Autozone Inc 10-Q for FY2022 Q3

Autozone Inc (AZO)

10-Q 2022-06-10 For: 2022-05-07

Added on April 07, 2026

About this 10-Q

Autozone Inc filed this 10-Q on June 10, 2022, covering the quarter ended May 7, 2022 (FY2022 Q3).

Headline figures

Quarter ended May 7, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.87B; up 5.9% from $3.65B a year earlier
Net income: $592.57M; down 0.6% from net income of $596.16M a year earlier
Diluted EPS: $29.03; up 9.6% from $26.48 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 7, 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


	May 7,		August 28,
(in thousands)	2022		2021

Assets
Current assets:
Cash and cash equivalents	$	263,044	$	1,171,335
Accounts receivable		439,820		378,392
Merchandise inventories		5,313,114		4,639,813
Other current assets		238,743		225,763
Total current assets		6,254,721		6,415,303

Property and equipment:
Property and equipment		9,139,576		8,807,178
Less: Accumulated depreciation and amortization		(4,167,950)		(3,950,287)
		4,971,626		4,856,891

Operating lease right-of-use assets		2,764,631		2,718,712
Goodwill		302,645		302,645
Deferred income taxes		40,707		41,043
Other long-term assets		186,235		181,605
		3,294,218		3,244,005
Total assets	$	14,520,565	$	14,516,199

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	6,793,205	$	6,013,924
Current portion of operating lease liabilities		268,975		236,568
Accrued expenses and other		925,271		1,039,788
Income taxes payable		76,625		79,474
Total current liabilities		8,064,076		7,369,754

Long-term debt		6,057,444		5,269,820
Operating lease liabilities, less current portion		2,659,535		2,632,842
Deferred income taxes		418,869		337,125
Other long-term liabilities		707,871		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; 20,707 shares issued and 19,576 shares outstanding as of May 7, 2022; 23,007 shares issued and 21,138 shares outstanding as of August 28, 2021		207		230
Additional paid-in capital		1,315,717		1,465,669
Retained deficit		(2,138,160)		(419,829)
Accumulated other comprehensive loss		(302,191)		(307,986)
Treasury stock, at cost		(2,262,803)		(2,535,620)
Total stockholders’ deficit		(3,387,230)		(1,797,536)
Total liabilities and stockholders' deficit	$	14,520,565	$	14,516,199


	Twelve Weeks Ended				Thirty-Six Weeks Ended
	May 7,		May 8,		May 7,		May 8,
(in thousands, except per share data)	2022		2021		2022		2021

Net sales	$	3,865,222	$	3,651,023	$	10,903,875	$	9,716,101
Cost of sales, including warehouse and delivery expenses		1,858,808		1,736,077		5,187,075		4,566,155
Gross profit		2,006,414		1,914,946		5,716,800		5,149,946
Operating, selling, general and administrative expenses		1,220,744		1,111,441		3,549,885		3,249,449
Operating profit		785,670		803,505		2,166,915		1,900,497
Interest expense, net		41,888		45,026		127,642		137,217
Income before income taxes		743,782		758,479		2,039,273		1,763,280
Income tax expense		151,211		162,315		419,712		378,737
Net income	$	592,571	$	596,164	$	1,619,561	$	1,384,543

Weighted average shares for basic earnings per share		19,798		21,956		20,433		22,609
Effect of dilutive stock equivalents		616		559		627		545
Weighted average shares for diluted earnings per share		20,414		22,515		21,060		23,154

Basic earnings per share	$	29.93	$	27.15	$	79.26	$	61.24
Diluted earnings per share	$	29.03	$	26.48	$	76.90	$	59.80


	Twelve Weeks Ended May 7, 2022
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at February 12, 2022	20,650	$	206	$	1,266,015	$	(2,730,731)	$	(310,163)	$	(1,362,804)	$	(3,137,477)
Net income	—		—		—		592,571		—		—		592,571
Total other comprehensive income	—		—		—		—		7,972		—		7,972
Purchase of 449 shares of treasury stock	—		—		—		—		—		(899,999)		(899,999)
Issuance of common stock under stock options and stock purchase plans	57		1		31,628		—		—		—		31,629
Share-based compensation expense	—		—		18,074		—		—		—		18,074
Balance at May 7, 2022	20,707	$	207	$	1,315,717	$	(2,138,160)	$	(302,191)	$	(2,262,803)	$	(3,387,230)


	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 loss	—		—		—		—		(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)


	Thirty-Six Weeks Ended May 7, 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	—		—		—		1,619,561		—		—		1,619,561
Total other comprehensive income	—		—		—		—		5,795		—		5,795
Retirement of treasury shares	(2,484)		(25)		(294,894)		(3,337,892)		—		3,632,811		—
Purchase of 1,746 shares of treasury stock	—		—		—		—		—		(3,359,994)		(3,359,994)
Issuance of common stock under stock options and stock purchase plans	184		2		98,084		—		—		—		98,086
Share-based compensation expense	—		—		46,858		—		—		—		46,858
Balance at May 7, 2022	20,707	$	207	$	1,315,717	$	(2,138,160)	$	(302,191)	$	(2,262,803)	$	(3,387,230)


	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)


		Weighted-
	Number	Average Grant
	of Shares	Date Fair Value

Nonvested at August 28, 2021	15,751	$	1,005.41
Granted	5,551		1,740.19
Vested	(6,572)		1,159.53
Canceled or forfeited	(1,698)		1,145.06
Nonvested at May 7, 2022	13,032	$	1,222.55


	May 7, 2022
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	57,927	$	335	$	—	$	58,262
Other long-term assets		49,213		11,934		—		61,147
	$	107,140	$	12,269	$	—	$	119,409


	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


	Thirty-Six Weeks Ended
	May 7,		May 8,
	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	%


	May 7, 2022
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	16,724	$	11	$	(264)	$	16,471
Government bonds		82,988		12		(1,672)		81,328
Mortgage-backed securities		5,120		18		(227)		4,911
Asset-backed securities and other		16,958		1		(260)		16,699
	$	121,790	$	42	$	(2,423)	$	119,409


	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


	May 7,		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 0.80% at May 7, 2022		1,283,310		—
Total debt before discounts and debt issuance costs		6,083,310		5,300,000
Less: Discounts and debt issuance costs		25,866		30,180
Long-term Debt	$	6,057,444	$	5,269,820


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

Balance at February 12, 2022	$	(289,889)	$	(711)	$	(19,563)	$	(310,163)
Other comprehensive income (loss) before reclassifications⁽²⁾⁽³⁾		8,531		(1,138)		—		7,393
Amounts reclassified from Accumulated other comprehensive loss⁽³⁾		—		—		579		579
Balance at May 7, 2022	$	(281,358)	$	(1,849)	$	(18,984)	$	(302,191)


	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 28,		May 8,		August 28,		May 7,		May 7,
(in thousands, except percentage)	2021		2021		2021		2022		2022

Net income	$	2,170,314	$	1,384,543	$	785,771	$	1,619,561	$	2,405,332
Adjustments:
Interest expense		195,337		137,217		58,120		127,642		185,762
Rent expense⁽¹⁾		345,380		236,737		108,643		251,433		360,076
Tax effect⁽²⁾		(110,847)		(76,661)		(34,186)		(77,710)		(111,896)
Adjusted after-tax return	$	2,600,184	$	1,681,836	$	918,348	$	1,920,926	$	2,839,274

Average debt⁽³⁾									$	5,541,462
Average stockholders’ deficit⁽³⁾										(2,442,077)
Add: Rent x 6⁽¹⁾										2,160,456
Average finance lease liabilities⁽³⁾										268,111
Invested capital									$	5,527,952

Adjusted after-tax ROIC										51.4	%


	Trailing Four Quarters Ended
(in thousands)	May 7, 2022		May 8, 2021

Total lease cost, per ASC 842	$	451,601	$	421,750
Less: Finance lease interest and amortization		(65,128)		(55,725)
Less: Variable operating lease components, related to insurance and common area maintenance		(26,397)		(26,832)
Rent expense	$	360,076	$	339,193


				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 13, 2022 to March 12, 2022	119,542	$	1,898.22	119,542	$	730,657,085
March 13, 2022 to April 9, 2022	181,485		1,972.17	181,485		2,372,738,270
April 10, 2022 to May 7, 2022	147,547		2,136.02	147,547		2,057,574,959
Total	448,574	$	2,006.36	448,574	$	2,057,574,959


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

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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 7, 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: June 10, 2022