9,166,000 SHARES
[LOGO]
AUTOZONE, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 9,166,000 shares of Common Stock offered, 7,332,800 shares are being
offered hereby in the United States and 1,833,200 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".
All of the shares of Common Stock offered are being sold by Selling
Stockholders of the Company. The Selling
Stockholders consist of certain KKR Partnerships that are limited partnerships
affiliated with Kohlberg Kravis Roberts & Co., L.P. and J.R. Hyde, III, a
director of the Company. After the offerings, the KKR Partnerships will not own
any shares of Common Stock, and Mr. Hyde and KKR Associates will own
approximately 6.8% and 7.8%, respectively, of the outstanding shares of Common
Stock (assuming exercise in full of the over-allotment options). See "The
Company" and "Principal and Selling Stockholders". The Company will not receive
any of the proceeds from the sale of the shares offered hereby.
The last reported sales price of the Common Stock, which is listed under the
symbol "AZO", on the New York Stock Exchange on November 20, 1997 was $28 7/8
per share. See "Price Range of Common Stock".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDERS(2)
--------------------- ------------------------ -------------------
Per Share....................................... $28.50 $1.00 $27.50
Total(3)........................................ $261,231,000 $9,166,000 $252,065,000
- -------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $400,000 payable by the Selling
Stockholders.
(3) The Selling Stockholders have granted the U.S. Underwriters an option for 30
days to purchase up to an additional 800,000 shares of Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Selling Stockholders have
granted the International Underwriters an option for 30 days to purchase up
to an additional 200,000 shares of Common Stock at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. If such options are exercised in full, the total initial
public offering price, underwriting discount and proceeds to Selling
Stockholders will be $289,731,000, $10,166,000 and $279,565,000,
respectively. See "Underwriting".
---------------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
November 26, 1997 against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ
MORGAN STANLEY DEAN WITTER
---------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 20, 1997.
[LOGO]
The following map identifies the locations of the Company's 1,728 stores in 32
states at August 30, 1997:
[For EDGAR filing: Map is shown illustrating the locations of the Company's
1,298 stores in 27 states at May 4, 1996, as follows:
Alabama.......... 69
Arizona.......... 51
Arkansas......... 35
Colorado......... 21
Florida.......... 49
Georgia.......... 83
Illinois......... 37
Indiana.......... 60
Kansas........... 6
Kentucky......... 35
Louisiana........ 65
Michigan......... 9
Mississippi...... 54
Missouri......... 50
New Mexico....... 22
North Carolina... 69
Ohio............. 120
Oklahoma......... 51
Pennsylvania..... 1
South Carolina... 40
Tennessee........ 96
Texas............ 228
Utah............. 15
Virginia......... 19
West Virginia.... 11
Wisconsin........ 1
Wyoming.......... 1
---------
Total........ 1,298
---------
---------
In addition, the map identifies the locations of the Company's 7 distribution
centers in Georgia, Tennessee, Illinois, Louisiana, Texas, Arizona and Ohio.]
-------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERINGS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
AVAILABLE INFORMATION
AutoZone, Inc. ("AutoZone" or the "Company") has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement (of which
this Prospectus is a part) under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding AutoZone and
the shares of Common Stock offered hereby, reference is hereby made to the
Registration Statement and the exhibits and schedules thereto which may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
AutoZone is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Registration Statement, the exhibits and schedules forming a
part thereof and the reports, proxy statement and other information filed by
AutoZone with the Commission in accordance with the Exchange Act can be
inspected and copied at the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: Seven World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. In
addition, AutoZone's Common Stock is listed on the New York Stock Exchange and
similar information concerning AutoZone can be inspected and copied at the New
York Stock Exchange, 20 Broad Street, New York, New York 10005. Electronic
filings made through the Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR") are also publicly available through the Commission's World Wide
Web site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission and are incorporated by reference herein:
a. Annual Report on Form 10-K for the fiscal year ended August 30, 1997
(the "1997 Form 10-K").
b. Proxy Statement dated October 29, 1997 (the "1997 Proxy Statement").
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock shall be deemed to be
incorporated by reference herein and to be part hereof from the date of filing
of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents which are incorporated by reference (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents) will be provided without charge to
each person, including any beneficial owner, to whom this Prospectus is
delivered, upon written or oral request and may be obtained from the
Commission's World Wide Web site (http://www.sec.gov). Copies of this
Prospectus, as amended or supplemented from time to time, and any other
documents (or parts of documents) that constitute part of this Prospectus under
Section 10(a) of the Securities Act will also be provided without charge to each
such person upon written or oral request. Requests should be directed to
AutoZone, Inc., Attention: Investor Relations, 123 South Front Street, Memphis,
Tennessee 38103, telephone (901) 495-7185.
3
THE COMPANY
AutoZone is the nation's leading specialty retailer of automotive parts and
accessories, focusing primarily on "Do-It-Yourself" ("D-I-Y") customers. The
Company began operations in 1979 and, at August 30, 1997, operated 1,728 stores
in 32 states, primarily located in the Sunbelt and Midwest regions of the United
States. Each AutoZone store carries an extensive product line, including new and
remanufactured automotive hard parts, such as alternators, starters, water
pumps, brake shoes and pads, carburetors, clutches and engines; maintenance
items, such as oil, antifreeze, transmission, brake and power steering fluids,
engine additives, protectants and waxes; and accessories, such as car stereos
and floor mats. The Company carries parts for domestic and foreign cars, vans
and light trucks. The Company also has a commercial sales program which provides
commercial credit and prompt delivery of parts and other products to local
repair garages, dealers and service stations. This program was offered in 1,265
of the Company's stores at August 30, 1997. AutoZone does not perform automotive
repairs or installations.
AutoZone has experienced significant growth due to the opening of new stores
and increases in comparable store sales. Net sales have increased from $1.2
billion in the Company's 1993 fiscal year to $2.7 billion in the 1997 fiscal
year, and net income has increased from $86.9 million to $195.0 million during
such period. In addition, the number of stores has increased from 678 at the
beginning of the 1993 fiscal year to 1,728 at August 30, 1997, representing an
increase in total store square footage from 4.0 million to 11.6 million square
feet during such period. A major element of the Company's business strategy is
continued store expansion, including the opening of stores in new market areas.
AutoZone opened 305 net new stores during its 1997 fiscal year and intends to
open 350 net new stores in its 1998 fiscal year and a substantial number of
additional stores in succeeding fiscal years. See "Business-- Store Development
and Expansion Strategy."
AutoZone is dedicated to a marketing and merchandising strategy to provide
customers with superior service, value and parts selection at conveniently
located, well-designed stores. The Company has implemented this strategy
primarily through knowledgeable and motivated store personnel trained to
emphasize prompt and courteous customer service, through an everyday low price
policy and by maintaining an extensive product line with an emphasis on
automotive hard parts. AutoZone's stores are generally situated in
high-visibility locations and provide a distinctive merchandise presentation in
an attractive store environment.
Approximately 6.8% of the Company's shares of Common Stock outstanding prior
to the offerings is held by three limited partnerships (the "KKR Partnerships"),
the general partner of each of which is KKR Associates, L.P. ("KKR Associates"),
a New York limited partnership and an affiliate of Kohlberg Kravis Roberts &
Co., L.P. ("KKR"), and approximately 8.1% is held by J.R. Hyde, III, a director
of the Company (together with the KKR Partnerships, the "Selling Stockholders").
In addition, KKR Associates owns approximately 6.3% of the outstanding shares of
Common Stock. After giving effect to the sale of shares of the Company's Common
Stock by the Selling Stockholders in the offerings and assuming exercise in full
of the over-allotment options, the KKR Partnerships will not own any shares of
Common Stock, and Mr. Hyde and KKR Associates will own approximately 6.8% and
7.8%, respectively, of the outstanding shares of Common Stock. The term of two
of the KKR Partnerships expired on December 31, 1996, in accordance with the
terms of the limited partnership agreements pursuant to which they were
organized (the "Limited Partnership Agreements"). The terminated KKR
Partnerships continue to be in existence for a winding-up period after the
termination date. See "Principal and Selling Stockholders."
The Company's executive offices are located at 123 South Front Street,
Memphis, Tennessee 38103, and its telephone number is (901) 495-6500.
References in this Prospectus to "AutoZone" or the "Company" include the
Company's direct and indirect wholly-owned subsidiaries, unless the context
otherwise requires. See "Business-- Introduction."
4
SELECTED FINANCIAL DATA
The following table sets forth selected financial and other operating
information of AutoZone. The selected financial data for the five fiscal years
during the period ended August 30, 1997 have been derived from the audited
financial statements of AutoZone, which in the case of the three most recent
fiscal years are incorporated by reference in the 1997 Form 10-K, which is
incorporated by reference herein. The data provided below should be read in
conjunction with the separate financial statements and notes thereto,
incorporated by reference herein.
FISCAL YEAR ENDED AUGUST(1)
---------------------------------------------------------------
1993 1994 1995 1996 1997
(52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS)
---------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA
AND SELECTED OPERATING DATA)
INCOME STATEMENT DATA:
Net sales........................ $1,216,793 $ 1,508,029 $ 1,808,131 $ 2,242,633 $ 2,691,440
Cost of sales, including
warehouse and delivery
expenses........................ 731,971 886,068 1,057,033 1,307,638 1,559,296
Operating, selling, general and
administrative expenses......... 344,060 431,219 523,440 666,061 810,793
---------- ----------- ----------- ----------- -----------
Operating profit................. 140,762 190,742 227,658 268,934 321,351
Interest income (expense)--net... 2,473 2,244 623 (1,969) (8,843)
---------- ----------- ----------- ----------- -----------
Income before income taxes....... 143,235 192,986 228,281 266,965 312,508
Income taxes..................... 56,300 76,600 89,500 99,800 117,500
---------- ----------- ----------- ----------- -----------
Net income....................... $ 86,935 $ 116,386 $ 138,781 $ 167,165 $ 195,008
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
Net income per share............. $ 0.59 $ 0.78 $ 0.93 $ 1.11 $ 1.28
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
Average shares outstanding,
including common stock
equivalents..................... 147,608 148,726 149,302 151,238 152,535
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
SELECTED OPERATING DATA:
Number of stores (at fiscal year
end)............................ 783 933 1,143 1,423 1,728
Total store square footage (at
fiscal year end) (000s)(2)...... 4,839 5,949 7,480 9,437 11,611
Percentage increase in square
footage(2)...................... 20% 23% 26% 26% 23%
Average net sales per store
(000s)(2)....................... $ 1,666 $ 1,758 $ 1,742 $ 1,702 $ 1,691
Average net sales per store
square foot(2).................. $ 274 $ 280 $ 269 $ 258 $ 253
Percentage increase in comparable
store net sales(3).............. 9% 9% 6% 6% 8%
BALANCE SHEET DATA (AT FISCAL
YEAR END):
Current assets................... $ 378,467 $ 424,402 $ 447,822 $ 613,097 $ 778,802
Current liabilities.............. 286,136 339,029 417,549 612,878 592,452
Working capital.................. 92,331 85,373 30,273 219 186,350
Total assets..................... 696,547 882,102 1,111,778 1,498,397 1,884,017
Total debt....................... 4,458 4,252 13,503 94,400 198,400
Stockholders' equity............. 396,613 528,377 684,710 865,582 1,075,208
- -------------
(1) The Company's fiscal year consists of 52 or 53 weeks ending on the last
Saturday in August.
(2) Total store square footage is based on the Company's standard store formats
including normal selling, office, stockroom and receiving space, but
excluding excess space not utilized in a store's operations. Average net
sales per store and average net sales per store square foot are based on the
average of beginning and ending number of stores and store square footage
and are not weighted to take into consideration the actual dates of store
openings or expansions. For fiscal 1996, average net sales per store and
average net sales per store square foot have been adjusted to exclude net
sales for the fifty-third week.
(3) Comparable store net sales data is calculated based on the change in net
sales of all stores opened as of the beginning of the preceding full fiscal
year. Increases for fiscal 1996 and fiscal 1997 have been adjusted to
exclude the effect of the fifty-third week in fiscal 1996.
5
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol AZO. The following table sets forth the high and low closing sale
prices for the Company's Common Stock for the calendar quarters indicated as
reported by the New York Stock Exchange Composite Tape.
HIGH LOW
------- -------
1995
- ----------------------------------------------------------------
Third Quarter................................................... $27 5/8 $25
Fourth Quarter.................................................. 30 1/8 24 3/4
1996
- ----------------------------------------------------------------
First Quarter................................................... 34 24 1/8
Second Quarter.................................................. 37 1/2 32 3/8
Third Quarter................................................... 34 1/2 27
Fourth Quarter.................................................. 30 5/8 22 7/8
1997
- ----------------------------------------------------------------
First Quarter................................................... 26 1/8 20 1/8
Second Quarter.................................................. 26 22 1/4
Third Quarter................................................... 31 5/8 23 3/4
Fourth Quarter (through November 20)............................ 32 9/16 27 3/16
The last reported sale price of the Common Stock on the New York Stock
Exchange Composite Tape as of a recent date is set forth on the cover page of
this Prospectus.
DIVIDEND POLICY
AutoZone has not declared or paid any cash dividends on its Common Stock
since its incorporation in May 1986 and does not currently intend to declare or
pay any dividends. Any determination to pay dividends in the future will be at
the discretion of the Company's Board of Directors and will be dependent upon
AutoZone's results of operations, financial condition, capital expenditures,
working capital requirements, any contractual restrictions and other factors
deemed relevant by the Board of Directors.
6
CAPITALIZATION
The following table sets forth the capitalization of AutoZone at August 30,
1997 (in thousands):
Short-term debt............................................................ $ --
----------
----------
Long-term debt............................................................. $ 198,400
Stockholders' equity:
Preferred Stock, par value $.01 per share; 1,000,000 shares authorized;
no shares issued......................................................... --
Common Stock, par value $.01 per share; 200,000,000 shares authorized;
151,313,000 shares outstanding(1)........................................ 1,513
Additional paid-in capital............................................. 249,853
Retained earnings...................................................... 823,842
----------
Total stockholders' equity........................................... 1,075,208
----------
Total capitalization............................................... $1,273,608
----------
----------
- ------------
(1) Excludes 10,599,254 shares of Common Stock underlying stock options
outstanding at August 30, 1997 at an average exercise price of $19.84 per
share. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Principal and Selling Stockholders."
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth income statement data of AutoZone expressed
as a percentage of net sales for the periods indicated:
FISCAL YEAR ENDED
-------------------------------------------
AUGUST 26, AUGUST 31, AUGUST 30,
1995 1996 1997
------------- ------------- -------------
Net sales.............................................. 100.0% 100.0% 100.0%
Cost of sales, including warehouse and delivery
expenses............................................. 58.5 58.3 58.0
----- ----- -----
Gross profit........................................... 41.5 41.7 42.0
Operating, selling, general and administrative
expenses............................................. 28.9 29.7 30.1
----- ----- -----
Operating profit....................................... 12.6 12.0 11.9
Interest expense--net.................................. -- 0.1 0.3
Income taxes........................................... 4.9 4.4 4.4
----- ----- -----
Net income............................................. 7.7% 7.5% 7.2%
----- ----- -----
----- ----- -----
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for fiscal 1997 increased by $448.8 million, or 20.0%, over net
sales for fiscal 1996. This increase was due to a comparable store net sales
increase of 8%, (which was primarily due to sales growth in the Company's newer
stores and the added sales of the Company's commercial program) and an increase
in net sales of $313.1 million for stores opened since the beginning of fiscal
1996, offset by net sales for the 53rd week of fiscal 1996. At August 30, 1997,
the Company had 1,728 stores in operation, a net increase of 305 stores, or
approximately 23% in new store square footage for the year.
Gross profit for fiscal 1997 was $1,132.1 million, or 42.0% of net sales,
compared with $935.0 million, or 41.7% of net sales, for fiscal 1996. The
increase in gross profit percentage was due primarily to improved leveraging of
warehouse and delivery expenses.
Operating, selling, general and administrative expenses for fiscal 1997
increased by $144.7 million over such expenses for fiscal 1996 and increased as
a percentage of net sales from 29.7% to 30.1%. The increase in the expense ratio
was primarily due to operating costs of ALLDATA and to costs of the Company's
commercial program.
Net interest expense for fiscal 1997 was $8.8 million compared with $2.0
million for fiscal 1996. The increase in interest expense was primarily due to
higher levels of borrowings.
AutoZone's effective income tax rate was 37.6% of pre-tax income for fiscal
1997 and 37.4% for fiscal 1996.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales for fiscal 1996 increased by $434.5 million, or 24.0%, over net
sales for fiscal 1995. This increase was due to a comparable store net sales
increase of 6% (which was primarily due to sales growth in the Company's newer
stores and added sales of the Company's commercial program), an increase in net
sales of $275.1 million for stores opened since the beginning of fiscal 1995 and
net sales for the fifty-third week of fiscal 1996. At August 31, 1996, the
Company had 1,423 stores in operation, a net increase of 280 stores, or
approximately 26% in new store square footage for the year.
Gross profit for fiscal 1996 was $935.0 million, or 41.7% of net sales,
compared with $751.1 million, or 41.5% of net sales, for fiscal 1995. The
increase in gross profit percentage was due primarily to improved leveraging of
warehouse and delivery expenses, favorable results of store and distribution
center inventories, and the added sales of higher margin ALLDATA products.
8
Operating, selling, general and administrative expenses for fiscal 1996
increased by $142.6 million over such expenses for fiscal 1995 and increased as
a percentage of net sales from 28.9% to 29.7%. The increase in the expense ratio
was primarily due to acquisition and operating costs of ALLDATA and to costs of
the Company's commercial program.
Net interest expense for fiscal 1996 was $2.0 million compared with interest
income of $0.6 million for fiscal 1995. The increase in interest expense was
primarily due to higher levels of borrowings.
AutoZone's effective income tax rate was 37.4% of pre-tax income for fiscal
1996 and 39.2% for fiscal 1995. The decrease in the tax rate was primarily due
to a reduction in state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements have been the funding of its
continued new store expansion program, the increase in distribution centers and
inventory requirements. The Company has opened 1,050 net new stores and
constructed four new distribution centers from the beginning of fiscal 1993 to
August 30, 1997. The Company has financed this growth through a combination of
internally generated funds and, to a lesser degree, borrowings. Net cash
provided by operating activities was $177.5 million in fiscal 1997, $174.2
million in fiscal 1996 and $180.1 million in fiscal 1995.
Capital expenditures were $297.5 million in fiscal 1997, $288.2 million in
fiscal 1996 and $258.1 million in fiscal 1995. The Company opened 305 net new
stores in fiscal 1997. Construction commitments totaled approximately $52
million at August 30, 1997.
The Company's new store development program requires significant working
capital, principally for inventories. Historically, the Company has negotiated
extended payment terms from suppliers, minimizing the working capital required
by its expansion. The Company believes that it will be able to continue
financing much of its inventory growth by favorable payment terms from
suppliers, but there can be no assurance that the Company will be successful in
obtaining such terms.
The Company anticipates that it will rely primarily 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 an unsecured revolving credit agreement with several
banks providing for borrowings up to $275 million. At August 30, 1997, the
Company had available borrowings under these agreements of $76.6 million.
At August 30, 1997, the Company had outstanding stock options to purchase
10,599,254 shares of Common Stock. Assuming all such options become vested and
are exercised, such options would result in proceeds of $210.3 million to the
Company. Such proceeds constitute an additional source for liquidity and capital
resources for the Company. For fiscal 1997, proceeds from sales of stock under
stock option and employee stock purchase plans were $14.6 million, including
related tax benefits.
INFLATION
The Company does not believe its operations have been materially affected by
inflation. The Company has been successful, in many cases, in mitigating the
effects of merchandise cost increases principally due to economies of scale
resulting from increased volumes of purchases, selective forward buying and the
use of alternative suppliers.
SEASONALITY AND QUARTERLY PERIODS
The Company's business is somewhat seasonal in nature, with the highest
sales occurring in the summer months of June through August, in which average
weekly per store sales historically have run about 20% to 30% higher than in the
slowest months of December through February. The Company's business is also
affected by weather conditions. Extremely hot or extremely cold weather tends to
enhance sales by causing parts to fail and spurring sales of seasonal products.
Mild or rainy weather tends to soften sales as parts' failure rates are lower in
mild weather and elective maintenance is deferred during periods of rainy
weather.
Each of the first three quarters of AutoZone's fiscal year consists of
twelve weeks and the fourth quarter consists of sixteen weeks (seventeen weeks
in fiscal 1996). Because the fourth quarter contains
9
the seasonally high sales volume and consists of sixteen weeks (seventeen weeks
in fiscal 1996) compared to twelve weeks for each of the first three quarters,
the Company's fourth quarter represents a disproportionate share of the annual
net sales and net income. For fiscal 1997 and 1996, the fourth quarter
represented 35.2% and 37.0%, respectively, of annual net sales and 41.8% and
40.3%, respectively, of net income.
The following table sets forth quarterly unaudited financial information for
fiscal 1997 and 1996:
SIXTEEN
TWELVE WEEKS ENDED WEEKS ENDED
------------------------------------------- --------------
NOVEMBER 23, FEBRUARY 15, MAY 10, AUGUST 30,
1996 1997 1997 1997
-------------- -------------- ----------- --------------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Net sales............................................ $ 569,145 $ 538,012 $ 637,895 $ 946,388
Gross profit......................................... 240,298 226,956 268,975 395,915
Operating profit..................................... 61,898 49,217 76,775 133,461
Income before income taxes........................... 60,725 47,107 74,103 130,573
Net income........................................... 37,975 29,407 46,103 81,523
Net income per share................................. 0.25 0.19 0.30 0.53
SEVENTEEN
WEEKS ENDED
--------------
NOVEMBER 18, FEBRUARY 10, MAY 4, AUGUST 31,
1995 1996 1996 1996
-------------- -------------- ----------- --------------
Net sales............................................ $ 463,029 $ 425,838 $ 524,175 $ 829,591
Gross profit......................................... 193,220 176,033 215,531 350,211
Operating profit..................................... 55,397 43,424 60,432 109,681
Income before income taxes........................... 55,397 43,424 59,705 108,439
Net income........................................... 34,797 27,324 37,605 67,439
Net income per share................................. 0.23 0.18 0.25 0.44
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus are forward-looking
statements. These statements discuss, among other things, expected growth, store
development and expansion strategy, business strategies, future revenues and
future performance. The forward-looking statements are subject to risks,
uncertainties and assumptions including, but not limited to competitive
pressures, demand for the Company's products, the market for auto parts, the
economy in general, inflation, consumer debt levels and the weather. Actual
results may materially differ from anticipated results described in these
forward-looking statements.
10
BUSINESS
INTRODUCTION
AutoZone is the nation's leading specialty retailer of automotive parts and
accessories, focusing primarily on D-I-Y customers. The Company began operations
in 1979 and, at August 30, 1997, operated 1,728 stores in 32 states, primarily
located in the Sunbelt and Midwest regions of the United States. Each AutoZone
store carries an extensive product line, including new and remanufactured
automotive hard parts, such as alternators, starters, water pumps, brake shoes
and pads, carburetors, clutches and engines; maintenance items, such as oil,
antifreeze, transmission, brake and power steering fluids, engine additives,
protectants and waxes; and accessories, such as car stereos and floor mats. The
Company carries parts for domestic and foreign cars, vans and light trucks. The
Company also has a commercial sales program which provides commercial credit and
prompt delivery of parts and other products to local repair garages, dealers and
service stations. This program was offered in 1,265 of the Company's stores at
August 30, 1997. AutoZone does not perform automotive repairs or installations.
AutoZone is dedicated to a marketing and merchandising strategy to provide
customers with superior service, value and parts selection at conveniently
located, well-designed stores. The Company has implemented this strategy
primarily with knowledgeable and motivated store personnel trained to emphasize
prompt and courteous customer service, through an everyday low price policy and
by maintaining an extensive product line with an emphasis on automotive hard
parts. AutoZone's stores are generally situated in high-visibility locations and
provide a distinctive merchandise presentation in an attractive store
environment.
At August 30, 1997, AutoZone had stores in the following 32 states:
Alabama.......... 77
Arizona.......... 64
Arkansas......... 39
California....... 8
Colorado......... 32
Florida.......... 82
Georgia.......... 96
Illinois......... 56
Indiana.......... 85
Iowa............. 10
Kansas........... 31
Kentucky......... 48
Louisiana........ 70
Maryland......... 1
Michigan......... 27
Mississippi...... 61
Missouri......... 72
Nevada........... 1
New Mexico....... 23
New York......... 11
North Carolina... 87
Ohio............. 166
Oklahoma......... 60
Pennsylvania..... 28
South Carolina... 49
Tennessee........ 106
Texas............ 264
Utah............. 19
Virginia......... 34
West Virginia.... 13
Wisconsin........ 5
Wyoming.......... 3
---------
Total............ 1,728
MARKETING AND MERCHANDISING STRATEGY
AutoZone's marketing and merchandising strategy is to provide customers with
superior service, value and parts selection at conveniently located,
well-designed stores. Key elements of this strategy are as follows:
CUSTOMER SERVICE
The Company believes that D-I-Y consumers place a significant value on
customer service. As a result, the Company emphasizes customer service as the
most important element in its marketing and merchandising strategy. The Company
attempts to promote a corporate culture which "always puts customers first" and
emphasizes knowledgeable and courteous service. To do so, the Company employs
parts personnel with technical expertise to advise customers regarding the
correct part type and application, utilizes a wide range of training methods to
educate and motivate its store personnel, and provides store personnel with
significant opportunities for promotion and incentive compensation. Customer
service is enhanced by electronic parts catalogs which assist in the selection
of parts; free testing of starters, alternators, batteries and sensors and
actuators; and liberal return and warranty policies. AutoZone also has a
satellite system for all its stores which, among other things, enables the
Company to speed up credit card and check approval processes and locate parts at
neighboring
11
AutoZone stores. AutoZone stores generally open at 8 a.m. and close between 8
and 10 p.m. (with some open to midnight) Monday through Saturday and typically
open at 9 a.m. and close between 6 and 7 p.m. on Sunday.
During fiscal 1997, the Company discontinued the operations of the Memphis
and Houston call centers and offered to transfer all call center employees to
stores in the Memphis and Houston area. The Company anticipates that the
discontinuation of the call center operations will result in ongoing savings to
the Company.
Alldata Corporation, a wholly owned subsidiary of AutoZone, has developed a
database system that provides comprehensive and up-to-date automotive
diagnostic, service and repair information which it markets to professional
repair shops.
PRODUCT SELECTION
The Company offers a wide selection of automotive parts and other products
designed to cover a broad range of specific vehicle applications. AutoZone's
stores generally carry between 17,000 and 20,000 stock keeping units ("SKUs").
Each AutoZone store carries the same basic product line with some regional and
local differences based on climate, demographics and age and type of vehicle
registration. The Company's "flexogram" program enables the Company to tailor
its hard parts inventory to the makes and models of the automobiles in each
store's trade area. In addition to brand name products, the Company sells a
number of products, including batteries and engines, under the "AutoZone" and
"Duralast" names and a selection of automotive hard parts, including starters,
alternators, water pumps, brakes and filters under its private label names. In
addition to products stocked in stores, the Company offers a range of products,
consisting principally of automotive hard parts, through its Express Parts
program. The Express Parts program provides air-freight delivery of lower
turnover products to AutoZone's stores.
PRICING
The Company employs an everyday low price strategy and attempts to be the
price leader in hard parts categories. Management believes that its prices
overall compare favorably to those of its competitors.
COMMERCIAL SALES PROGRAM
The Company's commercial sales program provides credit and prompt delivery
of parts and other products to local repair garages, dealers and service
stations. At August 30, 1997, this program was offered in 1,265 of the Company's
stores. Commercial customers generally pay the same everyday low prices for
parts and other products as paid by the Company's D-I-Y customers.
STORE DESIGN AND VISUAL MERCHANDISING
AutoZone seeks to design and build stores with a high visual impact.
AutoZone stores are designed to have an industrial "high tech" appearance by
utilizing colorful exterior signage, exposed beams and ductwork, and brightly
lighted interiors. Merchandise in stores is attractively displayed, typically
utilizing diagonally placed gondolas for maintenance and accessory products as
well as specialized shelving for batteries and, in many stores, oil products.
The Company employs a uniform ("planogrammed") store layout system to promote
consistent merchandise presentation in all of its stores. In-store signage and
special displays are used extensively to aid customers in locating merchandise
and promoting products.
12
STORE DEVELOPMENT AND EXPANSION STRATEGY
The following table sets forth the Company's store development activities
during the past five fiscal years:
FISCAL YEAR
---------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- --------- --------- ---------
Beginning Stores.............................................. 678 783 933 1,143 1,423
New Stores.................................................... 107 151 210 280 308
Replaced Stores(1)............................................ 20 20 29 31 17
Closed Stores(1).............................................. (22) (21) (29) (31) (20)
--- --- --------- --------- ---------
Ending Stores................................................. 783 933 1,143 1,423 1,728
--- --- --------- --------- ---------
--- --- --------- --------- ---------
----------------
(1) Replaced stores are either relocations or conversions of existing
smaller stores to larger formats. Closed stores include replaced stores.
The Company opened 305 net new stores in fiscal 1997, representing an
increase in total square footage from fiscal 1996 of approximately 23%, and had
52 stores under construction at the end of fiscal 1997. The Company plans to
open approximately 350 stores in fiscal 1998, representing an increase in total
store square footage of approximately 22% as compared with fiscal 1997.
The Company believes that expansion opportunities exist both in markets
which it does not currently serve and in markets in which it can achieve a
larger presence. The Company attempts to obtain high visibility in sites in high
traffic locations and undertakes substantial research prior to entering new
markets. Key factors in selecting new site and market locations include
population, demographics, vehicle profile and number and strength of
competitors' stores. The Company generally seeks to open new stores within or
contiguous to existing market areas and attempts to cluster development in new
urban markets in a relatively short period of time in order to achieve economies
of scale in advertising and distribution costs. The Company may also expand its
operations through acquisitions of existing stores from third parties. The
Company regularly evaluates potential acquisition candidates in new as well as
existing market areas.
AutoZone's net sales have grown significantly in the past several years,
increasing from $1,217 million in fiscal 1993 to $2,691 million in fiscal 1997.
The continued growth and financial performance of the Company will be dependent,
in large part, upon management's ability to open new stores on a profitable
basis in existing and new markets and also upon its ability to continue to
increase sales in existing stores. There can be no assurance that the Company
will continue to be able to open and operate new stores on a timely and
profitable basis or will continue to attain increases in comparable store sales.
STORE OPERATIONS
STORE FORMATS
Substantially all of AutoZone's stores are based on standard store formats
resulting in generally consistent appearance, merchandising and product mix.
Although the smaller store formats were generally used by the Company for its
earlier stores, the Company has increasingly used larger format stores, starting
with its 8,100 square foot store introduced in 1987, its 6,600 square foot store
introduced
13
in 1991 and its 7,700 square foot store introduced in 1993. In fiscal 1998, the
6,600 square foot and larger store formats are expected to account for more than
85% of new and replacement stores. Total store space as of August 30, 1997 was
as follows:
TOTAL STORE
STORE FORMAT NUMBER OF STORES SQUARE FOOTAGE(1)
- ---------------------------------------------------------------- ------------------- ------------------
8,100 sq. ft.................................................... 230 1,863,000
7,700 sq. ft.................................................... 415 3,195,500
6,600 sq. ft.................................................... 610 4,026,000
5,400 sq. ft.................................................... 453 2,446,200
4,000 sq. ft.................................................... 20 80,000
----- ------------------
Total....................................................... 1,728 11,610,700
----- ------------------
----- ------------------
----------------
(1) Total store square footage is based on the Company's standard store
formats, including normal selling, office, stockroom and receiving space,
but excluding excess space not utilized in a store's operations.
Approximately 85% to 90% of each store is selling space, of which
approximately 30% to 40% is dedicated to automotive parts inventory. The parts
inventory area is fronted by a counter staffed by knowledgeable parts personnel
and equipped with proprietary electronic parts catalogs. The remaining selling
space contains gondolas for accessories, maintenance items, including oil and
air filters, additives and waxes, and other parts together with specifically
designed shelving for batteries and, in many stores, oil products.
Approximately three quarters of the Company's stores are freestanding, with
the balance principally located within strip shopping centers. Freestanding
large format stores typically have parking for approximately 45 to 50 cars on a
lot of approximately 3/4 to one acre. The Company's 5,400 and 4,000 square foot
stores typically have parking for approximately 25 to 40 cars and are usually
located on a lot of approximately 1/2 to 3/4 acre.
STORE PERSONNEL AND TRAINING
While subject to fluctuation based on seasonal volumes and actual store
sales, the 4,000, 5,400 and 6,600 square foot stores typically employ 8 to 20
persons, including a manager and an assistant manager, and the larger stores
typically employ 9 to 21 persons. The Company generally hires personnel with
prior automotive experience. Although the Company relies primarily on on-the-job
training, it also provides formal training programs, which include regular store
meetings on specific sales and product issues, standardized training manuals and
a specialist program under which store personnel can obtain Company
certification in one of several areas of technical expertise. The Company
supplements training with frequent store visits by management.
The Company provides financial incentives to store managers through an
incentive compensation program and through participation in the Company's stock
option plan. In addition, AutoZone's growth has provided opportunities for the
promotion of qualified employees. Management believes these opportunities are an
important factor in AutoZone's ability to attract, motivate and retain quality
personnel.
The Company supervises store operations primarily through approximately 286
area advisors who report to one of 33 district managers, who, in turn, report to
one of seven regional managers, as of August 30, 1997. Purchasing,
merchandising, advertising, accounting, cash management, store development,
systems technology and support and other store support functions are centralized
in the Company's store support center in Memphis, Tennessee. The Company
believes that such centralization enhances consistent execution of the Company's
merchandising and marketing strategy at the store level.
14
STORE AUTOMATION
In order to assist store personnel in providing a high level of customer
service, all stores have proprietary electronic parts catalogs that provide
parts information based on the make, model and year of an automobile. The
catalog display screens are placed on the hard parts inventory counter so that
both employees and customers can view the screen. In addition, the Company's
satellite system enables the Company to speed up credit card and check approval
processes and locate parts at neighboring AutoZone stores.
All stores utilize the Company's computerized Store Management System, which
includes optical character recognition, scanning and point-of-sale data
collection terminals. The Store Management System provides productivity
benefits, including lower administrative requirements and improved personnel
scheduling at the store level, as well as enhanced merchandising information and
improved inventory control. The Company believes the Store Management System
also enhances customer service through faster processing of transactions and
simplified warranty and product return procedures.
PURCHASING AND DISTRIBUTION
Merchandise is selected and purchased for all stores at the Company's store
support center in Memphis. No one class of product accounts for as much as 10%
of the Company's total sales. In fiscal 1997, the Company purchased products
from approximately 300 suppliers and no single supplier accounted for more than
7% of the Company's total purchases. During fiscal 1997, the Company's ten
largest suppliers accounted for approximately 33% of the Company's purchases.
The Company generally has few long-term contracts for the purchase of
merchandise. Management believes that AutoZone's relationships with suppliers
are excellent. Management also believes that alternative sources of supply
exist, at similar cost, for substantially all types of product sold.
Substantially all of the Company's merchandise is shipped by vendors to the
Company's distribution centers. Orders are typically placed by stores on a
weekly basis with orders shipped from the warehouse in trucks operated by the
Company on the following day.
COMPETITION
The Company competes principally in the D-I-Y and, more recently, the
commercial automotive aftermarket. Although the number of competitors and the
level of competition experienced by AutoZone's stores vary by market area, the
automotive aftermarket is highly fragmented and generally very competitive. The
Company believes that the largest share of the automotive aftermarket is held by
independently owned jobber stores which, while principally selling to wholesale
accounts, have significant D-I-Y sales. The Company also competes with other
automotive specialty retailing chains and, in certain product categories, such
as oil and filters, with discount and general merchandise stores. The principal
competitive factors which affect the Company's business are store location,
customer service, product selection and quality and price. While AutoZone
believes that it competes effectively in its various geographic areas, certain
of its competitors have substantial resources or have been operating longer in
particular geographic areas.
TRADEMARKS
The Company has registered several service marks and trademarks in the
United States Patent and Trademark office, including its service mark "AutoZone"
and its trademarks "AutoZone", "Duralast", "Valucraft", "Ultra Spark",
"Deutsch", "Albany" and "Alldata". The Company believes that the "AutoZone"
service mark and trademarks have become an important component in its
merchandising and marketing strategy.
EMPLOYEES
As of August 30, 1997, the Company employed approximately 28,700 persons,
approximately 20,000 of whom were employed full-time. Approximately 86% of the
Company's employees were employed in stores or in direct field supervision,
approximately 7% in distribution centers and approximately 7% in store support
functions.
15
The Company's employees currently are not members of any unions. The Company
has never experienced any material labor disruption. Management believes that
its labor relations are generally good.
PROPERTIES
The following table sets forth certain information concerning AutoZone's
principal properties:
SQUARE NATURE OF
LOCATION PRIMARY USE FOOTAGE OCCUPANCY
- ------------------- ------------------------------------------- --------- -----------
Memphis, TN Store Support Center 360,000 Owned
Lavonia, GA Distribution Center 421,700 Owned
Lexington, TN Distribution Center 341,000 Owned
Danville, IL Distribution Center 304,500 Owned
Memphis, TN Express Parts and Fixture Warehouse 233,100 Leased
Lafayette, LA Distribution Center 464,000 Owned
San Antonio, TX Distribution Center 217,000 Owned
Phoenix, AZ Distribution Center 212,000 Owned
Zanesville, OH Distribution Center 550,000 Owned
The lease of the Express Parts and Fixture warehouse in Memphis expires in
March 2000. The Company also rents additional warehouse space, various district
offices and training and other office facilities which are not material in the
aggregate.
At August 30, 1997, the Company leased 595 and owned 1,133 of its 1,728
store properties. Original lease terms generally range from five to 20 years
with renewal options. Leases on 361 stores that are currently operating expire
prior to the end of fiscal 2002; however, leases on 334 of such stores contain
renewal options.
LEGAL PROCEEDINGS
The Company was a defendant in a purported class action entitled "Jack
Elliot and Greg Dobson, on behalf of themselves and all others similarly
situated, vs. AutoZone, Inc. and AutoZone Stores, Inc." filed on or about May 9,
1997, in the Circuit Court for Roane County, Tennessee. AutoZone Stores, Inc. is
a wholly owned subsidiary of AutoZone. In their complaint, which was similar to
class action complaints filed against several other retailers of aftermarket
automotive batteries, the plaintiffs alleged that the Company sold "old," "used"
or "out of warranty" automotive batteries to customers as if the batteries were
new, and purported to state causes of action for unfair or deceptive acts or
practices, breaches of contract, breaches of the duty of good faith and fair
dealing, intentional misrepresentation, fraudulent concealment, civil conspiracy
and unjust enrichment. The plaintiffs were seeking an accounting of all moneys
wrongfully received by the Company, compensatory and punitive damages, as well
as plaintiffs' costs. On September 4, 1997, on the plaintiffs' motion, the court
dismissed the case without prejudice.
The Company is a defendant in a purported class action entitled "Joe C.
Proffitt, Jr., on behalf of himself and all others similarly situated, vs.
AutoZone, Inc., and AutoZone Stores, Inc.," filed in the Circuit Court for
Jefferson County, Tennessee, on or about October 17, 1997. Along with the
complaint, the plaintiff filed a motion to conditionally certify a multistate
class. In the complaint, which is similar to the class action complaint in the
action "Elliott v. AutoZone, Inc." described above (and with substantially the
same lawyers representing the plaintiff), and is similar to other class action
complaints filed against several other retailers of aftermarket automotive
batteries, the plaintiff alleged that the Company sold "old," "used" or "out of
warranty" automotive batteries to customers as if the batteries were new, and
purports to state causes of action for unfair or deceptive acts or practices,
breach of contract, breach of duty of good faith and fair dealing, intentional
misrepresentation, fraudulent concealment, civil conspiracy, and unjust
enrichment. The plaintiffs are seeking an accounting of all moneys wrongfully
received by the Company, compensatory and punitive damages, as well as
plaintiffs' costs. The Company believes the claims are without merit and intends
to vigorously defend this action.
The Company is also a party to various claims and lawsuits arising in the
ordinary course of business. The Company does not believe that such claims and
lawsuits, individually or in the aggregate, will have a material adverse effect
on its results of operations or financial condition.
16
MANAGEMENT
The following table lists AutoZone's executive officers as of the date of
this Prospectus. The title of each executive officer includes the words
"Customer Satisfaction" which reflects AutoZone's commitment to customer service
as part of its marketing and merchandising strategy. Officers are elected by and
serve at the discretion of the Board of Directors.
NAME AGE POSITION
- ------------------------------------------ --- --------------------------------------------------------------
Johnston C. Adams, Jr. ................... 49 Chairman and Chief Executive Officer
Customer Satisfaction
Timothy D. Vargo.......................... 46 President and Chief Operating Officer
Customer Satisfaction
Lawrence E. Evans......................... 53 Executive Vice President-Development
Customer Satisfaction
Robert J. Hunt............................ 48 Executive Vice President-Finance
and Chief Financial Officer
Customer Satisfaction
Shawn P. McGhee........................... 34 Executive Vice President-Merchandising
Customer Satisfaction
Gerald E. Colley.......................... 45 Senior Vice President-Stores
Customer Satisfaction
Harry L. Goldsmith........................ 46 Senior Vice President, Secretary
and General Counsel
Customer Satisfaction
Anthony Dean Rose, Jr. ................... 37 Senior Vice President-Advertising
Customer Satisfaction
Stephen W. Valentine...................... 35 Senior Vice President-Systems Technology and Support and Chief
Information Officer
Customer Satisfaction
David J. Wilhite.......................... 35 Senior Vice President-Merchandising
Customer Satisfaction
Michael E. Butterick...................... 46 Vice President-Controller
Customer Satisfaction
Andrew M. Clarkson........................ 60 Chairman, Finance Committee
Customer Satisfaction
The Company's Board of Directors consists of Mr. Adams, Mr. Vargo, Mr. Hunt,
Mr. Clarkson, N. Gerry House, J.R. Hyde III, James F. Keegan, Michael W.
Michelson, John E. Moll, George R. Roberts and Ronald A. Terry. Messrs.
Michelson and Roberts are general partners of KKR. See "Principal and Selling
Stockholders."
17
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of AutoZone's outstanding Common Stock as of October 10, 1997, and as
adjusted to reflect the sale of 10,166,000 shares by the Selling Stockholders in
the offerings (assuming exercise in full of the over-allotment options), by (i)
any person or group that has reported to the Company that such person or group
is the beneficial owner of more than five percent of the Company's Common Stock
(including the Selling Stockholders) and (ii) all directors and executive
officers of AutoZone as a group (including Mr. Hyde). Except as indicated by the
notes to the following table, the holders listed below have sole voting power
and investment power over the shares beneficially held by them and the
beneficial ownership is direct.
BENEFICIAL OWNERSHIP
AS OF BENEFICIAL OWNERSHIP
OCTOBER 10, 1997(1) SHARES AFTER OFFERING(1)
------------------------- BEING -------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT
- ---------------------------------------------------- ------------ ----------- ------------ ------------ -----------
KKR Associates, L.P.(2)............................. 19,908,488 13.1% 8,169,458 11,739,030 7.8%
J.R. Hyde, III(3)................................... 12,319,846 8.1% 1,996,542 10,323,304 6.8%
The Equitable Companies, Inc.(4).................... 13,224,725 8.7% -- 13,224,725 8.7%
FMR Corp.(5)........................................ 9,023,490 6.0% -- 9,023,490 6.0%
Michael W. Michelson(2)............................. 19,908,488 13.1% 8,169,458 11,739,030 7.8%
George R. Roberts(2)................................ 19,908,488 13.1% 8,169,458 11,739,030 7.8%
All directors and executive officers as a group
including Mr. Hyde (19 persons)(6)................ 13,927,837 9.2% 1,996,542 11,931,295 7.9%
- -------------
(1) For purposes of this table, "beneficial ownership" includes any shares which
such person has the right to acquire within 60 days of October 10, 1997. For
purposes of computing the percentage of outstanding shares held by each
person or group of persons named above on a given date, any security which
such person or persons has the right to acquire within 60 days after such
date is deemed to be outstanding, but is not deemed to be outstanding in
computing the percentage ownership of any other person.
(2) Includes (i) 10,227,594 shares (6.8%) owned of record by the KKR
Partnerships, of which KKR Associates is the sole general partner and as to
which it possesses sole voting and investment power, and (ii) 9,680,894
shares (6.3%) owned by KKR Associates. Two of the Company's directors
(Messrs. Michelson and Roberts), as well as Edward A. Gilhuly, Perry Golkin,
James H. Greene, Jr., Henry R. Kravis, Robert I. MacDonnell, Paul E.
Raether, Clifton S. Robbins, Scott M. Stuart and Michael T. Tokarz, are
general partners of KKR Associates, a limited partnership. As general
partners of KKR Associates, such persons may be deemed to share beneficial
ownership of the shares of Common Stock owned by KKR Associates. Such
persons disclaim beneficial ownership of such shares (except for the shares
allocated to the account of any general partner). Messrs. Michelson and
Roberts, as general partners of KKR Associates, have 434,372 and 2,576,511
shares, respectively, allocated to the accounts of such persons, and
accordingly, beneficially own such allocated shares. Not included in the
number of shares listed are 120,000 shares held in an irrevocable trust
created by Mr. Roberts for the benefit of Mr. Roberts' children with respect
to which Messrs. Kravis and Michelson serve as trustees (the "Roberts
Trust"), 120,000 shares held in an irrevocable trust created by Mr. Kravis
for the benefit of his children with respect to which Mr. Kravis' wife
serves as trustee, 120,000 shares held in an irrevocable trust created by
Mr. MacDonnell for the benefit of Mr. MacDonnell's children with respect to
which Mr. Roberts serves as trustee (the "MacDonnell Trust"), 140,000 shares
held in trust for the family of Mr. Raether and for which Mr. Raether's
spouse acts as co-trustee, 20,000 shares held in trust for the family of Mr.
Gilhuly and for which Mr. Gilhuly acts as co-trustee, 2,000 shares owned by
Mr. Golkin, 40,000 shares owned jointly by Mr. Greene and his wife and
40,000 shares owned by Mr. Tokarz. Messrs. Michelson and Roberts disclaim
beneficial ownership of the shares held in the Roberts Trust, and Mr.
Roberts also disclaims beneficial ownership of the shares held in the
MacDonnell Trust. The address of KKR Associates is 9 West 57th Street, New
York, New York 10019.
(3) Includes 570,000 shares which are held in trusts for which Mr. Hyde is a
trustee, and 885,000 shares held by a charitable foundation for which Mr.
Hyde is an officer and a director and over which he shares investment power.
Does not include 2,000 shares owned by Mr. Hyde's spouse. The address of Mr.
Hyde is 123 South Front Street, Memphis, Tennessee 38103.
(4) All information regarding The Equitable Companies, Inc. ("Equitable") is
based upon the Schedule 13G dated February 14, 1997, filed jointly by
Equitable, on behalf of itself and its subsidiaries; AXA which beneficially
owns a majority interest in Equitable, and the Mutuelles AXA, as a group
which beneficially own a majority interest in AXA. The shares are held by
Equitable, AXA or Mutuelles AXA either directly or through one or more
direct or
18
indirect subsidiaries or affiliates, and of which Equitable, AXA, Mutuelles
AXA or their subsidiaries or affiliates will be deemed to have sole power to
vote or to direct the vote for 12,820,225 shares, deemed to share power to
vote or to direct the vote for 320,100 shares, deemed to have sole power to
dispose or to direct the disposition of 13,125,425 shares and deemed to
share power to dispose or to direct the disposition of 9,300 shares. The
address of Equitable is 787 Seventh Avenue, New York, New York 10019.
(5) All information regarding FMR Corp. is based upon the Schedule 13G dated
February 14, 1997, which is filed on behalf of FMR Corp. and its
subsidiaries and affiliates. FMR Corp. has the sole power to vote or direct
the vote for 601,040 shares and sole power to dispose or to direct the
disposition of 9,023,490 shares. The address of FMR Corp. is 82 Devonshire
Street, Boston, Massachusetts 02109.
(6) Other than as set forth in relation to KKR Associates and excluding any
shares allocated to Messrs. Michelson and Roberts.
The KKR Partnerships are Pittco Associates, L.P., Pittco Associates II,
L.P., and KKR Partners II, L.P. Each of the KKR Partnerships is a Delaware
limited partnership, the general partner of which is KKR Associates. The KKR
Partnerships own of record an aggregate of 10,227,594 shares of Common Stock,
representing approximately 6.8% of the outstanding Common Stock. These shares of
Common Stock consist of the 8,169,458 shares offered hereby (including 803,606
shares offered in the over-allotment option) and approximately 2,058,136 of
additional shares of Common Stock which are to be distributed to KKR Associates,
as discussed below. In addition to the shares held by the KKR Partnerships, KKR
Associates owns of record 9,680,894 shares of Common Stock, representing
approximately 6.3% of the outstanding Common Stock.
The term of Pittco Associates, L.P. and Pittco Associates II, L.P. expired
on December 31, 1996 in accordance with the terms of the Limited Partnership
Agreements. The terminated KKR Partnerships continue to be in existence for a
winding-up period after such date. The Limited Partnership Agreements provide
that, in connection with the dissolution and winding up of the KKR Partnerships,
KKR Associates has the sole discretion regarding the disposition of the Common
Stock owned by the KKR Partnerships, including public or private sales of such
Common Stock, the distribution of such Common Stock to the limited partners of
the KKR Partnerships or a combination of the foregoing. In addition, pursuant to
the Limited Partnership Agreements, the KKR Partnerships will distribute to KKR
Associates for its own account, concurrently with any sales of shares owned by
the Selling Stockholders, cash and/or shares of Common Stock that together have
a fair market value equal to approximately 20% of the profits realized with
respect to the shares sold and distributed. After giving effect to the sale of
all of the shares offered hereby, the assumed exercise in full of the
over-allotment options and the distribution of shares to KKR Associates in
connection therewith, the KKR Partnerships will not own any shares of Common
Stock, and KKR Associates will own approximately 11,739,030 shares of Common
Stock, representing approximately 7.8% of the outstanding shares of Common
Stock. Messrs. Michelson and Roberts will have allocated to their accounts as
general partners of KKR Associates approximately 516,697 and 3,064,845 shares,
respectively, of such 11,739,030 shares owned by KKR Associates.
After the offerings and assuming exercise in full of the over-allotment
options, Mr. Hyde will own approximately 6.8% of the outstanding Common Stock.
The Company, the Selling Stockholders and KKR Associates have agreed,
subject to certain exceptions, not to sell or otherwise dispose of, directly or
indirectly, any shares of capital stock of the Company, except for the shares to
be sold in the offerings, for a period of at least 60 days from the date of this
Prospectus without the prior written consent of the U.S. Underwriters and the
International Managers.
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sales, will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock (including shares issued upon the exercise of stock
options), or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock.
19
DESCRIPTION OF CAPITAL STOCK
GENERAL
AutoZone is incorporated in the State of Nevada and pursuant to its Articles
of Incorporation, as amended (the "Articles"), the authorized capital stock of
AutoZone consists of 200,000,000 shares of Common Stock, par value $.01 per
share, and 1,000,000 shares of Preferred Stock, par value $.01 per share. At the
close of business on October 10, 1997, AutoZone had outstanding 151,446,220
shares of Common Stock. There are no outstanding shares of Preferred Stock. All
outstanding shares of Common Stock are fully paid and nonassessable.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share owned of
record on matters voted upon by stockholders, and a majority vote is required
for all action to be taken by stockholders, except that, subject to certain
limited exceptions, under Nevada law any director may be removed from office by
the vote of stockholders representing not less than two-thirds of the voting
power of the issued and outstanding Common Stock. In the event of a liquidation,
dissolution or winding-up of AutoZone, the holders of Common Stock are entitled
to share equally and ratably in the assets of AutoZone, if any, remaining after
the payment of all debts and liabilities of AutoZone and the liquidation
preference of any outstanding preferred stock. The Common Stock has no
preemptive rights, no cumulative voting rights and no redemption, sinking fund
or conversion provisions.
Holders of Common Stock are entitled to receive dividends if, as, and when
declared by the Board of Directors out of funds legally available therefor,
subject to the dividend and liquidation rights of any preferred stock that may
be issued and subject to any dividend restrictions that may be contained in
future credit facilities. No dividend or other distribution (including
redemptions or repurchases of shares of capital stock) may be made if after
giving effect to such distribution, AutoZone would not be able to pay its debts
as they become due in the usual course of business, or AutoZone's total assets
would be less than the sum of its total liabilities plus the amount that would
be needed, if AutoZone were to be dissolved at the time of distribution to
satisfy the preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the distribution. AutoZone
does not currently intend to pay dividends on shares of Common Stock. See
"Dividend Policy."
The Nevada Revised Statutes Chapter 78 (the "Nevada Code") contains
provisions restricting the ability of a Nevada corporation to engage in business
combinations with an interested stockholder. Under the Nevada Code, except under
certain circumstances, business combinations with interested stockholders are
not permitted for a period of three years following the date such stockholder
becomes an interested stockholder. The Nevada Code defines an interested
stockholder, generally, as a person who is the beneficial owner, directly or
indirectly, of 10% of the outstanding shares of a Nevada corporation. In
addition, the Nevada Code generally disallows the exercise of voting rights with
respect to "control shares" of an "issuing corporation" held by an "acquiring
person," unless such voting rights are conferred by a majority vote of the
disinterested stockholders. "Control shares" are those outstanding voting shares
of an issuing corporation which an acquiring person and those persons acting in
association with an acquiring person (i) acquire or offer to acquire in an
acquisition of a controlling interest and (ii) acquire within ninety days
immediately preceding the date when the acquiring person became an acquiring
person. An "issuing corporation" is a corporation organized in Nevada which has
two hundred or more stockholders, at least one hundred of whom are stockholders
of record and residents of Nevada, and which does business in Nevada directly or
through an affiliated corporation. The Nevada Code also permits directors to
resist a change or potential change in control of the corporation if the
directors determine that the change or potential change is opposed to or not in
the best interest of the corporation. As a result, AutoZone's Board of Directors
may have considerable discretion in considering and responding to unsolicited
offers to purchase a controlling interest in AutoZone.
The Common Stock is listed on the New York Stock Exchange.
The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York.
20
PREFERRED STOCK
The Board of Directors of AutoZone is authorized, without further
stockholder action, to divide any or all shares of the authorized Preferred
Stock into series and to fix and determine the designations, preferences, and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereon, of any series so established, including
voting powers, dividend rights, liquidation preferences, redemption rights and
conversion privileges. As of the date of this Prospectus, the Board of Directors
has not authorized any series of Preferred Stock and there are no plans,
agreements, or understandings for the issuance of any shares of Preferred Stock.
21
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
GENERAL
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a holder who is not a United States person (a "Non-U.S. Holder"). For
purposes of this discussion, the term "Non-U.S. Holder" is defined as any person
or entity who is, for United States federal income tax purposes, a foreign
corporation, a non-resident alien individual, a non-resident fiduciary of a
foreign estate or trust, or a foreign partnership one or more of the members of
which is, for United States federal income tax purposes, a foreign corporation,
a non-resident alien individual or a non-resident fiduciary of a foreign estate
or trust. This discussion does not address all aspects of United States federal
income and estate taxes and does not deal with foreign, state and local
consequences that may be relevant to such Non-U.S. Holders in light of their
personal circumstances. Furthermore, this discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing and proposed regulations promulgated thereunder and administrative and
judicial interpretations thereof, all of which are subject to change. EACH
PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH
RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF ACQUIRING, HOLDING
AND DISPOSING OF COMMON STOCK AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE
UNDER THE LAWS OF ANY UNITED STATES STATE, LOCAL OR OTHER TAXING JURISDICTION.
An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States on at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar year
(counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to United States federal tax as if they were United States citizens and
residents.
DIVIDENDS
The Company does not currently intend to pay dividends on shares of Common
Stock. See "Dividend Policy." In the event that dividends are paid on shares of
Common Stock, except as described below, such dividends paid to a Non-U.S.
Holder of Common Stock will be subject to withholding of United States federal
income tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty, unless the dividends are effectively connected with the
conduct of a trade or business of the Non-U.S. Holder within the United States.
If the dividend is effectively connected with the conduct of a trade or business
of the Non-U.S. Holder within the United States and, where a tax treaty applies,
are attributable to a United States permanent establishment of the Non-U.S.
Holder, the dividend would be subject to United States federal income tax on a
net income basis at applicable graduated individual or corporate rates and would
be exempt from the 30% withholding tax described above. Any such effectively
connected dividends received by a foreign corporation may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.
Dividends paid to an address outside the United States are presumed to be
paid to a resident of such country (unless the payor has actual knowledge to the
contrary) for purposes of the withholding discussed above, and, under United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. Under recently promulgated final United States Treasury
regulations, which are generally effective with respect to payments made after
December 31, 1998, a Non-U.S. Holder of Common Stock who wishes to claim the
benefit of an applicable treaty rate (and avoid backup withholding as discussed
below) will be required to satisfy applicable certification and other
requirements which will include filing a Form W-8 containing the Non-U.S.
Holder's name, address and a certification that such Holder is eligible for the
benefits of such treaty under its Limitations on Benefits Article. Certain
certification and disclosure requirements must be complied with in order to be
exempt from withholding under the effectively connected income exemption
discussed above.
22
A Non-U.S. Holder of Common Stock that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
United States Internal Revenue Service (the "Service").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income or withholding tax on any gain realized on a sale or other disposition of
a share of Common Stock unless (i) subject to the exception discussed below, the
Company is or has been a "United States real property holding corporation" (a
"USRPHC") within the meaning of Section 897(c)(2) of the Code at any time within
the shorter of the five-year period preceding such disposition or such Non-U.S.
Holder's holding period (the "Required Holding Period"), (ii) the gain is
effectively connected with the conduct of a trade or business within the United
States of the Non-U.S. Holder and, if a tax treaty applies, attributable to a
United States permanent establishment maintained by the Non-U.S. Holder, (iii)
the Non-U.S. Holder is an individual who holds the share of Common Stock as a
capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition and either (a) such individual has a "tax home"
(as defined for United States federal income tax purposes) in the United States
or (b) the gain is attributable to an office or other fixed place of business
maintained in the United States by such individual, or (iv) the Non-U.S. Holder
is subject to tax pursuant to the Code provisions applicable to certain United
States expatriates. If an individual Non-U.S. Holder falls under clauses (ii) or
(iv) above, he or she will be taxed on his or her net gain derived from the sale
under regular United States federal income tax rates. If the individual Non-U.S.
Holder falls under clauses (iii) above, he or she will be subject to a flat 30%
tax on the gain derived from the sale which may be offset by United States
source capital losses (notwithstanding the fact that he or she is not considered
a resident of the United States). If a Non-U.S. Holder that is a foreign
corporation falls under clause (ii) above, it will be taxed on its gain under
regular graduated United States federal income tax rates and, in addition, will
under certain circumstances be subject to the branch profits tax equal to 30% of
its "effectively connected earnings and profits" within the meaning of the Code
for the taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable income tax treaty.
A corporation is generally a USRPHC if the fair market value of its United
States real property interests equals or exceeds 50% of the sum of the fair
market value of its worldwide real property interests plus its other assets used
or held for use in a trade or business. While not free from doubt, the Company
believes that it is currently a USRPHC; however, a Non-U.S. Holder would
generally not be subject to tax or withholding in respect of such tax, on gain
from a sale or other disposition of Common Stock by reason of the Company's
USRPHC status if the Common Stock is regularly traded on an established
securities market ("regularly traded") during the calendar year in which such
sale or disposition occurs provided that such holder does not own, actually or
constructively, Common Stock with a fair market value in excess of 5% of the
fair market value of all Common Stock outstanding at any time during the
Required Holding Period. The Company believes that the Common Stock will be
treated as regularly traded.
If the Company is or has been a USRPHC within the Required Holding Period,
and if a Non-U.S. Holder owns in excess of 5% of the fair market value of Common
Stock (as described in the preceding paragraph), such Non-U.S. Holder of Common
Stock will be subject to United States federal income tax at regular graduated
rates under certain rules ("FIRPTA tax") on gain recognized on a sale or other
disposition of such Common Stock. In addition, if the Common Stock were not
treated as regularly traded and the Company does not provide certification that
it is not (and has not been during a specified period) a USRPHC for United
States federal income tax purposes, a Non-U.S. Holder (without regard to its
ownership percentage) is subject to withholding in respect of FIRPTA tax at a
rate of 10% of the amount realized on a sale or other disposition of Common
Stock and will be further subject to FIRPTA tax in excess of the amounts
withheld. Any amount withheld pursuant to such withholding tax will be either
(i) refunded to a Non-U.S. Holder if the Company is not a USRPHC for United
States federal income tax
23
purposes and such Non-U.S. Holder files an appropriate claim for refund with the
Service, or (ii) creditable against such Non-U.S. Holder's United States federal
income tax liability. Non-U.S. Holders are urged to consult their tax advisors
concerning the potential applicability of these provisions.
FEDERAL ESTATE TAXES
An individual Non-U.S. Holder who (i) is not a citizen or resident of the
United States (as specifically defined for United States federal estate tax
purposes) at the time of his or her death and (ii) owns, or is treated as owning
Common Stock at the time of his or her death or has made certain lifetime
transfers of an interest in Common Stock, will be required to include the value
of such Common Stock in his or her gross estate for federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the Service and to each Non-U.S. Holder
the amount of dividends paid to such holder and the tax withheld with respect to
such dividends. These information reporting requirements apply regardless of
whether withholding is required. Copies of the information returns reporting
such dividends and withholding may also be made available to the tax authorities
in the country in which the Non-U.S. Holder resides under the provisions of an
applicable income tax treaty.
United States backup withholding tax (which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting requirements)
generally will not apply to (a) the payment of dividends paid on Common Stock to
a Non-U.S. Holder at an address outside the United States (unless the payor has
knowledge that the payee is a U.S. person) or (b) the payment of the proceeds of
the sale of Common Stock to or through the foreign office of a foreign broker.
In the case of the payment of proceeds from such a sale of Common Stock through
a foreign office of a broker that is a United States person or a "U.S. related
person," however, information reporting (but not backup withholding) is required
with respect to the payment unless the broker has documentary evidence in its
files that the owner in a Non-U.S. Holder and certain other requirements are met
or the holder otherwise establishes an exemption. For this purpose, a "U.S.
related person" is (i) a "controlled foreign corporation for United States
federal income tax purposes, or (ii) a foreign person 50% or more of whose gross
income from all sources for the three-year period ending with the close of its
taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are effectively
connected with the conduct of a United States trade or business. The payment of
the proceeds of a sale of shares of Common Stock to or through a United States
office of a broker is subject to information reporting and possible backup
withholding unless the owner certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption. Any amounts withheld
under the backup withholding rules from a payment to a Non-U.S. Holder will be
allowed as a refund or a credit against such Non-U.S. Holder's United States
federal income tax liability, provided that the required information is
furnished to the Service.
The United States Department of Treasury recently promulgated final
regulations regarding the withholding and information reporting rules applicable
to Non-U.S. Holders (the "New Withholding Regulations"). In general, the New
Withholding Regulations do not significantly alter the substantive withholding
and information reporting requirements, but rather, unify current certification
procedures and forms and clarify reliance standards. The New Withholding
Regulations are generally effective for payments made after December 31, 1998,
subject to certain transition rules. NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE IMPACT, IF ANY, OF THE NEW WITHHOLDING
REGULATIONS.
24
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Selling Stockholders have severally agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters has severally
agreed to purchase from the Selling Stockholders, the respective number of
shares of Common Stock set forth opposite its name below:
NUMBER OF
SHARES OF
COMMON
U.S. UNDERWRITER STOCK
- ----------------------------------------------------------------------------------------- -------------
Goldman, Sachs & Co. .................................................................... 1,466,560
Lehman Brothers Inc. .................................................................... 1,466,560
Donaldson, Lufkin & Jenrette Securities Corporation...................................... 1,466,560
Furman Selz LLC ......................................................................... 1,466,560
Morgan Stanley & Co. Incorporated ....................................................... 1,466,560
-------------
Total.......................................................................... 7,332,800
-------------
-------------
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $0.60 per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $0.10 per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and the other selling terms may from time
to time be varied by the representatives.
AutoZone and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement" with the underwriters of
the international offering (the "International Underwriters" and, together with
the U.S. Underwriters, the "Underwriters") providing for the concurrent offer
and sale of 1,833,200 shares of Common Stock in an international offering
outside the United States. The initial public offering price and aggregate
underwriting discounts per share for the offerings will be identical. The
closing of the offering made hereby is a condition to the closing of the
international offering, and vice versa. The representative of the International
Underwriters is Goldman Sachs International.
Pursuant to an agreement between the U.S. and international underwriting
syndicates (the "Agreement Between") relating to the offerings, each of the U.S.
Underwriters named herein has agreed, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will (a) offer, sell
or deliver shares of Common Stock, directly or indirectly, only in the United
States of America (including the States and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction (the
"United States") and to U.S. persons, which term shall mean, for purposes of
this paragraph: (i) any individual who is a resident of the United States or
(ii) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States, and (b)
cause any dealer to whom it may sell such shares at any concession to agree to
observe a similar restriction. Each of the International Underwriters has agreed
pursuant to the Agreement Between that, as a part of the distribution of the
shares offered as part of the international offering, and subject to certain
exceptions, it will (i) not, directly or indirectly, offer, sell or deliver
shares of Common Stock (a) in the United States or to any U.S. persons or (b) to
any person who it believes intends to reoffer, resell or deliver the shares in
the United States or to any U.S. persons and (ii) cause any dealer to whom it
may sell such shares at any concession to agree to observe a similar
restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
25
The Selling Stockholders have severally granted the U.S. Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase up
to an aggregate of 800,000 additional shares of Common Stock, solely to cover
over-allotments, if any. If the U.S. Underwriters exercise such over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
9,166,000 shares of Common Stock offered hereby. The Selling Stockholders have
granted the International Underwriters a similar option exercisable for up to an
aggregate of 200,000 additional shares of Common Stock.
Each U.S. Underwriter and International Underwriter has represented and
agreed that (i) it has not offered or sold and, prior to the date six months
after the date of issue of the shares of Common Stock, will not offer or sell
any shares of Common Stock to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or passed
on, and will only issue or pass on to any person in the United Kingdom, any
investment advertisement (within the meaning of the Financial Services Act 1986)
relating to the shares of Common Stock if that person falls within Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995.
In connection with the offerings, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offerings. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock that
they are required to purchase from the Selling Stockholders in the offerings.
The Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the Common
Stock sold in the offerings for their account may be reclaimed by the syndicate
if such shares of Common Stock are repurchased by the syndicate in stabilizing
or covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the New York Stock Exchange, in the over-the-counter market or otherwise.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
Certain of the U.S. Underwriters and International Underwriters have
provided from time to time, and expect to provide in the future, investment
banking services to the Company and its affiliates (including certain of the
Selling Stockholders) for which such U.S. Underwriters and International
Underwriters have received and will receive customary fees and commissions.
The Company, the Selling Stockholders and KKR Associates have agreed,
subject to certain exceptions, not to sell or otherwise dispose of, directly or
indirectly, any shares of capital stock of the Company, except for the shares to
be sold in the offerings, for a period of at least 60 days from the date of this
Prospectus without the prior written consent of the U.S. Underwriters and the
International Underwriters.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the U.S. Underwriters and the International Underwriters may be required to
make in respect thereof.
26
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of Common
Stock offered hereby will be passed upon for AutoZone and for the Selling
Stockholders by Latham & Watkins, Los Angeles, California, and Schreck Morris,
Las Vegas, Nevada. Certain partners of Latham & Watkins, members of their
families, related persons and others own, and through the Selling Stockholders,
have an indirect interest in, less than 1% of the Common Stock. Such persons do
not have the power to vote or dispose of shares which are indirectly held, some
of which shares will be sold in the offerings. Certain legal matters in
connection with the offerings will be passed upon for the U.S. Underwriters and
the International Underwriters by Simpson Thacher & Bartlett (a partnership
which includes professional corporations), New York, New York. Latham & Watkins
and Simpson Thacher & Bartlett render legal services to KKR on a regular basis.
EXPERTS
The financial statements and related schedule of AutoZone as of August 30,
1997 and August 31, 1996 and for each year in the three-year period ended August
30, 1997, included or incorporated by reference in the Annual Report on Form
10-K have been audited by Ernst & Young LLP, independent auditors, as set forth
in their reports thereon included or incorporated by reference therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
27
DEDICATED TO THE MEMORY OF PAUL KINLOCH
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------------
TABLE OF CONTENTS
PAGE
-----
Available Information............................. 3
Incorporation of Certain Documents by Reference... 3
The Company....................................... 4
Selected Financial Data........................... 5
Price Range of Common Stock....................... 6
Dividend Policy................................... 6
Capitalization.................................... 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 8
Business.......................................... 11
Management........................................ 17
Principal and Selling Stockholders................ 18
Description of Capital Stock...................... 20
Certain United States Tax Consequences to
Non-United States Holders........................ 22
Underwriting...................................... 25
Legal Matters..................................... 27
Experts........................................... 27
9,166,000 SHARES
AUTOZONE, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
[LOGO]
-------------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ
MORGAN STANLEY DEAN WITTER
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
REGISTRATION STATEMENT NO. 333-04087
RULE 424(b)(4)
9,166,000 SHARES
UVW
AUTOZONE, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Of the 9,166,000 shares of Common Stock offered, 1,833,200 shares are being
offered hereby in an international offering outside the United States and
7,332,800 shares are being offered in a concurrent offering in the United
States. The initial public offering price and the aggregate underwriting
discount per share will be identical for both offerings. See "Underwriting".
All of the shares of Common Stock offered hereby are being sold by Selling
Stockholders of the Company. The Selling Stockholders consist of certain KKR
Partnerships that are limited partnerships affiliated with Kohlberg Kravis
Roberts & Co., L.P. and J.R. Hyde, III, a director of the Company. After the
offerings, the KKR Partnerships will not own any shares of Common Stock, and Mr.
Hyde and KKR Associates will own approximately 6.8% and 7.8%, respectively, of
the outstanding shares of Common Stock (assuming exercise in full of the
over-allotment options). See "The Company" and "Principal and Selling
Stockholders". The Company will not receive any of the proceeds from the sale of
the shares offered hereby.
The last reported sales price of the Common Stock, which is listed under the
symbol "AZO", on the New York Stock Exchange on November 20, 1997 was $28 7/8
per share. See "Price Range of Common Stock".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDERS(2)
--------------------- --------------------------- -------------------
Per Share........... $28.50 $1.00 $27.50
Total(3)............ $261,231,000 $9,166,000 $252,065,000
- --------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $400,000 payable by the Selling
Stockholders.
(3) The Selling Stockholders have granted the U.S. Underwriters an option for 30
days to purchase up to an additional 200,000 shares of Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Selling Stockholders have
granted the U.S. Underwriters an option for 30 days to purchase up to an
additional 800,000 shares of Common Stock at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. If such options are exercised in full, the total initial
public offering price, underwriting discount and proceeds to Selling
Stockholders will be $289,731,000, $10,166,000 and $279,565,000,
respectively. See "Underwriting".
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The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York, on or about November 26, 1997 against payment therefor in immediately
available funds.
GOLDMAN SACHS INTERNATIONAL
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
FURMAN SELZ
MORGAN STANLEY DEAN WITTER
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THE DATE OF THIS PROSPECTUS IS NOVEMBER 20, 1997.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions of the International Underwriting
Agreement, the Selling Stockholders have severally agreed to sell to each of the
International Underwriters named below, and each of such International
Underwriters has severally agreed to purchase from the Selling Stockholders the
respective number of shares of Common Stock set forth opposite its name below:
NUMBER OF
SHARES OF
COMMON
INTERNATIONAL UNDERWRITER STOCK
- ------------------------------------------------------------ -----------
Goldman Sachs International................................. 366,640
Lehman Brothers International (Europe)...................... 366,640
Donaldson, Lufkin & Jenrette International.................. 366,640
Furman Selz LLC ............................................ 366,640
Morgan Stanley & Co. International Limited.................. 366,640
-----------
Total............................................. 1,833,200
-----------
-----------
Under the terms and conditions of the International Underwriting Agreement,
the International Underwriters are committed to take and pay for all of the
shares offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $0.60 per share. The International Underwriters
may allow, and such dealers may reallow, a concession not in excess of $0.10 per
share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and the other selling terms
may from time to time be varied by the representatives.
AutoZone and the Selling Stockholders have entered into an underwriting
agreement ("U.S. Underwriting Agreement") with the underwriters of the U.S.
offering (the "U.S. Underwriters") providing for the concurrent offer and sale
of 7,332,800 shares of Common Stock in an offering. The initial public offering
price and aggregate underwriting discount per share for the offerings will be
identical. The closing of the offering made hereby is a condition to the closing
of the U.S. offering, and vice versa. The representative of the U.S.
Underwriters is Goldman, Sachs & Co.
Pursuant to an agreement between the U.S. and international underwriting
syndicates (the "Agreement Between") relating to the offerings, each of the
International Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions, it
will (a) not offer, sell or deliver shares of Common Stock, directly or
indirectly, in the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas subject
to its jurisdiction (the "United States") or to U.S. persons, which term shall
mean, for purposes of this paragraph: (i) any individual who is a resident of
the United States or (ii) any corporation, partnership or other entity organized
in or under the laws of the United States or any political subdivision thereof
and whose office most directly involved with the purchase is located in the
United States, and (b) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction. Each of the U.S.
Underwriters has agreed pursuant to the Agreement Between that, as a part of the
distribution of the shares offered as a part of the U.S. offering, and subject
to certain exceptions, it will offer, sell or deliver the shares of Common Stock
offered, directly or indirectly, only in the United States and to U.S. persons.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Selling Stockholders have severally granted the International
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase up to an aggregate of 200,000 additional
25
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
shares of Common Stock, solely to cover over-allotments, if any. If the
International Underwriters exercise such over-allotment option, the
International Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
9,166,000 shares of Common Stock offered hereby. The Selling Stockholders have
granted the U.S. Underwriters a similar option exercisable for up to an
aggregate of 800,000 additional shares of Common Stock.
Each U.S. Underwriter and International Underwriter has represented and
agreed that (i) it has not offered or sold and, prior to the date six months
after the date of issue of the shares of Common Stock, will not offer or sell
any shares of Common Stock to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or passed
on, and will only issue or pass on to any person in the United Kingdom, any
investment advertisement (within the meaning of the Financial Services Act 1986)
relating to the shares of Common Stock if that person falls within Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995.
In connection with the offerings, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offerings. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock that
they are required to purchase from the Selling Stockholders in the offerings.
The Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the Common
Stock sold in the offerings for their account may be reclaimed by the syndicate
if such shares of Common Stock are repurchased by the syndicate in stabilizing
or covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the New York Stock Exchange, in the over-the-counter market or otherwise.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
Certain of the U.S. Underwriters and International Underwriters have
provided from time to time, and expect to provide in the future, investment
banking services to the Company and its affiliates (including certain of the
Selling Stockholders) for which such U.S. Underwriters and International
Underwriters have received and will receive customary fees and commissions.
The Company, the Selling Stockholders and KKR Associates have agreed,
subject to certain exceptions, not to sell or otherwise dispose of, directly or
indirectly, any shares of capital stock of the Company, except for the shares to
be sold in the offerings, for a period of at least 60 days from the date of this
Prospectus without the prior written consent of the U.S. Underwriters and the
International Underwriters.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the U.S. Underwriters and the International Underwriters may be required to
make in respect thereof.
26
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[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
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Available Information............................. 3
Incorporation of Certain Documents by Reference... 3
The Company....................................... 4
Selected Financial Data........................... 5
Price Range of Common Stock....................... 6
Dividend Policy................................... 6
Capitalization.................................... 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 8
Business.......................................... 11
Management........................................ 17
Principal and Selling Stockholders................ 18
Description of Capital Stock...................... 20
Certain United States Tax Consequences to
Non-United States Holders........................ 22
Underwriting...................................... 25
Legal Matters..................................... 27
Experts........................................... 27
9,166,000 SHARES
AUTOZONE, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
XYZ
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GOLDMAN SACHS INTERNATIONAL
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
FURMAN SELZ
MORGAN STANLEY DEAN WITTER
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