Advance Auto Parts, Inc. (NYSE: AAP), a leading retailer of automotive aftermarket parts, accessories, batteries, and maintenance items, today announced its financial results for the fiscal first quarter ended April 21, 2007.
Earnings per diluted share for the first quarter were $0.71, compared to $0.68 last year. In the first quarter, sales increased to $1.47 billion from $1.39 billion last year. Comparable-store sales increased 1.1% in the quarter, comprised of a 0.2% decrease in do-it-yourself (DIY) and a 5.2% increase in do-it-for-me (DIFM). The 1.1% comparable-store sales increase compares to a 3.9% increase in last year’s first quarter.
“For the first quarter, our comp store sales came in at the low end of our guidance range, which was disappointing,” said Jack Brouillard, interim Chairman, President and CEO. “However, largely due to our strong gross margin performance, our earnings per share of $0.71 came in at the higher end of our guidance range of $0.68 to $0.72 per share.”
First quarter gross margin was 48.3% of sales, a 57 basis-point improvement compared to last year’s quarter, primarily reflecting improved procurement costs and lower logistics costs.
First quarter selling, general and administrative (SG&A) expenses were 39.1% of sales, compared to 38.7% in first quarter 2006, a 46 basis point increase. This increase was primarily due to a 70 basis point loss of leverage on rent, depreciation and other fixed costs from modest comparable-store sales.
Store Information
During the first quarter, the Company opened 70 new stores, of which eight were Autopart International (AI) stores. The Company also relocated eight existing stores, remodeled 34 stores, and closed two stores.
2007 Guidance
The Company reiterates its earnings guidance on comparable-store sales for the second quarter and the year in the low single-digit range.Quarter-to-date results are tracking in that range. The Company forecasts second quarter 2007 earnings per diluted share in the range of $0.65 to $0.69, which compares to $0.59 in last year’s second quarter. The Company expects full year 2007 earnings per diluted share in the range of $2.38 to $2.48, an increase of 10% to 15% as compared to 2006.
For 2007, the Company anticipates new-store growth in the 200-210 range, from the opening of both Advance and AI stores.
Jack Brouillard, interim Chairman, President and CEO stated. “I will be serving as interim CEO while we undertake a nationwide search for a new CEO. I am proud to have served as a member of Advance’s board of directors since 2004 and look forward to working with our very capable management team to pursue the many opportunities we believe we have to continue our growth and improve our performance.
As a result of our comprehensive strategy review, we have been able to take a more in-depth look at the industry and our customers and we believe those understandings will help us to improve our sales growth.Through the lens of our strategy, we will be creating a more efficient business model enabling us to convert sales growth into increased profits.”
Annual Meeting Announcements
The Company held its annual meeting of stockholders on May 16, 2007.
- The following individuals will serve on the Company’s
Board of Directors:
- John C. Brouillard
- Lawrence P. Castellani
- Darren R. Jackson
- Nicholas J. LaHowchic
- William S. Oglesby
- Gilbert T. Ray
- Carlos A. Saladrigas
- William L. Salter
- Francesca M. Spinelli
Michael N. Coppola was also elected to the Board of Directors and resigned effective immediately following the annual meeting. Other proposals approved by the shareholders were the ratification of the appointment by the audit committee of Deloitte & Touche LLP as independent auditors for 2007, the approval of an amendment to the 2004 Long-Term Incentive plan and approval of the 2007 Executive Incentive Plan.
Dividend
On May 16, 2007, the Company’s Board of Directors declared a regular quarterly cash dividend of six cents per share to be paid on July 6, 2007 to stockholders of record as of June 22, 2007.
Investor Conference Call
The Company will host a conference call on May 17, 2007, at 8:00 a.m. Eastern Standard Time to discuss its quarterly results. To listen to the live call, please log on to the Company’s Web site, www.AdvanceAutoParts.com, or dial (866) 908-1AAP. The call will be archived on the Company’s Web site until May 16, 2008.
About Advance Auto Parts
Headquartered in Roanoke, Va., Advance Auto Parts is the second-largest retailer of automotive aftermarket parts, accessories, batteries, and maintenance items in the United States, based on store count and sales. As of April 21, 2007, the Company operated 3,150 stores in 40 states, Puerto Rico, and the Virgin Islands. The Company serves both the do-it-yourself and professional installer markets.
Certain statements contained in this release are forward-looking statements, as that statement is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events or developments, and typically use words such as believe, anticipate, expect, intend, plan, forecast, outlook or estimate. These statements discuss, among other things, expected growth and future performance, including store growth, comparable-store sales, gross margin and SG&A rates, and earnings per share for second-quarter 2007 and fiscal year 2007. These forward-looking statements are subject to risks, uncertainties and assumptions including, but not limited to, competitive pressures, demand for the Company’s products, the market for auto parts, the economy in general, inflation, consumer debt levels, the weather, acts of terrorism, availability of suitable real estate, dependence on foreign suppliers and other factors disclosed in the Company’s 10-K for the fiscal year ended December 30, 2006, on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results described in these forward-looking statements. The Company intends these forward-looking statements to speak only as of the time of this news release and does not undertake to update or revise them, as more information becomes available.
-Financial Tables to Follow-
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||
| (in thousands) | ||||||||||||
| (unaudited) | ||||||||||||
| April 21, | Dec. 30, | April 22, | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 16,983 | $ | 11,128 | $ | 55,350 | ||||||
| Receivables, net | 89,754 | 97,046 | 84,779 | |||||||||
| Inventories, net | 1,556,052 | 1,463,340 | 1,420,889 | |||||||||
| Other current assets | 29,418 | 40,459 | 28,742 | |||||||||
| Total current assets | 1,692,207 | 1,611,973 | 1,589,760 | |||||||||
| Property and equipment, net | 1,016,046 | 994,977 | 932,455 | |||||||||
| Assets held for sale | 1,448 | 1,548 | 5,106 | |||||||||
| Goodwill | 33,718 | 33,718 | 67,208 | |||||||||
| Intangible assets, net | 27,596 | 27,926 | - | |||||||||
| Other assets, net | 10,299 | 12,539 | 21,199 | |||||||||
| $ | 2,781,314 | $ | 2,682,681 | $ | 2,615,728 | |||||||
| Liabilities and Stockholders' Equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Bank overdrafts | $ | 5,707 | $ | 34,206 | $ | 21,923 | ||||||
| Current portion of long-term debt | 62 | 67 | 35,261 | |||||||||
| Financed vendor accounts payable | 118,246 | 127,543 | 125,433 | |||||||||
| Accounts payable | 768,621 | 651,587 | 696,559 | |||||||||
| Accrued expenses | 254,859 | 252,975 | 282,916 | |||||||||
| Other current liabilities | 47,173 | 47,042 | 46,786 | |||||||||
| Total current liabilities | 1,194,668 | 1,113,420 | 1,208,878 | |||||||||
| Long-term debt | 404,150 | 477,173 | 395,343 | |||||||||
| Other long-term liabilities | 64,537 | 61,234 | 72,002 | |||||||||
| Total stockholders' equity | 1,117,959 | 1,030,854 | 939,505 | |||||||||
| $ | 2,781,314 | $ | 2,682,681 | $ | 2,615,728 | |||||||
| NOTE: These preliminary condensed consolidated balance sheets have been prepared on a basis consistent with our previously prepared balance sheets filed with the Securities and Exchange Commission for our prior quarter and annual reports, but do not include the footnotes required by generally accepted accounting principles for complete financial statements. | ||||||||||||
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| Sixteen Week Periods Ended | ||||||||
| April 21, 2007 and April 22, 2006 | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| April 21, | April 22, | |||||||
| 2007 | 2006 | |||||||
| Net sales | $ | 1,468,120 | $ | 1,393,010 | ||||
| Cost of sales, including purchasing and warehousing costs | 758,717 | 727,842 | ||||||
| Gross profit | 709,403 | 665,168 | ||||||
| Selling, general and administrative expenses | 574,710 | 538,870 | ||||||
| Operating income | 134,693 | 126,298 | ||||||
| Other, net: | ||||||||
| Interest expense | (11,274) | (10,163) | ||||||
| Other income, net | 342 | 620 | ||||||
| Total other, net | (10,932) | (9,543) | ||||||
| Income before provision for income taxes | 123,761 | 116,755 | ||||||
| Provision for income taxes | 47,660 | 42,674 | ||||||
| Net income | $ | 76,101 | $ | 74,081 | ||||
| Basic earnings per share | $ | 0.72 | $ | 0.69 | ||||
| Diluted earnings per share | $ | 0.71 | $ | 0.68 | ||||
| Average common shares outstanding ( a ) | 105,694 | 107,879 | ||||||
| Dilutive effect of stock options | 951 | 1,376 | ||||||
| Average common shares outstanding - assuming dilution | 106,645 | 109,255 | ||||||
| ( a )Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At April 21, 2007 and April 22, 2006, we had 106,058 and 106,960 shares outstanding, respectively. | ||||||||
| NOTE: These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with our previously prepared statements of operations filed with the Securities and Exchange Commission for our prior quarter and annual reports , but do not include the footnotes required by generally accepted accounting principles for complete financial statements. | ||||||||
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||||
| Sixteen Week Periods Ended | ||||||||||||
| April 21, 2007 and April 22, 2006 | ||||||||||||
| (in thousands) | ||||||||||||
| (unaudited) | ||||||||||||
| April 21, | April 22, | |||||||||||
| 2007 | 2006 | |||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 76,101 | $ | 74,081 | ||||||||
| Depreciation and amortization | 45,426 | 39,833 | ||||||||||
| Share-based compensation | 5,398 | 5,045 | ||||||||||
| Benefit for deferred income taxes | (6,087) | (1,163) | ||||||||||
| Excess tax benefit from share-based compensation | (3,607) | (2,663) | ||||||||||
| Other non-cash adjustments to net income | 3,439 | 366 | ||||||||||
| Decrease (increase) in: | ||||||||||||
| Receivables, net | 4,041 | 9,716 | ||||||||||
| Inventories, net | (92,712) | (53,790) | ||||||||||
| Other assets | 13,316 | 15,454 | ||||||||||
| Increase in: | ||||||||||||
| Accounts payable | 117,034 | 67,311 | ||||||||||
| Accrued expenses | 21,491 | 10,130 | ||||||||||
| Other liabilities | 3,035 | 1,974 | ||||||||||
| Net cash provided by operating activities | 186,875 | 166,294 | ||||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchases of property and equipment | (75,940) | (77,954) | ||||||||||
| Insurance proceeds related to damaged property | 3,251 | - | ||||||||||
| Proceeds from sales of property and equipment | 239 | 5,111 | ||||||||||
| Net cash used in investing activities | (72,450) | (72,843) | ||||||||||
| Cash flows from financing activities: | ||||||||||||
| Decrease in bank overdrafts | (28,499) | (28,247) | ||||||||||
| (Decrease) increase in financed vendor accounts payable | (9,297) | 6,082 | ||||||||||
| Dividends paid | (12,682) | (6,479) | ||||||||||
| Net payments on credit facilities | (73,000) | (8,175) | ||||||||||
| Proceeds from the issuance of common stock, primarily exercise of stock options | ||||||||||||
| 11,262 | 8,576 | |||||||||||
| Excess tax benefit from share-based compensation | 3,607 | 2,663 | ||||||||||
| Repurchase of common stock | - | (53,327) | ||||||||||
| Other | 39 | 23 | ||||||||||
| Net cash used in financing activities | (108,570) | (78,884) | ||||||||||
| Net increase in cash and cash equivalents | 5,855 | 14,567 | ||||||||||
| Cash and cash equivalents, beginning of period | 11,128 | 40,783 | ||||||||||
| Cash and cash equivalents, end of period | $ | 16,983 | $ | 55,350 | ||||||||
| NOTE: These preliminary condensed consolidated statements of cash flows have been prepared on a consistent basis with previously prepared statements of cash flows filed with the Securities and Exchange Commission for our prior quarter and annual reports, but do not include the footnotes required by generally accepted accounting principles for complete financial statements. | ||||||||||||
| Advance Auto Parts, Inc. and Subsidiaries | |||||||||
| Supplemental Financial Schedules | |||||||||
| Sixteen Week Periods Ended | |||||||||
| April 21, 2007 and April 22, 2006 | |||||||||
| (in thousands, except per share data) | |||||||||
| (unaudited) | |||||||||
| Reconciliation of Free Cash Flow | |||||||||
| April 21, | April 22, | ||||||||
| 2007 | 2006 | ||||||||
| Cash flows from operating activities | $ | 186,875 | $ | 166,294 | |||||
| Cash flows used in investing activities | (72,450) | (72,843) | |||||||
| 114,425 | 93,451 | ||||||||
| Decrease (increase) in financed vendor accounts payable | (9,297) | 6,082 | |||||||
| Free cash flow | $ | 105,128 | $ | 99,533 | |||||
| Note: Management uses free cash flow as a measure of our liquidity and believes it is a useful indicator to stockholders of our ability to implement our growth strategies and service our debt. Free cash flow is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in our condensed consolidated statement of cash flows. | |||||||||
