Advance Auto Parts, Inc. : Advance Auto Parts Reports Third Quarter Fiscal 2011 Diluted EPS Increase of 37% to $1.41; Operating Income Rate Expands 167 basis points to 12.1%
11/09/2011| 04:20pm 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 the third quarter ended
October 8, 2011.Third quarter earnings per diluted share (EPS)
were $1.41 which was a 37% increase over the third quarter last year.
Third Quarter Performance Summary
Twelve Weeks Ended
Forty Weeks Ended
October 8, 2011
October 9, 2010
October 8, 2011
October 9, 2010
Sales (in millions)
$
1,465.0
$
1,406.5
$
4,842.9
$
4,655.1
Comp Store Sales %
2.2
%
9.9
%
2.0
%
7.8
%
Gross Profit %
49.5
%
50.3
%
49.9
%
50.1
%
SG&A %
37.3
%
39.9
%
38.5
%
39.4
%
Operating Income %
12.1
%
10.5
%
11.4
%
10.8
%
Diluted EPS
$
1.41
$
1.03
$
4.19
$
3.37
Avg Diluted Shares (in thousands)
74,730
84,802
78,058
87,953
"I would like to thank our team for delivering strong third quarter
results that include solid top line sales and accelerated earnings
results," said Darren R. Jackson, Chief Executive Officer."As a
company, we will continue to be focused on customer service and
executing the business with consistency and excellence."
Third Quarter and Year-to-Date Highlights
Total sales for the third quarter increased 4.2% to $1.46 billion,
compared with total sales of $1.41 billion during the third quarter of
fiscal 2010. The sales increase reflects the net addition of 105 new
stores during the past 12 months and a comparable store sales gain of
2.2% on top of a 9.9% comparable store sales gain during the third
quarter of fiscal 2010. Year-to-date, comparable store sales increased
2.0% which was on top of a 7.8% increase over the same period in fiscal
2010.
The Company's gross profit rate was 49.5% of sales during the third
quarter as compared to 50.3% during the third quarter last year. The 87
basis-point decline in the gross profit rate was driven by increased
shrink, increased supply chain expenses due to investments in Hubs and
higher fuel costs, commodity price inflation and the related timing of
the Company's retail price changes.Year-to-date, the Company's
gross profit rate was 49.9% versus 50.1% during the same period in
fiscal 2010.
The Company's SG&A rate was 37.3% of sales during the third quarter
as compared to 39.9% during the same period last year. This 254
basis-point decrease was primarily due to reduced incentive compensation
as a result of the Company's lower revenue growth versus the third
quarter last year, productivity improvements from the Company's
customer-driven labor model which includes the anniversary of investment
rollout expenses and a decrease in support costs.The expense
reductions were partially offset by increased strategic investments in
support of the Company's Service Leadership and Superior Availability
strategies.Year-to-date, the Company's SG&A rate decreased 85
basis points to 38.5% from 39.4% during the same period in fiscal 2010.
The Company's operating income during the third quarter increased
20.8% to $177.8 million, or 167 basis points on a rate basis, to 12.1%
of total sales as compared to 10.5% during the third quarter of fiscal
2010.Year-to-date, the Company's operating income rate was 11.4%
versus 10.8% during the same period last year.
Operating cash flow through the third quarter was $611.0 million
versus $596.5 million last year.Free cash flow through the third
quarter decreased 24.2% to $354.8 million from $467.8 million last year.The decrease in free cash flow was driven primarily by the change in
owned inventory this year versus last year as well as higher capital
expenditures.Capital expenditures were $207.5 million through
the third quarter as compared to $147.2 million through the third
quarter of fiscal 2010.This increase was primarily driven by
investments in the Company's supply chain, existing stores and
information technology.
"We are pleased with our strong business performance and execution
that drove a 21% increase in operating income and a 37% increase in
EPS," said Mike Norona, Executive Vice President and Chief Financial
Officer."Our performance during our third quarter shows we are
on the right path and reinforces our commitment to accelerate growth,
improve profitability and drive shareholder value.Given our
strong third quarter results, we now anticipate our annual 2011 EPS
outlook to be $4.90 to $4.95."
Comparable Key Financial Metrics and Statistics (1)
Twelve Weeks Ended
Forty Weeks Ended
Fifty-Two Weeks Ended
October 8, 2011
October 9, 2010
October 8, 2011
October 9, 2010
FY 2010
FY 2009
Sales Growth %
4.2
%
11.4
%
4.0
%
9.0
%
9.5
%
7.1
%
Sales per Store
$
1,702
$
1,667
$
1,702
$
1,667
$
1,697
$
1,595
Operating Income per Store
$
177
$
162
$
177
$
162
$
168
$
142
Return on Invested Capital
18.8
%
17.3
%
18.8
%
17.3
%
17.5
%
15.1
%
Gross Margin Return on Inventory
$
5.76
$
4.89
$
5.76
$
4.89
$
5.05
$
3.98
Total Store Square Footage, end of period
26,533
25,809
26,533
25,809
25,950
24,973
Total Team Members, end of period
52,386
50,605
52,386
50,605
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 third quarter, the Company opened 20 stores, and closed 2
stores.As of October 8, 2011, the Company's total store count
was 3,645 including 203 Autopart International stores.
Share Repurchases
During the third quarter, the Company repurchased 1.7 million shares
of itscommon stock at an aggregate cost of $100 million, or an
average price of $58.81 per share. At the end of the third quarter, the
Company had $200 million remaining under the $300.0 million share
repurchase authorization approved by the Board of Directors in August
2011. Through the fiscal third quarter of 2011 the Company has
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.
Dividend
On November 8, 2011, the Company's Board of Directors declared a
regular quarterly cash dividend of $0.06 per share to be paid on January
6, 2012 to stockholders of record as of December 23, 2011.
Investor Conference Call
The Company will host a conference call on Thursday, November 10,
2011 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 November 10, 2012.
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 October 8, 2011, the
Company operated 3,645 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 2011.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)
October 8,
January 1,
October 9,
2011
2011
2010
Assets
Current assets:
Cash and cash equivalents
$
65,929
$
59,209
$
194,502
Receivables, net
131,409
124,227
115,731
Inventories, net
2,109,721
1,863,870
1,839,498
Other current assets
67,063
76,965
51,931
Total current assets
2,374,122
2,124,271
2,201,662
Property and equipment, net
1,191,453
1,143,170
1,104,380
Assets held for sale
707
1,472
1,472
Goodwill
51,378
34,387
34,387
Intangible assets, net
29,122
25,360
25,583
Other assets, net
31,286
25,557
26,841
$
3,678,068
$
3,354,217
$
3,394,325
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt
$
949
$
973
$
1,176
Financed vendor accounts payable
-
31,648
50,310
Accounts payable
1,586,058
1,292,113
1,255,608
Accrued expenses (a)
390,283
404,086
429,262
Other current liabilities (a)
128,338
119,229
91,508
Total current liabilities
2,105,628
1,848,049
1,827,864
Long-term debt
599,438
300,851
301,043
Other long-term liabilities(a)
195,376
165,943
123,380
Total stockholders' equity
777,626
1,039,374
1,142,038
$
3,678,068
$
3,354,217
$
3,394,325
(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
October 8, 2011 and October 9, 2010
(in thousands, except per share data)
(unaudited)
October 8,
October 9,
2011
2010
Net sales
$
1,464,988
$
1,406,511
Cost of sales, including purchasing and warehousing costs
740,485
698,726
Gross profit
724,503
707,785
Selling, general and administrative expenses
546,683
560,563
Operating income
177,820
147,222
Other, net:
Interest expense
(8,150
)
(7,002
)
Other expense, net
(614
)
(293
)
Total other, net
(8,764
)
(7,295
)
Income before provision for income taxes
169,056
139,927
Provision for income taxes
63,503
52,329
Net income
$
105,553
$
87,598
Basic earnings per share (a)
$
1.43
$
1.04
Diluted earnings per share (a)
$
1.41
$
1.03
Average common shares outstanding (a)
73,381
83,695
Average common shares outstanding - assuming dilution (a)
74,730
84,802
( a )
Average common shares outstanding is calculated based on the
weighted average number of shares outstanding during the quarter. At
October 8, 2011 and October 9, 2010, we had 72,443 and 84,016 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
Forty Week Periods Ended
October 8, 2011 and October 9, 2010
(in thousands, except per share data)
(unaudited)
October 8,
October 9,
2011
2010
Net sales
$
4,842,890
$
4,655,073
Cost of sales, including purchasing and warehousing costs
2,424,338
2,321,243
Gross profit
2,418,552
2,333,830
Selling, general and administrative expenses
1,865,828
1,832,834
Operating income
552,724
500,996
Other, net:
Interest expense
(25,876
)
(20,134
)
Other expense, net
(771
)
(1,471
)
Total other, net
(26,647
)
(21,605
)
Income before provision for income taxes
526,077
479,391
Provision for income taxes
197,834
181,451
Net income
$
328,243
$
297,940
Basic earnings per share (a)
$
4.27
$
3.41
Diluted earnings per share (a)
$
4.19
$
3.37
Average common shares outstanding (a)
76,595
87,011
Average common shares outstanding - assuming dilution (a)
78,058
87,953
( a )
Average common shares outstanding is calculated based on the
weighted average number of shares outstanding during the
year-to-date period. At October 8, 2011 and October 9, 2010, we had
72,443 and 84,016 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
Forty Week Periods Ended
October 8, 2011 and October 9, 2010
(in thousands)
(unaudited)
October 8,
October 9,
2011
2010
Cash flows from operating activities:
Net income
$
328,243
$
297,940
Depreciation and amortization
134,480
125,441
Share-based compensation
14,232
15,741
Provision for deferred income taxes
45,374
25,526
Excess tax benefit from share-based compensation
(5,099
)
(3,965
)
Other non-cash adjustments to net income
4,153
5,720
(Increase) decrease in:
Receivables, net
(6,854
)
(23,171
)
Inventories, net
(245,851
)
(207,631
)
Other assets
17,715
10,790
Increase in:
Accounts payable
293,609
289,334
Accrued expenses
14,720
58,164
Other liabilities
16,260
2,605
Net cash provided by operating activities
610,982
596,494
Cash flows from investing activities:
Purchases of property and equipment
(207,505
)
(147,158
)
Business acquisition, net of cash acquired
(18,170
)
-
Proceeds from sales of property and equipment
1,114
197
Net cash used in investing activities
(224,561
)
(146,961
)
Cash flows from financing activities:
Decrease in bank overdrafts
(9,555
)
(4,620
)
(Decrease) increase in financed vendor accounts payable
(31,648
)
18,218
Issuance of senior unsecured notes
-
298,761
Early extinguishment of debt
-
(200,000
)
Net borrowings (payments) on credit facilities
299,200
-
Payment of debt related costs
(3,656
)
(4,572
)
Dividends paid
(18,541
)
(21,027
)
Proceeds from the issuance of common stock, primarily exercise
of stock options
9,301
33,160
Excess tax benefit from share-based compensation
5,099
3,965
Repurchase of common stock
(629,189
)
(478,080
)
Other
(712
)
(854
)
Net cash used in financing activities
(379,701
)
(355,049
)
Net increase in cash and cash equivalents
6,720
94,484
Cash and cash equivalents, beginning of period
59,209
100,018
Cash and cash equivalents, end of period
$
65,929
$
194,502
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
Forty Week Periods Ended
October 8, 2011 and October 9, 2010
(in thousands, except per share data)
(unaudited)
Reconciliation of Free Cash Flow:
October 8,
October 9,
2011
2010
Cash flows from operating activities
$
610,982
$
596,494
Cash flows used in investing activities
(224,561
)
(146,961
)
386,421
449,533
(Decrease) increase in financed vendor accounts payable
(31,648
)
18,218
Free cash flow
$
354,773
$
467,751
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
Forty Weeks Ended
Fifty-Two Weeks Ended
October 8, 2011
October 9, 2010
October 8, 2011
October 9, 2010
FY 2010
FY 2009
Sales Growth %
4.2
%
11.4
%
4.0
%
9.0
%
9.5
%
5.3
%
Sales per Store (2)(3)
$
1,702
$
1,667
$
1,702
$
1,667
$
1,697
$
1,595
Operating Income per Store (2)(4)
$
177
$
160
$
177
$
160
$
168
$
134
Return on Invested Capital (2)(5)
18.8
%
17.3
%
18.8
%
17.3
%
17.5
%
14.6
%
Gross Margin Return on Inventory (2)(6)
$
5.76
$
4.89
$
5.76
$
4.89
$
5.05
$
3.98
Total Store Square Footage, end of period
26,533
25,809
26,533
25,809
25,950
24,973
Total Team Members, end of period
52,386
50,605
52,386
50,605
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:
The Company has also presented its ROIC calculation on a
comparable basis which excludes the impact of store divestiture
expenses in fiscal 2009. Refer to the "Selected Consolidated Data"
on page 18 of our 2010 Form 10-K for further explanation of these
items.
( b )
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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