AutoZone 2004 Annual Report Download - page 41

42’04฀Annual฀Report
Notes฀to฀Consolidated฀Financial฀Statements฀
(continued)
On฀January฀1,฀2003,฀the฀Company฀introduced฀an฀enhanced฀defined฀contribution฀plan฀(“401(k)฀plan”)฀pursuant฀to฀Section฀401(k)฀of฀the฀
Internal฀Revenue฀Code฀that฀ replaced฀the฀previous฀401(k)฀plan.฀The฀ 401(k)฀plan฀covers฀ substantially฀all฀ employees฀ that฀meet฀the฀ plan’s฀
service฀ requirements.฀ The฀ new฀ plan฀ features฀ include฀ increased฀ Company฀ matching฀ contributions,฀ immediate฀ 100%฀ vesting฀ of฀ Company฀
contributions฀and฀an฀increased฀savings฀option฀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฀$8.8฀million฀in฀fiscal฀2004,฀$4.5฀million฀in฀fiscal฀year฀2003฀and฀$1.4฀million฀
in฀fiscal฀year฀2002.
Note฀J—Leases฀
Some฀of฀the฀Company’s฀retail฀stores,฀distribution฀centers฀and฀equipment฀are฀leased.฀Most฀of฀these฀leases฀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฀$116.9฀million฀in฀fiscal฀2004,฀$110.7฀million฀in฀fiscal฀2003฀and฀$99.0฀million฀in฀fiscal฀2002.฀Percentage฀rentals฀฀
were฀insignificant.
Minimum฀annual฀rental฀commitments฀under฀non-cancelable฀operating฀leases฀were฀as฀follows฀at฀the฀end฀of฀fiscal฀2004฀(in฀thousands):
Fiscal฀Year Amount
2005 $130,115
2006 119,846
2007 101,316
2008 81,675
2009 61,565
Thereafter 353,366
Total฀minimum฀payments฀required $847,883
In฀connection฀with฀the฀Company’s฀December฀2001฀sale฀of฀the฀TruckPro฀business,฀the฀Company฀subleased฀some฀properties฀to฀the฀purchaser฀
for฀an฀initial฀term฀of฀not฀less฀than฀20฀years.฀The฀Company’s฀remaining฀aggregate฀rental฀obligation฀at฀August฀28,฀2004฀of฀$30.1฀million฀is฀
included฀in฀the฀above฀table,฀but฀the฀obligation฀is฀entirely฀offset฀by฀the฀sublease฀rental฀agreement.
Note฀K—Restructuring฀and฀Closed฀Store฀Obligations฀
In฀fiscal฀2001,฀the฀Company฀recorded฀restructuring฀and฀impairment฀charges฀of฀$156.8฀million฀related฀to฀the฀planned฀closure฀of฀51฀domestic฀
auto฀parts฀stores฀and฀the฀disposal฀of฀real฀estate฀projects฀in฀process฀and฀excess฀properties.฀In฀fiscal฀2002,฀these฀stores฀were฀closed,฀and฀
sales฀of฀certain฀excess฀properties฀resulted฀in฀gains฀of฀approximately฀$2.6฀million.฀During฀fiscal฀2002,฀all฀remaining฀excess฀properties฀were฀
reevaluated.฀At฀that฀time,฀it฀was฀determined฀that฀several฀properties฀could฀be฀developed.฀This฀resulted฀in฀the฀reversal฀of฀accrued฀lease฀obliga-
tions฀totaling฀$6.4฀million.฀It฀was฀also฀determined฀that฀additional฀write-downs฀totaling฀$9.0฀million฀were฀needed฀to฀state฀remaining฀excess฀
properties฀at฀fair฀value.฀AutoZone฀recognized฀gains฀of฀$4.8฀million฀in฀fiscal฀2004฀and฀$4.6฀million฀in฀fiscal฀2003฀as฀a฀result฀of฀the฀develop-
ment,฀negotiated฀lease฀buy-out฀or฀disposition฀of฀properties฀associated฀with฀the฀restructuring฀and฀impairment฀charges฀in฀fiscal฀2001.
In฀December฀2001,฀TruckPro฀was฀sold฀to฀a฀group฀of฀investors฀for฀cash฀proceeds฀of฀$25.7฀million฀and฀a฀promissory฀note.฀The฀Company฀had฀
deferred฀a฀gain฀of฀$3.6฀million฀related฀to฀the฀sale฀due฀to฀uncertainties฀associated฀with฀the฀realization฀of฀the฀gain.฀During฀fiscal฀2003,฀the฀
note฀(with฀a฀face฀value฀of฀$4.5฀million)฀was฀repaid฀to฀the฀Company฀and฀certain฀liabilities฀were฀settled.฀As฀a฀result,฀a฀total฀gain฀of฀$4.7฀mil-
lion฀was฀recognized฀into฀income฀during฀fiscal฀2003.
From฀ time฀to฀time฀the฀Company฀ will฀close฀under-performing฀leased฀stores.฀The฀remaining฀minimum฀lease฀ obligations฀and฀other฀ carrying฀
costs฀of฀these฀properties฀are฀accrued฀upon฀the฀store฀closing.฀The฀following฀table฀presents฀a฀summary฀of฀the฀closed฀store฀obligations฀seg-
mented฀by฀those฀obligations฀originating฀from฀the฀2001฀restructuring฀and฀all฀other฀store฀closings:
(in฀thousands) Restructuring ฀ All฀Other ฀ Total
Balance฀at฀August฀31,฀2002 $18,140 $34,332 $52,472
Cash฀outlays/adjustments 5,664 ฀ 19,970 ฀ 25,634
Balance฀at฀August฀30,฀2003 12,476 14,362 ฀26,838
Cash฀outlays/adjustments 10,276 ฀ 5,376 ฀ 15,652
Balance฀at฀August฀28,฀2004 $฀ 2,200 ฀ $฀ 8,986 ฀ $฀11,186