10-QPeriod: Q3 FY2003

AUTOZONE INC Quarterly Report for Q3 Ended May 10, 2003

Filed June 11, 2003For Securities:AZO

Summary

AutoZone Inc. reported solid financial performance for the third quarter of fiscal year 2003, ending May 10, 2003. The company demonstrated revenue growth, with net sales increasing by 5.2% year-over-year, driven by higher average transaction values and new store contributions. Profitability also saw a significant improvement, with operating profit rising by 21.6% due to effective cost management, improved gross margins, and favorable sales mix. Financially, AutoZone maintained a strong liquidity position, supported by operating cash flows and revolving credit facilities. The company continued its strategic share repurchase program, indicating confidence in its value and future prospects. Significant debt financing activities included the issuance of new senior notes to refinance existing debt and manage interest expenses. The company also highlighted its ongoing compliance with financial covenants and its positive credit ratings.

Key Highlights

  • 1Net sales increased by 5.2% to $1.288 billion for the twelve weeks ended May 10, 2003, compared to the prior year period.
  • 2Comparable store sales increased by 2.8% for the twelve-week period.
  • 3Operating profit grew significantly by 21.6% to $221.9 million, with operating margin improving to 17.2% from 14.9%.
  • 4Gross profit margin increased to 46.5% from 44.3% due to cost savings, sales mix, pricing, and supply chain initiatives.
  • 5The company repurchased $589.9 million of common stock year-to-date, including shares under forward purchase contracts, demonstrating a commitment to returning value to shareholders.
  • 6AutoZone successfully issued $200 million of 4.375% Senior Notes due June 2013, using proceeds to repay commercial paper borrowings.
  • 7The company maintained compliance with all debt covenants and had positive credit ratings from major agencies.

Frequently Asked Questions

The primary driver of AutoZone's sales growth was an increase in the average dollars spent per transaction, rather than an increase in customer count. New store openings and sales from ALLDATA and Mexico also contributed to the growth.

AutoZone improved its operating profit through a combination of factors including cost savings initiatives, favorable changes in sales mix, effective pricing strategies, and supply chain improvements. The company also saw a decrease in operating expenses as a percentage of net sales due to leveraging staffing and IT spending.

AutoZone has actively managed its debt by issuing new, lower-interest rate senior notes and using the proceeds to refinance existing debt and commercial paper. The company also maintains significant revolving credit facilities to support its operations and has a shelf registration statement allowing for future debt issuance. They aim to fund capital expenditures and working capital needs through internally generated funds and borrowings.

AutoZone is actively returning value to shareholders through a substantial common stock repurchase program. Year-to-date, the company repurchased $589.9 million of stock, utilizing both open market purchases and equity forward contracts. The company has a significant authorization for future repurchases.