Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the New York Stock Exchange under the symbol “AZO.” On October 19, 2020, there were 2,021 stockholders of record, which does not include the number of beneficial owners whose shares were represented by security position listings.
We currently do not pay a dividend on our common stock. Our ability to pay dividends is subject to limitations imposed by Nevada law. Any future payment of dividends would be dependent upon our financial condition, capital requirements, earnings and cash flow.
During 1998, the Company announced a program permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company’s Board of Directors. The program was most recently amended on October 7, 2019, to increase the repurchase authorization by $1.250 billion, bringing total value of authorized share repurchases to $23.15 billion.
During fiscal 2020, we temporarily ceased share repurchases under our share repurchase program to conserve liquidity in response to the uncertainty related to COVID-19. While we have restarted share repurchases during the first quarter of fiscal year 2021, we will continue to evaluate current and expected business conditions and adjust the level of share repurchases under our share repurchase program as we deem appropriate.
The Company did not purchase any shares during the quarter ended August 29, 2020.
The Company also repurchased, at market value, an additional 8,287, 17,201 and 11,816 shares in fiscal years 2020, 2019 and 2018, respectively, from employees electing to sell their stock under the Company’s Sixth Amended and Restated Employee Stock Purchase Plan (the “Employee Plan”), qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone’s common stock at 85% of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are $15,000 per employee or 10 percent of compensation, whichever is less. Under the Employee Plan, 10,525, 11,011 and 14,523 shares were sold to employees in fiscal 2020, 2019 and 2018, respectively. At August 29, 2020, 142,241 shares of common stock were reserved for future issuance under the Employee Plan.
Once executives have reached the maximum purchases under the Employee Plan, the Sixth Amended and Restated Executive Stock Purchase Plan (the “Executive Plan”) permits all eligible executives to purchase AutoZone’s common stock up to 25 percent of his or her annual salary and bonus. Purchases by executives under the Executive Plan were 1,204, 1,483 and 1,840 shares in fiscal 2020, 2019 and 2018, respectively. At August 29, 2020, 235,361 shares of common stock were reserved for future issuance under the Executive Plan.
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Stock Performance Graph
The graph below presents changes in the value of AutoZone’s stock as compared to Standard & Poor’s 500 Composite Index (“S&P 500”) and to Standard & Poor’s Retail Index (“S&P Retail Index”) for the five-year period beginning August 29, 2015 and ending August 29, 2020.
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Item 6. Selected Financial Data
Fiscal Year Ended August
(in thousands, except per share data, same store sales and selected operating data)
2020 (1)
2019 (2)
2018 (3)
2017
2016
Income Statement Data
Net sales
$
12,631,967
$
11,863,743
$
11,221,077
$
10,888,676
$
10,635,676
Cost of sales, including warehouse and delivery expenses
5,861,214
5,498,742
5,247,331
5,149,056
5,026,940
Gross profit
6,770,753
6,365,001
5,973,746
5,739,620
5,608,736
Operating, selling, general and administrative expenses
4,353,074
4,148,864
4,162,890
3,659,551
3,548,341
Operating profit
2,417,679
2,216,137
1,810,856
2,080,069
2,060,395
Interest expense, net
201,165
184,804
174,527
154,580
147,681
Income before income taxes
2,216,514
2,031,333
1,636,329
1,925,489
1,912,714
Income tax expense (4)
483,542
414,112
298,793
644,620
671,707
Net income (4)
$
1,732,972
$
1,617,221
$
1,337,536
$
1,280,869
$
1,241,007
Diluted earnings per share (4)
$
71.93
$
63.43
$
48.77
$
44.07
$
40.70
Weighted average shares for diluted earnings per share (4)
24,093
25,498
27,424
29,065
30,488
Same Store Sales
Increase in domestic comparable store net sales (5)
7.4
%
3.0
%
1.8
%
0.5
%
2.4
%
Balance Sheet Data
Current assets
$
6,811,872
$
5,028,685
$
4,635,869
$
4,611,255
$
4,239,573
Operating lease right-of-use assets (6)
2,581,677
—
—
—
—
Working capital (deficit)
528,781
(483,456)
(392,812)
(155,046)
(450,747)
Total assets
14,423,872
9,895,913
9,346,980
9,259,781
8,599,787
Current liabilities
6,283,091
5,512,141
5,028,681
4,766,301
4,690,320
Debt
5,513,371
5,206,344
5,005,930
5,081,238
4,924,119
Finance lease liabilities, less current portion (6)
155,855
123,659
102,013
102,322
102,451
Operating lease liabilities, less current portion (6)
2,501,560
—
—
—
—
Stockholders’ deficit
(877,977)
(1,713,851)
(1,520,355)
(1,428,377)
(1,787,538)
Selected Operating Data
Number of locations at beginning of year
6,411
6,202
6,029
5,814
5,609
Sold locations (7)
—
—
26
—
—
New locations
138
209
201
215
205
Closed locations
—
—
2
—
—
Net new locations
138
209
199
215
205
Relocated locations
5
2
7
5
6
Number of locations at end of year
6,549
6,411
6,202
6,029
5,814
AutoZone domestic commercial programs
5,007
4,893
4,741
4,592
4,390
Inventory per location (in thousands)
$
683
$
674
$
636
$
644
$
625
Total AutoZone store square footage (in thousands)
43,502
42,526
41,066
39,684
38,198
Average square footage per AutoZone store
6,643
6,633
6,621
6,611
6,600
Increase in AutoZone store square footage
2.3
%
3.6
%
3.5
%
3.9
%
3.8
%
Average net sales per AutoZone store (in thousands)
$
1,914
$
1,847
$
1,778
$
1,756
$
1,773
Net sales per AutoZone store average square foot
$
288
$
279
$
269
$
266
$
269
Total employees at end of year (in thousands)
100
96
89
87
84
Inventory turnover (8)
1.3x
1.3x
1.3x
1.4x
1.4x
Accounts payable to inventory ratio
115.3
%
112.6
%
111.8
%
107.4
%
112.8
%
After-tax return on invested capital (9)
38.1
%
35.7
%
32.1
%
29.9
%
31.3
%
Adjusted debt to EBITDAR (10)
1.9
2.5
2.5
2.6
2.5
Net cash provided by operating activities (in thousands) (4)
$
2,720,108
$
2,128,513
$
2,080,292
$
1,570,612
$
1,641,060
Cash flow before share repurchases and changes in debt (in thousands) (11)
$
2,185,418
$
1,758,672
$
1,596,367
$
1,017,585
$
1,166,987
Share repurchases (in thousands) (12)
$
930,903
$
2,004,896
$
1,592,013
$
1,071,649
$
1,452,462
Number of shares repurchased (in thousands) (12)
826
2,182
2,398
1,495
1,903
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(1) The 52 weeks ended August 29, 2020 was negatively impacted by the charges for additional Emergency-Time Off ("ETO") benefit enhancement for eligible part-time and full-time hourly employees and other expenses in response to COVID-19 of $83.9 million (pre-tax), recognized in the third and fourth quarters.
(2) The fiscal year ended August 31, 2019 consisted of 53 weeks.
(3) Fiscal 2018 was negatively impacted by pension termination charges of $130.3 million (pre-tax) recognized in the fourth quarter and asset impairments of $193.2 million (pre-tax) recognized in the second quarter of fiscal 2018. See “Note L – Pension and Savings Plans” and “Note M – Sale of Assets” of the Notes to Consolidated Financial Statements for more information. Fiscal 2018 also includes a benefit to net income related to the Tax Cuts and Jobs Act (“Tax Reform”). See “Note D – Income Taxes” of the Notes to Consolidated Financial Statements for more information.
(4) Fiscal 2020, 2019, 2018 and 2017 include excess tax benefits from stock option exercises of $20.9 million, $46.0 million, $31.3 million and $31.2 million, respectively, related to the adoption of Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting. The Company adopted ASU 2016-09 effective August 28, 2016 and applied the recognition of excess tax deficiencies and tax benefits in the income statement on a prospective basis. Income tax expense, net income and diluted earnings per share amounts presented for prior periods were not restated. The Company applied ASU 2016-09 relating to the presentation of the excess tax benefits on the Consolidated Statements of Cash Flows retrospectively. Prior period amounts for net cash provided by operating activities for all years presented above were restated to conform to the current period presentation.
(5) The domestic comparable sales increases are based on sales for all AutoZone domestic stores open at least one year. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation.
(6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset (“ROU asset”) and a corresponding lease liability on the balance sheet. See “Note A – Significant Accounting Policies”.
(7) 26 IMC branches were sold on April 4, 2018. See “Note M – Sale of Assets” of the Notes to Consolidated Financial Statements for more information.
(8) Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters.
(9) After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize leases). For fiscal 2020, average debt is presented net of excess cash of $374.2 million. For fiscal 2019, after-tax operating profit was adjusted for the impact of the average revaluation of deferred tax liabilities, net of repatriation tax. For fiscal 2018, after-tax operating profit was adjusted for impairment charges, pension termination charges and the impact of the revaluation of deferred tax liabilities, net of repatriation tax. See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(10) Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net income plus interest, taxes, depreciation, amortization, rent and share-based compensation expense. For Fiscal 2020, adjusted debt is presented net of excess cash of $1.6 billion. For fiscal 2018, net income was adjusted for impairment charges and pension termination charges before tax impact. See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(11) Cash flow before share repurchases and changes in debt is defined as the change in cash and cash equivalents less the change in debt plus treasury stock purchases. See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations .
(12) During the third quarter of fiscal 2020, the Company temporarily ceased share repurchases under the share repurchase program in response to COVID-19.
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