Advance Auto Parts Reports Record Fourth Quarter Initiates First-Ever Cash Dividend
ROANOKE, Va.--Feb. 16, 2006--Advance Auto Parts, Inc. , a leading retailer of automotive aftermarket parts, accessories, batteries, and maintenance items, today announced record revenue and earnings for its fiscal fourth quarter ended December 31, 2005.Earnings per diluted share for the fourth quarter were $0.36, a 24% increase compared to earnings per diluted share of $0.29 last year. (All per-share amounts referenced in this release reflect the Company's 3-for-2 stock split, which took effect September 26, 2005).
Sales increased 13.5% in the fourth quarter to $963.7 million from $848.8 million last year. Same-store sales grew 6.3% in the quarter, comprised of 3.1% do-it-yourself (DIY) same-store sales and 19.4% do-it-for-me (DIFM) same-store sales. The quarter's 6.3% same-store sales increase compares to a 9.7% increase in comparable-store sales in last year's fourth quarter.
"We produced strong financial results during the fourth quarter, while continuing to invest for the future," said Michael Coppola, Advance's President and Chief Executive Officer. "We remain focused on providing a unique shopping experience and a compelling value proposition to our customers. Our investments in additional commercial programs, marketing and advertising, new stores and 2010 store remodels, which are providing us the newest, freshest store base, will continue to be key drivers of our performance in the years ahead."
Fourth quarter gross margin improved to 46.7% of sales, compared to 46.4% last year, reflecting the positive impact of category management and supply-chain efficiencies.
Fourth quarter selling, general and administrative (SG&A) expenses were 39.4% of sales, equal to the rate in fourth quarter 2004. This reflects lower self-insurance costs, offset by higher fuel and utility costs, depreciation and increases in tax-related expenses. SG&A expenses also reflect continued investment of additional funds in areas such as advertising and commercial-delivery programs to drive sales for the long term.
Fourth quarter operating margin rose to 7.3% of sales compared to 7.0% last year.
Fiscal 2005
For the fiscal 2005 year, sales grew to $4.26 billion, a 13.1% increase compared to 2004. Comparable-store sales grew 8.7% for the year, comprised of a 4.8% increase in DIY same-store sales and a 25.2% increase in DIFM same-store sales. Improvements in both gross margin and SG&A drove a record 9.6% operating margin, compared to 8.7% in 2004. Earnings per diluted share increased 28% to $2.13 in 2005, compared to $1.66 in 2004.
"In 2005, we achieved a number of significant milestones," Coppola said, "including a record number of store openings and the acquisition of Lappen Auto Supply and Autopart International. We successfully opened our new distribution center in Pennsylvania, which enabled us to provide better service to our stores and customers in the Northeast. We also achieved a record store in-stock level in 2005, helping to drive improved customer satisfaction. And in December, we completed the conversion of the remaining Discount Auto Parts stores to Advance's 2010 format, bringing a fresh look to all of our stores in the state of Florida. For the year, Advance achieved its highest-ever operating margin. We enter 2006 well-positioned for future growth."
Store Information
During the fourth quarter, the Company opened 48 new stores, closed five stores, relocated 10 existing stores, and remodeled 21 stores to the Company's innovative 2010 format. For the fiscal year, the Company added 231 stores (including 80 acquired stores), closed 11 stores, relocated 54 stores, and remodeled 189 stores to the 2010 format. At year-end 2005, the Company operated 2,872 stores in 40 states, Puerto Rico and the Virgin Islands, of which 1,531 are the Company's innovative 2010-format stores.
2006 Guidance
For 2006 the Company expects to open 170 to 180 new Advance stores (representing square footage growth in the range of 6% to 7%), in addition to remodeling 200 to 225 stores, and relocate approximately 50 stores.
For the 2006 fiscal year, the Company anticipates earnings per diluted share to be in the range of $2.37 to $2.47, inclusive of approximately $0.12 of annual stock-option expense. For comparative purposes, 2005 EPS of $2.13 do not include pro forma stock-option expense of $0.09 per share. The Company's 2006 guidance represents an 11% to 16% increase in EPS, as compared to 2005. On a long-term basis, the Company continues to view its target of 20% annual EPS growth as achievable. Advance targets growth in EPS through a balanced combination of new-store growth, comparable-store sales growth, gross margin improvement, and SG&A leverage.
"We continue to see significant opportunities to serve our customers even better," Coppola added, "which is what gives us confidence that our future is so bright. We will continue to lead the industry with new merchandise offerings, better-tailored assortments, additional store-related enhancements, and other programs that differentiate Advance as a customer-focused company. By satisfying more customers, we will drive further progress in sales per store and operating margin, two of our key financial goals."
For first quarter 2006, the Company is initiating guidance for earnings per diluted share in the range of $0.68 to $0.71, inclusive of approximately $0.03 of stock-option expense, representing an EPS increase of 8% to 13% compared to last year's first quarter. For comparative purposes, first quarter 2005 results of $0.63 do not include pro forma stock-option expense of $0.02 per share. First quarter guidance is based on mid-single-digit comparable-store sales gains. Through the first six weeks this year the Company is running low single-digit comps against 14% comps in the same six weeks last year. For the 10 weeks remaining in the quarter the Company expects to run high single-digit comps against 7% comps in the same period last year. As a reminder, in first quarter 2005, the Company experienced very strong gross margin improvements and robust comp-store sales.
Initiation of Quarterly Cash Dividend
On February 15, 2006, the Company's Board of Directors approved the initiation of a quarterly cash dividend, the first in the Company's history. Stockholders of record as of March 24, 2006 will be entitled to the Company's first quarterly dividend payment of $0.06 per share, payable on April 7, 2006.
"This dividend reflects the strength of Advance's financial position, and its ability to generate consistent cash flow while continuing to accelerate its growth rate," Coppola said. "Advance is in the strong position of being able to invest for the future while also returning capital to stockholders."
About Advance Auto Parts
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 December 31, 2005, the Company operated 2,872 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)
Dec. 31, Jan. 1,
2005 2005
----------- -----------
Assets
-------
Current assets:
Cash and cash equivalents $40,783 $56,321
Receivables, net 94,689 101,969
Inventories, net 1,367,099 1,201,450
Other current assets 45,369 17,687
----------- -----------
Total current assets 1,547,940 1,377,427
Property and equipment, net 898,851 786,212
Assets held for sale 8,198 18,298
Goodwill 67,094 2,720
Other assets, net 20,066 17,305
----------- -----------
$2,542,149 $2,201,962
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Bank overdrafts $50,170 $20,184
Current portion of long-term debt 32,760 31,700
Financed vendor accounts payable 119,351 56,896
Accounts payable 629,248 587,948
Accrued expenses 265,437 198,479
Other current liabilities 44,498 65,918
----------- -----------
Total current liabilities 1,141,464 961,125
Long-term debt 406,040 438,300
Other long-term liabilities 74,874 80,222
Total stockholders' equity 919,771 722,315
----------- -----------
$2,542,149 $2,201,962
=========== ===========
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
December 31, 2005 and January 1, 2005
(in thousands, except per share data)
(unaudited)
Dec. 31, Jan. 1,
2005 2005
------------ -----------
Net sales $963,725 $848,806
Cost of sales, including purchasing and
warehousing costs 513,643 455,150
------------ -----------
Gross profit 450,082 393,656
Selling, general and administrative expenses 379,740 334,009
------------ -----------
Operating income 70,342 59,647
------------ -----------
Other, net:
Interest expense (7,702) (4,891)
Loss on extinguishment of debt - (2,818)
Other income, net 517 187
------------ -----------
Total other, net (7,185) (7,522)
------------ -----------
Income before provision for income taxes and
gain on discontinued operations 63,157 52,125
Provision for income taxes 23,801 20,069
------------ -----------
Income from continuing operations 39,356 32,056
Discontinued operations:
Gain from operations of discontinued
wholesale dealer network - 22
Provision for income taxes - 9
------------ -----------
Gain on discontinued operations - 13
------------ -----------
Net income $39,356 $32,069
============ ===========
Net income per basic share from:
Income from continuing operations $0.36 $0.29
Gain on discontinued operations - -
------------ -----------
$0.36 $0.29
============ ===========
Net income per diluted share from:
Income from continuing operations $0.36 $0.29
Gain on discontinued operations - -
------------ -----------
$0.36 $0.29
============ ===========
Average common shares outstanding (a) 108,280 109,511
Dilutive effect of stock options 1,498 1,720
------------ -----------
Average common shares outstanding - assuming
dilution 109,778 111,231
============ ===========
(a) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for the quarter. At
December 31, 2005 and January 1, 2005, we had 108,198 and 108,367
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
Fifty-Two Week Periods Ended
December 31, 2005 and January 1, 2005
(in thousands, except per share data)
(unaudited)
Dec. 31, Jan. 1,
2005 2005
------------- -----------
Net sales $4,264,971 $3,770,297
Cost of sales, including purchasing and
warehousing costs 2,250,493 2,016,926
------------- -----------
Gross profit 2,014,478 1,753,371
Selling, general and administrative expenses 1,605,986 1,424,613
------------- -----------
Operating income 408,492 328,758
------------- -----------
Other, net:
Interest expense (32,384) (20,069)
Loss on extinguishment of debt - (3,230)
Other income, net 2,815 289
------------- -----------
Total other, net (29,569) (23,010)
------------- -----------
Income before provision for income taxes and
loss on discontinued operations 378,923 305,748
Provision for income taxes 144,198 117,721
------------- -----------
Income from continuing operations 234,725 188,027
Discontinued operations:
Loss from operations of discontinued
wholesale dealer network - (63)
Benefit for income taxes - (24)
------------- -----------
Loss on discontinued operations - (39)
------------- -----------
Net income $234,725 $187,988
============= ===========
Net income per basic share from:
Income from continuing operations $2.17 $1.70
Loss on discontinued operations - -
------------- -----------
$2.17 $1.70
============= ===========
Net income per diluted share from:
Income from continuing operations $2.13 $1.66
Loss on discontinued operations - -
------------- -----------
$2.13 $1.66
============= ===========
Average common shares outstanding (a) 108,318 110,846
Dilutive effect of stock options 1,669 2,376
------------- -----------
Average common shares outstanding - assuming
dilution 109,987 113,222
============= ===========
(a) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for the year. At
December 31, 2005 and January 1, 2005, we had 108,198 and 108,367
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
Fifty-Two Week Periods Ended
December 31, 2005 and January 1, 2005
(in thousands)
(unaudited)
Dec. 31, Jan. 1,
2005 2005
--------- ---------
Cash flows from operating activities:
Net income $234,725 $187,988
Depreciation and amortization 119,938 104,877
Provision for deferred income taxes 2,790 6,508
Tax benefit related to exercise of
stock options 30,300 23,749
Other non-cash adjustments to net income 5,065 8,650
Decrease (increase) in, net of business
acquisitions:
Receivables, net 21,819 (15,945)
Inventories, net (130,426) (87,669)
Other assets (23,963) 1,750
Increase (decrease) in, net of business
acquisitions:
Accounts payable 35,610 19,673
Accrued expenses 45,305 12,581
Other liabilities (3,452) 1,632
--------- ---------
Net cash provided by operating
activities 337,711 263,794
Cash flows from investing activities:
Purchases of property and equipment (216,214) (179,766)
Business acquisitions, net of cash acquired (111,800) -
Proceeds from sales of property and equipment 12,734 12,944
--------- ---------
Net cash used in investing activities (315,280) (166,822)
Cash flows from financing activities:
Increase (decrease) in bank overdrafts 29,986 (10,901)
Increase in financed vendor accounts payable 62,455 56,896
Early extinguishment of debt - (105,000)
Net (payments) borrowings on credit facilities (31,200) 130,000
Payment of debt related costs - (3,509)
Proceeds from exercise of stock options 28,696 20,470
Repurchase of common stock (101,594) (146,370)
(Decrease) increase in borrowings
secured by trade receivables (26,312) 6,276
--------- ---------
Net cash used in financing activities (37,969) (52,138)
--------- ---------
(Decrease) increase in cash and cash equivalents (15,538) 44,834
Cash and cash equivalents, beginning of period 56,321 11,487
--------- ---------
Cash and cash equivalents, end of period $40,783 $56,321
========= =========
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
Fifty-Two Week Periods Ended
December 31, 2005 and January 1, 2005
(in thousands)
(unaudited)
Dec. 31, Jan. 1
2005 2005
--------- ---------
Cash flows from operating activities $337,711 $263,794
Cash flows used in investing activities (315,280) (166,822)
--------- ---------
22,431 96,972
Increase in financed vendor accounts
payable 62,455 56,896
Business acquisitions, net of cash
acquired 111,800 -
Decrease in borrowings secured by trade
receivables (1) (34,684) -
--------- ---------
Free cash flow $162,002 $153,868
========= =========
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.
(1) Represents the reduction in borrowings secured by trade
receivables resulting from the conversion of our private label credit
card program during third quarter. We have included this financing
activity in our reconciliation of free cash flow to offset the
increase in cash from operating activities resulting from the
reduction of the corresponding trade receivables.