AutoZone 2011 Annual Report Download - page 118

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other stores. Fuel is not a material component of the Company’s operating costs; however, the Company attempts
to reduce fuel cost volatility in its operating results. Because unleaded and diesel fuel include transportation costs
and taxes, there are limited opportunities to hedge this exposure directly.
The Company had no fuel hedges during fiscal 2011 and 2010. During fiscal year 2009, the Company used a
derivative financial instrument to economically hedge the commodity cost associated with its unleaded fuel. The
notional amount of the contract was 2.5 million gallons and terminated August 31, 2009. The loss on the fuel
contract for fiscal 2009 was $2.3 million.
Note I – Financing
The Company’s long-term debt consisted of the following:
(in thousands)
August 27,
2011
August 28,
2010
4.750% Senior Notes due November 2010, effective interest rate of 4.17%......
.
$
–
$ 199,300
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
–
Commercial paper, weighted average interest rate of 0.4% at August 27,
2011, and 0.4% at August 28, 2010 ................................................................
.
567,600
433,000
$ 3,317,600 $ 2,882,300
As of August 27, 2011, the commercial paper borrowings mature in the next twelve months but are classified as
long-term in the Company’s 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 new $1.0 billion revolving credit facility, expiring in September 2016 that
would allow it to replace these short-term obligations with long-term financing.
In addition to the long-term debt discussed above, the Company had $34.1 million of short-term borrowings that
are scheduled to mature in the next twelve months as of August 27, 2011. The short-term borrowings are
unsecured, peso denominated borrowings and accrue interest at 4.85% as of August 27, 2011.
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 revolving credit facility agreement requires that the Company’s consolidated interest coverage ratio as of the
last day of each quarter shall be no less than 2.50:1. This ratio is defined as the ratio of (i) consolidated earnings
before interest, taxes and rents to (ii) consolidated interest expense plus consolidated rents. The Company’s
consolidated interest coverage ratio as of August 27, 2011 was 4.44:1.
56
10-K