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Form 8-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

May 26, 2004
Date of Report
(Date of earliest event reported)

AUTOZONE, INC.
(Exact name of registrant as specified in its charter)

Nevada
(State or other jurisdiction of
incorporation or organization) 		1-10714
(Commission File Number) 		62-1482048
(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

(not applicable)
Former name, former address and former fiscal year, if changed since last report.

 

   

 

 

Item 7. Financial Statements and Exhibits

The following exhibit is furnished with this Current Report pursuant to Item 12:

  (c) Exhibits

    99.1 Press Release dated May 26, 2004.

Item 12. Results of Operations and Financial Condition

     On May 26, 2004, the Company issued a press release announcing earnings for the fiscal quarter ended May 8, 2004, which is furnished as Exhibit 99.1.

 

  2 

 

 

SIGNATURES

     Pursuant to the requirements 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/ Michael G. Archbold
Michael G. Archbold
Senior Vice President and Chief Financial
Officer Customer Satisfaction

Dated: May 26, 2004

 

  3 

 

 

EXHIBIT INDEX

99.1 Press Release dated May 26, 2004

 

  4 

 

 

Exhibit 99.1

AutoZone EPS Up 29%;
Sales +6%, Same Store Sales +2%

     MEMPHIS, Tenn., May 26 /PRNewswire-FirstCall/ — AutoZone, Inc. (NYSE: AZO) today reported sales of $1.360 billion for its third fiscal quarter (12 weeks) ended May 8, 2004, an increase of 5.6% from fiscal 2003. Same store sales, or sales for domestic stores open at least one year, increased 2% for the quarter. Retail same store sales were up 1% while commercial same store sales were up 10%. Gross profit, as a percentage of sales, for the quarter improved by 3.2 percentage points while operating expenses, as a percentage of sales, increased by 2.0 percentage points. This resulted in an operating margin of 18.5%, up 1.3 percentage points from last year. Operating profit increased 13.3% over the prior year.

     Net income for the quarter increased by 13.8% over the same period last year to $143.4 million, and diluted earnings per share, reflecting net income and the benefit of the company share repurchase program, increased 29.4% to $1.68 per share from $1.30 per share reported in the year-ago quarter.

     Return on invested capital for the trailing four quarters increased to 25.1% from 22.3% the previous year.

     For the fiscal year-to-date period (36 weeks), sales were $3.801 billion, an increase of 4.8% from the prior year, with a same store sales increase of 2% on flat growth in retail same store sales and 12% growth in commercial same store sales. Year-to-date net income increased 15.0% to $356.8 million, while diluted earnings per share for the period increased 30.2% to $4.06 from $3.12.

     Under its ongoing share repurchase program, AutoZone repurchased 1.6 million shares of its common stock for $133 million during the third quarter. Since 1998, cumulative share repurchases have totaled $3.4 billion, or 78.3 million shares at an average price of $42.89 per share.

     For the quarter, gross profit, as a percentage of sales, was 49.7% while operating expenses, as a percentage of sales, were 31.2%. During the quarter, gross profit was affected by the accounting required by the Emerging Issues Task Force Issue 02-16, “Accounting by a Customer (including a Reseller) for Cash Consideration Received from a Vendor” (EITF Issue 02-16). AutoZone adopted the new accounting effective January 1, 2003. Both this year’s and last year’s quarters were affected by this change in classification. For the twelve weeks ended May 8, 2004 and May 10, 2003, this resulted in a change in classification of vendor funding from operating expenses to cost of goods sold of $34.4 million and $15.6 million, respectively. Additionally, during this year’s quarter the Company experienced a gain from warranty negotiations of $10.6 million or $0.08 per share while last year’s quarter experienced a one- time $4.7 million or $0.03 per share gain from the sale of the TruckPro business unit. Excluding the impact of these events, gross margin for the quarter would have been 46.4% (versus 45.5% last year) and operating selling, general and administrative expenses as a percent of sales would have been 28.7% (versus 28.4% last year). This increase in operating selling, general and administrative expenses as a percent of sales primarily reflects costs associated with the Company’s initiative to refresh 81 additional stores during the quarter and to open 151 incremental commercial programs.

     The Company reduced its gross inventory levels (the reported balance sheet inventory, which is total inventory less Pay On Scan inventory) per store as of May 8, 2004, to $447 thousand from $469 thousand last year. Net inventory, defined as gross inventory less accounts payable, declined on a per store level to $82 thousand from $128 thousand last year. For the quarter, the Company reflected $61.3 million in Pay On Scan inventory.

     AutoZone is the nation’s leading retailer of automotive parts and accessories with 3,337 domestic stores and 60 in Mexico. During the quarter ended May 8, 2004, AutoZone opened 38 new stores, acquired 12 stores formerly operated as ABC Auto Parts, a regional auto parts chain, and replaced 1 store in the U.S. and opened 5 new stores in Mexico. Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items and accessories. Many domestic stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers and service stations. AutoZone also sells the ALLDATA brand diagnostic and repair software. On the web, AutoZone sells diagnostic and repair information and auto and light truck parts through http://www.autozone.com . AutoZone does not derive revenue from automotive repair or installation.

     AutoZone will host a one-hour conference call this morning, Wednesday, May 26, 2004, beginning at 9:00 a.m. (CDT) to discuss the third quarter results. Investors may listen to the conference call live and review supporting slides on the AutoZone corporate website, http://www.autozoneinc.com by clicking “Investor Relations,” “Conference Calls.” The call will also be available by dialing (210) 234-0004. A replay of the call and slides will be available on AutoZone’s website. In addition, a replay of the call will be available by dialing (402) 220-4124 through Wednesday, June 2, 2004, at 10:59 p.m. (CDT).

     This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). This information should not be considered a substitute for any measures derived in accordance with GAAP. The Company believes that this information is useful to investors as it indicates more clearly the Company’s comparative year-to-year operating results. The financial impact of the adoption of EITF Issue 02-16 was identified as an “adjustment” for comparative purposes. The Company’s management uses comparative information regarding the adoption of EITF Issue 02-16 to analyze and compare the Company’s underlying operating results. Management also manages the Company’s debt levels to a ratio of adjusted debt to EBITDAR, as shown on the attached tables. This is important information for the Company’s management of its debt levels. We have included a reconciliation of this information to the most comparable GAAP measures in the accompanying reconciliation tables.

     Certain statements contained in this press release are forward-looking statements. These statements discuss, among other things, business strategies and future performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, without limitation, competition, product demand, the economy, inflation, gasoline prices, consumer debt levels, war and the prospect of war, including terrorist activity, and the availability of commercial transportation. Actual results may materially differ from anticipated results. Please refer to the Risk Factors section of AutoZone’s Form 10-K for the fiscal year ended August 30, 2003, for more information related to those risks. AutoZone undertakes no obligation to publicly release any revisions to any forward-looking statements contained in this press release to reflect events or circumstances occurring after the date of this release or to reflect the occurrence of unanticipated events.

AutoZone’s 3rd Quarter Highlights - Fiscal 2004

Condensed Consolidated Statements of Operations
3rd Quarter, F2004 Only
(in thousands, except per share data)

  GAAP Results
Adjustments
*Adjusted
12 Weeks Ended
May 8, 2004
12 Weeks Ended
May 10, 2003
12 Weeks Ended
May 8, 2004
12 Weeks Ended
May 10, 2003
12 Weeks Ended
May 8, 2004
12 Weeks Ended
May 10, 2003
Net sales   $1,360,022   $1,288,445   $        —   $        —   $1,360,022   $1,288,445  
Cost of Sales   683,835   689,622   44,977   13,016   728,812   702,638  
   
 
 
 
 
 
 
Gross profit   676,187   598,823   (44,977 ) (13,016 ) 631,210   585,807  
Operating SG&A
   expenses 		  424,866   376,940   (34,352 ) (10,900 ) 390,514   366,040  
   
 
 
 
 
 
 
Operating profit (EBIT)   251,321   221,883   (10,625 ) (2,116 ) 240,696   219,767  
Interest expense, net   21,910   19,353   —   —   21,910   19,353  
   
 
 
 
 
 
 
Income before taxes   229,411   202,530   (10,625 ) (2,116 ) 218,786   200,414  
Taxes   86,000   76,553   (3,983 ) (800 ) 82,017   75,753  
   
 
 
 
 
 
 
Net income   $   143,411   $   125,977   $(6,642 ) $(1,316 ) $   136,769   $   124,661  
   
 
 
 
 
 
 
Net income per share:          
       Basic   $         1.71   $         1.33   $  (0.08 ) $  (0.01 ) $         1.63   $         1.32  
       Diluted   $         1.68   $         1.30   $  (0.08 ) $  (0.01 ) $         1.61   $         1.29  
Weighted Average
   Shares outstanding: 		                         
       Basic   83,897   94,666                                                   83,897   94,666  
       Diluted   85,202   96,811           85,202   96,811  

* Adjusted Statement of Operations for F2003 and F2004 excludes EITF Issue 02-16 impact. F2003 also excludes the income deferral of $2.6MM to the Balance Sheet due to EITF Issue 02-16
Additionally, Fiscal 2004 excludes $10.6MM gain from warranty and F2003 excludes one time $4.7MM gain from sale of TruckPro

Year-to-date 3rd Quarter, F2004
  GAAP Results
Adjustments
*Adjusted
36 Weeks Ended
May 8, 2004
36 Weeks Ended
May 10, 2003
36 Weeks Ended
May 8, 2004
36 Weeks Ended
May 10, 2003
36 Weeks Ended
May 8, 2004
36 Weeks Ended
May 10, 2003
Net sales   $3,801,298   $3,627,776   $          —   $          —   $3,801,298   $3,627,776  
Cost of Sales   1,947,710   1,983,564   112,205   13,016   2,059,915   1,996,580  
   
 
 
 
 
 
 
Gross profit   1,853,588   1,644,212   (112,205 ) (13,016 ) 1,741,383   1,631,196  
Operating SG&A expenses   1,218,637   1,086,505   (85,580 ) (10,900 ) 1,133,057   1,075,605  
   
 
 
 
 
 
 
Operating profit (EBIT)   634,951   557,707   (26,625 ) (2,116 ) 608,326   555,591  
Interest expense, net   64,092   58,091   —   —   64,092   58,091  
   
 
 
 
 
 
 
Income before taxes   570,859   499,616   (26,625 ) (2,116 ) 544,234   497,500  
Taxes   214,050   189,453   (9,983 ) (800 ) 204,067   188,653  
   
 
 
 
 
 
 
Net income   $   356,809   $   310,163   $(16,642 ) $(1,316 ) $   340,167   $   308,847  
   
 
 
 
 
 
 
Net income per share:  
       Basic   $         4.13   $         3.19   $    (0.19 ) $    (0.01 ) $         3.94   $         3.17  
       Diluted   $         4.06   $         3.12   $    (0.19 ) $    (0.01 ) $         3.87   $         3.10  
Weighted Average Shares  
 outstanding:  
       Basic   86,432   97,307                                     86,432   97,307  
       Diluted   87,890   99,470           87,890   99,470  

* Adjusted Statement of Operations for F2003 and F2004 excludes EITF Issue 02-16 impact. F2003 also excludes the income deferral of $2.6MM to the Balance Sheet due to EITF Issue 02-16
Additionally, Fiscal 2004 excludes $26.6MM gain from warranty and F2003 excludes one time gain from sale of TruckPro

Selected Balance Sheet Information
(in thousands)
May 8, 2004
May 10, 2003
August 30, 2003
Merchandise inventories   $ 1,517,071   $1,497,643   $ 1,511,316  
Current assets   1,643,453   1,605,303   1,584,994  
Property and equipment, net   1,752,474   1,671,917   1,715,753  
Total assets   3,788,556   3,647,848   3,680,466  
Accounts payable   1,240,154   1,090,158   1,321,905  
Current liabilities   1,652,747   1,570,879   1,675,566  
Debt   1,798,917   1,419,967   1,546,845  
Stockholders’ equity   260,141   601,618   373,758  
Working capital   (9,294 ) 34,424   (90,572 )

Adjusted Debt/EBITDAR (Trailing 4 Qtrs)
May 8, 2004
May 10, 2003
Net income   $   564,250   $   488,149  
Add: Interest   90,790   82,827  
     Taxes   340,000   298,653  
   
 
 
EBIT   995,040   869,629  
           
Add: Depreciation/Amortization   107,063   111,284  
     Rent Expense   115,958   107,477  
   
 
 
EBITDAR   1,218,061   1,088,390  
           
Debt   1,798,917   1,419,967  
Add: Rent x 6   695,747   644,862  
   
 
 
Adjusted Debt   2,494,664   2,064,829  
           
Adjusted Debt to EBITDAR   2.0   1.9  

Selected Cash Flow Information
(in thousands)
12 Weeks
Ended
May 8, 2004
12 Weeks
Ended
May 10, 2003
36 Weeks
Ended
May 8, 2004
36 Weeks
Ended
May 10, 2003
Trailing 4
Quarters
May 8, 2004
Trailing 4
Quarters
May 10, 2003
Depreciation   $   24,499   $   24,690   $   72,841   $   75,526   $ 107,063   $ 111,284  
Capital spending   $   42,700   $   36,968   $ 112,178   $   98,800   $ 195,620   $ 134,194  
   
Cash flow before share repurchase:  
Net increase (decrease) in cash and  
 cash equivalents   $          47   $          79   $          16   $        140   $        120   $      (604 )
Subtract increase (decrease) in debt   11,972   80,425   252,072   225,450   356,422   168,833  
Subtract share repurchases   (132,640 ) (285,063 ) (530,303 ) (444,558 ) (976,840 ) (731,099 )
   
 
 
 
 
 
 
Cash flow before share repurchases   $ 120,715   $ 204,717   $ 278,247   $ 219,248   $ 620,538   $ 561,662  
   
 
 
 
 
 
 

Other Selected Financial Information
(in thousands)
May 8, 2004
May 10, 2003
Cumulative share repurchases ($):      
   On balance sheet   $3,357,114   $2,380,274  
   Forward contracts   —   295,390  
   
 
 
            Total   $3,357,114   $2,675,664  
Cumulative share repurchases (shares):  
   On balance sheet   78,269   66,233  
   Forward contracts   —   4,008  
            Total   78,269   70,241  
Shares outstanding, end of quarter   83,381   93,961  

    May 8, 2004
 May 10, 2003
Return on Equity (ROE)   131.0 %   70.9 %

Trailing 4
Quarters
May 8, 2004
Trailing 4
Quarters
May 10, 2003
Return on Invested Capital (ROIC)   25.1 % 22.3 %

AutoZone’s 3rd Quarter Fiscal 2004
Selected Operating Highlights

Store Count & Square Footage

12 Weeks Ended
May 8, 2004
12 Weeks Ended
May 10, 2003
36 Weeks Ended
May 8, 2004
36 Weeks Ended
May 10, 2003
Domestic stores:          
   Store count:  
   Stores opened   38   31   118   92  
   Stores closed   0   1   0   8  
   Replacement  
    stores   1   —   2   4  
   Total domestic  
    stores   3,337   3,152   3,337   3,152  
   Stores with  
    commercial sales   2,199   1,942   2,199   1,942  
   Square footage  
    (in thousands):   21,171   20,148   21,171   20,148  
   Square footage  
    per store   6,344   6,392   6,344   6,392  
Stores in Mexico:  
   Stores opened   5   2   11   4  
   Total stores in  
    Mexico   60   43   60   43  
Total Stores  
 Chainwide:   3,397   3,195   3,397   3,195  

Sales & Inventory Statistics (Domestic Stores Only):

12 Weeks Ended
May 8, 2004
12 Weeks Ended
May 10, 2003
Trailing 4
Quarters
May 8, 2004
Trailing 4
Quarters
May 10, 2003
Total Retail Sales          
 ($ in thousands)   $1,140,763   $1,093,188   $4,738,613   $4,596,160*  
   % Increase vs. LY  
   Retail Sales   4 % 2 % 3 % 4 %
Total Commercial  
 Sales ($ in  
 thousands)   $   179,712   $   161,235   $   729,608   $623,964*  
   % Increase vs. LY  
   Commercial Sales   11 % 31 % 17 % 27 %
Sales per average  
 store ($ in  
 thousands)   $          398   $          400   $       1,685   $1,683*  
Sales per average  
 square foot   63   63   265   263 *  
                   
Same store sales - rolling 13 periods 12 Weeks Ended
May 8, 2004
12 Weeks Ended
May 10, 2003
36 Weeks Ended
May 8, 2004
36 Weeks Ended
May 10, 2003
Total   2 % 3 % 2 % 3 %*
   Retail   1 % 0 % 0 % 0 %*
   Commercial   10 % 30 % 12 % 29 %*

* For comparison purposes, excludes 53rd week in fiscal 2002.
Inventory turns: Trailing 4
Quarters
May 8, 2004
Trailing 4
Quarters
May 10, 2003
   Based on average inventories   1.9x   2.1x  
   Based on ending inventories   1.9x   2.0x  
Inventory turns, net of payables:  
   Based on average inventories   11.7x   8.6x  
   Based on ending inventories   11.6x   7.6x  

Inventory Statistics (Total Stores):
as of
May 8, 2004
as of
May 10, 2003
Accounts payable/inventory (total company)   82 % 73 %
   
($ in thousands)  
Total Inventory*   $1,578,391   $1,497,643  
Total Inventory*/Store   $          465   $          469  
           
Gross Inventory**   $1,517,071   $1,497,643  
Gross Inventory**/Store   $          447   $          469  
           
Net Inventory (net of payables)   $   276,917   $   407,485  
Net Inventory/Store   $            82   $          128  

* Total inventory is defined as GAAP inventory plus Pay On Scan inventory added back.
** Gross inventory is defined as Total inventory excluding Pay On Scan inventory. This is GAAP.

SOURCE AutoZone, Inc.
     -0-                                   05/26/2004
     /CONTACT: Financial, Brian Campbell, +1-901-495-7005, or brian.campbell@autozone.com , or Media, Ray Pohlman, +1-901-495-7962, or ray.pohlman@autozone.com , both of AutoZone, Inc./
     /Web site: http://www.autozone.com http://www.autozoneinc.com / (AZO)

CO: AutoZone, Inc.
ST: Tennessee
IN: AUT REA
SU: CCA ERN MAV