| | Contact: |
| | Adam Bergman |
| | Adam.Bergman@advanceautoparts.com |
| | |
| | Direct | 540-561-8450 |
| | Fax | 540-561-6445 |
ADVANCE AUTO PARTS REPORTS RECORD FIRST QUARTER EPS OF $0.68
Comparable Store Sales Up 3.9%, Earnings Meet Low End of Company Guidance
ROANOKE, Va., May 18, 2006— Advance Auto Parts, Inc. (NYSE: AAP), 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.”
ADVANCE AUTO PARTS REPORTS RECORD EPS FOR FIRST QUARTER 2006
May 18, 2006
Page 2
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.
ADVANCE AUTO PARTS REPORTS RECORD EPS FOR FIRST QUARTER 2006
May 18, 2006
Page 3
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: |
| · | 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
The Company will host a conference call on May 18, 2006, at 8:00 a.m. Eastern Daylight Time to discuss its quarterly results. To listen to the live call, please log on to www.advanceautoparts.com, or dial (866) 800-8651. The call will be archived on the Company’s website www.advanceautoparts.com until May 17, 2007.
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.
ADVANCE AUTO PARTS REPORTS RECORD EPS FOR FIRST QUARTER 2006
May 18, 2006
Page 4
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, developments or results, 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 new-store growth, the impact of stock-option expensing, gross margin and SG&A rates, capital expenditures, tax rate, comparable-store sales and earnings per share for second-quarter 2006 and fiscal year 2006. 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, dependence on foreign suppliers and other factors disclosed in the Company’s 10-K for the fiscal year ended December 31, 2005, 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) |
| | | | | | | | |
| | | April 22, | | December 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 22, | | April 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. |
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| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | April 22, | | | April 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% | |
| | | | | | | | | | | |
| | | | | | | | | | | |
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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. |
