UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

      ☒                                                        Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended February 15, 2020, or

      ☐                                                        Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                  to                 .

Commission file number 1-10714

AUTOZONE, INC.

(Exact name of registrant as specified in its charter)

Nevada	62-1482048
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
123 South Front Street, Memphis, Tennessee	38103
(Address of principal executive offices)	(Zip Code)

(901) 495-6500

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock ($0.01 par value)	AZO	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).        Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐   Emerging growth company ☐	Smaller reporting company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐    No ☒

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

Common Stock, $.01 Par Value – 23,352,430 shares outstanding as of March 13, 2020.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME	4
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT	6
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	7
	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
SIGNATURES		30

2

PART I. FINANCIAL INFORMATION

Item 1.             Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)	February 15,       2020			August 31,         2019
Assets
Current assets:
Cash and cash equivalents	$	152,970		$	176,300
Accounts receivable		340,280			308,995
Merchandise inventories		4,606,211			4,319,113
Other current assets		201,086			224,277
Total current assets		5,300,547			5,028,685
Property and equipment:
Property and equipment		7,948,231			7,713,196
Less: Accumulated depreciation and amortization		(3,471,805	)		(3,314,445	)
		4,476,426			4,398,751
Operating lease right-of-use assets		2,579,217			–
Goodwill		302,645			302,645
Deferred income taxes		27,945			26,861
Other long-term assets		176,969			138,971
		3,086,776			468,477
	$	12,863,749		$	9,895,913
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	4,869,914		$	4,864,912
Current portion of operating lease liabilities		234,506			–
Accrued expenses and other		632,343			621,932
Income taxes payable		42,797			25,297
Total current liabilities		5,779,560			5,512,141
Long-term debt		5,451,471			5,206,344
Operating lease liabilities, less current portion		2,494,840			–
Deferred income taxes		325,263			311,980
Other long-term liabilities		523,734			579,299
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, authorized 1,000 shares; no shares issued		–			–
Common stock, par value $.01 per share, authorized 200,000 shares; 23,653 shares issued and 23,488 shares outstanding as of February 15, 2020; 25,445 shares issued and 24,038 shares outstanding as of August 31, 2019		237			254
Additional paid-in capital		1,241,733			1,264,448
Retained deficit		(2,534,322	)		(1,305,347	)
Accumulated other comprehensive loss		(228,337	)		(269,322	)
Treasury stock, at cost		(190,430	)		(1,403,884	)
Total stockholders’ deficit		(1,711,119	)		(1,713,851	)
	$	12,863,749		$	9,895,913

See Notes to Condensed Consolidated Financial Statements.

3

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Twelve Weeks Ended				Twenty-Four Weeks Ended
(in thousands, except per share data)	February 15,   2020		February 9,   2019		February 15,   2020		February 9,   2019
Net sales	$	2,513,663	$	2,450,568	$	5,306,700	$	5,092,302
Cost of sales, including warehouse and delivery expenses		1,147,600		1,125,461		2,439,569		2,349,721
Gross profit		1,366,063		1,325,107		2,867,131		2,742,581
Operating, selling, general and administrative expenses		958,125		925,087		1,959,170		1,854,742
Operating profit		407,938		400,020		907,961		887,839
Interest expense, net		44,335		41,362		88,078		80,369
Income before income taxes		363,603		358,658		819,883		807,470
Income tax expense		64,321		64,020		170,263		161,426
Net income	$	299,282	$	294,638	$	649,620	$	646,044
Weighted average shares for basic earnings per share		23,570		25,166		23,722		25,397
Effect of dilutive stock equivalents		590		477		604		473
Weighted average shares for diluted earnings per share		24,160		25,643		24,326		25,870
Basic earnings per share	$	12.70	$	11.71	$	27.38	$	25.44
Diluted earnings per share	$	12.39	$	11.49	$	26.70	$	24.97

See Notes to Condensed Consolidated Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Twelve Weeks Ended				Twenty-Four Weeks Ended
(in thousands)	February 15,   2020		February 9,   2019		February 15,   2020			February 9,   2019
Net income	$	299,282	$	294,638	$	649,620		$	646,044
Other comprehensive income (loss):
Foreign currency translation adjustments		21,178		39,332		40,218			(1,241	)
Unrealized gains (losses) on marketable debt securities, net of taxes(1)		178		508		(10	)		431
Net derivative activities, net of taxes(2)		388		389		777			778
Total other comprehensive income (loss)		21,744		40,229		40,985			(32	)
Comprehensive income	$	321,026	$	334,867	$	690,605		$	646,012

(1) Unrealized gains on marketable debt securities are presented net of taxes of $47 in fiscal 2020 and $135 in fiscal 2019 for the twelve weeks ended. Unrealized losses on marketable securities are presented net of tax benefit of $3 in fiscal 2020, and unrealized gains on marketable securities are presented net of taxes of $115 in fiscal 2019 for the twenty-four weeks ended.

(2) Net derivative activities are presented net of taxes of $120 in fiscal 2020 and fiscal 2019 for the twelve weeks ended and $240 for fiscal 2020 and fiscal 2019 for the twenty-four weeks ended.

See Notes to Condensed Consolidated Financial Statements.

4

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Twenty-Four Weeks Ended
(in thousands)		February 15, 2020			February 9, 2019
Cash flows from operating activities:
Net income		$	649,620		$	646,044
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment and intangibles			180,420			166,230
Amortization of debt origination fees			4,216			3,668
Deferred income taxes			11,154			7,211
Share-based compensation expense			22,107			21,558
Changes in operating assets and liabilities:
Accounts receivable			(28,897	)		(38,338	)
Merchandise inventories			(262,234	)		(364,392	)
Accounts payable and accrued expenses			6,571			256,969
Income taxes payable			11,124			31,701
Other, net			57,563			86,418
Net cash provided by operating activities			651,644			817,069
Cash flows from investing activities:
Capital expenditures			(190,563	)		(195,832	)
Purchase of marketable debt securities			(56,347	)		(21,054	)
Proceeds from sale of marketable debt securities			70,812			34,531
Proceeds from disposal of capital assets and other, net			1,185			6,152
Net cash used in investing activities			(174,913	)		(176,203	)
Cash flows from financing activities:
Net proceeds from commercial paper			242,700			103,500
Net proceeds from sale of common stock			48,705			107,578
Purchase of treasury stock			(764,846	)		(847,097	)
Repayment of principal portion of finance lease liabilities			(29,324	)		(25,529	)
Net cash used in financing activities			(502,765	)		(661,548	)
Effect of exchange rate changes on cash			2,704			(1,477	)
Net (decrease) in cash and cash equivalents			(23,330	)		(22,159	)
Cash and cash equivalents at beginning of period			176,300			217,824
Cash and cash equivalents at end of period		$	152,970		$	195,665

See Notes to Condensed Consolidated Financial Statements.

5

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

	Twelve Weeks Ended February 15, 2020
(in thousands)	Common Shares Issued			Common Stock			Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance at November 23, 2019		25,465		$	254		$	1,282,629		$	(955,009	)	$	(250,081	)	$	(1,853,883	)	$	(1,776,090	)
Net income		–			–			–			299,282			–			–			299,282
Total other comprehensive income		–			–			–			–			21,744			–			21,744
Retirement of treasury shares		(1,912	)		(19	)		(99,686	)		(1,878,595	)		–			1,978,300			–
Purchase of 267 shares of treasury stock		–			–			–			–			–			(314,847	)		(314,847	)
Issuance of common stock under stock options and stock purchase plans		100			2			46,477			–			–			–			46,479
Share-based compensation expense		–			–			12,313			–			–			–			12,313
Balance at February 15, 2020		23,653		$	237		$	1,241,733		$	(2,534,322	)	$	(228,337	)	$	(190,430	)	$	(1,711,119	)

	Twelve Weeks Ended February 9, 2019
(in thousands)	Common Shares Issued			Common Stock			Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance at November 17, 2018		27,658		$	277		$	1,209,851		$	(864,191	)	$	(276,066	)	$	(1,728,487	)	$	(1,658,616	)
Net income		–			–			–			294,638			–			–			294,638
Total other comprehensive income		–			–			–			–			40,229			–			40,229
Retirement of treasury shares		(2,563	)		(26	)		(125,442	)		(1,706,972	)		–			1,832,440			–
Purchase of 422 shares of treasury stock		–			–			–			–			–			(350,037	)		(350,037	)
Issuance of common stock under stock options and stock purchase plans		164			2			69,018			–			–			–			69,020
Share-based compensation expense		–			–			10,404			–			–			–			10,404
Balance at February 9, 2019		25,259		$	253		$	1,163,831		$	(2,276,525	)	$	(235,837	)	$	(246,084	)	$	(1,594,362	)

	Twenty-Four Weeks Ended February 15, 2020
(in thousands)	Common Shares Issued			Common Stock			Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance at August 31, 2019		25,445		$	254		$	1,264,448		$	(1,305,347	)	$	(269,322	)	$	(1,403,884	)	$	(1,713,851	)
Net income		–			–			–			649,620			–			–			649,620
Total other comprehensive income		–			–			–			–			40,985			–			40,985
Retirement of treasury shares		(1,912	)		(19	)		(99,686	)		(1,878,595	)		–			1,978,300			–
Purchase of 670 shares of treasury stock		–			–			–			–			–			(764,846	)		(764,846	)
Issuance of common stock under stock options and stock purchase plans		120			2			55,299			–			–			–			55,301
Share-based compensation expense		–			–			21,672			–			–			–			21,672
Balance at February 15, 2020		23,653		$	237		$	1,241,733		$	(2,534,322	)	$	(228,337	)	$	(190,430	)	$	(1,711,119	)

	Twenty-Four Weeks Ended February 9, 2019
(in thousands)	Common Shares Issued			Common Stock			Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance at August 25, 2018		27,530		$	275		$	1,155,426		$	(1,208,824	)	$	(235,805	)	$	(1,231,427	)	$	(1,520,355	)
Cumulative effect of adoption of ASU 2014-09		–			–			–			(6,773	)		–			–			(6,773	)
Balance at August 25, 2018, as adjusted		27,530		$	275		$	1,155,426		$	(1,215,597	)	$	(235,805	)	$	(1,231,427	)	$	(1,527,128	)
Net income		–			–			–			646,044			–			–			646,044
Total other comprehensive loss		–			–			–			–			(32	)		–			(32	)
Retirement of treasury shares		(2,563	)		(26	)		(125,442	)		(1,706,972	)		–			1,832,440			–
Purchase of 1,076 shares of treasury stock		–			–			–			–			–			(847,097	)		(847,097	)
Issuance of common stock under stock options and stock purchase plans		292			4			113,942			–			–			–			113,946
Share-based compensation expense		–			–			19,905			–			–