Advance Auto Parts Reports Third Quarter Fiscal 2012 Results

  Advance Auto Parts Reports Third Quarter Fiscal 2012 Results

Business Wire

ROANOKE, Va. -- November 08, 2012

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 third fiscal quarter ended October6,
2012. Third quarter earnings per diluted share (EPS) were $1.21 which was a
14.2% decrease versus the third quarter last year. Year-to-date, EPS was $4.34
which was an increase of 3.6% over the same period last year.


Third Quarter Performance Summary
                                                              
                       Twelve Weeks Ended           Forty Weeks Ended
                       October 6,     October 8,    October 6,     October 8,
                       2012           2011          2012           2011
                                                                   
Sales (in millions)    $ 1,457.5      $ 1,465.0     $ 4,875.8      $ 4,842.9
                                                                   
Comp Store Sales %     (1.8      %)   2.2       %   (0.5      %)   2.0       %
                                                                   
Gross Profit %         49.8      %    49.5      %   49.9      %    49.9      %
                                                                   
SG&A %                 39.4      %    37.3      %   38.8      %    38.5      %
                                                                   
Operating Income %     10.3      %    12.1      %   11.2      %    11.4      %
                                                                   
Diluted EPS            $ 1.21         $ 1.41        $ 4.34         $ 4.19
                                                                   
Avg Diluted Shares     73,992         74,730        74,107         78,058
(in thousands)
                                                                             

“Our efforts to invest in the continued long-term growth of Commercial and
increase customer traffic helped drive improvements in our comp store sales
from the second quarter to the third quarter of this year and strengthened our
positive Commercial comps for Advance stores through the quarter. Despite
these improved sales trends, we were still unable to achieve our profitability
expectations and fully mitigate the weak consumer demand within several of our
markets, especially in our colder weather markets,” said Darren R. Jackson,
President and Chief Executive Officer. “As we look beyond our current quarter,
we believe the industry fundamentals remain positive and that we are well
positioned with our initiatives to fuel our future growth. These initiatives
include the successful launch of our Advance Commercial Credit program, our
new distribution center in Remington, IN, our recent expansion into New York
City and our continued momentum from our B2B online ordering capability, hub
investments and inventory upgrades.”

Fiscal Third Quarter and Year-to-Date Highlights

Total sales for the third quarter decreased 0.5% to nearly $1.46 billion, as
compared with total sales during the third quarter of fiscal 2011. The sales
decrease reflected a comparable store sales decrease of 1.8% versus a
comparable store sales increase of 2.2% during the third quarter of fiscal
2011, partially offset by the net addition of 82 new stores during the past 12
months. Year-to-date, total sales increased 0.7% to $4.88 billion, compared
with total sales of $4.84 billion over the same period last year.

The Company's gross profit rate was 49.8% of sales during the third quarter as
compared to 49.5% during the third quarter last year. The 31 basis-point
increase in gross profit rate was primarily due to improved shrink, cost
deflation and supply chain efficiencies, partially offset by increased
promotional activity. Year-to-date, the Company's gross profit rate was 49.9%,
which was consistent with the same period in fiscal 2011.

The Company's SG&A rate was 39.4% of sales during the third quarter as
compared to 37.3% during the same period last year. The 213 basis-point
increase was primarily due to increased spending on in-store labor and
advertising in an effort to drive consumer traffic and maintain market share
in the softer consumer environment and expense deleverage as a result of the
Company's lower sales volume. Year-to-date, the Company's SG&A rate was 38.8%
versus 38.5% during the same period last year.

The Company's operating income during the third quarter of $150.4 million
decreased 15.4% versus the third quarter of fiscal 2011. On a rate basis,
operating income was 10.3% of total sales as compared to 12.1% during the
third quarter of fiscal 2011. Year-to-date the Company's operating income rate
was 11.2% versus 11.4% during the same period last year.

Operating cash flow decreased 17.4% to $504.8 million from $611.0 million
through the third quarter of fiscal 2011. Free cash flow was $298.6 million
versus $354.8 million through the third quarter of fiscal 2011. Capital
expenditures were $201.2 million as compared to $207.5 million through the
third quarter of fiscal 2011.

“Our third quarter performance continued to reflect the ongoing softness in
our colder weather markets and a tougher economic environment impacting
consumer demand for auto parts as evidenced by softness in both our
maintenance and failure categories. While we are disappointed we did not
achieve our profitability expectations, we are encouraged by the improvements
in our sales trends, particularly in Commercial, from our second to third
quarter,” said Mike Norona, Executive Vice President and Chief Financial
Officer. “Our decision to trade off profitability in the short term is driven
by our confidence in the long-term industry fundamentals and ensuring we
position the company for fiscal 2013 with momentum as we expect a more
normalized winter. As a result of the short-term softness in our performance,
we now anticipate our fiscal 2012 EPS to be in the range $5.05 to $5.15 per
share.”


Comparable Key Financial Metrics and Statistics ^(1)
                                                                  
            Twelve Weeks Ended       Forty Weeks Ended       Fifty-Two Weeks Ended
            October 6,   October     October     October
                         8,          6,          8,
            2012         2011        2012        2011        FY 2011     FY 2010
                                                                         
Sales       (0.5    %)   4.2     %   0.7     %   4.0     %   4.1     %   9.5     %
Growth %
                                                                         
Sales per
Store       $ 1,683      $ 1,702     $ 1,683     $ 1,702     $ 1,708     $ 1,697
^(2)
                                                                         
Operating
Income      $ 178        $ 177       $ 178       $ 177       $ 184       $ 168
per Store
^(3)
                                                                         
Return on
Invested    18.9    %    18.8    %   18.9    %   18.8    %   19.5    %   17.5    %
Capital
^(4)
                                                                         
Gross
Margin
Return on   6.9          5.8         6.9         5.8         6.6         5.1
Inventory
^(5)
                                                                         
Total
Store
Square      27,194       26,533      27,194      26,533      26,663      25,950
Footage,
end of
period
                                                                         
Total
Team
Members,    54,220       52,386      54,220      52,386      52,002      51,017
end of
period
                                                                                 

      In thousands except for gross margin return on inventory and total Team
(1)  Members. The financial metrics presented are calculated on an annual
      basis and accordingly reflect the last four quarters completed, except
      for Sales Growth % and where noted.
(2)   Sales per store is calculated as net sales divided by an average of
      beginning and ending store count.
(3)   Operating income per store is calculated as operating income divided by
      an average of beginning and ending store count.
(4)   Return on invested capital (ROIC) is calculated in detail in the
      supplemental financial schedules.
      Gross margin return on inventory is calculated as gross profit divided
(5)   by an average of beginning and ending inventory, net of accounts payable
      and financed vendor accounts payable.
      

Store Information

During the third quarter, the Company opened 35 stores, including seven
Autopart International stores. Year-to-date, the Company opened 70 stores,
including 13 Autopart International stores. As of October6, 2012, the
Company's total store count was 3,727 including 210 Autopart International
stores. The Company remains on pace to open approximately 120 to 140 stores in
fiscal 2012.

Dividend

On November6, 2012, the Company's Board of Directors declared a regular
quarterly cash dividend of $0.06 per share to be paid on January4, 2013 to
stockholders of record as of December21, 2012.

Investor Conference Call

The Company will host a conference call on Thursday, November8, 2012 at 10:00
a.m. Eastern Time to discuss its quarterly results. To listen to the live
call, please log on to the Company's website, www.AdvanceAutoParts.com, or
dial (866) 908-1AAP. The call will be archived on the Company's website until
November 8, 2013.

About Advance Auto Parts

Headquartered in Roanoke, Va., Advance Auto Parts, Inc., 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 October6, 2012, the Company operated 3,727 stores in
39 states, Puerto Rico, and the Virgin Islands. Additional information about
the Company, employment opportunities, customer services, and online shopping
for parts, accessories and other offerings can be found on the Company's
website 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, capital
expenditures, comparable store sales, SG&A, operating income, gross profit
rate, free cash flow, profitability and earnings per diluted share for fiscal
year 2012. 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, business
interruptions, information technology security, 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 31, 2011 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.

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
                                                               
                                   October 6,      December 31,    October 8,
                                   2012            2011            2011
                                                                   
Assets
                                                                   
Current assets:
Cash and cash equivalents          $ 479,383       $ 57,901        $ 65,929
Receivables, net                   204,555         140,007         131,409
Inventories, net                   2,193,369       2,043,158       2,109,721
Other current assets               70,582         52,754         67,063
Total current assets               2,947,889       2,293,820       2,374,122
                                                                   
Property and equipment, net        1,270,432       1,223,099       1,191,453
Assets held for sale               788             615             707
Goodwill                           76,389          76,389          51,378
Intangible assets, net             28,649          31,380          29,122
Other assets, net                  33,059         30,451         31,286
                                   $ 4,357,206    $ 3,655,754    $ 3,678,068
                                                                   
Liabilities and Stockholders'
Equity
                                                                   
Current liabilities:
Current portion of long-term       $ 699           $ 848           $ 949
debt
Accounts payable                   1,825,162       1,653,183       1,586,058
Accrued expenses                   413,950         385,746         390,283
Other current liabilities          141,043        148,098        128,338
Total current liabilities          2,380,854       2,187,875       2,105,628
                                                                   
Long-term debt                     599,550         415,136         599,438
Other long-term liabilities        229,324         204,829         195,376
Total stockholders' equity         1,147,478      847,914        777,626
                                   $ 4,357,206    $ 3,655,754    $ 3,678,068
                                                                     

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
Twelve Week Periods Ended
October 6, 2012 and October 8, 2011
(in thousands, except per share data)
(unaudited)
                                                             
                                                 October 6,      October 8,
                                                 2012            2011
                                                                 
Net sales                                        $ 1,457,527     $ 1,464,988
Cost of sales, including purchasing and          732,177        740,485     
warehousing costs
Gross profit                                     725,350         724,503
Selling, general and administrative expenses     574,990        546,683     
Operating income                                 150,360        177,820     
Other, net:
Interest expense                                 (8,048      )   (8,150      )
Other income (expense), net                      312            (614        )
Total other, net                                 (7,736      )   (8,764      )
Income before provision for income taxes         142,624         169,056
Provision for income taxes                       53,121         63,503      
Net income                                       $ 89,503       $ 105,553   
                                                                 
Basic earnings per share ^(a)                    $ 1.22          $ 1.43
Diluted earnings per share ^(a)                  $ 1.21          $ 1.41
                                                                 
Average common shares outstanding ^(a)           73,166          73,381
Average common shares outstanding - assuming     73,992          74,730
dilution ^(a)
                                                                             

      Average common shares outstanding is calculated based on the weighted
(a)  average number of shares outstanding during the quarter. At October 6,
      2012 and October 8, 2011, we had 73,366 and 72,443 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 report, but do not include the footnotes required by GAAP
for complete financial statements.

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Forty Week Periods Ended
October 6, 2012 and October 8, 2011
(in thousands, except per share data)
(unaudited)
                                                              
                                                 October 6,      October 8,
                                                 2012            2011
                                                                 
Net sales                                        $ 4,875,802     $ 4,842,890
Cost of sales, including purchasing and          2,440,921      2,424,338   
warehousing costs
Gross profit                                     2,434,881       2,418,552
Selling, general and administrative expenses     1,890,762      1,865,828   
Operating income                                 544,119        552,724     
Other, net:
Interest expense                                 (25,849     )   (25,876     )
Other income (expense), net                      759            (771        )
Total other, net                                 (25,090     )   (26,647     )
Income before provision for income taxes         519,029         526,077
Provision for income taxes                       196,414        197,834     
Net income                                       $ 322,615      $ 328,243   
                                                                 
Basic earnings per share ^(a)                    $ 4.41          $ 4.27
Diluted earnings per share ^(a)                  $ 4.34          $ 4.19
                                                                 
Average common shares outstanding ^(a)           73,052          76,595
Average common shares outstanding - assuming     74,107          78,058
dilution ^(a)
                                                                             

      Average common shares outstanding is calculated based on the weighted
(a)  average number of shares outstanding during the year-to-date period. At
      October 6, 2012 and October 8, 2011, we had 73,366 and 72,443 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 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
Forty Week Periods Ended
October 6, 2012 and October 8, 2011
(in thousands)
(unaudited)
                                                                
                                                     October 6,    October 8,
                                                     2012          2011
                                                                   
Cash flows from operating activities:
Net income                                           $ 322,615     $ 328,243
Depreciation and amortization                        143,767       134,480
Share-based compensation                             12,132        14,232
Provision for deferred income taxes                  18,402        45,374
Excess tax benefit from share-based compensation     (21,867   )   (5,099    )
Other non-cash adjustments to net income             3,125         4,153
(Increase) decrease in:
Receivables, net                                     (64,171   )   (6,854    )
Inventories, net                                     (148,759  )   (245,851  )
Other assets                                         (14,827   )   17,715
Increase in:
Accounts payable                                     171,979       293,609
Accrued expenses                                     75,876        14,720
Other liabilities                                    6,510        16,260    
Net cash provided by operating activities            504,782       610,982
                                                                   
Cash flows from investing activities:
Purchases of property and equipment                  (201,210  )   (207,505  )
Business acquisitions, net of cash acquired          (5,332    )   (18,170   )
Proceeds from sales of property and equipment        348          1,114     
Net cash used in investing activities                (206,194  )   (224,561  )
Cash flows from financing activities:
Decrease in bank overdrafts                          (14,527   )   (9,555    )
Decrease in financed vendor accounts payable         —             (31,648   )
Net (payments) borrowings on credit facilities       (115,000  )   299,200
Issuance of senior unsecured notes                   299,904       —
Payment of debt related costs                        (2,648    )   (3,656    )
Dividends paid                                       (17,586   )   (18,541   )
Proceeds from the issuance of common stock,          7,182         12,452
primarily exercise of stock options
Tax withholdings related to the exercise of stock    (25,627   )   (3,151    )
appreciation rights
Excess tax benefit from share-based compensation     21,867        5,099
Repurchase of common stock                           (25,193   )   (629,189  )
Contingent consideration related to previous         (4,755    )   —
business acquisition
Other                                                (723      )   (712      )
Net cash provided by (used in) financing             122,894      (379,701  )
activities
                                                                   
Net increase in cash and cash equivalents            421,482       6,720
Cash and cash equivalents, beginning of period       57,901       59,209    
Cash and cash equivalents, end of period             $ 479,383    $ 65,929  
                                                                             

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
Forty Week Periods Ended
October 6, 2012 and October 8, 2011
(in thousands)
(unaudited)
                                                          
Reconciliation of Free Cash Flow:
                                                             
                                               October 6,    October 8,
                                               2012          2011
                                                             
Cash flows from operating activities           $ 504,782     $ 610,982
Cash flows used in investing activities        (206,194  )   (224,561  )
                                               298,588       386,421
                                                             
Decrease in financed vendor accounts payable   —            (31,648   )
                                                             
Free cash flow                                 $ 298,588    $ 354,773 
                                                                       

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
                                             October 6, 2012   October 8, 2011
                                                               
Net income                                   $   389,053       $   376,353
Add:
After-tax interest expense and other, net    18,543            20,529
After-tax rent expense                       196,804          192,777      
After-Tax Operating Earnings                 604,400           589,659
                                                               
Average assets (less cash)                   3,744,982         3,405,982
Less: Average liabilities (excluding total   (2,454,768   )    (2,125,062   )
debt)
Add: Capitalized lease obligation (rent      1,900,062        1,855,242    
expense * 6) ^(a)
Total Invested Capital                       3,190,276         3,136,162
                                                               
ROIC                                         18.9         %    18.8         %
                                                               
Rent expense                                 $   316,677       $   309,207
Interest expense and other, net              $   29,848        $   32,920
                                                                            

(a) Capitalized lease obligation is estimated as annualized rent expense for
the applicable period times six years.

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. Management believes our
comparable results of operations are a useful indicator to stockholders for
consistency purposes.

Contact:

Advance Auto Parts, Inc.
Media Contact
Shelly Whitaker, APR, 540-561-8452
shelly.whitaker@advanceautoparts.com
or
Investor Contact
Joshua Moore, 952-715-5076
joshua.moore@advanceautoparts.com
 
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