10-QPeriod: Q3 FY2001

AUTOZONE INC Quarterly Report for Q3 Ended May 5, 2001

Filed June 1, 2001For Securities:AZO

Summary

AutoZone Inc. reported its third-quarter results for fiscal year 2001, ending May 5, 2001. The company experienced modest sales growth, with net sales increasing by 7.6% to $1.14 billion for the quarter, driven by a 5% increase in comparable store sales. While gross profit as a percentage of net sales remained relatively stable, operating expenses saw an increase, impacting profitability. Net income for the quarter was $63.5 million, a decrease from the prior year's $67.3 million, resulting in diluted earnings per share of $0.56 compared to $0.50 in the same period last year, despite a lower share count. Financially, AutoZone maintained a strong inventory position with merchandise inventories increasing to $1.21 billion. However, the company also saw an increase in long-term debt to $1.39 billion, primarily due to higher levels of borrowings supporting operations and capital expenditures. The company continued its share repurchase program, demonstrating a commitment to returning value to shareholders. Management anticipates continued growth and plans to fund capital expenditures and other needs through a combination of internally generated funds and borrowings.

Key Highlights

  • 1Net sales for the third quarter increased by 7.6% to $1.14 billion, with comparable store sales up 5%.
  • 2Gross profit margin remained stable at approximately 42.5% for the quarter.
  • 3Operating, selling, general, and administrative expenses increased as a percentage of net sales, primarily due to costs associated with abandoned real estate projects.
  • 4Net income for the quarter decreased to $63.5 million from $67.3 million in the prior year's comparable period.
  • 5Diluted earnings per share were $0.56, compared to $0.50 in the prior year, benefiting from a lower share count due to share repurchases.
  • 6Merchandise inventories increased significantly year-over-year to $1.21 billion.
  • 7Long-term debt increased to $1.39 billion, reflecting higher borrowings.

Frequently Asked Questions

The increase in operating, selling, general, and administrative expenses as a percentage of net sales was primarily due to the write-off of costs related to abandoned real estate projects that did not meet revised Company hurdle rates.

AutoZone continued its share repurchase program, having repurchased approximately $1.13 billion of common stock since January 1998. This reduction in the number of outstanding shares contributed to an increase in diluted earnings per share, as the net income was spread over fewer shares.

The company generated $206.2 million in cash from operations for the first thirty-six weeks of fiscal 2001. AutoZone anticipates funding capital expenditures, working capital requirements, and stock repurchases primarily through internally generated funds, supplemented by borrowings. The company has access to a commercial paper program and various credit facilities.

The company is involved in several legal proceedings, including a class action lawsuit regarding overtime pay for store managers in California (which has a settlement subject to court approval) and a Robinson-Patman Act lawsuit. While the Chief Auto Parts settlement was not material, the outcomes of the other cases, particularly the Quinnie and Coalition for a Level Playing Field lawsuits, could potentially have a substantial financial impact if the plaintiffs were to prevail.