 2011 Equity Incentive Award
Plan, as may be amended from time to time.
2.41
“Program” shall mean any program adopted by the Administrator pursuant to the Plan containing
the terms and conditions intended to govern a specified type of Award granted under the Plan and pursuant to which
such type of Award may be granted under the Plan.
2.42
“Restricted Stock” shall mean Common Stock awarded under the Plan hereof that is subject to
certain restrictions and may be subject to risk of forfeiture or repurchase.
2.43
“Restricted Stock Unit” shall mean a contractual right awarded under the Plan to receive in the
future a Share or the cash value of a Share.
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2.44
“Securities Act” shall mean the Securities Act of 1933, as amended.
2.45
“Share Limit” shall have the meaning provided in Section 3.1(a) hereof.
2.46
“Shares” shall mean shares of Common Stock.
2.47
“Stock Appreciation Right” or “SAR” shall mean a stock appreciation right granted under the
2.48
“Stock Payment” shall mean a payment in the form of Shares awarded under Section 9.2 hereof.
2.49
“Stockholder Approval Date” shall mean the date on which the Company’s stockholders approve
Plan.
the Plan.
2.50
“Subsidiary” shall mean any entity (other than the Company), whether domestic or foreign, in an
unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken
chain beneficially owns, at the time of the determination, securities or interests representing more than fifty percent
(50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such
chain.
2.51
“Substitute Award” shall mean an Award granted under the Plan in connection with a corporate
transaction, such as a merger, combination, consolidation or acquisition of property or stock, in any case, upon the
assumption of, or in substitution for, an outstanding equity award previously granted by a company or other entity;
provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in
connection with the cancellation and repricing of an Option or Stock Appreciation Right.
2.52
“Termination of Service” shall mean
(a)
As to a Non-Employee Director, the time when a Participant who is a Non-Employee
Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to
be elected, death or retirement, but excluding terminations where the Participant simultaneously commences or
remains in employment or service with the Company or any Affiliate.
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(b)
As to an Employee, the time when the employee-employer relationship between a
Participant and the Company and its Affiliates is terminated for any reason, including, without limitation, a termination
by resignation, discharge, death, disability or retirement; but excluding terminations where the Participant
simultaneously commences or remains in employment or service with the Company or any Affiliate.
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The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to
Terminations of Service, including, without limitation, the question of whether a Termination of Service has occurred,
whether any Termination of Service resulted from a discharge for Cause and all questions of whether particular leaves
of absence constitute a Termination of Service; provided, however, that, with respect to Incentive Stock Options,
unless the Administrator otherwise provides in the terms of any Program, Award Agreement or otherwise, a leave of
absence or change in the employee-employer relationship shall constitute a Termination of Service only if, and to the
extent that, such leave of absence or change in status interrupts employment for the purposes of Section 422(a)(2) of
the Code. For purposes of the Plan, a Participant’s employee-employer relationship shall be deemed to be terminated
in the event that the Affiliate employing or contracting with such Participant ceases to remain an Affiliate following
any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off).
ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1
Number of Shares. Subject to Sections 3, 13.1 and 13.2 hereof, the aggregate number of Shares
which may be issued or transferred pursuant to Awards under the Plan shall be equal to 1,400,000 (the “Share Limit”).
Following the Effective Date, no further grants shall be made under the Prior Plan. Any awards under the Prior Plan
shall continue to be subject to the terms and conditions of the Prior Plan. The number of Shares subject to the Share
Limit is the limit on Shares that may be issued as Incentive Stock Options. Notwithstanding the foregoing, to the
extent permitted under applicable law and applicable stock exchange rules, Awards that provide for the delivery of
Shares subsequent to the applicable grant date may be granted in excess of the Share Limit if such Awards provide
for the forfeiture or cash settlement of such Awards to the extent that insufficient Shares remain under the Share Limit
at the time that Shares would otherwise be issued in respect of such Award.
The Share Limit shall be reduced by two (2) Shares for each Share delivered in settlement
of an Award that is a Full Value Award and by one (1) Share for each Share delivered in settlement of an that is not a
Full Value Award.
(a)
(b)
Awards under the Plan that expire unexercised or are forfeited, settled for cash, canceled
or otherwise terminated without the delivery of Shares (in each case in whole or in part), shall immediately become
available for new Awards to the extent of such cancellation, forfeiture, expiration, termination or cash settlement. Any
Share that again becomes available for grant pursuant to the preceding sentence shall be added back as one (1) Share
if such Share was subject to an Option or SAR, and as two (2) Shares if such Share was subject to the grant of a Full
Value Award.
(c)
Notwithstanding anything to the contrary contained herein, the following Shares shall not
be added to the Share Limit: (i) Shares tendered by a Participant or withheld by the Company in payment of the
exercise price of an Option; (ii) Shares tendered by a Participant or withheld by the Company to satisfy any tax
withholding obligation with respect to an Award; (iii) Shares subject to a Stock Appreciation Right that are not issued
in connection with the stock settlement of the Stock Appreciation Right on exercise thereof; and (iv) Shares purchased
on the open market with the cash proceeds from the exercise of Options. Any Shares repurchased by the Company
under Section 8.4 at the same price paid by the Participant so that such shares are returned to the Company will again
be available for Awards. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards
shall not be counted against the shares available for issuance under the Plan. Notwithstanding the provisions of this
Section 3.1(c), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock
Option to fail to qualify as an incentive stock option under Section 422 of the Code.
Substitute Awards shall not reduce the Shares authorized for grant under the Plan.
Additionally, in the event that a company acquired by the Company or any Affiliate or with which the Company or
(d)
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any Affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in
contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-
existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or
formula used in such acquisition or combination to determine the consideration payable to the holders of common
stock of the entities party to such acquisition or combination) may be used for Awards under the Plan in the Board’s
discretion at the time of such acquisition or combination and shall not reduce the Shares authorized for grant under
the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants
could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only
be made to individuals who were not employed by or providing services to the Company or its Affiliates immediately
prior to such acquisition or combination.
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Stock Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part,
of authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market.
3.2
ARTICLE 4.
GRANTING OF AWARDS
4.1
Participation. The Administrator may, from time to time, select from among all Eligible
Individuals, those to whom one or more Awards shall be granted and shall determine the nature and amount of each
Award, which shall not be inconsistent with the requirements of the Plan. No Eligible Individual shall have any right
to be granted an Award pursuant to the Plan.
4.2
Award Agreement. Each Award shall be evidenced by an Award Agreement stating the terms
and conditions applicable to such Award, consistent with the requirements of the Plan and any applicable Program.
4.3
Limitations Applicable to Section 16 Persons. Notwithstanding anything contained herein to the
contrary, with respect to any Award granted or awarded to any individual who is then subject to Section 16 of the
Exchange Act, the Plan, any applicable Program and the applicable Award Agreement shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule
16b - 3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive
rule, and such additional limitations shall be deemed to be incorporated by reference into such Award to the extent
permitted by applicable law.
4.4
At-Will Service. Nothing in the Plan or in any Program or Award Agreement hereunder shall
confer upon any Participant any right to continue as an Employee or a Director of the Company or any Affiliate, or
shall interfere with or restrict in any way the rights of the Company and any Affiliate, which rights are hereby expressly
reserved, to discharge any Participant at any time for any reason whatsoever, with or without Cause, and with or
without notice, or to terminate or change all other terms and conditions of service or engagement, except to the extent
expressly provided otherwise in a written agreement between the Participant and the Company or any Affiliate.
4.5
Foreign Participants. Notwithstanding any provision of the Plan to the contrary, in order to
comply with the laws in other countries in which the Company and its Affiliates operate or have Employees or Non-
Employee Directors, or in order to comply with the requirements of any foreign securities exchange, the Administrator,
in its sole discretion, shall have the power and authority to: (a) determine which Affiliates shall be covered by the
Plan; (b) determine which Eligible Individuals outside the United States are eligible to participate in the Plan;
(c) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply
with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans
and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or
advisable (any such subplans and/or modifications shall be attached to the Plan as appendices); provided, however,
that no such subplans and/or modifications shall increase the Share Limit; and (e) take any action, before or after an
Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory
exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the
foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate
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the Code, the Exchange Act, the Securities Act, the rules of the securities exchange or automated quotation system on
which the Shares are listed, quoted or traded or any other applicable law.
4.6
Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the sole
discretion of the Administrator, be granted either alone, in addition to, or in tandem with, any other Award granted
pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same
time as or at a different time from the grant of such other Awards.
4.7
Maximum Awards to Non-Employee Directors. Notwithstanding anything to the contrary in this
Plan, the value of all Awards awarded under this Plan and all other cash compensation paid by the Company to any
Non-Employee Director in any calendar year shall not exceed $750,000. For the purpose of this limitation, the value
of any Award shall be its grant date fair value, as determined in accordance with ASC 718 or successor provision but
excluding the impact of estimated forfeitures related to service-based vesting provisions. The Board may make
exceptions to the applicable limit in this Section 4.7 for individual Non-Employee Directors in extraordinary
circumstances, such as where any such individual Non-Employee Directors are serving on a special litigation or
transactions committee of the Board, as the Board may determine in its discretion, provided that the Non-Employee
Director receiving such additional compensation may not participate in the decision to award such compensation
involving such Non-Employee Director.
ARTICLE 5.
GRANTING OF PERFORMANCE-BASED AWARDS
5.1
Granting of Performance-Based Awards to Eligible Individuals. The Committee, in its sole
discretion, may make Awards which are denominated in Shares or cash subject to Performance Criteria (such grants,
“Performance-Based Awards”). Such Performance-Based Awards shall be in such form, and dependent on such
conditions, as the Committee shall determine, including, without limitation, the right to receive, or vest with respect
to, one or more Shares or the cash value of the Award upon the completion of a specified period of service, the
occurrence of an event and/or the attainment of Performance Criteria. Performance-Based Awards may be granted
alone or in addition to any other grants granted under the Plan. A Participant’s Performance-Based Award shall be
determined based on the attainment of Performance Criteria approved by the Committee for a Performance Period
established by the Committee while the outcome for that Performance Period is substantially uncertain.
5.2
Applicability. The grant of an Award to an Eligible Individual for a particular Performance Period
shall not require the grant of an Award to such Eligible Individual in any subsequent Performance Period and the grant
of an Award to any one Eligible Individual shall not require the grant of an Award to any other Eligible Individual in
such period or in any other period.
5.3
Payment of Performance-Based Awards. Unless otherwise provided herein or in the applicable
Program or Award Agreement, the holder of a Performance-Based Award must be employed by the Company or an
Affiliate throughout the applicable Performance Period. The Committee shall determine whether, with respect to a
Performance Period, the applicable Performance Criteria have been met with respect to a given Participant. The
amount of the Performance-Based Award determined by the Committee for a Performance Period shall be paid to the
Participant at such time as determined by the Committee in its sole discretion after the end of such Performance Period;
provided, however, that a Participant may, if and to the extent permitted by the Committee and consistent with the
provisions of Section 409A of the Code, to the extent applicable, elect to defer payment of a Performance-Based
Award.
ARTICLE 6.
GRANTING OF OPTIONS
6.1
Granting of Options to Eligible Individuals. The Administrator is authorized to grant Options to
Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine which
shall not be inconsistent with the Plan.
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6.2
Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted to any
person who is not an Employee of the Company or any “parent corporation” or “subsidiary corporation” of the
Company (as defined in Sections 424(e) and 424(f) of the Code, respectively). No person who qualifies as a Greater
Than 10% Stockholder may be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under the Plan may be modified
by the Administrator, with the consent of the Participant, to disqualify such Option from treatment as an “incentive
stock option” under Section 422 of the Code. To the extent that the aggregate fair market value of stock with respect
to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by a Participant during any calendar year under the Plan and all
other plans of the Company and any Affiliate corporation thereof exceeds $100,000, the Options shall be treated as
Non-Qualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options and other “incentive stock options” into account in the order in which they
were granted and the Fair Market Value of stock shall be determined as of the time the respective options were granted.
In addition, to the extent that any Options otherwise fail to qualify as Incentive Stock Options, such Options shall be
treated as Nonqualified Stock Options.
6.3
Option Exercise Price. Except as provided in Section 6.6 hereof, the exercise price per Share
subject to each Option shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value of
a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options
granted to a Greater Than 10% Stockholder, such price shall not be less than 110% of the Fair Market Value of a
Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of
Section 424(h) of the Code).
6.4
Option Term. The term of each Option shall be set by the Administrator in its sole discretion;
provided, however, that the term (a) with respect to Incentive Stock Options shall not be more than ten (10) years from
the date of grant, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10%
Stockholder and (b) with respect to Non-Qualified Stock Options shall not be more than ten (10) years from the date
of grant. The Administrator shall determine the time period, including the time period following a Termination of
Service, during which the Participant has the right to exercise vested Options, which time period may not extend
beyond the stated term of the Option. Except as limited by the requirements of Section 409A or Section 422 of the
Code, the Administrator may extend the term of any outstanding Option, and may extend the time period during which
vested Options may be exercised, in connection with any Termination of Service of the Participant, and, subject to
Section 13.1 hereof, may amend any other term or condition of such Option relating to such a Termination of Service.
6.5
Option Vesting.
(a)
The terms and conditions pursuant to which an Option vests in the Participant and becomes
exercisable shall be determined by the Administrator and set forth in the applicable Award Agreement. Such vesting
may be based on service with the Company or any Affiliate, any of the Performance Criteria, or any other criteria
selected by the Administrator. At any time after grant of an Option, the Administrator may, in its sole discretion and
subject to whatever terms and conditions it selects, accelerate the vesting of the Option.
No portion of an Option which is unexercisable at a Participant’s Termination of Service
shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in a Program,
the applicable Award Agreement or by action of the Administrator following the grant of the Option.
(b)
6.6
Substitute Awards. Notwithstanding the foregoing provisions of this Article 6 to the contrary, in
the case of an Option that is a Substitute Award, the price per share of the shares subject to such Option may be less
than the Fair Market Value per share on the date of grant, provided, however, that the excess of: (a) the aggregate Fair
Market Value (as of the date such Substitute Award is granted) of the Shares subject to the Substitute Award, over
(b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate Fair Market Value (as of the
time immediately preceding the transaction giving rise to the Substitute Award) of the shares of the predecessor entity
that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such
shares.
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6.7
Substitution of Stock Appreciation Rights. The Administrator may provide in an applicable
Program or the applicable Award Agreement evidencing the grant of an Option that the Administrator, in its sole
discretion, shall have the right to substitute a Stock Appreciation Right for such Option at any time prior to or upon
exercise of such Option; provided, however, that such Stock Appreciation Right shall be exercisable with respect to
the same number of Shares for which such substituted Option would have been exercisable, and shall also have the
same exercise price and remaining term as the substituted Option.
ARTICLE 7.
EXERCISE OF OPTIONS
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7.1
Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the Administrator may require that, by the terms
of the Option, a partial exercise must be with respect to a minimum number of shares.
7.2
Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon
delivery of all of the following to the Secretary of the Company, or such other person or entity designated by the
Administrator, or his, her or its office, as applicable:
A written or electronic notice complying with the applicable rules established by the
Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Participant
or other person then entitled to exercise the Option or such portion of the Option;
(a)
(b)
Such representations and documents as the Administrator, in its sole discretion, deems
necessary or advisable to effect compliance with all applicable provisions of the Securities Act, the Exchange Act,
any other federal, state or foreign securities laws or regulations, the rules of any securities exchange or automated
quotation system on which the Shares are listed, quoted or traded or any other applicable law. The Administrator
may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and
registrars;
In the event that the Option shall be exercised pursuant to Section 11.3 hereof by any person
or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option,
as determined in the sole discretion of the Administrator; and
(c)
Full payment of the exercise price and applicable withholding taxes to the stock
administrator of the Company for the Shares with respect to which the Option, or portion thereof, is exercised, in a
manner permitted by Sections 11.1 and 11.2 hereof.
(d)
7.3
Notification Regarding Disposition. The Participant shall give the Company prompt written or
electronic notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option
which occurs within (a) two years from the date of granting (including the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code) such Option to such Participant, or (b) one year after the transfer
of such shares to such Participant.
ARTICLE 8.
RESTRICTED STOCK
8.1
Award of Restricted Stock.
(a)
The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall
determine the terms and conditions, including the restrictions applicable to each award of Restricted Stock, which
terms and conditions shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such
Restricted Stock as it deems appropriate.
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(b)
The Administrator shall establish the purchase price, if any, and form of payment for
Restricted Stock; provided, however, that if a purchase price is charged, such purchase price shall be no less than the
par value of the Shares to be purchased, unless otherwise permitted by applicable law. In all cases, legal consideration
shall be required for each issuance of Restricted Stock to the extent required by applicable law.
8.2
Rights as Stockholders. Subject to Section 8.4 hereof, upon issuance of Restricted Stock, the
Participant shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to
said shares, subject to the restrictions in an applicable Program or in the applicable Award Agreement, including the
right to receive dividends and other distributions paid or made with respect to the shares; provided, however, that any
Shares, cash or any other property distributed as a dividend or otherwise with respect to any Restricted Stock as to
which the restrictions have not yet lapsed shall be accumulated or credited, and shall be subject to the same restrictions
and risk of forfeiture as such Restricted Stock and shall not be paid until and unless the underlying Award vests.
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8.3
Restrictions. All shares of Restricted Stock (including any shares received by Participants thereof
with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of
recapitalization) shall, in the terms of an applicable Program or in the applicable Award Agreement, be subject to such
restrictions and vesting requirements as the Administrator shall provide. Such restrictions may include, without
limitation, restrictions concerning voting rights and transferability and such restrictions may lapse separately or in
combination at such times and pursuant to such circumstances or based on such criteria as selected by the
Administrator, including, without limitation, criteria based on the Participant’s duration of employment or directorship
with the Company, the Performance Criteria, Company or Affiliate performance, individual performance or other
criteria selected by the Administrator. Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire.
8.4
Repurchase or Forfeiture of Restricted Stock. If no price was paid by the Participant for the
Restricted Stock, upon a Termination of Service, the Participant’s rights in unvested Restricted Stock then subject to
restrictions shall lapse, and such Restricted Stock shall be surrendered to the Company and cancelled without
consideration. If a price was paid by the Participant for the Restricted Stock, upon a Termination of Service, the
Company shall have the right to repurchase from the Participant the unvested Restricted Stock then subject to
restrictions at a cash price per share equal to the price paid by the Participant for such Restricted Stock or such other
amount as may be specified in an applicable Program or the applicable Award Agreement. The Administrator in its
sole discretion may provide that, upon certain events, including without limitation a Change in Control, the
Participant’s death, retirement or disability, any other specified Termination of Service or any other event, the
Participant’s rights in unvested Restricted Stock shall not lapse, such Restricted Stock shall vest and cease to be
forfeitable and, if applicable, the Company cease to have a right of repurchase.
8.5
Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced
in such manner as the Administrator shall determine. Certificates or book entries evidencing shares of Restricted
Stock must include an appropriate legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company may, in its sole discretion, retain physical possession of any stock certificate until
such time as all applicable restrictions lapse.
8.6
Section 83(b) Election. If a Participant makes an election under Section 83(b) of the Code to be
taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or
dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, the Participant shall be
required to deliver a copy of such election to the Company promptly after filing such election with the Internal
Revenue Service.
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ARTICLE 9.
DIVIDEND EQUIVALENTS, STOCK PAYMENTS, DEFERRED STOCK, RESTRICTED STOCK UNITS;
CASH-BASED AWARDS, OTHER INCENTIVE AWARDS
9.1
Dividend Equivalents.
(a)
Subject to Section 9.1(b) hereof, Dividend Equivalents may be granted by the
Administrator, either alone or in tandem with another Award, based on dividends declared on the Common Stock, to
be credited as of dividend payment dates during the period between the date the Dividend Equivalents are granted to
a Participant and the date such Dividend Equivalents terminate or expire, as determined by the Administrator. Such
Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such
time and subject to such limitations as may be determined by the Administrator. In addition, Dividend Equivalents
with respect to Shares covered by an Award shall only be paid out to the Participant at the same time or times and to
the same extent that the vesting conditions, if any, are subsequently satisfied and the Award vests with respect to such
Shares.
Options or Stock Appreciation Rights, unless otherwise determined by the Administrator.
(b)
Notwithstanding the foregoing, no Dividend Equivalents shall be payable with respect to
9.2
Stock Payments. The Administrator is authorized to make one or more Stock Payments to any
Eligible Individual. The number or value of shares of any Stock Payment shall be determined by the Administrator
and may be based upon one or more Performance Criteria or any other specific criteria, including service to the
Company or any Affiliate, determined by the Administrator. Stock Payments may, but are not required to be made in
lieu of base salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.
9.3
Deferred Stock. The Administrator is authorized to grant Deferred Stock to any Eligible
Individual. The number of shares of Deferred Stock shall be determined by the Administrator and may be based on
one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, as the
Administrator determines, in each case on a specified date or dates or over any period or periods determined by the
Administrator, subject to compliance with Section 409A of the Code or an exemption therefrom. Shares underlying
a Deferred Stock Award which is subject to a vesting schedule or other conditions or criteria set by the Administrator
will not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a holder
of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time
as the Award has vested and the Shares underlying the Award have been issued to the Participant.
9.4
Restricted Stock Units. The Administrator is authorized to grant Restricted Stock Units to any
Eligible Individual. The number and terms and conditions of Restricted Stock Units shall be determined by the
Administrator. The Administrator shall specify the date or dates on which the Restricted Stock Units shall become
fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including
conditions based on one or more Performance Criteria or other specific criteria, including service to the Company or
any Affiliate, in each case on a specified date or dates or over any period or periods, as determined by the
Administrator. The Administrator shall specify, or, in the Administrator’s sole discretion, permit the Participant to
elect, the conditions and dates upon which the Shares underlying the Restricted Stock Units which shall be issued,
which dates shall not be earlier than the date as of which the Restricted Stock Units vest and become nonforfeitable
and which conditions and dates shall be subject to compliance with Section 409A of the Code or an exemption
therefrom. On the distribution dates, the Company shall issue to the Participant one unrestricted, fully transferable
Share (or the Fair Market Value of one such Share in cash) for each vested and nonforfeitable Restricted Stock Unit.
9.5
Grant of Cash-Based Awards. The Administrator may grant Cash-Based Awards under the Plan
or pursuant to a Program. A Cash-Based Award is an Award that entitles the Participant to a payment in cash upon
the attainment of Performance Criteria. The Administrator shall determine the maximum duration of the Cash-Based
Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based
Award shall become vested or payable, and such other provisions as the Administrator shall determine. Unless
otherwise determined by the Administrator, each Cash-Based Award shall specify a cash-denominated payment
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amount, formula or payment ranges as determined by the Administrator. At the Administrator’s discretion, Cash-
Based Awards may be settled in Shares.
9.6
Other Incentive Awards. The Administrator is authorized to grant Other Incentive Awards to any
Eligible Individual, which Awards may cover Shares or the right to purchase Shares or have a value derived from the
value of, or an exercise or conversion privilege at a price related to, or that are otherwise payable in or based on,
Shares, shareholder value or shareholder return, in each case on a specified date or dates or over any period or periods
determined by the Administrator. Other Incentive Awards may be linked to any one or more of the Performance
Criteria or other specific criteria determined appropriate by the Administrator.
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9.7
Cash Settlement. Without limiting the generality of any other provision of the Plan, the
Administrator may provide, in an Award Agreement or subsequent to the grant of an Award, in its discretion, that any
Award may be settled in cash, Shares or a combination thereof.
9.8
Other Terms and Conditions. All applicable terms and conditions of each Award described in
this Article 9, including without limitation, as applicable, the term, vesting and exercise/purchase price applicable to
the Award, shall be set by the Administrator in its sole discretion, provided, however, that the value of the
consideration paid by a Participant for an Award shall not be less than the par value of a Share, unless otherwise
permitted by applicable law.
9.9
Exercise upon Termination of Service. Awards described in this Article 9 are exercisable or
distributable, as applicable, only while the Participant is an Employee or a Director, as applicable. The Administrator,
however, in its sole discretion, may provide that such Award may be exercised or distributed subsequent to a
Termination of Service as provided under an applicable Program, Award Agreement, payment deferral election and/or
in certain events, including a Change in Control, the Participant’s death, retirement or disability or any other specified
Termination of Service.
ARTICLE 10.
STOCK APPRECIATION RIGHTS
10.1
Grant of Stock Appreciation Rights.
from time to time, in its sole discretion, on such terms and conditions as it may determine consistent with the Plan.
(a)
The Administrator is authorized to grant Stock Appreciation Rights to Eligible Individuals
(b)
A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise
the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation
Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined
by multiplying the difference obtained by subtracting the exercise price per share of the Stock Appreciation Right
from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Shares with
respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator
may impose. Except as described in Section 10.1(c) hereof, the exercise price per Share subject to each Stock
Appreciation Right shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value on the
date the Stock Appreciation Right is granted.
(c)
Notwithstanding the foregoing provisions of Section 10.1(b) hereof to the contrary, in the
case of a Stock Appreciation Right that is a Substitute Award, the price per share of the shares subject to such Stock
Appreciation Right may be less than the Fair Market Value per share on the date of grant; provided, however, that the
excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the Shares subject
to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate
Fair Market Value (as of the time immediately preceding the transaction giving rise to the Substitute Award) of the
shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the
aggregate exercise price of such shares.
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10.2
Stock Appreciation Right Vesting.
(a)
The Administrator shall determine the period during which a Participant shall vest in a
Stock Appreciation Right and have the right to exercise such Stock Appreciation Right in whole or in part. Such
vesting may be based on service with the Company or any Affiliate, or any other criteria selected by the Administrator.
At any time after grant of a Stock Appreciation Right, the Administrator may, in its sole discretion and subject to
whatever terms and conditions it selects, accelerate the period during which a Stock Appreciation Right vests.
No portion of a Stock Appreciation Right which is unexercisable at Termination of Service
shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in an applicable
Program or Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Right.
(b)
10.3 Manner of Exercise. All or a portion of an exercisable Stock Appreciation Right shall be deemed
exercised upon delivery of all of the following to the stock administrator of the Company, or such other person or
entity designated by the Administrator, or his, her or its office, as applicable:
(a)
A written or electronic notice complying with the applicable rules established by the
Administrator stating that the Stock Appreciation Right, or a portion thereof, is exercised. The notice shall be signed
by the Participant or other person then-entitled to exercise the Stock Appreciation Right or such portion of the Stock
Appreciation Right;
(b)
Such representations and documents as the Administrator, in its sole discretion, deems
necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal,
state or foreign securities laws or regulations. The Administrator may, in its sole discretion, also take whatever
additional actions it deems appropriate to effect such compliance; and
In the event that the Stock Appreciation Right shall be exercised pursuant to this Section
10.3 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to
exercise the Stock Appreciation Right.
(c)
10.4
Stock Appreciation Right Term. The term of each Stock Appreciation Right shall be set by the
Administrator in its sole discretion; provided, however, that the term shall not be more than ten (10) years from the
date the Stock Appreciation Right is granted. The Administrator shall determine the time period, including the time
period following a Termination of Service, during which the Participant has the right to exercise any vested Stock
Appreciation Rights, which time period may not extend beyond the expiration date of the Stock Appreciation Right
term. Except as limited by the requirements of Section 409A of the Code, the Administrator may extend the term of
any outstanding Stock Appreciation Right, and may extend the time period during which vested Stock Appreciation
Rights may be exercised in connection with any Termination of Service of the Participant, and, subject to Section 13.1
hereof, may amend any other term or condition of such Stock Appreciation Right relating to such a Termination of
Service.
ARTICLE 11.
ADDITIONAL TERMS OF AWARDS
11.1
Payment. The Administrator shall determine the methods by which payments by any Participant
with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check,
(b) Shares (including, in the case of payment of the exercise price of an Award, Shares issuable pursuant to the exercise
of the Award) held for such period of time as may be required by the Administrator in order to avoid adverse
accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate
payments required, (c) delivery of a written or electronic notice that the Participant has placed a market sell order with
a broker with respect to Shares then issuable upon exercise or vesting of an Award, and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate
payments required; provided, however, that payment of such proceeds is then made to the Company upon settlement
of such sale, (d) with respect to Options that are not Incentive Stock Options, by a “net exercise” arrangement pursuant
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to which the Company will reduce the number of Shares issuable upon exercise by the largest whole number of shares
with a Fair Market Value that does not exceed the aggregate exercise price or (e) other form of legal consideration
acceptable to the Administrator. The Administrator shall also determine the methods by which Shares shall be
delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary,
no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the
Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any
extension of credit with respect to such payment with a loan from the Company or a loan arranged by the Company
in violation of Section 13(k) of the Exchange Act.
11.2
Tax Withholding. The Company and its Affiliates shall have the authority and the right to deduct
or withhold, or require a Participant to remit to the Company or an Affiliate, an amount sufficient to satisfy federal,
state, local and foreign taxes (including the Participant’s social security, Medicare and any other employment tax
obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result
of the Plan. The Administrator may in its sole discretion and in satisfaction of the foregoing requirement allow a
Participant to elect to have the Company or an Affiliate withhold Shares otherwise issuable under an Award (or allow
the surrender of Shares). Unless determined otherwise by the Administrator, the number of Shares which may be so
withheld or surrendered shall be limited to the number of shares which have a Fair Market Value on the date of
withholding or repurchase no greater than the aggregate amount of such liabilities based on the minimum statutory
withholding rates or federal, state, local and foreign income tax and payroll tax purposes that are applicable to such
supplemental taxable income. The Administrator shall determine the fair market value of the Shares, consistent with
applicable provisions of the Code, for tax withholding obligations due in connection with a broker-assisted cashless
Option or Stock Appreciation Right exercise involving the sale of shares to pay the Option or Stock Appreciation
Right exercise price or any tax withholding obligation.
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11.3
Transferability of Awards.
(a)
Except as otherwise provided in Section 11.3(b) or (c) hereof:
No Award under the Plan may be sold, pledged, assigned or transferred in any
manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator,
pursuant to a DRO, unless and until such Award has been exercised, or the shares underlying such Award have been
issued, and all restrictions applicable to such shares have lapsed;
(i)
(ii)
No Award or interest or right therein shall be liable for the debts, contracts or
engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy) unless and until such Award has been exercised, or the Shares
underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed, and any attempted
disposition of an Award prior to the satisfaction of these conditions shall be null and void and of no effect, except to
the extent that such disposition is permitted by clause (i) of this provision; and
(iii)
During the lifetime of the Participant, only the Participant may exercise an Award
(or any portion thereof) granted to such Participant under the Plan, unless it has been disposed of pursuant to a DRO;
after the death of the Participant, any exercisable portion of an Award may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Program or Award Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable
laws of descent and distribution.
(b)
Notwithstanding Section 11.3(a) hereof, the Administrator, in its sole discretion, may
determine to permit a Participant or a Permitted Transferee of such Participant to transfer an Award other than an
Incentive Stock Option to any one or more Permitted Transferees of such Participant, subject to the following terms
and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the
Permitted Transferee (other to another Permitted Transferee of the applicable Participant) other than by will or the
laws of descent and distribution; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all
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the terms and conditions of the Award as applicable to the original Participant (other than the ability to further transfer
the Award); and (iii) the Participant (or transferring Permitted Transferee) and the Permitted Transferee shall execute
any and all documents requested by the Administrator, including without limitation, documents to (A) confirm the
status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under
applicable federal, state and foreign securities laws and (C) evidence the transfer.
(c)
Notwithstanding Section 11.3(a) hereof, a Participant may, in the manner determined by
the Administrator, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with
respect to any Award upon the Participant’s death or Disability. A beneficiary, legal guardian, legal representative,
or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any
Program or Award Agreement applicable to the Participant, except to the extent the Plan, the Program and the Award
Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the
Administrator. If the Participant is married or a domestic partner in a domestic partnership qualified under applicable
law and resides in a “community property” state, a designation of a person other than the Participant’s spouse or
domestic partner, as applicable, as his or her beneficiary with respect to more than 50% of the Participant’s interest in
the Award shall not be effective without the prior written or electronic consent of the Participant’s spouse or domestic
partner; provided that such consent is required by applicable state law. If no beneficiary has been designated or
survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the
laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the Administrator prior to the Participant’s
death or Disability.
11.4
Conditions to Issuance of Shares.
(a)
Notwithstanding anything herein to the contrary, neither the Company nor its Affiliates
shall be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the
exercise of any Award, unless and until the Administrator has determined, with advice of counsel, that the issuance
of such Shares is in compliance with all applicable laws, regulations of governmental authorities and, if applicable,
the requirements of any exchange on which the Shares are listed or traded, and the Shares are covered by an effective
registration statement or applicable exemption from registration. In addition to the terms and conditions provided
herein, the Administrator may require that a Participant make such reasonable covenants, agreements, and
representations as the Administrator, in its discretion, deems advisable in order to comply with any such laws,
regulations, or requirements.
(b)
All Share certificates delivered pursuant to the Plan and all shares issued pursuant to book
entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or
advisable to comply with federal, state, or foreign securities or other laws, rules and regulations and the rules of any
securities exchange or automated quotation system on which the Shares are listed, quoted, or traded. The
Administrator may place legends on any Share certificate or book entry to reference restrictions applicable to the
Shares.
The Administrator shall have the right to require any Participant to comply with any timing
or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period
limitation, as may be imposed in the sole discretion of the Administrator.
(c)
No fractional Shares shall be issued and the Administrator shall determine, in its sole
discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding down.
(d)
(e)
Notwithstanding any other provision of the Plan, unless otherwise determined by the
Administrator or required by any applicable law, rule or regulation, the Company and/or its Affiliates may, in lieu of
delivering to any Participant certificates evidencing Shares issued in connection with any Award, record the issuance
of Shares in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
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11.5
Forfeiture Provisions. Pursuant to its general authority to determine the terms and conditions
applicable to Awards under the Plan, the Administrator shall have the right to provide, in the terms of Awards made
under the Plan, or to require a Participant to agree by separate written or electronic instrument, that: (a)(i) any
proceeds, gains or other economic benefit actually or constructively received by the Participant upon any receipt or
exercise of the Award, or upon the receipt or resale of any Shares underlying the Award, must be paid to the Company,
and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited,
if (b)(i) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt
or exercise of the Award, or (ii) the Participant at any time, or during a specified time period, engages in any activity
in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further
defined by the Administrator or (iii) the Participant incurs a Termination of Service for Cause.
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11.6
Repricing. Subject to Section 13.2 hereof, the Administrator shall not, without the approval of
the stockholders of the Company, (i) authorize the amendment of any outstanding Option or Stock Appreciation Right
to reduce its price per share, or (ii) cancel any Option or Stock Appreciation Right in exchange for cash or another
Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying
Shares. Subject to Section 13.2 hereof, the Administrator shall have the authority, without the approval of the
stockholders of the Company, to amend any outstanding Award to increase the price per share or to cancel and replace
an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the
original Award.
ARTICLE 12.
ADMINISTRATION
12.1
Administrator. The Committee (or another committee or a subcommittee of the Board assuming
the functions of the Committee under the Plan) shall administer the Plan (except as otherwise permitted herein) and,
unless otherwise determined by the Board, shall consist solely of two or more Non-Employee Directors appointed by
and holding office at the pleasure of the Board, each of whom is intended to qualify as a “non-employee director” as
defined by Rule 16b-3 of the Exchange Act and an “independent director” under the rules of any securities exchange
or automated quotation system on which the Shares are listed, quoted or traded, in each case, to the extent required
under such provision; provided, however, that any action taken by the Committee shall be valid and effective, whether
or not members of the Committee at the time of such action are later determined not to have satisfied the requirements
for membership set forth in this Section 12.l or otherwise provided in any charter of the Committee. Except as may
otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by delivering written or electronic notice to
the Board. Vacancies in the Committee may only be filled by the Board. Notwithstanding the foregoing, (a) the full
Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect
to Awards granted to Non-Employee Directors and (b) the Board or Committee may delegate its authority hereunder
to the extent permitted by Section 12.6 hereof.
12.2
Duties and Powers of Administrator. It shall be the duty of the Administrator to conduct the
general administration of the Plan in accordance with its provisions. The Administrator shall have the power to
interpret the Plan and all Programs and Award Agreements, and to adopt such rules for the administration,
interpretation and application of the Plan and any Program as are not inconsistent with the Plan, to interpret, amend
or revoke any such rules and to amend any Program or Award Agreement provided that the rights or obligations of
the holder of the Award that is the subject of any such Program or Award Agreement are not affected adversely by
such amendment, unless the consent of the Participant is obtained or such amendment is otherwise permitted under
Section 13.10 hereof. Any such grant or award under the Plan need not be the same with respect to each Participant.
Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of
Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b - 3 under the
Exchange Act or the rules of any securities exchange or automated quotation system on which the Shares are listed,
quoted or traded are required to be determined in the sole discretion of the Committee.
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12.3
Action by the Committee. Unless otherwise established by the Board or in any charter of the
Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present
at any meeting at which a quorum is present, and acts approved in writing by all members of the Committee in lieu of
a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith,
rely or act upon any report or other information furnished to that member by any officer or other employee of the
Company or any Affiliate, the Company’s independent certified public accountants, or any executive compensation
consultant or other professional retained by the Company to assist in the administration of the Plan.
12.4
Authority of Administrator. Subject to any specific designation in the Plan, the Administrator has
the exclusive power, authority and sole discretion to:
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(a)
(b)
(c)
Award will relate;
Designate Eligible Individuals to receive Awards;
Determine the type or types of Awards to be granted to each Eligible Individual;
Determine the number of Awards to be granted and the number of Shares to which an
(d)
Determine the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any performance criteria, any restrictions or
limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability
of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of
gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;
Determine whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in cash, Shares, other Awards, or other property, or an Award
may be canceled, forfeited, or surrendered;
(e)
Participant;
(f)
Prescribe the form of each Award Agreement, which need not be identical for each
resolution of any disputes;
(g)
Decide all other matters that must be determined in connection with an Award, including
(h)
Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable
to administer the Plan;
(i)
Award Agreement;
Interpret the terms of, and any matter arising pursuant to, the Plan, any Program or any
Grant Substitute Awards on such terms and conditions as the Administrator may prescribe,
subject to compliance with the incentive stock option rules under Section 422 of the Code and the nonqualified
deferred compensation rules under Section 409A of the Code, where applicable;
(j)
as the Administrator deems necessary or advisable to administer the Plan; and
(k)
Make all other decisions and determinations that may be required pursuant to the Plan or
to time.
(l)
Establish a Program or Programs under the Plan, as may be adopted or amended from time
12.5
Decisions Binding. The Administrator’s interpretation of the Plan, any Awards granted pursuant
to the Plan, any Program, any Award Agreement and all decisions and determinations by the Administrator with
respect to the Plan are final, binding and conclusive on all parties.
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12.6
Delegation of Authority. To the extent permitted by applicable law or the rules of any securities
exchange or automated quotation system on which the Shares are listed, quoted or traded, the Board or Committee
may from time to time delegate to a committee of one or more members of the Board or one or more officers of the
Company the authority to grant or amend Awards or to take other administrative actions pursuant to this Article 12;
provided, however, that in no event shall an officer of the Company be delegated the authority to grant awards to, or
amend awards held by the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act
or (b) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated
hereunder; provided further, that any delegation of administrative authority shall only be permitted to the extent it is
permissible applicable securities laws or the rules of any securities exchange or automated quotation system on which
the Shares are listed, quoted or traded. Any delegation hereunder shall be subject to the restrictions and limits that the
Board or the Committee specifies at the time of such delegation, and the Board may at any time rescind the authority
so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.6 shall serve in
such capacity at the pleasure of the Board and the Committee.
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ARTICLE 13.
MISCELLANEOUS PROVISIONS
13.1
Amendment, Restatement, Suspension or Termination of the Plan. Except as otherwise provided
in this Section 13.1, the Plan may be wholly or partially amended, restated or otherwise modified, suspended or
terminated at any time or from time to time by the Board. However, without approval of the Company’s stockholders
given within twelve (12) months before or after the action by the Administrator, no action of the Administrator may,
except as provided in Section 13.2 hereof, (i) increase the Share Limit, (ii) reduce the price per share of any
outstanding Option or Stock Appreciation Right granted under the Plan, or (iii) cancel any Option or Stock
Appreciation Right in exchange for cash or another Award in violation of Section 11.6 hereof. Except as provided in
Section 13.10 hereof, no amendment, restatement, suspension or termination of the Plan shall, without the consent of
the Participant, materially impair any rights or obligations under any Award theretofore granted or awarded, unless
the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of
suspension or after termination of the Plan, and in no event may any Award be granted under the Plan after the tenth
(10th) anniversary of the Effective Date. In addition, in no event may any Incentive Stock Option be granted under the
Plan after the tenth (10th) anniversary of the date on which the Board adopted the Plan (subject to shareholder
approval).
13.2
and Other Corporate Events.
Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company
(a)
In the event of any stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other
change affecting the shares of the Company’s stock or the share price of the Company’s stock other than an Equity
Restructuring, the Administrator shall make equitable adjustments, if any, to reflect such change with respect to (i) the
aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of
the Share Limit); (ii) the number and kind of shares of Common Stock (or other securities or property) subject to
outstanding Awards; (iii) the terms and conditions of any outstanding Awards (including, without limitation, any
applicable performance targets or criteria with respect thereto); and/or (iv) the grant or exercise price per share for any
outstanding Awards under the Plan.
(b)
In the event of any transaction or event described in Section 13.2(a) hereof or any unusual
or nonrecurring transactions or events affecting the Company, any Affiliate of the Company, or the financial
statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles, the
Administrator, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of
the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the
Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator
determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential
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benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or principles:
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(i)
To provide for either (A) termination of any such Award in exchange for an
amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or
realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the
transaction or event described in this Section 13.2, the Administrator determines in good faith that no amount would
have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be
terminated by the Company without payment) or (B) the replacement of such Award with other rights or property
selected by the Administrator in its sole discretion having an aggregate value not exceeding the amount that could
have been attained upon the exercise of such Award or realization of the Participant’s rights had such Award been
currently exercisable or payable or fully vested;
To provide that such Award be assumed by the successor or survivor corporation,
or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of
the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices;
(ii)
To make adjustments in the number and type of securities subject to outstanding
Awards and Awards which may be granted in the future and/or in the terms, conditions and criteria included in such
Awards (including the grant or exercise price, as applicable);
(iii)
To provide that such Award shall be exercisable or payable or fully vested with
respect to all securities covered thereby, notwithstanding anything to the contrary in the Plan or an applicable Program
or Award Agreement; and
(iv)
event.
(v)
To provide that the Award cannot vest, be exercised or become payable after such
anything to the contrary in Sections 13.2(a) and 13.2(b) hereof:
(c)
In connection with the occurrence of any Equity Restructuring, and notwithstanding
The number and type of securities subject to each outstanding Award and/or the
exercise price or grant price thereof, if applicable, shall be equitably adjusted. The adjustment provided under this
Section 13.2(c)(i) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.
(i)
(ii)
The Administrator shall make such equitable adjustments, if any, as the
Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate
number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments to the Share
Limit). The adjustments provided under this Section 13.2(c) shall be nondiscretionary and shall be final and binding
on the affected Participant and the Company.
terms shall govern in the event of a Change in Control.
(d)
Change in Control. Except as may be determined otherwise by the Board, the following
(i)
In the event of a Change in Control, each outstanding Award shall be assumed,
continued or an equivalent award substituted, with appropriate adjustment as to the number and kind of shares and, if
appropriate, the per share exercise prices, as such parties shall agree (each, an “Assumed Award”), by the successor
entity or a parent or subsidiary of the successor entity (“Successor”); provided, however, that if the Participant’s
service with the Successor is terminated without Cause by the Successor, for Good Reason by the Participant, or on
account of the Participant’s death or Disability, in each case within 12 months following such Change in Control, each
then-outstanding and unvested Assumed Award held by such Participant shall become fully vested and, as applicable,
exercisable, and all forfeiture restrictions on such Assumed Awards shall lapse at such time.
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(ii)
In the event that a Successor refuses to assume, continue or substitute for any
Award in accordance with Section 13.2(d)(i) hereof, each such Award shall become fully vested and, as applicable,
exercisable and shall be deemed exercised, immediately prior to the consummation of such transaction, and all
forfeiture restrictions on any or all such Awards shall lapse at such time. If an Award vests and, as applicable, is
exercised in lieu of assumption, continuation or substitution in connection with a Change in Control, the Administrator
shall notify the Participant of such vesting and any applicable exercise, and the Award shall terminate upon the Change
in Control. For the avoidance of doubt, if the value of an Award that is terminated in connection with this Section
13.2(d)(ii) is zero or negative at the time of such Change in Control, such Award shall be terminated upon the Change
in Control without payment of consideration therefor.
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Notwithstanding Section 13.2(d)(i) and (ii), upon a Change in Control, all
Performance-Based Awards and Cash-Based Awards shall become vested and nonforfeitable in the Administrator’s
discretion or to the extent specified in the relevant Award Agreement.
(iii)
The Administrator may, in its sole discretion, include such further provisions and
limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company
that are not inconsistent with the provisions of the Plan.
(e)
(f)
No adjustment or action described in this Section 13.2 or in any other provision of the Plan
shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of
the Code. Furthermore, no such adjustment or action shall be authorized with respect to any Award to the extent such
adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions
of Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions.
(g)
The existence of the Plan, the Program, the Award Agreement and the Awards granted
hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company
to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or
the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
No action shall be taken under this Section 13.2 which shall cause an Award to fail to
comply with Section 409A of the Code or an exemption therefrom, in either case, to the extent applicable to such
Award, unless the Administrator determines any such adjustments to be appropriate.
(h)
(i)
In the event of any pending stock dividend, stock split, combination or exchange of shares,
merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or
any other change affecting the shares of Common Stock or the share price of the Common Stock including any Equity
Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the
exercise of any Award during a period of thirty (30) days prior to the consummation of any such transaction.
13.3
Approval of Plan by Stockholders. The Plan will be submitted for the approval of the Company’s
stockholders within twelve (12) months after the date of the Board’s initial adoption of the Plan. If the Plan is not
approved by the stockholders within twelve (12) months after its adoption by the Board, then the Prior Plan shall
continue on its existing terms and conditions and the Plan shall be of no force or effect.
13.4
No Stockholders Rights. Except as otherwise provided herein or in an Award Agreement, a
Participant shall have none of the rights of a stockholder with respect to shares of Common Stock covered by any
Award until the Participant becomes the record owner of such shares of Common Stock.
Paperless Administration. In the event that the Company establishes, for itself or using the
services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system
13.5
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using an internet website or interactive voice response, then the paperless documentation, granting or exercise of
Awards by a Participant may be permitted through the use of such an automated system.
13.6
Effect of Plan upon Other Compensation Plans. Except as set forth in Section 3.1(a) above, the
adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any
Affiliate. Nothing in the Plan shall be construed to limit the right of the Company or any Affiliate: (a) to establish
any other forms of incentives or compensation for Employees or Directors of the Company or any Affiliate, or (b) to
grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper
corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition
by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.
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13.7
Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and the
issuance and delivery of Shares and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal, state, local and foreign laws, rules and regulations
(including but not limited to state, federal and foreign securities law and margin requirements), the rules of any
securities exchange or automated quotation system on which the Shares are listed, quoted or traded, and to such
approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law, the Plan and Awards granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
13.8
Titles and Headings, References to Sections of the Code or Exchange Act. The titles and headings
of the sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan,
rather than such titles or headings, shall control. References to sections of the Code or the Exchange Act shall include
any amendment or successor thereto.
13.9
Governing Law. The Plan and any agreements hereunder shall be administered, interpreted and
enforced under the internal laws of the State of Nevada without regard to conflicts of laws thereof.
13.10 Section 409A. The Plan is intended to comply with the requirements of Section 409A of the Code
or an exemption or exclusion therefrom and, with respect to amounts that are subject to Section 409A of the Code, it
is intended that this Plan be administered in all respects in accordance with Section 409A of the Code. To the extent
that the Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, the
Plan, any applicable Program and the Award Agreement covering such Award shall be interpreted in accordance with
Section 409A of the Code. Notwithstanding any provision of the Plan to the contrary, in the event that, following the
Effective Date, the Administrator determines that any Award may be subject to Section 409A of the Code, the
Administrator may adopt such amendments to the Plan, any applicable Program and the Award Agreement or adopt
other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any
other actions, that the Administrator determines are necessary or appropriate to avoid the imposition of taxes on the
Award under Section 409A of the Code, either through compliance with the requirements of Section 409A of the Code
or with an available exemption therefrom. In the event that it is reasonably determined by the Administrator that, as a
result of Section 409A of the Code and the regulations thereunder, payments in respect of any Award under the Plan
may not be made at the time contemplated by the terms of the Plan or the relevant Award agreement, as the case may
be, without causing the Participant holding such Award to be subject to taxation under Section 409A of the Code, the
Company may make such payment on the first day that would not result in the Participant incurring any tax liability
under Section 409A of the Code; which, if the Participant is a “specified employee” within the meaning of the
Section 409A, shall be the first day following the six-month period beginning on the date of Participant’s termination
of employment. Unless otherwise provided in an Award Agreement or other document governing the issuance of such
Award, payment of any Performance-Based Award intended to qualify as a “short term deferral” within the meaning
of Section 1.409A-1(b)(4)(i) of the U.S. Treasury Regulations shall be made between the first day following the close
of the applicable Performance Period and the last day of the “applicable 2 ½ month period” as defined therein.
Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the
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requirements of Section 409A, the Company does not warrant that any Award under the Plan will qualify for favorable
tax treatment under Section 409A or any other provision of federal, state, local or foreign law. The Company shall
not be liable to any Participant for any tax, interest, or penalties that Participant might owe as a result of the grant,
holding, vesting, exercise, or payment of any Award under the Plan.
13.11 No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted
any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible
Individuals, Participants or any other persons uniformly.
13.12 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive
compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Program or Award Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Company or any Affiliate.
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13.13
Indemnification. To the extent allowable pursuant to applicable law, each member of the Board
and any officer or other employee to whom authority to administer any component of the Plan is delegated shall be
indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant
to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action,
suit, or proceeding against him or her; provided, however, that he or she gives the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such
persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them harmless.
13.14 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in
determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other
benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other
plan or an agreement thereunder.
13.15 Data Privacy. As a condition of receipt of any Award, each Participant explicitly and
unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described
in this paragraph by and among, as applicable, the Company and its Subsidiaries and Affiliates for the exclusive
purpose of implementing, administering and managing the Participant’s participation in the Plan. The Company and
its Subsidiaries and Affiliates may hold certain personal information about a Participant, including but not limited to,
the Participant’s name, home address and telephone number, date of birth, social security or other identification
number, salary, nationality, job title(s), any shares of stock held in the Company or any of its Subsidiaries and
Affiliates, details of all Awards, in each case, for the purpose of implementing, managing and administering the Plan
and Awards (the “Data”). The Company and its Subsidiaries and Affiliates may transfer the Data amongst themselves
as necessary for the purpose of implementation, administration and management of a Participant’s participation in the
Plan, and the Company and its Subsidiaries and Affiliates may each further transfer the Data to any third parties
assisting the Company in the implementation, administration and management of the Plan. These recipients may be
located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws
and protections than the recipients’ country. Through acceptance of an Award, each Participant authorizes such
recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of
implementing, administering and managing the Participant’s participation in the Plan, including any requisite transfer
of such Data as may be required to a broker or other third party with whom the Company or the Participant may elect
to deposit any Shares. The Data related to a Participant will be held only as long as is necessary to implement,
administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data held
by the Company with respect to such Participant, request additional information about the storage and processing of
the Data with respect to such Participant, recommend any necessary corrections to the Data with respect to the
Participant or refuse or withdraw the consents herein in writing, in any case without cost, by contacting his or her local
human resources representative. The Company may cancel Participant’s ability to participate in the Plan and, in the
Committee’s discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws his
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or her consents as described herein. For more information on the consequences of refusal to consent or withdrawal of
consent, Participants may contact their local human resources representative.
13.16 Clawback. Any Award granted pursuant to this Plan shall be subject to mandatory repayment by
the Participant to the Company (i) to the extent set forth in any Award Agreement, (ii) to the extent that such
Participant is, or in the future becomes, subject to (a) any “clawback” or recoupment policy adopted by the Company
or any Affiliate thereof to comply with the requirements of any applicable laws, rules or regulations, including
pursuant to final rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection
Act, or otherwise, or (b) any applicable laws which impose mandatory recoupment, under circumstances set forth in
such applicable laws, including the Sarbanes-Oxley Act of 2002.
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13.17 Expenses. The expenses of administering the Plan shall be borne by the Company and its
Affiliates.
[signature page follows]
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* * * * *
The foregoing Plan was duly adopted by the Board of Directors of AutoZone, Inc. on October 7, 2020.
The foregoing Plan was approved by the stockholders of AutoZone, Inc. on [______], 2020.
* * * * *
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[THIS PAGE INTENTIONALLY LEFT BLANK]
Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
☐
Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended August 29, 2020.
OR
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)
123 South Front Street, Memphis, Tennessee
(Address of principal executive offices)
62-1482048
(I.R.S. Employer Identification No.)
38103
(Zip Code)
1
0
-
K
Registrant’s telephone number, including area code : (901) 495-6500
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock ($0.01 par value)
Trading Symbol(s)
AZO
Name of Each Exchange on which Registered
New York Stock Exchange
Indicate by checkmark 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
Securities registered pursuant to Section 12(g) of the Act: None
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 periods 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 every Interactive Data File required to be submitted 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 such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange 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 $24,661,503,822.
The number of shares of Common Stock outstanding as of October 19, 2020, was 23,175,554.
Documents Incorporated By Reference
Portions of the definitive Proxy Statement to be filed within 120 days of August 29, 2020, pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting of
Stockholders to be held December 16, 2020, are incorporated by reference into Part III.
TABLE OF CONTENTS
4
PART I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Marketing and Merchandising Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Store Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Store Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Purchasing and Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Trademarks and Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
AutoZone Websites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Information about our Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 28
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . 79
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . 80
Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
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Forward-Looking Statements
Certain statements contained in this annual report constitute forward-looking statements that are subject to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use
words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,”
“positioned,” “strategy,” “seek,” “may,” “could” 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: product demand; energy prices;
weather; competition; credit market conditions; cash flows; access to available and feasible financing; future stock
repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks
associated with self-insurance; war and the prospect of war, including terrorist activity; the impact of public health
issues, such as the ongoing global pandemic of a novel strain of the coronavirus (“COVID-19”); inflation; the ability
to hire, train and retain qualified employees; construction delays; the compromising of confidentiality, availability or
integrity of information, including cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings;
damages to our reputation; challenges in international markets; failure or interruption of our information technology
systems; origin and raw material costs of suppliers; disruption in our supply chain, due to public health epidemics or
otherwise; impact of tariffs; anticipated impact of new accounting standards; and business interruptions. Certain of
these risks and uncertainties are discussed in more detail in the “Risk Factors” section contained in Item 1A under
Part 1 of this Annual Report on Form 10-K for the year ended August 29, 2020, 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. However, it
should be understood that it is not possible to identify or predict all such risks and other factors that could affect
these forward-looking statements. 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.
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Item 1. Business
Introduction
PART I
AutoZone, Inc. (“AutoZone,” the “Company,” “we,” “our” or “us”) is the leading retailer, and a leading distributor,
of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at August 29,
2020, operated 5,885 stores in the United States (“U.S.”), 621 stores in Mexico and 43 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 29,
2020, in 5,007 of our domestic stores, we also had a commercial sales program that provides commercial credit and
prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations
and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. 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 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.
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At August 29, 2020, our stores were in the following locations:
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arkansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Connecticut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delaware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hawaii . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Saint Thomas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Dakota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington, DC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Domestic stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Store
Count
118
8
159
67
631
93
49
16
379
204
11
31
241
158
32
54
100
127
14
81
82
203
58
95
116
15
23
66
23
111
63
204
226
7
274
82
50
205
48
17
1
95
9
169
637
61
2
141
95
5
45
75
9
5,885
621
43
6,549
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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 as well as identifying any associated warranties that are offered by us or our vendors. We sell automotive hard
parts, maintenance items, accessories and non-automotive parts through www.autozone.com, for pick-up in store or
to be shipped directly to a customer’s home or business, with next day delivery covering approximately 80% of the
U.S. population. Additionally, we offer a smartphone application that provides customers with store locations,
driving directions, operating hours, product availability and the ability to purchase products.
We also provide specialty tools through our suite of free services. 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 free diagnostic and related services,
including check engine light readings through our AutoZone Fix Finder service, testing of starters, alternators and
batteries, battery charging and the collection of used oil for recycling.
Merchandising
The following tables show some of the types of products we sell by major category of items:
Maintenance
Discretionary
Air Fresheners
Antifreeze & Windshield Washer Fluid
Brake Drums, Rotors, Shoes & Pads
Chemicals, including Brake & Power
Steering Fluid, Oil & Fuel Additives
Oil & Transmission Fluid
Oil, Cabin, Air, Fuel & Transmission
Filters
Oxygen Sensors
Paint & Accessories
Refrigerant & Accessories
Shock Absorbers & Struts
Spark Plugs & Wires
Windshield Wipers
Cell Phone Accessories
Drinks & Snacks
Floor Mats & Seat Covers
Interior & Exterior Accessories
Mirrors
Performance Products
Protectants & Cleaners
Sealants & Adhesives
Steering Wheel Covers
Stereos & Radios
Tools
Towing
Wash & Wax
Failure
A/C Compressors
Batteries & Accessories
Bearings
Belts & Hoses
Calipers
Chassis
Clutches
CV Axles
Engines
Fuel Pumps
Fuses
Ignition
Lighting
Mufflers
Radiators
Starters & Alternators
Thermostats
Tire Repair
Water Pumps
We believe that customer satisfaction is often impacted by our ability to promptly provide specific automotive
products as requested. Each store carries the same basic products, but we tailor our hard parts inventory to the makes
and models of the vehicles in each store’s trade area, and our sales floor products are tailored to the local store’s
demographics. Our hub stores (including mega hubs, which carry an even broader assortment) 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.
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Pricing
We want to be 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 Duralast and the family of Duralast brands, ProElite, ShopPro,
SureBilt, TruGrade and Valucraft. We believe that our overall value compares favorably to that of our competitors.
Brand Marketing: Marketing and Loyalty
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 advertising, direct marketing, loyalty programs and promotions primarily to highlight our
great value, the availability of high quality parts and develop a relationship with an expanding base of customers.
Broadcast and digital media are our primary advertising methods of driving retail traffic to our stores, while we
leverage a dedicated sales force and our ProVantage loyalty program to drive commercial sales.
Store Design, Visual Merchandising and Promotional Execution
We design and build stores for high visual impact. The typical store utilizes colorful exterior and interior signage,
exposed beams and ductwork and brightly lit interiors. Maintenance products, accessories and non-automotive items
are attractively displayed for easy browsing by customers. In-store signage and special displays promote products on
floor displays, end caps and shelves. We utilize in-store signage, in-store circulars, and creative product placement
and promotions to help educate customers about products that they need.
Commercial
Our commercial sales program operates in a highly fragmented market, and we are a leading distributor of
automotive parts and other products to local, regional and national repair garages, dealers, service stations and
public sector accounts in the Americas. As a part of the domestic store program, we offer credit and delivery to our
customers, as well as online ordering through www.autozonepro.com. Through our hub stores, we offer a greater
range of parts and products desired by professional technicians. We have dedicated sales teams focused on
independent repair shops as well as national, regional and public sector commercial accounts.
Store Operations
Store Formats
Substantially all stores are based on standard store formats, resulting in generally consistent appearance,
merchandising and product mix. Approximately 90% to 99% of each store’s square footage is selling space. In our
satellite stores, approximately 40% to 50% of our space is dedicated to hard parts inventory, while our hub stores
and mega hubs have 70% to 85% of their space utilized for hard parts. 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.
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Store Personnel and Training
We provide on-the-job training as well as formal training programs, including an annual national sales meeting with
related cascading meetings at our distribution centers, regional offices and stores; store meetings on specific sales
and product topics; standardized computer-based training to support culture, safety, salesmanship, compliance and
product and job knowledge; and several specialist, vendor and third-party programs to support learning and
development in areas requiring technical expertise and specific job knowledge. All domestic AutoZoners are
encouraged to complete our in-house product knowledge program and Parts Expert certification, which is developed
in partnership with our key suppliers. Training is supplemented with frequent store visits by management. Advanced
leadership training is an additional area of investment that is used to deepen bench strength and support succession
planning.
Store managers, commercial sales managers and managers at various levels across the organization receive financial
incentives through performance-based 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; 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.
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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 Point-of-Sale System, which includes bar code scanning and point-
of-sale data collection terminals. Our proprietary Store Management System provides administrative assistance, as
well as enhanced merchandising information and improved inventory control. We believe the Point-of-Sale System
also enhances customer service through faster processing of transactions, while the Store Management System
provides simplified warranty and product return procedures.
Store Development
The following table reflects our location development during the past five fiscal years:
2020
2019
2018
2017
2016
Fiscal Year
Locations:
Beginning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sold(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net new . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Relocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,411
—
138
—
138
5
6,549
6,202
—
209
—
209
2
6,411
6,029
26
201
2
199
7
6,202
5,814
—
215
—
215
5
6,029
5,609
—
205
—
205
6
5,814
(1) 26 Interamerican Motor Corporation (“IMC”) branches sold on April 4, 2018. See “Note M – Sale of Assets”
for more information.
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We believe expansion opportunities exist in markets we do not currently serve, as well as in markets where we can
achieve a larger presence. We 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 for stores 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 newer vehicles. We seek to open new
stores in high visibility sites in high traffic locations 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 locations, 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; Monterrey, Mexico and Sao Paulo, Brazil. Additionally, we have an office in Shanghai, China to support
our sourcing efforts in Asia. In fiscal 2020, one class of similar products accounted for approximately 12 percent of
our total sales, and one vendor supplied approximately 12 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 alternative sources of supply exist, at similar costs, 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. The distribution centers replenish all stores up to multiple times per
week depending on store sales volumes.
We ended fiscal 2020 with 224 total domestic hub stores, which have 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. Hub stores have increased our ability to distribute
products on a timely basis to many of our stores and to expand our product assortment.
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As a subset of our domestic hub stores, we ended fiscal 2020 with 44 domestic mega hubs, an increase of 9 since the
end of fiscal 2019. Mega hubs work in concert with our hubs to drive customer satisfaction through improved local
parts availability and expanded product assortments. A mega hub store carries inventory of 70,000 to 110,000
unique SKUs, approximately twice what a hub store carries. Mega hubs provide coverage to both surrounding stores
and other hub stores multiple times a day or on an overnight basis. Currently, we have over 5,700 domestic stores
with access to mega hub inventory. A majority of these 5,700 stores currently receive their service same day.
Competition
The sale of automotive parts, accessories and maintenance items is highly competitive due to numerous factors,
including name recognition, product availability, customer service, store location and price. AutoZone competes in
the aftermarket auto parts industry, which includes both the retail DIY and commercial do-it-for-me (“DIFM”) auto
parts and products markets.
Our competitors include national, regional and local auto parts chains, independently owned parts stores, online
automotive parts stores or marketplaces, wholesale distributors, jobbers, repair shops, car washes and auto dealers,
in addition to discount and mass merchandise stores, hardware stores, supermarkets, drugstores, convenience stores,
home stores and other retailers that sell aftermarket vehicle parts and supplies, chemicals, accessories, tools and
maintenance parts. AutoZone competes on the basis of customer service, including the knowledge and expertise of
our AutoZoners; merchandise quality, selection and availability; product warranty; store layouts, location and
convenience; price; and the strength of our AutoZone brand name, trademarks and service marks.
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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,” “AutoZone Rewards,” “Get in the Zone,”
“Parts Are Just Part of What We Do,” “ProVantage,” “The Best Parts in Auto Parts,” “Zone” and trademarks:
“ALLDATA Collision,” “ALLDATA Manage,” “ALLDATA Mobile,” “ALLDATA Repair,” “ALLDATA Tech-
Assist,” “AutoZone,” “AutoZone & Design,” “Duralast,” “Duralast Aero Blade,” “Duralast Flex Blade,” “Duralast
Gold,” “Duralast Gold Cmax,” “Duralast GT,” “Duralast Platinum,” “Duralast ProPower,” “Duralast ProPower
Plus,” “Duralast ProPower Ultra,” “Duralast ProPower AGM,” “Duralast Max,” “Econocraft,” “Loan-A-Tool,”
“ProElite,” “ProElite & Design,” “SureBilt,” “TruGrade,” “Valucraft,” “V & Design” and “Z-net.” We believe that
these service marks and trademarks are important components of our marketing and merchandising strategies.
Employees
As of August 29, 2020, we employed approximately 100,000 persons, approximately 60 percent of whom were
employed full-time. About 91 percent of our AutoZoners were employed in stores or in direct field supervision,
approximately 6 percent in distribution centers and approximately 3 percent in store support and other functions.
Included in the above numbers are approximately 10,000 persons employed in our Mexico and Brazil operations.
We have never experienced any material labor disruption and believe that relations with our AutoZoners are good.
Seasonality
Our business is somewhat seasonal in nature, with the highest sales typically occurring in the spring and
summer months of February through September, in which average weekly per-store sales historically have been
about 10% to 25% higher than in the slower months of December and January. During short periods of time, a
store’s sales can be affected by weather conditions. Extremely hot or extremely cold weather may enhance sales by
causing parts to fail; thereby increasing sales of seasonal products. Mild or rainy weather tends to soften sales, as
parts failure rates are lower in mild weather and elective maintenance is deferred during periods of rainy weather.
Over the longer term, we believe the effects of weather balance out, as we have locations throughout the Americas.
AutoZone Websites
AutoZone’s primary website is at www.autozone.com. We make available, free of charge, at www.autozone.com,
by clicking “Investor Relations” located at the bottom of the page, our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, 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 (“the SEC”). Our website and the information contained therein or linked thereto are not
intended to be incorporated into this Annual Report on Form 10-K.
Information about our Executive Officers
The following list describes our executive officers, which are elected by and serve at the discretion of the Board of
Directors. The title of each executive officer includes the words “Customer Satisfaction” which reflects our
commitment to customer service.
William C. Rhodes, III, 55—Chairman, 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 a member of the Board of Directors for Dollar General Corporation.
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William T. Giles, 61—Chief Financial Officer and Executive Vice President – Finance, Information Technology and
Store Development, Customer Satisfaction
William T. Giles was named Chief Financial Officer during May 2006 and has notified the Company of his intent to
retire, effective December 31, 2020. He has also held other responsibilities at various times including Executive
Vice President of Finance, Information Technology, ALLDATA and Store Development. 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. Mr. Giles is a member of
the Board of Directors for Brinker International.
Jamere Jackson, 51—Chief Financial Officer and Executive Vice President – Finance and Store Development-Elect,
Customer Satisfaction
Jamere Jackson was named Executive Vice President and Chief Financial Officer-Elect on September 13, 2020 and
Chief Financial Officer and Executive Vice President – Finance and Store Development effective January 1, 2021.
Mr. Jackson served as Executive Vice President and Chief Financial Officer of Hertz Global Holdings, Inc., a
worldwide rental company, since 2018. Hertz Global Holdings, Inc. filed Chapter 11 bankruptcy on May 22, 2020.
From 2014 to 2018, Mr. Jackson served as Chief Financial Officer of Nielsen Holdings plc, an information, data and
measurement company. Prior to 2014, Mr. Jackson held a variety of leadership roles at General Electric Company,
including Vice President and Chief Financial Officer of a division of General Electric Oil and Gas. Mr. Jackson
serves on the Board of Directors for Eli Lilly & Co. and Hibbett Sports, Inc.
Mark A. Finestone, 59—Executive Vice President – Merchandising, Supply Chain and Marketing, Customer
Satisfaction
Mark A. Finestone was named Executive Vice President – Merchandising, Supply Chain and Marketing during
October 2015. Previously, he was Senior Vice President – Merchandising and Store Development since 2014,
Senior Vice President – Merchandising from 2008 to 2014, and Vice President – Merchandising from 2002 to 2008.
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.
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Thomas B. Newbern, 58—Executive Vice President – Store Operations, Commercial, Loss Prevention and
ALLDATA, Customer Satisfaction
Thomas B. Newbern was named Executive Vice President – Store Operations, Commercial, Loss Prevention and
ALLDATA during February 2017. Prior to that, he was Executive Vice President – Store Operations, Commercial
and Loss Prevention since October 2015. Previously, he held the titles Senior Vice President – Store Operations and
Loss Prevention from 2014 to 2015, Senior Vice President – Store Operations and Store Development from 2012 to
2014, Senior Vice President – Store Operations from 2007 to 2012 and Vice President – Store Operations from 1998
to 2007. Prior thereto, he served in various capacities within the Company.
Philip B. Daniele, 51—Senior Vice President – Commercial, Customer Satisfaction
Philip B. Daniele was elected Senior Vice President – Commercial during November 2015. Prior to that, he was
Vice President – Commercial since 2013 and Vice President – Merchandising from 2008 to 2013. Previously, he
was Vice President – Store Operations from 2005 to 2008. From 1993 until 2008, Mr. Daniele served in various
capacities within the Company.
Preston B. Frazer, 44—Senior Vice President – Store Operations, Customer Satisfaction
Preston B. Frazer was named Senior Vice President, Store Operations in October 2019. Prior to that he was Vice
President, Stores and Store Operations Support since 2018 and Vice President, Loss Prevention from 2015 to 2018.
Previously, he was Vice President, Internal Audit from 2010 to 2015. From 2006 to 2010, Mr. Frazer served in
various capacities within the Company. Prior to joining AutoZone, Mr. Frazer was a senior manager with
KPMG, LLP.
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Ronald B. Griffin, 66—Senior Vice President and Chief Information Officer, Customer Satisfaction
Ronald B. Griffin was elected Senior Vice President and Chief Information Officer during June 2012. Prior to that,
he was Senior Vice President, Global Information Technology at Hewlett-Packard Company. During his tenure at
Hewlett-Packard Company, he also served as the Chief Information Officer for the Enterprise Business Division.
Prior to that, Mr. Griffin was Executive Vice President and Chief Information Officer for Fleming Companies, Inc.
He also spent over 12 years with The Home Depot, Inc., with the last eight years in the role of Chief Information
Officer. Mr. Griffin also served at Deloitte & Touche LLP and Delta Air Lines, Inc.
William R. Hackney, 55—Senior Vice President – Merchandising, Customer Satisfaction
William R. Hackney was named Senior Vice President, Merchandising in October 2015 and has notified the
Company of his intent to retire, effective December 31, 2020. His career with AutoZone began in 1983, and he has
held several key management roles within the Company, including Vice President – Store Operations Support and
Vice President – Merchandising.
Domingo J. Hurtado, 59—Senior Vice President – International, Customer Satisfaction
Domingo J. Hurtado Rodríguez was named Senior Vice President, International in September 2018. Prior to that, he
was President, AutoZone de México. Mr. Hurtado has served in various capacities within the Company since 2001,
which included leading the Company’s expansion into Mexico. Prior to 2001, he held different positions with
RadioShack including Director General in Mexico and General Manager in Venezuela.
Mitchell C. Major, 51—Senior Vice President – Supply Chain, Customer Satisfaction
Mitchell C. Major was named Senior Vice President – Supply Chain in November 2018. Previously, he served as
Vice President - Commercial Support since September 2016 and prior to that he held the title of President,
ALLDATA. Mr. Major joined AutoZone in 2005. Prior to AutoZone, Mr. Major worked for Family Dollar, Inc.
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Seong K. Ohm, 56—Senior Vice President – Merchandising, Customer Satisfaction
Seong K. Ohm was named Senior Vice President – Merchandising on October 26, 2020. Ms. Ohm served as the
Group Commercial Development Officer for the Dairy Farm Group supporting development, sourcing, branding and
packaging for private-label and exclusive brands in 7,000 retail outlets across 11 Southeast Asian countries. Ms.
Ohm also was the Chief Commercial Officer for Home Plus, the second largest retailer in Korea and led their
merchandising, sourcing and planning teams. Prior to these roles, she was Senior Vice President, General
Merchandise Manager for both Walmart and Sam’s Club and Vice President/Divisional Merchandise Manager,
Technology for Walmart Stores, Inc. Ms. Ohm began her career with General Electric in marketing, planning, brand
management and strategy development.
Charlie Pleas, III, 55—Senior Vice President and Controller, Customer Satisfaction
Charlie Pleas, III, was elected Senior Vice President and Controller during 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 during his tenure from 1988 to 1996. Prior to 1988, he
worked with Ernst & Young. Mr. Pleas is a member of the Board of Directors for Kirkland’s Inc.
Albert Saltiel, 56—Senior Vice President – Marketing and E-Commerce, Customer Satisfaction
Albert Saltiel was named Senior Vice President – Marketing and E-Commerce during October 2014. Previously, he
was elected Senior Vice President – Marketing since 2013. Prior to that, he was Chief Marketing Officer and a key
member of the leadership team at Navistar International Corporation. Mr. Saltiel has also been with Sony
Electronics as General Manager, Marketing, and Ford Motor Company where he held multiple marketing roles.
Richard C. Smith, 56—Senior Vice President – Human Resources, Customer Satisfaction
Richard C. Smith was elected Senior Vice President – Human Resources in December 2015. He has been an
AutoZoner since 1985, previously holding the position of Vice President of Stores since 1997. Prior thereto, he
served in various capacities within the Company.
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Kristen C. Wright, 44—Senior Vice President – General Counsel & Secretary, Customer Satisfaction
Kristen C. Wright was named Senior Vice President – General Counsel & Secretary effective January 2014. She
previously held the title of Vice President – Assistant General Counsel & Assistant Secretary since January 2012.
Before joining AutoZone, she was a partner with the law firm of Bass, Berry & Sims PLC.
Item 1A. Risk Factors
Our business is subject to a variety of risks and uncertainties. The risks and uncertainties described below could
materially and adversely affect our business, financial condition, operating results, cash flows and stock price. The
following information should be read in conjunction with the other information contained in this report and other
filings that we make with the SEC. These risks and uncertainties 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.
The ongoing outbreak of COVID-19 has been declared a pandemic by the World Health Organization,
continues to spread within the United States and many other parts of the world and may have a material
adverse effect on our business operations, financial condition, liquidity and cash flow.
As the outbreak of COVID-19 continues to grow both in the U.S. and globally, there has been significant volatility
in financial market indices and the adoption of emergency legislation aimed to address the negative impacts of the
pandemic. While sales were initially negatively impacted and we have incurred significant expenses, following the
U.S. federal government stimulus, our sales rebounded, reaching record levels. We are unable to accurately predict
the impact that COVID-19 will have on our business and financial condition due to numerous uncertainties,
including the severity of the disease, the duration of the outbreak, the likelihood of a resurgence of the outbreak,
actions that may be taken by governmental authorities in response to the disease and unintended consequences of the
foregoing. In particular, it is unclear what near-term and long-term impact these factors will have on the number of
vehicle miles driven, traffic to our stores, as well as demand for our products from our retail and commercial
customers. Continued business disruption caused by COVID-19 may require significant actions to mitigate the
impact, including but not limited to employee furloughs, reductions in store hours and store closings as well as
ongoing increases in expenses. Further, the continuing pandemic and related economic uncertainty may result in
prolonged disruption to our business, additional negative impacts of which we are not currently aware and may also
magnify other risks associated with our business and operations, including risks associated with sourcing quality
merchandise domestically and outside the U.S.; our ability to promptly adjust inventory levels to meet fluctuations
in customer demand; our ability to comply with complex and evolving laws and regulations related to customers’
and AutoZoners’ health and safety; our ability to open new store locations and expand or remodel existing stores;
and our ability to hire and train qualified employees to address temporary or sustained labor shortages. Accordingly,
the COVID-19 pandemic could have a material adverse effect on demand for our products, workforce availability
and our results of operations, financial condition, liquidity and cash flows.
If demand for our products slows, then our business may be materially adversely affected.
Demand for the products we sell may be affected by a number of factors we cannot control, including:
•
•
the number of older vehicles in service. Vehicles seven years old or older are generally no longer under
the original vehicle manufacturers’ warranties and tend to need more maintenance and repair than newer
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
and may drive their vehicles less, resulting in less wear and tear and lower demand for repairs and
maintenance.
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•
•
•
•
•
the economy. In periods of declining economic conditions, consumers may reduce their discretionary
spending by deferring 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 vehicles instead of working on their own vehicles,
or they may purchase new vehicles.
the weather. Milder weather conditions may lower the failure rates of automotive parts, while extended
periods of rain and winter precipitation 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, such as electric vehicles, and parts design
can result in cars needing maintenance less frequently and parts lasting longer.
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, ride sharing 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.
restrictions on access to telematics and diagnostic tools and repair information imposed by the original
vehicle manufacturers or by governmental regulation. These restrictions may cause vehicle owners to rely
on dealers to perform maintenance and repairs.
These factors could result in a decline in the demand for our products, which could adversely affect our business 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 sales volumes are
dependent on many factors, including name recognition, product availability, customer service, store location and
price. Competitors are opening locations near our existing locations. AutoZone competes as a provider in both the
DIY and DIFM auto parts and accessories markets.
Our competitors include national, regional and local auto parts chains, independently owned parts stores, online
automotive parts stores or marketplaces, wholesale distributors, jobbers, repair shops, car washes and auto dealers,
in addition to discount and mass merchandise stores, hardware stores, supermarkets, drugstores, convenience stores,
home stores, and other retailers 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 of our 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. Online and multi-channel retailers often
focus on delivery services, offering customers faster, guaranteed delivery times and low-price or free shipping.
Some online businesses have lower operating costs than we do. In addition, because our business strategy is based
on offering superior levels of customer service to complement the products we offer, our cost structure is higher than
some of our competitors, which also puts pressure on our margins.
Consumers are embracing shopping online and through mobile commerce applications. With the increasing use of
digital tools and social media, and our competitors’ increased focus on optimizing customers’ online experience, our
customers are quickly able to compare prices, product assortment and feedback from other customers before
purchasing our products either online, in the physical stores or through a combination of both offerings.
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We believe that we compete effectively on the basis of merchandise availability as a result of investments in
inventory available for immediate sale, the development of a robust hub and mega hub distribution network
providing efficient access to obtain products required on-demand, options to order products online or by telephone
and pick them up in stores and options for special orders directly from our vendors. We also offer hassle-free returns
to our customers. In addition, we believe that customers value the personal interaction with a salesperson that is
qualified to offer trustworthy advice and provide other free services such as parts testing.
We also utilize promotions, advertising and our loyalty programs to drive customer traffic and compete more
effectively, and we must regularly assess and adjust our efforts to address changes in the competitive marketplace. If
we are unable to continue to manage readily-available inventory demand and competitive delivery options as well as
develop successful competitive strategies, including the maintenance of effective promotions, advertising and
loyalty programs, or if our competitors develop more effective strategies, we could lose customers and our sales and
profits may decline.
We may not be able to sustain our historic rate of sales growth.
We have increased our store count in the past five fiscal years, growing from 5,609 stores at August 29, 2015, to
6,549 stores at August 29, 2020, an average store increase per year of three percent. Additionally, we have increased
annual revenues in the past five fiscal years from $10.187 billion in fiscal 2015 to $12.632 billion in fiscal 2020, an
average increase per year of five percent. Annual revenue growth is driven by the opening of new stores, the
development of new commercial programs and increases in same store sales. We open new stores only after
evaluating customer buying trends and market demand/needs, all of which could be adversely affected by persistent
unemployment, 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 economic 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.
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Consolidation among our competitors may negatively impact our business.
Historically some of our competitors have merged. Consolidation among our competitors could enhance their
market share and financial position, provide them with the ability to achieve better purchasing terms and provide
more competitive prices to customers for whom we compete, and allow them to utilize merger synergies and cost
savings to increase advertising and marketing budgets to more effectively compete for customers. Consolidation by
our competitors could also increase their access to local market parts assortment.
These consolidated competitors could take sales volume away from us in certain markets, could achieve greater
market penetration, could cause us to change our pricing with a negative impact on our margins or could cause us to
spend more money to maintain customers or seek new customers, all of which could negatively impact our business.
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, we must effectively compete
against national and regional auto parts chains, independently owned parts stores, wholesalers and jobbers in order
to increase our commercial market share. Although we believe we compete effectively in the commercial market 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
participants have been in business for substantially longer periods of time than we have, and as a result 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.
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Our business depends upon hiring, training and retaining qualified employees.
We believe that much of our brand value lies in the quality of the approximately 100,000 AutoZoners employed in
our stores, distribution centers, store support centers and ALLDATA. Our workforce costs represent our largest
operating expense, and our business is subject to employment laws and regulations, including requirements related
to minimum 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 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 is a risk of market increases in compensation.
If we are unable to hire, properly train and retain qualified employees, we could experience higher employment
costs, reduced sales, regulatory noncompliance, losses of customers and diminution of our 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.
Inability to acquire and provide quality merchandise at competitive prices could adversely affect our sales
and results of operations.
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
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. 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. 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 rebuild our reputation and regain the confidence of our customers. Moreover, our
vendors are impacted by global economic conditions. Credit market and other macroeconomic conditions, including
disruption to the global supply chain, could have a material adverse effect on the ability of our suppliers to finance
and operate their businesses, resulting in increased product costs and difficulties in meeting our inventory demands.
If we experience transitions or changeover 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.
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Risks associated with products sourced outside the U.S.
We directly imported approximately 13% of our purchases in fiscal 2020, but many of our domestic vendors directly
import their products or components of their products. Changes to the price or flow of these goods for any reason,
such as civil unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes and
economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of
suppliers, failure to meet our standards, issues with labor practices of our suppliers or labor problems they may
experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the
disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise
quality or safety issues, transport availability and cost, increases in wage rates and taxes, transport security, inflation
and other factors relating to the suppliers and the countries in which they are located or from which they import,
often are beyond our control and could adversely affect our operations and profitability. 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, such as the
COVID-19 pandemic, 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 location openings, existing location 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 locations and expand
and remodel existing locations to meet customers’ needs on a timely and profitable basis. Accomplishing our new
and existing location 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 locations at acceptable costs, the hiring and
training of qualified personnel and the integration of new locations into existing operations. There can be no
assurance we will be able to achieve our location expansion goals, manage our growth effectively, successfully
integrate the planned new locations into our operations or operate our new, remodeled and expanded locations
profitably.
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In addition, we extensively utilize our hub network, our supply chain and logistics management techniques to
efficiently stock our locations. We have made, and plan to continue to make, significant investments in our supply
chain to improve our ability to provide the best parts at the right price and to meet consumer product needs. 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 locations or increases in our operating costs, which could adversely
affect our sales volume and/or our margins.
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 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 areas 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
dispersed. Our reputation could be impacted if customers have a bad experience and share it over social media.
17
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. Failure to comply with applicable 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. If we fail to comply with existing or future laws or regulations, we may be subject to governmental or
judicial fines or sanctions, while incurring substantial legal fees and costs. In addition, our capital and operating
expenses could increase due to implementation of and compliance with existing and future laws and regulations or
remediation measures that may be required if we are found to be noncompliant with any existing or future laws or
regulations. The inability to pass through any increased expenses through higher prices would have an adverse effect
on our results of operations.
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.
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.
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Failure to protect or effectively respond to a breach of the privacy and security of customers’, suppliers’,
AutoZoners’ or Company information could damage our reputation, subject us to litigation, and cause us to
incur substantial costs.
Our business, like that of most retailers and distributors, involves the receipt, storage and transmission of personal
information about our customers, suppliers and AutoZoners, some of which is entrusted to third-party service
providers and vendors. Failure to protect the security of our customers’, suppliers’, employees’ and Company
information could subject us to costly regulatory enforcement actions, expose us to litigation and impair our
reputation, which may have a negative impact on our sales. We consider information security to be a top priority and
undertake cyber-security planning and activities throughout the Company. Senior management and the Board of
Directors are actively engaged in cyber-security risk management. While we and our third-party service providers
and vendors take significant steps to protect customer, supplier, employee and other confidential information,
including maintaining compliance with payment card industry standards and a security program that includes
updating technology and security policies, employee training and monitoring and routine testing of our systems,
these security measures may be breached in the future due to cyber-attack, employee error, system compromises,
fraud, trickery, hacking or other intentional or unintentional acts, and unauthorized parties may obtain access to this
data. We believe that our preventative actions provide adequate measures of protection against security breaches and
generally reduce our cyber-security risks. However, our business or our third party providers, with which we share
sensitive information, may not discover a security breach or loss of information for a significant period after the
security breach occurs. Failure to effectively respond to system compromises may undermine our security measures.
The methods used to obtain unauthorized access are constantly evolving and may be difficult to anticipate or detect
for long periods of time. To date, we have not experienced a material breach of cyber-security; however, our
computer systems have been, and will likely continue to be, subjected to unauthorized access or phishing attempts,
computer viruses, malware, ransomware or other malicious codes. As the regulatory environment related to
information security, data collection and use, and privacy becomes increasingly rigorous, compliance with these
requirements could also result in significant additional costs. There can be no assurance that our security measures
will prevent or limit the impact of a future incident. The cost to remediate damages to our systems suffered as a
result of a cyber-attack could be significant.
We accept payments using a variety of methods, including cash, checks, credit, debit, electronic payments (such as
PayPal, Apple Pay, etc.) and gift cards, and we may offer new payment options over time, which may have
information security risk implications. As a retailer accepting debit and credit cards for payment, we are subject to
various industry data protection standards and protocols, such as the American National Standards Institute
encryption standards and payment network security operating guidelines and Payment Card Industry Data Security
Standard. Even though we comply with these standards and protocols and other information security measures, we
cannot be certain that the security measures we maintain to protect all of our information technology systems are
able to prevent, contain or detect any cyber-attacks, cyber terrorism, or security breaches from known cyber-attacks
or malware that may be developed in the future. We maintain insurance coverage that may protect us from certain
cyber-attack claims; however, our insurance coverage may not be sufficient to cover significant losses in any
particular situation.
To the extent that any cyber-attack or intrusion in our or one of our third-party service provider’s information
systems results in the loss, damage or misappropriation of information, we may be materially adversely affected by
claims from customers, financial institutions, regulatory authorities, payment card networks and others. In certain
circumstances, payment card association rules and obligations to which we are subject under our contracts with
payment card processors make us liable to payment card issuers if information in connection with payment cards
and payment card transactions that we hold is compromised, which liabilities could be substantial. In addition, the
cost of complying with stricter and more complex data privacy, data collection and information security laws and
standards could be significant to us.
We have invested in information-technology risk management and disaster recovery plans. Although these plans are
in place, we must provide ongoing monitoring and consistently revise our plans as technologies change rapidly and
our efforts to overcome security risks continue to become increasingly more complex and concentrated.
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We rely heavily on our information technology systems for our key business processes. Any failure or
interruption in these systems could have a material adverse impact on our business.
We rely extensively on our information technology systems, some of which are managed or provided by third-party
service providers, to manage inventory, communicate with customers, process transactions and summarize results.
Our systems and the third-party systems we rely on are subject to damage or interruption from power outages,
facility damage, physical theft, telecommunications failures, computer viruses, security breaches, malicious cyber-
attacks, catastrophic events, and design or usage errors by our AutoZoners, contractors or third-party service
providers. Although we and our third-party service providers work diligently to maintain our respective systems, we
may not be successful in doing so.
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.
We are in the process of developing and implementing various information systems, as well as modifying existing
systems. These technological changes will require significant investment of human and financial resources, and we
may experience significant delays, costs increases and other obstacles with these projects. Although we have
invested significant resources during our planning, project management and training, implementation issues may
arise which may disrupt our operations and negatively impact our business operations, financial condition and cash
flows.
Business interruptions may negatively impact our location 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 or civil unrest, unusual weather conditions, hurricanes, tornadoes, windstorms,
fires, earthquakes, floods, global health epidemics (such as COVID-19) and other natural or other disasters or the
threat of any of them, may result in certain of our locations being closed for a period of time or permanently or have
a negative impact on our ability to obtain merchandise available for sale in our locations. Some of our merchandise
is imported from other countries. If imported goods become difficult or impossible to bring into the U.S., 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 transporting merchandise to our distribution centers and locations 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 are self-insured for certain costs associated with our operations and an increase in our insurance claims
and expenses may have a material negative impact on us.
We are self-insured up to certain limits for workers’ compensation, employee group medical, general liability,
product liability, property and automobile. The types and amounts of insurance may vary from time to time based on
our decisions with respect to risk retention and regulatory requirements. Our reserves are established using historical
trends and where appropriate, using a third party actuary, to estimate costs to settle reported claims and claims
incurred but not yet reported. Estimated costs are subject to a variety of assumptions and other factors including the
severity, duration and frequency of claims, legal costs associated with claims, healthcare trends and projected
inflation of related factors. Material increases in the number of insurance claims, changes to healthcare costs,
accident frequency and severity, legal expenses and other factors could result in unfavorable difference between
actual self-insurance costs and our reserve estimates. As a result, our self-insurance costs could increase which may
adversely affect our business, results of operations, financial condition and cash flows.
20
General Risk Factors
A downgrade in our credit ratings or a general disruption in the credit markets could make it more difficult
for us to access funds, refinance our debt, obtain new funding or issue debt securities.
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. A change by the rating
agencies in these 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 during the Great
Recession resulted in a severe loss of liquidity and availability of credit in global credit markets and in more
stringent borrowing terms. We can provide no assurance that such similar events that occurred during the Great
Recession will not occur again in the foreseeable future. Conditions and events in the global credit markets could
have a material adverse effect on our access to short-term and long-term debt and the terms and cost of that debt.
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.
We are subject to numerous federal, state and local laws and regulations, many of which are complex, frequently
revised and subject to varying interpretations. These include laws governing employment and labor, wage and hour,
environmental matters, proper handling and disposal of hazardous materials and waste, healthcare, data privacy,
cybersecurity, the pricing and sale of goods, import and export compliance and transportation and logistics, among
others. These laws may differ substantially in the areas where we operate. 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 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.
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.
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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. Job growth in the U.S. was stagnated and
unemployment was at historically high levels during the Great Recession. While in recent years, the unemployment
rate has improved to below pre-recession levels, unemployment has again reached historically high levels due to
COVID-19. Moreover, the U.S. government continues to operate under historically large deficits and debt burden.
Continued distress in global credit markets, business failures, inflation, foreign exchange rate fluctuations,
significant geo-political conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a
public health crisis or pandemic (such as COVID-19) 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.
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Item 2. Properties
The following table reflects the square footage and number of leased and owned properties for our stores as of
August 29, 2020:
Leased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Footage
Store Square
No. of
Stores
3,489 22,811,306
3,060 20,690,477
6,549 43,501,783
We have approximately 5.9 million square feet in distribution centers servicing our stores, of which approximately
1.9 million square feet is leased and the remainder is owned. Our 12 distribution centers are located in Arizona,
California, Florida, Georgia, Illinois, Ohio, Pennsylvania, Tennessee, Texas, Washington and two in Mexico. 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 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 that are not material in the aggregate.
Item 3. Legal Proceedings
In 2004, we 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 (“NJDEP”) and
entered into a Voluntary Remediation Agreement providing for the remediation of the contamination associated with
the property. We have conducted and paid for (at an immaterial cost to us) remediation of contamination on the
property.
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We have also voluntarily investigated and addressed potential vapor intrusion impacts in downgradient residences
and businesses. The NJDEP has asserted, in a Directive and Notice to Insurers dated February 19, 2013 and again in
an Amended Directive and Notice to Insurers dated January 13, 2014 (collectively the “Directives”), that we are
liable for the downgradient impacts under a joint and severable liability theory. By letter dated April 23, 2015,
NJDEP has demanded payment from us, and other parties, in the amount of approximately $296 thousand for costs
incurred by NJDEP in connection with contamination downgradient of the property. By letter dated January 29,
2016, we were informed that NJDEP has filed a lien against the property in connection with approximately $355
thousand in costs incurred by NJDEP in connection with contamination downgradient of the property. We have
contested, and will continue to contest, any such assertions due to the existence of other entities/sources of
contamination, some of which are named in the Directives and the April 23, 2015 demand letter, in the area of the
property. Pursuant to the Voluntary Remediation Agreement, upon completion of all remediation required by the
agreement, we believe we should be eligible to be reimbursed up to 75% of qualified remediation costs by the State
of New Jersey. We have asked the state for clarification that the agreement applies to off-site work. Although the
aggregate amount of additional costs that we may incur pursuant to the remediation cannot currently be ascertained,
we do not currently believe that fulfillment of our obligations under the agreement or otherwise will result in costs
that are material to our financial condition, results of operations or cash flows.
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.
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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 19, 2020, there
were 2,021 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 7, 2019, to increase the repurchase authorization by $1.250 billion, bringing total
value of authorized share repurchases to $23.15 billion.
During fiscal 2020, we temporarily ceased share repurchases under our share repurchase program to conserve
liquidity in response to the uncertainty related to COVID-19. While we have restarted share repurchases during the
first quarter of fiscal year 2021, we will continue to evaluate current and expected business conditions and adjust the
level of share repurchases under our share repurchase program as we deem appropriate.
The Company did not purchase any shares during the quarter ended August 29, 2020.
The Company also repurchased, at market value, an additional 8,287, 17,201 and 11,816 shares in fiscal years 2020,
2019 and 2018, respectively, from employees electing to sell their stock under the Company’s Sixth Amended and
Restated Employee Stock Purchase Plan (the “Employee Plan”), qualified under Section 423 of the Internal Revenue
Code, under which all eligible employees may purchase AutoZone’s common stock at 85% of the lower of the
market price of the common stock on the first day or last day of each calendar quarter through payroll deductions.
Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less.
Under the Employee Plan, 10,525, 11,011 and 14,523 shares were sold to employees in fiscal 2020, 2019 and 2018,
respectively. At August 29, 2020, 142,241 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 1,204, 1,483 and 1,840 shares in fiscal 2020, 2019 and 2018, respectively. At August 29, 2020, 235,361
shares of common stock were reserved for future issuance under the Executive Plan.
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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 29, 2015 and ending August 29, 2020.
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Item 6. Selected Financial Data
(in thousands, except per share data, same store sales and
selected operating data)
2020(1)
2019(2)
2018(3)
2017
2016
Fiscal Year Ended August
Income Statement Data
5,861,214
6,770,753
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,631,967
Cost of sales, including warehouse and delivery
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating, selling, general and administrative
4,353,074
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,417,679
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
201,165
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .
2,216,514
Income before income taxes . . . . . . . . . . . . . . . . . . . .
Income tax expense(4) . . . . . . . . . . . . . . . . . . . . . . . . .
483,542
Net income(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,732,972
Diluted earnings per share(4) . . . . . . . . . . . . . . . . . . . . $
71.93
Weighted average shares for diluted earnings
per share(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,093
$ 11,863,743
$ 11,221,077
$ 10,888,676
$ 10,635,676
5,498,742
6,365,001
5,247,331
5,973,746
5,149,056
5,739,620
5,026,940
5,608,736
4,148,864
2,216,137
184,804
2,031,333
414,112
$ 1,617,221
63.43
$
4,162,890
1,810,856
174,527
1,636,329
298,793
$ 1,337,536
48.77
$
3,659,551
2,080,069
154,580
1,925,489
644,620
$ 1,280,869
44.07
$
3,548,341
2,060,395
147,681
1,912,714
671,707
$ 1,241,007
40.70
$
25,498
27,424
29,065
30,488
Same Store Sales
Increase in domestic comparable store net sales(5) . . . .
7.4 %
3.0 %
1.8 %
0.5 %
2.4 %
Balance Sheet Data
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Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,811,872
Operating lease right-of-use assets(6) . . . . . . . . . . . . . .
2,581,677
528,781
Working capital (deficit) . . . . . . . . . . . . . . . . . . . . . . .
14,423,872
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,283,091
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,513,371
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease liabilities, less current portion(6) . . . . . . .
155,855
Operating lease liabilities, less current portion(6) . . . . .
2,501,560
(877,977)
Stockholders’ deficit . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,028,685
—
(483,456)
9,895,913
5,512,141
5,206,344
123,659
—
(1,713,851)
$ 4,635,869
—
(392,812)
9,346,980
5,028,681
5,005,930
102,013
—
(1,520,355)
$ 4,611,255
—
(155,046)
9,259,781
4,766,301
5,081,238
102,322
—
(1,428,377)
$ 4,239,573
—
(450,747)
8,599,787
4,690,320
4,924,119
102,451
—
(1,787,538)
Selected Operating Data
6,411
—
138
—
138
5
6,549
5,007
683
43,502
6,643
Number of locations at beginning of year . . . . . . . . . .
Sold locations(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed locations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net new locations . . . . . . . . . . . . . . . . . . . . . . . . . .
Relocated locations . . . . . . . . . . . . . . . . . . . . . . . . .
Number of locations at end of year . . . . . . . . . . . . . . . . .
AutoZone domestic commercial programs . . . . . . . . . . .
Inventory per location (in thousands) . . . . . . . . . . . . . . . $
Total AutoZone store square footage (in thousands) . . . .
Average square footage per AutoZone store . . . . . . . . . .
Increase in AutoZone store square footage . . . . . . . . . . .
Average net sales per AutoZone store (in thousands) . . . $
Net sales per AutoZone store average square foot . . . . . . $
Total employees at end of year (in thousands) . . . . . . . .
Inventory turnover(8) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable to inventory ratio . . . . . . . . . . . . . . . .
After-tax return on invested capital(9) . . . . . . . . . . . . . . .
Adjusted debt to EBITDAR(10) . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities
(in thousands)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,720,108
Cash flow before share repurchases and changes in debt
(in thousands)(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,185,418
Share repurchases (in thousands)(12) . . . . . . . . . . . . . . . . $
930,903
Number of shares repurchased (in thousands)(12) . . . . . . .
826
1.9
2.3 %
$
$
1,914
288
100
1.3x
115.3 %
38.1 %
$
6,202
—
209
—
209
2
6,411
4,893
674
42,526
6,633
$
6,029
26
201
2
199
7
6,202
4,741
636
41,066
6,621
$
5,814
—
215
—
215
5
6,029
4,592
644
39,684
6,611
$
5,609
—
205
—
205
6
5,814
4,390
625
38,198
6,600
3.6 %
$
$
1,847
279
96
1.3x
112.6 %
35.7 %
2.5
3.5 %
$
$
1,778
269
89
1.3x
111.8 %
32.1 %
2.5
3.9 %
$
$
1,756
266
87
1.4x
107.4 %
29.9 %
2.6
3.8 %
1,773
269
84
1.4x
112.8 %
31.3 %
2.5
$ 2,128,513
$ 2,080,292
$ 1,570,612
$ 1,641,060
$ 1,758,672
$ 2,004,896
2,182
$ 1,596,367
$ 1,592,013
2,398
$ 1,017,585
$ 1,071,649
1,495
$ 1,166,987
$ 1,452,462
1,903
26
(1) The 52 weeks ended August 29, 2020 was negatively impacted by the charges for additional Emergency-Time
Off ("ETO") benefit enhancement for eligible part-time and full-time hourly employees and other expenses in
response to COVID-19 of $83.9 million (pre-tax), recognized in the third and fourth quarters.
(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. See “Note L – Pension and Savings Plans” and “Note M – Sale of Assets” of the Notes to Consolidated
Financial Statements for more information. Fiscal 2018 also includes a benefit to net income related to the Tax
Cuts and Jobs Act (“Tax Reform”). See “Note D – Income Taxes” of the Notes to Consolidated Financial
Statements for more information.
(4) Fiscal 2020, 2019, 2018 and 2017 include excess tax benefits from stock option exercises of $20.9 million, $46.0
million, $31.3 million and $31.2 million, respectively, related to the adoption of Accounting Standards Update
(“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-based
Payment Accounting. The Company adopted ASU 2016-09 effective August 28, 2016 and applied the
recognition of excess tax deficiencies and tax benefits in the income statement on a prospective basis. Income
tax expense, net income and diluted earnings per share amounts presented for prior periods were not restated.
The Company applied ASU 2016-09 relating to the presentation of the excess tax benefits on the Consolidated
Statements of Cash Flows retrospectively. Prior period amounts for net cash provided by operating activities
for all years presented above were restated to conform to the current period presentation.
(5) The domestic comparable sales increases are based on sales for all AutoZone domestic stores open at least
one year. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store
sales computation based on the year the original store was opened. Closed store sales are included in the same
store sales computation up to the week it closes, and excluded from the computation for all periods subsequent
to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are
also included in the computation.
(6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23,
2019 which resulted in the Company recognizing a right-of-use asset (“ROU asset”) and a corresponding lease
liability on the balance sheet. See “Note A – Significant Accounting Policies”.
(7) 26 IMC branches were sold on April 4, 2018. See “Note M – Sale of Assets” of the Notes to Consolidated
Financial Statements for more information.
(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 2020, average debt is presented net of
excess cash of $374.2 million. For fiscal 2019, after-tax operating profit was adjusted for the impact of the
average revaluation of deferred tax liabilities, net of repatriation tax. 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 2020, adjusted debt is presented net of excess cash of $1.6 billion. For fiscal 2018, net
income was adjusted for impairment charges and pension termination charges before tax impact. See
Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
(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 ceased share repurchases under the share
repurchase program in response to COVID-19.
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27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We are the leading retailer, and a leading distributor, of automotive replacement parts and accessories in the
Americas. We began operations in 1979 and at August 29, 2020, operated 5,885 stores in the U.S., 621 stores in
Mexico and 43 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 29, 2020, in 5,007 of our domestic stores, we also had a commercial sales program
that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair
garages, dealers, service stations and public sector accounts. We also have commercial programs in all stores in
Mexico and Brazil. 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 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.
COVID-19 Impact
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The outbreak of a novel strain of the coronavirus (“COVID-19”), which was declared a global pandemic on March
11, 2020 by the World Health Organization, has led to adverse impacts on the national and global economy. We
have been able to keep our stores open and operating in the U.S. Initially, we reduced the hours of operation in most
stores, but subsequently have returned to more normal operating hours. We have also taken numerous measures to
ensure the health, safety and well-being of our customers and employees. We provided new Emergency Time-Off
benefit enhancements for both full-time and part-time eligible hourly employees in the U.S. We invested in supplies
for the protection of our employees and customers, increased the frequency of cleaning and disinfecting, and
introduced new service options for customers, such as curbside pickup, among other things. These expanded
benefits, supply costs and other COVID-19 related costs resulted in approximately $83.9 million of expense
included in Operating, selling, general and administrative expenses in the Condensed Consolidated Statements of
Income for the year ended August 29, 2020.
In March 2020, we issued $1.250 billion in Senior Notes and closed on a new 364-day Senior unsecured revolving
credit facility to strengthen our financial position and our ability to be responsive during this ever-changing
environment. We have also experienced challenges in recruiting and hiring employees in certain of our retail stores
and distribution centers.
While sales were initially negatively impacted, they have since increased to record levels. However, we are unable
to accurately predict the impact that COVID-19 will have due to numerous uncertainties, including the severity of
the disease, the duration of the outbreak, actions that may be taken by governmental authorities intended to
minimize the spread of the pandemic or to stimulate the economy or other unintended consequences. Accordingly,
continued business disruption related to the COVID-19 outbreak may continue to cause significant fluctuations in
our business, unusually impacting demand for our products, our store hours and our workforce availability and
magnify risks associated with sourcing quality merchandise domestically and outside the U.S. at competitive prices,
some of which would adversely impact our business and results of operations. Further, a resurgence of the outbreak
or other unforeseen developments may impede our ability to complete construction and open new stores at our
desired pace.
Our business is impacted by various factors within the economy that affect both our consumer and our industry,
including but not limited to fuel costs, wage rates and other economic conditions, including for fiscal 2020, COVID-
19. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will
continue, nor can we predict to what degree these trends will impact us in the future.
28
Executive Summary
For fiscal 2020, we achieved record net income of $1.733 billion, a 7.2% increase over the prior year, and sales
growth of $768.2 million, a 6.5% increase over the prior year. Domestic commercial sales increased 6.4%, which
represents 21.6% of our total sales. Fiscal 2020 consisted of 52 weeks whereas fiscal 2019 consisted of 53 weeks.
Both our retail sales and commercial sales grew this past year as we continue to make progress on our initiatives that
are aimed at improving our ability to say “Yes” to our customers more frequently, drive traffic to our stores and
accelerate our commercial growth.
Our business is impacted by various factors within the economy that affect both our consumer and our industry,
including but not limited to fuel costs, wage rates and other economic conditions, including for fiscal 2020, the
effects of, and responses to, COVID-19. Given the nature of these macroeconomic factors, we cannot predict
whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us
in the future.
One macroeconomic factor affecting our customers and our industry during fiscal 2020 was gas prices. During fiscal
2020, the average price per gallon of unleaded gasoline in the U.S. was $2.32 per gallon, compared to $2.63 per
gallon during fiscal 2019. We believe fluctuations in gas prices impact our customers’ level of disposable income.
With approximately 12 billion gallons of unleaded gas consumption each month across the U.S., each $1 decrease at
the pump contributes approximately $12 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 2020. Some of this is
attributed to regulatory changes in certain states and municipalities, while the larger portion is being driven by
general market pressures and some specific actions taken in recent years 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, but we are still assessing to what degree these changes will impact our
earnings growth in future periods.
During fiscal 2020, failure and maintenance related categories represented the largest portion of our sales mix, at
approximately 84% of total sales, with failure related categories continuing to comprise our largest set of categories.
While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in
our domestic stores we did experience a slight increase in mix of sales of the discretionary category as compared to
last year. We believe the improvement in this sales category resulted from the pandemic as many of our customers
had more time to work on projects. 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 that 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 2020 (latest publicly available information), miles driven in the U.S.
decreased by 8.8% compared to the same period in the prior year. We believe this decrease is a result of the
pandemic, but we are unable to predict if this decline will continue and are uncertain if it continues the impact it will
have to our business.
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29
Seven Year Old or Older Vehicles
New vehicles sales decreased 0.8% during 2020 as compared to the prior calendar year. 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, 2020, the average age of
vehicles on the road was 11.9 years. For the ninth consecutive year, the average age of vehicles has exceeded
11 years.
We expect the aging vehicle population to continue to increase as consumers keep their cars longer in an effort to
save money. 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.
Results of Operations
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Fiscal 2020 Compared with Fiscal 2019
For the fiscal year ended August 29, 2020, we reported net sales of $12.632 billion compared with $11.864 billion
for the year ended August 31, 2019, a 6.5% increase from fiscal 2019. This growth was driven primarily by a
domestic same store sales increase of 7.4% and net sales of $244.7 million from new stores. Same store sales are
computed on a 52-week basis. Domestic commercial sales increased $164.9 million, or 6.4%, over domestic
commercial sales for fiscal 2019.
At August 29, 2020, we operated 5,885 domestic stores, 621 in Mexico and 43 in Brazil, compared with 5,772
domestic stores, 604 in Mexico and 35 in Brazil at August 31, 2019. We reported a total auto parts segment
(domestic, Mexico and Brazil) sales increase of 6.5% for fiscal 2020.
Gross profit for fiscal 2020 was $6.771 billion, or 53.6% of net sales, a 5 basis point decrease compared with
$6.365 billion, or 53.7% of net sales for fiscal 2019. The decrease in gross margin was primarily attributable to
lower merchandise margins driven primarily by a shift in mix.
Operating, selling, general and administrative expenses for fiscal 2020 increased to $4.353 billion, or 34.5% of net
sales, from $4.149 billion, or 35.0% of net sales for fiscal 2019. The decrease in operating expenses, as a percentage
of sales, was primarily due to leverage from higher sales growth, partially offset by $83.9 million of costs incurred
in response to COVID-19.
Interest expense, net for fiscal 2020 was $201.2 million compared with $184.8 million during fiscal 2019. This
increase was primarily due to higher debt levels. Average borrowings for fiscal 2020 were $5.393 billion, compared
with $5.097 billion for fiscal 2019. Weighted average borrowing rates were 3.3% for fiscal 2020 and 3.2% for fiscal
2019.
Our effective income tax rate was 21.8% of pre-tax income for fiscal 2020 compared to 20.4% for fiscal 2019. The
increase in the tax rate was primarily attributable to a reduced benefit from stock options exercised during fiscal
2020 compared to fiscal 2019. The benefit of stock options exercised for fiscal 2020 was $20.9 million compared to
$46.0 million for fiscal 2019 (see “Note D – Income Taxes” in the Notes to Consolidated Financial Statements).
Net income for fiscal 2020 increased by 7.2% to $1.733 billion, and diluted earnings per share increased 13.4% to
$71.93 from $63.43 in fiscal 2019. Net income and diluted earnings per share for fiscal 2019 benefitted from an
additional week of sales. The impact on the fiscal 2020 diluted earnings per share from stock repurchases was an
increase of $1.59.
30
Fiscal 2019 Compared with Fiscal 2018
A discussion of changes in our results of operations from fiscal 2018 to fiscal 2019 has been omitted from this
Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of our Form 10-K for the fiscal year ended August 31, 2019, filed with the SEC on
October 28, 2019, which is available free of charge on the SECs website at www.sec.gov and at
www.autozone.com, by clicking “Investor Relations” located at the bottom of the page.
Quarterly Periods
Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks
in 2020, 17 weeks in 2019 and 16 weeks in 2018. 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 2020
represented 36.0% of annual sales and 42.7% of net income; the fourth quarter of fiscal year 2019 represented
33.6% of annual sales and 35.0% of net income; and the fourth quarter of fiscal year 2018 represented 31.7% of
annual sales and 29.9% of net income.
Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Reform”) was enacted into law. Tax Reform significantly
revises the U.S. federal corporate income tax by, among other things, lowering the statutory federal corporate rate
from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time transition tax on accumulated
earnings of foreign subsidiaries, and changing how foreign earnings are subject to U.S. federal tax. Also, in
December 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of
GAAP in situations when the registrant does not have the necessary information available, prepared or analyzed in
reasonable detail to complete the accounting for certain income tax effects of Tax Reform.
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During the year ended August 25, 2018, we recorded provisional tax benefit of $131.5 million related to Tax
Reform, comprised of $157.3 million remeasurement of its net Deferred Tax Asset (“DTA”), offset by $25.8 million
of transition tax. During the year ended August 31, 2019, we completed our analysis of Tax Reform and recorded
adjustments to the previously-recorded provisional amounts, resulting in an $8.8 million tax benefit, primarily
related to transition tax on accumulated earnings of foreign subsidiaries.
Beginning with the year ending August 31, 2019, we are subject to a new tax on global intangible low-taxed income
(“GILTI”) that is imposed on foreign earnings. We have made the election to record this tax as a period cost and
therefore, have not adjusted the deferred tax assets or liabilities of our foreign subsidiaries for the new tax. Net
impacts for GILTI are included in the provision for income taxes for the years ended August 29, 2020 and August
31, 2019.
Liquidity and Capital Resources
The primary source of our liquidity is our cash flows realized through the sale of automotive parts, products and
accessories. Net cash provided by operating activities was $2.720 billion in 2020, $2.129 billion in 2019 and $2.080
billion in 2018. Cash flows from operations are favorable compared to last year primarily due to growth in net
income due to accelerated sales growth as a result of the pandemic.
31
1
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K
Our net cash flows used in investing activities were $497.9 million in fiscal 2020, $491.8 million in fiscal 2019 and
$521.9 million in fiscal 2018. The increase in net cash used in investing activities in fiscal 2020, compared to fiscal
2019, was the result of an investment in a tax credit equity investment, partially offset by a decrease in capital
expenditures. We invested $457.7 million in capital assets in fiscal 2020, $496.1 million in fiscal 2019 and $521.8
million in fiscal 2018. We had 138 new location openings for fiscal 2020, 209 for fiscal 2019 and 201 for fiscal
2018. The decrease in capital expenditures from fiscal 2019 to fiscal 2020 was attributable to delayed store openings
in response to COVID-19. We invest a portion of our assets held by our wholly owned insurance captive in
marketable debt securities. We purchased $90.9 million in marketable debt securities in fiscal 2020, $55.5 million in
fiscal 2019 and $104.5 million in fiscal 2018. We had proceeds from the sale of marketable debt securities of $84.2
million in fiscal 2020, $53.1 million in fiscal 2019 and $69.6 million in fiscal 2018.
Net cash used in financing activities was $643.6 million in fiscal 2020, $1.674 billion in fiscal 2019 and
$1.632 billion in fiscal 2018. The net cash used in financing activities reflected purchases of treasury stock, which
totaled $930.9 million for fiscal 2020, $2.005 billion for fiscal 2019 and $1.592 billion for fiscal 2018. The decrease
in purchases of treasury stock for fiscal 2020 was due to the temporary suspension of the share repurchase program
in order to conserve liquidity in response to the uncertainty related to COVID-19. The treasury stock purchases in
fiscal 2020, 2019 and 2018 were primarily funded by cash flows from operations. The Company issued $1.850
billion of new debt in 2020, $750 million in fiscal 2019 and none in fiscal 2018. In fiscal 2020 the proceeds from the
issuance of debt were used for general corporate purposes, repayment of our outstanding commercial paper and
repayment of our $500 million Senior Notes due in November 2020 which were callable at par in August 2020 . In
fiscal 2019 the proceeds from the issuance of debt were used to repay a portion of our outstanding commercial paper
borrowings, our $250 million Senior Notes due in April 2019 and for general corporate purposes. In fiscal 2018, we
used commercial paper borrowings to repay our $250 million Senior Notes due in August 2018.
In fiscal 2020, we made net repayments of commercial paper and short term borrowings in the amount of $1.030
billion. Net repayments of commercial paper and short term borrowings for fiscal 2019 were $295.3 million and net
proceeds from the issuance of commercial paper and short-term borrowings for fiscal 2018 were $170.2 million.
During fiscal 2021, we expect to increase the investment in our business as compared to fiscal 2020. The expected
increase is driven by delays in capital spending for the third and fourth quarter of fiscal 2020 related to COVID-19.
Our investments are expected to be directed primarily to new locations, supply chain infrastructure, enhancements to
existing locations and investments in technology. The amount of investments in our new locations is impacted by
different factors, including such factors as whether the building and land are purchased (requiring higher
investment) or leased (generally lower investment), located in the United States, Mexico or Brazil, or located in
urban or rural areas. During fiscal 2020, 2019 and 2018 our capital expenditures decreased from the prior fiscal year
by approximately 8%, 5% and 6%, respectively.
In addition to building and land costs, our new locations require working capital, predominantly for inventories.
Historically, we have negotiated extended payment terms from suppliers, reducing the working capital required and
resulting in a high accounts payable to inventory ratio. We plan to continue leveraging our inventory purchases;
however, our ability to do so may be limited by our vendors’ capacity to factor their receivables from us. Certain
vendors participate in arrangements with financial institutions whereby they factor their AutoZone receivables,
allowing them to receive early payment from the financial institution on our invoices at a discounted rate. The terms
of these agreements are between the vendor and the financial institution. Upon request from the vendor, we confirm
to the vendor’s financial institution the balances owed to the vendor, the due date and agree to waive any right of
offset to the confirmed balances. A downgrade in our credit or changes in the financial markets may limit the
financial institutions’ willingness to participate in these arrangements, which may result in the vendor wanting to
renegotiate payment terms. A reduction in payment terms would increase the working capital required to fund future
inventory investments. Extended payment terms from our vendors have allowed us to continue our high accounts
payable to inventory ratio. We had an accounts payable to inventory ratio of 115.3% at August 29, 2020 and 112.6%
at August 31, 2019. The increase from fiscal 2019 was primarily due to accelerated sales growth.
32
Depending on the timing and magnitude of our future investments (either in the form of leased or purchased
properties or acquisitions), we anticipate that we will rely primarily on internally generated funds and available
borrowing capacity to support a majority of our capital expenditures, working capital requirements and stock
repurchases. The balance may be funded through new borrowings. We anticipate that we will be able to obtain such
financing in view of our credit ratings and favorable experiences in the debt markets in the past.
Our cash balances are held in various locations around the world. As of August 29, 2020, and August 31, 2019, cash
and cash equivalents of $62.4 million and $49.9 million, respectively, were held outside of the U.S. and were
generally utilized to support the liquidity needs in our foreign operations.
For the fiscal year ended August 29, 2020, our after-tax return on invested capital (“ROIC”) was 38.1% as compared
to 35.7% for the comparable prior year period. ROIC is calculated as after-tax operating profit (excluding rent
charges) divided by invested capital (which includes a factor to capitalize operating leases). For fiscal 2020, ROIC
was presented net of average excess cash of $374.2 million. For fiscal 2019, after-tax operating profit was adjusted
for the Tax Reform’s impact on the revaluation of deferred tax liabilities, net of the repatriation tax. We use ROIC to
evaluate whether we are effectively using our capital resources and believe it is an important indicator of our overall
operating performance. Refer to the “Reconciliation of Non-GAAP Financial Measures” section for further details
of our calculation.
Debt Facilities
We entered into a Master Extension, New Commitment and Amendment Agreement dated as of November 18, 2017
(the “Extension Amendment”) to the Third Amended and Restated Credit Agreement dated as of November 18,
2016, as amended, modified, extended or restated from time to time (the “Revolving Credit Agreement”). Under the
Extension Amendment: (i) our borrowing capacity under the Revolving Credit Agreement was increased from $1.6
billion to $2.0 billion; (ii) the maximum borrowing under the Revolving Credit Agreement may, at our option,
subject to lenders approval, be increased from $2.0 billion to $2.4 billion; (iii) the termination date of the Revolving
Credit Agreement was extended from November 18, 2021 until November 18, 2022; and (iv) we have the option to
make one additional written request of the lenders to extend the termination date then in effect for an
additional year. Under the Revolving Credit Agreement, we may borrow funds consisting of Eurodollar loans, base
rate loans or a combination of both. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as
LIBOR plus the applicable percentage, as defined in the Revolving Credit Agreement, depending upon our senior,
unsecured, (non-credit enhanced) long-term debt ratings. Interest accrues on base rate loans as defined in the
Revolving Credit Agreement.
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On April 3, 2020, we entered into a 364-Day Credit Agreement (the “364-Day Credit Agreement”) to augment our
access to liquidity due to current macroeconomic conditions, specifically the pandemic, and supplement our existing
Revolving Credit Agreement. The 364-Day Credit Agreement provides for loans in the aggregate principal amount
of up to $750 million. The 364-Day Credit Agreement will terminate, and all amounts borrowed under the 364-Day
Credit Agreement will be due and payable, on April 2, 2021. Revolving loans under the 364-Day Credit Agreement
may be base rate loans, Eurodollar loans, or a combination of both, at our election.
As of August 29, 2020, we had no outstanding borrowings under each of our revolving credit agreements and had
$1.7 million of outstanding letters of credit under the Revolving Credit Agreement.
Under our revolving credit agreements, covenants include restrictions on liens, a maximum debt to earnings ratio, a
minimum fixed charge coverage ratio and a change of control provision that may require acceleration of the
repayment obligations under certain circumstances.
The Revolving Credit Agreement requires that our consolidated interest coverage ratio as of the last day of each
quarter shall be no less than 2.5:1. This ratio is defined as the ratio of (i) consolidated earnings before interest, taxes
and rents to (ii) consolidated interest expense plus consolidated rents. Our consolidated interest coverage ratio as of
August 29, 2020 was 6.1:1.
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As of August 29, 2020, the $250 million 2.500% Senior Notes due April 2021 are classified as long-term in the
accompanying Consolidated Balance Sheets as we have the ability and intent to refinance them on a long-term basis
through available capacity in our revolving credit agreements. As of August 29, 2020, we had $2.748 billion of
availability, before giving effect to commercial paper borrowings, under our $2.750 billion revolving credit
agreements which would allow us to replace these short-term obligations with long-term financing facilities.
We also maintain a letter of credit facility that allows us to request the participating bank to issue letters of credit on
our behalf up to an aggregate amount of $25 million. The letter of credit facility is in addition to the letters of credit
that may be issued under the Revolving Credit Agreement. As of August 29, 2020, we had $25.0 million in letters of
credit outstanding under the letter of credit facility which expires in June 2022.
In addition to the outstanding letters of credit issued under the committed facilities discussed above, we had $220.3
million in letters of credit outstanding as of August 29, 2020. These letters of credit have various maturity dates and
were issued on an uncommitted basis.
On August 14, 2020, we issued $600 million in 1.650% Senior Notes due January 2031 under our automatic shelf
registration statement on Form S-3, filed with the SEC on April 4, 2019 (File No. 333-230719) (the “2019 Shelf
Registration”). The 2019 Shelf Registration allows us to sell an indeterminate amount in debt securities to fund
general corporate purposes, including repaying, redeeming or repurchasing outstanding debt and for working capital,
capital expenditures, new store openings, stock repurchases and acquisitions. Proceeds from the debt issuance were
used for general corporate purposes, including the repayment of the $500 million in 4.000% Senior Notes due in
November 2020 that were callable at par in August 2020.
On March 30, 2020, we issued $500 million in 3.625% Senior Notes due April 2025 and $750 million in 4.000%
Senior Notes due April 2030 under the 2019 Shelf Registration. Proceeds from the debt issuance were used to repay
a portion of the outstanding commercial paper borrowings and for other general corporate purposes.
On April 18, 2019, we issued $300 million in 3.125% Senior Notes due April 2024 and $450 million in 3.750%
Senior Notes due April 2029 under the 2019 Shelf Registration. Proceeds from the debt issuance were used to repay
a portion of our outstanding commercial paper borrowings, the $250 million in 1.625% Senior Notes due in
April 2019 and for other general corporate purposes.
All Senior Notes are subject to an interest rate adjustment if the debt ratings assigned are downgraded (as defined in
the agreements). Further, the Senior Notes contain a provision that repayment may be accelerated if we experience a
change in control (as defined in the agreements). Our borrowings under our Senior Notes contain minimal
covenants, primarily restrictions on liens, sale and leaseback transactions and consolidations, mergers and the sale of
assets. All of the repayment obligations under our borrowing arrangements may be accelerated and come due prior
to the applicable scheduled payment date if covenants are breached or an event of default occurs.
As of August 29, 2020, we were in compliance with all covenants and expect to remain in compliance with all
covenants under our borrowing arrangements.
For the fiscal year ended August 29, 2020, our adjusted debt to earnings before interest, taxes, depreciation,
amortization, rent and share-based compensation expense (“EBITDAR”) ratio was 1.9:1 as compared to 2.5:1 as of
the comparable prior year end. We calculate adjusted debt as the sum of total debt, finance lease liabilities and rent
times six; and we calculate EBITDAR by adding interest, taxes, depreciation, amortization, rent and share-based
compensation expense to net income. For fiscal 2020, debt was presented net of excess cash, which ended the year
at $1.6 billion. We target our debt levels to a specified ratio of adjusted debt to EBITDAR in order to maintain our
investment grade credit ratings and believe this is important information for the management of our debt levels.
To the extent EBITDAR continues to grow in future years, we expect our debt levels to increase; conversely, if
EBITDAR declines, we would expect our debt levels to decrease. Refer to the “Reconciliation of Non-GAAP
Financial Measures” section for further details of our calculation.
34
Stock Repurchases
During 1998, we announced a program permitting us to repurchase a portion of our outstanding shares not to exceed
a dollar maximum established by our Board of Directors (the “Board”). On October 7, 2019, the Board voted to
authorize the repurchase of an additional $1.25 billion of our common stock in connection with our ongoing share
repurchase program. Since the inception of the repurchase program in 1998, the Board has authorized $23.15 billion
in share repurchases. From January 1998 to August 29, 2020, we have repurchased a total of 147.7 million shares at
an aggregate cost of $22.354 billion. We repurchased 826 thousand shares of common stock at an aggregate cost of
$930.9 million during fiscal 2020, 2.2 million shares of common stock at an aggregate cost of $2.005 billion during
fiscal 2019 and 2.4 million shares of common stock at an aggregate cost of $1.592 billion during fiscal 2018. The
decrease in purchases of treasury stock for fiscal 2020 was due to the temporary suspension of the share repurchase
program in order to preserve cash as a result of the uncertainty related to the pandemic. Considering cumulative
repurchases as of August 29, 2020, we had $795.9 million remaining under the Board’s authorization to repurchase
our common stock.
For the fiscal year ended August 29, 2020, cash flow before share repurchases and changes in debt was $2.185
billion as compared to $1.759 billion during the comparable prior year period. Cash flow before share repurchases
and changes in debt is calculated as the net increase or decrease in cash and cash equivalents less net increases or
decreases in debt plus share repurchases. We use cash flow before share repurchases and changes in debt to calculate
the cash flows remaining and available. We believe this is important information regarding our allocation of
available capital where we prioritize investments in the business and utilize the remaining funds to repurchase
shares, while maintaining debt levels that support our investment grade credit ratings. Refer to the “Reconciliation
of Non-GAAP Financial Measures” section for further details of our calculation.
During fiscal 2020, we temporarily ceased share repurchases under our share repurchase program to conserve
liquidity in response to the uncertainty related to COVID-19. While we have restarted share repurchases during the
first quarter of fiscal year 2021, we will continue to evaluate current and expected business conditions and adjust the
level of share repurchases under our share repurchase program as we deem appropriate.
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Subsequent to August 29, 2020, we have repurchased 269,795 shares of common stock at an aggregate cost of
$314.4 million. Considering the cumulative repurchases subsequent to August 29, 2020, we have $481.5 million
remaining under the Board’s authorization to repurchase its common stock.
Financial Commitments
The following table shows our significant contractual obligations as of August 29, 2020:
(in thousands)
Total
Contractual
Obligations
Less than
1 year
Payment Due by Period
Between
3‑5 years
Between
1‑3 years
Over
5 years
Debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,550,000 $ 250,000 $ 1,300,000 $ 1,200,000 $ 2,800,000
Interest payments(2) . . . . . . . . . . . . . . . . .
329,450
Operating leases(3) . . . . . . . . . . . . . . . . . .
2,055,365
Finance leases(4) . . . . . . . . . . . . . . . . . . . .
44,765
Self-insurance reserves(5) . . . . . . . . . . . . .
40,003
—
Construction commitments . . . . . . . . . . .
$ 10,729,023 $ 941,250 $ 2,448,051 $ 2,070,139 $ 5,269,583
1,093,138
3,534,369
251,380
249,273
50,863
181,275
302,890
69,013
87,209
50,863
327,238
632,719
102,565
85,529
—
255,175
543,395
35,037
36,532
—
(1) Debt balances represent principal maturities, excluding interest, discounts, and debt issuance costs.
(2) Represents obligations for interest payments on long-term debt.
(3) We adopted ASU 2016-02, Leases (Topic 842), beginning with our first quarter ended November 23, 2019
which resulted in us recognizing a right-of-use asset (“ROU asset”) and a corresponding lease liability on the
balance sheet. See “Note A – Significant Accounting Policies” of Item 8.
(4) Finance lease obligations include related interest.
35
(5) Self-insurance reserves reflect estimates based on actuarial calculations and are presented net of insurance
receivables. Although these obligations do not have scheduled maturities, the timing of future payments are
predictable based upon historical patterns. Accordingly, we reflect the net present value of these obligations in
our Consolidated Balance Sheets.
Our tax liability for uncertain tax positions, including interest and penalties, was $23.0 million at August 29, 2020.
Approximately $2.0 million is classified as current liabilities and $21.0 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 29, 2020:
(in thousands)
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surety bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Other
Commitments
$
$
246,921
56,655
303,576
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A substantial portion of the outstanding standby letters of credit (which are primarily renewed on an annual basis)
and surety bonds are used to cover reimbursement obligations to our workers’ compensation carriers.
There are no additional contingent liabilities associated with these instruments as the underlying liabilities are
already reflected in our Consolidated Balance Sheets. The standby letters of credit and surety bond arrangements
expire within one year but have automatic renewal clauses.
Reconciliation of Non-GAAP Financial Measures
“Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” include certain financial measures not derived in accordance with generally accepted accounting
principles (“GAAP”). These non-GAAP financial measures provide additional information for determining our
optimum capital structure and are used to assist management in evaluating performance and in making appropriate
business decisions to maximize stockholders’ value.
Non-GAAP financial measures should not be used as a substitute for GAAP financial measures, or considered in
isolation, for the purpose of analyzing our operating performance, financial position or cash flows. However, we
have presented the non-GAAP financial measures, as we believe they provide additional information that is useful to
investors as it indicates more clearly our comparative year-to-year operating results. Furthermore, our management
and Compensation Committee of the Board use the above-mentioned non-GAAP financial measures to analyze and
compare our underlying operating results and use select measurements to determine payments of performance-based
compensation. We have included a reconciliation of this information to the most comparable GAAP measures in the
following reconciliation tables.
36
Reconciliation of Non-GAAP Financial Measure: Cash Flow Before Share Repurchases and Changes in Debt
The following table reconciles net increase (decrease) in cash and cash equivalents to cash flow before share
repurchases and changes in debt, which is presented in “Selected Financial Data” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”:
(in thousands)
Net cash provided by/(used in):
2020
Fiscal Year Ended August
2018
2017
2019
2016
Operating activities(1) . . . . . . . . . . . . . . $ 2,720,108 $ 2,128,513 $ 2,080,292 $ 1,570,612 $ 1,641,060
(505,835)
Investing activities . . . . . . . . . . . . . . . .
Financing activities(1) . . . . . . . . . . . . . .
(1,116,528)
Effect of exchange rate changes on
cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(491,846)
(1,674,088)
(521,860)
(1,632,154)
(553,599)
(914,329)
(497,875)
(643,636)
(4,082)
(4,103)
(1,724)
(4,272)
852
Net increase/(decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . .
Less: increase/(decrease) in debt,
excluding deferred financing costs . . . . .
Plus: Share repurchases(2) . . . . . . . . . . . .
Cash flow before share repurchases
and changes in debt . . . . . . . . . . . . . . . . . $ 2,185,418 $ 1,758,672 $ 1,596,367 $ 1,017,585 $ 1,166,987
204,700
2,004,896
(79,800)
1,592,013
157,600
1,071,649
299,900
1,452,462
320,000
930,903
1,574,515
103,536
(41,524)
(75,446)
14,425
(1) The Company adopted the provisions of ASU 2016-09, Compensation – Stock Compensation (Topic 718):
Improvement to Employee Share-based Payment Accounting, as of August 28, 2016.
(2) During the third quarter of fiscal 2020, the Company temporarily ceased share repurchases under the share
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repurchase program in response to COVID-19.
37
Reconciliation of Non-GAAP Financial Measure: Adjusted After-tax ROIC
The following table calculates the percentage of ROIC. ROIC is calculated as after-tax operating profit (excluding
rent) divided by invested capital (which includes a factor to capitalize operating leases). The ROIC percentages are
presented in “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”:
(in thousands, except percentages)
2020
2019(1)
2018(2)
2017
2016
Fiscal Year Ended August
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments:
Impairment before tax . . . . . . . . . . . . . . . . . . . . .
Pension termination charges before tax . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent expense(3) . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities, net of repatriation tax(5) . .
Adjusted after-tax return . . . . . . . . . . . . . . . . . . . . . . $
1,732,972 $
1,617,221 $
1,337,536 $
1,280,869 $
1,241,007
—
—
201,165
329,783
(115,747)
—
2,148,173
—
—
184,804
332,726
(105,576)
(6,340)
2,022,835
$
193,162
130,263
174,527
315,580
(211,806)
(132,113)
1,807,149
—
—
154,580
302,928
(153,265)
—
1,585,112
$
$
—
—
147,681
280,490
(150,288)
—
1,518,890
$
Average debt(6)(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Average stockholders’ deficit(6) . . . . . . . . . . . . . . . . .
Add: Rent x 6(3)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average finance lease liabilities(6) . . . . . . . . . . . . . . .
Invested capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,001,194
(1,542,355)
1,978,696
203,998
5,641,533
$
5,126,286
(1,615,339)
1,996,358
162,591
5,669,896
$
$
5,013,678
(1,433,196)
1,893,480
156,198
5,630,160
$
$
5,061,502
(1,730,559)
1,817,568
150,066
5,298,577
$
$
4,820,402
(1,774,329)
1,682,940
131,008
4,860,021
$
Adjusted after-tax ROIC . . . . . . . . . . . . . . . . . . . . . .
38.1 %
35.7 %
32.1 %
29.9 %
31.3 %
Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to EBITDAR
The following table calculates the ratio of adjusted debt to EBITDAR. Adjusted debt to EBITDAR is calculated as
the sum of total debt, financing lease liabilities and annual rents times six; divided by net income plus interest, taxes,
depreciation, amortization, rent and share-based compensation expense. The adjusted debt to EBITDAR ratios are
presented in “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”:
(in thousands, except ratios)
2020
2019(1)
Fiscal Year Ended August
2018(2)
2017
2016
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1,732,972 $
1,617,221 $
1,337,536 $
1,280,869 $
—
—
184,804
414,112
2,216,137
369,957
332,726
43,255
2,962,075
5,206,344
179,905
1,996,358
7,382,607
2.5
193,162
130,263
174,527
298,793
2,134,281
345,084
315,580
43,674
2,838,619
5,005,930
154,303
1,893,480
7,053,713
2.5
$
$
$
—
—
154,580
644,620
2,080,069
323,051
302,928
38,244
2,744,292
5,081,238
150,456
1,817,568
7,049,262
2.6
$
$
$
$
$
$
$
$
$
1,241,007
—
—
147,681
671,707
2,060,395
297,397
280,490
39,825
2,678,107
4,924,119
147,285
1,682,940
6,754,344
2.5
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Add: Impairment before tax . . . . . . . . . . . . . . . . . . . .
Pension termination charges before tax . . . . . . .
Add: Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . .
Adjusted EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Depreciation expense . . . . . . . . . . . . . . . . . . . .
Rent expense(3) . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based expense . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDAR . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
—
201,165
483,542
2,417,679
397,466
329,783
44,835
3,189,763
Debt(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing lease liabilities . . . . . . . . . . . . . . . . . . . . .
Add: Rent x 6(3)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted debt to EBITDAR . . . . . . . . . . . . . . . . . . . .
$
$
3,957,186
223,353
1,978,696
6,159,235
1.9
38
(1) The fiscal year ended August 31, 2019 consisted of 53 weeks.
(2) For fiscal 2018, after-tax operating profit was adjusted for impairment charges and pension settlement charges.
(3) 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. The
table below outlines the calculation of rent expense and reconciles rent expense to total lease cost, per ASC
842, the most directly comparable GAAP financial measure, for the 52 weeks ended, August 29, 2020.
Total lease cost, per ASC 842, for the 52 weeks ended August 29, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Finance lease interest and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Variable operating lease components, related to insurance and common area maintenance for the 52
weeks ended August 29, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent expense for the 52 weeks ended August 29, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
415,505
(60,275)
(25,447)
329,783
(4) For fiscal 2020 and 2019, the effective tax rate was 21.8% and 20.4%, respectively. The effective tax rate
during fiscal 2018 was 24.2% for impairment, 28.1% for pension termination and 26.2% for interest and rent
expense. For fiscal 2017 and 2016 the effective tax rate was 33.5% and 35.1%, respectively.
(5) For fiscal 2019 and 2018, after-tax operating profit was adjusted for the impact of the revaluation of deferred
tax liabilities, net of repatriation tax.
(6) All averages are computed based on trailing five quarters.
(7) Average debt is presented net of average excess cash of $374.2 million.
(8) Rent is multiplied by a factor of six to capitalize operating leases in the determination of pre-tax invested
capital.
(9) The Company ended fiscal 2020 with excess cash of $1.6 billion. Debt is presented net of excess cash.
Recent Accounting Pronouncements
See Note A of the Notes to Consolidated Financial Statements for a discussion on recent accounting
pronouncements.
Critical Accounting Policies and Estimates
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 $288.6 million at August 29, 2020, and $207.0 million at August
31, 2019. This change is primarily reflective of our growing operations, including inflation, increases in healthcare
costs, the number of vehicles and the number of hours worked, as well as our historical claims experience. Where
estimable, losses covered by insurance are recognized on a gross basis with a corresponding insurance receivable.
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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
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 materially 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 $22.4
million for fiscal 2020.
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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 $1.4 million for fiscal 2020.
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 29, 2020, we had approximately $23.0 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 that could be material. 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 materially affected.
40
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 85% of the vendor funds
received during fiscal 2020 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
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. Historically,
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.
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 $6.081 billion as of August 29, 2020, and $5.419 billion as of August 31,
2019, based on the quoted market prices for the same or similar debt issues or on the current rates available to us for
debt having the same remaining maturities. Such fair value is greater than the carrying value of debt by $567.5
million at August 29, 2020, which reflects its face amount, adjusted for any unamortized debt issuance costs and
discounts. At August 31, 2019, the fair value was greater than the carrying value of debt by $212.7 million.
We had no variable rate debt outstanding at August 29, 2020, and $1.030 billion of variable rate debt outstanding at
August 31, 2019.
We had outstanding fixed rate debt of $5.513 billion, net of unamortized debt issuance costs of $36.6 million, at
August 29, 2020, and $4.176 billion, net of unamortized debt issuance costs of $23.7 million, at August 31, 2019. A
one percentage point increase in interest rates would have reduced the fair value of our fixed rate debt by
approximately $318.7 million at August 29, 2020.
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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 $293.1 million at August 29, 2020 and $328.8 million at August 31, 2019. The year-end
exchange rates with respect to the Mexican peso decreased by approximately 10% and approximately 7% with
respect to the U.S. dollar during fiscal 2020 and fiscal 2019, respectively. The loss in value of our net assets in the
Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange
rates at August 29, 2020 and August 31, 2019, would have been approximately $26.6 million and approximately
$29.9 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.
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Item 8. Financial Statements and Supplementary Data
Index
Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Consolidated Statements of Stockholders’ Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). Our internal
control over financial reporting includes, among other things, defined policies and procedures for conducting and
governing our business, sophisticated information systems for processing transactions and properly trained staff.
Mechanisms are in place to monitor the effectiveness of our internal control over financial reporting, including
regular testing performed by the Company’s internal audit team. Actions are taken to correct deficiencies as they are
identified. Our procedures for financial reporting include the active involvement of senior management, our Audit
Committee and a staff of highly qualified financial and legal professionals.
Management, with the participation of our principal executive and financial officers, assessed our internal control
over financial reporting as of August 29, 2020, 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 29, 2020.
Our independent registered public accounting firm, Ernst & Young LLP, 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 29, 2020 is included in this Annual Report on Form 10-K.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of AutoZone, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited AutoZone Inc.’s internal control over financial reporting as of August 29, 2020, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, AutoZone, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of August 29, 2020, based
on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of August 29, 2020 and August 31, 2019, and
the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for each
of the three years in the period ended August 29, 2020, and the related notes and our report dated October 26, 2020
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
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We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Memphis, Tennessee
October 26, 2020
/s/ Ernst & Young LLP
45
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of AutoZone, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AutoZone, Inc. (the Company) as of August 29,
2020 and August 31, 2019, the related consolidated statements of income, comprehensive income, stockholders'
deficit, and cash flows for each of the three years in the period ended August 29, 2020, 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 29, 2020 and
August 31, 2019, and the results of its operations and its cash flows for each of the three years in the period ended
August 29, 2020, 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 29, 2020, 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 26, 2020, expressed an unqualified opinion
thereon.
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Adoption of ASU 2016-02
As discussed in Note A to the consolidated financial statements, the Company changed its method of accounting for
leases on September 1, 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases
(Topic 842), and related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any
way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure
to which it relates.
46
Description of the
Matter
Valuation of Self-insurance Reserves
At August 29, 2020, the Company’s self-insurance reserve estimate was $289 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.
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We have served as the Company’s auditor since 1988.
Memphis, Tennessee
October 26, 2020
/s/ Ernst & Young LLP
47
AutoZone, Inc. Consolidated Statements of Income
(in thousands, except per share data)
August 29,
2020
(52 weeks)
August 31,
2019
(53 weeks)
August 25,
2018
(52 weeks)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,631,967 $ 11,863,743 $ 11,221,077
Cost of sales, including warehouse and delivery expenses . . . . . . . .
5,247,331
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,973,746
4,162,890
Operating, selling, general and administrative expenses . . . . . . . . .
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,810,856
174,527
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,636,329
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
298,793
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,732,972 $ 1,617,221 $ 1,337,536
5,498,742
6,365,001
4,148,864
2,216,137
184,804
2,031,333
414,112
5,861,214
6,770,753
4,353,074
2,417,679
201,165
2,216,514
483,542
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Weighted average shares for basic earnings per share . . . . . . . . . . .
Effect of dilutive stock equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares for diluted earnings per share . . . . . . . . . .
23,540
553
24,093
24,966
532
25,498
26,970
454
27,424
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
73.62 $
71.93 $
64.78 $
63.43 $
49.59
48.77
See Notes to Consolidated Financial Statements.
AutoZone, Inc. Consolidated Statements of Comprehensive Income
(in thousands)
August 29,
2020
(52 weeks)
Year Ended
August 31,
2019
(53 weeks)
August 25,
2018
(52 weeks)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,732,972 $ 1,617,221 $ 1,337,536
Other comprehensive loss:
Pension liability adjustments, net of taxes(1)(2) . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on marketable debt securities, net of
taxes(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(862)
Net derivative activities, net of taxes(4) . . . . . . . . . . . . . . . . . . . . . .
323
Total other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . .
18,752
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,648,042 $ 1,583,704 $ 1,356,288
1,464
1,718
(33,517)
1,254
(19,461)
(84,930)
—
(36,699)
—
(66,723)
72,376
(53,085)
(1) Pension liability adjustments are presented net of taxes of $46,523 in 2018, which includes $13,122 related to the adoption
of ASU 2018-02 - Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax effects from
Accumulated Other Comprehensive Income (ASU 2018-02).
(2) On December 19, 2017, the Board approved a resolution to terminate both of the Company’s pension plans, effective
March 15, 2018. During the fourth quarter of 2018, the Company completed the termination and no longer has any
remaining defined benefit pension obligation.
(3) Unrealized gains on marketable debt securities are presented net of taxes of $336 and $389 in 2020 and 2019, respectively.
Unrealized losses on marketable debt securities are presented net of tax benefit of $234 in 2018.
(4) Net derivative activities are presented net of tax benefit of $6,164 in 2020. Net derivative activities are presented net of taxes
of $530 in 2019 and $1,882 in 2018, which includes $1,367 related to the adoption of ASU 2018-02.
See Notes to Consolidated Financial Statements.
48
AutoZone, Inc. Consolidated Balance Sheets
(in thousands)
Assets
Current assets:
August 29,
2020
August 31,
2019
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchandise inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,750,815 $
364,774
4,473,282
223,001
6,811,872
176,300
308,995
4,319,113
224,277
5,028,685
Property and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,205,228
4,020,271
2,158,251
586,839
165,953
8,136,542
(3,627,321)
4,509,221
2,581,677
302,645
27,843
190,614
3,102,779
$ 14,423,872 $
1,147,709
3,895,559
1,991,042
552,018
126,868
7,713,196
(3,314,445)
4,398,751
—
302,645
26,861
138,971
468,477
9,895,913
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Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,156,324 $
223,846
827,668
75,253
6,283,091
4,864,912
—
621,932
25,297
5,512,141
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,513,371
2,501,560
354,186
649,641
5,206,344
—
311,980
579,299
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; 23,697 shares
issued and 23,376 shares outstanding as of August 29, 2020; 25,445 shares issued and
24,038 shares outstanding as of August 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
237
1,283,495
(1,450,970)
(354,252)
(356,487)
(877,977)
254
1,264,448
(1,305,347)
(269,322)
(1,403,884)
(1,713,851)
9,895,913
See Notes to Consolidated Financial Statements.
$ 14,423,872 $
49
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AutoZone, Inc. Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
August 29,
2020
(52 weeks)
Year Ended
August 31,
2019
(53 weeks)
August 25,
2018
(52 weeks)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,732,972 $ 1,617,221 $ 1,337,536
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment and intangibles .
Amortization of debt origination fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension plan contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension termination charges (refund) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchandise inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of marketable debt securities . . . . . . . . . . . . . . . . . . . . . .
Investment in tax credit equity investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds (payments) from disposal of capital assets and other, net . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
397,466
10,730
51,077
44,835
—
—
—
(58,564)
(184,174)
531,131
90,172
104,463
2,720,108
(457,736)
—
(90,949)
84,237
(45,190)
11,763
(497,875)
369,957
8,162
35,051
43,255
—
(6,796)
—
(48,512)
(394,147)
464,176
(10,489)
50,635
2,128,513
(496,050)
—
(55,538)
53,140
—
6,602
(491,846)
345,084
8,393
(124,261)
43,674
(11,596)
130,263
193,162
7,534
(188,782)
319,609
(6,438)
26,114
2,080,292
(521,788)
35,279
(104,536)
69,644
—
(459)
(521,860)
Cash flows from financing activities:
Net (payments) proceeds of commercial paper . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from sale of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of principal portion of finance lease liabilities . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,030,000)
1,850,000
(500,000)
68,392
(930,903)
(52,158)
(48,967)
(643,636)
(295,300)
750,000
(250,000)
188,819
(2,004,896)
(53,307)
(9,404)
(1,674,088)
170,200
—
(250,000)
89,715
(1,592,013)
(49,004)
(1,052)
(1,632,154)
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,082)
(4,103)
(1,724)
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,750,815 $
1,574,515
176,300
(41,524)
217,824
176,300 $
(75,446)
293,270
217,824
Supplemental cash flow information:
Interest paid, net of interest cost capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Leased assets obtained in exchange for new finance lease liabilities . . . . . . . $
Leased assets obtained in exchange for new operating lease liabilities . . . . . . $
161,864 $
339,486 $
115,867 $
425,018 $
153,371 $
383,871 $
147,699 $
— $
163,965
427,161
98,782
—
See Notes to Consolidated Financial Statements.
50
AutoZone, Inc. Consolidated Statements of Stockholders’ Deficit
(in thousands)
Issued
Stock
Paid-in
Capital
Retained
Deficit
Comprehensive Treasury
Loss
Stock
Total
Common
Shares Common
Additional
Accumulated
Other
Balance at August 26, 2017 .
Net income . . . . . . . . . . . . . .
Total other comprehensive
income . . . . . . . . . . . . . . . . .
Purchase of 2,398 shares of
treasury stock . . . . . . . . . . . .
Retirement of treasury
shares . . . . . . . . . . . . . . . . . .
Issuance of common stock
under stock options and
stock purchase plans . . . . . .
Adoption of ASU 2018-02 . .
Share-based compensation
expense . . . . . . . . . . . . . . . .
Balance at August 25, 2018 .
Cumulative effect of
adoption of ASU 2014-09 . .
Balance at August 25, 2018,
as adjusted . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Total other comprehensive
income . . . . . . . . . . . . . . . . .
Purchase of 2,182 shares of
treasury stock . . . . . . . . . . . .
Retirement of treasury
shares . . . . . . . . . . . . . . . . . .
Issuance of common stock
under stock options and
stock purchase plans . . . . . .
Share-based compensation
expense . . . . . . . . . . . . . . . .
Balance at August 31, 2019 .
Net income . . . . . . . . . . . . . .
Total other comprehensive
income . . . . . . . . . . . . . . . . .
Purchase of 826 shares of
treasury stock . . . . . . . . . . . .
Retirement of treasury
shares . . . . . . . . . . . . . . . . . .
Issuance of common stock
under stock options and
stock purchase plans . . . . . .
Share-based compensation
expense . . . . . . . . . . . . . . . .
Balance at August 29, 2020 .
28,735
—
$ 287
—
$ 1,086,671
—
$ (1,642,387)
1,337,536
$ (254,557)
—
$ (618,391)
—
$ (1,428,377)
1,337,536
—
—
—
—
—
—
—
—
18,752
—
18,752
—
(1,592,013)
(1,592,013)
(1,512)
(15)
(60,500)
(918,462)
—
978,977
—
307
—
3
—
89,712
—
—
14,489
—
—
—
—
89,715
14,489
—
27,530
—
275
39,543
1,155,426
—
(1,208,824)
—
(235,805)
—
(1,231,427)
39,543
(1,520,355)
—
—
—
(6,773)
—
—
(6,773)
27,530
—
275
—
1,155,426
—
(1,215,597)
1,617,221
(235,805)
—
(1,231,427)
—
(1,527,128)
1,617,221
—
—
—
—
—
—
—
—
(33,517)
—
(33,517)
—
(2,004,896)
(2,004,896)
(2,563)
(26)
(125,442)
(1,706,971)
—
1,832,439
—
1
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K
478
5
195,185
—
—
—
195,190
—
25,445
—
—
—
—
254
—
—
—
39,279
1,264,448
—
—
(1,305,347)
1,732,972
—
(269,322)
—
—
(1,403,884)
—
39,279
(1,713,851)
1,732,972
—
—
—
—
(84,930)
—
(84,930)
—
(930,903)
(930,903)
(1,912)
(19)
(99,686)
(1,878,595)
—
1,978,300
—
164
2
74,985
—
—
43,748
—
—
—
—
—
—
23,697 $ 237 $ 1,283,495 $ (1,450,970) $
(354,252) $ (356,487) $
74,987
43,748
(877,977)
See Notes to Consolidated Financial Statements.
51
Notes to Consolidated Financial Statements
Note A – Significant Accounting Policies
Business: AutoZone, Inc. (“AutoZone” or the “Company”) is the leading retailer, and a leading distributor, of
automotive replacement parts and accessories in the Americas. At the end of fiscal 2020, the Company operated
5,885 stores in the U.S., 621 stores in Mexico and 43 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 2020, 5,007 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 also sells the ALLDATA brand
automotive diagnostic and repair software through www.alldata.com and www.alldatadiy.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.
Fiscal Year: The Company’s fiscal year consists of 52 or 53 weeks ending on the last Saturday in August. Fiscal
2020 and 2018 represented 52 weeks and 2019 represented 53 weeks.
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Basis of Presentation: The Consolidated Financial Statements include the accounts of AutoZone, Inc. and its
wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in
consolidation.
Variable Interest Entities: The Company invests in certain tax credit funds that promote renewable energy and
generate a return primarily through the realization of federal tax credits. The deferral method is used to account for
the tax attributes of these investments.
The Company considers its investment in these tax credit funds as an investment in a variable interest entity
(“VIE”). The Company evaluates the investment in any VIE to determine whether it is the primary beneficiary. The
Company considers a variety of factors in identifying the entity that holds the power to direct matters that most
significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing,
leasing, construction and other operating decisions and activities. As of August 29, 2020, the Company held tax
credit equity investments that were deemed to be VIE’s and determined that it was not the primary beneficiary of the
entities, as it did not have the power to direct the activities that most significantly impacted the entity and accounted
for this investment using the equity method. The Company’s maximum exposure to losses is limited to its net
investment, which was $6.5 million as of August 29, 2020, and was included within the Other long-term assets
caption in the accompanying Consolidated Balance Sheets.
Use of Estimates: Management of the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent liabilities to prepare these financial statements.
Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash equivalents consist of investments with original maturities of 90 days or less at
the date of purchase. Cash equivalents include proceeds due from credit and debit card transactions with settlement
terms of less than five days. Credit and debit card receivables included within cash and cash equivalents were $63.7
million at August 29, 2020 and $59.4 million at August 31, 2019.
Cash balances are held in various locations around the world. Cash and cash equivalents of $62.4 million and $49.9
million were held outside of the U.S. as of August 29, 2020, and August 31, 2019, respectively, and were generally
utilized to support the liquidity needs in foreign operations.
52
Accounts Receivable: Accounts receivable consists of receivables from commercial customers and vendors, and is
presented net of an allowance for uncollectible accounts. AutoZone routinely grants credit to certain of its
commercial customers. The risk of credit loss in its trade receivables is substantially mitigated by the Company’s
credit evaluation process, short collection terms and sales to a large number of customers, as well as the low dollar
value per transaction for most of its sales. Allowances for potential credit losses are determined based on historical
experience and current evaluation of the composition of accounts receivable. Historically, credit losses have been
within management’s expectations, and the balance of the allowance for uncollectible accounts was $10.0 million at
August 29, 2020, and $8.5 million at August 31, 2019.
Merchandise Inventories: Merchandise inventories include related purchasing, storage and handling costs.
Inventory cost has been determined using the last-in, first-out (“LIFO”) method stated at the lower of cost or market
for domestic inventories and the weighted average cost method stated at the lower of cost or net realizable value for
Mexico and Brazil inventories. Due to historical price deflation on the Company’s merchandise purchases, the
Company has exhausted its LIFO reserve balance. The Company’s policy is to not write up inventory in excess of
replacement cost. The difference between LIFO cost and replacement cost, which will be reduced upon experiencing
price inflation on the Company’s merchandise purchases, was $357.0 million at August 29, 2020, and $404.9
million at August 31, 2019.
Marketable Debt Securities: The Company invests a portion of its assets held by the Company’s wholly owned
insurance captive in marketable debt securities and classifies them as available-for-sale. The Company includes
these debt securities within the Other current assets and Other long-term assets captions in the accompanying
Consolidated Balance Sheets and records the amounts at fair market value, which is determined using quoted market
prices at the end of the reporting period. A discussion of marketable debt securities is included in “Note E – Fair
Value Measurements” and “Note F – Marketable Debt Securities.”
Property and Equipment: Property and equipment is stated at cost. Property consists of land, which includes
finance leases – real estate, buildings and improvements, equipment, which includes finance leases – vehicles, and
construction in progress. Depreciation and amortization are computed principally using the straight-line method over
the following estimated useful lives: buildings, 40 to 50 years; building improvements, 5 to 15 years; equipment,
including software, 3 to 10 years; and leasehold improvements, over the shorter of the asset’s estimated useful life or
the remaining lease term, which includes any reasonably assured renewal periods. Depreciation and amortization
include amortization of assets under finance lease.
Impairment of Long-Lived Assets: The Company evaluates the recoverability of its long-lived assets whenever
events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. When such
an event occurs, the Company compares the sum of the undiscounted expected future cash flows of the asset (asset
group) with the carrying amounts of the asset. If the undiscounted expected future cash flows are less than the
carrying value of the assets, the Company measures the amount of impairment loss as the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Goodwill: The cost in excess of fair value of identifiable net assets of businesses acquired is recorded as goodwill.
Goodwill has not been amortized since fiscal 2001, but an analysis is performed at least annually to compare the fair
value of the reporting unit to the carrying amount to determine if any impairment exists. The Company performs its
annual impairment assessment in the fourth quarter of each fiscal year, unless circumstances dictate more frequent
assessments. Refer to “Note N – Goodwill and Intangibles” for additional disclosures regarding the Company’s
goodwill and impairment assessment.
Intangible Assets: Intangible assets consist of customer relationships purchased relating to ALLDATA operations.
Amortizing intangible assets are amortized over periods ranging from 3 to 10 years. Refer to “Note N – Goodwill
and Intangibles” and “Note M – Sale of Assets” for additional disclosures regarding the Company’s intangible assets
and impairment assessment.
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53
Derivative Instruments and Hedging Activities: AutoZone is exposed to market risk from, among other things,
changes in interest rates, foreign exchange rates and fuel prices. From time to time, the Company uses various
derivative instruments to reduce such risks. To date, based upon the Company’s current level of foreign operations,
no derivative instruments have been utilized to reduce foreign exchange rate risk. All of the Company’s hedging
activities are governed by guidelines that are authorized by AutoZone’s Board of Directors (the “Board”). Further,
the Company does not buy or sell derivative instruments for trading purposes.
AutoZone’s financial market risk results primarily from changes in interest rates. At times, AutoZone reduces its
exposure to changes in interest rates by entering into various interest rate hedge instruments such as interest rate
swap contracts, treasury lock agreements and forward-starting interest rate swaps. All of the Company’s interest rate
hedge instruments are designated as cash flow hedges. Refer to “Note H – Derivative Financial Instruments” for
additional disclosures regarding the Company’s derivative instruments and hedging activities. Cash flows related to
these instruments designated as qualifying hedges are reflected in the accompanying Consolidated Statements of
Cash Flows in the same categories as the cash flows from the items being hedged. Accordingly, cash flows relating
to the settlement of interest rate derivatives hedging the forecasted issuance of debt have been reflected upon
settlement as a component of financing cash flows. The resulting gain or loss from such settlement is deferred to
Accumulated Other Comprehensive Loss and reclassified to interest expense over the term of the underlying debt.
This reclassification of the deferred gains and losses impacts the interest expense recognized on the underlying debt
that was hedged and is therefore reflected as a component of operating cash flows in periods subsequent to
settlement.
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Foreign Currency: The Company accounts for its Mexican, Brazilian, Canadian, European, Chinese and German
operations using the local market currency and converts its financial statements from these currencies to U.S.
dollars. The cumulative loss on currency translation is recorded as a component of Accumulated Other
Comprehensive Loss (Refer to “Note G – Accumulated Other Comprehensive Loss” for additional information
regarding the Company’s Accumulated Other Comprehensive Loss.)
Self-Insurance Reserves: The Company retains a significant portion of the risks associated with workers’
compensation, general liability, product liability, property and vehicle insurance. The Company obtains third party
insurance to limit the exposure related to certain of these risks. The reserve for the Company’s liability associated
with these risks totaled $288.6 million and $207.0 million at August 29, 2020 and August 31, 2019, respectively.
The assumptions made by management in estimating its self-insurance reserves include consideration of historical
cost experience, judgments about the present and expected levels of cost per claim and retention levels. The
Company utilizes various methods, including analyses of historical trends and use of a specialist, to estimate the
costs to settle reported claims and claims incurred but not yet reported. The actuarial methods develop estimates of
the future ultimate claim costs based on claims incurred as of the balance sheet date. When estimating these
liabilities, the Company considers factors, such as the severity, duration and frequency of claims, legal costs
associated with claims, healthcare trends and projected inflation of related factors.
The Company’s liabilities for workers’ compensation, general and product liability, property and vehicle claims do
not have scheduled maturities; however, the timing of future payments is predictable based on historical patterns and
is relied upon in determining the current portion of these liabilities. Accordingly, the Company reflects the net
present value of the obligations it determines to be long-term using the risk-free interest rate as of the balance sheet
date.
54
Leases: The Company leases certain retail stores, distribution centers and vehicles under various non-callable
leases. Leases are categorized at their commencement date and lease-related assets and liabilities are recognized for
all leases with an initial term of 12 months or greater. The exercise of lease renewal options is at the Company’s sole
discretion. The Company evaluates renewal options at commencement and on an ongoing basis and includes options
that are reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease
liabilities. Lease components are not separated from the non-lease components (typically fixed common-area
maintenance costs at its retail store locations) for all classes of leased assets, except vehicles which contain variable
non-lease components that are expensed as incurred. The Company uses the stated borrowing rate in determining the
present value of the lease payments over the lease term for vehicles. The Company’s incremental borrowing rate is
used to determine the present value of the lease payments over the lease term for substantially all the operating and
financing leases for retail stores, distribution centers and other real estate, as these leases typically do not have a
stated borrowing rate. The Company’s lease agreements do not contain any material residual value guarantees or
material restrictive covenants.
Effective in fiscal 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842).
Refer to “Note A – Recently Adopted Accounting Pronouncements”. Prior to the adoption of Topic 842, the
Company accounted for leases under Topic 840 and recognized rent expense on a straight-line basis over the course
of the lease term, which included any reasonably assured renewal periods, beginning on the date the Company took
physical possession of the property. Differences between the calculated expense and cash payments was recorded as
a liability within the Accrued expenses and other and Other long-term liabilities captions in the accompanying
Consolidated Balance Sheets, based on the terms of the lease. Deferred rent approximated $159.9 million as of
August 31, 2019. Refer to Note O – Leases for additional disclosures regarding the Company’s leases.
Financial Instruments: The Company has financial instruments, including cash and cash equivalents, accounts
receivable, other current assets and accounts payable. The carrying amounts of these financial instruments
approximate fair value because of their short maturities. A discussion of the carrying values and fair values of the
Company’s debt is included in “Note I – Financing,” marketable debt securities is included in “Note F – Marketable
Debt Securities,” and derivatives is included in “Note H – Derivative Financial Instruments.”
Income Taxes: The Company accounts for income taxes under the liability method. Deferred tax assets and
liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
Our effective tax rate is based on income by tax jurisdiction, statutory rates and tax saving initiatives available to the
Company in the various jurisdictions in which we operate.
The Company recognizes liabilities for uncertain income tax positions based on a two-step process. The first step is
to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is
more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest
amount that is more than 50% likely to be realized upon ultimate settlement. The Company reevaluates these
uncertain tax positions on a quarterly basis or when new information becomes available to management. These
reevaluations are based on factors including, but not limited to, changes in facts or circumstances, changes in tax
law, successfully settled issues under audit, expirations due to statutes and new audit activity. Such a change in
recognition or measurement could result in the recognition of a tax benefit or an increase to the tax accrual.
The Company classifies interest related to income tax liabilities, and if applicable, penalties, as a component of
Income tax expense. The income tax liabilities and accrued interest and penalties that are expected to be payable
within one year of the balance sheet date are presented within the Accrued expenses and other caption in the
accompanying Consolidated Balance Sheets. The remaining portion of the income tax liabilities and accrued interest
and penalties are presented within the Other long-term liabilities caption in the accompanying Consolidated Balance
Sheets because payment of cash is not anticipated within one year of the balance sheet date. Refer to “Note D –
Income Taxes” for additional disclosures regarding the Company’s income taxes.
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Sales and Use Taxes: Governmental authorities assess sales and use taxes on the sale of goods and services. The
Company excludes taxes collected from customers in its reported sales results; such amounts are included within the
Accrued expenses and other caption until remitted to the taxing authorities.
Dividends: The Company currently does not pay a dividend on its common stock. The ability to pay dividends is
subject to limitations imposed by Nevada law. Under Nevada law, any future payment of dividends would be
dependent upon the Company’s financial condition, capital requirements, earnings and cash flow.
Revenue Recognition: The Company’s primary source of revenue is derived from the sale of automotive
aftermarket parts and merchandise to its retail and commercial customers. Revenue is recognized when performance
obligations under the terms of a contract with a customer are satisfied, in an amount representing the consideration
the Company expects to receive in exchange for selling products to its customers. Sales are recorded net of variable
consideration in the period incurred, including discounts, sales incentives and rebates, sales taxes and estimated
sales returns. Sales returns are based on historical return rates. The Company may enter into contracts that include
multiple combinations of products and services, which are accounted for as separate performance obligations and do
not require significant judgment.
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The Company’s performance obligations are typically satisfied when the customer takes possession of the
merchandise. Revenue from retail customers is recognized when the customer leaves our store with the purchased
products, typically at the point of sale or for E-commerce orders when the product is shipped. Revenue from
commercial customers is recognized upon delivery, typically same-day. Payment from retail customers is at the
point of sale and payment terms for commercial customers are based on the Company’s pre-established credit
requirements and generally range from 1 to 30 days. Discounts, sales incentives and rebates are treated as separate
performance obligations, and revenue allocated to these performance obligations is recognized as the obligations to
the customer are satisfied. Additionally, the Company estimates and records gift card breakage as redemptions
occur. The Company offers diagnostic and repair information software used in the automotive repair industry
through ALLDATA. This revenue is recognized as services are provided. Revenue from these services are
recognized over the life of the contract. See “Note R – Revenue Recognition” for further discussion.
A portion of the Company’s transactions include the sale of auto parts that contain a core component. The core
component represents the recyclable portion of the auto part. Customers are not charged for the core component of
the new part if a used core is returned at the point of sale of the new part; otherwise the Company charges customers
a specified amount for the core component. The Company refunds that same amount upon the customer returning a
used core to the store at a later date. The Company does not recognize sales or cost of sales for the core component
of these transactions when a used part is returned or expected to be returned from the customer.
Vendor Allowances and Advertising Costs: The Company receives various payments and allowances from its
vendors through a variety of programs and arrangements. Monies received from vendors include rebates, allowances
and promotional funds. The amounts to be received are subject to the terms of the vendor agreements, which
generally do not state an expiration date, but are subject to ongoing negotiations that may be impacted in the future
based on changes in market conditions, vendor marketing strategies and changes in the profitability or sell-through
of the related merchandise.
Rebates and other miscellaneous incentives are earned based on purchases or product sales and are accrued ratably
over the purchase or sale of the related product. These monies are generally recorded as a reduction of merchandise
inventories and are recognized as a reduction to cost of sales as the related inventories are sold.
For arrangements that provide for reimbursement of specific, incremental, identifiable costs incurred by the
Company in selling the vendors’ products, the vendor funds are recorded as a reduction to Operating, selling,
general and administrative expenses in the period in which the specific costs were incurred.
56
The Company expenses advertising costs as incurred. Advertising expense, net of vendor promotional funds, was
$77.6 million in fiscal 2020, $87.5 million in fiscal 2019 and $95.2 million in fiscal 2018. Vendor promotional
funds, which reduced advertising expense, amounted to $39.4 million in fiscal 2020, $32.2 million in fiscal 2019
and $25.3 million in fiscal 2018.
Cost of Sales and Operating, Selling, General and Administrative Expenses: The following illustrates the
primary costs classified in each major expense category:
Cost of Sales
• Total cost of merchandise sold, including:
o Freight expenses associated with moving merchandise inventories from the Company’s vendors to
the distribution centers;
o Vendor allowances that are not reimbursements for specific, incremental and identifiable costs
• Costs associated with operating the Company’s supply chain, including payroll and benefits, warehouse
occupancy, transportation and depreciation; and
Inventory shrinkage
•
Operating, Selling, General and Administrative Expenses
• Payroll and benefits for store, field leadership and store support employees;
• Occupancy of store and store support facilities;
• Depreciation and amortization related to store and store support assets;
• Transportation associated with field leadership, commercial sales force and deliveries from stores;
• Advertising;
• Self-insurance; and
• Other administrative costs, such as credit card transaction fees, legal costs, supplies and travel and lodging
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Warranty Costs: The Company or the vendors supplying its products provides the Company’s customers limited
warranties on certain products that range from 30 days to lifetime. In most cases, the Company’s vendors are
primarily responsible for warranty claims. Warranty costs relating to merchandise sold under warranty not covered
by vendors are estimated and recorded as warranty obligations at the time of sale based on each product’s historical
return rate. These obligations, which are often funded by vendor allowances, are recorded within the Accrued
expenses and other caption in the Consolidated Balance Sheets. For vendor allowances that are in excess of the
related estimated warranty expense for the vendor’s products, the excess is recorded in inventory and recognized as
a reduction to cost of sales as the related inventory is sold.
Shipping and Handling Costs: The Company does not generally charge customers separately for shipping and
handling. Substantially all the costs the Company incurs to ship products to our stores are included in cost of sales.
Pre-opening Expenses: Pre-opening expenses, which consist primarily of payroll and occupancy costs, are
expensed as incurred.
Earnings per Share: Basic earnings per share is based on the weighted average outstanding common shares.
Diluted earnings per share is based on the weighted average outstanding common shares adjusted for the effect of
common stock equivalents, which are primarily stock options. There were 169,460, 90,314 and 847,279 stock
options excluded for the year ended August 29, 2020, August 31, 2019 and August 25, 2018, respectively because
they would have been anti-dilutive.
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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. See “Note B –
Share-Based Payments” for further discussion.
Risk and Uncertainties: In fiscal 2020, one class of similar products accounted for approximately 12 percent of the
Company’s total revenues, and one vendor supplied approximately 12 percent of the Company’s total purchases. No
other class of similar products accounted for 10 percent or more of total revenues, and no other individual vendor
provided more than 10 percent of total purchases.
Recently Adopted Accounting Pronouncements:
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842),
and subsequently amended this update by issuing additional ASU’s that provided clarification and further guidance
for areas identified as potential implementation issues. ASU 2016-02 requires a two-fold approach for lessee
accounting, under which a lessee will account for leases as finance leases or operating leases. For all leases with
original terms greater than 12 months, both lease classifications will result in the lessee recognizing a right-of-use
asset and a corresponding lease liability on its balance sheet, with differing methodologies for income statement
recognition. This guidance also requires certain quantitative and qualitative disclosures about leasing arrangements.
ASU 2016-02 and its amendments were effective for interim and annual reporting periods beginning after December
15, 2018, and early adoption was permitted. The ASU’s transition provisions could be applied under a modified
retrospective approach to each prior reporting period presented in the financial statements or only at the beginning of
the period of adoption using the alternative transition method.
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The Company adopted this standard and its amendments as of September 1, 2019, using the modified retrospective
transition method. Under this method, existing leases were recorded at the adoption date, comparative periods were
not restated and prior period amounts were not adjusted and continue to be reported under the accounting standards
in effect for the prior periods. In addition, the Company elected the package of practical expedients permitted under
the transition guidance within the new standard, which among other things, allowed the carry forward of prior lease
identification under Accounting Standards Codification (“ASC”) Topic 840. The Company made the accounting
policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis
over the lease term. The Company also elected the practical expedient to not separate lease components from the
non-lease components (typically fixed common-area maintenance costs at its retail store locations) for all classes of
leased assets, except vehicles. The Company chose not to elect the hindsight practical expedient to determine the
reasonably certain lease term for existing leases. Adoption of the leasing standard resulted in operating lease right-
of-use assets of approximately $2.5 billion and operating lease liabilities of approximately $2.7 billion as of
September 1, 2019. Existing prepaid and deferred rent were netted and recorded as an offset to our gross operating
lease right-of-use assets. There was no adjustment to the opening balance of retained earnings upon adoption. The
standard did not have a material impact on the Company’s Condensed Consolidated Statements of Income,
Condensed Consolidated Statements of Cash Flows or covenant compliance under its existing credit agreement.
Refer to “Note O – Leases”.
In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to
Nonemployee Share-Based Payment Accounting. ASU 2018-07 aims to simplify the accounting for share-based
payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain
exceptions. The Company adopted this standard beginning with its first quarter ending November 23, 2019. The
Company determined that the provisions of ASU 2018-07 did not have an impact on its Condensed Consolidated
Statements of Income, Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Cash
Flows.
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Recently Issued Accounting Pronouncements:
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other Internal Use Software (Subtopic
350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a
Service Contract. The amendments in this update align the requirements for capitalizing implementation costs
incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation
costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for fiscal years beginning after
December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company
will adopt this standard beginning with its first quarter ending November 21, 2020. The Company does not expect a
material effect on its Condensed Consolidated Statements of Income, Condensed Consolidated Balance Sheets or
Condensed Consolidated Statements of Cash Flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments which was subsequently amended in November 2018 through ASU
2018-19, Codification Improvements to Topic 326, Financial Instruments Credit Losses. ASU 2016-13 will require
entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financial
receivables, debt securities, and other instruments, which will result in earlier recognition of credit losses.
Further, the new credit loss model will affect how entities estimate their allowance for loss receivables that are
current with respect to their payment terms. ASU 2016-13 will be effective for the Company at the beginning of its
fiscal 2021 year. The Company will adopt this standard beginning its first quarter ending November 21, 2020. The
Company does not expect a material effect on its Condensed Consolidated Statements of Income, Condensed
Consolidated Balance Sheets or Condensed Consolidated Statements of Cash Flows.
Note B – Share-Based Payments
Overview of Share-Based Payment Plans
The Company has several active and inactive equity incentive plans under which the Company has been authorized
to grant share-based awards to key employees and non-employee directors. Awards under these plans have been in
the form of restricted stock, restricted stock units, stock options, stock appreciation rights and other awards as
defined by the plans. The Company also has an Employee Stock Purchase Plan that allows employees to purchase
Company shares at a discount subject to certain limitations. The Company also has an Executive Stock Purchase
Plan which permits all eligible executives to purchase AutoZone’s common stock at a discount 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 through
October 7, 2025.
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AutoZone, Inc. Director Compensation Program
During fiscal 2020, the Company adopted the 2020 Director Compensation Program (the “Program”), which states
that non-employee directors will receive their compensation in awards of restricted stock units under the 2018
Equity Incentive Award 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. The Program replaced the 2018 Director Compensation Program. Under the
Program, restricted stock units are granted 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 January 1 of each year and are paid in
shares of the Company’s common stock on the fifth anniversary of the Grant Date or the date the non-employee
director ceases to be a member of the Board (“Separation from Service”), whichever occurs first. Non-employee
directors may elect to defer receipt of the restricted stock units until their 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 $44.8 million for fiscal 2020, $43.3 million for fiscal 2019 and $43.7 million for fiscal 2018. As of August 29,
2020, share-based compensation expense for unvested awards not yet recognized in earnings is $42.0 million and
will be recognized over a weighted average period of 1.7 years.
General terms and methods of valuation for the Company’s share-based awards are as follows:
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Stock Options
The Company grants options to purchase common stock to certain of its employees under its plan at prices equal to
the market value of the stock on the date of grant. Options have a term of 10 years or 10 years and one day 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 30 or 90 days after the service relationship ends, or one year after
death, to exercise all vested options. 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 29, August 31, August 25,
2019
2018
2020
Expected price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average expected lives (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeiture rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22 %
1.4 %
5.5
10 %
0 %
21 %
3.0 %
5.6
10 %
0 %
20 %
1.9 %
5.1
10 %
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.
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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
or ten years and one day. 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 $252.54 during fiscal 2020, $208.37
during fiscal 2019 and $129.12 during fiscal 2018. The intrinsic value of options exercised was $101.9 million in
fiscal 2020, $227.4 million in fiscal 2019 and $123.1 million in fiscal 2018. The total fair value of options vested
was $39.1 million in fiscal 2020, $34.5 million in fiscal 2019 and $35.7 million in fiscal 2018.
The Company generally issues new shares when options are exercised. The following table summarizes information
about stock option activity for the year ended August 29, 2020:
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Weighted
Average
Weighted
Average
Exercise Price
Remaining Aggregate
Intrinsic
Contractual
Value
Term
(in thousands)
(in years)
Number
of Shares
Outstanding – August 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . 1,349,311 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188,824
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(146,705)
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,444)
Outstanding – August 29, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . 1,384,986
601.36
1,061.57
472.37
735.42
677.15
5.82 $ 709,085
Exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected to vest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available for future grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
882,668
452,086
348,293
587.27
835.08
4.65
7.88
531,234
160,066
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 29, 2020, total unrecognized stock-based compensation expense related to nonvested restricted stock
unit awards, net of estimated forfeitures, was approximately $9.0 million, before income taxes, which we expect to
recognize over an estimated weighted average period of 2.7 years.
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Transactions related to restricted stock units for the fiscal year ended August 29, 2020 are as follows:
Weighted-
Nonvested at August 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled or forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested at August 29, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number
of Shares
Average Grant
Date Fair Value
773.61
1,086.61
945.58
942.76
910.63
10,049 $
8,735
(4,183)
(441)
14,160 $
Stock Appreciation Rights
At August 29, 2020, the Company had $5.7 million and at August 31, 2019, the Company had $11.2 million of
accrued compensation expense related to 4,822 and 10,206 outstanding units, respectively, issued under the 2003
Comp Plan and prior plans. As directors retire, this balance will be reduced. No additional shares of stock or units
will be issued in future years under the 2003 Comp Plan or prior plans.
Employee Stock Purchase Plan and Executive Stock Purchase Plan
The Company recognized $3.1 million in compensation expense related to the discount on the selling of shares to
employees and executives under the various share purchase plans in fiscal 2020, $2.8 million in fiscal 2019 and
$2.1 million in fiscal 2018. Under the Employee Plan, 10,525, 11,011 and 14,523 shares were sold to employees in
fiscal 2020, 2019 and 2018, respectively. The Company repurchased 8,287, 17,201 and 11,816 shares in fiscal 2020,
2019 and 2018, respectively all at market value from employees electing to sell their stock. Purchases under the
Executive Plan were 1,204, 1,483 and 1,840 shares in fiscal 2020, 2019 and 2018, 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 29, 2020, 142,241 shares of common stock were
reserved for future issuance under the Employee Plan, and 235,361 shares of common stock were reserved for future
issuance under the Executive Plan.
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Note C – Accrued Expenses and Other
Accrued expenses and other consisted of the following:
(in thousands)
August 29,
August 31,
2020
2019
Accrued compensation, related payroll taxes and benefits . . . . . . . . . . . . . . . . . . . . . . . . $ 321,071 $ 170,321
Property, sales, and other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
122,372
Medical and casualty insurance claims (current portion) . . . . . . . . . . . . . . . . . . . . . . . . .
89,250
56,246
Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,147
Accrued gift cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,658
Accrued sales and warranty returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,310
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,628
$ 827,668 $ 621,932
121,196
112,746
67,498
63,503
43,876
32,356
65,422
The Company retains a significant portion of the insurance risks associated with workers’ compensation, employee
health, 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, $0.7 million for employee health,
and $1.0 million for general and product liability.
62
Note D – Income Taxes
The components of income from continuing operations before income taxes are as follows:
(in thousands)
Year Ended
August 29,
August 31,
August 25,
2020
2019
2018
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,960,320 $ 1,745,625 $ 1,412,963
223,366
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,216,514 $ 2,031,333 $ 1,636,329
256,194
285,708
1
0
-
K
The provision for income tax expense consisted of the following:
(in thousands)
Current:
Year Ended
August 29, August 31,
2020
2019
August 25,
2018
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 324,156 $ 274,504 $ 328,963
36,389
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57,702
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
423,054
45,457
59,100
379,061
47,880
60,429
432,465
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(131,926)
8,167
(502)
(124,261)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 483,542 $ 414,112 $ 298,793
25,757
6,914
2,380
35,051
43,706
12,544
(5,173)
51,077
A reconciliation of the provision for income taxes to the amount computed by applying the federal statutory tax rate
to income before income taxes is as follows:
(in thousands)
Year Ended
August 29, August 31,
2020
2019
August 25,
2018
Federal tax at statutory U.S. income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transition tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of tax reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global intangible lower-taxed income (“GILTI”) . . . . . . . . . . . . . . . . . . . . . . .
Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.0 %
2.2 %
—
(0.7) %
—
1.0 %
(1.1) %
(0.6) %
21.8 %
21.0 %
2.0 %
—
(1.8) %
(0.4) %
1.3 %
(1.1) %
(0.6) %
20.4 %
25.9 %
1.9 %
1.6 %
(1.6)%
(9.6)%
—
—
0.1 %
18.3 %
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Reform”) was enacted into law. Tax Reform significantly
revises the U.S. federal corporate income tax by, among other things, lowering the statutory federal corporate rate
from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time transition tax on accumulated
earnings of foreign subsidiaries, and changing how foreign earnings are subject to U.S. federal tax. Also in
December 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of
GAAP in situations when the registrant does not have the necessary information available, prepared or analyzed in
reasonable detail to complete the accounting for certain income tax effects of Tax Reform.
63
During the year ended August 25, 2018, the Company recorded provisional tax benefit of $131.5 million related to
Tax Reform, comprised of $157.3 million remeasurement of its net DTA, offset by $25.8 million of transition tax.
During the year ended August 31, 2019, the Company completed its analysis of Tax Reform and recorded
adjustments to the previously-recorded provisional amounts, resulting in an $8.8 million tax benefit, primarily
related to transition tax.
For the year ended August 29, 2020, August 31, 2019, and August 25, 2018, the Company recognized excess tax
benefits from stock option exercises of $20.9 million, $46.0 million, and $31.3 million, respectively.
Beginning with the year ending August 31, 2019, the Company is subject to 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. Net impacts for GILTI are included in the provision
for income taxes for the years ended August 31, 2019 and August 29, 2020. Significant components of the
Company’s deferred tax assets and liabilities were as follows:
(in thousands)
Deferred tax assets:
August 29,
August 31,
2020
2019
1
0
-
K
Net operating loss and credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,437 $
88,226
617,002
69,788
816,453
(28,373)
788,080
42,958
58,900
—
59,237
161,095
(23,923)
137,172
Deferred tax liabilities:
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(173,696)
(298,585)
(55,827)
(581,381)
(4,934)
(1,114,423)
(114,956)
(259,827)
(46,487)
—
(1,021)
(422,291)
(326,343) $ (285,119)
For the year ended August 31, 2019, the Company held the assertion, with few exceptions, that current and
accumulated earnings from foreign operations were not indefinitely reinvested. During the year ended August 29,
2020, the Company asserted indefinite reinvestment for other basis differences and accumulated earnings through
fiscal 2020 between its Luxembourg parent and Mexico subsidiaries. In addition, the Company has maintained its
assertion of indefinite reinvestment of earnings between its Dutch parent and Puerto Rican subsidiary. Where
necessary, withholding tax provisions resulting from foreign distributions of current and accumulated earnings have
been considered in the Company’s provision for income taxes.
The Company maintains its assertion related to other basis differences in foreign subsidiaries. It is impracticable for
the Company to determine the amount of unrecognized deferred tax liability on these indefinitely reinvested basis
differences.
At August 29, 2020 and August 31, 2019, the Company had deferred tax assets of $32.2 million and $29.9 million,
respectively, from net operating loss (“NOL”) carryforwards available to reduce future taxable income totaling
approximately $247.1 million and $226.3 million, respectively. Certain NOLs have no expiration date and others
will expire, if not utilized, in various years from fiscal 2021 through 2040. At August 29, 2020 and August 31, 2019,
the Company had deferred tax assets for income tax credit carryforwards of $9.2 million and $13.0 million,
respectively. Income tax credit carryforwards will expire, if not utilized, in various years from fiscal 2021 through
2037.
64
At August 29, 2020 and August 31, 2019, the Company had a valuation allowance of $28.4 million and $23.9
million, respectively, on deferred tax assets associated with NOL and tax credit carryforwards for which
management has determined it is more likely than not that the deferred tax asset will not be realized. Management
believes it is more likely than not that the remaining deferred tax assets will be fully realized.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in thousands)
August 29, August 31,
2020
2019
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,892 $ 26,077
8,621
2,115
(1,219)
(1,918)
(2,784)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,942 $ 30,892
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,512
946
(4,124)
—
(4,284)
Included in the August 29, 2020 and the August 31, 2019 balances are $18.9 million and $16.8 million, respectively,
of unrecognized tax benefits that, if recognized, would reduce the Company’s effective tax rate. The balances above
also include amounts of $10.5 million and $11.9 million for August 29, 2020 and the August 31, 2019, 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.
1
0
-
K
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 $1.6 million and $1.4
million accrued for the payment of interest and penalties associated with unrecognized tax benefits at August 29,
2020 and August 31, 2019, 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 2013 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 29, 2020, the Company estimates that
the amount of unrecognized tax benefits could be reduced by approximately $1.5 million over the next twelve
months as a result of tax audit settlements. While the Company believes that it is adequately accrued for possible
audit adjustments, the final resolution of these examinations cannot be determined at this time and could result in
final settlements that differ from current estimates.
Note E – Fair Value Measurements
The Company defines fair value as the price received to transfer an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. In accordance with ASC 820, Fair Value
Measurements and Disclosures, the Company uses the fair value hierarchy, which prioritizes the inputs used to
measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair
value hierarchy are set forth below:
Level 1 inputs — unadjusted quoted prices in active markets for identical assets or liabilities that the Company
can access at the measurement date.
Level 2 inputs — inputs other than quoted market prices included within Level 1 that are observable, either
directly or indirectly, for the asset or liability.
65
Level 3 inputs — unobservable inputs for the asset or liability, which are based on the Company’s own
assumptions as there is little, if any, observable activity in identical assets or liabilities.
Marketable Debt Securities Measured at Fair Value on a Recurring Basis
The Company’s marketable debt securities measured at fair value on a recurring basis were as follows:
(in thousands)
Level 1
Level 2
Level 3
Fair Value
August 29, 2020
Other current assets . . . . . . . . . . . . . . . . . . . . . $
Other long-term assets . . . . . . . . . . . . . . . . . . .
$
75,651 $
58,792
134,443 $
467 $
12,329
12,796 $
— $
—
— $
76,118
71,121
147,239
(in thousands)
Level 1
Level 2
Level 3
Fair Value
August 31, 2019
Other current assets . . . . . . . . . . . . . . . . . . . . . $
Other long-term assets . . . . . . . . . . . . . . . . . . .
$
65,344 $
65,573
130,917 $
2,614 $
5,395
8,009 $
— $
—
— $
67,958
70,968
138,926
1
0
-
K
At August 29, 2020, the fair value measurement amounts for assets and liabilities recorded in the accompanying
Consolidated Balance Sheet consisted of short-term marketable debt securities of $76.1 million, which are included
within Other current assets and long-term marketable debt securities of $71.1 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 29, 2020, 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
Note F – Marketable Debt Securities
The Company’s basis for determining the cost of a security sold is the “Specific Identification Model.” Unrealized
gains (losses) on marketable debt securities are recorded in Accumulated Other Comprehensive Loss. The
Company’s available-for-sale marketable debt securities consisted of the following:
(in thousands)
Amortized Gross
Gross
August 29, 2020
Cost
Basis
Unrealized Unrealized
Gains
Losses
Fair
Value
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,652 $
Government bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed securities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,594
4,842
48,798
1,172
75
143
970 $
$ 144,886 $ 2,360 $
(4) $ 47,618
—
45,766
—
4,917
48,938
(3)
(7) $ 147,239
(in thousands)
Amortized Gross
Gross
August 31, 2019
Cost
Basis
Unrealized Unrealized
Gains
Losses
Fair
Value
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,998 $
Government bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed securities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,741
2,089
53,345
$ 138,173 $
29 $
763
2
—
794 $
(19) $ 37,008
—
46,504
(15)
2,076
(7)
53,338
(41) $ 138,926
1
0
-
K
The marketable debt securities held at August 29, 2020, 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 2020, 2019 or 2018.
Included above in total marketable debt securities are $30.1 million and $89.2 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 29, 2020 and August 31, 2019,
respectively.
67
Note G – Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss includes certain adjustments to pension liabilities, foreign currency
translation adjustments, certain activity for interest rate swaps and treasury rate locks that qualify as cash flow
hedges and unrealized gains (losses) on available-for-sale debt securities. Changes in Accumulated Other
Comprehensive Loss consisted of the following:
(in thousands)
Net
Unrealized
Gain (Loss)
Currency(2) on Securities Derivatives
Foreign
Total
Balance at August 25, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (228,899) $
Other Comprehensive (Loss) income before reclassifications . . . . . . . .
Amounts reclassified from Accumulated Other Comprehensive
Loss(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at August 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Comprehensive (Loss) income before reclassifications . . . . . . . .
Amounts reclassified from Accumulated Other Comprehensive
Loss(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at August 29, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (332,321) $
—
(265,598)
(66,723)
(36,699)
—
(873) $
1,498
(6,033) $ (235,805)
(35,201)
—
(3)
(4)
(34)
591
1,117
1,718
(4,315)
(28,197)
1,684
(269,322)
(93,803)
(3)
(4)
137
8,873
8,736
1,845 $ (23,776) $ (354,252)
1
0
-
K
(1) Amounts in parentheses indicate debits to Accumulated Other Comprehensive Loss.
(2) Foreign currency is shown net of U.S. tax to account for foreign currency impacts of certain undistributed non-U.S.
subsidiaries earnings. Other foreign currency is not shown net of additional U.S. tax as other basis differences of non-U.S.
subsidiaries are intended to be permanently reinvested.
(3) Represents realized gains on marketable debt securities, net of taxes of $38 in fiscal 2020 and realized gains on marketable
debt securities, net of tax benefit of $9 in fiscal 2019, which is recorded in Operating, selling, general, and administrative
expenses on the Consolidated Statements of Income. See “Note F – Marketable Debt Securities” for further discussion.
(4) Represents gains and losses on derivatives, net of tax benefit of $6,164 in fiscal 2020 and net of taxes of $530 in fiscal 2019,
which is recorded in Interest expense, net, on the Consolidated Statements of Income. See “Note H – Derivative Financial
Instruments” for further discussion.
Note H – Derivative Financial Instruments
The Company periodically uses derivatives to hedge exposures to interest rates. The Company does not hold or issue
financial instruments for trading purposes. For transactions that meet the hedge accounting criteria, the Company
formally designates and documents the instrument as a hedge at inception and quarterly thereafter assesses the
hedges to ensure they are effective in offsetting changes in the cash flows of the underlying exposures. Derivatives
are recorded in the Company’s Consolidated Balance Sheet at fair value, determined using available market
information or other appropriate valuation methodologies. In accordance with ASC Topic 815, Derivatives and
Hedging, to the extent our derivatives are effective in offsetting the variability of the hedged cash flows, changes in
the derivatives’ fair value are not included in current earnings but are included in Accumulated Other
Comprehensive Loss, net of tax.
At August 29, 2020, the Company had $31.2 million recorded in Accumulated Other Comprehensive Loss related to
net realized losses associated with terminated interest rate swap and treasury rate lock derivatives which were
designated as hedging instruments. Net losses are amortized into Interest expense over the remaining life of the
associated debt. During fiscal 2020, the Company reclassified $2.6 million of net losses from Accumulated Other
Comprehensive Loss to Interest expense. During 2019, the Company reclassified $2.2 million of net losses from
Accumulated Other Comprehensive Loss to Interest expense. The Company expects to reclassify $3.7 million of net
losses from Accumulated Other Comprehensive Loss to Interest expense over the next 12 months.
68
Note I – Financing
The Company’s debt consisted of the following:
(in thousands)
August 29,
August 31,
2020
2019
— $
4.000% Senior Notes due November 2020, effective interest rate of 4.43% . . . . . . . . $
2.500% Senior Notes due April 2021, effective interest rate of 2.62% . . . . . . . . . . . . .
3.700% Senior Notes due April 2022, effective interest rate of 3.85% . . . . . . . . . . . . .
2.875% Senior Notes due January 2023, effective interest rate of 3.21% . . . . . . . . . . .
3.125% Senior Notes due July 2023, effective interest rate of 3.26% . . . . . . . . . . . . . .
3.125% Senior Notes due April 2024, effective interest rate 3.32% . . . . . . . . . . . . . . .
3.250% Senior Notes due April 2025, effective interest rate 3.36% . . . . . . . . . . . . . . .
3.625% Senior Notes due April 2025, effective interest rate 3.78% . . . . . . . . . . . . . . .
3.125% Senior Notes due April 2026, effective interest rate of 3.28% . . . . . . . . . . . . .
3.750% Senior Notes due June 2027, effective interest rate of 3.83% . . . . . . . . . . . . .
3.750% Senior Notes due April 2029, effective interest rate of 3.86% . . . . . . . . . . . . .
4.000% Senior Notes due April 2030, effective interest rate 4.09% . . . . . . . . . . . . . . .
1.650% Senior Notes due January 2031, effective interest rate of 2.19% . . . . . . . . . . .
Commercial paper, weighted average interest rate of 2.28% at August 31, 2019 . . . . .
Total debt before discounts and debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Discounts and debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
500,000
250,000
500,000
300,000
500,000
300,000
400,000
—
400,000
600,000
450,000
—
—
1,030,000
5,230,000
23,656
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,513,371 $ 5,206,344
250,000
500,000
300,000
500,000
300,000
400,000
500,000
400,000
600,000
450,000
750,000
600,000
—
5,550,000
36,629
The Company entered into a Master Extension, New Commitment and Amendment Agreement dated as of
November 18, 2017 (the “Extension Amendment”) to the Third Amended and Restated Credit Agreement dated as
of November 18, 2016, as amended, modified, extended or restated from time to time (the “Revolving Credit
Agreement”). Under the Extension Amendment: (i) the Company’s borrowing capacity under the Revolving Credit
Agreement was increased from $1.6 billion to $2.0 billion; (ii) the maximum borrowing under the Revolving Credit
Agreement may, at the Company’s option, subject to lenders approval, be increased from $2.0 billion to $2.4 billion;
(iii) the termination date of the Revolving Credit Agreement was extended from November 18, 2021 until
November 18, 2022; and (iv) the Company has the option to make one additional written request of the lenders to
extend the termination date then in effect for an additional year. Under the Revolving Credit Agreement, the
Company may borrow funds consisting of Eurodollar loans, base rate loans or a combination of both. Interest
accrues on Eurodollar loans at a defined Eurodollar rate, defined as LIBOR plus the applicable percentage, as
defined in the Revolving Credit Agreement, depending upon the Company’s senior, unsecured, (non-credit
enhanced) long-term debt ratings. Interest accrues on base rate loans as defined in the Revolving Credit Agreement.
On April 3, 2020, the Company entered into a 364-Day Credit Agreement (the “364-Day Credit Agreement”) to
augment the Company’s access to liquidity due to current macroeconomic conditions and supplement the
Company’s existing Revolving Credit Agreement. The 364-Day Credit Agreement provides for loans in the
aggregate principal amount of up to $750 million. The 364-Day Credit Agreement will terminate, and all amounts
borrowed under the 364-Day Credit Agreement will be due and payable, on April 2, 2021. Revolving loans under
the 364-Day Credit Agreement may be base rate loans, Eurodollar loans, or a combination of both, at the Company’s
election.
As of August 29, 2020, the Company had no outstanding borrowings under each of the revolving credit agreements
and $1.7 million of outstanding letters of credit under the Revolving Credit Agreement.
Under its revolving credit agreement, covenants include restrictions on liens, a maximum debt to earnings ratio, a
minimum fixed charge coverage ratio and a change of control provision that may require acceleration of the
repayment obligations under certain circumstances.
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The Revolving Credit Agreement requires that the Company’s consolidated interest coverage ratio as of the last day
of each quarter shall be no less than 2.5:1. This ratio is defined as the ratio of (i) consolidated earnings before
interest, taxes and rents to (ii) consolidated interest expense plus consolidated rents. The Company’s consolidated
interest coverage ratio as of August 29, 2020 was 6.1:1.
As of August 29, 2020, the $250 million 2.500% Senior Notes due April 2021 are classified as long-term in the
accompanying Consolidated Balance Sheets as the Company has the ability and intent to refinance the notes on a
long-term basis through available capacity in its revolving credit agreements. As of August 29, 2020, the Company
had $2.748 billion of availability, before giving effect to commercial paper borrowings, under its $2.750 billion
revolving credit agreements which would allow the Company to replace these short-term obligations with long-term
financing facilities.
The Company also maintains a letter of credit facility that allows it to request the participating bank to issue letters
of credit on its behalf up to an aggregate amount of $25 million. The letter of credit facility is in addition to the
letters of credit that may be issued under the Revolving Credit Agreement. As of August 29, 2020, the Company had
$25.0 million in letters of credit outstanding under the letter of credit facility which expires in June 2022.
In addition to the outstanding letters of credit issued under the committed facilities discussed above, the Company
had $220.3 million in letters of credit outstanding as of August 29, 2020. These letters of credit have various
maturity dates and were issued on an uncommitted basis.
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On August 14, 2020, the Company issued $600 million in 1.650% Senior Notes due January 2031 under its
automatic shelf registration statement on Form S-3, filed with the SEC on April 4, 2019 (File No. 333-230719) (the
“2019 Shelf Registration”). The 2019 Shelf Registration allows the Company to sell an indeterminate amount in
debt securities to fund general corporate purposes, including repaying, redeeming or repurchasing outstanding debt
and for working capital, capital expenditures, new store openings, stock repurchases and acquisitions. Proceeds from
the debt issuance were used for general corporate purposes, including the repayment of the $500 million in 4.000%
Senior Notes due in November 2020 that were callable at par in August 2020.
On March 30, 2020, the Company issued $500 million in 3.625% Senior Notes due April 2025 and $750 million in
4.000% Senior Notes due April 2030 under the 2019 Shelf Registration. Proceeds from the debt issuance were used
to repay a portion of the outstanding commercial paper borrowings and for other general corporate purposes.
On April 18, 2019, the Company issued $300 million in 3.125% Senior Notes due April 2024 and $450 million in
3.750% Senior Notes due April 2029 under the 2019 Shelf Registration. Proceeds from the debt issuance were used
to repay a portion of the outstanding commercial paper borrowings, the $250 million in 1.625% Senior Notes due in
April 2019 and for other general corporate purposes.
All Senior Notes are subject to an interest rate adjustment if the debt ratings assigned to the Senior Notes are
downgraded (as defined in the agreements). Further, the Senior Notes contain a provision that repayment of the
Senior Notes may be accelerated if the Company experiences a change in control (as defined in the agreements). The
Company’s borrowings under its senior notes contain minimal covenants, primarily restrictions on liens. All of the
repayment obligations under its borrowing arrangements may be accelerated and come due prior to the scheduled
payment date if covenants are breached or an event of default occurs.
70
As of August 29, 2020, the Company was in compliance with all covenants related to its borrowing arrangements.
All of the Company’s debt is unsecured. Scheduled maturities of debt are as follows:
(in thousands)
Scheduled
Maturities
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount and debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
250,000
500,000
800,000
300,000
900,000
2,800,000
5,550,000
36,629
$ 5,513,371
The fair value of the Company’s debt was estimated at $6.081 billion as of August 29, 2020, and $5.419 billion as of
August 31, 2019, based on the quoted market prices for the same or similar issues or on the current rates available to
the Company for debt of the same terms (Level 2). Such fair value is greater than the carrying value of debt by
$567.5 million at August 29, 2020, which reflects face amount, adjusted for any unamortized debt issuance costs and
discounts. At August 31, 2019, the fair value was greater than the carrying value of debt by $212.7 million.
Note J – Interest Expense
Net interest expense consisted of the following:
(in thousands)
Year Ended
August 29, August 31, August 25,
2020
2019
2018
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Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 208,021 $ 193,671 $ 181,668
(5,636)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,505)
$ 201,165 $ 184,804 $ 174,527
(7,396)
(1,471)
(5,689)
(1,167)
Note K – Stock Repurchase Program
During 1998, the Company announced a program permitting the Company to repurchase a portion of its outstanding
shares not to exceed a dollar maximum established by the Board. On October 7, 2019, the Board voted to authorize
the repurchase of an additional $1.25 billion of its common stock in connection with its ongoing share repurchase
program. Since the inception of the repurchase program in 1998, the Board has authorized $23.15 billion in share
repurchases. The Company has $795.9 million remaining under the Board’s authorization to repurchase its common
stock.
The Company’s share repurchase activity consisted of the following:
(in thousands)
Year Ended
August 29, August 31,
August 25,
2020
2019
2018
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 930,903 $ 2,004,896 $ 1,592,013
2,398
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,182
826
71
During fiscal year 2020, the Company retired 1.9 million shares of treasury stock which had previously been
repurchased under the Company’s share repurchase program. The retirement increased Retained deficit by $1.879
billion and decreased Additional paid-in capital by $99.7 million. During the comparable prior year period, the
Company retired 2.6 million shares of treasury stock, which increased Retained deficit by $1.707 billion and
decreased Additional paid-in capital by $125.4 million.
During fiscal 2020, the Company temporarily ceased share repurchases to conserve liquidity in response to the
uncertainty related to COVID-19. While the Company restarted share repurchases during the first quarter of fiscal
year 2021, the Company will continue to evaluate current and expected business conditions and adjust the level of
share repurchases as the Company deems appropriate.
Subsequent to August 29, 2020, the Company has repurchased 269,795 shares of common stock at an aggregate cost
of $314.4 million. Considering the cumulative repurchases subsequent to August 29, 2020, the Company has $481.5
million remaining under the Board’s authorization to repurchase its common stock.
Note L – Pension and Savings Plans
Prior to January 1, 2003, substantially all full-time employees were covered by a defined benefit pension plan. The
benefits under the plan were based on years of service and the employee’s highest consecutive five-year average
compensation. On January 1, 2003, the plan was frozen, resulting in pension plan participants earning no new
benefits under the plan formula and no new participants joining the pension plan.
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On January 1, 2003, the Company’s supplemental defined benefit pension plan for certain highly compensated
employees was also frozen, resulting in pension plan participants earning no new benefits under the plan formula
and no new participants joining the pension plan.
On December 19, 2017, the Board of Directors approved a resolution to terminate both of the Company’s pension
plans, effective March 15, 2018. The Company offered plan participants the option to receive an annuity purchased
from an insurance carrier or a lump-sum cash payment based on a number of factors. During the fourth quarter of
2018, the Company contributed $11.4 million to the pension plans to ensure that sufficient assets were available for
the lump-sum payments and annuity purchases, completed the transfer of all lump sum payments, transferred all
remaining benefit obligations related to the pension plans to a highly rated insurance company, and recognized
$130.3 million of non-cash pension termination charges in Operating, selling, general and administrative expenses in
the Consolidated Statements of Income. During fiscal 2019, the Company received a refund of $6.8 million related
primarily to annuity purchase overpayments, recorded in Operating, selling, general and administrative expenses, net
within the Consolidated statements of income. No refunds or expenses related to pension termination occurred in
fiscal 2020. There are no actuarial assumptions reflected in any pension plans estimates. The Company will no
longer have any remaining defined pension benefit obligation and thus no periodic pension benefit expense.
Net periodic benefit expense consisted of the following:
(in thousands)
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognized net actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic benefit expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) The pension plans were terminated in fiscal 2018.
Year Ended
August 25
2018(1)
$
$
10,356
(18,997)
10,736
130,263
132,358
72
The Company has a 401(k) plan that covers all domestic employees who meet the plan’s participation requirements.
The plan features include Company matching contributions, immediate 100% vesting of Company contributions and
a savings option up to 25% of qualified earnings. The Company makes matching contributions, per pay period, up to
a specified percentage of employees’ contributions as approved by the Board. The Company made matching
contributions to employee accounts in connection with the 401(k) plan of $29.8 million in fiscal 2020, $25.8 million
in fiscal 2019 and $23.1 million in fiscal 2018.
Note M – Sale of Assets
During the second quarter of fiscal 2018, the Company determined that the approximate fair value less costs to sell
its IMC and AutoAnything businesses was significantly lower than the carrying value of the net assets based on
recent offers received and recorded impairment charges totaling $193.2 million within Operating, selling, general
and administrative expenses in its Condensed Consolidated Statements of Income.
The Company recorded an impairment charge of $93.6 million for its IMC business, which was reflected as a
component of Auto Parts Locations in its segment reporting in fiscal 2018. Impairment charges for AutoAnything,
which were reflected as a component of the Other category in the Company’s segment reporting, totaled $99.6
million in fiscal 2018.
During the third quarter of fiscal 2018, the Company completed the IMC and AutoAnything sales for total
consideration that approximated the remaining net book value at the closing date.
Note N – Goodwill and Intangibles
The Company had approximately $302.6 million of goodwill, which is allocated to the Auto Parts Locations
operating segment at August 29, 2020 and August 31, 2019. The Company performs its annual goodwill and
intangibles impairment test in the fourth quarter of each fiscal year. In the fourth quarter of fiscal 2020 and 2019, the
Company concluded its remaining goodwill was not impaired.
The carrying amounts of intangible assets are included in Other long-term assets as follows:
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(in thousands)
Amortizing intangible assets:
August 29, 2020
Estimated Gross
Net
Useful
Life
Carrying
Amount
Accumulated Carrying
Amortization Amount
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10 years
Total intangible assets other than goodwill . . . . . . . . . . . . . . . . .
$
29,376
29,376 $ (27,933) $
(27,933)
1,443
1,443
(in thousands)
Amortizing intangible assets:
August 31, 2019
Estimated Gross
Useful
Life
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5 years $
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10 years
870 $
(870) $
29,376
(23,760)
Total intangible assets other than goodwill . . . . . . . . . . . . . . . . .
$ 30,246 $ (24,630) $
—
5,616
5,616
Amortization expense of intangible assets for the years ended August 29, 2020 and August 31, 2019 was $4.2
million, respectively.
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Total future amortization expense for intangible assets that have finite lives, based on the existing intangible assets
and their current estimated useful lives as of August 29, 2020, is estimated to be $1.4 million for fiscal 2021 and
none thereafter.
Note O – Leases
The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019
which requires leases to be recognized on the balance sheet. Leases with an original term of 12 months or less are
not recognized in the Company’s Condensed Consolidated Balance Sheets, and the lease expense related to these
short-term leases is recognized over the lease term. The Company aggregates lease and non-lease components,
which includes fixed common-area maintenance costs at its retail store locations, for all classes of leased assets,
except vehicles. The Company’s vehicle leases typically include variable non-lease components, such as
maintenance and fuel charges. The Company excludes these variable non-lease components from vehicle lease
payments for the purpose of calculating the right-of-use assets and liabilities. These variable lease payments are
expensed as incurred.
The Company’s leases primarily relate to its retail stores, distribution centers and vehicles under various non-
callable leases. Leases are categorized at their commencement date, which is the date the Company takes possession
or control of the underlying asset. Most of the Company’s leases are operating leases; however, certain land and
vehicles are leased under finance leases. The leases have varying terms and expire at various dates through 2040.
Retail leases typically have initial terms of between one and 20 years, with one to six optional renewal periods of
one to five years each. Finance leases for vehicles typically have original terms between one and five years, and
finance leases for real estate leases typically have terms of 20 or more years. The exercise of lease renewal options is
at the Company’s sole discretion. The Company evaluates renewal options at lease commencement and on an
ongoing basis and includes options that are reasonably certain to exercise in its expected lease terms when
classifying leases and measuring lease liabilities. The Company subleases certain properties that are not used in its
operations. Sublease income was not significant for the periods presented. Certain lease agreements require variable
payments based upon actual costs of common-area maintenance, real estate taxes and insurance. The Company’s
lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company’s finance leases for vehicles have a stated borrowing rate which it uses in determining the present
value of the lease payments over the lease term. Substantially all the operating leases and finance leases for real
estate do not provide a stated borrowing rate. Accordingly, the Company uses its incremental borrowing rate at
commencement or modification date in determining the present value of lease payments over the lease term. For
operating leases that commenced prior to the date of adoption of the new standard, the Company used the
incremental borrowing rate that corresponded to the remaining lease term as of the date of adoption.
Lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheet are as follows:
(in thousands)
Assets:
Classification
August 29, 2020
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating lease right-of-use assets
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment
Total lease assets . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Current:
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of operating lease liabilities
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses and other
Noncurrent:
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating lease liabilities, less current portion
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities
Total lease liabilities . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
2,581,677
327,006
2,908,683
223,680
67,498
2,501,726
155,855
2,948,759
Accumulated amortization related to finance lease assets was $107.3 million as of August 29, 2020.
74
Lease costs for finance and operating leases are as follows:
(in thousands)
Finance lease cost:
Statement of Income Location
Amortization of lease assets . . . . . . . . . . . . . . . Depreciation and amortization
Interest on lease liabilities . . . . . . . . . . . . . . . .
Operating lease cost(1) . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net
Selling, general and administrative
expenses
Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For year ended
August 29, 2020
$
$
55,920
4,355
355,230
415,505
(1) Includes short-term leases, variable lease costs and sublease income, which are immaterial.
The future rental payments, inclusive of renewal options that have been included in defining the expected lease term,
of our operating and finance lease obligations as of August 29, 2020 having initial or remaining lease terms in
excess of one year are as follows:
(in thousands)
Finance
Leases
Operating
Leases
Total
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,013 $ 302,890 $ 371,903
382,048
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
353,236
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
308,886
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
269,546
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,100,130
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,785,749
Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(836,990)
Less: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 223,353 $ 2,725,406 $ 2,948,759
324,860
307,859
284,296
259,099
2,055,365
3,534,369
(808,963)
57,188
45,377
24,590
10,447
44,765
251,380
(28,027)
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The following table summarizes the Company’s lease term and discount rate assumptions:
Weighted-average remaining lease term in years, inclusive of renewal options that are
reasonably certain to be exercised
Finance leases – real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases – vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average discount rate:
Finance leases – real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases – vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
3
15
3.49 %
2.29 %
3.46 %
August 29, 2020
75
Cash paid for amounts included in the measurement of operating lease liabilities of $352.9 million was reflected in
cash flows from operating activities in the consolidated statement of cash flows for fiscal 2020.
As of August 29, 2020, the Company has entered into additional leases which have not yet commenced and are
therefore not part of the right-of-use asset and liability. These leases are generally for real estate and have
undiscounted future payments of approximately $16.7 million and will commence when the Company obtains
possession of the underlying leased asset. Commencement dates are expected to be from fiscal 2021 to fiscal 2022.
Note P – Commitments and Contingencies
Construction commitments, primarily for new stores, totaled approximately $50.9 million at August 29, 2020.
The Company had $246.9 million in outstanding standby letters of credit and $56.7 million in surety bonds as of
August 29, 2020, which all have expiration periods of less than one year. A substantial portion of the outstanding
standby letters of credit (which are primarily renewed on an annual basis) and surety bonds are used to cover
reimbursement obligations to our workers’ compensation carriers. There are no additional contingent liabilities
associated with these instruments as the underlying liabilities are already reflected in the Consolidated Balance
Sheets. The standby letters of credit and surety bonds arrangements have automatic renewal clauses.
Note Q – Litigation
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The Company is involved in various legal proceedings incidental to the conduct of its business, including, but not
limited to, several lawsuits containing class-action allegations in which the plaintiffs are current and former hourly
and salaried employees who allege various wage and hour violations and unlawful termination practices. The
Company does not currently believe that, either individually or in the aggregate, these matters will result in
liabilities material to the Company’s financial condition, results of operations or cash flows.
Note R – Revenue Recognition
The Company adopted ASU 2014-09, Revenue from Contracts with Customers using the modified retrospective
method beginning with our first quarter ending in fiscal 2019, November 17, 2018. The cumulative effect of initially
applying ASU 2014-09 resulted in an increase to the opening retained deficit balance of $6.8 million, net of taxes at
August 26, 2018, and a related adjustment to accounts receivable, other current assets, other long-term assets, other
current liabilities and deferred income taxes as of that date. Revenue for periods prior to August 26, 2018 were not
adjusted and continue to be reported under the accounting standards in effect for the prior periods.
There were no material contract assets, liabilities or deferred costs recorded on the Consolidated Balance Sheet as of
August 29, 2020. Revenue related to unfulfilled performance obligations as of August 29, 2020 and August 31, 2019
is not significant. Refer to “Note S – Segment Reporting” for additional information related to revenue recognized
during the period.
Note S – Segment Reporting
The Company’s operating segments (Domestic Auto Parts, Mexico and Brazil; and IMC results through April 4,
2018) are aggregated as one reportable segment: Auto Parts Locations. The criteria the Company used to identify the
reportable segment are primarily the nature of the products the Company sells and the operating results that are
regularly reviewed by the Company’s chief operating decision maker to make decisions about the resources to be
allocated to the business units and to assess performance. The accounting policies of the Company’s reportable
segment are the same as those described in “Note A – Significant Accounting Policies.”
The Auto Parts Locations segment is a retailer and distributor of automotive parts and accessories through the
Company’s 6,549 locations in the U.S., Mexico and Brazil. Each location 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.
76
The Other category reflects business activities of three operating segments that are not separately reportable due to
the materiality of these operating segments. The operating segments include ALLDATA, which produces, sells and
maintains diagnostic and repair information software used in the automotive repair industry and E-commerce, which
includes direct sales to customers through www.autozone.com for sales that are not fulfilled by local stores; and
AutoAnything, which includes direct sales to customers through www.autoanything.com, prior to the Company’s
sale of substantially all of its assets on February 26, 2018.
The Company evaluates its reportable segment primarily on the basis of net sales and segment profit, which is
defined as gross profit. The following table shows segment results for the following fiscal years:
(in thousands)
Net Sales
August 29,
2020
Year Ended
August 31,
2019
Auto Parts Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,405,929
226,038
12,631,967
$
$
11,645,235
218,508
11,863,743
Segment Profit
Auto Parts Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating, selling, general and administrative
expenses(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . $
6,617,508
153,245
6,770,753
(4,353,074)
(201,165)
2,216,514
Segment Assets:
Auto Parts Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14,303,427
120,445
14,423,872
Capital Expenditures:
Auto Parts Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
432,067
25,669
457,736
Auto Parts Locations Sales by Product Grouping:
Failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Maintenance items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discretionary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auto Parts Locations net sales . . . . . . . . . . . . . . . . . . . . . . . $
6,088,859
4,284,913
2,032,157
12,405,929
$
$
$
$
$
$
$
$
6,209,229
155,772
6,365,001
(4,148,864)
(184,804)
2,031,333
9,781,926
113,987
9,895,913
479,120
16,930
496,050
5,728,294
4,140,987
1,775,954
11,645,235
August 25,
2018
10,951,498
269,579
11,221,077
5,805,561
168,185
5,973,746
(4,162,890)
(174,527)
1,636,329
9,231,021
115,959
9,346,980
499,762
22,026
521,788
5,338,890
3,914,546
1,698,062
10,951,498
$
$
$
$
$
$
$
$
$
$
(1) Operating, selling, general and administrative expenses for fiscal 2018 include $130.3 million related to pension
termination charges and $193.2 million related to impairment charges.
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Note T – Quarterly Summary (1)
(Unaudited)
(in thousands, except per share data)
Twelve Weeks Ended
November 23, February 15,
2019
2020
May 9,
2020
Sixteen
Weeks Ended
August 29,
2020(2)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,793,038 $ 2,513,663 $ 2,779,299 $ 4,545,968
2,412,975
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,018,045
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . .
952,407
Income before income taxes . . . . . . . . . . . . . . . . .
740,457
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.67
Basic earnings per share . . . . . . . . . . . . . . . . . . . .
30.93
Diluted earnings per share . . . . . . . . . . . . . . . . . . .
1,490,648
491,673
444,223
342,896
14.66
14.39
1,366,063
407,938
363,603
299,282
12.70
12.39
1,501,068
500,023
456,280
350,338
14.67
14.30
(in thousands, except per share data)
Twelve Weeks Ended
Seventeen
Weeks Ended
November 17, February 9,
2018
2019
May 4,
2019
August 31,
2019(2)
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Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,641,733 $ 2,450,568 $ 2,783,006 $ 3,988,435
2,130,400
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
780,775
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . .
719,578
Income before income taxes . . . . . . . . . . . . . . . . .
Net income(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
565,228
23.15
Basic earnings per share . . . . . . . . . . . . . . . . . . . .
22.59
Diluted earnings per share . . . . . . . . . . . . . . . . . . .
1,492,020
547,523
504,284
405,949
16.35
15.99
1,325,107
400,020
358,658
294,638
11.71
11.49
1,417,474
487,818
448,812
351,406
13.71
13.47
(1) The sum of quarterly amounts may not equal the annual amounts reported due to rounding. In addition, the earnings per
share amounts are computed independently for each quarter while full year is based on the annual weighted average shares
outstanding.
(2) The fourth quarter for fiscal 2020 is based on a 16-week period while fiscal 2019 is based on a 17-week period. All other
quarters presented are based on a 12-week period.
78
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of August 29, 2020, an evaluation was performed under the supervision and with the participation of AutoZone’s
management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act, as amended. Based on that evaluation, our management, including the Chief Executive Officer
and the Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of
August 29, 2020.
Internal Control Over Financial Reporting
A report of AutoZone’s management on our internal control over financial reporting (as such term defined in Rule
13a-15(f) under the Exchange Act) as a report of Ernst & Young, LLP, an independent registered public accounting
firm, on the effectiveness of AutoZone’s internal control over financial reporting are included in Part I, Item 8 of
this document and is incorporated herein by reference.
Changes in Internal Control Over Financial Reportings
There were no changes in our internal control over financial reporting that occurred during the quarter ended
August 29, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Attestation Report of Registered Public Accounting Firm
Our internal control over financial reporting as of August 29, 2020 has been audited by Ernst & Young, LLP, an
independent registered public accounting firm, which also audited our Consolidated Financial Statements for the
year ended August 29, 2020, as stated in their report included herein, which expresses an unqualified opinion on the
effectiveness of our internal control over financial reporting as of August 29, 2020.
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Item 9B. Other Information
Not applicable.
79
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information set forth in Part I, Item 1 of this document in the section entitled “Information about our Executive
Officers,” is incorporated herein by reference in response to this item. Additionally, the information contained in
AutoZone, Inc.’s Proxy Statement dated October 26, 2020, in the sections entitled “Corporate Governance Matters,”
“Proposal 1 – Election of Directors” and “Delinquent Section 16(a) Reports,” is incorporated herein by reference in
response to this item.
The Company has adopted a Code of Ethical Conduct for Financial Executives that applies to its chief executive
officer, chief financial officer, chief accounting officer and other financial executives. The Company has made the
Code of Ethical Conduct available at www.autozone.com, which can be accessed by clicking “Investor Relations”
located at the bottom of the page.
Item 11. Executive Compensation
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The information contained in AutoZone, Inc.’s Proxy Statement dated October 26, 2020, in the section entitled
“Executive Compensation,” is incorporated herein by reference in response to this item.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information contained in AutoZone, Inc.’s Proxy Statement dated October 26, 2020, in the sections entitled
“Security Ownership of Management and Board of Directors,” “Security Ownership of Certain Beneficial Owners”
and “Equity Compensation Plans” is incorporated herein by reference in response to this item.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information contained in AutoZone, Inc’s Proxy Statement dated October 26, 2020, in the sections entitled
“Related Party Transactions” and “Corporate Governance Matters – Independence” is incorporated herein by
reference in response to this item.
Item 14. Principal Accounting Fees and Services
The information contained in AutoZone, Inc.’s Proxy Statement dated October 26, 2020, in the section entitled
“Proposal 2 – Ratification of Independent Registered Public Accounting Firm,” is incorporated herein by reference
in response to this item.
80
PART IV
Item 15. Exhibits and Financial Statement Schedules
The following information required under this item is filed as part of this report.
(a) Financial Statements
The following financial statements, related notes and reports of independent registered public accounting firm are
filed with this Annual Report on Form 10-K in Part II, Item 8:
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income for the fiscal years ended August 29, 2020, August 31, 2019, and August 25,
2018
Consolidated Statements of Comprehensive Income for the fiscal years ended August 29, 2020, August 31, 2019,
and August 25, 2018
Consolidated Balance Sheets as of August 29, 2020, and August 31, 2019
Consolidated Statements of Cash Flows for the fiscal years ended August 29, 2020, August 31, 2019,
and August 25, 2018
Consolidated Statements of Stockholders’ Deficit for the fiscal years ended August 29, 2020, August 31, 2019,
and August 25, 2018
Notes to Consolidated Financial Statements
(b) Exhibits
The following exhibits are being filed herewith:
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3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
Restated Articles of Incorporation of AutoZone, Inc. Incorporated by reference to Exhibit 3.1 to
the Quarterly Report on Form 10-Q for the quarter ended February 13, 1999.
Seventh Amended and Restated By-Laws of AutoZone, Inc. Incorporated by reference to
Exhibit 3.1 to the Current Report on Form 8-K dated March 19, 2018.
Indenture dated as of August 8, 2003, between AutoZone, Inc. and Bank One Trust Company,
N.A. Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3
(No. 333-107828) filed August 11, 2003.
Officers’ Certificate dated April 24, 2012, pursuant to Section 3.2 of the indenture dated August 8,
2003, setting forth the terms of the 3.700% Senior Notes due 2022. Incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K dated April 24, 2012.
Form of 3.700% Senior Notes due 2022. Incorporated by reference from the Form 8-K dated
April 24, 2012.
Officers’ Certificate dated November 13, 2012, pursuant to Section 3.2 of the indenture dated
August 8, 2003, setting forth the terms of the 2.875% Senior Notes due 2023. Incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K dated November 13, 2012.
Form of 2.875% Senior Notes due 2023. Incorporated by reference from the Form 8-K dated
November 13, 2012.
Officers’ Certificate dated April 29, 2013, pursuant to Section 3.2 of the indenture dated August 8,
2003, setting forth the terms of the 3.125% Senior Notes due 2023. Incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K dated April 29, 2013.
81
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4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
Form of 3.125% Senior Notes due 2023. Incorporated by reference to Exhibit 4.2 to the Form 8-K
dated April 29, 2013.
Officers’ Certificate dated April 29, 2015, pursuant to Section 3.2 of the Indenture dated August 8,
2003, setting forth the terms of the 2.500% Senior Notes due 2021. Incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K dated April 29, 2015.
Form of 2.500% Senior Notes dated 2021. Incorporated by reference to Exhibit 4.3 to the Current
Report on Form 8-K dated April 29, 2015.
Officers’ Certificate dated April 29, 2015, pursuant to Section 3.2 of the Indenture dated August 8,
2003, setting forth the terms of the 3.250% Senior Notes due 2025. Incorporated by reference to
Exhibit 4.2 to the Current Report on Form 8-K dated April 29, 2015.
Form of 3.250% Senior Notes due 2025. Incorporated by reference to Exhibit 4.4 to the Current
Report on Form 8-K dated April 29, 2015.
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.
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.
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 8-K dated April 18, 2017.
Form of 3.750% Senior Notes due 2027. Incorporated by reference to Exhibit 4.2 to the Current
Report on Form 8-K dated April 18, 2017.
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 8-K dated April 18, 2019.
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 8-K dated April 18, 2019.
Form of 3.125% Senior Notes due 2024. Incorporated by reference to Exhibit 4.3 to the Current
Report on Form 8-K dated April 18, 2019.
Form of 3.750% Senior Notes due 2029. Incorporated by reference to Exhibit 4.4 to the Current
Report on Form 8-K dated April 18, 2019.
Officers’ Certificate dated March 30, 2020, pursuant to Section 3.2 of the Indenture, dated March
30, 2020, setting forth the terms of the 3.625% Senior Notes due 2025. Incorporated by reference
to Exhibit 4.1 to the Current Report on Form 8-K dated March 30, 2020.
Officers’ Certificate dated March 30, 2020, pursuant to Section 3.2 of the Indenture, dated March
30, 2020, setting forth the terms of the 4.000% Senior Notes due 2030. Incorporated by reference
to Exhibit 4.2 to the Current Report on Form 8-K dated March 30, 2020.
82
4.22
4.23
4.24
4.25
4.26
4.27
Form of 3.625% Note due 2025. Incorporated by reference to Exhibit 4.3 to the Current Report on
Form 8-K dated March 30, 2020.
Form of 4.000% Note due 2030. Incorporated by reference to Exhibit 4.4 to the Current Report on
Form 8-K dated March 30, 2020.
Form of 4.000% Note due 2030. Incorporated by reference to Exhibit 4.5 to the Current Report on
Form 8-K dated March 30, 2020.
Form of 1.650% Note due 2031. Incorporated by reference to Exhibit 4.2 to the Current Report on
Form 8-K dated August 14, 2020.
Form of 1.650% Note due 2031. Incorporated by reference to Exhibit 4.3 to the Current Report on
Form 8-K dated August 14, 2020.
Officers’ Certificate dated August 14, 2020, pursuant to Section 3.2 of the Indenture, dated
August 14, 2020, 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.
4.28
Description of Securities of AutoZone, Inc.
*10.1
*10.2
*10.3
*10.4
*10.5
*10.6
*10.7
*10.8
*10.9
Second Amended and Restated 1998 Director Compensation Plan. Incorporated by reference to
Exhibit 10.2 to the Annual Report on Form 10-K for the fiscal year ended August 26, 2000.
AutoZone, Inc. 2003 Director Compensation Plan. Incorporated by reference to Appendix D to the
definitive proxy statement dated November 1, 2002, for the Annual Meeting of Stockholders held
December 12, 2002.
Third Amendment to the AutoZone, Inc. Executive Deferred Compensation Plan. Incorporated by
reference to Exhibit 10.1 to the Form 8-K dated December 12, 2012.
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AutoZone, Inc. 2006 Stock Option Plan. Incorporated by reference to Appendix A to the
definitive proxy statement dated October 25, 2006, for the Annual Meeting of Stockholders held
December 13, 2006.
Form of Stock Option Agreement. Incorporated by reference to Exhibit 10.26 to the Annual
Report on Form 10-K for the fiscal year ended August 25, 2007.
Amended and Restated AutoZone, Inc. 2003 Director Compensation Plan. Incorporated by
reference to Exhibit 99.2 to the Current Report on Form 8-K dated January 4, 2008.
Form of non-compete and non-solicitation agreement for Section 16 executive officers and by
AutoZone, Inc. Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K
dated February 15, 2008.
Agreement dated February 14, 2008, between AutoZone, Inc. and William C. Rhodes, III.
Incorporated by reference to Exhibit 99.4 to the Current Report on Form 8-K dated February 15,
2008.
AutoZone, Inc. 2015 Executive Incentive Compensation Plan incorporated by reference to
Exhibit A to the definitive proxy statement dated October 27, 2014, for the Annual Meeting of
Stockholders held December 18, 2014.
83
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*10.10
*10.11
*10.12
*10.13
*10.14
*10.15
*10.16
*10.17
*10.18
*10.19
*10.20
*10.21
AutoZone, Inc. 2011 Equity Incentive Award Plan, incorporated by reference to Exhibit A to the
definitive proxy statement dated October 25, 2010, for the Annual Meeting of Stockholders held
December 15, 2010.
Form of Stock Option Agreement under the 2006 Stock Option Plan, effective September 2010.
Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q dated
December 16, 2010.
Form of Stock Option Agreement under the 2006 Stock Option Plan for certain executive officers,
effective September 2010. Incorporated by reference to Exhibit 10.3 to the Quarterly Report on
Form 10-Q dated December 16, 2010.
Form of Letter Agreement dated as of December 14, 2010, amending certain Stock Option
Agreements of executive officers. Incorporated by reference to Exhibit 10.4 to the Quarterly
Report on Form 10-Q dated December 16, 2010.
Form of Stock Option Agreement under the 2011 Equity Incentive Award Plan. Incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q dated March 17, 2011.
Form of Stock Option Agreement under the 2011 Equity Incentive Award Plan for officers
effective September 27, 2011. Incorporated by reference to Exhibit 10.37 to the Annual Report on
Form 10-K for the fiscal year ended August 27, 2011.
First Amended and Restated AutoZone, Inc. Enhanced Severance Pay Plan. Incorporated by
reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q dated March 17, 2011.
Form of Stock Option Agreement under the 2011 Equity Incentive Award Plan for officers
effective September 27, 2011. Incorporated by reference to Exhibit 10.37 to the Annual Report on
Form 10-K for the fiscal year ended August 27, 2011.
Form of Stock Option Agreement under the 2011 Equity Incentive Award Plan for certain
executive officers effective September 27, 2011. Incorporated by reference to Exhibit 10.38 to the
Annual Report on Form 10-K for the fiscal year ended August 27, 2011.
Second Amendment to the AutoZone, Inc. Executive Deferred Compensation Plan. Incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K dated December 14, 2011.
Offer letter dated August 5, 2020, to Jamere Jackson. Incorporated by reference to Exhibit 10.1 on
Form 8-K dated September 14, 2020.
Amended and Restated AutoZone, Inc. Executive Deferred Compensation Plan dated
December 17, 2013. Incorporated by reference to Exhibit 10.2 to the Quarterly Report on
Form 10-Q dated March 25, 2014.
*10.22
AutoZone, Inc. Director Compensation Program effective January 1, 2020.
*10.23
10.24
Amended and Restated AutoZone, Inc. 2011 Equity Incentive Award Plan dated December 16,
2015. Incorporated by reference to Exhibit A to the definitive proxy statement dated October 26,
2015, for the Annual Meeting of Stockholders held December 16, 2015.
Third Amended and Restated Credit Agreement dated as of November 18, 2016, among
AutoZone, Inc., as Borrower, the lenders party thereto and Bank of America, N.A. as
Administrative Agent, incorporated by reference to Exhibit 10.1 of the Current Report on
Form 8-K dated November 21, 2016.
84
*10.25
10.26
*10.27
*10.28
21.1
23.1
31.1
31.2
32.1
32.2
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.
Master Extension, New Commitment and Amendment Agreement dated as of November 18,
2017 among AutoZone, Inc. as Borrower; Bank of America, N.A. as Administrative Agent and
Swingline Lender; JPMorgan Chase Bank, N.A. as Syndication Agent; Merrill Lynch, Pierce,
Fenner & Smith Incorporated and J.P. Morgan Chase Bank, N.A. as Joint Lead Arrangers; Merrill
Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Chase Bank, N.A., SunTrust Robinson
Humphrey, Inc., U.S. Bank National Association, Wells Fargo Securities, LLC and Barclay’s
Capital as Joint Book Runners; SunTrust Bank, U.S. Bank National Association, Wells Fargo
Bank, National Association and Barclay’s Bank PLC as Documentation Agents; and the several
lenders party thereto.
Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under
the 2011 Equity Incentive Award Plan for officers effective September 27, 2011. Incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q dated December 17, 2018.
364-Day Credit Agreement, dated April 3, 2020, by and among the Company, as borrower, the
several lenders from time to time party thereto, and U.S. Bank, National Association., as
administrative agent for the lenders. Incorporated by reference to Exhibit 10.1 of the Current
Report on Form 8-K dated April 7, 2020.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data
File because its XBRL tags are embedded within the Inline XBRL document
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101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Document
101.LAB
Inline XBRL Taxonomy Extension Labels Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Document
101.DEF
Inline XBRL Taxonomy Extension Definition Document
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* Management contract or compensatory plan or arrangement.
(c) Financial Statement Schedules
Schedules are omitted because the information is not required or because the information required is included in the
financial statements or notes thereto.
Item 16. Form 10-K Summary
None.
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86
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
AUTOZONE, INC.
By: /s/ WILLIAM C. RHODES, III
William C. Rhodes, III
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Dated: October 26, 2020
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87
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE
TITLE
DATE
/s/ WILLIAM C. RHODES, III
William C. Rhodes, III
/s/ WILLIAM T. GILES
William T. Giles
Chairman, President and Chief Executive Officer
October 26, 2020
(Principal Executive Officer)
Chief Financial Officer and Executive Vice
President – Finance, Information Technology and
Store Development (Principal Financial Officer)
October 26, 2020
/s/ CHARLIE PLEAS, III
Charlie Pleas, III
Senior Vice President and Controller
October 26, 2020
(Principal Accounting Officer)
/s/ DOUGLAS H. BROOKS
Douglas H. Brooks
Director
/s/ MICHAEL M. CALBERT
Michael M. Calbert
Director
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/s/ LINDA A. GOODSPEED
Linda A. Goodspeed
Director
/s/ EARL G. GRAVES, JR.
Earl, G. Graves, Jr.
Director
/s/ ENDERSON GUIMARAES
Enderson Guimaraes
Director
/s/ D. BRYAN JORDAN
D. Bryan Jordan
/s/ GALE V. KING
Gale V. King
Director
Director
/s/ GEORGE R. MRKONIC, JR.
George R. Mrkonic, Jr.
Director
October 26, 2020
October 26, 2020
October 26, 2020
October 26, 2020
October 26, 2020
October 26, 2020
October 26, 2020
October 26, 2020
/s/ JILL A. SOLTAU
Jill A. Soltau
Director
October 26, 2020
88
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21.1
NAME
ALLDATA LLC
AutoZone.com, Inc.
AutoZone de México, S. de R.L. de
C.V.
AutoZone Development LLC
AutoZone IP LLC
AutoZone Northeast LLC
AutoZone Parts, Inc.
AutoZone Puerto Rico, Inc.
AutoZone Stores LLC
AutoZone Texas LLC
AutoZone West LLC
Riverside Captive Insurance
Company
STATE OR COUNTRY OF
ORGANIZATION OR INCORPORATION
Nevada
Virginia
Mexico
Nevada
Nevada
Nevada
Nevada
Puerto Rico
Nevada
Nevada
Nevada
Arizona
In addition, 44 subsidiaries operating in the United States and 27 subsidiaries operating outside of the United States
have been omitted as they would not, considered in the aggregate as a single subsidiary, constitute a significant
subsidiary as defined by Rule 1-02(w) of Regulation S-X.
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
Registration Statement (Form S-8 No. 333-139559) pertaining to the AutoZone, Inc. 2006 Stock Option Plan
Registration Statement (Form S-8 No. 333-103665) pertaining to the AutoZone, Inc. 2003 Director
Compensation Award Plan
Registration Statement (Form S-8 No. 333-42797) pertaining to the AutoZone, Inc. Amended and Restated
Employee Stock Purchase Plan
Registration Statement (Form S-8 No. 333-88241) pertaining to the AutoZone, Inc. Amended and Restated
Director Compensation Plan
Registration Statement (Form S-8 No. 333-75140) pertaining to the AutoZone, Inc. Executive Stock Purchase
Plan
Registration Statement (Form S-3ASR No. 333-230719) pertaining to a shelf registration to sell debt securities
Registration Statement (Form S-3ASR No. 333-152592) pertaining to a shelf registration to sell debt securities
Registration Statement (Form S-8 No. 333-171186) pertaining to the AutoZone, Inc. 2011 Equity Incentive
Award Plan
Registration Statement (Form S-3ASR No. 333-180768) pertaining to a shelf registration to sell debt securities
Registration Statement (Form S-3ASR No. 333-203439) pertaining to a shelf registration to sell debt securities
of our reports dated October 26, 2020, with respect to the Consolidated Financial Statements of AutoZone, Inc. and
the effectiveness of internal control over financial reporting of AutoZone, Inc., included in this Annual Report
(Form 10-K) of AutoZone, Inc. for the year ended August 29, 2020.
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/s/ Ernst & Young LLP
Memphis, Tennessee
October 26, 2020
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William C. Rhodes, III, certify that:
1.
I have reviewed this Annual Report on Form 10-K of AutoZone, Inc. (“registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
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5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
October 26, 2020
/s/ WILLIAM C. RHODES, III
William C. Rhodes, III
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
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Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William T. Giles, certify that:
1.
I have reviewed this Annual Report on Form 10-K of AutoZone, Inc. (“registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
October 26, 2020
/s/ WILLIAM T. GILES
William T. Giles
Chief Financial Officer and Executive
Vice President – Finance, Information
Technology and Store Development
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of AutoZone, Inc. (the “Company”) on Form 10-K for the fiscal year ended
August 29, 2020 as filed with the SEC on the date hereof (the “Report”), I, William C. Rhodes, III, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i)
(ii)
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
October 26, 2020
/s/ WILLIAM C. RHODES, III
William C. Rhodes, III
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of AutoZone, Inc. (the “Company”) on Form 10-K for the fiscal year ended
August 29, 2020, as filed with the SEC on the date hereof (the “Report”), I, William T. Giles, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i)
(ii)
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
October 26, 2020
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/s/ WILLIAM T. GILES
William T. Giles
Chief Financial Officer and Executive
Vice President – Finance, Information
Technology and Store Development
(Principal Financial Officer)
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Corporate Information
Corporate Information
AutoZone’s CEO Team
Our leadership team works tirelessly to support and continue to enhance the AutoZone that exists today. We lead as a team and we win as a team. Through
their support and guidance, but most importantly through the commitment and passion of approximately 100,000 AutoZoners, the Company is well
positioned for future growth and prosperity.
Officers
Customer Satisfaction
Executive Vice Presidents
Customer Satisfaction
William C. Rhodes, III†
Chairman, President and
Chief Executive Officer
Mark A. Finestone†
Merchandising, Supply
Chain and Marketing
William T. Giles†
Chief Financial Officer,
Finance, Information
Technology and Store
Development
Jamere Jackson†
Chief Financial Officer,
Finance and Store
Development – Elect
Thomas B. Newbern†
Store Operations,
Commercial, Loss
Prevention and ALLDATA
Senior Vice Presidents
Customer Satisfaction
Philip B. Daniele†
Commercial
Preston B. Frazer†
Store Operations
Ronald B. Griffin†
Chief Information Officer,
Information Technology
Vice Presidents
Customer Satisfaction
Stephen E. Agar, Jr.
Chief Information
Security Officer
Jarvis D. Allen
Stores
Jennie E. Anderson
Loss Prevention
Edward Beltran
Stores
B. Craig Blackwell
Stores
Charles D. Blank
Stores
Mauricio Braz
Presidente
AutoZone do Brasil
Michael B. Campanaro
Information Technology
Brian L. Campbell
Tax, Treasury and
Investor Relations
William R. Hackney†
Merchandising
Mitchell C. Major†
Supply Chain
Domingo Hurtado†
International
Seong Ohm†
Merchandising – Elect
Charlie Pleas, III†
Controller
Albert Saltiel†
Marketing and
E-Commerce
Richard C. Smith†
Human Resources
Kristen Collier Wright†
General Counsel and
Secretary
Catherine M. Culnane
Information Technology
Eric S. Gould
Replenishment
John R. Lammers
Merchandising
Anthony J. Dudek
Information Technology
Robert A. Durkin
Distribution
William R. Edwards II
Merchandising
Joseph Espinosa
Stores
Duane M. Findley
Commercial
Priya A. Galante
Assistant General Counsel
and Assistant Secretary
Patricia N. Glancy
Talent Development,
Diversity and
Communications
Timothy J. Goddard
Store Development
Matthew C. Harmon
Benefits, Compensation
and HR Systems
Matt Henson
Field Human Resources
Troy L. Hitchcock
Merchandising
Robert C. Hunter
Merchandising Pricing
and Analysis
Joyce L. Johns
Internal Audit
Thomas A. Kliman
Tax
Manoj Koratty
Chief Technology Officer
Maria M. Leggett
Assistant General Counsel
and Assistant Secretary
Lindsay Lehman
Marketing
J. Scott Murphy
Strategic Planning and
Business Development
Anthony D. Rose, Jr.
Visual Merchandising
Nick Sarraf
Information Technology
Dennis W. LeRiche
Stores
Joe L. Sellers, Jr.
Commercial
S. Jame Maki
E-Commerce
Brett L. Shanaman
Store Operations
Satwinder Mangat
President ALLDATA
Steven M. Stoll
Merchandising
Grant E. McGee
Stores
David E. McKinney
Government and
Community Relations
Jason M. McNeil
Global Sourcing
Patrick D. B. Webb
Presidente
AutoZone de Mexico
Solomon A. Woldeslassie
Transportation
† Required to file under Section 16 of the Securities and Exchange Act of 1934.
Board of Directors
Douglas H. Brooks (2)
Former Chairman, President and
CEO – Brinker International
Michael M. Calbert (1)
Chairman
Dollar General Corporation
Retired Partner
Kohlberg Kravis Roberts & Co.
Linda A. Goodspeed (1,2)
Former Managing Partner and COO
WealthStrategies Financial Advisors
Earl G. Graves, Jr. (3*,†)
President and CEO
Black Enterprise
Enderson Guimaraes (3)
Former President and COO
Laureate Education Inc. and
President at PepsiCo
D. Bryan Jordan(1*,3)
President and CEO
First Horizon National Corporation
Gale V. King (2)
Executive Vice President & Chief
Administrative Officer
Nationwide
George R. Mrkonic, Jr. (1, 2*)
Non-Executive Chairman
MARU Group
William C. Rhodes, III
Chairman, President and CEO
AutoZone, Inc.
Jill Soltau (3)
CEO
J.C. Penney Company, Inc.
(1) Audit Committee, (2) Compensation Committee, (3) Nominating and Corporate Governance Committee, * Committee Chair, † Lead Director
Transfer Agent and Registrar
Computershare Investor Services
P.O. Box 43069
Providence, RI 02940-3069
(877) 282-1168
(781) 575-2723
www.computershare.com
Annual Meeting
The Annual Meeting of Stockholders of
AutoZone, Inc. will be held on Wednesday,
December 16, 2020, 8.00 am Central
Standard Time. The meeting will be held
online via live webcast at www.meetingcenter.
io/276027987. Instructions as to how
shareholders can attend the annual meeting
are provided in the Proxy Statement.
Investor Relations Website
Available at www.autozone.com and click on
“investor relations” at the bottom of the page
Company Websites
www.autozone.com
www.autozonepro.com
www.alldata.com
www.duralastparts.com
Stock Exchange Listing
New York Stock Exchange
Ticker Symbol: AZO
Auditors
Ernst & Young, LLP
Memphis, Tennessee
Code of Ethical Conduct
Available at www.autozone.com and click on
“investor relations” at the bottom of the page
Corporate Social
Responsibility Report
Available at www.autozone.com and click on
“corporate and social responsibility report” at
the bottom of the page
Form of 10-K / Quarterly Report
Stockholders may obtain, free of charge, a
copy of AutoZone’s annual report on Form
10-K, its quarterly reports on Form 10-Q
as filed with the Securities and Exchange
Commission and quarterly press releases
by contacting
• Investor Relations
P.O. Box 2198
Memphis, TN 38101
• Phoning (901) 495-7185 or
• Emailing investor.relations@autozone.com
Copies of all documents filed by AutoZone
with the Securities and Exchange Commission,
including Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q, are also
available at the SEC’s EDGAR server at
www.sec.gov.
Stockholders of Record
As of August 29, 2020, there were 2,032
stockholders of record, excluding the number
of beneficial owners whose shares were
represented by security position listing.
123 S. Front Street
Memphis, TN 38103-3607
(901) 495-6500
www.autozone.com