updated 3/1/2011 7:16:15 AM ET 2011-03-01T12:16:15

MEMPHIS, Tenn., March 1, 2011 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $1.7 billion for its second quarter (12 weeks) ended February 12, 2011, an increase of 10.3% from the second quarter of fiscal 2010 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 7.1% for the quarter.

Net income for the quarter increased $24.7 million, or 20.0%, over the same period last year to $148.1 million, while diluted earnings increased 35.8% to $3.34 per share from $2.46 per share in the year-ago quarter.

For the quarter, gross profit, as a percentage of sales, was 50.9% (versus 50.0% for last year's quarter). The improvement in gross margin was attributable to higher margins on merchandise gross (45 bps) and lower shrink expense (39 bps). The increased merchandise gross margins continued to benefit this quarter from increased penetration of Duralast product sales and lower acquisition costs. Operating expenses, as a percentage of sales, were 34.6% (versus 34.7% last year).  The decrease in operating expenses, as a percentage of sales, was primarily the result of leverage on store operating expenses due to higher sales volumes, partially offset by increased incentive compensation costs (39 bps), increased investments in our hub store initiative (23 bps), higher advertising expenditures (22 bps), and an unfavorable comparison to last year's second quarter credit card class action settlement (17 bps). 

Under its share repurchase program, AutoZone repurchased 1.5 million shares of its common stock for $394 million during the second quarter, at an average price of $257 per share. At quarter end, the Company had $491 million remaining under its current share repurchase authorization.

The Company's inventory increased 7.0% over the same period last year, driven by an increase in store count and continued strategic investments in hard parts assortment. 

"We are pleased to announce another quarter of strong performance. This marks the ninth consecutive quarter of 20% plus growth in earnings per share and our eighteenth consecutive quarter of double digit growth. We remain committed to executing our 2011 operating theme of "1TEAM Going the Extra Mile." We continued our focus on improving parts coverage, hiring, retaining, and training the best automotive parts professionals, and growing our Commercial business. Additionally, our return on invested capital on a trailing four-quarter basis reached another new all-time high at 29.3%. We remain committed to our disciplined approach of growing operating earnings while efficiently utilizing our capital," said Bill Rhodes, Chairman, President and Chief Executive Officer. 

During the quarter ended February 12, 2011, AutoZone opened 21 new stores in the U.S. and opened 8 new stores in Mexico. As of February 12, 2011, the Company had 4,425 stores in 48 states, the District of Columbia and Puerto Rico in the U.S. and 249 stores in Mexico.

AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. Each 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. AutoZone also sells the ALLDATA brand diagnostic and repair software. On the web at www.autozone.com , AutoZone sells auto and light truck parts and subscriptions to the ALLDATAdiy product, and its Commercial customers can make purchases through www.autozonepro.com . AutoZone does not derive revenue from automotive repair or installation.

AutoZone will host a conference call this morning, Tuesday, March 1, 2011, 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, 2011 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 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; 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 our Annual Report on Form 10-K for the year ended August 28, 2010, 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 2011
     
Condensed Consolidated Statements of Operations
2nd Quarter
(in thousands, except per share data)
  GAAP Results
  12 Weeks Ended

Feb 12, 2011
12 Weeks Ended

Feb 13, 2010
     
Net sales  $ 1,660,946  $ 1,506,225
Cost of sales 815,335 752,489
Gross profit  845,611  753,736
Operating, SG&A expenses 573,863 523,355
Operating profit (EBIT)  271,748  230,381
Interest expense, net 39,576 36,309
Income before taxes  232,172  194,072
Income taxes 84,116 70,739
Net income  $ 148,056  $ 123,333
Net income per share:    
Basic  $ 3.41  $ 2.49
Diluted  $ 3.34  $ 2.46
Weighted average shares outstanding:    
Basic 43,399 49,436
Diluted 44,378 50,186
     
     
Year-to-date 2nd Quarter, FY2011
(in thousands, except per share data)
  GAAP Results
  24 Weeks Ended

Feb 12, 2011
24 Weeks Ended

Feb 13, 2010
     
Net sales  $ 3,452,608  $ 3,095,469
Cost of sales 1,699,249 1,541,809
Gross profit  1,753,359  1,553,660
Operating, SG&A expenses 1,175,491 1,062,850
Operating profit (EBIT)  577,868  490,810
Interest expense, net 76,829 72,650
Income before taxes  501,039  418,160
Income taxes 180,908 151,527
Net income  $ 320,131  $ 266,633
Net income per share:    
Basic  $ 7.27  $ 5.36
Diluted  $ 7.11  $ 5.28
Weighted Average Shares outstanding:    
Basic 44,034 49,775
Diluted 45,006 50,505
 
 
Selected Balance Sheet Information
(in thousands)      
  Feb 12, 2011 Feb 13, 2010 August 28, 2010
       
Cash and cash equivalents  $ 107,881  $ 105,161  $ 98,280
Merchandise inventories  2,418,751  2,261,528  2,304,579
Current assets  2,738,115  2,648,713  2,611,821
Property and equipment, net  2,554,864  2,383,143  2,519,946
Total assets  5,765,603  5,424,992  5,571,594
Accounts payable  2,524,539  2,144,995  2,433,050
Current liabilities*  3,225,136  2,749,324  3,063,960
Total debt*  3,249,230  2,774,700  2,908,486
Stockholders' deficit  (1,038,412)  (421,671)  (738,765)
Working capital  (487,021)  (100,611)  (452,139)
       
* Current liabilities and total debt both include short-term borrowings of $40,930 at February 12, 2011; $0 at February 13, 2010; and $26,186 at August 28, 2010.
 
 
Adjusted Debt / EBITDAR (Trailing 4 Qtrs)
(in thousands, except adjusted debt to EBITDAR ratio)
 
  Feb 12, 2011 Feb 13, 2010
Net income  $ 791,809  $ 676,447
Add: Interest  163,088  151,894
Taxes  451,575  385,297
EBIT  1,406,472  1,213,638
     
Add: Depreciation  193,402  185,568
Rent expense  204,218  188,045
Option expense  22,372  18,695
EBITDAR  $ 1,826,464  $ 1,605,946
     
Debt  $ 3,249,230  $ 2,774,700
Capital lease obligations         81,848  51,713
Add: rent x 6   1,225,308  1,128,270
Adjusted debt  $ 4,556,386  $ 3,954,683
     
Adjusted debt to EBITDAR  2.5  2.5
         
         
Selected Cash Flow Information        
(in thousands)        
  12 Weeks Ended

Feb 12, 2011
12 Weeks Ended

Feb 13, 2010
24 Weeks Ended

Feb 12, 2011
24 Weeks Ended

Feb 13, 2010
         
Depreciation  $ 44,126  $ 44,533  $ 88,417  $ 87,099
Capital spending  $ 62,546  $ 57,687  $ 108,357  $ 111,126
         
Cash flow before share repurchases:        
Net increase/(decrease) in cash and cash equivalents  $ 9,868  $ 25,558  $ 9,601  $ 12,455
Subtract increase in debt  370,014  35,200  340,744  47,800
Add back share repurchases  394,396  87,509  694,050  291,888
Cash flow before share repurchases and changes in debt  $ 34,250  $ 77,867  $ 362,907  $ 256,543
 
 
Other Selected Financial Information
(in thousands, except ROIC)
  Feb 12, 2011 Feb 13, 2010
     
     
Cumulative share repurchases ($ since fiscal 1998)  $ 9,408,622  $ 7,882,805
Remaining share authorization ($)  $ 491,378  $ 517,195
     
Cumulative share repurchases (shares since fiscal 1998)  124,577  117,352
Shares outstanding, end of quarter  42,611  49,081
 
  Trailing 4 Quarters
  Feb 12, 2011 Feb 13, 2010
Net income  $ 791,809  $ 676,447
Adjustments:    
Interest expense  163,088  151,894
Rent expense  204,218  188,045
Tax effect*  (133,615)  (123,852)
After-tax return  1,025,500  892,534
     
Average debt**  2,902,027  2,667,551
Average deficit**  (695,593)  (314,226)
Add: Rent x 6  1,225,308  1,128,270
Average capital lease obligations**  74,039  55,105
Pre-tax invested capital  $ 3,505,781  $ 3,536,700
     
Return on Invested Capital (ROIC) 29.3% 25.2%
     
* Effective tax rate over trailing four quarters ended February 12, 2011 and February 13, 2010 is 36.3% in each period.
** All averages are computed based on trailing 5 quarter balances.
 
 
AutoZone's 2nd Quarter Fiscal 2011
Selected Operating Highlights
         
Store Count & Square Footage
         
  12 Weeks Ended

Feb 12, 2011
12 Weeks Ended

Feb 13, 2010
24 Weeks Ended

Feb 12, 2011
24 Weeks Ended

Feb 13, 2010
Domestic stores:        
Store count:        
Stores opened  21  24  36  62
Stores closed   --  --  --  2
Replacement stores  --  --  4  1
Total domestic stores  4,425  4,289  4,425  4,289
         
Stores with commercial programs  2,521  2,321  2,521  2,321
         
Square footage (in thousands):  28,547  27,607  28,547  27,607
         
Mexico stores:        
Stores opened   8  9  11  14
Total stores in Mexico  249  202  249  202
         
Total stores chainwide  4,674  4,491  4,674  4,491
         
Square footage (in thousands):  30,362  29,069  30,362  29,069
Square footage per store  6,496  6,473  6,496  6,473
         
Sales Statistics
($ in thousands, except sales per average square foot and percentages)
 
Total Auto Parts (Domestic and Mexico)  12 Weeks Ended

Feb 12, 2011
12 Weeks Ended

Feb 13, 2010
Trailing 4 quarters

Feb 12, 2011
Trailing 4 quarters

Feb 13, 2010
Total auto parts sales  $ 1,623,949  $ 1,472,958  $ 7,563,470  $ 6,840,707
% Increase vs. LY  10.3% 4.1% 10.6% 5.1%
% Increase vs. LY (excl 53rd week)       7.1%
         
Sales per average store   $ 349  $ 329  $ 1,651  $ 1,556
Sales per average square foot   $ 54  $ 51  $ 255  $ 241
         
Domestic Commercial         
Total domestic commercial sales   $ 213,849  $ 176,515 955,914  $ 800,045
% Increase vs. LY 21.2% 8.5% 19.5% 4.8%
% Increase vs. LY (excl 53rd week)       6.6%
         
All Other (ALLDATA and E-Commerce)        
All other sales  $ 36,997  $ 33,267 156,286  $ 145,418
% Increase vs. LY  11.2% 0.7% 7.5% 1.4%
% Increase vs. LY (excl 53rd week)       3.4%
         
         
  12 Weeks Ended

Feb 12, 2011
12 Weeks Ended

Feb 13, 2010
24 Weeks Ended

Feb 12, 2011
24 Weeks Ended

Feb 13, 2010
Domestic same store sales  7.1% 1.0% 8.4% 3.4%
         
         
Inventory Statistics (Total Stores)    
         
  as of

Feb 12, 2011
as of

Feb 13, 2010
   
Accounts payable/inventory  104.4% 94.8%    
         
         
($ in thousands)        
Inventory  $ 2,418,751  $ 2,261,528    
Inventory per store  $ 517  $ 504    
         
Net inventory (net of payables)  $ (105,788)  $ 116,533    
Net inventory / per store  $ (23)  $ 26    
         
  Trailing 5 Points    
  Feb 12, 2011 Feb 13, 2010    
Inventory turns  1.6x  1.6x    
CONTACT: Financial:
         Brian Campbell 
         (901) 495-7005
         brian.campbell@autozone.com
 
         Media:
         Ray Pohlman  
         (866) 966-3017
         ray.pohlman@autozone.com

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