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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 Par Value – ~~26,900,873~~25,205,125 shares outstanding as of ~~March 9,~~December 13, 2018.


(in thousands)	February 10, 2018			August 26, 2017			November 17, 2018				August 25, 2018

Assets
Current assets:
Cash and cash equivalents	$	288,522		$	293,270			$	252,086			$	217,824
Accounts receivable		282,532			280,733				275,194				258,136
Merchandise inventories		4,085,528			3,882,086				4,090,376				3,943,670
Other current assets		169,725			155,166				196,673				216,239

Total current assets		4,826,307			4,611,255				4,814,329				4,635,869

Property and equipment:
Property and equipment		7,041,562			6,873,193				7,324,008				7,291,623
Less: Accumulated depreciation and amortization		(2,960,261	)		(2,842,175	)			3,095,207				3,073,223

		4,081,301			4,031,018				4,228,801				4,218,400

Goodwill		302,645			391,887				302,645				302,645
Deferred income taxes		34,251			35,308				33,118				34,620
Other long-term assets		159,215			190,313				144,688				155,446

		496,111			617,508				480,451				492,711

	$	9,403,719		$	9,259,781			$	9,523,581			$	9,346,980


Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	4,365,666		$	4,168,940			$	4,455,330			$	4,409,372
Accrued expenses and other		576,224			563,350				637,274				606,894
Income taxes payable		5,338			34,011				75,568				12,415

Total current liabilities		4,947,228			4,766,301				5,168,172				5,028,681

Long-term debt		5,043,541			5,081,238				5,156,037				5,005,930
Deferred income taxes		222,932			371,111				288,438				285,204
Other long-term liabilities		520,565			469,508				569,550				547,520

Commitments and contingencies		–			–				–				–

Stockholders’ deficit:
Preferred stock, authorized 1,000 shares; no shares issued		–			–				–				–
Common stock, par value $.01 per share, authorized 200,000 shares; 27,465 shares issued and 27,251 shares outstanding as of February 10, 2018; 28,735 shares issued and 27,833 shares outstanding as of August 26, 2017		275			287
Common stock, par value $.01 per share, authorized 200,000 shares; 27,658 shares issued and 25,216 shares outstanding as of November 17, 2018; 27,530 shares issued and 25,742 shares outstanding as of August 25, 2018									277				275
Additionalpaid-in capital		1,112,748			1,086,671				1,209,851				1,155,426
Retained deficit		(1,990,317	)		(1,642,387	)			(864,191	)			(1,208,824	)
Accumulated other comprehensive loss		(286,384	)		(254,557	)			(276,066	)			(235,805	)
Treasury stock, at cost		(166,869	)		(618,391	)			(1,728,487	)			(1,231,427	)

Total stockholders’ deficit		(1,330,547	)		(1,428,377	)			(1,658,616	)			(1,520,355	)

	$	9,403,719		$	9,259,781			$	9,523,581			$	9,346,980


	Twelve Weeks Ended							Twenty-Four Weeks Ended						Twelve Weeks Ended
(in thousands, except per share data)	February 10, 2018				February 11, 2017			February 10, 2018			February 11, 2017			November 17, 2018			November 18, 2017

Net sales		$	2,413,026			$	2,289,219		$	5,002,156		$	4,757,065		$	2,641,733		$	2,589,131
Cost of sales, including warehouse and delivery expenses			1,135,980				1,083,683			2,359,263			2,249,988			1,224,259			1,223,283

Gross profit			1,277,046				1,205,536			2,642,893			2,507,077			1,417,474			1,365,848
Operating, selling, general and administrative expenses			1,071,948				821,567			1,969,041			1,664,206			929,656			897,094

Operating profit			205,098				383,969			673,852			842,871			487,818			468,754
Interest expense, net			39,340				34,198			78,229			67,504			39,006			38,889

Income before income taxes			165,758				349,771			595,623			775,367			448,812			429,865
Income taxes			(123,772	)			112,626			25,090			260,097
Income tax expense																97,406			148,862

Net income		$	289,530			$	237,145		$	570,533		$	515,270		$	351,406		$	281,003


Weighted average shares for basic earnings per share			27,355				28,606			27,496			28,779			25,629			27,638
Effect of dilutive stock equivalents			527				734			493			743			468			458

Weighted average shares for diluted earnings per share			27,882				29,340			27,989			29,522			26,097			28,096


Basic earnings per share		$	10.58			$	8.29		$	20.75		$	17.90		$	13.71		$	10.17

Diluted earnings per share		$	10.38			$	8.08		$	20.38		$	17.45		$	13.47		$	10.00


	Twelve Weeks Ended								Twenty-Four Weeks Ended								Twelve Weeks Ended
(in thousands)	February 10, 2018				February 11, 2017				February 10, 2018				February 11, 2017				November 17, 2018				November 18, 2017

Net income		$	289,530			$	237,145			$	570,533			$	515,270			$	351,406			$	281,003
Other comprehensive income (loss):
Other comprehensive loss:
Pension liability adjustments, net of taxes⁽¹⁾			2,361				1,953				3,677				3,769				–				1,316
Foreign currency translation adjustments			7,507				(2,342	)			(35,710	)			(42,933	)			(40,573	)			(43,217	)
Unrealized losses on marketable securities, net of taxes⁽²⁾			(258	)			(46	)			(574	)			(275	)
Unrealized (losses) on marketable debt securities, net of taxes⁽²⁾																			(77	)			(316	)
Net derivative activities, net of taxes⁽³⁾			457				321				780				651				389				323

Total other comprehensive income (loss)			10,067				(114	)			(31,827	)			(38,788	)
Total other comprehensive loss																			(40,261	)			(41,894	)


Comprehensive income		$	299,597			$	237,031			$	538,706			$	476,482			$	311,145			$	239,109


	Twenty-Four Weeks Ended						Twelve Weeks Ended
(in thousands)	February 10, 2018			February 11, 2017			November 17, 2018				November 18, 2017

Cash flows from operating activities:
Net income	$	570,533		$	515,270			$	351,406			$	281,003
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment and intangibles		157,337			144,645				82,452				77,986
Amortization of debt origination fees		3,927			3,948				1,864				1,999
Deferred income taxes		(150,613	)		2,777				7,420				8,556
Share-based compensation expense		23,764			20,711				10,527				11,086
Asset impairments		193,162			–
Changes in operating assets and liabilities:
Accounts receivable		(3,139	)		38,697				(16,338	)			6,671
Merchandise inventories		(269,210	)		(290,921	)			(167,454	)			(151,396	)
Accounts payable and accrued expenses		211,902			24,882				67,762				185,009
Income taxes payable		(6,967	)		82,620				63,774				123,292
Other, net		21,647			21,269				47,769				20,811

Net cash provided by operating activities		752,343			563,898				449,182				565,017


Cash flows from investing activities:
Capital expenditures		(214,747	)		(216,103	)			(98,168	)			(110,278	)
Purchase of marketable securities		(80,828	)		(27,798	)
Proceeds from sale of marketable securities		63,102			40,473
Disposal of capital assets and other, net		1,866			714
Purchase of marketable debt securities									(7,480	)			(61,505	)
Proceeds from sale of marketable debt securities									13,116				36,776
Proceeds from disposal of capital assets and other, net									633				354

Net cash used in investing activities		(230,607	)		(202,714	)			(91,899	)			(134,653	)


Cash flows from financing activities:
Net (payments) proceeds of commercial paper		(39,600	)		625,600
Repayment of debt		–			(400,000	)
Net proceeds from (payments of) commercial paper									149,378				(99,000	)
Net proceeds from sale of common stock		65,244			23,302				44,671				7,033
Purchase of treasury stock		(527,454	)		(560,619	)			(497,060	)			(352,572	)
Payments of capital lease obligations		(21,247	)		(22,627	)			(12,597	)			(18,000	)
Other, net		(1,250	)		(2,224	)			–				(1,165	)

Net cash used in financing activities		(524,307	)		(336,568	)			(315,608	)			(463,704	)


Effect of exchange rate changes on cash		(2,177	)		(3,701	)			(7,413	)			(2,253	)


Net (decrease) increase in cash and cash equivalents		(4,748	)		20,915
Net increase (decrease) in cash and cash equivalents									34,262				(35,593	)
Cash and cash equivalents at beginning of period		293,270			189,734				217,824				293,270

Cash and cash equivalents at end of period	$	288,522		$	210,649			$	252,086			$	257,677

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with ~~U.S.~~United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and are presented in accordance with the requirements of Form10-Q and Article 10 of RegulationS-X of the Securities and Exchange Commission’s (the “SEC”) rules and regulations. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and related notes included in the AutoZone, Inc. (“AutoZone” or the “Company”) Annual Report on Form10-K for the year ended August ~~26, 2017.~~25, 2018.

Operating results for the twelve ~~and twenty-four~~ weeks ended ~~February 10,~~November 17, 2018 are not necessarily indicative of the results that may be expected for the full fiscal year ending August ~~25, 2018.~~31, 2019. Each of the first three quarters of AutoZone’s fiscal year consists of 12 weeks, and the fourth quarter consists of 16 or 17 weeks. The fourth ~~quarters for~~quarter of fiscal 2019 has 17 weeks and fiscal 2018 ~~and 2017 each have~~had 16 weeks. Additionally, the Company’s business is somewhat seasonal in nature, with the highest sales generally occurring during the months of February through September and the lowest sales generally occurring in the months of December and January.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standard~~Standards Update (“ASU”)2014-09,Revenue from Contracts with ~~Customers.~~Customers (Topic 606). This ASU, along with subsequent ~~ASU’s~~ASUs issued to clarify certain provisions of ASU2014-09, is a comprehensive new revenue recognition model that expands disclosure requirements and requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration ita company expects to receive in exchange for those goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ~~This update will be effective~~Companies that transition to this new standard may either retrospectively restate each prior reporting period or follow the modified retrospective method, which reflects the cumulative effect of initially applying the updates with an adjustment to retained earnings at the date of adoption. The Company adopted this standard using the modified retrospective approach with its first quarter ended November 17, 2018. Results for the ~~Company at~~quarter ended November 17, 2018 were presented under ASU2014-09, while prior period amounts were not adjusted and continue to be reported under the beginning of its fiscal 2019 year. The Company established a cross-functional implementation team to evaluate and identify the impact of the new standard on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company is considering the potential implications of the new standard on the Company’s recognition of customer related accounts receivable, warranty costs, the Company’s loyalty program, gift cards, subscriptions and other related topicsaccounting standards in addition to all applicable financial statement disclosures required by the new guidance. The Company is currently in the process of identifying changes to its business processes, systems and controls to support adoption of the new standard. At this time, the team has not completed its full analysis on impact or means of adoption.

~~In February 2016, the FASB issued ASU2016-02,~~~~Leases (Topic 842).~~~~ASU2016-02~~ ~~requires an entity to recognize aright-of-use~~ asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. Early adoption is permitted. The updated guidance requires a modified retrospective adoption. This update will be effectiveeffect for the ~~Company at the beginning~~prior periods. The cumulative effect of ~~its fiscal 2020 year. The Company established a cross-functional implementation team to evaluate and identify the impact of ASU2016-02~~ on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company is considering the possible implications of the new standard, including the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the new guidance. The Company is also in the process of identifying changes to its business processes, systems and controls to support adoption of the new standard. At this time, the team has not completed its full analysis and is unable to quantify the impact; however, the Company believes the adoption of ~~the new guidance will~~ASU2014-09 did not have a material impact on the ~~total assets and total liabilities reported on the~~ Company’s consolidated ~~balance sheets.~~financial condition, results of operations, cash flows, business processes, controls or systems. Refer to “Note L – Revenue Recognition”.

In October 2016, the FASB issued ASU2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory. ASU2016-16 requires that an entity recognize the income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs. The guidance must be applied using the modified retrospective ~~basis.~~approach. The Company ~~does not expect~~adopted this standard with its first quarter ended November 17, 2018 and evaluated the ~~provisions~~effects from this adoption. The Company determined the provision of ASU2016-16 did not have an impact on the Company’s consolidated financial statements.

On August 17, 2018, the SEC adopted a final rule that eliminates or amends certain disclosure requirements that were deemed redundant and outdated in light of changes in SEC requirements, U.S. GAAP or changes in technology or the business environment. The rule also requires registrants to include in their interim financial statements a reconciliation of changes in stockholders’ equity in the notes or as a separate statement. The analysis should reconcile the beginning balance to the ending balance of each caption in shareholders’ equity for each period for which an income statement is required to be filed. The final rule became effective November 5, 2018. Beginning in the first quarter of fiscal 2019, we have provided a reconciliation for the quarterly period as well as the comparable prior period in this Form10-Q. The eliminated or amended disclosures did not have a material impact on ~~its~~the Company’s unaudited condensed consolidated financial statements.

In February 2016, the FASB issued ASU2016-02,Leases (Topic 842).ASU2016-02 requires atwo-fold approach for lessee accounting, under which a lessee will account for leases as finance leases or operating leases. For all leases with terms greater than 12 months, both lease classifications will result in the lessee recognizing aright-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. This ~~update~~guidance also requires certain quantitative and qualitative disclosures about leasing arrangements. The amendment will be effective for the Company at the beginning of its fiscal ~~2019 year.~~2020 year, and early adoption is permitted. As originally issued, this guidance required a modified retrospective approach for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. In July 2018, the FASB issued additional guidance, which allows companies to record the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption, which the Company intends to apply, as an alternative to the modified retrospective approach. The Company intends to elect transition practical expedients under which the Company will not be required to reassess (i) whether expired or existing contracts are or contain leases as defined by the new standard, (ii) the classification of such leases, and (iii) whether previously capitalized initial direct costs would qualify for capitalization under the new standard.

The Company established a cross-functional implementation team to evaluate and identify the impact of ASU2016-02 on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company has concluded its assessment on its leasing arrangements, evaluated the impact of applying the practical expedients and accounting policy elections and is working on implementing software to meet the reporting requirements of this standard. The Company is currently in the process of identifying changes to its business processes and controls to support the adoption of the new standard. The team is continuing to understand the full analysis of the adoption, but is unable to quantify the impact at this time. The Company anticipates the adoption of this new standard to result in a significant increase in lease-related assets and liabilities on the Company’s consolidated balance sheets. The impact on the Company’s Consolidated Statements of Income is currently being evaluated. As the impact of this standard isnon-cash in nature, the Company does not anticipate its adoption to have an impact on the Company’s Consolidated Statement of Cash Flows.

In ~~January 2017,~~June 2018, the FASB issued ASU~~2017-01,~~2018-07,~~Business Combinations~~Compensation – Stock Compensation (Topic ~~805)~~718): ~~Clarifying the Definition of a Business~~Improvements to Nonemployee Share-Based Payment Accounting. ASU~~2017-01~~2018-07 ~~provides guidance~~aims to ~~assist entities in evaluating whether transactions should~~simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The amendment will be ~~accounted~~effective for ~~as acquisitions (or disposals)~~the Company at the beginning of ~~assets or businesses. The updated guidance requires a prospective adoption. Early~~its fiscal 2020 year, and early adoption is permitted. The Company does not expect the provisions of ASU~~2017-01~~2018-07 to have a material impact ~~on its consolidated financial statements. This update will be effective for the Company at the beginning of its fiscal 2019 year.~~

~~In February 2018, the FASB issued ASU2018-02,~~~~Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~~~. ASU2018-02~~ allows a reclassification from accumulated other comprehensive income to retained earnings for “stranded tax effects” resulting from the Tax Cuts and Jobs Act (“Tax Reform”). The guidance states that because the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate is required to be included in income from continuing operations, the tax effects of items within accumulated other comprehensive income (“stranded tax effects”) do not reflect the appropriate tax rate. As stated within the guidance, the amendments in this update should be applied retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform is recognized. At this time, the Company is in the process of evaluating the impact of the provisions of ASU~~2018-02~~ on its consolidated financial statements.

AutoZone maintains the Amended 2011 Equity Plan, which provides equity-based compensation tonon-employee directors and eligible employees for their service to AutoZone, its subsidiaries or affiliates. The Company recognizes compensation expense for share-based payments based on the fair value of the awards at the grant date. Share-based payments include stock option grants, restricted stock grants, restricted stock unit grants and the discount on shares sold to employees under share purchase plans. Additionally, directors’ fees are paid in restricted stock units with value equivalent to the value of shares of common stock as of the grant date. The change in fair value of liability-based stock awards is also recognized in share-based compensation expense.

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $12.7 million for the twelve week period ended February 10, 2018, and $10.9 million for the comparable prior year period. Share-based compensation expense was $23.8 million for the twenty-four week period ended February 10, 2018, and $20.7 million for the comparable prior year period.

During the twenty-four week period ended February 10, 2018, 234,114 stock options were exercised at a weighted average exercise price of $278.69. In the comparable prior year period, 91,136 stock options were exercised at a weighted average exercise price of $265.16. Stock Options:

The Company made stock option grants of ~~283,290~~171,293 shares during the ~~twenty-four~~twelve week period ended ~~February 10,~~November 17, 2018, and granted options to purchase ~~290,805~~282,820 shares during the comparable prior year period. The weighted average fair value of the stock option awards granted during the ~~twenty-four~~twelve week ~~period~~periods ended ~~February 10,~~November 17, 2018 and ~~February 11,~~November 18, 2017, using the Black-Scholes-Merton multiple-option pricing valuation model, was ~~$128.99~~$208.31 and ~~$139.80~~$128.93 per share, respectively, using the following weighted average key assumptions:


	Twenty-Four Weeks Ended				Twelve Weeks Ended
	February 10, 2018		February 11, 2017		November 17, 2018		November 18, 2017

Expected price volatility		20%		18%		21%		20%
Risk-free interest rate		1.9%		1.2%		3.1%		1.9%
Weighted average expected lives (in years)		5.1		5.1		5.6		5.1
Forfeiture rate		10%		10%		10%		10%
Dividend yield		0%		0%		0%		0%

During the twelve week period ended November 17, 2018, 129,559 stock options were exercised at a weighted average exercise price of $359.94. In the comparable prior year period, 24,761 stock options were exercised at a weighted average exercise price of $284.04.

The Company made restricted stock unit grants of 10,474 shares to eligible employees during the twelve week period ended November 17, 2018 and none in the comparable prior year period. The fair value of the restricted stock unit grants is the closing price of the Company’s common stock on the grant date and the grants vest ratably on an annual basis over a four-year service period. Restricted stock unit awards are payable in shares of common stock on the vesting date. Compensation expense for grants of employee restricted stock units is recognized on a straight-line basis over the four-year service period, less estimated forfeitures, which are consistent with stock option grant forfeiture assumptions.

The weighted average fair value per restricted stock unit granted was $772.80. As of November 17, 2018, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $7.0 million, before income taxes, which we expect to recognize over an estimated weighted average period of 4.0 years. None of the restricted stock units vested as of November 17, 2018.

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $10.5 million for the twelve week period ended November 17, 2018, and $11.1 million for the comparable prior year period.

For the twelve week period ended November 17, 2018, 427,407 stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive. For the comparable prior year period, 802,195 anti-dilutive shares were excluded from the dilutive earnings per share computation.

See AutoZone’s Annual Report on Form10-K for the year ended August ~~26, 2017,~~25, 2018, for a discussion regarding the methodology used in developing AutoZone’s assumptions to determine the fair value of the option awards and a description of AutoZone’s Amended and Restated 2011 Equity Incentive Award Plan, the 2011 Director Compensation Program and the 2014 Director Compensation Plan.

For the twelve week period ended February 10, 2018, 609,435 stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive. For the comparable prior year period, 645,561 anti-dilutive shares were excluded from the dilutive earnings per share computation. There were 844,912 anti-dilutive shares excluded from the diluted earnings per share computation for the twenty-four week period ended February 10, 2018, and 605,065 anti-dilutive shares excluded for the comparable prior year period.

The Company defines fair value as the price received to transfer an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ~~The~~In accordance with ASC 820,Fair Value Measurements and Disclosures, the Company uses the fair value hierarchy, which prioritizes the inputs used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy are set forth below:

Level 1 inputs—unadjusted quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2 inputs—inputs other than quoted market prices included within Level 1 that are observable, either directly or indirectly, for the asset or liability.

Level 3 inputs—unobservable inputs for the asset or liability, which are based on the Company’s own assumptions as there is little, if any, observable activity in identical assets or liabilities.

The Company’s assets and liabilities measured at fair value on a recurring basis were as follows:


	February 10, 2018												November 17, 2018
(in thousands)	Level 1			Level 2			Level 3			Fair Value			Level 1			Level 2			Level 3			Fair Value

Other current assets		$	30,007		$	1,928		$	–		$	31,935		$	53,889		$	3,308		$	–		$	57,197
Other long-term assets			61,534			24,248			–			85,782			57,214			14,531			–			71,745

		$	91,541		$	26,176		$	�� –		$	117,717		$	111,103		$	17,839		$	–		$	128,942


	August 26, 2017												August 25, 2018
(in thousands)	Level 1			Level 2			Level 3			Fair Value			Level 1			Level 2			Level 3			Fair Value

Other current assets		$	18,453		$	120		$	–		$	18,573		$	55,711		$	3,733		$	–		$	59,444
Other long-term assets			53,319			28,981			–			82,300			58,973			16,259			–			75,232

		$	71,772		$	29,101		$	–		$	100,873		$	114,684		$	19,992		$	–		$	134,676

At ~~February 10,~~November 17, 2018, the fair value measurement amounts for assets and liabilities recorded in the accompanying Condensed Consolidated Balance ~~Sheet~~Sheets consisted of short-term marketable debt securities of ~~$31.9~~$57.2 million, which are included within Other current assets, and long-term marketable debt securities of ~~$85.8~~$71.7 million, which are included in Other long-term assets. The Company’s marketable debt securities are typically valued at the closing price in the principal active market as of the last business day of the quarter or through the use of other market inputs relating to the securities, including benchmark yields and reported trades. The fair values of the marketable debt securities, by asset class, are described in “Note D – Marketable Debt Securities.”

Non-Financial Assets and Liabilities Measured at Fair Value on aNon-Recurring Basis

Certainnon-financial assets and liabilities are required to be measured at fair value on anon-recurring basis in certain circumstances, including in the event of impairment. Thesenon-financial assets and liabilities could include assets and liabilities acquired in an acquisition as well as goodwill, intangible assets and property, plant and equipment that are determined to be impaired. During the second quarter, the Company recorded impairment charges related to its Interamerican Motor Corporation (“IMC”) and AutoAnything businesses as the Company determined that the approximate fair value less costs to sell the businesses was significantly lower than the carrying value of the net assets. Based on the latest offers received as of the end of the second quarter from potential acquirers of these business operations, the Company recorded impairment charges related to goodwill, intangible assets and property, plant and equipment in order to record these assets at fair value. See “Note L – Assets Impairments” for further discussion. The fair value remeasurements are based on Level 2 inputs as defined in the fair value hierarchy. As of ~~February 10,~~November 17, 2018 and August ~~26, 2017,~~25, 2018, the Company did not have any other significantnon-financial assets or liabilities that had been measured at fair value on anon-recurring basis subsequent to initial recognition.

The Company has financial instruments, including cash and cash equivalents, accounts receivable, other current assets and accounts payable. The carrying amounts of these financial instruments approximate fair value because of their short maturities. A discussion of the carrying values and fair values of the Company’s debt is included in “Note HG – Financing.”

The Company’s basis for determining the cost of a security sold is the “Specific Identification Model.” Unrealized gains (losses) on marketable debt securities are recorded in Accumulated other comprehensive loss. The Company’savailable-for-sale marketable debt securities consisted of the following:


	February 10, 2018													November 17, 2018
(in thousands)	Amortized Cost Basis			Gross Unrealized Gains			Gross Unrealized Losses				Fair Value			Amortized Cost Basis			Gross Unrealized Gains			Gross Unrealized Losses				Fair Value

Corporate securities		$	65,261		$	–		$	(533	)		$	64,728
Corporate debt securities															$	46,378		$	–		$	(751	)		$	45,627
Government bonds			22,996			–			(129	)			22,867			30,376			4			(219	)			30,161
Mortgage-backed securities			4,005			–			(79	)			3,926			2,902			–			(81	)			2,821
Asset-backed securities and other			26,348			–			(152	)			26,196			50,484			–			(151	)			50,333

		$	118,610		$	–		$	(893	)		$	117,717		$	130,140		$	4		$	(1,202	)		$	128,942


	August 26, 2017													August 25, 2018
(in thousands)	Amortized Cost Basis			Gross Unrealized Gains			Gross Unrealized Losses				Fair Value			Amortized Cost Basis			Gross Unrealized Gains			Gross Unrealized Losses				Fair Value

Corporate securities		$	39,917		$	73		$	(13	)		$	39,977
Corporate debt securities															$	50,306		$	–		$	(684	)		$	49,622
Government bonds			31,076			49			(74	)			31,051			28,777			–			(173	)			28,604
Mortgage-backed securities			4,850			2			(42	)			4,810			3,248			–			(90	)			3,158
Asset-backed securities and other			25,042			28			(35	)			25,035			53,445			–			(153	)			53,292

		$	100,885		$	152		$	(164	)		$	100,873		$	135,776		$	–		$	(1,100	)		$	134,676

The debt securities held at ~~February 10,~~November 17, 2018, had effective maturities ranging from less than one year to approximately three years. The Company did not realize any material gains or losses on its marketable debt securities during the ~~twenty-four~~twelve week period ended ~~February 10,~~November 17, 2018.

The Company holds ~~112~~111 securities that are in an unrealized loss position of approximately ~~$893 thousand~~$1.2 million at ~~February 10,~~November 17, 2018. The Company has the intent and ability to hold these investments until recovery of fair value or maturity, and does not deem the investments to be impaired on an other than temporary basis. In evaluating whether the securities are deemed to be impaired on an other than temporary basis, the Company considers factors such as the duration and severity of the loss position, the credit worthiness of the investee, the term to maturity and the intent and ability to hold the investments until maturity or until recovery of fair value.

Included above in total marketable debt securities are ~~$85.0~~$85.9 million of marketable debt securities transferred by the Company’s insurance captive to a trust account to secure its obligations to an insurance company related to future workers’ compensation and casualty losses.

At ~~February 10,~~November 17, 2018, the Company had ~~$9.0~~$7.3 million recorded in Accumulated other comprehensive loss related to realized losses associated with terminated interest rate swap and treasury rate lock derivatives, which were designated as hedging instruments. Net losses are amortized into Interest expense over the remaining life of the associated debt. ~~The Company reclassified $509 thousand of net losses from Accumulated other comprehensive loss to interest expense for~~During the twelve ~~weeks ended February 10, 2018 and the comparable prior year period. During the twenty-four~~ week period ended ~~February 10,~~November 17, 2018 and the comparable prior year period, the Company reclassified ~~$1.0 million~~$509 thousand of net losses from Accumulated other comprehensive loss to Interest expense. The Company expects to reclassify $2.2 million of net losses from Accumulated other comprehensive loss to Interest expense over the next 12 months.

Merchandise inventories are stated at the lower of cost or market. Merchandise inventories include related purchasing, storage and handling costs. Inventory cost has been determined using thelast-in,first-out (“LIFO”) method for domestic inventories and the weighted average cost method for Mexico and Brazil inventories. Due to price deflation on the Company’s merchandise purchases, the Company has exhausted its LIFO reserve balance. The Company’s policy is not to write up inventory in excess of replacement cost, which is based on average cost. The difference between LIFO cost and replacement cost, which will be reduced upon experiencing price inflation on the Company’s merchandise purchases, was ~~$433.5~~$458.4 million at ~~February 10,~~November 17, 2018 and ~~$414.9~~$452.4 million at August ~~26, 2017.~~25, 2018.

~~The components of net periodic pension expense related to the Company’s pension plans consisted of the following:~~

The Company makes contributions in amounts at least equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006. During the twenty-four weeks period ended February 10, 2018, the Company did not make contributions to its funded plan.

On December 19, 2017, the Board of Directors approved a resolution to terminate the Company’s pension plans, effective March 15, 2018. Benefit accruals have been frozen, and the plan closed to new participants on January 1, 2003. The Company has commenced the plan termination process and expects to distribute a portion of the pension plan assets as lump sum payments with the remaining balance transferred to an insurance company in the form of an annuity. The total payments distributed will depend on the participation rate of eligible participants. Based on the estimated value of assets held in the plan, the Company currently estimates that a cash contribution of approximately $20—$30 million will be required to fully fund the plan’s liabilities at termination. The pension plan termination is expected to be completed by the end of fiscal 2018, and the Company is in the process of evaluating the impact of the termination and future settlement accounting on its consolidated financial statements and related disclosures.


(in thousands)	February 10, 2018			August 26, 2017			November 17, 2018			August 25, 2018
7.125% Senior Notes due August 2018, effective interest rate of 7.28%		$	250,000		$	250,000

1.625% Senior Notes due April 2019, effective interest rate of 1.77%			250,000			250,000		$	250,000		$	250,000
4.000% Senior Notes due November 2020, effective interest rate of 4.43%			500,000			500,000			500,000			500,000
2.500% Senior Notes due April 2021, effective interest rate of 2.62%			250,000			250,000			250,000			250,000
3.700% Senior Notes due April 2022, effective interest rate of 3.85%			500,000			500,000			500,000			500,000
2.875% Senior Notes due January 2023, effective interest rate of 3.21%			300,000			300,000			300,000			300,000
3.125% Senior Notes due July 2023, effective interest rate of 3.26%			500,000			500,000			500,000			500,000
3.250% Senior Notes due April 2025, effective interest rate 3.36%			400,000			400,000			400,000			400,000
3.125% Senior Notes due April 2026, effective interest rate of 3.28%			400,000			400,000			400,000			400,000
3.750% Senior Notes due June 2027, effective interest rate of 3.83%			600,000			600,000			600,000			600,000
Commercial paper, weighted average interest rate of 1.80% and 1.44% at February 10, 2018 and August 26, 2017, respectively			1,115,500			1,155,100
Commercial paper, weighted average interest rate of 2.55% and 2.29% at November 17, 2018 and August 25, 2018, respectively									1,474,678			1,325,300

Total debt before discounts and debt issuance costs			5,065,500			5,105,100			5,174,678			5,025,300
Less: Discounts and debt issuance costs			21,959			23,862			18,641			19,370

Long-term debt		$	5,043,541		$	5,081,238		$	5,156,037		$	5,005,930

As of ~~February 10,~~November 17, 2018, the commercial paper borrowings and the $250 million ~~7.125%~~1.625% Senior Notes due ~~August 2018 were~~April 2019 are classified as long-term in the accompanying Consolidated Balance Sheets as the Company ~~had~~has the ability and intent to refinance them on a long-term basis through available capacity in its revolving credit ~~facility.~~facilities. As of ~~February 10,~~November 17, 2018, the Company had $1.997 billion of availability under its $2.0 billion revolving credit facility, which would allow it to replace these short-term obligations with long-term financing facilities.

The Company entered into a Master Extension, New Commitment and Amendment Agreement dated as of November 18, 2017 (the “Extension Amendment”) to the Third Amended and Restated Credit Agreement dated as of November 18, 2016, as amended, modified, extended or restated from time to ~~time.~~time (the “Revolving Credit Agreement”). Under the Extension Amendment: (i) the Company’s borrowing capacity under the Revolving Credit Agreement was increased from $1.6 billion to $2.0 billion; (ii) the Company’s option to increase its borrowing capacity under the Revolving Credit Agreement was “refreshed” and the amount of such option remained at $400 million; the maximum borrowing under the Revolving Credit Agreement may, at the Company’s option, subject to lenders approval, be increased from $2.0 billion to $2.4 billion; (iii) the termination date of the Revolving Credit Agreement was extended from November 18, 2021 until November 18, 2022; and (iv) the Company has the option to make one additional written request of the lenders to extend the termination date then in effect for an additional ~~one~~ year.

Under the ~~revolving credit facility,~~Revolving Credit Agreement, the Company may borrow funds consisting of Eurodollar loans, base rate loans or a combination of both. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as LIBOR plus the applicable percentage, as defined in the ~~revolving~~

~~credit facility,~~Revolving Credit Agreement, depending upon the Company’s senior, unsecured,(non-credit enhanced) long-term debt ~~rating.~~ratings. Interest accrues on base rate loans as defined in the ~~credit facility.~~Revolving Credit Agreement. As of ~~February 10,~~November 17, 2018, the Company had $3.3 million of outstanding letters of credit under the Revolving Credit Agreement.

~~On November 18, 2016, the Company amended and restated its existing364-Day~~ ~~revolving credit facility (the “New364-Day~~ Credit Agreement”) by decreasing the committed credit amount from $500 million to $400 million, extending the expiration date by one year and renegotiating other terms and conditions. The credit facility was available to primarily support commercial paper borrowings and other short-term unsecured bank loans. Under the credit facility, the Company could borrow funds consisting of Eurodollar loans, base rate loans or a combination of both. Interest accrued on Eurodollar loans at a defined Eurodollar rate, defined as LIBOR plus the applicable margin, as defined in the revolving credit facility, depending upon the Company’s senior, unsecured,~~(non-credit~~ ~~enhanced) long-term debt rating. Interest accrued on base rate loans as defined in the credit facility. The New364-Day~~ ~~Credit Agreement expired on November 17, 2017, and the Company did not renew this revolving credit facility.~~

The fair value of the Company’s debt was estimated at ~~$5.049~~$5.065 billion as of ~~February 10,~~November 17, 2018, and ~~$5.171~~$4.948 billion as of August ~~26, 2017,~~25, 2018, based on the quoted market prices for the same or similar issues or on the current rates available to the Company for debt of the same terms (Level 2). Such fair value is ~~greater~~less than the the carrying value of debt by ~~$5.4~~$90.6 million at ~~February 10,~~November 17, 2018, ~~and $90.3 million at August 26, 2017,~~ which reflects their face amount, adjusted for any unamortized debt issuance costs and discounts. At August 25, 2018, the fair value was less than the carrying value of debt by $57.5 million.

All senior notes are subject to an interest rate adjustment if the debt ratings assigned to the senior notes are downgraded (as defined in the agreements). Further, the senior notes contain a provision that repayment of the senior notes may be accelerated if ~~we experience~~the Company experiences a change in control (as defined in the agreements). ~~Our~~The Company’s borrowings under ~~our~~its senior notes contain minimal covenants, primarily restrictions on liens. Under ~~our~~its revolving credit facilities, covenants include restrictions on liens, a maximum debt to earnings ratio, a minimum fixed charge coverage ratio and a change of control provision that may require acceleration of the repayment obligations under certain circumstances. All of the repayment obligations under ~~our~~its borrowing arrangements may be accelerated and come due prior to the applicable scheduled payment date if covenants are breached or an event of default occurs. As of ~~February 10,~~November 17, 2018, ~~we were~~the Company was in compliance with all covenants and expect to remain in compliance with all covenants under ~~our~~its borrowing arrangements.

From January 1, 1998 to ~~February 10,~~November 17, 2018, the Company has repurchased a total of ~~143.1~~145.3 million shares of its common stock at an aggregate cost of ~~$18.354~~$19.915 billion, including ~~824,733~~654,070 shares of its common stock at an aggregate cost of ~~$527.5~~$497.1 million during the ~~twenty-four~~twelve week period ended ~~February 10,~~November 17, 2018. On ~~March 21, 2017,~~September 26, 2018, the Board voted to increase the authorization by ~~$750 million.~~$1.25 billion. This raised the total value of shares authorized to be repurchased to ~~$18.65~~$20.9 billion. Considering the cumulative repurchases as of ~~February 10,~~November 17, 2018, the Company had ~~$296.2~~$984.6 million remaining under the Board’s authorization to repurchase its common stock.

During the twenty-four week period ended February 10, 2018, the Company retired 1.5 million shares of treasury stock which had previously been repurchased under the Company’s share repurchase program. The retirement increased Retained deficit by $918.5 million and decreased Additional~~paid-in~~ capital by $60.5 million. During the comparable prior year period, the Company retired 1.8 million shares of treasury stock, which increased Retained deficit by $1.321 billion and decreased Additional~~paid-in~~ ~~capital by $64.9 million.~~

Subsequent to ~~February 10,~~November 17, 2018, the Company has repurchased ~~382,928~~97,113 shares of its common stock at an aggregate cost of ~~$264.9~~$79.8 million.

Accumulated other comprehensive loss includes certain adjustments to pension liabilities, foreign currency translation adjustments, certain activity for interest rate swaps and treasury rate locks that qualify as cash flow hedges and unrealized gains (losses) onavailable-for-sale securities. Changes in Accumulated other comprehensive loss for the twelve week periods ended ~~February 10,~~November 17, 2018 and ~~February 11,~~November 18, 2017 consisted of the following:


(in thousands)	Pension Liability				Foreign Currency⁽³⁾				Net Unrealized Gain on Securities				Derivatives				Total				Pension Liability⁽⁶⁾				Foreign Currency and Other⁽³⁾				Net Unrealized Gain (Loss) on Securities				Derivatives				Total

Balance at November 18, 2017		$	(71,060	)		$	(219,031	)		$	(327	)		$	(6,033	)		$	(296,451	)
Other comprehensive income (loss) before reclassifications⁽¹⁾			–				7,507				(224	)			–				7,283
Amounts reclassified from Accumulated other comprehensive loss⁽¹⁾			2,361	⁽²⁾			–				(34	)⁽⁴⁾			457	⁽⁵⁾			2,784
Balance at August 25, 2018																						$	–			$	(228,899	)		$	(873	)		$	(6,033	)		$	(235,805	)
Other comprehensive loss before reclassifications⁽¹⁾																							–				(40,573	)			(77	)			–				(40,650	)
Amounts reclassified from Accumulated other comprehensive loss⁽¹⁾																							–				–				–				389	⁽⁵⁾			389

Balance at February 10, 2018		$	(68,699	)		$	(211,524	)		$	(585	)		$	(5,576	)		$	(286,384	)
Balance at November 17, 2018																						$	–			$	(269,472	)		$	(950	)		$	(5,644	)		$	(276,066	)


(in thousands)	Pension Liability				Foreign Currency⁽³⁾				Net Unrealized Gain on Securities				Derivatives				Total				Pension Liability				Foreign Currency and Other⁽³⁾				Net Unrealized Gain (Loss) on Securities				Derivatives				Total

Balance at November 19, 2016		$	(87,074	)		$	(251,603	)		$	(109	)		$	(7,417	)		$	(346,203	)
Balance at August 26, 2017																						$	(72,376	)		$	(175,814	)		$	(11	)		$	(6,356	)		$	(254,557	)
Other comprehensive loss before reclassifications⁽¹⁾			–				(2,342	)			(13	)			–				(2,355	)			–				(43,217	)			(314	)			–				(43,531	)
Amounts reclassified from Accumulated other comprehensive loss⁽¹⁾			1,953	⁽²⁾			–				(33	)⁽⁴⁾			321	⁽⁵⁾			2,241				1,316	⁽²⁾			–				(2	)⁽⁴⁾			323	⁽⁵⁾			1,637

Balance at February 11, 2017		$	(85,121	)		$	(253,945	)		$	(155	)		$	(7,096	)		$	(346,317	)
Balance at November 18, 2017																						$	(71,060	)		$	(219,031	)		$	(327	)		$	(6,033	)		$	(296,451	)

~~Changes in Accumulated other comprehensive loss for the twenty-four week periods ended February 10, 2018 and February 11, 2017, consisted of the following:~~

~~The~~As of November 17, 2018, there were no changes into the carrying amount of goodwill ~~are~~ as ~~follows:~~described in our Annual Report on Form10-K for the year ended August 25, 2018.

The carrying amounts of intangible assets ~~other than goodwill,~~ are included in Other long-term assets as follows:

Amortization expense of intangible assets for the twelve ~~and twenty-four~~ week periods ended ~~February 10,~~November 17, 2018 and November 18, 2017 was ~~$1.4~~$1.0 million and ~~$2.8 million, respectively. Amortization expense of intangible assets for the twelve and twenty-four week periods ended February 11, 2017 was $1.9 million and $4.0~~$1.4 million, respectively.

During the second quarter, the Company recorded impairment charges related to its IMC and AutoAnything businesses totaling $193.2 million as the Company determined that the approximate fair value less costs to sell the businesses was significantly lower than the carrying value of the net assets based on recent offers received for these businesses as of the quarter ended February 10, 2018.

The impairment charge for the IMC business, which is reflected as a component of Auto Parts Locations in our segment reporting, includes $48.3 million related to inventory, $24.1 million related to goodwill, $18.0 million related to property and equipment, and $3.2 million related to other intangible assets. The impairment charge for AutoAnything, which is reflected as a component of the Other category in our segment reporting, includes $65.2 million related to goodwill and $34.4 million related to other intangible assets. The Company recorded these impairment charges within Operating, selling, general and administrative expenses in its condensed consolidated statements of income.

The carrying value for the assets and liabilities remaining after these impairment charges total $97.4 million and $59.0 million as of February 10, 2018 and are included in our condensed consolidated balance sheet at that date. The major classes of assets and liabilities included in those amounts consisted of accounts receivable of $22.2 million, merchandise inventories of $64.6 million and accounts payable of $47.7 million as of February 10, 2018.

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

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

The Company adopted ASU2014-09,Revenue from Contracts with Customers using the modified retrospective method beginning with our first quarter ending November 17, 2018. The cumulative effect of initially applying ASU2014-09 resulted in an increase to the opening retained deficit balance of $6.8 million, net of taxes at August 26, 2018, and a related adjustment to accounts receivable, other current assets, other long-term assets, other current liabilities and deferred income taxes as of that date. Revenue for periods prior to August 26, 2018 were not adjusted and continue to be reported under the accounting standards in effect for the prior periods.

The Company’s primary source of revenue is derived from the sale of automotive aftermarket parts and merchandise to its retail and commercial customers. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, in an amount representing the consideration the Company expects to receive in exchange for selling products to its customers. Sales are recorded net of variable consideration in the period incurred, including discounts, sales incentives and rebates, sales taxes and estimated sales returns. Sales returns are based on historical return rates. The Company may enter into contracts that include multiple combinations of products and services, which are accounted for as separate performance obligations and do not require significant judgment.

The Company’s performance obligations are typically satisfied when the customer takes possession of the merchandise. Revenue from retail customers is recognized when the customer leaves our store with the purchased products, typically at the point of sale or forE-commerce orders when the product is shipped. Revenue from commercial customers is recognized upon delivery, typicallysame-day. Payment from retail customers is at the point of sale and payment terms for commercial customers are based on the Company’spre-established credit requirements and generally range from 1 to 30 days. Discounts, sales incentives and rebates are treated as separate performance obligations, and revenue allocated to these performance obligations is recognized as the obligations to the customer are satisfied. Additionally, the Company estimates and records gift card breakage as redemptions occur. The Company offers diagnostic and repair information software used in the automotive repair industry through ALLDATA. This revenue is recognized as services are provided. Revenue from these services are recognized over the life of the contract.

The Company or the vendors supplying its products provides the Company’s customers limited warranties on certain products that range from 30 days to lifetime. In most cases, the Company’s vendors are primarily responsible for warranty claims. Warranty costs for merchandise sold under warranty not covered by vendors are estimated and recorded at the time of sale based on the historical return rate for each individual product line. Differences between vendor allowances received, in lieu of warranty obligations and estimated warranty expense for the vendor’s products, are recorded as an adjustment to cost of sales.

There were no material contract assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheet as of November 17, 2018. Revenue related to unfulfilled performance obligations as of November 17, 2018 is not significant. Refer to “Note M – Segment Reporting” in the Condensed Consolidated Financial Statements for additional information related to revenue recognized during the period.

The Company’s ~~four~~ operating segments (Domestic Auto Parts, Mexico ~~Brazil~~ and ~~IMC)~~Brazil; and IMC through April 4, 2018) are aggregated as one reportable segment: Auto Parts Locations. The criteria the Company used to identify the reportable segment are primarily the nature of the products the Company sells and the operating results that are regularly reviewed by the Company’s chief operating decision maker to make decisions about the resources to be allocated to the business units and to assess performance. The accounting policies of the Company’s reportable segment are the same as those described in Note A in its Annual Report on Form10-K for the year ended August ~~26, 2017.~~25, 2018.

The Auto Parts Locations segment is a retailer and distributor of automotive parts and accessories through the Company’s ~~6,088 locations~~6,218 stores in the United States, Puerto Rico, Mexico and Brazil. Each ~~location~~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 andnon-automotive products.

The Other category reflects business activities of three operating segments that are not separately reportable due to the materiality of these operating segments. The operating segments include ALLDATA, which produces, sells and maintains diagnostic and repair information software used in the automotive repair industry;~~E-commerce,~~ ~~which includes direct~~ sales ~~to customers~~ through ~~www.autozone.com;~~www.autozone.com that are not fulfilled by an AutoZone store; and AutoAnything, which includes direct sales to customers through ~~www.autoanything.com.~~www.autoanything.com, prior to the Company’s sale of substantially all of AutoAnything’s assets on February 26, 2018.

The Company evaluates its reportable segment primarily on the basis of net sales and segment profit, which is defined as gross profit. Segment results for the periods presented were as follows:

~~Our~~The Company’s effective income tax rate ~~was (74.7%) of~~on pretax income for the twelve weeks ended ~~February 10, 2018.~~November 17, 2018, was 21.7% compared to 34.6% for the prior year period. The decrease in the tax rate was primarily due to the reduction in the Company’s Federal statutory tax rate from 35% to 21% upon enactment of Tax Reform, which resulted in a tax benefit of $52.6 million in addition to $9.0 million excess tax benefits from option exercises versus the prior year period.

The Company’s effective tax rate for the twelve weeks ended November 17, 2018 of 21.7% was ~~lower~~slightly higher than the U.S. statutory federal rate of 21% primarily due to a $111.9 million provisional tax benefit resulting from the enactment of the Tax Reform as described in further detail below; $32.1 million of excess tax benefits from option exercises; a $35.3 million benefit from the previously reported quarter one tax expense due to the reduction of the U.S. statutory rate from 35% to approximately 25.9%; and a second quarter tax benefit of $24.2 million due to the reduction of the U.S. statutory rate from 35% to approximately 25.9%.

Our effective income tax rate was 4.2% of pretax income for the twenty-four weeks ended February 10, 2018. The effective tax rate was lower than the U.S. statutory federal rate primarily due to a $111.9 million provisional tax benefit resulting from the enactment of Tax Reform as described in further detail below; $34.3 million of excess tax benefits from option exercises; and a $59.5 million benefit from the reduction of the U.S. statutory rate from 35% to approximately 25.9%.

At the end of each interim period, the Company estimates its effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur. In addition, the effects of changes in enacted tax laws or rates or tax status are recognized in the interim period in which the change occurs.

On December 22, 2017, Tax Reform was enacted by the U.S. government. Tax Reform contains several key provisions that affected the Company. The enacted provisions impacting the current financial statements include a mandatory~~one-time~~ transition tax on certain earnings of foreign subsidiaries and a permanent reduction of the U.S. corporate income tax rate from 35 to 21 percent, effective January 1, 2018. As the Company has an August 25^th ~~fiscalyear-end,~~ the impact of the lower rate will be phased in resulting in a U.S. statutory federal tax rate of approximately 25.9% for the fiscal year ending August 25, 2018 and a 21% U.S. statutory federal rate for fiscal years thereafter. Other enacted provisions which may impact the Company beginning in fiscal 2019 include: limitations on the deductibility of executive compensation, eliminating U.S. federal taxation of future remitted foreign earnings, and other new provisions requiring current inclusion of certain earnings of controlled foreign corporations. The Company maintained its permanent reinvestment assertion for~~non-U.S.~~ ~~subsidiary earnings but will continue to evaluate and analyze potential impacts of any additional foreign and/or~~ state income taxes ~~on cash repatriation. The Company has not recorded deferred taxes attributable~~offset by $11.2 million of tax benefits associated with stock option accounting, compared to ~~its foreign operations at this time. Based on information currently available and subject to change,~~$2.2 million in the ~~Company currently forecasts its long-term effective tax rate to be approximately 24.5 percent.~~prior year period.

The ~~Securities and Exchange Commission (SEC)~~SEC staff issued Staff Accounting Bulletin No. 118 ~~(SAB 118)~~(“SAB 118”) to address the application of ~~U.S.~~ GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of Tax Reform. To the extent that a company’s accounting for certain income tax effects of Tax Reform is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of Tax Reform.

The ultimate impact may differ from provisional amounts recorded, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, and additional regulatory guidance that may be issued. The accounting is expected to be completed within one year from the enactment date of Tax Reform.

~~Based on~~For the ~~current analysis,~~twelve weeks ended November 17, 2018, the Company has not recorded aadditional provisional ~~income tax benefit of $111.9 million~~adjustments in ~~its consolidated financial statements for~~ the ~~quarter~~Condensed Consolidated Financial Statements. During the preceding year ended ~~February 10, 2018. The~~August 25, 2018, the Company was able to determine a reasonable estimate for the mandatoryone-time transition tax as an increase to ~~increase~~ tax expense ~~by $24.8~~of $25.8 million, and for there-measurement of ~~the Company’s~~its net U.S. federal deferred tax liability at the lower rate, a reduction to ~~reduce~~ tax expense ~~by $136.7~~of $157.3 million. ~~The~~Additional provisions from Tax Reform are effective for FY19 and while immaterial, the Company’s analysis of these items is incomplete at this time. The Company will complete the accounting for these items during the measurement period, which will ~~not exceed beyond one year from the enactment date.~~

~~As of February 10, 2018, the Company has estimated the following obligations with respect to the mandatory deemed repatriation of~~end during the Company’s foreign subsidiaries. The estimate may change, possibly materially, due to among other things, further refinement of the Company’s calculations, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of Tax Reform.

~~Subsequent to the balance sheet date, on~~twenty-four week period ending February 22, 2018, the Company entered into an asset purchase agreement to sell substantially all of the assets, net of assumed liabilities related to its IMC operations for consideration that approximates the remaining net book value of the business. The transaction is expected to close in the third quarter of fiscal 2018. On February 26, 2018, the Company sold substantially all of the assets, net of assumed liabilities, related to its AutoAnything operations for consideration that approximates the remaining net book value of the business.9, 2019.

We have reviewed the accompanying condensed consolidated balance sheet of AutoZone, Inc. (the Company) as of ~~February 10,~~November 17, 2018, the related condensed consolidated statements of income, ~~for the twelve and twenty-four week periods ended February 10, 2018 and February 11, 2017, the condensed consolidated statements of~~ comprehensive income, ~~for the twelve~~stockholders’ deficit and ~~twenty-four week periods ended February 10, 2018 and February 11, 2017, and the condensed consolidated statements of~~ cash flows for the ~~twenty-four~~twelve week periods ended ~~February 10,~~November 17, 2018 and ~~February 11, 2017. These~~November 18, 2017, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements ~~are the responsibility of the Company’s management.~~for them to be in conformity with U.S. generally accepted accounting principles.

We ~~conducted our review~~have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of August 25, 2018, the related consolidated statements of income, comprehensive income, stockholders’ deficit and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated October 24, 2018, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of August 25, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial ~~information~~statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the ~~Public Company Accounting Oversight Board,~~PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of AutoZone, Inc. as of August 26, 2017, and the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for the year then ended, not presented herein, and, in our report dated October 25, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of August 26, 2017, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

~~Item 2.~~

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

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In Management’s Discussion and Analysis (“MD&A”), we provide a historical and prospective narrative of our general financial condition, results of operations, liquidity and certain other factors that may affect our future results. The ~~review of Management’s Discussion and Analysis~~following MD&A discussion should be ~~made~~read in conjunction with our ~~condensed consolidated financial statements,~~Condensed Consolidated Financial Statements, related notes to those statements and other financial information, including forward-looking statements and other risk factors, ~~included~~that appear elsewhere in this ~~quarterly report.~~Quarterly Report, and our Annual Report on Form10-K for the year ended August 25, 2018.

Certain statements contained in this Quarterly Report on Form10-Q constitute forward-looking statements that are ~~forward-looking statements.~~subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy”, “seek”, “may”, “could” and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand; energy prices; weather; competition; credit market conditions; access to available and feasible financing; the impact of recessionary conditions; consumer debt levels; 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; the compromising of confidentiality, availability, or integrity of information, including cyber attacks; and raw material costs of suppliers. Certain of these risks are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of our Annual Report on Form10-K for the year ended August ~~26, 2017,~~25, 2018, 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 “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.

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 ~~February 10,~~November 17, 2018, operated ~~5,514 AutoZone~~5,631 stores in the United States, including Puerto Rico; ~~532~~567 stores in Mexico; 16and 20 stores in ~~Brazil; and 26 IMC branches.~~Brazil. Each ~~AutoZone~~ 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 andnon-automotive products. At ~~February 10,~~November 17, 2018, in ~~4,645~~4,766 of our domestic ~~AutoZone~~ stores, we also had a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in ~~AutoZone~~ stores in Mexico and Brazil. We also sell the ALLDATA brand automotive diagnostic and repair software through www.alldata.com and www.alldatadiy.com. Additionally, we sell automotive hard parts, maintenance items, accessories andnon-automotive products through www.autozone.com and our commercial customers can make purchases through www.autozonepro.com. We do not derive revenue from automotive repair or installation services.

Operating results for the twelve ~~and twenty-four~~ weeks ended ~~February 10,~~November 17, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending August ~~25, 2018.~~31, 2019. Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consists of 16 or 17 weeks. The fourth ~~quarters for~~quarter of fiscal ~~2017~~2019 has 17 weeks and fiscal 2018 ~~each have~~had 16 weeks. Our business is somewhat seasonal in nature, with the highest sales generally occurring during the months of February through September and the lowest sales generally occurring in the months of December and January.

Net sales were up ~~5.4%~~2.0% for the quarter driven by ~~sales of $43.1 million from~~ new domestic AutoZone stores and an increase in domestic ~~same store~~commercial sales, ~~(sales from stores open at least one year)~~partially offset by the sale of ~~2.2%.~~two businesses in the prior year. Earnings per share increased ~~28.5%~~34.7% for the quarter and ~~were significantly impacted by the~~benefitted from a lower effective tax rate, primarily due to Tax ~~Reform and asset impairments recorded during the quarter.~~Reform.

Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to fuel costs, unemployment rates, foreign exchange and interest rates, and other economic conditions. Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.

During the ~~second~~first quarter of fiscal ~~2018,~~2019, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 85% of total sales, which ~~was~~is consistent to the comparable prior year period, with failure related categories continuing to be our largest set of categories. We did not experience any fundamental shifts in our category sales mix as compared to the previous year. Our sales mix can be impacted by severe or unusual weather over a ~~short term~~short-term period. Over the ~~long term,~~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 assortment. In recent years, we initiated 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, store inventory levels and product assortment, which led to strategic tests on

increased frequency of delivery to our domestic stores and significantly expanding parts assortment in select domestic stores we call mega hubs. During fiscal 2016 and most of fiscal 2017, we continued the implementation of more frequent deliveries from our distribution centers to improve the~~in-stock~~ levels for SKUs stocked in our stores. In the latter part of fiscal 2017, we made substantial changes to test different scenarios to determine the optimal approach around increased delivery frequency. We completed our testing and determined that at certain volumes more frequent deliveries make economic sense. We will be implementing the new frequencies over the next several months. Once completed, approximately 25% of our stores representing 40% of our sales volume, and nearly 50% of our commercial sales, will receive distribution center deliveries three or more times per week.

The two statistics we believe have the most positive 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. While over the long-term we have seen a positive correlation between our net sales and the number of miles driven, we have also seen 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. The average age of the ~~U.S.~~United States light vehicle fleet continues to trend in our industry’s favor. According to the latest data provided by the Auto Care Association as of January 1, 2018, for the 7^th consecutive year, the average age of vehicles on the road has exceeded 11 years. Since the beginning of ~~2017~~2018 and through ~~December 2017~~September 2018 (latest publicly available information), miles driven ~~increased by 1.2%.~~have been essentially flat.

Net sales for the twelve weeks ended ~~February 10,~~November 17, 2018 increased ~~$123.8~~$52.6 million to ~~$2.413~~$2.642 billion, or ~~5.4%~~2.0%, over net sales of ~~$2.289~~$2.589 billion for the comparable prior year period. Total auto parts sales increased by ~~5.7%~~3.3%, primarily driven by net sales of ~~$43.1~~$53.8 million from new domestic AutoZone stores and an increase in domestic same store sales of ~~2.2%~~2.7%. These increases in net sales were partially offset by the sale of two businesses in the prior year. Domestic commercial sales increased ~~$24.8~~$55.7 million, or ~~5.7%~~11.3%, over the comparable prior year period.

Gross profit for the twelve weeks ended ~~February 10,~~November 17, 2018 was ~~$1.277~~$1.417 billion, or ~~52.9%~~53.7% of net sales, compared with ~~$1.206~~$1.366 billion, or ~~52.7%~~52.8% of net sales, during the comparable prior year period. The increase in gross margin was primarily attributable to ~~lower distribution costs (17 basis points)~~the impact of the sale of two businesses completed in the prior year (65 bps) and higher merchandise margins.

Operating, selling, general and administrative expenses for the twelve weeks ended ~~February 10,~~November 17, 2018 were ~~$1.072 billion,~~$929.7 million, or ~~44.4%~~35.2% of net sales, ~~and included impairment charges of approximately $193.2~~compared with $897.1 million, or ~~8.0% of sales, compared with $821.6 million, or 35.9%~~34.6% of net sales, during the comparable prior year period. Operating expenses, ~~before impairment charges,~~ as a percentage of sales, were higher than last year with deleverage primarily ~~due to incentive compensation(-16~~ ~~basis points), higher advertising costs(-12~~ ~~basis points) and deleverage on occupancy costs(-10~~ ~~basis points)~~driven by domestic store payroll (56 bps).

Net interest expense for the twelve weeks ended ~~February 10,~~November 17, 2018 was ~~$39.3~~$39.0 million compared with ~~$34.2~~$38.9 million during the comparable prior year period. The increase was primarily due to ~~higher weighted average~~a slight increase in borrowing ~~rates~~levels over the comparable prior year period. Average borrowings for the twelve weeks ended ~~February 10,~~November 17, 2018 were ~~$5.033~~$4.972 billion, compared with ~~$5.133~~$4.946 billion for the comparable prior year period. Weighted average borrowing rates were 3.1% for each of the twelve ~~weeks~~week periods ended ~~February 10,~~November 17, 2018 and ~~2.6%~~November 18, 2017.

Our effective income tax rate was 21.7% of pretax income for the twelve weeks ended ~~February 11, 2017.~~November 17, 2018 and 34.6% for the comparable prior year period. The decrease in the tax rate was primarily due to Tax Reform and additional excess tax benefit from option exercises (see “Note N – Income Taxes” in the Notes to the Condensed Consolidated Financial Statements).

Net income for the twelve week period ended ~~February 10,~~November 17, 2018 increased by ~~$52.4~~$70.4 million to ~~$289.5~~$351.4 million due to the factors set forth above, and diluted earnings per share increased by ~~28.5%~~34.7% to ~~$10.38~~$13.47 from $8.08 in the comparable prior year period. Adjusted for impairment charges, Tax Reform, excess tax benefits from option exercises and operating results from IMC and AutoAnything, adjusted net income for the twelve week period ended February 10, 2018 increased by $8.8 million to $236.3 million, while adjusted diluted earnings per share increased by 9.3% to $8.47 from $7.75$10.00 in the comparable prior year period. The impact on current quarter diluted earnings per share from stock repurchases since the end of the comparable prior year period was an increase of ~~$0.40.~~

Net sales for the twenty-four weeks ended February 10, 2018 increased $245.1 million to $5.002 billion, or 5.2%, over net sales of $4.757 billion for the comparable prior year period. Total auto parts sales increased by 5.4%, primarily driven by net sales of $87.5 million from new domestic AutoZone stores and an increase in domestic same store sales of 2.3%. Domestic commercial sales increased $55.4 million, or 6.2%, over the comparable prior year period.

Gross profit for the twenty-four weeks ended February 10, 2018 was $2.643 billion, or 52.8% of net sales, compared with $2.507 billion, or 52.7% of net sales, during the comparable prior year period. The increase in gross margin was attributable to lower distribution costs (13 basis points) and higher merchandise margins.

Operating, selling, general and administrative expenses for the twenty-four weeks ended February 10, 2018 were $1.969 billion, or 39.4% of net sales, and included impairment charges of approximately $193.2 million, or 3.9% of sales, compared with $1.664 billion, or 35.0% of net sales, during the comparable prior year period. Operating expenses before impairment charges, as a percentage of sales, were higher than last year primarily due to hurricane-related expenses incurred during the first quarter~~(-17~~ ~~basis points), higher incentive compensation(-17~~ ~~basis points), deleverage on occupancy(-15~~ ~~basis points) and higher advertising costs(-5~~ ~~basis points).~~

Net interest expense for the twenty-four weeks ended February 10, 2018 was $78.2 million compared with $67.5 million during the comparable prior year period. The increase was primarily due to higher weighted average borrowing rates over the comparable year period. Average borrowings for the twenty-four weeks ended February 10, 2018 were $4.990 billion, compared with $5.034 billion for the comparable prior year period. Weighted average borrowing rates were 3.1% for the twenty-four weeks ended February 10, 2018 and 2.6% for the twenty-four weeks ended February 11, 2017.

Net income for the twenty-four weeks ended February 10, 2018 increased by $55.3 million to $570.5 million due to the factors set forth above, and diluted earnings per share increased by 16.8% to $20.38 from $17.45 in the comparable prior year period. Adjusted for impairment charges, Tax Reform, excess tax benefits from option exercises and operating results from IMC and AutoAnything, adjusted net income for the twenty-four weeks period ended February 10, 2018 increased by $11.4 million to $517.2 million, while adjusted diluted earnings per share increased by 7.8% to $18.47 from $17.13 in the comparable prior year period. The impact on year to date diluted earnings per share from stock repurchases since the end of the comparable prior year period was an increase of $0.91.

On December 22, 2017, the U.S. government enacted the Tax Reform legislation. The Tax Reform contains several key provisions that affected the Company. The enacted provisions impacting the current financial statements include a mandatory~~one-time~~ transition tax on certain earnings of foreign subsidiaries and a permanent reduction of the U.S. corporate income tax rate from 35 to 21 percent, effective January 1, 2018. As the Company has an August 25^th ~~fiscalyear-end,~~ the impact of the lower rate will be phased in resulting in a U.S. statutory federal tax rate of approximately 25.9% for the fiscal year ending August 25, 2018 and a 21% U.S. statutory federal rate for fiscal years thereafter. Other enacted provisions which may impact the Company beginning in fiscal 2019 include limitations on the deductibility of executive compensation, eliminating U.S. federal taxation of future remitted foreign earnings, and other new provisions requiring current inclusion of certain earnings of controlled foreign corporations. The Company maintained its permanent reinvestment assertion for~~non-U.S.~~ subsidiary earnings but will continue to evaluate and analyze potential impacts of any additional foreign and/or state income taxes on cash repatriation. We have not recorded deferred taxes attributable to its foreign operations at this time. Based on information currently available and subject to change, we currently forecasts its long-term effective tax rate to be approximately 24.5 percent.

The Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of Tax Reform. To the extent that a company’s accounting for certain income tax effects of Tax Reform is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of Tax Reform. The ultimate impact may differ from provisional amounts recorded, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, and additional regulatory guidance that may be issued. The accounting is expected to be completed within one year from the enactment date of Tax Reform.

Based on our current analysis, we recorded a provisional income tax benefit of $111.9 million in its consolidated financial statements for the quarter ended February 10, 2018. We were able to determine a reasonable estimate for the mandatory~~one-time~~ ~~transition tax to increase tax expense by $24.8 million and for there-measurement~~ of our net U.S. federal deferred tax liability at the lower rate to reduce tax expense by $136.7 million. Our analysis of these items is incomplete at this time. We will complete the accounting for these items during the measurement period, which will not extend beyond one year from the enactment date.

Our effective income tax rate was (74.7%) of pretax income for the twelve weeks ended February 10, 2018 and 32.2% for the comparable prior year period. The lower tax rate resulted from the $111.9 million provisional amount discussed above, $32.1 million of excess tax benefits from option exercises, $35.3 million benefit from the previously reported 2018 first quarter tax expense due to the reduction of the U.S. statutory rate from 35% to approximately 25.9% and a 2018 second quarter tax benefit of $24.2 million due to the reduction of the U.S. statutory rate from 35% to approximately 25.9%.

Our effective income tax rate was 4.2% of pretax income for the twenty-four weeks ended February 10, 2018 and 33.5% for the comparable prior year period. The lower tax rate resulted from the $111.9 million provisional amount discussed above, $34.3 million of excess tax benefits from option exercises and a $59.5 million benefit from the reduction of the U.S. statutory rate from 35% to approximately 25.9%.$0.73.

The primary source of our liquidity is our cash flows realized through the sale of automotive parts, products and accessories. For the ~~twenty-four~~twelve weeks ended ~~February 10,~~November 17, 2018, our net cash flows from operating activities provided ~~$752.3~~$449.2 million as compared with ~~$563.9~~$565.0 million provided during the comparable prior year period. The ~~increase~~decrease is primarily due to ~~increased earnings and favorable changes in taxes payable.~~the timing of accrued payments.

Our net cash flows used in investing activities for the ~~twenty-four~~twelve weeks ended ~~February 10,~~November 17, 2018 was ~~$230.6~~$91.9 million as compared with ~~$202.7~~$134.7 million in the comparable prior year period. Capital expenditures for the ~~twenty-four~~twelve weeks ended ~~February 10,~~November 17, 2018 were ~~$214.7~~$98.2 million compared to ~~$216.1~~$110.3 million for the comparable prior year period. The decrease is primarily driven by the reduction of capital expenditures related to the construction of a new distribution center in fiscal 2018. During the ~~twenty-four~~twelve week period ended ~~February 10,~~November 17, 2018, we opened 5916 net new ~~locations.~~stores. In the comparable prior year period, we opened 5820 net new ~~locations.~~stores. Investing cash flows were impacted by our wholly owned captive, which purchased ~~$80.8~~$7.5 million and sold ~~$63.1~~$13.1 million in marketable debt securities during the ~~twenty-four~~twelve weeks ended

~~February 10,~~ November 17, 2018. During the comparable prior year period, the captive purchased ~~$27.8~~$61.5 million in marketable debt securities and sold ~~$40.5~~$36.8 million in marketable debt securities.

Our net cash flows used in financing activities for the ~~twenty-four~~twelve weeks ended ~~February 10,~~November 17, 2018 were ~~$524.3~~$315.6 million compared to $336.6 million in the comparable prior year period. During the twenty-four week period ended February 10, 2018, we repaid no debt. During the comparable prior year period, we repaid our $400 million 1.35% Senior Notes due in January 2017 using commercial paper borrowings. For the twenty-four week period ended February 10, 2018, our commercial paper activity resulted in $39.6 million in net repayments of commercial paper, as compared to $625.6 million in net proceeds in the comparable prior year period. Stock repurchases were $527.5 million in the current twenty-four week period as compared with $560.6$463.7 million in the comparable prior year period. For the ~~twenty-four~~twelve week period ended November 17, 2018, our commercial paper activity resulted in $149.4 million in net proceeds from commercial paper, as compared to $99.0 million of net repayments of commercial paper in the comparable prior year period. For the twelve weeks ended ~~February 10,~~November 17, 2018, proceeds from the sale of common stock and exercises of stock options provided ~~$65.2~~$44.7 million. In the comparable prior year period, proceeds from the sale of common stock and exercises of stock options provided ~~$23.3~~$7.0 million.

During fiscal ~~2018,~~2019, we expect to ~~invest~~increase the investment in our business ~~at a rate consistent with~~as compared to fiscal ~~2017.~~2018. Our investments continue to be directed primarily to new ~~locations,~~stores, supply chain infrastructure, enhancements to existing ~~locations~~stores and investments in technology. The amount of our investments in our new ~~locations~~stores 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.

In addition to the building and land costs, our new ~~locations~~stores 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~~Extended payment terms from 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. Accounts payable, as a percentage of gross inventory, was ~~106.9%~~108.9% at ~~February 10,~~November 17, 2018, compared to ~~105.5%~~107.8% at ~~February 11,~~November 18, 2017. The ~~slight~~ increase ~~in this ratio is~~was primarily due to ~~inventory impairment charges related to IMC and increases in accounts payable due to favorable vendor payment terms.~~the impact of the sale of one of the businesses sold during the prior year.

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 current credit ratings and favorable experiences in the debt markets in the past.

Tax Reform was enacted on December 22, 2017. As part of the transition to the new territorial tax system, Tax Reform imposes a tax on the mandatory deemed repatriation of earnings of the Company’s foreign subsidiaries. It is estimated that the deemed repatriation tax will be approximately $24.8 million, which has been recorded to income tax expense. The estimate may change, possibly materially, due to among other things, further refinement of the Company’s calculations, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of Tax Reform.

For the trailing four quarters ended ~~February 10,~~November 17, 2018, our adjustedafter-tax return on invested capital (“ROIC”) was ~~30.2%~~33.7% as compared to ~~31.0%~~29.6% for the comparable prior year period. We use adjusted 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 ofNon-GAAP Financial Measures” section for further details of our calculation.

We entered into a Master Extension, New Commitment and Amendment Agreement dated as of November 18, 2017 (the “Extension ~~Amendment”~~Amendment��) to the Third Amended and Restated Credit Agreement dated as of November 18, 2016, as amended, modified, extended or restated from time to ~~time.~~time (the “Revolving Credit Agreement”). Under the Extension Amendment: (i) our borrowing capacity under the Revolving Credit Agreement was increased from $1.6 billion to $2.0 billion; (ii) our option to increase the borrowing capacity under the Revolving Credit Agreement was “refreshed” and the amount of such option remained at $400 million; the maximum borrowing under the Revolving Credit Agreement may, at our option, subject to lenders approval, be increased from $2.0 billion to $2.4 billion; (iii) the termination date of the Revolving Credit Agreement was extended from November 18, 2021 until November 18, 2022; and (iv) we have the option to make one additional written request of the lenders to extend the termination date then in effect for an additional ~~one~~ year. Under the ~~revolving credit facility,~~Revolving Credit Agreement, we may borrow funds consisting of Eurodollar loans, base rate loans or a combination of both. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as LIBOR plus the applicable percentage, as defined in the ~~revolving credit facility,~~Revolving Credit Agreement, depending upon our senior, unsecured,(non-credit enhanced) long-term debt ~~rating.~~ratings. Interest accrues on base rate loans as defined in the ~~credit facility.~~Revolving Credit Agreement. As of ~~February 10,~~November 17, 2018, we had $3.3 million of outstanding letters of credit under the Revolving Credit Agreement.

~~On November 18, 2016, we amended and restated our existing364-Day~~ ~~revolving credit facility (the “New364-Day~~ Credit Agreement”) by decreasing the committed credit amount from $500 million to $400 million, extending the expiration date by one year and renegotiating other terms and conditions. The credit facility was available to primarily support commercial paper borrowings and other short-term unsecured bank loans. Under the credit facility, we could borrow funds consisting of Eurodollar loans, base rate loans or a combination of both.

~~Interest accrued 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 accrued on base rate loans as defined in the credit facility. The New364-Day~~ ~~Credit Agreement expired on November 17, 2017, and we did not renew this revolving credit facility.~~

We also maintain a letter of credit facility that allows us to request the participating bank to issue letters of credit on our behalf up to an aggregate amount of $75 million. The letter of credit facility is in addition to the letters of credit that may be issued under the Revolving Credit Agreement. As of ~~February 10,~~November 17, 2018, we had $75.0 million in letters of credit outstanding under the letter of credit facility, which expires in June 2019.

In addition to the outstanding letters of credit issued under the committed facilities discussed above, we had ~~$30.1~~$23.3 million in letters of credit outstanding as of ~~February 10,~~November 17, 2018. These letters of credit have various maturity dates and were issued on an uncommitted basis.

All senior notes are subject to an interest rate adjustment if the debt ratings assigned to the senior notes are downgraded (as defined in the agreements). Further, the senior notes contain a provision that repayment of the senior notes may be accelerated if we experience a change in control (as defined in the agreements). Our borrowings under our senior notes contain minimal covenants, primarily restrictions on liens. Under our revolving credit facilities, covenants include restrictions on liens, a maximum debt to earnings ratio, a minimum fixed charge coverage ratio and a change of control provision that may require acceleration of the repayment obligations under certain circumstances. All of the repayment obligations under our borrowing arrangements may be accelerated and come due prior to the applicable scheduled payment date if covenants are breached or an event of default occurs. As of ~~February 10,~~November 17, 2018, we were in compliance with all covenants and expect to remain in compliance with all covenants under our borrowing arrangements.

As of ~~February 10,~~November 17, 2018, ~~$1.116~~the $1.475 billion of commercial paper borrowings and the $250 million ~~7.125%~~1.625% Senior Notes due ~~August 2018~~April 2019 were classified as long-term in the Consolidated Balance Sheets as we had the ability and intent to refinance them on a long-term basis through available capacity in our revolving credit ~~facility.~~facilities. As of ~~February 10,~~November 17, 2018, we had $1.997 billion of availability under our $2.0 billion revolving credit facilities, which would allow us to replace these short-term obligations with long-term financing ~~facility.~~facilities.

Our adjusted debt to earnings before impairment before tax, pension termination charges before tax, interest, taxes, depreciation, amortization, rent and share-based expense (“EBITDAR”) ratio was 2.5:1 as of ~~February 10,~~November 17, 2018, and was ~~2.6:~~2.5:1 as of ~~February 11,~~November 18, 2017. We calculate adjusted debt as the sum of total debt, capital lease obligations and rent times six; and we calculate adjusted EBITDAR by adding impairment before tax, ~~impact,~~pension termination charges before tax, interest, taxes, depreciation, amortization, rent and share-based expenses to net income. Adjusted debt to EBITDAR is calculated on a trailing four quarter basis. 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. To the extent EBITDAR continues to grow in future years, we expect our debt levels to increase; conversely, if EBITDAR declines, we would expect our debt levels to decrease. Refer to the “Reconciliation ofNon-GAAP Financial Measures” section for further details of our calculation.

From January 1, 1998 to ~~February 10,~~November 17, 2018, we have repurchased a total of ~~143.1~~145.3 million shares of our common stock at an aggregate cost of ~~$18.354~~$19.915 billion, including ~~824,733~~654,070 shares of our common stock at an aggregate cost of ~~$527.5~~$497.1 million during the ~~twenty-four~~twelve week period ended ~~February 10,~~November 17, 2018. On ~~March 21, 2017,~~September 26, 2018, the Board voted to increase the authorization by ~~$750 million.~~$1.25 billion. This raised the total value of shares authorized to be repurchased to ~~$18.65~~$20.9 billion. Considering cumulative repurchases as of ~~February 10,~~November 17, 2018, we had ~~$296.2~~$984.6 million remaining under the Board’s authorization to repurchase our common stock.

During the twenty-four week period ended February 10, 2018, we retired 1.5 million shares of treasury stock which had previously been repurchased under our share repurchase program. The retirement increased Retained deficit by $918.5 million and decreased Additional~~paid-in~~ ~~capital by $60.5 million. During the comparable prior year period, we retired 1.8 million shares of treasury stock, which increased Retained deficit by $1.321 billion and decreased Additionalpaid-in~~ ~~capital by $64.9 million.~~

Subsequent to ~~February 10,~~November 17, 2018, we have repurchased ~~382,928~~97,113 shares of our common stock at an aggregate cost of ~~$264.9~~$79.8 million.

Since our fiscal year end, we have cancelled, issued and modifiedstand-by letters of credit that are primarily renewed on an annual basis to cover deductible payments to our casualty insurance carriers. Our totalstand-by letters of credit commitment at ~~February 10,~~November 17, 2018, was ~~$108.4~~$101.6 million, compared with ~~$88.6~~$106.8 million at August ~~26, 2017,~~25, 2018, and our total surety bonds commitment at ~~February 10,~~November 17, 2018, was ~~$32.5~~$27.6 million, compared with ~~$28.8~~$23.6 million at August ~~26, 2017.~~25, 2018.

~~Except for the previously discussed amendments to our existing revolving credit facilities, debt issuance and retirement, as~~As of ~~February 10,~~November 17, 2018, there were no significant changes to our contractual obligations as described in our Annual Report on Form10-K for the year ended August ~~26, 2017.~~25, 2018.

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes certain financial measures not derived in accordance with GAAP. Thesenon-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. Furthermore, our management and the Compensation Committee of the Board use the ~~abovementioned~~above mentionednon-GAAP financial measures to analyze and compare our underlying operating results and to determine payments of performance-based compensation. We have included a reconciliation of this information to the most comparable GAAP measures in the following reconciliation tables.

Reconciliation ofNon-GAAP Financial Measure: AdjustedAfter-Tax ~~Return on Invested Capital “ROIC”~~ROIC

The following tables calculate the percentages of adjusted ROIC for the trailing four quarters ended ~~February 10,~~November 17, 2018 and ~~February 11,~~November 18, 2017.


																					A				B				A-B=C				D				C+D
	A				B				A-B=C				D				C+D
(in thousands, except percentage)	Fiscal Year Ended August 26, 2017				Twenty-Four Weeks Ended February 11, 2017				Twenty-Eight Weeks Weeks Ended August 26, 2017				Twenty-Four Weeks Ended February 10, 2018				Trailing Four Quarters Ended February 10, 2018				Fiscal Year Ended August 25, 2018				Twelve Weeks Ended November 18, 2017				Forty Weeks Ended August 25, 2018				Twelve Weeks Ended November 17, 2018				Trailing Four Quarters Ended November 17, 2018
Net income		$	1,280,869			$	515,270			$	765,599			$	570,533			$	1,336,132			$	1,337,536			$	281,003			$	1,056,533			$	351,406			$	1,407,939
Adjustments:
Impairment before tax impact			–				–				–				193,162				193,162
Impairment before tax																							193,162				–				193,162				–				193,162
Pension termination charges before tax																							130,263				–				130,263				–				130,263
Interest expense			154,580				67,504				87,076				78,229				165,305				174,527				38,889				135,638				39,006				174,644
Rent expense			302,928				135,859				167,069				142,712				309,781				315,580				69,655				245,925				71,216				317,141
Tax effect⁽¹⁾			(153,265	)			(69,957	)			(83,308	)			(112,656	)			(195,964	)			(211,806	)			(36,362	)			(175,444	)			(25,773	)			(201,217	)
Deferred tax remeasurement			–				–				–				(136,679	)			(136,679	)
Deferred tax liabilities, net of repatriation tax																							(132,113	)			–				(132,113	)			–				(132,113	)

After-tax return		$	1,585,112			$	648,676			$	936,436			$	735,301			$	1,671,737
Adjustedafter-tax return																						$	1,807,149			$	353,185			$	1,453,964			$	435,855			$	1,889,819


Average debt⁽²⁾																		$	5,082,494																			$	5,028,638
Average deficit⁽³⁾																			(1,565,135	)																			(1,479,244	)
Rent x 6⁽⁴⁾																			1,858,686																				1,902,846
Average capital lease obligations⁽⁵⁾																			153,599																				157,763

Invested capital																		$	5,529,644																			$	5,610,003


ROIC																			30.2%
Adjustedafter-tax ROIC																																							33.7%


																					A				B				A-B=C				D				C+D
	A				B				A-B=C				D				C+D
(in thousands, except percentage)	Fiscal Year Ended August 27, 2016				Twenty-Four Weeks Ended February 13, 2016				Twenty-Eight Weeks Ended August 27, 2016				Twenty-Four Weeks Ended February 11, 2017				Trailing Four Quarters Ended February 11, 2017				Fiscal Year Ended August 26, 2017				Twelve Weeks Ended November 19, 2016				Forty Weeks Ended August 26, 2017				Twelve Weeks Ended November 18, 2017				Trailing Four Quarters Ended November 18, 2017
Net income		$	1,241,007			$	486,725			$	754,282			$	515,270			$	1,269,552			$	1,280,869			$	278,125			$	1,002,744			$	281,003			$	1,283,747
Adjustments:
Interest expense			147,681				67,842				79,839				67,504				147,343				154,580				33,306				121,274				38,889				160,163
Rent expense			280,490				128,897				151,593				135,859				287,452				302,928				66,981				235,947				69,655				305,602
Tax effect⁽¹⁾			(147,291	)			(67,678	)			(79,613	)			(69,957	)			(149,570	)			(153,265	)			(34,900	)			(118,365	)			(36,362	)			(154,727	)

After-tax return		$	1,521,887			$	615,786			$	906,101			$	648,676			$	1,554,777			$	1,585,112			$	343,512			$	1,241,600			$	353,185			$	1,594,785


Average debt⁽²⁾																		$	4,974,468																			$	5,073,275
Average deficit⁽³⁾																			(1,822,960	)																			(1,678,071	)
Rent x 6⁽⁴⁾																			1,724,712																				1,833,612
Average capital lease obligations⁽⁵⁾																			140,851																				152,517

Invested capital																		$	5,017,071																			$	5,381,333


ROIC																			31.0%																				29.6%

(1)

~~The effective~~Effective tax rate ~~was 29.9%, excluding the impact of the revaluation of net deferred tax liabilities, and 34.4%~~ over ~~the~~ trailing four quarters ended ~~February 10,~~November 17, 2018 is 24.2% for impairment, 28.1% for pension termination and ~~February 11,~~23.4% for interest and rent expense. Effective tax rate over trailing four quarters ended November 18, 2017 ~~respectively.~~was 33.5%.

(2)

Average debt is equal to the average of our debt measured as of the previous five quarters.

(3)

Average equity is equal to the average of our stockholders’ deficit measured as of the previous five quarters.

(4)

Rent is multiplied by a factor of six to capitalize operating leases in the determination ofpre-tax invested capital.

(5)

Average capital lease obligations are equal to the average of our capital lease obligations measured as of the previous five quarters.

Reconciliation ofNon-GAAP Financial Measure: Adjusted Debt to ~~Earnings before Impairment, Interest, Taxes, Depreciation, Rent and Share-Based Expense “EBITDAR”~~EBITDAR

The following tables calculate the ratio of adjusted debt to EBITDAR for the trailing four quarters ended ~~February 10,~~November 17, 2018 and ~~February 11,~~November 18, 2017.


	A			B			A-B=C			D			C+D			A			B			A-B=C			D			C+D

(in thousands, except ratio)	Fiscal Year Ended August 26, 2017			Twenty-Four Weeks Ended February 11, 2017			Twenty-Eight Weeks Ended August 26, 2017			Twenty-Four Weeks Ended February 10, 2018			Trailing Four Quarters Ended February 10, 2018			Fiscal Year Ended August 25, 2018			Twelve Weeks Ended November 18, 2017			Forty Weeks Ended August 25, 2018			Twelve Weeks Ended November 17, 2018			Trailing Four Quarters Ended November 17, 2018
Net income		$	1,280,869		$	515,270		$	765,599		$	570,533		$	1,336,132		$	1,337,536		$	281,003		$	1,056,533		$	351,406		$	1,407,939
Add: Impairment before tax impact			–			–			–			193,162			193,162
Add: Impairment before tax																		193,162			–			193,162			–			193,162
Pension termination charges before tax																		130,263			–			130,263			–			130,263
Interest expense			154,580			67,504			87,076			78,229			165,305			174,527			38,889			135,638			39,006			174,644
Income tax expense			644,620			260,097			384,523			25,090			409,613			298,793			148,862			149,931			97,406			247,337

Adjusted EBIT			2,080,069			842,871			1,237,198			867,014			2,104,212			2,134,281			468,754			1,665,527			487,818			2,153,345
Add: Depreciation expense			323,051			144,645			178,406			157,337			335,743			345,084			77,986			267,098			82,452			349,550
Rent expense			302,928			135,859			167,069			142,712			309,781			315,580			69,655			245,925			71,216			317,141
Share-based expense			38,244			20,711			17,533			23,764			41,297			43,674			11,086			32,588			10,527			43,115

EBITDAR		$	2,744,292		$	1,144,086		$	1,600,206		$	1,190,827		$	2,791,033
Adjusted EBITDAR																	$	2,838,619		$	627,481		$	2,211,138		$	652,013		$	2,863,151


Debt														$	5,043,541														$	5,156,037
Capital lease obligations															156,238															158,284
Rent x 6⁽¹⁾															1,858,686															1,902,846

Adjusted debt														$	7,058,465														$	7,217,167


Adjusted debt / EBITDAR															2.5
Adjusted debt to EBITDAR																														2.5


	A			B			A-B=C			D			C+D			A			B			A-B=C			D			C+D

(in thousands, except ratio)	Fiscal Year Ended August 27, 2016			Twenty-Four Weeks Ended February 13, 2016			Twenty-Eight Weeks Ended August 27, 2016			Twenty-Four Weeks Ended February 11, 2017			Trailing Four Quarters Ended February 11, 2017			Fiscal Year Ended August 26, 2017			Twelve Weeks Ended November 19, 2016			Forty Weeks Ended August 26, 2017			Twelve Weeks Ended November 18, 2017			Trailing Four Quarters Ended November 18, 2017
Net income		$	1,241,007		$	486,725		$	754,282		$	515,270		$	1,269,552		$	1,280,869		$	278,125		$	1,002,744		$	281,003		$	1,283,747
Interest expense			147,681			67,842			79,839			67,504			147,343
Add: Interest expense																		154,580			33,306			121,274			38,889			160,163
Income tax expense			671,707			266,088			405,619			260,097			665,716			644,620			147,471			497,149			148,862			646,011

EBIT			2,060,395			820,655			1,239,740			842,871			2,082,611			2,080,069			458,902			1,621,167			468,754			2,089,921
Add: Depreciation expense			297,397			134,936			162,461			144,645			307,106			323,051			71,812			251,239			77,986			329,225
Rent expense			280,490			128,897			151,593			135,859			287,452			302,928			66,981			235,947			69,655			305,602
Share-based expense			39,825			18,547			21,278			20,711			41,989			38,244			9,787			28,457			11,086			39,543

EBITDAR		$	2,678,107		$	1,103,035		$	1,575,072		$	1,144,086		$	2,719,158		$	2,744,292		$	607,482		$	2,136,810		$	627,481		$	2,764,291


Debt														$	5,151,862														$	4,982,984
Capital lease obligations															149,802															159,540
Rent x 6⁽¹⁾															1,724,712															1,833,612

Adjusted debt														$	7,026,376														$	6,976,136


Adjusted debt / EBITDAR															2.6
Adjusted debt to EBITDAR																														2.5

~~Reconciliation ofNon-GAAP~~ ~~Financial Measure: Adjusted Operating Profit~~

~~The following table calculates adjusted operating profit. Adjusted operating profit is calculated to exclude the impact of impairment charges and operating results of IMC and AutoAnything:~~

The following table calculates adjusted net income. Adjusted net income is calculated to exclude the impact of impairment charges, Tax Reform, excess tax benefits from option exercises and operating results of IMC and AutoAnything:

~~Reconciliation ofNon-GAAP~~ ~~Financial Measure: Adjusted Diluted Earnings Per Share~~

The following table calculates the adjusted diluted earnings per share. Adjusted diluted earnings per share is calculated to exclude the impact of impairment charges, Tax Reform, excess tax benefits from option exercises and operating results of IMC and AutoAnything:

Refer to Note A of the Notes to Condensed Consolidated Financial Statements for the discussion of recent accounting pronouncements.

Preparation of our consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements, reported amounts of revenues and expenses during the reporting period and related disclosures of contingent liabilities. Our policies are evaluated on an ongoing basis, and our significant judgments and estimates are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results could differ under different assumptions or conditions.

Our critical accounting policies are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form10-K for the year ended August ~~26, 2017.~~25, 2018. Our critical accounting policies have not changed since the filing of our Annual Report on Form10-K for the year ended August ~~26, 2017.~~25, 2018.

At ~~February 10,~~November 17, 2018, the only material change to our instruments and positions that are sensitive to market risk since the disclosures in our ~~2017~~2018 Annual Report to Stockholders was the ~~$39.6~~$149.4 million net ~~decrease~~increase in commercial paper.

The fair value of our debt was estimated at ~~$5.049~~$5.065 billion as of ~~February 10,~~November 17, 2018 and ~~$5.171~~$4.948 billion as of August ~~26, 2017,~~25, 2018, based on the quoted market prices for the same or similar debt issues or on the current rates available to AutoZone for debt of the same ~~terms (Level 2).~~terms. Such fair value was ~~greater~~less than the carrying value of debt by ~~$5.4~~$90.6 million at ~~February 10,~~November 17, 2018 and ~~$90.3~~less than the carrying value by $57.5 million at August ~~26, 2017.~~25, 2018. We had ~~$1.116~~$1.475 billion of variable rate debt outstanding at ~~February 10,~~November 17, 2018 and ~~$1.155~~$1.325 billion of variable rate debt outstanding at August ~~26, 2017.~~25, 2018. At these borrowing levels for variable rate debt, a one percentage point increase in interest rates would have had an unfavorable annual impact on ourpre-tax earnings and cash flows of ~~$11.2~~$14.7 million in fiscal ~~2018.~~2019. The primary interest rate exposure on variable rate debt is based on LIBOR. We had outstanding fixed rate debt of ~~$3.928~~$3.681 billion, net of unamortized debt issuance costs of ~~$22.0~~$18.6 million at ~~February 10,~~November 17, 2018 and ~~$3.926~~$3.681 billion, net of unamortized debt issuance costs of ~~$23.9~~$19.4 million at August ~~26, 2017.~~25, 2018. A one percentage point increase in interest rates would reduce the fair value of our fixed rate debt by ~~$175.1~~$146.0 million at ~~February 10,~~November 17, 2018.

As of ~~February 10,~~November 17, 2018, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act, as amended. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of ~~February 10,~~November 17, 2018.

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~February 10,~~November 17, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

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

As of the date of this filing, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Annual Report on Form10-K for the fiscal year ended August ~~26, 2017.~~25, 2018.

Shares of common stock repurchased by the Company during the quarter ended ~~February 10,~~November 17, 2018 were as follows:

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. This program was most recently amended on ~~March 21, 2017~~September 26, 2018 to increase the repurchase authorization by ~~$750 million.~~$1.25 billion. This brings the total value of shares to be repurchased to ~~$18.65~~$20.9 billion. All of the above repurchases were part of this program. Subsequent to ~~February 10,~~November 17, 2018, we have repurchased ~~382,928~~97,113 shares of our common stock at an aggregate cost of ~~$264.9~~$79.8 million.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


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


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


PART I.			FINANCIAL INFORMATION		3
	Item 1.	Financial Statements		3
		CONDENSED CONSOLIDATED BALANCE SHEETS		3
		CONDENSED CONSOLIDATED STATEMENTS OF INCOME		4
		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		4
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS		5
		CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT		6
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		67
		REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		1716
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1817
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2623
	Item 4.	Controls and Procedures		2623
PART II.			OTHER INFORMATION		2724
	Item 1.	Legal Proceedings		2724
	Item 1A.	Risk Factors		2724
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2724
	Item 3.	Defaults Upon Senior Securities		2825
	Item 4.	Mine Safety Disclosures		2825
	Item 5.	Other Information		2825
	Item 6.	Exhibits		2926
SIGNATURES				3027
~~EXHIBIT INDEX~~


	Twelve Weeks Ended								Twenty-Four Weeks Ended
(in thousands)	February 10, 2018				February 11, 2017				February 10, 2018				February 11, 2017

Interest cost		$	2,390			$	2,385			$	4,780			$	4,770
Expected return on plan assets			(4,384	)			(4,628	)			(8,768	)			(9,257	)
Amortization of net loss			2,478				3,201				4,955				6,403

Net periodic pension expense		$	484			$	958			$	967			$	1,916


(in thousands)	Auto Parts Stores				Other				Total

Net balance as of August 26, 2017		$	326,703			$	65,184			$	391,887
Goodwill adjustments⁽¹⁾			(24,058	)			(65,184	)			(89,242	)


Net balance as of February 10, 2018		$	302,645			$	–			$	302,645


(in thousands)	Common Shares Issued		Common Stock		Additional Paid-in Capital		Retained Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance at August 25, 2018		27,530	$	275	$	1,155,426	$	(1,208,824	)	$	(235,805	)	$	(1,231,427	)	$	(1,520,355	)
Cumulative effect of adoption of ASU2014-09								(6,773	)								(6,773	)

Balance at August 25, 2018, as adjusted		27,530	$	275	$	1,155,426	$	(1,215,597	)	$	(235,805	)	$	(1,231,427	)	$	(1,527,128	)
Net income								351,406									351,406
Total other comprehensive loss											(40,261	)					(40,261	)
Purchase of 654 shares of treasury stock														(497,060	)		(497,060	)
Issuance of common stock under stock options and stock purchase plans		128		2		44,924											44,926
Share-based compensation expense						9,501											9,501

Balance at November 17, 2018		27,658	$	277	$	1,209,851	$	(864,191	)	$	(276,066	)	$	(1,728,487	)	$	(1,658,616	)


Balance at August 26, 2017		28,735	$	287	$	1,086,671	$	(1,642,387	)	$	(254,557	)	$	(618,391	)	$	(1,428,377	)
Net income								281,003									281,003
Total other comprehensive income											(41,894	)					(41,894	)
Purchase of 597 shares of treasury stock														(352,572	)		(352,572	)
Issuance of common stock under stock options and stock purchase plans		26		1		7,462											7,463
Share-based compensation expense						9,278											9,278

Balance at November 18, 2017		28,761	$	288	$	1,103,411	$	(1,361,384	)	$	(296,451	)	$	(970,963	)	$	(1,525,099	)


(in thousands)	Estimated Useful Life		Gross Carrying Amount			Accumulated Amortization				Impairment⁽¹⁾				Net Carrying Amount

Amortizing intangible assets:
Technology		3-5 years		$	10,570		$	(9,994	)		$	(576	)		$	–
Noncompete agreements		5 years			1,300			(1,223	)			(77	)			–
Customer relationships		3-10 years			49,676			(27,583	)			(10,057	)			12,036

				$	61,546		$	(38,800	)		$	(10,710	)			12,036

Non-amortizing intangible asset:
Trade name											$	(26,900	)			–


Total intangible assets other than goodwill															$	12,036


(in thousands)	Scheduled Payments

2018		$	3,507
2019			1,847
2020			1,847
2021			1,847
2022			1,847
2023			3,464
2024			4,619
2025			5,773

TotalOne-Time Transition Tax Forecasted Obligation Payments		$	24,751


Issuer Repurchases of Equity Securities
Period	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs
November 19, 2017 to December 16, 2017		13,002		$	616.38		13,002		$	463,116,160
December 17, 2017 to January 13, 2018		32,537			768.29		32,537			438,118,450
January 14, 2018 to February 10, 2018		181,764			780.52		181,764			296,247,583

Total		227,303		$	769.38		227,303		$	296,247,583



	3.1			Restated Articles of Incorporation of AutoZone, Inc. incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form10-Q for the quarter ended February 13, 1999.

	3.2			~~Sixth~~Seventh Amended and Restated~~By-laws~~By-Laws of AutoZone, Inc. incorporated by reference to Exhibit 3.1 to the Current Report on Form~~Form~~ 8-K dated ~~October 7, 2015.~~March 19, 2018.

	~~4.1~~*10.1			~~Master Extension, New Commitment~~Form of Restricted Stock Unit Grant Notice and ~~Amendment~~Restricted Stock Unit Award Agreement ~~dated as of November 18, 2017 among~~under the Amended and Restated AutoZone, Inc. as Borrower; Bank of America, N.A. as Administrative Agent and Swingline Lender; JPMorgan Chase Bank, N.A. as Syndication Agent; Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Chase Bank, N.A. as Joint Lead Arrangers; Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Chase Bank, N.A., SunTrust Robinson Humphrey, Inc., U.S. Bank National Association, Wells Fargo Securities, LLC and Barclay’s Capital as Joint Book Runners; SunTrust Bank, U.S. Bank National Association, Wells Fargo Bank, National Association and Barclay’s Bank PLC as Documentation Agents; and the several lenders party thereto. Incorporated by reference to Exhibit 10.1 of the Current Report on Form~~8-K~~ ~~dated November 18, 2017.~~

	~~12.1~~			~~Computation of Ratio of Earnings to Fixed Charges.~~2011 Equity Incentive Award Plan.

	15.1			Letter Regarding Unaudited Interim Financial Statements.

	31.1			Certification of Principal Executive Officer Pursuant to Rules13a-14(a) and15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2			Certification of Principal Financial Officer Pursuant to Rules13a-14(a) and15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1			Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2			Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	101. INS			XBRL Instance Document

	101.SCH			XBRL Taxonomy Extension Schema Document

	101.CAL			XBRL Taxonomy Extension Calculation Document

	101.LAB			XBRL Taxonomy Extension Labels Document

	101.PRE			XBRL Taxonomy Extension Presentation Document

	101.DEF			XBRL Taxonomy Extension Definition Document


AUTOZONE, INC.

By:		/s/ WILLIAM T. GILES
William T. Giles
Chief Financial Officer and Executive Vice President
Finance and Information Technology
(Principal Financial Officer)

By:		/s/ CHARLIE PLEAS, III
Charlie Pleas, III
Senior Vice President, Controller
(Principal Accounting Officer)