Advance Auto Parts Earnings- 2001 Sales Increased 10.0%
ROANOKE, Va., Feb. 20 -- Advance Auto Parts, Inc. ended December 29, 2001, which includes four weeks of results from Discount Auto Parts, which was acquired on November 28, 2001. The as reported results include one-time after-tax expenses of $23.0 million incurred in the fourth quarter, as described in the previous press release dated January 14, 2002, and an extraordinary after-tax charge of $3.7 million associated with the refinancing of the Company's bank debt in connection with the Discount Auto Parts acquisition.
As previously reported, fourth quarter sales increased 16.2% to $582.0 million compared with $500.7 million in the comparable period last year. Same store sales for the Advance stores grew 5.2% for the fourth quarter on top of 6.1% in the fourth quarter last year. Fiscal year sales increased 10.0% to $2,517.6 million compared with $2,288.0 million last year. Same store sales for Advance stores for the full year increased 6.2% on top of 4.4% last year.
Net income for the fourth quarter, excluding the aforementioned one-time expenses and extraordinary items, was $1.2 million compared to a loss of $2.3 million in the comparable period last year. Earnings per diluted share excluding these charges and extraordinary items for the fourth quarter were $0.04 compared to a loss of $0.08 per share in the comparable period last year. Including the one-time expenses and extraordinary items, the Company reported a net loss of $21.8 million, or $0.73 per diluted share for the fourth quarter of 2001.
Net income for the fiscal year, excluding the one-time expenses and extraordinary items, increased to $38.1 million compared to $16.6 million last year, which excludes an extraordinary after-tax gain of $2.9 million in 2000. Earnings per diluted share excluding these charges and extraordinary items increased 125.9% to $1.31 compared with $0.58 per share last year. Net income, including one-time expenses and extraordinary items, was $11.4 million in fiscal year 2001 compared to $19.6 million in fiscal 2000. Including these expenses and extraordinary items, diluted earnings per share decreased 42.6% to $0.39 for the fiscal year 2001 compared to $0.68 in the prior year, which included an extraordinary after-tax gain.
Operating income for the fourth quarter, before one-time expenses, increased 62.4% to $18.3 million from $11.2 million in the comparable period last year. Including the one time expenses, the Company reported an operating loss of $10.3 million in the fourth quarter compared to a gain of $11.2 million in the comparable period last year. For the fiscal year, operating income, before one-time expenses, rose to $123.8 million from $92.8 million last year. Including the one-time expenses, operating income for the year was $89.1 million compared to $92.8 million last year.
For the fourth quarter, EBITDA, which included operating income plus depreciation and amortization, as adjusted for non-cash and other employee compensation expenses and the one-time charges described herein, increased 30.3% to $36.5 million from $28.0 million in the comparable period last year. For the fiscal year, EBITDA, as adjusted, increased 23.3% to $199.7 million from $161.9 million in the prior year.
Larry Castellani, Chief Executive Officer, commented, ``Increases in our customer count and average ticket in both our DIY and commercial business drove our strong results for the fourth quarter. Furthermore, the marketing and merchandising initiatives that we are implementing had a positive impact on our comparable stores sales results.''
Mr. Castellani added, ``Importantly, along with achieving these strong results, during the quarter we executed two significant events: we acquired Discount Auto Parts and our stock began trading on the New York Stock Exchange. As we move into the 2002 fiscal year, we look forward to integrating the Discount Auto Parts stores and producing the $30 million in incremental EBITDA anticipated from the acquisition.''
During the 2001 fiscal year the Company grew its store base from 1,729 to 2,484 stores, opening 80 new locations and acquiring 30 stores from Carport Auto Parts, Inc. and 671 stores from Discount Auto Parts, Inc. During 2001 the Company identified and closed a total of 26 under-performing Advance stores. In 2002, the Company plans to open 100 to 125 stores under the Advance Auto Parts banner. As part of the Discount acquisition, the Company anticipates closing 100 to 125 stores. In addition, as part of the Company's ongoing review of store performance and focus on increasing the productivity of the entire store base, it anticipates closing approximately 25 additional Advance Auto Parts stores.
During the fourth quarter of 2001, the Company changed its method of accounting for cooperative funds received from vendors. In order to better align the reporting of these payments with the sale of the associated product, the Company elected to recognize these payments as a reduction to the cost of inventory acquired, which results in a lower cost of sales for the product sold, rather than the previous method of using these funds as a reduction to advertising expense. This change will be applied in the 2001 financial statements as if the change occurred at the beginning of the 2001 fiscal year and will be recognized as a cumulative effect of a change in accounting principle, resulting in a $2.1 million, net of tax, extraordinary charge. The Company will reflect this change in each of its three previously reported quarters of 2001.
The additional non-cash extraordinary charge of $3.7 million, net of tax, was due to the extinguishment of debt resulting from the refinancing of the Company's bank debt. The new debt agreement was put in place in connection with the acquisition of Discount Auto Parts.
With respect to the outlook for fiscal 2002, the Company remains comfortable with its previously provided guidance. For the full year, earnings per diluted share are estimated to range from $2.10 to $2.15, excluding acquisition related integration charges of approximately $40 million before taxes.
As announced on February 6, 2002, Advance Auto Parts filed a registration statement with the Securities and Exchange Commission for a proposed public offering of 9,000,000 shares of common stock. The proposed offering consists of 2,250,000 primary shares to be sold by the Company and 6,750,000 secondary shares to be sold by three of its stockholders. A registration statement relating to the securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time such registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
To obtain a prospectus describing the public offering, please contact Credit Suisse First Boston Corporation, 11 Madison Avenue, Prospectus Department, New York, New York 10010, (212) 325-2580 or Merrill Lynch, Pierce, Fenner and Smith Incorporated, 4 World Financial Center, Prospectus Department, Street Level, New York, New York 10080, (212) 449-1000.
Advance Auto Parts will host a conference call today, February 20, 2002 at 11:00 a.m. Eastern Time to discuss its fourth quarter and fiscal year results. To listen to the live webcast please log on to http://www.advanceautoparts.com/. The call will be archived on the Company's website: http://www.advanceautoparts.com/ until March 6, 2002.
Advance Auto Parts, Inc. is based in Roanoke, Va., and is the second largest auto parts chain in the nation. With over 2,400 stores in 38 states, Puerto Rico and the Virgin Islands, the Company serves both the do-it-yourself and professional installer markets. Additional information about the Company, employment opportunities, services, as well as on-line purchase of parts and accessories can be found on the Company's web site at http://www.advanceautoparts.com.
Certain statements contained in this news release are forward-looking
statements.
These statements discuss, among other things, expected growth,
store development and expansion strategy, business strategies, future revenues
and future performance.
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,
and other risk factors listed from time to time in the Company's filings with
the Securities and Exchange Commission.
Actual results may materially differ
from anticipated results described in these forward-looking statements.
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statement of Operations
Twelve Week Period Ended
(in thousands, except per share data)
December 29, 2001
Adjustment for As
One-time Comparable Reported
As Reported Items 2001 2000
Net sales $582,009 $-- $582,009 $500,652
Cost of sales, including
purchasing and
warehousing costs 340,494 2,113(a) 342,607 304,168
Gross profit 241,515 (2,113) 239,402 196,484
Selling, general and
administrative expenses 251,803 (30,667)(b) 221,136 185,239
Operating income (10,288) 28,554 18,266 11,245
Other (expense) income:
Interest expense (16,700) -- (16,700) (14,856)
Other 404 -- 404 (47)
Total other expense, net (16,296) -- (16,296) (14,903)
Income (loss) before
provision for income
taxes, extraordinary
item and cumulative
effect of change in
accounting principle (26,584) 28,554 1,970 (3,658)
Provision (benefit) for
income taxes (10,544) 11,336(c) 792 (1,352)
Income (loss) before
extraordinary item
and cumulative effect
of change in
accounting principle (16,040) 17,218 1,178 (2,306)
Extraordinary item, (loss)
on debt extinguishment,
net of $2,424 income
tax benefit (3,682) 3,682 -- --
Cumulative effect of change
in accounting principle,
net of $1,360 income
taxes benefit (2,065) 2,065 -- --
Net income (loss) $(21,787) $22,965 $1,178 $(2,306)
Net income (loss) per
basic share from:
Income (loss) before
extraordinary items
and cumulative effect
of change in
accounting principle $(0.54) $0.58 $0.04 $(0.08)
Extraordinary item, (loss)
on debt extinguishment (0.12) 0.12 -- --
Cumulative effect of
change in accounting
principle (0.07) 0.07 -- --
$(0.73) $0.77 $0.04 $(0.08)
Net income (loss) per
diluted share from:
Income (loss) before
extraordinary items
and cumulative effect of
change in accounting
principle $(0.54) $0.56 $0.04 $(0.08)
Extraordinary item, (loss)
on debt extinguishment (0.12) 0.12 -- --
Cumulative effect of
change in accounting
principle (0.07) 0.07 -- --
$(0.73) $0.75 $0.04 $(0.08)
Average common shares
outstanding 29,778(d) 29,778(d) 29,778(d) 28,304
Dilutive effect of
stock options -- 1,044 1,044 211
Average common shares
outstanding - assuming
dilution 29,778 30,822 30,822 28,515
(a) Reflects a $11,212 adjustment to reverse the quarterly impact of the
new method of accounting for cooperative advertising funds and a
reversal of $9,099 related to the write-off of certain inventory in
conjunction with our recently announced supply chain initiatives.
(b) Reflects a $5,109 adjustment to reverse the quarterly impact of the
new method of accounting for cooperative advertising funds and the
reversal of other one-time expenses including: $4,853 in expenses
associated with the Discount merger, $8,611 in compensation charges
related to changes made to certain stock options plans of the Company
and $12,094 in costs related to the supply chain initiatives,
primarily the devaluation of certain property held for sale.
(c) Reflects the tax impact for the above mentioned adjustments at a 39.7%
effective tax rate.
(d) Average common shares outstanding is calculated based on the weighted
average number of shares outstanding for the year. At December 29,
2001, we had 32,692 shares outstanding.
NOTE: These preliminary statements of operations have been prepared on a
consistent basis with previously presented statements of operations and do
not include the footnotes required by generally accepted accounting
principles for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statement of Operations
For the Years Ended December 29, 2001 and December 30, 2000
(in thousands, except per share data)
December 29, 2001
Adjustment for Comparable As Reported
As Reported One-time Items 2001 2000
Net sales $2,517,639 $-- $2,517,639 $2,288,022
Cost of sales,
including
purchasing and
warehousing costs 1,450,712 43,182(a) 1,493,894 1,392,127
Gross profit 1,066,927 (43,182) 1,023,745 895,895
Selling, general and
administrative
expenses 977,814 (77,839)(b) 899,975 803,106
Operating income 89,113 34,657 123,770 92,789
Other (expense) income:
Interest expense (61,895) -- (61,895) (66,640)
Other 1,283 -- 1,283 1,012
Total other
expense, net (60,612) -- (60,612) (65,628)
Income before provision
for income taxes,
extraordinary item
and cumulative effect
of change in
accounting principle 28,501 34,657 63,158 27,161
Provision for
income taxes 11,312 13,759(c) 25,071 10,535
Income before
extraordinary item
and cumulative
effect of change in
accounting principle 17,189 20,898 38,087 16,626
Extraordinary item,
gain (loss) on debt
extinguishment,
net of $2,424 income
tax benefit and $1,759
income taxes (3,682) 3,682 -- 2,933
Cumulative effect of
change in accounting
principle, net of
$1,360 income taxes
benefit (2,065) 2,065 -- --
Net income $11,442 $26,645 $38,087 $19,559
Net income per basic
share from:
Income before
extraordinary items
and cumulative effect
of change in
accounting
principle $0.60 $0.73 $1.33 $0.59
Extraordinary item,
gain (loss) on debt
extinguishment (0.13) 0.13 -- 0.10
Cumulative effect
of change in
accounting principle (0.07) 0.07 -- --
$0.40 $0.93 $1.33 $0.69
Net income per
diluted share from:
Income before
extraordinary
items and cumulative
effect of change in
accounting principle $0.59 $0.72 $1.31 $0.58
Extraordinary item,
gain (loss) on debt
extinguishment (0.13) 0.13 -- 0.10
Cumulative effect
of change in
accounting principle (0.07) 0.07 -- --
$0.39 $0.91 $1.31 $0.68
Average common
shares outstanding 28,637(d) 28,637(d) 28,637(d) 28,296
Dilutive effect of
stock options 521 521 521 315
Average common
shares outstanding
- assuming dilution 29,158 29,158 29,158 28,611
(a) Reflects a $52,281 adjustment to reverse the annual impact of the new
method of accounting for cooperative advertising funds and a reversal
of $9,099 related to the write-off of certain inventory in conjunction
with our recently announced supply chain initiatives.
(b) Reflects a $52,281 adjustment to reverse the annual impact of the new
method of accounting for cooperative advertising funds and the
reversal of other one-time expenses including: $4,853 in expenses
associated with the Discount merger, $8,611 in compensation charges
related to changes made to certain stock options plans of the Company
and $12,094 in costs related to the supply chain initiatives,
primarily the devaluation of certain property held for sale.
(c) Reflects the tax impact for the above mentioned adjustments at a 39.7%
effective tax rate.
(d) Average common shares outstanding is calculated based on the weighted
average number of shares outstanding for the year. At December 29,
2001, we had 32,692 shares outstanding.
NOTE: These preliminary statements of operations have been prepared on a
consistent basis with previously presented statements of operations and do
not include the footnotes required by generally accepted accounting
principles for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in thousands)
December 29, December 30,
2001 2000
Assets
Current assets:
Cash and cash equivalents $18,117 $18,009
Receivables, net 93,701 80,578
Inventories 982,000 788,914
Other current assets 41,837 10,274
Total current assets 1,135,655 897,775
Property and equipment, net 711,168 410,960
Assets held for sale 60,581 25,077
Other assets, net 43,694 22,548
$1,951,098 $1,356,360
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdrafts $34,748 $13,599
Current portion of long-term debt 23,715 7,028
Accounts payable 428,741 387,852
Accrued expenses 175,918 124,962
Other current liabilities 30,026 42,794
Total current liabilities 693,148 576,235
Long-term debt 932,022 579,921
Other long-term liabilities 37,358 43,933
Total stockholders' equity 288,570 156,271
$1,951,098 $1,356,360
NOTE: These balance sheets do not include the footnotes required by
generally accepted accounting principles for complete financial
statements. The balance sheet at December 29, 2001 is preliminary and
subject to reclassifications.
