What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-03-18 compared with 2021-12-17 · 81 added, 64 removed, 198 unchanged (42% of the section changed)

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These forward-looking statements are subject to a number of risks and uncertainties, including without limitation:

product demand;

product demand, due to changes in fuel prices, miles driven or otherwise;

energy prices;

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Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

We are the leading retailer, and a leading distributor, of automotive replacement parts and accessories in the Americas.

We began operations in 1979 and at November 20, 2021, operated 6,066 stores in the U.S., 666 stores in Mexico and 53 stores in Brazil.

We are the leading retailer and distributor of automotive replacement parts and accessories in the Americas.

We began operations in 1979 and at February 12, 2022, operated 6,091 stores in the U.S., 669 stores in Mexico and 55 stores in 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.

At November 20, 2021, in 5,211 of our domestic stores, we also had a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts.

At February 12, 2022, in 5,233 of our domestic stores, we also had a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts.

We also have commercial programs in all stores in Mexico and Brazil.

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We do not derive revenue from automotive repair or installation services.

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

Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consists of 16 or 17 weeks.

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Since the beginning of the COVID-19 pandemic, we have experienced strong same store sales growth and our sales have remained at all-time high volumes.

The long-term impact to our business remains unknown, may magnify risks associated with our business and operations and may continue to cause fluctuations in demand for our products, our store hours and our workforce availability.

Other unknowns include the potential impact of any related vaccine mandates on our workforce.

The long-term impact of COVID-19 to our business remains unknown, may magnify risks associated with our business and operations and may continue to cause fluctuations in demand and availability for our products, our store hours and our workforce availability.

Please refer to the “Risk Factors” section of our Annual report on Form 10-K for the year ended August 28, 2021 for additional information.

Executive Summary

Net sales increased 16.3% for the quarter ended November 20, 2021 compared to the prior year period, which was driven by an increase in domestic same store sales (sales from stores open at least one year) of 13.6%.

Net sales increased 15.8% for the quarter ended February 12, 2022 compared to the prior year period, which was driven by an increase in domestic same store sales (sales from stores open at least one year) of 13.8%.

Domestic commercial sales increased 32.1%, which represents approximately 25% of our total sales.

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Diluted earnings per share increased 49.4% to $22.30 per share from $14.93 per share.

The increase in net income for the quarter ended November 20, 2021 was driven by strong topline growth and operating expense leverage.

Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions, including the effects of, and responses to, COVID-19.

The increase in net income for the quarter ended February 12, 2022 was driven by strong topline growth and operating expense leverage.

Our business is impacted by various factors within the economy that affect both our consumer and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions, including the effects of, and responses to, the ongoing COVID-19 pandemic.

Given the nature of these macroeconomic factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.

During the first quarter of fiscal 2022, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 84% of total sales, which is consistent with the comparable prior year period, with failure related categories continuing to be the largest portion of our sales mix.

During the second quarter of fiscal 2022, failure and maintenance related categories represented the largest portion of our sales mix, at approximately 84% of total sales, which is consistent with the comparable prior year period, with failure related categories continuing to be the largest portion of our sales mix.

We did not experience any fundamental shifts in our category sales mix as compared to the previous year.

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As of January 1, 2021, the average age of light vehicles on the road was 12.1 years.

For September 2021 (latest publicly available information), miles driven in the U.S.

Since the beginning of the fiscal year and through December 2021 (latest publicly available information), miles driven in the U.S.

increased 9.6% compared to the same period in the prior year.

We believe the increase in miles driven is due to the nation beginning to return to pre-pandemic levels, but we are unable to predict if the increase will continue or the extent of the impact it will have on our business.

Twelve Weeks Ended November 20, 2021

Compared with Twelve Weeks Ended November 21, 2020

Net sales for the twelve weeks ended November 20, 2021 increased $514.6 million to $3.7 billion, or 16.3% over net sales of $3.2 billion for the comparable prior year period.

Twelve Weeks Ended February 12, 2022

Compared with Twelve Weeks Ended February 13, 2021

Net sales for the twelve weeks ended February 12, 2022 increased $458.9 million to $3.4 billion, or 15.8% over net sales of $2.9 billion for the comparable prior year period.

Total auto parts sales increased by 15.6%, primarily driven by an increase in domestic same store sales of 13.8% and net sales of $64.9 million from new stores.

Domestic commercial sales increased $205.0 million to $843.9 million, or 32.1%, over the comparable prior year period.

Gross profit for the twelve weeks ended November 20, 2021 was $1.9 billion, compared with $1.7 billion during the comparable prior year period.

Gross profit for the twelve weeks ended February 12, 2022 was $1.8 billion, compared with $1.6 billion during the comparable prior year period.

Gross profit, as a percentage of sales, was 53.0% compared to 53.6% during the comparable prior year period.

The decrease in gross margin was primarily driven by initiatives to accelerate commercial business growth.

Operating, selling, general and administrative expenses for the twelve weeks ended November 20, 2021 were $1.2 billion, or 31.9% of net sales, compared with $1.1 billion, or 33.6% of net sales during the comparable prior year period.

The decrease in operating expenses, as a percentage of sales, was driven by strong sales growth.

Net interest expense for the twelve weeks ended November 20, 2021 was $43.3 million compared with $46.2 million during the comparable prior year period.

Average borrowings for the twelve weeks ended November 20, 2021 were $5.3 billion, compared with $5.5 billion for the comparable prior year period.

Weighted average borrowing rates were 3.30% and 3.27% for the quarter ended November 20, 2021 and November 21, 2020, respectively.

Our effective income tax rate was 21.9% of pretax income for the twelve weeks ended November 20, 2021, and 22.2% for the comparable prior year period.

The decrease in the tax rate was primarily attributable to an increased benefit from stock options exercised during the twelve weeks ended November 20, 2021.

The benefit of stock options exercised for the twelve weeks ended November 20, 2021 was $11.3 million compared to $7.6 million in the comparable prior year period.

Net income for the twelve week period ended November 20, 2021 increased by $112.8 million to $555.2 million from $442.4 million in the comparable prior year period, and diluted earnings per share increased by 38.1% to $25.69 from $18.61.

Operating, selling, general and administrative expenses for the twelve weeks ended February 12, 2022 were $1.2 billion, or 34.4% of net sales, compared with $1.1 billion, or 37.0% of net sales during the comparable prior year period.

The decrease in operating expenses, as a percentage of sales, was driven by strong sales growth and approximately $40 million (137 basis points) in prior year pandemic related expenses, including Emergency Time-Off (“ETO”) for our AutoZoners.

Net interest expense for the twelve weeks ended February 12, 2022 was $42.5 million compared with $46.0 million during the comparable prior year period.

Average borrowings for the twelve weeks ended February 12, 2022 were $5.6 billion, compared with $5.5 billion for the comparable prior year period.

Weighted average borrowing rates were 3.29% and 3.27% for the quarter ended February 12, 2022 and February 13, 2021, respectively.

Our effective income tax rate was 19.3% of pretax income for the twelve weeks ended February 12, 2022, and 20.6% for the comparable prior year period.

The decrease in the tax rate was primarily attributable to an increased benefit from stock options exercised during the twelve weeks ended February 12, 2022.

The benefit of stock options exercised for the twelve weeks ended February 12, 2022 was $23.4 million compared to $11.6 million in the comparable prior year period.

Net income for the twelve week period ended February 12, 2022 increased by $125.8 million to $471.8 million from $345.9 million in the comparable prior year period, and diluted earnings per share increased by 49.4% to $22.30 from $14.93.

The impact on current quarter diluted earnings per share from stock repurchases since the end of the comparable prior year period was an increase of $1.89.

Twenty-Four Weeks Ended February 12, 2022

Compared with Twenty-Four Weeks Ended February 13, 2021

Net sales for the twenty-four weeks ended February 12, 2022 increased $973.6 million to $7.0 billion, or 16.1% over net sales of $6.1 billion for the comparable prior year period.

Total auto parts sales increased by 15.9%, primarily driven by an increase in domestic same store sales of 13.7% and net sales of $136.2 million from new stores.

Domestic commercial sales increased $409.6 million to $1.7 billion, or 30.7%, over the comparable prior year period.

Gross profit for the twenty-four weeks ended February 12, 2022 was $3.7 billion, compared with $3.2 billion during the comparable prior year period.

Gross profit, as a percentage of sales was 52.7% compared to 53.3% during the comparable prior year period.

The decrease in gross margin was primarily driven by initiatives to accelerate commercial business growth.

Operating, selling, general and administrative expenses for the twenty-four weeks ended February 12, 2022 were $2.3 billion, or 33.1% of net sales, compared with $2.1 billion, or 35.3% of net sales during the comparable prior year period.

The decrease in operating expenses, as a percentage of sales, was driven by strong sales growth and approximately $45 million (74 basis points) in prior year pandemic related expenses, including ETO for our AutoZoners.

Net interest expense for the twenty-four weeks ended February 12, 2022 was $85.8 million compared with $92.2 million during the comparable prior year period.

Average borrowings for the twenty-four weeks ended February 12, 2022 were $5.4 billion, compared with $5.5 billion for the comparable prior year period.

Weighted average borrowing rates were 3.29% and 3.27% for the twenty-four week periods ended February 12, 2022 and February 13, 2021, respectively.

Our effective income tax rate was 20.7% of pretax income for the twenty-four weeks ended February 12, 2022, and 21.5% for the comparable prior year period.

The decrease in the tax rate was primarily attributable to an increased benefit from stock options exercised during the twenty-four weeks ended February 12, 2022.

The benefit of stock options exercised for the twenty-four week period ended February 12, 2022 was $34.7 million compared to $19.2 million in the comparable prior year period.

Net income for the twenty-four week period ended February 12, 2022 increased by $238.6 million to $1.0 billion from $788.4 million in the comparable prior year period, and diluted earnings per share increased by 43.0% to $48.03 from $33.59.

The impact on current year to date diluted earnings per share from stock repurchases since the end of the comparable prior year period was an increase of $1.64.

Liquidity and Capital Resources

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Our cash flow results benefitted from the quarters strong sales and continued progress on our initiatives.

We believe that our cash generated from operating activities, available cash reserves and available credit, supplemented with our long-term borrowings will provide ample liquidity to fund our operations while allowing us to make strategic investments to support long-term growth initiatives and return excess cash to shareholders in the form of share repurchases.

As of November 20, 2021, we held $961.1 million of cash and cash equivalents, as well as $2.2 billion in undrawn capacity on our revolving credit facility.

We believe that our cash generated from operating activities and available credit, supplemented with our long-term borrowings will provide ample liquidity to fund our operations while allowing us to make strategic investments to support long-term growth initiatives and return excess cash to shareholders in the form of share repurchases.

As of February 12, 2022, we held $239.4 million of cash and cash equivalents, as well as $2.2 billion in undrawn capacity on our Revolving Credit Agreement, before giving effect to commercial paper borrowings.

We believe our sources of liquidity will continue to be adequate to fund our operations and investments to grow our business, repay our debt as it becomes due and fund our share repurchases over the short-term and long-term.

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However, decreased demand for our products or changes in customer buying patterns would negatively impact our ability to generate cash from operating activities.

Decreased demand or changes in buying patterns could also impact our ability to meet our debt covenants of our credit agreements and, therefore, negatively impact the funds available under our revolving credit facility.

In the event our liquidity is insufficient, we may be required to limit our spending.

For the twelve weeks ended November 20, 2021, our net cash flows from operating activities provided $777.9 million compared with $683.5 million provided during the comparable prior year period.

The increase is primarily due to growth in net income due to accelerated sales growth and a result of favorable changes in accounts payable, driven by higher sustained inventory purchase volume in the current period as compared to the same period in the prior year.

These favorable changes were partially offset by a smaller increase in accrued benefits and withholdings in the current period, as compared to the same period in the prior year due to the ability to defer certain payroll tax payments in the prior year under the Coronavirus Aid, Relief, and Economic Security Act.

Our net cash flows used in investing activities for the twelve weeks ended November 20, 2021 were $91.0 million as compared with $110.2 million in the comparable prior year period.

Capital expenditures for the twelve weeks ended November 20, 2021 were $102.3 million compared to $113.0 million in the comparable prior year period.

For the twenty-four weeks ended February 12, 2022, our net cash flows from operating activities provided $1.1 billion compared with $1.0 billion during the comparable prior year period.

The increase is primarily due to growth in net income due to accelerated sales growth.

The increase was partially offset by unfavorable changes in merchandise inventories, driven by higher sustained inventory purchase volume in the current period as compared to the same period in the prior year, and a decrease in accrued benefits and withholdings in the current period, as compared to the same period in the prior year due to the ability to defer certain payroll tax payments in the prior year under the Coronavirus Aid, Relief, and Economic Security Act.

Our net cash flows used in investing activities for the twenty-four weeks ended February 12, 2022 were $211.3 million as compared with $228.4 million in the comparable prior year period.

Capital expenditures for the twenty-four weeks ended February 12, 2022 were $208.1 million compared to $238.6 million in the comparable prior year period.

The decrease is primarily driven by decreased store openings.

During the twelve week period ended November 20, 2021 and November 21, 2020, we opened 18 and 41 net new stores, respectively.

Investing cash flows were impacted by our wholly owned captive, which purchased $7.0 million and sold $3.7 million in marketable debt securities during the twelve weeks ended November 20, 2021.

During the twenty-four week period ended February 12, 2022 and February 13, 2021, we opened 48 and 76 net new stores, respectively.

Investing cash flows were impacted by our wholly owned captive, which purchased $22.6 million and sold $13.9 million in marketable debt securities during the twenty-four weeks ended February 12, 2022.

During the comparable prior year period, the captive purchased $48.4 million in marketable debt securities and sold $60.6 million.

Our net cash flows used in financing activities for the twelve weeks ended November 20, 2021 were $895.9 million compared to $663.4 million in the comparable prior year period.

Stock repurchases were $900.0 million in the current twelve week period as compared with $678.3 million in the prior year period.

Our net cash flows used in financing activities for the twenty-four weeks ended February 12, 2022 were $1.9 billion compared to $1.5 billion in the comparable prior year period.

Stock repurchases were $2.5 billion in the current twenty-four week period as compared with $1.6 billion in the prior year period.

The treasury stock repurchases were primarily funded by cash flows from operations.

Proceeds from the sale of common stock and exercises of stock options for the twelve weeks ended November 20, 2021 and November 21, 2020 provided $21.1 million and $28.7 million, respectively.

D uring the twenty-four weeks ended February 12, 2022 , we repaid our $500 million 3.700% Senior Notes due April 2022, which were callable at par in January 2022.

For the twenty-four week period ended February 12, 2022, our commercial paper activity resulted in $1.1 billion in net proceeds from commercial paper compared to no commercial paper borrowings in the prior year period.

Proceeds from the sale of common stock and exercises of stock options provided $66.5 million for both of the twenty-four weeks ended February 12, 2022 and February 13, 2021, respectively.

During fiscal 2022, we expect to increase the investment in our business as compared to fiscal 2021.

Our investments are expected to be directed primarily to expansion of our store base and supply chain to fuel the growth of our domestic and international businesses, which includes new stores, including mega hubs, as well as distribution center expansions and remodels.

The amount of investments in our new stores is impacted by different factors, including whether the building and land are purchased (requiring higher investment) or leased (generally lower investment) and whether such buildings are located in the U.S., Mexico or Brazil, or located in urban or rural areas.

The amount of investments in our new stores is impacted by different factors, including whether the building and land are purchased (requiring higher investment) or leased (generally initial lower investment) and whether such buildings are located in the U.S., Mexico or Brazil, or located in urban or rural areas.

In addition to the building and land costs, our new stores require working capital, predominantly for inventories.

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Extended payment terms from our vendors have allowed us to continue our high accounts payable to inventory ratio.

Accounts payable, as a percentage of gross inventory, was 129.4% at November 20, 2021, compared to 114.1% at November 21, 2020.

Accounts payable, as a percentage of gross inventory, was 126.8% at February 12, 2022, compared to 113.0% at February 13, 2021.

The increase from the comparable prior year period was primarily due to increased purchases with favorable vendor terms and higher inventory turns.

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We anticipate that we will be able to obtain such financing based on our current credit ratings and favorable experiences in the debt markets in the past.

For the trailing four quarters ended November 20, 2021, our adjusted after-tax return on invested capital (“ROIC”), which is a non-GAAP measure, was 44.7% as compared to 36.0% for the comparable prior year period.

For the trailing four quarters ended February 12, 2022, our adjusted after-tax return on invested capital (“ROIC”), which is a non-GAAP measure, was 49.4% as compared to 36.0% for the comparable prior year period.

Adjusted ROIC is calculated as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize operating leases).

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Under our 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, we had no outstanding borrowings, $1.8 million of outstanding letters of credit and $2.2 billion of availability under our Revolving Credit Agreement.

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

We also maintain a letter of credit facility that allows us to request the participating bank to issue letters of credit on our behalf up to an aggregate amount of $25 million.

The letter of credit facility is in addition to the letters of credit that may be issued under the Revolving Credit Agreement.

As of November 20, 2021, we had $25.0 million in letters of credit outstanding under the letter of credit facility, which expires in June 2022.

In addition to the outstanding letters of credit issued under the committed facilities discussed above, we had $143.8 million in letters of credit outstanding as of November 20, 2021.

As of February 12, 2022, we had $25.0 million in letters of credit outstanding under the letter of credit facility, which expires in June 2022.

In addition to the outstanding letters of credit issued under the committed facilities discussed above, we had $105.1 million in letters of credit outstanding as of February 12, 2022.

These letters of credit have various maturity dates and were issued on an uncommitted basis.

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

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

As of February 12, 2022, our $1.1 billion of commercial paper borrowings and the $300 million 2.875% Senior Notes due January 2023 were classified as long-term in the Consolidated Balance Sheets, as we have the current ability and intent to refinance them on a long-term basis through available capacity in our Revolving Credit Agreement.

As of February 12, 2022, we had $2.2 billion of availability under our Revolving Credit Agreement, without giving effect to commercial paper borrowings, which would allow us 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).

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All of the repayment obligations under our borrowing arrangements may be accelerated and come due prior to the applicable scheduled payment date if covenants are breached or an event of default occurs.

As of November 20, 2021, we were in compliance with all covenants and expect to remain in compliance with all covenants under our borrowing arrangements.

Our adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and share-based compensation expense (“EBITDAR”) ratio was 2.0:1 as of November 20, 2021 and was 2.3:1 as of November 21, 2020.

As of February 12, 2022, we were in compliance with all covenants and expect to remain in compliance with all covenants under our borrowing arrangements.

Our adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and share-based compensation expense (“EBITDAR”) ratio was 2.0:1 as of February 12, 2022 and was 2.3:1 as of February 13, 2021.

We calculate adjusted debt as the sum of total debt, financing lease liabilities and rent times six;

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Stock Repurchases

From January 1, 1998 to November 20, 2021, we have repurchased a total of 150.8 million shares of our common stock at an aggregate cost of $26.6 billion, including 514,534 shares of our 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 our common stock in connection with our 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, we had $1.0 billion remaining under the Board’s authorization to repurchase our common stock.

Subsequent to November 20, 2021 and through December 10, 2021, we have repurchased 63,909 shares of our 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, we have $2.4 billion remaining under the Board’s authorization to repurchase our common stock.

From January 1, 1998 to February 12, 2022, we have repurchased a total of 151.6 million shares of our common stock at an aggregate cost of $28.2 billion, including 1.3 million shares of our 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 our common stock in connection with our ongoing share repurchase program, which raised the total value of our shares authorized to be repurchased to $29.2 billion.

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

Subsequent to February 12, 2022 and through March 11, 2022, we have repurchased 119,542 shares of our common stock at an aggregate cost of $226.9 million.

Off-Balance Sheet Arrangements

Since our fiscal year end, we have canceled, issued and modified stand-by letters of credit that are primarily renewed on an annual basis to cover deductible payments to our casualty insurance carriers.

Our total stand-by letters of credit commitment at November 20, 2021, was $170.6 million, compared with $162.4 million at August 28, 2021, and our total surety bonds commitment at November 20, 2021, was $36.8 million, compared with $35.4 million at August 28, 2021.

Our total stand-by letters of credit commitment at February 12, 2022, was $131.9 million, compared with $162.4 million at August 28, 2021, and our total surety bonds commitment at February 12, 2022, was $36.4 million, compared with $35.4 million at August 28, 2021.

Financial Commitments

Except for the previously discussed Revolving Credit Agreement, as of November 20, 2021, there were no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the year ended August 28, 2021.

Except for the previously discussed Revolving Credit Agreement and the repayment of the $500 million 3.700% Senior Notes due April 2022, as of February 12, 2022, there were no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the year ended August 28, 2021.

Reconciliation of Non-GAAP Financial Measures

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Adjusted After-Tax ROIC

The following tables calculate the percentages of adjusted ROIC for the trailing four quarters ended November 20, 2021 and November 21, 2020.

The following tables calculate the percentages of adjusted ROIC for the trailing four quarters ended February 12, 2022 and February 13, 2021.

Trailing Four

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Adjusted Debt to EBITDAR

The following tables calculate the ratio of adjusted debt to EBITDAR for the trailing four quarters ended November 20, 2021 and November 21, 2020.

The following tables calculate the ratio of adjusted debt to EBITDAR for the trailing four quarters ended February 12, 2022 and February 13, 2021.

Trailing Four

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Adjusted debt to EBITDAR

(1) The table below outlines the calculation of rent expense and reconciles rent expense to total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the trailing four quarters ended November 20, 2021 and November 21, 2020 (in thousands):

Trailing Four Quarters Ended

(in thousands)

November 20, 2021

November 21,2020

Total lease cost, per ASC 842, for the trailing four quarters

February 12, 2022

February 13, 2021

Total lease cost, per ASC 842

Finance lease interest and amortization

Variable operating lease components, related to insurance and common area maintenance

Rent expense for the trailing four quarters

(2) Effective tax rate over trailing four quarters ended November 20, 2021 and November 21, 2020 is 21.0% and 21.6%, respectively.

(2) Effective tax rate over trailing four quarters ended February 12, 2022 and February 13, 2021 is 20.8% and 22.1%, respectively.

(3) All averages are computed based on trailing five quarter balances.

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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 2. Management’s Discussion and Analysis