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 November 21, 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	(I.R.S. Employer Identification No.)
incorporation or organization)

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 ☐	Smaller reporting company ☐
Emerging growth 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 – 22,759,106 shares outstanding as of December 11, 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	17
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	27
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	27
	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)

	November 21,		August 29,
(in thousands)	2020		2020
Assets
Current assets:
Cash and cash equivalents	$	1,664,005	$	1,750,815
Accounts receivable		350,915		364,774
Merchandise inventories		4,628,334		4,473,282
Other current assets		193,541		223,001
Total current assets		6,836,795		6,811,872
Property and equipment:
Property and equipment		8,283,676		8,136,542
Less: Accumulated depreciation and amortization		(3,697,674)		(3,627,321)
		4,586,002		4,509,221
Operating lease right-of-use assets		2,607,019		2,581,677
Goodwill		302,645		302,645
Deferred income taxes		29,887		27,843
Other long-term assets		206,226		190,614
		3,145,777		3,102,779
	$	14,568,574	$	14,423,872
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	5,282,313	$	5,156,324
Current portion of operating lease liabilities		246,332		223,846
Accrued expenses and other		771,360		827,668
Income taxes payable		156,698		75,253
Total current liabilities		6,456,703		6,283,091
Long-term debt		5,514,874		5,513,371
Operating lease liabilities, less current portion		2,524,008		2,501,560
Deferred income taxes		370,076		354,186
Other long-term liabilities		729,893		649,641
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; 23,761 shares issued and 22,855 shares outstanding as of November 21, 2020; 23,697 shares issued and 23,376 shares outstanding as of August 29, 2020		238		237
Additional paid-in capital		1,323,037		1,283,495
Retained deficit		(1,008,537)		(1,450,970)
Accumulated other comprehensive loss		(306,907)		(354,252)
Treasury stock, at cost		(1,034,811)		(356,487)
Total stockholders’ deficit		(1,026,980)		(877,977)
	$	14,568,574	$	14,423,872

See Notes to Condensed Consolidated Financial Statements.

3

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Twelve Weeks Ended
	November 21,		November 23,
(in thousands, except per share data)	2020		2019
Net sales	$	3,154,261	$	2,793,038
Cost of sales, including warehouse and delivery expenses		1,478,644		1,291,970
Gross profit		1,675,617		1,501,068
Operating, selling, general and administrative expenses		1,060,392		1,001,045
Operating profit		615,225		500,023
Interest expense, net		46,179		43,743
Income before income taxes		569,046		456,280
Income tax expense		126,613		105,942
Net income	$	442,433	$	350,338
Weighted average shares for basic earnings per share		23,223		23,875
Effect of dilutive stock equivalents		555		618
Weighted average shares for diluted earnings per share		23,778		24,493
Basic earnings per share	$	19.05	$	14.67
Diluted earnings per share	$	18.61	$	14.30

See Notes to Condensed Consolidated Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Twelve Weeks Ended
	November 21,		November 23,
(in thousands)	2020		2019
Net income	$	442,433	$	350,338
Other comprehensive income:
Foreign currency translation adjustments		46,995		19,040
Unrealized losses on marketable debt securities, net of taxes		(309)		(188)
Net derivative activities, net of taxes		659		389
Total other comprehensive income		47,345		19,241
Comprehensive income	$	489,778	$	369,579

See Notes to Condensed Consolidated Financial Statements.

4

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Twelve Weeks Ended
	November 21,		November 23,
(in thousands)	2020		2019
Cash flows from operating activities:
Net income	$	442,433	$	350,338
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment and intangibles		89,551		89,750
Amortization of debt origination fees		3,150		2,195
Deferred income taxes		10,295		1,940
Share-based compensation expense		10,508		9,996
Changes in operating assets and liabilities:
Accounts receivable		17,491		(23,246)
Merchandise inventories		(124,746)		(133,206)
Accounts payable and accrued expenses		56,273		48,270
Income taxes payable		79,558		69,390
Other, net		98,978		31,675
Net cash provided by operating activities		683,491		447,102
Cash flows from investing activities:
Capital expenditures		(113,036)		(101,407)
Purchase of marketable debt securities		(45,985)		(35,448)
Proceeds from sale of marketable debt securities		51,210		45,765
(Payments) proceeds from disposal of capital assets and other, net		(2,368)		379
Net cash used in investing activities		(110,179)		(90,711)
Cash flows from financing activities:
Net proceeds of commercial paper		—		79,700
Net proceeds from sale of common stock		28,666		8,822
Purchase of treasury stock		(678,324)		(449,999)
Repayment of principal portion of finance lease liabilities		(13,786)		(14,331)
Net cash used in financing activities		(663,444)		(375,808)
Effect of exchange rate changes on cash		3,322		1,206
Net decrease in cash and cash equivalents		(86,810)		(18,211)
Cash and cash equivalents at beginning of period		1,750,815		176,300
Cash and cash equivalents at end of period	$	1,664,005	$	158,089

See Notes to Condensed Consolidated Financial Statements.

5

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

	Twelve Weeks Ended November 21, 2020
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total
Balance at August 29, 2020	23,697	$	237	$	1,283,495	$	(1,450,970)	$	(354,252)	$	(356,487)	$	(877,977)
Net income	—		—		—		442,433		—		—		442,433
Total other comprehensive loss	—		—		—		—		47,345		—		47,345
Purchase of 584 shares of treasury stock	—		—		—		—		—		(678,324)		(678,324)
Issuance of common stock under stock options and stock purchase plans	64		1		28,665		—		—		—		28,666
Share-based compensation expense	—		—		10,877		—		—		—		10,877
Balance at November 21, 2020	23,761	$	238	$	1,323,037	$	(1,008,537)	$	(306,907)	$	(1,034,811)	$	(1,026,980)

	Twelve Weeks Ended November 23, 2019
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		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	—		—		—		350,338		—		—		350,338
Total other comprehensive income	—		—		—		—		19,241		—		19,241
Purchase of 403 shares of treasury stock	—		—		—		—		—		(449,999)		(449,999)
Issuance of common stock under stock options and stock purchase plans	20		—		8,822		—		—		—		8,822
Share-based compensation expense	—		—		9,359		—		—		—		9,359
Balance at November 23, 2019	25,465	$	254	$	1,282,629	$	(955,009)	$	(250,081)	$	(1,853,883)	$	(1,776,090)

See Notes to Condensed Consolidated Financial Statements.

6

AUTOZONE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note A – General

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission’s (the “SEC”) rules and regulations. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and related notes included in the AutoZone, Inc. (“AutoZone” or the “Company”) Annual Report on Form 10-K for the year ended August 29, 2020.

Operating results for the twelve weeks ended November 21, 2020 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 28, 2021. Each of the first three quarters of AutoZone’s fiscal year consists of 12 weeks, and the fourth quarter consists of 16 or 17 weeks. The fourth quarters of fiscal 2021 and 2020 each have 16 weeks.

Recent Accounting Pronouncements:

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles – Goodwill and Other Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted the new guidance on a prospective basis in the first quarter of fiscal 2021. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which was subsequently amended in November 2018 through ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments Credit Losses. ASU 2016-13 requires entities to estimate all expected credit losses for financial assets measured at amortized cost basis, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The Company adopted this guidance using the modified retrospective adoption method beginning with its first quarter ended November 21, 2020. The adoption of this new guidance did not have a material impact on the Company's Condensed Consolidated Financial Statements and related disclosures. The balance for allowance for uncollectable accounts was $9.8 million at November 21, 2020 and $10.0 million at August 29, 2020.

Note B – Share-Based Payments

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

7

Stock Options:

The Company made stock option grants of 194,511 shares during the twelve week period ended November 21, 2020 and granted options to purchase 188,324 shares during the comparable prior year period. The Company grants options to purchase common stock to certain of its employees under its plan at prices equal to the market value of the stock on the date of grant. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the award and each vesting date.

The weighted average fair value of the stock option awards granted during the twelve week periods ended November 21, 2020 and November 23, 2019, using the Black-Scholes-Merton multiple-option pricing valuation model, was $299.48 and $252.39 per share, respectively, using the following weighted average key assumptions:

	Twelve Weeks Ended
	November 21,		November 23,
	2020		2019
Expected price volatility	28	%	22	%
Risk-free interest rate	0.4	%	1.4	%
Weighted average expected lives (in years)	5.6		5.5
Forfeiture rate	10	%	10	%
Dividend yield	0	%	0	%

During the twelve week period ended November 21, 2020, 59,990 stock options were exercised at a weighted average exercise price of $496.58. In the comparable prior year period, 18,407 stock options were exercised at a weighted average exercise price of $568.16.

Restricted Stock Units:

Restricted stock unit awards are valued at the market price of a share of the Company’s stock on the date of grant. Grants of employee restricted stock units vest ratably on an annual basis over a four-year service period and are payable in shares of common stock on the vesting date. Compensation expense for grants of employee restricted stock units is recognized on a straight-line basis over the four-year service period, less estimated forfeitures, which are consistent with stock option forfeiture assumptions. Grants of non-employee director restricted stock units are made and expensed on January 1 of each year, as they vest immediately.

As of November 21, 2020, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $14.5 million, before income taxes, which we expect to recognize over an estimated weighted average period of 3.1 years.

Transactions related to restricted stock units for the twelve weeks ended November 21, 2020 were as follows:

		Weighted-
	Number	Average Grant
	of Shares	Date Fair Value
Nonvested at August 29, 2020	14,160	$	910.63
Granted	6,328		1,139.99
Vested	(4,069)		888.78
Canceled or forfeited	(20)		962.49
Nonvested at November 21, 2020	16,399	$	1,004.49

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $10.5 million for the twelve week period ended November 21, 2020, and $10.0 million for the comparable prior year period.

8

For the twelve week period ended November 21, 2020, 293,280 stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive. For the comparable prior year period, 107,511 anti-dilutive shares were excluded from the dilutive earnings per share computation.

See AutoZone’s Annual Report on Form 10-K for the year ended August 29, 2020, for a discussion regarding the methodology used in developing AutoZone’s assumptions to determine the fair value of the option awards and a description of AutoZone’s Amended and Restated 2011 Equity Incentive Award Plan and the 2020 Director Compensation Program.

Note C – Fair Value Measurements

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

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

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

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

Marketable Debt Securities Measured at Fair Value on a Recurring Basis

The Company’s marketable debt securities measured at fair value on a recurring basis were as follows:

	November 21, 2020
(in thousands)	Level 1		Level 2		Level 3		Fair Value
Other current assets	$	41,085	$	194	$	—	$	41,279
Other long-term assets		83,666		16,678		—		100,344
	$	124,751	$	16,872	$	—	$	141,623

	August 29, 2020
(in thousands)	Level 1		Level 2		Level 3		Fair Value
Other current assets	$	75,651	$	467	$	—	$	76,118
Other long-term assets		58,792		12,329		—		71,121
	$	134,443	$	12,796	$	—	$	147,239

At November 21, 2020, the fair value measurement amounts for assets and liabilities recorded in the accompanying Condensed Consolidated Balance Sheets consisted of short-term marketable debt securities, which are included within Other current assets, and long-term marketable debt securities, which are included in Other long-term assets. The Company’s marketable debt securities are typically valued at the closing price in the principal active market as of the last business day of the quarter or through the use of other market inputs relating to the securities, including benchmark yields and reported trades. The fair values of the marketable debt securities, by asset class, are described in “Note D – Marketable Debt Securities.”

9

Financial Instruments not Recognized at Fair Value

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

Note D – Marketable Debt Securities

Marketable debt securities are carried at fair value, with unrealized gains and losses, net of income taxes, recorded in Accumulated other comprehensive loss until realized, and any credit risk related losses are recognized in net income in the period incurred. The Company’s basis for determining the cost of a security sold is the “Specific Identification Model.” The Company’s available-for-sale marketable debt securities consisted of the following:

	November 21, 2020
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value
Corporate debt securities	$	42,192	$	816	$	—	$	43,008
Government bonds		75,235		968		(18)		76,185
Mortgage-backed securities		6,590		68		(1)		6,657
Asset-backed securities and other		15,644		131		(2)		15,773
	$	139,661	$	1,983	$	(21)	$	141,623

	August 29, 2020
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value
Corporate debt securities	$	46,652	$	970	$	(4)	$	47,618
Government bonds		44,594		1,172		—		45,766
Mortgage-backed securities		4,842		75		—		4,917
Asset-backed securities and other		48,798		143		(3)		48,938
	$	144,886	$	2,360	$	(7)	$	147,239

The debt securities held at November 21, 2020, had effective maturities ranging from less than one year to approximately three years. At November 21, 2020, the Company held eight securities that are in an unrealized loss position. In evaluating whether the securities are deemed to be impaired on an other than temporary basis, the Company considers factors such as the duration and severity of the loss position, the credit worthiness of the investee, the term to maturity and the intent and ability to hold the investments until maturity or until recovery of fair value. An allowance for credit losses was deemed unnecessary given consideration of the factors above.

Included above in total available-for-sale marketable debt securities are $62.3 million of marketable debt securities transferred by the Company’s insurance captive to a trust account to secure its obligations to an insurance company related to future workers’ compensation and casualty losses.

10

Note E – Derivative Financial Instruments

At November 21, 2020, the Company had $30.4 million recorded in Accumulated other comprehensive loss related to realized losses associated with terminated interest rate swap and treasury rate lock derivatives, which were designated as hedging instruments. Net losses are amortized into Interest expense over the remaining life of the associated debt. During the twelve week periods ended November 21, 2020 and November 23, 2019, the Company reclassified $863 thousand and $509 thousand of net losses from Accumulated other comprehensive loss to Interest expense, respectively. The Company expects to reclassify $3.7 million of net losses from Accumulated other comprehensive loss to Interest expense over the next 12 months.

Note F – Merchandise Inventories

Merchandise inventories include related purchasing, storage and handling costs. Inventory cost has been determined using the last-in, first-out (“LIFO”) method stated at the lower of cost or net realizable value for domestic inventories and the weighted average cost method stated at the lower of cost or net realizable value for Mexico and Brazil inventories. Due to historical price deflation on the Company’s merchandise purchases, the Company has exhausted its LIFO reserve balance. The Company’s policy is not to write up inventory in excess of replacement cost. The difference between LIFO cost and replacement cost, which will be reduced upon experiencing price inflation on the Company’s merchandise purchases, was $362.5 million at November 21, 2020 and $357.0 million at August 29, 2020.

Note G – Financing

The Company’s long-term debt consisted of the following:

	November 21,		August 29,
(in thousands)	2020		2020
2.500% Senior Notes due April 2021, effective interest rate of 2.62%	$	250,000	$	250,000
3.700% Senior Notes due April 2022, effective interest rate of 3.85%		500,000		500,000
2.875% Senior Notes due January 2023, effective interest rate of 3.21%		300,000		300,000
3.125% Senior Notes due July 2023, effective interest rate of 3.26%		500,000		500,000
3.125% Senior Notes due April 2024, effective interest rate 3.32%		300,000		300,000
3.250% Senior Notes due April 2025, effective interest rate 3.36%		400,000		400,000
3.625% Senior Notes due April 2025, effective interest rate 3.78%		500,000		500,000
3.125% Senior Notes due April 2026, effective interest rate of 3.28%		400,000		400,000
3.750% Senior Notes due June 2027, effective interest rate of 3.83%		600,000		600,000
3.750% Senior Notes due April 2029, effective interest rate of 3.86%		450,000		450,000
4.000% Senior Notes due April 2030, effective interest rate 4.09%		750,000		750,000
1.650% Senior Notes due January 2031, effective interest rate of 2.19%		600,000		600,000
Total debt before discounts and debt issuance costs		5,550,000		5,550,000
Less: Discounts and debt issuance costs		35,126		36,629
Long-term debt	$	5,514,874	$	5,513,371

As of November 21, 2020, the $250 million 2.500% Senior Notes due April 2021 are classified as long-term in the accompanying Condensed Consolidated Balance Sheets as the Company has the ability and intent to refinance them on a long-term basis through available capacity in its revolving credit agreements. As of November 21, 2020, the Company had $2.748 billion of availability under its $2.750 billion revolving credit agreements, which would allow the Company to replace these short-term obligations with long-term financing facilities.

11

The Company entered into a Master Extension, New Commitment and Amendment Agreement dated as of November 18, 2017 (the “Extension Amendment”) to the Third Amended and Restated Credit Agreement dated as of November 18, 2016, as amended, modified, extended or restated from time to time (the “Revolving Credit Agreement”). Under the Extension Amendment: (i) the Company’s borrowing capacity under the Revolving Credit Agreement was increased from $1.6 billion to $2.0 billion; (ii) the maximum borrowing under the Revolving Credit Agreement may, at the Company’s option, subject to lenders approval, be increased from $2.0 billion to $2.4 billion; (iii) the termination date of the Revolving Credit Agreement was extended from November 18, 2021 until November 18, 2022; and (iv) the Company has the option to make one additional written request of the lenders to extend the termination date then in effect for an additional year. Under the Revolving Credit Agreement, the Company may borrow funds consisting of Eurodollar loans, base rate loans or a combination of both. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as LIBOR plus the applicable percentage, as defined in the Revolving Credit Agreement, depending upon the Company’s senior, unsecured, (non-credit enhanced) long-term debt ratings. Interest accrues on base rate loans as defined in the Revolving Credit Agreement.

On April 3, 2020, the Company entered into a 364-Day Credit Agreement (the “364-Day Credit Agreement”) to augment the Company’s access to liquidity due to current macroeconomic conditions, specifically the pandemic, and to supplement the Company’s existing Revolving Credit Agreement. The 364-Day Credit Agreement provides for loans in the aggregate principal amount of up to $750 million. The 364-Day Credit Agreement will terminate, and all amounts borrowed under the 364-Day Credit Agreement will be due and payable, on April 2, 2021. Revolving loans under the 364-Day Credit Agreement may be base rate loans, Eurodollar loans, or a combination of both, at the Company’s election.

As of November 21, 2020, the Company had no outstanding borrowings under either of the revolving credit agreements and $1.7 million of outstanding letters of credit under the Revolving Credit Agreement.

Under the Company’s revolving credit agreements, covenants include restrictions on liens, a maximum debt to earnings ratio, a minimum fixed charge coverage ratio and a change of control provision that may require acceleration of the repayment obligations under certain circumstances.

The fair value of the Company’s debt was estimated at $6.055 billion as of November 21, 2020, and $6.081 billion as of August 29, 2020, based on the quoted market prices for the same or similar issues or on the current rates available to the Company for debt of the same terms (Level 2). Such fair value is greater than the carrying value of debt by $540.1 million and $567.5 million at November 21, 2020 and August 29, 2020, respectively, which reflects their face amount, adjusted for any unamortized debt issuance costs and discounts.

All Senior Notes are subject to an interest rate adjustment if the debt ratings assigned are downgraded (as defined in the agreements). Further, the Senior Notes contain a provision that repayment may be accelerated if the Company experiences a change in control (as defined in the agreements). The Company’s borrowings under its Senior Notes contain minimal covenants, primarily restrictions on liens, sale and leaseback transactions and consolidations, mergers and the sale of assets. All of the repayment obligations under its borrowing arrangements may be accelerated and come due prior to the scheduled payment date if covenants are breached or an event of default occurs.

As of November 21, 2020, the Company was in compliance with all covenants and expects to remain in compliance with all covenants under its borrowing arrangements.

Note H – Stock Repurchase Program

From January 1, 1998 to November 21, 2020, the Company has repurchased a total of 148.3 million shares of its common stock at an aggregate cost of $23.032 billion, including 584,379 shares of its common stock at an aggregate cost of $678.3 million during the twelve week period ended November 21, 2020. Considering the cumulative repurchases as of November 21, 2020, the Company had $117.6 million remaining under the Board’s authorization to repurchase its common stock.

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On December 15, 2020, the Board voted to increase the authorization by $1.5 billion to raise the cumulative share repurchase authorization from $23.15 billion to $24.65 billion. Subsequent to November 21, 2020, the Company has repurchased 97,140 shares of its common stock at an aggregate cost of $110.0 million. Considering the cumulative repurchases and the increase in authorization subsequent to November 21, 2020, the Company has $1.508 billion remaining under the Board’s authorization to repurchase its stock.

Note I – Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss includes foreign currency translation adjustments, activity for interest rate swaps and treasury rate locks that qualify as cash flow hedges and unrealized gains (losses) on available-for-sale debt securities. Changes in Accumulated other comprehensive loss for the twelve week periods ended November 21, 2020 and November 23, 2019 consisted of the following:

			Net
	Foreign		Unrealized
	Currency and		Gain (Loss)
(in thousands)	Other(2)		on Securities			Derivatives			Total
Balance at August 29, 2020	$	(332,321)	$	1,845		$	(23,776)		$	(354,252)
Other comprehensive income (loss) before reclassifications(1)		46,995		(322)	(3)		—			46,673
Amounts reclassified from Accumulated other comprehensive loss		—		13	(3)		659	(3)		672
Balance at November 21, 2020	$	(285,326)	$	1,536		$	(23,117)		$	(306,907)

			Net
	Foreign		Unrealized
	Currency and		Gain (Loss)
(in thousands)	Other(2)		on Securities			Derivatives			Total
Balance at August 31, 2019	$	(265,598)	$	591		$	(4,315)		$	(269,322)
Other comprehensive income (loss) before reclassifications(1)		19,040		(233)	(3)		—			18,807
Amounts reclassified from Accumulated other comprehensive loss		—		45	(3)		389	(3)		434
Balance at November 23, 2019	$	(246,558)	$	403		$	(3,926)		$	(250,081)

(1) Amounts in parentheses indicate debits to Accumulated other comprehensive loss.

(2) Foreign currency is shown net of U.S. tax to account for foreign currency impacts of certain undistributed non-U.S. subsidiaries earnings. Other foreign currency is not shown net of additional U.S. tax as other basis differences of non-U.S. subsidiaries are intended to be permanently reinvested.

(3) Amounts shown are net of taxes/tax benefits.

Note J – Litigation

The Company is involved in various legal proceedings incidental to the conduct of its business, including, but not limited to, several lawsuits containing class-action allegations in which the plaintiffs are current and former hourly and salaried employees who allege various wage and hour violations and unlawful termination practices. While the resolution of these matters cannot be predicted with certainty, management does not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to the Company’s Condensed Consolidated Statements of Income, Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Cash Flows.

Note K – Leases

The Company’s leases primarily relate to its retail stores, distribution centers and vehicles under various non-callable leases. Retail leases typically have initial terms of between one and 20 years, with one to six optional renewal periods of one to five years each. Finance leases for vehicles typically have original terms between one and five years, and finance leases for real estate leases typically have terms of 20 or more years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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Lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheet are as follows:

		November 21,		August 29,
(in thousands)	Classification	2020		2020
Assets:
Operating	Operating lease right-of-use assets	$	2,607,019	$	2,581,677
Finance	Property and equipment		328,153		327,006
Total lease assets		$	2,935,172	$	2,908,683
Liabilities:
Current:
Operating	Current portion of operating lease liabilities	$	246,332	$	223,846
Finance	Accrued expenses and other		63,408		67,498
Noncurrent:
Operating	Operating lease liabilities, less current portion		2,524,008		2,501,560
Finance	Other long-term liabilities		169,513		155,855
Total lease liabilities		$	3,003,261	$	2,948,759

Accumulated amortization related to finance lease assets was $95.0 million as of November 21, 2020 and $107.3 million as of August 29, 2020.

Lease costs for finance and operating leases for the twelve week period ended November 21, 2020 are as follows:

		Twelve Weeks Ended
		November 21,		November 23,
(in thousands)	Statement of Income Location	2020		2019
Finance lease cost:
Amortization of lease assets	Depreciation and amortization	$	9,319	$	12,656
Interest on lease liabilities	Interest expense, net		703		1,385
Operating lease cost(1)	Selling, general and administrative expenses		84,103		81,799
Total lease cost		$	94,125	$	95,840

(1) Includes short-term leases, variable lease costs and sublease income, which are immaterial.

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The following table summarizes the Company’s lease term and discount rate assumptions:

	November 21,
	2020
Weighted-average remaining lease term in years, inclusive of renewal options that are reasonably certain to be exercised:
Finance leases – real estate	27
Finance leases – vehicles	4
Operating leases	15
Weighted-average discount rate:
Finance leases – real estate	3.48	%
Finance leases – vehicles	2.04	%
Operating leases	3.46	%

The following table summarizes the other information related to the Company’s lease liabilities: