10-QPeriod: Q1 FY2013

AUTOZONE INC Quarterly Report for Q1 Ended Nov 17, 2012

Filed December 13, 2012For Securities:AZO

Summary

AutoZone Inc. (AZO) reported solid results for the twelve weeks ended November 17, 2012, demonstrating resilience in a challenging economic environment. The company achieved a 3.5% increase in net sales, reaching $1.99 billion, driven by the opening of new stores and growth in its commercial sales program, despite a modest 0.2% same-store sales increase domestically. This top-line growth translated into a notable 15.7% increase in diluted earnings per share, which reached $5.41, signaling effective operational management and margin expansion. Financially, AutoZone maintained a strong gross margin of 51.8%, up from 51.1% in the prior year, attributed to improved merchandise margins and lower shrink. While operating expenses as a percentage of sales saw a slight increase, primarily due to higher store payroll, the company continued to manage its capital effectively. Significant cash flow was generated from operations ($318.3 million), supporting investments in new store development and a substantial $317.3 million in share repurchases during the quarter. The company also strategically managed its debt, issuing $300 million in new senior notes and repaying existing debt, while maintaining a healthy debt-to-EBITDAR ratio.

Financial Highlights

49 data points
Beta

Revenue

$1.99B

51.8% Gross Margin

Net Income

$203.45M

10.2% Net Margin

EPS (Diluted)

$5.41

Total Assets

$6.40B

Cash & Equivalents

$99.86M

Free Cash Flow

$237.82M

Financial Statements
Beta
Revenue$1.99B
Cost of Revenue$959.17M
Gross Profit$1.03B
SG&A Expenses$668.59M
Operating Expenses$668.59M
Operating Income$363.28M
Interest Expense$41.10M
Net Income$203.45M
EPS (Basic)$5.52
EPS (Diluted)$5.41
Shares Outstanding (Basic)36.84M
Shares Outstanding (Diluted)37.59M

Key Highlights

  • 1Net sales increased by 3.5% to $1.99 billion, supported by new store growth and an expanding commercial sales program.
  • 2Diluted Earnings Per Share (EPS) rose by a strong 15.7% to $5.41, indicating improved profitability.
  • 3Gross margin expanded to 51.8% from 51.1% year-over-year, driven by better merchandise margins and reduced shrink.
  • 4The company continued its aggressive share repurchase program, buying back $317.3 million worth of stock during the quarter.
  • 5Operating cash flow remained robust, providing $318.3 million, which supported investments and financing activities.
  • 6AutoZone strategically managed its debt, issuing $300 million in new senior notes and repaying $300 million in existing debt.
  • 7The average age of vehicles on the road continues to be a positive factor, supporting demand for replacement parts and maintenance.

Frequently Asked Questions

Net sales increased by 3.5% to $1.99 billion, primarily driven by the addition of new stores and growth in the company's commercial sales program. Domestic same-store sales saw a modest increase of 0.2%.

AutoZone improved its gross margin to 51.8% from 51.1% in the prior year, mainly due to lower acquisition costs for merchandise and reduced inventory shrink. While operating expenses increased as a percentage of sales due to higher payroll, the gross margin expansion helped to offset this and improve overall profitability.

The company is actively investing in growth through new store openings and capital expenditures, which are expected to increase by 10-15% in fiscal 2013. Simultaneously, AutoZone continues its significant commitment to returning capital to shareholders through a robust share repurchase program, having bought back $317.3 million in stock during the quarter.

AutoZone issued $300 million in 2.875% Senior Notes due January 2023, with proceeds used to repay commercial paper and for general corporate purposes. The company also repaid $300 million of Senior Notes due in October 2012. The company maintains a revolving credit facility and aims to manage its debt levels to maintain investment-grade credit ratings, as indicated by its debt-to-EBITDAR ratio.