UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended August 30, 2014,27, 2016, or

For the transition period from                    to                    .

Commission file number 1-10714

AUTOZONE, INC.

(Exact name of registrant as specified in its charter)

(901) 495-6500

(Registrant’s telephone number, including area code)

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

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  x    No  ¨

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation 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  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation 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 thisForm 10-K or any amendment to thisForm 10-K.    x

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” inRule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined inRule 12b-2 of the Act).    Yes  ¨    No  x

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 $18,167,987,884.$21,836,021,743.

The number of shares of Common Stock outstanding as of October 20, 2014,17, 2016, was 32,040,703.28,861,394.

Documents Incorporated By Reference

Portions of the definitive Proxy Statement to be filed within 120 days of August 30, 2014,27, 2016, pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting of Stockholders to be held on December 18, 2014,14, 2016, are incorporated by reference into Part III.

TABLE OF CONTENTS

Forward-Looking Statements

Certain statements contained in this annual report 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: product demand; energy prices; weather; competition; credit market conditions; access to available and feasible financing; 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;changes in laws or regulations; war and the prospect of war, including terrorist activity; inflation; the ability to hire and retain qualified employees; construction delays; access to availablethe compromising of the confidentiality, availability, or integrity of information, including cyber security attacks; and feasible financing; and changes in laws or regulations.raw material costs of our suppliers. Certain of these risks are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of this Annual Report onForm 10-K for the year ended August 30, 2014,27, 2016, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results; developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the “Risk Factors” could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results.

PART I

Item  1. Business

Introduction

AutoZone, Inc. (“AutoZone,” the “Company,” “we,” “our” or “us”) is the nation’s leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. We began operations in 1979 and at August 30, 2014,27, 2016, operated 4,9845,297 AutoZone stores in the United States, including Puerto Rico; 402483 stores in Mexico; and fiveeight stores in Brazil.Brazil; and 26 Interamerican Motor Corporation (“IMC”) branches. Each of our storesAutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. At August 30, 2014,27, 2016, in 3,8454,390 of our domestic AutoZone stores we also havehad a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in selectAutoZone stores in Mexico as well as in our stores inand Brazil. IMC branches carry an extensive line of original equipment quality import replacement parts. We also sell the ALLDATA brand automotive diagnostic and repair software through www.alldata.com.www.alldata.com and www.alldatadiy.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and accessories, performance and performancereplacement parts through www.autoanything.com, and our commercial customers can make purchases through www.autozonepro.com.www.autozonepro.com and www.imcparts.net. We do not derive revenue from automotive repair or installation services.

At August 30, 2014,27, 2016, our AutoZone stores and IMC branches were in the following locations:

North Dakota			13
Ohio			244256
Oklahoma			6874
Oregon			4042
Pennsylvania			151169
Puerto Rico			3740
Rhode Island			1517
South Carolina			86
South Dakota			6
Tennessee			160163
Texas			566585
Utah			4856
Vermont			2
Virginia			111118
Washington			8087
Washington, DC			5
West Virginia			3943
Wisconsin			6166
Wyoming			78
Total Domestic AutoZone stores			4,9845,297
Mexico			402483
Brazil			58
Total AutoZone stores			5,3915,788
IMC branches			26
Total locations			5,814

Marketing and Merchandising Strategy

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

Customer Service

Customer service is the most important element in our marketing and merchandising strategy, which is based upon consumer marketing research. We emphasize that our AutoZoners (employees) should always put customers first by providing prompt, courteous service and trustworthy advice. Our electronic parts catalog assists in the selection of parts as well as identifying any associated warranties that are offered by us or our vendors. We sell automotive hard parts, maintenance items, accessories and non-automotive parts through www.autozone.com for pick-up in store or to be shipped directly to a customer’s home or business. Additionally, we offer smartphone apps that provide customers with store locations, driving directions, operating hours, ability to purchase products and product availability.

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

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

Merchandising

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

We believe that the satisfaction of our customers is often impacted by our ability to provide specific automotive products as requested. Each store carries the same basic products, but we tailor our hard parts inventory to the makes and models of the vehicles in each store’s trade area, and our sales floor products are tailored to the local store’s demographics. Our hub stores (including mega hubs, which carry an even broader assortment) carry a larger assortment of products that are delivered to local satellite stores. We are constantly updating the products we offer to ensure that our inventory matches the products our customers need or desire.

Pricing

We want to be perceived by our customers as the value leader in our industry, by consistently providing quality merchandise at the right price, backed by a satisfactory warranty and outstanding customer service. For many of our products, we offer multiple value choices in a good/better/best assortment, with appropriate price and quality differences from the “good” products to the “better” and “best” products. A key differentiating component versus our competitors is our exclusive line of in-house brands, which includes the Econocraft, Valucraft, AutoZone, SureBilt, ProElite, Duralast, Duralast Max, Duralast Gold, Duralast Platinum and Duralast PlatinumProPower brands. We believe that our overall value compares favorably to that of our competitors.

Brand Marketing: Advertising and Promotions

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

Store Design and Visual Merchandising

We design and build stores for high visual impact. The typical AutoZone store utilizes colorful exterior and interior signage, exposed beams and ductwork and brightly lit interiors. Maintenance products, accessories and non-automotive items are attractively displayed for easy browsing by customers. In-store signage and special displays promote products on floor displays, end caps and shelves.

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 domestic store program, we offer credit and delivery to our customers, as well as online ordering through www.autozonepro.com.www.autozonepro.com and www.imcparts.net. Through our hub stores, we offer a greater range of parts and products desired by professional technicians. We have dedicated sales teams focused on independent repair shops as well as national, regional and public sector commercial accounts.

Store Operations

Store Formats

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

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

Store Personnel and Training

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

Store managers, sales representatives, commercial sales managers and managers at various levels across the organization receive financial incentives through performance-based bonuses. In addition, our growth has provided opportunities for the promotion of qualified AutoZoners. We believe these opportunities are important to attract, motivate and retain high quality AutoZoners.

All store support functions are centralized in our store support centers located in Memphis, Tennessee; Monterrey, Mexico; Chihuahua, Mexico andMexico; Sao Paulo, Brazil.Brazil and Canoga Park, California. 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 AutoZone stores haveZ-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. TheZ-net display screens are placed on the hard parts counter or pods, where both the AutoZoner and customer can view the screen.

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

Store Development

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

We believe that expansion opportunities exist 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 AutoZone store or IMC branch are the projected future profitability and the ability to achieve our required investment hurdle rate. Key factors in selecting new site and market locations for AutoZone stores and IMC branches include population, demographics, vehicle profile, customer buying trends, commercial businesses, number and strength of competitors’ stores and the cost of real estate. In reviewing the vehicle profile, we also consider the number of vehicles that are seven years old and older, or “our kind of vehicles”; these vehicles are generally no longer under the original manufacturers’ warranties and require more maintenance and repair than newer vehicles. We generally seek to open new AutoZone stores in high visibility sites in high traffic locations within or contiguous to existing market areas and attempt to cluster development in markets in a relatively short period of time. When selecting future sites and market locations for our IMC branches, we look for locations close to major highways to support IMC’s delivery schedule and also consider the population of AutoZone stores in the market. In addition to continuing to lease or develop our own stores,locations, we evaluate and may make strategic acquisitions.

Purchasing and Supply Chain

Merchandise is selected and purchased for all AutoZone stores through our store support centers located in Memphis, Tennessee,Tennessee; Monterrey, Mexico and Sao Paulo, Brazil. Merchandise is selected and purchased for all IMC branches through our store support center located in Canoga Park, California. In fiscal 2014,2016, one class of similar products accounted for approximately 1011 percent of our total sales, and one vendor supplied more thanapproximately 10 percent of our purchases. No other class of similar products accounted for 10 percent or more of our total sales, and no other individual vendor provided more than 10 percent of our total purchases. We believe that alternative sources of supply exist, at similar costs, for most types of product sold. Most of our merchandise flows through our distribution centers to our AutoZone stores and IMC branches by our fleet of tractors and trailers or by third-party trucking firms.

OurWe ended fiscal 2016 with 182 hub stores, which 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 has a larger assortment of products as well as regular replenishment items that can be delivered to a store in its network within 24 hours. Hub stores are generally replenished from distribution centers multiple times per week. Hub stores have increased our ability to distribute products on a timely basis to many of our stores and to expand our product assortment.

During fiscal 2014 and 2015, we tested two new concepts of our supply chain strategy, increased delivery frequency to our stores utilizing our distribution centers and significantly expanded parts assortments in select stores we call mega hubs. Our tests were concluded during fiscal 2015, and both initiatives were expanded to additional locations in fiscal 2016.

Increased delivery frequency focuses on improving our in-stock position of our core store-stocked product by providing deliveries to certain stores multiple times per week. We ended fiscal 2016 with over 1,900 stores receiving deliveries multiple times per week, an increase of approximately 1,000 stores since fiscal 2015.

A mega hub store carries inventory of 80,000 to 100,000 unique SKUs, approximately twice what a hub store carries. Mega hubs provide coverage to both surrounding stores and other hub stores multiple times a day or on an overnight basis. We ended fiscal 2016 with 11 mega hubs, an increase of six since fiscal 2015.

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 the aftermarket auto parts industry, which includes both the retail DIY and commercial do-it-for-me (“DIFM”) auto parts and products markets.

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

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,” “Duralast Platinum,” “Duralast ProPower,” “Duralast ProPower Plus,” “Duralast ProPower Ultra,” “Duralast ProPower AGM,” “Valucraft,” “Econocraft,“ProElite,” “SureBilt,” “ALLDATA,” “AutoAnything,” “IMC,” “Loan-A-Tool” and “Z-net.” We believe that these service marks and trademarks are important components of our marketing and merchandising strategies.

Employees

As of August 30, 2014,27, 2016, we employed over 76,00084,000 persons, approximately 5759 percent of whom were employed full-time. About 9291 percent of our AutoZoners were employed in stores or in direct field supervision, approximately 5 percent in distribution centers and approximately 34 percent in store support and other functions. Included in the above numbers are approximately 5,7007,500 persons employed in our Mexico and Brazil operations.

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

AutoZone Websites

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

Executive Officers of the Registrant

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

William C. Rhodes, III, 49—51 — Chairman, President and Chief Executive Officer, Customer Satisfaction

William C. Rhodes, III, was named Chairman of AutoZone during fiscal 2007 and has been President, Chief Executive Officer and a director since March 2005. Prior to his appointment as President and Chief Executive Officer, Mr. Rhodes was Executive Vice President – Store Operations and Commercial. Previously, he held several key management positions with the Company. Prior to 1994, Mr. Rhodes was a manager with Ernst & Young LLP. Mr. Rhodes is a member of the Board of Directors for Dollar General Corporation.Corporation, a discount retailer offering a broad selection of merchandise, including consumables, seasonal, home products and apparel.

William T. Giles, 5557—Chief Financial Officer and Executive Vice President – Finance, Information Technology and ALLDATA, Customer Satisfaction

William T. Giles was named Chief Financial Officer and Executive Vice President – Finance, Information Technology and ALLDATA during October 2012. Prior to that, he was Chief Financial Officer and Executive Vice President – Finance, Information Technology and Store Development from fiscal 2007 to October 2012; 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. Mr. Giles is a member of the Board of Directors for Brinker International.

Kristen C. Wright, 38—Senior Vice President – General CounselInternational, which owns, operates and franchises the Chili’s Grill & Secretary, Customer SatisfactionBar and Maggiano’s Little Italy restaurant concepts.

Kristen C. Wright was named Senior Vice President, General Counsel & Secretary effective January 2014. She previously held the title of Vice President – Assistant General Counsel & Assistant Secretary from January 2012 to January 2014. Before joining AutoZone, she was a partner with the law firm of Bass, Berry & Sims PLC.

Mark A. Finestone,5355— Executive Vice President – Merchandising, Supply Chain and Marketing, Customer Satisfaction

Mark A. Finestone was named Executive Vice President – Merchandising, Supply Chain and Marketing during October 2015. Previously, he was Senior Vice President – Merchandising and Store Development Customer Satisfaction

Mark A. Finestone was electedsince 2014, Senior Vice President – Merchandising during fiscal 2008. Previously, he wasfrom 2008 to 2014, and Vice President – Merchandising since 2002.from 2002 to 2008. Prior to joining AutoZone in 2002, Mr. Finestone worked for May Department Stores for 19 years where he held a variety of leadership roles which included Divisional Vice President, Merchandising.

William W. Graves,5456— Executive Vice President – Mexico, Brazil, IMC and Store Development, Customer Satisfaction

William W. Graves was named Executive Vice President – Mexico, Brazil, IMC and Store Development during October 2015. Previously, he was Senior Vice President – Supply Chain and International Customer Satisfaction

William W. Graves was named Senior Vice President – Supply Chain and International during Octobersince 2012. Prior thereto, he was Senior Vice President – Supply Chain from fiscal 2006 to October 2012 and Vice President – Supply Chain from fiscal 2000 to fiscal 2006. From 1992 to 2000, Mr. Graves served in various capacities with the Company.

Thomas B. Newbern, 54 — Executive Vice President – Store Operations, Commercial and Loss Prevention, Customer Satisfaction

Thomas B. Newbern was named Executive Vice President – Store Operations, Commercial and Loss Prevention during October 2015. Prior to that, he was Senior Vice President – Store Operations and Loss Prevention since 2014 and Senior Vice President – Store Operations and Store Development since 2012. Previously, Mr. Newbern held the titles Senior Vice President – Store Operations from 2007 to 2012 and Vice President – Store Operations from 1998 to 2007. Prior thereto, he held several key management positions with the Company.

Philip B. Daniele, 47 — Senior Vice President – Commercial, Customer Satisfaction

Philip B. Daniele was elected Senior Vice President – Commercial during November 2015. Prior to that, he was Vice President – Commercial since 2013 and Vice President – Merchandising from 2008 to 2013. Previously, he was Vice President – Store Operations from 2005 to 2008. From 1993 until 2008, Mr. Daniele served in various capacities within the Company.

Ronald B. Griffin, 6062—Senior Vice President and Chief Information Officer, Customer Satisfaction

Ronald B. Griffin was elected Senior Vice President and Chief Information Officer during June 2012. Prior to that, he was Senior Vice President, Global Information Technology at Hewlett-Packard Company. During his tenure at Hewlett-Packard Company, he also served as the Chief Information Officer for the Enterprise Business Division. Prior to that, Mr. Griffin was Executive Vice President and Chief Information Officer for Fleming Companies, Inc. He also spent over 12 years with The Home Depot, Inc., with the last eight years in the role of Chief Information Officer. Mr. Griffin also served at Deloitte & Touche LLP and Delta Air Lines, Inc.

Albert Saltiel, 50James C. Griffith, 51 —Senior Vice President – Marketing, Customer Satisfaction

Albert “Al” Saltiel was elected Senior Vice President – Marketing during April 2013. Prior to that, he was Chief Marketing Officer and a key member of the leadership team at Navistar International Corporation. Mr. Saltiel has also been with Sony Electronics as General Manager, Marketing, and Ford Motor Company where he held multiple marketing roles.

Thomas B. Newbern, 52—Senior Vice President – Store Operations, and Loss Prevention, Customer Satisfaction

Thomas B. NewbernJames C. Griffith was electednamed Senior Vice President–Store Operation andOperations in November 2015. Prior to that, he was Vice President – Store Development duringsince October 2012. Previously, Mr. Newbern held the titles Senior Vice President– Store Operations from fiscal 2007 to October 20122010 and Vice President – Store Operations from fiscal 1998 to fiscalsince 2007. Previously,Prior thereto, he held several key management positions within the Company.

William R. Hackney, 51 — Senior Vice President – Merchandising, Customer Satisfaction

William R. Hackney was named Senior Vice President, Merchandising in October 2015. His career with AutoZone began in 1983, and he has held several key management roles within the Company, including Vice President – Store Operations Support and Vice President – Merchandising.

Rodney C. Halsell, 48 — Senior Vice President –Supply Chain, Customer Satisfaction

Rodney C. Halsell was named Senior Vice President – Supply Chain during October 2015. Prior to that, he was Vice President – Distribution since 2005. From 1985 to 2005, he held several key management positions and served in various capacities with the Company.

Charlie Pleas, III, 49—51 — Senior Vice President and Controller, Customer Satisfaction

Charlie Pleas, III, was elected Senior Vice President and Controller during fiscal 2007. Prior to that, he was Vice President and Controller since 2003. Previously, he was Vice President – Accounting since 2000, and Director of General Accounting since 1996. Prior to joining AutoZone, Mr. Pleas was a Division Controller with Fleming Companies, Inc. where he served in various capacities since 1988. Mr. Pleas is a member of the Board of Directors for Kirkland’s, Inc., a specialty retailer of home décor and gifts.

Larry M. Roesel, 57—Albert Saltiel, 52 —Senior Vice President – Commercial,Marketing and E-Commerce, Customer Satisfaction

Larry M. RoeselAlbert Saltiel was named Senior Vice President – Marketing and E-Commerce during October 2014. Previously, he was elected Senior Vice President–Commercial during fiscal 2007. Marketing since 2013. Prior to that, he was Chief Marketing Officer and a key member of the leadership team at Navistar International Corporation. Mr. Roesel came to AutoZoneSaltiel has also been with more than thirty years of experience with OfficeMax, Inc.Sony Electronics as General Manager, Marketing, and its predecessor,Ford Motor Company where he served in operations, sales and general management.held multiple marketing roles.

Michael A. Womack, 47Richard C. Smith, 52 —Senior Vice President – Human Resources, Customer Satisfaction

Michael A. WomackRichard C. Smith was elected Senior Vice President – Human Resources in June 2012.December 2015. He washas been an AutoZoner since 1985, previously holding the position of Vice President of Human ResourcesStores since 1997. Prior thereto, he served in various capacities with Cintas Corporation and had been with Cintas since 2003.the Company.

Kristen C. Wright, 40 — Senior Vice President – General Counsel & Secretary, Customer Satisfaction

Kristen C. Wright was named Senior Vice President – General Counsel & Secretary effective January 2014. She previously held the title of Vice President – Assistant General Counsel & Assistant Secretary from January 2012 to January 2014. Before joining Cintas, heAutoZone, she was a partner with the Littler Mendelson law firm.firm of Bass, Berry & Sims PLC.

Item 1A. Risk Factors

Our business is subject to a variety of risks. Set forth below are certain of the important risks that we face, the occurrence of which could have a material adverse effect on our business. These risks are not the only ones we face. Our business could also be affected by additional factors that are presently unknown to us or that we currently believe to be immaterial to our business.

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

Demand for the products we sell may be affected by a number of factors we cannot control, including:

For the long term, demand for our products may be affected by:

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 sales volumes are dependent on many factors, including name recognition, product availability, customer service, store location and price. Competitors are opening locations near our existing stores.locations. AutoZone competes as a provider in both the DIY and DIFM auto parts and accessories markets.

Our competitors include national, regional and local auto parts chains, independently owned parts stores, online parts stores, wholesale distributors, jobbers, repair shops, car washes and auto dealers, in addition to discount and mass merchandise stores, hardware stores, supermarkets, drugstores, convenience stores, home stores and other online retailers that sell aftermarket vehicle parts and supplies, chemicals, accessories, tools and maintenance parts. Although we believe we compete effectively on the basis of customer service, including the knowledge and expertise of our AutoZoners; merchandise quality, selection and availability; product warranty; store layout,

location and convenience; price; and the strength of our AutoZone brand name, trademarks and service marks, some of our competitors may gain competitive advantages, such as greater financial and marketing resources allowing them to sell automotive products at lower prices, larger stores with more merchandise, longer operating histories, more frequent customer visits and more effective advertising. With the increasing use of digital tools and social media, and our competitors’ increased focus on optimizing customers’ online experience, our customers are quickly able to compare prices, product assortment and feedback from other customers before purchasing our products either online, in the physical stores, or through a combination of both offerings. 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.

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

We have increased our storelocation count in the past five fiscal years, growing from 4,417 stores4,813 locations at August 29, 2009,27, 2011, to 5,391 stores5,814 locations at August 30, 2014,27, 2016, an average store countlocation increase per year of 4%. Additionally, we have increased annual revenues in the past five fiscal years from $6.817$8.073 billion in fiscal 20092011 to $9.475$10.636 billion in fiscal 2014,2016, an average increase per year of 8%6%. Annual revenue growth is driven by the opening of new storeslocations and commercial programs and increases in same store sales. We open new storeslocations only after evaluating customer buying trends and market demand/needs, all of which could be adversely affected by persistent unemployment, wage cuts, small business failures and microeconomic conditions unique to the automotive industry. Same store sales are impacted both by customer demand levels and by the prices we are able to charge for our products, which can also be negatively impacted by the economic pressures mentioned above. We cannot provide any assurance that we will continue to open storeslocations at historical rates or continue to achieve increases in same store sales.

Consolidation among our competitors may negatively impact our business.

Recently some of our competitors have merged. Consolidation among our competitors could enhance their market share and financial position, provide them with the ability to achieve better purchasing terms and provide more competitive prices to customers for whom we compete, and allow them to utilize merger synergies and cost savings to increase advertising and marketing budgets to more effectively compete for customers. Consolidation by our competitors could also increase their access to local market parts assortment. These consolidated competitors could take sales volume away from us in certain markets, could cause us to change our pricing with a negative impact on our margins or could cause us to spend more money to maintain customers or seek new customers, all of which could negatively impact our business.

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

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

A downgrade in our credit ratings or a general disruption in the credit markets could make it more difficult for us to access funds, refinance our debt, obtain new funding or issue securities.

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

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

Significant changes in macroeconomic and geo-political factors could adversely affect our financial condition and results of operations.

Macroeconomic conditions impact both our customers and our suppliers. Job growth in the United States has remained relatively slow during the past five yearsyears; however, towards the end of fiscal 2015 and continuing through fiscal 2016, the unemployment rate has not recoveredimproved to pre-recession levels. Moreover, the United States government continues to operate under historically large deficits and debt burden. Continued distress in global credit markets, business failures, significant geo-political conflicts, continued highvolatility in energy prices and other factors continue to affect the global economy. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. Over the short term, such factors could positively impact our business. Over a longer period of time, all of these macroeconomic and geo-political conditions could adversely affect our sales growth, margins and overhead, which could adversely affect our financial condition and operations.

Our business depends upon hiring and retaining qualified employees.

We believe that much of our brand value lies in the quality of the more than 76,00084,000 AutoZoners employed in our stores, distribution centers, store support centers, ALLDATA, AutoAnything and AutoAnything.IMC. Our workforce costs represent our largest operating expense, and our business is subject to employment laws and regulations, including requirements related to minimum wage. We cannot be assured that we can continue to hire and retain qualified employees at current wage rates. If we are unable to hire, properly train and/or retain qualified employees, we could experience higher employment costs, reduced sales, losses of customers and diminution of our brand, which could adversely affect our earnings. If we do not maintain competitive wages, our customer service could suffer due to a declining quality of our workforce or, alternatively, our earnings could decrease if we increase our wage rates. A violation or change in employment laws and/or regulations could have a material adverse effect on our results of operations, financial condition and cash flows.

Inability to acquire and provide quality merchandise at competitive prices could adversely affect our sales and results of operations.

We are dependent upon our domestic and international vendors continuing to supply us with quality merchandise.merchandise at favorable prices and payment terms. If our merchandise offerings do not meet our customers’ expectations regarding quality and safety, we could experience lost sales, increased costs and exposure to legal and reputational risk. All of our vendors must comply with applicable product safety laws, and we are dependent on them to ensure that the products we buy comply with all safety and quality standards. Events that give rise to actual, potential or perceived product safety concerns could expose us to government enforcement action or private litigation and result in costly product recalls and other liabilities. To the extent our suppliers are subject to added government regulation of their product design and/or manufacturing processes, the cost of the merchandise we purchase may rise. In addition, negative customer perceptions regarding the safety or quality of the products we sell could cause our customers to seek alternative sources for their needs, resulting in lost sales. In those circumstances, it may be difficult and costly for us to rebuild our reputation and regain the confidence of our customers. Moreover, our vendors are impacted by global economic conditions. Credit market and other macroeconomic conditions could have a material adverse effect on the ability of our suppliers to finance and operate their businesses, resulting in increased product costs and meetdifficulties in meeting our inventory demands. If any of our significant vendors experience financial difficulties or otherwise are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers’ perceptions of us and cause us to lose customers and sales.

We directly imported approximately 10% of our purchases (measured at cost) in fiscal 2016, but many of our domestic vendors directly import their products or components of their products. Changes to the prices and flow of these goods for any reason, such as political unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes and economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers’ failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties, merchandise quality or safety issues, transport availability and

cost, increases in wage rates and taxes, transport security, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, are beyond our control and could adversely affect our operations and profitability. In addition, the United States’ foreign trade policies, tariffs and other impositions on imported goods, trade sanctions imposed on certain countries, the limitation on the importation of certain types of goods or of goods containing certain materials from other countries and other factors relating to foreign trade and port labor agreements are beyond our control. These and other factors affecting our suppliers and our access to products could adversely affect our business and financial performance. As we increase our imports of merchandise from foreign vendors, the risks associated with these imports also will increase.

Our ability to grow depends in part on new storelocation openings, existing storelocation remodels and expansions and effective utilization of our existing supply chain and hub network.

Our continued growth and success will depend in part on our ability to open and operate new storeslocations and expand and remodel existing storeslocations to meet customers’ needs on a timely and profitable basis. Accomplishing our new and existing storelocation expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded storeslocations at acceptable costs, the hiring and training of qualified personnel, particularly at the storelocation management level, and the integration of new storeslocations into existing operations. There can be no assurance we will be able to achieve our storelocation expansion goals, manage our growth effectively, successfully integrate the planned new storeslocations into our operations or operate our new, remodeled and expanded storeslocations profitably.

In addition, we extensively utilize our hub stores,network, our supply chain and logistics management techniques to efficiently stock our stores.locations. We have made, and plan to continue to make, significant investments in our supply chain to improve our ability to provide the best parts at the right price. If we fail to effectively utilize our existing hubs and/or supply chains or if our investments in our supply chain and global sourcing initiative do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores,locations or increase our costs, which could adversely affect our sales volume and/or our margins.

Our failure to protect our reputation could have a material adverse effect on our brand name.name and profitability.

We believe our continued strong sales growth is driven in significant part by our brand name. The value in our brand name and its continued effectiveness in driving our sales growth are dependent to a significant degree on our ability to maintain our reputation for safety, high product quality, friendliness, service, trustworthy advice, integrity and business ethics. Any negative publicity about these areas could damage our reputation and may result in reduced demand for our merchandise. The increasing use of technology also poses a risk as customers are able to quickly compare products and prices and use social media to provide feedback in a manner that is rapidly and broadly dispersed. Our reputation could be impacted if a customer has a bad experience and shares it over social media.

Failure to comply with ethical, social, product, labor, environmental and anti-corruption standards could also jeopardize our reputation and potentially lead to various adverse actions by consumer or environmental groups, employees or regulatory bodies. Failure to comply with applicable laws and regulations, to maintain an effective system of internal controls or to provide accurate and timely financial statement information could also hurt our reputation. If we fail to comply with existing or future laws or regulations, we may be subject to governmental or judicial fines or sanctions, while incurring substantial legal fees and costs. In addition, our capital and operating expenses could increase due to implementation of and compliance with existing and future laws and regulations or remediation measures that may be required if we are found to be noncompliant with any existing or future laws or regulations. The inability to pass through any increased expenses through higher prices would have an adverse effect on our results of operations.

Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation.

Our success in international operations is dependent on our ability to manage the unique challenges presented by international markets.

The various risks we face in our U.S. operations generally also exist when conducting operations in and sourcing products and materials from outside of the U.S., as well as unique costs and difficulties of managing international operations. Our expansion into international markets may be adversely affected by local laws and customs, U.S. laws applicable to foreign operations and political and economic conditions. Risks inherent in international operations also include potential adverse tax consequences, compliance with the Foreign Corrupt Practices Act and local anti-bribery law, greater difficulty in enforcing intellectual property rights, challenges to identify and gain access to local suppliers and possibly misjudging the response of consumers in foreign countries to our product assortment and marketing strategy.

In addition, our operations in international markets are conducted primarily in the local currency of those countries. Since our consolidated financial statements are denominated in U.S. dollars, amounts of assets, liabilities, net sales and other revenues and expenses denominated in local currencies must be translated into U.S. dollars using exchange rates for the current period. As a result, foreign currency exchange rates and fluctuations in those rates may adversely impact our financial performance.

Failure to protect the privacy and security of customers’, suppliers’, AutoZoners’ or Company information could damage our reputation, subject us to litigation and cause us to incur substantial costs.

Our business, like that of most retailers and distributors, involves the receipt, storage and transmission of personal information about our customers, suppliers and AutoZoners.AutoZoners, some of which is entrusted to third-party service providers and vendors. Failure to protect the security of our customers’, suppliers’, employees’ and company information could subject us to costly regulatory enforcement actions, expose us to litigation and impair our reputation, could suffer.which may have a negative impact on our sales. While we and our third-party service providers and vendors take significant steps to protect customer, supplier, employee and other confidential information, including maintaining compliance with payment card industry standards, ourthese security measures may be breached in the future due to cyber-attack, employee error, fraud, trickery, hacking or other intentional or unintentional acts, and unauthorized parties may obtain access to this data.

Business interruptions The methods used to obtain unauthorized access are constantly evolving, and may negatively impact our store hours, operabilitybe difficult to anticipate or detect for long periods of our computertime. As the regulatory environment related to information security, data collection and other systems, availability of merchandiseuse and otherwise have a material negative effect on our sales and our business.

War or acts of terrorism, political unrest, hurricanes, windstorms, fires, earthquakes and other natural or other disasters or the threat of any of them, mayprivacy becomes increasingly rigorous, compliance with these requirements could also result in certain of our stores being closed for a period of time or permanently or have a negative impact on our ability to obtain merchandise available for sale in our stores. Some of our merchandise is imported from other countries. If imported goods become difficult or impossible to bring into the United States, and if we cannot obtain such merchandise from other sources at similar costs, our sales and profit margins may be negatively affected.

In the event that commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution centers and stores resulting in lost sales and/or a potential loss of customer loyalty. Transportation issues could also cause us to cancel purchase orders if we are unable to receive merchandise in our distribution centers.additional costs.

We rely heavily on our computerinformation technology systems for our key business processes. Any failure or interruption in these systems could have a material adverse impact on our business.

We rely extensively on our computerinformation technology systems, some of which are managed or provided by third-party service providers, to manage inventory, process transactions and summarize results. Our systems and the third-party systems we rely on are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches, catastrophic events and catastrophic events.design or usage errors by our AutoZoners, contractors or third-party service providers. Although we and our third-party service providers work diligently to maintain our respective systems, we may not be successful in doing so. If our systems are damaged or fail to function properly, we may incur substantial costs to repair or replace them, and may experience loss of critical data and interruptions or delays in our ability to manage inventories or process transactions, which could result in lost sales, inability to process purchase orders and/or a potential loss of customer loyalty, which could adversely affect our results of operations.

Business interruptions may negatively impact our location hours, operability of our computer and other systems, availability of merchandise and otherwise have a material negative effect on our sales and our business.

War or acts of terrorism, political unrest, hurricanes, windstorms, fires, earthquakes, floods and other natural or other disasters or the threat of any of them, may result in certain of our locations being closed for a period of time or permanently or have a negative impact on our ability to obtain merchandise available for sale in our locations. Some of our merchandise is imported from other countries. If imported goods become difficult or impossible to bring into the 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 locations resulting in lost sales and/or a potential loss of customer loyalty. Transportation issues could also cause us to cancel purchase orders if we are unable to receive merchandise in our distribution centers.

Item 1B. Unresolved Staff Comments

None.None.

Item 2. Properties

The following table reflects the square footage and number of leased and owned properties for our AutoZone stores as of August 30, 2014:27, 2016:

We have approximately 4.04.6 million square feet in distribution centers servicing our AutoZone stores, of which approximately 1.31.9 million square feet is leased and the remainder is owned. Our nine distribution centers are located in Arizona, California, Georgia, Illinois, Ohio, Pennsylvania, Tennessee, Texas and Mexico. We currently have a second distribution center in Mexico under construction that is expected to open in early fiscal 2017 and two additional domestic distribution centers under development. Of our 26 IMC branches, 25 branches, consisting of 854,228 square feet, are leased, and one branch, consisting of approximately 23 thousand square feet, is owned. Our primary store support center is located in Memphis, Tennessee, and consists of approximately 260,000 square feet. We also have three additional AutoZone store support centers located in Monterrey, Mexico; Chihuahua, Mexico and Sao Paulo, Brazil.Brazil, and an IMC branch support center located in Canoga Park, California. The ALLDATA headquarters building in Elk Grove, California and the AutoAnything headquarters space in San Diego, California are leased, and we also own or lease other properties that are not material in the aggregate.

Item 3. Legal Proceedings

In 2004, we acquired a store site in Mount Ephraim, New Jersey that had previously been the site of a gasoline service station and contained evidence of groundwater contamination. Upon acquisition, we voluntarily reported the groundwater contamination issue to the New Jersey Department of Environmental Protection (“NJDEP”) and entered into a Voluntary Remediation Agreement providing for the remediation of the contamination associated with the

property. We have conducted and paid for (at an immaterial cost to us) remediation of contamination on the property. We arehave also investigating,voluntarily investigated and will be addressing,addressed potential vapor intrusion impacts in downgradient residences and businesses. The New Jersey Department of Environmental ProtectionNJDEP has asserted, in a Directive and Notice to Insurers dated February 19, 2013 and again in an Amended Directive and Notice to Insurers dated January 13, 2014 (collectively the “Directives”), that we are liable for the downgradient impacts under a joint and severable liability theory. By letter dated April 23, 2015, NJDEP has demanded payment from us, and other parties, in the amount of approximately $296 thousand for costs incurred by NJDEP in connection with contamination downgradient of the property. By letter dated January 29, 2016, we were informed that NJDEP has filed a lien against the property in connection with approximately $355 thousand in costs incurred by NJDEP in connection with contamination downgradient of the property. We have contested, and will continue to contest, any such assertions due to the existence of other entities/sources of contamination, some of which are named in the Directives and the April 23, 2015 Demand, in the area of the property. Pursuant to the Voluntary Remediation Agreement, upon completion of all remediation required by the agreement, we believe we should be eligible to be reimbursed up to 75 percent of qualified remediation costs by the State of New Jersey. We have asked the state for clarification that the agreement applies to off-site work, and the state is considering the request. Although the aggregate amount of additional costs that we may incur pursuant to the remediation cannot currently be ascertained, we do not currently believe that fulfillment of our obligations under the agreement or otherwise will result in costs that are material to our financial condition, results of operations or cash flow.

In July 2014, we received a subpoena from the District Attorney of the County of Alameda, along with other environmental prosecutorial offices in the state of California, seeking documents and information related to the handling, storage and disposal of hazardous waste. We received notice that the District Attorney will seek injunctive and monetary relief. We are cooperating fully with the request and cannot predict the ultimate outcome of these efforts.efforts, although we have accrued all amounts we believe to be probable and reasonably estimable. We do not believe the ultimate resolution of this matter will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

In April 2016, we received a letter from the California Air Resources Board seeking payment for alleged violations of the California Health and Safety Code related to the sale of certain aftermarket emission parts in the State of California. We do not believe that any resolution of the matter will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We are involved in various other legal proceedings incidental to the conduct of our business, including several lawsuits containing class-action allegations in which the plaintiffs are current and former hourly and salaried employees who allege various wage and hour violations and unlawful termination practices. We do not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to our financial condition, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

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

Our common stock is listed on the New York Stock Exchange under the symbol “AZO.” On October 20, 2014,17, 2016, there were 2,7042,486 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings.

We currently do not pay a dividend on our common stock. Our ability to pay dividends is subject to limitations imposed by Nevada law. Any future payment of dividends would be dependent upon our financial condition, capital requirements, earnings and cash flow.

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

During 1998, the Company announced a program permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company’s Board of Directors. The program was most recently amended on June 17, 2014,September 22, 2016, to increase the repurchase authorization by $750 millionmillion. This brings the total value of shares authorized to raise the cumulative share repurchase authorization from $14.15 billion to $14.9$17.9 billion.

Shares of common stock repurchased by the Company during the quarter ended August 30, 2014,27, 2016, were as follows:

The Company also repurchased, at fairmarket value, an additional 12,460 shares in fiscal 2016, 15,594 shares in fiscal 2015 and 16,013 shares in fiscal 2014 22,915 shares in fiscal 2013, and 24,113 shares in fiscal 2012 from employees electing to sell their stock under the Company’s Sixth Amended and Restated Employee Stock Purchase Plan (the “Employee Plan”), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone’s common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 12,662 shares were sold to employees in fiscal 2016, 14,222 shares in fiscal 2015 and 15,355 shares were sold to employees in fiscal 2014, 18,228 shares were sold to employees in fiscal 2013, and 19,403 shares were sold to employees in fiscal 2012.2014. At August 30, 2014, 219,38927, 2016, 192,505 shares of common stock were reserved for future issuance under the Employee Plan.

Once executives have reached the maximum purchases under the Employee Plan, the Fifth Amended and Restated Executive Stock Purchase Plan (the “Executive Plan”) permits all eligible executives to purchase AutoZone’s common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under the Executive Plan were 1,943 shares in fiscal 2016, 2,229 shares in fiscal 2015 and 3,028 shares in fiscal 2014, 3,454 shares in fiscal 2013, and 3,937 shares in fiscal 2012.2014. At August 30, 2014, 245,92527, 2016, 241,753 shares of common stock were reserved for future issuance under the Executive Plan.

Stock Performance Graph

The graph below presents changes in the value of AutoZone’s stock as compared to Standard & Poor’s 500 Composite Index (“S&P 500”) and to Standard & Poor’s Retail Index (“S&P Retail Index”) for the five-year period beginning August 29, 200927, 2011 and ending August 30, 2014.27, 2016.

Item 6. Selected Financial Data

(3)(4)

Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters.

(4)(5)

After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by average invested capital (which includes a factor to capitalize operating leases). See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(5)(6)

Adjusted debt to EBITDAR is defined as the sum of total debt, capital lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense. See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(6)(7)

Cash flow before share repurchases and changes in debt is defined as the change in cash and cash equivalents less the change in debt plus treasury stock purchases. See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

We are the nation’s leading retailer, and a leading distributor, of automotive replacement parts and accessories in the United States. We began operations in 1979 and at August 30, 2014,27, 2016, operated 4,9845,297 AutoZone stores in the United States, including Puerto Rico; 402483 stores in Mexico; and fiveeight stores in Brazil.Brazil; and 26 IMC branches. Each of our storesAutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. At August 30, 2014,27, 2016, in 3,8454,390 of our domestic AutoZone stores, we also havehad a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in selectAutoZone stores in Mexico and Brazil. IMC branches carry an extensive line of original equipment quality import replacement parts. We also sell the ALLDATA brand automotive diagnostic and repair software through www.alldata.com.www.alldata.com and www.alldatadiy.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and accessories, performance and performancereplacement parts through www.autoanything.com, and our commercial customers can make purchases through www.autozonepro.com.www.autozonepro.com and www.imcparts.net. We do not derive revenue from automotive repair or installation services.

Executive Summary

We achieved strong performance in fiscal 2014,2016, delivering record net income of $1.070$1.241 billion, a 5.2%7.0% increase over the prior year, and sales growth of $327.8$448.3 million, a 3.6%4.4% increase over the prior year. We completed the year with growth in all areas of our business. We are pleased with the results ofBoth our retail businesssales and the increase in our commercial business, wheresales grew this past year, as we continue to build our internal sales force and refine our parts assortment. Over the past several years,

Our business is impacted by various factors have occurred within the economy that affectsaffect both our consumer and our industry, including continued highbut not limited to fuel costs, unemployment rates and other challenging economic conditions. Although new vehicle sales have increased over previous years, we believe our consumers’ cash flows continue to be challenged due to these factors. Given the nature of these macroeconomic factors, we cannot predict whether or for how long thesecertain trends will continue, nor can we predict to what degree these trends will impact us in the future. We continue to believe we are well positioned to help our customers save money and meet their needs in a challenging macro environment.

AnotherOne macroeconomic factor affecting our customers and our industry isduring fiscal 2016 was gas prices. During fiscal 2014,2016, the average price per gallon of unleaded gasoline in the United States was $3.48$2.14 per gallon, compared to $3.65$2.69 per gallon during fiscal 2013.2015. We believe reduced gas prices gave our customers additional disposable income. With approximately 11 billion gallons of unleaded gas consumption each month across the U.S., each $1 decrease at the pump contributes approximately $11 billion of additional spending capacity to consumers each month. We continue to believe gas prices have an impact on our customers’ abilities to maintain their vehicles, allowing us to communicate through our marketing messages the steps needed to improve their gas mileage. Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods.

During fiscal 2014,2016, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 84% of total sales, with failure related categories continuing to be our strongest performers. Welargest set of categories. While we have not experienced any fundamental shifts in our category sales mix as compared to previous years.years, in our domestic stores we did experience a slight increase in mix of sales of the failure and discretionary categories as compared to last year. We believe the improvement in these sales categories was driven by

differences in regional weather patterns, improved merchandise assortments due to the products we have added over the last year and lower gas prices. Our sales mix can be impacted by severe or unusual weather over a short term period. Over the long term, we believe the impact of the weather on our sales mix is not significant.

Our primary response to fluctuations in the demand for the products we sell is to adjust our advertising message, store staffing and product quantities and assortment. Specifically, during fiscal 2013 and fiscal 2014,In recent years, we haveinitiated a variety of strategic tests focused on increasing inventory availability in our domestic stores. As part of those tests, we closely studied our hub distribution model, and store inventory levels and assortment. As a result, we are performing certainproduct assortment, which led to strategic tests including addingon increased frequency of delivery to our domestic stores and significantly expanding parts assortment in select domestic stores we call mega hubs. During fiscal 2015, we concluded our tests on these specific new concepts and continued to roll out these strategic initiatives in fiscal 2016. During fiscal 2016, we continued the implementation of more frequent deliveries from our distribution centers to additional inventory intodomestic stores and the execution of our mega hub stores, increasing product availability,strategy. We expect to continue this effort in fiscal 2017 and delivering to stores more frequently.beyond.

The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road.

Miles Driven

We believe that as the number of miles driven increases, consumers’ vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items. While over the long-term we have seen a close correlation between our net sales and the number of miles driven, we have also seen certain time frames of minimal correlation in sales performance and miles driven. During the periods of minimal correlation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including the number of seven year old or older vehicles on the road. Since the beginning of the fiscal year and through June 20142016 (latest publicly available information), miles driven increased slightly compared to the same period last year.

Seven Year Old or Older Vehicles

Between 2008 and 2012, new vehicle sales were significantly lower than historical levels, which we believe contributed to an increasing number of seven year old or older vehicles on the road. We estimate vehicles are driven an average of approximately 12,500 miles each year. In seven years, the average miles driven equates to approximately 87,500 miles. Our experience is that at this point in a vehicle’s life, most vehicles are not covered by warranties and increased maintenance is needed to keep the vehicle operating. According to the latest data provided by the Auto Care Association, as of January 1, 2014,2016, the average age of vehicles on the road is 11.411.6 years as compared to 11.311.5 years as of January 1, 2013.2015. Although the average age of vehicles continues to increase, it is increasing at a decelerated rate primarily driven by the improvement in new car sales in recent years. However, in the near term, we expect the aging vehicle population to continue to increase as consumers keep their cars longer in an effort to save money during this uncertain economy. As the number of seven year old or older vehicles on the road increases, we expect an increase in demand for the products we sell.

Results of Operations

Fiscal 20142016 Compared with Fiscal 20132015

For the fiscal year ended August 30, 2014,27, 2016, we reported net sales of $9.475$10.636 billion compared with $9.148$10.187 billion for the year ended August 31, 2013,29, 2015, a 3.6%4.4% increase from fiscal 2013.2015. This growth was driven primarily by domestic same store sales increase of 2.8%2.4% and net sales of $165.9$177.0 million comprised of sales from new stores anddomestic AutoZone stores. Domestic commercial sales for fiscal 2016 increased $129.8 million, or 7.1%, over domestic commercial programs. Excluding the 53^rd week last year, sales increased 5.6%.for fiscal 2015.

At August 30, 2014,27, 2016, we operated 4,9845,297 domestic AutoZone stores, 402483 stores in Mexico, and fiveeight stores in Brazil and 26 IMC branches compared with 4,8365,141 domestic AutoZone stores, 362441 stores in Mexico, and threeseven stores in Brazil and 20 IMC branches at August 31, 2013.29, 2015. We reported a total auto parts (domestic, Mexico, Brazil and Brazil)IMC) sales increase of 3.1%4.4% for fiscal 2014. Excluding the 53^rd week last year, total auto parts sales increased 5.1%.2016.

Gross profit for fiscal 20142016 was $4.935$5.609 billion, or 52.1%52.7% of net sales, compared with $4.741$5.327 billion, or 51.8%52.3% of net sales for fiscal 2013.2015. The improvement in gross margin was attributable to lower acquisition costs, and lower shrink expense, partially offset by higher supply chain costs associated with current year inventory initiatives (17(–18 basis points).

Operating, selling, general and administrative expenses for fiscal 20142016 increased to $3.105$3.548 billion, or 32.8%33.4% of net sales, from $2.968$3.374 billion, or 32.4%33.1% of net sales for fiscal 2013.2015. The increase in operating expenses, as a percentage of sales, was primarily due to higher store payroll (11 basis points) and planned information system investments (10 basis points).payroll.

Interest expense, net for fiscal 20142016 was $167.5$147.7 million compared with $185.4$150.4 million during fiscal 2013.2015. This decrease was primarily due to a decline in borrowing rates, partially offset by higher borrowing levels over the comparable year period. Average borrowings for fiscal 20142016 were $4.274$4.860 billion, compared with $3.927$4.520 billion for fiscal 20132015 and weighted average borrowing rates were 3.6%2.7% for fiscal 2014,2016, compared to 4.5%3.0% for fiscal 2013.2015.

Our effective income tax rate was 35.7%35.1% of pre-tax income for fiscal 20142016 compared to 36.0%35.6% for fiscal 2013.2015. The decrease in the effective income tax rate was driven by a discrete tax item during fiscal 2016.

Net income for fiscal 20142016 increased by 5.2%7.0% to $1.070$1.241 billion, and diluted earnings per share increased 13.6%13.0% to $31.57$40.70 from $27.79$36.03 in fiscal 2013.2015. The impact of the fiscal 20142016 stock repurchases on diluted earnings per share in fiscal 20142016 was an increase of approximately $1.04.$1.17.

Fiscal 20132015 Compared with Fiscal 20122014

For the fiscal year ended August 31, 2013,29, 2015, we reported net sales of $9.148$10.187 billion compared with $8.604$9.475 billion for the year ended August 25, 2012,30, 2014, a 6.3%7.5% increase from fiscal 2012.2014. This growth was driven primarily by domestic same store sales increase of 3.8%, net sales of $185.1 million from new domestic AutoZone stores and the inclusion of $222.3IMC sales. Domestic commercial sales for fiscal 2015 increased $208.4 million, the 53^rd weekor 12.9%, over domestic commercial sales of $177.7 million, and sales from AutoAnything for a portion of the fiscal year.2014.

At August 31, 2013,29, 2015, we operated 4,8365,141 domestic AutoZone stores, 362441 stores in Mexico, seven stores in Brazil and 20 IMC branches compared with 4,984 domestic AutoZone stores, 402 stores in Mexico and threefive stores in Brazil, compared with 4,685 domestic stores, 321 stores in Mexico and none in Brazil at August 25, 2012.30, 2014. We reported a total auto parts (domestic, Mexico, Brazil and Brazil operations)IMC) sales increase of 5.2%7.6% for fiscal 2013.2015.

Gross profit for fiscal 20132015 was $4.741$5.327 billion, or 51.8%52.3% of net sales, compared with $4.432$4.935 billion, or 51.5%52.1% of net sales for fiscal 2012.2014. The improvement in gross margin was primarily driven by lower product acquisition costs,attributable to higher merchandise margins, partially offset by the inclusionimpact of AutoAnything (28the IMC acquisition finalized during September 2014 (–25 basis points) and higher supply chain costs associated with current year inventory initiatives (–13 basis points).

Operating, selling, general and administrative expenses for fiscal 20132015 increased to $2.968$3.374 billion, or 32.4%33.1% of net sales, from $2.803$3.105 billion, or 32.6%32.8% of net sales for fiscal 2012. Operating2014. The increase in operating expenses, as a percentage of sales, improvedwas primarily due to lower incentive compensation (19higher legal costs (–14 basis points), partially offset by lower sales growth rates. and the impact of IMC (–13 basis points).

Interest expense, net for fiscal 20132015 was $185.4$150.4 million compared with $175.9$167.5 million during fiscal 2012.2014. This increasedecrease was primarily due to a decline in borrowing rates, partially offset by higher average borrowing levels over the comparable prior year period; partially offset by a decline in borrowing rates.period. Average borrowings for fiscal 20132015 were $3.927$4.520 billion, compared with $3.507$4.252 billion for fiscal 20122014 and weighted average borrowing rates were 4.5%3.0% for fiscal 2013,2015, compared to 4.7%3.6% for fiscal 2012.2014.

Our effective income tax rate was 36.0%35.6% of pre-tax income for fiscal 20132015 compared to 36.0%35.7% for fiscal 2012.2014.

Net income for fiscal 20132015 increased by 9.3%8.5% to $1.016$1.160 billion, and diluted earnings per share increased 18.3%14.1% to $27.79$36.03 from $23.48$31.57 in fiscal 2012.2014. The impact of the fiscal 20132015 stock repurchases on diluted earnings per share in fiscal 20132015 was an increase of approximately $1.09.

In December 2012, we acquired certain assets and liabilities of AutoAnything, an online retailer of specialized automotive products for $116 million. With the acquisition, we expect to bolster our online presence in the automotive accessory and performance markets. The results of operations from AutoAnything have been included in our Other business activities since the date of acquisition.

We performed our annual impairment testing in the fourth quarter of fiscal 2013 for the goodwill and indefinite-lived intangible asset related to the acquisition of AutoAnything. Based on an analysis of AutoAnything’s revised planned financial results compared to the initial projections, we determined it was more likely than not the goodwill attributed to AutoAnything was impaired. Accordingly, we performed a goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, including goodwill. Because the fair value of the reporting unit was lower than its carrying value, we recorded a goodwill impairment charge of $18.3 million during the fourth quarter of fiscal 2013. Based on our evaluation of the future discounted cash flows of AutoAnything’s trade name as compared to its carrying value, it was determined that AutoAnything’s trade name was also impaired. We recorded an impairment charge of $4.1 million during the fourth quarter of fiscal 2013 related to the trade name.$1.01.

Based on the revised plan financial results, we also determined AutoAnything is not likely to achieve the operating income targets necessary to earn the contingent consideration. Therefore, we adjusted the fair value of the contingent consideration at August 31, 2013 to $0.2 million, resulting in a decrease to the contingent consideration liability of $23.3 million during the fourth quarter of fiscal 2013. The net impact of the impairment charges and the contingent consideration adjustment is a gain of $0.9 million for fiscal 2013. The net impact is included in Operating, selling, general and administrative expenses in our Other business activities.

Seasonality and Quarterly Periods

Our business is somewhat seasonal in nature, with the highest sales typically occurring in the spring and summer months of February through September, in which average weekly per-store sales historically have been about 15% to 25%20% higher than in the slower months of December and January. During short periods of time, a store’s sales can be affected by weather conditions. Extremely hot or extremely cold weather may enhance sales by causing parts to fail; thereby increasing sales of seasonal products. Mild or rainy weather tends to soften sales, as parts failure rates are lower in mild weather, with elective maintenance deferred during periods of rainy weather. Over the longer term, the effects of weather balance out, as we have storeslocations throughout the United States, Puerto Rico, Mexico and Brazil.

Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2014, 17 weeks in 2013,2016, 2015 and 16 weeks in 2012.2014. Because the fourth quarter contains seasonally high sales volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of the annual net sales and net income. The fourth quarter of fiscal year 20142016 represented 32.2%32.0% of annual sales and 34.9%34.4% of net income; the fourth quarter of fiscal 2013year 2015 represented 33.8%32.3% of annual sales and 36.5%34.6% of net income; and the fourth quarter of fiscal 20122014 represented 32.1%32.2% of annual sales and 34.8%34.9% of net income.

Liquidity and Capital Resources

The primary source of our liquidity is our cash flows realized through the sale of automotive parts, products and products.accessories. Net cash provided by operating activities was $1.577 billion in 2016, $1.525 billion in 2015 and $1.341 billion in fiscal 2014, $1.415 billion in fiscal 2013, and $1.224 billion in fiscal 2012.2014. Cash flows from operations are unfavorablefavorable to last year primarily due to the change in inventories net of payables, partially offset by the growth in net income. We hadincome partially offset by an accounts payable to inventory ratio of 114.9% at August 30, 2014, 115.6% at August 31, 2013, and 111.4% at August 25, 2012. Our inventory increases are primarily attributable to our efforts to update product assortmentsincrease in all of our stores and an increased number of stores. During fiscal 2013 and 2014, we initiated a variety of strategic tests focused on increasing inventory availability, which increased our inventory per store. Many of our vendors have supported our initiative to update our product assortments by providing extended payment terms. These extended payment terms have allowed us to continue our high accounts payable to inventory ratio.pension contributions.

Our primary capital requirement has been the funding of our continued new-storenew-location development program. From the beginning of fiscal 20122014 to August 30, 2014,27, 2016, we have opened 580597 new stores.locations. Net cash flows used in investing activities were $505.8 million, compared to $567.9 million in fiscal 2015 and $448.0 million in fiscal 2014, compared to $527.3 million in fiscal 2013, and $374.8 million in fiscal 2012.2014. We invested $438.1$488.8 million in capital assets in fiscal 2014,2016, compared to $414.5$480.6 million in fiscal 2013,2015 and $378.1$438.1 million in fiscal 2012.2014. The increase in capital expenditures during this time was primarily attributable to the number and types of storeslocations opened and increased investment in our existing stores. New storelocations. We had new location openings were 190of 205 for fiscal 2014, 1972016, 202 for fiscal 2013,2015 and 193 for fiscal 2012. Cash flows used for purchasing intangibles were $11.1 million190 for fiscal 2014. Cash flows used in the acquisition of AutoAnythingIMC were $116.1$75.7 million during fiscal 2013. There were no purchases of intangibles or acquisitions in fiscal 2012.2015. Cash flows were also used in the purchase of other intangibles for $10 million in each of fiscal 2016 and fiscal 2015. In fiscal 2014 cash flows were used to purchase intangibles for $11.1 million. We invest a portion of our assets held by our wholly owned insurance captive in marketable securities. We purchased $49.7$130.2 million ofin marketable securities in fiscal 2014, $44.52016 and $49.7 million in each of fiscal 2013,2015 and $45.7 million in fiscal 2012.2014. We had proceeds from the sale of marketable securities of $120.5 million in fiscal 2016, $46.4 million in fiscal 2015 and $46.8 million in fiscal 2014, $37.9 million in fiscal 2013, and $42.4 million in fiscal 2012. Capital asset disposals provided proceeds of $4.2 million in fiscal 2014, $9.8 million in fiscal 2013, and $6.6 million in fiscal 2012.2014.

Net cash used in financing activities was $1.053 billion in 2016, $896.7 million in 2015 and $911.6 million in fiscal 2014, $847.0 million in fiscal 2013, and $843.4 million in fiscal 2012.2014. The net cash used in financing activities reflected purchases of treasury stock which totaled $1.452 billion for fiscal 2016, $1.271 billion for fiscal 2015 and $1.099 billion for fiscal 2014, $1.387 billion for fiscal 2013, and $1.363 billion for fiscal 2012.2014. The treasury stock purchases in fiscal 2014, 20132016, 2015 and 20122014 were primarily funded by cash flows from operations and by increases in debt levels. Proceeds from issuance of debt were $650 million for each of fiscal 2016 and 2015 and $400 million for fiscal 2014, $800 million2014. In fiscal 2016, the proceeds from the issuance of debt were used for general corporate purposes, including for working capital requirements, capital expenditures, store openings and stock repurchases. In fiscal 2013, and2015, the proceeds from the issuance of debt were used for the repayment of a portion of our outstanding commercial borrowings, which were used to repay the $500 million 5.750% Senior Notes due January 2015 and for fiscal 2012.the acquisition of IMC. In fiscal 2014, the proceeds from the issuance of debt were used for the repayment of a portion of the $500 million Senior Notes due in January 2014. We used commercial paper borrowings to repay the $300 million Senior Notes due in November 2015, the $200 million Senior Notes due in June 2016 and the remainder of the $500 million Senior Notes due in January 2014. In fiscal 2013 and fiscal 2012, the proceeds from the issuance of debt were used for the repayment of a portion of commercial paper borrowings and general corporate purposes, including for working capital requirements, capital expenditures, store openings and stock repurchases. Proceeds from the issuance of debt in fiscal 2013 were also used for the acquisition of AutoAnything. In fiscal 2013,2016 we repaid our $200 million Senior Notes due in June 2013 and our $300 million Senior Notes due in October 2012 using commercial paper borrowings. There were no repayments of debt in fiscal 2012. In 2014, we received net proceeds from the issuance of commercial paper and short-term borrowings in the amount of $256.8$149.9 million. In 2013, netNet proceeds from the issuance of commercial paper and short-term borrowings for fiscal 2015 and 2014 were $118.7 million. In 2012, net payments of commercial paper$153.8 million and short-term borrowings were $81.3 million.$256.8 million, respectively.

Subsequent to August 30, 2014, we purchased Interamerican Motor Corporation (“IMC”), the second largest distributor of OE quality import replacement parts in the United States, for approximately $80 million. IMC specializes in parts coverage for European and Asian cars, and it currently operates 17 branches. The transaction closed on September 27, 2014, and was financed with commercial paper borrowings.

During fiscal 2015,2017, we expect to invest in our business at an increased rate as compared to fiscal 2014.2016. Our investments are expected to be directed primarily to our new-store development program,new locations, supply chain infrastructure, enhancements to existing storeslocations and supply chain infrastructure, and the acquisition of IMC.investments in technology. The amount of our investments in our new-store programnew locations is impacted by different factors, including such factors as whether the building and land are purchased (requiring higher investment) or leased (generally lower investment), located in the United States, Mexico or Brazil, or located in urban or rural areas. During fiscal 2014, fiscal 2013,2016, 2015 and fiscal 2012,2014, our capital expenditures have increased by approximately 6%2%, 10% and 18%6%, respectively, as compared to the prior year. Our mix of store openings has moved away from build-to-suit leases (lower initial capital investment) to ground leases and land purchases (higher initial capital investment), resulting in increased capital expenditures per store over the previous three years, and we expect this trend to continue during the fiscal year ending August 29, 2015.

In addition to the building and land costs, our new-store development program requiresnew locations require working capital, predominantly for inventories. Historically, we have negotiated extended payment terms from suppliers, reducing the working capital required and resulting in a high accounts payable to inventory ratio. We plan to continue leveraging our inventory purchases; however, our ability to do so may be limited by our vendors’ capacity to factor their receivables from us. Certain vendors participate in financing arrangements with financial institutions whereby they factor their receivables from us, allowing them to receive payment on our invoices at a discounted rate. In recent years, we initiated a variety of strategic tests focused on increasing inventory availability, which increased our inventory per location. Many of our vendors have supported our initiative to update our product assortments by providing extended payment terms. These extended payment terms have allowed us to continue our high accounts payable to inventory ratio. We had an accounts payable to inventory ratio of 112.8% at August 27, 2016, 112.9% at August 29, 2015, and 114.9% at August 30, 2014. The decrease from fiscal 2014 to fiscal 2015 was driven by the inclusion of IMC in fiscal 2015.

Depending on the timing and magnitude of our future investments (either in the form of leased or purchased properties or acquisitions), we anticipate that we will rely primarily on internally generated funds and available borrowing capacity to support a majority of our capital expenditures, working capital requirements and stock repurchases. The balance may be funded through new borrowings. We anticipate that we will be able to obtain such financing in view of our credit ratings and favorable experiences in the debt markets in the past.

Our cash balances are held in various locations around the world. As of August 30, 2014,27, 2016 and August 31, 2013,29, 2015, cash and cash equivalents of $19.3$78.1 million and $38.2$64.9 million, respectively, were held outside of the U.S. and were generally utilized to support liquidity needs in our foreign operations. We intend to continue to permanently reinvest the cash held outside of the U.S. in our foreign operations.

For the fiscal year ended August 30, 2014,27, 2016, our after-tax return on invested capital (“ROIC”) was 31.9%31.3% as compared to 32.7%31.2% for the comparable prior year period. ROIC is calculated as after-tax operating profit

(excluding (excluding rent charges) divided by average invested capital (which includes a factor to capitalize operating leases). The decrease in ROIC is primarily due to the increase in average debt. We use ROIC to evaluate whether we are effectively using our capital resources and believe it is an important indicator of our overall operating performance. Refer to the “Reconciliation of Non-GAAP Financial Measures” section for further details of our calculation.

Debt Facilities

InOn December 2013,19, 2014, we amended and restated our existing revolving credit facility (the “Multi-Year Credit Agreement”) by increasing the capacity underamount of capital leases allowable to $225 million, extending the revolving credit facility to $1.25 billion.expiration date by two years and renegotiating other terms and conditions. This credit facility is available to primarily support commercial paper borrowings, letters of credit and other short-term unsecured bank loans. The capacity of the credit facility is $1.25 billion and may be increased to $1.5 billion prior to the maturity date at our election and subject to bank credit capacity and approval, may include up to $200 million in letters of credit and may include up to $175$225 million in capital leases each fiscal year. Under the revolving credit facility, we may borrow funds consisting of Eurodollar loans or base rate loans. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as the London InterBank Offered Rate (“LIBOR”)LIBOR plus the applicable percentage, as defined in the revolving credit facility, depending upon our senior, unsecured, (non-credit enhanced) long-term debt rating. Interest accrues on base rate loans as defined in the revolving credit facility. We also have the option to borrow funds under the terms of a swingline loan subfacility. The revolving credit facility expires in September 2017.December 2019.

On December 19, 2014, we entered into a new revolving credit facility (the “364-Day Credit Agreement”). The credit facility is available to primarily support commercial paper borrowings and other short-term unsecured bank loans. The 364-Day Credit Agreement provides for loans in the principal amount of up to $500 million. Under the credit facility, we may borrow funds consisting of Eurodollar loans, base rate loans or a combination of both.

Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as LIBOR plus the applicable margin, as defined in the revolving credit facility, depending upon our senior, unsecured, (non-credit enhanced) long-term debt rating. Interest accrues on base rate loans as defined in the credit facility. The original expiration date of the credit facility was December 19, 2015, but in accordance with the credit agreement, in November 2015, we requested, and the banks approved, the extension of the termination date to December 16, 2016. In addition, at least 15 days prior to December 16, 2016, we have the right to convert the credit facility to a term loan, for up to one year from the termination date, subject to a 1% penalty.

As of August 27, 2016, we had no outstanding borrowings under either of the revolving credit facilities and $3.3 million of outstanding letters of credit under the Multi-Year Credit Agreement.

The revolving credit facility agreement requiresagreements require that our consolidated interest coverage ratio as of the last day of each quarter shall be no less than 2.50:2.5:1. This ratio is defined as the ratio of (i) consolidated earnings before interest, taxes and rents to (ii) consolidated interest expense plus consolidated rents. Our consolidated interest coverage ratio as of August 30, 201427, 2016 was 4.95:5.5:1.

As of August 30, 2014, $893.8 million27, 2016, $1.198 billion of commercial paper borrowings and $319.1the $400 million of the 5.750% Senior1.300% Notes due January 20152017 are classified as long-term in the Consolidated Balance Sheets as we have the ability and intent to refinance on a long-term basis through available capacity in our revolving credit facility.facilities. As of August 30, 2014,27, 2016, we had $1.213$1.708 billion of availability under our $1.25$1.75 billion revolving credit facility, expiring in September 2017 thatfacilities, which would allow us to replace these short-term obligations with long-term financing.financing facilities.

In addition to the revolving credit facility, weWe also maintain a letter of credit facility that allows us to request the participating bank to issue letters of credit on our behalf up to an aggregate amount of $100 million. The letter of credit facility is in addition to the letters of credit that may be issued under the Multi-Year Credit Agreement. In fiscal 2016, we amended our existing letter of credit facility to decrease the amount that can be requested in letters of credit from $100 million to $75 million effective June 2016. This amendment also extended the maturity date from June 2016 to June 2019. As of August 30, 2014,27, 2016 we have $100.0had $74.9 million in letters of credit outstanding under the letter of credit facility, which expires in June 2016.facility.

In addition to the outstanding letters of credit issued under the committed facilities discussed above, we had $31.4$27.9 million in letters of credit outstanding as of August 30, 2014.27, 2016. These letters of credit have various maturity dates and were issued on an uncommitted basis.

On January 14, 2014,April 21, 2016, we issued $400 million in 1.300%3.125% Senior Notes due January 2017April 2026 and $250 million in 1.625% Senior Notes due April 2019 under our shelf registration statement filed with the SEC on April 17, 201215, 2015 (the “Shelf“2015 Shelf Registration”). The 2015 Shelf Registration allows us to sell an indeterminate amount in debt securities to fund general corporate purposes, including repaying, redeeming or repurchasing outstanding debt and for working capital, capital expenditures, new storelocation openings, stock repurchases and acquisitions. Proceeds from the debt issuances were used for general corporate purposes.

On April 29, 2015, we issued $400 million in 3.250% Senior Notes due April 2025 and $250 million in 2.500% Senior Notes due April 2021 under the 2015 Shelf Registration. Proceeds from the debt issuances were used to repay a portion of the outstanding commercial paper borrowings, which were used to repay the $500 million in 5.750% Senior Notes due in January 2015, and for general corporate purposes.

On January 14, 2014, we issued $400 million in 1.300% Senior Notes due January 2017 under our shelf registration statement filed with the SEC on April 17, 2012. Proceeds from the debt issuance on January 14, 2014, were used to repay a portion of the $500 million in 6.500% Senior Notes due January 2014. We used commercial paper borrowings to repay the remainder of the 6.500% Senior Notes.

On April 29, 2013, the Company issued $500 million in 3.125% Senior Notes due July 2023 under its Shelf Registration. Proceeds from the debt issuance on April 29, 2013, were used to repay a portion of the outstanding commercial paper borrowings, which were used to repay the $200 million in 4.375% Senior Notes due June 2013, and for general corporate purposes.

On November 13, 2012, we issued $300 million in 2.875% Senior Notes due January 2023 under the Shelf Registration. Proceeds from the debt issuance on November 13, 2012, were used to repay a portion of the outstanding commercial paper borrowings, which were used to repay the $300 million in 5.875% Senior Notes due in October 2012, and for general corporate purposes.

The 5.750% Senior Notes issued in July 2009 and the 7.125% Senior Notes issued during August 2008 (collectively, the “Notes”), are subject to an interest rate adjustment if the debt ratings assigned to the Notes are downgraded. Further, all Senior Notes issued since August 2008senior notes contain a provision that repayment of the notes may be accelerated if we experience 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 revolving credit facility,facilities, covenants include limitations on total indebtedness, restrictions on liens, a maximum debt to earnings ratio and a change of control provision that may require acceleration of the repayment obligations under certain circumstances. These covenants are in addition to the consolidated interest coverage ratio discussed above. 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.

As of August 30, 2014,27, 2016, we were in compliance with all covenants related to our borrowing arrangements and expect to remain in compliance with those covenants in the future.

For the fiscal year ended August 30, 2014,27, 2016, our adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and share-based compensation expense (“EBITDAR”) ratio was 2.5:1 as compared to 2.5:1 as of the comparable prior year end. We calculate adjusted debt as the sum of total debt, capital lease obligations and rent times six; and we calculate EBITDAR by adding interest, taxes, depreciation, amortization, rent and share-based compensation expense to net income. We target our debt levels to a ratio of adjusted debt to EBITDAR in order to maintain our investment grade credit ratings. We believe this is important information for the management of our debt levels. Refer to the “Reconciliation of Non-GAAP Financial Measures” section for further details of our calculation.

Stock Repurchases

During 1998, we announced a program permitting us to repurchase a portion of our outstanding shares not to exceed a dollar maximum established by our Board of Directors (the “Board”). On June 17, 2014,March 22, 2016, the Board voted to increase the authorization by $750 million to raise the cumulative share repurchase authorization from $14.15$16.4 billion to $14.9$17.15 billion. From January 1998 to August 30, 2014,27, 2016, we have repurchased a total of 136.9140.8 million shares at an aggregate cost of $14.031$16.755 billion. We repurchased 1.9 million shares of common stock at an aggregate cost of $1.452 billion during fiscal 2016, 2.0 million shares of common stock at an aggregate cost of $1.271 billion during fiscal 2015 and 2.2 million shares of common stock at an aggregate cost of $1.099 billion during fiscal 2014, 3.52014. Considering cumulative repurchases as of August 27, 2016, we had $395.4 million remaining under the Board’s authorization to repurchase our common stock.

On September 22, 2016, the Board voted to increase the authorization by $750 million. This brings the total value of shares authorized to $17.9 billion. Subsequent to August 27, 2016, we have repurchased 390,473 shares of common stock at an aggregate cost of $1.387 billion during fiscal 2013, and 3.8 million shares of common stock at an aggregate cost of $1.363 billion during fiscal 2012.$297.6 million. Considering the cumulative repurchases as ofand the increase in authorization subsequent to August 30, 2014,27, 2016, we have $869.2$847.7 million remaining under the Board of Director’sBoard’s authorization to repurchase our common stock.

Subsequent to August 30, 2014, we have repurchased 374,601 shares of common stock at an aggregate cost of $190.9 million.

Financial Commitments

The following table shows our significant contractual obligations as of August 30, 2014:27, 2016:

We have pension obligations reflected in our consolidated balance sheets that are not reflected in the table above due to the absence of scheduled maturities and the nature of the account. During fiscal 2014,2016, we made contributions of $16.9$52.7 million to the pension plan. We expect to make contributions of approximately $2.6$17.8 million during fiscal 2015;2017; however a change to the expected cash funding may be impacted by a change in interest rates or a change in the actual or expected return on plan assets.

As of August 30, 2014,27, 2016, our defined benefit obligation associated with our pension plans is $301.0$328.5 million and our pension assets are valued at $243.4$289.4 million, resulting in a net pension obligation of $57.6$39.1 million. Amounts recorded in Accumulated other comprehensive loss are $104.8$145.9 million at August 30, 2014.27, 2016. The balance in Accumulated other comprehensive loss will be amortized into pension expense in the future, unless the losses are recovered in future periods through actuarial gains.

Additionally, our tax liability for uncertain tax positions, including interest and penalties, was $33.5$25.8 million at August 30, 2014.27, 2016. Approximately $514 thousand$4.9 million is classified as current liabilities and $33.0$20.9 million is classified as long-term liabilities. We did not reflect these obligations in the table above as we are unable to make an estimate of the timing of payments of the long-term liabilities due to uncertainties in the timing and amounts of the settlement of these tax positions.

Off-Balance Sheet Arrangements

The following table reflects outstanding letters of credit and surety bonds as of August 30, 2014:27, 2016:

A substantial portion of the outstanding standby letters of credit (which are primarily renewed on an annual basis) and surety bonds are used to cover reimbursement obligations to our workers’ compensation carriers. There are no additional contingent liabilities associated with these instruments as the underlying liabilities are already reflected in our consolidated balance sheets. The standby letters of credit and surety bond arrangements expire within one year, but have automatic renewal clauses.

Reconciliation of Non-GAAP Financial Measures

“Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” include certain financial measures not derived in accordance with generally accepted accounting principles (“GAAP”). These non-GAAP financial measures provide additional information for determining our optimum capital structure and are used to assist management in evaluating performance and in making appropriate business decisions to maximize stockholders’ value.

Non-GAAP financial measures should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing our operating performance, financial position or cash flows. However, we have presented the non-GAAP financial measures, as we believe they provide additional information that is useful to investors as it indicates more clearly our comparative year-to-year operating results. Furthermore, our management and Compensation Committee of the Board use the above-mentioned non-GAAP financial measures to analyze and compare our underlying operating results and use select measurements to determine payments of performance-based compensation. We have included a reconciliation of this information to the most comparable GAAP measures in the following reconciliation tables.

Reconciliation of Non-GAAP Financial Measure: Cash Flow Before Share Repurchases and Changes in Debt

The following table reconciles net increase (decrease) in cash and cash equivalents to cash flow before share repurchases and changes in debt, which is presented in “Selected Financial Data”:

Reconciliation of Non-GAAP Financial Measure: After-tax Return on Invested Capital (“ROIC”)

The following table calculates the percentage of ROIC. ROIC 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 “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”: