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AutoZone 2nd Quarter Same Store Sales Increase 3.6%; EPS Increases 14.2% to $7.43

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MEMPHIS, Tenn., March 01, 2016 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE: AZO) today reported net sales of $2.3 billion for its second quarter (12 weeks) ended February 13, 2016, an increase of 5.3% from the second quarter of fiscal 2015 (12 weeks).  Domestic same store sales, or sales for stores open at least one year, increased 3.6% for the quarter.

Net income for the quarter increased 8.0% over the same period last year to $228.6 million, while diluted earnings per share increased 14.2% to $7.43 per share from $6.51 per share in the year-ago quarter. 

For the quarter, gross profit, as a percentage of sales, was 52.7% (versus 52.2% for last year's quarter).  The improvement in gross margin was attributable to higher merchandise margins, partially offset by higher supply chain costs associated with current year inventory initiatives (-21 bps).  Operating expenses, as a percentage of sales, were 35.8% (versus 35.4% last year).  The increase in operating expenses, as a percentage of sales, was primarily due to a favorable credit card litigation settlement recognized during last year's quarter (-25 bps), and higher domestic store payroll (-13 bps).

Under its share repurchase program, AutoZone repurchased 197 thousand shares of its common stock for $150 million during the second quarter, at an average price of $761 per share.  At the end of the second quarter, the Company had $548 million remaining under its current share repurchase authorization. 

The Company's inventory increased 3.9% over the same period last year, driven primarily by new store openings over the last twelve months.  Inventory per location was $633 thousand versus $631 thousand last year and $624 thousand last quarter.  Net inventory, defined as merchandise inventories less accounts payable, on a per location basis was a negative $57 thousand versus negative $47 thousand last year and negative $66 thousand last quarter.

"We would like to thank our entire organization for delivering another quarter of solid results: our thirty-eighth consecutive quarter of double digit earnings per share growth.  Our strong culture of providing exceptional customer service continues to be a key point of differentiation.  During the quarter, we continued implementation of our inventory availability initiatives.  At the end of the quarter, we have expanded our increased frequency of distribution center deliveries initiative to 1,300 domestic AutoZone stores and expect by the end of the fiscal year to be servicing approximately 2,000 of our over 5,000 domestic AutoZone stores.  We also plan to open approximately five additional Mega Hubs by the end of the fiscal year.  Our results to date continue to meet or exceed our expectations, further confirming our new inventory deployment strategy.  While we continue to strategically invest in our business in order to support our growth, we remain committed to our disciplined approach to growing operating earnings and utilizing our capital effectively," said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended February 13, 2016, AutoZone opened 30 new stores and relocated two stores in the U.S., opened nine new stores in Mexico, and opened two new IMC branches.  As of February 13, 2016, the Company had 5,193 stores in 50 states in the U.S., the District of Columbia and Puerto Rico, 451 stores in Mexico, 24 IMC branches, and eight stores in Brazil for a total count of 5,676.

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 and performance 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, March 1, 2016, 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 8, 2016, 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: credit market conditions; the impact of recessionary conditions; competition; product demand; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; energy prices; war and the prospect of war, including terrorist activity; construction delays; access to available and feasible financing; the compromising of the confidentiality, availability or integrity of information, including cyber security attacks; and changes in laws or regulations. Certain of these risks are discussed in more detail in the "Risk Factors" section contained in Item 1A under Part 1 of this Annual Report on Form 10-K for the year ended August 29, 2015, 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 2016
        
Condensed Consolidated Statements of Operations
2nd Quarter, FY2016
(in thousands, except per share data)
   GAAP Results  
   12 Weeks Ended 12 Weeks Ended  
   February 13, 2016 February 14, 2015  
        
Net sales $2,257,192  $2,143,651   
Cost of sales  1,066,596   1,023,618   
Gross profit  1,190,596   1,120,033   
Operating, SG&A expenses  807,936   758,764   
Operating profit  (EBIT)  382,660   361,269   
Interest expense, net  32,832   34,536   
Income before taxes  349,828   326,733   
Income taxes  121,215   115,010   
Net income $228,613  $211,723   
Net income per share:      
 Basic $7.58  $6.64   
 Diluted $7.43  $6.51   
Weighted average shares outstanding:      
 Basic  30,170   31,903   
 Diluted  30,778   32,540   
        
        
Year-To-Date 2nd Quarter, FY2016
(in thousands, except per share data) GAAP Results  
   24 Weeks Ended 24 Weeks Ended  
   February 13, 2016 February 14, 2015  
        
Net sales $4,643,235  $4,403,916   
Cost of sales  2,199,705   2,107,222   
Gross profit  2,443,530   2,296,694   
Operating, SG&A expenses  1,622,875   1,526,863   
Operating profit  (EBIT)  820,655   769,831   
Interest expense, net  67,842   71,596   
Income before taxes  752,813   698,235   
Income taxes  266,088   248,202   
Net income $486,725  $450,033   
Net income per share:      
 Basic $16.05  $14.06   
 Diluted $15.72  $13.78   
Weighted average shares outstanding:      
 Basic  30,334   32,018   
 Diluted  30,958   32,651   
        
Selected Balance Sheet Information
(in thousands)
   February 13, 2016 February 14, 2015 August 29, 2015
        
Cash and cash equivalents $207,958  $151,539  $175,309 
Merchandise inventories  3,590,687   3,456,812   3,421,635 
Current assets  4,209,813   3,913,863   3,970,294 
Property and equipment, net  3,544,882   3,376,480   3,505,632 
Total assets (1)  8,366,414   7,931,430   8,102,349 
Accounts payable  3,912,107   3,716,519   3,864,168 
Current liabilities (2)  4,994,661   4,623,323   4,712,873 
Total debt (1) (2)  4,845,215   4,429,765   4,624,876 
Stockholders' deficit  (1,741,313)  (1,468,679)  (1,701,390)
Working capital  (784,848)  (709,460)  (742,579)
        
(1) Certain balance sheet reclassifications have been made to the prior periods' financial information in order to conform to the current period's presentation due to the adoption of a new accounting standard at the end of FY15.
(2) Current liabilities and total debt both include short-term borrowings of $457,404 at February 13, 2016; $87,156 at February 14, 2015 and $0 at August 29, 2015. 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 13, 2016 February 14, 2015     
Net income $1,196,933  $1,108,860      
Add:Interest  146,685   157,184      
 Taxes  660,257   612,940      
EBIT  2,003,875   1,878,984      
          
Add:Depreciation and amortization  283,943   258,025      
 Rent expense  273,804   262,859      
 Share-based expense  39,342   38,874      
EBITDAR $2,600,964  $2,438,742      
          
Debt (1) $4,845,215  $4,429,765      
Capital lease obligations  127,468   125,795      
Add: rent x 6  1,642,824   1,577,154      
Adjusted debt $6,615,507  $6,132,714      
          
Adjusted debt to EBITDAR  2.5   2.5      
     
          
Selected Cash Flow Information         
(in thousands)         
  12 Weeks Ended 12 Weeks Ended  24 Weeks Ended 24 Weeks Ended
  February 13, 2016 February 14, 2015  February 13, 2016 February 14, 2015
          
Depreciation and amortization $68,653  $59,867   $134,936  $120,912 
Capital spending $99,933  $93,759   $186,591  $186,174 
          
Cash flow before share repurchases:         
Increase in cash and cash equivalents $42,472  $34,347   $32,649  $27,054 
Subtract increase in debt, excluding deferred financing  90,200   26,200    218,500   104,500 
Add back share repurchases  149,957   26,061    550,057   325,667 
Cash flow before share repurchases and changes in debt $102,229  $34,208   $364,206  $248,221 
          
          
Other Selected Financial Information         
(in thousands, except ROIC)         
  February 13, 2016 February 14, 2015     
          
          
Cumulative share repurchases ($ since fiscal 1998) $15,852,243  $14,356,437      
Remaining share repurchase authorization ($) $547,757  $543,563      
          
Cumulative share repurchases (shares since fiscal 1998)  139,625   137,495      
          
Shares outstanding, end of quarter  30,101   31,902      
          
  Trailing 4 Quarters     
  February 13, 2016 February 14, 2015    
Net income $1,196,933  $1,108,860      
Adjustments:         
Interest expense  146,685   157,184      
Rent expense  273,804   262,859      
Tax effect*  (149,694)  (149,535)     
After-tax return  1,467,728   1,379,368      
          
Average debt**(1)  4,632,858   4,362,118      
Average stockholders' deficit**  (1,666,550)  (1,654,368)     
Add: Rent x 6  1,642,824   1,577,154      
Average capital lease obligations**  127,339   116,747      
Pre-tax invested capital $4,736,471  $4,401,651      
          
Return on Invested Capital (ROIC)  31.0%  31.3%     
          
(1Certain balance sheet reclassifications have been made to the prior periods' financial information in order to conform to the current period's presentation due to the adoption of a new accounting standard at the end of FY15.
*Effective tax rate over trailing four quarters ended February 13, 2016 is 35.6% and February 14, 2015 is 35.6%.
**All averages are computed based on trailing 5 quarter balances.
          

 

AutoZone's 2nd Quarter Fiscal 2016 
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 13, 2016   February 14, 2015  February 13, 2016   February 14, 2015
AutoZone Domestic stores (Domestic):             
 Store count:             
 Beginning domestic stores  5,163     5,006    5,141     4,984 
 Stores opened  30     37    52     59 
 Stores closed  -     1    -     1 
 Ending domestic stores  5,193     5,042    5,193     5,042 
                 
 Relocated stores  2     1    3     2 
                 
 Stores with commercial programs  4,228     3,935    4,228     3,935 
                 
 Square footage (in thousands)  33,874     32,841    33,874     32,841 
                 
AutoZone Mexico stores:             
 Stores opened  9     5    10     9 
 Total stores in Mexico  451     411    451     411 
                 
AutoZone Brazil stores:             
 Stores opened  -     -    1     - 
 Total stores in Brazil  8     5    8     5 
                 
Total AutoZone stores  5,652     5,458    5,652     5,458 
 Square footage (in thousands)  37,255     35,891    37,255     35,891 
 Square footage per store  6,591     6,576    6,591     6,576 
                 
IMC branches:              
 Branches opened  2     1    4     1 
 Branches acquired  -     -    -     17 
 Total IMC branches  24     18    24     18 
                 
Total locations chainwide  5,676     5,476    5,676     5,476 
                 
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 13, 2016   February 14, 2015  February 13, 2016   February 14, 2015
 Sales per average store $379    $372   $1,780    $1,753 
 Sales per average square foot $58    $57   $270    $267 
                 
Total Auto Parts (Domestic, Mexico, Brazil, and IMC)             
 Total auto parts sales $2,170,986    $2,059,711   $10,058,938    $9,440,251 
 % Increase vs. LY  5.4%    7.6%   6.6%    4.3%
                 
Domestic Commercial (Excludes IMC)             
 Total domestic commercial sales $402,014    $372,247   $1,891,127    $1,706,096 
 % Increase vs. LY  8.0%    14.5%   10.8%    11.0%
                 
All Other (ALLDATA, E-Commerce, and AutoAnything)            
 All other sales $86,206    $83,940   $367,721    $354,906 
 % Increase vs. LY  2.7%    9.2%   3.6%    4.9%
                 
     12 Weeks Ended   12 Weeks Ended  24 Weeks Ended   24 Weeks Ended
     February 13, 2016   February 14, 2015  February 13, 2016   February 14, 2015
Domestic same store sales   3.6%    3.6%   3.6%    4.1%
                 
Inventory Statistics (Total Locations)             
     as of   as of       
     February 13, 2016   February 14, 2015       
 Accounts payable/inventory  109.0%    107.5%       
                 
 ($ in thousands)              
 Inventory  $3,590,687    $3,456,812        
 Inventory per location $633    $631        
 Net inventory (net of payables) $(321,420)   $(259,707)       
 Net inventory  / per location $(57)   $(47)       
                 
     Trailing 5 Quarters       
     February 13, 2016   February 14, 2015       
 Inventory turns  1.4 x   1.5 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

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