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2004฀Annual฀Report
®
AutoZoners฀always฀put฀customers฀first
AutoZoners฀always฀put฀customers฀first

Table of contents

  • Page 1
    2004฀Annual฀Report ® AutoZoners฀always฀put฀customers฀first

  • Page 2
    ...฀products฀with฀rapid฀delivery฀and฀an฀integrated฀software฀ solution,฀ALLDATA. F2004฀Highlights:฀By฀opening฀a฀...฀ Monterrey,฀Mexico฀continues฀to฀prove฀the฀AutoZone฀brand฀travels฀well฀across฀borders. The฀Financial฀Performance฀Zone:฀Page...

  • Page 3
    ...Laredo,฀Mexico. 1999 We฀made฀the฀Fortune฀500฀list฀(at฀456)฀for฀the฀first฀time.฀Today฀ AutoZone฀ranks฀331฀overall. 2002 AutoZoners฀developed.... 2003 Two฀leaders฀in฀the฀automotive฀industry-AutoZone฀the฀leader฀in฀ aftermarket฀auto฀parts฀...

  • Page 4
    2004฀marks฀ AutoZone's฀25th฀Silver฀Anniversary,฀ something฀we฀are฀very฀proud฀of฀here฀at฀ AutoZone.฀Year฀after฀...฀area฀of฀฀ our฀business. At฀AutoZone฀we฀are฀relentlessly฀creating฀฀ the฀most฀exciting฀Zone฀for฀฀ vehicle฀solutions!

  • Page 5
    ...฀share฀data) 800 ฀ 2000 800 ฀ 2001(1) ฀ 2002 ฀ 2003 ฀ 2004 48 Selected฀Financial฀Data Net฀Sales Operating฀Profit Diluted฀Earnings฀per฀Share After-Tax฀... 48 48 35 600 46 46 34 400 44 44 33 200 42 '04฀Annual฀Report 42 1 32 31 0 40 0

  • Page 6
    ...;฀ •฀Develop฀our฀business฀in฀Mexico. U.S.฀Retail:฀continuing฀to฀be฀our฀#1฀priority฀ AutoZone's฀core฀business฀is฀built฀on฀supporting฀the฀Do-It-Yourself฀(DIY)฀customer,฀ which฀according฀to฀the฀Automotive฀Aftermarket฀Industry฀Association...

  • Page 7
    ...time฀extend฀our฀position฀as฀price฀leader฀in฀the฀industry. We฀have฀begun฀to฀refresh฀our฀older฀AutoZone...฀our฀pay-on-scan฀initiative฀(POS)฀and฀...฀Franklin Steve฀Odland Chairman,฀President,฀and฀CEO Customer฀Satisfaction '04฀Annual฀Report...

  • Page 8
    ...$47฀billion฀annually*,฀and฀growing฀at฀a฀five-year฀compound฀annual฀growth฀rate฀of฀ 4.5%.*฀AutoZone฀is฀far฀...software฀provides฀us฀a฀valuable฀competitive฀advantage฀in฀the฀continued฀development฀of฀this฀professional฀installer฀market. *2004...

  • Page 9
    ...฀to฀63฀stores฀as฀of฀the฀end฀of฀fiscal฀2004.฀We฀ now฀have฀opened฀both฀an฀in-country฀distribution฀center฀in฀Nuevo฀Laredo฀and฀a฀new฀ store฀support฀center฀in฀Monterrey,฀Mexico฀to฀support฀our฀growth.฀The฀opportunity฀in฀ Mexico...

  • Page 10
    ...invested฀capital฀in฀the฀industry-well฀outpacing฀our฀peers...and฀on-line,฀AutoZone฀stores฀are฀equipped฀to฀help฀customers...Zone฀for฀vehicle฀solutions฀for฀DIYers฀across฀the฀country. *2004/2005฀AAIA฀Factbook '04฀Annual฀Report 6 '04฀Annual฀Report...

  • Page 11
    ...Zone฀for฀vehicle฀solutions!" Customers฀First! With฀about฀22฀thousand฀skus฀per฀store,฀AutoZone฀has฀industry-leading฀brands฀like฀Valucraft...we฀strive฀to฀grow฀our฀industry-leading฀market฀share฀position. '04฀Annual฀Report 8 '04฀Annual฀Report 9

  • Page 12
    ...฀ C omplete฀ Solution ! ™ AutoZone฀Commercial Recognizing฀the฀unique฀growth฀opportunity฀before...software฀available฀to฀automotive฀technicians฀today.฀By฀creating฀the฀ industry.... *2004/2005฀AAIA฀Factbook '04฀Annual฀Report 10 '04฀Annual฀Report 11

  • Page 13
    ...In฀an฀฀ extremely฀fragmented฀industry,฀AutoZone฀brings฀something฀unique฀to฀...time,฀we฀will฀differentiate฀ourselves฀in฀the฀eyes฀of฀our฀customers.฀ We฀look฀forward฀to฀a฀bright฀Commercial฀future.฀ '04฀Annual฀Report 12 '04฀Annual฀Report...

  • Page 14
    ...new฀Store฀Support฀Center฀in฀Monterrey,฀ and฀a฀dedicated฀in-country฀distribution฀facility,฀AutoZone฀de฀Mexico฀is฀ continuing฀to฀grow฀its฀market฀share฀in฀the฀$5฀billion*฀Mexican฀retail฀ An฀Expanding฀Zone aftermarket฀segment.฀With฀over...

  • Page 15
    ...'00 '01 '01 '02 '02 '03 '03 '04 '04 2004฀Financial฀Highlights Gross฀Margin฀to฀Sales฀Ratio After-Tax฀Return฀on฀Invested฀Capital ...00 30 '01 '02 '03 '04 '04฀Annual฀Report 0 Fiscal: '99 29 16 '01 '02 '03 '04 29 '00 Total฀Shares฀Outstanding฀(in฀Millions) 28

  • Page 16
    ...฀ cost฀ of฀ capital฀ than฀ equity,฀ and฀ therefore,฀ utilizing฀ debt฀ allows฀ AutoZone฀to฀reduce฀its฀overall฀cost฀of฀capital. How฀far฀can฀you฀take฀pay-on-scan? Pay-on-scan฀(POS)฀is฀one฀more฀tool฀in฀our฀toolbox฀to฀reduce฀inventory...

  • Page 17
    ...per฀share฀data฀and฀selected฀operating฀data) Fiscal฀Year฀Ended฀August 2004 (1) ฀ 2003 (2) ฀ 2002(3) $฀ 5,325,510 2,...sales฀for฀the฀53rd฀week. (4)฀ ฀ Fiscal฀... excludes฀ merchandise฀ under฀ pay-on-scan฀ arrangements. (7)฀ ฀ Net฀...Annual฀Report 18

  • Page 18
    ...3% 598,823 221,883 202,530 $฀ 125,977 $฀ 1.33 $฀ 1.30 ฀ ฀Sixteen฀ Weeks฀Ended August฀28,฀ 2004 (2) $฀ 1,835,728 (3)% 902,991 363,755 335,042 $฀ 209,392 $฀ 2.56 $฀ ...฀amounts฀may฀not฀equal฀the฀annual฀amounts฀reported฀due฀to฀rounding฀and฀due฀to...

  • Page 19
    ...฀and฀repair฀software.฀On฀the฀web฀at฀www.autozone.com,฀ we...2004฀was฀an฀increase฀of฀approximately฀$0.20. Fiscal฀2003฀Compared฀with฀Fiscal฀2002 For฀the฀year฀ended฀August฀30,฀2003,฀AutoZone฀reported฀sales฀of฀$5.457฀billion฀(52฀weeks...

  • Page 20
    ...weeks฀(17฀weeks฀in฀fiscal฀2002),฀ compared฀with฀12฀weeks฀for฀each฀of฀the฀first฀three฀quarters,฀our฀fourth฀quarter฀represents฀a฀disproportionate฀share฀of฀the฀annual฀net฀sales฀ and฀net฀income.฀The฀fourth฀quarter฀of฀fiscal฀2004...

  • Page 21
    ...pay-on-scan฀ ("POS")฀arrangements฀with฀certain฀vendors.฀Under฀a฀POS฀arrangement,฀AutoZone...store฀development฀program...the฀timing฀and...฀are฀raised.฀If฀...-term฀ unsecured฀ bank฀ loans.฀ As฀ the฀ available฀...2004.฀The฀rate฀of฀ '04฀Annual฀Report 22

  • Page 22
    ...฀the฀$350฀million฀unsecured฀bank฀loan฀ due฀November฀2004,฀and฀to฀settle฀interest฀rate฀hedges...Financial฀Commitments:฀ The฀following฀table฀shows฀AutoZone's฀obligations฀and฀commitments฀to฀make฀future...the฀table฀above.฀ '04฀Annual฀Report 23

  • Page 23
    ...shows฀AutoZone's฀other...time฀...2004฀and฀2003,฀we฀successfully฀negotiated฀with฀certain฀vendors฀to฀transfer฀warranty฀obligations฀to฀such฀vendors฀in฀order฀to฀minimize฀our฀warranty฀exposure฀resulting฀in฀ credits฀to฀earnings. '04฀Annual฀Report...

  • Page 24
    ...lived฀assets,฀such฀as฀property฀ and฀ equipment,฀ covered฀ by฀ this฀ standard฀...AutoZone's฀financial฀market฀risk฀results฀primarily฀from฀changes฀in฀interest฀rates.฀At฀times...has฀an฀October฀ 2004฀settlement฀and฀effective฀date...฀Annual฀Report 25

  • Page 25
    ...AutoZone฀ for฀ debt฀ of฀ the฀ same฀ remaining฀ maturities.฀Such฀fair฀value฀is฀greater฀than฀the฀carrying฀value฀of฀debt฀at฀August฀28,฀2004...financial฀measures,฀or฀considered฀in฀isolation,฀for฀the฀purpose฀ of฀.... '04฀Annual฀Report 26

  • Page 26
    ...฀Year฀Ended฀August (in฀thousands,฀except฀per฀share฀and฀percentage฀data) 2004 $฀ 566,202 58,003 73,086 ฀ 697,291 - ฀ ... Results฀of฀Operations ฀ of฀Revenue ฀ for฀53rd฀Week ฀ Excluding฀53rd฀Week ฀ of฀Revenue $5,325,510 2,950,123 2,375,...Annual฀Report 27

  • Page 27
    ...฀28,฀ 2004฀ (52฀Weeks) ฀ $฀ 5,637,025 2,880,446 1,757,873฀ 998,706 92,804฀ 905,902 339,700฀ $฀ 566,202฀ 84,993 1,357฀ 86,350 6.66฀ 6.56 August฀30,฀ 2003฀ (52฀Weeks) ฀ ...฀share See฀Notes฀to฀Consolidated฀Financial฀Statements. '04฀Annual฀Report 28

  • Page 28
    ...,฀ 2004 ฀ August฀30,฀ 2003 Assets Current฀assets: ฀ Cash฀and฀cash฀equivalents ฀ Accounts฀receivable ฀ Merchandise฀inventories ฀ Prepaid฀expenses฀and฀other฀current฀assets ฀ Deferred฀income฀taxes ฀ ฀ Total฀current฀assets Property฀and฀equipment...

  • Page 29
    Consolidated฀Statements฀of฀Cash฀Flows ฀ August฀28,฀ 2004฀ (52฀Weeks) ฀ $฀566,202 106,891 4,230 24,339 (42,094)...฀and฀amortization฀of฀property฀and฀equipment Amortization฀of฀debt฀origination฀fees Income...฀Financial฀Statements. '04฀Annual฀Report 30

  • Page 30
    ...purchase฀plans Tax฀benefit฀of฀exercise฀of฀stock฀options Balance฀at฀August฀28,฀2004 17,537 (3,841) ฀2,900 6,226 (2,701) 1,523 (848,...147 ฀ ฀ ฀ ฀ ฀ $(808,226) ฀ $฀(15,653) ฀ See฀Notes฀to฀Consolidated฀Financial฀Statements. '04฀Annual฀Report 31

  • Page 31
    ...,฀was฀$158฀million฀at฀August฀28,฀2004,฀ and฀$102฀million฀at฀August฀30,฀2003. AutoZone฀ has฀ entered฀ into฀ pay-on-scan฀ ("POS")฀ arrangements฀ with฀ certain฀ vendors,฀ whereby฀ AutoZone฀ will฀ not฀ purchase฀ merchandise฀ ฀ supplied฀by...

  • Page 32
    ...in฀the฀three฀years฀ended฀August฀28,฀2004.฀ Derivative฀ Instruments฀ and฀ Hedging฀ Activities:฀ AutoZone฀ is฀ exposed฀ to฀ market฀...provided฀at฀the฀time฀of฀sale฀of฀the฀product฀and฀are฀charged฀to฀ cost฀of฀sales. '04฀Annual฀Report 33

  • Page 33
    ...time...2004. Stock฀Options:฀At฀August฀28,฀2004...data) Year฀Ended August฀28,฀ 2004 ฀ $566,202 16,518 ...4.01 4.00 3.91 Reported฀net฀income Deduct฀total฀...reported ฀ Pro฀forma Diluted฀earnings฀per฀share: ฀ As฀reported...2004...2004...yield August฀28,฀ 2004 ฀ 37% ...2004...

  • Page 34
    ...AutoZone฀has฀utilized฀interest฀rate฀swaps฀to฀convert฀variable฀rate฀debt฀to฀fixed฀rate฀debt฀and฀to฀lock฀in฀fixed฀rates฀on฀future฀debt฀issuances.฀ At฀August฀28,฀2004...฀of฀counterparty฀default฀to฀be฀minimal. '04฀Annual฀Report 35

  • Page 35
    ...2004,฀and฀August฀30,฀2003,฀consisted฀of฀the฀following: (in฀thousands) August฀28,฀ 2004...time...2004... Year฀Ended August฀28,฀ 2004 ฀ $฀78,482 37,388...in฀thousands) August฀28,฀ 2004 ฀ $268,013 27,...฀thousands) Year฀Ended August฀28,฀ 2004 ฀ $317,066 19,601 3,...

  • Page 36
    ...฀assets Deferred฀tax฀liabilities: ฀ Property฀and฀equipment ฀ Inventory ฀ Derivatives ฀ Other ฀ Deferred...฀Notes฀due฀November฀2003 Bank฀term฀loan฀due฀November฀2004,฀variable฀interest฀rate฀of฀2.26%฀at฀...long-term฀basis. '04฀Annual฀Report 37

  • Page 37
    ...350฀ million฀unsecured฀bank฀loan฀due฀November฀2004,฀and฀to฀settle฀interest฀...of฀AutoZone฀or฀its฀ Board฀of฀Directors.฀As฀of฀August฀28,฀2004,฀the฀...August฀28,฀2004฀and฀by฀$27.3฀million฀ at฀August฀30,฀2003.฀ '04฀Annual฀Report 38

  • Page 38
    ...each฀of฀the฀last฀three฀fiscal฀years฀consisted฀of฀the฀following: ฀ (in฀thousands) Year฀Ended August฀28,฀ 2004 ฀ $93,831 (214) (813) ฀ $92,804 ฀ August฀30,฀ 2003 ฀ $86,635 (1,...24.49 34.47 61.10 71.12 77.99 $36.92 ฀ ฀ ฀฀ ฀ '04฀Annual฀Report 39

  • Page 39
    ...102,084฀shares฀in฀fiscal฀2004,฀134,972฀ shares฀ in...AutoZone,฀Inc.฀2003฀Director฀Compensation฀Plan,฀a฀non-employee฀director฀may฀receive฀no฀more฀than฀one-half฀of฀the฀annual...substantially฀ all฀ full-time฀ employees฀ were฀ ...Annual฀Report 40

  • Page 40
    ...: (in฀thousands) August฀28,฀ 2004 ฀ $฀136,077 - 8,114 ... $฀(26,022) 19,524 6,498) ฀ Year฀Ended August฀28,฀ 2004 8,114 (6,871) (645) 4,371 - ฀ $฀4,969 ฀ August฀30...฀return฀on฀assets ฀ 2004 ฀ 2003 ฀ 6.00...2004...Year฀Ending฀December฀31 2004 2005 2006 2007 2008...

  • Page 41
    ...pay...equipment...AutoZone฀recognized฀gains฀of฀$4.8฀million฀in฀fiscal฀2004฀and฀$4.6฀million฀in฀fiscal฀2003฀as฀a฀result฀of฀the฀development... time฀ to฀ time฀ ...2004 ฀ 14,362 5,376 ฀ 15,652 ฀ $฀ 11,186 ฀26,838 ฀ $฀ 8,986 '04฀Annual฀Report 42

  • Page 42
    ....4฀million฀at฀August฀28,฀2004. The฀Company฀currently,฀and฀from฀time฀to฀time,฀is฀involved฀in฀various฀...฀of฀the฀liability฀for฀reported฀claims฀and฀an฀estimated฀liability฀for฀claims฀incurred฀ but฀not฀reported. The฀Company฀had฀$97...

  • Page 43
    Report฀of฀Independent฀Registered฀Public฀Accounting฀Firm The฀Board฀of฀Directors฀and฀Stockholders AutoZone,฀Inc. We฀have฀audited฀the฀accompanying฀consolidated฀balance฀sheets฀of฀AutoZone,฀Inc.฀as฀of฀August฀28,฀2004...2004 '04฀Annual฀Report 44

  • Page 44
    ...control฀system฀effectiveness฀may฀vary฀over฀time. Steve฀Odland Chairman,฀President,฀and Chief฀Executive฀Officer Customer฀Satisfaction Michael฀G.฀Archbold Executive฀Vice฀President฀and Chief฀Financial฀Officer Customer฀Satisfaction '04฀Annual฀Report 45

  • Page 45
    ...://www.autozoneinc.com฀ ฀ Company฀Web฀Site:฀http://www.autozone.com Form฀10-K/Quarterly฀Reports Stockholders฀may฀obtain฀free฀of฀charge฀a฀copy฀of฀ AutoZone's฀annual฀report฀on฀Form฀10-K,฀its฀quarterly฀reports฀on฀Form฀10-Q฀as฀filed฀with฀the...

  • Page 46
    ...CEO James฀J.฀Postl฀(1*) Retired฀President฀and฀CEO...2004,฀AutoZone's฀founder฀and฀board฀member,฀Pitt฀Hyde,฀was฀ inducted฀into฀the฀Automotive฀Hall฀of฀Fame฀in฀Dearborn,฀Michigan...฀Annual฀Report฀update฀with฀you,฀our฀customers,฀AutoZoners,฀and...

  • Page 47
    ® 123฀South฀Front฀Street Memphis,฀Tennessee฀38103-3607 (901)฀495-6500 www.autozone.com