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1996* 1995 % Change

Sales $2,242,633,000 $1,808,131,000 +24%

Operating Profit $ 268,934,000 $ 227,658,000 +18%

Net Income $ 167,165,000 $ 138,781,000 +20%

Earnings Per Share $ 1.11 $ 0.93 +19%

Shareholders' Equity $ 865,582,000 $ 684,710,000 +26%

Number of Stores 1,423 1,143 +24%
*includes a 53rd week

[photos: painters painting AutoZone sign]

4
SALES

($ in millions)
[Bar Graph:

92: $1,002

93: $1,217

94: $1,508

95: $1,808

96: $2,243]
OPERATING PROFIT

($ in millions)
[Bar Graph:

92: $104

93: $141

94: $191

95: $228

96: $269]
NET INCOME

($ in millions)
[Bar Graph:

92: $63

93: $87

94: $116

95: $139

96: $167]

EARNINGS PER SHARE
[Bar Graph:

92: $.43

93: $.59

94: $.78

95: $.93

96: $1.11]

TO OUR CUSTOMERS, AUTOZONERS AND SHAREHOLDERS:
In fiscal 1996, AutoZone solidified its position as the leader in the do-it-

yourself retail auto parts market, started delivering parts to professional

repair shops and began exploring opportunities in the international market. For

the year, AutoZone:
- Opened 280 new stores - a 33% increase over last year.

- Increased store square footage by 26%.

- Rolled out a new commercial sales program to almost all of our stores.

We'll complete the rollout in the first quarter of fiscal 1997.

- Acquired ALLDATA, the nation's leading automotive diagnostic and repair

software company.

- Began shipments from our new 550,000-square-foot distribution

center in Zanesville, Ohio.

- Opened our second call center in Houston, Texas.

- Moved into a new corporate headquarters in downtown Memphis.
While making these investments for our future, we completed another record year

financially:

- Sales rose 24% to $2.24 billion - more than double our sales just

four years ago. Fiscal 1996 included a 53rd week.

- Net income increased 20% to $167 million.

- Earnings per share increased 19% to $1.11.

- Comparable store sales, or sales at stores open at the start of the

previous fiscal year, rose 6% for the 52 weeks.
We're pleased with our accomplishments last year, considering that unfavorable

weather contributed to soft comparable store sales to do-it-yourselfers. And

we're optimistic about the coming year. Our commercial sales program should have

a favorable impact on comparable store sales, and we're also continuing to focus

on increasing sales in our base DIY business.
For the past several years, AutoZone's record store openings have outpaced the

competition by a wide margin. And we see no reason why fiscal 1997 should be any

different. We are projecting a record 335 new stores for this coming fiscal

year.
As cars become more complex, it's more important than ever for AutoZone to

retain our position as the leader in providing the most comprehensive automotive

information to our customers. Our March acquisition of ALLDATA, which sells

repair and diagnostic information to professional repair shops on CD-ROM, will

keep us on the cutting edge.
Several promotions further strengthened a management team second to none in the

industry. John Adams, formerly our executive

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vice president - distribution, became vice chairman and chief operating officer.

Reporting to John are: Tim Vargo, formerly executive vice president -

merchandising, who became vice chairman and took over the responsibility for

day-to-day operation of our stores; and President Tom Hanemann, who shifted his

focus from domestic store operations to development of AutoZone's prospects in

the international market. While we don't have a firm timetable for international

expansion, Tom will lay the groundwork for expanding the AutoZone concept

outside U.S. borders.
Fiscal 1997 will be a challenging year, but I'm confident AutoZoners will

respond to the challenge with characteristic enthusiasm. To our customers, many

thanks for letting us earn your business and for making us the leading auto

parts retailer in America. To our AutoZoners, you and your ideas built this

company. Thank you for your many contributions. To our shareholders, thank you

for your continued support. With your business, ideas and support, we look

forward to an even more profitable and productive 1997.
Best regards,
/s/ Pitt Hyde

- -------------

J.R. Hyde III

(from left)

PITT HYDE

Chairman & CEO

Customer Satisfaction
JOHN ADAMS

Vice Chairman & COO

Customer Satisfaction
TIM VARGO

Vice Chairman

Customer Satisfaction
TOM HANEMANN

President

Customer Satisfaction

[Photo of Hyde, Adams, Vargo and Hanemann]


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AutoZone is the leader in the $32 billion market serving the do-it-yourself

customer. Our fiscal 1996 sales represent less than 7% of this growing industry.

That means AutoZone, the largest auto parts retailer in America, still serves

only about one out of every 15 do-it-yourselfers. Considering that the top 10

retail chains combined control only about a fifth of the $32 billion

do-it-yourself market, we believe there's plenty of room to grow.
Industry trends are favorable for our business. Recent statistics show the

average age of cars on the road is 8.3 years-the oldest it's been since 1948.

The number of cars on the road is steadily rising. People are driving more each

year. And the market we serve - vehicles that are at least 5 years old, out of

warranty and into the repair cycle - now numbers 127 million.
While typical AutoZone customers repair their own cars, millions of others are

having their vehicles repaired by professional technicians. And selling parts to

the professional is a $42 billion market we're just beginning to tap.
There are 127

million vehicles on

the road today that

are at least five

years old, out of

warranty and into

the repair cycle.
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RECORD-BREAKING STORE GROWTH

The opening of 280 new stores in fiscal 1996 was no small task. Our record store

openings brought AutoZone's total store count to 1,423 - more than double what

it was just four years ago. And in only six years, our total square footage more

than tripled. Last year's pace of store openings meant we added a new AutoZone

almost every 31 hours. Next year, we expect to increase the new store count to

335, or one every 26 hours.
While we added Pennsylvania as our 27th state, much of our store growth in the

first half of the year was devoted to filling in our existing markets. In some

instances, these new stores take sales away from older stores. In the long run,

however, we believe they help solidify AutoZone's competitive position in the

marketplace.
Perhaps our new store growth is best put in perspective this way: had they stood

alone as a chain, our 280 new stores would rank among the nation's top 10 auto

parts retailers. Needless to say, we're extremely proud of the effort put forth

by the many AutoZoners who helped open so many stores this year.

[Photo of exterior of AutoZone store]


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SERVING PROFESSIONAL REPAIR SHOPS

Fiscal 1996 marked the beginning of a new growth opportunity for AutoZone -

selling and delivering parts to professional repair shops. We started an

aggressive rollout of a program to serve these commercial customers in

September, and by fiscal year-end it was up and running in over 80% of our

stores. We'll complete the rollout in the first quarter of fiscal 1997.
By selling and delivering parts to professional repair shops, we're able to

greatly expand the sales potential of our stores with only a small incremental

investment: delivery trucks, dedicated commercial account specialists and

drivers. And by leveraging our existing store base and inventory, we believe the

program has the potential to offer very good returns over time.
The commercial market is a large one - $42 billion. And the customers we're

targeting account for about two-thirds of that market. We already know how to

take care of them. Our approach to serving professional customers is the very

same one we've used for years with DIYers: providing value, quality and - most

importantly - outstanding customer service.
We offer our professional customers the same high quality parts at the

By selling and

delivering parts to

professional repair

shops, we're able to

greatly expand the

sales potential of

each store.

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everyday low prices that have turned millions of DIYers into loyal AutoZone

customers. We've found these professionals to be very receptive to trying

AutoZone because our everyday prices are typically lower than even the

discounted prices they get from their current suppliers. They're enthusiastic

about the lifetime warranty we offer on so many parts. And as they gain

firsthand knowledge of the quality of our parts, we're able to win an even

larger share of their business.
It should come as no surprise that we believe our commitment to customer service

is what will ultimately distinguish us in the professional market. By dedicating

AutoZoners to satisfying their needs, serving a select number of accounts and

limiting the distances we drive, we can offer professional shops much quicker

delivery than they're used to - 30 minutes or less, in most cases. And that's

where our densely located 1,423 stores give AutoZone a competitive advantage in

serving these customers.
MORE PARTS, IMPROVED SYSTEMS

We added over 1,000 parts to the typical store's inventory this year, bringing

our average SKU count to 17,500. By using our proprietary flexogram system, we

were able to tailor the inventory based on the vehicles driven by each

individual store's customer base. We now have a wider range of inventory levels

across the chain, from a low of 16,000 SKUs to a high of 19,000.

We added over

1,000 parts to the

typical store's

inventory this year,

bringing our

average SKU count

to 17,500.

[Photo of AutoZone commercial delivery truck]
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We continue to expand and refine our electronic parts catalog, already the

superior system in the industry. In the past year alone, we've doubled the

amount of information available. Our electronic catalog now spans 67 years,

dating back to 1930. More diagnostic features were included, and several other

improvements were made that help AutoZoners serve customers better, faster and

more knowledgeably.
HOUSTON CALL CENTER OPENS

Our new Houston call center, which opened in October of 1995, is now serving 160

stores in our bilingual markets. As in our Memphis center, agents in Houston can

access the same information as AutoZoners in the stores through our satellite

system. By diverting calls from our busiest stores to these call centers, we

eliminate the age-old retail conflict of deciding which customer to help first:

the one at the parts counter or the one on the phone.
ALLDATA ACQUISITION

In March, we acquired ALLDATA Corp., the nation's premier automotive diagnostic

and repair software development company. ALLDATA, under the leadership of

Founder and President Rod Georgiu, provides more than 17,000 professional repair

shops across the country with information either on CD-ROM or on-line.

Our electronics parts

catalog now spans

67 years, dating

back to 1930.

Our new Houston

call center now

serves 160 stores in

our bilingual

markets.

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ALLDATA turned profitable last year, and we see strong growth opportunities in

its base business. There are over 230,000 garages and service centers in the

U.S., yet only about 30,000 have an electronic diagnostic and repair system in

place. AutoZone's association with ALLDATA will provide the financial resources

to build on its current leadership position in the industry.
We believe joining forces with ALLDATA further strengthens our own position as

the information leader in our industry. As the number of parts continues to

increase and cars become more complex, we believe information will become even

more of a competitive advantage for AutoZone. By adding features like technical

service bulletins, recall information and specifications to our electronic

catalog, we'll be in an even better position to help our customers solve their

problems.
In the meantime, we continue to search for new products, services and

innovations that will distinguish AutoZone in the marketplace. And we remain

confident that more and more customers will continue to reward us with their

business.

The aquisition of

ALLDATA further

strengthens our

position as the

information leader

in our industry.

[Photo of AutoZone employee and customer at parts counter]

12

TEN YEAR REVIEW

----------------------------------------------------------------

(in thousands, except per share data and selected operating data)
5-Year

Compound ---------------------------

Growth 1996* 1995

INCOME STATEMENT DATA -------- ---------- ----------
Net sales..................................................... 22% $2,242,633 $1,808,131

Cost of sales, including warehouse and

delivery expenses....................................... 1,307,638 1,057,033

Operating, selling, general and

administrative expenses................................. 666,061 523,440

---------- ----------

Operating profit.............................................. 28% 268,934 227,658

Interest income (expense)..................................... (1,969) 623

---------- ----------

Income before income taxes.................................... 30% 266,965 228,281

Income taxes.................................................. 99,800 89,500

---------- ----------

Net income.................................................... 31% $ 167,165 $ 138,781

========== ==========

Net income per share.......................................... 27% $ 1.11 $ 0.93

========== ==========

Average shares outstanding, including

common stock equivalents................................ 151,238 149,302
BALANCE SHEET DATA
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