Advance Auto Parts Reports Second Quarter 2005
ROANOKE, Va.--Aug. 1, 20050, 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 second quarter ended July 16, 2005.Earnings per diluted share for the second quarter were $0.90, a 28.6% increase compared to earnings per diluted share of $0.70 in last year's second quarter.
Net sales increased 12.6% in the quarter to $1.02 billion from $908.4 million in the second quarter last year. Same-store sales grew 9.0% in the quarter, comprised of 4.9% do-it-yourself (DIY) same-store sales and 27.1% do-it-for-me (DIFM) same-store sales.
"These results reflect our team's continued strong execution of our initiatives," President and Chief Executive Officer Michael Coppola said. "We continue to work hard to provide customers a more-complete shopping experience, and our recent rollout of factory-direct ordering and an improved local sourcing program are enhancing our ability to satisfy more of our customers' auto parts needs."
Second quarter gross margin increased to 47.1% of net sales, compared to 46.5% 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 improved to 36.1% of net sales, compared to 36.4% in last year's second quarter, primarily as a result of the leverage gained from strong comparable-store sales.
Second quarter operating margin rose to 11.0% of net sales compared to 10.0% in the second quarter last year. This is the highest operating margin percentage in the Company's public history.
For the first half of the year, sales grew 12.3% to $2.28 billion. Comparable-store sales grew 9.1% over this time, comprised of a 5.0% increase in DIY same-store sales and a 27.2% increase in DIFM same-store sales. First half operating margin expanded to 10.2% of sales, compared to 8.9% last year, and earnings per diluted share increased 34.3% to $1.84 compared to $1.37 last year.
Store Information
During the quarter, the Company opened 36 new stores, closed three stores, relocated 13 existing stores, and converted 51 stores to the Company's innovative 2010 format. For the first half of the year, the Company has opened 62 new stores, closed six stores, relocated 32 stores, and converted 119 stores to the 2010 format. With the previously announced acquisition of 19 Lappen Auto Supply stores, the Company anticipates new-store openings to be at the higher end of its 150-175 range. As of July 16, 2005, the Company operated 2,708 stores, of which 1,333 were the Company's new 2010-format stores.
Stock Repurchase Authorization
In separate news, the Company's Board of Directors earlier today authorized a new $300 million stock repurchase program. This new authorization replaces the Company's prior $200 million stock buyback program, which was authorized in August 2004 and had been nearly completed. Under the $200 million authorization, Advance repurchased approximately 4.7 million shares of its common stock at an average price of approximately $40.50 per share.
"Our business continues to generate significant free cash flow," Chief Financial Officer Jeff Gray said, "and as a growing company within a growing industry, we continue to reinvest in our business to drive long-term growth. Our strong cash flow and financial flexibility are enabling us to accelerate our growth, while also returning capital to shareholders. Opportunistic share repurchases are among the ways we are driving higher return on capital, which is one of our four key financial objectives."
Stock Split
Advance's Board of Directors today approved a three-for-two split of the Company's common stock, which will be effected in the form of a 50% stock dividend. The Company anticipates the additional shares associated with this stock dividend will be distributed on or about September 23, 2005 to stockholders of record as of September 9, 2005. The Company's common stock will begin trading on a post-split basis on September 26, 2005, the first trading day following the distribution date.
Guidance
As a result of its strong second-quarter results, the Company is raising its earnings per diluted share guidance for fiscal 2005 to a range of $3.12 to $3.18 on a pre-split basis ($2.08 to $2.12 after the pending 3-for-2 split), representing an increase of 25% to 28% over last year's diluted EPS. For the third quarter, the Company is reiterating its guidance for earnings per diluted share to be in the range of $0.78 to $0.83 on a pre-split basis ($0.52 to $0.55 after the pending 3-for-2 split), representing an increase of 15% to 22% compared to last year's third quarter. For the fourth quarter, the Company is initiating a guidance range for earnings per diluted share of $0.50 to $0.54 on a pre-split basis ($0.33 to $0.36 after the pending 3-for-2 split), representing an increase of 16% to 26% compared to last year's fourth quarter.
"Our strong first half of 2005 leaves us even more convinced about our opportunities to sustain strong growth for the foreseeable future," Coppola continued. "As we continue to reinvest to grow the Company for the long run, we remain committed to our goal of achieving 11-12% annual operating margin by 2007."
Investor Conference Call
The Company will host a conference call on August 11, 2005, at 8:00 a.m. Eastern Daylight Time to discuss its quarterly results. To listen to the live call, please log on to http://www.advanceautoparts.com, or dial 866.800.8651. The call will be archived on the Company's website http://www.advanceautoparts.com until August 10, 2006.
Annual Investor Conference
Advance will host its annual investor conference next Wednesday, August 17, 2005, in Charlotte, NC. A webcast of management's presentations and a question-and-answer session will be available on the investor relations section of the Company's website, http://www.advanceautoparts.com.
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 July 16, 2005, the Company operated 2,708 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)
July 16, January 1, July 17,
2005 2005 2004
----------- ----------- -----------
Assets
------
Current assets:
Cash and cash equivalents $175,888 $56,321 $19,817
Receivables, net 94,380 101,969 99,262
Inventories, net 1,327,332 1,201,450 1,189,567
Other current assets 31,380 17,687 27,734
----------- ----------- -----------
Total current assets 1,628,980 1,377,427 1,336,380
Property and equipment, net 843,034 786,212 743,945
Assets held for sale 16,912 18,298 20,290
Other assets, net 19,805 20,025 25,332
----------- ----------- -----------
$2,508,731 $2,201,962 $2,125,947
=========== =========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Bank overdrafts $25,561 $20,184 $11,509
Current portion of long-term debt 32,200 31,700 17,024
Financed vendor accounts payable 120,825 56,896 40,236
Accounts payable 643,686 587,948 629,915
Accrued expenses 243,140 198,479 198,957
Other current liabilities 75,053 65,918 74,745
----------- ----------- -----------
Total current liabilities 1,140,465 961,125 972,386
Long-term debt 421,950 438,300 317,976
Other long-term liabilities 75,899 80,222 75,837
Total stockholders' equity 870,417 722,315 759,748
----------- ----------- -----------
$2,508,731 $2,201,962 $2,125,947
=========== =========== ===========
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
July 16, 2005 and July 17, 2004
(in thousands, except per share data)
(unaudited)
July 16, July 17,
2005 2004
---------- ---------
Net Sales $1,023,146 $908,412
Cost of sales, including purchasing
and warehousing costs 541,096 486,110
----------- ---------
Gross profit 482,050 422,302
Selling, general and administrative
expenses 369,530 331,055
----------- ---------
Operating income 112,520 91,247
----------- ---------
Other, net:
Interest expense (7,575) (4,531)
Loss on extinguishment of debt - (168)
Other income, net 1,045 10
----------- ---------
Total other, net (6,530) (4,689)
----------- ---------
Income before provision for income
taxes and income on discontinued
operations 105,990 86,558
Provision for income taxes 40,061 33,329
----------- ---------
Income from continuing operations 65,929 53,229
Discontinued operations:
Income from operations of
discontinued wholesale dealer
network - 10
Provision for income taxes - 4
----------- ---------
Income on discontinued
operations - 6
----------- ---------
Net income $65,929 $53,235
=========== =========
Net income per basic share from:
Income from continuing operations $0.91 $0.71
Income on discontinued operations - -
----------- ---------
$0.91 $0.71
=========== =========
Net income per diluted share from:
Income from continuing operations $0.90 $0.70
Income on discontinued operations - -
----------- ---------
$0.90 $0.70
=========== =========
Average common shares outstanding (a) 72,518 74,590
Dilutive effect of stock options 1,047 1,694
----------- ---------
Average common shares outstanding -
assuming dilution 73,565 76,284
=========== =========
(a) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for the quarter. At July
16, 2005 and July 17, 2004, we had 72,975 and 74,867 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 Operations
Twenty-Eight Week Periods Ended
July 16, 2005 and July 17, 2004
(in thousands, except per share data)
(unaudited)
July 16, July 17,
2005 2004
------------ -----------
Net sales $2,281,510 $2,031,330
Cost of sales, including
purchasing and warehousing costs 1,198,529 1,088,130
------------ -----------
Gross profit 1,082,981 943,200
Selling, general and
administrative expenses 850,247 761,931
------------ -----------
Operating income 232,734 181,269
------------ -----------
Other, net:
Interest expense (16,486) (10,848)
Loss on extinguishment of debt - (412)
Other income, net 1,365 35
------------ -----------
Total other, net (15,121) (11,225)
------------ -----------
Income before provision for income
taxes and loss on discontinued
operations 217,613 170,044
Provision for income taxes 83,037 65,472
------------ -----------
Income from continuing operations 134,576 104,572
Discontinued operations:
Loss from operations of
discontinued wholesale dealer
network - (75)
Benefit for income taxes - (29)
------------ -----------
Loss on discontinued
operations - (46)
------------ -----------
Net income $134,576 $104,526
============ ===========
Net income per basic share from:
Income from continuing
operations $1.87 $1.41
Loss on discontinued operations - -
------------ -----------
$1.87 $1.41
============ ===========
Net income per diluted share from:
Income from continuing
operations $1.84 $1.37
Loss on discontinued
operations - -
------------ -----------
$1.84 $1.37
============ ===========
Average common shares outstanding (a) 71,940 74,248
Dilutive effect of stock options 1,171 1,826
------------ -----------
Average common shares outstanding
- assuming dilution 73,111 76,074
=============== ===========
(a) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for the quarter. At July
16, 2005 and July 17, 2004, we had 72,975 and 74,867 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
Twenty-Eight Week Periods Ended
July 16, 2005 and July 17, 2004
(in thousands)
(unaudited)
July 16, July 17,
2005 2004
--------- ---------
Cash flows from operating activities:
Net income $134,576 $104,526
Depreciation and amortization 62,476 55,416
(Benefit) provision for deferred income taxes (6,297) 9,172
Tax benefit related to exercise of stock options 27,998 10,979
Other non-cash adjustments to net income 2,938 3,322
Decrease (increase) in:
Receivables, net 7,589 (14,463)
Inventories, net (125,882) (75,786)
Other assets (13,241) (14,373)
Increase in:
Accounts payable 55,738 61,640
Accrued expenses 42,370 20,082
Other liabilities 2,740 3,250
--------- ---------
Net cash provided by operating
activities 191,005 163,765
Cash flows from investing activities:
Purchases of property and equipment (119,777) (87,093)
Proceeds from sales of property and
equipment 2,874 5,468
--------- ---------
Net cash used in investing activities (116,903) (81,625)
Cash flows from financing activities:
Increase (decrease) in bank overdrafts 5,377 (19,576)
Increase in financed vendor accounts
payable 63,929 40,236
Early extinguishment of debt - (105,000)
Net payments on credit facilities (15,850) (5,000)
Proceeds from exercise of stock options 26,784 10,204
Repurchase of common stock (42,978) -
Other net financing activities 8,203 5,326
--------- ---------
Net cash used in financing activities 45,465 (73,810)
--------- ---------
Increase in cash and cash equivalents 119,567 8,330
Cash and cash equivalents, beginning of period 56,321 11,487
--------- ---------
Cash and cash equivalents, end of period $175,888 $19,817
========= =========
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
Twenty-Eight Week Periods Ended
July 16, 2005 and July 17, 2004
(in thousands)
(unaudited)
July 16, July 17,
2005 2004
--------- ---------
Cash flows from operating activities $191,005 $163,765
Cash flows used in investing activities (116,903) (81,625)
--------- ---------
74,102 82,140
Increase in financed vendor accounts payable 63,929 40,236
--------- ---------
Free cash flow $138,031 $122,376
========= =========
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.