0000866787--08-312024Q2falseAUTOZONE INC0.0543P4YP5YP4Y0000866787us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2024-02-100000866787us-gaap:SubsequentEventMember2024-02-112024-03-0800008667871998-01-012024-02-100000866787us-gaap:TreasuryStockCommonMember2023-11-192024-02-100000866787us-gaap:TreasuryStockCommonMember2023-08-272024-02-100000866787us-gaap:TreasuryStockCommonMember2022-11-202023-02-110000866787us-gaap:TreasuryStockCommonMember2022-08-282023-02-1100008667872023-12-200000866787us-gaap:CommonStockMember2023-11-192024-02-100000866787us-gaap:CommonStockMember2023-08-272024-02-100000866787us-gaap:CommonStockMember2022-11-202023-02-110000866787us-gaap:CommonStockMember2022-08-282023-02-110000866787us-gaap:TreasuryStockCommonMember2024-02-100000866787us-gaap:RetainedEarningsMember2024-02-100000866787us-gaap:AdditionalPaidInCapitalMember2024-02-100000866787us-gaap:AccumulatedTranslationAdjustmentMember2024-02-100000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-02-100000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2024-02-100000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2024-02-100000866787us-gaap:TreasuryStockCommonMember2023-11-180000866787us-gaap:RetainedEarningsMember2023-11-180000866787us-gaap:AdditionalPaidInCapitalMember2023-11-180000866787us-gaap:AccumulatedTranslationAdjustmentMember2023-11-180000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-11-180000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-11-180000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-11-1800008667872023-11-180000866787us-gaap:TreasuryStockCommonMember2023-08-260000866787us-gaap:RetainedEarningsMember2023-08-260000866787us-gaap:AdditionalPaidInCapitalMember2023-08-260000866787us-gaap:AccumulatedTranslationAdjustmentMember2023-08-260000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-08-260000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-08-260000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-08-260000866787us-gaap:TreasuryStockCommonMember2023-02-110000866787us-gaap:RetainedEarningsMember2023-02-110000866787us-gaap:AdditionalPaidInCapitalMember2023-02-110000866787us-gaap:AccumulatedTranslationAdjustmentMember2023-02-110000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-02-110000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-02-110000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-02-110000866787us-gaap:TreasuryStockCommonMember2022-11-190000866787us-gaap:RetainedEarningsMember2022-11-190000866787us-gaap:AdditionalPaidInCapitalMember2022-11-190000866787us-gaap:AccumulatedTranslationAdjustmentMember2022-11-190000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-11-190000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-11-190000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-11-1900008667872022-11-190000866787us-gaap:TreasuryStockCommonMember2022-08-270000866787us-gaap:RetainedEarningsMember2022-08-270000866787us-gaap:AdditionalPaidInCapitalMember2022-08-270000866787us-gaap:AccumulatedTranslationAdjustmentMember2022-08-270000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-08-270000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-08-270000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-08-270000866787us-gaap:RestrictedStockUnitsRSUMember2024-02-100000866787srt:MinimumMemberus-gaap:EmployeeStockOptionMember2023-08-272024-02-100000866787srt:MaximumMemberus-gaap:EmployeeStockOptionMember2023-08-272024-02-100000866787us-gaap:RestrictedStockUnitsRSUMember2023-08-272024-02-100000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-11-192024-02-100000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-08-272024-02-100000866787us-gaap:PreferredStockMember2024-02-100000866787us-gaap:PreferredStockMember2023-08-260000866787us-gaap:AccumulatedTranslationAdjustmentMember2023-11-192024-02-100000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-11-192024-02-100000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-11-192024-02-100000866787us-gaap:AccumulatedTranslationAdjustmentMember2023-08-272024-02-100000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-08-272024-02-100000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-08-272024-02-100000866787us-gaap:AccumulatedTranslationAdjustmentMember2022-11-202023-02-110000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-11-202023-02-110000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-11-202023-02-110000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-11-202023-02-110000866787us-gaap:AccumulatedTranslationAdjustmentMember2022-08-282023-02-110000866787us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-08-282023-02-110000866787us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-08-282023-02-110000866787us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-08-282023-02-110000866787us-gaap:RetainedEarningsMember2023-11-192024-02-100000866787us-gaap:RetainedEarningsMember2023-08-272024-02-100000866787us-gaap:RetainedEarningsMember2022-11-202023-02-110000866787us-gaap:RetainedEarningsMember2022-08-282023-02-110000866787us-gaap:CommercialPaperMember2024-02-100000866787us-gaap:CommercialPaperMember2023-08-260000866787us-gaap:LetterOfCreditMember2021-11-150000866787azo:SwinglineLoansMember2021-11-150000866787azo:IndividualIssuerLetterOfCreditMember2021-11-150000866787azo:MasterExtensionAgreementMember2022-11-152022-11-150000866787azo:NewRevolvingCreditAgreementMember2021-11-150000866787azo:NewRevolvingCreditAgreementMember2021-11-140000866787us-gaap:LetterOfCreditMember2024-02-100000866787azo:NewRevolvingCreditAgreementMember2024-02-100000866787us-gaap:LetterOfCreditMember2023-08-260000866787azo:NewRevolvingCreditAgreementMember2023-08-260000866787us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:IndirectGuaranteeOfIndebtednessMember2024-02-100000866787us-gaap:AccountsPayableMemberus-gaap:IndirectGuaranteeOfIndebtednessMember2024-02-100000866787us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:IndirectGuaranteeOfIndebtednessMember2023-08-260000866787us-gaap:AccountsPayableMemberus-gaap:IndirectGuaranteeOfIndebtednessMember2023-08-260000866787us-gaap:AllOtherSegmentsMember2023-11-192024-02-100000866787azo:AutoPartsLocationsMember2023-11-192024-02-100000866787us-gaap:AllOtherSegmentsMember2023-08-272024-02-100000866787azo:AutoPartsLocationsMember2023-08-272024-02-100000866787us-gaap:AllOtherSegmentsMember2022-11-202023-02-110000866787azo:AutoPartsLocationsMember2022-11-202023-02-110000866787us-gaap:AllOtherSegmentsMember2022-08-282023-02-110000866787azo:AutoPartsLocationsMember2022-08-282023-02-110000866787azo:SeniorNoteTwentyNineMember2023-10-250000866787azo:SeniorNoteTwentyEightMember2023-10-250000866787azo:SeniorNoteTwentySevenMember2024-02-100000866787azo:SeniorNoteTwentyNineMember2024-02-100000866787azo:SeniorNoteTwentyEightMember2024-02-100000866787azo:SeniorNotesTwentyTwoMember2024-02-100000866787azo:SeniorNotesTwentyThreeMember2024-02-100000866787azo:SeniorNotesTwentySixMember2024-02-100000866787azo:SeniorNotesTwentyMember2024-02-100000866787azo:SeniorNotesTwentyFourMember2024-02-100000866787azo:SeniorNotesTwentyFiveMember2024-02-100000866787azo:SeniorNotesThirteenMember2024-02-100000866787azo:SeniorNotesSeventeenMember2024-02-100000866787azo:SeniorNotesNineteenMember2024-02-100000866787azo:SeniorNotesFourteenMember2024-02-100000866787azo:SeniorNotesFifteenMember2024-02-100000866787azo:SeniorNotesEighteenMember2024-02-100000866787azo:SeniorNoteTwentySevenMember2023-08-260000866787azo:SeniorNotesTwentyTwoMember2023-08-260000866787azo:SeniorNotesTwentyThreeMember2023-08-260000866787azo:SeniorNotesTwentySixMember2023-08-260000866787azo:SeniorNotesTwentyMember2023-08-260000866787azo:SeniorNotesTwentyFourMember2023-08-260000866787azo:SeniorNotesTwentyFiveMember2023-08-260000866787azo:SeniorNotesThirteenMember2023-08-260000866787azo:SeniorNotesSeventeenMember2023-08-260000866787azo:SeniorNotesNineteenMember2023-08-260000866787azo:SeniorNotesFourteenMember2023-08-260000866787azo:SeniorNotesFifteenMember2023-08-260000866787azo:SeniorNotesEighteenMember2023-08-260000866787us-gaap:CommonStockMember2023-11-180000866787us-gaap:CommonStockMember2023-02-110000866787us-gaap:CommonStockMember2022-11-190000866787us-gaap:CommonStockMember2022-08-270000866787us-gaap:CommonStockMember2024-02-100000866787us-gaap:CommonStockMember2023-08-2600008667872023-02-1100008667872022-08-270000866787us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-02-100000866787us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2024-02-100000866787us-gaap:FairValueMeasurementsRecurringMember2024-02-100000866787us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-08-260000866787us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-08-260000866787us-gaap:FairValueMeasurementsRecurringMember2023-08-260000866787us-gaap:MortgageBackedSecuritiesMember2024-02-100000866787us-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-08-260000866787us-gaap:MortgageBackedSecuritiesMember2023-08-260000866787azo:AssetBackedSecuritiesAndOtherMember2023-08-260000866787us-gaap:USGovernmentAgenciesDebtSecuritiesMember2024-02-100000866787us-gaap:CorporateDebtSecuritiesMember2024-02-100000866787azo:AssetBackedSecuritiesAndOtherMember2024-02-100000866787us-gaap:CorporateDebtSecuritiesMember2023-08-260000866787us-gaap:EmployeeStockOptionMember2023-11-192024-02-100000866787us-gaap:EmployeeStockOptionMember2023-08-272024-02-100000866787us-gaap:EmployeeStockOptionMember2022-11-202023-02-110000866787us-gaap:EmployeeStockOptionMember2022-08-282023-02-110000866787us-gaap:AdditionalPaidInCapitalMember2023-11-192024-02-100000866787us-gaap:AdditionalPaidInCapitalMember2023-08-272024-02-100000866787us-gaap:AdditionalPaidInCapitalMember2022-11-202023-02-1100008667872022-11-202023-02-110000866787us-gaap:AdditionalPaidInCapitalMember2022-08-282023-02-1100008667872023-11-192024-02-1000008667872024-03-080000866787us-gaap:ShareBasedPaymentArrangementEmployeeMemberazo:OmnibusIncentiveAwardPlan2020Member2023-08-272024-02-100000866787us-gaap:ShareBasedPaymentArrangementEmployeeMember2023-08-272024-02-1000008667872022-08-282023-02-1100008667872023-08-272024-02-1000008667872023-08-2600008667872023-12-202023-12-200000866787azo:SeniorNoteTwentySevenMember2023-08-272024-02-100000866787azo:SeniorNoteTwentyNineMember2023-08-272024-02-100000866787azo:SeniorNoteTwentyEightMember2023-08-272024-02-100000866787azo:SeniorNotesTwentyTwoMember2023-08-272024-02-100000866787azo:SeniorNotesTwentyThreeMember2023-08-272024-02-100000866787azo:SeniorNotesTwentySixMember2023-08-272024-02-100000866787azo:SeniorNotesTwentyMember2023-08-272024-02-100000866787azo:SeniorNotesTwentyFourMember2023-08-272024-02-100000866787azo:SeniorNotesTwentyFiveMember2023-08-272024-02-100000866787azo:SeniorNotesThirteenMember2023-08-272024-02-100000866787azo:SeniorNotesSeventeenMember2023-08-272024-02-100000866787azo:SeniorNotesNineteenMember2023-08-272024-02-100000866787azo:SeniorNotesFourteenMember2023-08-272024-02-100000866787azo:SeniorNotesFifteenMember2023-08-272024-02-100000866787azo:SeniorNotesEighteenMember2023-08-272024-02-100000866787azo:SeniorNoteTwentySevenMember2022-08-282023-08-260000866787azo:SeniorNotesTwentyTwoMember2022-08-282023-08-260000866787azo:SeniorNotesTwentyThreeMember2022-08-282023-08-260000866787azo:SeniorNotesTwentySixMember2022-08-282023-08-260000866787azo:SeniorNotesTwentyMember2022-08-282023-08-260000866787azo:SeniorNotesTwentyFourMember2022-08-282023-08-260000866787azo:SeniorNotesTwentyFiveMember2022-08-282023-08-260000866787azo:SeniorNotesThirteenMember2022-08-282023-08-260000866787azo:SeniorNotesSeventeenMember2022-08-282023-08-260000866787azo:SeniorNotesNineteenMember2022-08-282023-08-260000866787azo:SeniorNotesFourteenMember2022-08-282023-08-260000866787azo:SeniorNotesFifteenMember2022-08-282023-08-260000866787azo:SeniorNotesEighteenMember2022-08-282023-08-2600008667872024-02-100000866787azo:NewRevolvingCreditAgreementMember2021-11-152021-11-15iso4217:USDazo:storexbrli:purexbrli:sharesiso4217:USDxbrli:sharesazo:segment

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 10, 2024 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 – 17,302,899 shares outstanding as of March 8, 2024.

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

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

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 10,

August 26,

(in thousands)

2024

2023

Assets

 

  

Current assets:

 

  

Cash and cash equivalents

$

304,096

$

277,054

Accounts receivable

 

501,117

 

520,385

Merchandise inventories

 

5,970,175

 

5,764,143

Other current assets

 

381,668

 

217,844

Total current assets

 

7,157,056

 

6,779,426

Property and equipment:

Property and equipment

 

10,847,940

 

10,337,890

Less: Accumulated depreciation and amortization

 

(4,940,456)

 

(4,741,342)

 

5,907,484

 

5,596,548

Operating lease right-of-use assets

2,999,294

2,998,097

Goodwill

 

302,645

 

302,645

Deferred income taxes

 

84,700

 

86,002

Other long-term assets

 

266,475

 

223,160

Total long-term assets

 

3,653,114

 

3,609,904

Total assets

$

16,717,654

$

15,985,878

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable

$

7,149,882

$

7,201,281

Current portion of operating lease liabilities

296,509

257,256

Accrued expenses and other

 

1,214,996

 

1,000,841

Income taxes payable

 

111,222

 

52,478

Total current liabilities

 

8,772,609

 

8,511,856

Long-term debt

 

8,630,553

 

7,668,549

Operating lease liabilities, less current portion

2,901,636

2,917,046

Deferred income taxes

 

539,911

 

536,278

Other long-term liabilities

 

710,266

 

702,043

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; 17,351 shares issued and 17,312 shares outstanding as of February 10, 2024; 18,936 shares issued and 17,857 shares outstanding as of August 26, 2023

 

174

 

189

Additional paid-in capital

 

1,485,789

 

1,484,992

Retained deficit

 

(5,978,916)

 

(2,959,278)

Accumulated other comprehensive loss

 

(204,899)

 

(190,836)

Treasury stock, at cost

 

(139,469)

 

(2,684,961)

Total stockholders’ deficit

 

(4,837,321)

 

(4,349,894)

Total liabilities and stockholders' deficit

$

16,717,654

$

15,985,878

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 10,

February 11,

February 10,

February 11,

(in thousands, except per share data)

2024

2023

2024

2023

Net sales

    

$

3,859,126

    

$

3,690,982

    

$

8,049,403

    

$

7,676,049

Cost of sales, including warehouse and delivery expenses

1,779,474

1,760,979

3,755,735

3,751,424

Gross profit

2,079,652

 

1,930,003

4,293,668

 

3,924,625

Operating, selling, general and administrative expenses

1,336,410

1,260,026

2,701,822

2,531,615

Operating profit

743,242

669,977

1,591,846

1,393,010

Interest expense, net

102,619

65,609

194,004

123,332

Income before income taxes

640,623

 

604,368

1,397,842

 

1,269,678

Income tax expense

125,593

127,824

289,349

253,816

Net income

$

515,030

$

476,544

$

1,108,493

$

1,015,862

Weighted average shares for basic earnings per share

 

17,319

 

18,705

 

17,514

 

18,856

Effect of dilutive stock equivalents

509

632

517

635

Weighted average shares for diluted earnings per share

 

17,828

 

19,337

 

18,031

 

19,491

Basic earnings per share

$

29.74

$

25.48

$

63.29

$

53.87

Diluted earnings per share

$

28.89

$

24.64

$

61.48

$

52.12

See Notes to Condensed Consolidated Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Twelve Weeks Ended

Twenty-Four Weeks Ended

February 10,

    

February 11,

    

February 10,

    

February 11,

(in thousands)

    

2024

2023

2024

2023

Net income

$

515,030

$

476,544

$

1,108,493

$

1,015,862

Other comprehensive income (loss):

 

 

  

 

 

  

Foreign currency translation adjustments

 

4,339

 

22,060

 

(15,882)

 

25,395

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

 

717

 

548

 

1,012

 

(123)

Net derivative activities, net of taxes

 

404

 

5,345

 

807

 

5,952

Total other comprehensive income (loss)

 

5,460

 

27,953

 

(14,063)

 

31,224

Comprehensive income

$

520,490

$

504,497

$

1,094,430

$

1,047,086

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 10,

February 11,

(in thousands)

2024

2023

Cash flows from operating activities:

 

 

  

Net income

$

1,108,493

$

1,015,862

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

 

 

  

Depreciation and amortization of property and equipment

 

245,192

 

222,964

Other non-cash (income) charges

 

(16,000)

 

91,000

Amortization of debt origination fees

 

5,551

 

3,922

Deferred income taxes

 

5,998

 

(4,697)

Share-based compensation expense

 

45,961

 

42,379

Changes in operating assets and liabilities:

 

 

  

Accounts receivable

 

18,364

 

22,273

Merchandise inventories

 

(198,425)

 

(161,546)

Accounts payable and accrued expenses

 

(17,062)

 

(111,311)

Income taxes

 

96,282

 

87,400

Other, net

 

(29,968)

 

(60,185)

Net cash provided by operating activities

 

1,264,386

 

1,148,061

Cash flows from investing activities:

 

 

  

Capital expenditures

 

(490,807)

 

(259,234)

Purchase of marketable debt securities

 

(14,038)

 

(14,000)

Proceeds from sale of marketable debt securities

 

12,626

 

3,450

Investment in tax credit equity investments

(42,522)

(12,070)

Other, net

 

(9,253)

 

11,846

Net cash used in investing activities

 

(543,994)

 

(270,008)

Cash flows from financing activities:

 

 

  

Net (payments of) proceeds from commercial paper

 

(32,228)

 

227,600

Proceeds from issuance of debt

 

1,000,000

 

1,000,000

Repayment of debt

(300,000)

Net proceeds from sale of common stock

 

98,338

 

72,758

Purchase of treasury stock

(1,709,034)

(1,799,997)

Repayment of principal portion of finance lease liabilities

 

(41,459)

(40,572)

Other, net

 

(8,462)

 

(4,510)

Net cash used in financing activities

 

(692,845)

 

(844,721)

Effect of exchange rate changes on cash

 

(505)

 

3,574

Net increase in cash and cash equivalents

 

27,042

 

36,906

Cash and cash equivalents at beginning of period

 

277,054

 

264,380

Cash and cash equivalents at end of period

$

304,096

$

301,286

See Notes to Condensed Consolidated Financial Statements.

5

Table of Contents

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

Twelve Weeks Ended February 10, 2024

Accumulated

Common

Additional

Other

    

Shares

    

Common

    

Paid-in

    

Retained

    

Comprehensive

    

Treasury

    

(in thousands)

Issued

Stock

Capital

Deficit

Loss

Stock

Total

Balance at November 18, 2023

 

18,984

$

190

$

1,548,510

$

(2,365,815)

$

(210,359)

$

(4,186,197)

$

(5,213,671)

Net income

 

 

 

 

515,030

 

 

 

515,030

Total other comprehensive income

 

 

 

 

 

5,460

 

 

5,460

Retirement of treasury shares

(1,703)

 

(17)

 

(142,391)

 

(4,128,131)

 

 

4,270,539

 

Purchase of 84 shares of treasury stock

 

 

 

 

 

 

(223,811)

 

(223,811)

Issuance of common stock under stock options and stock purchase plans

 

70

 

1

 

56,890

 

 

 

 

56,891

Share-based compensation expense

 

 

 

22,780

 

 

 

 

22,780

Balance at February 10, 2024

 

17,351

$

174

$

1,485,789

$

(5,978,916)

$

(204,899)

$

(139,469)

$

(4,837,321)

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)

Twenty-Four Weeks Ended February 10, 2024

Accumulated

Common

Additional

Other

    

Shares

    

Common

    

Paid-in

    

Retained

    

Comprehensive

    

Treasury

    

(in thousands)

Issued

Stock

Capital

Deficit

Loss

Stock

Total

Balance at August 26, 2023

 

18,936

$

189

$

1,484,992

$

(2,959,278)

$

(190,836)

$

(2,684,961)

$

(4,349,894)

Net income

 

 

 

 

1,108,493

 

 

 

1,108,493

Total other comprehensive loss

 

 

 

 

 

(14,063)

 

 

(14,063)

Retirement of treasury shares

 

(1,703)

 

(17)

 

(142,391)

 

(4,128,131)

 

 

4,270,539

 

Purchase of 663 shares of treasury stock

 

 

 

 

 

 

(1,725,047)

 

(1,725,047)

Issuance of common stock under stock options and stock purchase plans

 

118

 

2

 

98,337

 

 

 

 

98,339

Share-based compensation expense

 

 

 

44,851

 

 

 

 

44,851

Balance at February 10, 2024

 

17,351

$

174

$

1,485,789

$

(5,978,916)

$

(204,899)

$

(139,469)

$

(4,837,321)

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)

See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents

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 26, 2023.

Operating results for the twelve and twenty-four weeks ended February 10, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 31, 2024. 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 quarter of fiscal 2024 has 17 weeks, and the fourth quarter of fiscal 2023 had 16 weeks.

Recently Adopted Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. The Company adopted this standard on a retrospective basis beginning with its first quarter ended November 18, 2023. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements. Refer to “Note F – Supplier Financing Programs.”

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (CODM), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company will adopt this standard with our fiscal 2025 annual filing. The Company is currently evaluating these new disclosure requirements and the impact of adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The amendments in this ASU are intended to enhance the transparency of income tax information by updating income tax disclosure requirements. The guidance is effective for public entities for annual periods beginning after December 15, 2024, and early adoption is permitted. The amendments in this ASU should be applied on a prospective basis; however, retrospective application is permitted. The Company will adopt this standard with our fiscal 2026 annual filing. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.

7

Table of Contents

Note B – 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. The Company’s LIFO credit reserve balance decreased to $43.0 million at February 10, 2024 from $59.0 million at August 26, 2023 as a result of net deflation, primarily driven by reduced freight costs. Until the credit reserve balance is exhausted, decreases are recorded as a non-cash benefit to cost of sales and increases are recorded as a non-cash charge to cost of sales. Debit LIFO reserve balances are not recorded as the Company’s policy is not to write up inventory in excess of replacement cost.

Note C – Variable Interest Entities

The Company invests in certain tax credit funds that promote renewable energy and generate a return primarily through the realization of federal tax credits. The Company considers its investment in these tax credit funds as an investment in a variable interest entity (“VIE”). The Company evaluates the investment in any VIE to determine whether it is the primary beneficiary. The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities. As of February 10, 2024, the Company held tax credit equity investments that were deemed to be VIE’s and determined that it was not the primary beneficiary of the entities, as it did not have the power to direct the activities that most significantly impacted the entity and accounted for this investment using the equity method. The Company’s maximum exposure to losses is generally limited to its net investment, which was $29.9 million as of February 10, 2024.

Note D – 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.

8

Table of Contents

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 10, 2024

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Fair Value

Other current assets

$

47,392

$

5,922

$

$

53,314

Other long-term assets

 

33,469

37,426

 

 

70,895

$

80,861

$

43,348

$

$

124,209

August 26, 2023

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Fair Value

Other current assets

$

35,349

$

4,290

$

$

39,639

Other long-term assets

 

71,028

 

10,846

 

 

81,874

$

106,377

$

15,136

$

$

121,513

At February 10, 2024 and August 26, 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 E – Marketable Debt Securities.”

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 H – Financing.”

Note E – 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 10, 2024

    

Amortized

    

Gross

    

Gross

    

Cost

Unrealized

Unrealized

Fair

(in thousands)

Basis

Gains

Losses

Value

Corporate debt securities

$

29,753

$

38

$

(240)

$

29,551

Government bonds

 

62,189

 

449

 

(1,107)

 

61,531

Mortgage-backed securities

 

3,043

 

 

(122)

 

2,921

Asset-backed securities and other

 

30,311

 

4

 

(109)

 

30,206

$

125,296

$

491

$

(1,578)

$

124,209

9

Table of Contents

August 26, 2023

    

Amortized

    

Gross

    

Gross

    

Cost

Unrealized

Unrealized

Fair

(in thousands)

Basis

Gains

Losses

Value

Corporate debt securities

$

31,683

$

17

$

(504)

$

31,196

Government bonds

 

63,747

 

 

(1,440)

 

62,307

Mortgage-backed securities

 

3,215

 

 

(213)

 

3,002

Asset-backed securities and other

 

25,242

 

 

(234)

 

25,008

$

123,887

$

17

$

(2,391)

$

121,513

The marketable debt securities held at February 10, 2024 had effective maturities ranging from less than one year to approximately twelve years. In evaluating whether a credit loss exists for the securities, the Company considers factors such as the 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. The Company did not realize any material gains or losses on its marketable debt securities during the twenty-four week period ended February 10, 2024 and the comparable prior year period.

Included above in total available-for-sale marketable debt securities are $107.9 million and $105.0 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 as of February 10, 2024 and August 26, 2023, respectively.

Note F – Supplier Financing Programs

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 directly 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. As of February 10, 2024 and August 26, 2023, the Company had supplier obligations outstanding that had been confirmed under these arrangements of $4.8 billion for each period, which are included in Accounts payable and $197.6 million and $224.8 million, respectively, which are included in Other long-term liabilities in the Condensed Consolidated Balance Sheets.

Note G – Litigation

The Company is involved in various legal proceedings incidental to the conduct of its business, including, but not limited to, claims and allegations related to wage and hour violations, unlawful termination, employment practices, product liability, privacy and cybersecurity, environmental matters, intellectual property rights or regulatory compliance. The Company does not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to the Company’s financial condition, results of operations or cash flows.

10

Table of Contents

Note H – Financing

The Company’s debt consisted of the following:

    

February 10,

    

August 26,

(in thousands)

2024

2023

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 3.28%