What changed in this filing

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Item 1. Financial Statements

2022-12-20 compared with 2022-06-10 · 73 added, 122 removed, 296 unchanged (40% of the section changed)

33 unchanged sentences

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

20,707 shares issued and 19,576 shares outstanding as of May 7, 2022;

20,794 shares issued and 18,797 shares outstanding as of November 19, 2022;

20,732 shares issued and 19,126 shares outstanding as of August 27, 2022

14 unchanged sentences

Twelve Weeks Ended

Thirty-Six Weeks Ended

(in thousands, except per share data)

14 unchanged sentences

Twelve Weeks Ended

Thirty-Six Weeks Ended

(in thousands)

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirty-Six Weeks Ended

Twelve Weeks Ended

(in thousands)

1 unchanged sentence

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

Depreciation and amortization of property and equipment and intangibles

Depreciation and amortization of property and equipment

Other non-cash

Amortization of debt origination fees

5 unchanged sentences

Accounts payable and accrued expenses

Income taxes payable

Net cash provided by operating activities

8 unchanged sentences

Net proceeds from commercial paper

Repayment of debt

Net proceeds from sale of common stock

Purchase of treasury stock

( 3,359,994 )

( 2,478,322 )

Repayment of principal portion of finance lease liabilities

Net cash used in financing activities

( 2,530,823 )

( 2,651,242 )

Effect of exchange rate changes on cash

Net decrease in cash and cash equivalents

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Twelve Weeks Ended May 7, 2022

Comprehensive

(in thousands)

Balance at February 12, 2022

( 2,730,731 )

( 1,362,804 )

( 3,137,477 )

Total other comprehensive income

Purchase of 449 shares of treasury stock

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at May 7, 2022

( 2,138,160 )

( 2,262,803 )

( 3,387,230 )

Twelve Weeks Ended May 8, 2021

Comprehensive

(in thousands)

Balance at February 13, 2021

( 1,801,764 )

( 1,523,573 )

Total other comprehensive loss

Purchase of 663 shares of treasury stock

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at May 8, 2021

( 1,205,600 )

( 1,635,621 )

( 1,763,392 )

Thirty-Six Weeks Ended May 7, 2022

Twelve Weeks Ended November 19, 2022

Comprehensive

3 unchanged sentences

( 3,262,769 )

Total other comprehensive income

Retirement of treasury shares

( 3,538,913 )

Total other comprehensive income

Purchase of 392 shares of treasury stock

( 3,359,994 )

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at May 7, 2022

( 2,138,160 )

Balance at November 19, 2022

( 4,162,767 )

( 3,837,923 )

Thirty-Six Weeks Ended May 8, 2021

Twelve Weeks Ended November 20, 2021

Comprehensive

2 unchanged sentences

( 2,535,620 )

Total other comprehensive income

Retirement of treasury shares

( 1,797,536 )

Total other comprehensive loss

Purchase of 515 shares of treasury stock

( 2,478,322 )

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at May 8, 2021

( 1,205,600 )

Balance at November 20, 2021

( 3,435,617 )

11 unchanged sentences

(“AutoZone” or the “Company”) Annual Report on Form 10-K for the year ended August 27, 2022.

Operating results for the twelve and thirty-six weeks ended May 7, 2022 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 weeks ended November 19, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 26, 2023.

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 2023 and 2022 each have 16 weeks.

Recently Adopted Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, Government Assistance (Topic 832) – Disclosures by Business Entities about Government Assistance , which requires annual disclosures for entities receiving governmental assistance to provide more transparency.

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

The Company adopted this ASU with its first quarter ended November 19, 2022 on a prospective basis.

The adoption of this guidance did not have a material impact on the Company's consolidated 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.

In September 2022, the FASB issued ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50) .

The update requires that a buyer in a supplier finance program disclose sufficient qualitative and quantitative information about the program to allow a reader of the financial statements to understand the program’s nature, activity during the period, changes from period to period and the program’s potential magnitude.

ASU 2022-04 is effective for fiscal years beginning after December 15, 2022, including interim periods within those years, except for the disclosure of rollforward information which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

8 unchanged sentences

Stock Options:

The Company made stock option grants of 164,262 shares during the thirty-six week period ended May 7, 2022 and granted options to purchase 196,520 shares during the comparable prior year period.

The Company made stock option grants of 157,113 shares during the twelve week period ended November 19, 2022 and granted options to purchase 163,786 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 thirty-six week periods ended May 7, 2022 and May 8, 2021, using the Black-Scholes-Merton multiple-option pricing valuation model, was $ 463.09 and $ 299.99 per share, respectively, using the following weighted average key assumptions:

Thirty-Six Weeks Ended

The weighted average fair value of the stock option awards granted during the twelve week periods ended November 19, 2022 and November 20, 2021, using the Black-Scholes-Merton multiple-option pricing valuation model, was $ 760.82 and $ 462.80 per share, respectively, using the following weighted average key assumptions:

Twelve Weeks Ended

Expected price volatility

3 unchanged sentences

Dividend yield

During the thirty-six week period ended May 7, 2022, 179,440 stock options were exercised at a weighted average exercise price of $ 574.79 .

During the twelve week period ended November 19, 2022, 57,092 stock options were exercised at a weighted average exercise price of $ 725.86 .

In the comparable prior year period, 47,705 stock options were exercised at a weighted average exercise price of $ 549.86 .

As of May 7, 2022, total unrecognized share-based expense related to stock options, net of estimated forfeitures, was approximately $ 77.3 million, before income taxes, which we expect to recognize over an estimated weighted average period of 3.3 years.

As of November 19, 2022, total unrecognized share-based expense related to stock options, net of estimated forfeitures, was approximately $ 158.1 million, before income taxes, which we expect to recognize over an estimated weighted average period of 3.5 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 May 7, 2022, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 12.3 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 thirty-six weeks ended May 7, 2022 were as follows:

As of November 19, 2022, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 13.7 million, before income taxes, which we expect to recognize over an estimated weighted average period of 3.0 years.

Transactions related to restricted stock units for the twelve weeks ended November 19, 2022 were as follows:

Average Grant

1 unchanged sentence

Nonvested at August 27, 2022

Canceled or forfeited

Nonvested at May 7, 2022

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $ 18.3 million for the twelve week period ended May 7, 2022, and $ 13.9 million for the comparable prior year period.

Total share-based compensation expense was $ 49.1 million for the thirty-six week period ended May 7, 2022, and $ 38.1 million for the comparable prior year period.

For the twelve and thirty-six week periods ended May 7, 2022, 120,515 and 136,994 , respectively, stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive.

For the comparable prior year periods, 142,660 and 166,456 anti-dilutive stock options were excluded from the dilutive earnings per share computation.

Nonvested at November 19, 2022

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $ 19.0 million for the twelve week period ended November 19, 2022, and $ 14.3 million for the comparable prior year period.

For the twelve week period ended November 19, 2022, 87,696 stock options were excluded from the diluted earnings per share computation because they would have been anti-dilutive.

For the comparable prior year period, 97,942 anti-dilutive stock options were excluded from the dilutive earnings per share computation.

See AutoZone’s Annual Report on Form 10-K for the year ended August 27, 2022 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 19, 2022

(in thousands)

5 unchanged sentences

Other long-term assets

At May 7, 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.

At November 19, 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.

yields and reported trades.

The fair values of the marketable debt securities, by asset class, are described in “Note D – Marketable Debt Securities.”

7 unchanged sentences

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

November 19, 2022

(in thousands)

9 unchanged sentences

Asset-backed securities and other

The debt securities held at May 7, 2022, had effective maturities ranging from less than one year to approximately three years .

At May 7, 2022, the Company held 65 securities that are in an unrealized loss position of approximately $ 2.4 million.

The debt securities held at November 19, 2022, had effective maturities ranging from less than one year to approximately three years .

Securities maturing in less than one year totaled $ 51.8 million and $ 49.7 million at November 19, 2022 and August 27, 2022, respectively.

Securities maturing between one and three years totaled $ 67.0 million and $ 62.8 million at November 19, 2022 and August 27, 2022, respectively.

At November 19, 2022, the Company held 75 securities that are in an unrealized loss position of approximately $ 3.6 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.

4 unchanged sentences

Inventory cost has been determined using the last-in, first-out (“LIFO”) method stated at the lower of cost or net realizable value for domestic inventories and the weighted average cost method stated at the lower of cost or net realizable value for Mexico and Brazil inventories.

Due to historical price deflation on the Company’s merchandise purchases, the Company has exhausted its LIFO reserve balance.

The Company’s policy is not to write up inventory in excess of replacement cost.

The difference between LIFO cost and replacement cost, which has been reduced due to price inflation on the Company’s merchandise purchases, was $ 91.3 million at May 7, 2022 and $ 335.3 million at August 28, 2021.

Due to recent price inflation on the Company’s merchandise purchases, primarily driven by increased freight costs, the Company’s LIFO credit reserve balance was $ 96.0 million at November 19, 2022, and $ 15.0 million at August 27, 2022.

Increases to the Company’s LIFO credit reserve balance are recorded as a non-cash charge to cost of sales.

Note F – Financing

1 unchanged sentence

(in thousands)

3.700 % Senior Notes due April 2022 , effective interest rate of 3.85 %

2.875 % Senior Notes due January 2023 , effective interest rate of 3.21 %

8 unchanged sentences

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

Commercial paper, weighted average interest rate of 0.80 % at May 7, 2022

4.750 % Senior Notes due August 2032 , effective interest rate of 4.76 %

Commercial paper, weighted average interest rate of 3.96 % and 2.43 % at November 19, 2022 and August 27, 2022, respectively

Total debt before discounts and debt issuance costs

1 unchanged sentence

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.

The Revolving Credit Agreement will terminate, and all amounts borrowed will be due and payable on November 15, 2026 , but AutoZone may make up to two requests to extend the termination date for an additional period of one year each.

Revolving borrowings under the Revolving Credit Agreement may be base rate loans, Eurodollar loans, or a combination of both, at AutoZone’s election.

On November 15, 2021, the Company amended and restated its existing revolving credit facility (as amended from time to time, 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.

On November 15, 2022, the Company amended the Revolving Credit Agreement, extending the termination date by one year.

As amended, the Revolving Credit Agreement will terminate, and all amounts borrowed will be due and payable on November 15, 2027 , but AutoZone may make one additional request to extend the termination date for an additional period of one year .

Revolving borrowings under the Revolving Credit Agreement may be base rate loans, Term Secured Overnight Financing Rate (“SOFR”) loans, or a combination of both, at AutoZone’s election.

The Revolving Credit Agreement includes (i) a $ 75 million sublimit for swingline loans, (ii) a $ 50 million individual issuer letter of credit sublimit and (iii) a $ 250 million aggregate sublimit for all letters of credit.

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 May 7, 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 May 7, 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 May 7, 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).

Further, the Senior Notes contain a provision that repayment may be accelerated if the Company experiences a change in control (as defined in the agreements).

The Company’s borrowings under its Senior Notes contain minimal covenants, primarily restrictions on liens, sale and leaseback transactions and consolidations, mergers and the sale of assets.

As of November 19, 2022, the Company had no outstanding borrowings and $ 1.8 million of outstanding letters of credit under the Revolving Credit Agreement.

The Company also maintains a letter of credit facility that allows it to request the participating bank to issue letters of credit on its 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 19, 2022, the Company had $ 25.0 million in letters of credit outstanding under the letter of credit facility, which expires in June 2025.

In addition to the outstanding letters of credit issued under the committed facilities discussed above, the Company had $ 107.2 million in letters of credit outstanding as of November 19, 2022.

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

As of November 19, 2022, the commercial paper borrowings, the $ 300 million 2.875 % Senior Notes due January 2023 and the $ 500 million 3.125 % Senior Notes due July 2023 were classified as long-term in the accompanying Consolidated Balance Sheets as the Company currently has the ability and intent to refinance them on a long-term basis through available capacity under its Revolving Credit Agreement.

As of November 19, 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.

The Senior Notes contain a provision that repayment may be accelerated if the Company experiences a change in control (as defined in the agreements).

The Company’s borrowings under its Senior Notes contain minimal covenants, primarily restrictions on liens.

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 $ 5.9 billion as of May 7, 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 less than the carrying value of debt by $ 163.3 million at May 7, 2022, and greater than the carrying value of debt by $ 413.1 million at August 28, 2021, which reflects their face amount, adjusted for any unamortized debt issuance costs and discounts.

As of May 7, 2022, the Company was in compliance with all covenants and expects to remain in compliance with all covenants under its borrowing arrangements.

Interest for the Senior Notes is paid on a semi-annual basis.

The fair value of the Company’s debt was estimated at $ 6.0 billion as of November 19, 2022, and $ 5.9 billion as of August 27, 2022, 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 less than the carrying value of debt by $ 341.1 million and $ 182.8 million at November 19, 2022 and August 27, 2022, respectively, which reflects their face amount, adjusted for any unamortized debt issuance costs and discounts.

As of November 19, 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 May 7, 2022, the Company has repurchased a total of 152.0 million shares of its common stock at an aggregate cost of $ 29.1 billion, including 1.7 million shares of its common stock at an aggregate cost of $ 3.4 billion during the thirty-six week period ended May 7, 2022.

On March 22, 2022, the Board voted to authorize the repurchase of an additional $ 2.0 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 $ 31.2 billion.

Considering the cumulative repurchases as of May 7, 2022, the Company had $ 2.1 billion remaining under the Board’s authorization to repurchase its common stock.

During the thirty-six week period ended May 7, 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 May 7, 2022 and through June 3, 2022, the Company has repurchased 103,726 shares of its common stock at an aggregate cost of $ 203.6 million.

From January 1, 1998 to November 19, 2022, the Company has repurchased a total of 152.9 million shares of its common stock at an aggregate cost of $ 31.0 billion, including 392.2 thousand shares of its common stock at an aggregate cost of $ 900.0 million during the twelve week period ended November 19, 2022.

On October 4, 2022, the Board voted to authorize the repurchase of an additional $ 2.5 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 $ 33.7 billion.

Considering the cumulative repurchases as of November 19, 2022, the Company had $ 2.7 billion remaining under the Board’s authorization to repurchase its common stock.

Subsequent to November 19, 2022 and through December 9, 2022, the Company has repurchased 42.9 thousand shares of its common stock at an aggregate cost of $ 108.0 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 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 May 7, 2022 and May 8, 2021 consisted of the following:

(in thousands)

on Securities

Balance at February 12, 2022

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

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at May 7, 2022

(in thousands)

on Securities

Balance at February 13, 2021

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

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at May 8, 2021

Changes in Accumulated other comprehensive loss for the thirty-six week periods ended May 7, 2022 and May 8, 2021 consisted of the following:

Changes in Accumulated other comprehensive loss for the twelve week periods ended November 19, 2022 and November 20, 2021 consisted of the following:

(in thousands)

3 unchanged sentences

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at May 7, 2022

Balance at November 19, 2022

(in thousands)

1 unchanged sentence

Balance at August 28, 2021

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

Other comprehensive loss before reclassifications (2)(3)

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at May 8, 2021

Balance at November 20, 2021

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

21 unchanged sentences

Twelve Weeks Ended

Thirty-Six Weeks Ended

(in thousands)

5 unchanged sentences

( 1,170,675 )

( 3,549,885 )

( 3,249,449 )

Interest expense, net

5 unchanged sentences

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

(the Company) as of May 7, 2022, the related condensed consolidated statements of income, comprehensive income and stockholders’ deficit for the twelve and thirty-six week periods ended May 7, 2022 and May 8, 2021, the condensed consolidated statements of cash flows for the thirty-six week periods ended May 7, 2022 and May 8, 2021, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”).

(the Company) as of November 19, 2022, the related condensed consolidated statements of income, comprehensive income, stockholders’ deficit and cash flows for the twelve week periods ended November 19, 2022 and November 20, 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

June 10, 2022

December 20, 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