| | Contact: |
| | Jeffrey T. Gray |
| | Chief Financial Officer |
| | |
| | jgray |
| | @advanceautoparts.com |
| | |
ADVANCE AUTO PARTS REPORTS RECORD THIRD QUARTER SALES AND EARNINGS
Comparable Store Sales Grew 3.0% and EPS Rose to $0.68
Company Reiterates Fourth Quarter Guidance
Announces New Senior Credit Facility
Roanoke, Virginia, November 3, 2004– Advance Auto Parts, Inc. (NYSE: AAP), a leading retailer of automotive parts and accessories, today announced record sales and earnings for its third quarter ended October 9, 2004.
Third Quarter
Net sales increased 6.1% in the third quarter to $890.2 million from $839.1 million in the same quarter last year. Comparable store sales grew 3.0% in the third quarter. Do-it-yourself (DIY) comparable store sales decreased 0.6% and do-it-for-me (DIFM) comparable sales increased 21.4%.
Commenting on the third quarter results, Larry Castellani, Chairman and Chief Executive Officer, said, “Our results were especially strong in light of the impact of the four major hurricanes that disrupted our operations in Florida, the Southeast and the Mid-Atlantic. We believe we would have achieved the high end of our guidance range of 3% to 4% for comparable store sales and $0.68 to $0.71 for earnings per share without the effects of these hurricanes. Our growth is attributable to the strength of our business model and the execution of our strategic initiatives.”
Mr. Castellani added, “We are pleased our comparable store sales increases in the last four weeks of the third quarter were in the mid-single digit range, and that trend has continued in the first three weeks of the fourth quarter. We remain optimistic and are prepared to maximize our results if these trends continue. We are very encouraged by the strength and consistency of our DIFM sales and the rebound of our DIY sales to solid, positive comps during these past seven weeks.”
Gross margin increased 68 basis points to 46.8% of net sales in the third quarter from 46.1% for the same quarter last year. Selling, general and administrative (SG&A) expenses increased by 48 basis points during the quarter to 36.9% of net sales as a result of higher medical costs and the de-leveraging caused by lower sales from the hurricane disruptions. SG&A expenses for the prior year were 36.4% of net sales,
Advance Auto Parts
Third Quarter 2004 Results - Page 2
excluding merger and integration costs associated with the Discount Auto Parts acquisition, and 36.7% of net sales on a GAAP basis. Third quarter operating margins rose to 9.9% of net sales versus last year’s 9.7% of net sales excluding merger and integration costs, and 9.4% of net sales on a GAAP basis.
Earnings from continuing operations for the third quarter of 2004 increased to $51.4 million versus comparable earnings from continuing operations of $46.3 million from the same quarter of last year. GAAP earnings from continuing operations were $44.7 million for the same quarter of last year. Earnings per diluted share from continuing operations rose 11.5% to $0.68 in the third quarter of 2004 versus comparable earnings per diluted share from continuing operations of $0.61 in the third quarter last year. GAAP earnings per diluted share from continuing operations were $0.59 in the third quarter last year.
The 2003 comparable results are non-GAAP measures because they excluded expenses associated with the Discount Auto Parts’ integration and the early redemption of notes and debentures, as reconciled on the accompanying financial tables. The Company used these non-GAAP measures as an indication of earnings from its core operations and believed they were important to the Company’s stockholders because of the nature and significance of the excluded expenses.
During the quarter, the Company opened 31 new stores, closed two stores, and relocated 11 stores, resulting in a total store count of 2,612 stores at October 9, 2004. The Company anticipates the opening of approximately 125 stores in fiscal year 2004.
Year-to-Date 2004
Net sales for the first three quarters of 2004 increased to $2.9 billion, or 9.3% over the same period in the prior year. Comparable store sales grew 5.1% during the first three quarters of this year.
Year-to-date gross margin increased 50 basis points to 46.5% of net sales. SG&A expenses were 37.3% of net sales for the first three quarters of this year. Comparable SG&A expenses were 37.1% of net sales for the prior year, while GAAP SG&A expenses were 37.5% of net sales. Year-to-date operating margins rose to 9.2% of net sales. Comparable operating margins were 8.9% of net sales for the prior year, while GAAP operating margins were 8.6% of net sales.
Year-to-date earnings from continuing operations rose to $156.0 million, an increase of 23.5%, versus comparable earnings from continuing operations of $126.2 million for the same period last year. GAAP earnings from continuing operations were $92.0 million for the same period last year. Earnings per diluted share from continuing operations rose to $2.05, a 20.6% increase over last year’s comparable earnings per diluted share from continuing operations of $1.70. GAAP earnings per diluted share from continuing operations were $1.24 for the same period last year.
Guidance
The Company reiterated its fourth quarter earnings guidance of $0.42 to $0.46 per diluted share. As stated in previous releases, this guidance does not include the costs of replacing its existing credit facility that will approximate $0.02 per diluted share or the positive effects of potential stock buybacks during the fourth quarter. The fourth quarter of 2004 includes 12 weeks compared to 13 weeks in the fourth quarter of 2003. The extra week last year contributed earnings per diluted share of approximately $0.07. On a GAAP basis, the Company anticipates fourth quarter earnings per diluted share to be $0.40 to $0.44, including the refinancing costs.
Advance Auto Parts
Third Quarter 2004 Results - Page 3
New Senior Credit Facility
The Company announced it has closed on a new $670 million Senior Credit Facility. The Company intends to use the proceeds from this new facility to refinance outstanding term loans and the revolver under its existing $495 million facility and to fund potential stock repurchases under its previously authorized stock repurchase program through a new delayed draw term loan. The new facility will also provide for lower effective borrowing rates and increase the capacity of its financed vendor accounts payable program.
Investor Conference Call
The Company will host a conference call tomorrow, November 4, 2004, at 8:00 a.m. Eastern Standard Time to discuss its third quarter results. To listen to the live web cast, please log on tohttp://www.advanceautoparts.com or dial 1-800-295-4740. The call will be archived on the Company’s websitehttp://www.advanceautoparts.com until November 4, 2005. There will not be a telephonic replay available.
Headquartered in Roanoke, Va., Advance Auto Parts is a leading retailer of automotive parts in the United States. At October 9, 2004, the Company had 2,612 stores in 39 states, Puerto Rico and the Virgin Islands. The Company serves both the do-it-yourself and professional installer markets.
Certain statements contained in this news release are forward-looking statements. Thesestatements discuss, among other things, expected growth, store development and expansion strategy, business strategies, future revenues and future performance, including our future free cash flow and earnings per share. 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, and other risk factors listed from time to time in the Company’s filings with the Securities and Exchange Commission. Actual results may materially differ from anticipated results described in these forward-looking statements. The Company intends these forward-looking statements to speak only as of the time of the 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)
| October 9,
2004 | January 3,
2004 | October 4,
2003 |
|---|
|
| |
| |
| |
| | | |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | | | $ | 27,479 | | $ | 11,487 | | $ | 49,858 | |
| Receivables, net | | | | 100,109 | | | 84,799 | | | 92,828 | |
| Inventories, net | | | | 1,194,943 | | | 1,113,781 | | | 1,102,565 | |
| Other current assets | | | | 27,152 | | | 16,387 | | | 24,453 | |
|
| |
| |
| |
| Total current assets | | | | 1,349,683 | | | 1,226,454 | | | 1,269,704 | |
| | | | | | | | | | | | |
| Property and equipment, net | | | | 754,374 | | | 712,702 | | | 707,309 | |
| Assets held for sale | | | | 20,984 | | | 20,191 | | | 23,177 | |
| Other assets, net | | | | 20,981 | | | 23,724 | | | 11,059 | |
|
| |
| |
| |
| | | | $ | 2,146,022 | | $ | 1,983,071 | | $ | 2,011,249 | |
|
| |
| |
| |
| Liabilities and Stockholders’ Equity | | | |
| Current liabilities: | | |
| Bank overdrafts | | | $ | 18,846 | | $ | 31,085 | | | 24,233 | |
| Current portion of long-term debt | | | | 17,024 | | | 22,220 | | | - | |
| Financed vendor accounts payable | | | | 38,076 | | | - | | | - | |
| Accounts payable | | | | 598,878 | | | 568,275 | | | 606,343 | |
| Accrued expenses | | | | 210,312 | | | 173,818 | | | 214,649 | |
| Other current liabilities | | | | 76,012 | | | 58,547 | | | 44,121 | |
|
| |
| |
| |
| Total current liabilities | | | | 959,148 | | | 853,945 | | | 889,346 | |
| | | | | | | | | | | | |
| Long-term debt | | | | 350,976 | | | 422,780 | | | 456,089 | |
| Other long-term liabilities | | | | 73,325 | | | 75,102 | | | 68,527 | |
| Total stockholders’ equity | | | | 762,573 | | | 631,244 | | | 597,287 | |
|
| |
| |
| |
| | | | $ | 2,146,022 | | $ | 1,983,071 | | $ | 2,011,249 | |
|
| |
| |
| |
NOTE:These preliminary condensed consolidated balance sheets 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
(in thousands, except per share data)
(unaudited)
| October 9, 2004 | October 4, 2003 |
|---|
|
| |
| |
| GAAP | GAAP | Merger and
Integration
Expenses | Comparable
2003 |
|---|
|
| |
| |
| |
| |
| Net sales | | | $ | 890,161 | | $ | 839,101 | | $ | - | | $ | 839,101 | |
| Cost of sales, including purchasing and warehousing costs | | | | 473,646 | | | 452,173 | | | - | | | 452,173 | |
|
| |
| |
| |
| |
| Gross profit | | | | 416,515 | | | 386,928 | | | - | | | 386,928 | |
| Selling, general and administrative expenses | | | | 328,673 | | | 308,298 | | | (2,522 | ) (a) | | 305,776 | |
|
| |
| |
| |
| |
| Operating income | | | | 87,842 | | | 78,630 | | | 2,522 | | | 81,152 | |
|
| |
| |
| |
| |
| Other, net: | | |
| Interest expense | | | | (4,330 | ) | | (5,860 | ) | | - | | | (5,860 | ) |
| Loss on extinguishment of debt | | | | - | | | (125 | ) | | - | | | (125 | ) |
| Other income, net | | | | 67 | | | 106 | | | - | | | 106 | |
|
| |
| |
| |
| |
| Total other, net | | | | (4,263 | ) | | (5,879 | ) | | - | | | (5,879 | ) |
|
| |
| |
| |
| |
| Income before provision for income taxes and | | | | | | | | | | | | | | |
| (loss) income on discontinued operations | | | | 83,579 | | | 72,751 | | | 2,522 | | | 75,273 | |
| Provision for income taxes | | | | 32,180 | | | 28,006 | | | 971 | (b) | | 28,977 | |
|
| |
| |
| |
| |
| Income from continuing operations | | | | 51,399 | | | 44,745 | | | 1,551 | | | 46,296 | |
| Discontinued operations: | | |
| (Loss)/income from operations of discontinued | | | | | | | | | | | | | | |
| wholesale distribution network | | | | (10 | ) | | 681 | | | - | | | 681 | |
| (Benefit)/provision for income taxes | | | | (4 | ) | | 262 | | | - | | | 262 | |
|
| |
| |
| |
| |
| (Loss) income on discontinued operations | | | | (6 | ) | | 419 | | | - | | | 419 | |
|
| |
| |
| |
| |
| Net income | | | $ | 51,393 | | $ | 45,164 | | $ | 1,551 | | $ | 46,715 | |
|
| |
| |
| |
| |
| Net income per basic share from: | | |
| Income from continuing operations | | | $ | 0.69 | | $ | 0.60 | | $ | 0.02 | | $ | 0.62 | |
| Income on discontinued operations | | | | - | | | 0.01 | | | - | | | 0.01 | |
|
| |
| |
| |
| |
| | | | $ | 0.69 | | $ | 0.61 | | $ | 0.02 | | $ | 0.63 | |
|
| |
| |
| |
| |
| Net income per diluted share from: | | |
| Income from continuing operations | | | $ | 0.68 | | $ | 0.59 | | $ | 0.02 | | $ | 0.61 | |
| Income on discontinued operations | | | | - | | | 0.01 | | | - | | | 0.01 | |
|
| |
| |
| |
| |
| | | | $ | 0.68 | | $ | 0.60 | | $ | 0.02 | | $ | 0.62 | |
|
| |
| |
| |
| |
| Average common shares outstanding ( c ) | | | | 73,968 | | | 73,650 | | | 73,650 | | | 73,650 | |
| Dilutive effect of stock options | | | | 1,458 | | | 1,898 | | | 1,898 | | | 1,898 | |
|
| |
| |
| |
| |
| Average common shares outstanding - assuming dilution | | | | 75,426 | | | 75,548 | | | 75,548 | | | 75,548 | |
|
| |
| |
| |
| |
| (a) | Represents the merger and integration expenses associated with the integration of the Discount Auto Parts operations. |
| (b) | This adjustment reflects the tax impact for the items in (a) at a 38.5% effective tax rate. |
| (c) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 9, 2004 and October 4, 2003, we had 73,520 and 73,812 shares outstanding, respectively. |
| Note: | The preliminary condensed consolidated statements above titled “GAAP” have been prepared on a basis consistent with our previously prepared financial statements 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
Forty Week Periods Ended
(in thousands, except per share data)
(unaudited)
| October 9, 2004 | October 4, 2003 |
|---|
|
| |
| |
| GAAP | GAAP | Merger and
Integration and
Extinguishment
of Debt Expenses | Comparable
2003 |
|---|
|
| |
| |
| |
| |
| Net sales | | | $ | 2,921,491 | | $ | 2,672,417 | | $ | - | | $ | 2,672,417 | |
| Cost of sales, including purchasing and warehousing costs | | | | 1,561,776 | | | 1,442,026 | | | - | | | 1,442,026 | |
|
| |
| |
| |
| |
| Gross profit | | | | 1,359,715 | | | 1,230,391 | | | - | | | 1,230,391 | |
| Selling, general and administrative expenses | | | | 1,090,604 | | | 1,001,564 | | | (8,793 | ) (a) | | 992,771 | |
|
| |
| |
| |
| |
| Operating income | | | | 269,111 | | | 228,827 | | | 8,793 | | | 237,620 | |
|
| |
| |
| |
| |
| Other, net: | | |
| Interest expense | | | | (15,178 | ) | | (32,225 | ) | | - | | | (32,225 | ) |
| Loss on extinguishment of debt | | | | (412 | ) | | (47,266 | ) | | 46,887 | (b) | | (379 | ) |
| Other income, net | | | | 102 | | | 259 | | | - | | | 259 | |
|
| |
| |
| |
| |
| Total other, net | | | | (15,488 | ) | | (79,232 | ) | | 46,887 | | | (32,345 | ) |
|
| |
| |
| |
| |
| Income before provision for income taxes and | | | | | | | | | | | | | | |
| (loss) income on discontinued operations | | | | 253,623 | | | 149,595 | | | 55,680 | | | 205,275 | |
| Provision for income taxes | | | | 97,652 | | | 57,591 | | | 21,437 | (c) | | 79,028 | |
|
| |
| |
| |
| |
| Income from continuing operations | | | | 155,971 | | | 92,004 | | | 34,243 | | | 126,247 | |
| Discontinued operations: | | |
| (Loss)/income from operations of discontinued | | | | | | | | | | | | | | |
| wholesale distribution network | | | | (85 | ) | | 2,696 | | | - | | | 2,696 | |
| (Benefit)/provision for income taxes | | | | (33 | ) | | 1,037 | | | - | | | 1,037 | |
|
| |
| |
| |
| |
| (Loss) income on discontinued operations | | | | (52 | ) | | 1,659 | | | - | | | 1,659 | |
|
| |
| |
| |
| |
| Net income | | | $ | 155,919 | | $ | 93,663 | | $ | 34,243 | | $ | 127,906 | |
|
| |
| |
| |
| |
| Net income per basic share from: | | |
| Income from continuing operations | | | $ | 2.10 | | $ | 1.27 | | $ | 0.47 | | $ | 1.74 | |
| Income on discontinued operations | | | | - | | | 0.02 | | | - | | | 0.02 | |
|
| |
| |
| |
| |
| | | | $ | 2.10 | | $ | 1.29 | | $ | 0.47 | | $ | 1.76 | |
|
| |
| |
| |
| |
| Net income per diluted share from: | | |
| Income from continuing operations | | | $ | 2.05 | | $ | 1.24 | | $ | 0.46 | | $ | 1.70 | |
| Income on discontinued operations | | | | - | | | 0.02 | | | - | | | 0.02 | |
|
| |
| |
| |
| |
| | | | $ | 2.05 | | $ | 1.26 | | $ | 0.46 | | $ | 1.72 | |
|
| |
| |
| |
| |
| Average common shares outstanding ( d ) | | | | 74,165 | | | 72,744 | | | 72,744 | | | 72,744 | |
| Dilutive effect of stock options | | | | 1,715 | | | 1,664 | | | 1,664 | | | 1,664 | |
|
| |
| |
| |
| |
| Average common shares outstanding - assuming dilution | | | | 75,880 | | | 74,408 | | | 74,408 | | | 74,408 | |
|
| |
| |
| |
| |
| (a) | Represents the merger and integration expenses associated with the integration of the Discount Auto Parts operations. |
| (b) | This adjustment reflects the deferred loan costs, unamortized discounts and the premiums paid upon the early redemption of our outstanding senior discount notes and senior discount debentures. |
| (c) | This adjustment reflects the tax impact for the items in (a) and (b) at a 38.5% effective tax rate. |
| (d) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the forty week period. At October 9, 2004 and October 4, 2003, we had 73,520 and 73,812 shares outstanding, respectively. |
| Note: | The preliminary condensed consolidated statements above titled “GAAP” have been prepared on a basis consistent with our previously prepared financial statements 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
Forty Week Periods Ended
(in thousands)
(unaudited)
| October 9,
2004 | October 4,
2003 |
|---|
|
| |
| |
| Cash flows from operating activities: | | | | | | | | |
| Net income | | | $ | 155,919 | | $ | 93,663 | |
| Depreciation | | | | 80,145 | | | 77,483 | |
| Loss on extinguishment of debt | | | | 412 | | | 47,266 | |
| Provision for deferred income taxes | | | | 9,218 | | | 36,945 | |
| Other non-cash adjustments to net income | | | | 15,082 | | | 14,815 | |
| (Increase) decrease in : | | |
| Receivables, net | | | | (14,453 | ) | | 9,746 | |
| Inventories, net | | | | (81,162 | ) | | (53,677 | ) |
| Other assets | | | | (8,699 | ) | | (11,120 | ) |
| Increase (decrease) in : | | |
| Accounts payable | | | | 30,603 | | | 135,603 | |
| Accrued expenses | | | | 30,705 | | | 12,750 | |
| Other liabilities | | | | 79 | | | (3,257 | ) |
|
| |
| |
| Net cash provided by operating activities | | | | 217,849 | | | 360,217 | |
| | | |
| Cash flows from investing activities: | | |
| Purchases of property and equipment | | | | (125,294 | ) | | (70,331 | ) |
| Proceeds from sales of property and equipment | | | | 6,809 | | | 12,165 | |
|
| |
| |
| Net cash used in investing activities | | | | (118,485 | ) | | (58,166 | ) |
| | | |
| Cash flows from financing activities: | | |
| (Decrease) increase in bank overdrafts | | | | (12,239 | ) | | 23,364 | |
| Increase in financed vendor accounts payable | | | | 38,076 | | | - | |
| Early extinguishment of debt | | | | (105,000 | ) | | (631,374 | ) |
| Net borrowings under the credit facility | | | | 28,000 | | | 348,300 | |
| Payment of debt related costs | | | | - | | | (36,895 | ) |
| Proceeds from the exercise of stock options | | | | 10,471 | | | 24,435 | |
| Purchase of treasury stock | | | | (49,997 | ) | | - | |
| Other net financing activities | | | | 7,317 | | | 6,092 | |
|
| |
| |
| Net cash used in financing activities | | | | (83,372 | ) | | (266,078 | ) |
|
| |
| |
| Increase in cash and cash equivalents | | | | 15,992 | | | 35,973 | |
| Cash and cash equivalents, beginning of period | | | | 11,487 | | | 13,885 | |
|
| |
| |
| Cash and cash equivalents, end of period | | | $ | 27,479 | | $ | 49,858 | |
|
| |
| |
| 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
(in thousands)
(unaudited)
| Forty Weeks Ended |
|---|
|
| |
| | October 9,
2004 | October 4,
2003 |
|---|
|
| |
| |
| Cash flows from operating activities | | | $ | 217,849 | | $ | 360,217 | |
| Cash flows used in investing activities | | | | (118,485 | ) | | (58,166 | ) |
|
| |
| |
| | | | | 99,364 | | | 302,051 | |
| | | | | | | | | |
| Increase in financed vendor | | |
| accounts payable | | | | 38,076 | | | - | |
| Payment of debt costs associated | | | | | | | | |
| with early redemption (a) | | | | - | | | (36,895 | ) |
|
| |
| |
| Free cash flow | | | $ | 137,440 | | $ | 265,156 | |
|
| |
| |
| (a) | Represents the cash expense associated with the early redemption of the high interest bearing notes anddebentures in the first quarter of 2003. |
Note: The Company uses free cash flow, which is a non-GAAP measure, as a measure of its liquidity and believes it is a useful indicator to stockholders of its ability to implement its growth strategies and service its debt.
