AUTOZONE INC

Previous wording

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (“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 the future results of AutoZone, Inc. (“AutoZone” or the “Company”). The following MD&A discussion should be read in conjunction with our Condensed Consolidated Financial Statements, related notes to those statements and other financial information, including forward-looking statements and risk factors, that appear elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended August 31, 2024, and other filings we make with the SEC.

Current wording

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (“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 the future results of AutoZone, Inc. (“AutoZone” or the “Company”). The following MD&A discussion should be read in conjunction with our Condensed Consolidated Financial Statements, related notes to those statements and other financial information, including forward-looking statements and risk factors, that appear elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended August 30, 2025, and our other filings with the SEC.

Previous wording

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 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 1 of our Annual Report on Form 10-K for the year ended August 31, 2024. 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.

Current wording

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 1 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.

Previous wording

We are the leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979 and at May 10, 2025, operated 6,537 stores in the U.S., 838 stores in Mexico and 141 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 May 10, 2025, in 6,011 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.

Current wording

We are a leading retailer and distributor of automotive replacement parts and accessories in the Americas. We began operations in 1979, and at November 22, 2025, operated 6,666 stores in the U.S., 895 stores in Mexico and 149 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 November 22, 2025, in 6,182 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 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. Our websites and the information contained therein or linked thereto are not intended to be incorporated into this report.

Previous wording

Operating results for the twelve and thirty-six weeks ended May 10, 2025, are not necessarily indicative of the results that may be expected for the fiscal year ending August 30, 2025. 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 quarter of fiscal 2025 has 16 weeks, and the fourth quarter of fiscal 2024 had 17 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.

Current wording

Operating results for the twelve weeks ended November 22, 2025, 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 in the spring and summer months of February through September, and the lowest sales generally occurring in the months of December and January.

Previous wording

During the third quarter of fiscal 2025, failure and maintenance related categories represented the largest portion of our sales mix at approximately 86% of total sales, whereas they represented approximately 85% 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.

Current wording

During the first quarter of fiscal 2026, failure and maintenance related categories represented the largest portion of our sales mix at approximately 86% of total sales, which is consistent with 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.

Previous wording

Our business is impacted by various factors within the economy that affect both our consumers and our industry, including but not limited to inflation, interest rates, levels of consumer debt, fuel and energy costs, prevailing wage rates, foreign currency 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, 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.

Current wording

Our business is impacted by various factors within the economy that affect both our consumers 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.

Previous wording

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 March 2025, miles driven in the U.S. increased 1.0% compared to the same period in the prior year, based on the latest information available from the U.S. Department of Transportation. According to S&P Global Mobility, as of 2025 the average age of light vehicles on the road in the U.S. was 12.8 years.

Current wording

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 12-month period ended in October 2025, miles driven in the U.S. increased 1.0% 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 was 12.8 years.

Previous wording

Net sales for the twelve weeks ended May 10, 2025, increased $228.9 million to $4.5 billion, or 5.4% over net sales of $4.2 billion for the comparable prior year period. This growth was driven by an increase in total company same store sales of 5.4% on a constant currency basis and net sales of $97.2 million from new domestic and international stores, partially offset by a $89.3 million impact from unfavorable foreign currency exchange rates. Domestic commercial sales increased $123.2 million to $1.3 billion, or 10.7% over the comparable prior year.

Current wording

Net sales for the twelve weeks ended November 22, 2025, increased $349.0 million to $4.6 billion, or 8.2% over net sales for the comparable prior year period. This growth was driven primarily by an increase in total company same store sales of 4.7% on a constant currency basis and net sales of $110.6 million from new domestic and international stores. Domestic commercial sales increased $163.7 million to $1.3 billion, or 14.5% over the comparable prior year period.

Previous wording

Gross profit for the thirty-six weeks ended May 10, 2025, was $6.7 billion, compared with $6.6 billion during the comparable prior year period. Gross profit, as a percentage of sales, was 53.2% compared to 53.4% during the comparable prior year period. The decrease in gross margin was negatively impacted by higher supply chain costs, higher inventory shrink, and an unfavorable 20 basis point ($24.0 million net) non-cash LIFO impact, partially offset by higher merchandise margins.

Current wording

Gross profit for the twelve weeks ended November 22, 2025, was $2.4 billion, compared with $2.3 billion during the comparable prior year period. Gross profit, as a percentage of sales, was 51.0% compared to 53.0% during the comparable prior year period. The decrease in gross margin was driven primarily by a 212 basis point unfavorable non-cash LIFO impact, partially offset by other net margin improvements.

Previous wording

Operating, selling, general and administrative expenses for the twelve weeks ended May 10, 2025, were $1.5 billion compared with $1.4 billion during the comparable prior year period. As a percentage of sales, these expenses were 33.3% compared with 32.2% during the comparable prior year period. The increase was primarily driven by an increase in our self-insurance expense and investments to support our growth initiatives.

Current wording

Operating, selling, general and administrative expenses for the twelve weeks ended November 22, 2025, and the comparable prior year period were $1.6 billion and $1.4 billion, respectively. As a percentage of sales, expenses were 34.0% for the twelve weeks ended November 22, 2025, compared with 33.3% during the comparable prior year period. The increase was primarily driven by investments to support our growth initiatives.

Previous wording

Net interest expense was $111.3 million and $104.4 million for the twelve weeks ended May 10, 2025, and May 4, 2024, respectively. Average borrowings were $9.2 billion and $8.8 billion, and weighted average borrowing rates were 4.48% and 4.43% for the twelve weeks ended May 10, 2025, and May 4, 2024, respectively.

Current wording

Net interest expense for the twelve weeks ended November 22, 2025, was $106.3 million compared to $107.6 million during the comparable prior year period. Average borrowings were $8.7 billion and $8.9 billion, and weighted average borrowing rates were 4.5% and 4.4% for the twelve weeks ended November 22, 2025, and November 23, 2024, respectively.

Previous wording

Our effective income tax rate was 19.4% and 18.1% of pretax income for the twelve weeks ended May 10, 2025, and May 4, 2024, respectively. The benefit from stock options exercised was $22.7 million and $38.1 million for the twelve weeks ended May 10, 2025 and the comparable prior year period, respectively.

Current wording

Our effective income tax rate for the twelve weeks ended November 22, 2025, was 21.7% of pretax income compared to 23.0% for the comparable prior year period. The benefit from stock options exercised for the twelve week period ended November 22, 2025, was $12.6 million compared to $5.3 million in the comparable prior year period.

Previous wording

Net income for the twelve weeks ended May 10, 2025, decreased by $43.3 million from the comparable prior year period to $608.4 million due to the factors set forth above, and diluted earnings per share decreased by 3.6% to $35.36 from $36.69. 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 $0.26 per share.

Current wording

Net income for the twelve weeks ended November 22, 2025, decreased by $34.1 million from the comparable prior year period to $530.8 million due to the factors set forth above, and diluted earnings per share decreased by 4.6% to $31.04 from $32.52.

Previous wording

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 May 10, 2025, we held $268.6 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 H – Financing” in the Notes to Condensed Consolidated Financial Statements. Except for the issuance of $500 million 5.125% Senior Notes due June 2030, repayments of the $400 million 3.250% Senior Notes due April 2025 and the $500 million 3.625% Senior Notes

Current wording

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 November 22, 2025, we held $287.6 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. There were no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the year ended August 30, 2025.

Previous wording

Our net cash flows used in investing activities for the thirty-six weeks ended May 10, 2025, were $917.3 million as compared with $916.3 million in the comparable prior year period. Capital expenditures for the thirty-six weeks ended May 10, 2025, were $885.6 million compared to $725.9 million in the comparable prior year period. The increase in capital expenditures was primarily driven by our growth initiatives, includingnew stores and hub and mega hub store expansion projects. During the thirty-six week periods ended May 10, 2025, and May 4, 2024, we opened 163 and 96 net new stores, respectively. Investing cash flows were impacted by our wholly-owned captive, which purchased $54.3 million and $17.6 million, and sold $54.8 million and $21.2 million in marketable debt securities during the thirty-six weeks ended May 10, 2025, and the comparable prior year period, respectively. Our investment in tax credit equity investments was $50.4 million and $193.3 million during the thirty-six weeks ended May 10, 2025, and the comparable prior year period, respectively.

Current wording

Our net cash flows used in investing activities for the twelve weeks ended November 22, 2025, were $326.7 million as compared with $265.7 million in the comparable prior year period. Capital expenditures for the twelve weeks ended November 22, 2025, were $314.2 million compared to $247.0 million in the comparable prior year period. The increase in capital expenditures was primarily driven by our growth initiatives, including new stores, and hub and mega hub store expansion projects. During the twelve weeks ended November 22, 2025, and November 23, 2024, we opened 53 and 34 net new stores, respectively. Investing cash flows were impacted by our wholly owned captive, which purchased $12.6 million and $12.3 million, and sold $6.3 million and $12.6 million in marketable debt securities during the twelve weeks ended November 22, 2025 and the comparable prior year period, respectively. Our investment in tax credit equity investments was $5.1 million during the twelve weeks ended November 22, 2025, compared to $31.0 million during the comparable prior year period.

Previous wording

Our net cash flows used in financing activities for the thirty-six weeks ended May 10, 2025, were $1.3 billion compared to $1.0 billion in the comparable prior year period. During the thirty-six weeks ended May 10, 2025, we had $500 million in debt issuances compared to $1.0 billion in debt issuances in the comparable prior year period, and $900 million in debt repayments compared to $300 million in debt repayments in the comparable prior year period. Stock repurchases were $1.1 billion in the current thirty-six week period versus $2.4 billion in the comparable prior year period. The treasury stock repurchases were primarily funded by cash flows from operations. For the thirty-six week periods ended May 10, 2025, and May 4, 2024, we had $225.5 million and $631.3 million in net proceeds from commercial paper, respectively. Proceeds from the issuance of common stock from exercises of stock options for the thirty-six weeks ended May 10, 2025, and May 4, 2024, provided $111.0 million and $154.4 million, respectively.

Current wording

Our net cash flows used in financing activities for the twelve weeks ended November 22, 2025, were $602.7 million compared to $538.1 million in the comparable prior year period. Stock repurchases were $427.2 million in the current twelve week period as compared with $540.1 million in the comparable prior year period. The treasury stock repurchases were primarily funded by cash flows from operations. For the twelve week period ended November 22, 2025, and the comparable prior year period, we had $179.1 million and $15.0 million in net repayments of commercial paper, respectively. Proceeds from the sale of common stock and exercises of stock options for the twelve weeks ended November 22, 2025, and November 23, 2024, provided $31.9 million and $36.0 million, respectively.

Previous wording

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 115.6% at May 10, 2025, and 119.7% at May 4, 2024.

Current wording

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 115.6% at November 22, 2025, and 119.5% at November 23, 2024.

Previous wording

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

Current wording

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

Previous wording

For the trailing four quarters ended May 10, 2025, our adjusted after-tax return on invested capital (“ROIC”), which is a non-GAAP measure, was 43.5% as compared to 51.4% 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.

Current wording

For the trailing four quarters ended November 22, 2025, our adjusted after-tax return on invested capital (“ROIC”), which is a non-GAAP measure, was 39.6% as compared to 47.7% 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.

Previous wording

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 May 10, 2025 and May 4, 2024. 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.

Current wording

Our adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and share-based compensation expense (“EBITDAR”) ratio as of November 22, 2025, and November 23, 2024, was 2.5:1. 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.

Previous wording

See “Note H – Financing” in the Notes to the Condensed Consolidated Financial Statements for additional information concerning our revolving credit agreement, outstanding letters of credit, surety bonds commitment and Senior Notes.

Current wording

See “Note I – Financing” in the Notes to the Condensed Consolidated Financial Statements for information concerning our Senior Notes, Revolving Credit Agreement, commercial paper borrowings, outstanding letters of credit and surety bonds commitment.

Previous wording

Refer to “Note A – General” in the Notes to Condensed Consolidated Financial Statements for the discussion of recently issued accounting pronouncements.

Current wording

Refer to “Note A – General” in the Notes to Condensed Consolidated Financial Statements for the discussion of recent accounting pronouncements.

Previous wording

Our critical accounting policies are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 31, 2024. There have been no significant changes to our critical accounting policies since the filing of our Annual Report on Form 10-K for the year ended August 31, 2024.

Current wording

Our critical accounting estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 30, 2025. There have been no significant changes to our critical accounting estimates since the filing of our Annual Report on Form 10-K for the year ended August 30, 2025.