Exhibit 99.1
ADVANCE AUTO PARTS FIRST QUARTER EARNINGS PER DILUTED SHARE INCREASED 21% TO $0.86 VERSUS $0.71 LAST YEAR
Board Authorizes $250 Million Share Repurchase to Replace Existing Program
ROANOKE, Va, May 15, 2008 – 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 first quarter ended April 19, 2008. First quarter earnings per diluted share increased 21% to $0.86 versus $0.71 last year.
| First Quarter Performance Summary |
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| | | Q1 FY08 | | | Q1 FY07 | |
| | | | | | | | | |
Sales (in millions) | | $ | 1,526.1 | | | $ | 1,468.1 | |
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Comp Stores Sales % (1) | | | 0.6% | | | | 0.7% | |
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| Gross Profit % | | | 48.7% | | | | 48.3% | |
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| SG&A % | | | 39.3% | | | | 39.1% | |
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| Operating Income % | | | 9.5% | | | | 9.2% | |
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| Diluted EPS | | $ | 0.86 | | | $ | 0.71 | |
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Avg Diluted Shares (in 000s) | | | 95,683 | | | | 106,645 | |
| | (1) | Beginning in Q1 2008, the Company includes in its comparable store sales the net sales from the Puerto Rico and Virgin Islands (“Offshore”) and Autopart International (“AI”) stores. The comparable periods have been adjusted accordingly. |
First Quarter Highlights
Total revenue for the first quarter increased 4.0% to $1.53 billion, compared with revenue of $1.47 billion in the first quarter of fiscal year 2007. The revenue increase reflected the net addition of 141 new stores in the past 12 months and a comparable store sales increase of 0.6% during the quarter compared to an increase of 0.7% in the first quarter last year. The comparable store sales gain was comprised of a 10.6% increase in commercial sales offset by a 3.0% decrease in do-it-yourself (DIY) sales. This compares to a 4.2% increase in commercial and a 0.5% decrease in DIY in the first quarter last year.
The gross profit rate was 48.7% in the first quarter as compared to 48.3% in the prior year, which reflects a 39 basis point improvement from the prior year. The 39 basis point improvement is driven by lower supply chain and logistics costs combined with more effective pricing.
The Company’s first quarter selling, general and administrative (SG&A) expenses were 39.3% of sales compared to 39.1% last year. This increase of 11 basis points was driven by de-leverage due to modest comp store sales and increased incentive compensation expenses, which was almost entirely offset by cost reduction initiatives that primarily occurred during the second half of fiscal year 2007.
Operating cash flow for the quarter increased 14.3%. Free cash flow for the quarter increased 43.1% to $150.5 million from $105.1 million in first quarter 2007. Capital expenditures were $58.9 million for the quarter. This compares to $75.9 million in 2007, which results in a reduction of $17.0 million, driven by a decrease in store development as well as the timing associated with the construction of a new distribution center.
As previously disclosed, the Company repurchased approximately 4.6 million shares during the first quarter 2008 at an average price of $34.04 for a total expenditure of $155 million. The Company repurchased 8.3 million and 3.7 million shares in fiscal 2007 and fiscal 2006, respectively.
“The dedication and hard work of our Team Members and the actions we took to improve our performance are beginning to show up in our financial results as evidenced by the strong commercial double-digit comparable store sales increase as well as a lower cost structure,” said Darren Jackson,
President and Chief Executive Officer. “We are encouraged with our first quarter financial results yet we are realistic that our turnaround is in it formative stages.”
Key Financial Metrics (1) | | Q1 FY08 | | | Q1 FY07 | | | FY 2007 | | | FY 2006 | |
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Sales Growth % | | | 4.0% | | | | 5.4% | | | | 4.9% | | | | 8.2% | |
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Sales per Square Foot (2)(3) | | $ | 207 | | | $ | 209 | | | $ | 207 | | | $ | 210 | |
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DIY Comp % (4) | | | (3.0%) | | | | (0.5%) | | | | (1.1%) | | | | (0.8%) | |
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Commercial Comp % (4) | | | 10.6% | | | | 4.2% | | | | 6.0% | | | | 10.7% | |
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Operating Income per Team Member (2)(5) | | $ | 9.50 | | | $ | 9.30 | | | $ | 9.40 | | | $ | 9.30 | |
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SG&A per Store (2)(6) | | $ | 599 | | | $ | 603 | | | $ | 601 | | | $ | 604 | |
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Return on Invested Capital (2)(7) | | | 14.0% | | | | 14.1% | | | | 13.7% | | | | 14.2% | |
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Gross Margin Return on Inventory (2)(8) | | $ | 3.52 | | | $ | 3.54 | | | $ | 3.39 | | | $ | 3.38 | |
| (1) | Dollars in thousands except for sales per square foot. |
| (2) | The financial metrics presented for each quarter are calculated on an annual basis and accordingly reflect the last four quarters completed. |
| (3) | Sales per square foot is calculated as net sales divided by an average of beginning and ending square footage. Average square footage for each of the reported periods is as follows: Q1 2008 – 23,708,000; Q1 2007 – 22,415,000; FY 2007 – 23,368,000; and FY 2006 – 22,000,000. |
| (4) | Beginning in Q1 2008, the Company includes in its comparable store sales the net sales from Offshore and AI stores. The comparable periods have been adjusted accordingly. |
| (5) | Operating income per team member is calculated as operating income divided by an average of beginning and ending team members. Average team members for each of the reported periods is as follows: Q1 2008 – 45,040; Q1 2007 – 44,355; FY 2007 – 44,281; and FY 2006 – 43,424. |
| (6) | Selling, general and administrative expenses (“SG&A”) per store is calculated as SG&A divided by the average of beginning and ending store count. |
| (7) | Return on invested capital (“ROIC”) is calculated in detail in the accompanying press release financial statements. |
| (8) | Gross margin return on inventory is calculated as gross margin divided by an average of beginning and ending inventory, net of accounts payable and financed vendor accounts payable. |
The Company continues to focus on four key strategies to turn around the business – DIY Transformation, Commercial Acceleration, Availability Excellence and Superior Experience. The strategies are focused on what matters most to the customer. The Company made progress on the turnaround
including senior management changes to lead strategy implementation, launching a new brand campaign “Keep the wheels turning,” and introducing new brands including MOOG®, Wagner® and Remy® to enhance brand quality while improving parts availability.
“The tangible strategic results are just beginning to emerge,” said Jackson. “The first phase of our turnaround is on track. We made material progress on focusing the organization on the four turnaround strategies. The Company will continue to educate, engage and enable the team to execute and assess the strategies. We remain confident that our key financial metrics will improve as our turnaround progresses.”
Annual Outlook Summary
Mike Norona, Executive Vice President and Chief Financial Officer said, “We are pleased with our first quarter results and pragmatic about the current economic headwinds and the fact that three quarters remain in our fiscal year. The Company provides an annual outlook at the beginning of the year only. We are in a turnaround and our financial results will not be linear. The turnaround approach will entail an in-depth assessment of all parts of the business. Correspondingly, I expect short-term earnings volatility while we position the Company to increase long-term value.”
Share Repurchase Authorization
The Company’s Board of Directors today authorized a $250 million share repurchase program. This new authorization replaces the Company’s $500 million share repurchase program authorized in August 2007, which had $105 million remaining. Under the $500 million share repurchase authorization, the Company repurchased 11.6 million shares at an average price of $34.13 per share.
Dividend
On May 15, 2008, the Company’s Board of Directors declared a regular quarterly cash dividend of six cents per share to be paid on July 3, 2008 to stockholders of record as of June 20, 2008.
Annual Meeting Announcements
The Company held its annual meeting of stockholders on May 15, 2008. During the meeting, the following individuals were approved to serve on the Company’s Board of Directors for the next year:
The other proposal approved by the stockholders was the ratification of the appointment by the Company’s Audit Committee of Deloitte & Touche LLP as its independent registered public accounting firm for 2008.
Appointment of Board Member
The Company is pleased to announce that John F. Bergstrom, Chairman and Chief Executive Officer of Bergstrom Corporation, has been appointed to its Board of Directors. Mr. Bergstrom has served in his current role for the past five years. Bergstrom Corporation owns and operates 24 automobile dealerships representing 26 different brands. Mr. Bergstrom serves as a director of Kimberly-Clark Corporation, Wisconsin Energy Corporation, Midwest Airlines, and the Green Bay Packers. Mr. Bergstrom also serves as President of the Theda Clark Medical Center Foundation.
“John Bergstrom’s 30 years of automobile industry experience and his extraordinary track record of customer service excellence will be a great asset to our Board of Directors,” stated Jack Brouillard, Chairman of the Board.
Investor Conference Call
The Company will host a conference call on Friday, May 16, 2008 at 8:00 a.m. Eastern Daylight 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 May 16, 2009.
About Advance Auto Parts
Headquartered in Roanoke, Va., Advance Auto Parts, 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 April 19, 2008, the Company operated 3,291 stores in 40 states, Puerto Rico, and the Virgin Islands. Additional information about the Company, employment opportunities, customer services, and on-line shopping for parts and accessories can be found on the Company’s web site 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, CAPEX, comparable-store sales, gross margin, SG&A, operating income, and earnings per diluted share for fiscal year 2008. 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 December 29, 2007, 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 19, | | | December 29, | | | April 21, | |
| | | 2008 | | | 2007 | | | 2007 | |
| | | | | | | | | | |
| Assets | | | | | | | | | |
| | | | | | | | | | |
| Current assets: | | | | | | | | | |
| Cash and cash equivalents | | $ | 19,128 | | | $ | 14,654 | | | $ | 16,983 | |
| Receivables, net | | | 84,083 | | | | 84,983 | | | | 89,754 | |
| Inventories, net | | | 1,618,320 | | | | 1,529,469 | | | | 1,556,052 | |
| Other current assets | | | 27,570 | | | | 53,719 | | | | 29,418 | |
| Total current assets | | | 1,749,101 | | | | 1,682,825 | | | | 1,692,207 | |
| | | | | | | | | | | | | |
| Property and equipment, net | | | 1,047,667 | | | | 1,047,944 | | | | 1,016,046 | |
| Assets held for sale | | | 3,672 | | | | 3,274 | | | | 1,448 | |
| Goodwill | | | 33,718 | | | | 33,718 | | | | 33,718 | |
| Intangible assets, net | | | 28,259 | | | | 26,844 | | | | 27,596 | |
| Other assets, net | | | 10,710 | | | | 10,961 | | | | 10,299 | |
| | | $ | 2,873,127 | | | $ | 2,805,566 | | | $ | 2,781,314 | |
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| Liabilities and Stockholders' Equity | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | |
| Bank overdrafts | | $ | 1,873 | | | $ | 30,000 | | | $ | 5,707 | |
| Current portion of long-term debt | | | 671 | | | | 610 | | | | 62 | |
| Financed vendor accounts payable | | | 146,924 | | | | 153,549 | | | | 118,246 | |
| Accounts payable | | | 801,214 | | | | 688,970 | | | | 768,621 | |
| Accrued expenses | | | 311,561 | | | | 301,414 | | | | 254,859 | |
| Other current liabilities | | | 53,689 | | | | 51,385 | | | | 47,173 | |
| Total current liabilities | | | 1,315,932 | | | | 1,225,928 | | | | 1,194,668 | |
| | | | | | | | | | | | | |
| Long-term debt | | | 553,836 | | | | 505,062 | | | | 404,150 | |
| Other long-term liabilities | | | 52,696 | | | | 50,781 | | | | 64,537 | |
| Total stockholders' equity | | | 950,663 | | | | 1,023,795 | | | | 1,117,959 | |
| | | $ | 2,873,127 | | | $ | 2,805,566 | | | $ | 2,781,314 | |
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| 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 |
| Sixteen Week Periods Ended |
| April 19, 2008 and April 21, 2007 |
| (in thousands, except per share data) |
| (unaudited) |
| | | | | | | | |
| | | | April 19, | | | April 21, | |
| | | | 2008 | | | 2007 | |
| | | | | | | | |
| Net sales | | $ | 1,526,132 | | | $ | 1,468,120 | |
| | | | | | | | | | |
| Cost of sales, including purchasing and warehousing costs | | | 782,681 | | | | 758,717 | |
| | | | | | | | | | |
| | Gross profit | | | 743,451 | | | | 709,403 | |
| | | | | | | | | | |
| Selling, general and administrative expenses | | | 599,173 | | | | 574,710 | |
| | | | | | | | | | |
| | Operating income | | | 144,278 | | | | 134,693 | |
| | | | | | | | | | |
| Other, net: | | | | | | | | |
| Interest expense | | | (12,325 | ) | | | (11,274 | ) |
| Other income, net | | | 28 | | | | 342 | |
| | Total other, net | | | (12,297 | ) | | | (10,932 | ) |
| | | | | | | | | | |
| Income before provision for income taxes | | | 131,981 | | | | 123,761 | |
| | | | | | | | | | |
| Provision for income taxes | | | 49,895 | | | | 47,660 | |
| | | | | | | | | | |
| Net income | | $ | 82,086 | | | $ | 76,101 | |
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| Basic earnings per share | | $ | 0.86 | | | $ | 0.72 | |
| Diluted earnings per share | | $ | 0.86 | | | $ | 0.71 | |
| | | | | | | | | | |
| Average common shares outstanding ( a ) | | | 94,987 | | | | 105,694 | |
| Dilutive effect of share-based compensation | | | 696 | | | | 951 | |
| Average common shares outstanding - assuming dilution | | | 95,683 | | | | 106,645 | |
| | | | | | | | | | |
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| ( a ) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At April 19, 2008 and April 21, 2007, we had 94,881 and 106,058 shares outstanding, respectively. | |
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| 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, 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 | |
| Sixteen Week Periods Ended | |
| April 19, 2008 and April 21, 2007 | |
| (in thousands) | |
| (unaudited) | |
| | | | | | | |
| | | April 19, | | | April 21, | |
| | | 2008 | | | 2007 | |
| Cash flows from operating activities: | | | | | | |
| Net income | | $ | 82,086 | | | $ | 76,101 | |
| Depreciation and amortization | | | 44,620 | | | | 45,426 | |
| Share-based compensation | | | 5,715 | | | | 5,398 | |
| Benefit for deferred income taxes | | | (2,182 | ) | | | (6,087 | ) |
| Excess tax benefit from share-based compensation | | | (327 | ) | | | (3,607 | ) |
| Other non-cash adjustments to net income | | | (1,135 | ) | | | 3,439 | |
| Decrease (increase) in: | | | | | | | | |
| Receivables, net | | | 900 | | | | 4,041 | |
| Inventories, net | | | (88,851 | ) | | | (92,712 | ) |
| Other assets | | | 26,233 | | | | 13,316 | |
| Increase in: | | | | | | | | |
| Accounts payable | | | 112,244 | | | | 117,034 | |
| Accrued expenses | | | 28,162 | | | | 21,491 | |
| Other liabilities | | | 6,136 | | | | 3,035 | |
| Net cash provided by operating activities | | | 213,601 | | | | 186,875 | |
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| Cash flows from investing activities: | | | | | | | | |
| Purchases of property and equipment | | | (58,863 | ) | | | (75,940 | ) |
| Insurance proceeds related to damaged property | | | - | | | | 3,251 | |
| Proceeds from sales of property and equipment | | | 4,117 | | | | 239 | |
| Other | | | (1,750 | ) | | | - | |
| Net cash used in investing activities | | | (56,496 | ) | | | (72,450 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Decrease in bank overdrafts | | | (28,127 | ) | | | (28,499 | ) |
| Decrease in financed vendor accounts payable | | | (6,625 | ) | | | (9,297 | ) |
| Dividends paid | | | (11,659 | ) | | | (12,682 | ) |
| Net borrowings (payments) on credit facilities | | | 49,000 | | | | (73,000 | ) |
| Proceeds from the issuance of common stock, primarily exercise | | | | | | | | |
| of stock options | | | 2,926 | | | | 11,262 | |
| Excess tax benefit from share-based compensation | | | 327 | | | | 3,607 | |
| Repurchase of common stock | | | (158,308 | ) | | | - | |
| Other | | | (165 | ) | | | 39 | |
| Net cash used in financing activities | | | (152,631 | ) | | | (108,570 | ) |
| | | | | | | | | |
| Net increase in cash and cash equivalents | | | 4,474 | | | | 5,855 | |
| Cash and cash equivalents, beginning of period | | | 14,654 | | | | 11,128 | |
| Cash and cash equivalents, end of period | | $ | 19,128 | | | $ | 16,983 | |
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| 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) |
| | | | | | | | | | | | | | | |
| Reconciliation of Free Cash Flow | | | | | | | | | | | | | | |
| | | Sixteen Week Periods Ended | | | | | | | | | |
| | | April 19, | | | April 21, | | | | | | | | | |
| | | 2008 | | | 2007 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Cash flows from operating activities | | $ | 213,601 | | | $ | 186,875 | | | | | | | | | |
| Cash flows used in investing activities | | | (56,496 | ) | | | (72,450 | ) | | | | | | | | |
| | | | 157,105 | | | | 114,425 | | | | | | | | | |
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| Decrease in financed vendor accounts payable | | | (6,625 | ) | | | (9,297 | ) | | | | | | | | |
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| Free cash flow | | $ | 150,480 | | | $ | 105,128 | | | | | | | | | |
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| 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. |
| Detail of Return on Invested Capital ("ROIC") Calculation | | | |
| | | Last Four Quarters Ended | | | Fiscal Years Ended | |
| | | April 19, | | | April 21, | | | December 29, | | | December 30, | |
| | | 2008 | | | 2007 | | | 2007 | | | 2006 | |
| | | | | | | | | | | | | | | |
| Net income | | $ | 244,302 | | | $ | 233,338 | | | $ | 238,317 | | | $ | 231,318 | |
| Add: | | | | | | | | | | | | | | | | |
| After-tax interest expense and other, net | | | 21,977 | | | | 21,567 | | | | 21,049 | | | | 20,908 | |
| After-tax rent expense | | | 167,404 | | | | 151,187 | | | | 163,113 | | | | 146,202 | |
| After-Tax Operating Earnings | | | 433,683 | | | | 406,092 | | | | 422,479 | | | | 398,428 | |
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| Average assets (less cash) | | | 2,880,580 | | | | 2,662,355 | | | | 2,731,233 | | | | 2,586,460 | |
| Less: Average liabilities (excluding total debt) | | | (1,384,913 | ) | | | (1,252,381 | ) | | | (1,225,343 | ) | | | (1,179,083 | ) |
Add: Capitalized lease obligation (rent expense * 6) (1) | | | 1,606,956 | | | | 1,464,744 | | | | 1,571,334 | | | | 1,402,806 | |
| Total Invested Capital | | | 3,102,623 | | | | 2,874,718 | | | | 3,077,224 | | | | 2,810,183 | |
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| ROIC | | | 14.0% | | | | 14.1% | | | | 13.7% | | | | 14.2% | |
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| Rent expense | | $ | 267,826 | | | $ | 244,124 | | | $ | 261,889 | | | $ | 233,801 | |
| Interest expense and other, net | | | 35,160 | | | | 34,824 | | | | 33,795 | | | | 33,435 | |
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| (1) - Capitalized lease obligation is estimated as annualized rent expense for the applicable period times six years. |
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| 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. |
