Advance Auto Parts Achieved Strong Fourth Quarter and Fiscal Year Results
* Comparable Store Sales Rose 5.5% for the Year, 3.1% for the Fourth Quarter * For the Year, Operating Margins Increased to 6.1% and on a Comparable Basis Rose 230 Basis Points to 7.2% * For the Fourth Quarter, Operating Margins Increased to 4.8% and on a Comparable Basis Rose 190 Basis Points to 6.1% * Generated $165 Million in Free Cash Flow for the Year, Reduced Debt by $220 Million * Larry Castellani appointed Chairman of the Board of Directors
ROANOKE, Va., Feb. 12 -- Advance Auto Parts, Inc.
today announced its comparable earnings per diluted share increased 168.8% to $0.43 for the fourth quarter ended December 28, 2002, compared to $0.16 for the same quarter last year. The Company's comparable results do not include integration expenses, one-time items in 2001 and extraordinary items as reconciled on the accompanying financial statements. The Company believes that these comparable measures are important to the Company's stockholders due to the non-recurring nature and significance of the excluded expenses. The fourth quarter $0.43 earnings per diluted share include approximately $0.03 of expenses associated with the recently completed secondary offering. On a GAAP basis, which includes integration expenses, one-time items in 2001 and extraordinary items, earnings per diluted share increased to $0.23 from a loss of $0.73 last year.
For the 2002 fiscal year, comparable earnings per diluted share increased 104.6% to $2.68 compared to $1.31 last year. On a GAAP basis earnings per diluted share increased to $1.80 from $0.39 last year.
The Company incurred pre-tax integration expenses related to the Discount Auto Parts acquisition of $9.1 million during the fourth quarter and $35.5 million for the year, $4.5 million below the original 2002 estimate of $40 million. In 2003, the Company estimates that it will incur approximately $10 million in integration expenses as originally planned.
During the fourth quarter, the Company repurchased $24.0 million in face value of its 10.25% senior subordinated notes and 12.875% senior discount debentures resulting in an after-tax extraordinary loss of $1.7 million, which includes un-amortized discounts, deferred loan fees and premiums paid. During the fiscal year, the Company repurchased $64.6 million in face value of bonds and pre-paid approximately $162 million in bank debt, incurring an after-tax extraordinary loss of $10.4 million relating to un-amortized discounts, write- off of deferred loan fees and premiums paid to repurchase bonds.
Fourth quarter sales increased 20.7% to $702.4 million, compared to $582.0 million last year. Same store sales grew 3.1% for the fourth quarter compared to 5.2% in the comparable period last year. The Discount Auto Parts stores, which joined the reported comparable store base for the last four weeks of the quarter, produced a comparable store sales increase of 3.3% during the fourth quarter compared to 2.7% the same quarter last year.
For the 2002 fiscal year, sales rose 30.6% to approximately $3.3 billion from $2.5 billion last year. Same store sales rose 5.5% year-to-date, compared to 6.2% last year. The Discount Auto Parts stores produced comparable store sales gains of 4.7% for the year, compared to 2.4% in 2001.
Comparable operating income for the fourth quarter increased 76.2% to $42.9 million from $24.4 million in the fourth quarter last year, generating an operating margin increase of 190 basis points to 6.1%. On a GAAP basis, operating income increased to $33.8 million. For the 2002 fiscal year comparable operating income rose 91.9% to $237.5 million from $123.8 million last year, generating an operating margin increase of 230 basis points to 7.2%, compared to 4.9% last year. On a GAAP basis, operating income increased to $202.0 million.
Comparable net income rose 226.5% in the fourth quarter to $15.9 million from $4.9 million in the fourth quarter last year. On a GAAP basis, net income increased to $8.6 million compared to a loss of $21.8 million last year. Year-to-date comparable net income increased 155.0% to $97.1 million from $38.1 million last year. On a GAAP basis, net income increased to $65.0 million for the fiscal year from $11.4 million last year.
The Company generated $165.0 million in free cash flow for the fiscal year. Free cash flow is calculated as cash provided by operating activities less cash used in investing activities. As a result of generating strong free cash flow, the Company reduced its total debt in 2003 by $220 million to $735.5 million.
Commenting on the fourth quarter and fiscal year results, Larry Castellani, the Company's Chief Executive Officer, said, "Our team members produced solid results for the quarter and for the fiscal year. In 2003, we will continue to focus on expanding our operating margins, generating strong free cash flow, and successfully integrating Discount Auto Parts."
The Company also reiterated its 2003 fiscal year guidance for a 25% increase in comparable earnings per diluted share, which excludes integration expenses and the impact of a potential bond refinancing. For the first quarter of 2003, the Company believes that it can achieve comparable earnings per diluted share of $0.70 to $0.75 compared to $0.55 last year. For the second quarter, the Company anticipates producing earnings per diluted share of $0.92 to $0.97, compared to $0.77 last year.
The Board of Directors of Advance Auto Parts also announced today that Nicholas F. Taubman, Chairman, and Garnett E. Smith, Vice Chairman, are stepping down from the Company's Board of Directors effective immediately. Concurrently, the Board of Directors appointed Larry Castellani the Company's Chief Executive Officer to the additional position of Chairman of the Board of Directors. John M. Roth, Partner of Freeman Spogli & Co., has been appointed as Lead Director.
"After over 45 years of building our Company, I am leaving it in very capable hands," said Nicholas F. Taubman. "I am confident that this executive team will continue to build Advance based on the Company's founding principle of always providing the highest level of integrity and customer service."
The Company will host a conference call tomorrow, February 13, 2002, at 8:00 a.m. Eastern Standard 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 12, 2003.
Advance Auto Parts, Inc., based in Roanoke, Va., is the second largest retailer of automotive parts in the United States. At December 28, 2002, the Company had 2,435 stores in 37 states, Puerto Rico and the Virgin Islands. The Company serves both the do-it-yourself and professional installer markets.
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, including our future free cash flow and earnings per share. 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. The Company intends these forward-looking statements to speak only as of the time of the news release and does not undertake to update or revise them, as more information becomes available.
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
December 28, December 29,
2002 2001
Assets
Current assets:
Cash and cash equivalents $13,885 $18,117
Receivables, net 102,574 93,704
Inventories, net 1,048,803 982,000
Other current assets 20,210 42,027
Total current assets 1,185,472 1,135,848
Property and equipment, net 728,432 711,282
Assets held for sale 28,346 60,512
Other assets, net 22,975 42,973
$1,965,225 $1,950,615
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdrafts $869 $34,748
Current portion of long-term debt 10,690 23,715
Accounts payable 470,740 429,041
Accrued expenses 208,176 176,218
Other current liabilities 32,101 30,027
Total current liabilities 722,576 693,749
Long-term debt 724,832 932,022
Other long-term liabilities 49,461 36,273
Total stockholders' equity 468,356 288,571
$1,965,225 $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 Statements of Operations
Twelve Week Periods Ended
(in thousands, except per share data)
December 28, 2002
Adjustment for
Non-recurring
and
Extraordinary Comparable
GAAP Items 2002
Net sales $702,416 $- $702,416
Cost of sales, including purchasing
and warehousing costs 389,606 - 389,606
Gross profit 312,810 - 312,810
Selling, general and administrative
expenses 278,974 (9,090)(a) 269,884
Operating income 33,836 9,090 42,926
Other, net:
Interest expense (15,485) - (15,485)
Secondary offering costs (1,733) - (1,733)
Other income, net 209 - 209
Total other, net (17,009) - (17,009)
Income before provision for income
taxes, extraordinary item and
cumulative effect of change in
accounting principle 16,827 9,090 25,917
Provision for income taxes 6,529 3,527(b) 10,056
Income before extraordinary item and
cumulative effect of change
in accounting principle 10,298 5,563 15,861
Extraordinary item, loss on debt
extinguishment, net of $937 income
tax benefit (1,679) 1,679(c) -
Net income $8,619 $7,242 $15,861
Net income per basic share from:
Net income before extraordinary
items and cumulative effect of
change in accounting principle $0.29 $0.15 $0.44
Extraordinary item, loss on debt
extinguishment (0.05) 0.05 -
$0.24 $0.20 $0.44
Net income per diluted share from:
Net income before extraordinary
items and cumulative effect of
change in accounting principle $0.28 $0.15 $0.43
Extraordinary item, loss on debt
extinguishment (0.05) 0.05 -
$0.23 $0.20 $0.43
Average common shares outstanding (d) 35,710 35,710 35,710
Dilutive effect of stock options 1,059 1,059 1,059
Average common shares outstanding --
assuming dilution 36,769 36,769 36,769
(a) Represents the non-recurring merger and integration expenses
associated with the integration of the Discount Auto Parts operations.
(b) This adjustment reflects the tax impact for the non-recurring
merger and integration expenses discussed above at a 38.8% effective
tax rate.
(c) This adjustment reflects the ratable portion of deferred loan
costs, unamortized discounts and the premium paid upon the repurchase
and retirement of outstanding bonds and prepayment of bank debt, net
of tax.
(d) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for the quarter. At
December 28, 2002, we had 35,735 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 Statements of Operations
Twelve Week Periods Ended
(in thousands, except per share data)
December 29, 2001
Adjustment for
Non-
recurring
and
Extraordinary Comparable
GAAP Items(a) 2001
Net sales $582,009 $- $582,009
Cost of sales, including purchasing
and warehousing costs 340,494 (9,099) 331,395
Gross profit 241,515 9,099 250,614
Selling, general and administrative
expenses 251,803 (25,558) 226,245
Operating income (10,288) 34,657 24,369
Other, net:
Interest expense (16,700) - (16,700)
Other income, net 404 - 404
Total other, net (16,296) - (16,296)
(Loss) income before provision for
income taxes, extraordinary
item and cumulative effect of
change in accounting principle (26,584) 34,657 8,073
Provision for income taxes (10,544) 13,759 3,215
(Loss) income before extraordinary
item and cumulative effect of change
in accounting principle (16,040) 20,898 4,858
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 tax benefit (2,065) 2,065 -
Net (loss) income $(21,787) $26,645 $4,858
Net (loss) income per basic share
from:
Net (loss) income before
extraordinary items and
cumulative effect of change in
accounting principle $(0.54) $0.70 $0.16
Extraordinary item, loss on debt
extinguishment (0.12) 0.12 -
Cumulative effect of change in
accounting principle (0.07) 0.07 -
$(0.73) $0.89 $0.16
Net (loss) income per diluted share
from:
Net (loss) income before
extraordinary items and
cumulative effect of change in
accounting principle $(0.54) $0.68 $0.16
Extraordinary item, loss on debt
extinguishment (0.12) 0.12 -
Cumulative effect of change in
accounting principle (0.07) 0.07 -
$(0.73) $0.86 $0.16
Average common shares outstanding 29,778 29,778 29,778
Dilutive effect of stock options - 1,044 1,044
Average common shares outstanding --
assuming dilution 29,778 30,822 30,822
(a) The fiscal 2001 adjustments represent charges associated with our
supply chain initiatives, expenses associated with the integration of
Discount Auto Parts, compensation charges associated with certain
stock option plans, the related tax effect of the above at a 39.7%
effective tax rate and the reversal of the extraordinary item and
cumulative effect of change in accounting principle. (See the
Consolidated Financial Statements and related notes at and for the
year ended December 29, 2001 for additional information).
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 Statements of Operations
Fifty-Two Week Periods Ended
(in thousands, except per share data)
December 28, 2002
Adjustment for
Non-recurring
and
Extraordinary Comparable
GAAP Items 2002
Net sales $3,287,883 $- $3,287,883
Cost of sales, including purchasing
and warehousing costs 1,839,889 - 1,839,889
Gross profit 1,447,994 - 1,447,994
Selling, general and administrative
expenses 1,246,009 (35,532)(a) 1,210,477
Operating income 201,985 35,532 237,517
Other, net:
Interest expense (78,219) - (78,219)
Secondary offering costs (1,733) - (1,733)
Other income, net 1,158 - 1,158
Total other, net (78,794) - (78,794)
Income before provision for income
taxes, extraordinary
item and cumulative effect of
change in accounting principle 123,191 35,532 158,723
Provision for income taxes 47,799 13,786(b) 61,585
Income before extraordinary item and
cumulative effect of change
in accounting principle 75,392 21,746 97,138
Extraordinary item, loss on debt
extinguishment, net of $6,449
income tax benefit (10,373) 10,373(c) -
Net income $65,019 $32,119 $97,138
Net income per basic share from:
Net income before extraordinary
items and cumulative effect of
change in accounting principle $2.15 $0.62 $2.77
Extraordinary item, loss on debt
extinguishment (0.29) 0.29 -
$1.86 $0.91 $2.77
Net income per diluted share from:
Net income before extraordinary
items and cumulative effect of
change in accounting principle $2.08 $0.60 $2.68
Extraordinary item, loss on debt
extinguishment (0.28) 0.28 -
$1.80 $0.88 $2.68
Average common shares outstanding (d) 35,049 35,049 35,049
Dilutive effect of stock options 1,139 1,139 1,139
Average common shares outstanding --
assuming dilution 36,188 36,188 36,188
(a) Represents the non-recurring merger and integration expenses
associated with the integration of the Discount Auto Parts
operations.
(b) This adjustment reflects the tax impact for the non-recurring
merger and integration expenses discussed above at a 38.8% effective
tax rate.
(c) This adjustment reflects the ratable portion of deferred loan
costs, unamortized discounts and the premium paid upon the repurchase
and retirement of outstanding bonds and prepayment of bank debt, net
of tax.
(d) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for each quarter. At
December 28, 2002, we had 35,735 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 Statements of Operations
Fifty-Two Week Periods Ended
(in thousands, except per share data)
December 29, 2001
Adjustment for
Non-
recurring
and
Extraordinary Comparable
GAAP Items(a) 2001
Net sales $2,517,639 $- $2,517,639
Cost of sales, including purchasing
and warehousing costs 1,450,712 (9,099) 1,441,613
Gross profit 1,066,927 9,099 1,076,026
Selling, general and administrative
expenses 977,814 (25,558) 952,256
Operating income 89,113 34,657 123,770
Other, net:
Interest expense (61,895) - (61,895)
Other income, net 1,283 - 1,283
Total other, net (60,612) - (60,612)
Income before provision for income
taxes, extraordinary item and
cumulative effect of change in
accounting principle 28,501 34,657 63,158
Provision for income taxes 11,312 13,759 25,071
Income before extraordinary item and
cumulative effect of change
in accounting principle 17,189 20,898 38,087
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 tax benefit (2,065) 2,065 -
Net income $11,442 $26,645 $38,087
Net income per basic share from:
Net income before extraordinary
items and cumulative effect of
change in accounting principle $0.60 $0.73 $1.33
Extraordinary item, loss on debt
extinguishment (0.13) 0.13 -
Cumulative effect of change in
accounting principle (0.07) 0.07 -
$0.40 $0.93 $1.33
Net income per diluted share from:
Net income before extraordinary
items and cumulative effect of
change in accounting principle $0.59 $0.72 $1.31
Extraordinary item, loss on debt
extinguishment (0.13) 0.13 -
Cumulative effect of change in
accounting principle (0.07) 0.07 -
$0.39 $0.91 $1.31
Average common shares outstanding 28,637 28,637 28,637
Dilutive effect of stock options 521 521 521
Average common shares outstanding --
assuming dilution 29,158 29,158 29,158
(a) The fiscal 2001 adjustments represent charges associated with our
supply chain initiatives, expenses associated with the integration of
Discount Auto Parts, compensation charges associated with certain
stock option plans, the related tax effect of the above at a 39.7%
effective tax rate and the reversal of the extraordinary item and
cumulative effect of change in accounting principle. (See the
Consolidated Financial Statements and related notes at and for the
year ended December 29, 2001 for additional information).
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.
Source: Advance Auto Parts, Inc.
CONTACT: Sheila Stuewe of Advance Auto Parts, Inc., +1-540-561-3281, or
Sstuewe@AdvanceAutoParts.com
Web site: http://www.advanceautoparts.com/