Advance Auto Parts (AAP) 8-K Advance Auto Parts Reports Third Quarter Results

Contact:
Adam Bergman
Adam.Bergman@advanceautoparts.com
Direct	540-561-8450
Fax	540-561-6445

ADVANCE AUTO PARTS REPORTS THIRD QUARTER RESULTS

Sales Increase 7.8%

ROANOKE, Va., November 2, 2006— Advance Auto Parts, Inc. (NYSE: AAP), a leading retailer of automotive aftermarket parts, accessories, batteries, and maintenance items, today announced its financial results for the fiscal third quarter ended October 7, 2006.

Earnings per diluted share for the third quarter were $0.56, compared to $0.55 last year. This year’s third quarter results include $0.03 per share of stock-option expense, whereas last year’s quarter does not include pro forma stock-option expense of $0.02 per share.

In the third quarter, sales increased 7.8% to $1.10 billion from $1.02 billion last year. Comparable-store sales increased 1.4% in the quarter, comprised of a 0.6% decrease in do-it-yourself (DIY) and an 8.7% increase in do-it-for-me (DIFM). The 1.4% comparable-store sales increase compares to a 10.0% increase in last year’s third quarter.

“These results reflect our initiatives to drive sales and enhance customer satisfaction, which are gaining traction,” said Mike Coppola, Chairman, President and CEO. “We believe that by focusing on superior customer service, we can achieve much-better financial performance, and we are committed to achieving it.”

Third quarter gross margin was 48.2% of sales, a 100 basis point improvement compared to last year’s quarter, primarily reflecting improved procurement costs, a favorable merchandise mix compared to last year, ongoing category management initiatives and logistics efficiencies.

Third quarter selling, general and administrative (SG&A) expenses were 38.9% of sales, compared to 36.9% in third quarter 2005. This reflects approximately 70 basis points loss of leverage on rent, depreciation and other fixed costs from modest comparable-store sales. In addition, SG&A was unfavorably impacted by higher costs for utilities, and insurance programs, including property, workers’ compensation

ADVANCE AUTO PARTS REPORTS RESULTS FOR THIRD QUARTER 2006

November 2, 2006

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and medical, which in total accounted for another 60 basis points. Non-comparable stock-option expense also increased SG&A in this year’s quarter by 42 basis points.

In the quarter, the Company recorded two items, both of which were associated with the Company’s prior credit facility. These include a charge of $1.9 million, representing deferred financing costs, and $2.9 million of previously unrealized gains on interest-rate swaps. These amounts netted to a pre-tax gain of $1.0 million, and are recorded in the gain on extinguishment of debt caption on the company’s statement of operations.

For the first three quarters of the year, sales grew 9.1% to $3.60 billion from $3.30 billion last year. Comparable-store sales increased 2.3% over this time, comprised of a 0.3% decrease in DIY and an 11.7% increase in DIFM. The 2.3% comparable-store sales increase compares to a 9.4% increase for the comparable period last year. Year-to-date earnings per share are $1.82 (inclusive of eight cents of non-comparable stock-option expense), compared to $1.78 over the same time period last year (which did not include pro forma stock-option expense of seven cents).

Store Information

During the third quarter, the Company opened 60 new stores, of which eight were Autopart International (AI) stores. The Company also closed two stores, relocated 10 existing stores, and remodeled 56 stores to the innovative Advance 2010 format. Year-to-date, the Company has opened 162 new stores. Since acquiring AI in September 2005, AI has opened 19 new stores, and now operates a total of 80 locations. The Company continues to expect to open 205 to 215 new stores in 2006, including AI. This level of new-store openings represents unit growth of 7% to 8% compared to 2005. As of October 7, 2006, 1,884 (or 64%) of the Company’s stores are 2010-format stores, and more than 81% of the Company’s Advance stores offer commercial delivery programs.

“During the quarter, we celebrated the opening of our 3,000^th store, a significant milestone in our company’s history,” Coppola said. “We continue to see solid returns on our new-store investments, and believe there is an opportunity to add 1,500 more stores within our existing geography. Meanwhile, we know excellent execution and superior customer service at every store is essential. These are the factors that will separate us from the competition and provide us with the platform to continue our growth.”

Guidance

Based on recent sales trends, the Company projects comparable-store sales to be in the range of 1% to 3% for the fourth quarter (compared to a 6.3% increase in last year’s fourth quarter). For the fourth quarter, the Company continues to anticipate gross margin improvement, and a slowing rate of growth in SG&A as compared to the third quarter. Accordingly, the Company forecasts fourth-quarter 2006 earnings per diluted share in the range of $0.33 to $0.37, inclusive of $0.03 of stock-option expense. Last year’s fourth-quarter EPS of $0.36 do not include pro forma stock-option expense of $0.02 per share.

For the year, this would result in EPS guidance of $2.15 to $2.19, inclusive of $0.12 of stock-option expense. Last year’s $2.13 of EPS do not include pro forma stock-option expense of $0.09 per share.

ADVANCE AUTO PARTS REPORTS RESULTS FOR THIRD QUARTER 2006

November 2, 2006

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For 2007, the Company anticipates new-store growth in the range of 7% to 8% (from the opening of both Advance and AI stores). In addition, the Company expects to remodel approximately 150 stores and relocate approximately 40 existing stores. The Company will provide more-detailed 2007 guidance in its fiscal year-end press release.

Investor Conference Call

The Company will host a conference call on November 2, 2006, at 8:00 a.m. Eastern Standard Time to discuss its quarterly results. To listen to the live call, please log on to the Company’s Web site, www.AdvanceAutoParts.com, or dial (866) 908-1AAP. The call will be archived on the Company’s Web site until November 1, 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 October 7, 2006, the Company operated 3,029 stores in 40 states, Puerto Rico, and the Virgin Islands. The Company serves both the do-it-yourself and professional installer markets.

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, the impact of stock-option expense, comparable-store sales, gross margin and SG&A rates, and earnings per share for fourth-quarter 2006, fiscal year 2006 and fiscal year 2007. 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)
	October 7,		December 31,		October 8,
	2006		2005		2005
Assets
Current assets:
Cash and cash equivalents	$	13,987	$	40,783	$	112,704
Receivables, net		83,733		94,689		83,877
Inventories, net		1,462,067		1,367,099		1,374,866
Other current assets		38,207		45,369		34,312
Total current assets		1,597,994		1,547,940		1,605,759
Property and equipment, net		983,609		898,851		869,114
Assets held for sale		2,777		8,198		14,602
Goodwill		33,765		67,094		54,344
Intangible assets, net		27,920		-		-
Other assets, net		15,520		20,066		18,755
	$	2,661,585	$	2,542,149	$	2,562,574
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdrafts	$	36,689	$	50,170	$	24,226
Current portion of long-term debt		67		32,760		32,450
Financed vendor accounts payable		140,736		119,351		117,689
Accounts payable		669,720		629,248		660,893
Accrued expenses		257,334		265,437		280,622
Other current liabilities		48,953		44,498		41,279
Total current liabilities		1,153,499		1,141,464		1,157,159
Long-term debt		450,859		406,040		413,775
Other long-term liabilities		66,773		74,874		78,581
Total stockholders' equity		990,454		919,771		913,059
	$	2,661,585	$	2,542,149	$	2,562,574
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
Twelve Week Periods Ended
October 7, 2006 and October 8, 2005
(in thousands, except per share data)
(unaudited)
	October 7,			October 8,
	2006			2005
Net sales	$	1,099,486		$	1,019,736
Cost of sales, including purchasing and warehousing costs		569,280			538,321
Gross profit		530,206			481,415
Selling, general and administrative expenses		423,105			375,999
Share-based compensation		4,580			-
Operating income		102,521			105,416
Other, net:
Interest expense		(9,232	)		(8,196	)
Gain on extinguishment of debt, net		986			-
Other income, net		154			933
Total other, net		(8,092	)		(7,263	)
Income before provision for income taxes		94,429			98,153
Provision for income taxes		35,482			37,360
Net income	$	58,947		$	60,793
Basic earnings per share ( a )	$	0.56		$	0.56
Diluted earnings per share ( a )	$	0.56		$	0.55
Average common shares outstanding ( b )		105,112			109,306
Dilutive effect of stock options		939			1,635
Average common shares outstanding - assuming dilution		106,051			110,941

( a )	Basic and diluted earnings per share include $0.03 of share-based compensation for the twelve weeks ended October 7, 2006. The twelve weeks ended October 8, 2005 do not include share-based compensation. On a pro forma basis, share-based compensation for the twelve weeks ended October 8, 2005 was $0.02 per basic and diluted share.
( b )	Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 7, 2006 and October 8, 2005, we had 105,208 and 109,013 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 Operations
Forty Week Periods Ended
October 7, 2006 and October 8, 2005
(in thousands, except per share data)
(unaudited)
	October 7,			October 8,
	2006			2005
Net sales	$	3,600,353		$	3,301,246
Cost of sales, including purchasing and warehousing costs		1,877,620			1,736,850
Gross profit		1,722,733			1,564,396
Selling, general and administrative expenses		1,368,995			1,226,009
Share-based compensation		14,473			237
Operating income		339,265			338,150
Other, net:
Interest expense		(28,147	)		(24,682	)
Gain on extinguishment of debt, net		986			-
Other income, net		753			2,298
Total other, net		(26,408	)		(22,384	)
Income before provision for income taxes		312,857			315,766
Provision for income taxes		116,893			120,397
Net income	$	195,964		$	195,369
Basic earnings per share ( a )	$	1.84		$	1.80
Diluted earnings per share ( a )	$	1.82		$	1.78
Average common shares outstanding ( b )		106,380			108,329
Dilutive effect of stock options		1,175			1,720
Average common shares outstanding - assuming dilution		107,555			110,049

( a )	Basic and diluted earnings per share include $0.08 of share-based compensation for the forty weeks ended October 7, 2006. The forty weeks ended October 8, 2005 include only nominal share-based compensation prior to the adoption of SFAS 123 on January 1, 2006. On a pro forma basis, share-based compensation for the forty weeks ended October 8, 2005 was $0.07 per basic and diluted share.
( b )	Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 7, 2006 and October 8, 2005, we had 105,208 and 109,013 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
Forty Week Periods Ended
October 7, 2006 and October 8, 2005
(in thousands)
(unaudited)
	October 7,			October 8,
	2006			2005
Cash flows from operating activities:
Net income	$	195,964		$	195,369
Depreciation and amortization		104,156			90,693
Share-based compensation		14,473			237
Benefit for deferred income taxes		(2,332	)		(190	)
Excess tax benefit from share-based compensation		(4,398	)		-
Tax benefit related to exercise of stock options		-			28,469
Loss on extinguishment of debt		1,887			-
Other non-cash adjustments to net income		2,002			1,267
Decrease (increase) in:
Receivables, net		10,995			30,489
Inventories, net		(90,966	)		(138,193	)
Other assets		9,031			(13,737	)
Increase (decrease) in:
Accounts payable		40,472			67,255
Accrued expenses		17,056			63,774
Other liabilities		(1,337	)		1,876
Net cash provided by operating activities		297,003			327,309
Cash flows from investing activities:
Purchases of property and equipment		(200,784	)		(159,391	)
Business acquisitions, net of cash acquired		(12,500	)		(99,300	)
Proceeds from sales of property and equipment		8,726			5,818
Net cash used in investing activities		(204,558	)		(252,873	)
Cash flows from financing activities:
(Decrease) increase in bank overdrafts		(13,481	)		4,042
Increase in financed vendor accounts payable		21,385			60,793
Early extinguishment of debt		(433,775	)		-
Dividends paid		(19,153	)		-
Net borrowings (payments) on credit facilities		445,901			(23,775	)
Payment of debt related costs		(1,078	)		-
Proceeds from the issuance of common stock, primarily exercise
of stock options		14,100			30,155
Excess tax benefit from share-based compensation		4,398			-
Repurchase of common stock		(137,560	)		(62,552	)
Increase (decrease) in borrowings secured by trade receivables		22			(26,716	)
Net cash used in financing activities		(119,241	)		(18,053	)
Net (decrease) increase in cash and cash equivalents		(26,796	)		56,383
Cash and cash equivalents, beginning of period		40,783			56,321
Cash and cash equivalents, end of period	$	13,987		$	112,704
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
Forty Week Periods Ended
October 7, 2006 and October 8, 2005
(in thousands, except per share data)
(unaudited)
Reconciliation of Free Cash Flow
	October 7,			October 8,
	2006			2005
Cash flows from operating activities	$	297,003		$	327,309
Cash flows used in investing activities		(204,558	)		(252,873	)
		92,445			74,436
Increase in financed vendor accounts payable		21,385			60,793
Free cash flow	$	113,830		$	135,229
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.

Reconciliation of Non-GAAP Operating Metrics
	Twelve Weeks Ended							Forty Weeks Ended
	October 7,		October 8,			%		October 7,		October 8,			%
	2006		2005			increase		2006		2005			increase
Adjusted diluted earnings per share:
Diluted earnings per share	$	0.56	$	0.55			1.8%	$	1.82	$	1.78			2.2%
Pro forma share-based compensation		-		(0.02	)				-		(0.07	)
Adjusted diluted earnings per share	$	0.56	$	0.53			5.7%	$	1.82	$	1.71			6.4%
Adjusted selling, general and administrative (SG&A)
expenses per store:
SG&A expense	$	427,685	$	375,999				$	1,383,468	$	1,226,246
Pro forma share-based compensation		-		3,620					-		10,933
Adjusted SG&A expense		427,685		379,619					1,383,468		1,237,179
Ending store count		3,029		2,829					3,029		2,829
SG&A expense per store	$	141	$	133			6.2%	$	457	$	433			5.4%
Adjusted SG&A expense per store	$	141	$	134			5.2%	$	457	$	437			4.4%
Note: Management believes adjusted diluted earnings per share and adjusted selling, general and administrative expenses per store are useful to our stockholders as they present a comparable measure of our operating results due to the adoption of SFAS 123R as of January 1, 2006. Adjusted diluted earnings per share and adjusted selling, general and administrative expenses per store are non-GAAP measures and should be considered in addition to, but not as a substitute for, information contained in our condensed consolidated statement of operations.