Advance Auto Parts Second Quarter Comparable Store Sales Increase 4.8%; Helps Fuel EPS Growth and $287 Million in Free Cash Flow
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 second quarter ended July 18, 2009. Second quarter earnings per diluted share were $0.83 which included a $0.06 charge related to store divestitures. Excluding the impact of the store divestitures, diluted earnings per share (EPS) of $0.89 increased 14% on top of a 22% increase in EPS last year. On a year-to-date basis, EPS of $1.92, excluding the $0.10 impact of store divestitures, increased 17% on top of a 21% increase in EPS last year.
| Second Quarter Performance Summary | ||||||||||||
| Twelve Weeks Ended | Twenty-Eight Weeks Ended | |||||||||||
| July 18, | July 12, | July 18, | July 12, | |||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
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Sales (in millions) |
$ | 1,322.8 | $ | 1,235.8 | $ | 3,006.5 | $ | 2,761.9 | ||||
| Comparable Store Sales % | 4.8% | 2.9% | 6.7% | 1.6% | ||||||||
| Gross Profit %(1) | 49.3% | 47.4% | 49.0% | 47.5% | ||||||||
| Selling, General & Administrative (SG&A) %(1) | 39.1% | 37.1% | 39.3% | 37.6% | ||||||||
| Operating Income % | 10.2% | 10.4% | 9.7% | 9.9% | ||||||||
| Diluted EPS(2) | $ | 0.83 | $ | 0.78 | $ | 1.82 | $ | 1.64 | ||||
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(1) |
The Company has retrospectively applied a change in accounting principle for costs included in inventory made in the first quarter to all prior periods presented herein related to cost of sales and selling, general and administrative expenses (SG&A). Refer to the accompanying financial statements included in this press release for further explanation. |
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(2) |
For the twelve and twenty-eight weeks ended July 18, 2009, diluted EPS includes a $0.06 and $0.10 charge, respectively, related to store divestitures. In addition, the Company’s adoption of FSP EITF 03-6-1 “Determining Whether Instruments Granted in Share-Based Transactions Are Participating Securities” during the first quarter 2009 decreased the Company’s diluted EPS for the twelve and twenty-eight weeks ended July 12, 2008 by $0.01. |
“Our 49,000 Advance Team Members continue to deliver strong top and bottom line performance, market share gains and improvements in our customer satisfaction and Team Member engagement scores,” said Darren R. Jackson, Chief Executive Officer. “Over the last 18 months we have been on a journey to turnaround the Company. Our focus on our customers, Team Members, growth and profitability is building the foundation to transform our Company into the industry customer experience leader.”
Second Quarter Highlights
Total sales for the second quarter increased 7% to $1.32 billion, compared with total sales of $1.24 billion in the second quarter of fiscal year 2008. The sales increase reflected the net addition of 82 new stores in the past 12 months and a comparable store sales increase of 4.8% during the quarter compared to an increase of 2.9% during the second quarter last year. The comparable store sales gain was comprised of a 14.8% increase in Commercial sales and a 0.7% increase in do-it-yourself (DIY) sales. This compares to a 13.5% increase in Commercial and a 0.8% decrease in DIY during the second quarter last year. Year-to-date comparable store sales increased 6.7% driven by a 16.3% increase in Commercial and a 2.7% increase in DIY.
The Company’s gross profit rate was 49.3% of sales in the second quarter as compared to 47.4% in the prior year, which reflects a 189 basis-point improvement. The 189 basis-point improvement was primarily due to continued investments in pricing capabilities, merchandising capabilities and parts availability, decreased inventory shrink and better store execution resulting from the impact of previous changes to better align Team Member incentives.
The Company’s second quarter SG&A rate was 39.1% of sales as compared to 37.1% during the second quarter last year. Excluding the impact of store divestitures, the SG&A rate increased 136 basis points. This increase was driven by higher incentive compensation, continued strategic capability investments to improve the Company’s gross profit rate and to accelerate the Commercial business and higher medical expenses. The SG&A rate increase was partially offset by lower advertising expenses and occupancy expense leverage as a result of the Company’s 4.8% comparable store sales increase.
Operating cash flow through the second quarter increased 24% to $433.8 million from $350.0 million in the second quarter last year. Free cash flow through the second quarter was $287.4 million or an 18% increase over second quarter last year. This increase was primarily driven by an increase in net income, improved working capital management and a decrease in capital expenditures. As a result of the increased free cash flow, the Company has decreased its total bank debt outstanding by $173 million over the past year. Capital expenditures were $90.8 million through the second quarter. This compares to $106.0 million in 2008, a decrease of $15.2 million primarily due to the timing of new store development partially offset by routine spending on existing stores.
“We are pleased with our sixth consecutive quarter of double-digit Commercial comparable sales growth, our second consecutive quarter of positive DIY comparable sales in over 3 years, as well as the strong gross profit rate improvement which fueled an increase in our operating income rate of over 50 basis-points before the impact of store divestitures. We are also pleased with the cash flow we generated and the fact that we continued to strengthen our balance sheet. Looking ahead, we continue to be optimistic about our growth and profitability potential based on our second quarter results and we remain committed to our strategic objectives and investment profile,” said Mike Norona, Executive Vice President and Chief Financial Officer.
| Key Financial Metrics and Statistics (1) | ||||||||||||||||||||||||
| Twelve | Comparable | Twenty-Eight | Comparable Twenty- | Comparable | ||||||||||||||||||||
| Weeks Ended | Twelve Weeks Ended | Weeks Ended | Eight Weeks Ended | Fifty-Two Weeks Ended | ||||||||||||||||||||
| July 18, | July 18, | July 12, | July 18, | July 18, | July 12, | |||||||||||||||||||
| 2009 | 2009 | 2008 | 2009 | 2009 | 2008 | FY 2008 | FY 2007 | |||||||||||||||||
| Sales Growth % | 7.0% | 7.0% | 5.6% | 8.9% | 8.9% | 4.7% | 6.1% | 4.9% | ||||||||||||||||
| Sales per Square Foot (2)(3) | $ | 215 | $ | 215 | $ | 207 | $ | 215 | $ | 215 | $ | 207 | $ | 208 | $ | 207 | ||||||||
| DIY Comparable Sales % | 0.7% | 0.7% | (0.8%) | 2.7% | 2.7% | (2.0%) | (2.3%) | (1.1%) | ||||||||||||||||
| Commercial Comparable Sales % | 14.8% | 14.8% | 13.5% | 16.3% | 16.3% | 11.9% | 12.1% | 6.2% | ||||||||||||||||
| Operating Income per Team Member (2)(4) | $ | 9.02 | $ | 9.78 | $ | 9.42 | $ | 9.02 | $ | 9.78 | $ | 9.42 | $ | 9.49 | $ | 9.40 | ||||||||
| SG&A per Store (2)(5)(6) | $ | 632 | $ | 620 | $ | 582 | $ | 632 | $ | 620 | $ | 582 | $ | 590 | $ | 581 | ||||||||
| Return on Invested Capital (2)(7) | 14.2% | 14.9% | 14.3% | 14.2% | 14.9% | 14.3% | 14.0% | 13.7% | ||||||||||||||||
| Gross Margin Return on Inventory (2)(5)(8) | $ | 3.86 | $ | 3.74 | $ | 3.54 | $ | 3.86 | $ | 3.74 | $ | 3.54 | $ | 3.37 | $ | 3.29 | ||||||||
| Total Store Square Footage, end of period | 24,920 | 24,920 | 24,431 | 24,920 | 24,920 | 24,431 | 24,711 | 23,982 | ||||||||||||||||
| Total Team Members, end of period | 49,427 | 49,427 | 47,050 | 49,427 | 49,427 | 47,050 | 47,582 | 44,141 | ||||||||||||||||
|
(1) |
In thousands except for sales per square foot, gross margin return on inventory and total Team Members. |
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(2) |
The financial metrics presented are calculated on an annual basis and accordingly reflect the last four quarters completed. The Company has presented its financial metrics on a comparable basis as a result of certain non-comparable items included in its financial results for the last four quarters. Second quarter and year-to-date 2009 comparable results exclude expenses associated with the store divestitures as discussed later in this press release. Fiscal 2008 comparable results exclude the additional week of business (53rd week) as well as a non-cash inventory adjustment resulting from a change in inventory management and related accounting policy for slow-moving inventory. |
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(3) |
Sales per square foot is calculated as net sales divided by an average of beginning and ending square footage. |
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(4) |
Operating income per Team Member is calculated as operating income divided by an average of beginning and ending Team Members. |
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(5) |
The Company has retroactively applied the change in accounting principle made in the first quarter 2009 to all financial metrics presented herein containing cost of sales and SG&A as explained in the accompanying financial statements included in this press release. |
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(6) |
SG&A per store is calculated as SG&A divided by the average of beginning and ending store count. |
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(7) |
Return on invested capital (ROIC) is calculated in detail in the accompanying financial statements included in this press release. |
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(8) |
Gross margin return on inventory is calculated as gross profit divided by an average of beginning and ending inventory, net of accounts payable and financed vendor accounts payable. |
Store Information
During the second quarter, the Company opened 23 stores, including 7 Autopart International stores. The Company also closed 21 stores and relocated 3 stores. As of July 18, 2009, the Company’s total store count was 3,407, including 142 Autopart International stores.
Share Repurchases
Under the Company’s share repurchase authorization plan, the Company repurchased 344,530 shares of its common stock during the second quarter at an aggregate cost of $14.4 million, or an average price of $41.71 per share. At the end of the second quarter, the Company had $174.6 million available from the $250 million share repurchase authorization approved by the Board of Directors in May 2008.
2009 Store Divestitures
As a result of the previously announced store divestiture initiative, the Company closed 20 stores during the quarter and expects to divest a total of 40 to 55 unprofitable stores in 2009 that are delivering unacceptable strategic or financial results. During the second quarter, the Company recorded a $0.06 EPS charge primarily due to lease exit costs for the 20 stores that were closed during the quarter. Year-to-date, the Company has closed 24 stores which resulted in a $0.10 EPS charge. Currently, the Company estimates that the incremental store divestitures will result in a $0.15 to $0.22 charge to EPS in fiscal 2009.
Dividend
On August 11, 2009, the Company’s Board of Directors declared a regular quarterly cash dividend of six cents per share to be paid on October 9, 2009 to stockholders of record as of September 25, 2009.
Investor Conference Call
The Company will host a conference call on Thursday, August 13, 2009 at 10:00 a.m. Eastern Time to discuss its quarterly results. To listen to the live call, please log on to the Company’s website, www.AdvanceAutoParts.com, or dial (866) 908-1AAP. The call will be archived on the Company’s website until August 13, 2010.
About Advance Auto Parts
Headquartered in Roanoke, Va., Advance Auto Parts, Inc., a leading automotive aftermarket retailer of parts, accessories, batteries, and maintenance items in the United States, serves both the do-it-yourself and professional installer markets. As of July 18, 2009, the Company operated 3,407 stores in 39 states, Puerto Rico, and the Virgin Islands. Additional information about the Company, employment opportunities, customer services, and online lookup for parts and accessories can be found on the Company’s website at www.AdvanceAutoParts.com.
Certain statements contained in this release are forward-looking statements, as that statement is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events or developments, and typically use words such as believe, anticipate, expect, intend, plan, forecast, outlook or estimate. These statements discuss, among other things, expected growth and future performance, including store growth, capital expenditures, comparable store sales, SG&A, operating income, gross profit rate, free cash flow, profitability and earnings per diluted share for fiscal year 2009. These forward-looking statements are subject to risks, uncertainties and assumptions including, but not limited to, competitive pressures, demand for the Company’s products, the market for auto parts, the economy in general, inflation, consumer debt levels, the weather, acts of terrorism, availability of suitable real estate, dependence on foreign suppliers and other factors disclosed in the Company’s 10-K for the fiscal year ended January 3, 2009 on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results described in these forward-looking statements. The Company intends these forward-looking statements to speak only as of the time of this news release and does not undertake to update or revise them as more information becomes available.
-Financial Tables to Follow-
| Advance Auto Parts, Inc. and Subsidiaries | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (in thousands) | |||||||||
| (unaudited) | |||||||||
| July 18, | January 3, | July 12, | |||||||
| 2009 | 2009 | 2008 | |||||||
|
Assets |
|||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 126,391 | $ | 37,358 | $ | 19,459 | |||
| Receivables, net | 89,393 | 97,203 | 90,146 | ||||||
| Inventories, net | 1,635,754 | 1,623,088 | 1,686,443 | ||||||
| Other current assets | 43,848 | 49,977 | 41,685 | ||||||
| Total current assets | 1,895,386 | 1,807,626 | 1,837,733 | ||||||
| Property and equipment, net | 1,067,432 | 1,071,405 | 1,058,273 | ||||||
| Assets held for sale | 1,382 | 2,301 | 3,654 | ||||||
| Goodwill | 34,603 | 34,603 | 34,603 | ||||||
| Intangible assets, net | 26,921 | 27,567 | 28,185 | ||||||
| Other assets, net | 19,247 | 20,563 | 11,532 | ||||||
| $ | 3,044,971 | $ | 2,964,065 | $ | 2,973,980 | ||||
|
Liabilities and Stockholders' Equity |
|||||||||
| Current liabilities: | |||||||||
| Bank overdrafts | $ | 76 | $ | 20,588 | $ | - | |||
| Current portion of long-term debt | 758 | 1,003 | 675 | ||||||
| Financed vendor accounts payable | 78,679 | 136,386 | 153,342 | ||||||
| Accounts payable | 875,987 | 791,330 | 884,946 | ||||||
| Accrued expenses | 413,009 | 372,510 | 339,142 | ||||||
| Other current liabilities | 52,916 | 43,177 | 52,367 | ||||||
| Total current liabilities | 1,421,425 | 1,364,994 | 1,430,472 | ||||||
| Long-term debt | 278,835 | 455,161 | 452,266 | ||||||
| Other long-term liabilities | 81,623 | 68,744 | 52,643 | ||||||
| Total stockholders' equity | 1,263,088 | 1,075,166 | 1,038,599 | ||||||
| $ | 3,044,971 | $ | 2,964,065 | $ | 2,973,980 | ||||
| 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 report, 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 | ||||||||
| July 18, 2009 and July 12, 2008 | ||||||||
|
(in thousands, except per share data) |
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|
(unaudited) |
||||||||
| July 18, | July 12, | |||||||
| 2009 | 2008 | |||||||
| Net sales | $ | 1,322,844 | $ | 1,235,783 | ||||
| Cost of sales, including purchasing and warehousing costs (a) | 670,194 | 649,501 | ||||||
| Gross profit (a) | 652,650 | 586,282 | ||||||
| Selling, general and administrative expenses (a) | 517,875 | 458,323 | ||||||
| Operating income | 134,775 | 127,959 | ||||||
| Other, net: | ||||||||
| Interest expense | (5,480 | ) | (7,250 | ) | ||||
| Other income (expense), net | 250 | (92 | ) | |||||
| Total other, net | (5,230 | ) | (7,342 | ) | ||||
| Income before provision for income taxes | 129,545 | 120,617 | ||||||
| Provision for income taxes | 49,215 | 45,231 | ||||||
| Net income | $ | 80,330 | $ | 75,386 | ||||
| Basic earnings per share (b) | $ | 0.84 | $ | 0.79 | ||||
| Diluted earnings per share (b) | $ | 0.83 | $ | 0.78 | ||||
| Average common shares outstanding (b) | 94,868 | 95,008 | ||||||
| Average common shares outstanding - assuming dilution (b) | 95,745 | 95,663 | ||||||
| (a) | Effective first quarter 2009, the Company implemented a change in accounting principle for costs included in inventory. The table below represents the impact of the accounting change on previously reported amounts (in thousands): |
| As Previously | |||||||||||||
| Twelve week period ended July 12, 2008 | Reported | Adjustments | As Adjusted | ||||||||||
| Cost of sales, including purchasing and warehousing costs | $ | 634,945 | $ | 14,556 | $ | 649,501 | |||||||
| Gross profit | 600,838 | (14,556 | ) | 586,282 | |||||||||
| Selling, general and administrative expenses | 472,879 | (14,556 | ) | 458,323 | |||||||||
| (b) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At July 18, 2009 and July 12, 2008, we had 95,417 and 95,366 shares outstanding, respectively. Effective first quarter 2009, the Company adopted FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Transactions Are Participating Securities." Accordingly, the Company reduced its net income by $407 and $299 for the twelve weeks ended July 18, 2009 and July 12, 2008, respectively, for purposes of calculating its basic and diluted earnings per share. As a result of this adoption, the Company's basic and diluted earnings per share for the twelve weeks ended July 12, 2008 have been reduced by $0.01. |
| 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 report, except for the change in accounting principle for inventory costs, but do not include the footnotes required by GAAP for complete financial statements. |
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| Twenty-Eight Week Periods Ended | ||||||||
| July 18, 2009 and July 12, 2008 | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| July 18, | July 12, | |||||||
| 2009 | 2008 | |||||||
| Net sales | $ | 3,006,480 | $ | 2,761,915 | ||||
| Cost of sales, including purchasing and warehousing costs (a) | 1,531,842 | 1,450,778 | ||||||
| Gross profit (a) | 1,474,638 | 1,311,137 | ||||||
| Selling, general and administrative expenses (a) | 1,182,281 | 1,038,900 | ||||||
| Operating income | 292,357 | 272,237 | ||||||
| Other, net: | ||||||||
| Interest expense | (13,091 | ) | (19,575 | ) | ||||
| Other income (expense), net | 146 | (64 | ) | |||||
| Total other, net | (12,945 | ) | (19,639 | ) | ||||
| Income before provision for income taxes | 279,412 | 252,598 | ||||||
| Provision for income taxes | 105,497 | 95,126 | ||||||
| Net income | $ | 173,915 | $ | 157,472 | ||||
| Basic earnings per share (b) | $ | 1.83 | $ | 1.65 | ||||
| Diluted earnings per share (b) | $ | 1.82 | $ | 1.64 | ||||
| Average common shares outstanding (b) | 94,642 | 94,996 | ||||||
| Average common shares outstanding - assuming dilution (b) | 95,247 | 95,630 | ||||||
| (a) | Effective first quarter 2009, the Company implemented a change in accounting principle for costs included in inventory. The table below represents the impact of the accounting change on previously reported amounts (in thousands): | |
| As Previously | ||||||||||||
| Twenty-eight week period ended July 12, 2008 | Reported | Adjustments | As Adjusted | |||||||||
| Cost of sales, including purchasing and warehousing costs | $ | 1,417,626 | $ | 33,152 | $ | 1,450,778 | ||||||
| Gross profit | 1,344,289 | (33,152 | ) | 1,311,137 | ||||||||
| Selling, general and administrative expenses | 1,072,052 | (33,152 | ) | 1,038,900 | ||||||||
| (b) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At July 18, 2009 and July 12, 2008, we had 95,417 and 95,366 shares outstanding, respectively. Effective first quarter 2009, the Company adopted FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Transactions Are Participating Securities." Accordingly, the Company reduced its net income by $905 and $519 for the twenty-eight weeks ended July 18, 2009 and July 12, 2008, respectively, for purposes of calculating its basic and diluted earnings per share. As a result of this adoption, the Company's basic and diluted earnings per share for the twenty-eight weeks ended July 12, 2008 have been reduced by $0.01. | |
| 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 report, except for the change in accounting principle for inventory costs, 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 | ||||||||
| Twenty-Eight Week Periods Ended | ||||||||
| July 18, 2009 and July 12, 2008 | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| July 18, | July 12, | |||||||
| 2009 | 2008 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 173,915 | $ | 157,472 | ||||
| Depreciation and amortization | 79,568 | 78,692 | ||||||
| Share-based compensation | 9,419 | 10,007 | ||||||
| Provision (benefit) for deferred income taxes | 11,384 | (1,827 | ) | |||||
| Excess tax benefit from share-based compensation | (2,114 | ) | (4,629 | ) | ||||
| Other non-cash adjustments to net income | 6,430 | 801 | ||||||
| Decrease (increase) in: | ||||||||
| Receivables, net | 7,810 | (4,886 | ) | |||||
| Inventories, net | (12,666 | ) | (156,528 | ) | ||||
| Other assets | 7,253 | 11,490 | ||||||
| Increase in: | ||||||||
| Accounts payable | 84,657 | 195,976 | ||||||
| Accrued expenses | 55,688 | 56,504 | ||||||
| Other liabilities | 12,460 | 6,952 | ||||||
| Net cash provided by operating activities | 433,804 | 350,024 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (90,837 | ) | (105,983 | ) | ||||
| Proceeds from sales of property and equipment | 2,117 | 4,146 | ||||||
| Other | - | (3,413 | ) | |||||
| Net cash used in investing activities | (88,720 | ) | (105,250 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Decrease in bank overdrafts | (20,512 | ) | (30,000 | ) | ||||
| Decrease in financed vendor accounts payable | (57,707 | ) | (207 | ) | ||||
| Dividends paid | (17,118 | ) | (17,397 | ) | ||||
| Net payments on credit facilities | (176,500 | ) | (52,400 | ) | ||||
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Proceeds from the issuance of common stock, primarily exercise of stock options |
28,112 | 18,166 | ||||||
| Excess tax benefit from share-based compensation | 2,114 | 4,629 | ||||||
| Repurchase of common stock | (14,369 | ) | (162,429 | ) | ||||
| Other | (71 | ) | (331 | ) | ||||
| Net cash used in financing activities | (256,051 | ) | (239,969 | ) | ||||
| Net increase in cash and cash equivalents | 89,033 | 4,805 | ||||||
| Cash and cash equivalents, beginning of period | 37,358 | 14,654 | ||||||
| Cash and cash equivalents, end of period | $ | 126,391 | $ | 19,459 | ||||
| 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 report, but do not include the footnotes required by GAAP for complete financial statements. |
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||||
| Supplemental Financial Schedules | ||||||||||
| (in thousands, except per share data) | ||||||||||
| (unaudited) | ||||||||||
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Reconciliation of Free Cash Flow: |
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| Twenty-Eight Week | ||||||||||
| Periods Ended | ||||||||||
| July 18, | July 12, | |||||||||
| 2009 | 2008 | |||||||||
| Cash flows from operating activities | $ | 433,804 | $ | 350,024 | ||||||
| Cash flows used in investing activities | (88,720 | ) | (105,250 | ) | ||||||
| 345,084 | 244,774 | |||||||||
| Decrease in financed vendor accounts payable | (57,707 | ) | (207 | ) | ||||||
| Free cash flow | $ | 287,377 | $ | 244,567 | ||||||
| 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. |
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Detail of Return on Invested Capital (ROIC) Calculation: |
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| Last Four Quarters Ended | ||||||||||||||||||||
| Comparable | ||||||||||||||||||||
| July 18, | Comparable | July 18, | July 12, | |||||||||||||||||
| 2009 | Adjustments (a) | 2009 | 2008 | |||||||||||||||||
| Net income | $ | 254,480 | $ | 23,452 | $ | 277,932 | $ | 251,264 | ||||||||||||
| Add: | ||||||||||||||||||||
| After-tax interest expense and other, net | 17,241 | (322 | ) | 16,919 | 22,343 | |||||||||||||||
| After-tax rent expense | 181,357 | - | 181,357 | 170,304 | ||||||||||||||||
| After-Tax Operating Earnings | 453,078 | 23,130 | 476,208 | 443,911 | ||||||||||||||||
| Average assets (less cash) | 2,936,551 | 26,295 | 2,962,846 | 2,873,721 | ||||||||||||||||
| Less: Average liabilities (excluding total debt) | (1,492,365 | ) | (9,749 | ) | (1,502,114 | ) | (1,399,006 | ) | ||||||||||||
| Add: Capitalized lease obligation (rent expense * 6) (b) | 1,741,482 | - | 1,741,482 | 1,628,910 | ||||||||||||||||
| Total Invested Capital | 3,185,668 | 16,546 | 3,202,214 | 3,103,625 | ||||||||||||||||
| ROIC | 14.2 | % | - | 14.9 | % | 14.3 | % | |||||||||||||
| Rent expense | $ | 290,247 | - | $ | 290,247 | $ | 271,485 | |||||||||||||
| Interest expense and other, net | 27,542 | (511 | ) | 27,031 | 35,618 | |||||||||||||||
|
(a) |
The Company has also presented its ROIC calculation on a comparable basis as a result of certain non-comparable items included in its financial results for the last four quarters ended July 18, 2009. The comparable results for the last four quarters ended July 18, 2009 exclude first and second quarter 2009 expenses associated with the store divestiture plan as discussed on page 5 of this release, the additional week of business (53rd week) of fiscal 2008 and the fiscal 2008 non-cash inventory adjustment resulting from a change in inventory management and related accounting policy for slow moving inventory. | |
|
(b) |
Capitalized lease obligation is estimated as annualized rent expense for the applicable period times six years. | |
| Note: Management uses ROIC to evaluate return on investments to the business and believes it is a useful indicator to stockholders given the future investments the Company plans to make in areas including information technology, supply chain and stores. ROIC is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in our condensed consolidated financial statements. Management believes our comparable results of operations are a useful indicator to stockholders for consistency purposes. |