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 third quarter ended October 6, 2007.
Earnings per diluted share for the third quarter were $.57. Excluding severance costs and asset write-offs associated with the Company’s expense reduction initiatives, earnings per diluted share were $.61 compared to $.56 last year, an 8.9% increase. In the third quarter, sales increased to $1.16 billion from $1.10 billion last year.Comparable-store sales increased 1.1% in the quarter, comprised of a 1.0% decrease in do-it-yourself (DIY) and an 8.0% increase in do-it-for-me (DIFM). The 1.1% comparable-store sales increase compared to a 1.4% increase in last year’s third quarter.
“We are pleased to report that we are on track with the initiatives that we announced at the end of our last quarter. Although we anticipate it will take time, we believe the results of those initiatives are beginning to have a positive impact on our sales, earnings, and return on invested capital,” said Jack Brouillard, Chairman, President and CEO.
Third quarter gross margin was 47.9% of sales, a 28 basis point decrease compared to last year. The decrease was primarily due to a less favorable merchandise sales mix as compared to last year. In addition, fewer discounts were earned as merchandise purchases were less than year ago levels and the Company had a greater proportion of commercial sales.
Third quarter selling, general and administrative (SG&A) expenses were 39.3% of sales compared to 38.9% last year. Excluding severance and asset write-off costs, SG&A expenses were 38.7%, a decrease of 18 basis points as compared to last year.
Year to date sales increased to $3.80 billion from $3.60 billion last year. Year to date comparable-store sales increased 1.2% comprised of a 0.4% decrease in do-it-yourself (DIY) and a 6.2% increase in do-it-for-me (DIFM). The year to date 1.2% comparable-store sales increase compares to a 2.3% increase last year.
Year to date earnings per diluted share were $1.92, compared to $1.82 last year. Year to date gross margin was 48.1% of sales, a 29 basis point improvement from last year. Year to date SG&A expenses were 38.8% of sales as compared to 38.4% in 2006, a 41 basis point increase.
Share Repurchases
In the third quarter, the Company repurchased 6.2 million shares at an average price of $33.26 for a total of $207 million. The Company currently has $335 million available under the share repurchase authorization approved by the Board of Directors in August 2007.
Store Information
During the third quarter, the Company opened 43 new stores, of which 4 are Autopart International (AI) stores. The Company also relocated 5 stores and closed 2 stores.
Year to date, the Company has opened 156 new stores, of which 17 are AI stores. The Company has also relocated 24 stores and closed 10 stores.
2007 Guidance
The Company forecasts fourth quarter earnings per share in the range of $.36 to $.40 as compared to $.33 last year, an increase of 9% to 21%. This guidance is based on comparable store sales growth of 0 to 2%. Gross margin is expected to be in line with fourth quarter last year. SG&A expenses are expected to leverage within the 0 to 2% sales guidance.
The Company anticipates full year 2007 earnings per diluted share to be in the range of $2.28 to $2.32. Excluding the severance costs and asset write-offs of $.04 per share incurred in the third quarter, earnings per diluted share for the year are expected to be $2.32 to $2.36 as compared to $2.16 last year, an increase of 7% to 9%. The Company expects free cash flow for the year to be in the range of $200to $220 million.
Investor Conference Call
The Company will host a conference call on Thursday November 1, 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 November 1, 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 October 6, 2007, the Company operated 3,228 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 fourth 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) | |||||||||
| October 6, | December 30, | October 7, | |||||||
| 2007 | 2006 | 2006 | |||||||
Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 14,836 | $ | 11,128 | $ | 13,987 | |||
| Receivables, net | 76,982 | 97,046 | 83,733 | ||||||
| Inventories, net | 1,540,666 | 1,463,340 | 1,462,067 | ||||||
| Other current assets | 43,805 | 40,459 | 38,207 | ||||||
Total current assets | 1,676,289 | 1,611,973 | 1,597,994 | ||||||
| Property and equipment, net | 1,016,712 | 994,977 | 983,609 | ||||||
| Assets held for sale | 2,390 | 1,548 | 2,777 | ||||||
| Goodwill | 33,718 | 33,718 | 33,765 | ||||||
| Intangible assets, net | 27,095 | 27,926 | 27,920 | ||||||
| Other assets, net | 10,362 | 12,539 | 15,520 | ||||||
| $ | 2,766,566 | $ | 2,682,681 | $ | 2,661,585 | ||||
Liabilities and Stockholders' Equity | |||||||||
| Current liabilities: | |||||||||
| Bank overdrafts | $ | 349 | $ | 34,206 | $ | 36,689 | |||
| Current portion of long-term debt | 661 | 67 | 67 | ||||||
| Financed vendor accounts payable | 153,324 | 127,543 | 140,736 | ||||||
| Accounts payable | 708,095 | 651,587 | 669,720 | ||||||
| Accrued expenses | 304,810 | 252,975 | 257,334 | ||||||
| Other current liabilities | 40,121 | 47,042 | 48,953 | ||||||
| Total current liabilities | 1,207,360 | 1,113,420 | 1,153,499 | ||||||
| Long-term debt | 433,774 | 477,173 | 450,859 | ||||||
| Other long-term liabilities | 60,042 | 61,234 | 66,773 | ||||||
| Total stockholders' equity | 1,065,390 | 1,030,854 | 990,454 | ||||||
| $ | 2,766,566 | $ | 2,682,681 | $ | 2,661,585 | ||||
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, or GAAP, for complete financial statements.
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| Twelve Week Periods Ended | ||||||||
| October 6, 2007 and October 7, 2006 | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| October 6, | October 7, | |||||||
| 2007 | 2006 | |||||||
| Net sales | $ | 1,158,043 | $ | 1,099,486 | ||||
| Cost of sales, including purchasing and warehousing costs | 602,930 | 569,280 | ||||||
| Gross profit | 555,113 | 530,206 | ||||||
| Selling, general and administrative expenses | 454,734 | 427,685 | ||||||
| Operating income | 100,379 | 102,521 | ||||||
| Other, net: | ||||||||
| Interest expense | (7,968 | ) | (9,232 | ) | ||||
| Gain on extinguishment of debt, net | - | 986 | ||||||
| Other income, net | 353 | 154 | ||||||
| Total other, net | (7,615 | ) | (8,092 | ) | ||||
| Income before provision for income taxes | 92,764 | 94,429 | ||||||
| Provision for income taxes | 33,724 | 35,482 | ||||||
| Net income | $ | 59,040 | $ | 58,947 | ||||
| Basic earnings per share | $ | 0.58 | $ | 0.56 | ||||
| Diluted earnings per share | $ | 0.57 | $ | 0.56 | ||||
Average common shares outstanding (a) | 102,546 | 105,112 | ||||||
| Dilutive effect of share-based compensation | 635 | 939 | ||||||
| Average common shares outstanding - assuming dilution | 103,181 | 106,051 | ||||||
(a) Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 6, 2007 and October 7, 2006, we had 100,927 and 105,208 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 GAAP for complete financial statements.
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| Forty Week Periods Ended | ||||||||
| October 6, 2007 and October 7, 2006 | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| October 6, | October 7, | |||||||
| 2007 | 2006 | |||||||
| Net sales | $ | 3,796,022 | $ | 3,600,353 | ||||
| Cost of sales, including purchasing and warehousing costs | 1,968,645 | 1,877,620 | ||||||
| Gross profit | 1,827,377 | 1,722,733 | ||||||
| Selling, general and administrative expenses | 1,474,495 | 1,383,468 | ||||||
| Operating income | 352,882 | 339,265 | ||||||
| Other, net: | ||||||||
| Interest expense | (26,634 | ) | (28,147 | ) | ||||
| Gain on extinguishment of debt, net | - | 986 | ||||||
| Other income, net | 1,203 | 753 | ||||||
| Total other, net | (25,431 | ) | (26,408 | ) | ||||
| Income before provision for income taxes | 327,451 | 312,857 | ||||||
| Provision for income taxes | 123,886 | 116,893 | ||||||
| Net income | $ | 203,565 | $ | 195,964 | ||||
| Basic earnings per share | $ | 1.94 | $ | 1.84 | ||||
| Diluted earnings per share | $ | 1.92 | $ | 1.82 | ||||
Average common shares outstanding (a) | 104,987 | 106,380 | ||||||
| Dilutive effect of share-based compensation | 866 | 1,175 | ||||||
| Average common shares outstanding - assuming dilution | 105,853 | 107,555 | ||||||
(a) Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the year. At October 6, 2007 and October 7, 2006, we had 100,927 and 105,208 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 GAAP for complete financial statements.
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| Forty Week Periods Ended | ||||||||
| October 6, 2007 and October 7, 2006 | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| October 6, | October 7, | |||||||
| 2007 | 2006 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 203,565 | $ | 195,964 | ||||
| Depreciation and amortization | 113,404 | 104,156 | ||||||
| Share-based compensation | 14,318 | 14,473 | ||||||
| Benefit for deferred income taxes | (21,141 | ) | (2,332 | ) | ||||
| Excess tax benefit from share-based compensation | (11,133 | ) | (4,398 | ) | ||||
| Loss on extinguishment of debt | - | 1,887 | ||||||
| Other non-cash adjustments to net income | 9,247 | 2,002 | ||||||
| Decrease (increase) in: | ||||||||
| Receivables, net | 14,317 | 10,995 | ||||||
| Inventories, net | (77,326 | ) | (90,966 | ) | ||||
| Other assets | (985 | ) | 9,031 | |||||
| Increase (decrease) in: | ||||||||
| Accounts payable | 56,508 | 40,472 | ||||||
| Accrued expenses | 71,708 | 17,056 | ||||||
| Other liabilities | 5,296 | (1,337 | ) | |||||
| Net cash provided by operating activities | 377,778 | 297,003 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (146,520 | ) | (200,784 | ) | ||||
| Insurance proceeds related to damaged property | 6,636 | - | ||||||
| Proceeds from sales of property and equipment | 1,761 | 8,726 | ||||||
| Business acquisitions, net of cash acquired | - | (12,500 | ) | |||||
| Net cash used in investing activities | (138,123 | ) | (204,558 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Decrease in bank overdrafts | (33,857 | ) | (13,481 | ) | ||||
| Increase in financed vendor accounts payable | 25,781 | 21,385 | ||||||
| Early extinguishment of debt | - | (433,775 | ) | |||||
| Dividends paid | (25,152 | ) | (19,153 | ) | ||||
| Net (payments) borrowings on credit facilities | (47,200 | ) | 445,950 | |||||
| Net borrowings (payments) on note payable | 4,395 | (49 | ) | |||||
| Payment of debt related costs | - | (1,078 | ) | |||||
Proceeds from the issuance of common stock, primarily exercise of stock options | 39,711 | 14,100 | ||||||
| Excess tax benefit from share-based compensation | 11,133 | 4,398 | ||||||
| Repurchase of common stock | (211,225 | ) | (137,560 | ) | ||||
| Other | 467 | 22 | ||||||
| Net cash used in financing activities | (235,947 | ) | (119,241 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 3,708 | (26,796 | ) | |||||
| Cash and cash equivalents, beginning of period | 11,128 | 40,783 | ||||||
| Cash and cash equivalents, end of period | $ | 14,836 | $ | 13,987 | ||||
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 GAAP for complete financial statements.
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||
| Supplemental Financial Schedule | ||||||||
| Forty Week Periods Ended | ||||||||
| October 6, 2007 and October 7, 2006 | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
Reconciliation of Free Cash Flow | ||||||||
| October 6, | October 7, | |||||||
| 2007 | 2006 | |||||||
| Cash flows from operating activities | $ | 377,778 | $ | 297,003 | ||||
| Cash flows used in investing activities | (138,123 | ) | (204,558 | ) | ||||
| 239,655 | 92,445 | |||||||
| Increase in financed vendor accounts payable | 25,781 | 21,385 | ||||||
| Free cash flow | $ | 265,436 | $ | 113,830 | ||||
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. The Company also included additional non-GAAP measures in this release, including adjusted earnings per diluted share and adjusted selling, general and administrative expenses. The Company believes these non-GAAP measures are useful to investors as they more clearly indicate the Company’s comparable operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP.
Contacts:
Shelly Whitaker, APR
Shelly.whitaker@advanceautoparts.com
Direct:
540-561-8452
Fax: 540-561-6445
