SEC Info℠  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Autozone Inc – ‘ARS’ for 8/28/99

On:  Tuesday, 10/26/99   ·   For:  8/28/99   ·   Accession #:  866787-99-21   ·   File #:  1-10714

Previous ‘ARS’:  ‘ARS’ on 11/2/98 for 8/29/98   ·   Next:  ‘ARS’ on 10/27/00 for 8/28/00   ·   Latest:  ‘ARS’ on 10/30/23 for 8/26/23

Find Words in Filings emoji
 		  in    Show  and   ↓Hints

  As Of                Filer                Filing    For·On·As Docs:Size

10/26/99  Autozone Inc                      ARS         8/28/99    2:2.6M

Annual Report to Security Holders
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: ARS         1999 Annual Report-Ascii                              35    193K 
 2: ARS         1999 Annual Report-PDF                               PDF   1.86M

ARS   —   1999 Annual Report-Ascii
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
26Disclosures about Segments of an Enterprise and Related Information 
ARS1st Page of 35TOC↑TopPreviousNext↓BottomJust 1st
 

[COVER]                                                                         

[5 PHOTOS APPEAR HERE, SHOWING AUTOZONE STORE AND                               
EMPLOYEES WORKING WITH CUSTOMERS]                                               
it's still about WITTDTJR 

 [AUTOZONE(R) LOGO APPEARS HERE]
1999 Annual Report  


ARS2nd Page of 35TOC1stPreviousNext↓BottomJust 2nd

--------------------------------------------------------------------------------
Financial Highlights                                                            
                                    1999                  1998          % Change
Sales                          $4,116,392,000        $3,242,922,000        +27% 
Operating Profit                 $433,095,000          $382,307,000        +13% 
Net Income                       $244,783,000          $227,903,000         +7% 
Earnings Per Share                      $1.63                 $1.48        +10% 
Stockholders' Equity           $1,323,801,000        $1,302,057,000         +2% 
Number of Auto Parts Stores             2,717                 2,657         +2% 
--------------------------------------------------------------------------------

Company Description                                                             

AutoZone is the undisputed industry leader in parts and information.  

    We sell auto parts, accessories, chemicals and motor oil to do-it-yourself
customers and professional technicians through 2,711 AutoZone stores in 39 of   
our United States and 6 tiendas en Mexico.                                      

We also sell heavy-duty truck parts through 46 TruckPro stores in 14  
states.                                                                         

   Through ALLDATA, we provide electronic diagnostic and repair information.
We offer the professional technician a complete software package, and the DIYer 
can purchase vehicle-specific information on CD-ROM. The wired world can now    
access this information on a subscription basis at alldatadiy.com.              

    [PHOTO OF AUTOZONE STORE APPEARS HERE]

  Happy birthday to us! Amid the acquisition of the Express locations from
Pep Boys, the Chief conversions and our push into Mexico, we also celebrated our
20th birthday during FY99.                                                      

        [LOGO APPEARS HERE, SHOWING:
20 YEARS, 1979-1999 
AutoZone(R)]        

     In these last 20 years, a lot has changed about us. We left the nest of our
parent company, changed our name, went public and this year cracked the Fortune 
500.                                                                            

   Through it all, our culture - the force that underlies our strength - has
remained solid.                                                                 

   Because of this unwavering culture, we sometimes speak a language all our
own. To help you decode this report, we offer a small glossary of terms. It's by
no means a complete primer on AutoZone culture, but it will get you through the 
next eight pages.                                                               


ARS3rd Page of 35TOC1stPreviousNext↓BottomJust 3rd

AUTOZONISMS 

ARBST - Alternator Regulator Battery Starter Tester. It's the rolling           
cart we use to diagnose our customers' vehicles for free in the parking lot.    

AutoZoner - Anyone who serves customers at the nation's #1 auto parts chain.    

CSR - Customer Service Representative. Not only do these AutoZoners run our     
lightning-fast registers, but they often look up parts on the WITT-JRs, maintain
merchandising displays on the sales floor and greet customers as they enter the 
store.                                                                          

DIY - Do-it-yourself. DIYers tackle their own repair jobs.                      

Technicians - Formerly known as auto mechanics. These people make a living      
serving the do-it-for-me (DIFM) market.                                         

WITTDTJR - What It Takes To Do The Job Right. A cornerstone, a state-of-mind, a 
way of doing business found only at the nation's #1 auto parts chain.           

WITT-JR - from the root "WITTDTJR." It's the parts counter computer that        
AutoZoners use to help customers find the right parts and information.          


ARS4th Page of 35TOC1stPreviousNext↓BottomJust 4th

[AUTOZONE(R) LOGO ON STORE APPEARS HERE]                                        
To our Customers, AutoZoners and Stockholders,                                  

    We kicked off our 20th year of business much like we ended our 19th - with
an acquisition. In October, we purchased 100 terrific Express locations from Pep
Boys.                                                                           

But FY99 wasn't about acquiring stores. Instead, we concentrated our  
efforts on weaving the AutoZone culture into the stores we'd acquired from Pep  
Boys and Chief and making those locations more profitable. In a few cases, that 
meant closing a store that was too close to an AutoZone or was situated in an   
underperforming location or undersized building. For others it meant relocating 
a store to more productive property. But the majority of our efforts went toward
converting acquired stores as quickly -- and economically -- as possible.       

     We knew earning the expected return on those investments meant transforming
them into full-fledged AutoZone stores -- complete with new signs, new systems, 
new parts and a new passion for serving customers. And by the end of the year,  
that aggressive conversion schedule was complete with 445 acquired stores       
changed over. Early results have confirmed our eagerness to convert those       
stores. Average weekly sales have shown sizable increases at both the former    
Express locations and Chief stores since the conversions.                       

    Of course, there's a cost that comes with those numbers. The vast majority
of the Chief stores were in California, a state where everything seems to be    
more expensive - including labor. It didn't take us long to realize we'd        
underputted a bit in forecasting the conversion costs. But we still managed to  
increase EPS 10% over the prior year to $1.63 per share.                        

Other significant financial accomplishments included:                     

. Sales rose 27% to $4.12 billion                                         

. Comparable store sales increased by 4%                                  

. Net income increased 7% to $244.8 million                               

We're proud to report our accomplishments in FY99 weren't limited to  
acquired stores. We strengthened our position in existing markets and entered   
several new markets with an internal growth plan that gave us 54 net new        
AutoZone stores last year. Included in that number were the 191 stores we closed
last year. The bulk of those closings were the acquired stores mentioned        
earlier. The remaining handful were underperforming AutoZone stores. It's       
important to point out that in our 20 year history, we've closed less than two  
percent of our internally developed stores.                                     

Store development reached an exciting new milestone last year as we   
embarked upon our first international venture. We opened six stores in Mexico   
near the U.S. border. While we're still getting a feel for the culture and      
business climate, we're very encouraged by the early results there. Future      
expansion will be slow and deliberate as we continue to learn better ways to    
meet the needs of our Mexican customers.                                        

  Along with the progress in the field, we made a few changes at the store
support center in Memphis. Extensive searches outside the company produced      
important additions to our senior management team.                              

    Gene Auerbach was named senior vice president, store development, customer
satisfaction. He replaces Lawrence Evans who retired at the end of the fiscal   
year. Gene's strong domestic and international retail experience includes three 
years as director of Asian operations for The Dairy Farm Company, an            
international operator of supermarkets, drugstores, convenience stores and      
restaurants. His proven organizational skills and P&L discipline are what we're 
counting on to lead our ambitious store expansion plans.                        

     Bruce Clark joined the company as chief information officer and senior vice
president, systems, technology and support, customer satisfaction. He filled the
vacancy left when Steve Valentine took on new responsibilities in store         
operations.                                                                     

[BAR GRAPHS APPEAR HERE SHOWING:                                                

Operating       Net             Earnings        
Sales           Profit          Income          Per share                       
($ millions)    ($ millions)    ($ millions)    ($)                             
95      1,808   95     228      95       139    95      .93                     
96      2,243   96     269      96       167    96     1.11                     
97      2,691   97     321      97       195    97     1.28                     
98      3,243   98     382      98       228    98     1.48                     
99      4,116   99     433      99       245    99     1.63]                    

2 


ARS5th Page of 35TOC1stPreviousNext↓BottomJust 5th

Bruce has vast experience in retail systems, most recently as CIO and senior    
vice president for Brylane, Inc. -- a consumer catalog business which includes  
Lane Bryant and Chadwick's of Boston. Bruce will be responsible for furthering  
our competitive edge in the evolving field of technology.                       

Joe Fabiano was brought in as chief people officer and senior vice    
president, human resources, customer satisfaction. Joe's extensive experience in
domestic and international human resources management includes time as vice     
president, human resources for Tricon Global Restaurants and senior vice        
president, human resources for Gruma Corporation. Joe's focus will be on making 
AutoZone the employer of choice in all of retailing.                            

   AutoZone's stock repurchase program, which was first announced in January
1998, was significantly increased during FY99. At the end of the fiscal year,   
our board had approved $400 million of company stock to be repurchased, dating  
back to the initial announcement. We closed out the year with over $260 million 
of stock already repurchased and another $100 million under contract to buy. We 
consider this ongoing program to be a wise investment.                          

     Outside of the auto parts business, FY99 was a year of visible progress for
our other businesses, as well.                                                  

     At TruckPro, we introduced a fantastic new store design which includes some
retail concepts that have proven successful in our AutoZone stores. It features 
an updated logo, better in-store signage and a larger sales floor. Most         
importantly, we've expanded the selection. The new layout offers our heavy-duty 
customers a much greater selection of parts and accessories. We've updated 23   
stores with the new look. We also incorporated the changes in the three new     
TruckPro stores opened last year, bringing the store count to 46. So far, our   
heavy-duty customers have responded favorably, and plans are to convert the     
remaining stores as soon as it's feasible.                                      

ALLDATA continues to make major strides as the leading provider of    
electronic diagnostic and repair information. To see the latest venture, cast   
your browser out to www.alldatadiy.com. There, you'll see the first generation  
of AutoZone's web commerce. Launched in June, this site offers ALLDATA's        
world-class diagnostic and repair information on a paid subscription basis to   
anybody with Internet access. A link on AutoZone's home page directs our        
customers to this new and exciting addition to the information superhighway.    

  We'll continue to find ways to improve and enhance these other ventures.
But the thing we're most looking forward to in FY00 is the opportunity to really
focus on what we do best -- selling auto parts. With the acquisitions and       
conversions behind us, our core domestic business will get the bulk of our      
attention. And the energy that went into completing the rigorous conversion     
schedule can now be directed toward the principles that made us the industry    
leader -- things like our enduring culture, our cutting-edge store development  
concepts, our passion for providing the best parts and our famous customer      
service.                                                                        

 That focus on the core business is reflected in this annual report. Our
20th birthday created a terrific opportunity to talk about the basic ideas on   
which we were founded. Ideas that were so fundamentally right for our business  
back in 1979 that 20 years later, they're still the guiding principles for all  
40,483 AutoZoners. They're absolutely what it takes to keep us in the clear-cut 
lead and to carry us miles (or kilometers) into the future.                     

[BAR GRAPH APPEARS HERE SHOWING:                                                

After Tax Return                                                                
On Average Equity                                                               
95            23%                                                               
96            22%                                                               
97            20%                                                               
98            19%                                                               
99            19%]                                                              

/s/ John Adams                            /s/ Tim Vargo       

John Adams                                Tim Vargo       
Chairman & CEO                           President & COO      
Customer Satisfaction                    Customer Satisfaction      

[PHOTO OF JOHN ADAMS APPEARS HERE]       [PHOTO OF TIM VARGO APPEARS HERE]      

3 


ARS6th Page of 35TOC1stPreviousNext↓BottomJust 6th

Service                                                                         

    It's amazing we sold $4 billion worth of parts in FY99 considering all the
stuff we gave away for free. Seriously, we didn't charge a dime for all kinds of
services someone else might have made a killing on.                             

Take our free testing. Somebody pushes a dead car into our parking lot
desperately wanting a new battery, but we hold off the sale by rolling the ARBST
out to the ailing vehicle. The AutoZoner flips a few switches, sets off a few   
bells and whistles -- the next thing you know, we're selling this customer a new
alternator and recharging the healthy battery for free.                         

  What gives? Hey, he didn't need a new battery. His bad alternator wasn't
putting out a charge, and as a result, the battery couldn't do its job. If we   
hadn't offered the free test, he would've returned the next day with an equally 
dead (though brand new!) Duralast Gold battery. And he'd be twice as mad.       

Instead, we've made a customer for life.                              

 And the list goes on. How many stores will sell you the right parts and
loan you the tools to get the job done?                                         

It's crazy. And the customers love it.                                

They love when an AutoZoner has an extra minute to install their wiper
blades or headlights. For free! No tipping allowed.                             

   They love the lightning-fast check-outs. Ever met a DIYer who wasn't in a
hurry? We haven't, either. That's why we keep back-up AutoZoners assigned to    
every open register in case the primary CSR is busy carrying a new battery out  
to a customer's car.                                                            

 But the crown jewel sits atop the parts counter. Those WITT-JRs pack in
hundreds of thousands of bits of priceless information -- just what our         
customers need to do the job right. Not only do we cram the right parts         
information in there, but we've got all kinds of vehicle specifications,        
diagnostic tips and the industry's only national electronic warranty database.  

   This database, still without peers after seven years online, tracks every
warranty so the customer doesn't have to worry about losing receipts or moving  
around the country. We know our customers' cars -- no matter where they drive.  

  Creating loyal customers like this makes for strong sales. That's why we
started giving stuff away in 1979, and 20 years later, it's still what it takes 
to do the job right.                                                            

[PHOTOS APPEAR HERE OF AUTOZONE EMPLOYEES WORKING WITH CUSTOMERS]               

4 


ARS7th Page of 35TOC1stPreviousNext↓BottomJust 7th

[PHOTO OF AUTOZONE EMPLOYEES WORKING WITH CUSTOMERS APPEARS HERE]               

5 


ARS8th Page of 35TOC1stPreviousNext↓BottomJust 8th

Parts                                                                           

  You can have the best customer service in the world, but without quality
parts, you'd be spinning your wheels.                                           

 We, however, have been gripping the road for more than 20 years even as
parts technology has evolved.                                                   

Some people say this evolution has made cars too difficult for our    
customers to work on. We can give them more than 19,000 reasons to disagree.    
That's how many parts our average store stocks.                                 

  Cars today still need the same basic parts they needed in 1979, and then
some. Brakes, water pumps, alternators, shocks, belts and hoses. The parts that 
launched our business are still on every car. Plus, we carry oxygen sensors,    
ignition control modules, coolant temperature sensors and all the other         
computer-controlled parts that have come along in the last 20 years.            

   Funny thing is, we don't carry the most parts in the industry, and that's
the point.                                                                      

Our edge is that we have the right parts. What good are more parts if 
they're collecting dust? Our state-of-the-art flexogram system determines which 
parts each store needs to serve its specific customer base. Down to the         
neighborhood. It gathers data from customer requests and past sales to create a 
neighborhood profile -- and automatically stocks the shelves accordingly.       

     Powerful. Efficient. Profitable. It's all part of knowing our customers and
satisfying their needs.                                                         

To move these parts off the shelves, we launch a two-pronged attack.  

For starters, our customers never have to wait for a sale. We offer   
everyday low prices. In short, our buying power with vendors translates into    
buying power for the customer. The more we sell, the more they can buy with     
their dollar.                                                                   

   And the higher the quality, too. As industry leader, we can work with our
vendors to create some of the best aftermarket parts on the planet.             

  The cliche applies: It's not quantity, it's quality. It's what keeps our
customers on the road and us in the lead.                                       

[PHOTOS OF AUTOZONERS WORKING WITH PARTS APPEAR HERE]                           

6 


ARS9th Page of 35TOC1stPreviousNext↓BottomJust 9th

[PHOTO OF AUTOZONE TRACTOR-TRAILER APPEARS HERE]                                

7 


ARS10th Page of 35TOC1stPreviousNext↓BottomJust 10th

Stores                                                                          

  Twenty years ago, the typical aftermarket parts store was a dusty, dimly
lit room stacked indiscriminately with parts and accessories. Customer service  
was optional, and not very likely.                                              

And then came Forrest City, Arkansas, - home of our very first store. 

Fortunately, our founder came from a family of grocers - a lineage of 
customer service innovators who understood the value of what we now call "the   
box."                                                                           

     It's the space in which the customer meets your product and your people. It
can be a dark, forbidding warehouse, or, in AutoZone's case, a bright and clean 
environment where folks feel welcome.                                           

That was our gamble. That do-it-yourselfers prefer the modern retail  
experience, the experience that wasn't available anywhere else in 1979.         

We were right.                                                        

   Our colorful displays, our expertly designed parts aisles and, believe it
or not, our shiny linoleum floors, drew in quite a crowd of customers.          

    And competitors, too. So many, in fact, that industry analysts adopted the
term "Zone Clones" for those who choose to honor us with the highest form of    
flattery.                                                                       

But we always manage to stay ahead of the game. Our real estate group 
searches non-stop for the perfect location in every neighborhood and factors in 
maximum parking availability in every choice.                                   

  And we don't just drop the same size box in every neighborhood. Because,
let's face it, no two neighborhoods are alike. We do our homework to determine  
which of our store designs best fits the local market.                          

Yes, it's a science. And it pays off.                                 

With 2,717 applications of our formula - sparkling stores, top-quality
parts and trademark customer service - we think it's safe to say that what it   
took to do the job right on July 4, 1979, in Forrest City, Arkansas, is still   
what it takes today.                                                            

[PHOTO OF AUTOZONE EMPLOYEES APPEARS HERE]                                      

8 


ARS11th Page of 35TOC1stPreviousNext↓BottomJust 11th

[PHOTO OF AUTOZONE STORE APPEARS HERE]                                          

9 


ARS12th Page of 35TOC1stPreviousNext↓BottomJust 12th

[NOTE: The following is a Spanish translation of the prior English section.]    

[AutoZone Logo Appears Here]  

Reporte Anual de AutoZone   
todavia se trata de WITTDTJR  

Descripcion de la Compania                                                      

AutoZone es el indiscutible lider de la industria de partes y de        
informacion.                                                                    

 Vendemos partes para autos, accesorios, quimicos y aceite para motores, a
clientes que hacen las reparaciones por si mismos y a tecnicos profesionales a  
traves de 2,711 tiendas de AutoZone, en 39 estados de los Estados Unidos de     
Norte America y 6 tiendas en Mexico.                                            

Tambien vendemos partes para camiones pesados a traves de 46 tiendas    
TruckPro en 14 estados.                                                         

A traves de ALLDATA, proveemos diagnostico electronico e informacion de 
reparacion. Ofrecemos al tecnico profesional un paquete completo de computacion,
y el DIYer puede comprar informacion especifica de su vehiculo en un CD-ROM. El 
mundo que este conectado por cable puede obtener esta informacion basandose en  
una subscripcion en el alldatadiy.com.                                          

Felicitaciones a nosotros En medio de la adquisicion de las locaciones  
Express de Pep Boys, las conversiones de las tiendas Chief y nuestro empuje para
entrar a Mexico, tambien celebramos durante FY99 nuestro cumpleanos numero 20.  

[PHOTO OF AUTOZONE STORE APPEARS HERE]          

Hemos cambiado bastante en los ultimos 20 anos. Hemos dejado el nido de 
nuestra compania matriz, hemos cambiado nuestro nombre, nos hemos convertido en 
una compania con acciones para el publico y este ano llegamos a la lista de las 
companias Fortune 500.                                                          

A traves de todo, nuestra cultura - la fuerza que es la base de nuestra 
fortaleza - ha permanecido solida.                                              

  Debido a esta cultura firme, algunas veces hablamos nuestro propio idioma.
Para ayudarlo a descifrar este reporte, le ofrecemos un pequeno glosario de     
terminos. Por supuesto que este no es un manual sobre la cultura de AutoZone,   
pero lo llevara del principio al fin en las siguientes ocho paginas.            

ARBST - (Alternator Regulator Battery Starter Tester) Aparato para hacer prueba 
del Alternador Regulador Bateria y Encendido. Es una carretilla que utilizamos  
para diagnosticar sin costo alguno, los vehiculos de los clientes en el         
estacionamiento.                                                                

AutoZoner - Cualquier persona que sirve a clientes en la cadena de partes para  
automoviles # 1 de la nacion.                                                   

CSR - (Customer Service Representative) Representante de Servicio al Cliente.   
Estos AutoZoners no solo manejan nuestras rapidas cajas de registro, pero muy a 
menudo localizan partes en el WITT-JRs, mantienen los anaqueles de exhibicion en
el piso de venta y reciben a los clientes cuando entran a la tienda.            

DIY - (Do-it-yourself) Hagalo-Usted-Mismo. Los DIYers hacen sus propios trabajos
de repara cion.                                                                 

Technicians - Conocidos formalmente como mecanicos de autos. Estas personas     
ganan la vida sirviendo al mercado de hazlo por mi (DIFM) (do-it-for-me).       

WITTDTJR - (What It Takes To Do The Job Right) Lo que se necesita para hacer el 
trabajo correctamente. La base, lo que sentimos, la manera de hacer negocios que
solo se puede encontrar en la cadena de partes para automoviles #1 de la nacion.

WITT-JR - de la raiz "WITTDTJR." Es la computadora del mostrador que los        
AutoZoners utilizan para ayudar a los clientes a encontrar las partes e         
informacion correcta.                                                           

Estimados Clientes,                                                             
AutoZoners y Accionistas,                                                       

  Comenzamos nuestro vigesimo ano de estar en el negocio, de la misma manera
que terminamos nuestro decimonoveno ano - con una adquisicion. En octubre       
compramos 100 extraordinarias locaciones Express de Pep Boys.                   

 Pero nuestro ano fiscal 99 no se trato de adquirir tiendas. Al contrario,
nosotros concentramos nuestros esfuerzos en entrelazar la cultura de AutoZone   
dentro de las tiendas adquirido de Pep Boys y las tiendas Chief, y hacer esas   
locaciones mas rentables. En pocos casos, eso significo cerrar una tienda que   
estaba muy cerca de una de AutoZone o estaba situada en una locacion de bajo    
desempeno o en un edificio pequeno. Para otras, esto significo ubicar una tienda
a una propiedad mas productiva. Pero la mayoria de nuestros esfuerzos fueron    
encauzados a convertir las tiendas adquiridas tan rapidamente como fuera        
posible.                                                                        

Sabiamos que para ganar el rendimiento esperado en esas inversiones,    
significaba transformarlas en tiendas de AutoZone hechas y derechas - completas 
con senales nuevas, sistemas nuevos, partes nuevas y una nueva pasion por servir
a los clientes. Y para el final de ano, ese programa de conversion agresivo fue 
completado con el cambio completo de las 445 tiendas adquiridas. Los primeros   
resultados han confirmado nuestro anhelo por convertir esas tiendas. Promedios  
de ventas semanales han demostrado un incremento de buen tamano en ambas        
locaciones, las Express y las tiendas Chief, desde la conversion.               

Por supuesto que existe un costo que viene con esos resultados. La gran 
mayoria de las tiendas Chief estaban en California, un estado donde todo parecer
ser mas caro - incluyendo la mano de obra. No nos tomo mucho tiempo darnos      

10  


ARS13th Page of 35TOC1stPreviousNext↓BottomJust 13th

cuenta de que habiamos dado un golpe un poco corto, al pronosticar los costos de
conversion. Sin embargo, podimos aumentar las ganancias de las acciones por 10% 
sobre el ano pasado ha $1.63 por cada accion.                                   

Otros logros financiero significantes incluyen:                                 

. Ventas crecieron 27% hasta $4.12 billones                                   
. Ventas de tiendas comparable aumentaron por un 4%                           
. Ingreso neto aumento 7% hasta $244.8 millones                               

 Estamos orgullosos de reportar que nuestros logros en FY99, no estuvieron
limitados a adquirir tiendas. El ano pasado reforzamos nuestra posicion en      
mercados existentes y entramos en varios nuevos mercados, con un plan de        
crecimiento interno que nos dio 54 tiendas nuevas de AutoZone. Incluido en esos 
numeros estan las 191 tiendas que cerramos el ano pasado. La mayor parte de     
aquellas que cerraron fueron las tiendas adquiridas que mencionamos             
anteriormente. El resto fueron tiendas de AutoZone que tenian un bajo desempeno.
Es importante indicar que en nuestra historia de 20 anos, nosotros hemos cerrado
menos del dos por ciento de nuestras tiendas desarrolladas internamente.        

   [PHOTO OF AUTOZONE EMPLOYEE WORKING WITH CUSTOMER APPEARS HERE]

   El desarrollo de tiendas alcanzo un nuevo paso muy excitante el ano pasado,
al momento en que nos embarcamos en nuestra primera aventura internacional.     
Abrimos seis tiendas en Mexico, cerca del borde con los EE.UU. Mientras todavia 
estamos acostumbrandonos a la cultura y al clima de negocios, estamos muy       
alentados por los primeros resultados. La expansion futura sera despacio y      
deliberada, al mismo tiempo que continuamos aprendiendo la mejor manera de      
llenar las necesidades de nuestros clientes Mexicanos.                          

   Al mismo tiempo con el progreso en el campo, hemos hecho algunos cambios en
el centro de soporte a tiendas en Memphis. Extensas busquedas fuera de la       
compania crearon adiciones importantes a nuestro equipo de gerencia.            

Gene Auerbach fue nombrado senior vice president, desarrollo de tiendas,
satisfaccion del cliente. El reemplaza a Lawrence Evans el cual se jubilo al    
final del ano fiscal. Su fuerte experiencia domestica e internacional en ventas 
al por menor, incluyen tres anos como director de operaciones de Asia para The  
Dairy Farm Company, una compania internacional operadora de supermercados,      
farmacias, tiendas de conveniencia y restaurantes. Contamos en sus habilidades  
demostradas de organizacion y disciplina en cuentas de perdidas y ganancias para
guiar nuestros ambiciosos planes de expansion de tiendas.                       

 Bruce Clark se unio a la compania como oficial principal de informacion y
senior vice president, de sistemas, tecnologia y soporte, y satisfaccion del    
cliente. El lleno la vacante que quedo cuando Steve Valentine tomo las nuevas   
responsabilidades de operaciones de tiendas. Bruce tiene una gran experiencia en
sistemas de ventas al por menor, recientemente era CIO y senior vice president  
de Brylane, Inc. - un negocio de ventas al consumidor por catalogo, el cual     
incluye Lane Bryant and Chadwick's of Boston. Bruce sera responsable por        
promover nuestro margen competitivo en el creciente campo de la tecnologia.     

Joe Fabiano fue traido como oficial principal de personal y senior vice 
president, recursos humanos, satisfaccion del cliente. La extensa experiencia de
Joe en manejo de recursos humanos, domestica e internacionalmente, incluye      
tiempo como vice president de recursos humanos para Tricon Global Restaurants y 
senior vice president, recursos humanos Gruma Corporation. El enfoque de Joe    
sera en hacer de AutoZone la compania de preferencia en ventas al por menor.    

 El programa de recompra de acciones de AutoZone, el cual fue anunciado en
enero de 1998, fue aumentado significadamente durante FY99. Al final del ano    
fiscal, nuestra mesa directiva ha aprobado que se compren nuevamente $400       
millones de acciones de la compania, remontandose en la declaracion inicial.    
Cerramos el ano con mas de $230 millones de acciones de recompra y otros $100   
millones bajo contrato de compra. Pensamos que este programa en marcha es una   
inversion prudente.                                                             

Fuera del negocio de partes para automoviles, FY99 fue tambien un ano de
progresos visibles para nuestros otros negocios.                                

    Introducimos en TruckPro un fantastico diseno nuevo, el cual incluye algunos
conceptos de venta al por menor que han probado ser exitosos en nuestras tiendas
de AutoZone. Tiene un nuevo logotipo, mejores senales dentro de la tienda y un  
piso de venta mas grande. Lo mas importante, hemos expandido la seleccion. La   
nueva distribucion de la tienda ofrece a nuestros clientes de servicio pesado   
muchas mas partes y accesorios. Hemos modernizado 23 tiendas con esta nueva     
apariencia. Tambien hemos incorporado los cambios en las tres nuevas tiendas de 
TruckPro que abrieron el ano pasado, con un total 46 tiendas. Hasta ahora,      
nuestros clientes de servicio pesado han respondido favorablemente, y nuestro   
plan es de convertir el restante de las tiendas tan pronto como sea             
economicamente posible.                                                         

ALLDATA continua haciendo grandes progresos como el proveedor lider de  
diagnostico electronico e informacion de reparacion. Para ver el ultimo         
proyecto, dirija su browser hacia www.alldataiy.com. Usted vera la primera      
generacion de comercio en la red de AutoZone. Esta site fue lanzada en junio, y 
ofrece                                                                          

11  


ARS14th Page of 35TOC1stPreviousNext↓BottomJust 14th

informacion de diagnostico y de reparacion de clase mundial de ALLDATA, a       
todos aquellos que tengan acceso a la red internacional, basandose en el pago de
una suscripcion. Existe un link en la pagina principal de AutoZone que dirige a 
nuestros clientes a esta interesante adicion de informacion en la red           
internacional.                                                                  

Continuamos descubriendo maneras de mejorar y aumentar estos otros      
proyectos. Pero una cosa que estamos esperando con ansiedad en FY00, es la      
oportunidad de enfocarnos realmente en lo que hacemos mejor - vender partes para
automoviles. Con las adquisiciones y conversiones siendo cosa del pasado,       
nuestro principal negocio domestico tendra la mayor parte de nuestra atencion. Y
toda la energia que fue dirigida en completar este programa riguroso de         
conversion, puede ser ahora dirigida hacia los principios que nos hicieron el   
lider de la industria - como son nuestra cultura perdurable, nuestros conceptos 
revolucionarios de desarrollo de tiendas, nuestra pasion por proveer las mejores
partes y nuestro famoso servicio al cliente.                                    

 Ese enfoco en nuestro negocio principal se refleja en el reporte anual de
este ano. Nuestro vigesimo cumpleanos crea una extraordinaria oportunidad para  
hablar sobre nuestras ideas basicas, en las cuales fuimos fundados. Las ideas   
que fueron fundamentalmente apropiadas para nuestro negocio en el ano de 1979 y 
que 20 anos despues, siguen siendo las guias principales para todos los 40,483  
AutoZoners. Estas ideas son las que absolutamente necesitamos para mantenernos  
como lideres definitivos y para llevarnos por millas (o kilometros) hacia el    
futuro.                                                                         

 [PHOTO OF AUTOZONE EMPLOYEE APPEARS HERE]

/s/ John Adams                    /s/ Tim Vargo               

John Adams                        Tim Vargo               
Chairman & CEO                   President & COO              
Satisfaccion del Cliente         Satisfaccion del Cliente               

Servicio                                                                        

    Es increible que vendimos $4 billones de un total de partes en FY99, tomando
en cuenta todas las cosas que entregamos gratis. De verdad, nosotros no cobramos
ni un centavo por muchos tipos de servicio que cualquier otra persona hubiera   
cobrado por mucho dinero.                                                       

Por ejemplo, nuestras pruebas gratis. Alguien empuja en automovil casi  
muerto a nuestro estacionamiento buscando desesperadamente una bateria, pero    
nosotros nos esperamos y traemos nuestro ARBST cerca del automovil. El AutoZoner
prende algunos interruptores, hace sonar algunas campanas y silbatos - lo que   
sigue a continuacion, le estamos vendiendo al cliente un alternador nuevo y le  
recargamos la bateria, la cual esta en buenas condiciones, sin costo alguno.    

  Que paso? Este cliente no necesitaba una bateria nueva. Lo que paso es que
su alternador viejo no estaba descargando correctamente, y como resultado, la   
bateria no podia hacer su trabajo. Si no hubiesemos ofrecido el servicio de     
prueba gratis, el hubiese regresado al dia siguiente con una bateria Duralast   
Gold igualmente muerta (aunque supuestamente nueva). Y el hubiese estado mucho  
mas molesto.                                                                    

En vez de eso, nosotros logramos obtener un cliente para siempre.       

    Y la lista continua. ?Cuantas tiendas le van a vender las partes correctas y
ademas prestarle las herramientas para hacer el trabajo correctamente?          

Es algo disparatado. Y a los clientes les encanta.                      

Les encanta cuando un AutoZoner tiene un minuto extra para instalar los 
hules del limpiaparabrisas o los faros delanteros. Gratis! No se permiten       
propinas.                                                                       

  Les encanta poder pagar rapidamente. ?Alguna vez a conocido a un DIYer que
no este deprisa? Nosotros no hemos conocido a ninguno. Es por eso que mantenemos
AutoZoners de respaldo, los cuales estan designados en cada caja de registro    
abierta, en caso de que el principal CSR este ocupado cargando una bateria nueva
al automovil de uno de los clientes.                                            

Pero la joya principal esta asentada sobre el mostrador. Esos WITT-JRs  
contienen cientos de mieles de pedazos de informacion invaluable - precisamente 
lo que nuestros clientes necesitan para hacer el trabajo correctamente. No      
solamente tenemos la informacion correcta de partes dentro de ellos, pero       
tambien tenemos todo tipo de especificaciones de vehiculos, sugerencias para    
diagnostico y la unica base de datos electronica en la nacion, que mantiene     
informacion sobre garantias.                                                    

   No existe nada semejante a esta base de datos, aun despues de siete anos de
estar en linea, la base de datos mantiene la pista de cualquier garantia, para  
que el cliente no tenga que preocuparse de no perder su recibo o pueda mudarse a
cualquier lugar en el pais. Conocemos los automoviles de nuestros clientes - no 
importa donde los manejen.                                                      

    El crear clientes leales de esta manera hace que las ventas sean fuertes. Es
por eso que empezamos a ofrecer cosas sin costo alguno en 1979, y 20 anos       
despues, es aun lo que se necesita para hacer el trabajo correctamente.         

12  


ARS15th Page of 35TOC1stPreviousNext↓BottomJust 15th

Partes                                                                          

   Usted puede tener el mejor servicio al cliente en el mundo, pero sin partes
de calidad, usted estara dando vueltas a sus llantas sin resultado.             

 Sin embargo, nuestras llantas estan bien agarradas al suelo por mas de 20
anos, aun cuando la tecnologia de partes ha evolucionado.                       

Algunas personas dicen que esta evolucion ha hecho que sea dificil que  
nuestros clientes trabajen en sus automoviles. Nosotros podemos darle mas de    
19,000 razones por las cuales no estamos de acuerdo. Ese es el numero de partes 
que nuestra tienda promedio mantiene en existencia.                             

   Los automoviles de hoy necesitan las mismas partes que necesitaban en 1979,
y algunas mas. Frenos, bombas de agua, alternadores, suspensiones, cinturones y 
mangueras. Las partes que lanzaron nuestro negocio siguen estando en cada       
automovil. Ademas, nosotros tenemos censores de oxigeno, modulos de control de  
encendido, censores de temperatura de enfriadores y todas las demas partes      
controladas por computadora que han aparecido en los ultimos 20 anos.           

Lo mas curioso es, nosotros no tenemos la mayoria de las partes en la   
industria, y ese es el porque.                                                  

 [PHOTO OF AUTOZONE EMPLOYEE TESTING BATTERY APPEARS HERE]

    Nuestra ventaja es que tenemos las partes correctas. ?Que tan buenas son las
partes si lo unico que hacen es coleccionar polvo? Nuestro moderno sistema,     
flexogram, determina cuales son las partes que cada tienda necesita para servir 
a la base especifica de clientes. Basandose en el vecindario. Recolecta         
informacion basandose en las solicitudes del cliente y en las ventas pasadas,   
para crear un perfil - y automaticamente surte los anaqueles de acuerdo a esto. 

Es poderoso. Eficiente. Rentable. Todo forma parte de conocer a nuestros
clientes y de satisfacer sus necesidades.                                       

    Para mover estas partes de nuestros anaqueles, lanzamos un ataque bilateral.

Para empezar, nuestros clientes nunca tienen que esperar a que salgan   
ofertas. Nosotros ofrecemos los precios mas bajos todos los dias. En resumen,   
nuestro poder de compra con los proveedores, se convierte en poder de compra    
para el cliente. Mientras mas vendemos, ellos pueden compran mas con su dinero. 

   Y tambien mas alta sera la calidad. Como el lider en la industria, nosotros
podemos trabajar con nuestros proveedores para crear el mejor mercado secundario
de partes en el planeta.                                                        

   El cliche es aplicable: Lo que importa no es la cantidad, es la calidad. Es
lo que mantiene a nuestros clientes en el camino y a nosotros a la cabeza.      

Tiendas                                                                         

 Hace veinte anos, la tienda de partes tipica de mercado secundario estaba
empolvada, en un cuarto iluminado pobremente, con partes y accesorios           
amontonados indiscriminadamente. El servicio al cliente era opcional, y no muy  
probable.                                                                       

Y entonces vino Forrest City, Arkansas, - el hogar de nuestra primera   
tienda.                                                                         

 Afortunadamente nuestro fundador vino de una familia de almaceneros - con
una estirpe de innovadores de servicio al cliente, quienes entendian el valor de
lo que ahora llamamos "la caja".                                                

  Es el espacio en el cual el cliente conoce su producto y a su gente. Puede
ser una bodega obscura y no muy amistosa, o, en el caso de AutoZone, un ambiente
brillante y limpio, donde las personas se sientes bienvenidas.                  

 Ese era nuestro riesgo. Las personas que les gusta hacer las cosas por si
mismas, prefieren la experiencia de compra por menudeo que sea moderna, es la   
experiencia que nos estaba disponible en cualquier otro lugar en el ano de 1979.

Nosotros estabamos en lo correcto.                                      

  Nuestras exhibiciones vibrantes, nuestros pasillos disenados habilmente y,
aunque no lo crea, nuestros pisos brillosos de linoleo, atrajo una buena        
multitud de clientes.                                                           

   Y tambien a los competidores. En efecto, atrajo a tantos, que los analistas
de la industria empesaron ha usar la frase "Zone Clones" (las reproducciones de 
Zone), para aquellos que decidieron hacernos honor con la mas alta forma de     
adulacion.                                                                      

Pero siempre nos las arreglamos para mantenernos a la cabeza del juego. 
Nuestro grupo de bienes raices siempre esta buscando las locaciones perfectas en
cada vecindario, y toma como factor importante la habilidad de estacionamiento  
en cada seleccion.                                                              

   Y no solamente echamos la caja del mismo tamano en cada vecindario. Ya que,
vamos a ser honestos, no todos los vecindarios son iguales. Nosotros hacemos    
nuestro trabajo preliminar para determinar cual de nuestros disenos de tienda es
el mas apropiado para el mercado local.                                         

Asi es, es una ciencia.  Y nos da resultados.                           

   Con 2,717 aplicaciones en nuestra formula - tiendas radiantes, partes de la
mejor calidad y el mejor servicio al cliente - pensamos que es muy seguro decir 
que lo que se necesito el dia 4 de julio de 1979 para hacer el trabajo          
correctamente en Forrest City, Arkansas, es aun lo que se necesita el dia de    
hoy.                                                                            

13  


ARS16th Page of 35TOC1stPreviousNext↓BottomJust 16th

                                                        [Enlarge/Download Table]


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

                                                                            5-Year    10-Year                              
                                                                           Compound  Compound    Fiscal Year Ended August  
                                                                            Growth    Growth       1999          1998      
                                                                                               ----------------------------

                                                                                                                           
Income           Net sales..............................................     22%       23%     $4,116,392     $3,242,922   
Statement        Cost of sales, including warehouse and                                                                    
Data                delivery expenses...................................                        2,384,970      1,889,847   
                 Operating, selling, general and                                                                           
                    administrative expenses.............................                        1,298,327        970,768   
                                                                                               ----------------------------

                 Operating profit.......................................     18%       33%        433,095        382,307   
                 Interest income (expense) - net........................                          (45,312)       (18,204)  
                                                                                               ----------------------------

                 Income before income taxes.............................     15%       38%        387,783        364,103   
                 Income taxes...........................................                          143,000        136,200   
                                                                                               ----------------------------

                 Net income.............................................     16%       39%     $  244,783     $  227,903   
                                                                                               ============================

                 Diluted earnings per share.............................     16%       37%          $1.63          $1.48   
                                                                                               ============================

                 Adjusted weighted average shares for                                                                      
                    diluted earnings per share..........................                          150,257        154,070   

Balance Sheet    Current assets.........................................                       $1,225,084     $1,117,090   
Data             Working capital........................................                          224,530        257,261   
                 Total assets...........................................                        3,284,767      2,748,113   
                 Current liabilities....................................                        1,000,554        859,829   
                 Debt...................................................                          888,340        545,067   
                 Stockholders' equity...................................                        1,323,801      1,302,057   

Selected         Number of domestic auto parts stores                                                                      
Operating Data      at beginning of year................................                            2,657          1,728   
                      New stores........................................                              245            952   
                      Replacement stores................................                               59             12   
                      Closed stores.....................................                              191             23   
                      Net new stores....................................                               54            929   
                 Number of domestic auto parts stores at end of year....                            2,711          2,657   
                 Total domestic auto parts store square footage (000's).                           17,405         16,499   
                 Percentage increase in domestic auto parts store                                                          
                    square footage......................................                                5%            42%  
                 Percentage increase in domestic auto parts                                                                
                    comparable store net sales..........................                                4%             2%  
                 Average net sales per domestic auto parts store (000's)                           $1,465         $1,568   
                 Average net sales per domestic auto parts store                                                           
                    square foot.........................................                             $232           $238   
                 Total employment.......................................                           40,483         38,526   
                 Gross profit - percentage of sales.....................                             42.1%          41.7%  
                 Operating profit - percentage of sales.................                             10.5%          11.8%  
                 Net income - percentage of sales.......................                              5.9%           7.0%  
                 Debt-to-capital - percentage...........................                             40.2%          29.5%  
                 Inventory turnover.....................................                              2.3x           2.3x  
                 Return on average equity...............................                               19%            19%  

  *53 weeks. Comparable store sales, average net sales per store and average
 net sales per store square foot for fiscal year 1996 and 1991 have been
adjusted to exclude net sales for the 53rd week.                      

14


ARS17th Page of 35TOC1stPreviousNext↓BottomJust 17th

                                                        [Enlarge/Download Table]

                                                                                             Fiscal Year Ended August          
                                                                                         1997          1996*          1995     
                                                                                     ------------------------------------------

                                                                                                                               
Income          Net sales........................................................... $2,691,440     $2,242,633     $1,808,131  
Statement Data  Cost of sales, including warehouse and delivery expenses............  1,559,296      1,307,638      1,057,033  
                Operating, selling, general and administrative expenses.............    810,793        666,061        523,440  
                                                                                     ------------------------------------------

                Operating profit....................................................    321,351        268,934        227,658  
                Interest income (expense) - net.....................................     (8,843)        (1,969)           623  
                                                                                     ------------------------------------------

                Income before income taxes..........................................    312,508        266,965        228,281  
                Income taxes........................................................    117,500         99,800         89,500  
                                                                                     ------------------------------------------

                Net income..........................................................  $ 195,008    $   167,165    $   138,781  
                                                                                     ==========================================

                Diluted earnings per share..........................................      $1.28          $1.11          $0.93  
                                                                                     ==========================================

                Adjusted weighted average shares for diluted earnings per share.....    152,535        151,238        149,302  

Balance Sheet   Current assets......................................................  $ 778,802      $ 613,097     $  447,822  
Data            Working capital.....................................................    186,350            219         30,273  
                Total assets........................................................  1,884,017      1,498,397      1,111,778  
                Current liabilities.................................................    592,452        612,878        417,549  
                Debt................................................................    198,400         94,400         13,503  
                Stockholders' equity................................................  1,075,208        865,582        684,710  

Selected        Number of domestic auto parts stores at beginning of year...........      1,423          1,143            933  
Operating Data       New stores.....................................................        308            280            210  
                     Replacement stores.............................................         17             31             29  
                     Closed stores..................................................          3              0              0  
                     Net new stores.................................................        305            280            210  
                Number of domestic auto parts stores at end of year.................      1,728          1,423          1,143  
                Total domestic auto parts store square footage (000's)..............     11,611          9,437          7,480  
                Percentage increase in domestic auto parts store square footage.....         23%            26%            26% 
                Percentage increase in domestic auto parts comparable                                                          
                     store net sales................................................          8%             6%             6% 
                Average net sales per domestic auto parts store (000's).............     $1,691         $1,702         $1,742  
                Average net sales per domestic auto parts store square foot.........       $253           $258           $269  
                Total employment....................................................     28,700         26,800         20,200  
                Gross profit - percentage of sales..................................       42.0%          41.7%          41.5% 
                Operating profit - percentage of sales..............................       11.9%          12.0%          12.6% 
                Net income - percentage of sales....................................        7.2%           7.5%           7.7% 
                Debt-to-capital - percentage........................................       15.6%           9.8%           1.9% 
                Inventory turnover..................................................        2.5x           2.7x           2.9x 
                Return on average equity............................................         20%            22%            23% 



                                                                                              Fiscal Year Ended August         
                                                                                         1994          1993           1992     
                                                                                     ------------------------------------------

                                                                                                                               
Income          Net sales........................................................... $1,508,029     $1,216,793     $1,002,327  
Statement Data  Cost of sales, including warehouse and delivery expenses............    886,068        731,971        602,956  
                Operating, selling, general and administrative expenses.............    431,219        344,060        295,701  
                                                                                     ------------------------------------------

                Operating profit....................................................    190,742        140,762        103,670  
                Interest income (expense) - net.....................................      2,244          2,473            818  
                                                                                     ------------------------------------------

                Income before income taxes..........................................    192,986        143,235        104,488  
                Income taxes........................................................     76,600         56,300         41,200  
                                                                                     ------------------------------------------

                Net income.......................................................... $  116,386      $  86,935      $  63,288  
                                                                                     ==========================================

                Diluted earnings per share..........................................      $0.78          $0.59          $0.43  
                                                                                     ==========================================

                Adjusted weighted average shares for diluted earnings per share.....    148,726        147,608        145,940  

Balance Sheet   Current assets......................................................  $ 424,402      $ 378,467     $  279,350  
Data            Working capital.....................................................     85,373         92,331         72,270  
                Total assets........................................................    882,102        696,547        501,048  
                Current liabilities.................................................    339,029        286,136        207,080  
                Debt................................................................      4,252          4,458          7,057  
                Stockholders' equity................................................    528,377        396,613        278,120  

Selected        Number of domestic auto parts stores at beginning of year...........        783            678            598  
Operating Data       New stores.....................................................        151            107             82  
                     Replacement stores.............................................         20             20             14  
                     Closed stores..................................................          1              2              2  
                     Net new stores.................................................        150            105             80  
                Number of domestic auto parts stores at end of year.................        933            783            678  
                Total domestic auto parts store square footage (000's)..............      5,949          4,839          4,043  
                Percentage increase in domestic auto parts store square footage.....         23%            20%            17% 
                Percentage increase in domestic auto parts comparable store                                                    
                     net sales......................................................          9%             9%            15% 
                Average net sales per domestic auto parts store (000's).............     $1,758         $1,666         $1,570  
                Average net sales per domestic auto parts store square foot.........       $280           $274           $267  
                Total employment....................................................     17,400         15,700         13,200  
                Gross profit - percentage of sales..................................       41.2%          39.8%          39.8% 
                Operating profit - percentage of sales..............................       12.6%          11.5%          10.3% 
                Net income - percentage of sales....................................        7.7%           7.1%           6.3% 
                Debt-to-capital - percentage........................................        0.8%           1.1%           2.5% 
                Inventory turnover..................................................        3.0x           3.2x           3.0x 
                Return on average equity............................................         25%            26%            26% 



                                                                                             Fiscal Year Ended August          
                                                                                         1991*         1990           1989     
                                                                                                                               
Income          Net sales...........................................................   $817,962   $  671,725      $  535,843   
Statement Data  Cost of sales, including warehouse and delivery expenses............    491,261      416,846         341,130   
                Operating, selling, general and administrative expenses.............    247,355      205,609         169,786   
                                                                                     ------------------------------------------

                Operating profit....................................................     79,346       49,270          24,927   
                Interest income (expense) - net.....................................     (7,295)     (10,936)         (9,799)  
                                                                                     ------------------------------------------

                Income before income taxes..........................................     72,051       38,334          15,128   
                Income taxes........................................................     27,900       14,840           6,200   
                                                                                     ------------------------------------------

                Net income..........................................................   $ 44,151     $ 23,494     $     8,928   
                                                                                     ==========================================

                Diluted earnings per share..........................................      $0.33        $0.19           $0.07   
                                                                                     ==========================================

                Adjusted weighted average shares for diluted earnings per share.....    134,656      121,212         119,320   

Balance Sheet   Current assets......................................................  $ 233,439   $  191,736       $ 177,824   
Data            Working capital.....................................................     55,807       26,803          35,831   
                Total assets........................................................    397,776      327,368         296,546   
                Current liabilities.................................................    177,632      164,933         141,993   
                Debt................................................................      7,246       74,851          93,293   
                Stockholders' equity................................................    204,628       80,356          54,592   

Selected        Number of domestic auto parts stores at beginning of year...........        538          504             440   
Operating Data       New stores.....................................................         60           38              70   
                     Replacement stores.............................................          4            7               7   
                     Closed stores..................................................          0            4               6   
                     Net new stores.................................................         60           34              64   
                Number of domestic auto parts stores at end of year.................        598          538             504   
                Total domestic auto parts store square footage (000's)..............      3,458        3,031           2,758   
                Percentage increase in domestic auto parts store square footage.....         14%          10%             19%  
                Percentage increase in domestic auto parts comparable                                                          
                     store net sales................................................         12%          13%             10%  
                Average net sales per domestic auto parts store (000's).............     $1,408       $1,289          $1,135   
                Average net sales per domestic auto parts store square foot.........       $246         $232            $211   
                Total employment....................................................     11,700        9,300           7,900   
                Gross profit - percentage of sales..................................       39.9%        37.9%           36.3%  
                Operating profit - percentage of sales..............................        9.7%         7.3%            4.6%  
                Net income - percentage of sales....................................        5.4%         3.5%            1.7%  
                Debt-to-capital - percentage........................................        3.4%        48.2%           63.1%  
                Inventory turnover..................................................        2.6x         2.4x            2.4x  
                Return on average equity............................................         31%          35%             18%  

15


ARS18th Page of 35TOC1stPreviousNext↓BottomJust 18th

 Quarterly Summary
 (Unaudited)

                                                        [Enlarge/Download Table]

                                                                                                       Sixteen  
                                                                Twelve Weeks Ended                   Weeks Ended
                                                     -----------------------------------------------------------
                                                                (in thousands, except per share data)           
                                                     November 21,   February 13,        May 8,       August 28, 
                                                         1998           1999             1999           1999    
                                                     -----------------------------------------------------------
                                                                                                                
Net sales........................................... $  900,949      $  852,538      $  970,236   $   1,392,669 
Increase in comparable store sales..................          3%              8%              3%              2%
Gross profit........................................ $  376,482      $  353,493      $  408,933   $     592,514 
Operating profit....................................     89,815          67,273         104,312         171,695 
Income before income taxes..........................     81,300          57,039          93,135         156,309 
Net income..........................................     51,300          36,039          58,735          98,709 
Basic earnings per share............................       0.34            0.24            0.39            0.67 
Diluted earnings per share..........................       0.34            0.24            0.39            0.67 
Stock price range:                                                                                              
     High...........................................     $29.50          $35.00          $37.06          $33.31 
     Low............................................     $21.50          $29.69          $28.38          $23.13 


                                                     November 22,   February 14,        May 9,        August 29,
                                                         1997           1998             1998            1998   
                                                     -----------------------------------------------------------
                                                                                                                
Net sales........................................... $   675,274     $  607,097      $  743,661   $   1,216,890 
Increase in comparable store sales..................           7%             2%              2%              0%
Gross profit........................................ $   280,441     $  253,681      $  311,080   $     507,873 
Operating profit....................................      78,648         58,082          90,457         155,120 
Income before income taxes..........................      76,146         55,054          86,240         146,663 
Net income..........................................      47,546         34,354          53,940          92,063 
Basic earnings per share............................        0.31           0.23            0.35            0.60 
Diluted earnings per share..........................        0.31           0.22            0.35            0.60 
Stock price range:                                                                                              
     High...........................................      $32.75         $32.06          $36.25          $38.00 
     Low............................................      $27.00         $23.75          $29.00          $26.63 

16


ARS19th Page of 35TOC1stPreviousNext↓BottomJust 19th

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
                                          --------------------------------------
  Operating profit                          10.5         11.8           11.9
  Interest expense - net                     1.1          0.6            0.3
  Income taxes                               3.5          4.2            4.4
                                          --------------------------------------
   Net income                                 5.9%         7.0%           7.2%
                                          ======================================

Results of Operations                                                           

 For an understanding of the significant factors that influenced the Company's
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 Company's 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 1999 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 1998. 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.  

AutoZone's effective income tax rate was 36.9% of pre-tax income for fiscal 
1999 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 Company's newer auto parts
stores and the added sales of the Company's 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 1998 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 1997. 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.                    

AutoZone's effective income tax rate was 37.4% of pre-tax income for fiscal 
1998 and 37.6% for fiscal 1997.                                                 

17


ARS20th Page of 35TOC1stPreviousNext↓BottomJust 20th

Financial Market Risk                                                           

Financial market risks relating to the Company's operations result    
primarily from changes in interest rates. The Company enters into interest rate 
swaps to minimize the risk associated with its financing activities. The swap   
agreements are contracts to exchange fixed or variable rates for floating       
interest rate payments periodically over the life of the instruments.           

Liquidity and Capital Resources                                                 

 The Company's primary capital requirements have been the funding of its
continued new store expansion program, inventory requirements and more recently,
acquisitions and stock repurchases. The Company has opened or acquired 1,928 net
new auto parts stores and constructed four new distribution centers from the    
beginning of fiscal 1994 to August 28, 1999. Cash flow generated from store     
operations provides the Company with a significant source of liquidity. Net cash
provided by operating activities was $307.4 million in fiscal 1999, $366.8      
million in fiscal 1998, and $177.6 million in fiscal 1997.                      

In fiscal 1999, the Company invested $428.3 million in capital assets 
including approximately $108 million for the Express real estate and real estate
leases from Pep Boys. In fiscal 1998, the Company invested $337.2 million in    
capital assets and had a net cash outlay of $365.5 million for acquisitions     
including the retirement of the acquired companies' debt. Acquisitions included 
Chief Auto Parts, with stores primarily in California, Auto Palace, with stores 
primarily in the Northeast, and a truck parts chain, TruckPro. Capital          
expenditures were $295.4 million in fiscal 1997. In fiscal 1999, the Company    
opened 245 new auto parts stores in the U.S. and 6 in Mexico, replaced 59 stores
and closed 191 U.S. stores. In addition, the Company opened 3 new TruckPro      
stores and relocated 6 stores. Construction commitments totaled approximately   
$57 million at August 28, 1999.                                                 

  The Company's new store development program requires significant working
capital, principally for inventories. Historically, the Company has negotiated  
extended payment terms from suppliers, minimizing the working capital required  
by its expansion. The Company believes that it will be able to continue         
financing much of its inventory growth by favorable payment terms from          
suppliers, but there can be no assurance that the Company will be successful in 
obtaining such terms.                                                           

  In November 1998, the Company sold $150 million of 6% Notes due November
2003, at a discount. Interest on the Notes is payable semi-annually on May 1 and
November 1 each year, beginning May 1999. In July 1998, the Company sold $200   
million of 6.5% Debentures due July 2008, at a discount. Interest on the        
Debentures is payable semi-annually on January 15 and July 15 of each year,     
beginning January 1999. The Debentures may be redeemed at any time at the option
of the Company. Proceeds were used to repay portions of the Company's long-term 
variable rate bank debt and for general corporate purposes.                     

     The Company has a commercial paper program that allows borrowing up to $700
million. As of August 28, 1999, there were borrowings of $533 million           
outstanding under the program. In connection with the program, the Company has a
5-year credit facility with a group of banks for up to $350 million and a 364-  
day $350 million credit facility with another group of banks. Borrowings under  
the commercial paper program reduce availability under the credit facilities. No
amounts were outstanding under either of the the $350 million credit facilities 
at August 28,1999. Outstanding commercial paper at August 28, 1999, is          
classified as long-term debt as it is the Company's ability and intention to    
refinance it on a long-term basis. Both of the revolving credit facilities      
contain a covenant limiting the amount of debt the Company may incur relative to
its total capitalization.                                                       

Subsequent to year end, in September 1999, the Company announced Board
approval to repurchase up to $200 million of common stock in the open market.   
This is in addition to the $150 million repurchase approved in June 1999, the   
$150 million repurchase approved in October 1998, and the $100 million          
repurchase approved in January 1998. From January 1998 to August 28, 1999, the  
Company had repurchased approximately $263 million of common stock. The impact  
of the stock repurchase program in fiscal year 1999 was an increase in earnings 
per share of $.02.                                                              

     The Company anticipates that it will rely primarily on internally generated
funds to support a majority of its capital expenditures, working capital        
requirements and stock repurchases. The balance will be funded through          
borrowings. The Company anticipates no difficulty in obtaining such long-term   
financing in view of its credit rating and favorable experiences in the debt    
market in the past. In addition to the available credit lines mentioned above,  
the Company may sell up to $50 million of public debt under shelf registration  
statements filed with the Securities and Exchange Commission.                   

Year 2000 Readiness                                                             

    The Year 2000 problem is, in its simplest terms, the inability of computer
hardware and software to properly process dates beyond December 31, 1999. In    
order to save valuable system memory, hard storage space and processing cycles, 
early programmers recorded dates using only the last two digits of the year.    
Year 2000 problems arise when performing date calculations between centuries    
based upon two digit year fields.                                               

The Company began addressing the Year 2000 issue in June 1996 and     
implemented a formal Year 2000 project office in May 1997. As of August 28,     
1999, the Company had completed over 95% of its critical readiness efforts. Thus
far, no significant issues have been detected during the testing of Year 2000   
ready systems. The Company has not achieved 100% completion primarily due to    
delays in receiving third party software upgrades. The Company anticipates      
completing all Year 2000 efforts by December 1, 1999.                           

18


ARS21st Page of 35TOC1stPreviousNext↓BottomJust 21st

  The total estimated cost of the Year 2000 project is $10 to $11 million,
which is being expensed as incurred. As of August 28, 1999, approximately $8    
million of this budget had been incurred. All of the related costs are being    
funded through operating cash flows. These costs are an immaterial part of the  
overall information technology budget. No major information technology projects 
or programs have been deferred.                                                 

     In addition to internal systems, the Company is addressing Year 2000 issues
which do not normally fall under information technology such as embedded chip   
equipment and the compliance status of business partners. The Company has       
addressed over 95% of the critical issues in this category. The Company is also 
assessing the Year 2000 readiness of its merchandise vendors, most of which     
communicate with the Company through electronic data interchange (EDI). The     
Company plans to complete Year 2000 testing of the EDI system with all critical 
vendors during October 1999.                                                    

    Although the Company believes that the ongoing assessment and testing will
minimize its overall Year 2000 risks, there is no guarantee that there will not 
be an adverse effect on the Company if third parties such as merchandise        
vendors, service providers or utility companies are not Year 2000 ready. The    
Company has developed detailed contingency plans for critical systems, processes
and business partners. Elements of the Company's contingency plans include:     
switching vendors, increasing the inventory levels of certain products, back-up 
systems and manual processes.                                                   

   While the Company does not anticipate any major business disruptions as a
result of Year 2000 issues, it is possible that certain disruptions may occur   
including loss of communications with stores, distribution centers or business  
partners; inability to process transactions in a timely manner or loss of power.
The Company plans to have dedicated resources available to address any Year 2000
issue that may arise. These resources will be managed through a dedicated       
command center and consist of technical personnel, business leaders and members 
of senior management.                                                           

Inflation                                                                       

   The Company does not believe its operations have been materially affected
by inflation. The Company has been successful, in many cases, in mitigating the 
effects of merchandise cost increases principally due to economies of scale     
resulting from increased volumes of purchases, selective forward buying and the 
use of alternative suppliers.                                                   

Seasonality and Quarterly Periods                                               

 The Company's business is somewhat seasonal in nature, with the highest
sales occurring in the summer months of June through August, in which average   
weekly per store sales historically have been about 20% to 30% higher than in   
the slowest months of December through February. The Company's business is also 
affected by weather conditions. Extremely hot or extremely cold weather tends to
enhance sales by causing parts to fail and spurring sales of seasonal products. 
Mild or rainy weather tends to soften sales as parts' failure rates are lower in
mild weather and elective maintenance is deferred during periods of rainy       
weather.                                                                        

Each of the first three quarters of AutoZone's fiscal year consists of
twelve weeks and the fourth quarter consists of sixteen weeks. Because the      
fourth quarter contains the seasonally high sales volume and consists of sixteen
weeks, compared to twelve weeks for each of the first three quarters, the       
Company's fourth quarter represents a disproportionate share of the annual net  
sales and net income. The fourth quarter of fiscal 1999 represented 33.8% of    
annual net sales and 40.3% of net income; the fourth quarter of fiscal 1998     
represented 37.5% of annual net sales and 40.4% of net income.                  

Forward-Looking Statements                                                      

    Certain statements contained in the Financial Review and elsewhere in this
annual report are forward-looking statements. These statements discuss, among   
other things, expected growth, domestic and international development and       
expansion strategy, business strategies and future performance. These           
forward-looking statements are subject to risks, uncertainties and assumptions, 
including without limitation, competition, product demand, domestic and         
international economies, government approvals, the ability to hire and retain   
qualified employees, consumer debt levels, inflation and the weather. Actual    
results may materially differ from anticipated results. For more information,   
please see the Risk Factors section of the Company's most recent Form 10-K as   
filed with the Securities and Exchange Commission.                              

19


ARS22nd Page of 35TOC1stPreviousNext↓BottomJust 22nd

Consolidated Statements of Income 

                                                        [Enlarge/Download Table]

                                                                                       Year Ended (52 Weeks)            
                                                                         -----------------------------------------------
                                                                           August 28,       August 29,        August 30,
                                                                              1999             1998              1997   
                                                                         -----------------------------------------------
                                                                              (in thousands, except per share data)     
                                                                                                                        
Net sales                                                                 $4,116,392        $3,242,922       $2,691,440 
Cost of sales, including warehouse and delivery expenses                   2,384,970         1,889,847        1,559,296 
Operating, selling, general and administrative expenses                    1,298,327           970,768          810,793 
------------------------------------------------------------------------------------------------------------------------
Operating profit                                                             433,095           382,307          321,351 
Interest expense - net                                                        45,312            18,204            8,843 
------------------------------------------------------------------------------------------------------------------------
       Income before income taxes                                            387,783           364,103          312,508 
Income taxes                                                                 143,000           136,200          117,500 
------------------------------------------------------------------------------------------------------------------------
       Net income                                                         $  244,783        $  227,903       $  195,008 
========================================================================================================================

Weighted average shares for basic earnings per share                         149,014           152,160          150,726 
Effect of dilutive stock options                                               1,243             1,910            1,809 
========================================================================================================================
Adjusted weighted average shares for diluted earnings per share              150,257           154,070          152,535 
========================================================================================================================

Basic earnings per share                                                  $     1.64        $     1.50       $     1.29 
========================================================================================================================
Diluted earnings per share                                                $     1.63        $     1.48       $     1.28 
========================================================================================================================

See Notes to Consolidated Financial Statements.                                 

20


ARS23rd Page of 35TOC1stPreviousNext↓BottomJust 23rd

 Consolidated Balance Sheets

                                                        [Enlarge/Download Table]

                                                                                      August 28,        August 29,     
                                                                                         1999              1998        
                                                                                  -------------------------------------
                                                                                  (in thousands, except per share data)
                                                                                                                       
Assets                Current assets:                                                                                  
                         Cash and cash equivalents                                    $    5,918        $   6,631      
                         Accounts receivable                                              25,917           42,252      
                         Merchandise inventories                                       1,129,693          966,560      
                         Prepaid expenses                                                 33,468           37,532      
                         Deferred income taxes                                            30,088           61,964      
                         Income taxes receivable                                                            2,151      
                      -------------------------------------------------------------------------------------------      
                            Total current assets                                       1,225,084        1,117,090      
                      Property and equipment:                                                                          
                         Land                                                            390,920          320,203      
                         Buildings and improvements                                    1,003,308          851,083      
                         Equipment                                                       438,855          374,465      
                         Leasehold improvements and interests                            102,646           82,273      
                         Construction in progress                                        153,323          150,461      
                      -------------------------------------------------------------------------------------------      
                                                                                       2,089,052        1,778,485      
                         Less accumulated depreciation and amortization                  450,566          350,979      
                      -------------------------------------------------------------------------------------------      
                                                                                       1,638,486        1,427,506      
                      Other assets:                                                                                    
                         Cost in excess of net assets acquired, net of accumulated amortization                        
                           of $15,375 in 1999 and $9,096 in 1998                         337,261          181,315      
                         Deferred income taxes                                            76,412            3,510      
                         Other assets                                                      7,524           18,692      
                      -------------------------------------------------------------------------------------------      
                                                                                         421,197          203,517      
                      -------------------------------------------------------------------------------------------      
                                                                                      $3,284,767       $2,748,113      
                      ===========================================================================================      
Liabilities and       Current liabilities:                                                                             
Stockholders' Equity     Accounts payable                                             $  757,447        $ 683,372      
                         Accrued expenses                                                230,036          176,457      
                         Income taxes payable                                             13,071                       
                      -------------------------------------------------------------------------------------------      
                            Total current liabilities                                  1,000,554          859,829      
                      Long-term debt                                                     888,340          545,067      
                      Other liabilities                                                   72,072           41,160      
                      Commitments and contingencies (See notes H and I)                                                
                      Stockholders' equity:                                                                            
                         Preferred Stock, authorized 1,000 shares; no shares issued                                    
                         Common Stock, par value $.01 per share, authorized 200,000 shares;                            
                           153,963 shares issued and 144,353 shares outstanding in 1999 and                            
                           153,039 shares issued and 152,086 shares outstanding in 1998    1,540            1,530      
                         Additional paid-in-capital                                      289,084          277,528      
                         Retained earnings                                             1,296,528        1,051,745      
                         Accumulated other comprehensive income                               (3)                      
                         Treasury stock, at cost                                        (263,348)         (28,746)     
                      -------------------------------------------------------------------------------------------      
                            Total stockholders' equity                                 1,323,801        1,302,057      
                      -------------------------------------------------------------------------------------------      
                                                                                      $3,284,767       $2,748,113      
                      ===========================================================================================      

See Notes to Consolidated Financial Statements.                                 

21


ARS24th Page of 35TOC1stPreviousNext↓BottomJust 24th

 Consolidated Statements of Cash Flows

                                                        [Enlarge/Download Table]

                                                                                               Year Ended (52 Weeks)          
                                                                                      --------------------------------------- 
                                                                                      August 28,     August 29,    August 30, 
                                                                                         1999           1998          1997    
                                                                                      --------------------------------------- 
                                                                                                   (in thousands)             
                                                                                                                              
Cash flows from operating activities:                                                                                         
      Net income                                                                       $244,783      $ 227,903       $195,008 
      Adjustments to reconcile net income to net cash provided by operating                                                   
activities:                                                                                                                   
            Depreciation and amortization of property and equipment                     122,221         95,464         77,163 
            Amortization of intangible and other assets                                   6,310          1,135            658 
            Deferred income tax expense (benefit)                                        42,929         20,241         (7,781)
            Net change in accounts receivable and prepaid expenses                       20,399        (15,260)        (5,009)
            Net increase in merchandise inventories                                    (201,553)       (47,285)      (153,552)
            Net increase in accounts payable and accrued expenses                        70,304        127,683         66,155 
            Net change in income taxes payable and receivable                            13,367        (22,230)         7,819 
            Net change in other assets and liabilities                                  (11,392)       (20,813)        (2,898)
----------------------------------------------------------------------------------------------------------------------------- 
                Net cash provided by operating activities                               307,368        366,838        177,563 

Cash flows from investing activities:                                                                                         
      Acquisitions                                                                                    (100,031)               
      Capital expenditures and Pep Express purchase                                    (428,315)      (337,202)      (295,417)
----------------------------------------------------------------------------------------------------------------------------- 
                Net cash used in investing activities                                  (428,315)      (437,233)      (295,417)

Cash flows from financing activities:                                                                                         
      Repayment of acquired companies' debt                                                           (265,429)               
      Increase in commercial paper                                                      228,000        305,000                
      Proceeds from debentures/notes                                                    148,913        197,751                
      Net (decrease) increase in credit facilities                                      (34,050)      (164,350)       104,000 
      Net proceeds from sale of Common Stock, including related tax benefit              11,566         27,692         14,618 
      Purchase of Treasury Stock                                                       (234,602)       (28,746)               
      Other                                                                                 407            173                
----------------------------------------------------------------------------------------------------------------------------- 
                Net cash provided by financing activities                               120,234         72,091        118,618 
----------------------------------------------------------------------------------------------------------------------------- 
Net (decrease) increase in cash and cash equivalents                                       (713)         1,696            764 
Cash and cash equivalents at beginning of year                                            6,631          4,668          3,904 
Cash provided by acquisitions                                                                              267                
----------------------------------------------------------------------------------------------------------------------------- 
Cash and cash equivalents at end of year                                               $  5,918    $     6,631     $    4,668 
============================================================================================================================= 

Supplemental cash flow information:                                                                                           
      Interest paid, net of interest cost capitalized                                  $ 41,533    $    17,042     $    8,779 
      Income taxes paid                                                                $ 93,073    $   122,529     $  109,681 

See Notes to Consolidated Financial Statements.                                 

22


ARS25th Page of 35TOC1stPreviousNext↓BottomJust 25th

 Consolidated Statements of Stockholders' Equity

                                                        [Enlarge/Download Table]

                                                                                      Accumulated                         
                                                           Additional                    Other                            
                                                Common       Paid-in      Retained   Comprehensive  Treasury              
                                                 Stock       Capital      Earnings      Income        Stock        Total  
                                                ------------------------------------------------------------------------- 
                                                                           (in thousands)                                 
                                                                                                                          
Balance at August 31, 1996                      $1,501      $235,247    $  628,834      $           $      $      865,582 
Net income                                                                 195,008                                195,008 
                                                                                                           -------------- 
   Comprehensive income                                                                                           195,008 
Sale of 1,176 shares of Common Stock                                                                                      
   under stock option and stock purchase plans      12         7,676                                                7,688 
Tax benefit of exercise of stock options                       6,930                                                6,930 
                                                ------------------------------------------------------------------------- 
Balance at August 30, 1997                       1,513       249,853       823,842                              1,075,208 
Net income                                                                 227,903                                227,903 
                                                                                                           -------------- 
   Comprehensive income                                                                                           227,903 
Purchase of 953 shares of Treasury Stock                                                             (28,746)     (28,746)
Sale of 1,726 shares of Common Stock                                                                                      
   under stock option and stock purchase plans      17        11,475                                               11,492 
Tax benefit of exercise of stock options                      16,200                                               16,200 
                                                ------------------------------------------------------------------------- 
Balance at August 29, 1998                       1,530       277,528     1,051,745                   (28,746)   1,302,057 
Net income                                                                 244,783                                244,783 
Foreign currency translation adjustment                                                     (3)                        (3)
                                                                                                           -------------- 
   Comprehensive income                                                                                           244,780 
Purchase of 8,657 shares of Treasury Stock                                                          (234,602)    (234,602)
Sale of 924 shares of Common Stock under                                                                                  
   stock option and stock purchase plans            10         7,256                                                7,266 
Tax benefit of exercise of stock options                       4,300                                                4,300 
                                                ------------------------------------------------------------------------- 
Balance at August 28, 1999                      $1,540      $289,084    $1,296,528      $   (3)  $  (263,348) $ 1,323,801 
                                                ========================================================================= 

See Notes to Consolidated Financial Statements.                                 

23


ARS26th Page of 35TOC1stPreviousNext↓BottomJust 26th

Notes To Consolidated Financial Statements                                      

Note A - Significant Accounting Policies                                        

 Business: The Company is principally a specialty retailer of automotive
parts and accessories. At the end of fiscal 1999, the Company operated 2,711    
domestic auto parts stores in 39 states and 6 auto parts stores in Mexico. In   
addition, the Company sells heavy duty truck parts and accessories through its  
46 TruckPro stores in 14 states, automotive diagnostic and repair software      
through ALLDATA and diagnostic and repair information through alldatadiy.com.   

     Fiscal Year: The Company's fiscal year consists of 52 or 53 weeks ending on
the last Saturday in August.                                                    

  Basis of Presentation: The consolidated financial statements include the
accounts of AutoZone, Inc. and its wholly owned subsidiaries (the Company). All 
significant intercompany transactions and balances have been eliminated in      
consolidation.                                                                  

 Merchandise Inventories: Inventories are stated at the lower of cost or
market using the last-in, first-out (LIFO) method.                              

Property and Equipment: Property and equipment is stated at cost.     
Depreciation is computed principally by the straight-line method over the       
estimated useful lives of the assets. Leasehold interests and improvements are  
amortized over the terms of the leases.                                         

     Amortization: The cost in excess of net assets acquired is amortized by the
straight-line method over 40 years.                                             

Preopening Expenses: Preopening expenses, which consist primarily of  
payroll and occupancy costs, are expensed as incurred.                          

Advertising Costs: The Company expenses advertising costs as incurred.
Advertising expense, net of vendor rebates, was approximately $21,857,000 in    
fiscal 1999, $30,109,000 in fiscal 1998 and $27,271,000 in fiscal 1997.         

Warranty Costs: The Company provides the consumer with a warranty on  
certain products. Estimated warranty obligations are provided at the time of    
sale of the product.                                                            

    Financial Instruments: The Company has certain financial instruments which
include cash, accounts receivable and accounts payable. The carrying amounts of 
these financial instruments approximate fair value because of their short       
maturities. The Company uses derivative financial instruments for purposes other
than trading to minimize the risk associated with financing activities.         
Settlements of interest rate swaps are accounted for by recording the net       
interest received or paid as an adjustment to interest expense. Gains or losses 
resulting from market movements are not recognized. Gains or losses resulting   
from equity instrument contracts are recognized through stockholders' equity.   
Contracts that effectively meet risk reduction and correlation criteria are     
recorded using hedge accounting. Hedges of anticipated transactions are deferred
and recognized when the hedged transaction occurs.                              

 Income Taxes: The Company accounts for income taxes under the liability
method. Deferred tax assets and liabilities are determined based on differences 
between financial reporting and tax bases of assets and liabilities and are     
measured using the enacted tax rates and laws that will be in effect when the   
differences are expected to reverse.                                            

   Cash Equivalents: Cash equivalents consist of investments with maturities
of 90 days or less at the date of purchase.                                     

    Use of Estimates: Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the     
disclosure of contingent liabilities to prepare these financial statements in   
conformity with generally accepted accounting principles. Actual results could  
differ from those estimates.                                                    

Earnings Per Share: Basic earnings per share is based on the weighted 
average outstanding common shares. Diluted earnings per share is based on the   
weighted average outstanding shares adjusted for the effect of stock options.   

 Impairment of Long-Lived Assets: The Company complies with Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement  
requires that long-lived assets and certain identifiable intangibles to be held 
and used by an entity be reviewed for impairment whenever events or changes in  
circumstances indicate that the carrying amount of an asset may not be          
recoverable. Also, in general, long-lived assets and certain identifiable       
intangibles to be disposed of are reported at the lower of carrying amount or   
fair value less cost to sell.                                                   

 Comprehensive Income: In fiscal 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for      
reporting and display of comprehensive income and its components. The Company   
has reflected comprehensive income and its components in the consolidated       
statements of stockholders' equity.                                             

 Disclosures about Segments of an Enterprise and Related Information: In
fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The adoption of this statement had no      
effect on the financial statements as the Company operates in a single          
reportable segment.                                                             

 Pensions and Other Postretirement Benefits: In fiscal 1999, the Company
adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other          
Postretirement Benefits." SFAS No. 132 establishes new standards for the        
reporting of information about pension and other postretirement benefits. All   
periods reported have been presented in accordance with SFAS No. 132.           

    Internal Use Software Costs: In fiscal 1999, the Company adopted Statement
of Position (SOP) 98-1, "Accounting for the Costs of Developing or Obtaining    
Internal Use Software." This SOP requires the capitalization of certain costs   
incurred in connection with developing or obtaining software for internal use.  
The adoption of SOP 98-1 did not have a material impact on the Company's results
of operations or financial position.                                            

   Derivative Instruments and Hedging Activities: During 1998, the Financial
Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for          
Derivative Instruments and Hedging Activities." This statement requires         
companies to record derivative instruments on the balance sheet as assets or    
liabilities, measured at fair value. Gains or losses resulting from changes in  
the values of a derivative would be accounted for depending on the use of the   
derivative and whether it qualifies for hedge accounting. In September 1999, the
FASB issued SFAS No. 137, which delayed the effective date of SFAS No. 133 to   
the Company's fiscal year 2001. Because of the Company's minimal historical use 
of derivatives, management anticipates that the adoption of SFAS No. 133 will   
not have a significant effect on earnings or the financial position of the      
Company.                                                                        

24


ARS27th Page of 35TOC1stPreviousNext↓BottomJust 27th

Note B - Accrued Expenses                                                       

Accrued expenses consist of the following:                            

      August 28,  August 29,
      1999        1998
      ----------------------
      (in thousands)
Medical and casualty                                                    
insurance claims          $ 48,111    $40,640                     
Accrued compensation                                                    
and related payroll taxes   41,345     37,684                     
Property and sales taxes       48,181     38,506                        
Accrued warranty               32,950     20,786                        
Other                          59,449     38,841                        
      ----------------------
     $230,036   $176,457
      ======================

Note C - Income Taxes                                                           

     At August 28, 1999, the Company has net operating loss carryforwards (NOLs)
of approximately $48 million that expire in years 2000 through 2018. These      
carryforwards resulted from the Company's acquisition of ALLDATA Corporation    
during fiscal 1996 and Chief Auto Parts Inc. and ADAP, Inc. (which had been     
doing business as "Auto Palace") in fiscal 1998. The use of the NOLs is subject 
to annual limitations. A valuation allowance of $10,813,000 in fiscal 1999 and  
$15,902,000 in fiscal 1998 relates to certain of those carryforwards.           

   The provision for income tax expense (benefit) consists of the following:

Year Ended      
------------------------------------      
August 28,   August 29,   August 30,      
1999         1998         1997      
------------------------------------      
(in thousands)      
Current:                                                                  
Federal      $ 90,018     $103,810     $114,113                   
State          10,053       12,149       11,168                   
------------------------------------      
100,071      115,959      125,281     

Deferred:                                                                 
Federal        38,999       19,665       (6,427)                  
State           3,930          576       (1,354)                  
------------------------------------      
42,929       20,241       (7,781)   
------------------------------------      
$143,000     $136,200     $117,500      
====================================      

     Significant components of the Company's deferred tax assets and liabilities
areas follows:                                                                  

         August 28,       August 29,
         1999             1998
         ---------------------------
        (in thousands)
Deferred tax assets:                                                      
Net operating loss and                                              
credit carryforwards  $  22,296        $   26,303             
Insurance reserves          15,938            13,847                
Warranty reserves           12,701             7,778                
Deferred lease expense                         6,694                
Accrued vacation             4,779             4,387                
Closed store reserves       25,970                                  
Inventory reserves          11,562                                  
Legal reserves               4,263                                  
Other                       25,157            29,690                
         ---------------------------
           122,666            88,699
Less valuation allowance    10,813            15,902                
         ---------------------------
           111,853            72,797
         ===========================
Deferred tax liabilities:                                                 
Property and equipment                         4,104                
Accrued property taxes       5,353             3,219                
         ---------------------------
             5,353             7,323
         ---------------------------
Net deferred tax assets     $ 106,500        $   65,474                   
         ===========================

   A reconciliation of the provision for income taxes to the amount computed
by applying the federal statutory tax rate of 35% to income before income taxes 
is as follows:                                                                  

        Year Ended
         ---------------------------------
         August 28, August 29,  August 30,
         1999       1998        1997
         ---------------------------------
        (in thousands)
Expected tax                                                              
at statutory rate     $ 135,724   $127,436    $109,378              
State income taxes, net      6,722      8,271       6,379                 
Other                          554        493       1,743                 
         ---------------------------------
         $143,000   $136,200    $117,500
         =================================

25


ARS28th Page of 35TOC1stPreviousNext↓BottomJust 28th

Note D - Financing Arrangements                                                 

   The Company's long-term debt at the end of fiscal 1999 and 1998 consisted
of the following:                                                               

                                   August 28,   August 29,
                                   1999         1998
                                   -----------------------
                                    (in thousands)
6% Notes due November 2003;                                                     
redeemable at any time at                                                 
the option of the Company                  $150,000      $                
6.5% Debentures due July 2008;                                                  
redeemable at any time at                                                 
the option of the Company                   200,000        200,000        
Commercial paper, weighted average rate                                         
of 5.4% at August 28, 1999                                                
and 5.7% at August 29, 1998                 533,000        305,000        
Unsecured bank loan, floating interest rate                                     
averaging 5.8% at August 29, 1998                           34,050        
Other                                            5,340          6,017           
                                   -----------------------
                                   $888,340       $545,067
                                   =======================

  In November 1998, the Company sold $150 million of 6% Notes due November
2003, at a discount. Interest on the Notes is payable semi-annually on May 1 and
November 1 of each year, beginning May 1999. In July 1998, the Company sold $200
million of 6.5% Debentures due July 2008, at a discount. Interest on the        
Debentures is payable semi-annually on January 15 and July 15 of each year,     
beginning January 1999. Proceeds were used to repay portions of the Company's   
long-term variable rate bank debt and for general corporate purposes.           

     The Company has a commercial paper program that allows borrowing up to $700
million. As of August 28, 1999, there were borrowings of $533 million           
outstanding under the program. In connection with the program, the Company has a
five-year credit facility with a group of banks for up to $350 million and a    
364-day $350 million credit facility with another group of banks. The 364-day   
facility includes a renewal feature as well as an option to extinguish the      
outstanding debt one year from the maturity date. Borrowings under the          
commercial paper program reduce availability under the credit facilities. No    
amounts were outstanding under either of the $350 million credit facilities at  
August 28, 1999. Outstanding commercial paper at August 28, 1999, is classified 
as long-term debt as it is the Company's ability and intention to refinance them
on a long-term basis.                                                           

 The rate of interest payable under the revolving credit agreements is a
function of the London Interbank Offered Rate (LIBOR) or the lending bank's base
rate (as defined in the agreement) at the option of the Company. In addition,   
the multi-year $350 million credit facility contains a competitive bid rate     
option. Both of the revolving credit facilities contain a covenant limiting the 
amount of debt the Company may incur relative to its total capitalization. These
facilities are available to support domestic commercial paper borrowings and to 
meet cash requirements.                                                         

     Maturities of long-term debt are $183 million for fiscal 2001, $350 million
for fiscal 2002 and $355 million thereafter.                                    

     Interest costs of $2,762,000 in fiscal 1999, $2,280,000 in fiscal 1998, and
$2,119,000 in fiscal 1997 were capitalized.                                     

     The estimated fair value of the 6.5% Debentures and the 6% Notes, which are
both publicly traded, was approximately $184 million and $143 million           
respectively based on the market price at August 28, 1999. The estimated fair   
values of all other long-term borrowings approximate their carrying values      
primarily because of their variable interest rates.                             

 Subsequent to year-end, the Company entered into financing arrangements
totaling $140 million with maturity dates ranging from March 2000 to August 2000
and interest rates ranging from 6.43% to 6.63%.                                 

Note E - Stock Repurchase Program                                               

   As of August 28, 1999, the Board of Directors had authorized the Company to
repurchase up to $400 million of common stock in the open market. The Company   
repurchased 8.7 million shares of its common stock in fiscal 1999 for an        
aggregate cost of $234.6 million, and repurchased 1 million shares of its common
stock in fiscal 1998 for an aggregate cost of $28.7 million. At times, the      
Company utilizes equity instrument contracts to facilitate its repurchase of    
common stock. At August 28, 1999, the Company held equity instrument contracts  
that relate to the purchase of approximately 4.1 million shares of common stock 
at an average cost of $24.66 per share.                                         

Subsequent to year-end, the Board authorized the repurchase of an     
additional $200 million of the Company's common stock in the open market.       
Additionally, in fiscal 2000, the Company purchased the 4.1 million shares as   
settlement of the equity instrument contract outstanding at August 28, 1999.    

Note F - Employee Stock Plans                                                   

The Company has granted options to purchase common stock to certain   
employees and directors under various plans at prices equal to the market value 
of the stock on the dates the options were granted. Options are generally       
exercisable in a three to seven year period, and expire 10 years after grant. A 
summary of outstanding stock options is as follows:                             

             Wtd. Avg.    Number
            Exercise Price of Shares
            ------------------------
Outstanding August 31, 1996          $17.96      9,759,756                      
Granted                        22.69      2,707,370               
Exercised                       4.93     (1,032,989)              
Canceled                       25.54       (834,883)              
            ------------------------
Outstanding August 30, 1997           19.84     10,599,254                      
Granted                        31.13      1,692,272               
Exercised                       7.39     (1,738,882)              
Canceled                       25.40       (795,780)              
            ------------------------
Outstanding August 29, 1998           23.56      9,756,864                      
Granted                        29.23      2,081,125               
Exercised                      12.87       (596,274)              
Canceled                       28.43       (741,309)              
            ------------------------
Outstanding August 28, 1999          $24.95     10,500,406                      
            ========================

26


ARS29th Page of 35TOC1stPreviousNext↓BottomJust 29th

    The following table summarizes information about stock options outstanding
at August 28, 1999:                                                             

                                                        [Enlarge/Download Table]

                                    Options Outstanding          Options Exercisable   
                                  -----------------------------------------------------
                                  Wtd. Avg.     Wtd. Avg.                     Wtd. Avg.
Range of Exercise   No. of        Exercise     Contractual      No. of        Exercise 
      Price         Options         Price    Life (in years)    Options         Price  
---------------------------------------------------------------------------------------
                                                                                       
  $  1.09-20.13    2,109,613       $14.20         4.90          974,678        $ 7.33  
    22.69-25.13    2,573,857        24.65         6.71          395,904         25.10  
    25.25-27.38    2,243,597        26.14         5.40          827,437         25.57  
    27.63-31.50    2,345,583        29.30         8.16          179,514         28.71  
    32.56-35.13    1,227,756        33.59         8.66           23,763         35.13  
---------------------------------------------------------------------------------------
   $ 1.09-35.13   10,500,406       $24.95         6.62        2,401,296        $18.42  
=======================================================================================

Options to purchase 2,401,296 shares at August 28, 1999, and 1,942,510
shares at August 29, 1998, were exercisable. Shares reserved for future grants  
were 6,176,283 at August 28, 1999, and 2,699,468 at August 29, 1998.            

   Pro forma information is required by SFAS No. 123, "Accounting for Stock-
Based Compensation." In accordance with the provisions of SFAS No. 123, the     
Company applies APB Opinion 25 and related interpretations in accounting for its
stock option plans and accordingly, no compensation expense for stock options   
has been recognized. If the Company had elected to recognize compensation cost  
based on the fair value of the options granted at the grant date as prescribed  
in SFAS No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below. The effects of applying SFAS  
No. 123 and the results obtained through the use of the Black-Scholes option    
pricing model in this pro forma disclosure are not indicative of future amounts.
SFAS No. 123 does not apply to awards prior to fiscal 1996.                     

  Year Ended
   ---------------------------------
   August 28, August 29,  August 30,
   1999       1998        1997
   ---------------------------------
Net Income ($000)                                                           
As reported      $ 244,783   $227,903    $195,008               
Pro forma      $ 234,898   $221,803    $191,118             
Basic earnings                                                        
per share                                                   
As reported      $    1.64   $   1.50    $   1.29               
Pro forma      $    1.58   $   1.46    $   1.27             
Diluted earnings                                                          
per share                                                   
As reported      $    1.63   $   1.48    $   1.28               
Pro forma      $    1.57   $   1.44    $   1.26             

    The weighted-average fair value of the stock options granted during fiscal
1999 was $12.74, during fiscal 1998 was $12.17 and during fiscal 1997 was $9.26.
The fair value of each option granted is estimated on the date of the grant     
using the Black-Scholes option pricing model with the following weighted-       
average assumptions for grants in 1999, 1998 and 1997: expected price           
volatility of .34 to .37; risk-free interest rates ranging from 4.56 to 5.98    
percent; and expected lives between 3.75 and 8.0 years.                         

The Company also has an employee stock purchase plan under which all  
eligible employees may purchase common stock at 85% of fair market value        
(determined quarterly) through regular payroll deductions. Annual purchases are 
limited to $4,000 per employee. Under the plan 268,554 shares were sold in      
fiscal 1999 and 232,389 shares were sold in fiscal 1998. The Company repurchased
210,525 shares in fiscal 1999 and 275,526 shares in fiscal 1998 for sale under  
the plan. A total of 1,299,057 shares of common stock is reserved for future    
issuance under this plan.                                                       

 During fiscal 1998, the Company adopted the 1998 Directors Stock Option
Plan. Under the stock option plan, each non-employee director was automatically 
granted an option to purchase 1,000 shares of common stock on the plan's        
adoption date. Each non-employee director will receive additional options to    
purchase 1,000 shares of common stock on January 1 of each year. In addition, so
long as the non-employee director owns common stock valued at least equal to    
five times the value of the annual fee paid to such director, that director will
receive an additional option to purchase 1,000 shares as of December 31 of each 
year.                                                                           

   In March 1998, the Company adopted the Directors Compensation Plan. Under
this plan, a director may receive no more than one-half of the annual and       
meeting fees immediately in cash, and the remainder of the fees must be taken in
either common stock or the fees may be deferred in units with value equivalent  
to the value of shares of common stock as of the grant date ("stock appreciation
rights").                                                                       

27


ARS30th Page of 35TOC1stPreviousNext↓BottomJust 30th

Note G - Pension and Savings Plan                                               

Substantially all full-time employees are covered by a defined benefit
pension plan. The benefits are based on years of service and the employee's     
highest consecutive five-year average compensation.                             

 The Company makes annual contributions in amounts at least equal to the
minimum funding requirements of the Employee Retirement Income Security Act of  
1974. The following table sets forth the plan's funded status and amounts       
recognized in the Company's financial statements (in thousands):                

                  August 28,      August 29,
                  1999            1998
                  --------------------------
Change in benefit obligation                                                    
Benefit obligation                                                              
at beginning of year             $53,971          $42,687               
Service cost                           8,022            7,001                   
Interest cost                          3,727            3,047                   
Actuarial losses                         327            1,922                   
Benefits paid                         (1,184)            (686)                  
                  --------------------------
Benefit obligation                                                              
at end of year                     64,863           53,971                

Change in plan assets                                                           
Fair value of plan assets                                                       
at beginning of year               54,565           39,598                
Actual return on plan assets           3,488            7,271                   
Company contributions (refunds)       (1,741)           8,687                   
Benefits paid                         (1,184)            (686)                  
Administrative expenses                 (365)            (305)                  
Fair value of plan assets           --------------------------                  
at end of year                     54,763           54,565                

Reconciliation of funded status                                                 
Funded status of the plan                                                       
(underfunded)                     (10,100)            594                 
Unrecognized net actuarial                                                      
losses                             11,037            9,282                
Unamortized prior service cost        (5,329)          (5,934)                  
                  --------------------------
Prepaid (accrued) benefit cost       $(4,392)         $ 3,942                   
                  ==========================

                      August 28, August 29, August 30,
                      1999      1998        1997
                      --------------------------------
Components of net periodic                                                      
benefit cost                                                              
Service cost                        $ 8,022    $7,001      $6,034               
Interest cost                         3,727     3,047       2,496               
Expected return on plan assets       (5,001)   (4,090)     (2,847)              
Amortization of prior service cost     (606)     (292)        138               
Amortization of                                                                 
transition obligation                  -      (118)       (150)           
Recognized net actuarial                                                        
losses                               451         -          63            
                      --------------------------------
                     $ 6,593   $ 5,548      $5,734
                      ================================

The actuarial present value of the projected benefit obligation was   
determined using weighted-average discount rates of 7.00% and 6.93% at August   
28, 1999 and August 29, 1998, respectively. The assumed increases in future     
compensation levels were generally 5-10% based on age in fiscal 1999 and 1998   
and 6% in fiscal 1997. The expected long-term rate of return on plan assets was 
9.5% at August 28, 1999, August 29, 1998 and August 30, 1997. Prior service cost
is amortized over the estimated average remaining service lives of the plan     
participants, and the unrecognized actuarial gain or loss is amortized over five
years.                                                                          

 During fiscal 1998, the Company established a defined contribution plan
("401(k) plan") pursuant to Section 401(k) of the Internal Revenue Code. The    
401(k) plan covers substantially all employees that meet the plan's service     
requirements. The Company makes matching contributions, on an annual basis, up  
to a specified percentage of employees' contributions as approved by the Board  
of Directors.                                                                   

Note H - Leases                                                                 

     A portion of the Company's retail stores, distribution centers, and certain
equipment are leased. Most of these leases include renewal options and some     
include options to purchase and provisions for percentage rent based on sales.  

Rental expense was $96,150,000 for fiscal 1999, $56,410,000 for fiscal
1998, and $39,078,000 for fiscal 1997. Percentage rentals were insignificant.   

     Minimum annual rental commitments under non-cancelable operating leases are
as follows (in thousands):                                                      

Year            Amount                      
-----------------------                     
2000           $106,202                     
2001             97,183                     
2002             82,231                     
2003             69,667                     
2004             55,885                     
Thereafter      214,028                     
-----------------------                     
$625,196      
=======================                     

Note I - Commitments and Contingencies                                          

   Construction commitments, primarily for new stores, totaled approximately
$57 million at August 28, 1999.                                                 

     AutoZone, Inc., is a defendant in a purported class action lawsuit entitled
"Melvin Quinnie on behalf of all others similarly situated v. AutoZone, Inc.,   
and DOES 1 through 100, inclusive" filed in the Superior Court of California,   
County of Los Angeles, in November 1998. The plaintiff claims that the          
defendants failed to pay overtime to store managers as required by California   
law and failed to pay terminated managers in a timely manner as required by     
California law. The plaintiff is seeking injunctive relief, restitution,        
statutory penalties, prejudgment interest, and reasonable attorneys' fees,      
expenses and costs. The case is in the early stages of pre-class certification  
discovery and therefore the Company is unable to predict the outcome of this    
lawsuit at this time. The Company is vigorously defending against this action.  

28


ARS31st Page of 35TOC1stPreviousNext↓BottomJust 31st

AutoZone, Inc., and Chief are defendants in a purported class action  
lawsuit entitled "Paul D. Rusch, on behalf of all others similarly situated, v. 
Chief Auto Parts Inc. and AutoZone, Inc." filed in the Superior Court of        
California, County of Los Angeles, in May 1999. The plaintiffs claim that the   
defendants have failed to pay their store managers overtime pay from March 1997 
to the present. The plaintiffs are seeking back overtime pay, interest, an      
injunction against the defendants committing such practices in the future,      
costs, and attorneys' fees. In September 1999, the Court denied the Company's   
motion to strike the complaint's request for class certification based on a     
prior case of Chief which relied on similar facts in which the class            
certification was denied. The Company has appealed the Court's decision. The    
Company is unable to predict the outcome of this lawsuit at this time, but      
believes that the potential damages recoverable by any single plaintiff are     
minimal. However, if the plaintiff class were to be certified and prevail on all
of its claims, the aggregate amount of damages could be substantial. The Company
is vigorously defending against this action.                                    

    The Company currently, and from time to time, is involved in various other
legal proceedings incidental to the conduct of its business. Although the amount
of liability that may result from these proceedings cannot be ascertained, the  
Company does not currently believe that, in the aggregate, these other matters  
will result in liabilities material to the Company's financial condition or     
results of operations.                                                          

    The Company is self-insured for workers' compensation, automobile, general
and product liability losses. The Company is also self-insured for health care  
claims for eligible active employees. The Company maintains certain levels of   
stop loss coverage for each self-insured plan. Self-insurance costs are accrued 
based upon the aggregate of the liability for reported claims and an estimated  
liability for claims incurred but not reported.                                 

Note J - Business Combinations                                                  

  In October 1998, the Company acquired real estate and real estate leases
for 100 Express auto parts stores from Pep Boys for approximately $108 million. 

In February 1998, the Company acquired ADAP, Inc. ("Auto Palace"). The
acquisition added 112 automotive parts and accessories stores in the Northeast. 
In May 1998, the Company acquired the assets and liabilities of TruckPro, L.P., 
including the service mark "TruckPro." The 43 TruckPro stores in 14 states      
specialized in the sale of heavy duty truck parts.                              

  Additionally, in June 1998, the Company acquired Chief for approximately
$280 million, including the assumption of approximately $205 million of         
indebtedness. Chief operated 560 auto parts stores primarily in California.     

    Results of operations for acquisitions are included with the Company since
each respective acquisition date. The purchase method of accounting for         
acquisitions was utilized for all transactions and, therefore, the acquired     
assets and liabilities were recorded at their estimated fair values at the date 
of acquisition. The goodwill associated with these transactions is being        
amortized over 40 years.                                                        

     The fair value of assets and liabilities recorded as a result of the fiscal
1999 and 1998 transactions as well as fiscal 1999 purchase accounting           
adjustments are as follows (in thousands):                                      

            Year Ended
           -------------------------
            August 28,    August 29,
            1999          1998
           -------------------------
Cash and cash equivalents   $              $      267                 
Receivables                                    22,786                 
Inventories                    (38,420)       209,829                 
Property and equipment          12,886        104,640                 
Goodwill                       162,225        166,013                 
Deferred income taxes           83,955         56,388                 
Accounts payable                  (992)      (106,947)                
Accrued liabilities            (58,213)       (52,826)                
Debt                                         (271,273)                
Other                          (53,441)       (28,846)                
           -------------------------
Total cash purchase price   $  108,000     $  100,031                 
           =========================

 The following unaudited pro forma results of operations assume that the
fiscal 1998 acquisitions and the related financing transactions occurred at the 
beginning of the periods presented.                                             

            Year Ended
            ------------------------
            August 29,    August 30,
            1998          1997
            ------------------------
             (in thousands, except per share data)
Net sales                   $3,758,700     $3,397,300                 
Net income                     221,200        189,200                 
Diluted earnings per share        1.44           1.24                 

     The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have 
occurred had the business combinations and related transactions been consummated
as of the beginning of the periods presented, nor is it necessarily indicative  
of future operating results.                                                    

During fiscal 1999, the Company recorded reserves for closed stores of
approximately $75 million and charged lease and related costs of approximately  
$15 million against this reserve.                                               

29


ARS32nd Page of 35TOC1stPreviousNext↓BottomJust 32nd

Management's Report                                                             

AutoZone's management takes responsibility for the integrity and      
objectivity of the financial statements in this annual report. These financial  
statements were prepared from accounting records which management believes      
fairly and accurately reflect the operations and financial position of AutoZone.

  The financial statements in this report were prepared in conformity with
generally accepted accounting principles. In certain instances, management used 
its best estimates and judgments based upon currently available information and 
management's view of current conditions and circumstances.                      

Management maintains a system of internal controls designed to provide
reasonable assurance that assets are protected from improper use and accounted  
for in accordance with its policies and that transactions are recorded          
accurately in the Company's records. The concept of reasonable assurance is     
based upon a recognition that the cost of the controls should not exceed the    
benefit derived.                                                                

 The financial statements of AutoZone have been audited by Ernst & Young
LLP, independent auditors. Their accompanying report is based on an audit       
conducted in accordance with generally accepted auditing standards, including a 
review of internal accounting controls and financial reporting matters.         

/s/ Robert J. Hunt                                                              

Robert J. Hunt                                                                  
Executive Vice President - Finance                                              
Chief Financial Officer                                                         
Customer Satisfaction                                                           

Corporate Information                                                           

Transfer Agent and Registrar                                                    
EquiServe                                                                       
P.O. Box 2500                                                                   
Jersey City, New Jersey 07303-2500                                              
(800) 756-8200                                                                  
(201) 324-0498                                                                  
equiserve.com                                                                   

Stock Exchange Listing                                                          
New York Stock Exchange                                                         
Ticker Symbol: AZO                                                              

Auditors                                                                        
Ernst & Young LLP                                                               
Memphis, Tennessee                                                              

Store Support Center                                                            
123 South Front Street                                                          
Memphis, Tennessee 38103-3607                                                   
(901) 495-6500                                                                  

AutoZone Web Site                                                               
http://www.autozone.com                                                         

Report of Independent Auditors                                                  

Stockholders                                                                    
AutoZone, Inc.,                                                                 

   We have audited the accompanying consolidated balance sheets of AutoZone,
Inc. as of August 28, 1999 and August 29, 1998, and the related consolidated    
statements of income, stockholders' equity and cash flows for each of the three 
years in the period ended August 28, 1999. These financial statements are the   
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements based on our audits.                      

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AutoZone, Inc. 
at August 28, 1999 and August 29, 1998, and the consolidated results of its     
operations and its cash flows for each of the three years in the period ended   
August 28, 1999 in conformity with generally accepted accounting principles.    

                                     /s/ Ernst & Young LLP

Memphis, Tennessee                                                              
September 29, 1999                                                              

Annual Meeting                                                                  
The Annual Meeting of Stockholders of AutoZone will be held at 10 a.m. on       
December 9, 1999, at The Orpheum Theater, 203 South Main, Memphis, Tennessee.   

Form 10-K/Quarterly Reports                                                     
Stockholders may obtain free of charge a copy of the Company's annual report on 
Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and   
Exchange Commission or our quarterly press releases by writing to Investor      
Relations, P.O. Box 2198, Memphis, Tennessee 38101.                             

Copies of all documents filed by the company with the Securities                
and Exchange Commission, including Form 10-K and Form 10-Q, are also available  
at the SEC's EDGAR server at http://www.sec.gov.                                

Stockholders of Record                                                          
As of August 28, 1999, there were 3,319 stockholders of record, excluding the   
number of beneficial owners whose shares were represented by security position  
listings.                                                                       

30


ARS33rd Page of 35TOC1stPreviousNext↓BottomJust 33rd

OFFICERS                                                                        

John C. Adams, Jr.                                                              
Chairman and CEO                                                                
Customer Satisfaction                                                           

Timothy D. Vargo                                                                
President and COO                                                               
Customer Satisfaction                                                           

EXECUTIVE VICE PRESIDENT                                                        
CUSTOMER SATISFACTION                                                           

Robert J. Hunt                                                                  
Chief Financial Officer                                                         

SENIOR VICE PRESIDENTS                                                          
CUSTOMER SATISFACTION                                                           

Gene Auerbach                                                                   
Store Development                                                               

Bruce G. Clark                                                                  
Systems Technology & Support,                                                   
and Chief Information Officer                                                   

Gerald E. Colley                                                                
Stores                                                                          

Joseph M. Fabiano                                                               
Chief People Officer                                                            

Harry L. Goldsmith                                                              
General Counsel                                                                 
& Secretary                                                                     

Michael E. Longo                                                                
Distribution                                                                    

Anthony D. Rose, Jr.                                                            
Advertising                                                                     

Stephen W. Valentine                                                            
International                                                                   

David J. Wilhite                                                                
Merchandising                                                                   

VICE PRESIDENTS                                                                 
CUSTOMER SATISFACTION                                                           

Richard F. Adams, Jr.                                                           
Merchandising Analysis                                                          
& Support                                                                       

Michael B. Baird                                                                
President & COO, TruckPro                                                       

Jon A. Bascom                                                                   
Systems Technology                                                              
& Support                                                                       

B. Craig Blackwell                                                              
Stores                                                                          

Michael E. Butterick                                                            
Controller                                                                      

William L. Cone                                                                 
Loss Prevention                                                                 

James A. Cook, III                                                              
Treasurer                                                                       

Brett D. Easley                                                                 
President, ALLDATA                                                              

James A. Etzkorn                                                                
Systems Technology                                                              
& Support                                                                       

Clete Faddis                                                                    
Stores                                                                          

Larry Fussy                                                                     
Stores                                                                          

Wm. David Gilmore                                                               
Store Design & Construction                                                     

Frank B. Goodman, III                                                           
Business Planning                                                               
& Analysis                                                                      

Tricia K. Greenberger                                                           
Financial Planning & Control                                                    

Phillip J. Jackson                                                              
Distribution                                                                    

William R. McCawley, Jr.                                                        
Stores                                                                          

Jack Mitchell                                                                   
Supplier Quality                                                                

Thomas Newbern                                                                  
Stores                                                                          

David W. Nichols                                                                
Stores                                                                          

Mark A. Palazola                                                                
Purchasing                                                                      

William C. Rhodes, III                                                          
Finance                                                                         

Richard C. Smith                                                                
Stores                                                                          

Dennis P. Tolivar, Sr.                                                          
Stores                                                                          

William E. Wulfers                                                              
Stores                                                                          

OTHER CORPORATE OFFICERS                                                        
CUSTOMER SATISFACTION                                                           

Emma Jo Kauffman                                                                
Assistant Treasurer                                                             

Donald R. Rawlins                                                               
Assistant Secretary                                                             

BOARD OF DIRECTORS                                                              

John C. Adams, Jr.                                                              
Chairman and CEO                                                                
Customer Satisfaction                                                           

Andrew M. Clarkson (3*)                                                         
Chairman                                                                        
Finance Committee                                                               
Customer Satisfaction                                                           

Dr. N. Gerry House(2)                                                           
Superintendent                                                                  
Memphis City Schools                                                            

Robert J. Hunt                                                                  
Executive Vice President                                                        
and CFO                                                                         
Customer Satisfaction                                                           

Joseph R. Hyde, III                                                             
Former Chairman and CEO                                                         
Customer Satisfaction                                                           

James F. Keegan(1*, 2)                                                          
Chairman                                                                        
Adams Keegan                                                                    

Michael W. Michelson(3)                                                         
General Partner                                                                 
Kohlberg Kravis Roberts                                                         
& Co. LLC                                                                       

Ronald A. Terry(1, 2*)                                                          
Retired Chairman                                                                
First Tennessee                                                                 
National Corporation                                                            

Timothy D. Vargo                                                                
President and COO                                                               
Customer Satisfaction                                                           

(1) Audit Committee                                                             
(2) Compensation Committee                                                      
(3) Finance Committee                                                           
(*) Committee Chairman                                                          

31


ARS34th Page of 35TOC1stPreviousNext↓BottomJust 34th

[PHOTO OF DOWNTOWN MEMPHIS APPEARS HERE]                                        

Yes, our customer service, our quality parts and our innovative stores propelled
us into the lead in the parts business. But we have a secret weapon. A silent   
partner, if you will. Memphis.                                                  

Our store support center overlooks the mighty Mississippi, the original path for
America's distribution.                                                         

Today, we trust the rails, the highways and the skies for moving America's goods
from manufacturer to customer. And Memphis is where they converge -- the        
distribution capital of the free world. That's probably why FedEx decided to    
hang out its shingle here 25 years ago.                                         

But there's more to Memphis than world-class distribution systems. Our          
distinction of being the birthplace of rock`n roll guarantees beehives and blue 
suede shoes to beat the band during Elvis' birthday week. And the music thing   
doesn't stop at rock`n roll. The blues heard on Beale Street are famous the     
world over. Does the name BB King ring a bell? In addition to blues so blue they
make Elvis' shoes look pale, BB's club serves up the best fried dill pickles    
you'll ever sink your teeth into. Ribs (pork ribs, for you out-of-towners) are  
also a strong suit. We're the home of the National Civil Rights Museum and the  
world's premier pediatric oncology research center -- St. Jude Children's       
Research Hospital.                                                              

AutoZone draws its strength from this cultural base, but topping the list is the
hospitality for which our region is known. Treating our customers like friends  
came naturally for us when we opened our first store, and 20 years later it's   
still the right thing to do.                                                    


ARSLast Page of 35TOC1stPreviousNext↓BottomJust 35th

AutoZoners always put customers first.
 We know our parts and products.
Our stores look great.
And we've got the best merchandise
 at the right price.

[AUTOZONE(R) LOGO APPEARS HERE]

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘ARS’ Filing    Date First  Last      Other Filings
12/31/99204
12/9/9932DEF 14A
12/1/9920
Filed on:10/26/99DEF 14A
9/29/99328-K
For Period End:8/28/99193210-K405,  10-K405/A,  5
8/29/98193210-K,  10-K/A,  5,  ARS
8/30/973010-K
8/31/96252810-K,  5
 List all Filings 
↑Top
Filing Submission 0000866787-99-000021   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help — Fri., Apr. 19, 4:34:01.2am ET