SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

o		Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

AUTOZONE, INC.

(Exact name of registrant as specified in its charter)

Nevada		62-1482048
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

123 South Front Street, Memphis, Tennessee 38103
(Address of principal executive offices) (Zip Code)

(901) 495-6500
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

		Name of each exchange
Title of each class		On which registered
Common Stock ($.01 par value)		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

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 o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $7,449,415,374.

The number of shares of Common Stock outstanding as of October 19, 2009, was 49,868,736.

Documents Incorporated By Reference

Portions of the definitive Proxy Statement to be filed within 120 days of August 29, 2009, pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting of Stockholders to be held December 16, 2009, are incorporated by reference into Part III.

 

 

TABLE OF CONTENTS

PART I			4
Item 1. Business			4
Introduction			4
Marketing and Merchandising Strategy			5
Commercial			6
Store Operations			6
Store Development			7
Purchasing and Supply Chain			8
Competition			8
Trademarks and Patents			8
Employees			8
AutoZone Website			8
Executive Officers of the Registrant			9
Item 1A. Risk Factors			10
Item 1B. Unresolved Staff Comments			13
Item 2. Properties			13
Item 3. Legal Proceedings			14
Item 4. Submission of Matters to a Vote of Security Holders			14
PART II			15
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			15
Item 6. Selected Financial Data			17
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			32
Item 8. Financial Statements and Supplementary Data			34
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure			62
Item 9A. Controls and Procedures			62
Item 9B. Other Information			62
PART III			63
Item 10. Directors, Executive Officers and Corporate Governance			63
Item 11. Executive Compensation			63
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			63
Item 13. Certain Relationships and Related Transactions, and Director Independence			63
Item 14. Principal Accounting Fees and Services			63
PART IV			64
Item 15. Exhibits and Financial Statement Schedules			64
Exhibit 12.1
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Forward-Looking Statements

Certain statements contained in this press release are forward-looking statements. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation, credit market conditions; the impact of recessionary conditions; competition; product demand; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; energy prices; war and the prospect of war, including terrorist activity; availability of consumer transportation; construction delays; access to available and feasible financing; and changes in laws or regulations. Certain of these risks are discussed in more detail in the “Risk Factors” section contained in Item IA under Part I of this Annual Report on Form 10-K, and you should read these Risk Factors 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 “Risk Factors” could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results.

PART I

Item 1. Business

Introduction

We are the nation’s leading retailer and a leading distributor of automotive replacement parts and accessories. We began operations in 1979 and at August 29, 2009, operated 4,229 stores in the United States and Puerto Rico, and 188 in Mexico. Each of our stores carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. At August 29, 2009, in 2,303 of our stores we also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also sell the ALLDATA brand automotive diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and as part of our commercial sales program, through www.autozonepro.com. We do not derive revenue from automotive repair or installation services.

At August 29, 2009, our stores were in the following locations:		Store Count
Alabama			97
Arizona			119
Arkansas			59
California			447
Colorado			62
Connecticut			35
Delaware			10
Florida			196
Georgia			175
Idaho			19
Illinois			208
Indiana			137
Iowa			23
Kansas			38
Kentucky			78
Louisiana			108
Maine			6
Maryland			39
Massachusetts			66
Michigan			145
Minnesota			25
Mississippi			85
Missouri			100
Montana			1
Nebraska			14
Nevada			49
New Hampshire			16
New Jersey			61
New Mexico			58
New York			114
North Carolina			164
North Dakota			1
Ohio			219
Oklahoma			67
Oregon			27
Pennsylvania			109
Puerto Rico			21
Rhode Island			15
South Carolina			75

At August 29, 2009, our stores were in the following locations:		Store Count
South Dakota			2
Tennessee			150
Texas			525
Utah			39
Vermont			1
Virginia			87
Washington			53
Washington, DC			6
West Virginia			23
Wisconsin			50
Wyoming			5
Domestic Total			4,229
Mexico			188
Total			4,417

Marketing and Merchandising Strategy

We are dedicated to providing customers with superior service and quality automotive parts and products at a great value in conveniently located, well-designed stores. Key elements of this strategy are:

Customer Service

Customer service is the most important element in our marketing and merchandising strategy, which is based upon consumer marketing research. We emphasize that our AutoZoners (employees) should always put customers first by providing prompt, courteous service and trustworthy advice. Our electronic parts catalog assists in the selection of parts; and warranties are offered by us or our vendors on many of the parts we sell. Our wide area network in our stores helps us to expedite credit or debit card and check approval processes, to locate parts at neighboring AutoZone stores, and in some cases, to place special orders directly with our vendors.

Our stores generally open at 7:30 or 8 a.m. and close between 8 and 10 p.m. Monday through Saturday and typically open at 9 a.m. and close between 6 and 9 p.m. on Sunday. However, some stores are open 24 hours, and some have extended hours of 6 or 7 a.m. until midnight seven days a week.

We also provide specialty tools through our Loan-A-Tool^® program. Customers can borrow a specialty tool, such as a steering wheel puller, for which a do-it-yourself (“DIY”) customer or a repair shop would have little or no use other than for a single job. AutoZoners also provide other free services, including check engine light readings where allowed by law, battery charging, the collection of DIY used oil for recycling; and the testing of starters, alternators, batteries, sensors and actuators.

Merchandising

The following tables show some of the types of products that we sell by major category of items:

Failure		Maintenance Items		Discretionary
A/C Compressors		Antifreeze & Windshield Washer Fluid		Air Fresheners
Batteries & Accessories		Brake Drums, Rotors, Shoes & Pads		Cell Phone Accessories
Belts & Hoses		Chemicals, including Brake & Power		Drinks & Snacks
Carburetors		Steering Fluid, Oil & Fuel Additives		Floor Mats & Seat Covers
Chassis		Oil & Transmission Fluid		Mirrors
Clutches		Oil, Air, Fuel & Transmission Filters		Performance Products
CV Axles		Oxygen Sensors		Protectants & Cleaners
Engines		Paint & Accessories		Seat Covers
Fuel Pumps		Refrigerant & Accessories		Sealants & Adhesives
Fuses		Shock Absorbers & Struts		Steering Wheel Covers
Ignition		Spark Plugs & Wires		Stereos & Radios
Lighting		Windshield Wipers		Tools
Mufflers				Wash & Wax
Starters & Alternators
Water Pumps
Radiators
Thermostats

We believe that the satisfaction of DIY customers and professional technicians is often impacted by our ability to provide specific automotive products as requested. Each store carries the same basic product lines, but we tailor our parts inventory to the makes and models of the vehicles in each store’s trade area. Our hub stores carry a larger assortment of products that can be delivered to Commercial customers or to local satellite stores.

We are constantly updating the products that we offer to ensure that our inventory matches the products that our customers demand.

Pricing

We want to be perceived by our customers as the value leader in our industry by consistently providing quality merchandise at the right price, backed by a good warranty and outstanding customer service. On 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: Valucraft, AutoZone, Duralast and Duralast Gold. We believe that our overall value compares favorably to those of our competitors.

Brand: Advertising and Promotions

We believe that targeted advertising and promotions play important roles in succeeding in today’s environment. We are constantly working to understand our customers’ wants and needs so that we can build long-lasting, loyal relationships. We utilize promotions and advertising primarily to advise customers about the overall importance of vehicle maintenance, our great value and the availability of high quality parts. Broadcast media is our primary advertising method of driving traffic to our stores. We utilize in-store signage, creative product placement and promotions to help educate customers about products that they need.

Store Design and Visual Merchandising

We design and build stores for high visual impact. The typical AutoZone store utilizes colorful exterior and interior signage, exposed beams and ductwork and brightly lighted 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 the shelf.

Commercial

Our Commercial sales program operates in a highly fragmented market, and we are one of the leading distributors of automotive parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts in the United States, Puerto Rico and Mexico. As a part of the program we offer credit and delivery to our Commercial customers. The program operates out of 2,303 domestic stores as of August 29, 2009. Through our hub stores, we offer a greater range of parts and products desired by professional technicians; this additional inventory is available for our DIY customers as well. We have sales teams focused on national, regional and public sector Commercial accounts.

Store Operations

Store Formats

Substantially all AutoZone stores are based on standard store formats, resulting in generally consistent appearance, merchandising and product mix. Approximately 85% to 90% of each store’s square footage is selling space, of which approximately 40% to 45% is dedicated to hard parts inventory. The hard parts inventory area is generally fronted by counters or pods that run the depth or length of the store, dividing the hard parts area from the remainder of the store. The remaining selling space contains displays of maintenance, accessories and non-automotive items.

We believe that our stores are “destination stores,” generating their own traffic rather than relying on traffic created by adjacent stores. Therefore, we situate most stores on major thoroughfares with easy access and good parking.

Store Personnel and Training

Each store typically employs from 10 to 16 AutoZoners, including a manager and, in some cases, an assistant manager. AutoZoners typically have prior automotive experience. All AutoZoners are encouraged to complete tests resulting in certification by the National Institute for Automotive Service Excellence (“ASE”), which is broadly recognized for training certification in the automotive industry. Although we do on-the-job training, we also provide formal training programs, including an annual national sales meeting, regular store meetings on specific sales and product issues, standardized training manuals and a specialist program that provides training to AutoZoners in several areas of technical expertise from both the Company and from independent certification agencies. Training is supplemented with frequent store visits by management.

Store managers, sales representatives and commercial specialists 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 and Mexico. We believe that this centralization enhances consistent execution of our merchandising and marketing strategies at the store level, while reducing expenses and cost of sales.

Store Automation

All of our stores have Z-net, our proprietary electronic catalog that enables our AutoZoners to efficiently look up the parts that our customers need and to provide complete job solutions, advice and information for customer vehicles. Z-net provides parts information based on the year, make, model and engine type of a vehicle and also tracks inventory availability at the store, at other nearby stores and through special order. The Z-net display screens are placed on the hard parts counter or pods, where both AutoZoners and customers can view the screen. In addition, our wide area network enables the stores to expedite credit or debit card and check approval processes, to access national warranty data, to implement real-time inventory controls and to locate and hold parts at neighboring AutoZone stores.

Our stores utilize our computerized proprietary Store Management System, which includes bar code scanning and point-of-sale data collection terminals. The Store Management System provides administrative assistance and improved personnel scheduling at the store level, as well as enhanced merchandising information and improved inventory control. We believe the Store Management System also enhances customer service through faster processing of transactions, simplified warranty and product return procedures.

Store Development

The following table reflects store development during the past five fiscal years:

		Fiscal Year
		2009				2008				2007				2006				2005
Beginning Domestic Stores			4,092				3,933				3,771				3,592				3,420
New Stores			140				160				163				185				175
Closed Stores			3				1				1				6				3
Net New Stores			137				159				162				179				172
Relocated Stores			9				14				18				18				7
Ending Domestic Stores			4,229				4,092				3,933				3,771				3,592
Ending Mexico Stores			188				148				123				100				81
Ending Total Stores			4,417				4,240				4,056				3,871				3,673

The domestic stores include stores in the United States and Puerto Rico. We believe that expansion opportunities exist both in markets that we do not currently serve, as well as in markets where we can achieve a larger presence. We attempt to obtain high visibility sites in high traffic locations and undertake substantial research prior to entering new markets. The most important criteria for opening a new store are its projected future profitability and its ability to achieve our required investment hurdle rate. Key factors in selecting new site and market locations include population, demographics, vehicle profile, 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, “our kind of vehicles,” as these are generally no longer under the original manufacturers’ warranties and require more maintenance and repair than younger vehicles. We generally seek to open new stores within or contiguous to existing market areas and attempt to cluster development in markets in a relatively short period of time. In addition to continuing to lease or develop our own stores, we evaluate and may make strategic acquisitions.

Purchasing and Supply Chain

Merchandise is selected and purchased for all stores through our store support centers located in Memphis, Tennessee and Mexico. In fiscal 2009, no class of similar products accounted for 10 percent or more of our total sales, nor did any single supplier account for more than 10 percent of our total purchases. We generally have few long-term contracts for the purchase of merchandise. We believe that we have good relationships with suppliers. We also believe that alternative sources of supply exist, at similar cost, for most types of product sold. Most of our merchandise flows through our distribution centers to our stores by our fleet of tractors and trailers or by third-party trucking firms.

Our hub stores have increased our ability to distribute products on a timely basis to many of our stores and to expand our product assortment. A hub store is able to provide replenishment of products sold and deliver other products maintained only in hub store inventories to a store in its coverage area generally within 24 hours. Hub stores are generally replenished from distribution centers multiple times per week.

Competition

The sale of automotive parts, accessories and maintenance items is highly competitive in many areas, including name recognition, product availability, customer service, store location and price. AutoZone competes in both the retail do-it-yourself (“DIY”) and commercial do-it-for-me (“DIFM”) auto parts and accessories markets.

Competitors include national, regional and local auto parts chains, independently owned parts stores, jobbers, repair shops, car washes and auto dealers, in addition to discount and mass merchandise stores, department stores, hardware stores, supermarkets, drugstores, convenience stores and home stores that sell aftermarket vehicle parts and supplies, chemicals, accessories, tools and maintenance parts. AutoZone competes on the basis of customer service, including the trustworthy advice of our AutoZoners, merchandise selection and availability, price, product warranty, store layouts and location.

Trademarks and Patents

We have registered several service marks and trademarks in the United States Patent and Trademark office as well as in certain other countries, including our service marks, “AutoZone” and “Get in the Zone,” and trademarks, “AutoZone,” “Duralast,” “Duralast Gold,” “Valucraft,” “ALLDATA,” “Loan-A-Tool” and “Z-net.” We believe that these service marks and trademarks are important components of our merchandising and marketing strategy.

Employees

As of August 29, 2009, we employed approximately 60,000 persons, approximately 57 percent of whom were employed full-time. About 92 percent of our AutoZoners were employed in stores or in direct field supervision, approximately 5 percent in distribution centers and approximately 3 percent in store support and other functions. Included in the above numbers are approximately 3,000 persons employed in our Mexico operations.

We have never experienced any material labor disruption and believe that relations with our AutoZoners are generally good.

AutoZone Website

AutoZone’s primary website is at http://www.autozone.com. We make available, free of charge, at our investor relations website, http://www.autozoneinc.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended, as soon as reasonably feasible after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Executive Officers of the Registrant

The following list describes our executive officers. The title of each executive officer includes the words “Customer Satisfaction” which reflects our commitment to customer service. Officers are elected by and serve at the discretion of the Board of Directors.

William C. Rhodes, III, 44—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. 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, including Vice President—Stores in 2000, Senior Vice President—Finance and Vice President—Finance in 1999 and Vice President—Operations Analysis and Support from 1997 to 1999. Prior to 1994, Mr. Rhodes was a manager with Ernst & Young LLP.

William T. Giles, 50 —		Chief Financial Officer and Executive Vice President, Finance, Information Technology and Store Development, Customer Satisfaction

William T. Giles was elected Executive Vice President — Finance, Information Technology and Store Development during fiscal 2007. Prior to that, he was Executive Vice President, Chief Financial Officer and Treasurer from June 2006 to December 2006 and Executive Vice President, Chief Financial Officer since May 2006. From 1991 to May 2006, he held several positions with Linens N’ Things, Inc., most recently as the Executive Vice President and Chief Financial Officer. Prior to 1991, he was with Melville, Inc. and PricewaterhouseCoopers.

Harry L. Goldsmith, 58—Executive Vice President, Secretary and General Counsel, Customer Satisfaction

Harry L. Goldsmith was elected Executive Vice President, General Counsel and Secretary during fiscal 2006. Previously, he was Senior Vice President, General Counsel and Secretary since 1996 and was Vice President, General Counsel and Secretary from 1993 to 1996.

Robert D. Olsen, 56—Executive Vice President—Store Operations, Commercial and Mexico, Customer Satisfaction

Robert D. Olsen has been Executive Vice President—Store Operations, Commercial and Mexico since fiscal 2007. Effective November 1, 2009, he was elected Corporate Development Officer, with primary responsibility for Mexico, ALLDATA and other strategic initiatives. Previously, he was Executive Vice President—Supply Chain, Information Technology, Mexico and Store Development since fiscal 2006 and before that, Senior Vice President since fiscal 2000 with primary responsibility for store development and Mexico operations. From 1993 to 2000, Mr. Olsen was Executive Vice President and Chief Financial Officer of Leslie’s Poolmart. From 1985 to 1989, Mr. Olsen held several positions with AutoZone, including Controller, Vice President—Finance, and Senior Vice President and Chief Financial Officer.

James A. Shea, 64—Executive Vice President—Merchandising, Marketing and Supply Chain, Customer Satisfaction

James A. Shea was elected Executive Vice President—Merchandising, Marketing and Supply Chain during fiscal 2007 and has served as Executive Vice President—Merchandising and Marketing since fiscal 2005. He was President and Co-founder of Portero during 2004. Prior to 2004, he was Chief Executive Officer of Party City from 1999 to 2003. From 1995 to 1999, he was with Lechters Housewares where he was Senior Vice President Marketing and Merchandising before being named President in 1997. From 1990 to 1995, he was Senior Vice President of Home for Kaufmanns Department Store, a division of May Company.

Jon A. Bascom, 52—Senior Vice President—Chief Information Officer, Customer Satisfaction

Jon A. Bascom was elected Senior Vice President—Chief Information Officer during fiscal 2008. Previously, he was Vice President—Information Technology since 1996. Since 1989, Mr. Bascom has worked in a variety of leadership roles in applications development, infrastructure, and technology support. Prior to joining AutoZone, Mr. Bascom worked for Malone & Hyde, AutoZone’s predecessor company, for 9 years.

Timothy W. Briggs, 48—Senior Vice President—Human Resources, Customer Satisfaction

Timothy W. Briggs was elected Senior Vice President—Human Resources during fiscal 2006. Prior to that, he was Vice President—Field Human Resources since March 2005. From 2002 to 2005, Mr. Briggs was Vice President—Organization Development. From 1996 to 2002, Mr. Briggs served in various management capacities at the Limited Inc., including Vice President, Human Resources.

Mark A. Finestone, 48—Senior Vice President—Merchandising, Customer Satisfaction

Mark A. Finestone was elected Senior Vice President—Merchandising during fiscal 2008. Previously, he was Vice President—Merchandising since 2002. Prior to joining AutoZone in 2002, Mr. Finestone worked for May Department Stores for 19 years where he held a variety of leadership roles which included Divisional Vice President, Merchandising.

William W. Graves, 49—Senior Vice President—Supply Chain, Customer Satisfaction

William W. Graves was elected Senior Vice President—Supply Chain during fiscal 2006. Prior thereto, he was Vice President—Supply Chain since 2000. From 1992 to 2000, Mr. Graves served in various capacities with the Company.

Lisa R. Kranc, 56—Senior Vice President—Marketing, Customer Satisfaction

Lisa R. Kranc was elected Senior Vice President—Marketing during fiscal 2001. Previously, she was Vice President—Marketing for Hannaford Bros. Co., a Maine-based grocery chain, since 1997, and was Senior Vice President—Marketing for Bruno’s, Inc., from 1996 to 1997. Prior to 1996, she was Vice President-Marketing for Giant Eagle, Inc. since 1992.

Thomas B. Newbern, 47—Senior Vice President—Store Operations, Customer Satisfaction

Thomas B. Newbern was elected Senior Vice President—Store Operations during fiscal 2007. Previously, Mr. Newbern held the title Vice President—Store Operations for AutoZone since 1998. A twenty-two year AutoZoner, he has held several key management positions with the Company.

Charlie Pleas, III, 44—Senior Vice President, Controller, Customer Satisfaction

Charlie Pleas, III, was elected Senior Vice President and Controller during fiscal 2007. Prior to that, he was Vice President, Controller since 2003. Previously, he was Vice President—Accounting since 2000, and Director of General Accounting since 1996. Prior to joining AutoZone, Mr. Pleas was a Division Controller with Fleming Companies, Inc. where he served in various capacities from 1988.

Larry M. Roesel, 52—Senior Vice President—Commercial, Customer Satisfaction

Larry M. Roesel joined AutoZone as Senior Vice President—Commercial during fiscal 2007. Mr. Roesel came to AutoZone with more than thirty years of experience with OfficeMax, Inc. and its predecessor, where he served in operations, sales and general management.

Item 1A. Risk Factors

Our business is subject to a variety of risks. Set forth below are certain of the important risks that we face and that could cause actual results to differ materially from historical results. These risks are not the only ones we face. Our business could also be affected by additional factors that are presently unknown to us or that we currently believe to be immaterial to our business.

Continued deterioration in the global credit markets, changes in our credit ratings and macroeconomic factors could adversely affect our financial condition and results of operations.

Our short-term and long-term debt is rated investment grade by the major rating agencies. These investment-grade credit ratings have historically allowed us to take advantage of lower interest rates and other favorable terms on our short-term credit lines, in our senior debt offerings and in the commercial paper markets. To maintain our investment-grade ratings, we are required to meet certain financial performance ratios. An increase in our debt and/or a decline in our earnings could result in downgrades in our credit ratings. A downgrade in our credit ratings could result in an increase in interest rates and more restrictive terms on certain of our senior debt and our commercial paper, could limit our access to public debt markets, could limit the institutions willing to provide credit facilities to us and could significantly increase the interest rates on such facilities from current levels.

Moreover, significant deterioration in the financial condition of large financial institutions has resulted in a severe loss of liquidity and availability of credit in global credit markets and in higher short-term borrowing costs and more stringent borrowing terms. During brief time intervals in the fourth quarter of calendar 2008 and the first quarter of calendar 2009, there was no liquidity in the commercial paper markets, resulting in an absence of commercial paper buyers and extraordinary high interest rates on commercial paper. Persistent recessionary conditions around the world could continue to affect the cost and availability of debt. We can provide no assurance that credit market events such as those that occurred in the fourth quarter of 2008 and the first quarter of 2009 will not occur again in the foreseeable future. Conditions and events in the global credit market could have a material adverse effect on our access to short-term debt and the terms and cost of that debt.

Macroeconomic conditions also impact both our customers and our suppliers. Continued recessionary conditions could result in additional job losses and business failures, which could result in our loss of certain small business customers and curtailment of spending by our retail customers. In addition, continued distress in global credit markets, business failures and other recessionary conditions could have a material adverse effect on the ability of our suppliers to meet our inventory demands. All of these macroeconomic conditions could adversely affect our sales growth, margins and overhead, which could adversely affect our financial condition and operations.

We may not be able to sustain our recent rate of sales growth.

We have increased our store count in the past five fiscal years, growing from 3,483 stores at August 28, 2004, to 4,417 stores at August 29, 2009, an average store count increase per year of 5%. Additionally, we have increased annual revenues in the past five fiscal years from $5.637 billion in fiscal 2004 to $6.817 billion in fiscal 2009, an average increase per year of 4%. Annual revenue growth is driven by the opening of new stores and increases in same-store sales. We open new stores only after evaluating customer buying trends and market demand/needs, all of which could be adversely affected by continued job losses, wage cuts, small business failures and microeconomic conditions unique to the automotive industry. Some of our new store openings are expected to be in Mexico, where legal and political factors can adversely affect our ability to obtain sites or permits to operate new stores. Same store sales are impacted both by customer demand levels and by the prices we are able to charge for our products, which can also be negatively impacted by continued recessionary pressures. We cannot provide any assurance that we will continue to open stores at historical rates or achieve increases in same-store sales.

Our business depends upon qualified employees.

At the end of fiscal 2009, our consolidated employee count was approximately 60,000. We cannot assure that we can continue to hire and retain qualified employees at current wage rates. If we do not maintain competitive wages, our customer service could suffer by reason of a declining quality of our workforce or, alternatively, our earnings could decrease if we increase our wage rates.

If demand for our products slows, then our business may be materially affected.

Demand for products sold by our stores depends on many factors, including:

•

the number of miles vehicles are driven annually. Higher vehicle mileage increases the need for maintenance and repair. Mileage levels may be affected by gas prices and other factors.

•

the number of vehicles in current service that are seven years old and older. These vehicles are generally no longer under the original vehicle manufacturers’ warranties and tend to need more maintenance and repair than younger vehicles.

•

the weather. Inclement weather may cause vehicle maintenance to be deferred.

•

the economy. In periods of rapidly declining economic conditions, both retail DIY and commercial DIFM customers may defer vehicle maintenance or repair. Additionally, such conditions may affect our customers’ credit availability. During periods of expansionary economic conditions, more of our DIY customers may pay others to repair and maintain their cars instead of working on their own vehicles or they may purchase new vehicles.

•

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.

For the long term, demand for our products may depend upon:

•

the quality of the vehicles manufactured by the original vehicle manufacturers and the length of the warranties or maintenance offered on new vehicles; and

•

restrictions on access to diagnostic tools and repair information imposed by the original vehicle manufacturers or by governmental regulation.

All of these factors could result in immediate and longer term declines in the demand for our products, which could adversely affect our sales, cash flows and overall financial condition.

If we are unable to compete successfully against other businesses that sell the products that we sell, we could lose customers and our sales and profits may decline.

The sale of automotive parts, accessories and maintenance items is highly competitive and is based on many factors, including name recognition, product availability, customer service, store location and price. Competitors are opening locations near our existing stores. AutoZone competes as a supplier in both the DIY and DIFM auto parts and accessories markets.

Competitors include national, regional and local auto parts chains, independently owned parts stores, jobbers, repair shops, car washes and auto dealers, in addition to discount and mass merchandise stores, department stores, hardware stores, supermarkets, drugstores, convenience stores and home stores that sell aftermarket vehicle parts and supplies, chemicals, accessories, tools and maintenance parts. Although we believe we compete effectively on the basis of customer service, including the knowledge and expertise of our AutoZoners; merchandise quality, selection and availability; product warranty; store layout, location and convenience; price; and the strength of our AutoZone brand name, trademarks and service marks; some competitors may gain competitive advantages, such as greater financial and marketing resources, larger stores with more merchandise, longer operating histories, more frequent customer visits and more effective advertising. If we are unable to continue to develop successful competitive strategies, or if our competitors develop more effective strategies, we could lose customers and our sales and profits may decline.

If we cannot profitably increase our market share in the commercial auto parts business, our sales growth may be limited.

Although we are one of the largest sellers of auto parts in the commercial market, to increase commercial sales we must compete against national and regional auto parts chains, independently owned parts stores, wholesalers and jobbers, repair shops and auto dealers. Although we believe we compete effectively on the basis of customer service, merchandise quality, selection and availability, price, product warranty and distribution locations, and the strength of our AutoZone brand name, trademarks and service marks, some automotive aftermarket jobbers have been in business for substantially longer periods of time than we have, have developed long-term customer relationships and have large available inventories. If we are unable to profitably develop new commercial customers, our sales growth may be limited.

Consolidation among our competitors may negatively impact our business.

Recently some of our competitors have merged. Consolidation among our competitors could enhance their financial position, provide them with the ability to achieve better purchasing terms allowing them to provide more competitive prices to customers for whom we compete, and allow them to achieve efficiencies in their mergers that allow for more effective use of advertising and marketing dollars and allow them to more effectively compete for customers. These consolidated competitors could take sales volume away from us in certain markets and 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.

War or acts of terrorism or the threat of either, may negatively impact availability of merchandise and adversely impact our sales.

War or acts of terrorism, or the threat of either, may have a negative impact on our ability to obtain merchandise available for sale in our stores. Some of our merchandise is imported from other countries. If imported goods become difficult or impossible to bring into the United States, and if we cannot obtain such merchandise from other sources at similar costs, our sales and profit margins may be negatively affected.

In the event that commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution centers and stores.

Rising energy prices may negatively impact our profitability.

As mentioned above, rising energy prices may impact demand for the products that we sell, overall transaction count and our profitability. Higher energy prices impact our merchandise distribution, commercial delivery, utility and product costs.

Our largest stockholder, as a result of its voting ownership, may have the ability to exert substantial influence over actions to be taken or approved by our stockholders.

As of October 19, 2009, ESL Investments, Inc. and certain of its investment affiliates (together, “ESL”) beneficially owned approximately 40% of the outstanding shares of our common stock. As a result, ESL may have the ability to exert substantial influence over actions to be taken or approved by our stockholders, including the election of directors and any transactions involving a change of control.

In the future, ESL may acquire or sell shares of common stock and thereby increase or decrease its ownership stake in us. Significant fluctuations in their level of ownership could have an impact on our share price.

In June 2008, we entered into an agreement with ESL (the “ESL Agreement”), in which ESL has agreed to vote shares of our common stock owned by ESL in excess of 40% in the same proportion as all non-ESL-owned shares are voted. Following the annual meeting of stockholders of the Company for the fiscal year ending on August 29, 2009, the applicable percentage threshold is reduced from 40% to 37.5% of the then outstanding common stock. Additionally, under the terms of the agreement, the Company added two directors in August 2008 that were identified by ESL. William C. Crowley, one of the two appointed directors, is the President and Chief Operating Officer of ESL Investments, Inc. The ESL Agreement is filed as Exhibit 10.22 to this Form 10-K.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The following table reflects the square footage and number of leased and owned properties for our stores as of August 29, 2009:

		No. of Stores				Square Footage
Leased			2,171				13,494,994
Owned			2,246				15,055,332
Total			4,417				28,550,326

We have 4.0 million square feet in distribution centers servicing our stores, of which approximately 1.3 million square feet is leased and the remainder is owned. Our distribution centers are located in Arizona, California, Georgia, Illinois, Ohio, Pennsylvania, Tennessee, Texas and Mexico. Our primary store support center, which we own, is located in Memphis, Tennessee, and consists of approximately 260,000 square feet. We also own and lease other properties that are not material in the aggregate.

Item 3. Legal Proceedings

AutoZone, Inc. is a defendant in a lawsuit entitled “Coalition for a Level Playing Field, L.L.C., et al., v. AutoZone, Inc. et al.,” filed in the U.S. District Court for the Southern District of New York in October 2004. The case was filed by more than 200 plaintiffs, which are principally automotive aftermarket warehouse distributors and jobbers (collectively “Plaintiffs”), against a number of defendants, including automotive aftermarket retailers and aftermarket automotive parts manufacturers. In the amended complaint, the plaintiffs allege, inter alia, that some or all of the automotive aftermarket retailer defendants have knowingly received, in violation of the Robinson-Patman Act (the “Act”), from various of the manufacturer defendants benefits such as volume discounts, rebates, early buy allowances and other allowances, fees, inventory without payment, sham advertising and promotional payments, a share in the manufacturers’ profits, benefits of pay on scan purchases, implementation of radio frequency identification technology, and excessive payments for services purportedly performed for the manufacturers. Additionally, a subset of plaintiffs alleges a claim of fraud against the automotive aftermarket retailer defendants based on discovery issues in a prior litigation involving similar Robinson-Patman Act claims. In the prior litigation, the discovery dispute, as well as the underlying claims, were decided in favor of AutoZone and the other automotive aftermarket retailer defendants who proceeded to trial, pursuant to a unanimous jury verdict which was affirmed by the Second Circuit Court of Appeals. In the current litigation, plaintiffs seek an unspecified amount of damages (including statutory trebling), attorneys’ fees, and a permanent injunction prohibiting the aftermarket retailer defendants from inducing and/or knowingly receiving discriminatory prices from any of the aftermarket manufacturer defendants and from opening up any further stores to compete with plaintiffs as long as defendants allegedly continue to violate the Act. The Company believes this suit to be without merit and is vigorously defending against it. The Company is unable to estimate a loss or possible range of loss as of August 29, 2009. Defendants have filed motions to dismiss all claims with prejudice on substantive and procedural grounds. Additionally, the Defendants have sought to enjoin plaintiffs from filing similar lawsuits in the future. If granted in their entirety, these dispositive motions would resolve the litigation in Defendants’ favor.

AutoZone is involved in various other legal proceedings incidental to the conduct of our business. Although the amount of liability that may result from these other proceedings cannot be ascertained, we do not currently believe that, in the aggregate, they will result in liabilities material to our financial condition, results of operations, or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

AutoZone’s common stock is listed on the New York Stock Exchange under the symbol “AZO.” On October 19, 2009, there were 3,381 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 cash dividend on our common stock. Any payment of dividends in the future would be dependent upon our financial condition, capital requirements, earnings, cash flow and other factors.

The following table sets forth the high and low sales prices per share of common stock, as reported by the New York Stock Exchange, for the periods indicated:

		Price Range of Common Stock
		High				Low
Fiscal Year Ended August 29, 2009:
Fourth quarter		$	164.38			$	141.00
Third quarter		$	169.99			$	129.21
Second quarter		$	145.77			$	92.52
First quarter		$	143.80			$	84.66
Fiscal Year Ended August 30, 2008:
Fourth quarter		$	142.49			$	110.39
Third quarter		$	126.85			$	108.89
Second quarter		$	132.44			$	103.07
First quarter		$	125.75			$	107.10

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 last amended in June 2009, to increase the repurchase authorization to $7.9 billion from $7.4 billion. The program does not have an expiration date.

Shares of common stock repurchased by the Company during the quarter ended August 29, 2009, were as follows:

										Total Number of				Maximum Dollar
										Shares Purchased				Value that May Yet
		Total Number				Average				as Part of Publicly				Be Purchased
		of Shares				Price Paid				Announced Plans				Under the Plans or
Period		Purchased				per Share				or Programs				Programs
May 10, 2009, to June 6, 2009			437,000			$	155.54				437,000			$	828,506,506
June 7, 2009, to July 4, 2009			1,783,355			$	155.45				1,783,355				551,279,167
July 5, 2009, to August 1, 2009			1,204,593			$	153.87				1,204,593				365,934,289
August 2, 2009, to August 29, 2009			386,308			$	147.17				386,308				309,082,914
Total			3,811,256			$	154.12				3,811,256			$	309,082,914

The Company also repurchased, at fair value, an additional 37,190 shares in fiscal 2009, 39,235 shares in fiscal 2008, and 65,152 shares in fiscal 2007 from employees electing to sell their stock under the Company’s Third Amended and Restated Employee Stock Purchase 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 plan, 29,147 shares were sold to employees in fiscal 2009, 36,147 shares were sold to employees in fiscal 2008, and 39,139 shares were sold to employees in fiscal 2007. At August 29, 2009, 320,603 shares of common stock were reserved for future issuance under this plan. Under the Amended and Restated Executive Stock Purchase Plan all eligible executives are permitted to purchase AutoZone’s common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under this plan were 1,705 shares in fiscal 2009, 1,793 shares in fiscal 2008, and 1,257 shares in fiscal 2007. At August 29, 2009, 259,539 shares of common stock were reserved for future issuance under this plan.

Stock Performance Graph

This graph shows, from the end of fiscal year 2004 to the end of fiscal year 2009, changes in the value of $100 invested in each of the following: AutoZone’s common stock, Standard & Poor’s 500 Composite Index, and a peer group consisting of other automotive aftermarket retailers.

Company Name / Index		8/28/04				8/27/05				8/26/06				8/25/07				8/30/08				8/29/09
AutoZone, Inc.			100				126.66				115.72				163.56				182.10				196.99
S&P 500 Index			100				110.80				121.35				141.16				124.98				103.00
Peer Group			100				130.88				116.05				141.96				133.43				140.88

The peer group consists of Advance Auto Parts, Inc., CSK Auto Corporation (through 7/11/08), Genuine Parts Company, O’Reilly Automotive, Inc., and The Pep Boys-Manny, Moe & Jack.

Item 6. Selected Financial Data

(in thousands, except per share data and selected		Fiscal Year Ended August
operating data)		2009(2)				2008(1)(2)				2007(2)				2006(2)				2005(3)
Income Statement Data
Net sales		$	6,816,824			$	6,522,706			$	6,169,804			$	5,948,355			$	5,710,882
Cost of sales, including warehouse and delivery expenses			3,400,375				3,254,645				3,105,554				3,009,835				2,918,334
Gross profit			3,416,449				3,268,061				3,064,250				2,938,520				2,792,548
Operating, selling, general and administrative expenses			2,240,387				2,143,927				2,008,984				1,928,595				1,816,884
Operating profit			1,176,062				1,124,134				1,055,266				1,009,925				975,664
Interest expense — net			142,316				116,745				119,116				107,889				102,443
Income before income taxes			1,033,746				1,007,389				936,150				902,036				873,221
Income taxes			376,697				365,783				340,478				332,761				302,202
Net income		$	657,049			$	641,606			$	595,672			$	569,275			$	571,019
Diluted earnings per share		$	11.73			$	10.04			$	8.53			$	7.50			$	7.18
Adjusted weighted average shares for diluted earnings per share			55,992				63,875				69,844				75,859				79,508
Same Store Sales
Increase (decrease) in domestic comparable store net sales(4)			4.4	%			0.4	%			0.1	%			0.4	%			(2.1	)%
Balance Sheet Data
Current assets		$	2,561,730			$	2,586,301			$	2,270,455			$	2,118,927			$	1,929,459
Working capital (deficit)			(145,022	)			66,981				(15,439	)			64,359				118,300
Total assets			5,318,405				5,257,112				4,804,709				4,526,306				4,245,257
Current liabilities			2,706,752				2,519,320				2,285,895				2,054,568				1,811,159
Debt			2,726,900				2,250,000				1,935,618				1,857,157				1,861,850
Long-term capital leases			38,029				48,144				39,073				—				—
Stockholders’ equity (deficit)		$	(433,074	)		$	229,687			$	403,200			$	469,528			$	391,007
Selected Operating Data
Number of domestic stores at beginning of year			4,092				3,933				3,771				3,592				3,420
New stores			140				160				163				185				175
Closed stores			3				1				1				6				3
Net new stores			137				159				162				179				172
Relocated stores			9				14				18				18				7
Number of domestic stores at end of year			4,229				4,092				3,933				3,771				3,592
Number of Mexico stores at end of year			188				148				123				100				81
Number of total stores at end of year			4,417				4,240				4,056				3,871				3,673
Total store square footage (in thousands)			28,550				27,291				26,044				24,713				23,369
Average square footage per store			6,464				6,437				6,421				6,384				6,362
Increase in store square footage			5	%			5	%			5	%			6	%			6	%
Inventory per store		$	500			$	507			$	495			$	477			$	453
Average net sales per store (in thousands)		$	1,575			$	1,572			$	1,557			$	1,577			$	1,596
Average net sales per store square foot		$	239			$	239			$	237			$	241			$	244
Total employees at end of year (in thousands)			60				57				55				53				52
Merchandise under pay-on-scan arrangements (in thousands)		$	3,530			$	6,732			$	22,387			$	92,142			$	151,682
Inventory turnover(5)			1.5	x			1.6	x			1.6	x			1.7	x			1.8	x
Accounts payable to inventory ratio			96.0	%			95.0	%			93.2	%			92.0	%			92.5	%
After-tax return on invested capital (6)			24.4	%			24.0	%			22.7	%			22.2	%			23.9	%
Adjusted debt to EBITDAR(7)			2.5				2.2				2.1				2.1				2.1
Net cash provided by operating activities (in thousands)		$	923,808			$	921,100			$	845,194			$	822,747			$	648,083
Cash flow before share repurchases and changes in debt (in thousands)(8)		$	673,347			$	690,621			$	678,522			$	599,507			$	432,210

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are the nation’s leading retailer and a leading distributor of automotive replacement parts and accessories. We began operations in 1979 and at August 29, 2009, operated 4,229 stores in the United States and Puerto Rico, and 188 in Mexico. Each of our stores carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. At August 29, 2009, in 2,303 of our stores we also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also sell the ALLDATA brand automotive diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and as part of our commercial sales program, through www.autozonepro.com. We do not derive revenue from automotive repair or installation services.

Executive Summary

We achieved a solid performance in fiscal 2009, delivering record earnings of $657 million and sales growth of $420 million over the prior year, excluding the 53^rd week in last year’s results. We completed the year with strong growth in our commercial and retail businesses. We are excited about our retail business opportunities and encouraged by the increase in our commercial business, where we continued to build our internal sales force and to refine our parts assortment. There are various factors occuring within the current economy that affect both our customers and our industry, including the credit crisis and higher unemployment, which we believe when combined have aided our sales growth during the year. We continue to believe we are well positioned to help our customers save money and meet their needs in a challenging macro economic environment.

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 declined for the sixteenth straight month in March, were relatively flat in April and May before increasing in June and July. We are optimistic that over the long-term this trend will stabilize at low single digit increases as the number of vehicles on the road continues to increase.

New vehicle sales declined significantly during 2008 and the first half of 2009, which we believe is contributing to an increasing number of “seven year old or older” vehicles on the road. In the near term, we expect this trend to continue, as consumers keep their cars longer in an effort to save money during this uncertain economy. Also, we believe gas prices impact our customers’ behavior with respect to driving and maintaining their cars. With approximately ten billion gallons of unleaded gas consumed each month across the United States, each $1 dollar decrease at the pump contributes approximately $10 billion of additional spending capacity to consumers each month. During the summer of 2008, gas prices peaked at roughly $4 per gallon, before falling to $2 per gallon in February 2009. By the end of fiscal 2009, gas prices had risen to approximately $2.61 per gallon.

During fiscal 2009, we worked hard to execute on several key initiatives as the macro environment turned in our industry’s favor and we saw an increase in traffic in our stores.

We significantly enhanced the utilization of our hub stores by refining and improving the product assortment in these locations while simultaneously increasing the delivery frequency to nearby stores. We accelerated our store maintenance efforts and also deployed additional capital in areas that we expect to yield benefits in the future, such as enhancing our IT infrastructure and continued additions of late model products. We also began an effort to purchase more of our new store locations rather than leasing them. Finally, we maintained our focus on developing a first class Commercial field sales organization by continuing to expand the size of our team and investing in training, tools and management programs.

In this challenging environment, we continue to see sales of maintenance and failure categories perform well, while discretionary categories are being negatively impacted. Consequently, we remain focused on refining and expanding our product assortment to ensure we have the “best” merchandise at the “right” price in each of our merchandise categories.

Results of Operations

Fiscal 2009 Compared with Fiscal 2008

For the year ended August 29, 2009, AutoZone reported net sales of $6.817 billion compared with $6.523 billion for the year ended August 30, 2008, a 4.5% increase from fiscal 2008. Excluding $125.9 million of sales from the 53^rd week included in the prior year, total company net sales increased 6.6%. This growth was driven primarily by an increase in domestic same store sales of 4.4% and sales from new stores of $165.5 million. The improvement in same store sales was driven by an improvement in transaction count trends, while increases in average transaction value remained generally consistent with our long-term trends. Higher transaction value is attributable to product inflation due to both more complex, costly products and commodity price increases.

At August 29, 2009, we operated 4,229 domestic stores and 188 stores in Mexico, compared with 4,092 domestic stores and 148 stores in Mexico at August 30, 2008. Excluding the sales from the 53^rd week in the prior year, domestic retail sales increased 7.1% and domestic commercial sales increased 4.3%.

Gross profit for fiscal 2009 was $3.416 billion, or 50.1% of net sales, compared with $3.268 billion, or 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 and administrative expenses for fiscal 2009 increased to $2.240 billion, or 32.9% of net sales, from $2.144 billion, or 32.9% of net sales for fiscal 2008. Leverage from increased sales was largely offset by expenses associated with our continued enhancements to our hub stores, an acceleration of our store maintenance program, and a continued expansion of our Commercial sales force.

Interest expense, net for fiscal 2009 was $142.3 million compared with $116.7 million during fiscal 2008. This increase was due to higher average borrowing levels over the comparable prior year period and a higher percentage of fixed rate debt. Average borrowings for fiscal 2009 were $2.460 billion, compared with $2.024 billion for fiscal 2008 and weighted average borrowing rates were 5.4% for fiscal 2009, compared to 5.2% for fiscal 2008.

Our effective income tax rate was 36.4% of pre-tax income for fiscal 2009 compared to 36.3% for fiscal 2008. Refer to “Note D — Income Taxes” for additional information regarding our income tax rate.

Net income for fiscal 2009 increased by 2.4% to $657.0 million, and diluted earnings per share increased 16.8% to $11.73 from $10.04 in fiscal 2008. The impact of the fiscal 2009 stock repurchases on diluted earnings per share in fiscal 2009 was an increase of approximately $0.78. Excluding the additional week in the prior year, net income for the year increased 5.0% over the previous year, while diluted earnings per share increased 19.7%.

Fiscal 2008 Compared with Fiscal 2007

For the year ended August 30, 2008, AutoZone reported net sales of $6.523 billion compared with $6.170 billion for the year ended August 25, 2007, a 5.7% increase from fiscal 2007. This growth was primarily driven by net sales of $166.6 million for fiscal 2008 from new stores, $125.9 million, or a 1.9% increase, from the addition of the 53^rd week and a domestic same store sales (excluding 53^rd week) increase of 0.4%. At August 30, 2008, we operated 4,092 domestic stores and 148 in Mexico, compared with 3,933 domestic stores and 123 in Mexico at August 25, 2007. The domestic same store sales increase was driven by higher average transaction value, partially offset by lower transaction count. Higher transaction value was primarily attributable to product price inflation due both to more complex, costly products and to commodity price increases. Transaction counts were lower due to a combination of factors, including product life cycles and deferred maintenance. Including the 53^rd week, domestic retail sales increased 4.5% and domestic commercial sales increased 6.8% from prior year. ALLDATA and Mexico sales, including the 53^rd week, increased over prior year, contributing 1.2 percentage points of the total increase in net sales.

Gross profit for fiscal 2008 was $3.268 billion, or 50.1% of net sales, compared with $3.064 billion, or 49.7% of net sales, for fiscal 2007. The increase in gross profit as a percent of net sales was primarily due to an approximately 50 basis point benefit from category management efforts, including increases in average retail prices of products sold and vendor supported promotional activities. These efforts were partially offset by increased distribution expense principally relating to higher fuel costs.

Operating, selling, general and administrative expenses for fiscal 2008 increased to $2.144 billion, or 32.9% of net sales, from $2.009 billion, or 32.6% of net sales for fiscal 2007. Approximately 20 basis points of the increase in operating expenses, as a percentage of sales, was due to higher employee medical expense driven by an increase in the number of catastrophic claims. The remaining increase was primarily due to higher fuel expense for our commercial fleet from increased fuel prices (approximately 6 basis points of the increase).

Interest expense, net for fiscal 2008 was $116.7 million compared with $119.1 million during fiscal 2007. This decrease was primarily due to lower short-term rates and was offset by higher average borrowing levels over the comparable fiscal 2007 period and the impact of the additional week in fiscal 2008. Average borrowings for fiscal 2008 were $2.024 billion, compared with $1.972 billion for fiscal 2007. Weighted average borrowing rates were 5.2% at August 30, 2008, compared to 5.7% at August 25, 2007.

Our effective income tax rate was 36.3% of pre-tax income for fiscal 2008 compared to 36.4% for fiscal 2007.

Net income for fiscal 2008 increased by 7.7% to $641.6 million, and diluted earnings per share increased 17.8% to $10.04 from $8.53 in fiscal 2007. The impact of the fiscal 2008 stock repurchases on diluted earnings per share in fiscal 2008 was an increase of approximately $0.29. Excluding the additional week, net income for the year increased 5.1% over the previous year to $625.8 million, while diluted earnings per share increased 14.9% to $9.80 per share.

Seasonality and Quarterly Periods

AutoZone’s business is somewhat seasonal in nature, with the highest sales typically occurring in the spring and summer months of March through September, in which average weekly per-store sales historically have been about 15% to 25% higher than in the slower months of December through February. 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 and spurring sales of seasonal products. Mild or rainy weather tends to soften sales, as parts failure rates are lower in mild weather, with elective maintenance deferred during periods of rainy weather. Over the longer term, the effects of weather balance out, as we have stores throughout the United States, Puerto Rico and Mexico.

Each of the first three quarters of AutoZone’s fiscal year consisted of 12 weeks, and the fourth quarter consisted of 16 weeks in 2009, 17 weeks in 2008, and 16 weeks in 2007. Because the fourth quarter contains the 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 the annual net sales and net income. The fourth quarter of fiscal year 2009, containing 16 weeks, represented 32.7% of annual sales and 35.9% of net income; the fourth quarter of fiscal 2008, containing 17 weeks, represented 33.9% of annual sales and 38.0% of net income; and the fourth quarter of fiscal 2007, containing 16 weeks, represented 32.5% of annual sales and 36.5% of net income.

Liquidity and Capital Resources

The primary source of our liquidity is our cash flows realized through the sale of automotive parts and accessories. Net cash provided by operating activities was $923.8 million in fiscal 2009, $921.1 million in fiscal 2008, and $845.2 million in fiscal 2007. The increase over prior year was primarily due to the growth in net income and to a lesser extent, timing of income tax payments and deductions, and improvements in our accounts payable to inventory ratio as our vendors continue to finance a large portion of our inventory. Partially offsetting this increase were higher accounts receivable and the 53^rd week of income in last year’s sales. The increase in fiscal 2008 verses fiscal 2007 was due primarily to higher net income and an increase in our accounts payable to inventory ratio. We had an accounts payable to inventory ratio of 96% at August 29, 2009, 95% at August 30, 2008, and 93% at August 25, 2007. Our inventory increases are primarily attributable to an increased number of stores and to a lesser extent, our efforts to update product assortment in all of our stores. Additionally, many of our vendors have supported our initiative to update our product assortment by providing extended payment terms. These extended payment terms have allowed us to grow accounts payable at a faster rate than inventory.

AutoZone’s primary capital requirement has been the funding of its continued new store development program. From the beginning of fiscal 2007 to August 29, 2009, we have opened 551 new stores. Net cash flows used in investing activities were $263.7 million in fiscal 2009, compared to $243.2 million in fiscal 2008, and $228.7 million in fiscal 2007. We invested $272.2 million in capital assets in fiscal 2009, compared to $243.6 million in capital assets in fiscal 2008, and $224.5 million in capital assets in fiscal 2007. The increase in capital expenditures in fiscal 2009 was primarily attributable to the types of stores opened and increased investment in our existing stores. New store openings were 180 for fiscal 2009, 185 for fiscal 2008, and 186 for fiscal 2007. We invest a portion of our assets held by the Company’s wholly owned insurance captive in marketable securities. We acquired $48.4 million of marketable securities in fiscal 2009, $54.3 million in fiscal 2008, and $94.6 million in fiscal 2007. We had proceeds from matured marketable securities of $46.3 million in fiscal 2009, $50.7 million in fiscal 2008, and $86.9 million in fiscal 2007. Capital asset disposals provided $10.7 million in fiscal 2009, $4.0 million in fiscal 2008, and $3.5 million in fiscal 2007.

Net cash used in financing activities was $806.9 million in fiscal 2009, $522.7 million in fiscal 2008, and $621.4 million in fiscal 2007. The net cash used in financing activities reflected purchases of treasury stock which totaled $1.3 billion for fiscal 2009, $849.2 million for fiscal 2008, and $761.9 million for fiscal 2007. The treasury stock purchases in fiscal 2009, 2008 and 2007 were primarily funded by cash flow from operations, and at times, by increases in debt levels. Proceeds from issuance of debt were $500.0 million for fiscal 2009, $750.0 million for fiscal 2008, and none for fiscal 2007. Debt repayments totaled $300.7 million for fiscal 2009, $229.8 million for fiscal 2008, and $5.8 million for fiscal 2007. As discussed in “Note H-Financing”, in July 2009, we issued $500.0 million in 5.75% Senior Notes due 2015. The proceeds from the issuance of debt were used to repay outstanding commercial paper indebtedness, to prepay our $300 million term loan in August 2009 and for general corporate purposes, including for working capital requirements, capital expenditures, new store openings and stock repurchases. Net proceeds from the issuance of commercial paper were $277.6 million for fiscal 2009 and $84.3 million for fiscal 2007. 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 2010, primarily related to our new store development program and enhancements to existing stores and infrastructure. In addition to the building and land costs, our new store development program requires working capital, predominantly for inventories. Historically, we have negotiated extended payment terms from suppliers, reducing the working capital required. We plan to continue leveraging our inventory purchases; however, our ability to do so may be impacted by a prolonged tightening of the credit markets which may directly limit our vendors’ capacity to factor their receivables from us.

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 rating and favorable experiences in the debt markets in the past.

Credit Ratings

At August 29, 2009, AutoZone had a senior unsecured debt credit rating from Standard & Poor’s of BBB and a commercial paper rating of A-2. Moody’s Investors Service had assigned the Company a senior unsecured debt credit rating of Baa2 and a commercial paper rating of P-2. Fitch Ratings assigned the Company a BBB rating for senior unsecured debt and an F-2 rating for commercial paper. As of August 29, 2009, Moody’s, Standard & Poor’s and Fitch had AutoZone listed as having a “stable” outlook. If our credit ratings drop, our interest expense will increase; similarly, we anticipate that our interest expense may decrease if our investment ratings are raised. If our commercial paper ratings drop below current levels, we may have difficulty continuing to utilize the commercial paper market and our interest expense will likely increase, as we will then be required to access more expensive bank lines of credit. If our senior unsecured debt ratings drop below investment grade, our access to financing may become more limited.

Debt Facilities

In July, 2009, we terminated our $1.0 billion revolving credit facility, which was scheduled to expire in fiscal 2010, and replaced it with an $800 million revolving credit facility. This credit facility is available to primarily support commercial paper borrowings, letters of credit and other short-term unsecured bank loans. The credit facility may be increased to $1.0 billion at AutoZone’s election and subject to bank credit capacity and approval, may include up to $200 million in letters of credit, and may include up to $100 million in capital leases each fiscal year. As the available balance is reduced by commercial paper borrowings and certain outstanding letters of credit, the Company had $410.5 million in available capacity under this facility at August 29, 2009. Interest accrues on Eurodollar loans at a defined Eurodollar rate plus the applicable percentage, which could range from 150 basis points to 450 basis points, depending upon our senior unsecured (non-credit enhanced) long-term debt rating. This facility expires in July 2012.

During August 2009, we elected to prepay, without penalty, our $300 million bank term loan entered in December 2004, and subsequently amended. The term loan facility provided for a term loan, which consisted of, at our election, base rate loans, Eurodollar loans or a combination thereof. The entire unpaid principal amount of the term loan was due and payable in full on December 23, 2009, when the facility was scheduled to terminate. We entered into an interest rate swap agreement on December 29, 2004, to effectively fix, based on current debt ratings, the interest rate of the term loan at 4.4%. The outstanding liability associated with the interest rate swap totaled $3.6 million, and was expensed in operating, selling, general and administrative expenses upon termination of the hedge in fiscal 2009.

On June 25, 2008, we entered into an agreement with ESL Investments, Inc. (the “ESL Agreement”), setting forth certain understandings and agreements regarding the voting by ESL Investments, Inc., on behalf of itself and its affiliates (collectively, “ESL”), of certain shares of common stock of AutoZone, Inc. and related matters. Among other things, we agreed to use our commercially reasonable efforts to increase our adjusted debt/EBITDAR target ratio from 2.1:1 to 2.5:1 no later than February 14, 2009. We met this commitment at February 14, 2009. We calculate adjusted debt as the sum of total debt, capital lease obligations and annual rent times six; and we calculate EBITDAR by adding interest, taxes, depreciation, amortization, rent and stock option expenses to net income. At August 29, 2009, our adjusted debt/EBITDAR ratio was 2.5:1. (The ESL agreement is filed as Exhibit 10.22 to this Form 10-K).

On August 4, 2008, we issued $500 million in 6.50% Senior Notes due 2014 and $250 million in 7.125% Senior Notes due 2018 under our shelf registration statement filed with the Securities and Exchange Commission on July 29, 2008 (the “Shelf Registration”). That shelf registration allowed 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.

On July 2, 2009, we issued $500 million in 5.75% Senior Notes due 2015 under the Shelf Registration. We used the proceeds to pay down our commercial paper borrowings, to prepay in full our $300 million term loan in August 2009, and the remainder for general corporate purposes, including for working capital requirements, capital expenditures, new store openings and stock repurchases.

The 6.50% and 7.125% Senior Notes issued during August 2008, and the 5.75% Senior Notes issued in July 2009, are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded. They also contain a provision that repayment of the notes may be accelerated if AutoZone experiences a change in control (as defined in the agreements). Our borrowings under our other senior notes contain minimal covenants, primarily restrictions on liens. Under our other borrowing arrangements, covenants include limitations on total indebtedness, restrictions on liens, a minimum fixed charge coverage ratio and a change of control provision that may require acceleration of the repayment obligations under certain circumstances. All of the repayment obligations under our borrowing arrangements may be accelerated and come due prior to the scheduled payment date if covenants are breached or an event of default occurs.

The $800 million revolving credit agreement requires that our consolidated interest coverage ratio as of the last day of each quarter shall be no less than 2.50:1. 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, 2009 was 4.19:1. As of August 29, 2009, we were in compliance with all covenants and expect to remain in compliance with all covenants.

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 program was last amended in June 2009 to increase the repurchase authorization to $7.9 billion from $7.4 billion. From January 1998 to August 29, 2009, we have repurchased a total of 115.4 million shares at an aggregate cost of $7.6 billion. We repurchased 9.3 million shares of common stock at an aggregate cost of $1.3 billion during fiscal 2009, 6.8 million shares of common stock at an aggregate cost of $849.2 million during fiscal 2008, and 6.0 million shares of common stock at an aggregate cost of $761.9 million during fiscal 2007.

From August 30, 2009 to October 26, 2009, we repurchased 1.2 million shares for $178.2 million.

Financial Commitments

The following table shows AutoZone’s significant contractual obligations as of August 29, 2009:

		Total				Payment Due by Period
		Contractual				Less than				Between				Between				Over 5
(in thousands)		Obligations				1 year				1-3 years				4-5 years				years
Long-term debt (1)		$	2,726,900			$	277,600			$	199,300			$	1,000,000			$	1,250,000
Interest payments (2)			780,175				145,338				276,425				220,237				138,175
Operating leases (3)			1,558,027				177,781				319,650				251,149				809,447
Capital leases (4)			55,703				16,932				30,132				8,639				—
Self-insurance reserves (5)			153,602				54,307				44,840				23,673				30,782
Construction commitments			18,749				18,749				—				—				—
		$	5,293,156			$	690,707			$	870,347			$	1,503,698			$	2,228,404

We have Pension obligations reflected in our consolidated balance sheet that are not reflected in the table above due to the absence of scheduled maturities and the nature of the account. As disclosed in “Note K — Pension and Savings Plans”, our pension liability is $185.6 million and our pension assets are $115.3 million at August 29, 2009.

Additionally, as disclosed in “Note D — Income Taxes”, our tax liability for uncertain tax positions, including interest and penalties, was $56.6 million at August 29, 2009. Approximately $25.9 million is classified as short term and $30.7 million is classified as long term. We did not reflect these obligations in the Financial Commitments table as we are unable to make an estimate of the timing of payments due to uncertainties in the timing 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, 2009.

		Total
		Other
(in thousands)		Commitments
Standby letters of credit		$	111,904
Surety bonds			14,818
		$	126,722

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 them as the underlying liabilities are already reflected in our consolidated balance sheet. The standby letters of credit and surety bonds arrangements expire within one year, but have automatic renewal clauses.

In conjunction with our commercial sales program, we offer credit to some of our commercial customers. Historically, certain of the receivables related to this credit program were sold to a third party at a discount for cash with limited recourse. At August 30, 2008, we had $55.4 million outstanding under this program. During the second quarter of fiscal 2009, AutoZone terminated its agreement to sell receivables to a third party. There were no amounts outstanding under this program as of August 29, 2009.

Value of Pension Assets

At August 29, 2009, the fair market value of AutoZone’s pension assets was $115.3 million, and the related accumulated benefit obligation was $185.6 million based on an August 29, 2009 measurement date. On January 1, 2003, our defined benefit pension plans were frozen. Accordingly, plan participants earn no new benefits under the plan formulas, and no new participants may join the plans. The material assumptions for fiscal 2009 are an expected long-term rate of return on plan assets of 8.0% and a discount rate of 6.24%. For additional information regarding AutoZone’s qualified and non-qualified pension plans refer to “Note K — Pension and Savings Plans” in the accompanying Notes to Consolidated Financial Statements.

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 the Company’s 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 to analyze and compare our underlying operating results and 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.

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 the “Selected Financial Data”.

		Fiscal Year Ended August
		2009				2008				2007				2006				2005
Net increase (decrease) in cash and cash equivalents		$	(149,755	)		$	155,807			$	(4,904	)		$	16,748			$	(2,042	)
Less: Increase (decrease) in debt			476,900				314,382				78,461				(4,693	)			(7,400	)
Less: Share repurchases			(1,300,002	)			(849,196	)			(761,887	)			(578,066	)			(426,852	)
Cash flow before share repurchases and changes in debt		$	673,347			$	690,621			$	678,522			$	599,507			$	432,210

Reconciliation of Non-GAAP Financial Measure: After-Tax Return on Invested Capital

The following table reconciles the percentages of after-tax return on invested capital, or “ROIC.” After-tax return on invested capital is calculated as after-tax operating profit (excluding rent) divided by average invested capital (which includes a factor to capitalize operating leases). The ROIC percentages are presented in the “Selected Financial Data”.

		Fiscal Year Ended August
		2009				2008				2007				2006				2005
Net income		$	657,049			$	641,606			$	595,672			$	569,275			$	571,019
Adjustments:
After-tax interest			90,456				74,355				75,793				68,089				65,533
After-tax rent			115,239				105,166				97,050				90,808				96,367
After-tax return		$	862,744			$	821,127			$	768,515			$	728,172			$	732,919
Average debt (1)		$	2,477,233			$	2,015,186			$	1,955,652			$	1,909,011			$	1,969,639
Average equity (2)			(82,006	)			353,411				478,853				510,657				316,639
Rent x 6 (3)			1,087,848				990,726				915,138				863,328				774,706
Average capital lease obligations (4)			58,512				60,824				30,538				—				—
Pre-tax invested capital		$	3,541,587			$	3,420,147			$	3,380,181			$	3,282,996			$	3,060,984
ROIC			24.4	%			24.0	%			22.7	%			22.2	%			23.9	%

Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to Earnings before Interest, Taxes, Depreciation, Rent and Options Expense “EBITDAR”

The following table reconciles the ratio of adjusted debt to EBITDAR. Adjusted debt to EBITDAR is calculated as the sum of total debt, capital lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, rent and stock option expenses. The adjusted debt to EBITDAR ratios are presented in the “Selected Financial Data”.

(in thousands, except for Adjusted Debt to EBITDAR)

Adjusted Debt / EBITDAR		August 29, 2009				August 30, 2008				August 25, 2007				August 26, 2006				August 27, 2005
Net income		$	657,049			$	641,606			$	595,672			$	569,275			$	571,019
Add: Interest			142,316				116,745				119,116				107,889				102,443
Taxes			376,697				365,783				340,478				332,761				302,202
EBIT		$	1,176,062			$	1,124,134			$	1,055,266			$	1,009,925			$	975,664
Add: Depreciation			180,433				169,509				159,411				139,465				135,597
Rent expense (1)			181,308				165,121				152,523				143,888				150,645
Option expense			19,135				18,388				18,462				17,370				—
EBITDAR		$	1,556,938			$	1,477,152			$	1,385,662			$	1,310,648			$	1,261,906
Debt		$	2,726,900			$	2,250,000			$	1,935,618			$	1,857,157			$	1,861,850
Capital lease obligations			54,764				64,061				55,088				—				—
Add: Rent x 6			1,087,848				990,726				915,138				863,328				774,708
Adjusted debt		$	3,869,512			$	3,304,787			$	2,905,844			$	2,720,485			$	2,636,558
Adjusted Debt / EBITDAR			2.5				2.2				2.1				2.1				2.1

Reconciliation of Non-GAAP Financial Measure: Fiscal 2008 Results Excluding Impact of 53^rd Week:

The following table summarizes the favorable impact of the additional week of the 53 week fiscal year ended August 30, 2008.

(in thousands, except per share and percentage data)

														Fiscal 2008
														Results of
		Fiscal 2008								Results of				Operations
		Results of				Percent of				Operations for				Excluding				Percent of
		Operations				Revenue				53rd Week				53rd Week				Revenue
Net sales		$	6,522,706				100.0	%		$	(125,894	)		$	6,396,812				100.0	%
Cost of sales			3,254,645				49.9	%			(62,700	)			3,191,945				49.9	%
Gross profit			3,268,061				50.1	%			(63,194	)			3,204,867				50.1	%
Operating expenses			2,143,927				32.9	%			(36,087	)			2,107,840				32.9	%
Operating profit			1,124,134				17.2	%			(27,107	)			1,097,027				17.2	%
Interest expense, net			116,745				1.8	%			(2,340	)			114,405				1.8	%
Income before income taxes			1,007,389				15.4	%			(24,767	)			982,622				15.4	%
Income taxes			365,783				5.6	%			(8,967	)			356,816				5.6	%
Net income		$	641,606				9.8	%		$	(15,800	)		$	625,806				9.8	%
Diluted earnings per share		$	10.04							$	(0.24	)		$	9.80

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). SFAS 158 requires plan sponsors of defined benefit pension and other postretirement benefit plans (collectively postretirement benefit plans) to: recognize the funded status of their postretirement benefit plans in the statement of financial position, measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end statement of financial position, and provide additional disclosures.

On August 25, 2007, we adopted the recognition and disclosure provisions and on August 31, 2008, we adopted the measurement date provisions. The adoption of these provisions had no material effect on our consolidated financial statements. Refer to “Note K-Pension and Savings Plans” for further description of these adoptions.

On August 31, 2008, we adopted, FASB Statement No. 157, “Fair Value Measurements” (“SFAS 157”). This new standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. There is a one-year deferral of the adoption of this standard as it relates to nonfinancial assets and liabilities. The adoption of this statement did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued FASB Statement 141R, “Business Combinations,” (“SFAS 141R”). This standard significantly changes the accounting for and reporting of business combinations in consolidated financial statements. Among other things, SFAS 141R requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed at the acquisition date and requires the expensing of most transaction and restructuring costs. The standard is effective for us beginning August 30, 2009 and is applicable only to transactions occurring after the effective date.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133,” (“SFAS 161”). SFAS 161 amends SFAS No. 133 to improve the disclosure requirements for derivative instruments and hedging activities by providing enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The adoption of SFAS 161 did not have a material impact on our financial statements.

In April 2009, the FASB issued FASB Staff Position No. 107-1 (“FSP 107-1”) and Accounting Principles Board Opinion No. 28-1 (“APB 28-1”), “Interim Disclosures about Fair Value of Financial Instruments,” amending the disclosure requirements in SFAS 107 and APB Opinion 28. FSP 107-1 and APB 28-1 require disclosures about the fair value of financial instruments for interim reporting periods in addition to annual reporting periods. These disclosures will be required commencing with our fiscal quarter beginning August 30, 2009.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. We adopted SFAS 165 on August 29, 2009, and it had no impact on our consolidated financial statements. Management has evaluated subsequent events through the date these financial statements were issued.

In June 2009, the FASB voted to approve the FASB Accounting Standards Codification (Codification) as the single source of authoritative nongovernmental U.S. generally accepted accounting principles. The Codification will be effective for us commencing with our fiscal quarter beginning August 30, 2009. The FASB Codification does not change U.S. generally accepted accounting principles, but combines all authoritative standards such as those issued by the FASB, American Institute of Certified Public Accountants and the Emerging Issues Task Force into a comprehensive topically organized online database.

Critical Accounting 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 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 of Directors. The following items in our consolidated financial statements require significant estimation or judgment:

Inventory Reserves and cost of sales

LIFO

We state our inventories at the lower of cost or market using the last-in, first-out (“LIFO”) method for domestic merchandise and the first-in, first out (FIFO) method for Mexico inventories. Due to price deflation on our merchandise purchases, our domestic inventory balances are effectively maintained under the FIFO method. We do not write up inventory for favorable LIFO adjustments, and due to price deflation, LIFO costs of our domestic inventories exceed replacement costs by $223.0 million at August 29, 2009, calculated using the dollar value method.

Inventory Obsolescence and Shrinkage

Our inventory, primarily hard parts, maintenance items and accessories/non-automotive products, is used on vehicles that have rather long lives; and therefore, the risk of obsolescence is minimal and the majority of excess inventory has historically been returned to our vendors for credit. In the isolated instances where less than full credit will be received for such returns and where we anticipate that items will be sold at retail prices that are less than recorded costs, we record a charge (less than $15 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 the market value of inventory to be sold in future periods.

Historically, we have not encountered material exposure to inventory obsolescence or excess inventory, nor have we experienced material changes to our estimates. However, we may be exposed to material losses should our vendors alter their policy with regard to accepting excess inventory returns.

Additionally, we reduce inventory for projected losses related to shrinkage, which is estimated based on historical losses and current inventory loss trends resulting from previous physical inventories. Shrinkage may occur due to theft, loss or inaccurate records for the receipt of goods, among other things. Throughout the year, we take physical inventory counts of our stores and distribution centers to verify these estimates. We make assumptions regarding upcoming physical inventory counts that may differ from actual results. Over the last three years, there has been less than a 25 basis point fluctuation in our shrinkage rate.

Each quarter, we evaluate the accrued shrinkage in light of the actual shrink results. To the extent our actual physical inventory count results differ from our estimates, we may experience material adjustments to our financial statements. Historically, we have not experienced material adjustments to our shrinkage estimates and do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use.

A 10% difference in our inventory reserves as of August 29, 2009, would have affected net income by approximately $3 million in fiscal 2009.

Vendor allowances

AutoZone receives various payments and allowances from its 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 inventory, unless they are provided as a reimbursement of specific, incremental, identifiable costs incurred by the Company in selling the vendor’s products. Approximately 90% of the vendor funds received are 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 based on our inventory purchases. Therefore, we record receivables for funding 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 have not recorded a reserve against these receivables as we have legal right of offset with our vendors for payments owed them. Historically, we have had minimal write-offs (less than $100 thousand in any of the last three years) and these write-offs were due to severed relationships.

Self-Insurance

We retain a significant portion of the risks associated with workers’ compensation, vehicle, employee health, general and products liability and property losses; and we obtain third party insurance to limit the exposure related to certain of these risks. Our self-insurance reserve estimates totaled $158 million, $145 million, and $133 million as of the end of fiscal years 2009, 2008, and 2007, respectively. These increases are primarily reflective of our growing operations, including inflation and increases in vehicles and the number of hours worked.

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 actuarial methods, 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, we have experienced improvements in frequency and duration of claims; however, medical and wage inflation have partially offset these trends. Throughout this time, our methods for determining our exposure have remained consistent, and these trends have been appropriately factored into our reserve estimates.

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 health care 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 $10 million for fiscal 2009.

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. In recent years, we have experienced favorable claims development, particularly related to workers compensation, and have adjusted our estimates accordingly. We attribute this success to programs, such as return to work and projects aimed at accelerating claims closure. The programs have matured and proven to be successful and are therefore considered in our current and future assumptions regarding claims costs.

Our liabilities for workers compensation, certain 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 these obligations in our balance sheet using the risk-free interest rate as of the balance sheet date. If the discount rate used to calculate present value of these reserves changed by 50 basis points, net income would have changed approximately $2 million at August 29, 2009. Our liability for health benefits is classified as current, as the historical average duration of claims is approximately six weeks.

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 experience with previous 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, 2009, we had approximately $56.6 million reserved for uncertain tax positions.

We evaluate potential exposures associated with our various tax filings in accordance with FIN 48 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 certain 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.

Pension Obligation

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. Accordingly, pension plan participants will earn no new benefits under the plan formula and no new participants will join the pension plan. On January 1, 2003, the Company’s supplemental defined benefit pension plan for certain highly compensated employees was also frozen. Accordingly, plan participants will earn no new benefits under the plan formula and no new participants will join the pension plan. As the plan benefits are frozen, the annual pension expense and recorded liabilities are not impacted by increases in future compensation levels, but are impacted by the use of two key assumptions in the calculation of these balances:

i. Expected long-term rate of return on plan assets: As described more fully in “Note K — Pension and Savings Plans”, we have assumed an 8% long-term rate of return on our plan assets. This estimate is a judgmental matter in which management considers the composition of our asset portfolio, our historical long-term investment performance and current market conditions. We review the expected long-term rate of return on an annual basis, and revise it accordingly. Additionally, we monitor the mix of investments in our portfolio to ensure alignment with our long-term strategy to manage pension cost and reduce volatility in our assets. At August 29, 2009, our plan assets totaled $115 million in our qualified plan. We have no assets in our nonqualified plan. A 50 basis point change in our expected long term rate of return would impact annual pension expense/income by approximately $570 thousand for the qualified plan.

ii. Discount rate used to determine benefit obligations: This rate is highly sensitive and is adjusted annually based on the interest rate for long-term high-quality corporate bonds as of the measurement date using yields for maturities that are in line with the duration of our pension liabilities. This same discount rate is also used to determine pension expense for the following plan year. For fiscal 2009, we assumed a discount rate of 6.24%. A decrease in the discount rate increases pension expense. A 50 basis point change in the discount rate at August 29, 2009 would impact annual pension expense/income by approximately $1.9 million for the qualified plan and $30 thousand for the nonqualified plan.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

AutoZone is 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 financial 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 our Board of Directors. Further, we do not buy or sell financial instruments for trading purposes.

Interest Rate Risk

AutoZone’s 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.

AutoZone has 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 in our consolidated balance sheets as a component of other assets or liabilities. All of the Company’s interest rate hedge instruments are designated as cash flow hedges. We had an outstanding interest rate swap with a negative fair value of $4.3 million at August 30, 2008, to effectively fix the interest rate on the $300 million term loan entered into during December 2004. During the current fiscal year, we prepaid the term loan and terminated the interest rate swap; as a result, at August 29, 2009, we had no outstanding interest rate swaps.

Unrealized gains and losses on interest rate hedges are deferred in stockholders’ equity as a component of other comprehensive income or 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 income. For further discussion, see “Note G-Derivative Financial Instruments”.

The fair value of our debt was estimated at $2.853 billion as of August 29, 2009, and $2.235 billion as of August 30, 2008, based on the quoted market prices for the same or similar debt issues or on the current rates available to AutoZone for debt having the same remaining maturities. Such fair value is greater than the carrying value of debt by $126.5 million at August 29, 2009, and less than the carrying value of debt by $15.0 million at August 30, 2008. We had $277.6 million of variable rate debt outstanding at August 29, 2009, and considering the effect of the interest rate swap designated and effective as a cash flow hedge, no variable rate debt outstanding at August 30, 2008. In fiscal 2009, at this borrowing level for variable rate debt, a one percentage point increase in interest rates would have had an unfavorable impact on our pre-tax earnings and cash flows of $2.8 million, which includes the effects of the interest rate swap. The primary interest rate exposure on variable rate debt is based on LIBOR. We had outstanding fixed rate debt of $2.449 billion at August 29, 2009, and considering the effect of the interest rate swap designated and effective as a cash flow hedge, $2.250 billion at August 30, 2008. A one percentage point increase in interest rates would reduce the fair value of our fixed rate debt by $105.9 million at August 29, 2009, and $90.7 million at August 30, 2008.

Fuel Price Risk

Fuel swap contracts that we utilize have not previously been designated as hedging instruments under the provisions of SFAS 133 and thus do not qualify for hedge accounting treatment, although the instruments were executed to economically hedge a portion of our diesel and unleaded fuel exposure. In fiscal year 2009, we entered into fuel swaps to economically hedge a portion of our unleaded fuel exposure. We did not enter into any fuel swap contracts during the 2008 fiscal year and during fiscal year 2007, we entered into fuel swaps to economically hedge a portion of our unleaded and diesel fuel exposures. As of August 29, 2009, we had an outstanding liability of less than one hundred thousand dollars associated with our unleaded fuel swap and no outstanding fuel swap contracts at August 25, 2007. The swaps during fiscal years 2009 and 2007 had no significant impact on our results of operations in either year.

Foreign Currency Risk

Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than an entity’s functional currency. The Company and its subsidiaries generally enter into transactions denominated in their respective functional currencies. Foreign currency exposures arising from transactions denominated in currencies other than the functional currency are not material.

The Company’s primary foreign currency exposure arises from Mexican peso-denominated revenues and profits and their translation into U.S. dollars. The Company generally views as long-term its investments in the Mexican subsidiaries, which have the Mexican peso as the functional currency. As a result, the Company generally does not hedge these net investments. The net investment in Mexican subsidiaries translated into U.S. dollars using the year-end exchange rates was $215.4 million at August 29, 2009 and $160.8 million at August, 30, 2008. The potential loss in value of the Company’s net investment in Mexican subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at August 29, 2009 and August, 30, 2008 amounted to $19.6 million and $14.6 million, respectively. This change would be reflected in the foreign currency translation component of accumulated other comprehensive income (loss) in the equity section of the Company’s Consolidated Balance Sheets, unless the Mexican subsidiaries are sold or otherwise disposed.

During 2009, exchange rates with respect to the Mexican peso decreased by approximately 30% with respect to the U.S. dollar. The resulting foreign currency translation losses are recorded as a component of accumulated other comprehensive income (loss).

Item 8. Financial Statements and Supplementary Data

Index

Management’s Report on Internal Control Over Financial Reporting			35
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting			36
Report of Independent Registered Public Accounting Firm			37
Consolidated Statements of Income			38
Consolidated Balance Sheets			39
Consolidated Statements of Cash Flows			40
Consolidated Statements of Stockholders’ Equity (Deficit)			41
Notes to Consolidated Financial Statements			42
Quarterly Summary (unaudited)			62

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, which is comprised of both Deloitte & Touche LLP professionals and Company personnel. 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, 2009, 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 (the COSO criteria).

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of August 29, 2009.

Our independent registered public accounting firm, Ernst & Young LLP, audited the effectiveness of our internal control over financial reporting. Ernst & Young has issued its report concurring with management’s assessment, which is included in this Annual Report.

Certifications

Compliance with NYSE Corporate Governance Listing Standards

On January 5, 2009, the Company submitted to the New York Stock Exchange the Annual CEO Certification required pursuant to Section 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 29, 2009, the certifications of its Principal Executive Officer and Principal Financial Officer required pursuant to Section 302 of the Sarbanes-Oxley Act of 2004.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of AutoZone, Inc.

We have audited AutoZone, Inc.’s internal control over financial reporting as of August 29, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). AutoZone, Inc.’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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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.

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.

In our opinion, AutoZone, Inc. maintained, in all material respects, effective internal control over financial reporting as of August 29, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of AutoZone, Inc. as of August 29, 2009 and August 30, 2008 and the related consolidated statements of income, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended August 29, 2009 of AutoZone, Inc. and our report dated October 26, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Memphis, Tennessee
October 26, 2009

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 29, 2009 and August 30, 2008 and the related consolidated statements of income, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended August 29, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AutoZone, Inc. as of August 29, 2009 and August 30, 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 29, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in Note D to the consolidated financial statements, the Company adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109,” effective August 26, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), AutoZone, Inc.’s internal control over financial reporting as of August 29, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 26, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Memphis, Tennessee
October 26, 2009

Consolidated Statements of Income

		Year Ended
		August 29,				August 30,				August 25,
		2009				2008				2007
(in thousands, except per share data)		(52 Weeks)				(53 Weeks)				(52 Weeks)
Net sales		$	6,816,824			$	6,522,706			$	6,169,804
Cost of sales, including warehouse and delivery expenses			3,400,375				3,254,645				3,105,554
Gross profit			3,416,449				3,268,061				3,064,250
Operating, selling, general and administrative expenses			2,240,387				2,143,927				2,008,984
Operating profit			1,176,062				1,124,134				1,055,266
Interest expense, net			142,316				116,745				119,116
Income before income taxes			1,033,746				1,007,389				936,150
Income taxes			376,697				365,783				340,478
Net income		$	657,049			$	641,606			$	595,672
Weighted average shares for basic earnings per share			55,282				63,295				69,101
Effect of dilutive stock equivalents			710				580				743
Adjusted weighted average shares for diluted earnings per share			55,992				63,875				69,844
Basic earnings per share		$	11.89			$	10.14			$	8.62
Diluted earnings per share		$	11.73			$	10.04			$	8.53

Consolidated Balance Sheets

		August 29,				August 30,
(in thousands, except per share data)		2009				2008
Assets
Current assets:
Cash and cash equivalents		$	92,706			$	242,461
Accounts receivable			126,514				71,241
Merchandise inventories			2,207,497				2,150,109
Other current assets			135,013				122,490
Total current assets			2,561,730				2,586,301
Property and equipment:
Land			656,516				643,699
Buildings and improvements			1,900,610				1,814,668
Equipment			887,521				850,679
Leasehold improvements			219,606				202,098
Construction in progress			145,161				128,133
			3,809,414				3,639,277
Less: Accumulated depreciation and amortization			1,455,057				1,349,621
			2,354,357				2,289,656
Goodwill, net of accumulated amortization			302,645				302,645
Deferred income taxes			59,067				38,283
Other long-term assets			40,606				40,227
			402,318				381,155
		$	5,318,405			$	5,257,112
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable		$	2,118,746			$	2,043,271
Accrued expenses and other			381,271				327,664
Income taxes payable			35,145				11,582
Deferred income taxes			171,590				136,803
Total current liabilities			2,706,752				2,519,320
Long-term debt			2,726,900				2,250,000
Other liabilities			317,827				258,105
Commitments and Contingencies			—				—
Stockholders’ equity (deficit):
Preferred stock, authorized 1,000 shares; no shares issued			—				—
Common stock, par value $.01 per share, authorized 200,000 shares; 57,881 shares issued and 50,801 shares outstanding in 2009 and 63,600 shares issued and 59,608 shares outstanding in 2008			579				636
Additional paid-in capital			549,326				537,005
Retained earnings			136,935				206,099
Accumulated other comprehensive loss			(92,035	)			(4,135	)
Treasury stock, at cost			(1,027,879	)			(509,918	)
Total stockholders’ equity (deficit)			(433,074	)			229,687
		$	5,318,405			$	5,257,112

See Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

		Year Ended
		August 29,				August 30,				August 25,
		2009				2008				2007
(in thousands)		(52 Weeks)				(53 Weeks)				(52 Weeks)
Cash flows from operating activities:
Net income		$	657,049			$	641,606			$	595,672
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment			180,433				169,509				159,411
Amortization of debt origination fees			3,644				1,837				1,719
Income tax benefit from exercise of stock options			(8,407	)			(10,142	)			(16,523	)
Deferred income taxes			46,318				67,474				24,844
Share-based compensation expense			19,135				18,388				18,462
Changes in operating assets and liabilities:
Accounts receivable			(56,823	)			(11,145	)			20,487
Merchandise inventories			(76,337	)			(137,841	)			(160,780	)
Accounts payable and accrued expenses			137,158				175,733				186,228
Income taxes payable			32,264				(3,861	)			17,587
Other, net			(10,626	)			9,542				(1,913	)
Net cash provided by operating activities			923,808				921,100				845,194
Cash flows from investing activities:
Capital expenditures			(272,247	)			(243,594	)			(224,474	)
Purchase of marketable securities			(48,444	)			(54,282	)			(94,615	)
Proceeds from sale of investments			46,306				50,712				86,921
Disposal of capital assets			10,663				4,014				3,453
Net cash used in investing activities			(263,722	)			(243,150	)			(228,715	)
Cash flows from financing activities:
Net (repayments of) proceeds from commercial paper			277,600				(206,700	)			84,300
Proceeds from issuance of debt			500,000				750,000				—
Repayment of debt			(300,700	)			(229,827	)			(5,839	)
Net proceeds from sale of common stock			39,855				27,065				58,952
Purchase of treasury stock			(1,300,002	)			(849,196	)			(761,887	)
Income tax benefit from exercise of stock options			8,407				10,142				16,523
Payments of capital lease obligations			(17,040	)			(15,880	)			(11,360	)
Other			(15,016	)			(8,286	)			(2,072	)
Net cash used in financing activities			(806,896	)			(522,682	)			(621,383	)
Effect of exchange rate changes on cash			(2,945	)			539				—
Net increase (decrease) in cash and cash equivalents			(149,755	)			155,807				(4,904	)
Cash and cash equivalents at beginning of year			242,461				86,654				91,558
Cash and cash equivalents at end of year		$	92,706			$	242,461			$	86,654
Supplemental cash flow information:
Interest paid, net of interest cost capitalized		$	132,905			$	107,477			$	116,580
Income taxes paid		$	299,021			$	313,875			$	299,566
Assets acquired through capital lease		$	16,880			$	61,572			$	69,325