AutoZone 2004 Annual Report Download - page 9

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AutoZone฀has฀significant฀opportunity฀to฀gain฀market฀share฀in฀a฀segment฀where฀the฀top฀
three฀players฀are฀estimated฀to฀hold฀only฀a฀17%฀market฀share!*฀Additionally,฀in฀our฀
ongoing฀efforts฀to฀maximize฀shareholder฀value,฀Commercial฀is฀highly฀accretive฀to฀our฀
ROIC฀as฀it฀requires฀little฀capital฀investment,฀and฀leverages฀AutoZone’s฀pre-existing฀
stores฀and฀distribution฀system.฀
Mexico:฀consistent฀growth,฀future฀potential฀
Our฀third฀priority฀continues฀to฀be฀the฀development฀of฀stores฀in฀Mexico.฀We฀have฀
grown฀from฀6฀stores฀back฀in฀2000฀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฀continues฀to฀be฀driven฀by฀a฀higher฀average฀age฀of฀vehicles฀on฀the฀road฀than฀
in฀the฀U.S.฀and฀a฀fragmented฀competitive฀base.฀Our฀stores฀in฀Mexico฀are฀unique฀to฀
the฀Mexican฀automotive฀aftermarket฀landscape฀as฀most฀competition฀is฀poorly฀capi-
talized฀and฀dedicated฀to฀very฀specific฀lines฀of฀products฀and฀services.฀Our฀customers฀
have฀embraced฀the฀AutoZone฀culture฀and,฀as฀in฀the฀U.S.,฀look฀to฀our฀stores฀as฀their฀฀
one-stop฀destination฀for฀all฀their฀vehicle฀solutions.฀
We฀will฀continue฀to฀open฀stores฀in฀Mexico฀over฀time.
We฀will฀focus฀on฀investments฀that฀exceed฀a฀15%฀after-tax฀return฀on฀invested฀capital฀
This฀past฀year฀we฀generated฀over฀$500฀million฀in฀cash฀flow฀before฀share฀repurchases฀
versus฀$399฀million฀back฀in฀fiscal฀2001,฀while฀almost฀doubling฀our฀return฀on฀capi-
tal฀to฀an฀industry-leading฀25.1%.฀Additionally,฀since฀the฀inception฀of฀the฀share฀buy-
back฀program,฀the฀Company฀has฀repurchased฀over฀half฀its฀outstanding฀shares฀at฀an฀
average฀cost฀of฀$45.฀We฀have฀maintained฀our฀debt฀relative฀to฀our฀cash฀flow,฀and฀
continue฀to฀be฀one฀of฀the฀only฀investment-grade-credit฀companies฀in฀our฀industry.฀
F2004฀was฀not฀an฀easy฀year฀from฀a฀sales฀perspective.฀We฀saw฀our฀comp฀store฀฀
sales฀performance฀slow฀as฀customers฀became฀challenged฀in฀the฀last฀quarter฀by฀฀
the฀higher฀price฀of฀gasoline.฀But,฀despite฀this,฀we฀maintained฀customer฀service฀and฀
delivered฀increased฀profitability.฀
In฀summary,฀we฀proudly฀are฀the฀clear฀leader฀in฀an฀exciting฀and฀growing฀industry.฀We฀
will฀continue฀to฀push฀to฀profitably฀grow฀sales.฀We฀have฀a฀clear฀plan฀for฀the฀future฀and฀
a฀strong฀team฀to฀execute฀it.฀We฀are฀focused฀on฀operating฀AutoZone฀to฀take฀care฀of฀our฀
customers฀and฀AutoZoners,฀and฀optimize฀long-term฀shareholder฀value฀at฀the฀highest฀
level฀of฀ethics฀and฀corporate฀governance.
Best฀regards,
Steve฀Odland
Chairman,฀President,฀and฀Chief฀Executive฀Officer
Customer฀Satisfaction
*2004/2005฀AAIA฀Factbook
Our฀leadership฀team฀is฀comprised฀of฀about฀40฀talented฀individuals.฀We฀could฀not฀have฀accomplished฀so฀
much฀in฀such฀a฀short฀period฀of฀time฀without฀the฀energy฀and฀leadership฀of฀this฀entire฀group.฀This฀team฀will฀
not฀rest฀on฀its฀past฀accomplishments.฀We฀owe฀it฀to฀our฀customers,฀fellow฀AutoZoners,฀and฀Shareholders฀฀
to฀seek฀to฀continually฀push฀the฀boundaries฀in฀order฀to฀optimize฀long-term฀value.