Advance Auto Parts Reports Record EPS of $0.94 for First Quarter 2005
Same-Store Sales Grew 9.2% for the Quarter
ROANOKE, Va., May 18 -- Advance Auto Parts, Inc. , a leading automotive aftermarket retailer of parts, accessories, batteries and maintenance items, today announced record revenue and earnings for its first quarter ended April 23, 2005.
Earnings per diluted share for the first quarter were $0.94, a 38% increase compared to earnings per diluted share of $0.68 for the first quarter last year.
Net sales increased 12.1% in the quarter to $1.26 billion compared to $1.12 billion in the first quarter last year. Same-store sales grew 9.2% in the quarter, comprised of 5.1% do-it-yourself (DIY) same-store sales and 27.2% do-it-for-me (DIFM) same-store sales.
"Our team once again produced strong sales and earnings growth during the quarter," said President and Chief Executive Officer Michael Coppola. "We are seeing strong demand from both our retail and commercial customers. We continue to focus on having the newest, most vibrant stores in our industry, with the right people, parts, and prices available to serve our customers' automotive needs."
First quarter gross margin improved to 47.8% of net sales, compared to 46.4% in the same quarter last year, primarily reflecting the positive impact of a more-favorable mix of higher-margin categories, as well as the impact of category management and supply-chain initiatives.
Selling, general and administrative (SG&A) expenses improved to 38.2% of net sales, compared to 38.4% in the first quarter last year, primarily as a result of the leverage caused by our higher comp-store sales.
First quarter operating margin rose to 9.6% of net sales compared to 8.0% in the first quarter last year.
Store Openings
During the first quarter, the Company opened 26 new stores, closed three stores, relocated 19 existing stores, and converted 68 stores to Advance's 2010 format. The Company continues to expect an acceleration in store openings, with 150-175 new stores planned for 2005. In addition, the Company celebrated its entry into New Mexico, with the grand opening of its Clovis, NM store last month. This expands Advance's footprint to 40 states in the continental United States (in addition to its stores in Puerto Rico and the Virgin Islands). The Company operated 2,675 stores as of April 23, 2005, of which 1,266 were the Company's new 2010-format stores.
Guidance
As a result of its strong first-quarter results, the Company is raising its earnings per diluted share guidance for fiscal 2005 to a range of $3.04 to $3.14, representing an increase of 22% to 26% over fiscal 2004. For the second quarter, the Company is reiterating its earnings per diluted share guidance in the range of $0.82 to $0.88, representing an increase of 17% to 26% over earnings per diluted share of $0.70 in the second quarter last year. For the third quarter, the Company is initiating earnings per diluted share guidance in the range of $0.78 to $0.83, representing an increase of 15% to 22% over earnings per diluted share of $0.68 in the third quarter last year.
Mr. Coppola continued: "Our performance reflects continued execution toward achieving our four key goals: 1) Improving sales per store, 2) Expanding our operating margin, 3) Generating strong free cash flow, and 4) Improving our return on invested capital. We continue to see tremendous opportunity to drive improved performance, by continuing to implement our strategic initiatives and leveraging positive industry dynamics."
"We remain committed to our goal of increasing our annual earnings per share 20% or more over the next several years," Mr. Coppola said. "Our philosophy of investing for the long term is paying off, and we will continue to invest in our people, brand, and business to sustain our growth. We are pleased by our strong start to 2005, and believe we are well positioned to continue growing our market share."
Annual Meeting Announcements
The Company's Annual Meeting of Stockholders was held earlier today. At the meeting, stockholders:
* Elected the following board nominees to the Company's Board of
Directors:
-- John C. Brouillard
-- Lawrence P. Castellani
-- Michael N. Coppola
-- Darren R. Jackson
-- William S. Oglesby
-- Gilbert T. Ray
-- Carlos A. Saladrigas
-- William L. Salter
-- Francesca Spinelli, Ph.D.
-- Nicholas F. Taubman
* Ratified the audit committee's appointment of Deloitte & Touche LLP as
the Company's independent registered public accounting firm for 2005.
The Company's planned CEO transition from Larry Castellani to Mike Coppola also officially took place. Mr. Castellani continues to serve as the Company's Chairman of the Board.
"It has been my privilege to lead this fine company for the past five years," Mr. Castellani said. "I can't think of a more able successor than Mike Coppola to drive Advance Auto Parts to even greater success in the years ahead. It has been a pleasure to work with such a dedicated and talented team, and I will continue to do so on a strategic basis as non-executive Chairman of the Board. I thank each and every member of our team for their hard work and determination to serve our customers better than anyone."
About Advance Auto Parts
Headquartered in Roanoke, Va., Advance Auto Parts is the second-largest automotive aftermarket retailer of parts, accessories, batteries and maintenance items, in the United States, based on sales and store count. 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)
April 23, January 1, April 24,
2005 2005 2004
Assets
Current assets:
Cash and cash equivalents $ 131,688 $ 56,321 $ 12,867
Receivables, net 91,233 101,969 94,299
Inventories, net 1,309,297 1,201,450 1,174,001
Other current assets 26,284 17,687 24,254
Total current assets 1,558,502 1,377,427 1,305,421
Property and equipment, net 810,342 786,212 710,503
Assets held for sale 17,407 18,298 21,113
Other assets, net 20,132 20,025 26,243
$2,406,383 $2,201,962 $2,063,280
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdrafts $ 21,588 $ 20,184 $ 26,942
Current portion of long-term debt 31,950 31,700 5,615
Financed vendor accounts payable 95,431 56,896 32,526
Accounts payable 676,626 587,948 603,148
Accrued expenses 240,146 198,479 187,646
Other current liabilities 70,101 65,918 66,658
Total current liabilities 1,135,842 961,125 922,535
Long-term debt 430,125 438,300 374,385
Other long-term liabilities 80,928 80,222 77,468
Total stockholders' equity 759,488 722,315 688,892
$2,406,383 $2,201,962 $2,063,280
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
Sixteen Week Periods Ended
April 23, 2005 and April 24, 2004
(in thousands, except per share data)
(unaudited)
April 23, April 24,
2005 2004
Net sales $ 1,258,364 $ 1,122,918
Cost of sales, including purchasing
and warehousing costs 657,433 602,020
Gross profit 600,931 520,898
Selling, general and administrative
expenses 480,717 430,876
Operating income 120,214 90,022
Other, net:
Interest expense (8,911) (6,317)
Loss on extinguishment of debt - (244)
Other income, net 320 25
Total other, net (8,591) (6,536)
Income before provision for income taxes
and loss on discontinued operations 111,623 83,486
Provision for income taxes 42,976 32,143
Income from continuing operations 68,647 51,343
Discontinued operations:
Loss from operations of discontinued
wholesale distribution network - (85)
Benefit for income taxes - (33)
Loss on discontinued operations - (52)
Net income $ 68,647 $ 51,291
Net income per basic share from:
Income from continuing operations $ 0.96 $ 0.69
Loss on discontinued operations - -
$ 0.96 $ 0.69
Net income per diluted share from:
Income from continuing operations $ 0.94 $ 0.68
Loss on discontinued operations - -
$ 0.94 $ 0.68
Average common shares outstanding (a) 71,507 73,992
Dilutive effect of stock options 1,263 1,924
Average common shares outstanding -
assuming dilution 72,770 75,916
(a) Average common shares outstanding is calculated based on the weighted
average number of shares outstanding for the quarter. At April 23,
2005 and April 24, 2004, we had 71,625 and 74,148 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 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
Sixteen Week Periods Ended
April 23, 2005 and April 24, 2004
(in thousands)
(unaudited)
April 23, April 24,
2005 2004
Cash flows from operating activities:
Net income $ 68,647 $ 51,291
Depreciation and amortization 35,010 31,338
(Benefit) provision for deferred
income taxes (2,640) 3,077
Other non-cash adjustments to net income 5,432 4,404
Decrease (increase) in:
Receivables, net 10,736 (9,500)
Inventories, net (107,847) (60,220)
Other assets (8,558) (11,211)
Increase in:
Accounts payable 88,678 34,873
Accrued expenses 40,791 12,755
Other liabilities 3,957 4,233
Net cash provided by operating
activities 134,206 61,040
Cash flows from investing activities:
Purchases of property and equipment (59,497) (32,005)
Proceeds from sales of property and
equipment 1,414 2,497
Net cash used in investing activities (58,083) (29,508)
Cash flows from financing activities:
Increase (decrease) in bank overdrafts 1,404 (4,143)
Increase in financed vendor accounts
payable 38,535 32,526
Early extinguishment of debt - (60,000)
Net payments on credit facilities (7,925) (5,000)
Proceeds from exercise of stock options 6,999 3,089
Repurchase of common stock (42,978) -
Other net financing activities 3,209 3,376
Net cash used in financing activities (756) (30,152)
Increase in cash and cash equivalents 75,367 1,380
Cash and cash equivalents, beginning
of period 56,321 11,487
Cash and cash equivalents, end of period $ 131,688 $ 12,867
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
Sixteen Week Periods Ended
April 23, 2005 and April 24, 2004
(in thousands)
(unaudited)
April 23, April 24,
2005 2004
Cash flows from operating activities $ 134,206 $ 61,040
Cash flows used in investing activities (58,083) (29,508)
76,123 31,532
Increase in financed vendor accounts payable 38,535 32,526
Free cash flow $ 114,658 $ 64,058
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.