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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended November 23, 1996,
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to .
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Commission file number 1-10714
AUTOZONE, INC.
(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
Registrant's telephone number, including area code
(not applicable)
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 - 150,384,839 shares as of December 31, 1996
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PART 1. FINANCIAL INFORMATION
AUTOZONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Nov. 23, Aug. 31,
1996 1996
---- ----
(Unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents .......................................... $ 3,878 $ 3,904
Accounts receivable ............................................... 18,280 15,466
Merchandise inventories ........................................... 610,480 555,894
Prepaid expenses .................................................. 24,939 19,225
Deferred income taxes ............................................. 19,140 18,608
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Total current assets ............................................ 676,717 613,097
Property and equipment:
Property and equipment ............................................ 1,115,282 1,061,166
Less accumulated depreciation and amortization .................... (215,531) (198,292)
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899,751 862,874
Other assets:
Cost in excess of net assets acquired ............................. 17,044 17,187
Deferred income taxes ............................................. 3,488 2,938
Other assets ...................................................... 3,410 2,301
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23,942 22,426
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$ 1,600,410 $ 1,498,397
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $ 417,337 $ 381,304
Accrued expenses .................................................. 97,879 104,909
Checks outstanding, net ........................................... 1,936 20,005
Income taxes payable .............................................. 23,982 12,260
Revolving credit agreements ....................................... - 94,400
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Total current liabilities ....................................... 541,134 612,878
Long-term debt .................................................... 133,000 -
Other liabilities ................................................. 19,788 19,937
Stockholders' equity .............................................. 906,488 865,582
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$ 1,600,410 $ 1,498,397
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See Notes to Condensed Consolidated Financial Statements.
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AUTOZONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Twelve Weeks Ended
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Nov. 23, Nov. 18,
1996 1995
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(in thousands, except per share amounts)
Net sales ................................................ $ 569,145 $ 463,029
Cost of sales, including warehouse
and delivery expenses .................................. 328,847 269,809
Operating, selling, general and
administrative expenses ................................ 178,400 137,823
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Operating profit ......................................... 61,898 55,397
Interest income (expense)-net ............................ (1,173) -
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Income before income taxes ............................... 60,725 55,397
Income taxes ............................................. 22,750 20,600
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Net income ........................................... $ 37,975 $ 34,797
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Net income per share ..................................... $ 0.25 $ 0.23
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Average shares outstanding, including
common stock equivalents ............................... 152,394 149,847
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See notes to Condensed Consolidated Financial Statements.
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AUTOZONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twelve Weeks Ended
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Nov. 23, Nov. 18,
1996 1995
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(in thousands)
Cash flows from operating activities:
Net income .......................................................... $ 37,975 $ 34,797
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................................... 17,482 12,679
Net increase in merchandise inventories ......................... (54,586) (26,754)
Net increase in current liabilities ............................. 22,656 41,706
Other - net ..................................................... (10,874) (5,334)
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Net cash provided by operating activities ..................... 12,653 57,094
Cash flows from investing activities:
Cash outflows for property
and equipment, net ................................................ (54,210) (69,100)
Cash flows from financing activities:
Net proceeds from debt .............................................. 38,600 4,959
Proceeds from sale of Common Stock, including related tax benefit ... 2,931 3,530
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Net cash provided by financing activities ..................... 41,531 8,489
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Net decrease in cash and cash equivalents ............................. (26) (3,517)
Cash and cash equivalents at beginning of period ...................... 3,904 6,411
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Cash and cash equivalents at end of period ............................ $ 3,878 $ 2,894
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See notes to Condensed Consolidated Financial Statements.
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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 weeks ended November 23, 1996,
are not necessarily indicative of the results that may be expected for the
fiscal year ending August 30, 1997. 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 31, 1996.
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--DEBT
Effective September 19, 1996, the Company increased its unsecured
revolving credit agreement with a bank by $10 million resulting in lines of
credit totaling $135 million which extend 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
November 23, 1996, the Company's borrowings under the agreements were $133
million and the weighted average interest rate was 5.6%. The revolving credit
agreements contain a covenant limiting the amount of debt the Company may incur
relative to its net worth. During December 1996, the Company executed an
agreement with a group of banks for a $275 million five-year revolving credit
facility to replace the existing revolving credit agreements. Based on
the terms of the Company's new five-year credit facility, amounts outstanding
under the revolving credit facility at November 23, 1996 have been classified
as long-term.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
TWELVE WEEKS ENDED NOVEMBER 23, 1996, COMPARED TO
TWELVE WEEKS ENDED NOVEMBER 18, 1995
Net sales for the twelve weeks ended November 23, 1996 increased by
$106.1 million, or 22.9%, over net sales for the comparable period of fiscal
1996. This increase was due to a comparable store sales increase of 7%, (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 1996. At November 23, 1996 the
Company had 1,477 stores in operation compared with 1,193 stores at November 18,
1995.
Gross profit for the twelve weeks ended November 23, 1996, was $240.3
million, or 42.2% of net sales, compared with $193.2 million, or 41.7% of net
sales, during the comparable period for fiscal 1996. The increase in the gross
profit percentage was due primarily to efficiencies in distribution and
inventory control costs and the added sales of higher margin ALLDATA products.
Operating, selling, general and administrative expenses for the twelve
weeks ended November 23, 1996 increased by $40.6 million over such expenses for
the comparable period for fiscal 1996, and increased as a percentage of net
sales from 29.8% to 31.3%. The increase in the expense ratio was due primarily
to start up costs of the Company's commercial program, which was fully
implemented at the end of the first fiscal quarter of 1997, and operating costs
of ALLDATA. Although the commercial sales program is currently unprofitable, the
Company anticipates that optimum operating efficiencies will be achieved after
consolidating the commercial business of certain stores. Ultimately, the
Company expects that the program will be in 80 to 90 percent of its stores. The
number of stores participating in the commercial program was 1,436 at November
23, 1996.
The Company's effective income tax rate was 37.5% of pre-tax income for
the twelve weeks ended November 23, 1996 and 37.2% for the twelve weeks ended
November 18, 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the twelve weeks ended November 23, 1996, net cash of $12.7 million
was provided by the Company's operations versus $57.1 million for the comparable
period of fiscal year 1996. The comparative decrease in cash provided by
operations is due primarily to increased inventory requirements.
Capital expenditures for the twelve weeks ended November 23, 1996 were
$54.2 million. The Company anticipates that capital expenditures for fiscal 1997
as a whole will be approximately $335 to $350 million. Year-to-date, the Company
opened 54 net new stores and 5 stores that replaced existing stores. The Company
expects to open approximately 335 new stores and approximately 30 replacement
stores during fiscal 1997.
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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
borrowings. The Company has revolving credit agreements with several banks
providing for lines of credit in an aggregate maximum amount of $135 million,
including an increase of $10 million in September 1996. At November 23, 1996,
the Company had borrowings outstanding under these credit agreements of $133
million. During December 1996, the Company executed an agreement with a
group of banks for a new $275 million five year revolving credit facility to
replace the existing revolving credit agreements.
PART II. OTHER INFORMATION
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 Form10-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 Auto Shack, 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).
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10.1 Management Contract or Compensatory Plan or Arrangement.
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Employment Agreement; Covenant Not to Compete; Not to Solicit
and Agreement Concerning Confidential Information and Trade
Secrets between the Company and Thomas S. Hanemann dated
November 8, 1996.
11.1 Statement re: Computation of earnings per share.
27.1 Financial Data Schedule. (SEC Use Only)
(b) Reports on Form 8-K
During the twelve weeks ended November 23, 1996, the Company filed a
report on Form 8-K dated November 8, 1996, stating:
On November 8, 1996, the Company announced that Thomas S.
Hanemann, President, would retire December 12, 1996. Johnston C.
Adams, Jr. currently the Company's Vice Chairman and Chief Operating
Officer, will be elected President upon Mr. Hanemann's retirement.
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
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Robert J. Hunt
Executive Vice President and
Chief Financial Officer-Customer Satisfaction
(Principal Financial Officer)
By: /s/ Michael E. Butterick
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Michael E. Butterick
Vice President, Controller-Customer Satisfaction
(Principal Accounting Officer)
Dated: January 6, 1997