Autozone Inc 10-Q for FY2023 Q2

Autozone Inc (AZO)

10-Q 2023-03-17 For: 2023-02-11

Added on April 07, 2026

About this 10-Q

Autozone Inc filed this 10-Q on March 17, 2023, covering the quarter ended February 11, 2023 (FY2023 Q2).

Headline figures

Quarter ended February 11, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.69B; up 9.5% from $3.37B a year earlier
Net income: $476.54M; up 1.0% from net income of $471.76M a year earlier
Diluted EPS: $24.64; up 10.5% from $22.30 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 11, 2023, 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	27
	Item 4.	Controls and Procedures	27
PART II.		OTHER INFORMATION	27
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 3.	Defaults Upon Senior Securities	28
	Item 4.	Mine Safety Disclosures	28
	Item 5.	Other Information	28
	Item 6.	Exhibits	28
SIGNATURES			30


	February 11,		August 27,
(in thousands)	2023		2022

Assets
Current assets:
Cash and cash equivalents	$	301,286	$	264,380
Accounts receivable		484,767		504,886
Merchandise inventories		5,731,255		5,638,004
Other current assets		277,497		220,714
Total current assets		6,794,805		6,627,984

Property and equipment:
Property and equipment		9,723,855		9,453,171
Less: Accumulated depreciation and amortization		(4,487,726)		(4,282,752)
		5,236,129		5,170,419

Operating lease right-of-use assets		2,943,844		2,918,817
Goodwill		302,645		302,645
Deferred income taxes		59,814		52,047
Other long-term assets		207,905		203,131
		3,514,208		3,476,640
Total assets	$	15,545,142	$	15,275,043

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	7,321,551	$	7,301,347
Current portion of operating lease liabilities		275,269		243,407
Accrued expenses and other		933,735		1,008,701
Income taxes payable		84,063		34,938
Total current liabilities		8,614,618		8,588,393

Long-term debt		7,042,302		6,122,092
Operating lease liabilities, less current portion		2,854,227		2,837,973
Deferred income taxes		536,102		533,884
Other long-term liabilities		682,063		731,614

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; 18,786 shares issued and 18,467 shares outstanding as of February 11, 2023; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022		188		207
Additional paid-in capital		1,324,258		1,354,252
Retained deficit		(4,471,842)		(1,330,067)
Accumulated other comprehensive loss		(269,312)		(300,536)
Treasury stock, at cost		(767,462)		(3,262,769)
Total stockholders’ deficit		(4,184,170)		(3,538,913)
Total liabilities and stockholders' deficit	$	15,545,142	$	15,275,043


		Twelve Weeks Ended			Twenty-Four Weeks Ended
	February 11,		February 12,		February 11,		February 12,
(in thousands, except per share data)	2023		2022		2023		2022

Net sales	$	3,690,982	$	3,369,750	$	7,676,049	$	7,038,653
Cost of sales, including warehouse and delivery expenses		1,760,979		1,584,524		3,751,424		3,328,267
Gross profit		1,930,003		1,785,226		3,924,625		3,710,386
Operating, selling, general and administrative expenses		1,260,026		1,158,466		2,531,615		2,329,141
Operating profit		669,977		626,760		1,393,010		1,381,245
Interest expense, net		65,609		42,471		123,332		85,755
Income before income taxes		604,368		584,289		1,269,678		1,295,490
Income tax expense		127,824		112,534		253,816		268,500
Net income	$	476,544	$	471,755	$	1,015,862	$	1,026,990

Weighted average shares for basic earnings per share		18,705		20,513		18,856		20,750
Effect of dilutive stock equivalents		632		645		635		633
Weighted average shares for diluted earnings per share		19,337		21,158		19,491		21,383

Basic earnings per share	$	25.48	$	23.00	$	53.87	$	49.49
Diluted earnings per share	$	24.64	$	22.30	$	52.12	$	48.03


	Twelve Weeks Ended February 11, 2023
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at November 19, 2022	20,794	$	208	$	1,412,650	$	(790,749)	$	(297,265)	$	(4,162,767)	$	(3,837,923)
Net income	—		—		—		476,544		—		—		476,544
Total other comprehensive income	—		—		—		—		27,953		—		27,953
Retirement of treasury shares	(2,051)		(20)		(143,440)		(4,157,637)		—		4,301,097		—
Purchase of 372 shares of treasury stock	—		—		—		—		—		(905,792)		(905,792)
Issuance of common stock under stock options and stock purchase plans	43		—		31,929		—		—		—		31,929
Share-based compensation expense	—		—		23,119		—		—		—		23,119
Balance at February 11, 2023	18,786	$	188	$	1,324,258	$	(4,471,842)	$	(269,312)	$	(767,462)	$	(4,184,170)


	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)


	Twenty-Four Weeks Ended February 11, 2023
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at August 27, 2022	20,732	$	207	$	1,354,252	$	(1,330,067)	$	(300,536)	$	(3,262,769)	$	(3,538,913)
Net income	—		—		—		1,015,862		—		—		1,015,862
Total other comprehensive income	—		—		—		—		31,224		—		31,224
Retirement of treasury shares	(2,051)		(20)		(143,440)		(4,157,637)		—		4,301,097		—
Purchase of 764 shares of treasury stock	—		—		—		—		—		(1,805,790)		(1,805,790)
Issuance of common stock under stock options and stock purchase plans	105		1		72,757		—		—		—		72,758
Share-based compensation expense	—		—		40,689		—		—		—		40,689
Balance at February 11, 2023	18,786	$	188	$	1,324,258	$	(4,471,842)	$	(269,312)	$	(767,462)	$	(4,184,170)


	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)


		Weighted-
	Number	Average Grant
	of Shares	Date Fair Value

Nonvested at August 27, 2022	12,731	$	1,223.61
Granted	3,584		2,267.40
Vested	(6,635)		1,276.65
Forfeited	(1,054)		1,555.01
Nonvested at February 11, 2023	8,626	$	1,576.00


	February 11, 2023
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	62,455	$	—	$	—	$	62,455
Other long-term assets		49,925		10,558		—		60,483
	$	112,380	$	10,558	$	—	$	122,938


	August 27, 2022
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	49,659	$	109	$	—	$	49,768
Other long-term assets		57,301		5,476		—		62,777
	$	106,960	$	5,585	$	—	$	112,545


	Twenty-Four Weeks Ended
	February 11,		February 12,
	2023		2022

Expected price volatility	29	%	28	%
Risk-free interest rate	3.8	%	1.1	%
Weighted average expected lives (in years)	5.4		5.6
Forfeiture rate	10	%	10	%
Dividend yield	0	%	0	%


	February 11, 2023
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	12,789	$	—	$	(289)	$	12,500
Government bonds		90,877		1		(2,101)		88,777
Mortgage-backed securities		4,005		—		(267)		3,738
Asset-backed securities and other		18,206		1		(284)		17,923
	$	125,877	$	2	$	(2,941)	$	122,938


	August 27, 2022
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	15,293	$	1	$	(298)	$	14,996
Government bonds		88,903		—		(1,963)		86,940
Mortgage-backed securities		4,600		—		(243)		4,357
Asset-backed securities and other		6,531		—		(279)		6,252
	$	115,327	$	1	$	(2,783)	$	112,545


	February 11,		August 27,
(in thousands)	2023		2022

2.875% Senior Notes due January 2023, effective interest rate 3.21%	$	—	$	300,000
3.125% Senior Notes due July 2023, effective interest rate 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 3.28%		400,000		400,000
3.750% Senior Notes due June 2027, effective interest rate 3.83%		600,000		600,000
4.500% Senior Notes due February 2028, effective interest rate 4.43%		450,000		—
3.750% Senior Notes due April 2029, effective interest rate 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 2.19%		600,000		600,000
4.750% Senior Notes due August 2032, effective interest rate 4.76%		750,000		750,000
4.750% Senior Notes due February 2033, effective interest rate 4.70%		550,000		—
Commercial paper, weighted average interest rate 4.68% and 2.43% at February 11, 2023 and August 27, 2022, respectively		831,000		603,400
Total debt before discounts and debt issuance costs		7,081,000		6,153,400
Less: Discounts and debt issuance costs		38,698		31,308
Long-term Debt	$	7,042,302	$	6,122,092


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

Balance at November 19, 2022	$	(276,855)	$	(2,842)	$	(17,568)	$	(297,265)
Other comprehensive income before reclassifications⁽²⁾⁽³⁾		22,060		548		4,781		27,389
Amounts reclassified from Accumulated other comprehensive loss⁽³⁾		—		—		564		564
Balance at February 11, 2023	$	(254,795)	$	(2,294)	$	(12,223)	$	(269,312)


	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 27,		February 12,		August 27,		February 11,		February 11,
(in thousands, except percentage)	2022		2022		2022		2023		2023

Net income	$	2,429,604	$	1,026,990	$	1,402,614	$	1,015,862	$	2,418,476
Adjustments:
Interest expense		191,638		85,755		105,883		123,332		229,215
Rent expense⁽¹⁾		373,278		165,967		207,311		186,987		394,298
Tax effect⁽²⁾		(117,503)		(52,358)		(65,145)		(64,546)		(129,691)
Adjusted after-tax return	$	2,877,017	$	1,226,354	$	1,650,663	$	1,261,635	$	2,912,298

Average debt⁽³⁾									$	6,278,213
Average stockholders’ deficit⁽³⁾										(3,617,143)
Add: Rent x 6⁽¹⁾										2,365,788
Average finance lease liabilities⁽³⁾										294,337
Invested capital									$	5,321,195

Adjusted after-tax ROIC										54.7	%


	Trailing Four Quarters Ended
(in thousands)	February 11, 2023		February 12, 2022

Total lease cost, per ASC 842	$	498,970	$	442,950
Less: Finance lease interest and amortization		(77,302)		(62,607)
Less: Variable operating lease components, related to insurance and common area maintenance		(27,370)		(25,933)
Rent expense	$	394,298	$	354,410


				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 20, 2022 to December 17, 2022	53,243	$	2,498.78	53,243	$	2,524,537,469
December 18, 2022 to January 14, 2023	117,062		2,446.40	117,062		2,238,156,537
January 15, 2023 to February 11, 2023	201,806		2,410.08	201,806		1,751,788,248
Total	372,111	$	2,434.20	372,111	$	1,751,788,248

		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.
3.1		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.

4.1		Officers’ Certificate dated January 27, 2023, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 4.500% Senior Notes due 2028. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated January 27, 2023.

4.2		Officers’ Certificate dated January 27, 2023, pursuant to Section 3.2 of the Indenture dated August 8, 2003, setting forth the terms of the 4.750% Senior Notes due 2033. Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated January 27, 2023.

4.3		Form of 4.500% Senior Notes due 2028. Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K dated January 27, 2023.

4.4		Form of 4.750% Senior Notes due 2033. Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K dated January 27, 2023.

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.

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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 11, 2023, 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 17, 2023


March 17, 2023

	/s/ WILLIAM C. RHODES, III
	William C. Rhodes, III
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)