XML 37 R21.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Pension and Savings Plans | 12 Months Ended
--- | ---
Aug. 26, 2017
Retirement Benefits [Abstract] |
Pension and Savings Plans | Note L – Pension and Savings Plans Prior to January 1, 2003, substantially all full-time employees were covered by a defined benefit pension plan. The benefits under the plan were based on years of service and the employee’s highest consecutive five-year average compensation. On January 1, 2003, the plan was frozen. Accordingly, pension plan participants will earn no new benefits under the plan formula and no new participants will join the pension plan. On January 1, 2003, the Company’s supplemental defined benefit pension plan for certain highly compensated employees was also frozen. Accordingly, plan participants will earn no new benefits under the plan formula and no new participants will join the pension plan. The Company has recognized the unfunded status of the defined pension plans in its Consolidated Balance Sheets, which represents the difference between the fair value of pension plan assets and the projected benefit obligations of its defined benefit pension plans. The net unrecognized actuarial losses and unrecognized prior service costs are recorded in Accumulated other comprehensive loss. These amounts will be subsequently recognized as net periodic benefit cost pursuant to the Company’s historical accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic benefit cost 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 benefit cost 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 may 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 were fully liquidated during fiscal 2016. 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 various investments in limited partnerships, limited liability companies and corporations. The fair value of the hedge fund of funds is determined using valuations provided by third party administrators 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. The fair values of investments by level and asset category and the weighted-average asset allocations of the Company’s pension plans at the measurement date are presented in the following table:
August 26, 2017 |
|  | Fair |  |  | Asset Allocation |  |  |  |  | Fair Value Hierarchy |
(in thousands) |  | Value |  |  | Actual |  |  | Target |  |  |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
U.S. equities |  | $ | 50,125 |  |  |  | 15.8 | % |  |  | 17.0 | % |  |  |  | $ | — |  |  | $ | 50,125 |  |  | $ | — |
International equities |  |  | 33,696 |  |  |  | 10.7 |  |  |  | 11.0 |  |  |  |  |  | — |  |  |  | 33,696 |  |  |  | — |
Emerging equities |  |  | 19,027 |  |  |  | 6.0 |  |  |  | 6.0 |  |  |  |  |  | — |  |  |  | 19,027 |  |  |  | — |
High yield securities |  |  | 17,063 |  |  |  | 5.4 |  |  |  | 6.0 |  |  |  |  |  | — |  |  |  | 17,063 |  |  |  | — |
Alternative investments |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  | — |  |  |  | — |
Fixed income securities |  |  | 178,650 |  |  |  | 56.5 |  |  |  | 60.0 |  |  |  |  |  | — |  |  |  | 178,650 |  |  |  | — |
Cash and cash equivalents |  |  | 17,706 |  |  |  | 5.6 |  |  |  | — |  |  |  |  |  | — |  |  |  | 17,706 |  |  |  | — |
|  | $ | 316,267 |  |  |  | 100.0 | % |  |  | 100.0 | % |  |  |  | $ | — |  |  | $ | 316,267 |  |  | $ | — |
August 27, 2016 |
|  | Fair |  |  | Asset Allocation |  |  |  |  | Fair Value Hierarchy |
(in thousands) |  | Value |  |  | Actual |  |  | Target |  |  |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
U.S. equities |  | $ | 66,008 |  |  |  | 22.9 | % |  |  | 26.0 | % |  |  |  | $ | — |  |  | $ | 66,008 |  |  | $ | — |
International equities |  |  | 42,023 |  |  |  | 14.5 |  |  |  | 17.0 |  |  |  |  |  | — |  |  |  | 42,023 |  |  |  | — |
Emerging equities |  |  | 22,848 |  |  |  | 7.9 |  |  |  | 8.5 |  |  |  |  |  | — |  |  |  | 22,848 |  |  |  | — |
High yield securities |  |  | 21,445 |  |  |  | 7.4 |  |  |  | 8.5 |  |  |  |  |  | — |  |  |  | 21,445 |  |  |  | — |
Alternative investments |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  | — |  |  |  | — |
Fixed income securities |  |  | 99,336 |  |  |  | 34.3 |  |  |  | 40.0 |  |  |  |  |  | — |  |  |  | 99,336 |  |  |  | — |
Cash and cash equivalents |  |  | 37,726 |  |  |  | 13.0 |  |  |  | — |  |  |  |  |  | — |  |  |  | 37,726 |  |  |  | — |
|  | $ | 289,386 |  |  |  | 100.0 | % |  |  | 100.0 | % |  |  |  | $ | — |  |  | $ | 289,386 |  |  | $ | — |
The asset allocations in the charts above include $17.5 million and $48.0 million in cash contributions made in the last month prior to the balance sheet date of August 26, 2017, and August 27, 2016, respectively. Subsequent to August 26, 2017, and August 27, 2016, these cash contributions were allocated to the pension plan investments in accordance with the targeted asset allocation. In January 2017, the Company’s Investment Committee approved a revised asset allocation target for the investments held by the pension plan. Based on the revised asset allocation target, the expected long-term rate of return on plan assets changed from 7.0% for the year ended August 26, 2017 to 6.0% for the year ending August 25, 2018. The following table sets forth the plans’ funded status and amounts recognized in the Company’s Consolidated Balance Sheets:
(in thousands) |  | August 26, 2017 |  |  | August 27, 2016 |
Change in Projected Benefit Obligation: |  |  |  |  |  |  |  |
Projected benefit obligation at beginning of year |  | $ | 328,511 |  |  | $ | 296,123 |
Interest cost |  |  | 10,335 |  |  |  | 11,272 |
Actuarial (gains) losses |  |  | (8,746 | ) |  |  | 39,842 |
Benefits paid |  |  | (15,376 | ) |  |  | (18,726 | )
Benefit obligations at end of year |  | $ | 314,724 |  |  | $ | 328,511 |
Change in Plan Assets: |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | $ | 289,386 |  |  | $ | 238,755 |
Actual return on plan assets |  |  | 24,496 |  |  |  | 16,636 |
Employer contributions |  |  | 17,761 |  |  |  | 52,721 |
Benefits paid |  |  | (15,376 | ) |  |  | (18,726 | )
Fair value of plan assets at end of year |  | $ | 316,267 |  |  | $ | 289,386 |
Amount Recognized in the Statement of Financial Position: |  |  |  |  |  |  |  |
Current liabilities |  | $ | (283 | ) |  | $ | (276 | )
Long-term assets |  |  | 8,686 |  |  |  | — |
Long-term liabilities |  |  | (6,860 | ) |  |  | (38,849 | )
Net amount recognized |  | $ | 1,543 |  |  | $ | (39,125 | )
Amount Recognized in Accumulated Other Comprehensive Loss and not yet reflected in Net Periodic Benefit Cost: |  |  |  |  |  |  |  |
Net actuarial loss |  | $ | (118,889 | ) |  | $ | (145,948 | )
Accumulated other comprehensive loss |  | $ | (118,889 | ) |  | $ | (145,948 | )
Amount Recognized in Accumulated Other Comprehensive Loss and not yet reflected in Net Periodic Benefit Cost and expected to be amortized in next year’s Net Periodic Benefit Cost: |  |  |  |  |  |  |  |
Net actuarial loss |  | $ | (10,736 | ) |  | $ | (13,874 | )
Amount recognized |  | $ | (10,736 | ) |  | $ | (13,874 | )
Net periodic benefit expense consisted of the following:
|  | Year Ended |
(in thousands) |  | August 26, 2017 |  |  | August 27, 2016 |  |  | August 29, 2015 |
Interest cost |  | $ | 10,335 |  |  | $ | 11,272 |  |  | $ | 12,338 |
Expected return on plan assets |  |  | (20,056 | ) |  |  | (16,512 | ) |  |  | (16,281 | )
Recognized net actuarial losses |  |  | 13,873 |  |  |  | 10,506 |  |  |  | 8,941 |
Net periodic benefit expense |  | $ | 4,152 |  |  | $ | 5,266 |  |  | $ | 4,998 |
The blended actuarial assumptions used in determining the projected benefit obligation include the following:
|  | Year Ended |
|  | August 26, 2017 |  |  | August 27, 2016 |  |  | August 29, 2015 |
Discount rate to determine benefit obligation |  |  | 3.86 | % |  |  | 3.72 | % |  |  | 4.50 | %
Discount rate to determine net interest cost |  |  | 3.21 | % |  |  | 3.90 | % |  |  | 4.28 | %
Expected long-term rate of return on plan assets |  |  | 7.00 | % |  |  | 7.00 | % |  |  | 7.00 | %
As the plan benefits are frozen, increases in future compensation levels no longer impact the calculation and there is no service cost. The discount rate to determine the projected benefit obligation is determined as of the measurement date and is based on the calculated yield of a portfolio of high-grade corporate bonds with cash flows that generally match the Company’s expected benefit payments in future years. During fiscal 2016, the Company changed the method used to estimate the interest cost component of net periodic benefit cost. Previously, the Company estimated interest cost using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation. The Company elected to utilize a spot rate approach by applying specific spot rates along the yield curve to calculate interest costs instead of a single weighted-average discount rate. This calculation is believed to be more refined under the applicable accounting standard. The impact of this change to net periodic benefit cost was a reduction of $1.8 million in fiscal 2016. The Company accounted for this change as a change in accounting estimate and accounted for it prospectively. The expected long-term rate of return on plan assets is based on the historical relationships between the investment classes and the capital markets, updated for current conditions. The Company makes annual contributions in amounts at least equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974. The Company contributed $17.8 million to the plans in fiscal 2017, $52.7 million to the plans in fiscal 2016 and $17.1 million to the plans in fiscal 2015. The Company expects to contribute approximately $20.3 million to the plans in fiscal 2018; however, a change to the expected cash funding may be impacted by a change in interest rates or a change in the actual or expected return on plan assets or through other plans initiated by management. Based on current assumptions about future events, benefit payments are expected to be paid as follows for each of the following fiscal years. Actual benefit payments may vary significantly from the following estimates:
(in thousands) |  | Benefit Payments |
2018 |  | $ | 13,608 |
2019 |  |  | 13,139 |
2020 |  |  | 13,817 |
2021 |  |  | 14,538 |
2022 |  |  | 14,917 |
2023 – 2027 |  |  | 79,742 |
The Company has a 401(k) plan that covers all domestic employees who meet the plan’s participation requirements. The plan features include Company matching contributions, immediate 100% vesting of Company contributions and a savings option up 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. The Company made matching contributions to employee accounts in connection with the 401(k) plan of $21.0 million in fiscal 2017, $19.7 million in fiscal 2016, and $17.7 million in fiscal 2015.

X
- References No definition available. + Details
Name: | us-gaap_CompensationAndRetirementDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
Name: | us-gaap_PensionAndOtherPostretirementBenefitsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration