AutoZone 1999 Annual Report Download - page 19

Financial Review
The following table sets forth income statement data of the Company expressed as a percentage of net sales for the periods indicated:
Fiscal Year Ended
August 28, August 29, August 30,
1999 1998 1997
Net sales 100.0% 100.0% 100.0%
Cost of sales, including warehouse
and delivery expenses 57.9 58.3 58.0
Gross profit 42.1 41.7 42.0
Operating, selling, general
and administrative expenses 31.6 29.9 30.1
O perating profit 10.5 11.8 11.9
Interest expense Ð net 1.1 0.6 0.3
Income taxes 3.5 4.2 4.4
Net income 5.9% 7.0% 7.2%
17
Results of Operations
For an understanding of the significant factors that
influenced the CompanyÕs performance during the past three
fiscal years, the following Financial Review should be read in
conjunction with the consolidated financial statements presented
in this annual report.
Fiscal 1999 Compared to Fiscal 1998
Net sales for fiscal 1999 increased by $873.5 million or
26.9% over net sales for fiscal 1998. The increase was due to a
comparable store net sales increase of 4% (which was primarily
due to sales growth in the CompanyÕs newer auto parts stores)
and an increase in net sales of $756.4 million for stores opened or
acquired since the beginning of fiscal 1998. As of August 28,
1999, the Company had 2,711 domestic auto parts stores in
operation compared with 2,657 at August 29, 1998.
Gross profit for fiscal 1 9 99 was $1,731.4 million, or 42.1%
of net sales, compared with $1,353.1 million, or 41.7% of net
sales for fiscal 1 9 98. The increase in gross profit percentage was
due primarily to lower battery and commodity gross margins in
the prior year offset by acquisition integration distribution costs.
Operating, selling, general and administrative expenses for
fiscal 1999 increased by $327.6 million over such expenses for
fiscal 1998 and increased as a percentage of net sales from 29.9%
to 31.6%. The increase in the expense ratio was primarily due to
higher payroll and occupancy costs principally in recently acquired
stores, and approximately $25 million in remodeling and
remerchandising activities in acquired stores.
Net interest expense for fiscal 1999 was $45.3 million
compared with $18.2 million for fiscal 1998. The increase in
interest expense was primarily due to higher levels of
borrowings as a result of acquisitions and stock repurchases.
AutoZoneÕs effective income tax rate was 36.9% of pre-tax
income for fiscal 1 9 99 and 37.4% for fiscal 1998. The decline in
the effective tax rate is due to the utilization of acquired
company net operating loss carryforwards.
Fiscal 1998 Compared to Fiscal 1997
Net sales for fiscal 1998 increased by $551.5 million or
20.5% over net sales for fiscal 1997. This increase was due to a
comparable store net sales increase of 2% (which was primarily
due to sales growth in the CompanyÕs newer auto parts stores
and the added sales of the CompanyÕs commercial program) and
an increase in net sales of $485.7 million for stores opened or
acquired since the beginning of fiscal 1997. At August 29, 1998,
the Company had 2,657 auto parts stores in operation, a net
increase of 929 stores, including the acquisition of 112 and 560
auto parts stores acquired in February and June 1998, respectively.
Gross profit for fiscal 1 9 98 was $1,353.1 million, or 41.7%
of net sales, compared with $1,132.1 million, or 42.0% of net
sales, for fiscal 1 9 97. The decrease in gross profit percentage was
due primarily to lower commodities gross margins coupled with
lower gross margins in certain recently acquired stores.
Operating, selling, general and administrative expenses for
fiscal 1998 increased by $160.0 million over such expenses for fiscal
1997 and decreased as a percentage of net sales from 30.1% to
29.9%. The decrease in the expense ratio was primarily due to
commercial expense leverage and additional cooperative advertising
funds received from vendors partially offset by higher occupancy
costs primarily in recently acquired stores.
Net interest expense for fiscal 1998 was $18.2 million
compared with $8.8 million for fiscal 1997. The increase in
interest expense was primarily due to higher levels of borrowings
as a result of the acquisitions.
AutoZoneÕs effective income tax rate was 37.4% of pre-tax
income for fiscal 1 9 98 and 37.6% for fiscal 1997.