Certain statements contained in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy”“strategy,” and similar expressions. These statements 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,limitation: credit market conditions; the impact of recessionary conditions; competition; product demand; the economy; credit markets; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; energy prices; war and the prospect of war, including terrorist activity; availability of consumer transportation; construction delays; access to available and feasible financing; and changes in laws or regulations. Certain of these risks are discussed in more detail in the “Risk Factors” section contained in Item IA under Part I of this Annual Report on Form 10-K for the year ended August 28, 2010, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results,results; developments and business decisions may differ from those contemplated by such forward-looking statements, and such 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. Please refer to the Risk Factors section contained in Item 1 under Part I of this Form 10-K for more details.

We areAutoZone, Inc. (“AutoZone”, the “Company” or “we”) is the nation’s leading specialty retailer and a leading distributor of automotive replacement parts and accessories. We began operations in 1979 and at August 30, 200828, 2010 operated 4,0924,389 stores in the United States and Puerto Rico, and 148238 in Mexico. Each of our stores carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. In manyAt August 28, 2010, in 2,424 of our domestic stores and 173 of our Mexico stores, we also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and government agencies.public sector accounts. We also sell the ALLDATA brand automotive diagnostic and repair software. On the web,software through www.alldata.com. Additionally, we sell diagnostic and repair information and automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com.www.autozone.com, and as part of our commercial sales program, through www.autozonepro.com. We do not derive revenue from automotive repair or installation services.

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

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;parts, and warranties that are offered by us or our vendors on many of the parts that we sell. OurThe wide area network in our stores helps us to expedite credit or debit card and check approval processes, to locate parts at neighboring AutoZone stores, and in some cases, to place special orders directly with our vendors.

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

We also provide specialty tools through our Loan-A-Tool^® program. Customers can borrow a specialty tool, such as a steering wheel puller, for which a DIYdo-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;readings where allowed by law, battery charging;charging, the collection of DIY used oil recycling;for recycling, and the testing of starters, alternators, batteries, sensors and actuators.

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

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

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

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 goodsatisfactory warranty and outstanding customer service. On many of our products we offer multiple value choices in a good/better/best assortment, with appropriate price and quality differences from the “good” products to the “better” and “best” products. A key differentiating component versus our competitors is our exclusive line of in-house brands:brands, which includes Valucraft, AutoZone, Duralast and Duralast Gold.Gold brands. We believe that our overall prices and value comparecompares favorably to thosethat of our competitors.

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 advertisingloyalty card programs primarily to advise customers about the overall importance of vehicle maintenance, our great value and the availability of high quality parts. Broadcasting isBroadcast and internet media are our primary marketing methodadvertising methods of driving traffic to our stores. We utilize in-store signage, creative product placement and promotions to help educate customers about products that they need.

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

Our commercial sales program operates in a highly fragmented market, and iswe are one of the leading distributors of automotive parts and other products to local, regional and national repair garages, dealers, service stations and government agenciespublic sector accounts in the United States, Puerto Rico and Mexico. As a part of the program, we offer credit and delivery to our commercial customers.customers, as well as direct commercial sales through www.autozonepro.com. The program operated out of 2,2362,424 domestic stores and 173 of our Mexico stores as of August 30, 2008.28, 2010. Through our hub stores, we offer a greater range of parts and products desired by professional technicians, andtechnicians; this additional inventory is available for our DIY customers as well. We have dedicated sales teams focused on national, regional and public sector commercial accounts.

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.

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

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

All store support functions are centralized in our store support centers located in Memphis, Tennessee, Monterrey, Mexico and Chihuahua, Mexico. We believe that this centralization enhances consistent execution of our merchandising and marketing strategies at the store level, while reducing expenses and cost of sales.

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

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

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

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

Merchandise is selected and purchased for all stores through our store support centers located in Memphis, Tennessee and Monterrey, Mexico. No oneIn fiscal 2010, no class of product accountssimilar products accounted for as much as10 percent or more of our total sales. Also, during fiscal 2010, one vendor supplied 10 percent of our total sales. In fiscal 2008,purchases; no single supplier accounted forother individual vendor provided more than 10 percent of our total purchases. We generally have few long-term contracts for the purchase of merchandise. We believe that we have good relationships with our suppliers. We also believe that alternative sources of supply exist, at similar cost, for most types of product sold. Most of our merchandise flows through our distribution centers to our stores by our fleet of tractors and trailers or by third-party trucking firms.

Our hub stores have increased our ability to distribute products on a timely basis to many of our stores.stores and to expand our product assortment. A hub store is able to provide replenishmentgenerally has a larger assortment of products sold and deliver other products maintained only in hub store inventoriesas well as regular replenishment items that can be delivered to a store in its coverage area generally within 24 hours. Additionally, hub stores can provide replenishment of products sold to stores within its network. Hub stores are generally replenished from distribution centers multiple times per week.

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

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

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

As of August 30, 2008,28, 2010, we employed approximately 57,000over 63,000 persons, approximately 5756 percent of whom were employed full-time. About 91 percent of our AutoZoners were employed in stores or in direct field supervision, approximately 65 percent in distribution centers and approximately 34 percent in store support and other functions. Included in the above numbers are approximately 2,6003,000 persons employed in our Mexico operations.

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

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

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, 4345—Chairman, President and Chief Executive Officer, Customer Satisfaction

William C. Rhodes, III, was named Chairman of AutoZone in Juneduring 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-StorePresident — Store Operations and Commercial. Prior to fiscal 2005, he had been Senior Vice President-Supply Chain and Information Technology since fiscal 2002, and prior thereto had been Senior Vice President-Supply Chain since 2001. Prior to that time,Previously, he served in various capacities within the Company, including Vice President-Stores in 2000, Senior Vice President-FinancePresident — Supply Chain and Information Technology, Senior Vice President — Supply Chain, Vice President — Stores, Senior Vice President — Finance and Vice President-Finance in 1999President — Finance and Vice President-OperationsPresident — Operations Analysis and Support from 1997 to 1999.Support. Prior to 1994, Mr. Rhodes was a manager with Ernst & Young LLP. Mr. Rhodes is currently a member of the Board of Directors for Dollar General Corporation.

William T. Giles, 4951—Chief Financial Officer and Executive Vice President, Finance, Information Technology and Store

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

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

James A. Shea was elected Executive Vice President- — Merchandising, Marketing and Supply Chain during fiscal 2007 and has served as Executive Vice President-MerchandisingPresident — Merchandising and Marketing since fiscal 2005. He was President and Co-founder of Portero during 2004. Prior to 2004, he was Chief Executive Officer of Party City from 1999 to 2003. From 1995 to 1999, he was with Lechters Housewares where he was Senior Vice President, Marketing and Merchandising before being named President in 1997. From 1990 to 1995, he was Senior Vice President of Home for Kaufmanns Department Store, a division of May Company. Mr. Shea announced his plans to retire, effective at the end of October 2010.

Jon A. Bascom,5153—Senior Vice President-ChiefPresident and Chief Information Officer, Customer Satisfaction

Jon A. Bascom was elected Senior Vice President-ChiefPresident and Chief Information Officer in December 2007.during fiscal 2008. Previously, he was Vice President-InformationPresident — Information Technology since 1996. Prior to joining AutoZone, Mr. Bascom worked for Malone & Hyde, the AutoZone predecessor company, for 9 years. Since 1989, Mr. Bascom has worked in a variety of leadership roles in applications development, infrastructure, and technology support. Prior to joining AutoZone, Mr. Bascom worked for Malone & Hyde, AutoZone’s predecessor company, for 9 years.

William W. Graves,4850—Senior Vice President-SupplyPresident — Supply Chain, Customer Satisfaction

William W. Graves was elected Senior Vice President-SupplyPresident — Supply Chain in October 2005.during fiscal 2006. Prior thereto, he was Vice President-SupplyPresident — Supply Chain since 2000. From 1992 to 2000, Mr. Graves served in various capacities with the Company.

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

Thomas B. Newbern was elected Senior Vice President- — Store Operations in Marchduring fiscal 2007. Previously, Mr. Newbern held the title Vice President — Store Operations for AutoZone since 1998. A twenty-one year25-year AutoZoner, he has held several key management positions with the Company.

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

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

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

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

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

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

Although we are one of the largest sellers of auto parts in the commercial market, to increase commercial sales we must compete against national and regional auto parts chains, independently owned parts stores, wholesalers and jobbers repair shops and auto dealers. Although we believe we compete effectively on the basis of customer service, merchandise quality, selection and availability, price, product warranty, and distribution locations, and the strength of our AutoZone brand name, trademarks and service marks, some automotive aftermarket jobbers have been in business for substantially longer periods of time than we have, have developed long-term customer relationships and have large available inventories. We can make no assurances thatIf we canare unable to profitably develop new commercial customers, or make available inventories required by commercial customers.

The following table reflects the square footage and number of leased and owned properties for our stores as of August 30, 2008:28, 2010:

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

In an order dated September 7, 2010 and issued on September 16, 2010, the court granted motions to dismiss all claims against AutoZone and its co-defendant competitors and suppliers.  Based on the record in the prior litigation, the court dismissed with prejudice all overlapping claims – that is, those covering the same time periods covered by the prior litigation and brought by the judgment plaintiffs in the prior litigation. The Company believescourt also dismissed with prejudice the plaintiffs’ attempt to revisit discovery disputes from the prior litigation.  Further, with respect to the other claims under the Act, the court found that the factual statements contained in the complaint fall short of what would be necessary to support a plausible inference of unlawful price discrimination.  Finally, the court held that the AutoZone pay-on-scan program is a difference in non-price terms that are not governed by the Act.  The court ordered the case closed, but also stated that “in an abundance of caution the Court [was] defer[ring] decision on whether to grant leave to amend to allow plaintiff an opportunity to propose curative amendments.” Without moving for leave to amend their complaint for a third time, four plaintiffs filed a Third Amended and Supplemental Complaint (the “Third Amended Complaint”) on October 18, 2010. The Third Amended Complaint repeats and expands certain allegations from previous complaints, asserting two claims under the Act, but states that all other plaintiffs have withdrawn their claims, and that,inter alia, Chief Auto Parts, Inc. has been dismissed as a defendant.  The court set no specific procedure for further response or motion by the defendants.  We anticipate that the defendants, including AutoZone, will request that the court reject the Third Amended Complaint and/or will seek to have it dismissed.

We believe this suit to be without merit and isare vigorously defending against it. Defendants have filed motionsWe are unable to dismiss all claims with prejudice on substantive and procedural grounds. Additionally, the Defendants have sought to enjoin plaintiffs from filing similar lawsuits in the future. If granted in their entirety, these dispositive motions would resolve the litigation in Defendants’ favor.estimate a loss or possible range of loss.

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

AutoZone’sOur common stock is listed on the New York Stock Exchange under the symbol “AZO.” On October 20, 2008,18, 2010, there were 3,5043,182 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings.

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

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

This graph shows, from the end of fiscal year 20032005 to the end of fiscal year 2008,2010, changes in the value of $100 invested in each of the following: AutoZone’s common stock as compared to Standard & Poor’s 500 Composite Index and a peer group consisting of other automotive aftermarket retailers.(“S&P 500”).

Gross profit for fiscal 20082010 was $3.268$3.712 billion, or 50.4% of net sales, compared with $3.416 billion, or 50.1% of net sales compared with $3.064 billion, or 49.7% of net sales, for fiscal 2007.2009. The increaseimprovement in gross profit as a percent of net salesmargin was primarily attributable to leveraging distribution costs due to the positive impact of category management efforts, partially offset by increased distribution expense relating to higher fuel costs.

Operating, selling, general and administrative expenses for fiscal 20082010 increased to $2.392 billion, or 32.5% of net sales, from $2.240 billion, or 32.9% of net sales for fiscal 2009. The reduction in operating expenses, as a percentage of sales, reflected leverage of store operating expenses due to higher sales, partially offset by higher pension expense (17 basis points) and the continued investment in the hub store initiative (16 basis points).

Operating, selling, general and administrative expenses for fiscal 2009 increased to $2.240 billion, or 32.9% of net sales, from $2.144 billion, or 32.9% of net sales from $2.009 billion, or 32.6% of net sales for fiscal 2007. The increase of operating expenses, as a percentage of2008. Leverage from increased sales was primarily duelargely offset by expenses associated with our continued enhancements to higher employee medical expenseour hub stores (17 basis points), an acceleration of our store maintenance program (9 basis points), and fuel expense fora continued expansion of our commercial fleet.sales force (7 basis points).

Interest expense, net for fiscal 20082009 was $116.7$142.3 million compared with $119.1$116.7 million during fiscal 2007.2008. This decreaseincrease was primarily due to lower short-term rates and was offset by higher average borrowing levels over the comparable prior year period and the impacta higher percentage of the additional week in the current fiscal year.fixed rate debt. Average borrowings for fiscal 20082009 were $2.024$2.460 billion, compared with $1.972$2.024 billion for fiscal 2007. Weighted2008 and weighted average borrowing rates were 5.2% at August 30, 2008,5.4% for fiscal 2009, compared to 5.7% at August 25, 2007.5.2% for fiscal 2008.

Our effective income tax rate was 36.3%36.4% of pre-tax income for fiscal 20082009 compared to 36.4%36.3% for fiscal 2007. Refer to “Note D — Income Taxes” for additional information regarding our income tax rate.2008.

Net income for fiscal 20082009 increased by 7.7%2.4% to $641.6$657.0 million, and diluted earnings per share increased 17.8%16.8% to $10.04$11.73 from $8.53$10.04 in fiscal 2007.2008. The impact of the fiscal 20082009 stock repurchases on diluted earnings per share in fiscal 20082009 was an increase of approximately $0.29.$0.78. Excluding the additional week in the prior year, net income for the year increased 5.1%5.0% over the previous year, to $625.8 million, while diluted earnings per share increased 14.9% to $9.80 per share.

The primary source of our liquidity is our cash flows realized through the sale of automotive parts and accessories. Net cash provided by operating activities was $1,196.3 million in fiscal 2010, $923.8 million in fiscal 2009, and $921.1 million in fiscal 2008, $845.2 million in fiscal 2007, and $822.7 million in fiscal 2006.2008. The increase over prior year was primarily due to higher net income of $81.3 million and improvements in accounts payable as our cash flows from operating activities continue to benefit from our inventory purchases being largely financed by our vendors. The increase in fiscal 2009 as compared to fiscal 2008 was due primarily to the growth in net income, and to a lesser extent, timing of income tax payments and deductions, and improvements in our accounts payable to inventory ratio as our vendors continue to finance a large portion of our inventory. Partially offsetting this increase waswere higher accounts receivable.receivable and the 53^rd week of income in fiscal 2008. We have maintainedhad an accounts payable to inventory ratio of 106% at August 28, 2010, 96% at August 29, 2009, and 95% at August 30, 2008, 93%2008. Our inventory increases are primarily attributable to an increased number of stores and to a lesser extent, our efforts to update product assortment in all of our stores. Many of our vendors have supported our initiative to update our product assortment by providing extended payment terms. These extended payment terms have allowed us to continue to grow accounts payable at August 25, 2007, and 92% at August 26, 2006.a faster rate than inventory.

AutoZone’sOur primary capital requirement has been the funding of itsour continued new storenew-store development program. From the beginning of fiscal 20062008 to August 30, 2008,28, 2010, we have opened 567 net578 new stores. Net cash flows used in investing activities were $307.4 million in fiscal 2010, compared to $263.7 million in fiscal 2009, and $243.2 million in fiscal 2008,2008. We invested $315.4 million in capital assets in fiscal 2010, compared to $228.7$272.2 million in fiscal 2007, and $268.3 millioncapital assets in fiscal 2006. We invested2009, and $243.6 million in capital assets in fiscal 2008, compared to $224.5 million2008. The increase in capital assetsexpenditures during this time was primarily attributable to the number and types of stores opened and increased investment in fiscal 2007, and $263.6 million in capital assets in fiscal 2006.our existing stores. New store openings were 213 for fiscal 2010, 180 for fiscal 2009, and 185 for fiscal 2008, 186 for fiscal 2007, and 204 for fiscal 2006.2008. We invest a portion of our assets held by the Company’s wholly owned insurance captive in marketable securities. We acquired $54.3$56.2 million of marketable securities in fiscal 2008, $94.62010, $48.4 million in fiscal 20072009, and $160.0$54.3 million in fiscal 2006.2008. We had proceeds from matured marketable securities of $52.6 million in fiscal 2010, $46.3 million in fiscal 2009, and $50.7 million in fiscal 2008, $86.9 million in fiscal 2007 and $145.4 million in fiscal 2006.2008. Capital asset disposals provided $11.5 million in fiscal 2010, $10.7 million in fiscal 2009, and $4.0 million in fiscal 2008, $3.5 million in fiscal 2007, and $9.8 million in fiscal 2006.2008.

Net cash used in financing activities was $883.5 million in fiscal 2010, $806.9 million in fiscal 2009, and $522.7 million in fiscal 2008, $621.4 million in fiscal 2007, and $537.7 million in fiscal 2006.2008. The net cash used in financing activities reflected purchases of treasury stock which totaled $1.1 billion for fiscal 2010, $1.3 billion for fiscal 2009, and $849.2 million for fiscal 2008, $761.9 million for fiscal 2007, and $578.1 million for fiscal 2006.2008. The treasury stock purchases in fiscal 2008, 20072010, 2009 and 20062008 were primarily funded by cash flow from operations, and at times, by increases in debt levels. Proceeds from issuance of debt reflectedwere $26.2 million for fiscal 2010, $500.0 million for fiscal 2009, and $750.0 million for fiscal 2008, none2008. There were no debt repayments for fiscal 2007 and $200.02010; debt repayments were $300.7 million for fiscal 2006. Debt repayments totaled2009, and $229.8 million for fiscal 2008, $5.8 million for2008. In fiscal 2007 and $152.7 million for fiscal 2006. As discussed in Note F, in August 2008,2009, we issued $500.0 million in 6.50% Senior Notes due 2014 and $250.0 million in 7.125% Senior Notes due 2018. A portion ofused the proceeds from the issuance of debt wasto repay outstanding commercial paper indebtedness, to prepay our $300 million term loan in August 2009 and for general corporate purposes, including for working capital requirements, capital expenditures, store openings and stock repurchases. Proceeds from the debt issuance in fiscal 2008 were used to repay outstanding commercial paper which had increased for the repayment of the $190.0 million senior notes that matured in July. We intend to use the remainder of the proceeds to redeem or repurchase existing debt, for working capital needs, for capital expenditures, for the repurchase of common stock under our stock repurchase programindebtedness and for general corporate purposes.purposes, including for working capital requirements, capital expenditures, store openings and stock repurchases. Net repayments of commercial paper were $206.7 million for fiscal 2008 and $52.0 million for fiscal 2006. For fiscal 2007, net proceeds from the issuance of commercial paper were $84.3$155.4 million for fiscal 2010 and $277.6 million for fiscal 2009. For fiscal 2008, net repayments of commercial paper were $206.7 million.

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

We maintainIn July 2009, we terminated our $1.0 billion of revolving credit facilitiesfacility, which was scheduled to expire in fiscal 2010, and replaced it with a group of banksan $800 million revolving credit facility. This credit facility is available to primarily support commercial paper borrowings, letters of credit and other short-term unsecured bank loans. The credit facilitiesfacility may be increased to $1.3$1.0 billion at AutoZone’sour election and subject to bank credit capacity and approval, may include up to $200 million in letters of credit, and may include up to $100 million in capital leases.leases each fiscal year. As the available balance is reduced by commercial paper borrowings and certain outstanding letters of credit, the Companywe had $879.7$331.1 million in available capacity under these facilitiesthis facility at August 30, 2008. The28, 2010. Under the revolving credit facility, we may borrow funds consisting of Eurodollar loans or base rate of interest payableloans. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as the London InterBank Offered Rate (“LIBOR”) plus the applicable percentage, which could range from 150 basis points to 450 basis points, depending upon our senior unsecured (non-credit enhanced) long-term debt rating. Interest accrues on base rate loans at the prime rate. We also have the option to borrow funds under the terms of a swingline loan subfacility. The revolving credit facilitiesfacility expires in July 2012.

The revolving credit facility agreement requires that our consolidated interest coverage ratio as of the last day of each quarter shall be no less than 2.50:1. This ratio is defined as the ratio of (i) consolidated earnings before interest, taxes and rents to (ii) consolidated interest expense plus consolidated rents. Our consolidated interest coverage ratio as of August 28, 2010 was 4.27:1.

In June 2010, we entered into a functionletter of Bankcredit facility that allows us to request the participating bank to issue letters of America’s base rate or a Eurodollar rate (each as definedcredit 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 revolving credit facility. As of August 28, 2010, we have $100.0 million in letters of credit outstanding under the letter of credit facility, agreements), or a combination thereof. These facilities expirewhich expires in May 2010.June 2013.

Our $300.0During August 2009, we elected to prepay, without penalty, the $300 million bank term loan entered in December 2004, was amended in April 2006 to have similar terms and conditions as the $1.0 billion credit facilities, but with a December 2009 maturity, and was further amended in August 2007 to reduce the interest rate on Eurodollar loans. That credit agreement with a group of banks providessubsequently amended. The term loan facility provided for a term loan, which consistsconsisted of, at our election, base rate loans, Eurodollar loans or a combination thereof. The interest accruesentire unpaid principal amount of the term loan would be due and payable in full on December 23, 2009, when the facility was scheduled to terminate. Interest accrued on base rate loans at a base rate per annum equal to the higher of the prime rate or the Federal Funds Rate plus 1/2 of 1%. Interest accrues on Eurodollar loans at a defined Eurodollar rate plus the applicable percentage, which can range from 30 basis points to 90 basis points, depending upon our senior unsecured (non-credit enhanced) long-term debt rating. Based on our ratings at August 30, 2008, the applicable percentage on Eurodollar loans is 35 basis points. We may select interest periods of one, two, three or six months for Eurodollar loans, subject to availability. Interest is payable at the end of the selected interest period, but no less frequently than quarterly. We entered into an interest rate swap agreement on December 29, 2004, to effectively fix, based on current debt ratings, the interest rate of the term loan at 4.4%. We haveThe outstanding liability associated with the option to extend loans into subsequent interest period(s) or convert them into loans of another interest rate type. The entire unpaid principal amountswap totaled $3.6 million, and was expensed in operating, selling, general and administrative expenses upon termination of the term loan will be due and payablehedge in full on December 23, 2009, when the facility terminates. We may prepay the term loan in whole or in part at any time without penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar borrowings.fiscal 2009.

On June 25, 2008, we entered into an agreement with ESL Investments, Inc., setting forth certain understandings and agreements (see Exhibit 10.32 for complete details) regarding the voting by ESL Investments, Inc., on behalf of itself and its affiliates (collectively, “ESL”), of certain shares of common stock of AutoZone, Inc. and related matters. Among other things, we agreed to use our commercially reasonable efforts to increase our adjusted debt/EBITDAR target ratio from 2.1:1 to 2.5:1 no later than February 14, 2009. We 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 options expenses to net income.

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

As of August 30, 2008,28, 2010, we were in compliance with all covenants related to our borrowing arrangements and expect to remain in compliance with all covenants.those covenants in the future.

During 1998, we announced a program permitting us to repurchase a portion of our outstanding shares not to exceed a dollar maximum established by our Board of Directors. The program was amended in June 20082010 to increase the repurchase authorization to $6.4$8.9 billion from $5.9$8.4 billion. From January 1998 to August 30, 2008,28, 2010, we have repurchased a total of 106.1121.7 million shares at an aggregate cost of $6.3$8.7 billion. We repurchased 6.4 million shares of common stock at an aggregate cost of $1.1 billion during fiscal 2010, 9.3 million shares of common stock at an aggregate cost of $1.3 billion during fiscal 2009, and 6.8 million shares of common stock at an aggregate cost of $849.2 million during fiscal 2008, 6.02008. Considering cumulative repurchases as of August 28, 2010, we have $185.4 million remaining under the Board of Director’s authorization to repurchase our common stock.

On September 28, 2010, the Board of Directors voted to increase the authorization by $500 million to raise the cumulative share repurchase authorization from $8.9 billion to $9.4 billion. We have repurchased approximately 800 thousand shares of itsour common stock at an aggregate cost of $761.9$185.9 million during fiscal 2007, and 6.2 million shares of its common stock at an aggregate cost of $578.1 million during fiscal 2006.

The following table shows AutoZone’sour significant contractual obligations as of August 30, 2008:28, 2010:

We have otherpension obligations reflected in our consolidated balance sheet that are not reflected in the table above due to the absence of scheduled maturities or due toand the nature of the account. Therefore,As of August 28, 2010, our pension liability is $211.5 million and our pension assets are valued at $117.2 million. Amounts recorded in accumulated other comprehensive loss are $94.3 million at August 28, 2010. These amounts will be amortized into pension expense in the future, unless they are recovered in future periods through actuarial gains.

Additionally, our tax liability for uncertain tax positions, including interest and penalties, was $46.5 million at August 28, 2010. Approximately $28.4 million is classified as current liabilities and $18.1 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 due to uncertainties in the timing of the settlement of these payments cannot be determined, except for amounts estimated to be payable in 2009 that are included in current liabilities.tax positions.

The following table reflects outstanding letters of credit and surety bonds as of August 30, 2008.28, 2010:

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

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