AUTOZONE Second Quarter 2005 EPS Up
MEMPHIS, Tenn., March 2 -- AutoZone, Inc. today reported sales of $1.204 billion for its fiscal second quarter (12 weeks) ended February 12, 2005, up 3.9% over fiscal second quarter 2004. Same store sales, or sales for domestic stores open at least one year, were flat for the quarter. Operating profit increased 12.2% over the prior year.
Net income for the quarter increased by 30.4% over the same period last year to $119.5 million, and diluted earnings per share increased 41.9% to $1.48 per share from $1.04 per share reported in the year-ago quarter.
Return on invested capital for the trailing four quarters increased to an historic high of 25.4% from 24.5% the previous year.
For the quarter, gross profit, as a percentage of sales, was 48.4% (versus 48.7% last year) while operating expenses, as a percentage of sales, were 32.7% (versus 34.1% last year). The slight reduction in gross margin largely was due to one-time expenses related to the closure of one distribution center and the opening of a new facility near Dallas, Texas. The reduction in operating expenses has continued to be driven by a focused effort to reduce expenditures throughout all levels of the organization.
Additionally, the fiscal second quarter ended February 12, 2005 contained a one-time tax benefit adjustment of $15.3 million. Excluding these credits, earnings per share for the quarter increased 24% to $1.29 versus the year-ago quarter.
The Company's gross per store inventory levels (the reported balance sheet inventory, which is total inventory less supplier owned Pay On Scan inventory) as of February 12, 2005, were $450 thousand versus $443 thousand last year. Net inventory, defined as gross inventory less accounts payable, increased on a per store level to $86 thousand from $74 thousand last year. The increase in inventory levels is attributable to the Company's efforts to invest in having the right part at the right price to further enhance our industry- leading brand in the eyes of our customers.
"Business strengthened considerably this quarter versus the past two quarters as gas prices fell from highs last year. We continue to implement new initiatives to grow sales profitably. We are also excited by our newest plan to expand into Puerto Rico," said Steve Odland, Chairman, President, and Chief Executive Officer. As part of its plan to open approximately 200 stores in fiscal year 2005, the Company will enter the Puerto Rico marketplace for the first time this year. The Company expects to open 10 stores by fall of 2005.
During the quarter ended February 12, 2005, AutoZone opened 27 new stores, replaced 1 store, and closed 1 store in the U.S. while additionally opening 3 new stores in Mexico. As of February 12, 2005, the Company had 3,474 domestic stores and 67 stores in Mexico.
Based upon recent SEC clarification, the Company is reviewing its accounting for leases and related leasehold improvements. While the impact on fiscal 2005 is estimated to be less than $1 million (net of tax), the Company expects to record a one-time charge for the cumulative non-cash adjustment in
the second quarter. The charge, which is not reflected in the attached results, is currently estimated to be in the range of $15 million to $25 million (net of tax).
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, March 2, 2005, beginning at 10:00 a.m. (EST) to discuss the second 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, March 9, 2005, at 11:59 p.m. (EST).
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 2nd Quarter Highlights - Fiscal 2005
Condensed Consolidated Statements of Operations
2nd Quarter
(in thousands, except per share data)
GAAP Results Adjustments
12 Weeks 12 Weeks 12 Weeks 12 Weeks
Ended Ended Ended Ended
February February February February
12, 2005 14, 2004 12, 2005* 14, 2004
Net sales $1,204,055 $1,159,236 $- $-
Cost of sales 621,684 594,925 - -
Gross profit 582,371 564,311 - -
Operating SG&A expenses 393,331 395,785 - -
Operating profit (EBIT) 189,040 168,526 - -
Interest expense, net 23,645 21,922 - -
Income before taxes 165,395 146,604 - -
Income taxes 45,900 54,950 15,300 -
Net income $119,495 $91,654 $(15,300) $-
Net income per share:
Basic $1.50 $1.06 $(0.19) $-
Diluted $1.48 $1.04 $(0.19) $-
Weighted average shares outstanding:
Basic 79,692 86,618 79,692 86,618
Diluted 80,860 88,028 80,860 88,028
* Fiscal year 2005 income taxes include a $15.3 million benefit primarily
from the planned one-time repatriation from foreign subsidiaries.
Condensed Consolidated Statements of Operations
2nd Quarter
(in thousands, except per share data)
Adjusted*
12 Weeks Ended 12 Weeks Ended
February 12, February 14,
2005 2004
Net sales $1,204,055 $1,159,236
Cost of sales 621,684 594,925
Gross profit 582,371 564,311
Operating SG&A expenses 393,331 395,785
Operating profit (EBIT) 189,040 168,526
Interest expense, net 23,645 21,922
Income before taxes 165,395 146,604
Income taxes 61,200 54,950
Net income $104,195 $91,654
Net income per share:
Basic $1.31 $1.06
Diluted $1.29 $1.04
Weighted average shares outstanding:
Basic 79,692 86,618
Diluted 80,860 88,028
* Fiscal year 2005 income taxes include a $15.3 million benefit primarily
from the planned one-time repatriation from foreign subsidiaries.
Year-to-date 2nd Quarter, F2005
GAAP Results Adjustments
24 Weeks 24 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February February February February
12, 2005 14, 2004 12, 2005 14, 2004
Net sales $2,490,258 $2,441,276 $- $-
Cost of sales 1,287,086 1,263,875 - 16,000
Gross profit 1,203,172 1,177,401 - (16,000)
Operating SG&A expenses 797,819 793,771 - -
Operating profit (EBIT) 405,353 383,630 - (16,000)
Interest expense, net 45,435 42,182 - -
Income before taxes 359,918 341,448 - (16,000)
Income taxes 117,900 128,050 15,300 (6,003)
Net income $242,018 $213,398 $(15,300) $(9,997)
Net income per share:
Basic $3.04 $2.43 $(0.19) $(0.11)
Diluted $3.00 $2.39 $(0.19) $(0.11)
Weighted average shares outstanding:
Basic 79,702 87,679 79,702 87,679
Diluted 80,803 89,219 80,803 89,219
Year-to-date 2nd Quarter, F2005
Adjusted*
24 Weeks Ended 24 Weeks Ended
February 12, February 14,
2005 2004
Net sales $2,490,258 $2,441,276
Cost of sales 1,287,086 1,279,875
Gross profit 1,203,172 1,161,401
Operating SG&A expenses 797,819 793,771
Operating profit (EBIT) 405,353 367,630
Interest expense, net 45,435 42,182
Income before taxes 359,918 325,448
Income taxes 133,200 122,048
Net income $226,718 $203,400
Net income per share:
Basic $2.84 $2.32
Diluted $2.81 $2.28
Weighted average shares outstanding:
Basic 79,702 87,679
Diluted 80,803 89,219
* Fiscal year 2005 income taxes include a $15.3 million benefit primarily
from the planned one-time repatriation from foreign subsidiaries, while
F2004 includes $16 million gain from warranty.
Selected Balance Sheet Information
(in thousands)
February 12, February 14, August 28,
2005 2004 2004
Merchandise inventories $1,591,996 $1,487,478 $1,561,479
Current assets 1,847,054 1,674,178 1,755,757
Property and equipment, net 1,856,054 1,735,505 1,790,089
Total assets 4,063,312 3,775,540 3,912,565
Accounts payable 1,286,780 1,240,592 1,429,128
Current liabilities 1,637,888 1,671,661 1,818,115
Debt 1,901,500 1,786,945 1,869,250
Stockholders' equity 410,133 233,877 171,393
Working capital 209,166 2,517 (62,358)
Adjusted Debt / EBITDAR
(Trailing 4 Qtrs) February 12, February 14,
2005 2004
Net income 594,822 546,816
Add: Interest 96,057 88,234
Taxes 329,550 330,553
EBIT 1,020,429 965,603
Add: Depreciation 111,079 107,254
Rent Expense 120,332 114,213
EBITDAR 1,251,840 1,187,070
Debt 1,901,500 1,786,945
Add : Rent x 6 721,992 685,278
Adjusted Debt 2,623,492 2,472,223
Adjusted Debt to EBITDAR 2.1* 2.1
* No change from Q4, F2004.
Selected Cash Flow Information
(in thousands)
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February February February February
12, 2005 14, 2004 12, 2005 14, 2004
Depreciation $26,873 $24,392 $52,530 $48,342
Capital spending $59,971 $40,122 $118,778 $69,478
Cash flow before share repurchase:
Net increase (decrease) in cash
and cash equivalents $16,258 $5,525 $3,287 $(12,567)
Subtract increase (decrease) in debt 76,725 333,600 32,250 240,100
Subtract share repurchases - (337,218) (30,000) (397,663)
Cash flow before share repurchases
and changes in debt $(60,467) $9,143 $1,037 $144,996
Selected Cash Flow Information
(in thousands)
Trailing 4 Trailing 4
Quarters Quarters
February 12, February 14,
2005 2004
Depreciation $111,079 $107,254
Capital spending $234,170 $189,888
Cash flow before share repurchase:
Net increase (decrease) in cash and
cash equivalents $(396) $2,997
Subtract increase (decrease) in debt 114,555 447,403
Subtract share repurchases (480,439) (1,129,263)
Cash flow before share repurchases
and changes in debt $365,488 $684,857
Other Selected Financial Information
(in thousands)
February 12, February 14,
2005 2004
Cumulative share repurchases ($): $3,704,913 $3,224,474
Cumulative share repurchases (shares): 82,570 76,698
Shares outstanding, end of quarter 79,806 84,756
February 12, February 14,
2005 2004
Return on Equity (ROE) 184.7% 111.4%
Trailing 4 Trailing 4
Quarters Quarters
February 12, February 14,
2005 2004
Return on Invested Capital (ROIC) 25.4% 24.5%
AutoZone's 2nd Quarter Fiscal 2005
Selected Operating Highlights
Store Count & Square Footage
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February February February February
12, 2005 14, 2004 12, 2005 14, 2004
Domestic stores:
Store count:
Stores opened 27 40 55 80
Stores closed 1 - 1 -
Replacement stores 1 - 2 1
Total domestic stores 3,474 3,299 3,474 3,299
Stores with commercial sales 2,131 2,048 2,131 2,048
Square footage (in thousands):
Square footage per store 22,035 20,944 22,035 20,944
Stores in Mexico:
Stores opened 3 5 4 6
Total stores in Mexico 67 55 67 55
Total Stores Chainwide: 3,541 3,354 3,541 3,354
Sales Statistics (Domestic Stores Only):
12 Weeks 12 Weeks Trailing 4 Trailing 4
Ended Ended Quarters Quarters
February February February February
12, 2005 14, 2004 12, 2005 14, 2004
Total Retail Sales ($ in
thousands) $1,005,292 $966,698 $4,768,667 $4,691,038
% Increase vs. LY Retail
Sales 4% 2% 2% 2%
Total Commercial Sales ($ in
thousands) $154,415 $153,871 $737,449 $711,131
% Increase vs. LY
Commercial Sales 0% 12% 4% 22%
Sales per average store ($
in thousands) $335 $342 $1,626 $1,683
Sales per average square foot 53 54 256 264
* For comparison purposes, excludes 53rd week in fiscal 2002.
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February February February February
12, 2005 14, 2004 12, 2005 14, 2004
Same store sales - rolling
13 periods 0% 0% (1%) 1%
Inventory Statistics (Total Stores):
as of as of
February 12, February 14,
2005 2004
Accounts payable/inventory 81% 83%
($ in thousands)
Gross Inventory** $1,591,996 $1,487,478
Gross Inventory** / Store $450 $443
Net Inventory (net of payables) $305,216 $246,886
Net Inventory / Store $86 $74
** Gross inventory excludes Pay On Scan inventory. This is the reported
balance sheet number.
Trailing 4 Trailing 4
Quarters Quarters
February 12, February 14,
Inventory turns: 2005 2004
Based on average inventories 1.8 x 1.9 x
Based on ending inventories 1.8 x 2.0 x
Inventory turns, net of payables:
Based on average inventories 9.7 x 8.8 x
Based on ending inventories 9.5 x 11.8 x