AZO 10-K & 10-Q changes, risk factors and insider trading

We have increased annual revenues in the past five fiscal years from $11.9$12.6 billion in fiscal 20192020 to $18.5$18.9 billion in fiscal 2024,2025, with a compounded annual growth rate of approximately nineeight percent. Annual revenue growth is driven by increases in same store sales, the opening of new stores and the development of new commercial programs. Same store sales are impacted both by customer demand levels and by the prices we are able to charge for our products, which can also be negatively impacted by economic pressures. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of same store sales.

Achieving our store development and expansion goalsgoals, domestically and in international markets, will depend upon our ability to identify and obtain suitable sites for new and expanded stores in a timely manner and at acceptable costs, the hiring and training of qualified personnelpersonnel, effective utilization of our supply chain and hub network, and the integration of new stores into existing operations, among other factors. Furthermore, we open new stores only after evaluating customer buying trends and market demand/needs, all of which could be adversely affected by persistent unemployment, wage cuts, small business failures,failures and microeconomic conditions unique to the automotive industry and our ability to expand into international markets.industry. There can be no assurance we will be able to achieve our store expansion goals, manage our growth investments effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably.

Although we are a leading distributor of automotive parts and other products in the commercial market, we must effectively compete against national, regional and local auto parts chains, independently owned parts stores, wholesalers, jobbers, repair shops, auto dealers, online retailers and others in order to increase our commercial market share. Although we believe we compete effectively in the commercial market on the basis of customer service, merchandise quality, selectionassortment and availability, price, delivery times, product warranty, distribution locations and the strength of our AutoZone brand, trademarks and service marks, some automotive aftermarket participants have been in business for substantially longer periods of time than we have, and as a result have developed long-term customer relationships, an experienced sales organization, considerable market presence and have large available inventories. If we are unable to profitably grow our sales with existing commercial customers, our sales growth may be limited.

Furthermore, our vendors are impacted by global economic and geopolitical conditions which in turn impact our ability to source merchandise at competitive prices. For example, new or increased tariffs, inflation, rising interest rates and disruption to the global supply chain have negatively impacted costs and inventory availability and may continue to have a negative impact on future results and profitability. Credit market and other macroeconomic conditions could also have a material adverse effect on the ability of our global and domestic suppliers to finance and operate their businesses.

We directly imported approximately 13% of our purchases in fiscal 2024,2025, but many of our domestic vendors directly import their products or components of their products. Changes to the price or flow of these goods for any reason, such as increased import duties or tariffs, foreign trade policies, civil unrest or acts of war, currency fluctuations, disruptions in maritime lanes, port labor disputes and other issues, economic conditions and instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers’ failure to meet our standards, issues with labor practices of our suppliers or labor problems they may experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and following the disruption), the availability and cost of raw materials to suppliers, increased import duties or tariffs, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, foreign trade policies, trade sanctions, import limitations on certain types of goods or of goods containing certain materials from other countries, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import, often are beyond our control and could adversely affect our operations and profitability. Furthermore, these risks may be amplified if we or our domestic vendors are unable to diversify our or their supply chainchains or rely too heavily on a single country to source our or our vendors’ products. These and other factors affecting our supplierssuppliers’ and our access to products could materially adversely affect our business and financial performance. As we or our domestic vendors increase the importation of merchandise or components from foreign vendors, these risks are likely to increase.

A disruption to our supply chain or distribution network could adversely affect our ability to receive and distribute inventory in a timely manner, which could result in low inventory availability, lost sales, increased supply chain costs and loss of customer loyalty, among other things. Such disruptions may result from damage or destruction of our distribution centers, our ability to attract and retain qualified drivers, costs associated with maintaining or operating our fleet or macroeconomic conditions impacting the broader logistics or supply chain industry at large. For example, in recent years, ports, rails and domestic long-hauls in the U.S. and elsewhere have been negatively impacted by capacity constraints, congestion and delays, periodic labor disputes, security issues, weather-related events, and natural disasters, which were further exacerbated by the COVID-19 pandemic and other factors beyond our control. Our business and competitive position may be negatively impacted if we are unable to successfully mitigate the impacts of such disruption to our supply chain or if we are unable to manage such disruptions more effectively than our competitors.

In addition, we have made, and plan to continue to make, significant investments in our supply chain, such as the construction of multiple new distribution centers which began operations in fiscal 2025 and the execution of various technology initiatives. These investments seek to improve product availability and assortment, fulfill evolving consumer product demands and keep up with our long-term store expansion goals. If we fail to effectively implement thesefuture changes,investments, or if our investments in our supply chain initiatives do not provide the anticipated benefits, we could experience sub-optimal inventory levels in our stores or increasesbe inrequired ourto operatingmake costs,further investments, which could adversely affect our sales volume and/or our margins.

The various risks we face in our U.S. operations generally also exist when conducting operations in and sourcing products and materials from outside of the U.S.,U.S. There are also challenges inherent in establishing and managing international operations, in addition to the uniquespecific costs, risks and difficulties ofunique managingto internationalthat operations.market. OurFor expansionexample, intothe international markets may be adversely affected by local lawssale and customs,distribution U.S.of laws applicable to foreign operations,parts and politicalproducts in Mexico and socio-economicBrazil conditionsrequires as well as our generalthe ability to competeadapt effectivelyour merchandising and providemarketing superiorstrategies customerto serviceaccount regardlessfor, ofamong distance,other languagethings, different vehicles in operation in local markets and culturaldifferent differences.consumer behaviors with respect to aftermarket automotive repair.

Risks inherent in international operations also include potential adverse tax consequences, potential changes to tariffs, trade policies and trade agreements, compliance with the Foreign Corrupt Practices Act and local anti-bribery and anti-corruption laws, greater difficulty in obtaining and enforcing intellectual property rights, challenges to identify and gain access to local suppliers, and possibly misjudging the response of consumers in foreign countries to our product assortment and marketing strategy.

Business interruptions including war or acts of terrorism, political or civil unrest, unusual or severe weather conditions such as hurricanes, tornadoes, windstorms, fires, earthquakes and floods, public health crisescrises, disruption of critical infrastructure systems, banking systems or utility services and other disasters or the threat of any of them, may negatively impact the hours and operations of our stores, distribution centers, store support centers or sourcing offices; may negatively impact our supply chain and distribution network; and may impede our ability to source quality merchandise domestically and outside of the U.S. on favorable terms.

We rely extensively on information technology systems, some of which are managed or provided by third-party service providers, to collect, analyze, process, store, manage, transmit and protect key business processes, transactions and data, such as sales data, customer data, employee data, demand forecasting, merchandise ordering, inventory replenishment, supply chain management, payment processing, order fulfillment and more. Delays in the maintenance, updates, upgrading, or patching of these systems, applications or processes could adversely impact their effectiveness orand couldwould expose us to security and other risks. Our systems and the third-party systems with which we interact are subject to damage, failure or interruption due to various reasons such as: power or other critical infrastructure outages, facility damage, physical theft, telecommunications failures, malware, security incidents, malicious cyber-attacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware, natural disasters and catastrophic events, inadequate or ineffective redundancy measures; and design or usage errors by AutoZoners, contractors or third-party service providers. Although we seek to effectively maintain and safeguard our systems and our data and we seek to ensure our third-party service providers effectively maintain and safeguard their systems and our data, such efforts are not always successful. As a result, we or our service providers have experienced and are likely to again experience one or more errors, interruptions, delays or cessations of service impacting the integrityintegrity, performance or availability of our information technology infrastructure. While such incidents have not been material to date, any future incident could significantly disrupt our operations and key business processes, result in the impairment or loss of critical data, be costly and resource-intensive to remedy; harm our reputation and relationship with customers, AutoZoners, vendors and other stakeholders; and have a material adverse impact on our business and operating results.

In addition, our information technology systems, infrastructure and personnel require ongoing substantial investments, such as replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or designing or cost-effectively acquiring and implementing new systems with new functionality.functionality, including artificial intelligence. These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, cost overruns, or implementation delays or errors, and may result in operational challenges, security control failures, reputational harm, and increased costs that could adversely affect our business operations and results of operations.

While we have not experienced a material breach of our information systems or data to date, unauthorized parties have in the past gained access and exfiltrated data, and will continue to attempt to do so as the result of a cyber-attack, employeemisconduct misconduct,or employeeerror error,by an AutoZoner, job applicant, customer, vendor or third party, system vulnerabilities or compromises, fraud, hacking, phishing attempts, malware, ransomware, other malicious codes or other intentional or unintentional acts. Furthermore, hardware, software or other IT applications that we or a third party develop for our use have contained and may contain exploitable vulnerabilities, bugs or design defects or may involve other problems that could unexpectedly compromise information security.

The cost to remediate and respond to a cyber incident involving unauthorized use, access, damage or loss of systems, data or other information could be significant. To the extent any cyber incident involving our or one of our customer’s or third-party service provider’s information systems results in the unauthorized access, loss, damage or misappropriation of information, we may be required by law to notify impacted individuals and face substantial liability due to claims arising from customers, financial institutions, AutoZoners, regulatory authorities, payment card issuers and others. We maintain insurance coverage that may protect us from losses or claims in connection with certain incidents; however, our insurance coverage may not be sufficient to cover significant losses in any particular situation.

The regulatory environment related to information security, data collection, processing and use, and data privacy is becoming increasingly rigorous and complex. Multiple states in the U.S. have passed, and continue to pass, data protection laws. The potential effects of the various laws regulating the collection, retention, transfer, useuse, notification, consent and other types of processing of personal or protected information are far-reaching and may require significant time, resources and costs to comply, may require changes to our existing practices and processes that are not advantageous to our business, and otherwise limit our ability to use data to provide a more personalized customeruser experience or as otherwise desired. In addition, failure to comply with applicable requirements by us or our business partners or third-party service providers or vendors could subject us to governmental investigations, regulatory enforcement actions, fines, sanctions, governmental investigations, lawsuits or reputational damage.

We are self-insured up to certain limits for workers’ compensation, employee group medical, general liability,and product liability, property and automobile.vehicle claims. The types and amounts of insurance may vary from time to time based on our decisions with respect to risk retention and regulatory requirements. Our reserves are established using historical trends and, where appropriate, using a third-party actuary to estimate costs to settle reported claims and claims incurred but not yet reported. Estimated costs are subject to a variety of assumptions and other factors including the severity, duration and frequency of claims, legal costs associated with claims, healthcare trends and projected inflation of related factors. Material increases in the number of insurance claims, changes to healthcare costs, accident frequency and severity, legal expenses and other factors could result in an unfavorable difference between actual self-insurance costs and our reserve estimates. As a result, our self-insurance costs could increaseincrease, which may adversely affect our business, results of operations, financial condition and cash flows.

We are subject to numerous federal, state and local laws and regulations, many of which are complex, frequently revised and subject to varying interpretations. These include laws governing employment and labor, wage and hour, environmental matters, proper handling and disposal of hazardous materials and waste, employee benefits, data privacy, cybersecurity, safety, the pricing and sale of goods, import and export compliance, transportation and logistics, consumer protection and advertising, among others. These laws may change over time and may differ substantially across the areas where we operate. There is added uncertainty surrounding potential changes to the regulatory environment in the United States. Although we have implemented policies and procedures to help ensure compliance with these laws, there can be no certainty that our AutoZoners and third parties with whom we do business will not take actions in violation of our policies or applicable laws. If we fail to comply with these laws, rules and regulations, or the manner in which they are interpreted or applied, we may be subject to governmental enforcement action or private litigation resulting in restrictions on our business, monetary penalties, reputational harm and increased costs of regulatory compliance. Any changes in the enforcement or interpretation of existing laws and regulations or the enactment of any new laws and regulations, including tax legislation, could have a material adverse impact on our financial condition and results of operations. We may also be subject to investigations or audits by governmental authorities and regulatory agencies as a result of enforcing existing laws and regulations or changes in enforcement priorities, which can occur in the ordinary course of business or may result from increased scrutiny from a particular agency or toward a particular industry.

Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations. For example, we have significant operations in California,California and other states, where serious drought has made water less available and more costly and has increased the risk of wildfires. Changes in climate patterns leading to extreme heat waves or unusual cold weather at some of our locations can lead to increased energy usage and costs, or otherwise adversely impact our facilities and operations and disrupt our supply chains and distribution systems. Growing concern over climate change has led policy makers in thesome U.S.jurisdictions to consider the enactment of legislative and regulatory proposals that would impose extensive mandatory reporting requirements as well as requirements for reductions of greenhouse gas (“GHG”) emissions. Such laws, if enacted, are likely to impact our business in a number of ways. For example, significant increaseschanges in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new or changing federal or state incentive programs or other regulations that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell. We may not be able to accurately predict, prepare for and effectively respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers. Our inability to appropriately respond to such changes could materially adversely impact our business, financial condition, results of operations or cash flows.

We may be unable to achieve the goals and aspirations set forth in our environmental,Corporate social and governance (ESG)Responsibility report, particularly with respect to the reduction of GHG emissions, or otherwise meet the expectations of our stakeholders with respect to ESGcorporate responsibility matters.

Increasing governmentalGovernmental and societal attention to ESGcorporate responsibility matters, including expanding mandatory and voluntary reporting of GHG emissions and other sustainability metrics, and disclosure topics such as climate change, sustainability, natural resources, waste reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. We strive to deliver shared value through our businessbusiness, and our diverse stakeholders expect us to make progress in certain ESGcorporate responsibility priority issue areas. A failure or perceived failure to meet these expectations could adversely affect public perception of our business, employee morale or customer or shareholder support.

We have announced certain aspirations and goals related to ESGcorporate responsibility matters, such as our intention to reduce certain GHG emissions over time. Achievement of these aspirations, plans and goals is subject to numerous risks and uncertainties, many of which are outside of our control. These risks and uncertainties include, but are not limited to: our ability to successfully identify and implement relevant strategies on a timely and cost-effective basis; our ability to achieve the anticipated benefits and cost savings of such strategies and actions; and the availability and cost of existing and future technologies, such as alternative fuel vehicles, off-site renewable energy, and other materials and components. It is possible that we may be unsuccessful in the achievement of our ESGcorporate responsibility goals, on a timely basis or at all, or that the costs to achieve those goals become prohibitively expensive. Furthermore, our stakeholders may not be satisfied with our efforts or the speed at which we are progressing towards any such aspirations and goals. In addition, some jurisdictions have adopted laws and other regulations that may subject companies operating in those jurisdictions to legal liability for failing to meet published goals. A delay, failure or perceived failure or delay to meet our goals and aspirations could adversely affect public perception of our business, cause us to lose shareholder support, and subject us to legal claims and liabilities with respect to such matters. Certain challenges we face in the achievement of our ESGcorporate responsibility objectives are also captured within our ESGcorporate responsibility reporting, which is not incorporated by reference into and does not form any part of this report.

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

Macroeconomic conditions impact both our customers and our suppliers. Moreover, the U.S. government continues to operate under historically large deficits and debt burden. Continued distress in global credit markets, business failures, civil unrest, inflation, rising interest rates, foreign exchange rate fluctuations, significant geo-politicalgeopolitical conflicts, proposed or additional tariffs, continued volatility in energy prices, the impact of a public health crisis or pandemic (such as the COVID-19 pandemic),pandemic, constraints on the global supply chainchain, a sustained government shutdown and other factors continue to affect the global economy. Moreover, rising energy prices could impact our merchandise distribution, commercial delivery, utility and product costs. It is unclear how such factors could impact our business in the short term. Over a longer period of time, these macroeconomic and geo-politicalgeopolitical conditions could adversely affect our sales growth, margins and overhead. These could materially adversely affect our financial condition and operations.

We are thea leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at August 31,30, 2024,2025, operated 6,4326,627 stores in the U.S., 794883 stores in Mexico and 127147 stores in Brazil. Each store carries an extensive product line for cars, sport utility vehicles, vans and light duty trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. At August 31,30, 2024,2025, in 5,8986,098 of our domestic stores as well as the vast majority of our stores in Mexico and Brazil, we had a commercial sales program that providedprovides prompt delivery of parts and other products and commercial credit to local, regional and national repair garages, dealers, service stations, fleet owners and other accounts. We also sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and our commercial customers can make purchases through www.autozonepro.com. Additionally, we sell the ALLDATA brand of automotive diagnostic, repair, collision and shop management software through www.alldata.com. We also provide product information on our Duralast branded products through www.duralastparts.com. We do not derive revenue from automotive repair or installation services.

For fiscal 2024,2025, net sales increased to $18.5$18.9 billion, a 5.9%2.4% increase over the prior year. Our retail sales andDomestic commercial sales inincreased 6.7%, which represents 31.7% of our domestictotal andDomestic international markets grew as we continue to make progress on our growth initiatives aimed at improving parts availability and providing WOW! Customer Service.sales. Operating profit increaseddecreased 9.1%4.7% to $3.8$3.6 billion, net income increaseddecreased 5.3%6.2% to $2.7$2.5 billion and diluted earnings per share increaseddecreased 13.0%3.1% to $149.55$144.87 for the year.

During fiscal 2024,2025, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 86%85% of total sales. While we have not experienced any fundamental shifts in our category sales mix as compared to previous years, in our domestic stores we seehave seen a slight decrease in mix of sales of the discretionaryaccessories category and a slight increase in the maintenance and failure categories compared to lastthe year.previous two years.

Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, interest rates, levels of consumer debt, fuel and energy costs, prevailing wage rates, foreign exchange rate fluctuations, supply chain disruptions, tariffs, trade policies and other geopolitical factors, hiring and other economic conditions. Given the nature of these macroeconomic factors, which are generally outside of our control, 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.

We believe as the number of miles driven increases, consumers’ vehicles are more likely to need service and maintenance, resulting in an increase in the need for automotive hard parts and maintenance items. SinceFor the beginningtwelve-month ofperiod the fiscal year and throughended July 20242025, miles driven in the U.S. increased 1.2%1.0% compared to the same period in the prior year based on the latest information available from the U.S. Department of Transportation.

As the number of seven-year-old or older vehicles on the road increases, we expect an increase in demand for the products we sell. We expect the aging vehicle population to continue to increase as consumers keep their cars longer. According to the latest data provided by S&P Global Mobility, the average age of light vehicles on the road wasincreased 12.6slightly to 12.8 years and these vehicles account for approximately 38%43% of U.S. vehicles.

(2) The 52 weeks ended August 28, 2021 and August 29, 2020 werewas negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0 million (pre-tax) and $83.9 million (pre-tax), respectively..

(10) Share repurchases are inclusive of excise tax in fiscal 2025, 2024 and 2023. The excise tax is assessed at one percent of the fair market value of net stock repurchases after December 31, 2022.

A discussion of changes in our results of operations from fiscal 20232024 to fiscal 20222023 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended August 26,31, 2023,2024, filed with the SECUnited States Securities and Exchange Commission on October 24,28, 2023,2024, which is available free of charge on the SECsSEC’s website at www.sec.gov and at www.autozone.com, by clicking “Investor Relations” located at the bottom of the page.

Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16 weeks in 2025, 17 weeks in 2024 and 16 weeks in 2023 and 2022.2023. Because the fourth quarter contains seasonally high sales volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth quarter represents a disproportionate share of our annual net sales and net income. The fourth quarter of fiscal year 2025 represented 33.0% of annual sales and 33.5% of net income; the fourth quarter of fiscal year 2024 represented 33.6% of annual sales and 33.9% of net income; and the fourth quarter of fiscal year 2023 represented 32.6% of annual sales and 34.2% of net income; and the fourth quarter of fiscal year 2022 represented 32.9% of annual sales and 33.3% of net income.

Net cash provided by operating activities was $3.1 billion in 2025, $3.0 billion in 2024,2024 and $2.9 billion in 2023 and $3.2 billion in 2022.2023. Cash flows from operations areincreased favorableslightly compared toover last year primarily due to higherfavorable netchanges in deferred income partially due to the additional week of sales in the current year.taxes.

Our net cash flows used in investing activities were $1.3$1.4 billion, $876.2$1.3 millionbillion and $648.1$876.2 million in fiscal 2024,2025, 20232024 and 2022,2023, respectively. The increase in net cash used in investing activities in fiscal 20242025 was primarily due to an increase in capital expenditures. We invested $1.1$1.3 billion, $796.7$1.1 millionbillion and $672.4$796.7 million in capital assets in fiscal 2024,2025, 20232024 and 2022,2023, respectively. The increase in capital expenditures from fiscal 20232024 to fiscal 20242025 was primarily driven by our growth initiatives, including investments in new distribution centersstores and storeshub toand bemega openedhub instore subsequent periods as well as stores opened in the current year.expansions. We had net new store openings of 213,304, 197213 and 176197 for fiscal 2024,2025, 20232024 and 2022,2023, respectively. We invest a portion of our assets held by our wholly owned insurance captive in marketable debt securities. We purchased marketable debt securities of $38.8$64.5 million, $66.9$38.8 million and $56.0$66.9 million in fiscal 2024,2025, 20232024 and 2022,2023, respectively. We had proceeds from the sale of marketable debt securities of $40.8$63.3 million, $58.4$40.8 million and $53.9$58.4 million in fiscal 2024,2025, 20232024 and 2022,2023, respectively. Our net investment in tax credit equity investments was $227.5$111.8 million, $98.0$227.5 million and $31.5$98.0 million in fiscal 2024,2025, 20232024 and 2022,2023, respectively.

Net cash used in financing activities was $1.7 billion, $2.1$1.7 billion and $3.5$2.1 billion in fiscal 2024,2025, 20232024 and 2022,2023, respectively. The net cash used in financing activities reflected purchases of treasury stock, which totaled $3.1$1.6 billion, $3.7$3.1 billion and $4.4$3.7 billion for fiscal 2024,2025, 20232024 and 2022,2023, respectively. The treasury stock purchases in fiscal 2024,2025, 20232024 and 20222023 were primarily funded by cash flows from operations and increased borrowings.borrowings in fiscal 2024 and 2023. During the year ended August 31,30, 2024,2025, we repaid our $300$400 million 3.125%3.250% Senior Notes and $500 million 3.625% Senior Notes due April 20242025 and issued $2.3$500 billionmillion of new debt compared to $2.3 billion in 2024 and $1.8 billion in 20232023. In fiscal years 2025 and $7502023 millionthe inproceeds 2022.from the issuance of debt were used for general corporate purposes. In fiscal year 2024 the proceeds from the issuance of debt were used to repay a portion of our commercial paper borrowings and for general corporate purposes. In fiscal years 2023 and 2022 the proceeds from the issuance of debt were used for general corporate purposes.

The Company had net proceeds from commercial paper and short-term borrowings of $168.6 million during fiscal 2025, net repayments of commercial paper and short-term borrowingborrowings of $629.6 million during fiscal 2024,2024 and net proceeds from the issuance of commercial paper and short-term borrowings of $606.2 million and $603.4 million during fiscal 2023 and 2022, respectively.2023.

During fiscal 2025,2026, we expect to moderately increase the investment in our business as compared to fiscal 2024.2025. Our investments are expected to be directed primarily to our supply chaingrowth initiatives, which includeincluding new distribution centersstores and new stores, including expanded hub stores and mega hub stores. The amount of investments in our new stores is impacted by different factors, including whether the building and land are purchased (requiring higher investment) or leased (generally lower investment) and whether such buildings are located in the U.S., Mexico or Brazil, or located in urban or rural areas.

On November 15, 2021,2024, we amended and restated our existing revolving credit facility (as amended from time to time, the “Revolving Credit Agreement”) pursuant, to which our borrowing capacity under the Revolving Credit Agreement was increased from $2.0 billion to $2.25 billion, and the maximum borrowing under the Revolving Credit Agreement may, at our option, subject to lenders approval, be increased from $2.25 billion to $3.25 billion. On November 15, 2022, we amended the Revolving Credit Agreement, extendingextend the termination date by one year. As amended, the Revolving Credit Agreement will terminate, and all amounts borrowed will be due and payable, on November 15, 2027, but we may make one additional request to extend the termination date for an additional period of one year.2028. Revolving borrowings under the Revolving Credit Agreement may be base rate loans, Term Secured Overnight Financing Rate (“SOFR”) loans, or a combination of both, at our election. The Revolving Credit Agreement includes (i) a $75 million sublimit for swingline loans, (ii) a $50 million individual issuer letter of credit sublimit and (iii) a $250 million aggregate sublimit for all letters of credit.

UnderCovenants under our Revolving Credit Agreement, covenantsAgreement 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.

We also maintainmaintained a letter of credit facility that allowsallowed us to request the participating bank to issue letters of credit on our behalf up to an aggregate amount of $25 million. The letter of credit facility iswas in addition to the letters of credit that may be issued under the Revolving Credit Agreement and had an expiration in June 2022. On May 16, 2022, we amended and restated the letter of credit facility to, among other things, extend the facility through June 2025.Agreement. As of August 31, 2024, we had no letters of credit outstanding under the letter of credit facility.facility, which was terminated in September 2024.

In addition to the outstanding letters of credit issued under the committedRevolving facilityCredit Agreement discussed above, we had $141.6$149.1 million in letters of credit outstanding as of August 31,30, 2024.2025. These letters of credit have various maturity dates and were issued on an uncommitted basis.

As of August 31,30, 2024,2025, the $580$748.6 million of commercial paper borrowings, the $400 million 3.250%3.125% Senior Notes due April 20252026 and the $500$450 million 3.625%5.050% Senior Notes due AprilJuly 20252026 were classified as long-term in the Consolidated Balance Sheets as we have the current ability and intent to refinance them on a long-term basis through available capacity in our revolving credit facility. As of August 31,30, 2024,2025, we had $2.2 billion of availability under our Revolving Credit Agreement, without giving effect to commercial paper borrowings, which would allow us to replace these short-term obligations with a long-term financing facility.

On JuneApril 28,14, 2024,2025, we issued $600$500 million in 5.100%5.125% Senior Notes due JulyJune 2029 and $700 million 5.400% Senior Notes due July 20342030 under our automatic shelf registration statement on Form S-3, filed with the SEC on July 19, 2022 (File No. 333-266209) (the “2022 Shelf Registration Statement”). The 2022 Shelf Registration Statement allowsallowed us to sell an indeterminate amount in debt securities to fund general corporate purposes, including repaying, redeeming or repurchasing outstanding debt and for working capital, capital expenditures, new store or distribution center openings, stock repurchases and acquisitions. Proceeds from the debt issuance were used to repay a portion of our outstanding commercial paper borrowings and for other general corporate purposes.

For the fiscal yearyears ended August 30, 2025, and August 31, 2024, our adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and share-based compensation expense (“EBITDAR”) ratio was 2.5:1 asfor comparedboth to 2.3:1 as of the comparable prior year end.periods. We calculate adjusted debt as the sum of total debt, finance lease liabilities and rent times six; and we calculate adjusted EBITDAR by adding interest, taxes, depreciation, amortization, rent and share-based compensation expense to net income. We target our debt levels to a specified ratio of adjusted debt to EBITDAR in order to maintain our investment grade credit ratings and believe this is important information for the management of our debt levels. To the extent adjusted EBITDAR increases, we expect our debt levels to increase; conversely, if adjusted EBITDAR decreases, we would expect our debt levels to decrease. Refer to the “Reconciliation of Non-GAAP Financial Measures” section for further details of our calculation.

During 1998, we announced a program permitting us to repurchase a portion of our outstanding shares not to exceed a dollar maximum established by our Board of Directors (the “Board”). TheOn June 19, 2024, the Board voted to increase the repurchase authorization by $2.0 billion on December 20, 2023 and $1.5 billion on June 19, 2024,billion, bringing the total authorization to $39.2 billion. Previously, the Board voted to increase the authorization by $4.5 billion in fiscal 2023 and $5.0 billion in fiscal 2022. From January 1998 to August 31,30, 2024,2025, we have repurchased a total of 155.2155.6 million shares at an aggregate cost of $37.0$38.5 billion. We repurchased 1.10.4 million, 1.51.1 million and 2.21.5 million shares of common stock at an aggregate cost of $3.2$1.5 billion, $3.7$3.2 billion and $4.4$3.7 billion during fiscal 2024,2025, 20232024 and 2022,2023, respectively. Considering cumulative repurchases as of August 31,30, 20242025 we had $2.2$632.3 billionmillion remaining under the Board’s authorization to repurchase our common stock. We will continue to evaluate current and expected business conditions and adjust the level of share repurchases under our share repurchase program in a manner that is consistent with our capital allocation strategy or as we otherwise deem appropriate.

On October 8, 2025, the Board voted to authorize the repurchase of an additional $1.5 billion of our common stock in connection with our ongoing share repurchase program. Since the inception of the repurchase program in 1998, the Board has authorized $40.7 billion in share repurchases. Subsequent to August 31,30, 20242025, and through October 21,20, 2024,2025, we have repurchased 67,67751,543 shares of common stock at an aggregate cost of $212.0$215.6 million. Considering the cumulative repurchases and the increase in authorization subsequent to August 30, 2025, and through October 21,20, 2024,2025, we have $2.0$1.9 billion remaining under the Board’s authorization to repurchase our common stock.

Critical Accounting Policies and Estimates

We retain a significant portion of the risks associated with workers’ compensation, general,general and product liability, property and vehicle liabilityinsurance; and we obtain third party insurance to limit the exposure related to certain of these risks. Our self-insurance reserve estimates totaled $268.8 million at August 30, 2025, and $257.7 million at August 31, 2024, and $268.8 million at August 26, 2023.2024. Where estimates are possible, losses covered by insurance are recognized on a gross basis with a corresponding insurance receivable.

Our liabilities for workers’ compensation, general and product liability, property and vehicle claims do not have scheduled maturities; however, the timing of future payments is predictable based on historical patterns and is relied upon in determining the current portion of these liabilities. Accordingly, we reflect the net present value of the obligations we determine to be long-term using the risk-free interest rate as of the balance sheet date.dates.

Certain statements herein constitute forward-looking statements that are 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 statements are based on assumptions and assessments made by our management in light of experience, historical trends, current conditions, expected future developments and other factors that we believe appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand, due to changes in fuel prices, miles driven or otherwise; energy prices; weather, including extreme temperatures and natural disasters; competition; credit market conditions; cash flows; access to financing on favorable terms; future stock repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks associated with self-insurance; war and the prospect of war, including terrorist activity; public health issues; inflation, including wage inflation; exchange rates; the ability to hire, train and retain qualified employees, including members of management; construction delays; failure or interruption of our information technology systems; issues relating to the confidentiality, integrity or availability of information, including due to cyber-attacks; historic sales and profit growth rate sustainability; downgrade of our credit ratings; damage to our reputation; challenges associated with doing business in and expanding into international markets; origin and raw material costs of suppliers; inventory availability; disruption in our supply chain; tariffs, trade policies and other geopolitical factors; new accounting standards; our ability to execute our growth initiatives; and other business interruptions. These and other risks and uncertainties are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1I of our Annual Report on Form 10-K for the year ended August 30, 2025. Forward-looking statements are not guarantees of future performance and actual results may differ materially from those contemplated by such forward-looking statements. Events described above and in the “Risk Factors” could materially and adversely affect our business. However, it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. 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.

We are a leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at FebruaryMay 14,9, 2026, operated 6,7096,766 stores in the U.S., 913933 stores in Mexico and 152157 stores in Brazil. Each store carries an extensive product line for cars, sport utility vehicles, vans and light duty trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. At FebruaryMay 14,9, 2026, in 6,3106,356 of our domestic stores as well as the vast majority of our stores in Mexico and Brazil, we had a commercial sales program that provides prompt delivery of parts and other products and commercial credit to local, regional and national repair garages, dealers, service stations, fleet owners and other accounts. We also sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and our commercial customers can make purchases through www.autozonepro.com. Additionally, we sell the ALLDATA brand automotive diagnostic, repair, collision and shop management software through www.alldata.com. We also provide product information on our Duralast branded products through www.duralastparts.com. We do not derive revenue from automotive repair or installation services. Our websites and the information contained therein or linked thereto are not intended to be incorporated into this report.

Operating results for the twelve and twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, are not necessarily indicative of the results that may be expected for the fiscal year ending August 29, 2026. 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 of fiscal 2026 and 2025 each have 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 increased to $4.3$4.8 billion, an 8.1%8.4% increase over the comparable prior year period. Operating profit decreasedincreased 1.2%6.6% to $698.5$923.8 million. The secondthird quarter operating profit comparison was negatively impacted by $59.0a $36.0 million due to annet unfavorable non-cash LIFO charge in the current quarter.impact. Net income decreasedincreased 3.9%5.4% to $468.9$641.5 million and diluted earnings per share decreasedincreased 2.3%7.7% to $27.63$38.07 for the quarter.

During the secondthird quarter of fiscal 2026, failure and maintenance related categories represented the largest portion of our sales mix at approximately 85% of total sales, whereas they represented approximately 86% of total sales in the comparable prior year period. Failure related categories continue to be the largest portion of our sales mix. 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 weather over a short-term period. Over the long-term, we believe the impact of weather on our sales mix is not significant.

The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road. For the twelve-month period ended DecemberMarch 2025,2026, miles driven in the U.S. increased 0.9%1.1% compared to the same period in the prior year, based on the latest information available from the U.S. Department of Transportation. According to the latest data provided by S&P Global Mobility, the average age of light vehicles on the road in the U.S. was 12.8 years.

On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act.Act (“IEEPA”). The President immediately introduced new tariffs under different statutory authority, though their scope and duration, and the likelihood and outcome of further legal challenges to these tariffs, remain uncertain. On April 20, 2026, the Company filed for refunds of IEEPA tariffs paid directly by the Company via the U.S. Customs and Border Protection’s consolidated administration and processing of entries tool in the automated commercial environment portal. Due to the uncertainty around the timing and amount of refunds to be received, the Company has not recognized any potential IEEPA tariff refunds within its Condensed Consolidated Financial Statements as of May 9, 2026. Tariff policy continuesand legal challenges continue to evolve, and we arewill monitoringcontinue to monitor potential impacts on our businessbusiness, financial condition and results of operations.

Twelve Weeks Ended FebruaryMay 14,9, 2026

Compared with Twelve Weeks Ended FebruaryMay 15,10, 2025

Net sales for the twelve weeks ended FebruaryMay 14,9, 2026, increased $322.1$376.6 million to $4.3$4.8 billion, or 8.1%8.4% over net sales of $4.0$4.5 billion for the comparable prior year period. This growth was primarily driven by an increase in total company same store sales of 3.3%3.9% on a constant currency basis and net sales of $114.4$129.0 million from new domestic and international stores. Domestic commercial sales increased $103.0$132.4 million to $1.2$1.4 billion, or 9.8%10.4% over the comparable prior year.

Gross profit for the twelve weeks ended FebruaryMay 14,9, 2026, was $2.2$2.5 billion, compared with $2.1$2.4 billion during the comparable prior year period. Gross profit, as a percentage of sales, was 52.5%52.2% for the twelve weeks ended FebruaryMay 14,9, 2026, compared to 53.9%52.7% for the comparable prior year period. The decrease in gross margin was driven by a 13877 basis point unfavorable net non-cash LIFO charge.impact, partially offset by other margin improvements.

Operating, selling, general and administrative expenses for the twelve weeks ended FebruaryMay 14,9, 2026, were $1.5$1.6 billion compared with $1.4$1.5 billion during the comparable prior year period. As a percentage of sales, these expenses were 36.1%33.1% compared with 36.0%33.3% during the comparable prior year period. The increase wasperiod, primarily driven by investmentsstrong totop supportline oursales growth initiatives.growth.

Net interest expense was $107.2$110.5 million and $108.8$111.3 million for the twelve weeks ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, respectively. Average borrowings were $8.8$8.9 billion and $9.1$9.2 billion, and weighted average borrowing rates were 4.49%4.52% and 4.43%4.48% for the twelve weeks ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, respectively.

Our effective income tax rate was 20.7%21.1% and 18.4%19.4% of pretax income for the twelve weeks ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, respectively. The increase is primarily due to a reduced benefit from stock options exercised compared to the prior year, and last year benefiting from favorable discrete items related to our international business.year. The benefit from stock options exercised was $7.3$4.0 million and $14.3$22.7 million for the twelve weeks ended FebruaryMay 14,9, 20262026, and the comparable prior year period, respectively.

Net income for the twelve weeks ended FebruaryMay 14,9, 2026, decreasedincreased by $19.1$33.1 million from the comparable prior year period to $468.9$641.5 million due to the factors set forth above, and diluted earnings per share decreasedincreased by 2.3%7.7% to $27.63$38.07 from $28.29.$35.36.

Twenty-fourThirty-six Weeks Ended FebruaryMay 14,9, 2026

Compared with Twenty-fourThirty-six Weeks Ended FebruaryMay 15,10, 2025

Net sales for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, increased $671.1$1.0 millionbillion to $8.9$13.7 billion, or 8.2%8.3% over net sales of $8.2$12.7 billion for the comparable prior year period. This growth was primarily driven by an increase in total company same store sales of 4.0% on a constant currency basis and net sales of $225.0$354.0 million from new domestic and international stores. Domestic commercial sales increased $266.7$399.1 million to $2.4$3.8 billion, or 12.2%11.6% over the comparable prior year period.

Gross profit for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, was $4.6$7.1 billion, compared with $4.4$6.7 billion during the comparable prior year period. Gross profit, as a percentage of sales, was 51.7%51.9% compared to 53.4%53.2% during the comparable prior year period. The decrease in gross margin was driven by a 176142 basis point unfavorable net non-cash LIFO charge.impact.

Operating, selling, general and administrative expenses for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, were $3.1$4.7 billion compared with $2.8$4.3 billion during the comparable prior year period. As a percentage of sales, these expenses were 35.0%34.3% compared with 34.6%34.2% during the comparable prior year period. The increase was primarily driven by an increase in investments to support our growth initiatives.

Net interest expense was $213.5$323.9 million and $216.5$327.7 million for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, respectively. Average borrowings were $8.8 billion and $9.0$9.1 billion, and weighted average borrowing rates were 4.51% and 4.43%4.45% for the twenty-fourthirty-six week periods ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, respectively.

Our effective income tax rate was 21.2% and 20.9%20.4% of pretax income for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, respectively. The benefit from stock options exercised for the twenty-fourthirty-six week period ended FebruaryMay 14,9, 2026, was $19.9$23.8 million compared to $19.5$42.3 million in the comparable prior year period.

Net income for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, decreased by $53.2$20.1 million from the comparable prior year period to $999.7$1.6 millionbillion due to the factors set forth above, and diluted earnings per share decreasedincreased by 3.5%0.5% to $58.68$96.69 from $60.83.$96.17.

The primary source of our liquidity is our cash flows realized through the sale of automotive parts, products and accessories. We believe that our cash generated from operating activities and available credit, supplemented with our long-term borrowings, will provide ample liquidity to fund our operations while allowing us to make strategic investments to support growth initiatives and return excess cash to shareholders in the form of share repurchases. As of FebruaryMay 14,9, 2026, we held $285.5$253.7 million of cash and cash equivalents, as well as $2.2 billion in undrawn capacity on our Revolving Credit Agreement. We believe our sources of liquidity will continue to be adequate to fund our operations and investments to grow our business, repay our debt as it becomes due and fund our share repurchases over the short-term and long-term. In addition, we believe we have the ability to obtain alternative sources of financing, if necessary. However, decreased demand for our products or changes in customer buying patterns would negatively impact our ability to generate cash from operating activities. Decreased demand or changes in buying patterns could also impact our ability to meet the debt covenants of our credit agreements and, therefore, negatively impact the funds available under our Revolving Credit Agreement. In the event our liquidity is insufficient, we may be required to limit our spending. All of our material borrowing arrangements are described in greater detail in “Note I – Financing” in the Notes to Condensed Consolidated Financial Statements. Except for the $102.4$609.4 million increase in commercial paper,paper and repayment of our outstanding $400 million 3.125% Senior Notes due April 2026, there have been no material changes to our contractual obligations as described in our Annual Report on Form 10-K for the year ended August 30, 2025.

For the twenty-fourthirty-six week periods ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, our net cash flows from operating activities provided $1.3$2.1 billion and $1.4$2.2 billion, respectively. Cash flows from operations decreased over last year primarily due to unfavorable changes in accounts payable and accrued expenses.

Our net cash flows used in investing activities for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, were $667.5$1.0 millionbillion as compared to $563.4$917.3 million in the comparable prior year period. Capital expenditures for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, were $652.0$997.5 million compared to $539.7$885.6 million in the comparable prior year period. The increase in capital expenditures was primarily driven by our growth initiatives, including new stores, hub and mega hub store expansion projects. During the twenty-fourthirty-six week periods ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, we opened 117199 and 79163 net new stores, respectively. Investing cash flows were impacted by our wholly-owned captive, which purchased $23.0$35.4 million and $31.3$54.3 million, and sold $8.8$17.7 million and $30.1$54.8 million in marketable debt securities during the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, and the comparable prior year period, respectively. Our net investment in tax credit equity investments was $9.7$9.2 million and $37.4$50.4 million during the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, and the comparable prior year period, respectively.

Our net cash flows used in financing activities for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, were $642.9$1.1 millionbillion compared to $826.4$1.3 millionbillion in the comparable prior year period. During the thirty-six weeks ended May 9, 2026, we had no debt issuances, versus $500 million in debt issuances in the comparable prior year period. During the thirty-six week periods ended May 9, 2026, and May 10, 2025, we had $400 million and $900 million in debt repayments, respectively. Stock repurchases were $741.7$1.3 millionbillion in the current twenty-fourthirty-six week period versus $866.5$1.1 millionbillion in the comparable prior year period. The treasury stock repurchases were primarily funded by cash flows from operations. For the twenty-fourthirty-six week periods ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, we had $102.4$609.4 million and $22.0$225.5 million in net proceeds from commercial paper, respectively. Proceeds from the issuance of common stock from exercises of stock options for the twenty-fourthirty-six weeks ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025, provided $51.5$67.7 million and $64.3$111.0 million, respectively.

In addition to the building and land costs, our new 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 suppliers’ ability to factor their receivables from us. The Company has arrangements with third-party financial institutions to confirm invoice balances owed by the Company to certain suppliers and pay the financial institutions the confirmed amounts on the invoice due dates. These arrangements allow the Company’s inventory suppliers, at their sole discretion, to enter into agreements with these financial institutions to finance the Company’s obligations to the suppliers at terms negotiated between the suppliers and the financial institutions. Supplier participation is optional and our obligations to our suppliers, including the amount and dates due, are not impacted by our suppliers’ decision to enter into an agreement with a third-party financial institution. A downgrade in our credit or changes in the financial markets could limit the financial institutions’ and our suppliers’ willingness to participate in these arrangements; however, we do not believe such risk would have a material impact on our working capital or cash flows. We plan to continue negotiating extended terms with our suppliers, benefitting our working capital and resulting in a high accounts payable to inventory ratio. We had an accounts payable to inventory ratio of 110.9%111.1% at FebruaryMay 14,9, 2026, and 118.2%115.6% at FebruaryMay 15,10, 2025.

For the trailing four quarters ended FebruaryMay 14,9, 2026, our adjusted after-tax return on invested capital (“ROIC”), which is a non-GAAP measure, was 37.6%36.3% as compared to 45.5%43.5% for the comparable prior year period. Adjusted ROIC is calculated as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize operating leases). 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 of Non-GAAP Financial Measures” section for further details of our calculation.

Our adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and share-based compensation expense (“EBITDAR”) ratio, which is a non-GAAP measure, was 2.5:1 as of FebruaryMay 14,9, 20262026, and FebruaryMay 15,10, 2025. We calculate adjusted debt as the sum of total debt, financing lease liabilities and rent times six; and we calculate EBITDAR by adding interest, taxes, depreciation, amortization, rent, and share-based compensation expense 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 increases, we expect our debt levels to increase; conversely, if EBITDAR decreases, we would expect our debt levels to decrease. Refer to the “Reconciliation of Non-GAAP Financial Measures” section for further details of our calculation.

The following tables calculate the percentages of adjusted ROIC for the trailing four quarters ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025.

The following tables calculate the ratio of adjusted debt to EBITDAR for the trailing four quarters ended FebruaryMay 14,9, 2026, and FebruaryMay 15,10, 2025.