10-Q
1
FORM 10-Q
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended MAY 4, 1996
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Commission file number 1-10714
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AUTOZONE, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 62-1482048
---------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
123 South Front Street
Memphis, Tennessee 38103
---------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(901) 495-6500
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Registrant's telephone number, including area code
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Former name, former address and former
fiscal year, if changed since last report.
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 periods 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
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
COMMON STOCK, $.01 PAR VALUE - 149,891,533 SHARES AS OF MAY 4, 1996
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1
INDEX
AUTOZONE, INC.
PART I. FINANCIAL INFORMATION PAGE
----------------------------- ----
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--May 4,
1996 and August 26, 1995 3
Condensed consolidated statements of income--
Twelve weeks and Thirty-Six weeks ended May 4,
1996 and May 6, 1995 4
Condensed consolidated statements of cash flows
--Thirty-Six weeks ended May 4, 1996 and May 6, 1995 5
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
--------------------------
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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2
CONDENSED CONSOLIDATED BALANCE SHEETS
May 4, Aug. 26,
1996 1995
------------- ------------
(Unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . $ 4,782 $ 6,411
Accounts receivable. . . . . . . . . 15,083 9,690
Merchandise inventories. . . . . . . 531,255 395,751
Prepaid expenses . . . . . . . . . . 17,719 13,329
Deferred income taxes. . . . . . . . 23,853 22,641
------------ -----------
Total current assets . . . . . . . 592,692 447,822
Property, plant and equipment:
Property, plant and equipment. . . . 964,254 792,356
Less: Allowances for
depreciation and amortization. . . (176,615) (148,148)
------------ -----------
787,639 644,208
Other assets:
Cost in excess of
net assets acquired. . . . . . . . . 17,376 17,803
Deferred income taxes. . . . . . . . 4,070 -
Other assets . . . . . . . . . . . . 2,231 1,945
------------ -----------
23,677 19,748
------------ -----------
$ 1,404,008 $1,111,778
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . $ 376,769 $ 300,578
Accrued expenses . . . . . . . . . . 106,024 91,838
Checks outstanding, net. . . . . . . 68 5,863
Income taxes payable . . . . . . . . 9,126 5,767
Revolving credit agreements. . . . . 97,775 9,500
Current portion of long-term debt. . - 4,003
------------ -----------
Total current liabilities. . . . . 589,762 417,549
Other liabilities. . . . . . . . . . 19,371 8,318
Deferred income taxes. . . . . . . . - 1,201
Stockholders' equity . . . . . . . . 794,875 684,710
------------ -----------
$ 1,404,008 $1,111,778
------------ -----------
------------ -----------
See Notes to Condensed Consolidated Financial Statements
3
AUTOZONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Twelve Weeks Ended Thirty-Six Weeks Ended
-------------------- -----------------------
May 4, May 6, May 4, May 6,
1996 1995 1996 1995
---------- ----------- ---------- ----------
(in thousands, except per share amounts)
Net Sales. . . . . . . . . . . . . . . . . . . . $ 524,175 $ 425,483 $1,413,042 $1,179,307
Cost of sales, including warehouse
and delivery expense . . . . . . . . . . . . . 308,644 248,392 828,322 694,318
Operating, selling, general and
administrative expenses. . . . . . . . . . . . 155,099 123,977 425,467 347,266
--------- --------- --------- ---------
Operating profit . . . . . . . . . . . . . . . . 60,432 53,114 159,253 137,723
Interest income (expense), net . . . . . . . . . (727) - (727) 623
--------- --------- --------- ---------
Income before income taxes . . . . . . . . . . . 59,705 53,114 158,526 138,346
Income taxes . . . . . . . . . . . . . . . . . . 22,100 20,700 58,800 54,462
--------- --------- --------- ---------
Net income . . . . . . . . . . . . . . . . . $ 37,605 $ 32,414 $ 99,726 $ 83,884
--------- --------- --------- ---------
Net income per share . . . . . . . . . . . . . . $ .25 $ .22 $ .66 $ .56
--------- --------- --------- ---------
--------- --------- --------- ---------
Average shares outstanding including
common stock equivalents . . . . . . . . . . . 151,541 149,198 150,508 149,057
--------- --------- --------- ---------
See notes to Condensed Consolidated Financial Statements
4
AUTOZONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirty-Six Weeks Ended
------------------------------
May 4, May 6,
1996 1995
--------- ---------
(in thousands)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . $ 99,726 $ 83,884
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization. . . . . 41,540 29,361
Net increase in merchandise inventories (134,034) (44,751)
Net increase in current liabilities. . 74,917 33,971
Other - net. . . . . . . . . . . . . . (3,544) (12,255)
--------- ---------
Net cash provided by operating
activities . . . . . . . . . . . . 78,605 90,210
Cash flows from investing activities:
Cash outflows for property, plant
and equipment, net . . . . . . . . . . . (183,181) (166,771)
Cash flows from financing activities:
Net proceeds from debt. . . . . 84,272 12,580
Proceeds from sale of Common
Stock including related tax benefit . . . 14,431 10,219
--------- ---------
Net cash provided by
financing activities . . . . . . . . 98,703 22,799
--------- ---------
Net decrease in cash and cash equivalents. . (5,873) (53,762)
Cash and cash equivalents
at beginning of period . . . . . . . . . . 6,411 56,236
Beginning cash balance
of pooled entity . . . . . . . . . . . . . . 4,244 -
--------- ---------
Cash and cash equivalents
at end of period . . . . . . . . . . . . . $ 4,782 $ 2,474
--------- ---------
--------- ---------
See notes to Condensed Consolidated Financial Statements
5
AUTOZONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the twelve and thirty-six weeks ended May
4, 1996, are not necessarily indicative of the results that may be expected for
the fiscal year ending August 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended August 26, 1995.
NOTE B--INVENTORIES
Inventories are stated at the lower of cost or market using the last-in,
first-out (LIFO) method. An actual valuation of inventory under the LIFO method
can be made only at the end of each year based on the inventory levels and costs
at that time. Accordingly, interim LIFO calculations must necessarily be based
on management's estimates of expected year-end inventory levels and costs.
NOTE C--SHORT-TERM DEBT
On January 16, 1996, the Company increased its unsecured revolving credit
agreements with a group of banks by $50,000,000 for a line of credit totaling
$125,000,000 which extends until February 1, 1998. The rate of interest payable
under the agreements is a function of the London Interbank Offered Rate (LIBOR),
or the lending bank's base rate (or prime rate as such term may be used by the
individual bank), at the option of the Company. At May 4, 1996, the Company's
borrowings under the agreements were $97,775,000 and the weighted average
interest rate was 5.59%. The revolving credit agreements contain a covenant
limiting the amount of debt the Company may incur relative to its net worth.
NOTE D--MERGER WITH ALLDATA CORPORATION
On March 29, 1996, Alldata Corporation ("Alldata") became a wholly owned
subsidiary of AutoZone in a stock-for-stock merger accounted for as a pooling
of interests. Alldata has developed a database system that provides
comprehensive and up-to-date automotive diagnostic, service and repair
information, which it markets to professional repair shops. Under the terms
of the merger agreement, AutoZone issued approximately 1.7 million shares of
Common Stock and stock options covering approximately 200,000 shares of
Common Stock. Financial information of Alldata has been included in the
results of operations from the date of acquisition, and is included in the
balance sheet as of May 4, 1996. Financial statements for periods prior to
the date of combination have not been restated as the effect is not material
to AutoZone's financial condition and results of operations. The assets and
liabilities of Alldata were approximately $18 million and $21 million,
respectively, at the date of combination.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
TWELVE WEEKS ENDED MAY 4, 1996, COMPARED TO
TWELVE WEEKS ENDED MAY 6, 1995
Net sales for the twelve weeks ended May 4, 1996 increased by $98.7
million, or 23.2%, over net sales for the comparable period of fiscal 1995.
This increase was due to a comparable store sales increase of 8%, (which was
primarily due to sales growth in the Company's newer stores and the added
sales of the Company's commercial program), and increases in net sales for
stores opened since the beginning of fiscal 1995. At May 4, 1996 the Company
had 1,298 stores in operation compared with 1,059 stores at May 6, 1995.
Gross profit for the twelve weeks ended May 4 1996, was $215.5 million, or
41.1% of net sales, compared with $177.1 million, or 41.6% of net sales, during
the comparable period for fiscal 1995. The decrease in the gross profit
percentage was due primarily to increased sales mix of lower margin products
such as batteries, Freon and antifreeze, a lower initial gross margin in
commercial sales and to a LIFO credit in the prior year.
Operating, selling, general and administrative expenses for the twelve
weeks ended May 4, 1996 increased by $31.1 million over such expenses for the
comparable period for fiscal 1995, and increased as a percentage of net sales
from 29.1% to 29.6%. The increase in the expense ratio was due primarily to
costs related to the acquisition of Alldata and to start up costs of the
Company's commercial program, partially offset by lower advertising costs.
The Company's effective income tax rate decreased from 39.0% of pre-tax
income for the twelve weeks ended May 6, 1995 to 37.0% for the twelve weeks
ended May 4, 1996. The decrease in the effective income tax rate is due to a
reduction in state income taxes.
THIRTY-SIX WEEKS ENDED MAY 4, 1996, COMPARED TO
THIRTY-SIX WEEKS ENDED MAY 6, 1995
Net sales for the thirty-six weeks ended May 4, 1996 increased by $233.7
million, or 19.8%, over net sales for the comparable period of fiscal 1995.
This increase was due to a comparable store sales increase of 5%, (which was
primarily due to sales growth in the Company's newer stores), and increases
in net sales for stores opened since the beginning of fiscal 1995.
Gross profit for the thirty-six weeks ended May 4, 1996 was $584.7
million, or 41.4% of net sales, compared with $485.0 million, or 41.1% of net
sales, during the comparable period for fiscal 1995. The increase in the
gross profit percentage was due primarily to efficiencies in distribution
costs and favorable results of second quarter physical inventories.
Operating, selling, general and administrative expenses for the
thirty-six weeks ended May 4, 1996 increased by $78.2 million over such
expenses for the comparable period for fiscal 1995, and increased as a
percentage of net sales from 29.4% to 30.1%. The increase in the expense
ratio was due primarily to operating costs of the Company's second call
center in Houston and start-up costs of the Company's commercial program
(which program is still being implemented and has been unprofitable to date).
During the thirty-six week period ending May 4, 1996, the Company increased
the number of stores participating in the commercial program from three to
519.
The Company's effective income tax rate decreased from 39.4% of pre-tax
income for the thirty-six weeks ended May 6, 1995 to 37.1% for the thirty-six
weeks ended May 4, 1996. The decrease in the effective income tax rate is due
to a reduction in state income taxes.
7
LIQUIDITY AND CAPITAL RESOURCES
For the thirty-six weeks ended May 4, 1996, net cash of $78.6 million was
provided by the Company's operations versus $90.2 million for the comparable
period of fiscal year 1995. The comparative decrease in cash provided by
operations is due primarily to increased inventory due to forward buying,
opening of the new Zanesville, Ohio, distribution center and opening of new
stores, which was offset by higher net income, depreciation, and leverage of
accounts payable.
Capital expenditures for the thirty-six weeks ended May 4, 1996 were
$183.2 million. The Company anticipates that capital expenditures for fiscal
1996 as a whole will be approximately $275 million to $285 million. Year-
to-date, the Company opened 155 new stores and 22 stores that replaced existing
stores. The Company expects to open approximately 257 new stores and
approximately 30 replacement stores during fiscal 1996.
The Company anticipates that it will rely on internally generated funds to
support a majority of its capital expenditures and working capital requirements;
the balance of such requirements will be funded through short-term borrowings.
The Company has revolving credit agreements with several banks providing for
lines of credit in an aggregate maximum amount of $125 million, including an
increase of $50 million in January 1996. At May 4, 1996, the Company had
borrowings outstanding under these credit agreements of $97.8 million.
8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) There were no matters submitted to a vote by security holders during
the twelve weeks ended May 4, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
3.1 Articles of Incorporation of AutoZone, Inc. Incorporated by
reference to Exhibit 3.1 to the Form 10-K for the fiscal year
ended August 27, 1994.
3.2 Amendment to Articles of Incorporation of AutoZone, Inc. dated
December 16, 1993, to increase its authorized shares of common
stock to 200,000,000. Incorporated by reference to Exhibit 3.2
to the form 10-K for the fiscal year ended August 27, 1994.
3.3 By-laws of AutoZone, Inc. Incorporated by reference to Exhibit
3.2 to the February 1992 Form S-1
4.1 Form of Common Stock Certificate. Incorporated by reference to
Exhibit 4.1 to Pre-Effective Amendment No. 2 to the February
1992 Form S-1.
4.2 Registration Rights Agreement, dated as of February 18, 1987,
by and among AutoShack, Inc. and certain stockholders.
Incorporated by reference to Exhibit 4.9 to the form S-1
Registration Statement filed by the Company under the
Securities Act (No. 33-39197), (the "April 1991 Form S-1").
4.3 Amendment to the Registration Rights Agreement dated as of
August 1, 1993. Incorporated by reference to Exhibit 4.1 to the
Form S-3 Registration Statement filed by the Company under the
Securities Act (No. 33-67550)
10.1 Agreement and Plan of Merger between AutoZone, Inc., Alldata
Corporation, and DataZone Acquisition Corporation, dated
February 6, 1996, incorporated by reference to Annex I to the
Form S-4 filed February 20, 1996 (Reg. No. 333-01506).
11.1 Statement re: Computation of earnings per share is included
herein.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the twelve weeks ended May 4, 1996, the Company filed a report
on Form 8-K dated March 6, 1996, stating:
On March 2, 1996, Johnston C. Adams, Jr., was elected Vice Chairman
and Chief Operating Officer, Timothy D. Vargo was elected Vice
Chairman, and Shawn P. McGhee was promoted to Executive Vice President
- Merchandising. Messrs. Adams and Vargo were also elected to
the Board of Directors.
9
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\ ROBERT J. HUNT
--------------------------------
Robert J. Hunt
Executive Vice President and
Chief Financial Officer-Customer
Satisfaction
(Principal Financial Officer)
BY \s\ Michael E. Butterick
--------------------------------
Michael E. Butterick
Vice President Controller-Customer
Satisfaction
(Principal Accounting Officer)
Dated: May 20, 1996
10
EX-11
2
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(in thousands, except per share data)
Twelve Weeks Ended Thirty-Six Weeks Ended
---------------------------- ----------------------------
May 4, May 6, May 4, May 6,
1996 1995 1996 1995
-------- -------- -------- --------
Primary:
Average shares outstanding 148,670 146,287 147,831 145,930
Net effect of dilutive stock options,
based on the treasury stock
method, using average
fair market value 2,871 2,911 2,677 3,127
-------- -------- -------- --------
Total shares used in computation 151,541 149,198 150,508 149,057
-------- -------- -------- --------
-------- -------- -------- --------
Net income $ 37,605 $ 32,414 $ 99,726 $ 83,884
-------- -------- -------- --------
-------- -------- -------- --------
Per share amount $ .25 $ .22 $ .66 $ .56
-------- -------- -------- --------
-------- -------- -------- --------
Fully diluted:
Average shares outstanding 148,670 146,287 147,831 145,930
Net effect of dilutive stock options,
based on the treasury stock method,
using higher of average or ending
fair market value 3,750 2,911 4,151 3,127
-------- -------- -------- --------
Total shares used in computation 152,420 149,198 151,982 149,057
-------- -------- -------- --------
-------- -------- -------- --------
Net income $ 37,605 $ 32,414 $ 99,726 $ 83,884
-------- -------- -------- --------
-------- -------- -------- --------
Per share amount $ .25 $ .22 $ .66 $ .56
-------- -------- -------- --------
-------- -------- -------- --------
11
EX-27
3
FDS EXHIBIT 27.1
5
1,000
OTHER
AUG-31-1996
FEB-11-1996
MAY-04-1996
4,782
0
15,083
0
531,255
592,692
964,254
176,615
1,404,008
589,762
0
0
0
0
794,875
1,404,008
1,413,042
1,413,042
828,322
425,467
0
0
727
158,526
58,800
99,726
0
0
0
99,726
0.66
0.66