Autozone Inc 10-Q for FY2021 Q2

Autozone Inc (AZO)

10-Q 2021-03-19 For: 2021-02-13

Added on April 07, 2026

About this 10-Q

Autozone Inc filed this 10-Q on March 19, 2021, covering the quarter ended February 13, 2021 (FY2021 Q2).

Headline figures

Quarter ended February 13, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.91B; up 15.8% from $2.51B a year earlier
Net income: $345.95M; up 15.6% from net income of $299.28M a year earlier
Diluted EPS: $14.93; up 20.5% from $12.39 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 February 13, 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	18
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	29
PART II.		OTHER INFORMATION	29
	Item 1.	Legal Proceedings	29
	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	30
	Item 5.	Other Information	30
	Item 6.	Exhibits	30
SIGNATURES			32


	February 13,		August 29,
(in thousands)	2021		2020

Assets
Current assets:
Cash and cash equivalents	$	1,026,164	$	1,750,815
Accounts receivable		352,517		364,774
Merchandise inventories		4,736,826		4,473,282
Other current assets		211,338		223,001
Total current assets		6,326,845		6,811,872

Property and equipment:
Property and equipment		8,410,097		8,136,542
Less: Accumulated depreciation and amortization		(3,782,104)		(3,627,321)
		4,627,993		4,509,221

Operating lease right-of-use assets		2,660,667		2,581,677
Goodwill		302,645		302,645
Deferred income taxes		30,240		27,843
Other long-term assets		211,603		190,614
		3,205,155		3,102,779
	$	14,159,993	$	14,423,872

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	5,351,096	$	5,156,324
Current portion of operating lease liabilities		252,523		223,846
Current portion of debt		250,000		—
Accrued expenses and other		866,297		827,668
Income taxes payable		84,355		75,253
Total current liabilities		6,804,271		6,283,091

Debt, less current portion		5,266,396		5,513,371
Operating lease liabilities, less current portion		2,566,974		2,501,560
Deferred income taxes		358,161		354,186
Other long-term liabilities		687,764		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; 22,796 shares issued and 22,183 shares outstanding as of February 13, 2021; 23,697 shares issued and 23,376 shares outstanding as of August 29, 2020		228		237
Additional paid-in capital		1,314,424		1,283,495
Retained deficit		(1,801,764)		(1,450,970)
Accumulated other comprehensive loss		(300,839)		(354,252)
Treasury stock, at cost		(735,622)		(356,487)
Total stockholders’ deficit		(1,523,573)		(877,977)
	$	14,159,993	$	14,423,872


	Twelve Weeks Ended				Twenty-Four Weeks Ended
	February 13,		February 15,		February 13,		February 15,
(in thousands, except per share data)	2021		2020		2021		2020

Net sales	$	2,910,818	$	2,513,663	$	6,065,078	$	5,306,700
Cost of sales, including warehouse and delivery expenses		1,351,435		1,147,600		2,830,078		2,439,569
Gross profit		1,559,383		1,366,063		3,235,000		2,867,131
Operating, selling, general and administrative expenses		1,077,616		958,125		2,138,008		1,959,170
Operating profit		481,767		407,938		1,096,992		907,961
Interest expense, net		46,012		44,335		92,191		88,078
Income before income taxes		435,755		363,603		1,004,801		819,883
Income tax expense		89,809		64,321		216,422		170,263
Net income	$	345,946	$	299,282	$	788,379	$	649,620

Weighted average shares for basic earnings per share		22,648		23,570		22,935		23,722
Effect of dilutive stock equivalents		520		590		538		604
Weighted average shares for diluted earnings per share		23,168		24,160		23,473		24,326

Basic earnings per share	$	15.27	$	12.70	$	34.37	$	27.38
Diluted earnings per share	$	14.93	$	12.39	$	33.59	$	26.70


	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)


	Twelve Weeks Ended February 15, 2020
								Accumulated
	Common			Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(in thousands)	Issued	Stock		Capital		Deficit		Loss		Stock		Total

Balance at November 23, 2019	25,465	$	254	$	1,282,629	$	(955,009)	$	(250,081)	$	(1,853,883)	$	(1,776,090)
Net income	—		—		—		299,282		—		—		299,282
Total other comprehensive income	—		—		—		—		21,744		—		21,744
Retirement of treasury shares	(1,912)		(19)		(99,686)		(1,878,595)		—		1,978,300		—
Purchase of 267 shares of treasury stock	—		—		—		—		—		(314,847)		(314,847)
Issuance of common stock under stock options and stock purchase plans	100		2		46,477		—		—		—		46,479
Share-based compensation expense	—		—		12,313		—		—		—		12,313
Balance at February 15, 2020	23,653	$	237	$	1,241,733	$	(2,534,322)	$	(228,337)	$	(190,430)	$	(1,711,119)


	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)


	Twenty-Four Weeks Ended February 15, 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	—		—		—		649,620		—		—		649,620
Total other comprehensive income	—		—		—		—		40,985		—		40,985
Retirement of treasury shares	(1,912)		(19)		(99,686)		(1,878,595)		—		1,978,300		—
Purchase of 670 shares of treasury stock	—		—		—		—		—		(764,846)		(764,846)
Issuance of common stock under stock options and stock purchase plans	120		2		55,299		—		—		—		55,301
Share-based compensation expense	—		—		21,672		—		—		—		21,672
Balance at February 15, 2020	23,653	$	237	$	1,241,733	$	(2,534,322)	$	(228,337)	$	(190,430)	$	(1,711,119)


		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	(78)		1,008.34
Nonvested at February 13, 2021	16,341	$	1,003.98


	February 13, 2021
(in thousands)	Level 1		Level 2		Level 3		Fair Value

Other current assets	$	42,741	$	2	$	—	$	42,743
Other long-term assets		74,508		17,161		—		91,669
	$	117,249	$	17,163	$	—	$	134,412


	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


	Twenty-Four Weeks Ended
	February 13,		February 15,
	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	%


	February 13, 2021
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
(in thousands)	Basis		Gains		Losses		Value

Corporate debt securities	$	35,515	$	701	$	—	$	36,216
Government bonds		73,237		798		—		74,035
Mortgage-backed securities		5,702		90		—		5,792
Asset-backed securities and other		18,240		129		—		18,369
	$	132,694	$	1,718	$	—	$	134,412


	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


	February 13,		August 29,
(in thousands)	2021		2020

2.500% Senior Notes due April 2021, effective interest rate of 2.62%	$	250,000	$	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		5,550,000		5,550,000
Less: Current portion of debt		250,000		—
Less: Discounts and debt issuance costs		33,604		36,629
Debt, less current portion	$	5,266,396	$	5,513,371


			Net
	Foreign		Unrealized
	Currency and		Gain (Loss)
(in thousands)	Other⁽²⁾		on Securities			Derivatives			Total

Balance at November 21, 2020	$	(285,326)	$	1,536		$	(23,117)		$	(306,907)
Other comprehensive income (loss) before reclassifications⁽¹⁾		5,601		(193)	⁽³⁾		—			5,408
Amounts reclassified from Accumulated other comprehensive loss		—		1	⁽³⁾		659	⁽³⁾		660
Balance at February 13, 2021	$	(279,725)	$	1,344		$	(22,458)		$	(300,839)


	February 13,
	2021

Weighted-average remaining lease term in years, inclusive of renewal options that are reasonably certain to be exercised:
Finance leases – real estate	27
Finance leases – vehicles	3
Operating leases	16
Weighted-average discount rate:
Finance leases – real estate	3.55	%
Finance leases – vehicles	1.95	%
Operating leases	3.42	%


	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 29,		February 15,		August 29,		February 13,		February 13,
(in thousands, except percentage)	2020		2020		2020		2021		2021

Net income	$	1,732,972	$	649,620	$	1,083,352	$	788,379	$	1,871,731
Adjustments:
Interest expense		201,165		88,078		113,087		92,191		205,278
Rent expense⁽²⁾		329,783		150,751		179,032		156,937		335,969
Tax effect⁽³⁾		(117,340)		(52,781)		(64,559)		(55,057)		(119,616)
Adjusted after-tax return	$	2,146,580	$	835,668	$	1,310,912	$	982,450	$	2,293,362

Average debt⁽⁴⁾⁽⁵⁾									$	4,648,593
Average stockholders’ deficit⁽⁵⁾										(1,354,477)
Add: Rent x 6⁽²⁾										2,015,814
Average finance lease liabilities⁽⁵⁾										220,550
Invested capital									$	5,530,480

Adjusted after-tax ROIC										41.5	%


Total lease cost, per ASC 842, for the trailing four quarters ended February 13, 2021	$	418,100
Less: Finance lease interest and amortization		(55,880)
Less: Variable operating lease components, related to insurance and common area maintenance for the trailing four quarters ended February 13, 2021		(26,251)
Rent expense for the trailing four quarters ended February 13, 2021	$	335,969

Total lease cost, per ASC 842, for the 24 weeks ended February 15, 2020	$	190,390
Less: Finance lease interest and amortization		(28,195)
Less: Variable operating lease components, related to insurance and common area maintenance		(11,444)
Rent expense for the 24 weeks ended February 15, 2020	$	150,751
Add: Rent expense for the 29 weeks ended August 31, 2019 as previously reported prior to the adoption of ASC 842		188,366
Rent expense for the trailing four quarters ended February 15, 2020	$	339,117


				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 22, 2020 to December 19, 2020	103,621	$	1,133.94	103,621	$	1,500,066,354
December 20, 2020 to January 16, 2021	235,626		1,212.39	235,626		1,214,395,896
January 17, 2021 to February 13, 2021	412,757		1,203.68	412,757		717,566,745
Total	752,004	$	1,196.80	752,004	$	717,566,745


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.

10.1		AutoZone, Inc. 2020 Omnibus Incentive Award Plan. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K dated December 17, 2020.

10.2		Form of Grant Notice and Award Agreement for Stock Options granted to Officers under the AutoZone, Inc. 2020 Omnibus Incentive Award Plan. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K dated December 17, 2020.

10.3		Form of Grant Notice and Award Agreement for Restricted Stock Units granted to Officers under the AutoZone, Inc. 2020 Omnibus Incentive Award Plan. Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K dated December 17, 2020.

10.4		Form of Grant Notice and Award Agreement for Restricted Stock Units granted to Directors under the AutoZone, Inc. 2020 Omnibus Incentive Award Plan. Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K dated December 17, 2020.

10.5*		AutoZone, Inc. Director Compensation Program.

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 13, 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: March 19, 2021


March 19, 2021

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