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Press release from GlobeNewswire (a Nasdaq OMX company)

AutoZone 2nd Quarter EPS Increases 15.1% to $4.78

Tuesday, February 26, 2013

AutoZone 2nd Quarter EPS Increases 15.1% to $4.7804:00 EST Tuesday, February 26, 2013MEMPHIS, Tenn., Feb. 26, 2013 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $1.9 billion for its second quarter (12 weeks) ended February 9, 2013, an increase of 2.8% from the second quarter of fiscal 2012 (12 weeks). Domestic same store sales, or sales for stores open at least one year, decreased 1.8% for the quarter. Net income for the quarter increased $9.3 million, or 5.6%, over the same period last year to $176.2 million, while diluted earnings increased 15.1% to $4.78 per share from $4.15 per share in the year-ago quarter. For the quarter, gross profit, as a percentage of sales, was 51.9% (versus 51.3% for last year's quarter). The improvement in gross margin was primarily driven by lower acquisition costs. Operating expenses, as a percentage of sales, were 34.7% (versus 34.7% last year). Operating expenses, as a percentage of sales, increased slightly due to the lower sales growth rates, partially offset by lower incentive compensation (47 bps). Under its share repurchase program, AutoZone repurchased 513 thousand shares of its common stock for $185 million during the second quarter, at an average price of $361 per share. At quarter end, the Company had $603 million remaining under its current share repurchase authorization. The Company's inventory increased 7.0% over the same period last year, driven by an increase in store count and continued strategic investments in hard parts assortment. Net inventory, defined as merchandise inventories less accounts payable per store was a negative $54 thousand versus negative $51 thousand last year. "While we are pleased to report our twenty-sixth consecutive quarter of double digit earnings per share growth, we were not pleased with our same store sales results for the quarter.  Historically, we have seen our sales increase significantly during the final two weeks of our second quarter.  However, this year our total domestic auto parts same store sales for the last two weeks declined by eight percent.  Our belief is the approximate two week delay in processing of income tax returns this year was the key contributor to this decline in sales.  Our expectation is sales in the upcoming quarter should recover to more normalized sales volumes.  Excluding the last two weeks, our sales were generally consistent with last quarter," said Bill Rhodes, Chairman, President and Chief Executive Officer.  "I would like to thank and congratulate our entire team of 70,000+ AutoZoners for their intense dedication and hard work which delivered strong earnings per share and return on invested capital performance in the second quarter.  As we enter our key spring and summer selling season, we are optimistic about our future.  We believe we have the right initiatives in place to meet and exceed our customer's expectations.  We remain committed to our disciplined approach of growing operating earnings while efficiently utilizing our capital." During the quarter ended February 9, 2013, AutoZone opened 32 new stores in the U.S. and opened nine new stores in Mexico. As of February 9, 2013, the Company had 4,735 stores in 49 states, the District of Columbia and Puerto Rico in the U.S., 334 stores in Mexico, and one store in Brazil for a total store count of 5,070. AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. 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 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, service stations, and public sector accounts.  AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories, non-automotive products and subscriptions to the ALLDATAdiy product through www.autozone.com, accessories through www.autoanything.com and our commercial customers can make purchases through www.autozonepro.com.    AutoZone does not derive revenue from automotive repair or installation. AutoZone will host a conference call this morning, Tuesday, February 26, 2013, beginning at 10:00 a.m. (EST) to discuss its second quarter results. Investors may listen to the conference call live and review supporting slides on the AutoZone corporate website, 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 (203) 369-1211 through Tuesday, March 5, 2013 at 11:59 p.m. (EST). This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP measures include return on invested capital, adjusted debt, adjusted debt to EBITDAR, and cash flow before share repurchases. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company's comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management targets the Company's capital structure in order to maintain its investment grade credit ratings and manages cash flows available for share repurchase by monitoring cash flows before share repurchases, as shown on the attached tables. The Company believes this is important information for the management of its debt levels and share repurchases. We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables. Certain statements contained in this press release are forward-looking statements. Forward-looking statements typically use words such as "believe," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy" and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: credit market conditions; the impact of recessionary conditions; competition; product demand; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; energy prices; war and the prospect of war, including terrorist activity; construction delays; access to available and feasible financing; and changes in laws or regulations. Certain of these risks are discussed in more detail in the "Risk Factors" section contained in Item 1A under Part 1 of our Annual Report on Form 10-K for the year ended August 25, 2012, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results; developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the "Risk Factors" could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results.AutoZone's 2nd Quarter Highlights - Fiscal 2013            Condensed Consolidated Statements of Operations      2nd Quarter, FY2013       (in thousands, except per share data)        GAAP Results    12 Weeks Ended February 9, 201312 Weeks Ended February 11, 2012           Net sales  $ 1,855,198  $ 1,804,069   Cost of sales 893,217 877,854   Gross profit  961,981  926,215   Operating, SG&A expenses 644,410 625,564   Operating profit (EBIT)  317,571  300,651   Interest expense, net 41,323 38,923   Income before taxes  276,248  261,728   Income taxes 100,001 94,798   Net income  $ 176,247  $ 166,930   Net income per share:       Basic  $ 4.86  $ 4.25   Diluted  $ 4.78  $ 4.15   Weighted average shares outstanding:       Basic 36,258 39,281   Diluted 36,904 40,237                  Year-To-Date 2nd Quarter, FY2013       (in thousands, except per share data)GAAP Results    24 Weeks Ended February 9, 201324 Weeks Ended February 11, 2012           Net sales  $ 3,846,238  $ 3,728,411   Cost of sales 1,852,391 1,818,569   Gross profit  1,993,847  1,909,842   Operating, SG&A expenses 1,312,999 1,268,257   Operating profit (EBIT)  680,848  641,585   Interest expense, net 82,428 78,017   Income before taxes  598,420  563,568   Income taxes 218,722 205,513   Net income  $ 379,698  $ 358,055   Net income per share:       Basic  $ 10.39  $ 9.05   Diluted  $ 10.19  $ 8.83   Weighted average shares outstanding:       Basic 36,552 39,573   Diluted 37,246 40,551          Selected Balance Sheet Information       (in thousands)        February 9, 2013February 11, 2012August 25, 2012         Cash and cash equivalents  $ 115,548  $ 103,207  $ 103,093 Merchandise inventories  2,758,543  2,577,704  2,627,983 Current assets  3,123,368  2,908,564  2,978,946 Property and equipment, net  2,944,549  2,724,396  2,855,928 Total assets  6,662,188  6,056,464  6,265,639 Accounts payable  3,034,017  2,824,873  2,926,740 Current liabilities*  4,231,808  3,516,789  3,655,592 Total debt*  3,997,806  3,464,360  3,768,183 Stockholders' (deficit)  (1,550,109)  (1,295,524)  (1,548,025) Working capital  (1,108,440)  (608,225)  (676,646)         * Current liabilities and total debt both include short-term borrowings of $484,533 at February 9, 2013; $29,560 at February 11, 2012 and $49,881 at August 25, 2012.          Adjusted Debt / EBITDAR (Trailing 4 Qtrs)         (in thousands, except adjusted debt to EBITDAR ratio)          February 9, 2013February 11, 2012     Net income  $ 952,016  $ 886,898     Add:  Interest  180,316  171,745     Taxes  535,822  499,877     EBIT  1,668,154  1,558,520               Add:  Depreciation  218,705  203,962     Rent expense  235,611  220,875     Share-based expense  34,934  29,551     EBITDAR  $ 2,157,404  $ 2,012,908               Debt  $ 3,997,806  $ 3,464,360     Capital lease obligations  99,369  103,774     Add: rent x 6   1,413,666  1,325,250     Adjusted debt  $ 5,510,841  $ 4,893,384               Adjusted debt to EBITDAR  2.6  2.4                    Selected Cash Flow Information         (in thousands)          12 Weeks Ended February 9, 201312 Weeks Ended February 11, 201224 Weeks Ended February 9, 201324 Weeks Ended February 11, 2012           Depreciation  $ 52,344  $ 47,523  $ 103,044  $ 96,170 Capital spending  $ 89,183  $ 70,506  $ 169,613  $ 132,430          Cash flow before share repurchases:         Increase in cash and cash equivalents  $ 15,684  $ 6,531  $ 12,455  $ 5,601 Subtract increase in debt  195,069  107,856  229,517  113,652 Add back share repurchases  185,016  172,505  502,348  482,270 Cash flow before share repurchases and changes in debt  $ 5,631  $ 71,180  $ 285,286  $ 374,219                    Other Selected Financial Information         (in thousands, except ROIC)          February 9, 2013February 11, 2012                         Cumulative share repurchases ($ since fiscal 1998)  $ 12,046,591  $ 10,663,643     Remaining share authorization ($)  $ 603,409  $ 486,357               Cumulative share repurchases (shares since fiscal 1998)  132,506  128,799               Shares outstanding, end of quarter  36,079  38,951                Trailing 4 Quarters      February 9, 2013February 11, 2012     Net income  $ 952,016  $ 886,898     Adjustments:         Interest expense  180,316  171,745     Rent expense  235,611  220,875     Tax effect*  (149,733)  (141,523)     After-tax return  1,218,210  1,137,995               Average debt**  3,727,872  3,328,075     Average stockholders' deficit**  (1,480,371)  (1,210,962)     Add: Rent x 6  1,413,666  1,325,250     Average capital lease obligations**  101,446  88,413     Pre-tax invested capital  $ 3,762,613  $ 3,530,776              Return on Invested Capital (ROIC) 32.4% 32.2%               * Effective tax rate over the trailing four quarters ended February 9, 2013 and February 11, 2012 is 36.0%.     ** All averages are computed based on trailing 5 quarter balances.                  AutoZone's 2nd Quarter Fiscal 2013        Selected Operating Highlights                  Store Count & Square Footage                    12 Weeks Ended February 9, 201312 Weeks Ended February 11, 201224 Weeks Ended February 9, 201324 Weeks Ended February 11, 2012Domestic stores:        Store count:         Beginning domestic stores  4,703  4,551  4,685  4,534 Stores opened  32  29  51  46 Stores closed  --  --  1  --  Ending domestic stores  4,735  4,580  4,735  4,580 Relocated stores  3  4  3  5           Stores with commercial programs  3,146  2,825  3,146  2,825          Square footage (in thousands): 30,713  29,636 30,713  29,636          Mexico stores:         Stores opened   9  6  13  8 Total stores in Mexico  334  287  334  287          Brazil stores:         Stores opened   --  --  1  --  Total stores in Brazil  1  --  1  --           Total stores chainwide  5,070  4,867  5,070  4,867          Square footage (in thousands):  33,155  31,727  33,155  31,727Square footage per store  6,539  6,519  6,539  6,519          Sales Statistics         ($ in thousands, except sales per average square foot and percentages)        Total Auto Parts (Domestic, Mexico and Brazil) 12 Weeks Ended February 9, 201312 Weeks Ended February 11, 2012Trailing 4 Quarters February 9, 2013Trailing 4 Quarters February 11, 2012 Total auto parts sales  $ 1,796,280  $ 1,762,903  $ 8,520,522  $ 8,174,796  % Increase vs. LY  1.9% 8.6% 4.2% 8.1%           Sales per average store   $ 356  $ 364  $ 1,715  $ 1,714 Sales per average square foot   $ 54  $ 56  $ 263  $ 263          Domestic Commercial          Total domestic commercial sales   $ 289,915  $ 266,547  $ 1,352,473 $ 1,179,408  % Increase vs. LY 8.8% 24.6% 14.7% 23.4%          All Other (ALLDATA, E-Commerce and AutoAnything)         All other sales  $ 58,918  $ 41,166  $ 201,166 $ 173,980  % Increase vs. LY  43.1% 11.3% 15.6% 11.3%            12 Weeks Ended February 9, 201312 Weeks Ended February 11, 201224 Weeks Ended February 9, 201324 Weeks Ended February 11, 2012 Domestic same store sales  (1.8%) 5.9% (0.7%) 5.2%                    Inventory Statistics (Total Stores)          as of February 9, 2013as of February 11, 2012     Accounts payable/inventory  110.0% 109.6%               ($ in thousands)         Inventory  $ 2,758,543  $ 2,577,704     Inventory per store  $ 544  $ 530     Net inventory (net of payables)  $ (275,474)  $ (247,169)     Net inventory / per store  $ (54)  $ (51)                Trailing 5 Quarters      February 9, 2013February 11, 2012     Inventory turns  1.6 x  1.6 x    CONTACT: Financial: Brian Campbell at (901) 495-7005 brian.campbell@autozone.com Media: Ray Pohlman at (866) 966-3017 ray.pohlman@autozone.com