Exhibit 99.1
 | | 5673 Airport Road Roanoke, VA 24012 Phone (540) 362-4911 Fax (540) 561-1448 |
| CONTACT: | | Sheila Stuewe Sstuewe@AdvanceAutoParts.com (540) 561-3281 |
ADVANCE AUTO PARTS REPORTS RECORD THIRD QUARTER RESULTS
~ Declares a Two-for-One Stock Split in the Form of a Dividend ~
Roanoke, Virginia, October 29, 2003 — Advance Auto Parts, Inc. (NYSE: AAP) today announced it achieved strong third quarter results. The highlights of the quarter include:
| • | Achieving a comparable stores sales gain of 3.1% on top of 5.5% last year. |
| • | Generating a gross margin increase of 143 basis points to 45.8%. |
| • | Repaying $80 million in debt during the quarter and $279 million year-to-date. |
The Company produced earnings per diluted share of $1.20 for the third quarter ended October 4, 2003, which includes expenses of $0.04 per diluted share associated with the Discount Auto Parts’ integration. Year-to-date earnings per diluted share rose to $2.52, which includes expenses of $0.78 per diluted share resulting from the early redemption of outstanding notes and debentures and $0.14 per diluted share in integration expenses.
Comparable earnings per diluted share rose by 34.8% to $1.24 in the third quarter from $0.92 last year. Year-to-date comparable earnings per diluted share rose 52.2% to $3.44 compared to $2.26 last year. Comparable results are non-GAAP measures because they exclude the 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 uses these non-GAAP measures as an indication of its earnings from its core operations and believes it is important to the Company’s stockholders due to the nature and significance of the excluded expenses.
Sales increased 7.7% in the third quarter to $849.3 million compared to $788.7 million last year. Same store sales grew 3.1% in the third quarter on top of 5.5% in the same quarter last year. The stores acquired as part of the Discount Auto Parts’ acquisition, which are in the comparable store base this year, produced a comparable store sales increase of 3.1% during the third quarter on top of 6.3% last year. Year-to-date sales increased 5.3% to $2,722.0 million compared to $2,585.5
million last year as same store sales rose 2.0% compared to 6.2% during the same period last year.
During the third quarter, gross margin increased 143 basis points to 45.8% compared to 44.3% last year, reflecting the benefits realized from the Company’s category management initiatives and continued leveraging of its logistics costs. Year-to-date, gross margin improved 157 basis points to 45.5% from 43.9% last year.
During the third quarter, the Company invested a portion of its gross margin improvements in increased advertising to grow the Company’s brand recognition and in expanded customer service levels through a slight increase in store labor hours. This investment resulted in an increase in comparable selling, general and administrative expenses to 36.1% as a percent of net sales from 35.4% last year. On a GAAP basis, selling, general and administrative expenses as a percent of net sales were consistent with last year at 36.4%. On a year-to-date basis, comparable selling, general and administrative expenses as a percent of sales increased 25 basis points to 36.6% compared to 36.4% last year. On a GAAP basis selling, general and administration costs year-to-date declined 45 basis points to 37.0% from 37.4% last year, reflecting the decrease in integration expenses.
Comparable operating margins improved in the third quarter to 9.6% compared to 9.0% in the same quarter last year. On a GAAP basis, third quarter operating margins rose to 9.3% compared to 7.9% last year. Year-to-date, comparable operating margins improved 131 basis points to 8.8% compared to 7.5% last year. On a GAAP basis, year-to-date operating margins improved to 8.5% from 6.5% last year.
Comparable net income rose 38.6% in the third quarter to $46.7 million from $33.7 million in the third quarter last year. On a GAAP basis, net income increased 59.2% to $45.2 million in the third quarter, which includes $1.6 million of after-tax integration expenses associated with the Discount Auto Parts’ acquisition. Year-to-date comparable net income increased 57.4% to $127.9 million compared to $81.3 million last year. On a GAAP basis, net income increased 66.1% to $93.7 million, which includes $5.4 million of after-tax integration expenses associated with the Discount Auto Parts’ acquisition and $28.8 million of after-tax expenses related to the early redemption of outstanding notes and debentures in the first quarter.
Commenting on the third quarter results, Larry Castellani, the Company’s Chairman and Chief Executive Officer, said, “Our investments in building Advance Auto Parts, including category management, are generating strong results. Our enhanced merchandising gives our team the opportunity to service our customers more effectively and we believe that these investments will continue to produce strong results.”
Year-to-date, the Company generated $302.1 million in free cash flow, including $67.8 million in the third quarter. These results do not include the cash expenses of $36.9 million associated with the early redemption of the Company’s high interest bearing notes and debentures in the first quarter of 2003. Including these expenses, year-to-date the Company generated $265.2 million in free cash flow. The generation of this free cash flow allowed the Company to repay $80 million in debt during the third quarter and $279 million of debt since December 28, 2002. Free cash flow is calculated as cash provided by operating activities reduced by cash used in investing activities. The Company expects to be a user of cash in the fourth quarter and raised its 2003 fiscal year guidance for free cash flow to $210 million.
During the quarter 19 new stores were opened, six stores were relocated, and five stores were closed resulting in an ending store count of 2,496. Year-to-date, the Company opened 79 new
stores, relocated 24 stores, and closed 18 stores. The Company expects to open approximately 125 stores this year, relocate approximately 40 stores, and close approximately 25 stores.
The Company also reconfirmed its comparable earnings per diluted share guidance for the fourth quarter in the range of $0.74 to $0.80 compared to $0.43 last year, a 72% to 86% increase. The Company’s comparable earnings per diluted share are anticipated to be in the range of $4.18 to $4.24 for the full year. This guidance excludes the expenses of the redemption of notes and debentures of $0.78 and integration expenses of $0.16. Expenses associated with the discontinuance of the Western Auto wholesale supply program and the positive effect of the 53rd week in the fourth quarter are included. On a GAAP basis, the Company raised its earnings per diluted share guidance to $3.24 to $3.30, which includes the expenses associated with the redemption of bonds and debentures in the first quarter, integration expenses related to the Discount Auto Parts acquisition, expenses associated with the discontinuance of the Western Auto wholesale supply program and the positive effect of the 53rd week in fourth quarter. The Company anticipates earnings per diluted share in 2004 to be in the range of $5.00 to $5.10. The above earnings per share guidance does not include the impact of a stock split.
Also today, the Company’s Board of Directors declared a two-for-one stock split of the Company’s common stock, which will be effected as a 100% stock dividend. The dividend shares will be distributed on January 2, 2004 to stockholders of record on December 11, 2003. The Company’s common stock will trade on a post-split basis, on January 5, 2004, the next trading day following the distribution date.
The Board of Directors also announced today that Peter Fontaine, former Chairman and Chief Executive Officer of Discount Auto Parts, submitted his resignation to the Board effective immediately. Discount Auto Parts was acquired by Advance Auto Parts in November 2001.
“Peter has made a tremendous contribution to our Board during the last two years especially in regards to the integration of Discount Auto Parts,” commented Larry Castellani. “We sincerely thank Peter for all his contributions.”
The Company will host a conference call tomorrow, October 30, 2003, at 8:00 a.m. Eastern Standard Time to discuss its third quarter results. To listen to the live webcast please log on to http://www.advanceautoparts.com. The call will be archived on the Company’s website http://www.advanceautoparts.com until October 30, 2004.
Advance Auto Parts, Inc., based in Roanoke, Va., is the third largest retailer of automotive parts in the United States. At October 4, 2003, the Company had 2,496 stores in 38 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. These statements 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
Consolidated Balance Sheets
(in thousands)
| | | October 4, 2003
| | December 28, 2002
| | October 5, 2002
|
| Assets | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | | $ | 49,858 | | $ | 13,885 | | $ | 56,843 |
Receivables, net | | | 92,828 | | | 102,574 | | | 131,957 |
Inventories, net | | | 1,102,565 | | | 1,048,803 | | | 1,078,388 |
Other current assets | | | 24,453 | | | 20,210 | | | 32,065 |
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|
| |
|
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Total current assets | | | 1,269,704 | | | 1,185,472 | | | 1,299,253 |
Property and equipment, net | | | 707,309 | | | 728,432 | | | 718,352 |
Assets held for sale | | | 23,177 | | | 28,346 | | | 38,569 |
Other assets, net | | | 11,059 | | | 22,975 | | | 27,029 |
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| | | $ | 2,011,249 | | $ | 1,965,225 | | $ | 2,083,203 |
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| Liabilities and Stockholders' Equity | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Bank overdrafts | | $ | 24,233 | | $ | 869 | | $ | — |
Current portion of long-term debt | | | — | | | 10,690 | | | 11,542 |
Accounts payable | | | 606,343 | | | 470,740 | | | 554,609 |
Accrued expenses | | | 214,649 | | | 208,176 | | | 223,682 |
Other current liabilities | | | 44,121 | | | 32,101 | | | 35,276 |
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Total current liabilities | | | 889,346 | | | 722,576 | | | 825,109 |
Long-term debt | | | 456,089 | | | 724,832 | | | 761,226 |
Other long-term liabilities | | | 68,527 | | | 49,461 | | | 40,677 |
Total stockholders' equity | | | 597,287 | | | 468,356 | | | 456,191 |
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| | | $ | 2,011,249 | | $ | 1,965,225 | | $ | 2,083,203 |
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NOTE: These balance sheets do not include the footnotes required by generally accepted accounting principles for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Operations
Twelve Week Period Ended
(in thousands, except per share data)
| | | October 4, 2003
| |
| | | GAAP
| | | Adjustment
for Integration Expenses
| | | Comparable 2003
| |
Net sales | | $ | 849,323 | | | $ | — | | | $ | 849,323 | |
Cost of sales, including purchasing and warehousing costs | | | 460,579 | | | | — | | | | 460,579 | |
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|
|
| |
|
|
| |
|
|
|
Gross profit | | | 388,744 | | | | — | | | | 388,744 | |
Selling, general and administrative expenses | | | 309,390 | | | | (2,522 | )(a) | | | 306,868 | |
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Operating income | | | 79,354 | | | | 2,522 | | | | 81,876 | |
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Other, net: | | | | | | | | | | | | |
Interest expense | | | (5,935 | ) | | | — | | | | (5,935 | ) |
Loss on extinguishment of debt | | | (125 | ) | | | — | | | | (125 | ) |
Other income, net | | | 138 | | | | — | | | | 138 | |
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Total other, net | | | (5,922 | ) | | | — | | | | (5,922 | ) |
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Income before provision for income taxes | | | 73,432 | | | | 2,522 | | | | 75,954 | |
Provision for income taxes | | | 28,268 | | | | 971 | (b) | | | 29,239 | |
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Net income | | $ | 45,164 | | | $ | 1,551 | | | $ | 46,715 | |
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Net income per share: | | | | | | | | | | | | |
Basic | | $ | 1.23 | | | $ | 0.04 | | | $ | 1.27 | |
Diluted | | | 1.20 | | | | 0.04 | | | | 1.24 | |
| | | |
Average common shares outstanding (c) | | | 36,825 | | | | 36,825 | | | | 36,825 | |
Dilutive effect of stock options | | | 949 | | | | 949 | | | | 949 | |
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Average common shares outstanding - assuming dilution | | | 37,774 | | | | 37,774 | | | | 37,774 | |
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| (a) | | Represents merger and integration expenses associated with the integration of the Discount Auto Parts operations. |
| (b) | | This adjustment reflects the tax impact for the expenses discussed above 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 4, 2003, we had 36,906 shares outstanding. |
NOTE: These preliminary statements of operations have been prepared on a consistent basis with previously presented statements of operations and do not include the footnotes required by generally accepted accounting principles for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Operations
Forty Week Period Ended
(in thousands, except per share data)
| | | October 4, 2003
| |
| | | GAAP
| | | Adjustment for Integration and Debt
Extinguishment
| | | Comparable 2003
| |
Net sales | | $ | 2,722,028 | | | $ | — | | | $ | 2,722,028 | |
Cost of sales, including purchasing and warehousing costs | | | 1,484,188 | | | | — | | | | 1,484,188 | |
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|
|
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|
|
| |
|
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|
Gross profit | | | 1,237,840 | | | | — | | | | 1,237,840 | |
Selling, general and administrative expenses | | | 1,005,976 | | | | (8,793 | )(a) | | | 997,183 | |
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Operating income | | | 231,864 | | | | 8,793 | | | | 240,657 | |
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Other, net: | | | | | | | | | | | | |
Interest expense | | | (32,684 | ) | | | — | | | | (32,684 | ) |
Loss on extinguishment of debt | | | (47,266 | ) | | | 46,887 | (b) | | | (379 | ) |
Other income, net | | | 377 | | | | — | | | | 377 | |
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Total other, net | | | (79,573 | ) | | | 46,887 | | | | (32,686 | ) |
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Income before provision for income taxes | | | 152,291 | | | | 55,680 | | | | 207,971 | |
Provision for income taxes | | | 58,628 | | | | 21,437 | (c) | | | 80,065 | |
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Net income | | $ | 93,663 | | | $ | 34,243 | | | $ | 127,906 | |
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Net income per share: | | | | | | | | | | | | |
Basic | | $ | 2.58 | | | $ | 0.94 | | | $ | 3.52 | |
Diluted | | | 2.52 | | | | 0.92 | | | | 3.44 | |
Average common shares outstanding (d) | | | 36,372 | | | | 36,372 | | | | 36,372 | |
Dilutive effect of stock options | | | 832 | | | | 832 | | | | 832 | |
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Average common shares outstanding - assuming dilution | | | 37,204 | | | | 37,204 | | | | 37,204 | |
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| (a) | | Represents 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 complete repurchase and retirement of our outstanding bonds during the first quarter of 2003. |
| (c) | | This adjustment reflects the tax impact for the expenses discussed above 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 quarter. At October 4, 2003, we had 36,906 shares outstanding. |
NOTE: These preliminary statements of operations have been prepared on a consistent basis with previously presented statements of operations and do not include the footnotes required by generally accepted accounting principles for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Operations
Twelve Week Period Ended
(in thousands, except per share data)
| | | October 5, 2002
| |
| | | GAAP
| | | Adjustment for
Integration and
Debt
Extinguishment
| | | Comparable
2002
| |
Net sales | | $ | 788,662 | | | $ | — | | | $ | 788,662 | |
Cost of sales, including purchasing and warehousing costs | | | 439,000 | | | | — | | | | 439,000 | |
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Gross profit | | | 349,662 | | | | — | | | | 349,662 | |
Selling, general and administrative expenses | | | 287,117 | | | | (8,248 | )(a) | | | 278,869 | |
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Operating income | | | 62,545 | | | | 8,248 | | | | 70,793 | |
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Other, net: | | | | | | | | | | | | |
Interest expense | | | (16,016 | ) | | | — | | | | (16,016 | ) |
Loss on extinguishment of debt | | | (482 | ) | | | 482 | (b) | | | — | |
Other income, net | | | 299 | | | | — | | | | 299 | |
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Total other, net | | | (16,199 | ) | | | 482 | | | | (15,717 | ) |
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Income before provision for income taxes | | | 46,346 | | | | 8,730 | | | | 55,076 | |
Provision for income taxes | | | 17,983 | | | | 3,387 | (c) | | | 21,370 | |
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Net income | | $ | 28,363 | | | $ | 5,343 | | | $ | 33,706 | |
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Net income per share: | | | | | | | | | | | | |
Basic | | $ | 0.80 | | | $ | 0.14 | | | $ | 0.94 | |
Diluted | | | 0.77 | | | | 0.15 | | | | 0.92 | |
| | | |
Average common shares outstanding (d) | | | 35,673 | | | | 35,673 | | | | 35,673 | |
Dilutive effect of stock options | | | 1,052 | | | | 1,052 | | | | 1,052 | |
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Average common shares outstanding - assuming dilution | | | 36,725 | | | | 36,725 | | | | 36,725 | |
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| (a) | | Represents merger and integration expenses associated with the integration of the Discount Auto Parts operations. |
| (b) | | This adjustment reflects the current and deferred loan costs associated with the Company's refinancing of the tranche B term loan under its senior credit facility and reflects the ratable portion of deferred loan costs and the premium paid upon the repurchase and retirement of outstanding bonds. |
| (c) | | This adjustment reflects the tax impact for the expenses discussed above at a 38.8% effective tax rate. |
| (d) | | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 5, 2002, we had 35,686 shares outstanding. |
NOTE: These preliminary statements of operations have been prepared on a consistent basis with previously presented statements of operations and do not include the footnotes required by generally accepted accounting principles for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Operations
Forty Week Period Ended
(in thousands, except per share data)
| | | October 5, 2002
| |
| | | GAAP
| | | Adjustment for Integration and Debt
Extinguishment
| | | Comparable 2002
| |
Net sales | | $ | 2,585,466 | | | $ | — | | | $ | 2,585,466 | |
Cost of sales, including purchasing and warehousing costs | | | 1,450,282 | | | | — | | | | 1,450,282 | |
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Gross profit | | | 1,135,184 | | | | — | | | | 1,135,184 | |
Selling, general and administrative expenses | | | 967,035 | | | | (26,442 | )(a) | | | 940,593 | |
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Operating income | | | 168,149 | | | | 26,442 | | | | 194,591 | |
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Other, net: | | | | | | | | | | | | |
Interest expense | | | (62,734 | ) | | | — | | | | (62,734 | ) |
Loss on extinguishment of debt | | | (14,206 | ) | | | 14,206 | (b) | | | — | |
Other income, net | | | 949 | | | | — | | | | 949 | |
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Total other, net | | | (75,991 | ) | | | 14,206 | | | | (61,785 | ) |
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Income before provision for income taxes | | | 92,158 | | | | 40,648 | | | | 132,806 | |
Provision for income taxes | | | 35,758 | | | | 15,771 | (c) | | | 51,529 | |
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Net income | | $ | 56,400 | | | $ | 24,877 | | | $ | 81,277 | |
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Net income per share: | | | | | | | | | | | | |
Basic | | $ | 1.62 | | | $ | 0.71 | | | $ | 2.33 | |
Diluted | | | 1.57 | | | | 0.69 | | | | 2.26 | |
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Average common shares outstanding (d) | | | 34,851 | | | | 34,851 | | | | 34,851 | |
Dilutive effect of stock options | | | 1,163 | | | | 1,163 | | | | 1,163 | |
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Average common shares outstanding - assuming dilution | | | 36,014 | | | | 36,014 | | | | 36,014 | |
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| (a) | | Represents merger and integration expenses associated with the integration of the Discount Auto Parts operations. |
| (b) | | This adjustment reflects the current and deferred loan costs associated with the Company's refinancing of the tranche B term loan under its senior credit facility and reflects the ratable portion of deferred loan costs and the premium paid upon the repurchase and retirement of outstanding bonds. |
| (c) | | This adjustment reflects the tax impact for the expenses discussed above at a 38.8% effective tax rate. |
| (d) | | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 5, 2002, we had 35,686 shares outstanding. |
NOTE: These preliminary statements of operations have been prepared on a consistent basis with previously presented statements of operations and do not include the footnotes required by generally accepted accounting principles for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Forty Week Periods Ended
(in thousands)
| | | October 4,
2003
| | | October 5,
2002
| |
Cash flows from operating activities: | | | | | | | | |
Net income | | $ | 93,663 | | | $ | 56,400 | |
Depreciation | | | 77,483 | | | | 71,455 | |
Loss on extinguishment of debt | | | 47,266 | | | | 14,206 | |
Provision for deferred income taxes | | | 36,945 | | | | 35,540 | |
Other non-cash adjustments to net income | | | 14,815 | | | | 17,789 | |
Decrease (increase) in: | | | | | | | | |
Receivables, net | | | 9,746 | | | | (35,310 | ) |
Inventories, net | | | (53,677 | ) | | | (110,030 | ) |
Other assets | | | (11,120 | ) | | | (16,178 | ) |
Increase (decrease) in: | | | | | | | | |
Accounts payable | | | 135,603 | | | | 126,960 | |
Accrued expenses | | | 12,750 | | | | 53,452 | |
Other liabilities | | | (3,257 | ) | | | 4,596 | |
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Net cash provided by operating activities | | | 360,217 | | | | 218,880 | |
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Cash flows from investing activities: | | | | | | | | |
Purchases of property and equipment | | | (70,331 | ) | | | (68,524 | ) |
Acquisitions, net of cash acquired | | | — | | | | (3,411 | ) |
Proceeds from sales of property and equipment | | | 12,165 | | | | 19,989 | |
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Net cash used in investing activities | | | (58,166 | ) | | | (51,946 | ) |
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Cash flows from financing activities: | | | | | | | | |
Increase in bank overdrafts | | | 23,364 | | | | (34,748 | ) |
Early extinguishment of debt | | | (631,374 | ) | | | (433,103 | ) |
Net borrowings under the credit facility | | | 348,300 | | | | 240,000 | |
Payment of debt related costs | | | (36,895 | ) | | | (8,982 | ) |
Proceeds from the exercise of stock options | | | 24,435 | | | | 16,321 | |
Proceeds from the issuance of common stock | | | — | | | | 88,677 | |
Other net financing activities | | | 6,092 | | | | 3,627 | |
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Net cash used in financing activities | | | (266,078 | ) | | | (128,208 | ) |
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Increase in cash and cash equivalents | | | 35,973 | | | | 38,726 | |
Cash and cash equivalents, beginning of period | | | 13,885 | | | | 18,117 | |
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Cash and cash equivalents, end of period | | $ | 49,858 | | | $ | 56,843 | |
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NOTE: These preliminary statements of cash flows have been prepared on a consistent basis with previously presented statements of cash flows and do not include the footnotes required by generally accepted accounting principles for complete financial statements.
