AutoZone 2014 Annual Report Download - page 134
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64
expense in the same periods will be recognized as a component of other comprehensive income. Those amounts
will be subsequently recognized as a component of net periodic pension expense on the same basis as the amounts
previously recognized in Accumulated other comprehensive loss.
The Company’s investment strategy for pension plan assets is to utilize a diversified mix of domestic and
international equity and fixed income portfolios to earn a long-term investment return that meets the Company’s
pension plan obligations. The pension plan assets are invested primarily in listed securities, and the pension plans
hold only a minimal investment in AutoZone common stock that is entirely at the discretion of third-party pension
fund investment managers. The Company’s largest holding classes, fixed income bonds and U.S. equities, are
invested with a fund manager that holds diversified portfolios. Accordingly, the Company does not have any
significant concentrations of risk in particular securities, issuers, sectors, industries or geographic regions.
Alternative investment strategies are in the process of being liquidated and constitute less than 1% of the pension
plan assets. The Company’s investment managers are prohibited from using derivatives for speculative purposes
and are not permitted to use derivatives to leverage a portfolio.
The following is a description of the valuation methodologies used for the Company’s investments measured at
fair value:
U.S., international, emerging, and high yield equities – These investments are commingled funds and are
valued using the net asset values, which are determined by valuing investments at the closing price or last
trade reported on the major market on which the individual securities are traded. These investments are
subject to annual audits.
Alternative investments – This category represents a hedge fund of funds made up of 9 different hedge fund
managers diversified over 4 different hedge strategies. The fair value of the hedge fund of funds is
determined using valuations provided by the third party administrator for each of the underlying funds.
Fixed income securities – The fair values of corporate, U.S. government securities and other fixed income
securities are estimated by using bid evaluation pricing models or quoted prices of securities with similar
characteristics.
Cash and cash equivalents – These investments include cash equivalents valued using exchange rates
provided by an industry pricing vendor and commingled funds valued using the net asset value. These
investments also include cash.
10-K