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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
----------- -----------
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)
----------- -----------
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
----------- -----------
$ 1,600,410 $ 1,498,397
=========== ===========
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
----------- -----------
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
----------------------------
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
----------- -----------
Operating profit ......................................... 61,898 55,397
Interest income (expense)-net ............................ (1,173) -
----------- -----------
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
---------------------------
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
----------- -----------
Net cash provided by financing activities ..................... 41,531 8,489
----------- -----------
Net decrease in cash and cash equivalents ............................. (26) (3,517)
Cash and cash equivalents at beginning of period ...................... 3,904 6,411
----------- -----------
Cash and cash equivalents at end of period ............................ $ 3,878 $ 2,894
=========== ===========
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
-----------------------------------------------
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: January 6, 1997
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT;
COVENANT NOT TO COMPETE; NOT TO
SOLICIT AND AGREEMENT CONCERNING
CONFIDENTIAL INFORMATION AND TRADE SECRETS
THIS AGREEMENT is made and entered into in duplicate originals and
effective this 8th day of November, 1996, by and between AUTOZONE, INC., a
Nevada corporation with headquarters in Memphis, Tennessee, (AutoZone, Inc. and
its direct and indirect subsidiaries are hereafter collectively referred to as
"Company") and THOMAS S. HANEMANN, an individual who is a resident of Shelby
County, Tennessee, (hereafter referred to as "Hanemann").
RECITALS
WHEREAS, the Company is a leading specialty retailer, engaged in the
business of pricing and buying at wholesale and selling, promoting, marketing
and distributing automotive parts and automotive accessories for automobiles,
trucks, and miscellaneous vehicular equipment throughout a substantial portion
of the United States with reasonable expectations in the foreseeable future of
extending its business operations to include Hawaii and Alaska as well as
Puerto Rico, Canada and Mexico. The Company carries out its business
operations through the development and implementation of business plans and
strategies developed through the expenditure of substantial time and expense;
and
WHEREAS, Hanemann, as an officer of the Company, has participated in
discussing and developing the Company's expectations of expanding its business
operations throughout the United States, including Hawaii and Alaska, Puerto
Rico, Canada and Mexico, and understands and acknowledges the importance of
these strategies to the Company's business interest; and
WHEREAS, the Company has developed and compiled highly valuable and
confidential business plans which include applications of its expertise in
connection with its business operations, its list of customers and suppliers of
goods and services (sometimes hereinafter collectively referred to as
"Vendors") and its purchasing, marketing and computer software systems,
computer programs and designs, processes, procedures and techniques; and
WHEREAS, Hanemann is now and for some time has been employed by the
Company as an executive officer of the Company, the principal duties of which
have included overall managerial responsibility for the operation of the
Company's retail stores and the Human Resource Department of the Company, as
well as involvement on the highest corporate level
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with the overall business operations of the Company, including its strategic
planning and business forecasts; and
WHEREAS, Hanemann has requested the Company of his own free will and
accord to accept his resignation as an officer of the Company effective as of
the close of business on December 12, 1996 (the "Resignation Date"), for the
purpose of providing him time to pursue other personal interests, and to allow
him to remain as an employee of the Company on a leave of absence during the
term of this Agreement, but to remain as a member of the Board of Directors of
the Company subject to removal, annual election, and resignation in the same
manner as other members of the Board; and
WHEREAS, the Company has agreed to accept Hanemann's resignation as an
officer of the Company effective as of the Resignation Date, and has agreed to
enter into this Agreement with Hanemann to employ him as an employee of the
Company and to accept his request that he be granted a leave of absence
pursuant to the provisions of this Agreement, subject, however, to Hanemann's
agreement to fully perform and abide by each and every covenant, condition and
agreement set forth herein; and
WHEREAS, during the course of performing the duties of his position up
through the date of this Agreement, Hanemann participated in the establishment
and execution of the Company's business policies and operations and by doing so
has created a substantial similarity of identification between the Company and
Hanemann with respect to the Company's Vendors, suppliers, customers and retail
outlets; and
WHEREAS, as a result of such responsibilities, and similarity of
identification, and because of Hanemann's knowledge of the identity of the
Company's strategic business operations and plans, present as well as future,
it is essential that the Company protect its business interests; and
WHEREAS, Hanemann, in connection with his employment by and with the
Company has gained broad experience and has otherwise become familiar with the
nature and extent of the business of the Company, both present and planned, its
business secrets, its methods and systems of doing business and Confidential
Information (as hereinbelow defined); and
WHEREAS, in view of all of the foregoing it is necessary and essential
that the Company in order to maintain its competitive position in the
automotive parts and automotive accessories after market, protect the
confidentiality of all of the aforementioned systems and methods, techniques,
forms, materials, procedures pertinent thereto, customer lists, Vendor lists
and future business plans, and secure the interest of the Company by entering
into this
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Agreement with Hanemann who acknowledges that the securing of this protection
by the Company is a reasonable requirement of protecting the Company's business
interest; and
WHEREAS, Hanemann recognizes and acknowledges that the confidential
business planning, computer software systems, computer programs and designs,
processes and techniques developed by the Company over the years to which he
has become privy, are unique and of significant value to the Company; and
WHEREAS, Hanemann recognizes, acknowledges and agrees that the intent
of this Agreement is to protect and preserve the confidentiality of the
Company's unique, special and valuable expertise in the sale of automotive
parts and automotive accessories as well as the Company's business operations
including by way of illustration, but not limitation, its sales, marketing, and
distribution processes, plans and techniques, inventory costs, Vendor and
distribution lists and customer lists, all toward the end that the Company's
business and competitive position are not impaired as they would be if not
protected and preserved by this Agreement; and
WHEREAS, Hanemann acknowledges and agrees that this Agreement is
reasonably necessary to protect the Company's interest throughout the
geographic area and period of time defined below without imposing undue
hardship on Hanemann and that the public interest is not adversely affected by
the Agreement and that it is in all respects warranted and appropriate given
the modern facilities of travel and communication as well as the breadth of the
Company's business and Hanemann's responsibility, authority and involvement in
the business of the Company; and
WHEREAS, the Company and Hanemann jointly acknowledge and agree that
this Agreement supersedes all prior employment and non-competition agreements,
if any, between the parties and all such agreements, if any, are hereby
terminated by this Agreement; and
WHEREAS, the Company and Hanemann further jointly acknowledge and
agree that without agreeing to the terms hereof, Hanemann would not receive the
consideration set forth hereinbelow.
NOW, THEREFORE, in consideration of the above and the foregoing
promises and the consideration set forth hereinbelow and other good and
valuable consideration, the receipt of which is hereby acknowledged, Hanemann
does hereby covenant and agree as follows:
1. Definitions.
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(a) "Area" shall mean the entire geographic area encompassed
within the borders of the continental United States and Hawaii and Alaska; and
it shall also mean the entire geographic area encompassed within the boundaries
of Puerto Rico, Canada and Mexico.
(b) "Business Ideas" shall mean all ideas, inventions and other
developments or improvements conceived or reduced to practice by Hanemann,
alone or with others, during the term of his employment with the Company,
whether or not during working hours that are within the scope of the Business
of the Company or that relate to Business of the Company, all of which shall be
the exclusive property of the Company.
(c) "Business of the Company" shall mean and include the business
of pricing and buying at wholesale and selling, marketing, promoting and
distributing at retail and wholesale automotive parts and automotive
accessories for automobiles, trucks and other automotive vehicles in any and
all segments of the automotive after market, including but not limited to the
"DIY" and commercial segments. The parties agree that the sale of automotive
parts in conjunction with their installation by a company solely engaged in the
sale of automotive parts in conjunction with the installation of such
automotive parts by such company shall not be deemed to be a part of the
Business of the Company, and the sale of automotive parts in conjunction with
their installation shall not be deemed a "Competing Business" under Section
1(d) hereof. By way of illustration and not limitation, the following shall
not be considered "Competing Businesses": Jiffy Lube, Midas Muffler and Brake
Shop, Precision Tune, Goodyear Auto Service Centers, and Firestone Tire and
Service Centers. The parties also agree that a company not engaged in the
direct sale or indirect sale through subsidiaries (whether direct or indirect)
or affiliates (whether direct or indirect) of automotive parts or accessories
to (i) retail outlets (including, but not limited to outlets with sales to
"DIY" customers or installers of automotive parts or accessories) (ii) end
users of the automotive parts or accessories, or (iii) installers of automotive
parts or accessories, shall not be a "Competing Business" under Section 1(d)
hereof. Notwithstanding, it is agreed that TBC as it presently conducts
business, shall not be considered a "Competing Business".
(d) "Competing Business" shall mean any entity of any kind which
is engaged in any manner in the same business or substantially the same
business as the Business of the Company; or any entity of any kind which has
any organizational unit, part, subpart, subsidiary or affiliate engaged in the
same or substantially the same business as the Business of the Company.
Hanemann and the Company expressly agree that the wholesale distribution of
automotive parts through a network of "jobbers" or through company-owned or
company-controlled outlets such as Genuine Parts - NAPA shall be a "Competing
Business". Provided, however, solely for purposes of excluding any retail
business with retail stores that sell automotive parts and automotive
accessories as a minor portion of the retail business in each of its retail
stores from the term "Competing Business", any such retail business engaged in
the same business or
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substantially the same business as the Business of the Company either directly
or through an operating division or subsidiary of such retail business shall
not be deemed to be a "Competing Business" if both (a) the average sales per
store per annum of the business or the average sales per store per annum of any
organizational unit, part, subpart, subsidiary or affiliate of such business
from the sale of automotive parts and automotive accessories (excluding sales
at stores which do not sell automotive parts and automotive accessories) shall
be less than 10% of the average sales per store per annum of the Company for
the same year and (b) the total sales of automotive parts and accessories for
any such retail business (including the sales of automotive parts and
automotive accessories by any organizational unit, part, subpart, subsidiary or
affiliate of such business) shall be, in the aggregate, less than 10% of such
business' total gross sales. By way of illustration and not limitation,
Competing Business" is consequently intended to include (i) all public or
independently owned automotive parts and automotive accessory specialty
retailing chains such as, for example, Pep-Boys, Advance, and Hi-Lo; (ii) all
chains with divisions or subsidiaries selling automotive parts and automotive
accessories from separate business units such as, for example, Western Auto or
Auto Palace; (iii) all wholesalers (other than those excluded by the last
sentence of Section 1(c)) of automotive parts or automotive accessories such as
Genuine Parts - NAPA; and (iv) all other retail businesses with sales of
automotive parts and/or automotive accessories exceeding either of the minimum
sales volume limitations set forth in clauses (a) or (b) of this Section 1(d).
(e) "Confidential Information" shall mean all Business Ideas,
customer lists, sales promotion, distribution and marketing information, trade
secrets (as hereinafter defined), analysis or other information relating to the
Business of the Company; listings of the Company's Vendors and/or their prices;
all ideas, designs, inventions, data and developments including strategic
plans, whether or not copyrightable or patentable, whether originated or
developed by or with Hanemann or others while working on behalf of the Company
and which are related to the Business of the Company; all customer account
records, training and operations material and memoranda, personnel records,
pricing policies and information, financial information concerning or related
to the Business of the Company, including, but not limited to, its accounts,
customers, distributors, employees and affairs, obtained by or furnished,
disclosed or disseminated to Hanemann, or obtained, assembled or compiled by
Hanemann during the course of his employment by the Company and all physical
embodiments of the foregoing, all of which are hereby agreed to be the property
of and confidential to the Company, but Confidential Information shall not
include any of the foregoing to the extend the same is or becomes publicly
known through no fault or beach of this Agreement by Hanemann or through no
fault or breach of a confidential relationship between the Company and a third
party. The term trade secrets shall mean the singular and plural, whole or any
part of or phase of any and all scientific or technical information, design,
drawing, diagram, process, procedure, computer software systems, computer
programs and designs, formula, improvement, invention, plan, apparatus,
fixture, tool, equipment, mechanism, technique of production or method of
manufacture or assembly, or
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method of marketing, distribution or sale which is used or has been used by the
Company and is secret and of value to the Company or which gives the Company an
advantage over competitors who do not know or use it and which is known only by
the Company and those of the Company's employees to whom it has been confided
in order to apply it to its intended uses. For purposes hereof, "Confidential
Information" shall not include the general knowledge and management abilities
of Hanemann as long as his knowledge and management abilities are utilized in
or imparted to any business which is not a Competing Business.
2. Term of Agreement. This Agreement shall remain in full force
and effect beginning with the date of this Agreement and continuing thereafter
for the remainder of the Company's 1997 fiscal year and, in addition, for the
following two (2) consecutive fiscal years of the Company thereafter through
August 2630, 1999.
3. Effective Date. This Agreement shall be effective as of the
date of this Agreement.
4. Recitals. The recitals set forth above are fully incorporated
into and made a part of this Agreement.
5. Resignation as Officer. Hanemann hereby resigns as an officer
of the Company effective as of the Resignation Date, and the Company accepts
his resignation.
6. Employment. The Company hereby agrees to continue to employ
Hanemann as an employee of the Company during the term of this Agreement, and
Hanemann hereby accepts employment pursuant to the terms and conditions set
forth herein. Upon the earlier to occur of either (i) the expiration of the
term of this Agreement or (ii) Hanemann's breach of any term or provision of
this Agreement, including the covenants, conditions and agreements set forth in
Sections 8, 9, 10 and 11, Hanemann and the Company agree that Hanemann's
employment with the Company shall automatically terminate, and the Company
shall have no further obligation to pay to him the consideration set forth in
Section 19 hereof; provided, however, the covenants, conditions and agreements
of Hanemann, including each of those set forth in Sections 8, 9, 10 and 11
hereof, shall remain in full force and effect during the term of this Agreement
ending August 2630, 1999.
7. Leave of Absence/Duties of Hanemann. Effective as of the date
of this Agreement, the Company agrees to accept Hanemann's request that he be
granted a leave of absence from the Company while remaining in the employ of
the Company at the salary and with such benefits as are expressly set forth
herein. Hanemann agrees that he shall take no action for or on behalf of or in
the name of the Company or otherwise represent himself by either words, conduct
or both as having any authority to act for it, on its behalf or in its name.
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Hanemann agrees to be available for such duties as reasonably requested by the
Chairman of the Board of the Company such duties to not interfere with any new
employment or business ventures of Hanemann. The Company agrees that Hanemann
shall be entitled to seek and accept such additional employment as he may
desire during the term of this Agreement, but only to the extent such
additional employment does not in any manner violate any of the provisions of
this Agreement, including specifically the provisions of Sections 7 through 11
hereof.
8. Covenant Not to Compete. For and in consideration of the
covenants and agreements of the Company set forth herein, including the
consideration described in Sections 19 and 20 hereof, Hanemann hereby covenants
and agrees that during the term of this Agreement as set forth hereinabove,
Hanemann shall not directly or indirectly, as an owner, partner, shareholder
(other than as an owner of less than 5% of the issued and outstanding voting
securities of an entity whose voting securities are traded on a national
securities exchange or reported on the NASDAQ Stock Market's National Market
System), officer, executive, board member, director, trustee, employee,
consultant, or otherwise, whether directly or indirectly, engage in, work for,
consult, provide advice or assistance or otherwise participate in, engage in,
or be employed by any Competing Business as hereinabove defined.
This foregoing covenant not to compete shall be effective within the
Area as hereinabove defined during the entire term of this Agreement.
9. Agreement Not to Solicit Employees. For and in consideration
of the covenants and agreements of the Company set forth herein, including the
consideration described in Sections 19 and 20 hereof, Hanemann agrees that
during the term of this Agreement as hereinabove set forth without the prior
express written consent of the Company, he will not on his own behalf or on
behalf of others, solicit, entice, or hire away or participate in any attempt
to solicit, entice, or hire away, nor will he employ or seek to employ or
participate in any attempt to employ any person who is then employed by the
Company in a managerial or supervisory position.
10. Non-Disclosure and Non-Use of Confidential Information. For
and in consideration of the covenants and agreements of the Company set forth
herein, including the consideration described in Sections 19 and 20 hereof,
Hanemann acknowledges and agrees that all Confidential Information as
hereinabove defined and all physical embodiments thereof are confidential to
and shall be and remain the sole and exclusive property of the Company and
whether original or any copy form thereof, shall not be removed by Hanemann or
by anyone acting for or on his behalf from the possession or custody of the
Company. Furthermore, Hanemann agrees that he will not, during the term of
this Agreement, without the prior express written consent of the Company,
disclose or make available any Confidential Information to any
7
8
person or entity, nor shall he make or cause to be made, or permit, either on
his own behalf or on behalf of others, any use of such Confidential
Information.
11. Agreement Not to Solicit Customers or Vendors. For and in
consideration of the covenants and agreements of the Company set forth herein,
including the consideration described in Sections 19 and 20 hereof, Hanemann
agrees that during the term of this Agreement, he will not, without the prior
written consent of the Company, within the Area, either directly or indirectly,
on his own behalf or in the service or on behalf of others, as a partner,
shareholder, officer, executive or managerial employee, consultant, director or
trustee, solicit, divert or appropriate, to or for any Competing Business any
customer or Vendor, including any person or entity from whom the Company
acquired or sought to acquire any product or services for the Business of the
Company during the term of employment of Hanemann by the Company and to whom
any automotive parts and automotive accessories for automobiles, trucks and
other automotive vehicles were sold at any time during the same time period.
12. Severability. In the event any portion of this Agreement is
determined by a court of competent jurisdiction to be unenforceable, then the
remaining portions and provisions of this Agreement shall in all respects
remain unaffected and in full force and effect.
13. Reasonable Restrictions. Hanemann understands and agrees that
this Agreement and its terms and provisions including, but not limited to the
provisions of paragraphs 8, 9, 10 and 11 above, are reasonable and necessary
for the proper protection of the Business of the Company and the Company's
interest therein and will neither impose undue hardship upon Hanemann nor
otherwise unduly deprive Hanemann of the means or opportunity to support and
maintain suitably himself or for obtaining other or different employment after
the termination of this employment with the Company.
14. Essence of the Agreement. The Company and Hanemann understand
and agree that paragraphs 8, 9, 10 and 11 are the essence of this Agreement.
15. Remedy. Hanemann recognizes and agrees that monetary damages
for breach of this Agreement cannot adequately compensate the Company for any
breach of this Agreement, and in the event of any breach or threatened breach
hereof, the Company shall be entitled to injunctive relief, both temporary and
permanent, as well as and in addition to all other available remedies,
including such damages as may be permitted by law, all of which remedies shall
be cumulative and non-exclusive. Notwithstanding, in no event shall the
Company be entitled to recover from Hanemann monetary damages in excess of two
million five hundred thousand dollars ($2,500,000) (provided that this damage
limitation shall have no effect on the injunctive relief provided for herein
and shall not apply to amounts paid to or for Hanemann's benefit on
8
9
account of any violation of this Agreement, by any person or entity other than
Hanemann personally). Hanemann shall have thirty (30) days from receipt of
written notice from the Company in which to cure any unintentional violation of
this agreement by Hanemann and in the event such unintentional violation by
Hanemann is not or cannot be cured by Hanemann in such thirty day (30) day
period, the Company shall have all rights set forth herein.
16. Judicial Modification. In the event that a court of competent
jurisdiction declares any provision of this Agreement unenforceable or void
with respect to subject matter, time or geographic scope as sought to be
enforced, the parties hereby authorize such court to enforce the Agreement as
if it had been executed by both parties subsequent to the expungement of the
provisions found by said court to be unenforceable or void. The parties
further agree that if such court finds this Agreement unreasonable, the court
shall modify this Agreement to make it reasonable in the opinion of the court
and in light of the intentions of the parties as set forth in this Agreement.
17. No Waiver. The failure of either party to this Agreement to
insist upon the immediate performance of any of the terms and condition of this
Agreement or the waiver of any breach of any of the terms and conditions of
this Agreement, shall not be construed as thereafter waiving any such terms and
conditions or any other terms and conditions of this Agreement or the breach
thereof, and the entire Agreement shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred, unless the same shall
be in writing and signed by Hanemann and a duly authorized executive officer of
the Company.
18. Amendments. No alteration, modification or amendment of this
Agreement shall be effective or binding unless in writing and signed by both
Hanemann and a duly authorized executive officer of the Company.
19. Consideration. In consideration for the promises,
undertakings and covenants of Hanemann including those set forth in Sections 8
- - 11 hereof, and in consideration of Hanemann's employment by the Company, the
Company agrees to pay to Hanemann the compensation hereinafter set forth and to
provide him with the following benefits;
(a) Compensation.
(1) Hanemann will receive his scheduled bonus
for the 1996 fiscal year of the Company (ending August 31, 1996), based upon
the same formula that would have been used had this Agreement not been
executed. Hanemann shall not be entitled to any bonus payments thereafter.
The bonus shall be paid at the same time as other officer bonuses are paid for
the 1996 fiscal year.
9
10
(2) Thereafter, (i) beginning on the date of the
effective date of this Agreement and continuing for the remainder of the
Company's 1997 fiscal year and ending upon the end of the 1997 fiscal year,
Hanemann shall continue to receive his current base salary in bi-weekly
installments of $14,558.66 (which would total $378,525 per annum if such
payments were to continue for a complete fiscal year) (ii) commencing with the
beginning of the 1998 fiscal year and ending upon the end of the Company's 1998
fiscal year, Hanemann shall receive an amount in bi-weekly installments of
$9,615.38 totaling $250,000 per annum for the Company's 1998 fiscal year and
(iii) commencing with the beginning of the Company's 1999 fiscal year and
ending upon the end of the Company's 1999 fiscal year, Hanemann shall receive
an amount in bi-weekly installments of $9,615.38 totaling $250,000 per annum
for the Company's 1999 fiscal year. All payments stated herein are stated
before deductions required by law or then Company policy are made and all such
deductions shall be made by the Company before payment to Hanemann. All such
payments shall be made at the same time as the Company's normal bi-weekly
payroll for salaried employees. As used in this Section 19 paragraph (a), the
term bi-weekly shall mean once every two weeks.
(3) Hanemann acknowledges and agrees that the
payments he is to receive from the Company pursuant to paragraphs (a)(1) and
(2) above are conditioned upon and subject to the full and complete performance
of this Agreement by Hanemann throughout the term of this Agreement. In the
event Hanemann shall be in breach of this Agreement, including any covenant or
agreement set forth in Sections 8, 9, 10 and 11 hereof, the Company shall have
no other or further obligations to pay any amounts to him under paragraphs
(a)(1) and (2) hereof, and the Company shall be entitled to seek as a part of
the damages it has incurred on account of Hanemann's breach of this Agreement,
full and complete restitution of all amounts paid to Hanemann pursuant to
paragraphs (a)(1) and (2) hereof from and after the date of this Agreement in
addition to any and all other damages suffered by the Company, subject to the
limitations contained in Paragraph 15 of this Agreement. Notwithstanding
anything to the contrary contained herein, in the event Hanemann shall die
prior to final and complete payments of all amounts set forth in paragraphs
(a)(1) and (2) above, any amounts which would otherwise be due subsequent to
the date of his death shall automatically cease and terminate and the Company
shall be obligated under paragraphs (a)(1) and (2) only to pay the amounts
accruing as of the date of Hanemann's death.
(b) Pension Plan Benefits, Health and Medical Insurance
and Other Company Benefits. For so long as Hanemann shall remain an employee
of the Company, Hanemann shall continue to accrue such pension benefits as he
shall be entitled to accrue in accordance with the terms and provisions of the
applicable Company pension benefit plans, as they may be amended from time to
time by the Company. For purposes of medical and hospitalization coverage, the
Company will continue to provide Hanemann with the same medical and
hospitalization insurance and on the same basis as its other employees receive
from time to time from the
10
11
Company as long as Hanemann shall remain an employee of the Company and upon
the termination of this employment, Hanemann shall have the rights he is
entitled to receive under COBRA. Hanemann waives any rights he may have to
life insurance customarily provided by the Company to employees and life
insurance available to be purchased at the option of employees.
20. Lump Sum Payment for Covenants. As additional consideration
for each and every covenant, condition and agreement of Hanemann's contained
herein, including specifically those set forth in Section 8 - 11 hereof, the
Company shall pay to Hanemann, and Hanemann agrees to accept as full and
adequate consideration, a lump-sum payment of Fifty Thousand Dollars
($50,000.00), less deductions required by law or Company policy, to be paid
within thirty-one (31) days of the effective date hereof.
21. Options. Except as set forth herein, all non-qualified stock
options granted to Hanemann by the Company, whether vested or unvested, shall
continue to be governed by the applicable non-qualified stock option agreements
relating thereto. Hanemann and the Company acknowledge and agree that 100,000
of the 200,000 unvested stock options granted to Hanemann by the Company
pursuant to the Non-Qualified Stock Option Agreement dated April 30, 1994,
shall terminate and be canceled as of the Resignation Date with 50,000 options
that would have vested on each of April 30, 2000 and April 30, 2001 terminating
and being canceled on the Resignation Date. Hanemann shall have no further
rights and benefits thereunder.
22. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee, and the
parties hereto acknowledge and agree that any litigation, cause of action or
proceeding arising hereunder shall be brought in a court of competent
jurisdiction in Shelby County, Tennessee.
23. Enforcement. In the event either party shall bring any action
or otherwise institute any proceeding against the other party for the
enforcement of all or any part of this Agreement, including but not limited to
the enforcement of the provisions of this paragraph, the prevailing party shall
be entitled to receive from the other party all of the reasonable costs,
expenses and attorney's fees incurred by the prevailing party in enforcing this
Agreement.
24. Captions. The captions to the various paragraphs in this
Agreement are for convenience only and are not otherwise a part of the
Agreement.
25. Entire Agreement. This Agreement constitutes the sole and
entire Agreement and understanding between the parties with respect to the
matters expressly covered hereby, there being no other promises, agreements,
representations, warranties or other statements between them in respect to such
matters not expressly set forth in this Agreement.
11
12
26. Consultation with Counsel. With the assistance and advice of
his attorney, Hanemann hereby acknowledges that he has had ample opportunity to
read and review this Agreement and that he fully understands its content and
intent, and that he enters into and executes this Agreement with such
understanding and advice of counsel that in all respects this Agreement is
enforceable and valid.
27. Release. Except for the obligations of the Company set forth
in this Agreement (including Hanemann's rights and benefits to certain stock
options as more fully described in the applicable stock option agreement of the
Company), Hanemann hereby absolutely and unconditionally fully releases the
Company from all claims, demands, losses, liability, actions, or rights of
action whether arising out of contract, local ordinance, or state or federal
law, in any way arising out of or related to any compensation or benefits he is
entitled to receive as an officer and employee of the Company including, but
not limited to, claims under the Federal Age Discrimination in Employment Act
("ADEA") or its state counterpart; Title VII of the Civil Rights Act of 1964,
as amended, or its state counterpart; the Tennessee Human Rights Commission
Act, or any other claims or causes of action arising out of common law, any
contract, or any local, state or federal statute, regulation or ordinance
arising out of or accruing during the course of or in any way related to
Hanemann's employment with the Company or his service as one of its officers.
In the event Hanemann shall have the right under any applicable law to withdraw
any release or waiver of rights set forth in this Agreement or if Hanemann
should seek to revoke or withdraw any release or waiver of rights set forth in
this Agreement, the Company shall have the right to immediately terminate
Hanemann's employment with the Company and discontinue all of its obligations
under this Agreement to pay Hanemann for such employment, provided that all of
the covenants, conditions and agreements of Hanemann, including those set forth
in Sections 8 - 11 hereof, shall remain in full force and effect during the
term of this Agreement.
Except for the obligations of Hanemann set forth in this Agreement,
the Company hereby absolutely and unconditionally fully releases Hanemann from
all claims, demands, losses, liabilities, actions or rights of action, whether
arising out of contract, local ordinance, or state or federal law in any way
arising out of or related to his employment with the Company or any other
claims or causes of action arising out of common law, any contract, or any
local, state or federal statute, regulation or ordinance arising out of or
accruing during the course of or in any way related to Hanemann's employment
with the Company or his service as one of its officers.
28. Older Workers Benefit Protection Act. To comply with the
Older Workers Benefit Protection Act of 1990, the Company advises Hanemann of
the legal requirements of the Act, and fully incorporates the legal
requirements into this Agreement as follows:
(a) Hanemann understands the terms and conditions of this
Agreement;
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13
(b) Hanemann has been advised of his right to consult
with an attorney to review this Agreement;
(c) Hanemann does not waive any rights or claims under
the ADEA that may arise after the date the waiver is executed;
(d) Hanemann is receiving additional consideration over
and above anything of value to which he is already entitled; and
(e) Hanemann has been given a period of twenty-one (21)
days within which to consider his release and waiver of ADEA claims as set
forth above. Hanemann hereby waives such period of time.
(f) Hanemann has the right to revoke the foregoing
release and waiver of any claims arising under the ADEA within seven (7) days
after the effective date of this Agreement by written notice addressed to the
Company and delivered to the Company's general counsel. Such right of
revocation does not apply to any other provisions of this Agreement.
29. No Set-Off. The existence of any claim, demand, action or
cause of action by Hanemann against the Company, or any parent, subsidiary or
affiliate of the Company, whether predicated upon this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of any of its
rights hereunder.
30. Assignment. This Agreement may be assigned by the Company to
any successors to the business of the Company through purchase, merger,
reorganization or any similar corporate transaction and shall inure to the
benefit of and may be enforced directly by any such assignee. Neither this
Agreement nor any right of Hanemann hereunder may be assigned by Hanemann, nor
may Hanemann in any way delegate the performance of his covenants and
obligations hereunder.
31. Notices. Any notice required or permitted to be given to
Hanemann pursuant to this Agreement shall be in writing, and deemed given and
effective when personally delivered or delivered by courier, or when deposited
in the United States mail, mailed to Hanemann by certified mail, return receipt
requested, at the address set forth below or at such other address as he shall
designate by written notice to the Company given in accordance with this
Section 26, and any notice required or permitted to be given to the Company
shall be in writing, and deemed given when personally delivered or delivered
by courier or when deposited in the United States mails, mailed to the Company
by certified mail, return receipt requested, addressed to the Company at the
Address set forth below or at such other address as the Company shall designate
by written notice to Hanemann given in accordance with this paragraph.
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14
If to Hanemann:
If to the Company:
AutoZone, Inc.
123 South Front Street
Memphis, TN 38103
Attention: Chairman of the Board
with a copy to: AutoZone, Inc.
123 South Front Street
Memphis, TN 38103
Attention: General Counsel
IN WITNESS WHEREOF, the Company and Hanemann have each duly executed
and delivered this Agreement in duplicate originals as of the date first shown
above.
/s/ Thomas S. Hanemann
---------------------------------
THOMAS S. HANEMANN, an individual
AUTOZONE, INC.
By: /s/ J.R. Hyde, III
----------------------------
Name
Title: Chairman and CEO
--------------------------
By: /s/ Harry L. Goldsmith
-----------------------------
Name
Title: Vice President and Secretary
----------------------------
14
1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(in thousands, except per share data)
Twelve Weeks Ended
---------------------------
Nov. 23, Nov. 18,
1996 1995
----------- ------------
PRIMARY:
Average shares outstanding .......................................... 150,243 147,170
Net effect of dilutive stock options,
based on the treasury stock
method, using average
fair market value ................................................. 2,151 2,677
----------- -----------
Total shares used in computation .................................... 152,394 149,847
=========== ===========
Net income .......................................................... $ 37,975 $ 34,797
=========== ===========
Per share amount .................................................... $ 0.25 $ 0.23
=========== ===========
FULLY DILUTED:
Average shares outstanding .......................................... 150,243 147,170
Net effect of dilutive stock options,
based on the treasury stock method,
using higher of average or ending
fair market value ................................................. 2,151 3,000
----------- -----------
Total shares used in computation .................................... 152,394 150,170
=========== ===========
Net income .......................................................... $ 37,975 $ 34,797
=========== ===========
Per share amount .................................................... $ 0.25 $ 0.23
=========== ===========
5
1,000
3-MOS
AUG-30-1997
SEP-01-1996
NOV-23-1996
3,878
0
18,280
0
610,480
676,717
1,115,282
215,531
1,600,410
541,134
133,000
0
0
1,503
904,985
1,600,410
569,145
569,145
328,847
328,847
178,400
0
1,173
60,725
22,750
37,975
0
0
0
37,975
0.25
0.25
