EXHIBIT 99.1
AutoZone 2nd Quarter Sales up 4.1%; Same Store Sales up 0.4%
MEMPHIS, Tenn., March 1, 2006 (PRIMEZONE) -- AutoZone, Inc. (NYSE:AZO) today reported sales of $1.254 billion for its second quarter (12 weeks) ended February 11, 2006, up 4.1% from fiscal second quarter 2005. Same store sales, or sales for stores open at least one year, were up 0.4% for the quarter.
Operating margin for the quarter increased 187 basis points from last year to 14.2%, while operating profit increased 19.9% over the prior year. Net income for the quarter increased 3.1% over the same period last year to $97.0 million, while diluted earnings per share increased 7.6% to $1.25 per share from $1.16 per share reported in the year-ago quarter.
For the quarter, gross profit, as a percentage of sales, was 49.1% (versus 48.4% last year). The improvement in comparable gross margin was largely due to the Company's ongoing category management initiatives as well as reduced sales of non-core, lower-margin merchandise. Operating expenses, as a percentage of sales, were 34.9% (versus 36.0% last year). On a comparable basis, adjusted operating expenses were 34.6% (versus 32.7% last year) or 192 basis points over last year. A portion of the increase in operating expenses this year reflected $4.2 million in share-based expenses resulting from the adoption of the Financial Accounting Standards Board ("FASB") Statement No. 123(R), "Share-Based Payments." The remaining increase in comparable operating expenses reflected both short-term expenditures to complete the remaining store resets underway during the first quarter and longer-term efforts to improve the customer shopping experience, from expanding hours of operation to continuing to improve the in-store mer chandising presentation.
Excluding this quarter's share-based expenses and last year's adjustments to both operating expenses and income taxes, adjusted operating profit decreased 3.4%, while adjusted diluted earnings per share were flat versus the year-ago quarter at $1.29.
The Company's total per store inventory level, including supplier owned pay-on-scan inventory, as of February 11, 2006, was $494 thousand versus $484 thousand last year. Net inventory, defined as merchandise inventories less accounts payable, decreased on a per store level to $79 thousand from $86 thousand last year. AutoZone continues to provide excellent product availability while effectively financing those inventory levels.
"The second quarter marked the completion of our store adjacencies initiative, and I would like to thank our AutoZoners for their amazing efforts," said Bill Rhodes, President and Chief Executive Officer of AutoZone. "Additionally during the quarter, we continued our relentless focus on improving the customer shopping experience by increasing store-level training, improving our in-stock position, and continuing to focus on our unique and powerful culture to ensure we provide our customers with trustworthy advice.
"Over the past two quarters, we have deployed many new initiatives designed to deepen the relationship we have with our customers. Our operating margin reflects the impact of those initiatives. While some of them have been completed, many will be ongoing. We are pleased with our progress and believe we are well positioned as we enter our peak selling season," commented Bill Rhodes, President and Chief Executive Officer.
During the quarter ended February 11, 2006, AutoZone opened 41 new stores, replaced 4 stores, and closed 1 store in the U.S. while additionally opening 4 new stores in Mexico. Additionally, the Company re-opened 3 of 13 U.S. stores closed due to hurricane-related damage. As of February 11, 2006, the Company had 3,655 domestic stores and 88 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 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 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 1, 2006, 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, 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) 369-3524 through Wednesday, March 8, 2006, 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 adjusted debt, adjusted debt/EBITDAR, adjusted rent expense, adjusted operating expense, adjusted operating profit, adjusted income before taxes, adjusted income taxes, adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share. 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 manages the Company's debt levels to a ratio of adjusted debt to EBITDAR and manages cash flows available for share repurchase by monitoring cash flows before share repurchases, as shown on the following tables. This is important information for the Company's manag ement of its debt levels and share repurchases. We have included a reconciliation of this 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: competition; product demand; the economy; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; gasoline prices; war and the prospect of war, including terrorist activity; availability of consumer transportation; construction delays; access to available and feasible financing; and changes in laws or regulations. Fo rward-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 such events 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. Please refer to the Risk Factors section of AutoZone's Form 10-K for the fiscal year ended August 27, 2005, for more information related to those risks.
AutoZone's 2nd Quarter Highlights - Fiscal 2006 Condensed Consolidated Statements of Operations 2nd Quarter (in thousands, except per share data) GAAP Results Adjustments ---------------------- ---------------------- 12 Weeks Ended 12 Weeks Ended ---------------------- ---------------------- Feb. 11, Feb. 12, Feb. 11, Feb. 12, 2006 2005 2006(a) 2005(b) ---------- ---------- ---------- ---------- Net sales $1,253,815 $1,204,055 $ -- $ -- Cost of sales 637,625 621,684 -- -- ---------- ---------- ---------- ---------- Gross profit 616,190 582,371 -- -- Operating, SG&A expenses 437,845 433,652 (4,242) (40,321) ---------- ---------- ---------- ---------- Operating profit (EBIT) 178,345 148,719 4,242 40,321 Interest expense, net 24,333 23,645 -- -- ---------- ---------- ---------- ---------- Income before taxes 154,012 125,074 4,242 40,321 Income taxes 56,990 30,981 1,570 30,219 ---------- ---------- ---------- ---------- Net income $ 97,022 $ 94,093 $ 2,672 $ 10,102 ========== ========== ========== ========== Net income per share: Basic $ 1.26 $ 1.18 $ 0.04 $ 0.13 Diluted $ 1.25 $ 1.16 $ 0.04 $ 0.13 Weighted average shares outstanding: Basic 76,784 79,692 Diluted 77,474 80,860 Adjusted -------------------------------- 12 Weeks Ended -------------------------------- Feb. 11, Feb. 12, 2006 2005 ---------- ---------- Net sales $1,253,815 $1,204,055 Cost of sales 637,625 621,684 ---------- ---------- Gross profit 616,190 582,371 Operating, SG&A expenses 433,603 393,331 ---------- ---------- Operating profit (EBIT) 182,587 189,040 Interest expense, net 24,333 23,645 ---------- ---------- Income before taxes 158,254 165,395 Income taxes 58,560 61,200 ---------- ---------- Net income $ 99,694 $ 104,195 ========== =========== Net income per share: Basic $1.30 $1.31 Diluted $1.29 $1.29 Weighted average shares outstanding: Basic 76,784 79,692 Diluted 77,474 80,860 (a) Fiscal 2006 operating expense includes $4.2MM in share-based compensation expense related to the adoption of SFAS No.123(R). (b) Fiscal 2005 includes a non-cash adjustment, substantially all of which relates to prior years, of $40.3 million ($25.4 million net of tax) associated with accounting for leases and leasehold improvements. Additionally, 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, F2006 GAAP Results Adjustments ---------------------- ---------------------- 24 Weeks Ended 24 Weeks Ended ---------------------- ---------------------- Feb. 11, Feb. 12, Feb. 11, Feb. 12, 2006 2005 2006(a) 2005(b) ---------- ---------- ---------- ---------- Net sales $2,591,891 $2,490,258 $ -- $ -- Cost of sales 1,320,172 1,287,086 -- -- ---------- ---------- ---------- ---------- Gross profit 1,271,719 1,203,172 -- -- Operating, SG&A expenses 888,081 838,140 (10,782) (40,321) ---------- ---------- ---------- ---------- Operating profit (EBIT) 383,638 365,032 10,782 40,321 Interest expense, net 48,072 45,435 -- -- ---------- ---------- ---------- ---------- Income before taxes 335,566 319,597 10,782 40,321 Income taxes 124,170 102,981 3,989 30,219 ---------- ---------- ---------- ---------- Net income $ 211,396 $ 216,616 $ 6,793 $ 10,102 ========== ========== ========== ========== Net income per share: Basic $ 2.76 $ 2.72 $ 0.09 $ 0.12 Diluted $ 2.73 $ 2.68 $ 0.09 $ 0.13 Weighted Average Shares outstanding: Basic 76,686 79,702 76,686 79,702 Diluted 77,313 80,803 77,313 80,803 Adjusted --------------------------------- 24 Weeks Ended --------------------------------- February 11, February 12, 2006 2005 ---------- ---------- Net sales $2,591,891 $2,490,258 Cost of sales 1,320,172 1,287,086 ---------- ---------- Gross profit 1,271,719 1,203,172 Operating, SG&A expenses 877,299 797,819 ---------- ---------- Operating profit (EBIT) 394,420 405,353 Interest expense, net 48,072 45,435 ---------- ---------- Income before taxes 346,348 359,918 Income taxes 128,159 133,200 ---------- ---------- Net income $ 218,189 $ 226,718 ========== ========== Net income per share: Basic $ 2.85 $ 2.84 Diluted $ 2.82 $ 2.81 Weighted Average Shares outstanding: Basic 76,686 79,702 Diluted 77,313 80,803 (a) Fiscal 2006 operating expense includes $2.8MM in hurricane related expense and $8.0MM in share-based compensation expense related to the adoption of SFAS No.123(R). (b) Fiscal year 2005 includes a non-cash adjustment, substantially all of which relates to prior years, of $40.3 million ($25.4 million net of tax) associated with accounting for leases and leasehold improvements. Additionally, fiscal year 2005 income taxes include a $15.3 million benefit primarily from the planned one-time repatriation from foreign subsidiaries. Selected Balance Sheet Information (in thousands) February 11, February 12, August 27, 2006 2005 2005 ---------- ---------- ---------- Merchandise inventories $1,722,681 $1,591,996 $1,663,860 Current assets 2,034,992 1,847,054 1,929,459 Property and equipment, net 1,992,415 1,837,260 1,937,615 Total assets 4,401,853 4,059,437 4,245,257 Accounts payable 1,427,672 1,286,780 1,539,776 Current liabilities 1,794,801 1,645,420 1,811,159 Debt 1,779,300 1,901,500 1,861,850 Stockholders' equity 641,158 384,731 391,007 Working capital 240,191 201,634 118,300 ----------------------------------------------------- Adjusted Debt/EBITDAR (Trailing 4 Qtrs) February 11, February 12, 2006 2005 ---------- ---------- Net income $ 565,799 $ 569,419 Add: Interest 105,080 96,057 Taxes 323,391 314,632 ---------- ---------- EBIT 994,270 980,108 Add: Depreciation 126,582 129,873 Rent expense 135,712 141,859 Option expense 7,982 -- ---------- ---------- EBITDAR $1,264,546 $1,251,840 Debt $1,779,300 $1,901,500 Add: Adjusted rent x 6(a) 814,272 721,992 ---------- ---------- Adjusted debt $2,593,572 $2,623,492 Adjusted debt to EBITDAR 2.1 2.1 (a) Adjusted rent is defined as GAAP rent expense less the impact from the cumulative lease accounting adjustment recorded in the second quarter of fiscal year 2005. Selected Cash Flow Information (in thousands) 12 Weeks Ended 24 Weeks Ended -------------------- -------------------- Feb. 11, Feb. 12, Feb. 11, Feb. 12, 2006 2005 2006 2005 -------- -------- -------- -------- Depreciation $ 31,493 $ 45,667 $ 62,309 $ 71,324 Capital spending $ 57,405 $ 59,971 $115,862 $118,778 Cash flow before share repurchase: Net increase (decrease) in cash and cash equivalents $ (6) $ 16,258 $ 6,562 $ 3,287 Subtract increase (decrease) in debt (10,475) 76,725 (82,550) 32,250 Subtract share repurchases -- -- (9,787) (30,000) -------- -------- -------- -------- Cash flow before share repurchases and changes in debt $ 10,469 $(60,467) $ 98,899 $ 1,037 ======== ======== ======== ======== Other Selected Financial Information (in thousands) February 11, February 12, 2006 2005 ---------- ---------- Cumulative share repurchases ($) $4,111,553 $3,704,913 Cumulative share repurchases (shares) 87,158 82,570 Shares outstanding, end of quarter 76,910 79,806 --------------------------------------------------------------------- Trailing 4 Quarters ---------------------------- February 11, February 12, 2006 2005 ---------- ---------- Net income $ 565,799 $ 569,419 Add: After-tax interest 66,831 61,861 After-tax rent 86,313 91,357 ---------- ---------- After-tax return 718,943 722,637 Average debt 1,945,764 1,917,682 Average equity 424,949 252,845 Rent x 6 814,272 851,154 ---------- ---------- Pre-tax invested capital 3,184,985 3,021,681 Return on Invested Capital (ROIC) 22.6% 23.9% --------------------------------------------------------------------- AutoZone's 2nd Quarter Fiscal 2006 Selected Operating Highlights Store Count & Square Footage ---------------------------- 12 Weeks Ended 24 Weeks Ended --------------- --------------- Feb. 11, Feb. 12, Feb. 11, Feb. 12, 2006 2005 2006 2005 ------ ------ ------ ------ Domestic stores: Store count: Stores opened 41 27 74 55 Store closures 1 1 1 1 Re-opened hurricane stores 3 - 3 - Hurricane-related store closures 10 - 13 - Replacement stores 4 1 7 2 Total domestic stores 3,655 3,474 3,655 3,474 Stores with commercial sales 2,107 2,131 2,107 2,131 Square footage (in thousands): 23,221 22,035 23,221 22,035 Square footage per store 6,353 6,343 6,353 6,343 Stores in Mexico: Stores opened 4 3 7 4 Total stores in Mexico 88 67 88 67 Total stores chainwide 3,743 3,541 3,743 3,541 Sales Statistics (Domestic Stores Only) -------------------------------------- 12 Weeks Ended Trailing 4 Quarters ---------------------- ----------------------- Feb. 11, Feb. 12, Feb. 11, Feb. 12, 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Total retail sales ($ in thousands) $1,040,931 $1,005,292 $4,876,160 $4,768,667 % Increase vs. LY retail sales 4% 4% 2% 2% Total commercial sales ($ in thousands) $ 154,729 $ 154,415 $ 715,282 $ 737,449 % Increase vs. LY commercial sales 0% 0% (3%) 4% Sales per average store ($ in thousands) $ 329 $ 335 $ 1,569 $ 1,626 Sales per average square foot 52 53 247 256 12 Weeks Ended 24 Weeks Ended ---------------------- ----------------------- Feb. 11, Feb. 12, Feb. 11, Feb. 12, 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Same store sales 0.4% 0.4% 0.6% (1.5%) Inventory Statistics (Total Stores) ---------------------------------- as of as of February 11, 2006 February 12, 2005 -------------- -------------- Accounts payable/inventory 82.9% 80.8% ($ in thousands) Inventory(a) $ 1,722,681 $ 1,591,996 Pay-on-scan inventory 126,607 121,109 ------------ ------------ Total inventory $ 1,849,288 $ 1,713,105 Total inventory per store $ 494 $ 484 Net inventory (net of payables) $ 295,009 $ 305,216 Net inventory / store $ 79 $ 86 (a) This is reported balance sheet inventory Trailing 4 Quarters February 11, 2006 February 12, 2005 ----------------- ----------------- Inventory turns based on ending inventories(b) 1.7 x 1.8 x (b) Inventory turns include $122.2MM in cost of sales related to Pay on Scan merchandise for F06 and $97.6MM for F05. Pay on Scan inventory not recorded on the balance sheet was $126.6MM in F06 and $121.1MM in F05.
CONTACT: AutoZone, Inc. Financial: Brian Campbell (901) 495-7005 brian.campbell@autozone.com Media: Ray Pohlman (901) 495-7962 ray.pohlman@autozone.com