Advance Auto Parts, Inc. (NYSE: AAP), the largest automotive
aftermarket parts provider in North America, serving both
professional installer and do-it-yourself customers, today
announced its financial results for the first quarter ended
April 25, 2015. First quarter comparable cash earnings per
diluted share (Comparable Cash EPS) were $2.39, an increase of 6.2%
versus the first quarter last year. These first quarter comparable
results exclude $0.11 of amortization of acquired intangible assets
and integration costs of $0.28 primarily associated with the
acquisition of General Parts International, Inc. (General
Parts).
Comparable First Quarter Performance Summary
(1,2)
Sixteen Weeks Ended April 25,
2015 April 19, 2014 Sales (in
millions) $ 3,038.2 $ 2,969.5
Comp Store Sales % 0.7
% 2.4 %
Gross Profit (in millions) $ 1,393.9 $
1,353.1
Comparable SG&A (in millions) $ 1,085.6 $
1,068.7
Comparable Operating Income (in millions) $
308.3 $ 284.4
Comparable Cash EPS $ 2.39 $ 2.25
Avg Diluted Shares (in thousands) 73,653 73,355
(1)
Fiscal 2015 and 2014 include certain
non-comparable expenses. The Comparable SG&A, Comparable
Operating Income and Comparable Cash EPS for the sixteen weeks
ended April 25, 2015 and April 19, 2014, respectively, have been
reported on a comparable basis to exclude General Parts integration
and store consolidation costs of $32.7 million and $15.5 million,
respectively, and General Parts amortization of acquired intangible
assets of $13.0 million and $13.1 million, respectively. For a
better understanding of the Company's comparable results, refer to
the presentation of the respective financial measures on a GAAP
basis and reconciliation of the financial results reported on a
comparable basis to the GAAP basis in the accompanying financial
tables in this press release.
(2)
Consistent with its comparable store sales
policy, the Company has included the sales from the Carquest stores
and Worldpac branches in its comparable store sales beginning with
the Company's second fiscal period of 2015.
“I would like to thank all our Team Members for their hard work
during the first quarter of 2015,” said Darren R. Jackson, Chief
Executive Officer. “As we enter our second year of the General
Parts integration, we remain very confident with the growth,
service and earnings potential of the combined companies. We have
undertaken the industry’s largest acquisition and just completed
our heaviest quarter of integration activities to-date. Our first
quarter comparable store sales increased 0.7% and Comparable Cash
EPS grew 6.2% to $2.39. While these results did not meet our high
expectations, we remain confident in our integration plan and are
focused on executing the foundational work necessary to deliver the
full potential of the combination.”
First Quarter 2015 Highlights
Total sales for the first quarter increased 2.3% to $3.04
billion, as compared with total sales during the first quarter of
fiscal 2014 of $2.97 billion. The sales increase was driven by the
addition of new stores over the past 12 months and a comparable
store sales increase of 0.7%. Our sales were unfavorably impacted
primarily from integration activities and unfavorable weather.
The Company's Gross Profit rate was 45.9% of sales during the
first quarter as compared to 45.6% during the first quarter last
year. The 31 basis-point increase in gross profit rate was
primarily due to achieved merchandise cost synergies partially
offset by the costs from our new Hartford, CT distribution center,
which opened in late 2014.
The Company's Comparable SG&A rate was 35.7% of sales during
the first quarter as compared to 36.0% during the same period last
year. The 26 basis-point decrease was primarily the result of
achieved cost synergies and lower incentive compensation partially
offset by slightly higher advertising expenses. On a GAAP basis,
the Company's SG&A rate was 37.2% of sales during the first
quarter as compared to 37.0% during the same period last year.
The Company's Comparable Operating Income was $308.3 million
during the first quarter, an increase of 8.4% versus the first
quarter of fiscal 2014. As a percentage of sales, Comparable
Operating Income in the first quarter was 10.1% compared to 9.6%
during the first quarter of fiscal 2014. On a GAAP basis, the
Company's operating income during the first quarter of $262.5
million increased 2.6% versus the first quarter of fiscal 2014. On
a GAAP basis, the Operating Income rate was 8.6% during the first
quarter as compared to 8.6% during the first quarter of fiscal
2014.
Operating cash flow increased approximately 26.0% to $102.2
million in the first quarter of fiscal 2015 from $81.1 million in
the first quarter of fiscal 2014. Free cash flow increased to $45.2
million in the first quarter of fiscal 2015 from $20.6 million in
the first quarter of fiscal 2014. Capital expenditures in the first
quarter of fiscal 2015 were $57.0 million as compared to $60.5
million for the first quarter of fiscal 2014.
“Our first quarter results were softer than we expected
primarily driven by the change impacts of our integration
activities,” said Mike Norona, Executive Vice President and Chief
Financial Officer. "Despite the softness, we were pleased that we
delivered our synergy expectations and grew our Comparable
Operating Income 8.4%."
2015 Full-Year Outlook
The Company’s integration activities have progressed to the
operational phase of aligning the Company’s people, processes,
systems and capabilities to a common foundation. These integration
activities are an integral and necessary next step for the Company
to leverage the full potential of the acquisition. In the
first quarter of 2015, the Company executed a number of
simultaneous customer-facing organizational changes including
product and price alignment, integrating field organizational
structures, aligning compensation programs and changing
aspects of its customer processes. These activities were more
taxing on the Company and impacted the first quarter results.
"Turning to the balance of the year, we do expect to see some
continued short term business volatility from our integration
activities, given that these changes were sequenced throughout the
first quarter and our teams were still working through the changes
as we exited the quarter," said Mike Norona, Executive Vice
President and Chief Financial Officer. "It is prudent to build in
the earnings miss we experienced in our first quarter and also
factor in some continued integration headwinds into our results,
primarily impacting commercial sales. We now expect our annual
comparable store sales to be at the low end of the previously
communicated range. As part of this outlook, we expect our share
count to be 73.7 million shares, our tax rate to be in the range of
37.5% - 38% and our full-year interest expense to be approximately
$64 million. As a result, we are revising our full year Comparable
Cash EPS outlook down to $8.10 to $8.30. We are confident in our
team’s ability to execute and our revised full year outlook
reflects our best view of the short term change impacts from the
integration. Our 2015 synergy estimates remain unchanged at $45
million to $55 million for the full year."
Store Information
As of April 25, 2015, the Company operated 5,235 stores and
115 Worldpac branches and served approximately 1,300
independently-owned Carquest stores. The below table summarizes the
changes in the number of the company-operated stores and branches
during the sixteen weeks ended April 25, 2015.
AAP AI BWP CARQUEST
WORLDPAC Total January 3, 2015
3,888 210 38 1,125 111
5,372 New 20 — — 1 4 25 Closed (6 ) — — (1 ) — (7 )
Consolidated (1 ) (25 ) (2 ) (12 ) — (40 ) Converted 7 (4 )
— (3 ) — —
April 25, 2015 3,908
181 36 1,110
115 5,350
Dividend
On May 20, 2015, the Company's Board of Directors declared
a regular quarterly cash dividend of $0.06 per share to be paid on
July 2, 2015 to stockholders of record as of June 19,
2015.
Annual Stockholders' Meeting Announcements
The Company held its annual meeting of stockholders on May 20,
2015. During the meeting, the following individuals were elected to
serve on the Company's Board of Directors for the next year: John
F. Bergstrom, John C. Brouillard, Fiona P. Dias, John F. Ferraro,
Darren R. Jackson, Adriana Karaboutis, William S. Oglesby, J. Paul
Raines, Gilbert T. Ray, Carlos A. Saladrigas, O. Temple Sloan III,
and Jimmie L. Wade.
The Company's stockholders voted to approve the compensation of
the Company's named executive officers. The stockholders also
ratified the appointment by the Company's Audit Committee of
Deloitte & Touche LLP as its independent registered public
accounting firm for 2015. A majority of the shares voted were cast
against an advisory proposal regarding the ability of stockholders
to act by written consent.
Investor Conference Call
The Company will host a conference call on Thursday, May 21,
2015, 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 May 21, 2016.
About Advance Auto Parts
Headquartered in Roanoke, Va., Advance Auto Parts, Inc., the
largest automotive aftermarket parts provider in North America,
serves both the professional installer and do-it-yourself
customers. As of April 25, 2015 Advance operated 5,235 stores
and 115 Worldpac branches and served approximately 1,300
independently-owned Carquest branded stores in the United States,
Puerto Rico, the U.S. Virgin Islands and Canada. Advance
employs approximately 74,000 Team Members. Additional information
about the Company, employment opportunities, customer services, and
on-line shopping for parts, accessories and other offerings can be
found on the Company's website at www.AdvanceAutoParts.com.
Forward Looking Statements
Certain statements contained in this release are forward-looking
statements, as that term 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 forward looking statements include, but are not
limited to, guidance for 2015 financial performance, statements
regarding the benefits and other effects of the acquisition of
General Parts; the combined company’s plans, objectives and
expectations; expected growth and future performance of AAP,
including store growth, capital expenditures, comparable store
sales, gross profit rate, SG&A, operating income, free cash
flow, income tax rate, General Parts integration costs and store
consolidation costs, synergies, expenses to achieve synergies,
comparable cash earnings per diluted share for fiscal year 2015 and
other statements that are not historical facts. These
forward-looking statements are subject to significant risks,
uncertainties and assumptions, and actual future events or results
may differ materially from such forward-looking statements. Such
differences may result from, among other things, the risk that the
benefits of the General Parts acquisition, including synergies, may
not be fully realized or may take longer to realize than expected;
the possibility that the General Parts acquisition may not advance
AAP’s business strategy; the risk that AAP may experience
difficulty integrating General Part’s employees, business systems
and technology; the potential diversion of AAP’s management’s
attention from AAP’s other businesses resulting from the General
Parts acquisition; the impact of the General Parts acquisition on
third-party relationships, including customers, wholesalers,
independently owned and jobber stores and suppliers; changes in
regulatory, social and political conditions, as well as general
economic conditions; competitive pressures; demand for AAP’s and
General Parts' 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 AAP’s 10-K for the fiscal year ended January
3, 2015 and other filings made by AAP with the Securities and
Exchange Commission. Readers are cautioned not to place undue
reliance on these forward-looking statements. AAP intends these
forward-looking statements to speak only as of the time of this
communication 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)
April 25, 2015 January 3,
2015 April 19, 2014
Assets
Current assets: Cash and cash equivalents $ 123,821 $
104,671 $ 83,358 Receivables, net 631,926 579,825 574,998
Inventories, net 4,104,777 3,936,955 3,912,038 Other current assets
76,341 119,589 70,515 Total current assets 4,936,865
4,741,040 4,640,909
Property and equipment, net
1,397,950 1,432,030 1,425,923
Assets held for sale 615 615
615
Goodwill 993,276 995,426 1,025,239
Intangible assets,
net 729,765 748,125 789,825
Other assets, net 88,224
45,122 44,434 $ 8,146,695 $ 7,962,358 $
7,926,945
Liabilities and
Stockholders' Equity
Current liabilities: Current portion of long-term
debt $ 587 $ 582 $ 70,865 Accounts payable 3,138,574 3,095,365
2,967,861 Accrued expenses 536,931 520,673 551,642 Other current
liabilities 148,386 126,446 82,415 Total current
liabilities 3,824,478 3,743,066 3,672,783
Long-term
debt 1,609,687 1,636,311 2,001,740
Other long-term
liabilities 565,942 580,069 585,791
Total stockholders'
equity 2,146,588 2,002,912 1,666,631 $ 8,146,695
$ 7,962,358 $ 7,926,945
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. Certain
balance sheet lines as of April 19, 2014 have been adjusted for
opening balance sheet entries made subsequent to our first quarter
ended April 19, 2014.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Sixteen
Week Periods Ended April 25, 2015 and April 19, 2014 (in
thousands, except per share data) (unaudited)
Q1 2015 Q1 2014 As
Reported
ComparableAdjustments
(a)
Comparable As Reported
ComparableAdjustments
(a)
Comparable Net sales $ 3,038,233 $ — $ 3,038,233 $
2,969,499 $ — $ 2,969,499 Cost of sales 1,644,309 —
1,644,309 1,616,377 — 1,616,377 Gross
profit 1,393,924 — 1,393,924 1,353,122 — 1,353,122 Selling, general
and administrative expenses 1,131,396 (45,751 ) 1,085,645
1,097,320 (28,579 ) 1,068,741 Operating income
262,528 45,751 308,279 255,802 28,579
284,381 Other, net: Interest expense (21,777 ) —
(21,777 ) (23,642 ) — (23,642 ) Other income, net (1,908 ) —
(1,908 ) 603 — 603 Total other, net (23,685 )
— (23,685 ) (23,039 ) — (23,039 ) Income before
provision for income taxes 238,843 45,751 284,594 232,763 28,579
261,342 Provision for income taxes 90,731 17,385
108,116 85,037 10,860 95,897 Net income
$ 148,112 $ 28,366 $ 176,478 $ 147,726
$ 17,719 $ 165,445 Basic earnings per share
(b) $ 2.02 $ 0.38 $ 2.40 $ 2.02 $ 0.24 $ 2.26 Diluted earnings per
share (b) $ 2.00 $ 0.39 $ 2.39 $ 2.01 $ 0.24 $ 2.25 Average
common shares outstanding (b) 73,122 73,122 73,122 72,869 72,869
72,869 Average diluted common shares outstanding (b) 73,653 73,653
73,653 73,355 73,355 73,355
(a)
The comparable adjustments to Selling,
general and administrative expenses for Q1 2015 include General
Parts integration and store consolidation costs of $32.7 million
and General Parts amortization of acquired intangible assets of
$13.0 million. The comparable adjustments to Selling, general and
administrative expenses for Q1 2014 include General Parts
integration and store consolidation costs of $15.5 million and
General Parts amortization of acquired intangible assets of $13.1
million.
(b)
Average common shares outstanding is
calculated based on the weighted average number of shares
outstanding during the quarter. At April 25, 2015 and April 19,
2014, we had 73,168 and 72,947 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, with the exception of the footnotes required by GAAP for
complete financial statements and inclusion of certain non-GAAP
adjustments and measures as described in footnote (a) above.
Management believes the reporting of comparable results is
important in assessing the overall performance of the business and
is therefore useful for investors and prospective investors.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows Sixteen
Week Periods Ended April 25, 2015 and April 19, 2014 (in
thousands) (unaudited)
April 25, 2015
April 19, 2014 Cash flows from operating
activities: Net income $ 148,112 $ 147,726 Depreciation and
amortization 83,247 88,205 Share-based compensation 8,945 7,133
(Benefit) provision for deferred income taxes (5,206 ) 5,202 Excess
tax benefit from share-based compensation (6,498 ) (4,165 ) Other
non-cash adjustments to net income 6,189 1,247 Increase in:
Receivables, net (53,526 ) (45,507 ) Inventories, net (171,865 )
(196,062 ) Other assets (845 ) (16,458 ) Increase (decrease) in:
Accounts payable 45,678 101,381 Accrued expenses 39,494 (10,739 )
Other liabilities 8,486 3,168 Net cash provided by
operating activities 102,211 81,131
Cash flows from
investing activities: Purchases of property and equipment
(57,038 ) (60,529 ) Business acquisitions, net of cash acquired
(433 ) (2,056,937 ) Proceeds from sales of property and equipment
295 33 Net cash used in investing activities (57,176
) (2,117,433 )
Cash flows from financing activities:
Increase (decrease) in bank overdrafts 11,628 (5,796 ) Net
(payments) borrowings on credit facilities (26,700 ) 1,019,000
Dividends paid (8,813 ) (8,781 ) Proceeds from the issuance of
common stock, primarily exercise of stock options 1,352 2,979 Tax
withholdings related to the exercise of stock appreciation rights
(7,572 ) (3,118 ) Excess tax benefit from share-based compensation
6,506 4,165 Repurchase of common stock (1,590 ) (615 ) Other (118 )
(232 ) Net cash (used in) provided by financing activities (25,307
) 1,007,602 Effect of exchange rate changes on cash
(578 ) (413 )
Net increase (decrease) in cash and cash
equivalents 19,150 (1,029,113 )
Cash and cash equivalents,
beginning of period 104,671 1,112,471
Cash and
cash equivalents, end of period $ 123,821 $ 83,358
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 Sixteen Week Periods
Ended April 25, 2015 and April 19, 2014 (in thousands)
(unaudited)
Reconciliation of
Free Cash Flow:
April 25, 2015 April 19, 2014
Cash flows from operating activities $ 102,211 $ 81,131
Purchases of property and equipment (57,038 ) (60,529 ) Free cash
flow $ 45,173 $ 20,602
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.
Adjusted Debt to
EBITDAR:
(In thousands, except adjusted debt to EBITDAR ratio)
Four
Quarters Ended April 25, 2015 January 3,
2015
(Four QuartersEnded)
(53 weeks) Total debt $ 1,610,274 $ 1,636,893
Add:
Capitalized lease obligation (rent expense
* 6)
3,127,428 3,038,904 Adjusted debt 4,737,702 4,675,797
Operating income 858,436 851,710
Add:
Comparable adjustments (a)
99,417 82,234 Depreciation and amortization 280,351 284,693
EBITDA 1,238,204 1,218,637 Rent expense (less favorable
lease amortization of $4,923 and $4,972, respectively) 521,238
506,484 EBITDAR $ 1,759,442 $ 1,725,121
Adjusted Debt to EBITDAR 2.7 2.7
(a)
The comparable adjustments to the four
quarters ended April 25, 2015 include General Parts integration and
store consolidation costs of $99.4 million. The comparable
adjustments to Fiscal 2014 include General Parts integration and
store consolidation costs of $82.2 million.
NOTE: Management believes its Adjusted Debt to EBITDAR ratio
(“leverage ratio”) is a key financial metric and believes its debt
levels are best analyzed using this measure. The Company’s goal is
to quickly pay down debt resulting from the GPI acquisition, get
back to a 2.5 times leverage ratio and to maintain an investment
grade rating. The leverage ratio calculated by the Company is a
non-GAAP measure and should not be considered a substitute for debt
to net earnings, net earnings or debt as determined in accordance
with GAAP. The Company’s calculation of its leverage ratio might
not be calculated in the same manner as, and thus might not be
comparable to, similarly titled measures by other companies.
First Quarter
Performance Summary on a GAAP
Basis(a):
Sixteen Weeks Ended April 25, 2015
April 19, 2014 Sales (in millions) $
3,038.2 $ 2,969.5
Comp Store Sales % 0.7 % 2.4 %
Gross Profit (in millions) $ 1,393.9 $ 1,353.1
SG&A (in millions) $ 1,131.4 $ 1,097.3
Operating Income (in millions) $ 262.5 $ 255.8
Diluted EPS $ 2.00 $ 2.01
Avg Diluted Shares
(in thousands) 73,653 73,355 (a)
These financial measures for the sixteen
weeks ended April 25, 2015 have been reported on a GAAP basis which
includes the impact of General Parts integration and store
consolidation costs of $32.7 million and General Parts amortization
of acquired intangible assets of $13.0 million. These financial
measures for the sixteen weeks ended April 19, 2014 have been
reported on a GAAP basis which includes the impact of General Parts
integration and store consolidation costs of $15.5 million and
General Parts amortization of acquired intangible assets of $13.1
million. These financial measures should be read in conjunction
with our financial measures presented on a comparable basis earlier
in this press release. Management believes the reporting of
financial results on a non-GAAP basis to remain comparable is
important in assessing the overall performance of our base business
and is therefore useful for investors and prospective
investors.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150521005343/en/
Advance Auto Parts, Inc.Media:Laurie Stacy,
540-561-8452laurie.stacy@advanceautoparts.comorInvestor:Zaheed
Mawani, 919-573-3848zaheed.mawani@advanceautoparts.com
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