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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): February 28, 2017  

AutoZone, Inc.
(Exact Name of Registrant as Specified in Charter)

Nevada1-1071462-1482048
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

 

123 South Front Street, Memphis, Tennessee 38103
(Address of Principal Executive Offices) (Zip Code)

(901) 495-6500
(Registrant's telephone number, including area code)


(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 [ ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 [ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 [ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 [ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

Item 2.02. Results of Operations and Financial Condition.

On February 28, 2017, AutoZone, Inc. issued a press release announcing its earnings for the fiscal quarter ended February 11, 2017, which is furnished as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

The following exhibit is furnished with this Current Report pursuant to Item 2.02:

(d)       Exhibits

            99.1     Press Release dated February 28, 2017

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 AutoZone, Inc.
   
  
Date: February 28, 2017By: /s/ WILLIAM T. GILES        
  William T. Giles
  Chief Financial Officer and
Executive Vice President - Finance,
Information Technology and ALLDATA
  

EXHIBIT INDEX 

99.1 Press Release dated February 28, 2017

EdgarFiling

EXHIBIT 99.1

AutoZone 2nd Quarter Same Store Sales Flat for Q2; EPS Increases 8.8% to $8.08

MEMPHIS, Tenn., Feb. 28, 2017 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $2.3 billion for its second quarter (12 weeks) ended February 11, 2017, an increase of 1.4% from the second quarter of fiscal 2016 (12 weeks).  Domestic same store sales, or sales for stores open at least one year, were flat for the quarter. 

Net income for the quarter increased 3.7% over the same period last year to $237.1 million, while diluted earnings per share increased 8.8% to $8.08 per share from $7.43 per share in the year-ago quarter.  As previously reported, the Company adopted a new accounting standard on August 28, 2016, related to stock option exercises.  For the quarter, the adoption of the new standard increased EPS by $0.37.  Excluding this adjustment, EPS would have increased by 3.8%.

For the quarter, gross profit, as a percentage of sales, was 52.7% (-9 bps versus the same period last year).  The decrease in gross margin was attributable to higher shrink expense (-34 bps) and higher supply chain costs associated with current year inventory initiatives (-29 bps), partially offset by lower acquisition costs.  Operating expenses, as a percentage of sales, were 35.9% (versus 35.8% the same period last year).  Operating expenses, as a percentage of sales, were higher than last year, due to higher domestic store payroll, offset in part by lower incentive compensation.   

Under its share repurchase program, AutoZone repurchased 256 thousand shares of its common stock for $198 million during the second quarter, at an average price of $773 per share.  At the end of the second quarter, the Company had $585 million remaining under its current share repurchase authorization. 

The Company’s inventory increased 8.7% over the same period last year, driven by new stores and increased product placement.  Inventory per location was $665 thousand versus $633 thousand last year and $647 thousand last quarter.  Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $36 thousand versus negative $57 thousand last year and negative $67 thousand last quarter.

“I would like to thank all AutoZoners across the organization for their tremendous efforts during what ultimately turned out to be a challenging quarter.  Our sales performance in the last three weeks of our quarter was significantly challenged by well-publicized timing delays in IRS tax refunds, which negatively impacted our profitability for the quarter.  While this quarter’s results were below our expectations, our AutoZoners’ ongoing commitment to providing customers with Trustworthy Advice will allow us to continue to succeed for years to come.  Our objective remains to continue to provide great service to our customers and deliver strong, consistent performance for our shareholders as we remain committed to our approach of increasing operating earnings and utilizing our capital effectively,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended February 11, 2017, AutoZone opened 33 new stores in the U.S., three new stores in Mexico, and one new store in Brazil.  As of February 11, 2017, the Company had 5,346 stores in 50 states in the U.S., the District of Columbia and Puerto Rico, 491 stores in Mexico, 26 IMC branches, and nine stores in Brazil for a total count of 5,872.

AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. Each AutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products.  Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations, and public sector accounts.  IMC branches carry an extensive line of original equipment quality import replacement parts.  AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories, and non-automotive products through www.autozone.com, and accessories, performance and replacement parts through www.autoanything.com, and our commercial customers can make purchases through www.autozonepro.com and www.imcparts.net.  AutoZone does not derive revenue from automotive repair or installation.

AutoZone will host a conference call this morning, Tuesday, February 28, 2017, beginning at 10:00 a.m. (EST) to discuss its second quarter results.  Investors may listen to the conference call live and review supporting slides on the AutoZone corporate website, www.autozoneinc.com by clicking “Investor Relations,” “Conference Calls.”  The call will also be available by dialing (210) 839-8923.  A replay of the call and slides will be available on AutoZone’s website.  In addition, a replay of the call will be available by dialing (203) 369-1211 through Tuesday, March 7, 2017, at 11:59 p.m. (EST).

This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”).  These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt, adjusted debt to EBITDAR, and cash flow before share repurchases.  The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company’s comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP.  Management targets the Company’s capital structure in order to maintain its investment grade credit ratings and manages cash flows available for share repurchase by monitoring cash flows before share repurchases, as shown on the attached tables.  The Company believes this is important information for the management of its debt levels and share repurchases.  We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables.

Certain statements contained in this press release are forward-looking statements.  Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand; energy prices; weather; competition; credit market conditions; access to available and feasible financing; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; war and the prospect of war, including terrorist activity; inflation; the ability to hire and retain qualified employees; construction delays; the compromising of the confidentiality, availability, or integrity of information, including cyber security attacks; and raw material costs of our suppliers.  Certain of these risks are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of the Annual Report on Form 10-K for the year ended August 27, 2016, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results; developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the “Risk Factors” could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results.

     
AutoZone's 2nd Quarter Highlights - Fiscal 2017    
           
Condensed Consolidated Statements of Operations      
2nd Quarter, FY2017        
(in thousands, except per share data)        
    GAAP Results    
    12 Weeks Ended 12 Weeks Ended    
    February 11, 2017 February 13, 2016    
           
Net sales $2,289,219  $2,257,192     
Cost of sales  1,083,683   1,066,596     
Gross profit  1,205,536   1,190,596     
Operating, SG&A expenses  821,567   807,936     
Operating profit  (EBIT)  383,969   382,660     
Interest expense, net  34,198   32,832     
Income before taxes  349,771   349,828     
Income taxes (1)  112,626   121,215     
Net income $237,145  $228,613     
Net income per share: (1)        
 Basic $8.29  $7.58     
 Diluted $8.08  $7.43     
Weighted average shares outstanding:        
 Basic  28,606   30,170     
 Diluted (1)  29,340   30,778     
           
(1) The Company adopted a new accounting standard on August 28, 2016, that requires excess tax benefits from stock option exercises to be recognized in the income statement. The adoption of the new standard increased EPS by $0.37, driven by a lower effective tax rate of 358 bps, (a $0.43 benefit to EPS), partially offset by a change to the dilutive outstanding shares calculation (a $0.06 reduction to EPS). Prior period's financial information was not restated to conform to the current period’s presentation.  
           
           
Year-To-Date 2nd Quarter, FY2017        
(in thousands, except per share data) GAAP Results    
    24 Weeks Ended 24 Weeks Ended    
    February 11, 2017 February 13, 2016    
           
Net sales $4,757,065  $4,643,235     
Cost of sales  2,249,988   2,199,705     
Gross profit  2,507,077   2,443,530     
Operating, SG&A expenses  1,664,206   1,622,875     
Operating profit  (EBIT)  842,871   820,655     
Interest expense, net  67,504   67,842     
Income before taxes  775,367   752,813     
Income taxes (2)  260,097   266,088     
Net income $515,270  $486,725     
Net income per share: (2)        
 Basic $17.90  $16.05     
 Diluted $17.45  $15.72     
Weighted average shares outstanding:        
 Basic  28,779   30,334     
 Diluted (2)  29,522   30,958     
           
(2) The Company adopted a new accounting standard on August 28, 2016, that requires excess tax benefits from stock option exercises to be recognized in the income statement. The adoption of the new standard increased EPS by $0.40, driven by a lower effective tax rate of 202 bps, (a $0.53 benefit to EPS), partially offset by a change to the dilutive outstanding shares calculation (a $0.13 reduction to EPS). Prior period's financial information was not restated to conform to the current period’s presentation.  
           
           
Selected Balance Sheet Information        
(in thousands)        
    February 11, 2017 February 13, 2016 August 27, 2016  
           
Cash and cash equivalents $210,649  $207,958  $189,734   
Merchandise inventories  3,902,121   3,590,687   3,631,916   
Current assets  4,492,767   4,209,813   4,239,573   
Property and equipment, net  3,803,803   3,544,882   3,733,254   
Total assets  8,902,630   8,366,414   8,599,787   
Accounts payable  4,114,960   3,912,107   4,095,854   
Current liabilities  (3)  4,784,272   4,994,661   4,690,320   
Total debt  (3)  5,151,862   4,845,215   4,924,119   
Stockholders' deficit  (1,827,440)  (1,741,313)  (1,787,538)  
Working capital  (291,505)  (784,848)  (450,747)  
           
(3) Current liabilities and total debt both include short-term borrowings of $0 at February 11, 2017; $457,404 at February 13, 2016 and $0 at August 27, 2016. These amounts represent current debt maturities that are in excess of our revolving credit facility available capacity.  
           

 

Condensed Consolidated Statements of Operations          
             
Adjusted Debt / EBITDAR (Trailing 4 Qtrs)        
(in thousands, except adjusted debt to EBITDAR ratio)          
    February 11, 2017 February 13, 2016      
Net income $1,269,552  $1,196,933       
Add: Interest  147,343   146,685       
Taxes  665,716   660,257       
EBIT   2,082,611   2,003,875       
             
Add: Depreciation and amortization  307,106   283,943       
Rent expense  287,452   273,804       
Share-based expense  41,989   39,342       
EBITDAR $2,719,158  $2,600,964       
             
Debt  $5,151,862  $4,845,215       
Capital lease obligations  149,802   127,468       
Add: Rent x 6  1,724,712   1,642,824       
Adjusted debt $7,026,376  $6,615,507       
             
Adjusted debt to EBITDAR  2.6   2.5       
             
             
Selected Cash Flow Information          
(in thousands)          
    12 Weeks Ended 12 Weeks Ended  24 Weeks Ended 24 Weeks Ended 
    February 11, 2017 February 13, 2016  February 11, 2017 February 13, 2016 
             
Depreciation and amortization $72,833  $68,653   $144,645 $134,936 
Capital spending  118,186   99,933    216,103  186,591 
             
Cash flow before share repurchases:          
Increase in cash and cash equivalents $15,111  $42,472   $20,915 $32,649 
Increase in debt, excluding deferred financing  153,400   90,200    225,600  218,500 
Add back share repurchases  197,985   149,957    560,619  550,057 
Cash flow before share repurchases and changes in debt $59,696  $102,229   $355,934 $364,206 
             
             
Other Selected Financial Information          
(in thousands, except ROIC)          
    February 11, 2017 February 13, 2016      
             
             
Cumulative share repurchases ($ since fiscal 1998) $17,315,268  $15,852,243       
Remaining share repurchase authorization ($)  584,732   547,757       
             
Cumulative share repurchases (shares since fiscal 1998)  141,529   139,625       
             
Shares outstanding, end of quarter  28,475   30,101       
             
    Trailing 4 Quarters      
    February 11, 2017 February 13, 2016      
Net income $1,269,552  $1,196,933       
Adjustments:          
Interest expense  147,343   146,685       
Rent expense  287,452   273,804       
Tax effect*  (149,570)  (149,694)      
After-tax return  1,554,777   1,467,728       
             
Average debt**  4,974,468   4,632,858       
Average stockholders' deficit**  (1,822,960)  (1,666,550)      
Add: Rent x 6  1,724,712   1,642,824       
Average capital lease obligations**  140,851   127,339       
Pre-tax Invested capital $5,017,071  $4,736,471       
             
Return on Invested Capital (ROIC)  31.0%  31.0%      
             
 *Effective tax rate over trailing four quarters ended February 11, 2017 is 34.4% and February 13, 2016 is 35.6%.
 
**All averages are computed based on trailing 5 quarter balances.
 
             

 

AutoZone's 2nd Quarter Fiscal 2017           
Selected Operating Highlights             
Condensed Consolidated Statements of Operations           
                 
Location Count & Square Footage             
                 
     12 Weeks Ended   12 Weeks Ended  24 Weeks Ended   24 Weeks Ended
     February 11, 2017   February 13, 2016  February 11, 2017   February 13, 2016
AutoZone Domestic stores (Domestic):             
 Store count:             
 Beginning domestic stores  5,313     5,163    5,297     5,141 
 Stores opened  33     30    49     52 
 Stores closed  -     -    -     - 
 Ending domestic stores  5,346     5,193    5,346     5,193 
                 
 Relocated stores  -     2    2     3 
                 
 Stores with commercial programs  4,437     4,228    4,437     4,228 
                 
 Square footage (in thousands)  34,906     33,874    34,906     33,874 
                 
AutoZone Mexico stores:             
 Stores opened  3     9    8     10 
 Total stores in Mexico  491     451    491     451 
                 
AutoZone Brazil stores:             
 Stores opened  1     -    1     1 
 Total stores in Brazil  9     8    9     8 
                 
Total AutoZone stores  5,846     5,652    5,846     5,652 
 Square footage (in thousands)  38,597     37,255    38,597     37,255 
 Square footage per store  6,602     6,591    6,602     6,591 
                 
IMC branches:              
 Branches opened  -     2    -     4 
 Branches acquired  -     -    -     - 
 Total IMC branches  26     24    26     24 
                 
Total locations chainwide  5,872     5,676    5,872     5,676 
                 
Sales Statistics              
($ in thousands, except sales per average square foot)             
     12 Weeks Ended   12 Weeks Ended  Trailing 4 Quarters   Trailing 4 Quarters
Total AutoZone stores (Domestic, Mexico and Brazil)February 11, 2017   February 13, 2016  February 11, 2017   February 13, 2016
 Sales per average store $372    $379   $1,775    $1,780 
 Sales per average square foot $56    $58   $269    $270 
                 
Total Auto Parts (Domestic, Mexico, Brazil, and IMC)             
 Total auto parts sales $2,205,562    $2,170,986   $10,380,931    $10,058,938 
 % Increase vs. LY  1.6%    5.4%   3.2%    6.6%
                 
Domestic Commercial (Excludes IMC)             
 Total domestic commercial sales $431,151    $402,014   $2,008,349    $1,891,127 
 % Increase vs. LY  7.2%    8.0%   6.2%    10.8%
                 
All Other (ALLDATA, E-Commerce, and AutoAnything)            
 All other sales $83,657    $86,206   $368,575    $367,721 
 % Increase vs. LY  (3.0%)    2.7%   0.2%    3.6%
                 
     12 Weeks Ended   12 Weeks Ended  24 Weeks Ended   24 Weeks Ended
     February 11, 2017   February 13, 2016  February 11, 2017   February 13, 2016
Domestic same store sales   0.0%    3.6%   0.8%    3.6%
                 
Inventory Statistics (Total Locations)             
     as of   as of       
     February 11, 2017   February 13, 2016       
 Accounts payable/inventory  105.5%    109.0%       
                 
 ($ in thousands)              
 Inventory  $3,902,121    $3,590,687        
 Inventory per location  665     633        
 Net inventory (net of payables)  (212,839)    (321,420)       
 Net inventory  / per location  (36)    (57)       
                 
     Trailing 5 Quarters       
     February 11, 2017   February 13, 2016       
 Inventory turns  1.4 x   1.4 x      
                 
                 

 

 

 

Contact Information:
Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.com
Media: Ray Pohlman at (866) 966-3017, ray.pohlman@autozone.com