AutoZone First Quarter EPS Up 12.7%
MEMPHIS, Tenn., Dec. 8, 2004 -- AutoZone, Inc. today reported sales of $1.286 billion for its first fiscal quarter (12 weeks) ended November 20, 2004, up 0.3% over fiscal 2003. Same store sales, or sales for domestic stores open at least one year, decreased 3% for the quarter. Gross profit, as a percentage of sales, for the quarter improved by 44 basis points while operating expenses, as a percentage of sales, increased by 40 basis points. This resulted in an operating margin of 16.8%, up 4 basis points from last year. Operating profit increased 0.6% over the prior year.
Net income, as a percentage of sales, for the quarter was up slightly over the same period last year to $123 million, and diluted earnings per share, reflecting net income and the benefit of the company's share repurchase program, increased 12.7% to $1.52 per share from $1.35 per share reported in the year-ago quarter.
Return on invested capital for the trailing four quarters increased to 24.9% from 24.0% the previous year.
Under its ongoing share repurchase program, AutoZone repurchased 0.4 million shares of its common stock for $30 million during the first quarter, at an average price of $84 per share. Since 1998, cumulative share repurchases have totaled $3.7 billion, or 82.6 million shares at an average price of $45 per share.
For the quarter, gross profit, as a percentage of sales, was 48.3% (versus 47.8% last year) while operating expenses, as a percentage of sales, were 31.4% (versus 31.0% last year). However, both the prior year's gross profit, as a percentage of sales, and operating profit, as a percentage of sales, benefited 125 basis points from a $16 million pre-tax benefit due to warranty negotiations. The opening of 28 new AutoZone stores along with higher utility and fuel costs contributed to the increase in operating, selling, general and administrative expenses as a percent of sales.
The Company's gross inventory levels (the reported balance sheet inventory, which is total inventory less supplier owned Pay On Scan inventory) per store as of November 20, 2004, were $464 thousand versus $459 thousand last year. Net inventory, defined as gross inventory less accounts payable, declined on a per store level to $40 thousand from $44 thousand last year.
"Our business was challenged by the high gas prices this past quarter, as our customers continued to manage their expenditures closely and hold off on doing some preventative maintenance," said Steve Odland, Chairman, President, and Chief Executive Officer. "Our financial model is strong, however, and we have continued to increase earnings and operating cash flow while simultaneously improving our business model by removing risks associated with interest rate fluctuations and warranty liability. This consistency in cash flows will continue to be our ongoing focus, while we introduce many initiatives that, we believe, can help us grow same store sales over time."
During the quarter ended November 20, 2004, AutoZone opened 23 new stores, re-opened 5 stores under the AutoZone brand formerly operated as ABC Auto Parts, a regional auto parts chain, and replaced 1 store in the U.S. while additionally opening 1 new store in Mexico. As of November 20, 2004, the Company had 3,448 domestic stores and 64 stores in Mexico. AutoZone is the nation's leading retailer of automotive parts and accessories. 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, accessories, and non-automotive products. 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, December 8, 2004, beginning at 9:00 a.m. (CST) to discuss the fourth 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) 839-8923. 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, December 15, 2004, at 10:59 p.m. (CST).
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. Management 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.
AutoZone's 1st Quarter Highlights - Fiscal 2005
Condensed Consolidated Statements of Operations
1st Quarter
(in thousands, except per share data)
GAAP Results Adjustments
12 Weeks 12 Weeks 12 Weeks 12 Weeks
Ended Ended Ended Ended
November 20, November 22, November 20, November 22,
2004 2003 2004 2003
Net sales $1,286,203 $1,282,040
Cost of Sales 665,402 668,950 16,000
Gross profit 620,801 613,090 - (16,000)
Operating SG&A expenses 404,488 397,985
Operating profit (EBIT) 216,313 215,105 - (16,000)
Interest expense, net 21,790 20,260
Income before taxes 194,523 194,845 - (16,000)
Taxes 72,000 73,100 (6,003)
Net income $122,523 $121,745 $- $(9,997)
Net income per share:
Basic $1.54 $1.37 $- $(0.11)
Diluted $1.52 $1.35 $- $(0.11)
Weighted Average Shares
outstanding:
Basic 79,711 88,741 79,711 88,741
Diluted 80,748 90,422 80,748 90,422
* Fiscal 2004 Cost of Sales includes a $16 million pre-tax gain from
warranty.
Condensed Consolidated Statements of Operations
1st Quarter
(in thousands, except per share data)
Adjusted*
12 Weeks Ended 12 Weeks Ended
November 20, November 22,
2004 2003
Net sales $1,286,203 $1,282,040
Cost of Sales 665,402 684,950
Gross profit 620,801 597,090
Operating SG&A expenses 404,488 397,985
Operating profit (EBIT) 216,313 199,105
Interest expense, net 21,790 20,260
Income before taxes 194,523 178,845
Taxes 72,000 67,097
Net income $122,523 $111,748
Net income per share:
Basic $1.54 $1.26
Diluted $1.52 $1.24
Weighted Average Shares outstanding:
Basic 79,711 88,741
Diluted 80,748 90,422
* Fiscal 2004 Cost of Sales includes a $16 million pre-tax gain from
warranty.
Selected Balance Sheet Information
(in thousands)
November 20, November 22, August 28,
2004 2003 2004
Merchandise inventories $1,629,312 $1,519,573 $1,561,479
Current assets 1,840,244 1,700,731 1,755,757
Property and equipment, net 1,823,972 1,719,386 1,790,089
Total assets 4,020,050 3,788,621 3,912,565
Accounts payable 1,490,583 1,373,941 1,429,128
Current liabilities 1,869,643 1,778,465 1,818,115
Debt 1,824,775 1,453,345 1,869,250
Stockholders' equity 277,388 473,271 171,393
Working capital (29,399) (77,734) (62,358)
Adjusted Debt / EBITDAR (Trailing
4 Qtrs) November 20, 2004 November 22, 2003
Net income 566,981 534,438
Add: Interest 94,334 85,945
Taxes 338,600 324,192
EBIT 999,915 944,575
Add: Depreciation 108,598 108,105
Rent Expense 118,017 112,503
EBITDAR 1,226,530 1,165,183
Debt 1,824,775 1,453,345
Add : Rent x 6 708,102 675,018
Adjusted Debt 2,532,877 2,128,363
Adjusted Debt to EBITDAR 2.1 * 1.8
* No change from Q4, F2004.
Selected Cash Flow Information
(in thousands)
12 Weeks 12 Weeks Trailing 4 Trailing 4
Ended Ended Quarters Quarters
November November November November
20, 2004 22, 2003 20, 2004 22, 2003
Depreciation $25,657 $23,950 $108,598 $108,105
Capital spending $58,807 $29,356 $214,322 $181,133
Cash flow before share repurchase:
Net increase (decrease) in cash
and cash equivalents $(12,971) $(18,092) $(11,129) $10,499
Subtract increase (decrease) in
debt (44,475) (93,500) 371,430 140,253
Subtract share repurchases (30,000) (60,445) (817,657) (873,017)
Cash flow before share repurchases
and changes in debt $61,504 $135,853 $435,098 $743,263
Other Selected Financial Information
(in thousands)
November 20, 2004 November 22, 2003
Cumulative share repurchases ($): $3,704,913 $2,887,256
Cumulative share repurchases (shares): 82,570 72,664
Shares outstanding, end of quarter 79,608 88,663
November 20, 2004 November 22, 2003
Return on Equity (ROE) 151.1% 87.1%
Trailing 4 Trailing 4
Quarters Quarters
November 20, 2004 November 22, 2003
Return on Invested Capital (ROIC) 24.9% 24.0%
AutoZone's 1st Quarter Fiscal 2005
Selected Operating Highlights
Store Count & Square Footage
12 Weeks Ended 12 Weeks Ended
November 20, 2004 November 22, 2003
Domestic stores:
Store count:
Stores opened 28 40
Stores closed - -
Replacement stores 1 1
Total domestic stores 3,448 3,259
Stores with commercial sales 2,132 1,986
Square footage (in thousands): 21,862 20,719
Square footage per store 6,340 6,357
Stores in Mexico:
Stores opened 1 1
Total stores in Mexico 64 50
Total Stores Chainwide: 3,512 3,309
Sales Statistics (Domestic Stores Only):
12 Weeks 12 Weeks Trailing 4 Trailing 4
Ended Ended Quarters Quarters
November 20, November 22, November 20, November 22,
2004 2003 2004 2003
Total Retail Sales
($ in thousands) $1,081,758 $1,079,087 $4,730,073 $4,673,074
% Increase vs. LY
Retail Sales 0% 3% 1% 2% *
Total Commercial Sales
($ in thousands) $163,607 $167,182 $736,905 $695,232
% Increase vs. LY
Commercial Sales (2%) 18% 6% 26% *
Sales per average store
($ in thousands) $363 $385 $1,630 $1,689
Sales per average square
foot 57 60 257 265
* For comparison purposes, excludes 53rd week in fiscal 2002.
12 Weeks Ended 12 Weeks Ended
November 20, 2004 November 22, 2003
Same store sales -
rolling 13 periods (3%) 2%
Inventory Statistics (Total Stores):
as of as of
November 20, 2004 November 22, 2003
Accounts payable/inventory 91% 90%
($ in thousands)
Gross Inventory** $1,629,312 $1,519,573
Gross Inventory** / Store $464 $459
Net Inventory (net of payables) $138,729 $145,632
Net Inventory / Store $40 $44
** Gross inventory excludes Pay On Scan inventory. This is the reported
balance sheet number.
Trailing 4 Quarters Trailing 4 Quarters
Inventory turns: November 20, 2004 November 22, 2003
Based on average inventories 1.8 x 1.9 x
Based on ending inventories 1.8 x 1.9 x
Inventory turns, net of payables:
Based on average inventories 10.0 x 8.2 x
Based on ending inventories 20.7 x 20.2 x