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| 8-K - AAP 8K - ADVANCE AUTO PARTS INC | a8k_q2x2012.htm |
News Release | Advance Auto Parts |
5008 Airport Road | |
Roanoke, VA 24012 | |
Shelly Whitaker, APR | |
Media Contact | |
t: 540-561-8452 | |
e: shelly.whitaker@advanceautoparts.com | |
Joshua Moore | |
Investor Contact | |
t: 952-715-5076 | |
e: joshua.moore@advanceautoparts.com | |
ADVANCE AUTO PARTS REPORTS SECOND QUARTER FISCAL 2012 RESULTS
ROANOKE, Va, August 9, 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 second fiscal quarter ended July 14, 2012. Second quarter earnings per diluted share (EPS) were $1.34 which was an 8.2% decrease versus the second quarter last year. Year-to-date, EPS was $3.14 which was an increase of 12.5% over the same period last year.
Second Quarter Performance Summary | ||||||||||||||||
Twelve Weeks Ended | Twenty-Eight Weeks Ended | |||||||||||||||
July 14, 2012 | July 16, 2011 | July 14, 2012 | July 16, 2011 | |||||||||||||
Sales (in millions) | $ | 1,461.0 | $ | 1,479.8 | $ | 3,418.3 | $ | 3,377.9 | ||||||||
Comp Store Sales % | (2.7 | %) | 2.5 | % | 0.0 | % | 1.9 | % | ||||||||
Gross Profit % | 49.9 | % | 49.7 | % | 50.0 | % | 50.2 | % | ||||||||
SG&A % | 38.3 | % | 37.0 | % | 38.5 | % | 39.1 | % | ||||||||
Operating Income % | 11.6 | % | 12.8 | % | 11.5 | % | 11.1 | % | ||||||||
Diluted EPS | $ | 1.34 | $ | 1.46 | $ | 3.14 | $ | 2.79 | ||||||||
Avg Diluted Shares (in thousands) | 74,084 | 77,426 | 74,157 | 79,484 | ||||||||||||
“As we anticipated, our second quarter faced weak consumer demand in both DIY and Commercial which resulted in our performance coming in at the low end of our outlook. The most significant slowdown was within our cold weather markets, principally in the Northeast and Great Lakes regions of the U.S.,” said Darren R. Jackson, President and Chief Executive Officer. “We remain encouraged by our positive comp store sales growth during the last period of our quarter, as well as the long-term fundamentals of our industry. As we look to the balance of the year we continue to focus on growing Commercial and competing more effectively through investments in areas such as Hub and inventory upgrades, our Commercial Sales Force and the launch of the new Advance Commercial Credit program.”
Fiscal Second Quarter and Year-to-Date Highlights
Total sales for the second quarter decreased 1.3% to $1.46 billion, compared with total sales of $1.48 billion during the second quarter of fiscal 2011. The sales decrease reflected a comparable store sales decrease of 2.7% versus a comparable store sales increase of 2.5% during the second quarter of fiscal 2011, partially offset by the net addition of 65 new stores during the past 12 months. Year-to-date, total sales increased 1.2% to $3.42 billion, compared with total sales of $3.38 billion over the same period last year.
The Company's gross profit rate was 49.9% of sales during the second quarter as compared to 49.7% during the second quarter last year. The 16 basis-point increase in gross profit rate was primarily due to improved store shrink and lower supply chain costs, partially offset by increased promotional activity. Year-to-date, the Company's gross profit rate was 50.0%, a 14 basis-point decrease over the same period in fiscal 2011.
The Company's SG&A rate was 38.3% of sales during the second quarter as compared to 37.0% during the same period last year. The 135 basis-point increase was primarily due to expense deleverage as a result of the Company's lower sales volume and a planned shift in expenses that occurred during the second quarter versus the first quarter. Year-to-date, the Company's SG&A rate was 38.5% versus 39.1% during the same period last year.
The Company's operating income during the second quarter of $169.2 million decreased 10.4% versus the second quarter of fiscal 2011. On a rate basis, operating income was 11.6% of total sales as compared to 12.8% during the second quarter of fiscal 2011.
Operating cash flow decreased 12.4% to $411.4 million from $469.6 million through the second quarter of fiscal 2011. Free cash flow was $265.4 million versus $287.3 million through the second quarter of fiscal 2011. Capital expenditures were $146.3 million as compared to $151.6 million through the second quarter of fiscal 2011.
“While we are not satisfied with our second quarter performance, resulting from weaker consumer demand, we remain committed to our strategic investments in commercial and availability as they are foundational to our future growth,” said Mike Norona, Executive Vice President and Chief Financial Officer. “Given the continued softness in our business trends, we believe it's prudent to be cautious in our outlook for both sales and profitability for the balance of the year. As a result, we now anticipate our fiscal 2012 comparable store sales to be flat to slightly down and our EPS to be in the range $5.25 to $5.35 per share.”
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Comparable Key Financial Metrics and Statistics (1) | ||||||||||||||||||||||||
Twelve Weeks Ended | Twenty-Eight Weeks Ended | Fifty-Two Weeks Ended | ||||||||||||||||||||||
July 14, 2012 | July 16, 2011 | July 14, 2012 | July 16, 2011 | FY 2011 | FY 2010 | |||||||||||||||||||
Sales Growth % | (1.3 | %) | 4.4 | % | 1.2 | % | 4.0 | % | 4.1 | % | 9.5 | % | ||||||||||||
Sales per Store (2) | $ | 1,697 | $ | 1,700 | $ | 1,697 | $ | 1,700 | $ | 1,708 | $ | 1,697 | ||||||||||||
Operating Income per Store (3) | $ | 187 | $ | 170 | $ | 187 | $ | 170 | $ | 184 | $ | 168 | ||||||||||||
Return on Invested Capital (4) | 19.9 | % | 18.5 | % | 19.9 | % | 18.5 | % | 19.5 | % | 17.5 | % | ||||||||||||
Gross Margin Return on Inventory (5) | 7.0 | 5.9 | 7.0 | 5.9 | 6.6 | 5.1 | ||||||||||||||||||
Total Store Square Footage, end of period | 26,927 | 26,400 | 26,927 | 26,400 | 26,663 | 25,950 | ||||||||||||||||||
Total Team Members, end of period | 53,464 | 52,141 | 53,464 | 52,141 | 52,002 | 51,017 | ||||||||||||||||||
(1) | In thousands except for gross margin return on inventory and total Team 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. |
(5) | Gross margin return on inventory is calculated as gross profit divided by an average of beginning and ending inventory, net of accounts payable and financed vendor accounts payable. |
Store Information
During the second quarter, the Company opened 10 stores, including three Autopart International stores. Year-to-date, the Company opened 35 stores, including six Autopart International stores. As of July 14, 2012, the Company's total store count was 3,692 including 203 Autopart International stores. The Company remains on pace to open approximately 120 to 140 stores in fiscal 2012.
Dividend
On August 7, 2012, the Company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on October 5, 2012 to stockholders of record as of September 21, 2012.
Investor Conference Call
The Company will host a conference call on Thursday, August 9, 2012 at 10:00 a.m. Eastern Daylight 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 August 9, 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 July 14, 2012, the Company operated 3,692 stores in 39 states, Puerto Rico, and the Virgin
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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.
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Advance Auto Parts, Inc. and Subsidiaries | ||||||||||||
Condensed Consolidated Balance Sheets | ||||||||||||
(in thousands) | ||||||||||||
(unaudited) | ||||||||||||
July 14, 2012 | December 31, 2011 | July 16, 2011 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 448,594 | $ | 57,901 | $ | 68,820 | ||||||
Receivables, net | 159,349 | 140,007 | 122,188 | |||||||||
Inventories, net | 2,096,341 | 2,043,158 | 2,091,913 | |||||||||
Other current assets | 60,883 | 52,754 | 59,245 | |||||||||
Total current assets | 2,765,167 | 2,293,820 | 2,342,166 | |||||||||
Property and equipment, net | 1,263,680 | 1,223,099 | 1,172,132 | |||||||||
Assets held for sale | 788 | 615 | 707 | |||||||||
Goodwill | 76,389 | 76,389 | 34,387 | |||||||||
Intangible assets, net | 29,468 | 31,380 | 24,839 | |||||||||
Other assets, net | 33,654 | 30,451 | 29,237 | |||||||||
$ | 4,169,146 | $ | 3,655,754 | $ | 3,603,468 | |||||||
Liabilities and Stockholders' Equity | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of long-term debt | $ | 760 | $ | 848 | $ | 991 | ||||||
Accounts payable | 1,738,101 | 1,653,183 | 1,570,320 | |||||||||
Accrued expenses | 417,663 | 385,746 | 396,187 | |||||||||
Other current liabilities | 135,517 | 148,098 | 118,537 | |||||||||
Total current liabilities | 2,292,041 | 2,187,875 | 2,086,035 | |||||||||
Long-term debt | 599,696 | 415,136 | 565,420 | |||||||||
Other long-term liabilities | 218,308 | 204,829 | 187,735 | |||||||||
Total stockholders' equity | 1,059,101 | 847,914 | 764,278 | |||||||||
$ | 4,169,146 | $ | 3,655,754 | $ | 3,603,468 | |||||||
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 | |||||||||
July 14, 2012 and July 16, 2011 | |||||||||
(in thousands, except per share data) | |||||||||
(unaudited) | |||||||||
July 14, 2012 | July 16, 2011 | ||||||||
Net sales | $ | 1,460,983 | $ | 1,479,839 | |||||
Cost of sales, including purchasing and warehousing costs | 732,125 | 743,991 | |||||||
Gross profit | 728,858 | 735,848 | |||||||
Selling, general and administrative expenses | 559,663 | 546,921 | |||||||
Operating income | 169,195 | 188,927 | |||||||
Other, net: | |||||||||
Interest expense | (7,947 | ) | (8,007 | ) | |||||
Other expense, net | (55 | ) | (212 | ) | |||||
Total other, net | (8,002 | ) | (8,219 | ) | |||||
Income before provision for income taxes | 161,193 | 180,708 | |||||||
Provision for income taxes | 61,587 | 67,601 | |||||||
Net income | $ | 99,606 | $ | 113,107 | |||||
Basic earnings per share (a) | $ | 1.36 | $ | 1.48 | |||||
Diluted earnings per share (a) | $ | 1.34 | $ | 1.46 | |||||
Average common shares outstanding (a) | 73,150 | 75,979 | |||||||
Average common shares outstanding - assuming dilution (a) | 74,084 | 77,426 | |||||||
(a) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding during the quarter. At July 14, 2012 and July 16, 2011, we had 73,325 and 74,072 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 | |||||||||
Twenty-Eight Week Periods Ended | |||||||||
July 14, 2012 and July 16, 2011 | |||||||||
(in thousands, except per share data) | |||||||||
(unaudited) | |||||||||
July 14, 2012 | July 16, 2011 | ||||||||
Net sales | $ | 3,418,275 | $ | 3,377,902 | |||||
Cost of sales, including purchasing and warehousing costs | 1,708,744 | 1,683,853 | |||||||
Gross profit | 1,709,531 | 1,694,049 | |||||||
Selling, general and administrative expenses | 1,315,772 | 1,319,145 | |||||||
Operating income | 393,759 | 374,904 | |||||||
Other, net: | |||||||||
Interest expense | (17,801 | ) | (17,726 | ) | |||||
Other income (expense), net | 447 | (157 | ) | ||||||
Total other, net | (17,354 | ) | (17,883 | ) | |||||
Income before provision for income taxes | 376,405 | 357,021 | |||||||
Provision for income taxes | 143,293 | 134,331 | |||||||
Net income | $ | 233,112 | $ | 222,690 | |||||
Basic earnings per share (a) | $ | 3.19 | $ | 2.85 | |||||
Diluted earnings per share (a) | $ | 3.14 | $ | 2.79 | |||||
Average common shares outstanding (a) | 73,003 | 77,973 | |||||||
Average common shares outstanding - assuming dilution (a) | 74,157 | 79,484 | |||||||
(a) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding during the year-to-date period. At July 14, 2012 and July 16, 2011, we had 73,325 and 74,072 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 | ||||||||
Twenty-Eight Week Periods Ended | ||||||||
July 14, 2012 and July 16, 2011 | ||||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
July 14, 2012 | July 16, 2011 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 233,112 | $ | 222,690 | ||||
Depreciation and amortization | 98,527 | 92,973 | ||||||
Share-based compensation | 9,280 | 9,992 | ||||||
Provision for deferred income taxes | 1,526 | 25,962 | ||||||
Excess tax benefit from share-based compensation | (20,685 | ) | (4,780 | ) | ||||
Other non-cash adjustments to net income | 2,232 | 2,674 | ||||||
(Increase) decrease in: | ||||||||
Receivables, net | (19,342 | ) | 2,057 | |||||
Inventories, net | (53,183 | ) | (228,043 | ) | ||||
Other assets | (7,483 | ) | 17,162 | |||||
Increase in: | ||||||||
Accounts payable | 84,918 | 278,207 | ||||||
Accrued expenses | 75,037 | 41,922 | ||||||
Other liabilities | 7,444 | 8,734 | ||||||
Net cash provided by operating activities | 411,383 | 469,550 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (146,281 | ) | (151,595 | ) | ||||
Proceeds from sales of property and equipment | 268 | 1,028 | ||||||
Net cash used in investing activities | (146,013 | ) | (150,567 | ) | ||||
Cash flows from financing activities: | ||||||||
Decrease in bank overdrafts | (16,181 | ) | (7,820 | ) | ||||
Decrease in financed vendor accounts payable | — | (31,648 | ) | |||||
Net (payments) borrowings on credit facilities | (115,000 | ) | 265,000 | |||||
Issuance of senior unsecured notes | 299,904 | — | ||||||
Payment of debt related costs | (2,648 | ) | (3,561 | ) | ||||
Dividends paid | (13,196 | ) | (14,155 | ) | ||||
Proceeds from the issuance of common stock, primarily exercise of stock options | 6,260 | 10,514 | ||||||
Tax withholdings related to the exercise of stock appreciation rights | (24,214 | ) | (2,841 | ) | ||||
Excess tax benefit from share-based compensation | 20,685 | 4,780 | ||||||
Repurchase of common stock | (25,042 | ) | (529,176 | ) | ||||
Contingent consideration related to previous business acquisition | (4,755 | ) | — | |||||
Other | (490 | ) | (465 | ) | ||||
Net cash provided by (used in) financing activities | 125,323 | (309,372 | ) | |||||
Net increase in cash and cash equivalents | 390,693 | 9,611 | ||||||
Cash and cash equivalents, beginning of period | 57,901 | 59,209 | ||||||
Cash and cash equivalents, end of period | $ | 448,594 | $ | 68,820 | ||||
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 | ||||||||
Twenty-Eight Week Periods Ended | ||||||||
July 14, 2012 and July 16, 2011 | ||||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Reconciliation of Free Cash Flow: | ||||||||
July 14, 2012 | July 16, 2011 | |||||||
Cash flows from operating activities | $ | 411,383 | $ | 469,550 | ||||
Cash flows used in investing activities | (146,013 | ) | (150,567 | ) | ||||
265,370 | 318,983 | |||||||
Decrease in financed vendor accounts payable | — | (31,648 | ) | |||||
Free cash flow | $ | 265,370 | $ | 287,335 | ||||
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 | ||||||||
July 14, 2012 | July 16, 2011 | |||||||
Net income | $ | 405,103 | $ | 358,401 | ||||
Add: | ||||||||
After-tax interest expense and other, net | 19,168 | 19,619 | ||||||
After-tax rent expense | 193,850 | 190,984 | ||||||
After-Tax Operating Earnings | 618,121 | 569,004 | ||||||
Average assets (less cash) | 3,627,600 | 3,351,278 | ||||||
Less: Average liabilities (excluding total debt) | (2,391,184 | ) | (2,116,364 | ) | ||||
Add: Capitalized lease obligation (rent expense * 6) (a) | 1,873,212 | 1,837,002 | ||||||
Total Invested Capital | 3,109,628 | 3,071,916 | ||||||
ROIC | 19.9 | % | 18.5 | % | ||||
Rent expense | $ | 312,202 | $ | 306,167 | ||||
Interest expense and other, net | $ | 30,877 | $ | 31,451 | ||||
(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.