Autozone Inc 10-Q for FY2022 Q2

Autozone Inc (AZO)

10-Q 2022-03-18 For: 2022-02-12

Added on April 07, 2026

About this 10-Q

Autozone Inc filed this 10-Q on March 18, 2022, covering the quarter ended February 12, 2022 (FY2022 Q2).

Headline figures

Quarter ended February 12, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.37B; up 15.8% from $2.91B a year earlier
Net income: $471.76M; up 36.4% from net income of $345.95M a year earlier
Diluted EPS: $22.30; up 49.4% from $14.93 a year earlier

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☒		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended February 12, 2022, or

☐		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from _______ to ________.

		Commission file number 1-10714


Nevada	62-1482048
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)


123 South Front Street, Memphis, Tennessee	38103
(Address of principal executive offices)	(Zip Code)

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on which Registered
Common Stock ($0.01 par value)		AZO		New York Stock Exchange


Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐


PART I.		FINANCIAL INFORMATION	3
	Item 1.	Financial Statements	3
		CONDENSED CONSOLIDATED BALANCE SHEETS	3
		CONDENSED CONSOLIDATED STATEMENTS OF INCOME	4
		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	4
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
		CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT	6
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	7
		REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	15
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
	Item 4.	Controls and Procedures	25
PART II.		OTHER INFORMATION	25
	Item 1.	Legal Proceedings	25
	Item 1A.	Risk Factors	26
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
	Item 3.	Defaults Upon Senior Securities	26
	Item 4.	Mine Safety Disclosures	26
	Item 5.	Other Information	26
	Item 6.	Exhibits	26
SIGNATURES			28


	February 12,		August 28,
(in thousands)	2022		2021

Assets
Current assets:
Cash and cash equivalents	$	239,423	$	1,171,335
Accounts receivable		405,585		378,392
Merchandise inventories		5,031,222		4,639,813
Other current assets		227,540		225,763
Total current assets		5,903,770		6,415,303

Property and equipment:
Property and equipment		8,965,026		8,807,178
Less: Accumulated depreciation and amortization		(4,085,947)		(3,950,287)
		4,879,079		4,856,891

Operating lease right-of-use assets		2,743,771		2,718,712
Goodwill		302,645		302,645
Deferred income taxes		40,730		41,043
Other long-term assets		208,478		181,605
		3,295,624		3,244,005
Total assets	$	14,078,473	$	14,516,199

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	6,378,606	$	6,013,924
Current portion of operating lease liabilities		268,921		236,568
Accrued expenses and other		961,898		1,039,788
Income taxes payable		75,220		79,474
Total current liabilities		7,684,645		7,369,754

Long-term debt		5,840,884		5,269,820
Operating lease liabilities, less current portion		2,641,555		2,632,842
Deferred income taxes		379,176		337,125
Other long-term liabilities		669,690		704,194

Commitments and contingencies

Stockholders’ deficit:
Preferred stock, authorized 1,000 shares; no shares issued		—		—
Common stock, par value $.01 per share, authorized 200,000 shares; 20,650 shares issued and 19,967 shares outstanding as of February 12, 2022; 23,007 shares issued and 21,138 shares outstanding as of August 28, 2021		206		230
Additional paid-in capital		1,266,015		1,465,669
Retained deficit		(2,730,731)		(419,829)
Accumulated other comprehensive loss		(310,163)		(307,986)
Treasury stock, at cost		(1,362,804)		(2,535,620)
Total stockholders’ deficit		(3,137,477)		(1,797,536)
Total liabilities and stockholders' deficit	$	14,078,473	$	14,516,199


	Twelve Weeks Ended				Twenty-Four Weeks Ended
	February 12,		February 13,		February 12,		February 13,
(in thousands, except per share data)	2022		2021		2022		2021

Net sales	$	3,369,750	$	2,910,818	$	7,038,653	$	6,065,078
Cost of sales, including warehouse and delivery expenses		1,584,524		1,351,435		3,328,267		2,830,078
Gross profit		1,785,226		1,559,383		3,710,386		3,235,000
Operating, selling, general and administrative expenses		1,158,466		1,077,616		2,329,141		2,138,008
Operating profit		626,760		481,767		1,381,245		1,096,992
Interest expense, net		42,471		46,012		85,755		92,191
Income before income taxes		584,289		435,755		1,295,490		1,004,801
Income tax expense		112,534		89,809		268,500		216,422
Net income	$	471,755	$	345,946	$	1,026,990	$	788,379

Weighted average shares for basic earnings per share		20,513		22,648		20,750		22,935
Effect of dilutive stock equivalents		645		520		633		538
Weighted average shares for diluted earnings per share		21,158		23,168		21,383		23,473

Basic earnings per share	$	23.00	$	15.27	$	49.49	$	34.37
Diluted earnings per share	$	22.30	$	14.93	$	48.03	$	33.59


	Twelve Weeks Ended February 12, 2022
								Accumulated
	Common			Additional		Retained		Other
	Shares	Common		Paid-in		Earnings		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		(Deficit)		Loss		Stock		Total

Balance at November 20, 2021	23,057	$	231	$	1,499,557	$	135,406	$	(324,327)	$	(3,435,617)	$	(2,124,750)
Net income	—		—		—		471,755		—		—		471,755
Total other comprehensive income	—		—		—		—		14,164		—		14,164
Retirement of treasury shares	(2,484)		(25)		(294,894)		(3,337,892)		—		3,632,811		—
Purchase of 783 shares of treasury stock	—		—		—		—		—		(1,559,998)		(1,559,998)
Issuance of common stock under stock options and stock purchase plans	77		—		45,356		—		—		—		45,356
Share-based compensation expense	—		—		15,996		—		—		—		15,996
Balance at February 12, 2022	20,650	$	206	$	1,266,015	$	(2,730,731)	$	(310,163)	$	(1,362,804)	$	(3,137,477)


	Twelve Weeks Ended February 13, 2021
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at November 21, 2020	23,761	$	238	$	1,323,037	$	(1,008,537)	$	(306,907)	$	(1,034,811)	$	(1,026,980)
Net income	—		—		—		345,946		—		—		345,946
Total other comprehensive income	—		—		—		—		6,068		—		6,068
Retirement of treasury shares	(1,044)		(10)		(60,005)		(1,139,173)		—		1,199,188		—
Purchase of 752 shares of treasury stock	—		—		—		—		—		(899,999)		(899,999)
Issuance of common stock under stock options and stock purchase plans	79		—		37,844		—		—		—		37,844
Share-based compensation expense	—		—		13,548		—		—		—		13,548
Balance at February 13, 2021	22,796	$	228	$	1,314,424	$	(1,801,764)	$	(300,839)	$	(735,622)	$	(1,523,573)


	Twenty-Four Weeks Ended February 12, 2022
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at August 28, 2021	23,007	$	230	$	1,465,669	$	(419,829)	$	(307,986)	$	(2,535,620)	$	(1,797,536)
Net income	—		—		—		1,026,990		—		—		1,026,990
Total other comprehensive loss	—		—		—		—		(2,177)		—		(2,177)
Retirement of treasury shares	(2,484)		(25)		(294,894)		(3,337,892)		—		3,632,811		—
Purchase of 1,298 shares of treasury stock	—		—		—		—		—		(2,459,995)		(2,459,995)
Issuance of common stock under stock options and stock purchase plans	127		1		66,456		—		—		—		66,457
Share-based compensation expense	—		—		28,784		—		—		—		28,784
Balance at February 12, 2022	20,650	$	206	$	1,266,015	$	(2,730,731)	$	(310,163)	$	(1,362,804)	$	(3,137,477)


	Twenty-Four Weeks Ended February 13, 2021
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at August 29, 2020	23,697	$	237	$	1,283,495	$	(1,450,970)	$	(354,252)	$	(356,487)	$	(877,977)
Net income	—		—		—		788,379		—		—		788,379
Total other comprehensive income	—		—		—		—		53,413		—		53,413
Retirement of treasury shares	(1,044)		(10)		(60,005)		(1,139,173)		—		1,199,188		—
Purchase of 1,336 shares of treasury stock	—		—		—		—		—		(1,578,323)		(1,578,323)
Issuance of common stock under stock options and stock purchase plans	143		1		66,509		—		—		—		66,510
Share-based compensation expense	—		—		24,425		—		—		—		24,425
Balance at February 13, 2021	22,796	$	228	$	1,314,424	$	(1,801,764)	$	(300,839)	$	(735,622)	$	(1,523,573)


		Weighted-
	Number	Average Grant
	of Shares	Date Fair Value

Nonvested at August 28, 2021	15,751	$	1,005.41
Granted	5,325		1,732.57
Vested	(6,346)		1,132.46
Canceled or forfeited	(1,071)		1,106.02
Nonvested at February 12, 2022	13,659	$	1,221.98


	February 12, 2022
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	40,810	$	44	$	—	$	40,854
Other long-term assets		67,853		12,264		—		80,117
	$	108,663	$	12,308	$	—	$	120,971


	August 28, 2021
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	46,007	$	—	$	—	$	46,007
Other long-term assets		54,105		13,806		—		67,911
	$	100,112	$	13,806	$	—	$	113,918


	Twenty-Four Weeks Ended
	February 12,		February 13,
	2022		2021

Expected price volatility	28	%	28	%
Risk-free interest rate	1.1	%	0.4	%
Weighted average expected lives (in years)	5.6		5.6
Forfeiture rate	10	%	10	%
Dividend yield	0	%	0	%


	February 12, 2022
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	19,325	$	79	$	(87)	$	19,317
Government bonds		77,914		57		(773)		77,198
Mortgage-backed securities		5,656		25		(113)		5,568
Asset-backed securities and other		18,997		11		(120)		18,888
	$	121,892	$	172	$	(1,093)	$	120,971


	August 28, 2021
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	23,650	$	329	$	(2)	$	23,977
Government bonds		65,416		338		(2)		65,752
Mortgage-backed securities		6,552		58		(8)		6,602
Asset-backed securities and other		17,551		43		(7)		17,587
	$	113,169	$	768	$	(19)	$	113,918


	February 12,		August 28,
(in thousands)	2022		2021

3.700% Senior Notes due April 2022, effective interest rate of 3.85%	$	—	$	500,000
2.875% Senior Notes due January 2023, effective interest rate of 3.21%		300,000		300,000
3.125% Senior Notes due July 2023, effective interest rate of 3.26%		500,000		500,000
3.125% Senior Notes due April 2024, effective interest rate 3.32%		300,000		300,000
3.250% Senior Notes due April 2025, effective interest rate 3.36%		400,000		400,000
3.625% Senior Notes due April 2025, effective interest rate 3.78%		500,000		500,000
3.125% Senior Notes due April 2026, effective interest rate of 3.28%		400,000		400,000
3.750% Senior Notes due June 2027, effective interest rate of 3.83%		600,000		600,000
3.750% Senior Notes due April 2029, effective interest rate of 3.86%		450,000		450,000
4.000% Senior Notes due April 2030, effective interest rate 4.09%		750,000		750,000
1.650% Senior Notes due January 2031, effective interest rate of 2.19%		600,000		600,000
Commercial paper, weighted average interest rate of 0.22% at February 12, 2022		1,068,100		—
Total debt before discounts and debt issuance costs		5,868,100		5,300,000
Less: Discounts and debt issuance costs		27,216		30,180
Long-term Debt	$	5,840,884	$	5,269,820


			Net
	Foreign		Unrealized
	Currency and		Gain (Loss)
(in thousands)	Other⁽¹⁾		on Securities		Derivatives		Total

Balance at November 20, 2021	$	(304,204)	$	159	$	(20,282)	$	(324,327)
Other comprehensive income (loss) before reclassifications⁽²⁾⁽³⁾		14,315		(870)		—		13,445
Amounts reclassified from Accumulated other comprehensive loss⁽³⁾		—		—		719		719
Balance at February 12, 2022	$	(289,889)	$	(711)	$	(19,563)	$	(310,163)


	A		B		A-B=C		D		C+D
	Fiscal Year		Twenty-Four		Twenty-Eight		Twenty-Four		Trailing Four
	Ended		Weeks Ended		Weeks Ended		Weeks Ended		Quarters Ended
	August 28,		February 13,		August 28,		February 12,		February 12,
(in thousands, except percentage)	2021		2021		2021		2022		2022

Net income	$	2,170,314	$	788,379	$	1,381,935	$	1,026,990	$	2,408,925
Adjustments:
Interest expense		195,337		92,191		103,146		85,755		188,901
Rent expense⁽¹⁾		345,380		156,937		188,443		165,967		354,410
Tax effect⁽²⁾		(112,469)		(51,819)		(60,650)		(52,358)		(113,008)
Adjusted after-tax return	$	2,598,562	$	985,688	$	1,612,874	$	1,226,354	$	2,839,228

Average debt⁽³⁾									$	5,433,252
Average stockholders’ deficit⁽³⁾										(2,069,346)
Add: Rent x 6⁽¹⁾										2,126,460
Average finance lease liabilities⁽³⁾										255,497
Invested capital									$	5,745,863

Adjusted after-tax ROIC										49.4	%


	Trailing Four Quarters Ended
(in thousands)	February 12, 2022		February 13, 2021

Total lease cost, per ASC 842	$	442,950	$	418,100
Less: Finance lease interest and amortization		(62,607)		(55,880)
Less: Variable operating lease components, related to insurance and common area maintenance		(25,933)		(26,251)
Rent expense	$	354,410	$	335,969


				Total Number of	Maximum Dollar
				Shares Purchased as	Value that May Yet
	Total Number	Average		Part of Publicly	Be Purchased Under
	of Shares	Price Paid		Announced Plans or	the Plans or
Period	Purchased	per Share		Programs	Programs

November 21, 2021 to December 18, 2021	100,484	$	1,918.46	100,484	$	2,324,797,047
December 19, 2021 to January 15, 2022	185,254		2,037.29	185,254		1,947,380,819
January 16, 2022 to February 12, 2022	497,520		1,989.48	497,520		957,573,710
Total	783,258	$	1,991.68	783,258	$	957,573,710


3.1		Restated Articles of Incorporation of AutoZone, Inc. Incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for the quarter ended February 13, 1999.

3.2		Seventh Amended and Restated By-Laws of AutoZone, Inc. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated March 19, 2018.

15.1		Letter Regarding Unaudited Interim Financial Statements.

31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101. INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104.		The cover page for the Company’s Quarterly Report on Form 10-Q for the quarter ended February 12, 2022, has been formatted in Inline XBRL.


	AUTOZONE, INC.

	By:	/s/ JAMERE JACKSON
	Jamere Jackson
	Chief Financial Officer and Executive Vice President
	Finance and Store Development
	(Principal Financial Officer)

	By:	/s/ J. SCOTT MURPHY
	J. Scott Murphy
	Vice President, Controller (Principal Accounting Officer)

Dated: March 18, 2022