AutoZone Second Quarter EPS Up 36%
MEMPHIS, Tenn., March 4 -- AutoZone, Inc. , today reported sales of $1.121 billion for its second fiscal quarter (12 weeks) ended February 15, 2003, an increase of 3.6% from fiscal 2002. Excluding the sales of the TruckPro subsidiary which was sold in December 2001 sales increased 4.8%. Same store sales, or sales for domestic stores open at least one year, increased 2.4% during the quarter. Gross profit, as a percentage of sales, for the quarter improved by 0.34 percentage points, while operating expenses, as a percentage of sales, declined by 1.62 percentage points. This resulted in a 13.2% operating profit margin, up 1.96 percentage points from last year. Net income for the quarter increased 24% to $79.3 million, while diluted earnings per share increased 36% to $0.79 from $0.58 reported in the year-ago quarter. Return on invested capital for the trailing four quarters increased to 21.4%.
For the fiscal year-to-date period (24 weeks), sales were $2.339 billion, an increase of 3.6% from the previous year, with a same store sales increase of 3.5%. Year-to-date net income increased 25% to $184.2 million, while diluted earnings per share for the period increased 37% to $1.83 from $1.34. On a trailing four quarters basis, AutoZone has achieved a 5.8% same store sales increase, including 4.0% for retail and 22.8% for commercial.
"We are pleased with our strong performance through the second quarter, even as we anniversaried 12% same store sales increases from the prior year," said Steve Odland, Chairman, President, and Chief Executive Officer. "The 29% same store sales increase in our AZ Commercial business reflects our commercial customers' positive response to our efforts. Additionally, we are excited about our new advertising initiatives.
"Our continued focus on controlling costs through relentless expense discipline continues to drive shareholder value. Operating expenses as a percentage of sales declined 1.62 percentage points to 31.1% in the second quarter. This rate is the lowest second quarter rate achieved since 1995. Additionally, we maintained our inventory per store at levels not exceeding the first quarter while reducing net inventory per store versus the previous year.
"AutoZone believes in the highest level of integrity in its operations and financial reporting. Among other things during 2000, we created a Nominating and Corporate Governance Committee which is comprised of independent directors. We restructured our Board of Directors, repealed our poison pill, and instituted a code of conduct. I am proud to say that our efforts have been recognized recently by Institutional Shareholder Services. Out of 5,000 companies assessed, ISS ranked AutoZone in the top ten in its overall Corporate Governance Quotient Research Tool. This rating confirms that we are focused on the right things for instilling honest, clear decision making procedures in all our day-to-day activities."
Additionally, AutoZone, Inc. announced on January 29, 2003 that its Board of Directors authorized the repurchase of an additional $500 million of the company's common stock, in connection with the ongoing share repurchase program. During the quarter, the company purchased 3.8 million shares for $259 million, including $178 million purchased under forward purchase contracts. Since 1998, cumulative share repurchases under the share repurchase program were $2.39 billion, or 66.3 million shares at an average price of $36.08 per share, including $297.5 million, or 4.3 million shares, under forward purchase contracts. Subsequent to the end of the quarter, the company purchased 1.5 million shares in settlement of certain forward contracts outstanding as of February 15, 2003, at an average cost of $64.92 per share.
AutoZone will host a one-hour conference call Wednesday, March 5, 2003, beginning at 9 a.m. (CST) to discuss this press release and the outlook for the remainder of fiscal 2003. Investors may listen to the conference call live and review supporting slides on the AutoZone website, www.autozone.com, by clicking "Investor Relations," "Conference Calls," or by going directly to http://www.autozone.com/Investors. The call will also be available by dialing (712) 271-3887. 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) 998-1323 through Tuesday, April 8, 2003.
During the quarter, AutoZone opened 30 new stores, replaced 3 stores and closed 6 stores in the U.S. and opened 1 new store in Mexico. As of February 15, 2003, AutoZone sells auto and light truck parts, chemicals and accessories through 3,122 AutoZone stores in 44 states plus the District of Columbia in the U.S. and 41 AutoZone stores in Mexico and also sells the ALLDATA brand automotive diagnostic and repair software. On the web, AutoZone sells diagnostic and repair information through www.alldatadiy.com, and auto and light truck parts through www.autozone.com.
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 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 31, 2002, 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 2nd Quarter Highlights - Fiscal 2003
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
12 Weeks 12 Weeks 24 Weeks
Ended Ended Ended
February February February
15, 9, 15,
2003 2002 2003
Net sales $1,120,696 $1,081,311 $2,339,331
Cost of goods sold 624,697 606,411 1,293,942
Gross profit 495,999 474,900 1,045,389
Operating expenses 348,501 353,751 709,565
Restructuring and impairment charges -- -- --
Operating profit 147,498 121,149 335,824
Interest expense, net 19,633 18,278 38,738
Income before taxes 127,865 102,871 297,086
Taxes 48,590 39,100 112,900
Net income $79,275 $63,771 $184,186
Net income per share:
Basic $0.81 $0.60 $1.87
Diluted $0.79 $0.58 $1.83
Shares outstanding:
Basic 98,446 106,846 98,627
Diluted 100,393 109,797 100,800
24 Weeks Trailing 4 Trailing 4
Ended Quarters Quarters
February February February
9, 15, 9,
2002 2003 2002
Net sales $2,257,363 $5,407,478 $5,037,983
Cost of goods sold 1,266,327 2,977,738 2,876,556
Gross profit 991,036 2,429,740 2,161,427
Operating expenses 714,383 1,599,561 1,558,442
Restructuring and impairment charges -- -- 126,689
Operating profit 276,653 830,179 476,296
Interest expense, net 37,705 80,893 89,846
Income before taxes 238,948 749,286 386,450
Taxes 91,100 284,800 148,600
Net income $147,848 $464,486 $237,850
Net income per share:
Basic $1.38 $4.63 $2.18
Diluted $1.34 $4.52 $2.14
Shares outstanding:
Basic 107,415 100,388 109,189
Diluted 110,201 102,772 111,229
Selected Balance Sheet Information
(in thousands)
February February August
15, 9, 31,
2003 2002 2002
Merchandise inventories $1,490,172 $1,273,420 $1,375,584
Current assets 1,577,914 1,350,012 1,450,128
Property and equipment, net 1,662,567 1,682,335 1,661,728
Total assets 3,614,582 3,421,448 3,477,791
Accounts payable 1,048,077 838,092 1,145,533
Current liabilities 1,469,797 1,206,581 1,533,571
Stockholders' equity 747,774 891,600 689,127
Debt 1,339,542 1,251,942 1,194,517
Working capital 108,117 143,431 (83,443)
Selected Cash Flow Information
(in thousands)
12 Weeks 12 Weeks 24 Weeks
Ended Ended Ended
February February February
15, 9, 15,
2003 2002 2003
Depreciation & amortization $25,243 $27,924 $50,836
Capital spending $31,367 $24,411 $61,832
Cash flow before share repurchases $54,522 $128,464 $14,470
Share repurchases $80,972 $99,764 $159,495
24 Weeks Trailing 4 Trailing 4
Ended Quarters Quarters
February February February
9, 15, 9,
2002 2003 2002
Depreciation & amortization $56,093 $112,998 $126,183
Capital spending $40,622 $138,449 $116,847
Cash flow before share repurchases $142,671 $601,667 $598,699
Share repurchases $169,211 $689,267 $330,596
Other Selected Financial Information
(in thousands)
February 15, February 9,
2003 2002
Cumulative share
repurchases ($):
On balance sheet $2,095,191 $1,405,944
Forward contracts 297,525 115,332
Total $2,392,716 $1,521,276
Cumulative share
repurchases (shares):
On balance sheet 62,032 51,423
Forward contracts 4,283 2,492
Total 66,315 53,915
Shares outstanding, end of
quarter 97,857 106,433
After-tax return on
invested capital 21.4% 15.7%
AutoZone's 2nd Quarter Fiscal 2003
Selected Operating Highlights
Store Count & Square Footage
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February February February February
15, 2003 9, 2002 15, 2003 9, 2002
Domestic stores:
Store count:
Stores opened 30 38 61 53
Stores closed 6 -- 7 35
Replacement stores 3 4 4 10
Total domestic stores 3,122 3,037 3,122 3,037
Stores with commercial
sales 1,954 1,643 1,954 1,643
Square footage (in
thousands): 19,986 19,505 19,986 19,505
Stores in Mexico:
Stores opened 1 1 2 2
Total stores in Mexico 41 23 41 23
Sales & Inventory Statistics (Domestic stores):
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February February February February
15, 2003 9, 2002 15, 2003 9, 2002
Sales per average store ($ in
thousands) $349 $345 $734 $712
Sales per average square foot $55 $54 $115 $111
Same store sales - rolling 13
periods
Total 2.4 % 11.9 % 3.5 % 10.2 %
Retail vs. commercial
Retail (0.6)% 11.3 % 0.7 % 9.6 %
Commercial 29.2 % 17.9 % 28.7 % 15.8 %
Inventory turns:
Based on average
inventories 2.1 X 2.3 X
Based on ending
inventories 2.0 X 2.2 X
Inventory turns, net of
payables:
Based on average
inventories 8.4 X 7.1 X
Based on ending
inventories 6.9 X 6.6 X
Accounts payable/inventory
(total company) 70 % 66 %