What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-03-15 compared with 2023-12-18 · 105 added, 74 removed, 184 unchanged (49% of the section changed)

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

We began operations in 1979 and at November 18, 2023, operated 6,316 stores in the U.S., 745 stores in Mexico and 104 stores in Brazil.

We began operations in 1979 and at February 10, 2024, operated 6,332 stores in the U.S., 751 stores in Mexico and 108 stores in Brazil.

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

At November 18, 2023, in 5,803 of our domestic stores as well as the vast majority of our stores in Mexico and Brazil, we had a commercial sales program that provided commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations, fleet owners and other accounts.

We also sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and our commercial customers can make purchases through www.autozonepro.com.

Additionally, we sell the ALLDATA brand of automotive diagnostic, repair, collision and shop management software through www.alldata.com.

At February 10, 2024, in 5,823 of our domestic stores as well as the vast majority of our stores in Mexico and Brazil, we had a commercial sales program that provides prompt delivery of parts and other products and commercial credit to local, regional and national repair garages, dealers, service stations, fleet owners and other accounts.

Through our mobile application and websites, including autozone.com, we also sell automotive hard parts, maintenance items, accessories and non-automotive products, and our commercial customers can make purchases through www.autozonepro.com.

Additionally, we sell the ALLDATA brand automotive diagnostic, repair, collision and shop management software through www.alldata.com.

We also provide product information on our Duralast branded products through www.duralastparts.com.

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Our websites and the information contained therein or linked thereto are not intended to be incorporated into this report.

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

Operating results for the twelve and twenty-four weeks ended February 10, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2024.

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

The fourth quarter of fiscal 2024 has 17 weeks and the fourth quarter of fiscal 2023 has 16 weeks.

The fourth quarter of fiscal 2024 has 17 weeks, and the fourth quarter of fiscal 2023 had 16 weeks.

Our business is somewhat seasonal in nature, with the highest sales generally occurring during the months of February through September, and the lowest sales generally occurring in the months of December and January.

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Our retail and commercial sales in our domestic and international markets grew as we continue to make progress on our growth initiatives.

Operating profit increased 17.4% to $848.6 million, net income increased 10.0% to $593.5 million and diluted earnings per share increased 18.6% to $32.55.

During the first quarter of fiscal 2024, failure and maintenance related categories represented the largest portion of our sales mix at approximately 86% of total sales, which is consistent with the comparable prior year period.

Operating profit increased 10.9% to $743.2 million, net income for the quarter increased 8.1% to $515.0 million and diluted earnings per share increased 17.2% to $28.89.

During the second quarter of fiscal 2024, failure and maintenance related categories represented the largest portion of our sales mix at approximately 86% of total sales, which is consistent with the comparable prior year period.

Failure related categories continue to be the largest portion of our sales mix.

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Over the long-term, we believe the impact of weather on our sales mix is not significant.

Our business is impacted by various factors within the economy that affect both our consumers and our industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring and other economic conditions.

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.

Our business is impacted by various factors within the economy that affect both consumers and our industry, including but not limited to inflation, fuel costs, prevailing wage rates, supply chain disruptions, hiring and other economic conditions.

Given the nature of these macroeconomic factors, which are generally outside of our control, 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.

The two statistics we believe have the closest correlation to our market growth over the long-term are miles driven and the number of seven year old or older vehicles on the road.

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The average age of the U.S.

light vehicle fleet remains in our industry’s favor as the average age has exceeded 11 years since 2012, according to the latest data provided by the Auto Care Association.

light vehicle fleet remains in our industry’s favor as the average age has exceeded 11 years since 2012, according to the latest data provided by S&P Global Mobility.

As of January 1, 2023, the average age of light vehicles on the road was 12.5 years.

Since the beginning of the fiscal year and through September 2023 (latest publicly available information), miles driven in the U.S.

increased 0.9% compared to the same period in the prior year.

Twelve Weeks Ended November 18, 2023

Compared with Twelve Weeks Ended November 19, 2022

Net sales for the twelve weeks ended November 18, 2023 increased $205.2 million to $4.2 billion, or 5.1% over net sales of $4.0 billion for the comparable prior year period.

This growth was driven primarily by an increase in total company same store sales of 2.1% on a constant currency basis and net sales of $75.7 million from new domestic and international stores.

Domestic commercial sales increased $58.6 million to $1.1 billion, or 5.7% over the comparable prior year period.

Same store sales, or sales for our domestic and international stores open at least one year, are as follows:

Since the beginning of the fiscal year and through December 2023 (latest publicly available information), miles driven in the U.S.

were up 1.7% compared to the same period in the prior year.

Twelve Weeks Ended February 10, 2024

Compared with Twelve Weeks Ended February 11, 2023

Net sales for the twelve weeks ended February 10, 2024 increased $168.1 million to $3.9 billion, or 4.6% over net sales of $3.7 billion for the comparable prior year period.

This growth was primarily driven by net sales of $62.0 million from new domestic and international stores and an increase in total company same store sales of 1.5% on a constant currency basis.

Domestic commercial sales increased $25.6 million to $980.1 million, or 2.7% over the comparable prior year.

Same store sales, or sales from our domestic and international stores open at least one year, are as follows:

Twelve Weeks Ended

Constant Currency (1)

February 10, 2024

February 11, 2023

February 10, 2024

February 11, 2023

International

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(1) Constant currency same store sales exclude impacts from fluctuations of foreign exchange rates by converting both the current year and prior year international results at the prior year foreign currency exchange rate.

Gross profit for the twelve weeks ended November 18, 2023 was $2.2 billion, compared with $2.0 billion during the comparable prior year period.

Gross profit for the twelve weeks ended February 10, 2024 was $2.1 billion, compared with $1.9 billion during the comparable prior year period.

Gross profit, as a percentage of sales, was 53.9% compared to 52.3% during the comparable prior year period.

The increase in gross margin was driven by 208 basis point ($83.0 million net) non-cash LIFO favorability, with the remaining increase primarily from favorable supply chain costs and higher merchandise margins.

Operating, selling, general and administrative expenses for the twelve weeks ended November 18, 2023 were $1.4 billion compared with $1.3 billion during the comparable prior year period.

The increase in gross margin was driven by higher merchandise margins and a 63 basis point ($24.0 million net) non-cash LIFO favorability, with the remaining increase primarily from favorable supply chain costs.

Operating, selling, general and administrative expenses for the twelve weeks ended February 10, 2024 and the comparable prior year period were $1.3 billion.

As a percentage of sales, these expenses were 34.6% compared with 34.1% during the comparable prior year period.

The increase was driven primarily by domestic store payroll and investments in technology related initiatives.

Net interest expense was $102.6 million and $65.6 million for the twelve weeks ended February 10, 2024 and February 11, 2023, respectively.

Average borrowings were $8.7 billion and $6.9 billion and weighted average borrowing rates were 4.40% and 3.70% for the twelve weeks ended February 10, 2024 and February 11, 2023, respectively.

Our effective income tax rate was 19.6% and 21.2% of pretax income for the twelve weeks ended February 10, 2024 and February 11, 2023, respectively.

The benefit from stock options exercised for the twelve week period ended February 10, 2024 was $23.0 million compared to $13.4 million in the comparable prior year period.

Net income for the twelve weeks ended February 10, 2024 increased by $38.5 million from the comparable prior year period to $515.0 million due to the factors set forth above, and diluted earnings per share increased by 17.2% to $28.89 from $24.64.

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 $0.49 per share.

Twenty-Four Weeks Ended February 10, 2024

Compared with Twenty-Four Weeks Ended February 11, 2023

Net sales for the twenty-four weeks ended February 10, 2024 increased $373.4 million to $8.0 billion, or 4.9% over net sales of $7.7 billion for the comparable prior year period.

This growth was driven primarily by net sales of $137.7 million from new domestic and international stores and an increase in total company same store sales of 1.8% on a constant currency basis.

Domestic commercial sales increased $84.1 million to $2.1 billion, or 4.2% over the comparable prior year period.

Same store sales, or sales from our domestic and international stores open at least one year, are as follows:

Twenty-Four Weeks Ended

Constant Currency (1)

February 10, 2024

February 11, 2023

February 10, 2024

February 11, 2023

International

Total Company

Gross profit for the twenty-four weeks ended February 10, 2024 was $4.3 billion, compared with $3.9 billion during the comparable prior year period.

Gross profit, as a percentage of sales, was 53.3% compared to 51.1% during the comparable prior year period.

The increase in gross margin was driven by 138 basis point ($107.0 million net) non-cash LIFO favorability, with the remaining increase resulting primarily from higher merchandise margins and favorable supply chain costs.

Operating, selling, general and administrative expenses for the twenty-four weeks ended February 10, 2024, were $2.7 billion compared with $2.5 billion during the comparable prior year period.

As a percentage of sales, these expenses were 33.6% compared with 33.0% during the comparable prior year period.

The increase was driven primarily by domestic store payroll and investment in technology related initiatives.

Net interest expense was $91.4 million and $57.7 million for the twelve weeks ended November 18, 2023 and November 19, 2022, respectively.

Average borrowings were $8.1 billion and $6.2 billion, and weighted average borrowing rates were 4.23% and 3.47% for the twelve weeks ended November 18, 2023 and November 19, 2022, respectively.

Our effective income tax rate was 21.6% and 18.9% of pretax income for the twelve weeks ended November 18, 2023, and November 19, 2022, respectively.

The benefit from stock options exercised for the twelve week period ended November 18, 2023 was $11.2 million compared to $29.7 million in the comparable prior year period.

Net income for the twelve weeks ended November 18, 2023 increased by $54.1 million from the comparable prior year period to $593.5 million due to the factors set forth above, and diluted earnings per share increased by 18.6% to $32.55 from $27.45.

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 $0.41.

Net interest expense was $194.0 million and $123.3 million for the twenty-four weeks ended February 10, 2024 and February 11, 2023, respectively.

Average borrowings were $8.4 billion and $6.5 billion and weighted average borrowing rates were 4.31% and 3.58% for the twenty-four week periods ended February 10, 2024 and February 11, 2023, respectively.

Our effective income tax rate was 20.7% and 20.0% of pretax income for the twenty-four weeks ended February 10, 2024 and February 11, 2023, respectively.

The benefit from stock options exercised for the twenty-four week period ended February 10, 2024 was $34.2 million compared to $43.1 million in the comparable prior year period.

Net income for the twenty-four weeks ended February 10, 2024 increased by $92.6 million from the comparable prior year period to $1.1 billion due to the factors set forth above, and diluted earnings per share increased by 18.0% to $61.48 from $52.12.

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 $0.82.

Liquidity and Capital Resources

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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 November 18, 2023, we held $283.0 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.

As of February 10, 2024, we held $304.1 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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In the event our liquidity is insufficient, we may be required to limit our spending.

For the twelve week periods ended November 18, 2023 and November 19, 2022, our net cash flows from operating activities provided $830.3 million and $793.6 million, respectively.

Our net cash flows used in investing activities for the twelve weeks ended November 18, 2023 were $270.5 million as compared with $113.9 million in the comparable prior year period.

Capital expenditures for the twelve weeks ended November 18, 2023 were $235.4 million compared to $114.4 million in the comparable prior year period.

The increase in capital expenditures was primarily driven by our growth initiatives, including new stores, hub and mega hub expansion projects and new distribution centers.

During the twelve weeks ended November 18, 2023 and November 19, 2022, we opened 25 and 35 net new stores, respectively.

Investing cash flows were impacted by our wholly owned captive, which purchased $4.1 million and sold $1.9 million in marketable debt securities during the twelve weeks ended November 18, 2023.

For the twenty-four week periods ended February 10, 2024 and February 11, 2023, our net cash flows from operating activities provided $1.3 billion and $1.1 billion, respectively.

Cash flows from operations are favorable to last year primarily due to changes in working capital and higher net income.

Our net cash flows used in investing activities for the twenty-four weeks ended February 10, 2024 were $544.0 million as compared with $270.0 million in the comparable prior year period.

Capital expenditures for the twenty-four weeks ended February 10, 2024 were $490.8 million compared to $259.2 million in the comparable prior year period.

The increase in capital expenditures was primarily driven by our growth initiatives, including investments in distribution centers and stores to be opened in subsequent periods as well as stores opened in the current twenty-four week period.

During the twenty-four week periods ended February 10, 2024 and February 11, 2023, we opened 51 and 71 net new stores, respectively.

Investing cash flows were impacted by our wholly-owned captive, which purchased $14.0 million and sold $12.6 million in marketable debt securities during the twenty-four weeks ended February 10, 2024.

During the comparable prior year period, the captive purchased $14.0 million and sold $3.5 million in marketable debt securities.

Our investment in tax credit equity investments was $41.2 million during the twelve weeks ended November 18, 2023 compared to $2.5 million during the comparable prior year period.

Our net cash flows used in financing activities for the twelve weeks ended November 18, 2023 were $552.2 million compared to $675.6 million in the comparable prior year period.

During the twelve weeks ended November 18, 2023, we received $1.0 billion in debt issuances and no debt was issued in the comparable prior year period .

Stock repurchases were $1.5 billion in the current twelve week period as compared with $900.0 million in the comparable prior year period.

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

For the twelve week period ended November 18, 2023, we had $76.9 million in net repayments of commercial paper compared to $204.9 million in net proceeds from commercial paper in the comparable prior year period.

Proceeds from the sale of common stock and exercises of stock options for the twelve weeks ended November 18, 2023 and November 19, 2022 provided $41.4 million and $40.8 million, respectively.

Our investment in tax credit equity investments was $42.5 million during the twenty-four weeks ended February 10, 2024 compared to $12.1 million during the comparable prior year period.

Our net cash flows used in financing activities for the twenty-four weeks ended February 10, 2024 were $692.8 million compared to $844.7 million in the comparable prior year period.

During the twenty-four weeks ended February 10, 2024, we received $1.0 billion in debt issuances.

During the comparable prior year period, we received $1.0 billion in debt issuances and repaid our $300 million 2.875% Senior Notes due January 2023.

Stock repurchases were $1.7 billion in the current twenty-four week period as compared with $1.8 billion in the comparable prior year period.

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

For the twenty-four week period ended February 10, 2024, we had $32.2 million in net payments of commercial paper compared to $227.6 million in net proceeds from commercial paper in the comparable prior year period.

Proceeds from the issuance of common stock from exercises of stock options for the twenty-four weeks ended February 10, 2024 and February 11, 2023 provided $98.3 million and $72.8 million, respectively.

During fiscal 2024, we expect to increase the investment in our business as compared to fiscal 2023.

Our investments are expected to be directed primarily to our supply chain initiatives, which include expanded hub and mega hubs, as well as distribution center expansions and new stores.

Our investments are expected to be directed primarily to new stores and our supply chain initiatives, which include new distribution centers as well as expanded hubs and mega hubs.

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.

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We plan to continue leveraging our inventory purchases;

however, our ability to do so may be limited by our supplier’s capacity to factor their receivables from us.

however, our ability to do so may be limited by our suppliers’ ability to factor their receivables from us.

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.

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A downgrade in our credit or changes in the financial markets could limit the financial institutions’ willingness to participate in these arrangements.

however, we do not believe such risk would have a material impact on our working capital or cash flows.

We plan to continue negotiating extended terms with our suppliers, reducing our working capital required and resulting in a high accounts payable to inventory ratio.

We had an accounts payable to inventory ratio of 124.4% at November 18, 2023 and 131.0% at November 19, 2022.

We plan to continue negotiating extended terms with our suppliers, reducing our working capital required resulting in a high accounts payable to inventory ratio.

We had an accounts payable to inventory ratio of 119.8% at February 10, 2024 and 127.7% at February 11, 2023.

Depending on the timing and magnitude of our future investments (either in the form of leased or purchased properties or acquisitions), we anticipate that we will rely primarily on internally generated funds and available borrowing capacity to support a majority of our capital expenditures, working capital requirements and stock repurchases.

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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 18, 2023, our adjusted after-tax return on invested capital (“ROIC”), which is a non-GAAP measure, was 55.0% as compared to 54.3% for the comparable prior year period.

For the trailing four quarters ended February 10, 2024, our adjusted after-tax return on invested capital (“ROIC”), which is a non-GAAP measure, was 53.5% as compared to 54.7% 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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As amended, the Revolving Credit Agreement will terminate, and all amounts borrowed will be due and payable, on November 15, 2027, but we 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 SOFR loans, or a combination of both, at our election.

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 our 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 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 18, 2023, we had no outstanding borrowings and $1.8 million of outstanding letters of credit under our Revolving Credit Agreement.

As of February 10, 2024, 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 18, 2023, we 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, we had $120.5 million in letters of credit outstanding as of November 18, 2023.

As of February 10, 2024, we had $16.1 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, we had $128.4 million in letters of credit outstanding as of February 10, 2024.

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

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 we currently have the ability and intent to refinance them on a long-term basis through available capacity under our Revolving Credit Agreement .

As of November 18, 2023, 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.

As of February 10, 2024, the $1.2 billion commercial paper borrowings and the $300 million 3.125% Senior Notes due April 2024 were included in Long-term debt in the accompanying Condensed Consolidated Balance Sheets as we currently have the ability and intent to refinance them on a long-term basis through available capacity under our Revolving Credit Agreement .

As of February 10, 2024, 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.

On October 25, 2023, we 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 issuance were used for general corporate purposes.

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

The Company’s borrowings under our 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 applicable scheduled payment date if covenants are breached or an event of default occurs.

As of November 18, 2023, 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 2.5:1 as of November 18, 2023 and was 2.2:1 as of November 19, 2022.

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

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

Our borrowings under our Senior Notes contain minimal covenants, primarily restrictions on liens.

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 February 10, 2024, 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 2.4:1 as of February 10, 2024 and was 2.3:1 as of February 11, 2023.

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 18, 2023, we have repurchased a total of 154.6 million shares of our common stock at an aggregate cost of $35.3 billion, including 579.7 thousand shares of our 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 June 14, 2023, the Board voted to authorize the repurchase of an additional $2.0 billion of our common stock in connection with our 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, we had $333.1 million remaining under the Board’s authorization to repurchase our common stock.

Subsequent to November 18, 2023 and through December 11, 2023, we have repurchased 40.1 thousand shares of our common stock at an aggregate cost of $106.0 million.

From January 1, 1998 to February 10, 2024, we have repurchased a total of 154.7 million shares of our common stock at an aggregate cost of $35.5 billion, including 663.4 thousand shares of our common stock at an aggregate cost of $1.7 billion during the twenty-four week period ended February 10, 2024.

On December 20, 2023, the Board voted to authorize the repurchase of an additional $2.0 billion of our common stock in connection with our ongoing share repurchase program, which raised the total value of shares authorized to be repurchased to $37.7 billion.

Considering the cumulative repurchases as of February 10, 2024, we had $2.1 billion remaining under the Board’s authorization to repurchase our common stock.

Subsequent to February 10, 2024 and through March 8, 2024, we have repurchased 63.0 thousand shares of our common stock at an aggregate cost of $180.7 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 18, 2023, was $147.2 million, compared with $134.0 million at August 26, 2023, and our total surety bonds commitment at November 18, 2023, was $43.4 million, compared with $43.1 million at August 26, 2023.

Our total stand-by letters of credit commitment at February 10, 2024, was $146.2 million, compared with $134.0 million at August 26, 2023, and our total surety bonds commitment at February 10, 2024, was $47.8 million, compared with $43.1 million at August 26, 2023.

Financial Commitments

Except for the previously discussed Revolving Credit Agreement, the $500 million 6.250% Senior Notes due November 2028 and $500 million 6.550% Senior Notes due November 2033 debt issuances, and the $76.9 million net decrease in commercial paper, there were no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the year ended August 26, 2023.

Except for the $500 million 6.250% Senior Notes due November 2028 and $500 million 6.550% Senior Notes due November 2033 debt issuances and the $32.2 net decrease in commercial paper, there were no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the year ended August 26, 2023.

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 18, 2023 and November 19, 2022.

The following tables calculate the percentages of adjusted ROIC for the trailing four quarters ended February 10, 2024 and February 11, 2023.

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 18, 2023 and November 19, 2022.

The following tables calculate the ratio of adjusted debt to EBITDAR for the trailing four quarters ended February 10, 2024 and February 11, 2023.

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 18, 2023 and November 19, 2022 .

Trailing Four Quarters Ended

(in thousands)

November 18, 2023

November 19, 2022

February 10, 2024

February 11, 2023

Total lease cost, per ASC 842

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

(2) Effective tax rate over trailing four quarters ended November 18, 2023 and November 19, 2022 was 20.8% and 20.4%, respectively.

(2) Effective tax rate over trailing four quarters ended February 10, 2024 and February 11, 2023 was 20.5% and 20.8%, respectively.

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

Recent Accounting Pronouncements

Refer to Note A of the Notes to Condensed Consolidated Financial Statements for the discussion of recent accounting pronouncements.

Refer to “Note A – General” in the Condensed Consolidated Financial Statements for the discussion of recent accounting pronouncements.

Critical Accounting Policies and Estimates

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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