Note N – Segment Reporting

The Company’s operating segments (Domestic Auto Parts, Mexico and Brazil; and IMC results through April 4, 2018) are aggregated as one reportable segment: Auto Parts Locations. The criteria the Company used to identify the reportable segment are primarily the nature of the products the Company sells and the operating results that are regularly reviewed by the Company’s chief operating decision maker to make decisions about the resources to be allocated to the business units and to assess performance. The accounting policies of the Company’s reportable segment are the same as those described in Note A in its Annual Report on Form 10-K for the year ended August 26, 2017.

The Auto Parts Locations segment is a retailer and distributor of automotive parts and accessories through the Company’s 6,092 locations in the U.S., Puerto Rico, Mexico and Brazil. Each location carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products.

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

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


	Twelve Weeks Ended								Thirty-Six Weeks Ended
(in thousands)	May 5, 2018				May 6, 2017				May 5, 2018				May 6, 2017

Net Sales
Auto Parts Locations		$	2,610,485			$	2,530,689			$	7,452,186			$	7,125,812
Other			49,667				88,318				210,123				250,259

Total		$	2,660,152			$	2,619,007			$	7,662,309			$	7,376,071


Segment Profit
Auto Parts Locations		$	1,387,497			$	1,332,086			$	3,942,949			$	3,750,776
Other			35,477				46,332				122,918				134,720

Gross profit			1,422,974				1,378,418				4,065,867				3,885,496
Operating, selling, general and administrative expenses ⁽¹⁾			(877,209	)			(848,848	)			(2,846,250	)			(2,513,054	)
Interest expense, net			(41,958	)			(35,675	)			(120,186	)			(103,180	)

Income before income taxes		$	503,807			$	493,895			$	1,099,431			$	1,269,262

(1)

Includes impairment charges of $193.2 million for the thirty-six weeks ended May 5, 2018. See “Note L – Sale of Assets” for further discussion.