AutoZone 2010 Annual Report Download

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2010 ANNUAL REPORT
Notice of Annual Stockholders Meeting and Proxy Statement
Same
Store Sales
+5.4%
ROICEPS
27.6%+27.6%
AZO-AnnualReport-2010-18Oct2010.indd 2-3 10/19/10 2:58 PM

Table of contents

  • Page 1
    2010 ANNUAL REPORT Notice of Annual Stockholders Meeting and Proxy Statement EPS +27.6% Same Store Sales +5.4% ROIC 27.6%

  • Page 2
    ... Profile AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. The Company also operates stores in Puerto Rico and Mexico. Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks...

  • Page 3
    ... revenues by eight percent and grew earnings per share by 27.6% on top of our very solid 2009 results. More important than this year's results, we believe AutoZone continues to be very well positioned for future growth. In September, we hosted our annual National Sales Meeting in Memphis, Tennessee...

  • Page 4
    ... the United States and Puerto Rico, our Retail initiatives continue to be more about evolution than revolution. As the economy remained challenged in 2010, our goals remained similar to the previous year: (1) Improve Customer Service by relentlessly hiring, retaining, and training our AutoZoners...

  • Page 5
    ... with record Sales, Earnings Per Share, Operating Cash Flow, and Return on Invested Capital, these results would not have been possible without our AutoZoners' commitment to providing the industry's best customer service. Their dedication is what makes our organization great. I would personally like...

  • Page 6

  • Page 7
    notice of annual meeting of stockholders and proxy statement

  • Page 8

  • Page 9
    ...: When: Where: Annual Meeting of Stockholders December 15, 2010, 8:30 a.m. Central Standard Time J. R. Hyde III Store Support Center 123 South Front Street Memphis, Tennessee • Election of ten directors • Approval of the AutoZone, Inc. 2011 Equity Incentive Award Plan • Ratification of the...

  • Page 10
    ... Corporate Governance Committee ...Director Nomination Process ...Procedure for Communication with the Board of Directors ...Compensation of Directors ...PROPOSAL 2 - Approval of AutoZone, Inc. 2011 Equity Incentive Award Plan ...PROPOSAL 3 - Ratification of Independent Registered Public Accounting...

  • Page 11
    ... Company" mean AutoZone, Inc., and • "Annual Meeting" or "Meeting" means the Annual Meeting of Stockholders to be held on December 15, 2010, at 8:30 a.m. CST at the J. R. Hyde III Store Support Center, 123 South Front Street, Memphis, Tennessee. • "Board" means the Board of Directors of AutoZone...

  • Page 12
    ...vote the shares in person at the Annual Meeting. What if I have shares in the AutoZone Employee Stock Purchase Plan? If you have shares in an account under the AutoZone Employee Stock Purchase Plan, you have the right to vote the shares in your account. To do this you must sign and timely return the...

  • Page 13
    ...Corporate Governance Principles and the rules of the New York Stock Exchange. William C. Crowley and Robert R. Grusky were identified by ESL and were appointed to the Board in accordance with the ESL Agreement and were re-elected by AutoZone's stockholders at AutoZone's 2008 and 2009 Annual Meetings...

  • Page 14
    ... Chief Financial Officer until 2003. Experience, Skills and Qualifications: The Board believes Ms. Gove is qualified to serve as a director of the Company based on her experience in executive retail operations and finance roles, her knowledge of accounting, financial reporting, and financial systems...

  • Page 15
    ... and Chief Executive Officer of AutoZone, is qualified to serve as a director of the Company based on his extensive knowledge of AutoZone's business and the automotive aftermarket industry, his expertise in strategic business development and executive management, his owner orientation, and his board...

  • Page 16
    ...: The Board believes Mr. Rhodes, AutoZone's Chairman and Chief Executive Officer, is qualified to serve as a director of the Company based on his 15 years' experience with the Company, which have included responsibility for corporate strategy, executive management, operations and supply chain; his...

  • Page 17
    ... under applicable laws and regulations, the listing standards of the New York Stock Exchange, and the standards contained in our Corporate Governance Principles (listed above). The Board relies on information from Company records and questionnaires completed annually by each director. As part of...

  • Page 18
    .... The Board of Directors 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...

  • Page 19
    ...& Corporate Governance Committees; a Code of Business Conduct & Ethics 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 www.autozoneinc.com and is also available, free of charge...

  • Page 20
    ... 2010 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 www.autozoneinc.com and is also available, free of charge, in print to any stockholder who requests it. Compensation...

  • Page 21
    ...whom are independent directors under the standards of AutoZone's Corporate Governance Principals and the listing standards of the New York Stock Exchange. How many times did the Compensation Committee meet during the last fiscal year? During the 2010 fiscal year, the Compensation Committee held four...

  • Page 22
    ..., management expertise, crisis response, industry knowledge, international markets, 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 www.autozoneinc.com...

  • Page 23
    ... the AutoZone, Inc. 2003 Director Compensation Plan, non-employee directors receive at least 50% of their annual retainer fees and committee chair fees in AutoZone common stock or in Stock Units (units with value equivalent to the value of shares of AutoZone common stock as of the grant date). They...

  • Page 24
    ... 718 for stock options awarded under the AutoZone, Inc. 2003 Director Stock Option Plan during fiscal 2010. See Note B, Share-Based Payments, to our consolidated financial statements in our 2010 Annual Report for a discussion of our accounting for share-based awards and the assumptions used. As of...

  • Page 25
    ...each new director receives an option to purchase 3,000 shares upon election to the Board, plus a portion of the base annual option grant corresponding to the director's compensation election, prorated for the portion of the year served in office. Stock option grants are made at the fair market value...

  • Page 26
    ... for non-employee directors. Within three years of joining the Board, each director must personally invest at least $150,000 in AutoZone stock. Shares and Stock Units issued under the AutoZone, Inc. Second Amended and Restated Director Compensation Plan and the 2003 Director Compensation Plan count...

  • Page 27
    ... director" under the rules of the New York Stock Exchange. Except with respect to awards granted to our senior executives who are subject to Section 16 of the Exchange Act or employees who are "covered employees" within the meaning of Section 162(m) of the Code, the Plan allows the Compensation...

  • Page 28
    ... anniversary of the date of grant. The aggregate fair market value of the shares with respect to which options intended to be ISOs are exercisable for the first time by an employee in any calendar year may not exceed $100,000, or such other amount as the Code provides. The Plan prohibits, without...

  • Page 29
    ... by the Administrator. 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...

  • Page 30
    ... equity-based compensation expense); (ii) gross or net sales or revenue; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating earnings, profit or pre-tax profit or margin; (vi) cash flow (including, but not limited to, operating or net cash flow and free cash flow...

  • Page 31
    (xxii) economic value goals (including economic value added); (xxiii) customer retention; (xxiv) sales or sales-related goals (including sales per square foot and comparable store sales); (xxv) earnings before interest and taxes margin; and Proxy (xxvi) return on inventory any of which may be ...

  • Page 32
    ... 1 of each year. The number of Restricted Stock Units granted each quarter will be determined by dividing one-fourth of the amount of the Retainer by the fair market value of the shares of our common stock as of the grant date. If a non-employee director is elected to the Board after the beginning...

  • Page 33
    ...election); restricted stock units, stock-based performance awards, dividend equivalents, other incentive awards and other types of awards are generally subject to tax at the time of payment. Compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, AutoZone will...

  • Page 34
    ...2010, had the Plan and Program been in effect on such date. 2011 Equity Incentive Award Plan Name and Position Dollar Value ($) Number of Units Proxy William C. Rhodes, III ...Chairman, President and Chief Financial Officer William T. Giles ...Executive Vice President, IT, Store Development, Chief...

  • Page 35
    ... have recommended to the Board of Directors the inclusion of AutoZone's audited financial statements in the annual report for the fiscal year ended August 28, 2010, on Form 10-K for filing with the Securities and Exchange Commission. While the Audit Committee has the responsibilities and powers set...

  • Page 36
    ...current directors and executive officers as a group. Unless stated otherwise in the notes to the table, each person named below has sole authority to vote and invest the shares shown. Beneficial Ownership as of October 18, 2010 Name of Beneficial Owner Shares Deferred Stock Units(1) Options(2) Total...

  • Page 37
    ... is the manager of Tynan, LLC and the President and Chief Operating Officer of ESL Investments, Inc. Mr. Crowley is also a current Director of AutoZone. In their respective capacities, each of the foregoing may be deemed to be the beneficial owner of the shares of AutoZone common stock beneficially...

  • Page 38
    ... package each year is the potential value of his or her stock options. The table below illustrates how AutoZone's compensation program weights the "at-risk" components of its named executive officers' 2010 total compensation (using actual base earnings + fiscal 2010 cash incentive payment + Black...

  • Page 39
    ...financial and operating objectives. • Support and reward consistent, balanced growth and returns performance (add value every year) with demonstrable links to stockholder returns. • Drive cross-functional collaboration and a totalcompany perspective. Stock options • Senior executives receive...

  • Page 40
    ...IRS and the company set for the Employee Stock Purchase Plan. An executive may make purchases using up to 25% of his prior fiscal year's eligible compensation. • AutoZone implemented a stock ownership requirement during fiscal 2008 for executive officers. • Covered executives must meet specified...

  • Page 41
    ....) related to: • base salaries • variable compensation • total annual cash compensation • long-term incentive compensation • total direct compensation The salary surveys cover both the retail industry and compensation data on a broader, more general public company universe. Multiple salary...

  • Page 42
    ... and taxes ("EBIT") and return on invested capital ("ROIC"), as were the incentive objectives for fiscal 2011, set during a Compensation Committee meeting held in September 2010. The total incentive award is determined based on the impact of EBIT and ROIC on AutoZone's economic profit for the year...

  • Page 43
    ... is the result of achievement of Company financial and operating objectives that leads to growth in the per-share value of AutoZone common stock. In order to support and facilitate stock ownership by our executive officers, a portion of their annual stock option grant typically consists of Incentive...

  • Page 44
    ... as it deems appropriate. Newly promoted or hired officers may receive a grant shortly after their hire or promotion. As a general rule, new hire or promotional stock options are approved and effective on the date of a regularly scheduled meeting of the Compensation Committee. On occasion, these...

  • Page 45
    ... account all forms of compensation, including base salary, annual cash incentive, stock option awards, and the value of other benefits received. Other Executive Officers. The Compensation Committee reviews and establishes base salaries for AutoZone's executive officers other than the Chief Executive...

  • Page 46
    ... usually relate to base salary increases and stock option grants. The Chief Executive Officer also recommends pay packages for newly hired executives. Management provides the Compensation Committee with data, analyses and perspectives on market trends and annually prepares information to...

  • Page 47
    ...the Chief Executive Officer are held outside his presence. Does AutoZone use compensation consultants? Neither AutoZone management nor the Compensation Committee hired executive compensation consultants during fiscal 2010. Although historically we have hired consultants to provide services from time...

  • Page 48
    ... for each executive officer were fully deductible in 2010, because in no case did the sum of this compensation exceed $1 million. Section 409A of the Internal Revenue Code was created with the passage of the American Jobs Creation Act of 2004. These new tax regulations create strict rules related to...

  • Page 49
    ... which support this conclusion include: • Oversight of the management incentive plan and stock option program by the Compensation Committee of the Board of Directors; • Management oversight of key plans and programs, including approving target level payouts, setting financial and operating goals...

  • Page 50
    ... Other Option Incentive Plan Compensation Stock Compensation Earnings Salary Bonus Awards Awards Compensation ($)(6) ($)(5) ($)(4) Year ($) ($)(1) ($)(2)(3) ($)(3) Proxy Name and Principal Position Total ($) William C. Rhodes III ...Chairman, President & Chief Executive Officer William T. Giles...

  • Page 51
    ... taxes as part of the sales contract. (C) Represents employer contributions to the AutoZone, Inc. 401(k) Plan and the AutoZone, Inc. Executive Deferred Compensation Plan. (D) Represents transition payments to Mr. Goldsmith which the Company pays to certain individuals due to their age and service...

  • Page 52
    GRANTS OF PLAN-BASED AWARDS The following table sets forth information regarding plan-based awards granted to the Company's Named Executive Officers during the 2010 fiscal year. All Other Closing Price Option Awards: All Other Estimated Future Payments Stock Awards: Grant Date on Date Number of ...

  • Page 53
    ...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 Proxy The EICP provides that the goal may be different for...

  • Page 54
    ... Executive Stock Purchase Plan for the Company's Named Executive Officers as of August 28, 2010: Proxy Name Option Awards Number of Securities Underlying Unexercised Options(1) Grant Date Exercisable Unexercisable Option Exercise Price Option Expiration Date Stock Awards Number Market of Shares...

  • Page 55
    ... Unexercisable Name Option Exercise Price Option Expiration Date Stock Awards Market Number Value of Shares of Shares of Stock of Stock that that have have not Vested(2) not Vested(3) Proxy James A. Shea ...09/26/06 09/26/06 09/25/07 09/22/08 09/29/09 09/29/09 Totals ...Harry L. Goldsmith...

  • Page 56
    ... information regarding pension benefits for the Company's Named Executive Officers as of August 28, 2010: Number of Years of Credited Service Present Value of Accumulated Benefit ($)(1) Payments During Last Fiscal Year ($) Plan Name William C. Rhodes III ...AutoZone, Inc. Associates Pension Plan...

  • Page 57
    ... covered full-time AutoZone employees who were at least 21 years old and had completed one year of service with the Company. The benefits under the Pension Plan were based on years of service and the employee's highest consecutive five-year average compensation. Compensation included total annual...

  • Page 58
    ...after their first year of employment with the Company. As of August 28, 2010, there were 43 such officers of the Company. The EDCP is a nonqualified plan that allows officers who participate in AutoZone's 401(k) plan to make a pretax deferral of base salary and bonus compensation. Officers may defer...

  • Page 59
    ...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...

  • Page 60
    ... and "normal retirement date." 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 options but include salary and bonuses received...

  • Page 61
    ... if their employment had been involuntarily terminated on August 28, 2010. This table does not include amounts related to the Named Executive Officers' vested benefits under our deferred compensation and pension plans or pursuant to stock option awards, all of which are described in the tables above...

  • Page 62
    ... date. Unvested stock awards are share options under the Executive Stock Purchase Plan, which vest upon involuntary termination not for cause, disability, death or normal retirement. Disability Benefits are benefits under Company-paid individual long-term disability insurance policy. Life Insurance...

  • Page 63
    ... a similar position or in which such person has a 5% or greater beneficial ownership interest. Our Board has adopted a Code of Business 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...

  • Page 64
    ...of stock executed in trades at multiple sales prices over three days was made one day late with respect to the transactions executed on the earliest day. Copies of the insider trading reports can be found on the AutoZone corporate website at www.autozoneinc.com. STOCKHOLDER PROPOSALS FOR 2011 ANNUAL...

  • Page 65
    ... 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...

  • Page 66
    ... paid on Shares, awarded under Section 9.1 hereof. 2.17 "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. 2.18 "Effective Date" shall mean the date the Plan is...

  • Page 67
    ... 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...

  • Page 68
    ...added); (xxiii) customer retention; (xiv) sales or sales-related goals (including sales per square foot and comparable store sales); (xxv) earnings before interest and taxes margin; and (xxvi) return on inventory, any of which may be measured either in absolute terms for the Company or any operating...

  • Page 69
    ... Plan and the AutoZone, Inc. Fourth Amended and Restated 1998 Director Stock Option Plan, each as may be amended from time to time. 2.42 "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...

  • Page 70
    ... the number of shares available for issuance under the 2006 Stock Option Plan, the First Amended and Restated 2003 Director Compensation Plan and the First Amended and Restated 2003 Director Stock Option Plan as of the Stockholder Approval Date and (ii) any shares underlying awards outstanding under...

  • Page 71
    ... (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...

  • Page 72
    ... that would violate 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...

  • Page 73
    ... 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...

  • Page 74
    ... 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...

  • Page 75
    ...right of such person or persons to exercise the Option, as determined in the sole discretion of the Administrator; and (d) 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...

  • Page 76
    ... 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. ARTICLE 9. DIVIDEND EQUIVALENTS, STOCK PAYMENTS, DEFERRED STOCK, RESTRICTED STOCK UNITS; PERFORMANCE SHARE AWARDS, OTHER INCENTIVE AWARDS...

  • Page 77
    ... 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 Performance Share Awards. Any...

  • Page 78
    ...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...

  • Page 79
    ... 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...

  • Page 80
    ... 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...

  • Page 81
    ... 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...

  • Page 82
    ... 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...

  • Page 83
    ... 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...

  • Page 84
    ... 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; (iii) To make adjustments in the number and type of securities subject...

  • Page 85
    ...may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan. (f) With respect to Awards which are granted to Covered Employees and are intended to qualify as Performance-Based Compensation, no adjustment or action described in this Section 13...

  • Page 86
    ... shares of Common Stock. 13.5 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 using an internet website or interactive voice response...

  • Page 87
    ... 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...

  • Page 88
    Proxy

  • Page 89
    form 10-K

  • Page 90

  • Page 91
    ... _____ 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...

  • Page 92
    ...shares of Common Stock outstanding as of October 18, 2010, was 44,625,787. Documents Incorporated By Reference 10-K Portions of the definitive Proxy Statement to be filed within 120 days of August 28, 2010, pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting...

  • Page 93
    ... CONTENTS PART I...5 Item 1. Business ...5 Introduction ...5 Marketing and Merchandising Strategy ...6 Commercial ...7 Store Operations ...7 Store Development ...8 Purchasing and Supply Chain ...9 Competition ...9 Trademarks and Patents ...9 Employees ...9 AutoZone Website ...9 Executive Officers of...

  • Page 94
    ... Item IA under Part I of this Annual Report on Form 10-K for the year ended August 28, 2010, 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...

  • Page 95
    ...stores, we also have a commercial sales program that provides prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also sell the ALLDATA brand automotive diagnostic and repair software through www.alldata...

  • Page 96
    ...("DIY") customer or a repair shop would have little or no use other than for a single job. AutoZoners also provide other free services, including check engine light readings where allowed by law, battery charging, the collection of DIY used oil for recycling, and the testing of starters, alternators...

  • Page 97
    ... automotive parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts in the United States, Puerto Rico and Mexico. As a part of the program, we offer delivery to our commercial customers, as well as direct commercial sales through...

  • Page 98
    ...card and check approval processes, to access national warranty data, to implement real-time inventory controls and to locate and hold parts at neighboring AutoZone stores. Our stores utilize our computerized proprietary Store Management System, which includes bar code scanning and point-of-sale data...

  • Page 99
    ..., customer service, store location and price. AutoZone competes in both the retail DIY and commercial do-it-for-me ("DIFM") auto parts and products. Competitors include national, regional and local auto parts chains, independently owned parts stores, on-line parts stores, jobbers, repair shops, car...

  • Page 100
    ... and Support. Prior to 1994, Mr. Rhodes was a manager with Ernst & Young LLP. Mr. Rhodes is currently a member of the Board of Directors for Dollar General Corporation. William T. Giles, 51-Chief Financial Officer and Executive Vice President - Finance, Information Technology and Store Development...

  • Page 101
    ... AutoZone as Senior Vice President - Commercial during fiscal 2007. Mr. Roesel came to AutoZone with more than thirty years of experience with OfficeMax, Inc. and its predecessor, where he served in operations, sales and general management. Robert D. Olsen, 57-Corporate Development Officer, Customer...

  • Page 102
    ...line parts stores, jobbers, repair shops, car washes and auto dealers, in addition to discount and mass merchandise stores, department stores, hardware stores, supermarkets, drugstores, convenience stores and home stores that sell aftermarket vehicle parts and supplies, chemicals, accessories, tools...

  • Page 103
    ...prices could impact our merchandise distribution, commercial delivery, utility and product costs. All of these macroeconomic conditions could adversely affect our sales growth, margins and overhead, which could adversely affect our financial condition and operations. Our business depends upon hiring...

  • Page 104
    ... goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably. In addition, we extensively utilize hub stores, our supply chains and logistics management techniques to efficiently stock our stores...

  • Page 105
    ... and profit margins may be negatively affected. In the event that commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution centers and stores resulting in lost sales, canceled purchase...

  • Page 106
    ... various of the manufacturer defendants benefits such as volume discounts, rebates, early buy allowances and other allowances, fees, inventory without payment, sham advertising and promotional payments, a share in the manufacturers' profits, benefits of pay-on-scan purchases, implementation of radio...

  • Page 107
    ...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 plan, 26,620 shares were sold to employees in fiscal 2010, 29...

  • Page 108
    ... fiscal 2009, and 1,793 shares in fiscal 2008. At August 28, 2010, 250,575 shares of common stock were reserved for future issuance under this plan. Stock Performance Graph This graph shows, from the end of fiscal year 2005 to the end of fiscal year 2010, changes in the value of AutoZone's stock as...

  • Page 109
    ...in thousands) ...Average net sales per store (in thousands) ...Net sales per store square foot ...Total employees at end of year (in thousands) ...Merchandise under pay-on-scan arrangements (in thousands) ...Inventory turnover(3) ...Accounts payable to inventory ratio ...After-tax return on invested...

  • Page 110
    ...stores, we also have a commercial sales program that provides prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also sell the ALLDATA brand automotive diagnostic and repair software through www.alldata...

  • Page 111
    ... 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 data provided by the Automotive Aftermarket Industry Association, the number of seven year old or older...

  • Page 112
    ... 50.1% of net sales, for fiscal 2008. Gross profit as a percent of net sales was positively impacted by favorable distribution costs from improved efficiencies and lower fuel costs. However, this favorability was largely offset by a shift in mix to lower margin products. Operating, selling, general...

  • Page 113
    ... for fiscal 2010 and $277.6 million for fiscal 2009. For fiscal 2008, net repayments of commercial paper were $206.7 million. We expect to invest in our business consistent with historical rates during fiscal 2011, with our investment being directed primarily to our new-store development program and...

  • Page 114
    ... 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. For the fiscal year ended August 28, 2010, our after-tax return on...

  • Page 115
    ... of August 28, 2010 and August 29, 2009, respectively. We calculate adjusted debt as the sum of total debt, capital lease obligations and rent times six; and we calculate EBITDAR by adding interest, taxes, depreciation, amortization, rent and share-based compensation expense to net income. We target...

  • Page 116
    ... and closed store obligations reflected in our consolidated balance sheets. (4) Capital lease obligations include related interest. (5) We retain a significant portion of the risks associated with workers' compensation, employee health, general and product liability, property, and vehicle insurance...

  • Page 117
    ... 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 of Directors use the above-mentioned non-GAAP financial measures...

  • Page 118
    ...Week and percentages) Operations Revenue Revenue Net sales ...Cost of sales ...Gross profit ...Operating expenses ...Operating profit ...Interest expense, net ...Income before income taxes ...Income taxes ...Net income ...Diluted earnings per share ...Recent Accounting Pronouncements In October 2009...

  • Page 119
    ... sold at retail prices that are less than recorded costs, we record a charge (less than $20 million in each of the last three years) through cost of sales for the difference. These charges are based on management's judgment, including estimates and assumptions regarding marketability of products and...

  • Page 120
    ... the end of fiscal years 2010, 2009, and 2008, respectively. These changes are primarily reflective of our growing operations, including inflation, increases in vehicles and the number of hours worked, as well as our historical claims experience and changes in our discount rate. The assumptions made...

  • Page 121
    ... strategy to manage pension cost and reduce volatility in our assets. At August 28, 2010, our plan assets totaled $117 million in our qualified plan. Our assets are generally valued using the net asset values, which are determined by valuing investments at the closing price or last trade reported...

  • Page 122
    ... The fair value of our debt was estimated at $3.182 billion as of August 28, 2010, and $2.853 billion as of August 29, 2009, 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...

  • Page 123
    ... loss, unless the Mexican subsidiaries are sold or otherwise disposed. During fiscal 2010, exchange rates with respect to the Mexican peso increased by approximately 1.4% with respect to the U.S. dollar. Exchange rates with respect to the Mexican peso decreased by approximately 30% with respect to...

  • Page 124
    Item 8. Financial Statements and Supplementary Data Index Management's Report on Internal Control Over Financial Reporting...35 Reports of Independent Registered Public Accounting Firm ...36 Consolidated Statements of Income ...38 Consolidated Balance Sheets ...39 Consolidated Statements of Cash ...

  • Page 125
    ... 303A.12(a) of the New York Stock Exchange Listed Company Manual. Rule 13a-14(a) Certifications of Principal Executive Officer and Principal Financial Officer The Company has filed, as exhibits to its Annual Report on Form 10-K for the fiscal year ended August 28, 2010, the certifications of its...

  • Page 126
    ...standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of AutoZone, Inc. as of August 28, 2010 and August 29, 2009 and the related consolidated statements of income, stockholders' (deficit) equity, and cash flows for each of the three years in the...

  • Page 127
    Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of AutoZone, Inc. We have audited the accompanying consolidated balance sheets of AutoZone, Inc. as of August 28, 2010 and August 29, 2009 and the related consolidated statements of income, stockholders' ...

  • Page 128
    ... of Income Year Ended August 28, 2010 (52 weeks) August 29, 2009 (52 weeks) August 30, 2008 (53 weeks) (in thousands, except per share data) Net sales ...$7,362,618 Cost of sales, including warehouse and delivery expenses ...3,650,874 Gross profit ...3,711,744 Operating, selling, general and...

  • Page 129
    Consolidated Balance Sheets (in thousands) August 28, 2010 August 29, 2009 Assets Current assets: Cash and cash equivalents ...$ 98,280 Accounts receivable...125,802 Merchandise inventories ...2,304,579 Other current assets ...83,160 Total current assets ...2,611,821 Property and equipment: Land ...

  • Page 130
    ...Repayment of debt ...Net proceeds from sale of common stock ...Purchase of treasury stock...Income tax benefit from exercise of stock options ...Payments of capital lease obligations ...Other...Net cash used in financing activities ...Effect of exchange rate changes on cash ...Net increase (decrease...

  • Page 131
    ...of 3 shares of common stock ...Retirement of treasury shares...Sale of common stock under stock option and stock purchase plans...Share-based compensation expense ...Income tax benefit from exercise of stock options ...Balance at August 29, 2009 ...Net income ...Pension liability adjustments, net of...

  • Page 132
    ... fiscal 2010, the Company had a commercial sales program that provides prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations, and public sector accounts. The Company also sells the ALLDATA brand automotive diagnostic and repair software...

  • Page 133
    ... as of August 28, 2010, and August 29, 2009. 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 financial instruments to reduce...

  • Page 134
    ... sales at the time the sale is made and the product is delivered to the customer. Revenue from sales are presented net of allowances for estimated sales returns, which are based on historical return rates. A portion of the Company's transactions include the sale of auto parts that contain a core...

  • Page 135
    ...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...

  • Page 136
    ... used in determining the fair value of options granted and the related share-based compensation expense: Year Ended August 28, August 29, August 30, 2010 2009 2008 Expected price volatility ...Risk-free interest rates ...Weighted average expected lives in years ...Forfeiture rate...Dividend yield...

  • Page 137
    ...shares upon election to the Board of Directors, plus a portion of the annual directors' option grant prorated for the portion of the year actually served in office. Under the Director Compensation Program, each non-employee director may choose between two pay options, and the number of stock options...

  • Page 138
    ... market value as of the grant date. At August 28, 2010, there are 137,016 outstanding options with 210,484 shares of common stock reserved for future issuance under this plan. The Company recognized $1.0 million in expense related to the discount on the selling of shares to employees and executives...

  • Page 139
    ...the Company's deferred tax assets and liabilities were as follows: (in thousands) Deferred tax assets: Domestic net operating loss and credit carryforwards ...Foreign net operating loss and credit carryforwards ...Insurance reserves ...Accrued benefits ...Pension...Other ...Total deferred tax assets...

  • Page 140
    ... for the payment of interest and penalties associated with unrecognized tax benefits at August 28, 2010 and August 29, 2009, respectively. The major jurisdictions where the Company files income tax returns are the U.S. and Mexico. With few exceptions, tax returns filed for tax years 2006 through...

  • Page 141
    ... 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 securities, including benchmark yields and reported trades. Reference "Note H - Derivative Financial Instruments" for further information on how the Company...

  • Page 142
    ... Company's available-for-sale marketable securities consisted of the following: Amortized Cost Basis $28,707 24,560 8,603 9,831 $71,701 August 28, 2010 Gross Gross Unrealized Unrealized Gains Losses $ 490 283 192 47 $1,012 $ (1) - - (11) (12) (in thousands) Corporate securities...Government bonds...

  • Page 143
    ... August 28, 2010, the Company had $6.3 million, net of tax, recorded in accumulated other comprehensive loss related to net unrealized losses associated with these derivatives. For the fiscal year ended August 28, 2010, the Company's forward starting swaps were determined to be highly effective, and...

  • Page 144
    ... in each year. Derivatives not designated as Hedging Instruments The Company is dependent upon diesel fuel to operate its vehicles used in the Company's distribution network to deliver parts to its stores and unleaded fuel for delivery of parts from its stores to its commercial customers or other...

  • Page 145
    ... 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. In fiscal 2009, the Company used...

  • Page 146
    ...Scheduled Maturities $ 632,300 - 500,000 500,000 500,000 750,000 $2,882,300 The fair value of the Company's debt was estimated at $3.182 billion as of August 28, 2010, and $2.853 billion as of August 29, 2009, based on the quoted market prices for the same or similar issues or on the current rates...

  • Page 147
    ...-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. Accordingly, pension plan participants will earn no new benefits...

  • Page 148
    ... valued using exchange rates provided by an industry pricing vendor and commingled funds valued using the net asset value. These investments also include cash. The fair values of investments by level and asset category and the weighted-average asset allocations of the Company's pension plans at...

  • Page 149
    ... losses ...Net periodic benefit expense (income) ... The actuarial assumptions used in determining the projected benefit obligation include the following: August 28, 2010 Weighted average discount rate ...Expected long-term rate of return on plan assets ...5.25% 8.00% Year Ended August 29, 2009 6.24...

  • Page 150
    ...is no service cost. The discount rate is determined as of the measurement date and is based on the calculated yield of a portfolio of high-grade corporate bonds with cash flows that generally match the Company's expected benefit payments in future years. The expected long-term rate of return on plan...

  • Page 151
    ... various of the manufacturer defendants benefits such as volume discounts, rebates, early buy allowances and other allowances, fees, inventory without payment, sham advertising and promotional payments, a share in the manufacturers' profits, benefits of pay on scan purchases, implementation of radio...

  • Page 152
    ... software used in the automotive repair industry, and e-Commerce, which includes direct sales to customers through www.autozone.com. The Company evaluates its reportable segment primarily on the basis of net sales and segment profit, which is defined as gross profit. During fiscal 2009, the Company...

  • Page 153
    ... Profit: Auto Parts Stores ...Other...Gross profit ...Operating, selling, general and administrative expenses...Interest expense, net ...Income before income taxes...Segment Assets: Auto Parts Stores ...Other...Total ...Capital Expenditures: Auto Parts Stores ...Other...Total ...Sales by Product...

  • Page 154
    ...Summary (Unaudited) (1) (in thousands, except pershare data) Net sales ...Gross profit ...Operating profit ...Income before income taxes ...Net income ...Basic earnings per share ...Diluted earnings per share ... Twelve Weeks Ended November 21, February 13, 2009 2010 $1,589,244 799,924 260,428 224...

  • Page 155
    ... officer, chief accounting officer and persons performing similar functions. The Company has filed a copy of this Code of Ethical Conduct as Exhibit 14.1 to this Form 10-K. The Company has also made the Code of Ethical Conduct available on its investor relations website at http://www.autozoneinc.com...

  • Page 156
    ..., 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 28, 2010, August 29, 2009...

  • Page 157
    ... Executive Officer) Chief Financial Officer and Executive Vice President - Finance, Information Technology and Store Development (Principal Financial Officer) Senior Vice President and Controller (Principal Accounting Officer) Director Director Director Director Director Director Director Director...

  • Page 158
    ...Form 8-K dated September 28, 2007. 4.1 Senior Indenture, dated as of July 22, 1998, between AutoZone, Inc. and the First National Bank of Chicago. Incorporated by reference to Exhibit 4.1 to the Form 8-K dated July 17, 1998. 4.2 Fourth Amended and Restated AutoZone, Inc. Employee Stock Purchase Plan...

  • Page 159
    ... Compensation Plan. Incorporated by reference to Exhibit A to the Company's Proxy Statement dated October 27, 2004, for the Annual Meeting of Stockholders held December 16, 2004. 10.10 Credit Agreement dated as of July 9, 2009, among AutoZone, Inc., as Borrower, The Several Lenders From Time To Time...

  • Page 160
    ..., 2009. *10.26 AutoZone, Inc. 2010 Executive Incentive Compensation Plan, incorporated by reference to Exhibit A to the definitive proxy statement dated October 26, 2009, for the Annual Meeting of Stockholders held December 16, 2009. 12.1 Computation of Ratio of Earnings to Fixed Charges. 14.1 Code...

  • Page 161
    ... Presentation Document **101.DEF XBRL Taxonomy Extension Definition Document * Management contract or compensatory plan or arrangement. 10-K ** In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Annual Report on Form 10-K shall be deemed "furnished" and not...

  • Page 162
    ... Fixed Charges (Unaudited) 2010 (52 weeks) Fiscal Year Ended August 2009 2008 2007 (52 weeks) (53 weeks) (52 weeks) 2006 (52 weeks) (in thousands, except ratios) Earnings: Income before income taxes ...Fixed charges ...Less: Capitalized interest ...Adjusted earnings ...Fixed charges: Gross interest...

  • Page 163
    ... THE REGISTRANT NAME ALLDATA LLC AutoZone de México, S. de R.L. de C.V. AutoZone Development Corporation AutoZone Northeast, Inc. fka ADAP, Inc AutoZone Stores, Inc. AutoZone Texas, L.P. AutoZone West, Inc. fka Chief Auto Parts Inc. AutoZone.com, Inc. AutoZone Parts, Inc. AutoZone Puerto Rico, Inc...

  • Page 164
    ... Annual Report (Form 10-K) for the year ended August 28, 2010: Registration Statement (Form S-8 No. 333-19561) pertaining to the AutoZone, Inc. 1996 Stock Option Plan Registration Statement (Form S-8 No. 333-42797) pertaining to the AutoZone, Inc. Amended and Restated Employee Stock Purchase Plan...

  • Page 165
    ... 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. 2. I have reviewed this Annual Report on Form 10-K of AutoZone, Inc. ("registrant...

  • Page 166
    ... management or other employees who have a significant role in the registrant's internal control over financial reporting. 3. 4. 10-K October 25, 2010 /s/ WILLIAM T. GILES William T. Giles Chief Financial Officer and Executive Vice President - Finance, Information Technology and Store Development...

  • Page 167
    ...-OXLEY ACT OF 2002 In connection with the Annual Report of AutoZone, Inc. (the "Company") on Form 10-K for the fiscal year ended August 28, 2010, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William C. Rhodes, III, certify, pursuant to 18 U.S.C. Section...

  • Page 168
    ... Report fairly presents, in all material respects, the financial condition and results of operations of the Company. (ii) October 25, 2010 /s/ WILLIAM T. GILES William T. Giles Chief Financial Officer and Executive Vice President - Finance, Information Technology and Store Development (Principal...

  • Page 169
    corporate information

  • Page 170
    ... Chief Information Officer Timothy W. Briggs†Human Resources Mark A. Finestone†Merchandising William W. Graves†Supply Chain Lisa R. Kranc†Marketing Thomas B. Newbern†Store Operations Charlie Pleas, III†Controller Larry M. Roesel†Commercial Corporate Development Officer Customer...

  • Page 171
    ... Listing New York Stock Exchange Ticker Symbol: AZO Auditors Ernst & Young, LLP Memphis, Tennessee Code of Ethical Conduct AutoZone's Code of Ethical Conduct is available on its Investor Relations Web site at www.autozoneinc.com Form of 10-K/Quarterly Reports Stockholders may obtain free of charge...

  • Page 172
    123 South Front Street Memphis, Tennessee 38103-3607 (901) 495-6500 www.autozone.com