What changed in this filing

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Item 1. Financial Statements

2023-12-18 compared with 2023-06-09 · 132 added, 176 removed, 273 unchanged (53% of the section changed)

17 unchanged sentences

Other long-term assets

Total long-term assets

Liabilities and Stockholders’ Deficit

14 unchanged sentences

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

18,900 shares issued and 18,225 shares outstanding as of May 6, 2023;

18,984 shares issued and 17,326 shares outstanding as of November 18, 2023;

18,936 shares issued and 17,857 shares outstanding as of August 26, 2023

15 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)

3 unchanged sentences

Net derivative activities, net of taxes

Total other comprehensive income

Total other comprehensive (loss) income

Comprehensive income

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirty-Six Weeks Ended

Twelve Weeks Ended

(in thousands)

2 unchanged sentences

Depreciation and amortization of property and equipment

Other non-cash charges

Other non-cash (income) charges

Amortization of debt origination fees

14 unchanged sentences

Cash flows from financing activities:

Net proceeds from commercial paper

Net (payments of) proceeds from commercial paper

Proceeds from issuance of debt

Repayment of debt

Net proceeds from sale of common stock

1 unchanged sentence

( 1,486,876 )

( 3,359,994 )

Repayment of principal portion of finance lease liabilities

Net cash used in financing activities

( 1,388,307 )

( 2,530,823 )

Effect of exchange rate changes on cash

Net increase/(decrease) in cash and cash equivalents

Net increase 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 6, 2023

Comprehensive

(in thousands)

Balance at February 11, 2023

( 4,471,842 )

( 4,184,170 )

Total other comprehensive income

Purchase of 356 shares of treasury stock

Issuance of common stock under stock options and stock purchase plans

Share-based compensation expense

Balance at May 6, 2023

( 3,824,119 )

( 1,675,687 )

( 4,301,577 )

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 )

Thirty-Six Weeks Ended May 6, 2023

Twelve Weeks Ended November 18, 2023

Comprehensive

5 unchanged sentences

Total other comprehensive income

Retirement of treasury shares

( 4,157,637 )

Purchase of 580 shares of treasury stock (1)

3 unchanged sentences

Share-based compensation expense

Balance at May 6, 2023

Balance at November 18, 2023

( 2,365,815 )

1 unchanged sentence

( 5,213,671 )

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 )

(1) Inclusive of excise tax of $ 14.4 million for the quarter ended November 18, 2023.

The excise tax is assessed at one percent of the fair value of net stock repurchases after December 31, 2022.

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 26, 2023.

Operating results for the twelve and thirty-six weeks ended May 6, 2023 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 26, 2023.

Operating results for the twelve weeks ended November 18, 2023 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 31, 2024.

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.

The fourth quarter of fiscal 2024 has 17 weeks, and the fourth quarter of fiscal 2023 had 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 September 2022, the FASB issued ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50) .

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50) .

This ASU requires buyers in a supplier finance program to 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.

This ASU is effective for all companies for fiscal years beginning after December 15, 2022, including interim periods within those years, and requires retrospective adoption.

The Company adopted the required disclosures of this standard on a retrospective basis beginning with its first quarter ending November 18, 2023.

The adoption of ASU 2022-04 did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

Refer to “Note F – Supplier Financing Programs.”

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) .

The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (CODM), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss.

This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss.

Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption.

Early adoption is permitted.

The Company expects to adopt this standard beginning with its first quarter ending November 18, 2023.

The Company will adopt this standard beginning with our fiscal year ending August 30, 2025.

The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.

Note B – Share-Based Payments

AutoZone maintains several equity incentive plans, which provide equity-based compensation to non-employee directors and eligible employees for their service to AutoZone, its subsidiaries or affiliates.

The Company recognizes compensation expense for share-based payments based on the fair value of the awards at the grant date.

Share-based payments include stock option grants, restricted stock grants, restricted stock unit grants, stock appreciation rights, discounts on shares sold to employees under share purchase plans and other awards.

Additionally, directors’ fees are paid in restricted stock units with value equivalent to the value of shares of common stock as of the grant date.

The change in fair value of liability-based stock awards is also recognized in share-based compensation expense.

Stock Options:

The Company made stock option grants for 161,510 shares during the thirty-six week period ended May 6, 2023 and granted options to purchase 164,262 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 6, 2023 and May 7, 2022, using the Black-Scholes-Merton multiple-option pricing valuation model, was $ 764.68 and $ 463.09 per share, respectively, using the following weighted average key assumptions:

Thirty-Six Weeks Ended

Expected price volatility

Risk-free interest rate

Weighted average expected lives (in years)

Forfeiture rate

Dividend yield

During the thirty-six week period ended May 6, 2023, and the comparable prior year period, 208,482 and 179,440 stock options, respectively, were exercised at a weighted average exercise price of $ 705.52 and $ 574.79 , respectively.

As of May 6, 2023, total unrecognized share-based expense related to stock options, net of estimated forfeitures, was approximately $ 117.5 million, before income taxes, which we expect to recognize over an estimated weighted average period of 3.1 years.

Restricted Stock Units:

Restricted stock unit awards are valued at the market price of a share of the Company’s stock on the date of grant.

Grants of employee restricted stock units vest ratably on an annual basis over a four-year service period and are payable in shares of common stock on the vesting date.

Compensation expense for grants of employee restricted stock units is recognized on a straight-line basis over the four-year service period, less estimated forfeitures, which are consistent with stock option forfeiture assumptions.

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 6, 2023, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 10.1 million, before income taxes, which we expect to recognize over an estimated weighted average period of 2.6 years.

Transactions related to restricted stock units for the thirty-six weeks ended May 6, 2023 were as follows:

Average Grant

Date Fair Value

Nonvested at August 27, 2022

Nonvested at May 6, 2023

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) for the twelve and thirty-six week periods ended May 6, 2023, was $ 20.0 million and $ 62.4 million, respectively.

For the comparable prior year periods, total share-based compensation expense was $ 18.3 million and $ 49.1 million, respectively.

For the twelve and thirty-six week periods ended May 6, 2023, 154,041 and 132,965 , 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, 120,515 and 136,994 , respectively, 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.

2020 Omnibus Incentive Award Plan and the Director Compensation Program.

Note C – Fair Value Measurements

Note B – Merchandise Inventories

Merchandise inventories include related purchasing, storage and handling costs.

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.

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

Due to price inflation on the Company’s merchandise purchases, primarily driven by increased freight costs, the Company’s LIFO credit reserve

balance was $ 57.0 million at November 18, 2023, and $ 59.0 million at August 26, 2023.

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

Note C – Variable Interest Entities

The Company invests in certain tax credit funds that promote renewable energy and generate a return primarily through the realization of federal tax credits.

The Company considers its investment in these tax credit funds as an investment in a variable interest entity (“VIE”).

The Company evaluates the investment in any VIE to determine whether it is the primary beneficiary.

The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities.

As of November 18, 2023, the Company held tax credit equity investments that were deemed to be VIE’s and determined that it was not the primary beneficiary of the entities, as it did not have the power to direct the activities that most significantly impacted the entity and accounted for this investment using the equity method.

The Company’s maximum exposure to losses is generally limited to its net investment, which was $ 23.8 million as of November 18, 2023.

Note D – Fair Value Measurements

The Company defines fair value as the price received to transfer an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

7 unchanged sentences

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

November 18, 2023

(in thousands)

5 unchanged sentences

Other long-term assets

At May 6, 2023, 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 November 18, 2023, 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.

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

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

Financial Instruments not Recognized at Fair Value

1 unchanged sentence

The carrying amounts of these financial instruments approximate fair value because of their short maturities.

A discussion of the carrying values and fair values of the Company’s debt is included in “Note G – Financing.”

Note D – Marketable Debt Securities

A discussion of the carrying values and fair values of the Company’s debt is included in “Note H – Financing.”

Note E – Marketable Debt Securities

Marketable debt securities are carried at fair value, with unrealized gains and losses, net of income taxes, recorded in Accumulated other comprehensive loss until realized, and any credit risk related losses are recognized in net income in the period incurred.

1 unchanged sentence

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

November 18, 2023

(in thousands)

9 unchanged sentences

Asset-backed securities and other

The marketable debt securities held at May 6, 2023, had effective maturities ranging from less than one year to approximately three years .

Securities maturing in less than one year totaled $ 42.6 million and $ 49.7 million at May 6, 2023 and August 27, 2022, respectively.

Securities maturing between one and three years totaled $ 81.9 million and $ 62.8 million at May 6, 2023 and August 27, 2022, respectively.

At May 6, 2023, the Company held 60 securities that are in an unrealized loss position of approximately $ 2.0 million.

The marketable debt securities held at November 18, 2023, had effective maturities ranging from less than one year to approximately twelve years .

At November 18, 2023, the Company held 73 securities that are in an unrealized loss position of approximately $ 2.5 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.

An allowance for credit losses was deemed unnecessary given consideration of the factors above.

The Company did not realize any material gains or losses on its marketable debt securities during the twelve week period ended November 18, 2023 and the comparable prior year period.

Included above in total available-for-sale marketable debt securities are $ 106.4 million of marketable debt securities transferred by the Company’s insurance captive to a trust account to secure its obligations to an insurance company related to future workers’ compensation and casualty losses.

Note E – Derivative Financial Instruments

During the second quarter of fiscal 2023, the Company entered into two treasury rate locks designated as cash flow hedges used to manage our exposure to interest rate volatility associated with anticipated debt financing, each with a notional amount of $ 250 million.

The treasury rate locks had fixed rates of 3.45 % and 3.38 % benchmarked based on the 5-year and the 10-year U.S.

treasury notes, respectively.

These locks expired on January 27, 2023 and resulted in gains of $ 1.9 million and $ 2.9 million, respectively, which have been deferred in Accumulated other comprehensive loss and will be reclassified to Interest expense over the life of the underlying debt.

The hedges remained highly effective until they expired, and no ineffectiveness was recognized in earnings.

At May 6, 2023, the Company had $ 13.0 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 and thirty-six week periods ended May 6, 2023, the Company reclassified $ 531 thousand and $ 2.1 million, respectively, of net losses from Accumulated other comprehensive loss to Interest expense.

During the comparable prior year periods, $ 798 thousand and $ 2.6 million, respectively, were reclassified from Accumulated other comprehensive loss to Interest expense.

The Company expects to reclassify $ 2.3 million of net losses from Accumulated other comprehensive loss to Interest expense over the next 12 months.

Note F – Merchandise Inventories

Merchandise inventories include related purchasing, storage and handling costs.

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

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 $ 89.0 million at May 6, 2023, 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 and decreases are recorded as a non-cash benefit to cost of sales.

Note G – Financing

Note F – Supplier Financing Programs

The Company has arrangements with third-party financial institutions to confirm invoice balances owed by the Company to certain suppliers and pay the financial institutions the confirmed amounts on the invoice due dates.

These arrangements allow the Company’s inventory suppliers, at their sole discretion, to enter into agreements directly with these financial institutions to finance the Company’s obligations to the suppliers at terms negotiated between the suppliers and the financial institutions.

Supplier participation is optional and our obligations to our suppliers, including the amount and dates due, are not impacted by our suppliers’ decision to enter into an agreement with a third-party financial institution.

As of November 18, 2023 and August 26, 2023, the Company had supplier obligations outstanding that had been confirmed under these arrangements of $ 4.8 billion for each period, which are included in Accounts payable and $ 209.6 million and $ 224.8 million, respectively, which are included in Other long-term liabilities in the Condensed Consolidated Balance Sheets.

Note G – Litigation

The Company is involved in various legal proceedings incidental to the conduct of its business, including, but not limited to, claims and allegations related to wage and hour violations, unlawful termination, employment practices, product liability, privacy and cybersecurity, environmental matters, intellectual property rights or regulatory compliance.

The Company does not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to the Company’s financial condition, results of operations or cash flows.

Note H – Financing

The Company’s debt consisted of the following:

(in thousands)

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

3.125 % Senior Notes due July 2023 , effective interest rate 3.26 %

3.125 % Senior Notes due April 2024 , effective interest rate 3.32 %

2 unchanged sentences

3.125 % Senior Notes due April 2026 , effective interest rate 3.28 %

5.050 % Senior Notes due July 2026 , effective interest rate 5.09 %

3.750 % Senior Notes due June 2027 , effective interest rate 3.83 %

4.500 % Senior Notes due February 2028 , effective interest rate 4.43 %

6.250 % Senior Notes due November 2028 , effective interest rate 6.46 %

3.750 % Senior Notes due April 2029 , effective interest rate 3.86 %

3 unchanged sentences

4.750 % Senior Notes due February 2033 , effective interest rate 4.70 %

Commercial paper, weighted average interest rate 5.14 % and 2.43 % at May 6, 2023 and August 27, 2022, respectively

5.200 % Senior Notes due August 2033 , effective interest rate 5.22 %

6.550 % Senior Notes due November 2033 , effective interest rate 6.71 %

Commercial paper, weighted average interest rate 5.43 % at November 18, 2023 and August 26, 2023

Total debt before discounts and debt issuance costs

7 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 May 6, 2023, the Company had no outstanding borrowings and $ 1.8 million of outstanding letters of credit under the Revolving Credit Agreement.

As of November 18, 2023, 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 May 6, 2023, 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 May 6, 2023.

As of November 18, 2023, 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 $ 120.5 million in letters of credit outstanding as of November 18, 2023.

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

As of May 6, 2023, the commercial paper borrowings, the $ 500 million 3.125 % Senior Notes due July 2023 and the $ 300 million 3.125 % Senior Notes due April 2024 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 May 6, 2023, 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.

On January 17, 2023, the Company repaid its outstanding $ 300 million 2.875 % Senior Notes due January 2023.

On January 27, 2023, the Company issued $ 450 million in 4.500 % Senior Notes due February 2028 and $ 550 million in 4.750 % Senior Notes due February 2033.

Proceeds from the debt issuance were used to repay a portion of the Company’s outstanding commercial paper borrowings and for other general corporate purposes.

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

As of November 18, 2023, the $ 1.1 billion commercial paper borrowings and the $ 300 million 3.125 % Senior Notes due April 2024 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 18, 2023, 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.

On October 25, 2023, the Company issued $ 500 million in 6.250 % Senior Notes due November 2028 and $ 500 million in 6.550 % Senior Notes due November 2033.

Proceeds from the debt issuances were used for general corporate purposes.

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

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

1 unchanged sentence

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

The fair value of the Company’s debt was estimated at $ 7.1 billion as of May 6, 2023, 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 $ 229.9 million and $ 182.8 million at May 6, 2023 and August 27, 2022, respectively, which reflects their face amount, adjusted for any unamortized debt issuance costs and discounts.

As of May 6, 2023, 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 May 6, 2023, the Company has repurchased a total of 153.6 million shares of its common stock at an aggregate cost of $ 32.8 billion, including 1.1 million shares of its common stock at an aggregate cost of $ 2.7 billion (inclusive of excise tax of $ 14.0 million) during the thirty-six week period ended May 6, 2023.

The fair value of the Company’s debt was estimated at $ 8.2 billion as of November 18, 2023, and $ 7.3 billion as of August 26, 2023, 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 $ 372.0 million and $ 406.6 million at November 18, 2023 and August 26, 2023, respectively, which reflects their face amount, adjusted for any unamortized debt issuance costs and discounts.

As of November 18, 2023, the Company was in compliance with all covenants and expects to remain in compliance with all covenants under its borrowing arrangements.

Note I – Stock Repurchase Program

From January 1, 1998 to November 18, 2023, the Company has repurchased a total of 154.6 million shares of its common stock at an aggregate cost of $ 35.3 billion, including 579.7 thousand shares of its common stock at an aggregate cost of $ 1.5 billion (inclusive of excise tax of $ 14.4 million) during the twelve week period ended November 18, 2023.

The excise tax is assessed at one percent of the fair market value of net stock repurchases after December 31, 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 May 6, 2023, the Company had $ 843.6 million remaining under the Board’s authorization to repurchase its common stock.

During the thirty-six week period ended May 6, 2023, the Company retired 2.1 million shares of treasury stock which had been previously repurchased under the Company’s share repurchase program.

The retirement increased Retained deficit by $ 4.2 billion and decreased Additional paid-in capital by $ 143.4 million.

During the comparable prior year period, the Company retired 2.5 million shares of treasury stock, which increased Retained deficit by $ 3.3 billion and decreased Additional paid-in capital by $ 294.9 million.

Subsequent to May 6, 2023 and through June 2, 2023, the Company has repurchased 86.7 thousand shares of its common stock at an aggregate cost of $ 219.9 million.

Note I – Accumulated Other Comprehensive Loss

On June 14, 2023, 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 $ 35.7 billion.

Considering the cumulative repurchases as of November 18, 2023, the Company had $ 333.1 million remaining under the Board’s authorization to repurchase its common stock.

Subsequent to November 18, 2023 and through December 11, 2023, the Company has repurchased 40.1 thousand shares of its common stock at an aggregate cost of $ 106.0 million.

Note J – 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 6, 2023 and May 7, 2022 consisted of the following:

(in thousands)

on Securities

Balance at February 11, 2023

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

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at May 6, 2023

(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

Changes in Accumulated other comprehensive loss for the thirty-six week periods ended May 6, 2023 and May 7, 2022 consisted of the following:

Changes in Accumulated other comprehensive loss for the twelve week periods ended November 18, 2023 and November 19, 2022 consisted of the following:

(in thousands)

and Other (1)

on Securities

Balance at August 26, 2023

Other comprehensive income before reclassifications (2)(3)

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

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at May 6, 2023

Balance at November 18, 2023

(in thousands)

and Other (1)

on Securities

2 unchanged sentences

Amounts reclassified from Accumulated other comprehensive loss (3)

Balance at May 7, 2022

Balance at November 19, 2022

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

6 unchanged sentences

(3) Amounts shown are net of tax .

Note J – Litigation

The Company is involved in various legal proceedings incidental to the conduct of its business, including, but not limited to, several lawsuits containing class-action allegations in which the plaintiffs are current and former hourly and salaried employees who allege various wage and hour violations and unlawful termination practices.

While the resolution of these matters cannot be predicted with certainty, management does not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to the Company’s Condensed Consolidated Statements of Income, Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Cash Flows.

Note K – Segment Reporting

Note K – Share-Based Payments

The Company recognizes compensation expense for share-based payments based on the fair value of the awards at the grant date.

Additionally, directors’ fees are paid in restricted stock units with value equivalent to the value of shares of common stock as of the grant date.

The change in fair value of liability-based stock awards is also recognized in share-based compensation expense.

Stock Options:

The Company made stock option grants for 130,723 shares during the twelve week period ended November 18, 2023 and granted options to purchase 157,113 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 or above the market value of the stock on the date of grant.

Option-vesting periods range from four to five years , with the vast majority of options vesting ratably over four years .

The fair value of each option is amortized into compensation expense on a straight-line basis over the requisite service period, less estimated forfeitures.

Beginning with grants made in fiscal 2024, employees who meet the qualified retirement provisions under the AutoZone, Inc.

2020 Omnibus Incentive Award Plan are assumed to have a 0 % forfeiture rate.

All other employee grants assume a 10 % forfeiture rate, which is based on historical experience.

The weighted average fair value of the stock option awards granted during the twelve week period ended November 18, 2023 and November 19, 2022, using the Black-Scholes-Merton multiple-option pricing valuation model, was $ 913.31 and $ 760.82 per share, respectively, using the following weighted average key assumptions:

Twelve Weeks Ended

Expected price volatility

Risk-free interest rate

Weighted average expected lives (in years)

Forfeiture rate

Dividend yield

During the twelve week period ended November 18, 2023, and the comparable prior year period, 44,644 and 57,092 stock options, respectively, were exercised at a weighted average exercise price of $ 931.85 and $ 725.86 , respectively.

As of November 18, 2023, total unrecognized share-based expense related to stock options, net of estimated forfeitures, was approximately $ 177.9 million, before income taxes, which we expect to recognize over an estimated weighted average period of 3.5 years.

Restricted Stock Units:

Restricted stock unit awards are valued at the market price of a share of the Company’s stock on the date of grant.

Grants of employee restricted stock units vest ratably on an annual basis over a four-year service period and are payable in shares of common stock on the vesting date.

Compensation expense for grants of employee restricted stock units is recognized on a straight-line basis over the requisite service period, less estimated forfeitures, which are consistent with stock option forfeiture assumptions.

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 18, 2023, total unrecognized stock-based compensation expense related to nonvested restricted stock unit awards, net of estimated forfeitures, was approximately $ 12.0 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 18, 2023 were as follows:

Average Grant

Date Fair Value

Nonvested at August 26, 2023

Nonvested at November 18, 2023

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) for the twelve week period ended November 18, 2023, was $ 22.9 million and $ 19.0 million for the comparable prior year period.

For the twelve week periods ended November 18, 2023 and November 19, 2022, 169,798 and 87,696 stock options, respectively, were excluded from the diluted earnings per share computation because they would have been anti-dilutive.

See AutoZone’s Annual Report on Form 10-K for the year ended August 26, 2023 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.

2020 Omnibus Incentive Award Plan and the Director Compensation Program.

Note L – Segment Reporting

The Company’s operating segments (Domestic Auto Parts, Mexico and Brazil) are aggregated as one reportable segment:

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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 26, 2023.

The Auto Parts Stores segment is a retailer and distributor of automotive parts and accessories through the Company’s 7,044 stores in the U.S., Mexico and Brazil.

The Auto Parts Stores segment is a retailer and distributor of automotive replacement parts and accessories through the Company’s 7,165 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 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 operating segments include ALLDATA, which produces, sells and maintains diagnostic, repair, collision 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.

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Twelve Weeks Ended

Thirty-Six Weeks Ended

(in thousands)

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( 1,271,589 )

( 3,819,261 )

( 3,549,885 )

Interest expense, net

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

(the Company) as of May 6, 2023, the related condensed consolidated statements of income, comprehensive income and stockholders’ deficit for the twelve and thirty-six week periods ended May 6, 2023 and May 7, 2022, the condensed consolidated statements of cash flows for the thirty-six week periods ended May 6, 2023 and May 7, 2022, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”).

(the Company) as of November 18, 2023, the related condensed consolidated statements of income, comprehensive income, stockholders’ deficit and cash flows for the twelve week periods ended November 18, 2023 and November 19, 2022, 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.

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Memphis, Tennessee

December 18, 2023

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