Advance Auto Parts Reports Third Quarter 2005
ROANOKE, Va.--Nov. 3, 2005--Advance Auto Parts, Inc. , a leading retailer of automotive aftermarket parts, accessories, batteries and maintenance items, today announced record revenue and earnings for its fiscal third quarter ended October 8, 2005.Earnings per diluted share for the third quarter were $0.55, a 22% increase compared to earnings per diluted share of $0.45 in last year's third quarter. (All per-share amounts referenced in this release reflect the Company's 3-for-2 stock split, which took effect September 26, 2005).
Sales increased 14.6% in the quarter to $1.02 billion from $890.2 million in the third quarter last year. Same-store sales grew 10.0% in the quarter, comprised of 6.1% do-it-yourself (DIY) same-store sales and 26.5% do-it-for-me (DIFM) same-store sales.
"We again produced strong sales and earnings growth for the quarter," President and Chief Executive Officer Michael Coppola said. "Our ability to achieve our goals in spite of two major hurricanes within the quarter is a significant accomplishment. The temporary effects of these storms on our operations are minor compared to the losses sustained by a number of our Team Members and our customers, whose lives were dramatically impacted. It was gratifying to see our team pull together and respond heroically to these challenges by helping each other and our customers. Another quarter of solid results demonstrates that 'The Best Part is Our People' and 'We're Ready in Advance' are much more than advertising slogans - they're the culture that our team demonstrates every day, as they focus on driving the business to superior levels of performance."
Third quarter gross margin increased to 47.2% of net sales, compared to 46.8% in the same quarter of last year, reflecting the positive impact of category management and supply-chain initiatives.
Selling, general and administrative (SG&A) expenses were 36.9% of net sales, flat compared to last year's third quarter. This reflects leverage gained from strong comparable-store sales, which was offset by higher fuel and utility costs, as well as the related impact from two major hurricanes. In addition, SG&A for third quarter 2005 reflects higher incentives paid to Team Members, following a strong sales quarter.
Third quarter operating margin rose to 10.3% of sales compared to 9.9% in the third quarter last year.
Through the first three quarters of the year, sales grew 13.0% to $3.3 billion. Comparable-store sales grew 9.4% over this time, comprised of a 5.3% increase in DIY same-store sales and a 27.0% increase in DIFM same-store sales. For the first three quarters of 2005, operating margin expanded to 10.2% of sales, compared to 9.2% last year, and earnings per diluted share increased 30% to $1.78 compared to $1.37 last year.
Store Information
During the quarter, the Company increased its store count by 121 stores (including 80 acquired stores), relocated 12 existing stores, and remodeled 46 stores to the Company's innovative 2010 format. During the first three quarters of the year, the Company added 183 new stores (including 80 acquired stores), closed 6 stores, relocated 44 stores, and remodeled 165 stores to the 2010 format. Including acquired stores, the Company continues to anticipate adding 220-230 stores this year. As of October 8, 2005, the Company operated 2,829 stores, of which 1,437 were the Company's new 2010-format stores.
"Our ongoing investments to refresh our store base are delivering very solid returns," Coppola said. "We continue to make excellent progress converting more stores to our customer-friendly 2010 format. During the third quarter, we began converting the acquired Lappen stores in Massachusetts, acquired Autopart International, and this month we will complete the remodeling of all the former Discount Auto Parts stores. With attractive stores, knowledgeable Team Members and quality parts at competitive prices, Advance offers what customers want."
Guidance
For the fourth quarter, the Company is reiterating its guidance range for earnings per diluted share of $0.33 to $0.36, which would represent an increase of 14% to 24% compared to last year's fourth quarter.
For the 2005 fiscal year, the Company anticipates its earnings per diluted share to be in the range of $2.10 to $2.13, which would represent an increase of 27% to 28% compared to last year.
For 2006, the Company anticipates new-store growth in the range of 6% to 7%, in addition to 200 to 250 re-models and approximately 50 relocations. The Company will provide more-detailed 2006 guidance in its fiscal year-end press release.
Investor Conference Call
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 8, 2005, the Company operated 2,829 stores in 40 states, Puerto Rico, and the Virgin Islands. The Company serves both the do-it-yourself and professional installer markets.
-Financial Tables to Follow-
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
Oct. 8, Jan. 1, Oct. 9,
2005 2005 2004
----------- ----------- -----------
Assets
------
Current assets:
Cash and cash equivalents $112,704 $56,321 $27,479
Receivables, net 83,877 101,969 100,109
Inventories, net 1,374,866 1,201,450 1,194,943
Other current assets 34,312 17,687 27,152
----------- ----------- -----------
Total current assets 1,605,759 1,377,427 1,349,683
Property and equipment, net 869,114 786,212 754,374
Assets held for sale 14,602 18,298 20,984
Goodwill 54,344 2,720 2,720
Other assets, net 18,755 17,305 18,261
----------- ----------- -----------
$2,562,574 $2,201,962 $2,146,022
=========== =========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Bank overdrafts $24,226 $20,184 $18,846
Current portion of long-term
debt 32,450 31,700 17,024
Financed vendor accounts
payable 117,689 56,896 38,076
Accounts payable 660,893 587,948 598,878
Accrued expenses 280,622 198,479 210,312
Other current liabilities 41,279 65,918 76,012
----------- ----------- -----------
Total current liabilities 1,157,159 961,125 959,148
Long-term debt 413,775 438,300 350,976
Other long-term liabilities 78,581 80,222 73,325
Total stockholders' equity 913,059 722,315 762,573
----------- ----------- -----------
$2,562,574 $2,201,962 $2,146,022
=========== =========== ===========
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
Twelve Week Periods Ended
October 8, 2005 and October 9, 2004
(in thousands, except per share data)
(unaudited)
Oct 8, Oct. 9,
2005 2004
----------- ----------
Net sales $1,019,736 $ 890,161
Cost of sales, including
purchasing and warehousing costs 538,321 473,646
------------ ---------
Gross profit 481,415 416,515
Selling, general and administrative
expenses 375,999 328,673
------------ ---------
Operating income 105,416 87,842
------------ ---------
Other, net:
Interest expense (8,196) (4,330)
Other income, net 933 67
------------ ---------
Total other, net (7,263) (4,263)
------------ ---------
Income before provision for income
taxes and loss on discontinued
operations 98,153 83,579
Provision for income taxes 37,360 32,180
------------ ---------
Income from continuing
operations 60,793 51,399
Discontinued operations:
Loss from operations of
discontinued wholesale
dealer network - (10)
Benefit for income taxes - (4)
------------ ---------
Loss on discontinued operations - (6)
------------ ---------
Net income $ 60,793 $ 51,393
============ =========
Net income per basic share from:
Income from continuing
operations $ 0.56 $ 0.46
Loss on discontinued operations - -
------------ ---------
$ 0.56 $ 0.46
============ =========
Net income per diluted share from:
Income from continuing
operations $ 0.55 $ 0.45
Loss on discontinued operations - -
------------ ---------
$ 0.55 $ 0.45
============ =========
Average common shares outstanding (a) 109,306 110,952
Dilutive effect of stock options 1,635 2,187
------------ ---------
Average common shares outstanding -
assuming dilution 110,941 113,139
============ =========
(a) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for the quarter. At
October 8, 2005 and October 9, 2004, we had 109,013 and 110,280 shares
outstanding as adjusted for our recent 3-for-2 stock split,
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 Operations
Forty Week Periods Ended
October 8, 2005 and October 9, 2004
(in thousands, except per share data)
(unaudited)
Oct. 8, Oct. 9,
2005 2004
-------------- -----------
Net sales $3,301,246 $2,921,491
Cost of sales, including
purchasing and warehousing costs 1,736,850 1,561,776
-------------- -----------
Gross profit 1,564,396 1,359,715
Selling, general and
administrative expenses 1,226,246 1,090,604
-------------- -----------
Operating income 338,150 269,111
-------------- -----------
Other, net:
Interest expense (24,682) (15,178)
Loss on extinguishment of debt - (412)
Other income, net 2,298 102
-------------- -----------
Total other, net (22,384) (15,488)
-------------- -----------
Income before provision for
income taxes and
loss on discontinued
operations 315,766 253,623
Provision for income taxes 120,397 97,652
-------------- -----------
Income from continuing
operations 195,369 155,971
Discontinued operations:
Loss from operations of
discontinued
wholesale dealer network - (85)
Benefit for income taxes - (33)
-------------- -----------
Loss on discontinued
operations - (52)
-------------- -----------
Net income $ 195,369 $ 155,919
============== ===========
Net income per basic share from:
Income from continuing
operations $ 1.80 $ 1.40
Loss on discontinued
operations - -
-------------- -----------
$ 1.80 $ 1.40
============== ===========
Net income per diluted share
from:
Income from continuing
operations $ 1.78 $ 1.37
Loss on discontinued
operations - -
-------------- -----------
$ 1.78 $ 1.37
============== ===========
Average common shares outstanding (a) 108,329 111,248
Dilutive effect of stock options 1,720 2,572
-------------- -----------
Average common shares outstanding
- assuming dilution 110,049 113,820
============== ===========
(a) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for the quarter. At
October 8, 2005 and October 9, 2004, we had 109,013 and 110,280 shares
outstanding as adjusted for our recent 3-for-2 stock split,
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
Forty Week Periods Ended
October 8, 2005 and October 9, 2004
(in thousands)
(unaudited)
Oct. 8 Oct. 9
2005 2004
----------- ---------
Cash flows from operating activities:
Net income $195,369 $155,919
Depreciation and amortization 90,693 80,145
(Benefit) provision for deferred income taxes (190) 9,218
Tax benefit related to exercise of stock
options 28,469 11,069
Other non-cash adjustments to net income 4,083 4,425
Decrease (increase) in :
Receivables, net 30,489 (14,453)
Inventories, net (138,193) (81,162)
Other assets (13,737) (8,699)
Increase in :
Accounts payable 67,255 30,603
Accrued expenses 63,774 30,705
Other liabilities 1,876 79
--------- ---------
Net cash provided by operating activities 329,888 217,849
Cash flows from investing activities:
Purchases of property and equipment (159,391) (125,294)
Business acquisitions, net of cash acquired (99,300) -
Proceeds from sales of property and equipment 5,818 6,809
--------- ---------
Net cash used in investing activities (252,873) (118,485)
Cash flows from financing activities:
Increase (decrease) in bank overdrafts 4,042 (12,239)
Increase in financed vendor accounts payable 60,793 38,076
Early extinguishment of debt - (105,000)
Net (payments) borrowings on credit
facilities (23,775) 28,000
Proceeds from exercise of stock options 27,576 10,471
Repurchase of common stock (62,552) (49,997)
(Decrease) increase in borrowings secured by
trade receivables (26,716) 7,317
--------- ---------
Net cash used in financing activities (20,632) (83,372)
--------- ---------
Increase in cash and cash equivalents 56,383 15,992
Cash and cash equivalents, beginning of period 56,321 11,487
--------- ---------
Cash and cash equivalents, end of period $112,704 $27,479
========= =========
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
Forty Week Periods Ended
October 8, 2005 and October 9, 2004
(in thousands)
(unaudited)
Oct. 8, Oct. 9,
2005 2004
--------- ---------
Cash flows from operating
activities $ 329,888 $ 217,849
Cash flows used in investing activities (252,873) (118,485)
--------- ---------
77,015 99,364
Increase in financed vendor accounts payable 60,793 38,076
Business acquisitions, net of cash acquired 99,300 -
Decrease in borrowings secured by trade
receivables (1) (34,684) -
--------- ---------
Free cash flow $ 202,424 $ 137,440
========= =========
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.
(1) Represents the reduction in borrowings secured by trade
receivables resulting from the conversion of our private label credit
card program during third quarter. We have included this financing
activity in our reconciliation of free cash flow to offset the
increase in cash from operating activities resulting from the
reduction of the corresponding trade receivables.
