UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

xQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended February 11,May 5, 2012, 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

 

 

 

LOGOLOGO

AUTOZONE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Nevada 62-1482048

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

123 South Front Street, Memphis, Tennessee 38103
(Address of principal executive offices) (Zip Code)

(901) 495-6500

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 Par Value – 38,971,41237,433,856 shares outstanding as of March 2,June 8, 2012.

 

 

 


TABLE OF CONTENTS

 

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 CASH FLOWS

  5  
 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  6  
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  13  

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  14  

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

  20  

Item 4.

 

Controls and Procedures

  20  

Item 4T.

 

Controls and Procedures

  20  

PART II.

 

OTHER INFORMATION

  21  

Item 1.

 

Legal Proceedings

  21  

Item 1A.

 

Risk Factors

  21  

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

  21  

Item 3.

 

Defaults Upon Senior Securities

  2122  

Item 4.

 

Removed and ReservedMine Safety Disclosures

  2122  

Item 5.

 

Other Information

  2122  

Item 6.

 

Exhibits

  22

SIGNATURES

23  

EXHIBIT INDEXSIGNATURES

  24
EXHIBIT INDEX25  

PART I. FINANCIAL INFORMATION

 

Item 1.Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(in thousands)

  February 11,
2012
 August 27,
2011
   May 5,
2012
 August 27,
2011
 

Assets

      

Current assets:

      

Cash and cash equivalents

  $103,207   $97,606    $103,100   $97,606  

Accounts receivable

   144,790    140,690     133,941    140,690  

Merchandise inventories

   2,577,704    2,466,107     2,629,821    2,466,107  

Other current assets

   82,863    88,022     77,410    88,022  
  

 

  

 

   

 

  

 

 

Total current assets

   2,908,564    2,792,425     2,944,272    2,792,425  

Property and equipment:

      

Property and equipment

   4,488,383    4,371,872     4,565,947    4,371,872  

Less: Accumulated depreciation and amortization

   (1,763,987  (1,702,997   (1,798,849  (1,702,997
  

 

  

 

   

 

  

 

 
   2,724,396    2,668,875     2,767,098    2,668,875  

Goodwill

   302,645    302,645     302,645    302,645  

Deferred income taxes

   19,685    10,661     22,390    10,661  

Other long-term assets

   101,174    94,996     112,449    94,996  
  

 

  

 

 
   423,504    408,302    

 

  

 

 
  

 

  

 

    437,484    408,302  
  $6,056,464   $5,869,602    

 

  

 

 
  

 

  

 

   $6,148,854   $5,869,602  
  

 

  

 

 

Liabilities and Stockholders’ Deficit

      

Current liabilities:

      

Accounts payable

  $2,824,873   $2,755,853    $2,866,580   $2,755,853  

Accrued expenses and other

   430,588    449,327     443,161    449,327  

Income taxes payable

   62,150    25,185     80,718    25,185  

Deferred income taxes

   169,618    166,449     169,625    166,449  

Short-term borrowings

   29,560    34,082     7,309    34,082  
  

 

  

 

   

 

  

 

 

Total current liabilities

   3,516,789    3,430,896     3,567,393    3,430,896  

Long-term debt

   3,434,800    3,317,600     3,599,000    3,317,600  

Other long-term liabilities

   400,399    375,338     399,290    375,338  

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; 39,452 shares issued and 38,951 shares outstanding as of February 11, 2012; 44,084 shares issued and 40,109 shares outstanding as of August 27, 2011

   395    441  

Common stock, par value $.01 per share, authorized 200,000 shares; 39,624 shares issued and 38,069 shares outstanding as of May 5, 2012; 44,084 shares issued and 40,109 shares outstanding as of August 27, 2011

   396    441  

Additional paid-in capital

   588,234    591,384     629,322    591,384  

Retained deficit

   (1,605,514  (643,998   (1,356,930  (643,998

Accumulated other comprehensive loss

   (106,134  (119,691   (116,657  (119,691

Treasury stock, at cost

   (172,505  (1,082,368   (572,960  (1,082,368
  

 

  

 

   

 

  

 

 

Total stockholders’ deficit

   (1,295,524  (1,254,232   (1,416,829  (1,254,232
  

 

  

 

   

 

  

 

 
  $6,056,464   $5,869,602    $6,148,854   $5,869,602  
  

 

  

 

   

 

  

 

 

See Notes to Condensed Consolidated Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

  Twelve Weeks Ended   Twenty-Four Weeks Ended   Twelve Weeks Ended   Thirty-Six Weeks Ended 

(in thousands, except per share data)

  February 11,
2012
   February 12,
2011
   February 11,
2012
   February 12,
2011
   May 5,
2012
   May 7,
2011
   May 5,
2012
   May 7,
2011
 

Net sales

  $1,804,069    $1,660,946    $3,728,411    $3,452,608    $2,111,866    $1,978,369    $5,840,277    $5,430,977  

Cost of sales, including warehouse and delivery expenses

   877,854     815,335     1,818,569     1,699,249     1,022,067     964,839     2,840,636     2,664,088  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Gross profit

   926,215     845,611     1,909,842     1,753,359     1,089,799     1,013,530     2,999,641     2,766,889  

Operating, selling, general and administrative expenses

   625,564     573,863     1,268,257     1,175,491     662,549     620,605     1,930,806     1,796,095  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Operating profit

   300,651     271,748     641,585     577,868     427,250     392,925     1,068,835     970,794  

Interest expense, net

   38,923     39,576     78,017     76,829     39,743     39,916     117,760     116,745  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Income before income taxes

   261,728     232,172     563,568     501,039     387,507     353,009     951,075     854,049  

Income taxes

   94,798     84,116     205,513     180,908     138,921     125,636     344,434     306,544  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Net income

  $166,930    $148,056    $358,055    $320,131    $248,586    $227,373    $606,641    $547,505  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Weighted average shares for basic earnings per share

   39,281     43,399     39,573     44,034     38,644     41,978     39,263     43,349  

Effect of dilutive stock equivalents

   956     979     978     972     946     977     968     973  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Adjusted weighted average shares for diluted earnings per share

   40,237     44,378     40,551     45,006     39,590     42,955     40,231     44,322  
  

 

   

 

   

 

   

 

 

Basic earnings per share

  $4.25    $3.41    $9.05    $7.27    $6.43    $5.42    $15.45    $12.63  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Diluted earnings per share

  $4.15    $3.34    $8.83    $7.11    $6.28    $5.29    $15.08    $12.35  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

See Notes to Condensed Consolidated Financial Statements.

AUTOZONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

  Twenty-Four Weeks Ended   Thirty-Six Weeks Ended 

(in thousands)

  February 11,
2012
 February 12,
2011
   May 5,
2012
 May 7,
2011
 

Cash flows from operating activities:

      

Net income

  $358,055   $320,131    $606,641   $547,505  

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation and amortization of property and equipment

   96,170    88,417     145,177    133,347  

Amortization of debt origination fees

   3,573    3,898     5,426    6,060  

Income tax benefit from exercise of stock options

   (21,793  (15,847   (37,263  (22,027

Deferred income taxes

   5,956    (1,955   3,413    (9,771

Share-based compensation expense

   15,045    12,119     23,872    18,482  

Changes in operating assets and liabilities:

      

Accounts receivable

   (3,796  (13,903)��   6,556    (9,872

Merchandise inventories

   (113,450  (104,770   (169,578  (174,138

Accounts payable and accrued expenses

   49,095    65,957     102,849    277,158  

Income taxes payable

   58,511    75,513     92,438    111,823  

Other, net

   13,848    11,549     19,076    18,326  
  

 

  

 

   

 

  

 

 

Net cash provided by operating activities

   461,214    441,109     798,607    896,893  
  

 

  

 

   

 

  

 

 

Cash flows from investing activities:

      

Capital expenditures

   (132,430  (108,357   (228,277  (200,584

Purchase of marketable securities

   (18,970  (22,581   (34,132  (34,720

Proceeds from sale of marketable securities

   16,403    19,454     30,306    32,087  

Disposal of capital assets and other, net

   5,803    2,158     5,870    2,299  
  

 

  

 

   

 

  

 

 

Net cash used in investing activities

   (129,194  (109,326   (226,233  (200,918
  

 

  

 

   

 

  

 

 

Cash flows from financing activities:

      

Net proceeds from commercial paper

   117,200    25,300  

Net (payments) proceeds of short-term borrowings

   (3,548  12,493  

Net payments of commercial paper

   (218,600  (11,900

Net (payments) proceeds from short-term borrowings

   (24,793  19,690  

Proceeds from issuance of debt

   —      500,000     500,000    500,000  

Repayment of debt

   —      (199,300   —      (199,300

Net proceeds from sale of common stock

   33,050    33,249     50,521    42,147  

Purchase of treasury stock

   (482,270  (694,050   (882,725  (1,033,488

Income tax benefit from exercise of stock options

   21,793    15,847     37,263    22,027  

Payments of capital lease obligations

   (12,485  (10,903   (17,352  (16,683

Other, net

   —      (5,450   (10,927  (17,180
  

 

  

 

   

 

  

 

 

Net cash used in financing activities

   (326,260  (322,814   (566,613  (694,687

Effect of exchange rate changes on cash

   (159  632     (267  799  
  

 

  

 

 
  

 

  

 

 

Net increase in cash and cash equivalents

   5,601    9,601     5,494    2,087  

Cash and cash equivalents at beginning of period

   97,606    98,280     97,606    98,280  
  

 

  

 

   

 

  

 

 

Cash and cash equivalents at end of period

  $103,207   $107,881    $103,100   $100,367  
  

 

  

 

   

 

  

 

 

See Notes to Condensed Consolidated Financial Statements.

AUTOZONE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note A – General

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission’s (the “SEC”) rules and regulations. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and related notes included in the AutoZone, Inc. (“AutoZone” or the “Company”) Annual Report on Form 10-K for the year ended August 27, 2011.

Operating results for the twelve and twenty-fourthirty-six weeks ended February 11,May 5, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending August 25, 2012. Each of the first three quarters of AutoZone’s fiscal year consists of 12 weeks, and the fourth quarter consists of 16 or 17 weeks. The fourth quarters for fiscal 2011 and fiscal 2012 each have 16 weeks. Additionally, the Company’s business is somewhat seasonal in nature, with the highest sales generally occurring during the months of February through September and the lowest sales generally occurring in the months of December and January.

Recent Accounting Pronouncements:In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-12,Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income, which amends Accounting Standards Codification (“ASC”) Topic 220,Comprehensive Income. The purpose of ASU 2011-12 is to defer the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05,Presentation of Comprehensive Income, until the FASB is able to reconsider operational concerns related to ASU 2011-05. All other requirements in ASU 2011-05 are not affected by ASU 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The Company does not expect the provisions of ASU 2011-05 or ASU 2011-12 to have a material impact on the consolidated financial statements. Both ASU 2011-05 and ASU 2011-12 will be effective for the Company’s fiscal year ending August 31, 2013, including interim periods within that year.

Note B – Share-Based Payments

AutoZone recognizes compensation expense for share-based payments based on the fair value of the awards at the grant date. Share-based payments include stock option grants, restricted stock grants, restricted stock unit grants and the discount on shares sold to employees under share purchase plans. Additionally, directors’ fees are paid in restricted stock units with value equivalent to the value of shares of common stock as of the grant date. The change in fair value of liability-based stock awards is also recognized in share-based compensation expense.

Total share-based compensation expense (a component of Operating, selling, general and administrative expenses) was $7.5$8.8 million for the twelve week period ended February 11,May 5, 2012, and was $7.0$6.4 million for the comparable prior year period. Share-based compensation expense was $15.0$23.9 million for the twenty-fourthirty-six week period ended February 11,May 5, 2012, and was $12.1$18.5 million for the comparable prior year period.

During the twenty-fourthirty-six week period ended February 11,May 5, 2012, 294,387467,644 shares of stock options were exercised at a weighted average exercise price of $113.18.$110.13. In the comparable prior year period, 339,370436,394 shares of stock options were exercised at a weighted average exercise price of $101.44.$99.87.

The Company made stock option grants of 377,130 shares during the twenty-fourthirty-six week period ended February 11,May 5, 2012, and granted options to purchase 424,780 shares during the comparable prior year period. The weighted average fair value of the stock option awards granted during the twenty-fourthirty-six week periods ended February 11,May 5, 2012, and February 12,May 7, 2011, using the Black-Scholes-Merton multiple-option pricing valuation model, was $93.42 and $58.58 per share, respectively, using the following weighted average key assumptions:

 

   Twenty-Four Weeks Ended 
   February 11,
2012
  February 12,
2011
 

Expected price volatility

   31  31

Risk-free interest rate

   0.7  1.0

Weighted average expected lives (in years)

   5.3    4.3  

Forfeiture rate

   10  10

Dividend yield

   0  0

   Thirty-Six Weeks Ended 
   May 5,
2012
  May 7,
2011
 

Expected price volatility

   31  31

Risk-free interest rate

   0.7  1.0

Weighted average expected lives (in years)

   5.3    4.3  

Forfeiture rate

   10  10

Dividend yield

   0  0

See AutoZone’s Annual Report on Form 10-K for the year ended August 27, 2011, for a discussion regarding the methodology used in developing AutoZone’s assumptions to determine the fair value of the option awards and a description of AutoZone’s 2011 Equity Incentive Award Plan and the 2011 Director Compensation Program.

For the twelve week periodperiods ended February 11,May 5, 2012 1,500 stock optionsand May 7, 2011, there were excluded from the diluted earnings per share computation because they would have been anti-dilutive. For the comparable prior year period, 1,260no anti-dilutive shares were excluded from the diluted earnings per share computation. There were 1,500 anti-dilutive shares excluded from the diluted earnings per share computation for the twenty-fourthirty-six week period ended February 11,May 5, 2012, and 1,260 anti-dilutive shares excluded for the comparable prior year.

Note C – Fair Value Measurements

The Company defines fair value as the price received to transfer an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a hierarchy of valuation inputs to measure fair value.

The hierarchy prioritizes the inputs into three broad levels:

Level 1 inputs—unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.

Level 2 inputs—inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates.

Level 3 inputs—unobservable inputs for the asset or liability.

Financial Assets & Liabilities Measured at Fair Value on a Recurring Basis

The Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

 

   February 11, 2012 

(in thousands)

  Level 1   Level 2   Level 3   Fair
Value
 

Other current assets

  $13,624    $—      $—      $13,624  

Other long-term assets

   55,734     6,169     —       61,903  
  

 

 

   

 

 

   

 

 

   

 

 

 
  $69,358    $6,169    $—      $75,527  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  August 27, 2011   May 5, 2012 

(in thousands)

  Level 1   Level 2   Level 3   Fair
Value
   Level 1   Level 2   Level 3   Fair Value 

Other current assets

  $11,872    $—      $—      $11,872    $5,542    $—      $—      $5,542  

Other long-term assets

   55,390     5,869     —       61,259     60,394     10,808     —       71,202  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
  $67,262    $5,869    $—      $73,131    $65,936    $10,808    $—      $76,744  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
  August 27, 2011 

(in thousands)

  Level 1   Level 2   Level 3   Fair Value 

Other current assets

  $11,872    $—      $—      $11,872  

Other long-term assets

   55,390     5,869     —       61,259  
  

 

   

 

   

 

   

 

 
  $67,262    $5,869    $—      $73,131  
  

 

   

 

   

 

   

 

 

At February 11,May 5, 2012, the fair value measurement amounts for assets and liabilities recorded in the accompanying Condensed Consolidated Balance Sheet consisted of short-term marketable securities of $13.6$5.5 million, which are included within Other current assets, and long-term marketable securities of $61.9$71.2 million, which are included in Other long-term assets. The Company’s marketable securities are typically valued at the closing price in the principal active market as of the last business day of the quarter or through the use of other market inputs relating to the securities, including benchmark yields and reported trades. The fair values of the marketable securities, by asset class, are described in “Note D – Marketable Securities”.

Non-Financial Assets measured at Fair Value on a Non-Recurring Basis

Non-financial assets could be required to be measured at fair value on a non-recurring basis in certain circumstances, including the event of impairment. The assets could include assets acquired in an acquisition as well as property, plant and equipment that are determined to be impaired. During the twenty-fourthirty-six week periods ended February 11,May 5, 2012 and February 12,May 7, 2011, the Company did not have any significant non-financial assets measured at fair value on a non-recurring basis in periods subsequent to initial recognition.

Financial Instruments not Recognized at Fair Value

The Company has financial instruments, including cash and cash equivalents, accounts receivable, other current assets and accounts payable. The carrying amounts of these financial instruments approximate fair value because of their short maturities. A discussion of the carrying values and fair values of the Company’s debt is included in “Note H – Financing”.

Note D – Marketable Securities

The Company’s basis for determining the cost of a security sold is the “Specific Identification Model”. Unrealized gains (losses) on marketable securities are recorded in Accumulated other comprehensive loss. The Company’s available-for-sale marketable securities consisted of the following:

 

   February 11, 2012 

(in thousands)

  Amortized
Cost

Basis
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
  Fair
Value
 

Corporate securities

  $25,756    $261    $(23 $25,994  

Government bonds

   28,710     232     (4  28,938  

Mortgage-backed securities

   3,413     22     (17  3,418  

Asset-backed securities and other

   17,081     96     —      17,177  
  

 

 

   

 

 

   

 

 

  

 

 

 
  $74,960    $611    $(44 $75,527  
  

 

 

   

 

 

   

 

 

  

 

 

 

 

  August 27, 2011   May 5, 2012 

(in thousands)

  Amortized
Cost

Basis
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
 Fair
Value
   Amortized
Cost

Basis
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
 Fair
Value
 

Corporate securities

  $26,261    $229    $(45 $26,445    $24,930    $234    $(5 $25,159  

Government bonds

   29,464     343     —      29,807     27,792     184     (3  27,973  

Mortgage-backed securities

   4,291     55     —      4,346     4,868     26     (4  4,890  

Asset-backed securities and other

   12,377     156     —      12,533     18,628     94     —      18,722  
  

 

   

 

   

 

  

 

   

 

   

 

   

 

  

 

 
  $72,393    $783    $(45 $73,131    $76,218    $538    $(12 $76,744  
  

 

   

 

   

 

  

 

   

 

   

 

   

 

  

 

 
  August 27, 2011 

(in thousands)

  Amortized
Cost

Basis
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
 Fair
Value
 

Corporate securities

  $26,261    $229    $(45 $26,445  

Government bonds

   29,464     343     —      29,807  

Mortgage-backed securities

   4,291     55     —      4,346  

Asset-backed securities and other

   12,377     156     —      12,533  
  

 

   

 

   

 

  

 

 
  $72,393    $783    $(45 $73,131  
  

 

   

 

   

 

  

 

 

The debt securities held at February 11,May 5, 2012, had effective maturities ranging from less than one year to approximately 3 years. The Company did not realize any material gains or losses on its marketable securities during the twenty-fourthirty-six week period ended February 11,May 5, 2012.

The Company holds eight securities that are in an unrealized loss position of approximately $44$12 thousand at February 11,May 5, 2012. The Company has the intent and ability to hold these investments until recovery of fair value or maturity, and does not deem the investments to be impaired on an other than temporary basis. In evaluating whether the securities are deemed to be impaired on an other than temporary basis, the Company considers factors such as the duration and severity of the loss position, the credit worthiness of the investee, the term to maturity and the intent and ability to hold the investments until maturity or until recovery of fair value.

Note E – Derivative Financial Instruments

During the third quarter of fiscal 2012, the Company entered into two treasury rate locks. These agreements were designated as cash flow hedges and were used to hedge the exposure to variability in future cash flows resulting from changes in variable interest rates related to the $500 million Senior Note debt issuance in April 2012. The treasury rate locks had notional amounts of $300 million and $100 million with associated fixed rates of 2.09% and 2.07% respectively. The locks were benchmarked based on the 10-year U.S. treasury notes. These locks expired on April 20, 2012 and resulted in a loss of $2.8 million, which has been deferred in Accumulated other comprehensive loss and will be reclassified to Interest expense over the life of the underlying debt. The hedges remained highly effective until they expired, and no ineffectiveness was recognized in earnings.

During the first quarter of fiscal 2011, the Company was party to three forward starting swaps, of which two were entered into during the fourth quarter of fiscal 2010 and one was entered into during the first quarter of fiscal 2011. These agreements were designated as cash flow hedges and were used to hedge the exposure to variability in future cash flows resulting from changes in variable interest rates related to the $500 million Senior Note debt issuance during the first quarter of fiscal 2011. The swaps had notional amounts of $150 million, $150 million and $100 million with associated fixed rates of 3.15%, 3.13%, and 2.57%, respectively. The swaps were benchmarked based on the 3-month London InterBank Offered Rate (“LIBOR”). These swaps expired in November 2010 and resulted in a loss of $11.7 million, which has been deferred in accumulatedAccumulated other comprehensive loss and will be reclassified to Interest expense over the life of the underlying debt. The hedges remained highly effective until they expired; therefore,expired, and no ineffectiveness was recognized in earnings.

At February 11,May 5, 2012, the Company had $3.9$5.4 million recorded in Accumulated other comprehensive loss related to net realized losses associated with terminated interest rate swap and treasury rate lock derivatives which were designated as hedges.hedging instruments. Net losses are amortized into Interest expense over the remaining life of the associated debt. During the twenty-fourthirty-six week period ended February 11,May 5, 2012, the Company reclassified $813 thousand$1.2 million of net losses from Accumulated other comprehensive loss to Interest expense. In the comparable prior year period, the Company reclassified $453$858 thousand of net losses from Accumulated other comprehensive loss to Interest expense. The Company expects to reclassify $1.5$1.7 million of net losses from Accumulated other comprehensive loss to Interest expense over the next 12 months.

Subsequent to May 5, 2012, the Company entered into two treasury rate locks, each with a notional amount of $100 million. These agreements, which are set to expire on November 1, 2012, are cash flow hedges used to hedge the exposure to variability in future cash flows resulting from changes in variable interest rates relating to an anticipated debt transaction. The fixed rates of the hedges are 2.07% and 1.92% and are benchmarked based on the 10-year U.S. treasury notes. It is expected that upon settlement of these agreements, the realized gain or loss will be deferred in Accumulated other comprehensive loss and reclassified to Interest expense over the life of the underlying debt.

Note F – Merchandise Inventories

Inventories are stated at the lower of cost or market using the last-in, first-out (“LIFO”) method for domestic inventories and the first-in, first-out (“FIFO”) method for Mexico inventories. Included in inventories are related purchasing, storage and handling costs. Due to price deflation on the Company’s merchandise purchases, the Company’s domestic inventory balances are effectively maintained under the FIFO method. The Company’s policy is not to write up inventory in excess of replacement cost. The cumulative balance of this unrecorded adjustment, which will be reduced upon experiencing price inflation on the Company’s merchandise purchases, was $261.0$266.2 million at February 11,May 5, 2012, and $253.3 million at August 27, 2011.

Note G – Pension and Savings Plans

The components of net periodic pension expense related to the Company’s pension plans consisted of the following:

 

   Twelve Weeks Ended  Twenty-Four Weeks Ended 

(in thousands)

  February 11,
2012
  February 12,
2011
  February 11,
2012
  February 12,
2011
 

Interest cost

  $2,819   $2,570   $5,637   $5,139  

Expected return on plan assets

   (2,704  (2,152  (5,408  (4,304

Amortization of net loss

   2,260    2,170    4,521    4,341  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net periodic pension expense

  $2,375   $2,588   $4,750   $5,176  
  

 

 

  

 

 

  

 

 

  

 

 

 

   Twelve Weeks Ended  Thirty-Six Weeks
Ended
 

(in thousands)

  May 5,
2012
  May 7,
2011
  May 5,
2012
  May 7,
2011
 

Interest cost

  $2,819   $2,570   $8,456   $7,709  

Expected return on plan assets

   (2,704  (2,152  (8,112  (6,456

Amortization of net loss

   2,260    2,170    6,781    6,511  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net periodic pension expense

  $2,375   $2,588   $7,125   $7,764  
  

 

 

  

 

 

  

 

 

  

 

 

 

The Company makes contributions in amounts at least equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006. During the twenty-fourthirty-six week period ended February 11,May 5, 2012, the Company made contributions to its funded plan in the amount of $2.6$4.6 million. The Company expects to contribute approximately $14.1$10.7 million to the plan during the remainder of fiscal 2012; however, a change to the expected cash funding may be impacted by a change in interest rates or a change in the actual or expected return on plan assets.

Note H – Financing

The Company’s long-term debt consisted of the following:

 

(in thousands)

  February 11,
2012
   August 27,
2011
 

5.875% Senior Notes due October 2012, effective interest rate of 6.33%

  $300,000    $300,000  

4.375% Senior Notes due June 2013, effective interest rate of 5.65%

   200,000     200,000  

6.500% Senior Notes due January 2014, effective interest rate of 6.63%

   500,000     500,000  

5.750% Senior Notes due January 2015, effective interest rate of 5.89%

   500,000     500,000  

5.500% Senior Notes due November 2015, effective interest rate of 4.86%

   300,000     300,000  

6.950% Senior Notes due June 2016, effective interest rate of 7.09%

   200,000     200,000  

7.125% Senior Notes due August 2018, effective interest rate of 7.28%

   250,000     250,000  

4.000% Senior Notes due November 2020, effective interest rate of 4.43%

   500,000     500,000  

Commercial paper, weighted average interest rate of 0.43% and 0.35% at February 11, 2012 and August 27, 2011, respectively

   684,800     567,600  
  

 

 

   

 

 

 
  $3,434,800    $3,317,600  
  

 

 

   

 

 

 

(in thousands)

  May 5,
2012
   August 27,
2011
 

5.875% Senior Notes due October 2012, effective interest rate of 6.33%

  $300,000    $300,000  

4.375% Senior Notes due June 2013, effective interest rate of 5.65%

   200,000     200,000  

6.500% Senior Notes due January 2014, effective interest rate of 6.63%

   500,000     500,000  

5.750% Senior Notes due January 2015, effective interest rate of 5.89%

   500,000     500,000  

5.500% Senior Notes due November 2015, effective interest rate of 4.86%

   300,000     300,000  

6.950% Senior Notes due June 2016, effective interest rate of 7.09%

   200,000     200,000  

7.125% Senior Notes due August 2018, effective interest rate of 7.28%

   250,000     250,000  

4.000% Senior Notes due November 2020, effective interest rate of 4.43%

   500,000     500,000  

3.700% Senior Notes due April 2022, effective interest rate of 3.85%

   500,000     —    

Commercial paper, weighted average interest rate of 0.44% and 0.35% at May 5, 2012 and August 27, 2011, respectively

   349,000     567,600  
  

 

 

   

 

 

 
  $3,599,000    $3,317,600  
  

 

 

   

 

 

 

As of February 11,May 5, 2012, the commercial paper borrowings and the 5.875% Senior Notes due October 2012 mature in the next twelve months, but are classified as long-term in the accompanying Condensed Consolidated Balance Sheets, as the Company has the ability and intent to refinance them on a long-term basis. Specifically, excluding the effect of commercial paper borrowings, the Company had $996.6 million of availability under its $1.0 billion revolving credit facility, expiring in September 2016, which would allow it to replace these short-term obligations with long-term financing.

In addition to the long-term debt discussed above, as of February 11,May 5, 2012, the Company had $29.6$7.3 million of short-term borrowings that are scheduled to mature in the next 12 months. The short-term borrowings are unsecured, peso-denominated borrowings and accrued interest at 4.64%4.63% as of February 11,May 5, 2012.

On April 24, 2012, the Company issued $500 million in 3.700% Senior Notes due April 2022 under the Company’s shelf registration statement filed with the Securities and Exchange Commission on April 17, 2012 (the “Shelf Registration”). The Shelf Registration allows the Company to sell an indeterminate amount in debt securities to fund general corporate purposes, including repaying, redeeming or repurchasing outstanding debt and for working capital, capital expenditures, new store openings, stock repurchases and acquisitions. The Company used the proceeds from the issuance of debt to repay a portion of the commercial paper borrowings and for general corporate purposes.

In September 2011, the Company amended and restated its $800 million revolving credit facility, which was scheduled to expire in July 2012. The capacity under the revolving credit facility was increased to $1.0 billion. This credit facility is available to primarily support commercial paper borrowings, letters of credit and other short-term unsecured bank loans. The capacity of the credit facility may be increased to $1.250 billion prior to the maturity date at the Company’s election and subject to bank credit capacity and approval, may include up to $200 million in letters of credit, and may include up to $175 million in capital leases each fiscal year. Under the revolving credit facility, the Company may borrow funds consisting of Eurodollar loans or base rate loans. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as LIBOR plus the applicable percentage, as defined in the revolving credit facility, depending upon the Company’s senior, unsecured, (non-credit enhanced) long-term debt rating. Interest accrues on base rate loans as defined in the credit facility. The Company also has the option to borrow funds under the terms of a swingline loan subfacility. The revolving credit facility expires in September 2016.

The fair value of the Company’s debt was estimated at $3.730$3.896 billion as of February 11,May 5, 2012, and $3.633 billion as of August 27, 2011, based on the quoted market prices for the same or similar issues or on the current rates available to the Company for debt of the same terms.terms (Level 2). Such fair value is greater than the carrying value of debt by $265.6$289.7 million at February 11,May 5, 2012, and $281.0 million at August 27, 2011.

Note I – Stock Repurchase Program

From January 1, 1998 to February 11,May 5, 2012, the Company has repurchased a total of 128.8129.9 million shares at an aggregate cost of $10.7$11.1 billion, including 1,455,0462,510,029 shares of its common stock at an aggregate cost of $482.3$882.7 million during the twenty-fourthirty-six week period ended February 11,May 5, 2012. On September 28, 2011, the Board voted to increase the authorization by $750 million to raise the cumulative share repurchase authorization from $10.4 billion to $11.15 billion. Considering cumulative repurchases as of February 11, 2012, the Company had $486.4 million remaining under the Board’s authorization to repurchase its common stock.

On March 7, 2012, the Board voted to increase the authorization by $750 million to raise the cumulative share repurchase authorization from $11.15 billion to $11.9 billion. Considering the cumulative repurchases as of May 5, 2012, the Company had $835.9 million remaining under the Board’s authorization to repurchase its common stock. Subsequent to February 11,May 5, 2012, the Company has repurchased 26,240893,910 shares of its common stock at an aggregate cost of $10.0$335.5 million.

During the twenty-fourthirty-six week period ended February 11,May 5, 2012, the Company retired 4.9 million shares of treasury stock which had previously been repurchased under the Company’s share repurchase program. The retirement increased Retained deficit by $1,319.6 million and decreased Additional paid-in capital by $72.5 million. During the comparable prior year period, the Company retired 6.6 million shares of treasury stock, which increased Retained deficit by $1,247.7 million and decreased Additional paid-in capital by $82.2 million.

Note J – Comprehensive Income

Comprehensive income includes foreign currency translation adjustments; the impact from certain derivative financial instruments designated and effective as cash flow hedges, including changes in fair value, as applicable; the reclassification of gains and/or losses from Accumulated other comprehensive loss to Net income to offset the earnings impact of the underlying items being hedged; pension liability adjustments and changes in the fair value of certain investments classified as available-for-sale.

Comprehensive income consisted of the following:

 

   Twelve Weeks Ended  Twenty-Four Weeks Ended 

(in thousands)

  February 11,
2012
   February 12,
2011
  February 11,
2012
  February 12,
2011
 

Net income

  $166,930    $148,056   $358,055   $320,131  

Foreign currency translation adjustments

   20,726     3,614    (3,261  16,282  

Net impact from derivative instruments

   255     (3,939  3,132    (4,998

Pension liability adjustments

   3,378     1,620    13,797    3,243  

Unrealized gains (losses) from marketable securities

   150     (327  (111  (400
  

 

 

   

 

 

  

 

 

  

 

 

 

Comprehensive income

  $191,439    $149,024   $371,612   $334,258  
  

 

 

   

 

 

  

 

 

  

 

 

 

   Twelve Weeks Ended   Thirty-Six Weeks Ended 

(in thousands)

  May 5,
2012
  May 7,
2011
   May 5,
2012
  May 7,
2011
 

Net income

  $248,586   $227,373    $606,641   $547,505  

Foreign currency translation adjustments

   (10,355  8,508     (13,616  24,790  

Net impact from derivative instruments

   (1,513  405     1,619    (4,594

Pension liability adjustments

   1,372    736     15,169    3,979  

Unrealized gains (losses) from marketable securities

   (27  220     (138  (181
  

 

 

  

 

 

   

 

 

  

 

 

 

Comprehensive income

  $238,063   $237,242    $609,675   $571,499  
  

 

 

  

 

 

   

 

 

  

 

 

 

Note K – Litigation

The Company was a defendant in a lawsuit entitled “Coalition for a Level Playing Field, L.L.C., et al., v. AutoZone, Inc. et al.,” filed in the U.S. District Court for the Southern District of New York in October 2004. The case was originally filed by more than 200 plaintiffs, which are principally automotive aftermarket warehouse distributors and jobbers, against a number of defendants, including automotive aftermarket retailers and aftermarket automotive parts manufacturers. In the amended complaint, theThe plaintiffs alleged,inter alia,, that some or all of the automotive aftermarket retailer defendants including AutoZone had knowingly received, in violation of the Robinson-Patman Act, (the “Act”), from various of the manufacturer defendants benefits such as volume discounts, rebates, early buy allowances and other allowances, fees, inventory without payment,and other payments including sham advertising and promotional payments a share in the manufacturers’ profits, benefits of pay-on-scan purchases, implementation of radio frequency identification technology, and excessive payments for services purportedly performed for the manufacturers. Additionally, a subset of plaintiffs alleged a claim of fraud against the automotive aftermarket retailer defendants based on discovery issues in a prior litigation involving similar claims under the Act. In the prior litigation, the discovery dispute, as well as the underlying claims, was decided in favor of AutoZone and the other automotive aftermarket retailer defendants who proceededthat were not available to trial, pursuant to a unanimous jury verdict which was affirmed by the Second Circuit Court of Appeals. In the current litigation, the plaintiffs sought an unspecified amount of damages (including statutory trebling), attorneys’ fees, and a permanent injunction prohibiting the aftermarket retailer defendants from inducing and/or knowingly receiving discriminatory prices from any of the aftermarket manufacturer defendants and from opening up any further stores to compete with the plaintiffs as long as the defendants allegedly continue to violate the Act.Plaintiffs.

In an order dated September 7, 2010, and issued on September 16, 2010, the court granted motions to dismiss all claims against AutoZone and its co-defendant competitors and suppliers. Based on the record in the prior litigation, the court dismissed with prejudice all overlapping claims – that is, those covering the same time periods covered by the prior litigation and brought by the judgment plaintiffs in the prior litigation. The court also dismissed with prejudice the plaintiffs’ attempt to revisit discovery disputes from the prior litigation. Further, with respect to the other claims under the Act, the court found that the factual statements contained in the complaint fall short of what would be necessary to support a plausible inference of unlawful price discrimination. Finally, the court held that the AutoZone pay-on-scan program is a difference in non-price terms that are not governed by the Act. The court ordered the case closed, but also stated that “in an abundance of caution the Court [was] defer[ring] decision on whetherallowed plaintiffs to grant leave to amend to allow plaintiff an opportunity to propose curative amendments.” The plaintiffs filed a motionmove for leave to amend their complaint and attachedfile a proposed Third Amended and Supplemental Complaint (the “Third Amended Complaint”) on behalf of four plaintiffs. The Third Amended Complaint repeated and expanded certain allegations from previous complaints, asserting two claims under the Act, but stated that all other plaintiffs have withdrawn their claims, and that,inter alia, Chief Auto Parts, Inc. had been dismissed as a defendant. AutoZone and the co-defendants filed an opposition to the motion seeking leave to amend.

third amended complaint. In an order dated September 28, 2011, the court denied the four remaining plaintiffs’ motion for leave to file a Third Amended Complaintthird amended complaint because the proposed Third Amended Complaintthird amended complaint failed to address deficiencies previously identified by the court. On October 26, 2011, plaintiffs filed an appeal of the dismissal was filed by 143 plaintiffs toin the United StatesU.S. Court of appealsAppeals for the Second Circuit. BriefingFollowing mediation, on March 23, 2012, all parties settled the case pursuant to a confidential settlement agreement. On April 5, 2012, the case was withdrawn with prejudice from the U.S. Court of Appeals for the Second Circuit. On April 11, 2012, the case was dismissed with prejudice by both sides will proceed over the next several months and will likely be followed by oral argument.

The Company believes this suit to be without merit and is vigorously defending against it. The Company is unable to estimate a loss or possible rangeU.S. District Court for the Southern District of loss.New York.

In 2004, the Company acquired a store site in Mount Ephraim, New Jersey that had previously been the site of a gasoline service station and contained evidence of groundwater contamination. Upon acquisition, the Company voluntarily reported the groundwater contamination issue to the New Jersey Department of Environmental Protection and entered into a Voluntary Remediation Agreement providing for the remediation of the contamination associated with the property. The Company has conducted and paid for (at an immaterial cost to the Company) remediation of visible contamination on the property and is investigating, and will be addressing, potential vapor intrusion impacts in downgradient residences and businesses. The New Jersey Department of Environmental Protection has indicated that it will assert that the Company is liable for the downgradient impacts under a joint and severable liability theory, and the Company intends to contest any such assertion. Pursuant to the Voluntary Remediation Agreement, upon completion of all remediation required by the agreement, the Company believes it should be eligible to be reimbursed up to 75 percent of qualified remediation costs by the State of New Jersey. The Company has asked the state for clarification that the agreement applies to off-site work, and the state is considering the request. Although the aggregate amount of additional costs that the Company may incur pursuant to the remediation cannot currently be ascertained, the Company does not currently believe that fulfillment of its obligations under the agreement or otherwise will result in costs that are material to its financial condition, results of operations or cash flow.

The Company is involved in various other legal proceedings incidental to the conduct of its business, including several lawsuits containing class-action allegations in which the plaintiffs are current and former hourly and salaried employees who allege various wage and hour violations and unlawful termination practices. The Company does not currently believe that, either individually or in the aggregate, these matters will result in liabilities material to the Company’s financial condition, results of operations or cash flows.

Note L – Segment Reporting

The Company’s two operating segments (Domestic Auto Parts and Mexico) are aggregated as one reportable segment: Auto Parts Stores. The criteria the Company used to identify the reportable segment are primarily the nature of the products the Company sells and the operating results that are regularly reviewed by the Company’s chief operating decision maker to make decisions about the resources to be allocated to the business units and to assess performance. The accounting policies of the Company’s reportable segment are the same as those described in Note A in its Annual Report on Form 10-K for the year ended August 27, 2011.

The Auto Parts Stores segment is a retailer and distributor of automotive parts and accessories through the Company’s 4,8674,910 stores in the United States, including Puerto Rico, and Mexico. Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products.

The Other category reflects business activities that are not separately reportable, including ALLDATA, which produces, sells and maintains diagnostic and repair information software used in the automotive repair industry, and E-commerce, which includes direct sales to customers throughwww.autozone.com.

The Company evaluates its reportable segment primarily on the basis of net sales and segment profit, which is defined as gross profit. Segment results for the periods presented were as follows:

 

   Twelve Weeks Ended  Twenty-Four Weeks Ended 

(in thousands)

  February 11,
2012
  February 12,
2011
  February 11,
2012
  February 12,
2011
 

Net Sales

     

Auto Parts Stores

  $1,762,903   $1,623,949   $3,647,041   $3,378,936  

Other

   41,166    36,997    81,370    73,672  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $1,804,069   $1,660,946   $3,728,411   $3,452,608  
  

 

 

  

 

 

  

 

 

  

 

 

 

Segment Profit

     

Auto Parts Stores

  $894,493   $816,692   $1,846,850   $1,695,558  

Other

   31,722    28,919    62,992    57,801  
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

   926,215    845,611    1,909,842    1,753,359  

Operating, selling, general and administrative expenses

   (625,564  (573,863  (1,268,257  (1,175,491

Interest expense, net

   (38,923  (39,576  (78,017  (76,829
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

  $261,728   $232,172   $563,568   $501,039  
  

 

 

  

 

 

  

 

 

  

 

 

 

   Twelve Weeks Ended  Thirty-Six Weeks Ended 

(in thousands)

  May 5,
2012
  May 7,
2011
  May 5,
2012
  May 7,
2011
 

Net Sales

     

Auto Parts Stores

  $2,068,643   $1,939,094   $5,715,683   $5,318,031  

Other

   43,223    39,275    124,594    112,946  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $2,111,866   $1,978,369   $5,840,277   $5,430,977  
  

 

 

  

 

 

  

 

 

  

 

 

 

Segment Profit

     

Auto Parts Stores

  $1,056,587   $983,256   $2,903,437   $2,678,814  

Other

   33,212    30,274    96,204    88,075  
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

   1,089,799    1,013,530    2,999,641    2,766,889  

Operating, selling, general and administrative expenses

   (662,549  (620,605  (1,930,806  (1,796,095

Interest expense, net

   (39,743  (39,916  (117,760  (116,745
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

  $387,507   $353,009   $951,075   $854,049  
  

 

 

  

 

 

  

 

 

  

 

 

 

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

AutoZone, Inc.

We have reviewed the condensed consolidated balance sheet of AutoZone, Inc. as of February 11,May 5, 2012, the related condensed consolidated statements of income for the twelve and twenty-fourthirty-six week periods ended February 11,May 5, 2012 and February 12,May 7, 2011, and the condensed consolidated statements of cash flows for the twenty-fourthirty-six week periods ended February 11,May 5, 2012 and February 12,May 7, 2011. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of AutoZone, Inc. as of August 27, 2011, and the related consolidated statements of income, stockholders’ deficit, and cash flows for the year then ended, not presented herein, and, in our report dated October 24, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of August 27, 2011, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

/s/ Ernst & Young LLP

Memphis, Tennessee

March 8,June 13, 2012

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are the nation’s leading retailer, and a leading distributor, of automotive replacement parts and accessories in the United States. We began operations in 1979 and at February 11,May 5, 2012, operated 4,5804,613 stores in the United States, including Puerto Rico, and 287297 in Mexico. Each of our stores carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. At February 11,May 5, 2012, in 2,8252,946 of our domestic stores, we also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We have commercial programs in select stores in Mexico as well. We also sell the ALLDATA brand automotive diagnostic and repair software throughwww.alldata.com andwww.alldatadiy.com. Additionally, we sell automotive hard parts, maintenance items, accessories, and non-automotive products throughwww.autozone.com, and our commercial customers can make purchases throughwww.autozonepro.com. We do not derive revenue from automotive repair or installation services.

Operating results for the twelve and twenty-fourthirty-six weeks ended February 11,May 5, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending August 25, 2012. Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consists of 16 or 17 weeks. The fourth quarters for fiscal 2011 and fiscal 2012 each have 16 weeks. Our business is somewhat seasonal in nature, with the highest sales generally occurring during the months of February through September and the lowest sales generally occurring in the months of December and January.

Executive Summary

Net sales were up 8.6%6.7% for the quarter, driven by domestic same store sales growth of 5.9%3.9%. We experienced sales growth from both our retail and commercial customers. Earnings per share increased 24.4%18.6% for the quarter.

Over the past several years, various factors have occurred within the economy that affect both our consumer and our industry, including the impact of the recession, continued high unemployment and other challenging economic conditions, which we believe have aided our sales growth during the quarter. As consumers’ cash flows have decreased due to these factors, we believe consumers have become more likely to keep their current vehicles longer and perform repair and maintenance in order to keep those vehicles well maintained. Given the nature of these macroeconomic factors, we cannot predict whether or for how long these trends will continue, nor can we predict to what degree these trends will impact us in the future.

More recently, we feel other macroeconomic factors have adversely impacted both our consumer and our industry. During the secondthird quarter of fiscal 2012, the average price per gallon of unleaded gasoline in the United States wasremained at a high level beginning the quarter at $3.52 up $0.38 or 11% fromper gallon and increasing to $3.79 per gallon. During the prior year, gas prices began the quarter at $3.14 per gallon and increased to $3.97 per gallon. While we have seen recent declines in gas prices as compared to the comparable prior year period. Weperiod, we continue to believe that the increase in gas prices isremain at overall high levels, thereby reducing discretionary spending for all consumers, and, in particular, our customers. Given the unpredictability of gas prices, we cannot predict whether gas prices will increase or decrease, nor can we predict how any future changes in gas prices will impact our sales in future periods.

Our primary response to fluctuations in the demand for the products we sell are to adjust our inventory levels, store staffing, and advertising messages. We continue to believe we are well positioned to help our customers save money and meet their needs in a challenging macro environment.

Historically, the two statistics that we believed had the closest correlation to our market growth over the long-term were miles driven and the number of seven year old or older vehicles on the road. While over the long-term, we have seen a close correlation between our net sales and the number of miles driven, we have also seen short time frames of minimal correlation in sales performance and miles driven. During the periods of minimal correlation between net sales and miles driven, we believe net sales have been positively impacted by other factors, including the number of seven year old or older vehicles on the road. Since the beginning of fiscal year 2011 and through December 2011March 2012 (latest publicly available information), miles driven have decreased slightly as compared to the corresponding prior period. However, during the first quarter of calendar 2012, miles driven improved by 1.4% as compared to the prior year period, while theperiod. The average age of the U.S. light vehicle fleet continues to trend in our industry’s favor. We believe that annual miles driven will returncontinue to improve to a low single digit growth rate over time and that the number of seven year old or older vehicles will continue to increase; however, we are unable to predict the impact, if any, these indicators will have on future results.

InDuring the secondthird quarter, we believe that weather had an impact inon the mix of products that we sold. Typically, failure related categories contribute the largestour third quarter benefits from increased sales of maintenance items. However, this category experienced a slight decrease as a percentage of our sales in any quarter. While this trend continued during second quarter, we did experience a slight decline intotal product mix of failure related categories as compared to the prior year. Conversely,We believe traditional maintenance jobs were shifted into January and February as a result of the maintenance and discretionary categories experienced a slight increase in mix as compared to the prior year.milder than normal winter. We remain focused on refining and expanding our product assortment to ensure we have the best merchandise at the right price in each of our categories.

Twelve Weeks Ended February 11,May 5, 2012,

Compared with Twelve Weeks Ended February 12,May 7, 2011

Net sales for the twelve weeks ended February 11,May 5, 2012, increased $143.1$133.5 million to $1.804$2.112 billion, or 8.6%6.7%, over net sales of $1.661$1.978 billion for the comparable prior year period. Total auto parts sales increased by 8.6%6.7%, primarily driven by a domestic same store sales (sales for stores open at least one year) increase of 5.9%3.9% and net sales of $47.3$53.9 million from new stores. The domestic same store sales increase was driven by higher transaction value, partially offset by decreased transaction counts. Higher transaction value is attributable to product inflation due to more complex, costly products and commodity price increases.

Gross profit for the twelve weeks February 11,ended May 5, 2012, was $926.2 million,$1.090 billion, or 51.3%51.6% of net sales, compared with $845.6 million,$1.014 billion, or 50.9%51.2% of net sales, during the comparable prior year period. The improvement in gross marginprofit was primarily attributable to leveraging distribution costs due to higher sales (25 basis points) and lower shrink expense (35 basis points).expense.

Operating, selling, general and administrative expenses for the twelve weeks ended February 11,May 5, 2012, were $625.6$662.5 million, or 34.7%31.4% of net sales, compared with $573.9$620.6 million, or 34.6%31.4% of net sales, during the comparable prior year period. The primary contributor toDuring the increase inquarter, operating expenses, was higher self insurance costs (59as a percentage of sales, were favorably impacted by lower incentive compensation (31 basis points), which was partially offset by leverage of other operating expenses due to higher sales volumes.self-insurance costs (23 basis points).

Net interest expense for the twelve weeks ended February 11,May 5, 2012, was $38.9$39.7 million compared with $39.6$39.9 million during the comparable prior year period. This decrease was primarily due to a decrease in borrowing rates, offset by the increase in debt over the comparable prior year period. Average borrowings for the twelve weeks ended February 11,May 5, 2012, were $3.428$3.489 billion, compared with $3.145$3.219 billion for the comparable prior year period. Weighted average borrowing rates were 4.7% for the twelve weeks ended February 11,May 5, 2012, and 5.0% for the twelve weeks ended February 12,May 7, 2011.

Our effective income tax rate was 36.2%35.8% of pretax income for the twelve weeks ended February 11,May 5, 2012, and 36.2%35.6% for the comparable prior year period.

Net income for the twelve week period ended February 11,May 5, 2012, increased by $18.9$21.2 million to $166.9$248.6 million, and diluted earnings per share increased by 24.4%18.6% to $4.15$6.28 from $3.34$5.29 in the comparable prior year period. The impact on current quarter diluted earnings per share from stock repurchases since the end of the comparable prior year period was an increase of $0.35.$0.47.

Twenty-FourThirty-Six Weeks Ended February 11,May 5, 2012,

Compared with Twenty-FourThirty-Six Weeks Ended February 12,May 7, 2011

Net sales for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, increased $275.8$409.3 million to $3.728$5.840 billion, or 8.0%7.5% over net sales of $3.453$5.431 billion for the comparable prior year period. Total auto parts sales increased by 7.9%7.5%, primarily driven by an increase in domestic comparable same store sales of 5.2%4.7% and net sales of $94.5$148.5 million from new stores. The domestic same store sales increase was driven by higher transaction value and, partially offset by decreased transaction count trends.counts.

Gross profit for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, was $1.910$3.000 billion, or 51.2%51.4% of net sales, compared with $1.753$2.767 billion, or 50.8%50.9% of net sales, during the comparable prior year period. The improvement in gross margin was primarily attributable to lower shrink expense (26(24 basis points) and leveraging distribution costs leveraging ondue to higher sales (21(22 basis points).

Operating, selling, general and administrative expenses for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, were $1.268 billion,$1.931billion, or 34.0%33.1% of net sales, compared with $1.175$1.796 billion, or 34.0%33.1% of net sales, during the comparable prior year period. The slight improvement in operating expenses was due to lower incentive compensation (21(25 basis points), favorable legal expense (20(14 basis points) and leverage from higher sales volumes, partially offset by higher self insurance costs (55(45 basis points).

Net interest expense for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, was $78.0$117.8 million compared with $76.8$116.7 million during the comparable prior year period. This increase was primarily due to the increase in debt over the comparable prior year period, partially offset by a decline in borrowing rates. Average borrowings for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, were $3.357$3.401 billion, compared with $3.003$3.075 billion for the comparable prior year period. Weighted average borrowing rates were 4.8%4.7% for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, and 5.2%5.1% for the twenty-fourthirty-six weeks ended February 12,May 7, 2011.

Our effective income tax rate was 36.5%36.2% of pretax income for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, and 36.1%35.9% for the comparable prior year period.

Net income for the twenty-fourthirty-six week period ended February 11,May 5, 2012, increased by $37.9$59.1 million to $358.1$606.6 million, and diluted earnings per share increased by 24.1%22.1% to $8.83$15.08 from $7.11$12.35 in the comparable prior year period. The impact on year to date diluted earnings per share from stock repurchases since the end of the comparable prior year period was an increase of $0.67.$0.87.

Liquidity and Capital Resources

The primary source of our liquidity is our cash flows realized through the sale of automotive parts, products and accessories. For the twenty-fourthirty-six weeks ended February 11,May 5, 2012, our net cash flows from operating activities provided $461.2$798.6 million as compared with $441.1$896.9 million provided during the comparable prior year period. The increasedecrease is primarily due to higherthe change in inventories net income, partially offset by the timing of income tax payments.payables.

Our net cash flows from investing activities for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, used $129.2$226.2 million as compared with $109.3$200.9 million used in the comparable prior year period. Capital expenditures for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, were $132.4$228.3 million compared to $108.4$200.6 million for the comparable prior year period. The increase is primarily driven by a shift in the mix in types of stores opened as well as increased store openings and increased investment in our hub initiative. During this twenty-four week period, we opened 54 net new stores. In the comparable prior year period, we opened 47 net new stores. Investing cash flows were also impacted by our wholly owned insurance captive, which purchased $19.0$34.1 million and sold $16.4$30.3 million in marketable securities during the twenty-fourthirty-six weeks ended February 11,May 5, 2012. During the comparable prior year period, the captive purchased $22.6$34.7 million in marketable securities and sold $19.5$32.1 million in marketable securities. Capital asset disposals and other provided $5.8$5.9 million during the twenty-fourthirty-six week period ended February 11,May 5, 2012, and $2.2$2.3 million in the comparable prior year period.

Our net cash flows from financing activities for the twenty-fourthirty-six weeks ended February 11,May 5, 2012, used $326.3$566.6 million compared to $322.8$694.7 million used in the comparable prior year period. There were noDuring the thirty six weeks ended May 5, 2012, we received $500.0 million in proceeds from the issuance of debtdebt. The proceeds were used for the current twenty-four week period ended February 11, 2012.repayment of a portion of commercial paper borrowings and general corporate purposes. During the comparable prior year, proceeds from the issuance of debt totaled $500.0 million. Those proceeds were used for the repayment of debt of $199.3 million, the repayment of a portion of our commercial paper borrowings, and general corporate purposes. For the twenty-fourthirty-six weeks ended February 11,May 5, 2012, net proceeds from borrowingspayments of commercial paper and short-term borrowings were $113.7$243.4 million as compared to proceeds from net borrowings of $37.8$7.8 million in the comparable prior year period. Stock repurchases were $482.3$882.7 million in the current twenty-fourthirty-six week period as compared with $694.1 million$1.033 billion in the comparable prior year period. For the twenty-fourthirty-six weeks ended February 11,May 5, 2012, proceeds from the sale of common stock and exercises of stock options provided $54.8$87.8 million, including $21.8$37.3 million in related tax benefits. In the comparable prior year period, proceeds from the sale of common stock and exercises of stock options provided $49.1$64.2 million, including $15.8$22.0 million in related tax benefits.

During fiscal 2012, we expect to invest in our business at an increased rate as compared to fiscal 2011. Our investment is expected to be directed primarily to our new-store development program and enhancements to existing stores and infrastructure. The amount of our investments in our new-store program is impacted by different factors, including such factors as whether the building and land are purchased (requiring higher investment) or leased (generally lower investment), located in the United States or Mexico, or located in urban or rural areas. During fiscal 2011 and fiscal 2010, our capital expenditures increased by approximately 2% and 16%, respectively, as compared to the prior year, and we expect our capital expenditures for fiscal 2012 to increase by 20%15% to 25%20% as compared to fiscal 2011. Our mix of store openings has moved away from build-to-suit leases (lower initial capital investment) to ground leases and land purchases (higher initial capital investment), resulting in increased capital expenditures per store during recent years. We expect this trend to continue during the remainder of the fiscal year ending August 25, 2012.

In addition to the building and land costs, our new-store development program requires working capital, predominantly for inventories. Historically, we have negotiated extended payment terms from suppliers, reducing the working capital required and resulting in a high accounts payable to inventory ratio. We had an accountsAccounts payable, toas a percent of gross inventory, ratio of 110%finished the quarter at February 11, 2012, as compared to 104% at February 12, 2011.109%, flat with last year’s third quarter. We plan to continue leveraging our inventory purchases; however, our ability to do so may be limited by our vendors’ capacity to factor their receivables from us. Certain vendors participate in financing arrangements with financial institutions whereby they factor their receivables from us, allowing them to receive payment on our invoices at a discounted rate.

Depending on the timing and magnitude of our future investments (either in the form of leased or purchased properties or acquisitions), we anticipate that we will rely primarily on internally generated funds and available borrowing capacity to support a majority of our capital expenditures, working capital requirements and stock repurchases. The balance may be funded through new borrowings. We anticipate that we will be able to obtain such financing in view of our current credit ratings and favorable experiences in the debt markets in the past.

For the trailing four quarters ended February 11,May 5, 2012, our after-tax return on invested capital (“ROIC”) was 32.2%32.7% as compared to 29.3%30.2% for the comparable prior year period. ROIC is calculated as after-tax operating profit (excluding rent charges) divided by average invested capital (which includes a factor to capitalize operating leases). ROIC increased primarily due to increased after-tax operating profit. We use ROIC to evaluate whether we are effectively using our capital resources and believe it is an important indicator of our overall operating performance.

Debt Facilities

In September 2011, we amended and restated our $800 million revolving credit facility, which was scheduled to expire in July 2012. The capacity under the revolving credit facility was increased to $1.0 billion. This credit facility is available to primarily support commercial paper borrowings, letters of credit and other short-term, unsecured bank loans. The capacity of the credit facility may be increased to $1.250 billion prior to the maturity date at our election and subject to bank credit capacity and approval, may include up to $200 million in letters of credit, and may include up to $175 million in capital leases each fiscal year. Under the revolving credit facility, we may borrow funds consisting of Eurodollar loans or base rate loans. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as the London InterBank Offered Rate (“LIBOR”) plus the applicable percentage, as defined in the revolving credit facility, depending upon our senior, unsecured, (non-credit enhanced) long-term debt rating. Interest accrues on base rate loans as defined in the revolving credit facility. We also have the option to borrow funds under the terms of a swingline loan subfacility. The revolving credit facility expires in September 2016.

As the available balance is reduced by commercial paper borrowings and certain outstanding letters of credit, we had $283.5$619.3 million in available capacity under our $1.0 billion credit facility at February 11,May 5, 2012.

We also maintain a letter of credit facility that allows us to request the participating bank to issue letters of credit on our behalf up to an aggregate amount of $100 million. The letter of credit facility is in addition to the letters of credit that may be issued under the revolving credit facility. As of February 11,May 5, 2012, we have $98.7 million in letters of credit outstanding under the letter of credit facility, which expires in June 2013.

On November 15, 2010,April 24, 2012, we issued $500 million in 4.000%3.700% Senior Notes due 2020April 2022 under our shelf registration statement filed with the Securities and Exchange Commission on July 29, 2008April 17, 2012 (the “Shelf Registration”). The Shelf Registration allows us to sell an indeterminate amount in debt securities to fund general corporate purposes, including repaying, redeeming or repurchasing outstanding debt and for working capital, capital expenditures, new store openings, stock repurchases and acquisitions. DuringProceeds from the quarter endeddebt issuance on April 24, 2012, were used to repay a portion of the commercial paper borrowings and for general corporate purposes. On November 20,15, 2010, we issued $500 million in 4.000% Senior Notes due 2020 under a shelf registration statement filed with the Securities and Exchange Commission on July 29, 2008. We used the proceeds from the November 15, 2010 issuance of debt to repay the principal due relating to the 4.750% Senior Notes that matured on November 15, 2010, to repay a portion of the commercial paper borrowings and for general corporate purposes.

The 6.500% and 7.125% Senior Notes issued during August 2008, and the 5.750% Senior Notes issued in July 2009, are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded. These notes, along with the 3.700% Senior Notes issued in April 2012 and the 4.000% Senior Notes issued in November 2010, also contain a provision that repayment of the notes may be accelerated if AutoZone experiences a change in control (as defined in the agreements). Our borrowings under our other senior notes contain minimal covenants, primarily restrictions on liens. Under our other borrowing arrangements, covenants include limitations on total indebtedness, restrictions on liens, a minimum fixed charge coverage ratio and a change of control provision that may require acceleration of the repayment obligations under certain circumstances. All of the repayment obligations under our borrowing arrangements may be accelerated and come due prior to the scheduled payment date if covenants are breached or an event of default occurs. As of February 11,May 5, 2012, we were in compliance with all covenants and expect to remain in compliance with all covenants.

Our adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and share-based expense (“EBITDAR”) ratio was 2.5:1 as of May 5, 2012, and was 2.4:1 as of February 11, 2012, and was 2.5:1 as of February 12,May 7, 2011. We calculate adjusted debt as the sum of total debt, capital lease obligations and rent times six; and we calculate EBITDAR by adding interest, taxes, depreciation, amortization, rent and share-based expenses to net income. Adjusted debt to EBITDAR is calculated on a trailing four quarter basis. We target our debt levels to a ratio of adjusted debt to EBITDAR in order to maintain our investment grade credit ratings. We believe this is important information for the management of our debt levels.

Stock Repurchases

From January 1, 1998 to February 11,May 5, 2012, we have repurchased a total of 128.8129.9 million shares at an aggregate cost of $10.7$11.1 billion, including 1,455,0462,510,029 shares of our common stock at an aggregate cost of $482.3$882.7 million during the twenty-fourthirty-six week period ended February 11,May 5, 2012. On September 28, 2011, the Board of Directors (the “Board”) voted to increase the authorization by $750 million to raise the cumulative share repurchase authorization from $10.4 billion to $11.15 billion. Considering cumulative repurchases as of February 11, 2012, we have $486.4 million remaining under the Board’s authorization to repurchase our common stock.

On March 7, 2012, the Board voted to increase the authorization by $750 million to raise the cumulative share repurchase authorization from $11.15 billion to $11.9 billion. Considering cumulative repurchases as of May 5, 2012, we have $835.9 million remaining under the Board’s authorization to repurchase our common stock. Subsequent to February 11,May 5, 2012, we have repurchased 26,240893,910 shares of our common stock at an aggregate cost of $10.0$335.5 million.

Off-Balance Sheet Arrangements

Since our fiscal year end, we have cancelled, issued and modified stand-by letters of credit that are primarily renewed on an annual basis to cover deductible payments to our casualty insurance carriers. Our total stand-by letters of credit commitment at February 11,May 5, 2012, was $102.3 million compared with $96.6 million at August 27, 2011, and our total surety bonds commitment at February 11,May 5, 2012, was $31.1$32.7 million compared with $26.3 million at August 27, 2011.

Financial Commitments

As of February 11,May 5, 2012, there were no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the year ended August 27, 2011.

Reconciliation of Non-GAAP Financial Measures

Management’s Discussion and Analysis of Financial Condition and Results of Operations include certain financial measures not derived in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures provide additional information for determining our optimum capital structure and are used to assist management in evaluating performance and in making appropriate business decisions to maximize stockholders’ value.

Non-GAAP financial measures should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing our operating performance, financial position or cash flows. However, we have presented the non-GAAP financial measures, as we believe they provide additional information that is useful to investors. Furthermore, our management and the Compensation Committee of the Board use the abovementioned non-GAAP financial measures to analyze and compare our underlying operating results and to determine payments of performance-based compensation. We have included a reconciliation of this information to the most comparable GAAP measures in the following reconciliation tables.

Reconciliation of Non-GAAP Financial Measure: After-Tax Return on Invested Capital “ROIC”

The following tables calculate the percentages of ROIC for the trailing four quarters ended February 11,May 5, 2012 and February 12,May 7, 2011.

 

0000000000000000000000000000000000000000000000000000000
   A  B  A-B=C  D  C+D 

(in thousands, except percentage)

  Fiscal Year
Ended

August 27,
2011
  Twenty-Four
Weeks  Ended

February 12,
2011
  Twenty-Eight
Weeks Ended
August 27,
2011
  Twenty-Four
Weeks  Ended

February 11,
2012
  Trailing  Four
Quarters
Ended
February 11,
2012
 

Net income

  $848,974   $320,131   $528,843   $358,055   $886,898  

Adjustments:

      

Interest expense

   170,557    76,829    93,728    78,017    171,745  

Rent expense

   213,846    96,692    117,154    103,721    220,875  

Tax effect(1)

   (138,562  (62,548  (76,014  (65,509  (141,523
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

After-tax return

  $1,094,815   $431,104   $663,711   $474,284   $1,137,995  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average debt(2)

      $3,328,075  

Average deficit(3)

       (1,210,962

Rent x 6(4)

       1,325,250  

Average capital lease obligations(5)

       88,413  
      

 

 

 

Pre-tax invested capital

      $3,530,776  
      

 

 

 

ROIC

       32.2
      

 

 

 

0000000000000000000000000000000000000000000000000000000
  A B A-B=C D C+D   A B A-B=C D C+D 

(in thousands, except percentage)

  Fiscal Year
Ended

August 28,
2010
 Twenty-Four
Weeks Ended

February 13,
2010
 Twenty-Eight
Weeks Ended
August 28,
2010
 Twenty-Four
Weeks Ended

February 12,
2011
 Trailing Four
Quarters
Ended
February 12,
2011
   Fiscal Year
Ended

August 27,
2011
 Thirty-Six
Weeks Ended

May  7,
2011
 Sixteen
Weeks
Ended

August 27,
2011
 Thirty-Six
Weeks
Ended

May  5,
2012
 Trailing Four
Quarters
Ended

May 5,
2012
 

Net income

  $738,311   $266,633   $471,678   $320,131   $791,809    $848,974   $547,505   $301,469   $606,641   $908,110  

Adjustments:

            

Interest expense

   158,909    72,650    86,259    76,829    163,088     170,557    116,745    53,812    117,760    171,572  

Rent expense

   195,632    88,106    107,526    96,692    204,218     213,846    147,252    66,594    158,109    224,703  

Tax effect(1)

   (128,983  (58,355  (70,628  (62,987  (133,615   (138,792  (95,318  (43,474  (99,605  (143,079
  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 

After-tax return

  $   963,869   $369,034   $594,835   $430,665   $1,025,500    $1,094,585   $716,184   $378,401   $782,905   $1,161,306  
  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 

Average debt(2)

      $2,902,027        $3,399,491  

Average deficit(3)

       (695,593       (1,286,645

Rent x 6(4)

       1,225,308         1,348,218  

Average capital lease obligations(5)

       74,039         92,181  
      

 

       

 

 

Pre-tax invested capital

      $3,505,781        $3,553,245  
      

 

       

 

 

ROIC

       29.3       32.7
      

 

       

 

 
  A B A-B=C D C+D 

(in thousands, except percentage)

  Fiscal Year
Ended

August 28,
2010
 Thirty-Six
Weeks Ended

May  8,
2010
 Sixteen
Weeks
Ended

August 28,
2010
 Thirty-Six
Weeks
Ended

May  7,
2011
 Trailing Four
Quarters
Ended

May 7,
2011
 

Net income

  $738,311   $469,378   $268,933   $547,505   $816,438  

Adjustments:

      

Interest expense

   158,909    109,483    49,426    116,745    166,171  

Rent expense

   195,632    133,560    62,072    147,252    209,324  

Tax effect(1)

   (127,989  (87,739  (40,250  (95,303  (135,553
  

 

  

 

  

 

  

 

  

 

 

After-tax return

  $964,863   $624,682   $340,181   $716,199   $1,056,380  
  

 

  

 

  

 

  

 

  

 

 

Average debt(2)

      $2,991,244  

Average deficit(3)

       (835,167

Rent x 6(4)

       1,255,944  

Average capital lease obligations(5)

       80,302  
      

 

 

Pre-tax invested capital

      $3,492,323  
      

 

 

ROIC

       30.2
      

 

 

 

(1)The effective tax rate over the trailing four quarters ended February 11,May 5, 2012 and February 12,May 7, 2011 is 36.0% and 36.3%36.1%, respectively.
(2)Average debt is equal to the average of our debt measured as of the previous five quarters.
(3)Average equity is equal to the average of our stockholders’ deficit measured as of the previous five quarters.
(4)Rent is multiplied by a factor of six to capitalize operating leases in the determination of pre-tax invested capital.
(5)Average capital lease obligations are equal to the average of our capital lease obligations measured as of the previous five quarters.

Reconciliation of Non-GAAP Financial Measure: Adjusted Debt to Earnings before Interest, Taxes, Depreciation, Rent and Share-Based Expense “EBITDAR”

The following tables calculate the ratio of adjusted debt to EBITDAR for the trailing four quarters ended February 11,May 5, 2012 and February 12,May 7, 2011.

 

   A   B   A-B=C   D   C+D 

(in thousands, except ratio)

  Fiscal Year
Ended

August 27,
2011
   Twenty-Four
Weeks  Ended

February 12,
2011
   Twenty-Eight
Weeks Ended
August 27,
2011
   Twenty-Four
Weeks  Ended

February 11,
2012
   Trailing Four
Quarters
Ended
February 11,
2012
 

Net income

  $848,974    $320,131    $528,843    $358,055    $886,898  

Add: Interest expense

   170,557     76,829     93,728     78,017     171,745  

     Income tax expense

   475,272     180,908     294,364     205,513     499,877  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBIT

   1,494,803     577,868     916,935     641,585     1,558,520  

Add: Depreciation expense

   196,209     88,417     107,792     96,170     203,962  

     Rent expense

   213,846     96,692     117,154     103,721     220,875  

     Share-based expense

   26,625     12,119     14,506     15,045     29,551  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDAR

  $1,931,483    $775,096    $1,156,387    $856,521    $2,012,908  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Debt

          $3,464,360  

Capital lease obligations

           103,774  

Add: Rent x 6(1)

           1,325,250  
          

 

 

 

Adjusted debt

          $4,893,384  
          

 

 

 

Adjusted debt / EDITDAR

           2.4  
          

 

 

 

  A   B   A-B=C   D   C+D   A   B   A-B=C   D   C+D 

(in thousands, except ratio)

  Fiscal Year
Ended

August 28,
2010
   Twenty-Four
Weeks  Ended

February 13,
2010
   Twenty-Eight
Weeks Ended
August 28,
2010
   Twenty-Four
Weeks  Ended

February 12,
2011
   Trailing Four
Quarters
Ended
February 12,
2011
   Fiscal Year
Ended

August 27,
2011
   Thirty-Six
Weeks Ended

May  7,
2011
   Sixteen
Weeks
Ended

August 27,
2011
   Thirty-Six
Weeks
Ended

May  5,
2012
   Trailing
Four
Quarters
Ended

May 5,
2012
 

Net income

  $738,311    $266,633    $471,678    $320,131    $791,809    $848,974    $547,505    $301,469    $606,641    $908,110  

Add: Interest expense

   158,909     72,650     86,259     76,829     163,088     170,557     116,745     53,812     117,760     171,572  

Income tax expense

   422,194     151,527     270,667     180,908     451,575     475,272     306,544     168,728     344,434     513,162  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

EBIT

   1,319,414     490,810     828,604     577,868     1,406,472     1,494,803     970,794     524,009     1,068,835     1,592,844  

Add: Depreciation expense

   192,084     87,099     104,985     88,417     193,402     196,209     133,347     62,862     145,177     208,039  

Rent expense

   195,632     88,106     107,526     96,692     204,218     213,846     147,252     66,594     158,109     224,703  

Share-based expense

   19,120     8,867     10,253     12,119     22,372     26,625     18,482     8,143     23,872     32,015  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

EBITDAR

  $1,726,250    $674,882    $1,051,368    $775,096    $1,826,464    $1,931,483    $1,269,875    $661,608    $1,395,993    $2,057,601  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Debt

          $3,249,230            $3,606,309  

Capital lease obligations

           81,848             100,687  

Add: Rent x 6(1)

           1,225,308             1,348,218  
          

 

           

 

 

Adjusted debt

          $4,556,386            $5,055,214  
          

 

           

 

 

Adjusted debt / EDITDAR

           2.5  

Adjusted debt / EBITDAR

           2.5  
          

 

           

 

 
  A   B   A-B=C   D   C+D 

(in thousands, except ratio)

  Fiscal Year
Ended

August 28,
2010
   Thirty-Six
Weeks Ended

May  8,
2010
   Sixteen
Weeks
Ended

August 28,
2010
   Thirty-Six
Weeks
Ended

May  7,
2011
   Trailing
Four
Quarters
Ended

May 7,
2011
 

Net income

  $738,311    $469,378    $268,933    $547,505    $816,438  

Add: Interest expense

   158,909     109,483     49,426     116,745     166,171  

Income tax expense

   422,194     267,814     154,380     306,544     460,924  
  

 

   

 

   

 

   

 

   

 

 

EBIT

   1,319,414     846,675     472,739     970,794     1,443,533  

Add: Depreciation expense

   192,084     129,918     62,166     133,347     195,513  

Rent expense

   195,632     133,560     62,072     147,252     209,324  

Share-based expense

   19,120     13,215     5,905     18,482     24,387  
  

 

   

 

   

 

   

 

   

 

 

EBITDAR

  $1,726,250    $1,123,368    $602,882    $1,269,875    $1,872,757  
  

 

   

 

   

 

   

 

   

 

 

Debt

          $3,220,786  

Capital lease obligations

           83,027  

Add: Rent x 6(1)

           1,255,944  
          

 

 

Adjusted debt

          $4,559,757  
          

 

 

Adjusted debt / EBITDAR

           2.4  
          

 

 

 

(1)Rent is multiplied by a factor of six to capitalize operating leases in the determination of adjusted debt.

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-12,Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income, which amends Accounting Standards Codification (“ASC”) Topic 220,Comprehensive Income. The purpose of ASU 2011-12 is to defer the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05,Presentation of Comprehensive Income, until the FASB is able to reconsider operational concerns related to ASU 2011-05. All other requirements in ASU 2011-05 are not affected by ASU 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. We do not expect the provisions of ASU 2011-05 or ASU 2011-12 to have a material impact to our consolidated financial statements. The Company does not expect the provisions of ASU 2011-05 or ASU 2011-12 to have a material impact on the consolidated financial statements. Both ASU 2011-05 and ASU 2011-12 will be effective for our fiscal year ending August 31, 2013, including interim periods within that year.

Critical Accounting Policies

Preparation of our consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements, reported amounts of revenues and expenses during the reporting period and related disclosures of contingent liabilities. Our policies are evaluated on an ongoing basis, and our significant judgments and estimates are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results could differ under different assumptions or conditions.

Our critical accounting policies are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 27, 2011. Our critical accounting policies have not changed since the filing of our Annual Report on Form 10-K for the year ended August 27, 2011.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: credit market conditions; the impact of recessionary conditions; competition; product demand; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; energy prices; war and the prospect of war, including terrorist activity; construction delays; access to available and feasible financing; and changes in laws or regulations. Certain of these risks are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of our Annual Report on Form 10-K for the year ended August 27, 2011, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results; developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the “Risk Factors” could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results.

 

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

At February 11,May 5, 2012, there have been no material changes to our instruments and positions that are sensitive to market risk since the disclosures in our Annual Report on Form 10-K for the year ended August 27, 2011, except as described below.

The fair value of our debt was estimated at $3.730$3.896 billion as of February 11,May 5, 2012, and $3.633 billion as of August 27, 2011, based on the quoted market prices for the same or similar debt issues or on the current rates available to AutoZone for debt of the same terms. Such fair value is greater than the carrying value of debt by $265.6$289.7 million at February 11,May 5, 2012 and $281.0 million at August 27, 2011. We had $714.4$356.3 million of variable rate debt outstanding at February 11,May 5, 2012, and $601.7 million of variable rate debt outstanding at August 27, 2011. At these borrowing levels for variable rate debt, a one percentage point increase in interest rates would have had an unfavorable annual impact on our pre-tax earnings and cash flows of $7.1$3.6 million in fiscal 2012. The primary interest rate exposure on variable rate debt is based on LIBOR. We had outstanding fixed rate debt of $2.750$3.250 billion at February 11,May 5, 2012, and $2.750 billion at August 27, 2011. A one percentage point increase in interest rates would reduce the fair value of our fixed rate debt by $102.0$147.7 million at February 11,May 5, 2012.

 

Item 4.Controls and Procedures.

As of February 11,May 5, 2012, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of February 11,May 5, 2012. During or subsequent to the quarter ended February 11,May 5, 2012, there were no changes in our internal controls that have materially affected or are reasonably likely to materially affect, internal controls over financial reporting.

 

Item 4T.Controls and Procedures.

Not applicable.

PART II. OTHER INFORMATION

 

Item 1.Legal Proceedings.

AsWe were a defendant in a lawsuit entitled “Coalition for a Level Playing Field, L.L.C., et al., v. AutoZone, Inc. et al.,” filed in the U.S. District Court for the Southern District of New York in October 2004. The case was filed by more than 200 plaintiffs, which are principally automotive aftermarket warehouse distributors and jobbers, against a number of defendants, including automotive aftermarket retailers and aftermarket automotive parts manufacturers. The plaintiffs alleged, inter alia, that some or all of the dateautomotive aftermarket retailer defendants including AutoZone had knowingly received, in violation of this filing, therethe Robinson-Patman Act, from various of the manufacturer defendants benefits such as volume discounts, rebates, early buy allowances and other allowances, fees, and other payments including sham advertising and promotional payments that were not available to Plaintiffs.

In an order issued on September 16, 2010, the court granted motions to dismiss all claims against AutoZone and its co-defendant competitors and suppliers. The court ordered the case closed, but allowed plaintiffs to move for leave to file a third amended complaint. In an order dated September 28, 2011, the court denied the plaintiffs’ motion for leave to file a third amended complaint because the proposed third amended complaint failed to address deficiencies previously identified by the court. On October 26, 2011, plaintiffs filed an appeal of the dismissal in the U.S. Court of Appeals for the Second Circuit. Following mediation, on March 23, 2012, all parties settled the case pursuant to a confidential settlement agreement. On April 5, 2012, the case was withdrawn with prejudice from the U.S. Court of Appeals for the Second Circuit. On April 11, 2012, the case was dismissed with prejudice by the U.S. District Court for the Southern District of New York.

In 2004, we acquired a store site in Mount Ephraim, New Jersey that had previously been the site of a gasoline service station and contained evidence of groundwater contamination. Upon acquisition, we voluntarily reported the groundwater contamination issue to the New Jersey Department of Environmental Protection and entered into a Voluntary Remediation Agreement providing for the remediation of the contamination associated with the property. We have been noconducted and paid for (at an immaterial cost to us) remediation of visible contamination on the property and are investigating, and will be addressing, potential vapor intrusion impacts in downgradient residences and businesses. The New Jersey Department of Environmental Protection has indicated that it will assert that we are liable for the downgradient impacts under a joint and severable liability theory, and we intend to contest any such assertion. Pursuant to the Voluntary Remediation Agreement, upon completion of all remediation required by the agreement, we believe it should be eligible to be reimbursed up to 75 percent of qualified remediation costs by the State of New Jersey. We have asked the state for clarification that the agreement applies to off-site work, and the state is considering the request. Although the aggregate amount of additional costs that we may incur pursuant to the remediation cannot currently be ascertained, we do not currently believe that fulfillment of its obligations under the agreement or otherwise will result in costs that are material to its financial condition, results of operations or cash flow.

We are involved in various other legal proceedings incidental to the conduct of our business, including several lawsuits containing class-action allegations in which the plaintiffs are current and former hourly and salaried employees who allege various wage and hour violations and unlawful termination practices. We do not currently believe that, either individually or material developments in the legal proceedings disclosedaggregate, these matters will result in Part II, Item 1,liabilities material to our financial condition, results of our Quarterly Report on Form 10-Q for the quarterly period ended November 19, 2011.operations or cash flows.

 

Item 1A.Risk Factors.

As of the date of this filing, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended August 27, 2011.

 

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Shares of common stock repurchased by the Company during the quarter ended February 11,May 5, 2012, were as follows:

Issuer Repurchases of Equity Securities

 

Period

  Total Number
of Shares
Purchased
   Average
Price Paid
per Share
   Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
   Maximum Dollar
Value that May Yet
Be Purchased Under
the Plans or
Programs
 

November 20, 2011 to December 17, 2011

   —      $—       —      $658,861,646  

December 18, 2011 to January 14, 2012

   94,700     337.24     94,700     626,924,622  

January 15, 2012 to February 11, 2012

   405,957     346.26     405,957     486,356,822  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   500,657    $344.56     500,657    $486,356,822  
  

 

 

   

 

 

   

 

 

   

 

 

 

Period

  Total Number
of Shares
Purchased
   Average
Price Paid
per Share
   Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
   Maximum Dollar
Value that May Yet
Be Purchased
Under the Plans or
Programs
 

February 12, 2012 to March 10, 2012

   26,240    $381.09     26,240    $1,226,357,062  

March 11, 2012 to April 7, 2012

   596,123     378.43     596,123     1,000,767,275  

April 8, 2012 to May 5, 2012

   432,620     381.09     432,620     835,901,241  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,054,983    $379.58     1,054,983    $835,901,241  
  

 

 

   

 

 

   

 

 

   

 

 

 

During 1998, the Company announced a program permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company’s Board of Directors. The program was most recently amended on March 7, 2012, to increase the repurchase authorization to $11.9 billion from $11.15 billion and does not have an expiration date. All of the above repurchases were part of this program. Subsequent to February 11,May 5, 2012, the Company has repurchased 26,240893,910 shares of its common stock at an aggregate cost of $10.0$335.5 million.

Item 3.Defaults Upon Senior Securities.

Not applicable.

 

Item 4.Removed and Reserved.Mine Safety Disclosures

Not applicable.

 

Item 5.Other Information.

Not applicable.

Item 6.Exhibits.

The following exhibits are filed as part of this report:

 

        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 Fifth Amended and Restated By-laws of AutoZone, Inc. incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated September 28, 2011.
        4.1Officers’ Certificate dated April 24, 2012, pursuant to section 3.2 of the indenture dated August 8, 2003, setting forth the terms of the 3.700% Senior Notes due 2022. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated April 24, 2012.
        4.2Form of 3.700% Senior Notes due 2022. Incorporated by reference from the Form 8-K dated April 24, 2012.
      12.1 Computation of Ratio of Earnings to Fixed Charges.
      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 XBRL Instance Document
**101.SCH XBRL Taxonomy Extension Schema Document
**101.CAL XBRL Taxonomy Extension Calculation Document
**101.LAB XBRL Taxonomy Extension Labels Document
**101.PRE XBRL Taxonomy Extension Presentation Document
**101.DEF XBRL Taxonomy Extension Definition Document

 

*Management contract or compensatory plan or arrangement.
**In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

AUTOZONE, INC.
By: 

/s/ WILLIAM T. GILES

William T. Giles
Chief Financial Officer, Executive Vice President,
Finance, Information Technology and Store Development
(Principal Financial Officer)
By: 

/s/ CHARLIE PLEAS, III

Charlie Pleas, III
Senior Vice President, Controller
(Principal Accounting Officer)

Dated: March 8,June 13, 2012

EXHIBIT INDEX

The following exhibits are filed as part of this report:

 

        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 Fifth Amended and Restated By-laws of AutoZone, Inc. incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated September 28, 2011.
        4.1Officers’ Certificate dated April 24, 2012, pursuant to section 3.2 of the indenture dated August 8, 2003, setting forth the terms of the 3.700% Senior Notes due 2022. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated April 24, 2012.
        4.2Form of 3.700% Senior Notes due 2022. Incorporated by reference from the Form 8-K dated April 24, 2012.
      12.1 Computation of Ratio of Earnings to Fixed Charges.
      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 XBRL Instance Document
**101.SCH XBRL Taxonomy Extension Schema Document
**101.CAL XBRL Taxonomy Extension Calculation Document
**101.LAB XBRL Taxonomy Extension Labels Document
**101.PRE XBRL Taxonomy Extension Presentation Document
**101.DEF XBRL Taxonomy Extension Definition Document

 

*Management contract or compensatory plan or arrangement.
**In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

 

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