Autozone Inc 10-Q for FY2023 Q3

Autozone Inc (AZO)

10-Q 2023-06-09 For: 2023-05-06

Added on April 07, 2026

About this 10-Q

Autozone Inc filed this 10-Q on June 9, 2023, covering the quarter ended May 6, 2023 (FY2023 Q3).

Headline figures

Quarter ended May 6, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.09B; up 5.8% from $3.87B a year earlier
Net income: $647.72M; up 9.3% from net income of $592.57M a year earlier
Diluted EPS: $34.12; up 17.5% from $29.03 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 6, 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	17
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	28
PART II.		OTHER INFORMATION	28
	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	29
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 3.	Defaults Upon Senior Securities	29
	Item 4.	Mine Safety Disclosures	29
	Item 5.	Other Information	29
	Item 6.	Exhibits	29
SIGNATURES			31


	May 6,		August 27,
(in thousands)	2023		2022

Assets
Current assets:
Cash and cash equivalents	$	274,916	$	264,380
Accounts receivable		471,009		504,886
Merchandise inventories		5,703,688		5,638,004
Other current assets		259,259		220,714
Total current assets		6,708,872		6,627,984

Property and equipment:
Property and equipment		9,937,300		9,453,171
Less: Accumulated depreciation and amortization		(4,603,277)		(4,282,752)
		5,334,023		5,170,419

Operating lease right-of-use assets		2,959,488		2,918,817
Goodwill		302,645		302,645
Deferred income taxes		62,043		52,047
Other long-term assets		230,851		203,131
		3,555,027		3,476,640
Total assets	$	15,597,922	$	15,275,043

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	7,215,566	$	7,301,347
Current portion of operating lease liabilities		281,964		243,407
Accrued expenses and other		906,415		1,008,701
Income taxes payable		61,002		34,938
Total current liabilities		8,464,947		8,588,393

Long-term debt		7,340,484		6,122,092
Operating lease liabilities, less current portion		2,862,152		2,837,973
Deferred income taxes		538,264		533,884
Other long-term liabilities		693,652		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; 18,900 shares issued and 18,225 shares outstanding as of May 6, 2023; 20,732 shares issued and 19,126 shares outstanding as of August 27, 2022		189		207
Additional paid-in capital		1,425,515		1,354,252
Retained deficit		(3,824,119)		(1,330,067)
Accumulated other comprehensive loss		(227,475)		(300,536)
Treasury stock, at cost		(1,675,687)		(3,262,769)
Total stockholders’ deficit		(4,301,577)		(3,538,913)
Total liabilities and stockholders' deficit	$	15,597,922	$	15,275,043


	Twelve Weeks Ended				Thirty-Six Weeks Ended
	May 6,		May 7,		May 6,		May 7,
(in thousands, except per share data)	2023		2022		2023		2022

Net sales	$	4,090,541	$	3,865,222	$	11,766,591	$	10,903,875
Cost of sales, including warehouse and delivery expenses		1,944,415		1,858,808		5,695,840		5,187,075
Gross profit		2,146,126		2,006,414		6,070,751		5,716,800
Operating, selling, general and administrative expenses		1,287,645		1,220,744		3,819,261		3,549,885
Operating profit		858,481		785,670		2,251,490		2,166,915
Interest expense, net		74,313		41,888		197,645		127,642
Income before income taxes		784,168		743,782		2,053,845		2,039,273
Income tax expense		136,445		151,211		390,260		419,712
Net income	$	647,723	$	592,571	$	1,663,585	$	1,619,561

Weighted average shares for basic earnings per share		18,389		19,798		18,700		20,433
Effect of dilutive stock equivalents		594		616		622		627
Weighted average shares for diluted earnings per share		18,983		20,414		19,322		21,060

Basic earnings per share	$	35.22	$	29.93	$	88.96	$	79.26
Diluted earnings per share	$	34.12	$	29.03	$	86.10	$	76.90


	Twelve Weeks Ended May 6, 2023
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at February 11, 2023	18,786	$	188	$	1,324,258	$	(4,471,842)	$	(269,312)	$	(767,462)	$	(4,184,170)
Net income	—		—		—		647,723		—		—		647,723
Total other comprehensive income	—		—		—		—		41,837		—		41,837
Purchase of 356 shares of treasury stock	—		—		—		—		—		(908,225)		(908,225)
Issuance of common stock under stock options and stock purchase plans	114		1		82,104		—		—		—		82,105
Share-based compensation expense	—		—		19,153		—		—		—		19,153
Balance at May 6, 2023	18,900	$	189	$	1,425,515	$	(3,824,119)	$	(227,475)	$	(1,675,687)	$	(4,301,577)


	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)


	Thirty-Six Weeks Ended May 6, 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	—		—		—		1,663,585		—		—		1,663,585
Total other comprehensive income	—		—		—		—		73,061		—		73,061
Retirement of treasury shares	(2,051)		(20)		(143,440)		(4,157,637)		—		4,301,097		—
Purchase of 1,120 shares of treasury stock	—		—		—		—		—		(2,714,015)		(2,714,015)
Issuance of common stock under stock options and stock purchase plans	219		2		154,861		—		—		—		154,863
Share-based compensation expense	—		—		59,842		—		—		—		59,842
Balance at May 6, 2023	18,900	$	189	$	1,425,515	$	(3,824,119)	$	(227,475)	$	(1,675,687)	$	(4,301,577)


	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)


		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	(6,643)		1,276.32
Forfeited	(1,338)		1,565.85
Nonvested at May 6, 2023	8,334	$	1,575.55


	May 6, 2023
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	39,649	$	2,908	$	—	$	42,557
Other long-term assets		69,302		12,605		—		81,907
	$	108,951	$	15,513	$	—	$	124,464


	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


	Thirty-Six Weeks Ended
	May 6,		May 7,
	2023		2022

Expected price volatility	29	%	28	%
Risk-free interest rate	3.8	%	1.1	%
Weighted average expected lives (in years)	5.5		5.6
Forfeiture rate	10	%	10	%
Dividend yield	0	%	0	%


	May 6, 2023
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	32,516	$	73	$	(197)	$	32,392
Government bonds		64,087		116		(1,334)		62,869
Mortgage-backed securities		3,689		—		(215)		3,474
Asset-backed securities and other		25,936		22		(229)		25,729
	$	126,228	$	211	$	(1,975)	$	124,464


	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


	May 6,		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 5.14% and 2.43% at May 6, 2023 and August 27, 2022, respectively		1,127,400		603,400
Total debt before discounts and debt issuance costs		7,377,400		6,153,400
Less: Discounts and debt issuance costs		36,916		31,308
Long-term Debt	$	7,340,484	$	6,122,092


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

Balance at February 11, 2023	$	(254,795)	$	(2,294)	$	(12,223)	$	(269,312)
Other comprehensive income (loss) before reclassifications⁽²⁾⁽³⁾		41,657		948		(1,146)		41,459
Amounts reclassified from Accumulated other comprehensive loss⁽³⁾		—		(25)		403		378
Balance at May 6, 2023	$	(213,138)	$	(1,371)	$	(12,966)	$	(227,475)


	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 27,		May 7,		August 27,		May 6,		May 6,
(in thousands, except percentage)	2022		2022		2022		2023		2023

Net income	$	2,429,604	$	1,619,561	$	810,043	$	1,663,585	$	2,473,628
Adjustments:
Interest expense		191,638		127,642		63,996		197,645		261,641
Rent expense⁽¹⁾		373,278		251,433		121,845		281,567		403,412
Tax effect⁽²⁾		(112,983)		(75,815)		(37,168)		(95,842)		(133,010)
Adjusted after-tax return	$	2,881,537	$	1,922,821	$	958,716	$	2,046,955	$	3,005,671

Average debt⁽³⁾									$	6,578,133
Average stockholders’ deficit⁽³⁾										(3,849,963)
Add: Rent x 6⁽¹⁾										2,420,472
Average finance lease liabilities⁽³⁾										296,772
Invested capital									$	5,445,414

Adjusted after-tax ROIC										55.2	%


	Trailing Four Quarters Ended
(in thousands)	May 6, 2023		May 7, 2022

Total lease cost, per ASC 842	$	513,857	$	451,601
Less: Finance lease interest and amortization		(81,871)		(65,128)
Less: Variable operating lease components, related to insurance and common area maintenance		(28,574)		(26,397)
Rent expense	$	403,412	$	360,076


				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 12, 2023 to March 11, 2023	83,546	$	2,538.55	83,546	$	1,539,702,367
March 12, 2023 to April 8, 2023	125,625		2,429.03	125,625		1,234,555,301
April 9, 2023 to May 6, 2023	146,891		2,661.78	146,891		843,563,496
Total	356,062	$	$2,550.75	356,062	$	843,563,496

		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		Eighth 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 23, 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 May 6, 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: June 9, 2023


June 9, 2023

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