Advance Auto Parts, Inc. : Advance Auto Parts Reports Fourth Quarter Fiscal 2011 Diluted EPS Increase of 57.9% to $0.90 and Record Annual Free Cash Flow of $507 Million
02/16/2012| 08:35am US/Eastern
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Advance Auto Parts, Inc. (NYSE: AAP), a leading retailer of automotive
aftermarket parts, accessories, batteries, and maintenance items, today
announced its financial results for its fourth quarter and fiscal year
ended December 31, 2011.
Fourth quarter comparable earnings per diluted share (EPS) were $0.90
which was a 57.9% increase over the fourth quarter of fiscal 2010. For
fiscal 2011, EPS increased 29.4% to $5.11 on top of a 31.7% increase in
EPS during fiscal 2010.
Fourth Quarter Performance Summary
Twelve Weeks Ended
Fifty-Two Weeks Ended
December 31, 2011
January 1, 2011
December 31, 2011
January 1, 2011
Sales (in millions)
$
1,327.6
$
1,270.1
$
6,170.5
$
5,925.2
Comp Store Sales %
2.9%
8.9%
2.2%
8.0%
Gross Profit %
49.0%
49.4%
49.7%
50.0%
SG&A %
40.6%
42.8%
39.0%
40.1%
Operating Income %
8.4%
6.6%
10.8%
9.9%
Diluted EPS
$
0.90
$
0.57
$
5.11
$
3.95
Avg Diluted Shares (in thousands)
73,807
84,494
77,071
87,155
"I would like to thank our 52,000 Team Members for their hard work and
congratulate them on their outstanding performance in the fourth quarter
and for the 2011 fiscal year. Our team's conviction and commitment
helped build momentum throughout the year, which resulted in a very
strong finish to another great year," said Darren R. Jackson, President
and Chief Executive Officer. "Once again, our team reached many record
strategic and financial milestones in 2011 including sales of over $6
billion, continued improvement in customer satisfaction, and record
profitability, free cash flow and returns on invested capital. Based on
our Team's focus on execution combined with strong industry
fundamentals, we expect 2012 will be another successful year."
Fourth Quarter and Fiscal 2011 Highlights
Total sales for the fourth quarter increased 4.5% to $1.33 billion,
compared with total sales of $1.27 billion during the fourth quarter of
fiscal 2010. The 4.5% sales increase reflects the net addition of 99 new
stores during the past 12 months and a comparable store sales gain of
2.9% compared to an 8.9% comparable store sales gain during the fourth
quarter of fiscal 2010. Fiscal 2011 comparable store sales increased
2.2% on top of an 8.0% increase in fiscal 2010.
The Company's gross profit rate was 49.0% of sales during the fourth
quarter as compared to 49.4% during the fourth quarter of fiscal 2010.
The 39 basis-point decline in the gross profit rate was driven by
increased supply chain expenses due to investments in hub stores and
increased shrink expense. For fiscal 2011, the Company's gross profit
rate was 49.7%, or a 24 basis-point decline from fiscal 2010.
The Company's SG&A rate was 40.6% of sales during the fourth quarter as
compared to 42.8% during the same period in fiscal 2010. This 221
basis-point decrease was driven by productivity improvements from the
Company's variable customer-driven labor model which includes the
anniversary of investment rollout expenses, reduced incentive
compensation as a result of the Company's lower comparable sales growth
versus the fourth quarter of 2010, occupancy cost leverage and a
significant decrease in overall administrative costs. The expense
reductions were partially offset by continued strategic investments in
support of the Company's Service Leadership and Superior Availability
strategies. For fiscal 2011, the Company's SG&A rate decreased 114 basis
points to 39.0% versus 40.1% in fiscal 2010.
The Company's operating income increased 33.3% during the fourth quarter
to $111.9 million as compared to the fourth quarter of fiscal 2010. The
Company's operating income rate increased 182 basis points to 8.4% of
sales. For the year, the Company's operating income rate increased 90
basis points to 10.8% as compared to fiscal 2010.
During fiscal 2011, the Company generated $828.8 million in operating
cash flow and a record $507.2 million of free cash flow. Free cash flow
was driven by a significant decrease in inventory, net of payables, and
strong growth in net income, partially offset by an increase in capital
expenditures. Capital expenditures were $268.1 million for fiscal 2011
as compared to $199.6 million in fiscal 2010.
"As a direct result of our Team's ability to respond, adapt and provide
outstanding service, our operating income rate increased to a record
10.8% of sales in fiscal 2011 and our diluted EPS increased 29.4% on top
of a 31.7% EPS increase in 2010," said Mike Norona, Executive Vice
President and Chief Financial Officer.
Comparable Key Financial Metrics and Statistics (1)
Twelve Weeks Ended
Fifty-Two Weeks Ended
December 31, 2011
January 1, 2011
FY 2011
FY 2010
FY 2009
Sales Growth %
4.5%
11.1%
4.1%
9.5%
7.1%
Sales per Store
$
1,708
$
1,697
$
1,708
$
1,697
$
1,595
Operating Income per Store
$
184
$
168
$
184
$
168
$
142
Return on Invested Capital
19.5%
17.5%
19.5%
17.5%
15.1%
Gross Margin Return on Inventory
$
6.60
$
5.05
$
6.60
$
5.05
$
3.98
Total Store Square Footage, end of period
26,663
25,950
26,663
25,950
24,973
Total Team Members, end of period
52,002
51,017
52,002
51,017
48,771
(1)
In thousands except for gross margin return on inventory and total
Team Members. The financial metrics have been reported on a
comparable basis to exclude the impact of store divestiture expenses
in fiscal 2009. The financial metrics presented are calculated on an
annual basis and accordingly reflect the last four quarters
completed, except for Sales Growth % and where noted. Refer to the
presentation of the financial metrics on a GAAP basis, definitions
of the financial metrics and reconciliation of the financial results
reported on a comparable basis to the GAAP basis in the accompanying
financial statements in this press release.
Store Information
During the fourth quarter, the Company opened 19 stores, closed one
Advance store and one Autopart International store. For fiscal 2011, the
Company opened 104 stores, including 9 Autopart International stores,
and closed 4 Advance stores and one Autopart International store. As of
December 31, 2011, the Company's total store count was 3,662 including
202 Autopart International stores.
Share Repurchases
During fiscal 2011, the Company repurchased 9.9 million shares of its
common stock at an aggregate cost of $609.7 million, or an average price
of $61.51 per share. At the end of the fourth quarter, the Company had
$200.0 million remaining under the $300.0 million share repurchase
authorization approved by the Board of Directors in August 2011.
2012 Annual Financial Outlook
The Company has provided the following annual financial outlook and
certain key assumptions for fiscal 2012.
Fiscal 2012 Annual Financial Outlook Key Assumptions
New Stores
120 - 140 (110 - 120 Advance Auto Parts stores, 10 - 20 Autopart
International stores)
Comparable Store Sales
Low to mid-single digits
EPS
$5.55 - $5.75
Capital Expenditures
$275 million - $300 million
Diluted Share Count
Approximately 74 million shares
Free Cash Flow
Minimum of $400 million
In fiscal 2012, the Company anticipates a low to mid-single digit
increase in comparable store sales driven by continued strong Commercial
sales growth. The Company expects a modest increase in gross profit
rate. The Company expects its rate of growth in SG&A dollars per store
to increase low-single digits. The Company estimates an EPS range of
approximately $5.55 to $5.75 for fiscal 2012, which assumes an average
diluted share count of approximately 74 million shares.
"We believe 2012 will be another strong year based on the solid industry
fundamentals, previous strategic and capability investments coupled with
improving service levels. As a result, our Company is positioned to grow
our comp store sales, expand our operating income rate and generate
double-digit EPS growth for our fifth consecutive year," said Mike
Norona, Executive Vice President and Chief Financial Officer. "Our
pursuit of increased growth and profitability requires a relentless
focus on service, operational excellence and continued investments in
the areas of Service Leadership and Superior Availability as we progress
towards our goal of a 12% operating income."
Dividend
On February 13, 2012, the Company's Board of Directors declared a
regular quarterly cash dividend of $0.06 per share to be paid on April
6, 2012 to stockholders of record as March 23, 2012.
Investor Conference Call
The Company will host a conference call on Thursday, February 16, 2012
at 10:00 a.m. Eastern Standard Time to discuss its quarterly results. To
listen to the live call, please log on to the Company's website, www.AdvanceAutoParts.com,
or dial (866) 908-1AAP. The call will be archived on the Company's
website until February 16, 2013.
About Advance Auto Parts
Headquartered in Roanoke, Va., Advance Auto Parts, Inc., a leading
automotive aftermarket retailer of parts, accessories, batteries, and
maintenance items in the United States, serves both the do-it-yourself
and professional installer markets. As of December 31, 2011, the Company
operated 3,662 stores in 39 states, Puerto Rico, and the Virgin Islands.
Additional information about the Company, employment opportunities,
customer services, and online shopping for parts and accessories can be
found on the Company's website at www.AdvanceAutoParts.com.
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, capital expenditures, comparable
store sales, SG&A, operating income, gross profit rate, free cash flow,
profitability and earnings per diluted share for fiscal year 2012. 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, business
interruptions, 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 January 1, 2011 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.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31,
January 1,
2011
2011
Assets
Current assets:
Cash and cash equivalents
$
57,901
$
59,209
Receivables, net
140,007
124,227
Inventories, net
2,043,158
1,863,870
Other current assets
52,754
76,965
Total current assets
2,293,820
2,124,271
Property and equipment, net
1,223,099
1,143,170
Assets held for sale
615
1,472
Goodwill
76,389
34,387
Intangible assets, net
31,380
25,360
Other assets, net
30,451
25,557
$
3,655,754
$
3,354,217
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt
$
848
$
973
Financed vendor accounts payable
-
31,648
Accounts payable
1,653,183
1,292,113
Accrued expenses (a)
385,746
404,086
Other current liabilities (a)
148,098
119,229
Total current liabilities
2,187,875
1,848,049
Long-term debt
415,136
300,851
Other long-term liabilities(a)
204,829
165,943
Total stockholders' equity
847,914
1,039,374
$
3,655,754
$
3,354,217
(a)
Effective January 1, 2011, the Company reclassified $50.3 million
of its self-insurance liability from Accrued expenses to Other
long-term liabilities because the timing of future payments had
become predictable based on historical patterns. Due to the maturity
of the program, the Company can now rely upon these historical
patterns in determining the current portion of these liabilities.
This reclassification was partially offset by the related income tax
impact.
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 report, 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
December 31, 2011 and January 1, 2011
(in thousands, except per share data)
(unaudited)
December 31,
January 1,
2011
2011
Net sales
$
1,327,572
$
1,270,130
Cost of sales, including purchasing and warehousing costs
676,834
642,645
Gross profit
650,738
627,485
Selling, general and administrative expenses
538,820
543,548
Operating income
111,918
83,937
Other, net:
Interest expense
(5,073
)
(6,727
)
Other income, net
314
454
Total other, net
(4,759
)
(6,273
)
Income before provision for income taxes
107,159
77,664
Provision for income taxes
40,720
29,551
Net income
$
66,439
$
48,113
Basic earnings per share (a)
$
0.92
$
0.58
Diluted earnings per share (a)
$
0.90
$
0.57
Average common shares outstanding (a)
72,394
82,983
Average common shares outstanding - assuming dilution (a)
73,807
84,494
(a)
Average common shares outstanding is calculated based on the
weighted average number of shares outstanding during the quarter.
At December 31, 2011 and January 1, 2011, we had 72,799 and 81,956
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 report, but do not include the footnotes required by GAAP
for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Fifty-Two Week Periods Ended
December 31, 2011 and January 1, 2011
(in thousands, except per share data)
(unaudited)
December 31,
January 1,
2011
2011
Net sales
$
6,170,462
$
5,925,203
Cost of sales, including purchasing and warehousing costs
3,101,172
2,963,888
Gross profit
3,069,290
2,961,315
Selling, general and administrative expenses
2,404,648
2,376,382
Operating income
664,642
584,933
Other, net:
Interest expense
(30,949
)
(26,861
)
Other expense, net
(457
)
(1,017
)
Total other, net
(31,406
)
(27,878
)
Income before provision for income taxes
633,236
557,055
Provision for income taxes
238,554
211,002
Net income
$
394,682
$
346,053
Basic earnings per share (a)
$
5.21
$
4.00
Diluted earnings per share (a)
$
5.11
$
3.95
Average common shares outstanding (a)
75,620
86,082
Average common shares outstanding - assuming dilution (a)
77,071
87,155
(a)
Average common shares outstanding is calculated based on the
weighted average number of shares outstanding during the year. At
December 31, 2011 and January 1, 2011, we had 72,799 and 81,956
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 report, 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
Fifty-Two Week Periods Ended
December 31, 2011 and January 1, 2011
(in thousands)
(unaudited)
December 31,
January 1,
2011
2011
Cash flows from operating activities:
Net income
$
394,682
$
346,053
Depreciation and amortization
175,949
164,437
Share-based compensation
19,553
22,311
Provision for deferred income taxes
53,037
40,503
Excess tax benefit from share-based compensation
(9,663
)
(7,260
)
Other non-cash adjustments to net income
6,326
7,640
(Increase) decrease in:
Receivables, net
(15,372
)
(31,667
)
Inventories, net
(179,288
)
(232,003
)
Other assets
23,073
(13,105
)
Increase (decrease) in:
Accounts payable
360,678
325,839
Accrued expenses
(15,901
)
38,715
Other liabilities
15,775
4,696
Net cash provided by operating activities
828,849
666,159
Cash flows from investing activities:
Purchases of property and equipment
(268,129
)
(199,585
)
Business acquisitions, net of cash acquired
(23,133
)
-
Proceeds from sales of property and equipment
1,288
235
Net cash used in investing activities
(289,974
)
(199,350
)
Cash flows from financing activities:
Increase in bank overdrafts
6,625
28
Decrease in financed vendor accounts payable
(31,648
)
(444
)
Net borrowings (payments) on credit facilities
115,000
-
Issuance of senior unsecured notes
-
298,761
Early extinguishment of debt
-
(200,000
)
Payment of debt related costs
(3,656
)
(4,572
)
Dividends paid
(18,554
)
(21,051
)
Proceeds from the issuance of common stock, primarily exercise of
stock options
14,474
36,113
Excess tax benefit from share-based compensation
9,663
7,260
Repurchase of common stock
(631,149
)
(622,442
)
Other
(938
)
(1,271
)
Net cash used in financing activities
(540,183
)
(507,618
)
Net decrease in cash and cash equivalents
(1,308
)
(40,809
)
Cash and cash equivalents, beginning of period
59,209
100,018
Cash and cash equivalents, end of period
$
57,901
$
59,209
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 report, but do
not include the footnotes required by GAAP for complete financial
statements.
Advance Auto Parts, Inc. and Subsidiaries
Supplemental Financial Schedules
Fifty-Two Week Periods Ended
December 31, 2011 and January 1, 2011
(in thousands, except per share data)
(unaudited)
Reconciliation of Free Cash Flow:
December 31,
January 1,
2011
2011
Cash flows from operating activities
$
828,849
$
666,159
Cash flows used in investing activities
(289,974
)
(199,350
)
538,875
466,809
Decrease in financed vendor accounts payable
(31,648
)
(444
)
Free cash flow
$
507,227
$
466,365
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.
Key Financial Metrics and Statistics(1):
Twelve Weeks Ended
December 31, 2011
January 1, 2011
FY 2011
FY 2010
FY 2009
Sales Growth %
4.5
%
11.1
%
4.1
%
9.5
%
5.3
%
Sales per Store (2)(3)
$
1,708
$
1,697
$
1,708
$
1,697
$
1,595
Operating Income per Store (2)(4)
$
184
$
168
$
184
$
168
$
134
Return on Invested Capital (2)(5)
19.5
%
17.5
%
19.5
%
17.5
%
14.6
%
Gross Margin Return on Inventory (2)(6)
$
6.60
$
5.05
$
6.60
$
5.05
$
3.98
Total Store Square Footage, end of period
26,663
25,950
26,663
25,950
24,973
Total Team Members, end of period
52,002
51,017
52,002
51,017
48,771
(1)
In thousands except for gross margin return on inventory and
total Team Members. These financial metrics have been reported on a
GAAP basis which include the impact of store divestiture expenses in
fiscal 2009. These financial metrics should be read in conjunction
with our financial metrics presented on a comparable basis earlier
in this press release. Refer to the "Selected Consolidated Data" on
page 18 of our 2010 Form 10-K for further explanation of these items.
(2)
The financial metrics presented are calculated on an annual basis
and accordingly reflect the last four quarters completed.
(3)
Sales per store is calculated as net sales divided by an average
of beginning and ending store count.
(4)
Operating income per store is calculated as operating income
divided by an average of beginning and ending store count.
(5)
Return on invested capital (ROIC) is calculated in detail in
these supplemental financial schedules.
(6)
Gross margin return on inventory is calculated as gross profit
divided by an average of beginning and ending inventory, net of
accounts payable and financed vendor accounts payable.
Detail of Return on Invested Capital
(ROIC) Calculation:
Capitalized lease obligation is estimated as annualized rent
expense for the applicable period times six years.
Note: Management uses ROIC to evaluate return on investments to
the business and believes it is a useful indicator to stockholders
given the future investments the Company plans to make in areas
including information technology, supply chain and stores. ROIC is
a non-GAAP measure and should be considered in addition to, but
not as a substitute for, information contained in our condensed
consolidated financial statements. Management believes our
comparable results of operations are a useful indicator to
stockholders for consistency purposes.
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