Autozone Inc 10-Q for FY2021 Q3

Autozone Inc (AZO)

10-Q 2021-06-11 For: 2021-05-08

Added on April 07, 2026

About this 10-Q

Autozone Inc filed this 10-Q on June 11, 2021, covering the quarter ended May 8, 2021 (FY2021 Q3).

Headline figures

Quarter ended May 8, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.65B; up 31.4% from $2.78B a year earlier
Net income: $596.16M; up 73.9% from net income of $342.9M a year earlier
Diluted EPS: $26.48; up 84.0% from $14.39 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 May 8, 2021, 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	16
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	27
PART II.		OTHER INFORMATION	27
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	27
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	Item 3.	Defaults Upon Senior Securities	27
	Item 4.	Mine Safety Disclosures	28
	Item 5.	Other Information	28
	Item 6.	Exhibits	28
SIGNATURES			29


	May 8,		August 29,
(in thousands)	2021		2020

Assets
Current assets:
Cash and cash equivalents	$	975,646	$	1,750,815
Accounts receivable		359,669		364,774
Merchandise inventories		4,665,477		4,473,282
Other current assets		223,604		223,001
Total current assets		6,224,396		6,811,872

Property and equipment:
Property and equipment		8,538,854		8,136,542
Less: Accumulated depreciation and amortization		(3,855,705)		(3,627,321)
		4,683,149		4,509,221

Operating lease right-of-use assets		2,694,846		2,581,677
Goodwill		302,645		302,645
Deferred income taxes		30,366		27,843
Other long-term assets		202,544		190,614
		3,230,401		3,102,779
	$	14,137,946	$	14,423,872

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	5,778,222	$	5,156,324
Current portion of operating lease liabilities		256,382		223,846
Accrued expenses and other		884,377		827,668
Income taxes payable		94,268		75,253
Total current liabilities		7,013,249		6,283,091

Long-term debt		5,267,896		5,513,371
Operating lease liabilities, less current portion		2,594,506		2,501,560
Deferred income taxes		366,497		354,186
Other long-term liabilities		659,190		649,641

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; 22,897 shares issued and 21,620 shares outstanding as of May 8, 2021; 23,697 shares issued and 23,376 shares outstanding as of August 29, 2020		229		237
Additional paid-in capital		1,381,982		1,283,495
Retained deficit		(1,205,600)		(1,450,970)
Accumulated other comprehensive loss		(304,382)		(354,252)
Treasury stock, at cost		(1,635,621)		(356,487)
Total stockholders’ deficit		(1,763,392)		(877,977)
	$	14,137,946	$	14,423,872


	Twelve Weeks Ended				Thirty-Six Weeks Ended
	May 8,		May 9,		May 8,		May 9,
(in thousands, except per share data)	2021		2020		2021		2020

Net sales	$	3,651,023	$	2,779,299	$	9,716,101	$	8,085,999
Cost of sales, including warehouse and delivery expenses		1,736,077		1,288,651		4,566,155		3,728,221
Gross profit		1,914,946		1,490,648		5,149,946		4,357,778
Operating, selling, general and administrative expenses		1,111,441		998,975		3,249,449		2,958,144
Operating profit		803,505		491,673		1,900,497		1,399,634
Interest expense, net		45,026		47,450		137,217		135,528
Income before income taxes		758,479		444,223		1,763,280		1,264,106
Income tax expense		162,315		101,327		378,737		271,591
Net income	$	596,164	$	342,896	$	1,384,543	$	992,515

Weighted average shares for basic earnings per share		21,956		23,386		22,609		23,610
Effect of dilutive stock equivalents		559		442		545		550
Weighted average shares for diluted earnings per share		22,515		23,828		23,154		24,160

Basic earnings per share	$	27.15	$	14.66	$	61.24	$	42.04
Diluted earnings per share	$	26.48	$	14.39	$	59.80	$	41.08


	Twelve Weeks Ended May 8, 2021
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at February 13, 2021	22,796	$	228	$	1,314,424	$	(1,801,764)	$	(300,839)	$	(735,622)	$	(1,523,573)
Net income	—		—		—		596,164		—		—		596,164
Total other comprehensive income	—		—		—		—		(3,543)		—		(3,543)
Purchase of 663 shares of treasury stock	—		—		—		—		—		(899,999)		(899,999)
Issuance of common stock under stock options and stock purchase plans	101		1		55,413		—		—		—		55,414
Share-based compensation expense	—		—		12,145		—		—		—		12,145
Balance at May 8, 2021	22,897	$	229	$	1,381,982	$	(1,205,600)	$	(304,382)	$	(1,635,621)	$	(1,763,392)


	Twelve Weeks Ended May 9, 2020
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at February 15, 2020	23,653	$	237	$	1,241,734	$	(2,534,323)	$	(228,337)	$	(190,430)	$	(1,711,119)
Net income	—		—		—		342,896		—		—		342,896
Total other comprehensive income	—		—		—		—		(116,179)		—		(116,179)
Purchase of 156 shares of treasury stock	—		—		—		—		—		(166,057)		(166,057)
Issuance of common stock under stock options and stock purchase plans	16		—		7,599		—		—		—		7,599
Share-based compensation expense	—		—		10,124		—		—		—		10,124
Balance at May 9, 2020	23,669	$	237	$	1,259,457	$	(2,191,427)	$	(344,516)	$	(356,487)	$	(1,632,736)


	Thirty-Six Weeks Ended May 8, 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	—		—		—		1,384,543		—		—		1,384,543
Total other comprehensive income	—		—		—		—		49,870		—		49,870
Retirement of treasury shares	(1,044)		(10)		(60,005)		(1,139,173)		—		1,199,188		—
Purchase of 1,999 shares of treasury stock	—		—		—		—		—		(2,478,322)		(2,478,322)
Issuance of common stock under stock options and stock purchase plans	244		2		121,922		—		—		—		121,924
Share-based compensation expense	—		—		36,570		—		—		—		36,570
Balance at May 8, 2021	22,897	$	229	$	1,381,982	$	(1,205,600)	$	(304,382)	$	(1,635,621)	$	(1,763,392)


	Thirty-Six Weeks Ended May 9, 2020
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at August 31, 2019	25,445	$	254	$	1,264,448	$	(1,305,347)	$	(269,322)	$	(1,403,884)	$	(1,713,851)
Net income	—		—		—		992,515		—		—		992,515
Total other comprehensive income	—		—		—		—		(75,194)		—		(75,194)
Retirement of treasury shares	(1,912)		(19)		(99,686)		(1,878,595)		—		1,978,300		—
Purchase of 826 shares of treasury stock	—		—		—		—		—		(930,903)		(930,903)
Issuance of common stock under stock options and stock purchase plans	136		2		62,899		—		—		—		62,901
Share-based compensation expense	—		—		31,796		—		—		—		31,796
Balance at May 9, 2020	23,669	$	237	$	1,259,457	$	(2,191,427)	$	(344,516)	$	(356,487)	$	(1,632,736)


		Weighted-
	Number	Average Grant
	of Shares	Date Fair Value

Nonvested at August 29, 2020	14,160	$	910.63
Granted	8,064		1,149.77
Vested	(5,805)		977.48
Canceled or forfeited	(367)		1,025.45
Nonvested at May 8, 2021	16,052	$	1,003.38


	May 8, 2021
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	50,579	$	—	$	—	$	50,579
Other long-term assets		58,015		17,857		—		75,872
	$	108,594	$	17,857	$	—	$	126,451


	August 29, 2020
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	75,651	$	467	$	—	$	76,118
Other long-term assets		58,792		12,329		—		71,121
	$	134,443	$	12,796	$	—	$	147,239


	Thirty-Six Weeks Ended
	May 8,		May 9,
	2021		2020

Expected price volatility	28	%	22	%
Risk-free interest rate	0.4	%	1.4	%
Weighted average expected lives (in years)	5.6		5.5
Forfeiture rate	10	%	10	%
Dividend yield	0	%	0	%


	May 8, 2021
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	31,660	$	546	$	—	$	32,206
Government bonds		69,237		580		—		69,817
Mortgage-backed securities		4,912		64		—		4,976
Asset-backed securities and other		19,361		104		(13)		19,452
	$	125,170	$	1,294	$	(13)	$	126,451


	August 29, 2020
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	46,652	$	970	$	(4)	$	47,618
Government bonds		44,594		1,172		—		45,766
Mortgage-backed securities		4,842		75		—		4,917
Asset-backed securities and other		48,798		143		(3)		48,938
	$	144,886	$	2,360	$	(7)	$	147,239


	May 8,		August 29,
(in thousands)	2021		2020

2.500% Senior Notes due April 2021, effective interest rate of 2.62%	$	—	$	250,000
3.700% Senior Notes due April 2022, effective interest rate of 3.85%		500,000		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
Total debt before discounts and debt issuance costs		5,300,000		5,550,000
Less: Discounts and debt issuance costs		32,104		36,629
Long-term debt	$	5,267,896	$	5,513,371


			Net
	Foreign		Unrealized
	Currency and		Gain (Loss)
(in thousands)	Other⁽³⁾		on Securities		Derivatives		Total

Balance at February 13, 2021	$	(279,725)	$	1,344	$	(22,458)	$	(300,839)
Other comprehensive (loss) before reclassifications⁽¹⁾⁽²⁾		(3,865)		(346)		—		(4,211)
Amounts reclassified from Accumulated other comprehensive (loss)⁽¹⁾⁽²⁾		—		9		659		668
Balance at May 8, 2021	$	(283,590)	$	1,007	$	(21,799)	$	(304,382)


	A		B		A-B=C		D		C+D
	Fiscal Year		Thirty-Six		Sixteen		Thirty-Six		Trailing Four
	Ended		Weeks Ended		Weeks Ended		Weeks Ended		Quarters Ended
	August 29,		May 9,		August 29,		May 8,		May 8,
(in thousands, except percentage)	2020⁽¹⁾		2020		2020		2021		2021

Net income	$	1,732,972	$	992,515	$	740,457	$	1,384,543	$	2,125,000
Adjustments:
Interest expense		201,165		135,528		65,637		137,217		202,854
Rent expense⁽²⁾		329,783		227,327		102,456		236,737		339,193
Tax effect⁽³⁾		(115,747)		(79,102)		(36,645)		(81,522)		(118,167)
Adjusted after-tax return	$	2,148,173	$	1,276,268	$	871,905	$	1,676,975	$	2,548,880

Average debt⁽⁴⁾									$	5,446,162
Average stockholders’ deficit⁽⁴⁾										(1,364,932)
Add: Rent x 6⁽²⁾										2,035,158
Average finance lease liabilities⁽⁴⁾										227,061
Invested capital									$	6,343,449

Adjusted after-tax ROIC										40.2	%


Total lease cost, per ASC 842, for the trailing four quarters ended May 8, 2021	$	421,750
Less: Finance lease interest and amortization		(55,725)
Less: Variable operating lease components, related to insurance and common area maintenance		(26,832)
Rent expense for the trailing four quarters ended May 8, 2021	$	339,193

Total lease cost, per ASC 842, for the 36 weeks ended May 9, 2020	$	286,626
Less: Finance lease interest and amortization		(42,172)
Less: Variable operating lease components, related to insurance and common area maintenance		(17,127)
Rent expense for the 36 weeks ended May 9, 2020	$	227,327
Add: Rent expense for the 17 weeks ended August 31, 2019 as previously reported prior to the adoption of ASC 842		108,467
Rent expense for the trailing four quarters ended May 9, 2020	$	335,794


				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

February 14, 2021 to March 13, 2021	169,396	$	1,198.28	169,396	$	514,582,871
March 14, 2021 to April 10, 2021	249,812		1,356.90	249,812		1,675,612,921
April 11, 2021 to May 8, 2021	244,120		1,466.68	244,120		1,317,567,694
Total	663,328	$	1,356.79	663,328	$	1,317,567,694


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 May 8, 2021, 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/ CHARLIE PLEAS, III
	Charlie Pleas, III
	Senior Vice President, Controller
	(Principal Accounting Officer)
Dated: June 11, 2021