What changed in this filing

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Item 1. Financial Statements

2022-03-18 compared with 2021-12-17 · 129 added, 53 removed, 296 unchanged (38% 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

Debt, less current portion

Long-term debt

Operating lease liabilities, less current portion

6 unchanged sentences

Common stock, par value $ .01 per share, authorized 200,000 shares;

23,057 shares issued and 20,674 shares outstanding as of November 20, 2021;

20,650 shares issued and 19,967 shares outstanding as of February 12, 2022;

23,007 shares issued and 21,138 shares outstanding as of August 28, 2021

Additional paid-in capital

Retained earnings (deficit)

Retained deficit

( 2,730,731 )

Accumulated other comprehensive loss

10 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)

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustments

1 unchanged sentence

Net derivative activities, net of taxes

Total other comprehensive (loss) income

Total other comprehensive income (loss)

Comprehensive income

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Twelve Weeks Ended

Twenty-Four Weeks Ended

(in thousands)

15 unchanged sentences

Proceeds from sale of marketable debt securities

Investment in tax credit equity investments

Proceeds (payments) from disposal of capital assets and other, net

1 unchanged sentence

Cash flows from financing activities:

Net proceeds from commercial paper

Repayment of debt

Net proceeds from sale of common stock

Purchase of treasury stock

( 2,459,995 )

( 1,578,323 )

Repayment of principal portion of finance lease liabilities

Net cash used in financing activities

( 1,859,900 )

( 1,540,889 )

Effect of exchange rate changes on cash

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Twelve Weeks Ended November 20, 2021

Twelve Weeks Ended February 12, 2022

Comprehensive

(in thousands)

(Deficit) Earnings

Balance at August 28, 2021

Balance at November 20, 2021

( 3,435,617 )

1 unchanged sentence

Total other comprehensive income

Retirement of treasury shares

( 3,337,892 )

Purchase of 783 shares of treasury stock

( 1,559,998 )

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at February 12, 2022

( 2,730,731 )

( 1,362,804 )

( 3,137,477 )

Twelve Weeks Ended February 13, 2021

Comprehensive

(in thousands)

Balance at November 21, 2020

1 unchanged sentence

( 1,034,811 )

Twelve Weeks Ended November 21, 2020

( 1,026,980 )

Total other comprehensive income

Retirement of treasury shares

( 1,139,173 )

Purchase of 752 shares of treasury stock

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 12, 2022

Comprehensive

2 unchanged sentences

( 2,535,620 )

Total other comprehensive income

( 1,797,536 )

Total other comprehensive loss

Retirement of treasury shares

( 3,337,892 )

Purchase of 1,298 shares of treasury stock

( 2,459,995 )

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at November 21, 2020

Balance at February 12, 2022

( 2,730,731 )

1 unchanged sentence

( 3,137,477 )

Twenty-Four Weeks Ended February 13, 2021

Comprehensive

(in thousands)

Balance at August 29, 2020

( 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 )

See Notes to Condensed Consolidated Financial Statements.

9 unchanged sentences

(“AutoZone” or the “Company”) Annual Report on Form 10-K for the year ended August 28, 2021.

Operating results for the twelve weeks ended November 20, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 27, 2022.

Operating results for the twelve and twenty-four weeks ended February 12, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 27, 2022.

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 2022 and 2021 each have 16 weeks.

The Company does not expect any recently issued accounting pronouncements to have a material effect on the Company’s financial statements and related disclosures .

Recently Issued Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2021-10, Government Assistance (Topic 832) – Disclosures by Business Entities about Government Assistance .

The update increases the disclosures for entities receiving governmental assistance for more transparency.

ASU 2021-10 is effective for fiscal years beginning after December 15, 2021.

Early adoption is permitted.

The Company will adopt this standard beginning with its first quarter ending November 19, 2022.

The Company is currently evaluating the new guidance to determine the impact the adoption will have on the Company's consolidated financial statements and related disclosures.

Note B – Share-Based Payments

5 unchanged sentences

Stock Options:

The Company made stock option grants of 163,786 shares during the twelve week period ended November 20, 2021 and granted options to purchase 194,511 shares during the comparable prior year period.

The Company made stock option grants of 164,262 shares during the twenty-four week period ended February 12, 2022 and granted options to purchase 196,161 shares during the comparable prior year period.

The Company grants options to 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 twelve week periods ended November 20, 2021 and November 21, 2020, using the Black-Scholes-Merton multiple-option pricing valuation model, was $ 462.80 and $ 299.48 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 12, 2022 and February 13, 2021, using the Black-Scholes-Merton multiple-option pricing valuation model, was $ 463.09 and $ 299.86 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 20, 2021, 47,705 stock options were exercised at a weighted average exercise price of $ 549.86 .

During the twenty-four week period ended February 12, 2022, 123,216 stock options were exercised at a weighted average exercise price of $ 584.81 .

In the comparable prior year period, 138,705 stock options were exercised at a weighted average exercise price of $ 484.13 .

As of November 20, 2021, total unrecognized share-based expense related to stock options, net of estimated forfeitures, was approximately $ 98.4 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.2 years.

As of February 12, 2022, total unrecognized share-based expense related to stock options, net of estimated forfeitures, was approximately $ 85.2 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.1 years.

Restricted Stock Units:

3 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 20, 2021, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 15.6 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 twelve weeks ended November 20, 2021 were as follows:

As of February 12, 2022, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 14.1 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.7 years.

Transactions related to restricted stock units for the twenty-four weeks ended February 12, 2022 were as follows:

Average Grant

2 unchanged sentences

Canceled or forfeited

Nonvested at November 20, 2021

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $ 14.3 million for the twelve week period ended November 20, 2021, and $ 10.5 million for the comparable prior year period.

For the twelve week period ended November 20, 2021, 97,942 stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive.

Nonvested at February 12, 2022

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $ 16.4 million for the twelve week period ended February 12, 2022, and $ 13.7 million for the comparable prior year period.

Total share-based compensation expense was $ 30.7 million for the twenty-four week period ended February 12, 2022, and $ 24.2 million for the comparable prior year period.

For the twelve week period ended February 12, 2022, 162,955 stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive.

For the comparable prior year period, 196,280 anti-dilutive stock options were excluded from the dilutive earnings per share computation.

There were 128,399 anti-dilutive shares excluded from the diluted earnings per share computation for the twenty-four week period ended February 12, 2022, and 248,578 anti-dilutive shares excluded for the comparable prior year period.

See AutoZone’s Annual Report on Form 10-K for the year ended August 28, 2021 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.

10 unchanged sentences

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

November 20, 2021

February 12, 2022

(in thousands)

5 unchanged sentences

Other long-term assets

At November 20, 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.

At February 12, 2022, 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.

8 unchanged sentences

The Company’s available-for-sale marketable debt securities consisted of the following:

November 20, 2021

February 12, 2022

(in thousands)

9 unchanged sentences

Asset-backed securities and other

The debt securities held at November 20, 2021, had effective maturities ranging from less than one year to approximately four years .

At November 20, 2021, the Company held 20 securities that are in an unrealized loss position of approximately $ 260 thousand.

The debt securities held at February 12, 2022, had effective maturities ranging from less than one year to approximately four years .

At February 12, 2022, the Company held 38 securities that are in an unrealized loss position of approximately $ 1.1 million.

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.

6 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 $ 312.7 million at November 20, 2021 and $ 335.3 million at August 28, 2021.

The difference between LIFO cost and replacement cost, which will be reduced upon experiencing price inflation on the Company’s merchandise purchases, was $ 237.3 million at February 12, 2022 and $ 335.3 million at August 28, 2021.

Note F – Financing

12 unchanged sentences

1.650 % Senior Notes due January 2031 , effective interest rate of 2.19 %

Commercial paper, weighted average interest rate of 0.22 % at February 12, 2022

Total debt before discounts and debt issuance costs

Current portion of debt

Discounts and debt issuance costs

Debt, less current portion

Long-term Debt

On November 15, 2021, the Company amended and restated its existing revolving credit facility (the “Revolving Credit Agreement”) pursuant to which the Company’s borrowing capacity was increased from $ 2.0 billion to $ 2.25 billion and the maximum borrowing under the Revolving Credit Agreement may, at the Company’s option, subject to lenders approval, be increased from $ 2.25 billion to $ 3.25 billion.

3 unchanged sentences

Under the Company’s Revolving Credit Agreement, 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.

As of November 20, 2021, the Company had no outstanding borrowings, $ 1.8 million of outstanding letters of credit and $ 2.2 billion of availability under the Revolving Credit Agreement.

As of November 20, 2021, the $ 500 million 3.700 % Senior Notes due April 2022 are classified as current in the accompanying Condensed Consolidated Balance Sheets as the Company has the intent to utilize operating cash to fund the payment.

As of February 12, 2022, the Company had no outstanding borrowings and $ 1.8 million of outstanding letters of credit under the Revolving Credit Agreement.

On January 18, 2022, the Company repaid the $ 500 million 3.700 % Senior Notes due April 2022 , which were callable at par in January 2022.

As of February 12, 2022, the commercial paper borrowings and the $ 300 million 2.875 % Senior Notes due January 2023 were classified as long-term in the accompanying Condensed Consolidated Balance Sheets, as the Company currently has the ability and intent to refinance them on a long-term basis through available capacity in its Revolving Credit Agreement.

As of February 12, 2022, the Company had $ 2.2 billion of availability under its Revolving Credit Agreement, without giving effect to commercial paper borrowings, which would allow it to replace these short-term obligations with a long-term financing facility.

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.

The fair value of the Company’s debt was estimated at $ 5.6 billion as of November 20, 2021, and $ 5.7 billion as of August 28, 2021, 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 $ 306.0 million and $ 413.1 million at November 20, 2021 and August 28, 2021, respectively, which reflects their face amount, adjusted for any unamortized debt issuance costs and discounts.

As of November 20, 2021, the Company was in compliance with all covenants and expects to remain in compliance with all covenants under its borrowing arrangements.

The fair value of the Company’s debt was estimated at $ 6.0 billion as of February 12, 2022, and $ 5.7 billion as of August 28, 2021, 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 $ 128.7 million and $ 413.1 million at February 12, 2022 and August 28, 2021, respectively, which reflects their face amount, adjusted for any unamortized debt issuance costs and discounts.

As of February 12, 2022, the Company was in compliance with all covenants and expects to remain in compliance with all covenants under its borrowing arrangements.

Note G – Stock Repurchase Program

From January 1, 1998 to November 20, 2021, the Company has repurchased a total of 150.8 million shares of its common stock at an aggregate cost of $ 26.6 billion, including 514,534 shares of its common stock at an aggregate cost of $ 900.0 million during the twelve week period ended November 20, 2021.

On October 5, 2021, the Board voted to authorize the repurchase of an additional $ 1.5 billion of the Company’s common stock in connection with the Company’s ongoing share repurchase program.

Since the inception of the repurchase program in 1998, the Board has authorized $ 27.7 billion in share repurchases.

Considering the cumulative repurchases as of November 20, 2021, the Company had $ 1.0 billion remaining under the Board’s authorization to repurchase its common stock.

Subsequent to November 20, 2021 and through December 10, 2021, the Company has repurchased 63,909 shares of its common stock at an aggregate cost of $ 120.0 million.

On December 14, 2021, the Board voted to increase the authorization by $ 1.5 billion to raise the cumulative share repurchase authorization to $ 29.2 billion.

Considering the cumulative repurchases subsequent to November 20, 2021 and through December 10, 2021 and the December 14, 2021 additional authorization, the Company has $ 2.4 billion remaining under the Board’s authorization to repurchase its common stock.

From January 1, 1998 to February 12, 2022, the Company has repurchased a total of 151.6 million shares of its common stock at an aggregate cost of $ 28.2 billion, including 1.3 million shares of its common stock at an aggregate cost of $ 2.5 billion during the twenty-four week period ended February 12, 2022.

On December 14, 2021, the Board voted to authorize the repurchase of an additional $ 1.5 billion of the Company’s common stock in connection with its ongoing share repurchase program, which raised the total value of shares authorized to be repurchased to $ 29.2 billion.

Considering the cumulative repurchases as of February 12, 2022, the Company had $ 957.6 million remaining under the Board’s authorization to repurchase its common stock.

During the twenty-four week period ended February 12, 2022, the Company retired 2.5 million shares of treasury stock which had been previously repurchased under the Company’s share repurchase program.

The retirement increased Retained deficit by $ 3.3 billion and decreased Additional paid-in capital by $ 294.9 million.

During the comparable prior year period, the Company retired 1.0 million shares of treasury stock, which increased Retained deficit by $ 1.1 billion and decreased Additional paid-in capital by $ 60.0 million.

Subsequent to February 12, 2022 and through March 11, 2022, the Company has repurchased 119,542 shares of its common stock at an aggregate cost of $ 226.9 million.

Note H – 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 20, 2021 and November 21, 2020 consisted of the following:

Accumulated other comprehensive loss includes foreign currency translation adjustments, activity for interest rate swaps and treasury rate locks that qualified as cash flow hedges and unrealized gains (losses) on available-for-sale marketable debt securities.

Changes in Accumulated other comprehensive loss for the twelve week periods ended February 12, 2022 and February 13, 2021 consisted of the following:

(in thousands)

on Securities

Balance at November 20, 2021

Other comprehensive income (loss) before reclassifications (2)(3)

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at February 12, 2022

(in thousands)

on Securities

Balance at November 21, 2020

Other comprehensive income (loss) before reclassifications (2)(3)

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at February 13, 2021

Changes in Accumulated other comprehensive loss for the twenty-four week periods ended February 12, 2022 and February 13, 2021 consisted of the following:

(in thousands)

on Securities

Balance at August 28, 2021

1 unchanged sentence

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at November 20, 2021

Balance at February 12, 2022

(in thousands)

3 unchanged sentences

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at November 21, 2020

Balance at February 13, 2021

(1) Foreign currency is shown net of U.S.

14 unchanged sentences

The accounting policies of the Company’s reportable segment are the same as those described in “Note A – Significant Accounting Policies” in its Annual Report on Form 10-K for the year ended August 28, 2021.

The Auto Parts Stores segment is a retailer and distributor of automotive parts and accessories through the Company’s 6,785 locations in the U.S., Mexico and Brazil.

The Auto Parts Stores segment is a retailer and distributor of automotive parts and accessories through the Company’s 6,815 stores in the U.S., Mexico and Brazil.

Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products.

The Other category reflects business activities of two operating segments that are not separately reportable due to the materiality of these operating segments.

The operating segments include ALLDATA, which produces, sells and maintains diagnostic and repair information software used in the automotive repair industry and E-commerce, which includes direct sales to customers through www.autozone.com for sales that are not fulfilled by local stores.

The operating segments include ALLDATA, which produces, sells and maintains automotive diagnostic, repair and shop management software used in the automotive repair industry and E-commerce, which includes direct sales to customers through www.autozone.com for sales that are not fulfilled by local stores.

The Company evaluates its reportable segment primarily on the basis of net sales and segment profit, which is defined as gross profit.

1 unchanged sentence

Twelve Weeks Ended

Twenty-Four Weeks Ended

(in thousands)

5 unchanged sentences

( 1,077,616 )

( 2,329,141 )

( 2,138,008 )

Interest expense, net

5 unchanged sentences

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

(the Company) as of November 20, 2021, the related condensed consolidated statements of income, comprehensive income, stockholders’ deficit and cash flows for the twelve week periods ended November 20, 2021 and November 21, 2020, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”).

(the Company) as of February 12, 2022, the related condensed consolidated statements of income, comprehensive income and stockholders’ deficit for the twelve and twenty-four week periods ended February 12, 2022 and February 13, 2021, the condensed consolidated statements of cash flows for the twenty-four week periods ended February 12, 2022 and February 13, 2021, 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 17, 2021

March 18, 2022

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