AutoZone 2013 Annual Report Download - page 106

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Notes to Consolidated Financial Statements
Note A – Significant Accounting Policies
Business: AutoZone, Inc. and its wholly owned subsidiaries (“AutoZone” or the “Company”) are principally a
retailer and distributor of automotive parts and accessories. At the end of fiscal 2013, the Company operated 4,836
stores in the United States (“U.S.”), including Puerto Rico; 362 stores in Mexico; and three stores in Brazil. 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. In 3,421 of
the domestic stores, select stores in Mexico, and the stores in Brazil, at the end of fiscal 2013, the Company had 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. The Company also
sells the ALLDATA brand automotive diagnostic and repair software through www.alldata.com. Additionally, the
Company sells automotive hard parts, maintenance items, accessories, and non-automotive products through
www.autozone.com, and accessories and performance parts through www.autoanything.com, and its commercial
customers can make purchases through www.autozonepro.com. The Company does not derive revenue from
automotive repair or installation services.
Fiscal Year: The Company’s fiscal year consists of 52 or 53 weeks ending on the last Saturday in August. Fiscal
2013 represented 53 weeks and fiscal 2012 and 2011 represented 52 weeks.
Basis of Presentation: The consolidated financial statements include the accounts of AutoZone, Inc. and its
wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates: Management of the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent liabilities to prepare these financial statements.
Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash equivalents consist of investments with original maturities of 90 days or less
at the date of purchase. Cash equivalents include proceeds due from credit and debit card transactions with
settlement terms of less than 5 days. Credit and debit card receivables included within cash and cash equivalents
were $39.8 million at August 31, 2013 and $34.0 million at August 25, 2012.
Cash balances are held in various locations around the world. Of the $142.2 million and $103.1 million of cash
and cash equivalents at August 31, 2013, and August 25, 2012, respectively, $38.2 million and $7.8 million,
respectively, were held outside of the U.S. and were generally utilized to support liquidity needs in foreign
operations. The Company intends to continue to permanently reinvest the cash held outside of the U.S. in its
foreign operations.
Accounts Receivable: Accounts receivable consists of receivables from commercial customers and vendors, and
are presented net of an allowance for uncollectible accounts. AutoZone routinely grants credit to certain of its
commercial customers. The risk of credit loss in its trade receivables is substantially mitigated by the Company’s
credit evaluation process, short collection terms and sales to a large number of customers, as well as the low dollar
value per transaction for most of its sales. Allowances for potential credit losses are determined based on
historical experience and current evaluation of the composition of accounts receivable. Historically, credit losses
have been within management’s expectations and the allowances for uncollectible accounts were $2.9 million at
August 31, 2013, and $2.4 million at August 25, 2012.
Merchandise Inventories: Inventories are stated at the lower of cost or market using the last-in, first-out method
for domestic inventories and the first-in, first out (“FIFO”) method for Mexico inventories. Included in inventory
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 our merchandise purchases,
was $283.7 million at August 31, 2013, and $270.4 million at August 25, 2012.
10-K