Advance Auto Parts First Quarter EPS Increased 293% To $0.55 Before One-Time Items
ROANOKE, Va., May 22 Advance Auto Parts, Inc. today announced it achieved an increase of 293% in earnings per diluted share to $0.55 for the first quarter ending April 20, 2002, before integration expenses and an extraordinary item, compared to $0.14 for the same quarter last year. Including the one-time items, earnings per diluted share rose 143% to $0.34.
First quarter sales increased 37.7% to $1,004.1 million compared with $729.4 million last year. Same store sales for the Advance Auto Parts stores grew 7.8% for the first quarter compared to 5.7% in the comparable period last year. The Discount Auto Parts stores, which were acquired on November 29, 2001, are not yet in the reported comparable store base. These stores produced a comparable store sales increase of 5.1% during the first quarter compared to 2.7% last year.
Operating income, before integration expenses, increased 128% to $58.9 million from $25.9 million in the comparable period last year, generating an operating margin increase of 230 basis points to 5.9% from 3.6% last year. Including integration expenses, the Company reported an 86.8% increase in operating income to $48.4 million and a 120 basis points increase in operating margin to 4.8%. The Company had previously announced that it anticipates $40 million of pre-tax integration expenses related to the Discount Auto Parts acquisition of which $10.6 million were incurred in the first quarter as planned.
Net income, before integration expense and the extraordinary item, rose 399% to $19.3 million from $3.9 million in the comparable quarter last year. Including integration expense and the extraordinary item the Company reported a 212.3% increase in net income to $12.1 million. The extraordinary item of $0.8 million reflects the write-off of deferred loan fees as a result of the early repayment of debt from the proceeds of the recent public offering.
During the quarter, the company generated $70.0 million in free cash flow. The Company reduced its working capital by $37.7 million during the first quarter due to an increase in the accounts payable to inventory ratio to 50.9% from 43.7% at year end, as well as a positive impact from the Company's merchandising and supply chain initiatives.
Larry Castellani, Chief Executive Officer, commented, "The first quarter results were solid across the board. Our strong same store sales results allowed us to leverage our fixed costs resulting in a strong gain in our operating margins. We will continue to focus on expanding our operating margins and increasing our return on invested capital."
The Company also announced that the integration of Discount Auto Parts is progressing as planned. During the quarter the Company converted 54 stores to Advance Auto Parts. The Company closed 94 Discount Auto Parts stores and 25 Advance Auto Parts stores, as planned.
Commenting on the integration, Mr. Castellani added, "The integration is on track due to the hard work and dedication of our team members. We are especially proud of the very strong personnel retention rate we have achieved."
With respect to the outlook for the remainder of fiscal 2002, the Company is comfortable with its ability to achieve earnings per share in line with current analyst estimates before integration expenses and extraordinary items. For the fiscal year 2003, the Company believes it can achieve a 25% increase in earnings per diluted share.
The Company will host a conference call tomorrow, May 23, 2002 at 8:30 a.m. Eastern Time to discuss its first quarter 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 June 5, 2002.
Advance Auto Parts, Inc. is based in Roanoke, Va., and is the second largest auto parts chain in the nation. With approximately 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
Condensed Consolidated Balance Sheet
(in thousands)
April 20, December 29,
2002 2001
Assets
Current assets:
Cash and cash equivalents $65,287 $18,117
Receivables, net 114,356 93,704
Inventories 1,015,848 982,000
Other current assets 41,328 42,027
Total current assets 1,236,819 1,135,848
Property and equipment, net 720,309 711,282
Assets held for sale 53,033 60,512
Other assets, net 39,043 42,973
$2,049,204 $1,950,615
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdrafts $-- $34,748
Current portion of long-term debt 19,404 23,715
Accounts payable 517,340 429,041
Accrued expenses 186,639 176,218
Other current liabilities 33,640 30,027
Total current liabilities 757,023 693,749
Long-term debt 863,457 932,022
Other long-term liabilities 37,232 36,273
Total stockholders' equity 391,492 288,571
$2,049,204 $1,950,615
NOTE: These balance sheets 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
Sixteen Week Period Ended
(in thousands, except per share data)
April 20, 2002 April 21,
Adjustment for Comparable 2001
As Reported One-time Items 2002 As Reported(d)
Net sales $1,004,087 $-- $1,004,087 $729,359
Cost of sales,
including purchasing
and warehousing costs 567,579 -- 567,579 417,909
Gross profit 436,508 -- 436,508 311,450
Selling, general
and administrative
expenses 388,154 (10,565)(a) 377,589 285,559
Operating income 48,354 10,565 58,919 25,891
Other (expense) income:
Interest expense (27,598) -- (27,598) (19,631)
Other 273 -- 273 174
Total other
expense, net (27,325) -- (27,325) (19,457)
Income before provision
for income taxes and
extraordinary item 21,029 10,565 31,594 6,434
Provision for
income taxes 8,158 4,099(b) 12,257 2,561
Income before
extraordinary item 12,871 6,466 19,337 3,873
Extraordinary item, loss
on debt extinguishment,
net of $491 income
tax benefit (775) 775(c) -- --
Net income $12,096 $7,241 $19,337 $3,873
Net income (loss) per
basic share from:
Income before
extraordinary item $0.38 $0.19 $0.57 $0.14
Extraordinary item,
(loss) on debt
extinguishment (0.02) 0.02 -- --
$0.36 $0.21 $0.57 $0.14
Net income (loss) per
diluted share from:
Income before
extraordinary item $0.36 $0.19 $0.55 $0.14
Extraordinary item,
(loss) on debt
extinguishment (0.02) 0.02 -- --
$0.34 $0.21 $0.55 $0.14
Average common
shares outstanding 33,833(e) 33,833(e) 33,833(e) 28,281
Dilutive effect of
stock options 1,289 1,289 1,289 292
Average common
shares outstanding
- assuming dilution 35,122 35,122 35,122 28,573
(a) The $10,565 represent the non-recurring merger and integration
expenses associated with the integration of the Discount Auto Parts
operations.
(b) Reflects the tax impact for the non-recurring merger and integration
expenses discussed above at a 38.8% effect tax rate.
(c) Reflects the ratable portion of deferred loan costs associated with
the Company's partial repayment of its senior credit facility.
(d) The reported results for the quarter ended April 21, 2001 have been
restated to reflect the change in accounting principle for
unrestricted cooperative advertising funds. See the
December 29, 2001, audited financial statements and related footnotes.
(e) Average common shares outstanding is calculated based on the weighted
average number of shares outstanding for the quarter. At
April 20, 2002, we had 34,985 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.