AutoZone 2014 Annual Report Download - page 94

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was also impaired. We recorded an impairment charge of $4.1 million during the fourth quarter of fiscal 2013
related to the trade name.
Based on the revised plan financial results, we also determined AutoAnything is not likely to achieve the
operating income targets necessary to earn the contingent consideration. Therefore, we adjusted the fair value of
the contingent consideration at August 31, 2013 to $0.2 million, resulting in a decrease to the contingent
consideration liability of $23.3 million during the fourth quarter of fiscal 2013. The net impact of the impairment
charges and the contingent consideration adjustment is a gain of $0.9 million for fiscal 2013. The net impact is
included in Operating, selling, general and administrative expenses in our Other business activities.
Seasonality and Quarterly Periods
Our business is somewhat seasonal in nature, with the highest sales typically occurring in the spring and summer
months of February through September, in which average weekly per-store sales historically have been about 15%
to 25% higher than in the slower months of December and January. During short periods of time, a store’s sales
can be affected by weather conditions. Extremely hot or extremely cold weather may enhance sales by causing
parts to fail; thereby increasing sales of seasonal products. Mild or rainy weather tends to soften sales, as parts
failure rates are lower in mild weather, with elective maintenance deferred during periods of rainy weather. Over
the longer term, the effects of weather balance out, as we have stores throughout the United States, Puerto Rico,
Mexico and Brazil.
Each of the first three quarters of our fiscal year consists of 12 weeks, and the fourth quarter consisted of 16
weeks in 2014, 17 weeks in 2013, and 16 weeks in 2012. Because the fourth quarter contains seasonally high sales
volume and consists of 16 or 17 weeks, compared with 12 weeks for each of the first three quarters, our fourth
quarter represents a disproportionate share of the annual net sales and net income. The fourth quarter of fiscal year
2014 represented 32.2% of annual sales and 34.9% of net income; the fourth quarter of fiscal 2013 represented
33.8% of annual sales and 36.5% of net income; and the fourth quarter of fiscal 2012 represented 32.1% of annual
sales and 34.8% of net income.
Liquidity and Capital Resources
The primary source of our liquidity is our cash flows realized through the sale of automotive parts and products.
Net cash provided by operating activities was $1.341 billion in fiscal 2014, $1.415 billion in fiscal 2013, and
$1.224 billion in fiscal 2012. Cash flows from operations are unfavorable to last year due to the change in
inventories net of payables, partially offset by the growth in net income. We had an accounts payable to inventory
ratio of 114.9% at August 30, 2014, 115.6% at August 31, 2013, and 111.4% at August 25, 2012. Our inventory
increases are primarily attributable to our efforts to update product assortments in all of our stores and an
increased number of stores. During fiscal 2013 and 2014, we initiated a variety of strategic tests focused on
increasing inventory availability, which increased our inventory per store. Many of our vendors have supported
our initiative to update our product assortments by providing extended payment terms. These extended payment
terms have allowed us to continue our high accounts payable to inventory ratio.
Our primary capital requirement has been the funding of our continued new-store development program. From the
beginning of fiscal 2012 to August 30, 2014, we have opened 580 new stores. Net cash flows used in investing
activities were $448.0 million in fiscal 2014, compared to $527.3 million in fiscal 2013, and $374.8 million in
fiscal 2012. We invested $438.1 million in capital assets in fiscal 2014, compared to $414.5 million in fiscal 2013,
and $378.1 million in fiscal 2012. The increase in capital expenditures during this time was primarily attributable
to the number and types of stores opened and increased investment in our existing stores. New store openings
were 190 for fiscal 2014, 197 for fiscal 2013, and 193 for fiscal 2012. Cash flows used for purchasing intangibles
were $11.1 million for fiscal 2014. Cash flows used in the acquisition of AutoAnything were $116.1 million
during fiscal 2013. There were no purchases of intangibles or acquisitions in fiscal 2012. We invest a portion of
our assets held by our wholly owned insurance captive in marketable securities. We purchased $49.7 million of
marketable securities in fiscal 2014, $44.5 million in fiscal 2013, and $45.7 million in fiscal 2012. We had
proceeds from the sale of marketable securities of $46.8 million in fiscal 2014, $37.9 million in fiscal 2013, and
$42.4 million in fiscal 2012. Capital asset disposals provided proceeds of $4.2 million in fiscal 2014, $9.8 million
in fiscal 2013, and $6.6 million in fiscal 2012.
10-K