Washington, D.C. 20549
_____________
Form 10-K/A
[X] Annual Report under section 13 or 15(d)
of the Securities Exchange Act of 1934 for the fiscal year ended
August 28, 1999,
or
[ ] Transition report pursuant to section
13 or 15(d) of the Securities Exchange Act of 1934 For the transition period
from _____to
_____.
Commission file number 1-10714
AUTOZONE, INC.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
123 South Front Street, Memphis, Tennessee 38103
(Address of principal executive offices) (Zip Code)
(901) 495-6500
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
|
|
on which registered |
|
($.01 par value) |
|
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 0(§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the 126,263,042 shares of voting stock
of the registrant held by non-affiliates of the registrant (excluding,
for this purpose, shares held by officers, directors, or 10% stockholders)
was $3,432,776,454 based on the last sales price of the Common Stock on
October 12, 1999 as reported on the New York Stock Exchange. The number
of shares of Common Stock outstanding as of October 12, 1999, was 138,935,636.
Documents Incorporated By Reference
Portions of the Annual Report to Stockholders for the year ended August 28, 1999, filed as Exhibit 13.1 hereto, are incorporated by reference into Part II.
Portions of the definitive Proxy Statement dated October 25, 1999, for
the Annual Meeting of Stockholders to be held December 9, 1999, are incorporated
by reference into Part III.
NOTE:
This amended Form 10-K is being filed to physically attach excerpts from the Annual Report to Stockholders as Exhibit 13.1. The Annual Report had previously been provided as EDGAR form type ARS and incorporated by reference. The information contained in Exhibit 13.1 is unchanged from the information contained in the Annual Report as previously provided.
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters
Common Stock Market Prices
for our common stock as traded on the New York Stock Exchange as shown
in the section labeled "Quarterly Summary" of Exhibit 13.1 attached hereto
are incorporated herein by reference.
At October 12, 1999, we had
3,337 stockholders of record, excluding the number of beneficial owners
whose shares were represented by security position listings.
Item 6. Selected Financial Data
Selected financial data contained
in the section entitled "Ten-Year Review" of Exhibit 13.1 attached hereto
are incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The section entitled "Financial
Review" of Exhibit 13.1 attached hereto is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The subsection entitled "Financial
Market Risk" of the section entitled "Financial Review" of Exhibit 13.1
attached hereto is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements
and related notes and the section entitled "Quarterly Summary" of Exhibit
13.1 attached hereto are incorporated herein by reference.
PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports On
Form 8-K
(a) 1. Financial Statements
The following financial statements
included in the Annual Report to Stockholders for the fiscal year ended
August 28, 1999, are incorporated by reference in Item 8:
Consolidated Statements of Income for the fiscal years ended August
28, 1999, August 29, 1998, and August 30, 1997
Consolidated Balance Sheets as of August 28, 1999, and August 29, 1998
Consolidated Statements of Stockholders' Equity for the fiscal years
ended August 28, 1999, August 29, 1998, and August 30, 1997
Consolidated Statements of Cash Flows for the fiscal years ended August
28, 1999, August 29, 1998, and August 30, 1997
Notes to Consolidated Financial Statements All other schedules are omitted
because the information is not required or because the information required
is included in the financial statements or notes thereto.
3. The following exhibits are filed as a part of this report:
(b) Reports on Form 8-K.
The Company filed a Current
Report on Form 8-K dated May 26, 1999, which contained a press release
announcing the Company's financial results for the quarter ended May 8,
1999.
SIGNATURES Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AUTOZONE, INC.
By: /s/ Harry L. Goldsmith
Dated: March 4, 2002
SCHEDULE II
AUTOZONE, INC.
(1) Cost of product for warranty replacements, net of
salvage and amounts collected from customers.
__________________
Ten-Year Review
(in thousands, except per share data and selected operating data)
5-Year 10-Year
Compound Compound Fiscal Year Ended August
Growth Growth 1999 1998
----------------------------
Income Net sales.............................................. 22% 23% $4,116,392 $3,242,922
Statement Cost of sales, including warehouse and
Data delivery expenses................................... 2,384,970 1,889,847
Operating, selling, general and
administrative expenses............................. 1,298,327 970,768
----------------------------
Operating profit....................................... 18% 33% 433,095 382,307
Interest income (expense) - net........................ (45,312) (18,204)
----------------------------
Income before income taxes............................. 15% 38% 387,783 364,103
Income taxes........................................... 143,000 136,200
----------------------------
Net income............................................. 16% 39% $ 244,783 $ 227,903
============================
Diluted earnings per share............................. 16% 37% $1.63 $1.48
============================
Adjusted weighted average shares for
diluted earnings per share.......................... 150,257 154,070
Balance Sheet Current assets......................................... $1,225,084 $1,117,090
Data Working capital........................................ 224,530 257,261
Total assets........................................... 3,284,767 2,748,113
Current liabilities.................................... 1,000,554 859,829
Debt................................................... 888,340 545,067
Stockholders' equity................................... 1,323,801 1,302,057
Selected Number of domestic auto parts stores
Operating Data at beginning of year................................ 2,657 1,728
New stores........................................ 245 952
Replacement stores................................ 59 12
Closed stores..................................... 191 23
Net new stores.................................... 54 929
Number of domestic auto parts stores at end of year.... 2,711 2,657
Total domestic auto parts store square footage (000's). 17,405 16,499
Percentage increase in domestic auto parts store
square footage...................................... 5% 42%
Percentage increase in domestic auto parts
comparable store net sales.......................... 4% 2%
Average net sales per domestic auto parts store (000's) $1,465 $1,568
Average net sales per domestic auto parts store
square foot......................................... $232 $238
Total employment....................................... 40,483 38,526
Gross profit - percentage of sales..................... 42.1% 41.7%
Operating profit - percentage of sales................. 10.5% 11.8%
Net income - percentage of sales....................... 5.9% 7.0%
Debt-to-capital - percentage........................... 40.2% 29.5%
Inventory turnover..................................... 2.3x 2.3x
Return on average equity............................... 19% 19%
*53 weeks. Comparable store sales, average net sales per store and average
net sales per store square foot for fiscal year 1996 and 1991 have been
adjusted to exclude net sales for the 53rd week.
Fiscal Year Ended August
1997 1996* 1995
------------------------------------------
Income Net sales........................................................... $2,691,440 $2,242,633 $1,808,131
Statement Data Cost of sales, including warehouse and delivery expenses............ 1,559,296 1,307,638 1,057,033
Operating, selling, general and administrative expenses............. 810,793 666,061 523,440
------------------------------------------
Operating profit.................................................... 321,351 268,934 227,658
Interest income (expense) - net..................................... (8,843) (1,969) 623
------------------------------------------
Income before income taxes.......................................... 312,508 266,965 228,281
Income taxes........................................................ 117,500 99,800 89,500
------------------------------------------
Net income.......................................................... $ 195,008 $ 167,165 $ 138,781
==========================================
Diluted earnings per share.......................................... $1.28 $1.11 $0.93
==========================================
Adjusted weighted average shares for diluted earnings per share..... 152,535 151,238 149,302
Balance Sheet Current assets...................................................... $ 778,802 $ 613,097 $ 447,822
Data Working capital..................................................... 186,350 219 30,273
Total assets........................................................ 1,884,017 1,498,397 1,111,778
Current liabilities................................................. 592,452 612,878 417,549
Debt................................................................ 198,400 94,400 13,503
Stockholders' equity................................................ 1,075,208 865,582 684,710
Selected Number of domestic auto parts stores at beginning of year........... 1,423 1,143 933
Operating Data New stores..................................................... 308 280 210
Replacement stores............................................. 17 31 29
Closed stores.................................................. 3 0 0
Net new stores................................................. 305 280 210
Number of domestic auto parts stores at end of year................. 1,728 1,423 1,143
Total domestic auto parts store square footage (000's).............. 11,611 9,437 7,480
Percentage increase in domestic auto parts store square footage..... 23% 26% 26%
Percentage increase in domestic auto parts comparable
store net sales................................................ 8% 6% 6%
Average net sales per domestic auto parts store (000's)............. $1,691 $1,702 $1,742
Average net sales per domestic auto parts store square foot......... $253 $258 $269
Total employment.................................................... 28,700 26,800 20,200
Gross profit - percentage of sales.................................. 42.0% 41.7% 41.5%
Operating profit - percentage of sales.............................. 11.9% 12.0% 12.6%
Net income - percentage of sales.................................... 7.2% 7.5% 7.7%
Debt-to-capital - percentage........................................ 15.6% 9.8% 1.9%
Inventory turnover.................................................. 2.5x 2.7x 2.9x
Return on average equity............................................ 20% 22% 23%
Fiscal Year Ended August
1994 1993 1992
------------------------------------------
Income Net sales........................................................... $1,508,029 $1,216,793 $1,002,327
Statement Data Cost of sales, including warehouse and delivery expenses............ 886,068 731,971 602,956
Operating, selling, general and administrative expenses............. 431,219 344,060 295,701
------------------------------------------
Operating profit.................................................... 190,742 140,762 103,670
Interest income (expense) - net..................................... 2,244 2,473 818
------------------------------------------
Income before income taxes.......................................... 192,986 143,235 104,488
Income taxes........................................................ 76,600 56,300 41,200
------------------------------------------
Net income.......................................................... $ 116,386 $ 86,935 $ 63,288
==========================================
Diluted earnings per share.......................................... $0.78 $0.59 $0.43
==========================================
Adjusted weighted average shares for diluted earnings per share..... 148,726 147,608 145,940
Balance Sheet Current assets...................................................... $ 424,402 $ 378,467 $ 279,350
Data Working capital..................................................... 85,373 92,331 72,270
Total assets........................................................ 882,102 696,547 501,048
Current liabilities................................................. 339,029 286,136 207,080
Debt................................................................ 4,252 4,458 7,057
Stockholders' equity................................................ 528,377 396,613 278,120
Selected Number of domestic auto parts stores at beginning of year........... 783 678 598
Operating Data New stores..................................................... 151 107 82
Replacement stores............................................. 20 20 14
Closed stores.................................................. 1 2 2
Net new stores................................................. 150 105 80
Number of domestic auto parts stores at end of year................. 933 783 678
Total domestic auto parts store square footage (000's).............. 5,949 4,839 4,043
Percentage increase in domestic auto parts store square footage..... 23% 20% 17%
Percentage increase in domestic auto parts comparable store
net sales...................................................... 9% 9% 15%
Average net sales per domestic auto parts store (000's)............. $1,758 $1,666 $1,570
Average net sales per domestic auto parts store square foot......... $280 $274 $267
Total employment.................................................... 17,400 15,700 13,200
Gross profit - percentage of sales.................................. 41.2% 39.8% 39.8%
Operating profit - percentage of sales.............................. 12.6% 11.5% 10.3%
Net income - percentage of sales.................................... 7.7% 7.1% 6.3%
Debt-to-capital - percentage........................................ 0.8% 1.1% 2.5%
Inventory turnover.................................................. 3.0x 3.2x 3.0x
Return on average equity............................................ 25% 26% 26%
Fiscal Year Ended August
1991* 1990 1989
Income Net sales........................................................... $817,962 $ 671,725 $ 535,843
Statement Data Cost of sales, including warehouse and delivery expenses............ 491,261 416,846 341,130
Operating, selling, general and administrative expenses............. 247,355 205,609 169,786
------------------------------------------
Operating profit.................................................... 79,346 49,270 24,927
Interest income (expense) - net..................................... (7,295) (10,936) (9,799)
------------------------------------------
Income before income taxes.......................................... 72,051 38,334 15,128
Income taxes........................................................ 27,900 14,840 6,200
------------------------------------------
Net income.......................................................... $ 44,151 $ 23,494 $ 8,928
==========================================
Diluted earnings per share.......................................... $0.33 $0.19 $0.07
==========================================
Adjusted weighted average shares for diluted earnings per share..... 134,656 121,212 119,320
Balance Sheet Current assets...................................................... $ 233,439 $ 191,736 $ 177,824
Data Working capital..................................................... 55,807 26,803 35,831
Total assets........................................................ 397,776 327,368 296,546
Current liabilities................................................. 177,632 164,933 141,993
Debt................................................................ 7,246 74,851 93,293
Stockholders' equity................................................ 204,628 80,356 54,592
Selected Number of domestic auto parts stores at beginning of year........... 538 504 440
Operating Data New stores..................................................... 60 38 70
Replacement stores............................................. 4 7 7
Closed stores.................................................. 0 4 6
Net new stores................................................. 60 34 64
Number of domestic auto parts stores at end of year................. 598 538 504
Total domestic auto parts store square footage (000's).............. 3,458 3,031 2,758
Percentage increase in domestic auto parts store square footage..... 14% 10% 19%
Percentage increase in domestic auto parts comparable
store net sales................................................ 12% 13% 10%
Average net sales per domestic auto parts store (000's)............. $1,408 $1,289 $1,135
Average net sales per domestic auto parts store square foot......... $246 $232 $211
Total employment.................................................... 11,700 9,300 7,900
Gross profit - percentage of sales.................................. 39.9% 37.9% 36.3%
Operating profit - percentage of sales.............................. 9.7% 7.3% 4.6%
Net income - percentage of sales.................................... 5.4% 3.5% 1.7%
Debt-to-capital - percentage........................................ 3.4% 48.2% 63.1%
Inventory turnover.................................................. 2.6x 2.4x 2.4x
Return on average equity............................................ 31% 35% 18%
Quarterly Summary
(Unaudited)
Sixteen
Twelve Weeks Ended Weeks Ended
-----------------------------------------------------------
(in thousands, except per share data)
November 21, February 13, May 8, August 28,
1998 1999 1999 1999
-----------------------------------------------------------
Net sales........................................... $ 900,949 $ 852,538 $ 970,236 $ 1,392,669
Increase in comparable store sales.................. 3% 8% 3% 2%
Gross profit........................................ $ 376,482 $ 353,493 $ 408,933 $ 592,514
Operating profit.................................... 89,815 67,273 104,312 171,695
Income before income taxes.......................... 81,300 57,039 93,135 156,309
Net income.......................................... 51,300 36,039 58,735 98,709
Basic earnings per share............................ 0.34 0.24 0.39 0.67
Diluted earnings per share.......................... 0.34 0.24 0.39 0.67
Stock price range:
High........................................... $29.50 $35.00 $37.06 $33.31
Low............................................ $21.50 $29.69 $28.38 $23.13
November 22, February 14, May 9, August 29,
1997 1998 1998 1998
-----------------------------------------------------------
Net sales........................................... $ 675,274 $ 607,097 $ 743,661 $ 1,216,890
Increase in comparable store sales.................. 7% 2% 2% 0%
Gross profit........................................ $ 280,441 $ 253,681 $ 311,080 $ 507,873
Operating profit.................................... 78,648 58,082 90,457 155,120
Income before income taxes.......................... 76,146 55,054 86,240 146,663
Net income.......................................... 47,546 34,354 53,940 92,063
Basic earnings per share............................ 0.31 0.23 0.35 0.60
Diluted earnings per share.......................... 0.31 0.22 0.35 0.60
Stock price range:
High........................................... $32.75 $32.06 $36.25 $38.00
Low............................................ $27.00 $23.75 $29.00 $26.63
Financial Review
The following table sets forth income statement data of the Company expressed
as a percentage of net sales for the periods indicated:
Fiscal Year Ended
--------------------------------------
August 28, August 29, August 30,
1999 1998 1997
--------------------------------------
Net sales 100.0% 100.0% 100.0%
Cost of sales, including warehouse
and delivery expenses 57.9 58.3 58.0
--------------------------------------
Gross profit 42.1 41.7 42.0
Operating, selling, general
and administrative expenses 31.6 29.9 30.1
--------------------------------------
Operating profit 10.5 11.8 11.9
Interest expense - net 1.1 0.6 0.3
Income taxes 3.5 4.2 4.4
--------------------------------------
Net income 5.9% 7.0% 7.2%
======================================
Results of Operations
For an understanding of the significant factors that influenced the Company's
performance during the past three fiscal years, the following Financial Review
should be read in conjunction with the consolidated financial statements
presented in this annual report.
Fiscal 1999 Compared to Fiscal 1998
Net sales for fiscal 1999 increased by $873.5 million or 26.9% over net sales
for fiscal 1998. The increase was due to a comparable store net sales increase
of 4% (which was primarily due to sales growth in the Company's newer auto parts
stores) and an increase in net sales of $756.4 million for stores opened or
acquired since the beginning of fiscal 1998. As of August 28, 1999, the Company
had 2,711 domestic auto parts stores in operation compared with 2,657 at August
29, 1998.
Gross profit for fiscal 1999 was $1,731.4 million, or 42.1% of net sales,
compared with $1,353.1 million, or 41.7% of net sales for fiscal 1998. The
increase in gross profit percentage was due primarily to lower battery and
commodity gross margins in the prior year offset by acquisition integration
distribution costs.
Operating, selling, general and administrative expenses for fiscal 1999
increased by $327.6 million over such expenses for fiscal 1998 and increased as
a percentage of net sales from 29.9% to 31.6%. The increase in the expense ratio
was primarily due to higher payroll and occupancy costs principally in recently
acquired stores, and approximately $25 million in remodeling and remerchandising
activities in acquired stores.
Net interest expense for fiscal 1999 was $45.3 million compared with $18.2
million for fiscal 1998. The increase in interest expense was primarily due to
higher levels of borrowings as a result of acquisitions and stock repurchases.
AutoZone's effective income tax rate was 36.9% of pre-tax income for fiscal
1999 and 37.4% for fiscal 1998. The decline in the effective tax rate is due to
the utilization of acquired company net operating loss carryforwards.
Fiscal 1998 Compared to Fiscal 1997
Net sales for fiscal 1998 increased by $551.5 million or 20.5% over net sales
for fiscal 1997. This increase was due to a comparable store net sales increase
of 2% (which was primarily due to sales growth in the Company's newer auto parts
stores and the added sales of the Company's commercial program) and an increase
in net sales of $485.7 million for stores opened or acquired since the beginning
of fiscal 1997. At August 29, 1998, the Company had 2,657 auto parts stores in
operation, a net increase of 929 stores, including the acquisition of 112 and
560 auto parts stores acquired in February and June 1998, respectively.
Gross profit for fiscal 1998 was $1,353.1 million, or 41.7% of net sales,
compared with $1,132.1 million, or 42.0% of net sales, for fiscal 1997. The
decrease in gross profit percentage was due primarily to lower commodities gross
margins coupled with lower gross margins in certain recently acquired stores.
Operating, selling, general and administrative expenses for fiscal 1998
increased by $160.0 million over such expenses for fiscal 1997 and decreased as
a percentage of net sales from 30.1% to 29.9%. The decrease in the expense ratio
was primarily due to commercial expense leverage and additional cooperative
advertising funds received from vendors partially offset by higher occupancy
costs primarily in recently acquired stores.
Net interest expense for fiscal 1998 was $18.2 million compared with $8.8
million for fiscal 1997. The increase in interest expense was primarily due to
higher levels of borrowings as a result of the acquisitions.
AutoZone's effective income tax rate was 37.4% of pre-tax income for fiscal
1998 and 37.6% for fiscal 1997.
Financial Market Risk
Financial market risks relating to the Company's operations result
primarily from changes in interest rates. The Company enters into interest rate
swaps to minimize the risk associated with its financing activities. The swap
agreements are contracts to exchange fixed or variable rates for floating
interest rate payments periodically over the life of the instruments.
Liquidity and Capital Resources
The Company's primary capital requirements have been the funding of its
continued new store expansion program, inventory requirements and more recently,
acquisitions and stock repurchases. The Company has opened or acquired 1,928 net
new auto parts stores and constructed four new distribution centers from the
beginning of fiscal 1994 to August 28, 1999. Cash flow generated from store
operations provides the Company with a significant source of liquidity. Net cash
provided by operating activities was $307.4 million in fiscal 1999, $366.8
million in fiscal 1998, and $177.6 million in fiscal 1997.
In fiscal 1999, the Company invested $428.3 million in capital assets
including approximately $108 million for the Express real estate and real estate
leases from Pep Boys. In fiscal 1998, the Company invested $337.2 million in
capital assets and had a net cash outlay of $365.5 million for acquisitions
including the retirement of the acquired companies' debt. Acquisitions included
Chief Auto Parts, with stores primarily in California, Auto Palace, with stores
primarily in the Northeast, and a truck parts chain, TruckPro. Capital
expenditures were $295.4 million in fiscal 1997. In fiscal 1999, the Company
opened 245 new auto parts stores in the U.S. and 6 in Mexico, replaced 59 stores
and closed 191 U.S. stores. In addition, the Company opened 3 new TruckPro
stores and relocated 6 stores. Construction commitments totaled approximately
$57 million at August 28, 1999.
The Company's new store development program requires significant working
capital, principally for inventories. Historically, the Company has negotiated
extended payment terms from suppliers, minimizing the working capital required
by its expansion. The Company believes that it will be able to continue
financing much of its inventory growth by favorable payment terms from
suppliers, but there can be no assurance that the Company will be successful in
obtaining such terms.
In November 1998, the Company sold $150 million of 6% Notes due November
2003, at a discount. Interest on the Notes is payable semi-annually on May 1 and
November 1 each year, beginning May 1999. In July 1998, the Company sold $200
million of 6.5% Debentures due July 2008, at a discount. Interest on the
Debentures is payable semi-annually on January 15 and July 15 of each year,
beginning January 1999. The Debentures may be redeemed at any time at the option
of the Company. Proceeds were used to repay portions of the Company's long-term
variable rate bank debt and for general corporate purposes.
The Company has a commercial paper program that allows borrowing up to $700
million. As of August 28, 1999, there were borrowings of $533 million
outstanding under the program. In connection with the program, the Company has a
5-year credit facility with a group of banks for up to $350 million and a 364-
day $350 million credit facility with another group of banks. Borrowings under
the commercial paper program reduce availability under the credit facilities. No
amounts were outstanding under either of the the $350 million credit facilities
at August 28,1999. Outstanding commercial paper at August 28, 1999, is
classified as long-term debt as it is the Company's ability and intention to
refinance it on a long-term basis. Both of the revolving credit facilities
contain a covenant limiting the amount of debt the Company may incur relative to
its total capitalization.
Subsequent to year end, in September 1999, the Company announced Board
approval to repurchase up to $200 million of common stock in the open market.
This is in addition to the $150 million repurchase approved in June 1999, the
$150 million repurchase approved in October 1998, and the $100 million
repurchase approved in January 1998. From January 1998 to August 28, 1999, the
Company had repurchased approximately $263 million of common stock. The impact
of the stock repurchase program in fiscal year 1999 was an increase in earnings
per share of $.02.
The Company anticipates that it will rely primarily on internally generated
funds to support a majority of its capital expenditures, working capital
requirements and stock repurchases. The balance will be funded through
borrowings. The Company anticipates no difficulty in obtaining such long-term
financing in view of its credit rating and favorable experiences in the debt
market in the past. In addition to the available credit lines mentioned above,
the Company may sell up to $50 million of public debt under shelf registration
statements filed with the Securities and Exchange Commission.
Year 2000 Readiness
The Year 2000 problem is, in its simplest terms, the inability of computer
hardware and software to properly process dates beyond December 31, 1999. In
order to save valuable system memory, hard storage space and processing cycles,
early programmers recorded dates using only the last two digits of the year.
Year 2000 problems arise when performing date calculations between centuries
based upon two digit year fields.
The Company began addressing the Year 2000 issue in June 1996 and
implemented a formal Year 2000 project office in May 1997. As of August 28,
1999, the Company had completed over 95% of its critical readiness efforts. Thus
far, no significant issues have been detected during the testing of Year 2000
ready systems. The Company has not achieved 100% completion primarily due to
delays in receiving third party software upgrades. The Company anticipates
completing all Year 2000 efforts by December 1, 1999.
The total estimated cost of the Year 2000 project is $10 to $11 million,
which is being expensed as incurred. As of August 28, 1999, approximately $8
million of this budget had been incurred. All of the related costs are being
funded through operating cash flows. These costs are an immaterial part of the
overall information technology budget. No major information technology projects
or programs have been deferred.
In addition to internal systems, the Company is addressing Year 2000 issues
which do not normally fall under information technology such as embedded chip
equipment and the compliance status of business partners. The Company has
addressed over 95% of the critical issues in this category. The Company is also
assessing the Year 2000 readiness of its merchandise vendors, most of which
communicate with the Company through electronic data interchange (EDI). The
Company plans to complete Year 2000 testing of the EDI system with all critical
vendors during October 1999.
Although the Company believes that the ongoing assessment and testing will
minimize its overall Year 2000 risks, there is no guarantee that there will not
be an adverse effect on the Company if third parties such as merchandise
vendors, service providers or utility companies are not Year 2000 ready. The
Company has developed detailed contingency plans for critical systems, processes
and business partners. Elements of the Company's contingency plans include:
switching vendors, increasing the inventory levels of certain products, back-up
systems and manual processes.
While the Company does not anticipate any major business disruptions as a
result of Year 2000 issues, it is possible that certain disruptions may occur
including loss of communications with stores, distribution centers or business
partners; inability to process transactions in a timely manner or loss of power.
The Company plans to have dedicated resources available to address any Year 2000
issue that may arise. These resources will be managed through a dedicated
command center and consist of technical personnel, business leaders and members
of senior management.
Inflation
The Company does not believe its operations have been materially affected
by inflation. The Company has been successful, in many cases, in mitigating the
effects of merchandise cost increases principally due to economies of scale
resulting from increased volumes of purchases, selective forward buying and the
use of alternative suppliers.
Seasonality and Quarterly Periods
The Company's business is somewhat seasonal in nature, with the highest
sales occurring in the summer months of June through August, in which average
weekly per store sales historically have been about 20% to 30% higher than in
the slowest months of December through February. The Company's business is also
affected by weather conditions. Extremely hot or extremely cold weather tends to
enhance sales by causing parts to fail and spurring sales of seasonal products.
Mild or rainy weather tends to soften sales as parts' failure rates are lower in
mild weather and elective maintenance is deferred during periods of rainy
weather.
Each of the first three quarters of AutoZone's fiscal year consists of
twelve weeks and the fourth quarter consists of sixteen weeks. Because the
fourth quarter contains the seasonally high sales volume and consists of sixteen
weeks, compared to twelve weeks for each of the first three quarters, the
Company's fourth quarter represents a disproportionate share of the annual net
sales and net income. The fourth quarter of fiscal 1999 represented 33.8% of
annual net sales and 40.3% of net income; the fourth quarter of fiscal 1998
represented 37.5% of annual net sales and 40.4% of net income.
Forward-Looking Statements
Certain statements contained in the Financial Review and elsewhere in this
annual report are forward-looking statements. These statements discuss, among
other things, expected growth, domestic and international development and
expansion strategy, business strategies and future performance. These
forward-looking statements are subject to risks, uncertainties and assumptions,
including without limitation, competition, product demand, domestic and
international economies, government approvals, the ability to hire and retain
qualified employees, consumer debt levels, inflation and the weather. Actual
results may materially differ from anticipated results. For more information,
please see the Risk Factors section of the Company's most recent Form 10-K as
filed with the Securities and Exchange Commission.
Consolidated Statements of Income
Year Ended (52 Weeks)
-----------------------------------------------
August 28, August 29, August 30,
1999 1998 1997
-----------------------------------------------
(in thousands, except per share data)
Net sales $4,116,392 $3,242,922 $2,691,440
Cost of sales, including warehouse and delivery expenses 2,384,970 1,889,847 1,559,296
Operating, selling, general and administrative expenses 1,298,327 970,768 810,793
- - ------------------------------------------------------------------------------------------------------------------------
Operating profit 433,095 382,307 321,351
Interest expense - net 45,312 18,204 8,843
- - ------------------------------------------------------------------------------------------------------------------------
Income before income taxes 387,783 364,103 312,508
Income taxes 143,000 136,200 117,500
- - ------------------------------------------------------------------------------------------------------------------------
Net income $ 244,783 $ 227,903 $ 195,008
========================================================================================================================
Weighted average shares for basic earnings per share 149,014 152,160 150,726
Effect of dilutive stock options 1,243 1,910 1,809
========================================================================================================================
Adjusted weighted average shares for diluted earnings per share 150,257 154,070 152,535
========================================================================================================================
Basic earnings per share $ 1.64 $ 1.50 $ 1.29
========================================================================================================================
Diluted earnings per share $ 1.63 $ 1.48 $ 1.28
========================================================================================================================
See Notes to Consolidated Financial Statements.
Consolidated Balance Sheets
August 28, August 29,
1999 1998
-------------------------------------
(in thousands, except per share data)
Assets Current assets:
Cash and cash equivalents $ 5,918 $ 6,631
Accounts receivable 25,917 42,252
Merchandise inventories 1,129,693 966,560
Prepaid expenses 33,468 37,532
Deferred income taxes 30,088 61,964
Income taxes receivable 2,151
-------------------------------------------------------------------------------------------
Total current assets 1,225,084 1,117,090
Property and equipment:
Land 390,920 320,203
Buildings and improvements 1,003,308 851,083
Equipment 438,855 374,465
Leasehold improvements and interests 102,646 82,273
Construction in progress 153,323 150,461
-------------------------------------------------------------------------------------------
2,089,052 1,778,485
Less accumulated depreciation and amortization 450,566 350,979
-------------------------------------------------------------------------------------------
1,638,486 1,427,506
Other assets:
Cost in excess of net assets acquired, net of accumulated amortization
of $15,375 in 1999 and $9,096 in 1998 337,261 181,315
Deferred income taxes 76,412 3,510
Other assets 7,524 18,692
-------------------------------------------------------------------------------------------
421,197 203,517
-------------------------------------------------------------------------------------------
$3,284,767 $2,748,113
===========================================================================================
Liabilities and Current liabilities:
Stockholders' Equity Accounts payable $ 757,447 $ 683,372
Accrued expenses 230,036 176,457
Income taxes payable 13,071
-------------------------------------------------------------------------------------------
Total current liabilities 1,000,554 859,829
Long-term debt 888,340 545,067
Other liabilities 72,072 41,160
Commitments and contingencies (See notes H and I)
Stockholders' equity:
Preferred Stock, authorized 1,000 shares; no shares issued
Common Stock, par value $.01 per share, authorized 200,000 shares;
153,963 shares issued and 144,353 shares outstanding in 1999 and
153,039 shares issued and 152,086 shares outstanding in 1998 1,540 1,530
Additional paid-in-capital 289,084 277,528
Retained earnings 1,296,528 1,051,745
Accumulated other comprehensive income (3)
Treasury stock, at cost (263,348) (28,746)
-------------------------------------------------------------------------------------------
Total stockholders' equity 1,323,801 1,302,057
-------------------------------------------------------------------------------------------
$3,284,767 $2,748,113
===========================================================================================
See Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows
Year Ended (52 Weeks)
---------------------------------------
August 28, August 29, August 30,
1999 1998 1997
---------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $244,783 $ 227,903 $195,008
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 122,221 95,464 77,163
Amortization of intangible and other assets 6,310 1,135 658
Deferred income tax expense (benefit) 42,929 20,241 (7,781)
Net change in accounts receivable and prepaid expenses 20,399 (15,260) (5,009)
Net increase in merchandise inventories (201,553) (47,285) (153,552)
Net increase in accounts payable and accrued expenses 70,304 127,683 66,155
Net change in income taxes payable and receivable 13,367 (22,230) 7,819
Net change in other assets and liabilities (11,392) (20,813) (2,898)
- - -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 307,368 366,838 177,563
Cash flows from investing activities:
Acquisitions (100,031)
Capital expenditures and Pep Express purchase (428,315) (337,202) (295,417)
- - -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (428,315) (437,233) (295,417)
Cash flows from financing activities:
Repayment of acquired companies' debt (265,429)
Increase in commercial paper 228,000 305,000
Proceeds from debentures/notes 148,913 197,751
Net (decrease) increase in credit facilities (34,050) (164,350) 104,000
Net proceeds from sale of Common Stock, including related tax benefit 11,566 27,692 14,618
Purchase of Treasury Stock (234,602) (28,746)
Other 407 173
- - -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 120,234 72,091 118,618
- - -----------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (713) 1,696 764
Cash and cash equivalents at beginning of year 6,631 4,668 3,904
Cash provided by acquisitions 267
- - -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 5,918 $ 6,631 $ 4,668
=============================================================================================================================
Supplemental cash flow information:
Interest paid, net of interest cost capitalized $ 41,533 $ 17,042 $ 8,779
Income taxes paid $ 93,073 $ 122,529 $ 109,681
See Notes to Consolidated Financial Statements.
Consolidated Statements of Stockholders' Equity
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Income Stock Total
-------------------------------------------------------------------------
(in thousands)
Balance at August 31, 1996 $1,501 $235,247 $ 628,834 $ $ $ 865,582
Net income 195,008 195,008
--------------
Comprehensive income 195,008
Sale of 1,176 shares of Common Stock
under stock option and stock purchase plans 12 7,676 7,688
Tax benefit of exercise of stock options 6,930 6,930
-------------------------------------------------------------------------
Balance at August 30, 1997 1,513 249,853 823,842 1,075,208
Net income 227,903 227,903
--------------
Comprehensive income 227,903
Purchase of 953 shares of Treasury Stock (28,746) (28,746)
Sale of 1,726 shares of Common Stock
under stock option and stock purchase plans 17 11,475 11,492
Tax benefit of exercise of stock options 16,200 16,200
-------------------------------------------------------------------------
Balance at August 29, 1998 1,530 277,528 1,051,745 (28,746) 1,302,057
Net income 244,783 244,783
Foreign currency translation adjustment (3) (3)
--------------
Comprehensive income 244,780
Purchase of 8,657 shares of Treasury Stock (234,602) (234,602)
Sale of 924 shares of Common Stock under
stock option and stock purchase plans 10 7,256 7,266
Tax benefit of exercise of stock options 4,300 4,300
-------------------------------------------------------------------------
Balance at August 28, 1999 $1,540 $289,084 $1,296,528 $ (3) $ (263,348) $ 1,323,801
=========================================================================
See Notes to Consolidated Financial Statements.
Notes To Consolidated Financial Statements
Note A - Significant Accounting Policies
Business: The Company is principally a specialty retailer of automotive
parts and accessories. At the end of fiscal 1999, the Company operated 2,711
domestic auto parts stores in 39 states and 6 auto parts stores in Mexico. In
addition, the Company sells heavy duty truck parts and accessories through its
46 TruckPro stores in 14 states, automotive diagnostic and repair software
through ALLDATA and diagnostic and repair information through alldatadiy.com.
Fiscal Year: The Company's fiscal year consists of 52 or 53 weeks ending on
the last Saturday in August.
Basis of Presentation: The consolidated financial statements include the
accounts of AutoZone, Inc. and its wholly owned subsidiaries (the Company). All
significant intercompany transactions and balances have been eliminated in
consolidation.
Merchandise Inventories: Inventories are stated at the lower of cost or
market using the last-in, first-out (LIFO) method.
Property and Equipment: Property and equipment is stated at cost.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets. Leasehold interests and improvements are
amortized over the terms of the leases.
Amortization: The cost in excess of net assets acquired is amortized by the
straight-line method over 40 years.
Preopening Expenses: Preopening expenses, which consist primarily of
payroll and occupancy costs, are expensed as incurred.
Advertising Costs: The Company expenses advertising costs as incurred.
Advertising expense, net of vendor rebates, was approximately $21,857,000 in
fiscal 1999, $30,109,000 in fiscal 1998 and $27,271,000 in fiscal 1997.
Warranty Costs: The Company provides the consumer with a warranty on
certain products. Estimated warranty obligations are provided at the time of
sale of the product.
Financial Instruments: The Company has certain financial instruments which
include cash, accounts receivable and accounts payable. The carrying amounts of
these financial instruments approximate fair value because of their short
maturities. The Company uses derivative financial instruments for purposes other
than trading to minimize the risk associated with financing activities.
Settlements of interest rate swaps are accounted for by recording the net
interest received or paid as an adjustment to interest expense. Gains or losses
resulting from market movements are not recognized. Gains or losses resulting
from equity instrument contracts are recognized through stockholders' equity.
Contracts that effectively meet risk reduction and correlation criteria are
recorded using hedge accounting. Hedges of anticipated transactions are deferred
and recognized when the hedged transaction occurs.
Income Taxes: The Company accounts for income taxes under the liability
method. Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Cash Equivalents: Cash equivalents consist of investments with maturities
of 90 days or less at the date of purchase.
Use of Estimates: Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Earnings Per Share: Basic earnings per share is based on the weighted
average outstanding common shares. Diluted earnings per share is based on the
weighted average outstanding shares adjusted for the effect of stock options.
Impairment of Long-Lived Assets: The Company complies with Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Also, in general, long-lived assets and certain identifiable
intangibles to be disposed of are reported at the lower of carrying amount or
fair value less cost to sell.
Comprehensive Income: In fiscal 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components. The Company
has reflected comprehensive income and its components in the consolidated
statements of stockholders' equity.
Disclosures about Segments of an Enterprise and Related Information: In
fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The adoption of this statement had no
effect on the financial statements as the Company operates in a single
reportable segment.
Pensions and Other Postretirement Benefits: In fiscal 1999, the Company
adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." SFAS No. 132 establishes new standards for the
reporting of information about pension and other postretirement benefits. All
periods reported have been presented in accordance with SFAS No. 132.
Internal Use Software Costs: In fiscal 1999, the Company adopted Statement
of Position (SOP) 98-1, "Accounting for the Costs of Developing or Obtaining
Internal Use Software." This SOP requires the capitalization of certain costs
incurred in connection with developing or obtaining software for internal use.
The adoption of SOP 98-1 did not have a material impact on the Company's results
of operations or financial position.
Derivative Instruments and Hedging Activities: During 1998, the Financial
Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement requires
companies to record derivative instruments on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of a derivative would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. In September 1999, the
FASB issued SFAS No. 137, which delayed the effective date of SFAS No. 133 to
the Company's fiscal year 2001. Because of the Company's minimal historical use
of derivatives, management anticipates that the adoption of SFAS No. 133 will
not have a significant effect on earnings or the financial position of the
Company.
Note B - Accrued Expenses
Accrued expenses consist of the following:
August 28, August 29,
1999 1998
----------------------
(in thousands)
Medical and casualty
insurance claims $ 48,111 $40,640
Accrued compensation
and related payroll taxes 41,345 37,684
Property and sales taxes 48,181 38,506
Accrued warranty 32,950 20,786
Other 59,449 38,841
----------------------
$230,036 $176,457
======================
Note C - Income Taxes
At August 28, 1999, the Company has net operating loss carryforwards (NOLs)
of approximately $48 million that expire in years 2000 through 2018. These
carryforwards resulted from the Company's acquisition of ALLDATA Corporation
during fiscal 1996 and Chief Auto Parts Inc. and ADAP, Inc. (which had been
doing business as "Auto Palace") in fiscal 1998. The use of the NOLs is subject
to annual limitations. A valuation allowance of $10,813,000 in fiscal 1999 and
$15,902,000 in fiscal 1998 relates to certain of those carryforwards.
The provision for income tax expense (benefit) consists of the following:
Year Ended
------------------------------------
August 28, August 29, August 30,
1999 1998 1997
------------------------------------
(in thousands)
Current:
Federal $ 90,018 $103,810 $114,113
State 10,053 12,149 11,168
------------------------------------
100,071 115,959 125,281
Deferred:
Federal 38,999 19,665 (6,427)
State 3,930 576 (1,354)
------------------------------------
42,929 20,241 (7,781)
------------------------------------
$143,000 $136,200 $117,500
====================================
Significant components of the Company's deferred tax assets and liabilities
areas follows:
August 28, August 29,
1999 1998
---------------------------
(in thousands)
Deferred tax assets:
Net operating loss and
credit carryforwards $ 22,296 $ 26,303
Insurance reserves 15,938 13,847
Warranty reserves 12,701 7,778
Deferred lease expense 6,694
Accrued vacation 4,779 4,387
Closed store reserves 25,970
Inventory reserves 11,562
Legal reserves 4,263
Other 25,157 29,690
---------------------------
122,666 88,699
Less valuation allowance 10,813 15,902
---------------------------
111,853 72,797
===========================
Deferred tax liabilities:
Property and equipment 4,104
Accrued property taxes 5,353 3,219
---------------------------
5,353 7,323
---------------------------
Net deferred tax assets $ 106,500 $ 65,474
===========================
A reconciliation of the provision for income taxes to the amount computed
by applying the federal statutory tax rate of 35% to income before income taxes
is as follows:
Year Ended
---------------------------------
August 28, August 29, August 30,
1999 1998 1997
---------------------------------
(in thousands)
Expected tax
at statutory rate $ 135,724 $127,436 $109,378
State income taxes, net 6,722 8,271 6,379
Other 554 493 1,743
---------------------------------
$143,000 $136,200 $117,500
=================================
Note D - Financing Arrangements
The Company's long-term debt at the end of fiscal 1999 and 1998 consisted
of the following:
August 28, August 29,
1999 1998
-----------------------
(in thousands)
6% Notes due November 2003;
redeemable at any time at
the option of the Company $150,000 $
6.5% Debentures due July 2008;
redeemable at any time at
the option of the Company 200,000 200,000
Commercial paper, weighted average rate
of 5.4% at August 28, 1999
and 5.7% at August 29, 1998 533,000 305,000
Unsecured bank loan, floating interest rate
averaging 5.8% at August 29, 1998 34,050
Other 5,340 6,017
-----------------------
$888,340 $545,067
=======================
In November 1998, the Company sold $150 million of 6% Notes due November
2003, at a discount. Interest on the Notes is payable semi-annually on May 1 and
November 1 of each year, beginning May 1999. In July 1998, the Company sold $200
million of 6.5% Debentures due July 2008, at a discount. Interest on the
Debentures is payable semi-annually on January 15 and July 15 of each year,
beginning January 1999. Proceeds were used to repay portions of the Company's
long-term variable rate bank debt and for general corporate purposes.
The Company has a commercial paper program that allows borrowing up to $700
million. As of August 28, 1999, there were borrowings of $533 million
outstanding under the program. In connection with the program, the Company has a
five-year credit facility with a group of banks for up to $350 million and a
364-day $350 million credit facility with another group of banks. The 364-day
facility includes a renewal feature as well as an option to extinguish the
outstanding debt one year from the maturity date. Borrowings under the
commercial paper program reduce availability under the credit facilities. No
amounts were outstanding under either of the $350 million credit facilities at
August 28, 1999. Outstanding commercial paper at August 28, 1999, is classified
as long-term debt as it is the Company's ability and intention to refinance them
on a long-term basis.
The rate of interest payable under the revolving credit agreements is a
function of the London Interbank Offered Rate (LIBOR) or the lending bank's base
rate (as defined in the agreement) at the option of the Company. In addition,
the multi-year $350 million credit facility contains a competitive bid rate
option. Both of the revolving credit facilities contain a covenant limiting the
amount of debt the Company may incur relative to its total capitalization. These
facilities are available to support domestic commercial paper borrowings and to
meet cash requirements.
Maturities of long-term debt are $183 million for fiscal 2001, $350 million
for fiscal 2002 and $355 million thereafter.
Interest costs of $2,762,000 in fiscal 1999, $2,280,000 in fiscal 1998, and
$2,119,000 in fiscal 1997 were capitalized.
The estimated fair value of the 6.5% Debentures and the 6% Notes, which are
both publicly traded, was approximately $184 million and $143 million
respectively based on the market price at August 28, 1999. The estimated fair
values of all other long-term borrowings approximate their carrying values
primarily because of their variable interest rates.
Subsequent to year-end, the Company entered into financing arrangements
totaling $140 million with maturity dates ranging from March 2000 to August 2000
and interest rates ranging from 6.43% to 6.63%.
Note E - Stock Repurchase Program
As of August 28, 1999, the Board of Directors had authorized the Company to
repurchase up to $400 million of common stock in the open market. The Company
repurchased 8.7 million shares of its common stock in fiscal 1999 for an
aggregate cost of $234.6 million, and repurchased 1 million shares of its common
stock in fiscal 1998 for an aggregate cost of $28.7 million. At times, the
Company utilizes equity instrument contracts to facilitate its repurchase of
common stock. At August 28, 1999, the Company held equity instrument contracts
that relate to the purchase of approximately 4.1 million shares of common stock
at an average cost of $24.66 per share.
Subsequent to year-end, the Board authorized the repurchase of an
additional $200 million of the Company's common stock in the open market.
Additionally, in fiscal 2000, the Company purchased the 4.1 million shares as
settlement of the equity instrument contract outstanding at August 28, 1999.
Note F - Employee Stock Plans
The Company has granted options to purchase common stock to certain
employees and directors under various plans at prices equal to the market value
of the stock on the dates the options were granted. Options are generally
exercisable in a three to seven year period, and expire 10 years after grant. A
summary of outstanding stock options is as follows:
Wtd. Avg. Number
Exercise Price of Shares
------------------------
Outstanding August 31, 1996 $17.96 9,759,756
Granted 22.69 2,707,370
Exercised 4.93 (1,032,989)
Canceled 25.54 (834,883)
------------------------
Outstanding August 30, 1997 19.84 10,599,254
Granted 31.13 1,692,272
Exercised 7.39 (1,738,882)
Canceled 25.40 (795,780)
------------------------
Outstanding August 29, 1998 23.56 9,756,864
Granted 29.23 2,081,125
Exercised 12.87 (596,274)
Canceled 28.43 (741,309)
------------------------
Outstanding August 28, 1999 $24.95 10,500,406
========================
The following table summarizes information about stock options outstanding
at August 28, 1999:
Options Outstanding Options Exercisable
-----------------------------------------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Range of Exercise No. of Exercise Contractual No. of Exercise
Price Options Price Life (in years) Options Price
- - ---------------------------------------------------------------------------------------
$ 1.09-20.13 2,109,613 $14.20 4.90 974,678 $ 7.33
22.69-25.13 2,573,857 24.65 6.71 395,904 25.10
25.25-27.38 2,243,597 26.14 5.40 827,437 25.57
27.63-31.50 2,345,583 29.30 8.16 179,514 28.71
32.56-35.13 1,227,756 33.59 8.66 23,763 35.13
- - ---------------------------------------------------------------------------------------
$ 1.09-35.13 10,500,406 $24.95 6.62 2,401,296 $18.42
=======================================================================================
Options to purchase 2,401,296 shares at August 28, 1999, and 1,942,510
shares at August 29, 1998, were exercisable. Shares reserved for future grants
were 6,176,283 at August 28, 1999, and 2,699,468 at August 29, 1998.
Pro forma information is required by SFAS No. 123, "Accounting for Stock-
Based Compensation." In accordance with the provisions of SFAS No. 123, the
Company applies APB Opinion 25 and related interpretations in accounting for its
stock option plans and accordingly, no compensation expense for stock options
has been recognized. If the Company had elected to recognize compensation cost
based on the fair value of the options granted at the grant date as prescribed
in SFAS No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below. The effects of applying SFAS
No. 123 and the results obtained through the use of the Black-Scholes option
pricing model in this pro forma disclosure are not indicative of future amounts.
SFAS No. 123 does not apply to awards prior to fiscal 1996.
Year Ended
---------------------------------
August 28, August 29, August 30,
1999 1998 1997
---------------------------------
Net Income ($000)
As reported $ 244,783 $227,903 $195,008
Pro forma $ 234,898 $221,803 $191,118
Basic earnings
per share
As reported $ 1.64 $ 1.50 $ 1.29
Pro forma $ 1.58 $ 1.46 $ 1.27
Diluted earnings
per share
As reported $ 1.63 $ 1.48 $ 1.28
Pro forma $ 1.57 $ 1.44 $ 1.26
The weighted-average fair value of the stock options granted during fiscal
1999 was $12.74, during fiscal 1998 was $12.17 and during fiscal 1997 was $9.26.
The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions for grants in 1999, 1998 and 1997: expected price
volatility of .34 to .37; risk-free interest rates ranging from 4.56 to 5.98
percent; and expected lives between 3.75 and 8.0 years.
The Company also has an employee stock purchase plan under which all
eligible employees may purchase common stock at 85% of fair market value
(determined quarterly) through regular payroll deductions. Annual purchases are
limited to $4,000 per employee. Under the plan 268,554 shares were sold in
fiscal 1999 and 232,389 shares were sold in fiscal 1998. The Company repurchased
210,525 shares in fiscal 1999 and 275,526 shares in fiscal 1998 for sale under
the plan. A total of 1,299,057 shares of common stock is reserved for future
issuance under this plan.
During fiscal 1998, the Company adopted the 1998 Directors Stock Option
Plan. Under the stock option plan, each non-employee director was automatically
granted an option to purchase 1,000 shares of common stock on the plan's
adoption date. Each non-employee director will receive additional options to
purchase 1,000 shares of common stock on January 1 of each year. In addition, so
long as the non-employee director owns common stock valued at least equal to
five times the value of the annual fee paid to such director, that director will
receive an additional option to purchase 1,000 shares as of December 31 of each
year.
In March 1998, the Company adopted the Directors Compensation Plan. Under
this plan, a director may receive no more than one-half of the annual and
meeting fees immediately in cash, and the remainder of the fees must be taken in
either common stock or the fees may be deferred in units with value equivalent
to the value of shares of common stock as of the grant date ("stock appreciation
rights").
Note G - Pension and Savings Plan
Substantially all full-time employees are covered by a defined benefit
pension plan. The benefits are based on years of service and the employee's
highest consecutive five-year average compensation.
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 following table sets forth the plan's funded status and amounts
recognized in the Company's financial statements (in thousands):
August 28, August 29,
1999 1998
--------------------------
Change in benefit obligation
Benefit obligation
at beginning of year $53,971 $42,687
Service cost 8,022 7,001
Interest cost 3,727 3,047
Actuarial losses 327 1,922
Benefits paid (1,184) (686)
--------------------------
Benefit obligation
at end of year 64,863 53,971
Change in plan assets
Fair value of plan assets
at beginning of year 54,565 39,598
Actual return on plan assets 3,488 7,271
Company contributions (refunds) (1,741) 8,687
Benefits paid (1,184) (686)
Administrative expenses (365) (305)
Fair value of plan assets --------------------------
at end of year 54,763 54,565
Reconciliation of funded status
Funded status of the plan
(underfunded) (10,100) 594
Unrecognized net actuarial
losses 11,037 9,282
Unamortized prior service cost (5,329) (5,934)
--------------------------
Prepaid (accrued) benefit cost $(4,392) $ 3,942
==========================
August 28, August 29, August 30,
1999 1998 1997
--------------------------------
Components of net periodic
benefit cost
Service cost $ 8,022 $7,001 $6,034
Interest cost 3,727 3,047 2,496
Expected return on plan assets (5,001) (4,090) (2,847)
Amortization of prior service cost (606) (292) 138
Amortization of
transition obligation - (118) (150)
Recognized net actuarial
losses 451 - 63
--------------------------------
$ 6,593 $ 5,548 $5,734
================================
The actuarial present value of the projected benefit obligation was
determined using weighted-average discount rates of 7.00% and 6.93% at August
28, 1999 and August 29, 1998, respectively. The assumed increases in future
compensation levels were generally 5-10% based on age in fiscal 1999 and 1998
and 6% in fiscal 1997. The expected long-term rate of return on plan assets was
9.5% at August 28, 1999, August 29, 1998 and August 30, 1997. Prior service cost
is amortized over the estimated average remaining service lives of the plan
participants, and the unrecognized actuarial gain or loss is amortized over five
years.
During fiscal 1998, the Company established a defined contribution plan
("401(k) plan") pursuant to Section 401(k) of the Internal Revenue Code. The
401(k) plan covers substantially all employees that meet the plan's service
requirements. The Company makes matching contributions, on an annual basis, up
to a specified percentage of employees' contributions as approved by the Board
of Directors.
Note H - Leases
A portion of the Company's retail stores, distribution centers, and certain
equipment are leased. Most of these leases include renewal options and some
include options to purchase and provisions for percentage rent based on sales.
Rental expense was $96,150,000 for fiscal 1999, $56,410,000 for fiscal
1998, and $39,078,000 for fiscal 1997. Percentage rentals were insignificant.
Minimum annual rental commitments under non-cancelable operating leases are
as follows (in thousands):
Year Amount
-----------------------
2000 $106,202
2001 97,183
2002 82,231
2003 69,667
2004 55,885
Thereafter 214,028
-----------------------
$625,196
=======================
Note I - Commitments and Contingencies
Construction commitments, primarily for new stores, totaled approximately
$57 million at August 28, 1999.
AutoZone, Inc., is a defendant in a purported class action lawsuit entitled
"Melvin Quinnie on behalf of all others similarly situated v. AutoZone, Inc.,
and DOES 1 through 100, inclusive" filed in the Superior Court of California,
County of Los Angeles, in November 1998. The plaintiff claims that the
defendants failed to pay overtime to store managers as required by California
law and failed to pay terminated managers in a timely manner as required by
California law. The plaintiff is seeking injunctive relief, restitution,
statutory penalties, prejudgment interest, and reasonable attorneys' fees,
expenses and costs. The case is in the early stages of pre-class certification
discovery and therefore the Company is unable to predict the outcome of this
lawsuit at this time. The Company is vigorously defending against this action.
AutoZone, Inc., and Chief are defendants in a purported class action
lawsuit entitled "Paul D. Rusch, on behalf of all others similarly situated, v.
Chief Auto Parts Inc. and AutoZone, Inc." filed in the Superior Court of
California, County of Los Angeles, in May 1999. The plaintiffs claim that the
defendants have failed to pay their store managers overtime pay from March 1997
to the present. The plaintiffs are seeking back overtime pay, interest, an
injunction against the defendants committing such practices in the future,
costs, and attorneys' fees. In September 1999, the Court denied the Company's
motion to strike the complaint's request for class certification based on a
prior case of Chief which relied on similar facts in which the class
certification was denied. The Company has appealed the Court's decision. The
Company is unable to predict the outcome of this lawsuit at this time, but
believes that the potential damages recoverable by any single plaintiff are
minimal. However, if the plaintiff class were to be certified and prevail on all
of its claims, the aggregate amount of damages could be substantial. The Company
is vigorously defending against this action.
The Company currently, and from time to time, is involved in various other
legal proceedings incidental to the conduct of its business. Although the amount
of liability that may result from these proceedings cannot be ascertained, the
Company does not currently believe that, in the aggregate, these other matters
will result in liabilities material to the Company's financial condition or
results of operations.
The Company is self-insured for workers' compensation, automobile, general
and product liability losses. The Company is also self-insured for health care
claims for eligible active employees. The Company maintains certain levels of
stop loss coverage for each self-insured plan. Self-insurance costs are accrued
based upon the aggregate of the liability for reported claims and an estimated
liability for claims incurred but not reported.
Note J - Business Combinations
In October 1998, the Company acquired real estate and real estate leases
for 100 Express auto parts stores from Pep Boys for approximately $108 million.
In February 1998, the Company acquired ADAP, Inc. ("Auto Palace"). The
acquisition added 112 automotive parts and accessories stores in the Northeast.
In May 1998, the Company acquired the assets and liabilities of TruckPro, L.P.,
including the service mark "TruckPro." The 43 TruckPro stores in 14 states
specialized in the sale of heavy duty truck parts.
Additionally, in June 1998, the Company acquired Chief for approximately
$280 million, including the assumption of approximately $205 million of
indebtedness. Chief operated 560 auto parts stores primarily in California.
Results of operations for acquisitions are included with the Company since
each respective acquisition date. The purchase method of accounting for
acquisitions was utilized for all transactions and, therefore, the acquired
assets and liabilities were recorded at their estimated fair values at the date
of acquisition. The goodwill associated with these transactions is being
amortized over 40 years.
The fair value of assets and liabilities recorded as a result of the fiscal
1999 and 1998 transactions as well as fiscal 1999 purchase accounting
adjustments are as follows (in thousands):
Year Ended
-------------------------
August 28, August 29,
1999 1998
-------------------------
Cash and cash equivalents $ $ 267
Receivables 22,786
Inventories (38,420) 209,829
Property and equipment 12,886 104,640
Goodwill 162,225 166,013
Deferred income taxes 83,955 56,388
Accounts payable (992) (106,947)
Accrued liabilities (58,213) (52,826)
Debt (271,273)
Other (53,441) (28,846)
-------------------------
Total cash purchase price $ 108,000 $ 100,031
=========================
The following unaudited pro forma results of operations assume that the
fiscal 1998 acquisitions and the related financing transactions occurred at the
beginning of the periods presented.
Year Ended
------------------------
August 29, August 30,
1998 1997
------------------------
(in thousands, except per share data)
Net sales $3,758,700 $3,397,300
Net income 221,200 189,200
Diluted earnings per share 1.44 1.24
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the business combinations and related transactions been consummated
as of the beginning of the periods presented, nor is it necessarily indicative
of future operating results.
During fiscal 1999, the Company recorded reserves for closed stores of
approximately $75 million and charged lease and related costs of approximately
$15 million against this reserve.
Report of Independent Auditors
Stockholders
AutoZone, Inc.,
We have audited the accompanying consolidated balance sheets of AutoZone,
Inc. as of August 28, 1999 and August 29, 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended August 28, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AutoZone, Inc.
at August 28, 1999 and August 29, 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
August 28, 1999 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Memphis, Tennessee
September 29, 1999
Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form10-K/A) of AutoZone, Inc. of our report dated September 29, 1999, included in the 1999 Annual Report to Stockholders of AutoZone, Inc. Our audits also included the financial statement schedule of AutoZone, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-42797) pertaining to the Amended and Restated AutoZone, Inc. Employee Stock Purchase Plan, the Registration Statement (Form S-8 and S-3 No. 33-41618) pertaining to the AutoZone, Inc. Amended and Restated Stock Option Plan, the Registration Statement (Form S-8 No. 333-88245) pertaining to the AutoZone, Inc. Second Amended and Restated 1996 Stock Option Plan, the Registration Statement (Form S-8 No. 333-88241) pertaining to the AutoZone, Inc. Amended and Restated Director Compensation Plan, the Registration Statement (Form S-8 No. 333-88243) pertaining to the AutoZone, Inc. Amended and Restated 1998 Director Stock Option Plan and the Registration Statement (Form S-3 No. 333-58565), of our report dated September 29, 1999, with respect to the consolidated financial statements and schedule of AutoZone, Inc. incorporated by reference in this Annual Report (Form 10-K/A) for the year ended August 28, 1999. Memphis, Tennessee March 1, 2002
2. Financial Statement Schedule II - Valuation and Qualifying Accounts
Report of Independent Auditors
Exhibit no.
Description of Exhibit
Restated Articles of Incorporation of AutoZone, Inc. Incorporated by
reference to Exhibit 3.1 to the Form 10-Q for the quarter ended February
13, 1999.
Amended and Restated By-laws of AutoZone, Inc. Incorporated by reference
to Exhibit 3.3 to the Form 10-K for the fiscal year ended August 29, 1998.
Registration Rights Agreement between AutoZone, Inc. and J. Dale Dawson
and Judith S. Dawson dated May 1, 1998. Incorporated by reference to the
Form 10-Q for the quarter ended May 9, 1998.
Senior Indenture, dated as of July 22, 1998, between AutoZone, Inc.
and the First National Bank of Chicago. Incorporated by reference to Exhibit
4.1 to the Form 8-K dated July 17, 1998.
Amended and Restated Director Stock Option Plan. Incorporated by reference
to Exhibit 4.1 to the Form S-8 (No. 333-88243) dated October 1, 1999.
Amended and Restated 1998 Director Compensation Plan. Incorporated
by reference to Exhibit 4.1 to the Form S-8 (No. 333-88241) dated October
1, 1999.
Amended and Restated Stock Option Plan, as amended on February 26,
1991. Incorporated by reference to Exhibit 10.4 to the Form S-1 (No. 33-39197)
filed April 1, 1991.
Amendment No. 1 dated December 18, 1992, to the Amended and Restated
Stock Option Plan. Incorporated by reference to Exhibit 10.5 to the Form
10-K for the fiscal year ended August 28, 1993.
Second Amended and Restated 1996 Stock Option Plan. Incorporated by
reference to Appendix B to the definitive Proxy Statement as filed with
the Securities and Exchange Commission on November 2, 1998.
Employment and Non-Compete Agreement between John C. Adams, Jr., and
AutoZone, Inc., dated June 11, 1997. Incorporated by reference to the Form
10-K for the fiscal year ended August 29, 1997.
Employment and Non-Compete Agreement between Timothy D. Vargo, and
AutoZone, Inc., dated June 11, 1997. Incorporated by reference to the Form
10-K for the fiscal year ended August 29, 1997.
Employment and Non-Compete Agreement between Robert J. Hunt, and AutoZone,
Inc., dated June 11, 1997. Incorporated by reference to the Form 10-K for
the fiscal year ended August 29, 1997.
Employment and Non-Compete Agreement between Stephen W. Valentine,
and AutoZone, Inc., dated July 7,1997. Incorporated by reference to the
Form 10-K for the fiscal year ended August 29, 1997.
Employment and Non-Compete Agreement between Harry L. Goldsmith, and
AutoZone, Inc., dated June 11, 1997. Incorporated by reference to the Form
10-K for the fiscal year ended August 29, 1997.
Executive Incentive Compensation Plan. Incorporated by reference to
Exhibit A to the definitive Proxy Statement dated November 14, 1994.
Amended and Restated Agreement between J.R. Hyde, III, and AutoZone,
Inc., dated October 23, 1997. Incorporated by reference to Exhibit
10.1 to the Form 10-Q for the quarter ended November 22, 1997.
Credit Agreement among AutoZone, Inc., as Borrower, the several lenders
from time to time party thereto, NationsBank, N.A., as Agent, and SunTrust
Bank, Nashville, N.A. as Co-Agent, dated December 20, 1996. Incorporated
by reference to Exhibit 10.1 to the Form 10-Q/A for the quarter ended February
15, 1997.
Amendment No. 1, dated February 10, 1998, to Credit Agreement among
AutoZone, Inc., as Borrower, the several lenders from time to time party
thereto, NationsBank, N.A., as Agent, and SunTrust Bank, Nashville, N.A.
as Co-Agent, dated December 20, 1996. Incorporated by reference to Exhibit
10.2 to the Form 10-Q for the quarter ended February 14, 1998.
Amendment No. 2 to Credit Agreement among AutoZone, Inc., as Borrower,
the several lenders from time to time party thereto, NationsBank, N.A.,
as Agent, and SunTrust Bank, Nashville, N.A. as Co-Agent, dated December
20, 1996. Incorporated by reference to Exhibit 10.3 to the Form 10-Q for
the quarter ended November 21, 1998.
Credit Agreement, dated November 13, 1998, between AutoZone, Inc.,
as Borrower, the several lenders from time to time party thereto,
and NationsBank, N.A., as Agent. Incorporated by reference to Exhibit 10.5
to the Form 10-Q for the quarter ended November 21, 1998.
Amendment No. 1, dated July 16, 1999, to Credit Agreement dated November
13, 1998, between AutoZone, Inc., as Borrower, the several lenders from
time to time party thereto, and NationsBank, N.A., as Agent.**
Excerpts from the Annual Report to Stockholders for the fiscal year
ended August 28, 1999.
Subsidiaries of the Registrant.**
Consent of Ernst & Young LLP.
Financial Data Schedule (SEC Use Only).**
*Management contract or compensatory plan or arrangement.
**Previously filed.
Harry L. Goldsmith
Senior Vice President
& Secretary
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
COL E
Beginning of Period
Describe
End of Period
Charged to Other Accounts-Describe
Year Ended August 30, 1997:
Reserve for warranty claims
(1)
$19,122
Other reserves
11,227
Year Ended August 29, 1998:
Reserve for warranty claims
(1)
$20,786
Other reserves
14,296
Year Ended August 28, 1999:
Reserve for warranty claims
(1)
$32,950
Other reserves
(2) Purchase accounting adjustments related to the acquisition
of Chief Auto Parts Inc.
(3) Amount includes items classified in other accrued
expenses and other long-term liabilities.
Exhibit no.
Description of Exhibit
Restated Articles of Incorporation of AutoZone, Inc. Incorporated by
reference to Exhibit 3.1 to the Form 10-Q for the quarter ended February
13, 1999.
Amended and Restated By-laws of AutoZone, Inc. Incorporated by reference
to Exhibit 3.3 to the Form 10-K for the fiscal year ended August 29, 1998.
Registration Rights Agreement between AutoZone, Inc. and J. Dale Dawson
and Judith S. Dawson dated May 1, 1998. Incorporated by reference to the
Form 10-Q for the quarter ended May 9, 1998.
Senior Indenture, dated as of July 22, 1998, between AutoZone, Inc.
and the First National Bank of Chicago. Incorporated by reference to Exhibit
4.1 to the Form 8-K dated July 17, 1998.
Amended and Restated Director Stock Option Plan. Incorporated by reference
to Exhibit 4.1 to the Form S-8 (No. 333-88243) dated October 1, 1999.
Amended and Restated 1998 Director Compensation Plan. Incorporated
by reference to Exhibit 4.1 to the Form S-8 (No. 333-88241) dated October
1, 1999.
Amended and Restated Stock Option Plan, as amended on February 26,
1991. Incorporated by reference to Exhibit 10.4 to the Form S-1 (No. 33-39197)
filed April 1, 1991.
Amendment No. 1 dated December 18, 1992, to the Amended and Restated
Stock Option Plan. Incorporated by reference to Exhibit 10.5 to the Form
10-K for the fiscal year ended August 28, 1993.
Second Amended and Restated 1996 Stock Option Plan. Incorporated by
reference to Appendix B to the definitive Proxy Statement as filed with
the Securities and Exchange Commission on November 2, 1998.
Employment and Non-Compete Agreement between John C. Adams, Jr., and
AutoZone, Inc., dated June 11, 1997. Incorporated by reference to the Form
10-K for the fiscal year ended August 29, 1997.
Employment and Non-Compete Agreement between Timothy D. Vargo, and
AutoZone, Inc., dated June 11, 1997. Incorporated by reference to the Form
10-K for the fiscal year ended August 29, 1997.
Employment and Non-Compete Agreement between Robert J. Hunt, and AutoZone,
Inc., dated June 11, 1997. Incorporated by reference to the Form 10-K for
the fiscal year ended August 29, 1997.
Employment and Non-Compete Agreement between Stephen W. Valentine,
and AutoZone, Inc., dated July 7,1997. Incorporated by reference to the
Form 10-K for the fiscal year ended August 29, 1997.
Employment and Non-Compete Agreement between Harry L. Goldsmith, and
AutoZone, Inc., dated June 11, 1997. Incorporated by reference to the Form
10-K for the fiscal year ended August 29, 1997.
Executive Incentive Compensation Plan. Incorporated by reference to
Exhibit A to the definitive Proxy Statement dated November 14, 1994.
Amended and Restated Agreement between J.R. Hyde, III, and AutoZone,
Inc., dated October 23, 1997. Incorporated by reference to Exhibit
10.1 to the Form 10-Q for the quarter ended November 22, 1997.
Credit Agreement among AutoZone, Inc., as Borrower, the several lenders
from time to time party thereto, NationsBank, N.A., as Agent, and SunTrust
Bank, Nashville, N.A. as Co-Agent, dated December 20, 1996. Incorporated
by reference to Exhibit 10.1 to the Form 10-Q/A for the quarter ended February
15, 1997.**
Amendment No. 1, dated February 10, 1998, to Credit Agreement among
AutoZone, Inc., as Borrower, the several lenders from time to time party
thereto, NationsBank, N.A., as Agent, and SunTrust Bank, Nashville, N.A.
as Co-Agent, dated December 20, 1996. Incorporated by reference to Exhibit
10.2 to the Form 10-Q for the quarter ended February 14, 1998.
Amendment No. 2 to Credit Agreement among AutoZone, Inc., as Borrower,
the several lenders from time to time party thereto, NationsBank, N.A.,
as Agent, and SunTrust Bank, Nashville, N.A. as Co-Agent, dated December
20, 1996. Incorporated by reference to Exhibit 10.3 to the Form 10-Q for
the quarter ended November 21, 1998.**
Credit Agreement, dated November 13, 1998, between AutoZone, Inc.,
as Borrower, the several lenders from time to time party thereto,
and NationsBank, N.A., as Agent. Incorporated by reference to Exhibit 10.5
to the Form 10-Q for the quarter ended November 21, 1998.
Amendment No. 1, dated July 16, 1999, to Credit Agreement dated November
13, 1998, between AutoZone, Inc., as Borrower, the several lenders from
time to time party thereto, and NationsBank, N.A., as Agent.**
Excerpts from the Annual Report to Stockholders for the fiscal year
ended August 28, 1999.
Subsidiaries of the Registrant.**
Consent of Ernst & Young LLP.
Financial Data Schedule (SEC Use Only).**
*Management contract or compensatory plan or arrangement.
**Previously filed.
The following pages are excerpted from AutoZone, Inc.'s Annual Report
to Stockholders for the year ended August 28, 1999.