Net Income up 101% Same Store Sales Up 12% New Directors Elected Shelf Registration Announced
MEMPHIS, Tenn., Feb 26, 2002 /PRNewswire-FirstCall via COMTEX/ -- AutoZone,
Inc. (NYSE: AZO), today reported sales of $1.08 billion for its second fiscal
quarter (12 weeks) ended February 9, 2002, an increase of 11% from $974 million
in fiscal 2001. Excluding the sales of the TruckPro subsidiary which was sold
during the quarter, total sales increased 13%. Same store sales, or sales for
domestic auto parts stores open at least one year, increased 12% during the
quarter, including 11% for retail sales and 18% for commercial sales. AutoZone
stores in Mexico continue to report high same store sales increases. Net income
for the quarter increased 101% to $64 million, while diluted earnings per share
increased 107% to $0.58 from $0.28 reported in the year-ago quarter.
For the fiscal year-to-date period (24 weeks), sales were $2.26 billion, an
increase of 11% from the prior year, with a same store sales increase of 10%,
including a 10% increase for retail sales and 16% for commercial sales.
Year-to-date net income increased 73% to $148 million, while diluted earnings
per share for the period increased 81% to $1.34 from $0.74.
"We are very pleased with the results of our second quarter and year to date,"
said Steve Odland, Chairman, President, and Chief Executive Officer. "In
addition to some positive external factors like more older cars on the road and
more miles being driven, our marketing, merchandising, and operating initiatives
continue to drive strong same store sales by reminding customers to maintain
their vehicles. This is an important way to grow the business as industry
studies show that $60B of annual maintenance goes undone each year. We also are
focused on providing the tools and training that our AutoZoners need to provide
the highest level of customer service. AutoZone continues to experience very
encouraging results from our increased efforts toward commercial customers and
we remain optimistic about the opportunities in Mexico.
"We continue to focus on decreasing costs, strategic pricing, and on relentless
expense discipline. Our cash flow and financial returns continue to improve. The
strong, stable cash flow provided by our application parts business, when
combined with increased hurdle rates for new investments, should continue to
drive improved return on invested capital and shareholder value.
"AutoZone believes in the highest level of integrity in its operations and
financial reporting. In June, AutoZone's Board of Directors adopted our
Corporate Governance Principles. These progressive guidelines were developed
with the assistance of Charles Elson, Professor of Corporate Governance at the
University of Delaware, who is on AutoZone's Board of Directors." (Corporate
Governance Principles are attached to this release.)
The Board of Directors has recently elected two new outside directors, Marsha
Johnson Evans and Earl G. Graves, Jr. Marsha Evans is a retired U.S. Navy Rear
Admiral, the current National Executive Director of the Girl Scouts of America
and also a director of The May Department Stores Company. Earl G. Graves, Jr. is
the President and Chief Operating Officer for Earl G. Graves Publishing Company,
the publisher of Black Enterprise Magazine. He is the Chairman of the Madison
Avenue Initiative and sits on the board of advisors of Earl G. Graves, Ltd.,
Channel 13's Board of Trustees and Education and Diversity Committees. He is
also on the Volvo Business Diversity Advisory Board, the Jaguar Diversity Board,
and the Jaguar Marketing and Franchise Development Board. These new board
members have a wide range of experience that will further strengthen the board
and provide additional outside perspectives.
During the quarter, AutoZone opened 38 new and replaced 4 stores in the U.S. and
opened one store in Mexico. In addition, AutoZone sold TruckPro, its 49-store
heavy duty truck parts subsidiary in the quarter. Year-to-date, AutoZone has
opened 53 new and replaced 10 auto parts stores in the U.S. and 2 stores in
Mexico. In the first quarter, 35 AutoZone stores were closed, for which reserves
were recorded in fiscal 2001.
Aggregate share repurchases under the currently authorized $1.7 billion share
repurchase program are $1.52 billion or 53.9 million shares at the end of the
second quarter, including $115.3 million or 2.5 million shares under forward
purchase contracts.
AutoZone, Inc. today filed a registration statement with the Securities and
Exchange Commission relating to the possible resale by certain affiliates of
both ESL Investments and Mr. Edward S. Lampert, a member of AutoZone's Board of
Directors and Chairman of ESL Investments, of up to 15 million shares. The
registration statement is a shelf registration that, once declared effective,
will permit the selling shareholders to sell or distribute the stock in
transactions as set forth in the registration statement. The timing of the sale
or distribution of the shares has not been determined. AutoZone will not receive
any of the proceeds from these sales. "The shelf registration filed by AutoZone
today gives ESL affiliates the flexibility to diversify a portion of their
holdings from time to time as circumstances warrant but does not obligate ESL
affiliates to sell," Mr. Lampert said. "We continue to have considerable faith
in Steve Odland and the management of AutoZone and believe that they have just
begun to tap into the potential for the AutoZone franchise. ESL affiliates
intend to remain as significant shareholders of AutoZone for some time to come."
Even if all the shares registered today were sold, ESL affiliates would still
own over 10 million shares of the Company with an investment of over $700
million based on the closing price on February 25, 2002.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission, but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
AutoZone will host a one-hour conference call beginning at 9 a.m. (CST) tomorrow
to discuss the results of the quarter. Investors may listen to the conference
call live and review supporting slides on the AutoZone website,
www.autozone.com, by clicking "Investor Relations," "Conference Calls." The call
will also be available by dialing (712) 271-3887. A replay of the call and
supporting slides will be available on the AutoZone website. In addition, a
telephone replay will be available by dialing (402) 220-5074 through Wednesday,
March 6, 2002, at 11:00 p.m. (EST).
AutoZone sells auto and light truck parts, chemicals and accessories through
3,037 AutoZone stores in 44 states plus the District of Columbia in the U.S. and
23 AutoZone stores in Mexico and also sells the ALLDATA brand automotive
diagnostic and repair software. On the web, AutoZone sells diagnostic and repair
information through alldatadiy.com, and auto and light truck parts through
AutoZone.com.
Certain statements contained in this press release are forward-looking
statements. These statements discuss, among other things, business strategies
and future performance. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, without limitation, accuracy of
estimates, competition, product demand, the economy, inflation, gasoline prices,
the ability to hire and retain qualified employees, consumer debt levels, war
and the prospect of war, including terrorist activity, and availability of
commercial transportation. Actual results may materially differ from anticipated
results. AutoZone undertakes no obligation to publicly release any revisions to
any forward-looking statements contained in this press release to reflect events
or circumstances occurring after the date of this release or to reflect the
occurrence of unanticipated events.
Contact Information:
Media: Ray Pohlman at 901 495-7962, ray.pohlman@autozone.com
Financial: Emma Jo Kauffman at 901 495-7005,
emma.jo.kauffman@autozone.com
AutoZone's 2nd Quarter Highlights - Fiscal 2002
Condensed Consolidated Statements of Operations
(in thousands, except per share data and selected operating data)
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February 9, February 10 February 9, February 10,
2002 2001 2002 2001
Net sales $1,081,311 $973,999 $2,257,363 $2,037,565
Cost of goods sold 606,411 576,666 1,266,327 1,194,667
Gross profit 474,900 397,333 991,036 842,898
Operating expenses 353,751 320,053 714,383 654,850
Operating profit 121,149 77,280 276,653 188,048
Interest expense, net 18,278 25,544 37,705 48,524
Income before taxes 102,871 51,736 238,948 139,524
Taxes 39,100 20,000 91,100 54,000
Net income $63,771 $31,736 $147,848 $85,524
Net income per share:
Basic $0.60 $0.28 $1.38 $0.74
Diluted $0.58 $0.28 $1.34 $0.74
Shares outstanding:
Basic 106,846 113,908 107,415 115,312
Diluted 109,797 114,496 110,201 115,773
Selected Balance Sheet Information
(in thousands)
February 9, February 10, August 25,
2002 2001 2001
Merchandise inventories $1,273,420 $1,159,161 $1,242,896
Current assets 1,350,012 1,238,392 1,328,511
Property and equipment,
net 1,682,335 1,756,108 1,710,443
Total assets 3,421,448 3,391,125 3,432,512
Accounts payable 838,092 659,284 945,666
Current liabilities 1,206,581 937,163 1,266,654
Stockholders' equity 891,600 878,573 866,213
Debt 1,251,942 1,520,045 1,225,402
Working capital 143,431 301,229 61,857
Selected Cash Flow Information
(in thousands)
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February 9 February 10 February 9 February 10
2002 2001 2002 2001
Capital spending $24,411 $38,023 $40,622 $93,071
Share repurchases $99,764 $50,072 $169,211 $204,712
Depreciation & amortization
(exc. goodwill) $27,924 $28,762 $56,093 $57,209
Goodwill amortization -- $2,017 -- $4,034
Other Selected Financial Information
February 9, February 10, August 25,
(in thousands) 2002 2001 2001
Cumulative share repurchases ($):
On balance sheet $1,405,944 $1,075,626 $1,236,733
Forward contracts $115,332 $170,107 $131,092
Total $1,521,276 $1,245,733 $1,367,825
Cumulative share repurchases (shares):
On balance sheet 51,423 40,643 47,162
Forward contracts 2,492 7,471 3,894
Total 53,915 48,114 51,056
Shares outstanding,
end of quarter 106,433 113,961 109,408
AutoZone's 2nd Quarter Fiscal 2002
Selected Operating Highlights
Store Count & Square Footage
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February 9 February 10 February 9 February 10
2002 2001 2002 2001
Domestic auto parts stores:
Store count:
Stores opened 38 18 53 59
Stores closed -- 2 35 2
Replacement stores 4 3 10 8
Total domestic auto
parts stores 3,037 2,972 3,037 2,972
Stores with commercial
sales 1,643 1,484 1,643 1,484
Square footage
(in thousands) 19,505 19,063 19,505 19,063
Auto parts stores in Mexico:
Stores opened 1 -- 2 --
Total auto parts stores
in Mexico 23 13 23 13
TruckPro stores (total) -- 49 -- 49
Note: TruckPro was sold on Dec. 19, 2001
Sales & Inventory Statistics (Domestic auto parts):
12 Weeks 12 Weeks 24 Weeks 24 Weeks
Ended Ended Ended Ended
February 9, February 10, February 9, February 10,
2002 2001 2002 2001
Sales per average store ($ in
thousands) $345 $311 $712 $657
Sales per average sq foot $54 $48 $111 $102
Same store sales - rolling 13 periods
Total 12% 2% 10% 2%
Organic vs acquired:
Organic 11% 1% 9% 0%
Acquired 18% 10% 16% 11%
Retail vs commercial
Retail 11% 1% 10% 1%
Commercial 18% 11% 16% 10%
Inventory turns:
Based on average
inventories 2.3 X 2.3 X
Based on ending
inventories 2.2 X 2.3 X
Inventory turns, net of payables:
Based on average
inventories 7.1 X 6.4 X
Based on ending
inventories 6.6 X 5.4 X
Accounts payable/inventory
(total company) 66% 57%
AUTOZONE, INC.
CORPORATE GOVERNANCE PRINCIPLES
ADOPTION
The Board of Directors of AutoZone, Inc., has adopted these Corporate Governance
Principles on June 5, 2001.
BOARD MISSION & OBJECTIVES
Mission Statement
AutoZone's primary objective is to maximize long-term stockholder value, while
adhering to the laws of the jurisdictions wherein it operates and at all times
observing the highest ethical standards.
Corporate Authority & Responsibility
All corporate authority resides in the Board of Directors as the representative
of the stockholders. Authority is delegated to management by the Board in order
to implement AutoZone's mission. Such delegated authority includes the
authorization of spending limits and the authority to hire employees and
terminate their services. The Board retains responsibility to recommend
candidates to the stockholders for election to the Board of Directors. The Board
retains responsibility for selection and evaluation of the CEO, oversight of the
succession plan, determination of senior management compensation, approval of
the annual budget, assurance of adequate systems, procedures and controls, as
well as assisting in the preparation and approval of the strategic plan.
Additionally, the Board provides advice and counsel to senior management. The
Board may exercise its authority through committees of the Board.
DIRECTORS
Personal Characteristics & Core Competencies of Directors:
Individual Directors should possess all of the following personal
characteristics:
* Integrity and Accountability - Character is the primary consideration in
evaluating any Director. Directors should demonstrate high ethical
standards and integrity in their personal and professional dealings and
be willing to act on and remain accountable for their Boardroom
decisions.
* Informed Judgment - Directors should have the ability to provide wise,
thoughtful counsel on a broad range of issues. Directors should possess
high intelligence and wisdom and apply it in decision making.
* Financial Literacy - One of the important roles of the Board is to
monitor AutoZone's financial performance. Directors should be
financially literate. Directors should know how to read a balance
sheet, income statement, cash flow statement, and understand the use of
financial ratios and other indices for evaluating company performance.
* Mature Confidence - The Board functions best when Directors value Board
and team performance over individual performance. Openness to other
opinions and the willingness to listen should rank as highly as the
ability to communicate persuasively. Directors should approach others
assertively, responsibly and supportively and identify issues in a
manner that encourages open discussion.
* High Performance Standards - In today's highly competitive world, only
companies capable of performing at the highest levels are likely to
prosper. Directors should have a history of achievements that reflect
high standards for themselves and others.
* Passion - Directors should be passionate about the performance of
AutoZone, both in absolute terms and relative to its peers. That
passion should manifest itself in engaged debate about the future of
AutoZone and an esprit de corps among the Board that both challenges and
inspires AutoZoners.
Core Competencies of the Board as a Whole
To adequately fulfill the Board's complex roles, from overseeing the audit and
monitoring managerial performance to responding to crises and approving
AutoZone's strategic plan, a host of core competencies need to be represented on
the Board. The Board as a whole should possess the following core competencies,
with each member contributing knowledge, experience and skills in one or more
domains:
* Accounting and Finance - Among the most important missions of the Board
is ensuring that stockholder value is both enhanced through corporate
performance and protected through adequate internal financial controls.
The Board should have one or more Directors with specific expertise in
financial accounting and corporate finance, especially with respect to
trends in debt and equity markets.
* Business Judgment - Stockholders rely on Directors to make sensible
choices on their behalf. The majority of Directors should have a record
of making good business decisions in the corporate sector.
* Management - To monitor corporate management, the Board needs to
understand management trends in general and industry trends in
particular. The Board should have one or more Directors who understand
and stay current on general management "best practices" and their
application in complex, rapidly evolving business environments.
* Crisis Response - Organizations inevitably experience both short and
long-term crises. The ability to deal with crises can minimize
ramifications and limit negative impact on firm performance. Boards
should have one or more Directors who have the ability and time to
perform during periods of both short-term and prolonged crises.
* Industry Knowledge - Companies continually face new opportunities and
threats that are unique to their industries. The Board should have one
or more members with appropriate and relevant industry-specific
knowledge.
* International Markets - To succeed in an increasingly global economy,
the Board should have one or more Directors who appreciate the
importance of global business trends and who have first-hand knowledge
of international business experience in those markets.
* Strategy & Vision - A key Board role is to approve and monitor company
strategy to ensure AutoZone's continued high performance. The Board
should have one or more Directors with the skills and capacity to
provide strategic insight and direction by encouraging innovation,
conceptualizing key trends, evaluating strategic decisions, and
continuously challenging the organization to sharpen its vision.
Changes in Professional Responsibility
The Board should consider whether a change in an individual's professional
responsibilities directly or indirectly impacts that person's ability to fulfill
directorship obligations. All Directors should submit a resignation as a matter
of course upon retirement, a change in employer, or other significant change in
their professional roles and responsibilities. If the Board believes that a
director will continue to make a contribution to the organization, the continued
membership of that director may be supported.
Identification and Recruitment of Directors
One of the tasks of the Nominating and Corporate Governance Committee is to
identify and recruit candidates to serve on the Board of Directors. A list of
candidates shall be presented to the Board for nomination and to the
stockholders for consideration. The committee may, at its discretion, seek
third-party resources to assist in the process. The CEO will be included in the
process on a non-voting basis. The Nominating and Corporate Governance Committee
will make the final recommendation to the Board.
Independent Directors
A substantial majority of the Board of Directors should be independent. An
independent director is defined as a director who:
* has not been employed by AutoZone in an executive capacity within the
last three years;
* is not, and is not affiliated with a company that is, an adviser, or
consultant to AutoZone or a member of AutoZone's senior management;
* is not affiliated with a significant customer or supplier of AutoZone;
* has no personal services contract with AutoZone or with any member of
AutoZone's senior management;
* is not affiliated with a not-for-profit entity that receives significant
contributions from AutoZone;
* within the last three years, has not had any business relationship with
AutoZone (other than service as a director) for which AutoZone has been
or will be required to make disclosure under Regulation S-K of the
Securities and Exchange Commission as currently in effect;
* is not employed by a public company at which an executive officer of
AutoZone serves as a director;
* has not had any of the relationships described above with any affiliate
of AutoZone; and
* is not a member of the immediate family of any person with any
relationships described above;
Outside Directorships
The members of the Board acknowledge that significant time is required to be a
fully participating and effective member of AutoZone's Board of Directors.
Therefore, each independent director should not hold more than two or three
directorships of public companies other than AutoZone. The CEO should not be a
member on more than one or two Boards of other public companies, and AutoZone's
other executive officers should not be members of more than one other Board of a
public company. A Director should notify the Secretary prior to accepting a new
position on another Board in order that the Secretary may examine the
relationship for a potential conflict of interest.
Compensation of Directors
Outside Directors are compensated in accordance with the Director Compensation
Plan and the Director Stock Option Plan as may be in effect from time to time.
The Board believes that a significant portion of a director's compensation
should be in common stock to further the direct correlation of directors' and
stockholders' interests.
The Compensation Committee shall review independent director compensation from
time to time and recommend to the full Board any changes in compensation as the
committee may deem necessary.
Directors that are officers or employees shall not receive any additional
compensation for their service as Directors. Outside Directors shall not receive
a pension solely as a result of service as a Director.
Direct Investment in AutoZone Stock by Directors
Since a significant ownership stake leads to a stronger alignment of interests
between directors and stockholders, each director is required to personally
invest at least $100,000 in company stock within three years of joining the
board. Exceptions to this requirement may only be made by the board under
compelling mitigating circumstances.
Service Limitations of Directors
A Director may not stand for reelection after age 70, but need not resign until
the end of his or her term. The Board may, however, upon evaluation of a
Director that has reached 70 years of age, in its discretion ask such Director
to remain on the Board in extraordinary circumstances if the Board believes that
such Director will continue to make significant contributions to the work of the
Board.
No director shall be eligible to be reelected to the Board of Directors after
serving on the Board for 15 years. However, notwithstanding the foregoing,
Director serving on the Board as of the first date of the adoption of these
Corporate Governance Principles shall be eligible to be re-elected as a Director
until the first annual meeting of stockholders held after the passage of fifteen
years from the date of first adoption of these Corporate Governance Principles.
In order to retain freshness in the process and to give new management the
unfettered ability to provide new leadership, a retiring CEO shall not continue
to serve on the Board except in extraordinary circumstances.
Conflict of Interest
From time to time, an issue being considered by the Board may present, or may
give the appearance of presenting, a conflict of interest for a Director. Each
Director should take appropriate steps to assure that in each matter considered
that the Director is disinterested with respect to that matter, other than the
interests of AutoZone and its stockholders. Any Director faced with any
potential conflict should disclose any such potential conflict to the Secretary
and the Chairman and should not participate in discussions or votes on such
issue unless a majority of the Board determines, after consultation with
counsel, that no conflict of interest exists as to such matter.
Directors that are not independent Directors shall not participate in the
Board's decision of selection, removal, or performance assessment of the CEO.
BOARD ORGANIZATION
Board Size
In general, smaller boards are more cohesive, work better together and tend to
be more effective monitors than larger boards. Ideally, the Board should be
comprised of six to ten outside Directors and one to two Directors who also are
employees or officers.
Committees
All major decisions will be considered by the Board as a whole. As a
consequence, the committee structure of the Board is limited to those committees
considered to be basic to or required for the operation of AutoZone as a
publicly-owned entity. Standing committees shall include audit, compensation,
and nominating and corporate governance. The audit, compensation, and nominating
and corporate governance committees shall be composed solely of independent
Directors. The Board may form other committees as it determines appropriate.
Each committee shall operate in accordance with its charter as adopted by the
Board. Committee members and chairs shall be appointed annually by the Board in
accordance with the charter of each committee.
BOARD OPERATIONS
Meetings
The agenda for each Board meeting shall be determined by the Chairman. Each
Director is encouraged to suggest agenda items.
The Board shall meet at least four times per fiscal year in accordance with a
meeting schedule that is approved by the Board. The Board may also meet at such
other times in meetings which may be called in accordance with AutoZone's
Bylaws.
Other members of management may attend non-executive meetings of the Board at
the invitation of the Chairman.
Communications
Directors have full access to the Chairman and CEO and senior officers reporting
directly to the CEO and to information about the corporation's operations.
Directors should refrain from giving strategic or operating direction to members
of management outside the scope of full Board or committee responsibility and
accountability.
Board Ability to Retain Advisors
The Board shall retain advisors as it believes to be appropriate. If management
is retaining advisors to the Board, such decision must be ratified by the Board.
Material in Advance of Meetings
The Board must be given sufficient information to fully exercise its governance
functions. This information comes from a variety of sources, including
management reports, a comparison of performance to plans, security analysts'
reports, articles in various business publications, etc. Generally, Board
members will receive information prior to Board meetings so they will have an
opportunity to reflect properly on the items to be considered at the meeting.
The Board will ensure that adequate time is provided for full discussion of
important items and that management presentations are scheduled in a manner that
permits a substantial proportion of Board meeting time to be available for open
discussion.
Executive Session
The independent Directors should meet privately in executive session from time
to time to review the performance of the CEO and other executive officers. The
independent Directors should meet in executive session at the end of each Board
meeting to consider other issues that they may determine from time to time,
without the presence of any member of management.
Evaluation of the CEO
The selection and evaluation of the chief executive officer and concurrence with
the CEO's selection and evaluation of the corporation's top management team are
the most important function of the Board. In its broader sense, "selection and
evaluation" includes considering compensation, planning for succession and, when
appropriate, replacing the CEO or other members of the top management team. The
performance of the CEO will be reviewed at least annually solely by the outside
Directors without the presence of the CEO or other inside Directors. The
evaluation of the CEO shall be led by the chair of the compensation committee.
The Board should have an understanding with the CEO with respect to criteria on
which he or she will be evaluated, and the results of the evaluation will be
communicated to the CEO.
Succession and Management Development
The CEO will report annually to the Board on AutoZone's program for succession
and management development.
CEO succession is a Board-driven, collaborative process. Although the current
CEO has an important role to play, the Board must own the plan for succession
while collaborating with the CEO in deciding the timing and the necessary
qualifications for making a final decision.
Outside Communication
The Board believes that management speaks for the company. In accordance with
this philosophy, Directors should defer to the Chairman or AutoZone's public
relations department when requested to make any comments regarding AutoZone or
its business.
Annual Election of Directors
In order to create greater alignment between the Board's and our stockholder's
interests and to promote greater accountability to the stockholders, Directors
shall be elected annually.
PERIODIC REVIEW OF GUIDELINES
These guidelines shall be reviewed periodically by the Nominating and Corporate
Governance Committee and any amendments shall be presented to the Board for
adoption.
Amended: December 13, 2001
SOURCE AutoZone, Inc.
CONTACT: media, Ray Pohlman, +1-901-495-7962, or
ray.pohlman@autozone.com,
or financial, Emma Jo Kauffman, +1-901-495-7005,
or
emma.jo.kauffman@autozone.com, both of AutoZone, Inc.