AutoZone 2011 Annual Report Download - page 87

fiscal 2009, our capital expenditures have increased by approximately 2%, 16% and 12%, respectively, as
compared to the prior year. 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 over the previous three years, and we expect this trend to continue during 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 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 credit ratings and favorable experiences in the debt markets in the past.
For the fiscal year ended August 27, 2011, our after-tax return on invested capital (“ROIC”) was 31.3% as
compared to 27.6% 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.
The revolving credit facility agreement requires that our 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. Our consolidated interest
coverage ratio as of August 27, 2011 was 4.44:1.
As the available balance is reduced by commercial paper borrowings and certain outstanding letters of credit, we
had $200.7 million in available capacity under our previous revolving credit facility at August 27, 2011.
Assuming the amended and restated revolving credit facility had been executed as of our balance sheet date, we
would have had $400.7 million in available capacity under the facility at August 27, 2011.
In June 2010, we entered into a letter of credit facility that allows us to request the participating bank 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 August 27, 2011, we have $92.9
million in letters of credit outstanding under the letter of credit facility, which expires in June 2013.
On November 15, 2010, we issued $500 million in 4.000% Senior Notes due 2020 under our shelf registration
statement filed with the Securities and Exchange Commission on July 29, 2008 (the “Shelf Registration”). The
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10-K