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Table of Contents

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 11, 2023, 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

Graphic

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 – 18,397,705 shares outstanding as of March 10, 2023.

Table of Contents

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

16

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

28

SIGNATURES

30

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

February 11,

August 27,

(in thousands)

2023

2022

Assets

 

  

Current assets:

 

  

Cash and cash equivalents

$

301,286

$

264,380

Accounts receivable

 

484,767

 

504,886

Merchandise inventories

 

5,731,255

 

5,638,004

Other current assets

 

277,497

 

220,714

Total current assets

 

6,794,805

 

6,627,984

Property and equipment:

Property and equipment

 

9,723,855

 

9,453,171

Less: Accumulated depreciation and amortization

 

(4,487,726)

 

(4,282,752)

 

5,236,129

 

5,170,419

Operating lease right-of-use assets

2,943,844

2,918,817

Goodwill

 

302,645

 

302,645

Deferred income taxes

 

59,814

 

52,047

Other long-term assets

 

207,905

 

203,131

 

3,514,208

 

3,476,640

Total assets

$

15,545,142

$

15,275,043

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable

$

7,321,551

$

7,301,347

Current portion of operating lease liabilities

275,269

243,407

Accrued expenses and other

 

933,735

 

1,008,701

Income taxes payable

 

84,063

 

34,938

Total current liabilities

 

8,614,618

 

8,588,393

Long-term debt

 

7,042,302

 

6,122,092

Operating lease liabilities, less current portion

2,854,227

2,837,973

Deferred income taxes

 

536,102

 

533,884

Other long-term liabilities

 

682,063

 

731,614

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; 18,786 shares issued and 18,467 shares outstanding as of February 11, 2023; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022

 

188

 

207

Additional paid-in capital

 

1,324,258

 

1,354,252

Retained deficit

 

(4,471,842)

 

(1,330,067)

Accumulated other comprehensive loss

 

(269,312)

 

(300,536)

Treasury stock, at cost

 

(767,462)

 

(3,262,769)

Total stockholders’ deficit

 

(4,184,170)

 

(3,538,913)

Total liabilities and stockholders' deficit

$

15,545,142

$

15,275,043

See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Twelve Weeks Ended

Twenty-Four Weeks Ended

February 11,

February 12,

February 11,

February 12,

(in thousands, except per share data)

2023

2022

2023

2022

Net sales

    

$

3,690,982

    

$

3,369,750

    

$

7,676,049

    

$

7,038,653

Cost of sales, including warehouse and delivery expenses

1,760,979

1,584,524

3,751,424

3,328,267

Gross profit

1,930,003

 

1,785,226

3,924,625

 

3,710,386

Operating, selling, general and administrative expenses

1,260,026

1,158,466

2,531,615

2,329,141

Operating profit

669,977

626,760

1,393,010

1,381,245

Interest expense, net

65,609

42,471

123,332

85,755

Income before income taxes

604,368

 

584,289

1,269,678

 

1,295,490

Income tax expense

127,824

112,534

253,816

268,500

Net income

$

476,544

$

471,755

$

1,015,862

$

1,026,990

Weighted average shares for basic earnings per share

 

18,705

 

20,513

 

18,856

 

20,750

Effect of dilutive stock equivalents

632

645

635

633

Weighted average shares for diluted earnings per share

 

19,337

 

21,158

 

19,491

 

21,383

Basic earnings per share

$

25.48

$

23.00

$

53.87

$

49.49

Diluted earnings per share

$

24.64

$

22.30

$

52.12

$

48.03

See Notes to Condensed Consolidated Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Twelve Weeks Ended

Twenty-Four Weeks Ended

February 11,

    

February 12,

    

February 11,

    

February 12,

(in thousands)

    

2023

2022

2023

2022

Net income

$

476,544

$

471,755

$

1,015,862

$

1,026,990

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Foreign currency translation adjustments

 

22,060

 

14,315

 

25,395

 

(2,251)

Unrealized gains (losses) on marketable debt securities, net of taxes

 

548

 

(870)

 

(123)

 

(1,300)

Net derivative activities, net of taxes

 

5,345

 

719

 

5,952

 

1,374

Total other comprehensive income (loss)

 

27,953

 

14,164

 

31,224

 

(2,177)

Comprehensive income

$

504,497

$

485,919

$

1,047,086

$

1,024,813

See Notes to Condensed Consolidated Financial Statements.

4

Table of Contents

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Twenty-Four Weeks Ended

    

February 11,

February 12,

(in thousands)

2023

2022

Cash flows from operating activities:

 

  

 

  

Net income

$

1,015,862

$

1,026,990

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

Depreciation and amortization of property and equipment

 

222,964

 

199,282

Other non-cash charges

 

91,000

 

Amortization of debt origination fees

 

3,922

 

5,373

Deferred income taxes

 

(4,697)

 

40,983

Share-based compensation expense

 

42,379

 

30,738

Changes in operating assets and liabilities:

 

 

  

Accounts receivable

 

22,273

 

(27,385)

Merchandise inventories

 

(161,546)

 

(393,459)

Accounts payable and accrued expenses

 

(111,311)

 

278,833

Income taxes

 

87,400

 

12,774

Other, net

 

(60,185)

 

(34,383)

Net cash provided by operating activities

 

1,148,061

 

1,139,746

Cash flows from investing activities:

 

  

 

  

Capital expenditures

 

(259,234)

 

(208,143)

Purchase of marketable debt securities

 

(14,000)

 

(22,632)

Proceeds from sale of marketable debt securities

 

3,450

 

13,908

Investment in tax credit equity investments

(12,070)

(20,656)

Proceeds from disposal of capital assets and other, net

 

11,846

 

26,210

Net cash used in investing activities

 

(270,008)

 

(211,313)

Cash flows from financing activities:

 

  

 

  

Net proceeds from commercial paper

 

227,600

 

1,068,100

Proceeds from issuance of debt

 

1,000,000

 

Repayment of debt

(300,000)

(500,000)

Net proceeds from sale of common stock

 

72,758

 

66,457

Purchase of treasury stock

(1,799,997)

(2,459,995)

Repayment of principal portion of finance lease liabilities

 

(40,572)

(31,100)

Other, net

 

(4,510)

 

(3,362)

Net cash used in financing activities

 

(844,721)

 

(1,859,900)

Effect of exchange rate changes on cash

 

3,574

 

(445)

Net increase/(decrease) in cash and cash equivalents

 

36,906

 

(931,912)

Cash and cash equivalents at beginning of period

 

264,380

 

1,171,335

Cash and cash equivalents at end of period

$

301,286

$

239,423

See Notes to Condensed Consolidated Financial Statements.

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AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

Twelve Weeks Ended February 11, 2023

Accumulated

Common

Additional

Other

    

Shares

    

Common

    

Paid-in

    

Retained

    

Comprehensive

    

Treasury

    

(in thousands)

Issued

Stock

Capital

Deficit

Loss

Stock

Total

Balance at November 19, 2022

 

20,794

$

208

$

1,412,650

$

(790,749)

$

(297,265)

$

(4,162,767)

$

(3,837,923)

Net income

 

 

 

 

476,544

 

 

 

476,544

Total other comprehensive income

 

 

 

 

 

27,953

 

 

27,953

Retirement of treasury shares

(2,051)

 

(20)

 

(143,440)

 

(4,157,637)

 

 

4,301,097

Purchase of 372 shares of treasury stock

 

(905,792)

 

(905,792)

Issuance of common stock under stock options and stock purchase plans

 

43

 

 

31,929

 

31,929

Share-based compensation expense

 

 

 

23,119

 

 

 

 

23,119

Balance at February 11, 2023

 

18,786

$

188

$

1,324,258

$

(4,471,842)

$

(269,312)

$

(767,462)

$

(4,184,170)

Twelve Weeks Ended February 12, 2022

Accumulated

Common

Additional

Retained

Other

    

Shares

    

Common

    

Paid-in

    

Earnings

    

Comprehensive

    

Treasury

    

(in thousands)

Issued

Stock

Capital

(Deficit)

Loss

Stock

Total

Balance at November 20, 2021

 

23,057

$

231

$

1,499,557

$

135,406

$

(324,327)

$

(3,435,617)

$

(2,124,750)

Net income

 

 

 

 

471,755

 

 

 

471,755

Total other comprehensive income

 

 

 

 

 

14,164

 

 

14,164

Retirement of treasury shares

 

(2,484)

 

(25)

 

(294,894)

 

(3,337,892)

 

 

3,632,811

 

Purchase of 783 shares of treasury stock

 

 

 

 

 

 

(1,559,998)

 

(1,559,998)

Issuance of common stock under stock options and stock purchase plans

 

77

 

 

45,356

 

45,356

Share-based compensation expense

 

 

 

15,996

 

 

 

 

15,996

Balance at February 12, 2022

 

20,650

$

206

$

1,266,015

$

(2,730,731)

$

(310,163)

$

(1,362,804)

$

(3,137,477)

Twenty-Four Weeks Ended February 11, 2023

Accumulated

Common

Additional

Other

    

Shares

    

Common

    

Paid-in

    

Retained

    

Comprehensive

    

Treasury

    

(in thousands)

Issued

Stock

Capital

Deficit

Loss

Stock

Total

Balance at August 27, 2022

 

20,732

$

207

$

1,354,252

$

(1,330,067)

$

(300,536)

$

(3,262,769)

$

(3,538,913)

Net income

 

 

 

 

1,015,862

 

 

 

1,015,862

Total other comprehensive income

 

 

 

 

 

31,224

 

 

31,224

Retirement of treasury shares

 

(2,051)

 

(20)

 

(143,440)

 

(4,157,637)

 

 

4,301,097

 

Purchase of 764 shares of treasury stock

 

 

 

 

 

 

(1,805,790)

 

(1,805,790)

Issuance of common stock under stock options and stock purchase plans

 

105

 

1

 

72,757

 

72,758

Share-based compensation expense

 

 

 

40,689

 

 

 

 

40,689

Balance at February 11, 2023

 

18,786

$

188

$

1,324,258

$

(4,471,842)

$

(269,312)

$

(767,462)

$

(4,184,170)

Twenty-Four Weeks Ended February 12, 2022

Accumulated

Common

Additional

Other

    

Shares

    

Common

    

Paid-in

    

Retained

    

Comprehensive

    

Treasury

    

(in thousands)

Issued

Stock

Capital

Deficit

Loss

Stock

Total

Balance at August 28, 2021

 

23,007

$

230

$

1,465,669

$

(419,829)

$

(307,986)

$

(2,535,620)

$

(1,797,536)

Net income

 

 

 

 

1,026,990

 

 

 

1,026,990

Total other comprehensive loss

 

 

 

 

 

(2,177)

 

 

(2,177)

Retirement of treasury shares

 

(2,484)

 

(25)

 

(294,894)

 

(3,337,892)

 

 

3,632,811

 

Purchase of 1,298 shares of treasury stock

 

 

 

 

 

 

(2,459,995)

 

(2,459,995)

Issuance of common stock under stock options and stock purchase plans

 

127

 

1

 

66,456

 

66,457

Share-based compensation expense

 

 

 

28,784

 

 

 

 

28,784

Balance at February 12, 2022

 

20,650

$

206

$

1,266,015

$

(2,730,731)

$

(310,163)

$

(1,362,804)

$

(3,137,477)

See Notes to Condensed Consolidated Financial Statements.

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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 27, 2022.

Operating results for the twelve and twenty-four weeks ended February 11, 2023 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 26, 2023. 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 2023 and 2022 each have 16 weeks.

Recently Adopted Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, Government Assistance (Topic 832) – Disclosures by Business Entities about Government Assistance, which requires annual disclosures for entities receiving governmental assistance to provide more transparency. This ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted this ASU with its first quarter ended November 19, 2022 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In September 2022, the FASB issued ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50). This ASU requires buyers in a supplier finance program to disclose sufficient qualitative and quantitative information about the program to allow a reader of the financial statements to understand the program’s nature, activity during the period, changes from period to period and the program’s potential magnitude. This ASU is effective for all companies for fiscal years beginning after December 15, 2022, including interim periods within those years, and requires retrospective adoption. Early adoption is permitted. The Company will adopt this standard beginning with its first quarter ending November 18, 2023. The Company is currently evaluating the new guidance to determine the impact the adoption will have on the Company’s disclosures.

R

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.

Stock Options:

The Company made stock option grants for 157,870 shares during the twenty-four week period ended February 11, 2023 and granted options to purchase 164,262 shares during the comparable prior year period. The Company grants options to

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purchase common stock to certain of its employees under its equity incentive plans 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 twenty-four week periods ended February 11, 2023 and February 12, 2022, using the Black-Scholes-Merton multiple-option pricing valuation model, was $760.98 and $463.09 per share, respectively, using the following weighted average key assumptions:

Twenty-Four Weeks Ended

    

February 11,

    

February 12,

    

    

2023

2022

Expected price volatility

 

29

%  

28

%

Risk-free interest rate

 

3.8

%  

1.1

%

Weighted average expected lives (in years)

 

5.4

 

5.6

 

Forfeiture rate

 

10

%  

10

%

Dividend yield

 

0

%  

0

%

During the twenty-four week period ended February 11, 2023, and the comparable prior year period, 96,080 and 123,216 stock options were exercised at a weighted average exercise price of $709.98 and $584.81, respectively.

As of February 11, 2023, total unrecognized share-based expense related to stock options, net of estimated forfeitures, was approximately $137.7 million, before income taxes, which we expect to recognize over an estimated weighted average period of 3.3 years.

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 February 11, 2023, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $11.7 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.8 years.

Transactions related to restricted stock units for the twenty-four weeks ended February 11, 2023 were as follows:

Weighted-

    

Number

    

Average Grant

of Shares

Date Fair Value

Nonvested at August 27, 2022

 

12,731

$

1,223.61

Granted

 

3,584

2,267.40

Vested

 

(6,635)

1,276.65

Forfeited

 

(1,054)

1,555.01

Nonvested at February 11, 2023

 

8,626

$

1,576.00

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) for the twelve and twenty-four week periods ended February 11, 2023, was $23.4 million and $42.4 million, respectively. For the comparable prior year periods, total share-based compensation expense was $16.4 million and $30.7 million, respectively.

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Table of Contents

For the twelve and twenty-four week periods ended February 11, 2023, 156,925 and 122,072, respectively, stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive. For the comparable prior year periods, 162,955 and 128,399, respectively, anti-dilutive stock options were excluded from the dilutive earnings per share computation.

See AutoZone’s Annual Report on Form 10-K for the year ended August 27, 2022 and other filings with the SEC, 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, the AutoZone, Inc. 2020 Omnibus Incentive Award Plan and the 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:

February 11, 2023

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Fair Value

Other current assets

$

62,455

$

$

$

62,455

Other long-term assets

 

49,925

10,558

 

 

60,483

$

112,380

$

10,558

$

$

122,938

August 27, 2022

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Fair Value

Other current assets

$

49,659

$

109

$

$

49,768

Other long-term assets

 

57,301

 

5,476

 

 

62,777

$

106,960

$

5,585

$

$

112,545

At February 11, 2023, 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.”

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Table of Contents

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:

February 11, 2023

    

Amortized

    

Gross

    

Gross

    

Cost

Unrealized

Unrealized

Fair

(in thousands)

Basis

Gains

Losses

Value

Corporate debt securities

$

12,789

$

$

(289)

$

12,500

Government bonds

 

90,877

 

1

 

(2,101)

 

88,777

Mortgage-backed securities

 

4,005

 

 

(267)

 

3,738

Asset-backed securities and other

 

18,206

 

1

 

(284)

 

17,923

$

125,877

$

2

$

(2,941)

$

122,938

August 27, 2022

    

Amortized

    

Gross

    

Gross

    

Cost

Unrealized

Unrealized

Fair

(in thousands)

Basis

Gains

Losses

Value

Corporate debt securities

$

15,293

$

1

$

(298)

$

14,996

Government bonds

 

88,903

 

 

(1,963)

 

86,940

Mortgage-backed securities

 

4,600

 

 

(243)

 

4,357

Asset-backed securities and other

 

6,531

 

 

(279)

 

6,252

$

115,327

$

1

$

(2,783)

$

112,545

The debt securities held at February 11, 2023, had effective maturities ranging from less than one year to approximately three years. Securities maturing in less than one year totaled $62.5 million and $49.7 million at February 11, 2023 and August 27, 2022, respectively. Securities maturing between one and three years totaled $60.5 million and $62.8 million at February 11, 2023 and August 27, 2022, respectively. At February 11, 2023, the Company held 70 securities that are in an unrealized loss position of approximately $