Advance Auto Parts Reports Third Quarter Results

ROANOKE, Va.--Advance Auto Parts, Inc. , a leading retailer of automotive aftermarket parts, accessories, batteries, and maintenance items, today announced its financial results for the fiscal third quarter ended October 6, 2007.

Earnings per diluted share for the third quarter were $.57. Excluding severance costs and asset write-offs associated with the Company’s expense reduction initiatives, earnings per diluted share were $.61 compared to $.56 last year, an 8.9% increase. In the third quarter, sales increased to $1.16 billion from $1.10 billion last year. Comparable-store sales increased 1.1% in the quarter, comprised of a 1.0% decrease in do-it-yourself (DIY) and an 8.0% increase in do-it-for-me (DIFM). The 1.1% comparable-store sales increase compared to a 1.4% increase in last year’s third quarter.

“We are pleased to report that we are on track with the initiatives that we announced at the end of our last quarter. Although we anticipate it will take time, we believe the results of those initiatives are beginning to have a positive impact on our sales, earnings, and return on invested capital,” said Jack Brouillard, Chairman, President and CEO.

Third quarter gross margin was 47.9% of sales, a 28 basis point decrease compared to last year. The decrease was primarily due to a less favorable merchandise sales mix as compared to last year. In addition, fewer discounts were earned as merchandise purchases were less than year ago levels and the Company had a greater proportion of commercial sales.

Third quarter selling, general and administrative (SG&A) expenses were 39.3% of sales compared to 38.9% last year. Excluding severance and asset write-off costs, SG&A expenses were 38.7%, a decrease of 18 basis points as compared to last year.

Year to date sales increased to $3.80 billion from $3.60 billion last year. Year to date comparable-store sales increased 1.2% comprised of a 0.4% decrease in do-it-yourself (DIY) and a 6.2% increase in do-it-for-me (DIFM). The year to date 1.2% comparable-store sales increase compares to a 2.3% increase last year.

Year to date earnings per diluted share were $1.92, compared to $1.82 last year. Year to date gross margin was 48.1% of sales, a 29 basis point improvement from last year. Year to date SG&A expenses were 38.8% of sales as compared to 38.4% in 2006, a 41 basis point increase.

Share Repurchases

In the third quarter, the Company repurchased 6.2 million shares at an average price of $33.26 for a total of $207 million. The Company currently has $335 million available under the share repurchase authorization approved by the Board of Directors in August 2007.

Store Information

During the third quarter, the Company opened 43 new stores, of which 4 are Autopart International (AI) stores. The Company also relocated 5 stores and closed 2 stores.

Year to date, the Company has opened 156 new stores, of which 17 are AI stores. The Company has also relocated 24 stores and closed 10 stores.

2007 Guidance

The Company forecasts fourth quarter earnings per share in the range of $.36 to $.40 as compared to $.33 last year, an increase of 9% to 21%. This guidance is based on comparable store sales growth of 0 to 2%. Gross margin is expected to be in line with fourth quarter last year. SG&A expenses are expected to leverage within the 0 to 2% sales guidance.

The Company anticipates full year 2007 earnings per diluted share to be in the range of $2.28 to $2.32. Excluding the severance costs and asset write-offs of $.04 per share incurred in the third quarter, earnings per diluted share for the year are expected to be $2.32 to $2.36 as compared to $2.16 last year, an increase of 7% to 9%. The Company expects free cash flow for the year to be in the range of $200 to $220 million.

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 October 6, 2007, the Company operated 3,228 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)
		October 6,			December 30,			October 7,
		2007			2006			2006
Assets
Current assets:
Cash and cash equivalents		$	14,836		$	11,128		$	13,987
Receivables, net			76,982			97,046			83,733
Inventories, net			1,540,666			1,463,340			1,462,067
Other current assets			43,805			40,459			38,207
Total current assets			1,676,289			1,611,973			1,597,994
Property and equipment, net			1,016,712			994,977			983,609
Assets held for sale			2,390			1,548			2,777
Goodwill			33,718			33,718			33,765
Intangible assets, net			27,095			27,926			27,920
Other assets, net			10,362			12,539			15,520
		$	2,766,566		$	2,682,681		$	2,661,585
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdrafts		$	349		$	34,206		$	36,689
Current portion of long-term debt			661			67			67
Financed vendor accounts payable			153,324			127,543			140,736
Accounts payable			708,095			651,587			669,720
Accrued expenses			304,810			252,975			257,334
Other current liabilities			40,121			47,042			48,953
Total current liabilities			1,207,360			1,113,420			1,153,499
Long-term debt			433,774			477,173			450,859
Other long-term liabilities			60,042			61,234			66,773
Total stockholders' equity			1,065,390			1,030,854			990,454
		$	2,766,566		$	2,682,681		$	2,661,585

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, or GAAP, for complete financial statements.

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Twelve Week Periods Ended
October 6, 2007 and October 7, 2006
(in thousands, except per share data)
(unaudited)
		October 6,				October 7,
		2007				2006
Net sales		$	1,158,043			$	1,099,486
Cost of sales, including purchasing and warehousing costs			602,930				569,280
Gross profit			555,113				530,206
Selling, general and administrative expenses			454,734				427,685
Operating income			100,379				102,521
Other, net:
Interest expense			(7,968	)			(9,232	)
Gain on extinguishment of debt, net			-				986
Other income, net			353				154
Total other, net			(7,615	)			(8,092	)
Income before provision for income taxes			92,764				94,429
Provision for income taxes			33,724				35,482
Net income		$	59,040			$	58,947
Basic earnings per share		$	0.58			$	0.56
Diluted earnings per share		$	0.57			$	0.56
Average common shares outstanding (a)			102,546				105,112
Dilutive effect of share-based compensation			635				939
Average common shares outstanding - assuming dilution			103,181				106,051

(a) Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 6, 2007 and October 7, 2006, we had 100,927 and 105,208 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 GAAP for complete financial statements.

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in thousands, except per share data)
(unaudited)
		October 6,				October 7,
		2007				2006
Net sales		$	3,796,022			$	3,600,353
Cost of sales, including purchasing and warehousing costs			1,968,645				1,877,620
Gross profit			1,827,377				1,722,733
Selling, general and administrative expenses			1,474,495				1,383,468
Operating income			352,882				339,265
Other, net:
Interest expense			(26,634	)			(28,147	)
Gain on extinguishment of debt, net			-				986
Other income, net			1,203				753
Total other, net			(25,431	)			(26,408	)
Income before provision for income taxes			327,451				312,857
Provision for income taxes			123,886				116,893
Net income		$	203,565			$	195,964
Basic earnings per share		$	1.94			$	1.84
Diluted earnings per share		$	1.92			$	1.82
Average common shares outstanding (a)			104,987				106,380
Dilutive effect of share-based compensation			866				1,175
Average common shares outstanding - assuming dilution			105,853				107,555

(a) Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the year. At October 6, 2007 and October 7, 2006, we had 100,927 and 105,208 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 GAAP for complete financial statements.

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in thousands)
(unaudited)
		October 6,				October 7,
		2007				2006
Cash flows from operating activities:
Net income		$	203,565			$	195,964
Depreciation and amortization			113,404				104,156
Share-based compensation			14,318				14,473
Benefit for deferred income taxes			(21,141	)			(2,332	)
Excess tax benefit from share-based compensation			(11,133	)			(4,398	)
Loss on extinguishment of debt			-				1,887
Other non-cash adjustments to net income			9,247				2,002
Decrease (increase) in:
Receivables, net			14,317				10,995
Inventories, net			(77,326	)			(90,966	)
Other assets			(985	)			9,031
Increase (decrease) in:
Accounts payable			56,508				40,472
Accrued expenses			71,708				17,056
Other liabilities			5,296				(1,337	)
Net cash provided by operating activities			377,778				297,003
Cash flows from investing activities:
Purchases of property and equipment			(146,520	)			(200,784	)
Insurance proceeds related to damaged property			6,636				-
Proceeds from sales of property and equipment			1,761				8,726
Business acquisitions, net of cash acquired			-				(12,500	)
Net cash used in investing activities			(138,123	)			(204,558	)
Cash flows from financing activities:
Decrease in bank overdrafts			(33,857	)			(13,481	)
Increase in financed vendor accounts payable			25,781				21,385
Early extinguishment of debt			-				(433,775	)
Dividends paid			(25,152	)			(19,153	)
Net (payments) borrowings on credit facilities			(47,200	)			445,950
Net borrowings (payments) on note payable			4,395				(49	)
Payment of debt related costs			-				(1,078	)
Proceeds from the issuance of common stock, primarily exercise of stock options			39,711				14,100
Excess tax benefit from share-based compensation			11,133				4,398
Repurchase of common stock			(211,225	)			(137,560	)
Other			467				22
Net cash used in financing activities			(235,947	)			(119,241	)
Net increase (decrease) in cash and cash equivalents			3,708				(26,796	)
Cash and cash equivalents, beginning of period			11,128				40,783
Cash and cash equivalents, end of period		$	14,836			$	13,987

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 GAAP for complete financial statements.

Advance Auto Parts, Inc. and Subsidiaries
Supplemental Financial Schedule
Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in thousands)
(unaudited)
Reconciliation of Free Cash Flow
		October 6,				October 7,
		2007				2006
Cash flows from operating activities		$	377,778			$	297,003
Cash flows used in investing activities			(138,123	)			(204,558	)
			239,655				92,445
Increase in financed vendor accounts payable			25,781				21,385
Free cash flow		$	265,436			$	113,830

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. The Company also included additional non-GAAP measures in this release, including adjusted earnings per diluted share and adjusted selling, general and administrative expenses. The Company believes these non-GAAP measures are useful to investors as they more clearly indicate the Company’s comparable operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP.