AutoZone 2012 Annual Report Download - page 82

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22
Interest expense, net for fiscal 2012 was $175.9 million compared with $170.6 million during fiscal 2011. This
increase was primarily due to higher average borrowing levels over the comparable prior year period; partially
offset by a decline in borrowing rates. Average borrowings for fiscal 2012 were $3.507 billion, compared with
$3.103 billion for fiscal 2011 and weighted average borrowing rates were 4.7% for fiscal 2012, compared to 5.1%
for fiscal 2011.
Our effective income tax rate was 36.0% of pre-tax income for fiscal 2012 compared to 35.9% for fiscal 2011.
Net income for fiscal 2012 increased by 9.6% to $930.4 million, and diluted earnings per share increased 20.6% to
$23.48 from $19.47 in fiscal 2011. The impact of the fiscal 2012 stock repurchases on diluted earnings per share
in fiscal 2012 was an increase of approximately $0.96.
Fiscal 2011 Compared with Fiscal 2010
For the fiscal year ended August 27, 2011, we reported net sales of $8.073 billion compared with $7.363 billion
for the year ended August 28, 2010, a 9.6% increase from fiscal 2010. This growth was driven primarily by an
increase in domestic same store sales of 6.3% and sales from new stores of $216.8 million. The improvement in
domestic same store sales was driven by higher transaction value and, to a lesser extent, higher transaction count
trends. Higher transaction value is attributable to product inflation due to more complex, costly products and
commodity price increases.
At August 27, 2011, we operated 4,534 domestic stores and 279 stores in Mexico, compared with 4,389 domestic
stores and 238 stores in Mexico at August 28, 2010. We reported a total auto parts (domestic and Mexico
operations) sales increase of 9.6% for fiscal 2011.
Gross profit for fiscal 2011 was $4.119 billion, or 51.0% of net sales, compared with $3.712 billion, or 50.4% of
net sales for fiscal 2010. The improvement in gross margin was primarily attributable to lower shrink expense (32
basis points) and higher merchandise margins (26 basis points). Increased penetration of Duralast product sales, as
well as retail price increases on commodity based products, drove the higher merchandise margins, which were
partially offset by increased penetration of commercial sales.
Operating, selling, general and administrative expenses for fiscal 2011 increased to $2.625 billion, or 32.5% of net
sales, from $2.392 billion, or 32.5% of net sales for fiscal 2010. The slight increase in operating expenses, as a
percentage of sales, was the result of higher fuel costs (20 basis points) and increased incentive compensation
costs (17 basis points), partially offset by leverage due to higher sales volumes.
Interest expense, net for fiscal 2011 was $170.6 million compared with $158.9 million during fiscal 2010. This
increase was primarily due to higher average borrowing levels over the comparable prior year period; partially
offset by a decline in borrowing rates. Average borrowings for fiscal 2011 were $3.103 billion, compared with
$2.752 billion for fiscal 2010 and weighted average borrowing rates were 5.1% for fiscal 2011, compared to 5.3%
for fiscal 2010.
Our effective income tax rate was 35.9% of pre-tax income for fiscal 2011 compared to 36.4% for fiscal 2010.
Net income for fiscal 2011 increased by 15.0% to $849.0 million, and diluted earnings per share increased 30.0%
to $19.47 from $14.97 in fiscal 2010. The impact of the fiscal 2011 stock repurchases on diluted earnings per
share in fiscal 2011 was an increase of approximately $1.15.
Seasonality and Quarterly Periods
Our business is somewhat seasonal in nature, with the highest sales typically occurring in the spring and summer
months of February through September, in which average weekly per-store sales historically have been about 15%
to 25% higher than in the slower months of December and January. During short periods of time, a store’s sales
can be affected by weather conditions. Extremely hot or extremely cold weather may enhance sales by causing
parts to fail; thereby increasing sales of seasonal products. Mild or rainy weather tends to soften sales, as parts
failure rates are lower in mild weather, with elective maintenance deferred during periods of rainy weather. Over
the longer term, the effects of weather balance out, as we have stores throughout the United States, Puerto Rico
and Mexico.
10-K