Advance Auto Parts Reports 2006 Record First Quarter
ROANOKE, Va.--May 18, 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 first quarter ended April 22, 2006.Earnings per diluted share for the first quarter were $0.68, compared to $0.63 last year, an increase of 8%, on top of a 39% increase in last year's first quarter. First quarter results include approximately $0.03 per share of stock-option expense, whereas results in last year's quarter do not include pro forma stock-option expense of approximately $0.02 per share. Adjusted for comparable treatment of stock options, adjusted EPS grew 11% compared to 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).
In the first quarter, sales increased to $1.39 billion from $1.26 billion last year, a 10.7% increase. Same-store sales increased 3.9% in the quarter, comprised of 0.5% do-it-yourself (DIY) same-store sales and 16.3% do-it-for-me (DIFM) same-store sales. The 3.9% same-store sales increase compares to a 9.2% increase in last year's first quarter.
First quarter sales reflect the previously announced slow start to the quarter, somewhat offset by stronger sales in the latter part of the quarter.
"I am disappointed that sales came in at the low end of our mid-single-digit comp guidance," said Mike Coppola, chairman and CEO, "and as a result, earnings per share were also disappointing, coming in at the low end of our guidance of $0.68 to $0.71. Higher energy prices and higher interest rates are reducing consumers' discretionary income. In addition, very mild winter weather unfavorably impacted first quarter sales. Our team is working diligently on a large number of sales-enhancing initiatives, and focusing as well on curtailing selected expenses in non-sales-related areas."
First quarter gross margin was 47.8% of sales, equal to last year, which was up 137 basis points over the prior year.
First quarter selling, general and administrative (SG&A) expenses were 38.7% of sales, compared to 38.2% in first quarter 2005. Non-comparable stock-option expense impacted SG&A in this year's quarter by 36 basis points. This year's SG&A rate also reflects the cost of the company's store manager conference, held every other year, which exceeded 30 basis points. In addition, SG&A includes approximately 20 basis points of unplanned expenses related to the resolution of certain legal matters and property damage costs.
The quarter's income tax rate was 36.6%, and benefited from the resolution of certain tax contingencies. The company anticipates its tax rate to be in the range of 38.0% to 38.2% for the balance of 2006.
"While first quarter DIY sales did not materialize to the extent we would have liked, the internal drivers of our business remain solid," Coppola added. "Our in-stock percentage is at an all-time high, and our average transaction size is also at a record level, all of which tells us that Advance is doing a good job fulfilling customers' expectations. Additionally, our commercial business continues to perform well, with sales on-plan. Our focus is to maximize our results for the balance of 2006."
Store Information
During the first quarter, the Company opened 58 new stores, closed three stores, relocated 11 existing stores, and remodeled 65 stores to the Company's innovative 2010 format. The Company is raising its guidance for new-store openings in 2006 to a range of 185 to 195, compared to previous guidance for 170 to 180 new stores. At quarter end, the Company operated 2,927 stores in 40 states, Puerto Rico and the Virgin Islands, of which 1,661 are the Company's innovative 2010-format stores.
2006 Guidance
Due to the current macroeconomic environment that is affecting our customers, the Company is forecasting comp-store sales to be in the range of 3% to 5% for the remainder of 2006. The Company forecasts operating margin improvement for the balance of the year, and therefore continues to target 2006 earnings per diluted share in the range of $2.37 to $2.47. 2006 results will include approximately $0.12 per share of stock-option expense in accordance with new accounting requirements, whereas 2005 results did not include such expenses. For second quarter 2006, the Company forecasts 3% to 5% comps and earnings per diluted share in the range of $0.65 to $0.68, inclusive of approximately $0.03 of stock-option expense. Last year's second quarter EPS of $0.60 do not include stock-option expense of approximately $0.02 per share. Through the first three weeks of the quarter, comps have run consistent with first quarter's run-rate. For the year, the Company continues to expect capital expenditures to be in the range of $260 million to $280 million.
Annual Meeting Announcements
The Company held its annual meeting of stockholders on May 17, 2006. At the meeting, stockholders:
-- Elected the following individuals to the Company's Board of Directors:
-- John C. Brouillard
-- Lawrence P. Castellani
-- Michael N. Coppola
-- Darren R. Jackson
-- Nicholas J. LaHowchic
-- William S. Oglesby
-- Gilbert T. Ray
-- Carlos A. Saladrigas
-- William L. Salter
-- Francesca M. Spinelli
-- Ratified the audit committee's appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for 2006.
Following the stockholders' meeting, the Board of Directors unanimously elected Michael Coppola to serve as Chairman of the Board, in addition to his current responsibilities as President and CEO.
"It has been my privilege to serve Advance Auto Parts as its CEO, and more recently as Chairman of the Board," Larry Castellani said. "I look forward to continuing to serve the company as a board member. Meanwhile, I couldn't be more enthusiastic that Mike Coppola will guide this company both operationally and strategically, in his additional role of Chairman of the Board. Mike's leadership, extensive retail experience, and the quality team supporting him are propelling Advance to be best-in-class."
Quarterly Dividend
The Company's Board of Directors declared a regular quarterly cash dividend of six cents per share to be paid on July 7, 2006 to stockholders of record as of June 23, 2006.
Investor Conference Call
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 April 22, 2006, the Company operated 2,927 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)
April 22, Dec. 31, April 23,
2006 2005 2005
----------- ----------- -----------
Assets
-------
Current assets:
Cash and cash equivalents $55,350 $40,783 $131,688
Receivables, net 84,779 94,689 91,233
Inventories, net 1,420,889 1,367,099 1,309,297
Other current assets 28,742 45,369 26,284
----------- ----------- -----------
Total current assets 1,589,760 1,547,940 1,558,502
Property and equipment, net 932,455 898,851 810,342
Assets held for sale 5,106 8,198 17,407
Goodwill 67,208 67,094 2,705
Other assets, net 21,199 20,066 17,427
----------- ----------- -----------
$2,615,728 $2,542,149 $2,406,383
=========== =========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Bank overdrafts $21,923 $50,170 $21,588
Current portion of long-term
debt 35,261 32,760 31,950
Financed vendor accounts
payable 125,433 119,351 95,431
Accounts payable 696,559 629,248 676,626
Accrued expenses 282,916 265,437 240,146
Other current liabilities 46,786 44,498 70,101
----------- ----------- -----------
Total current liabilities 1,208,878 1,141,464 1,135,842
Long-term debt 395,343 406,040 430,125
Other long-term liabilities 72,002 74,874 80,928
Total stockholders' equity 939,505 919,771 759,488
----------- ----------- -----------
$2,615,728 $2,542,149 $2,406,383
=========== =========== ===========
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 except for the effect of adopting
Financial Accounting Standards Board's Statement No. 123 (revised
2004), "Share-Based Payment," (SFAS 123R) as of January 1, 2006, 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 22, 2006 and April 23, 2005
(in thousands, except per share data)
(unaudited)
April 22, April 23,
2006 2005
----------- -----------
Net sales $1,393,010 $1,258,364
Cost of sales, including purchasing and
warehousing costs 727,842 657,433
----------- -----------
Gross profit 665,168 600,931
Stock option compensation 5,045 -
Selling, general and administrative expenses 533,825 480,717
----------- -----------
Operating income 126,298 120,214
----------- -----------
Other, net:
Interest expense (10,163) (8,911)
Other income, net 620 320
----------- -----------
Total other, net (9,543) (8,591)
----------- -----------
Income before provision for income taxes 116,755 111,623
Provision for income taxes 42,674 42,976
----------- -----------
Net income $74,081 $68,647
=========== ===========
Basic earnings per share 0.69 0.64
Diluted earnings per share (a) 0.68 0.63
Average common shares outstanding (b) 107,879 107,261
Dilutive effect of stock options 1,376 1,894
----------- -----------
Average common shares outstanding - assuming
dilution 109,255 109,155
=========== ===========
(a) Diluted earnings per share include $0.03 of stock option expense
for the sixteen weeks ended April 22, 2006. The sixteen weeks
ended April 23, 2005 do not include stock option expense. On a
pro forma basis, stock option expense for the sixteen weeks
ended April 23, 2005 was $0.02 per diluted share.
(b) Average common shares outstanding is calculated based on the
weighted average number of shares outstanding for the quarter. At
April 22, 2006 and April 23, 2005, we had 106,960 and 107,438
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
except for the effect of adopting SFAS 123R as of January 1, 2006, 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 22, 2006 and April 23, 2005
(in thousands)
(unaudited)
April April
22, 23,
2006 2005
-------- ---------
Cash flows from operating activities:
Net income $74,081 $68,647
Depreciation and amortization 39,833 35,010
Stock-based compensation 5,045 -
Benefit for deferred income taxes (1,163) (2,640)
Excess tax benefit from stock-based
compensation (2,663) -
Tax benefit related to exercise of stock
options - 4,062
Other non-cash adjustments to net income 366 565
Decrease (increase) in:
Receivables, net 9,716 10,736
Inventories, net (53,790) (107,847)
Other assets 15,454 (8,558)
Increase in:
Accounts payable 67,311 88,678
Accrued expenses 10,130 40,791
Other liabilities 1,974 3,957
-------- ---------
Net cash provided by operating activities 166,294 133,401
Cash flows from investing activities:
Purchases of property and equipment (77,954) (59,497)
Proceeds from sales of property and equipment 5,111 1,414
-------- ---------
Net cash used in investing activities (72,843) (58,083)
Cash flows from financing activities:
(Decrease) increase in bank overdrafts (28,247) 1,404
Increase in financed vendor accounts payable 6,082 38,535
Dividends paid (6,479) -
Net payments on credit facilities (8,196) (7,925)
Proceeds from the insuance of common stock,
primarily exercise of stock options 8,576 7,804
Excess tax benefit from stock-based
compensation 2,663 -
Repurchase of common stock (53,327) (42,978)
Increase in borrowings secured by trade
receivables 44 3,209
-------- ---------
Net cash (used in) provided by financing
activities (78,884) 49
-------- ---------
Net increase in cash and cash equivalents 14,567 75,367
Cash and cash equivalents, beginning of period 40,783 56,321
-------- ---------
Cash and cash equivalents, end of period $55,350 $131,688
======== =========
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 except
for the effect of adopting SFAS 123R as of January 1, 2006, 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 22, 2006 and April 23, 2005
(in thousands)
(unaudited)
April 22, April 23,
2006 2005
--------- ---------
Cash flows from operating activities $166,294 $133,401
Cash flows used in investing activities (72,843) (58,083)
--------- ---------
93,451 75,318
Increase in financed vendor accounts payable 6,082 38,535
--------- ---------
Free cash flow $99,533 $113,853
========= =========
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.
April April
22, 23, %
2006 2005 increase
------ --------- ---------
Diluted earnings per share $0.68 $0.63 8%
Pro forma stock option compensation - (0.02)
------ ---------
Adjusted diluted earnings per share $0.68 $0.61 11%
====== =========
Note: Management believes adjusted diluted earnings per share is
useful to our stockholders as it presents a more comparable measure of
our earnings results since the adoption of SFAS 123R as of January 1,
2006. Adjusted diluted earnings per share 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
operations.