AutoZone 2010 Annual Report Download - page 150

As the plan benefits are frozen, increases in future compensation levels no longer impact the calculation and
there is no service cost. The discount rate is determined as of the measurement date and is based on the
calculated yield of a portfolio of high-grade corporate bonds with cash flows that generally match the
Company’s expected benefit payments in future years. The expected long-term rate of return on plan assets is
based on the historical relationships between the investment classes and the capital markets, updated for
current conditions.
The Company makes annual contributions in amounts at least equal to the minimum funding requirements of
the Employee Retirement Income Security Act of 1974. The Company contributed approximately $12 thousand
to the plans in fiscal 2010, $18 thousand to the plans in fiscal 2009 and $1.3 million to the plans in fiscal
2008. The Company expects to contribute approximately $3 million to the plan in fiscal 2011; 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.
Based on current assumptions about future events, benefit payments are expected to be paid as follows for
each of the following fiscal years. Actual benefit payments may vary significantly from the following
estimates:
(in thousands)
Benefit
Payments
2011 ......................................................................................................................................................... $ 5,907
2012 ......................................................................................................................................................... 6,581
2013 ......................................................................................................................................................... 7,281
2014 ......................................................................................................................................................... 7,910
2015 ......................................................................................................................................................... 8,544
2016 — 2020 ........................................................................................................................................... 52,047
The Company has a 401(k) plan that covers all domestic employees who meet the plan’s participation
requirements. The plan features include Company matching contributions, immediate 100% vesting of
Company contributions and a savings option up to 25% of qualified earnings. The Company makes matching
contributions, per pay period, up to a specified percentage of employees’ contributions as approved by the
Board of Directors. The Company made matching contributions to employee accounts in connection with the
401(k) plan of $11.7 million in fiscal 2010, $11.0 million in fiscal 2009 and $10.8 million in fiscal 2008.
Note M — Leases
The Company leases some of its retail stores, distribution centers, facilities, land and equipment, including
vehicles. Most of these leases are operating leases and include renewal options, at the Company’s election, and
some include options to purchase and provisions for percentage rent based on sales. Rental expense was
$195.6 million in fiscal 2010, $181.3 million in fiscal 2009, and $165.1 million in fiscal 2008. Percentage
rentals were insignificant.
The Company has a fleet of vehicles used for delivery to its commercial customers and travel for members of
field management. The majority of these vehicles are held under capital lease. At August 28, 2010, the
Company had capital lease assets of $85.8 million, net of accumulated amortization of $20.4 million, and
capital lease obligations of $88.3 million, of which $21.9 million is classified as accrued expenses and other
as it represents the current portion of these obligations. At August 29, 2009, the Company had capital lease
assets of $53.9 million, net of accumulated amortization of $25.4 million, and capital lease obligations of
$54.8 million, of which $16.7 million was classified as accrued expenses and other.
The Company records rent for all operating leases on a straight-line basis over the lease term, including any
reasonably assured renewal periods and the period of time prior to the lease term that the Company is in
possession of the leased space for the purpose of installing leasehold improvements. Differences between
recorded rent expense and cash payments are recorded as a liability in accrued expenses and other and other
long-term liabilities in the accompanying Consolidated Balance Sheets. The deferred rent approximated
$67.6 million on August 28, 2010, and $59.5 million on August 29, 2009.
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10-K