What changed in this filing

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Item 1. Financial Statements

2021-03-19 compared with 2020-12-18 · 136 added, 61 removed, 361 unchanged (35% of the section changed)

21 unchanged sentences

Current portion of operating lease liabilities

Current portion of debt

Accrued expenses and other

1 unchanged sentence

Total current liabilities

Long-term debt

Debt, less current portion

Operating lease liabilities, less current portion

6 unchanged sentences

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;

22,796 shares issued and 22,183 shares outstanding as of February 13, 2021;

23,697 shares issued and 23,376 shares outstanding as of August 29, 2020

5 unchanged sentences

Treasury stock, at cost

( 1,034,811 )

Total stockholders’ deficit

4 unchanged sentences

Twelve Weeks Ended

Twenty-Four Weeks Ended

(in thousands, except per share data)

14 unchanged sentences

Twelve Weeks Ended

Twenty-Four Weeks Ended

(in thousands)

1 unchanged sentence

Foreign currency translation adjustments

Unrealized losses on marketable debt securities, net of taxes

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

Net derivative activities, net of taxes

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Twelve Weeks Ended

Twenty-Four Weeks Ended

(in thousands)

18 unchanged sentences

Cash flows from financing activities:

Net proceeds of commercial paper

Net proceeds from commercial paper

Net proceeds from sale of common stock

Purchase of treasury stock

( 1,578,323 )

Repayment of principal portion of finance lease liabilities

Net cash used in financing activities

( 1,540,889 )

Effect of exchange rate changes on cash

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Twelve Weeks Ended November 21, 2020

Twelve Weeks Ended February 13, 2021

Comprehensive

(in thousands)

Balance at August 29, 2020

Balance at November 21, 2020

( 1,008,537 )

Total other comprehensive loss

( 1,034,811 )

( 1,026,980 )

Total other comprehensive income

Retirement of treasury shares

( 1,139,173 )

Purchase of 752 shares of treasury stock

1 unchanged sentence

Share-based compensation expense

Balance at February 13, 2021

( 1,801,764 )

( 1,523,573 )

Twelve Weeks Ended February 15, 2020

Comprehensive

(in thousands)

Balance at November 23, 2019

1 unchanged sentence

( 1,776,090 )

Total other comprehensive income

Retirement of treasury shares

( 1,878,595 )

Twelve Weeks Ended November 23, 2019

Purchase of 267 shares of treasury stock

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at February 15, 2020

( 2,534,322 )

( 1,711,119 )

Twenty-Four Weeks Ended February 13, 2021

Comprehensive

2 unchanged sentences

( 1,450,970 )

Total other comprehensive income

Retirement of treasury shares

( 1,139,173 )

Purchase of 1,336 shares of treasury stock

( 1,578,323 )

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at February 13, 2021

( 1,801,764 )

( 1,523,573 )

Twenty-Four Weeks Ended February 15, 2020

Comprehensive

(in thousands)

Balance at August 31, 2019

( 1,305,347 )

( 1,403,884 )

( 1,713,851 )

Total other comprehensive income

Retirement of treasury shares

( 1,878,595 )

Purchase of 670 shares of treasury stock

1 unchanged sentence

Share-based compensation expense

Balance at November 23, 2019

Balance at February 15, 2020

( 2,534,322 )

11 unchanged sentences

(“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.

Operating results for the twelve and twenty-four weeks ended February 13, 2021 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.

13 unchanged sentences

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.

The balance for allowance for uncollectable accounts was $ 11.2 million at February 13, 2021 and $ 10.0 million at August 29, 2020.

Note B – Share-Based Payments

5 unchanged sentences

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 made stock option grants of 196,161 shares during the twenty-four week period ended February 13, 2021 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

The weighted average fair value of the stock option awards granted during the twenty-four week periods ended February 13, 2021 and February 15, 2020, using the Black-Scholes-Merton multiple-option pricing valuation model, was $ 299.86 and $ 252.39 per share, respectively, using the following weighted average key assumptions:

Twenty-Four Weeks Ended

Expected price volatility

3 unchanged sentences

Dividend yield

During the twelve week period ended November 21, 2020, 59,990 stock options were exercised at a weighted average exercise price of $ 496.58 .

During the twenty-four week period ended February 13, 2021, 138,705 stock options were exercised at a weighted average exercise price of $ 484.13 .

In the comparable prior year period, 105,860 stock options were exercised at a weighted average exercise price of $ 476.60 .

4 unchanged sentences

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:

As of February 13, 2021, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 13.3 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.9 years.

Transactions related to restricted stock units for the twenty-four weeks ended February 13, 2021 were as follows:

Average Grant

2 unchanged sentences

Canceled or forfeited

Nonvested at November 21, 2020

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.

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.

Nonvested at February 13, 2021

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $ 13.7 million for the twelve week period ended February 13, 2021, and $ 12.1 million for the comparable prior year period.

Total share-based compensation expense was $ 24.2 million for the twenty-four week period ended February 13, 2021, and $ 22.1 million for the comparable prior year period.

For the twelve week period ended February 13, 2021, 196,280 stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive.

For the comparable prior year period, 188,486 anti-dilutive shares were excluded from the dilutive earnings per share computation.

There were 248,578 anti-dilutive shares excluded from the diluted earnings per share computation for the twenty-four week period ended February 13, 2021, and 147,998 anti-dilutive shares excluded for the comparable prior year period.

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.

9 unchanged sentences

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

November 21, 2020

February 13, 2021

(in thousands)

5 unchanged sentences

Other long-term assets

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.

At February 13, 2021, 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.

7 unchanged sentences

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

February 13, 2021

(in thousands)

9 unchanged sentences

Asset-backed securities and other

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.

The debt securities held at February 13, 2021, had effective maturities ranging from less than one year to approximately six 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.

1 unchanged sentence

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.

At February 13, 2021, the Company had $ 29.5 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.

During the twelve week periods ended February 13, 2021 and February 15, 2020, the Company reclassified $ 863 thousand and $ 508 thousand of net losses from Accumulated other comprehensive loss to Interest expense, respectively.

During the twenty-four week period ended February 13, 2021 and the comparable prior year period, the Company reclassified $ 1.7 million and $ 1.0 million 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 13 periods.

Note F – Merchandise Inventories

3 unchanged sentences

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.

The difference between LIFO cost and replacement cost, which will be reduced upon experiencing price inflation on the Company’s merchandise purchases, was $ 363.3 million at February 13, 2021 and $ 357.0 million at August 29, 2020.

Note G – Financing

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

The Company’s debt consisted of the following:

(in thousands)

12 unchanged sentences

Total debt before discounts and debt issuance costs

Current portion of debt

Discounts and debt issuance costs

Long-term debt

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.

Debt, less current portion

As of February 13, 2021, the $ 250 million 2.500 % Senior Notes due April 2021 are classified as current in the accompanying Condensed Consolidated Balance Sheets.

On March 15, 2021, the Company repaid the $ 250 million 2.500 % Senior Notes due April 2021, which were callable at par in March 2021.

As of February 13, 2021, 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.

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”).

8 unchanged sentences

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.

The 364-Day Credit Agreement provided for loans in the aggregate principal amount of up to $ 750 million.

The 364-Day Credit Agreement had a termination date of, and any amounts borrowed under the 364-Day Credit Agreement were due and payable on, on April 2, 2021.

Revolving loans under the 364-Day Credit Agreement could be base rate loans, Eurodollar loans, or a combination of both, at the Company’s election.

Effective February 22, 2021, the Company terminated the 364-Day Credit Agreement dated as of April 3, 2020 between the Company as borrower, the banks party thereto, and U.S.

Bank National Association as administrative agent.

There were no borrowings outstanding under this revolving credit agreement.

The Company entered into this credit agreement to augment its access to liquidity due to macroeconomic conditions existing at the time, and the Company has determined the additional access to liquidity is no longer necessary.

As of February 13, 2021, 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.

The fair value of the Company’s debt was estimated at $ 6.007 billion as of February 13, 2021, 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 $ 490.9 million and $ 567.5 million at February 13, 2021 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).

2 unchanged sentences

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.

As of February 13, 2021, 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.

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.

From January 1, 1998 to February 13, 2021, the Company has repurchased a total of 149.0 million shares of its common stock at an aggregate cost of $ 23.932 billion, including 1.3 million shares of its common stock at an aggregate cost of $ 1.578 billion during the twenty-four week period ended February 13, 2021.

On December 15, 2020, the Board voted to increase the repurchase authorization by $ 1.5 billion.

This raised the total value of shares authorized to be repurchased to $ 24.65 billion.

Considering the cumulative repurchases as of February 13, 2021, the Company had $ 717.6 million remaining under the Board’s authorization to repurchase its common stock.

During the twenty-four week period ended February 13, 2021, the Company retired 1.0 million shares of treasury stock which had previously been repurchased under the Company’s share repurchase program.

The retirement increased Retained deficit by $ 1.139 billion and decreased Additional paid-in capital by $ 60.0 million.

During the comparable prior year period, the Company retired 1.9 million shares of treasury stock, which increased Retained deficit by $ 1.879 billion and decreased Additional paid-in capital by $ 99.7 million.

Subsequent to February 13, 2021, the Company has repurchased 169,396 shares of its common stock at an aggregate cost of $ 203.0 million.

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:

Changes in Accumulated other comprehensive loss for the twelve week periods ended February 13, 2021 and February 15, 2020 consisted of the following:

(in thousands)

on Securities

Balance at August 29, 2020

Balance at November 21, 2020

Other comprehensive income (loss) before reclassifications (1)

Amounts reclassified from Accumulated other comprehensive loss

Balance at February 13, 2021

(in thousands)

on Securities

Balance at November 23, 2019

Other comprehensive income before reclassifications

Amounts reclassified from Accumulated other comprehensive income (loss) (1)

Balance at February 15, 2020

Changes in Accumulated other comprehensive loss for the twenty-four week periods ended February 13, 2021 and February 15, 2020 consisted of the following:

(in thousands)

3 unchanged sentences

Amounts reclassified from Accumulated other comprehensive loss

Balance at November 23, 2019

Balance at February 13, 2021

(in thousands)

on Securities

Balance at August 31, 2019

Other comprehensive income (loss) before reclassifications (1)

Amounts reclassified from Accumulated other comprehensive loss

Balance at February 15, 2020

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

25 unchanged sentences

Total lease liabilities

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:

Accumulated amortization related to finance lease assets was $ 99.9 million as of February 13, 2021 and $ 107.3 million as of August 29, 2020.

Lease costs for finance and operating leases for the twelve weeks ended February 13, 2021 are as follows:

Twelve Weeks Ended

9 unchanged sentences

Total lease cost

Lease costs for finance and operating leases for the twenty-four weeks ended February 13, 2021 are as follows:

Twenty-Four Weeks Ended

(in thousands)

Statement of Income Location

Finance lease cost:

Amortization of lease assets

Depreciation and amortization

Interest on lease liabilities

Interest expense, net

Operating lease cost (1)

Selling, general and administrative expenses

Total lease cost

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

9 unchanged sentences

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

Twelve Weeks Ended

Twenty-Four Weeks Ended

(in thousands)

2 unchanged sentences

Leased assets obtained in exchange for new operating lease liabilities

As of November 21, 2020, the Company has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability.

These leases have undiscounted future payments of approximately $ 36.8 million for real estate and $85.0 million for vehicles, of which the majority will replace existing leased vehicles, and will commence when the Company obtains possession of the underlying leased asset.

As of February 13, 2021, the Company has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability.

These leases have undiscounted future payments of approximately $ 23.7 million and $ 159.5 million for real estate and vehicles, respectively, and will commence when the Company obtains possession of the underlying leased asset.

Commencement dates are expected to be from fiscal 2021 to fiscal 2022 .

11 unchanged sentences

Twelve Weeks Ended

Twenty-Four Weeks Ended

(in thousands)

5 unchanged sentences

( 2,138,008 )

( 1,959,170 )

Interest expense, net

Income before income taxes

Note M – Subsequent Events

On December 8, 2020, the Company announced that its Board of Directors approved an additional week of Emergency Time-Off for eligible employees and extended the current carryover period for Paid Time-Off in response to the coronavirus (“COVID-19”).

The Company estimates this will result in approximately $ 50.0 million of expense that will be recorded in the second quarter of this fiscal year.

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

We have reviewed the accompanying condensed consolidated balance sheet of AutoZone, Inc.

(the Company) as of November 21, 2020, the related condensed consolidated statements of income, comprehensive income, stockholders’ deficit and cash flows for the twelve week periods ended November 21, 2020 and November 23, 2019, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”).

(the Company) as of February 13, 2021, the related condensed consolidated statements of income, comprehensive income and stockholders’ deficit for the twelve and twenty-four week periods ended February 13, 2021 and February 15, 2020, the condensed consolidated statements of cash flows for the twenty-four week periods ended February 13, 2021 and February 15, 2020, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S.

13 unchanged sentences

Memphis, Tennessee

December 18, 2020

March 19, 2021

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements