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 second quarter ended
July 18, 2015. Second quarter comparable cash earnings per
diluted share (Comparable Cash EPS) were $2.27, which included a
$0.03 unfavorable impact from foreign currency and was an increase
of 9.1% versus the second quarter last year. These second quarter
comparable results exclude $0.08 of amortization of acquired
intangible assets and integration costs of $0.16 primarily
associated with the acquisition of General Parts International,
Inc. (General Parts).
Comparable Second Quarter Performance Summary
(1) Twelve Weeks
Ended Twenty-Eight Weeks Ended July 18,
2015 July 12, 2014 July 18, 2015
July 12, 2014 Sales (in millions) $
2,370.0 $ 2,347.7 $ 5,408.3 $ 5,317.2
Comp Store Sales
% 1.0 % 2.6 % 0.8 % 2.5 %
Gross Profit (in
millions) $ 1,087.3 $ 1,062.1 $ 2,481.2 $ 2,415.2
Comparable SG&A (in millions) $ 801.8 $ 799.4 $ 1,887.5
$ 1,868.2
Comparable Operating Income (in millions) $
285.5 $ 262.7 $ 593.8 $ 547.1
Comparable Cash EPS $
2.27 $ 2.08 $ 4.65 $ 4.33
Avg Diluted Shares (in
thousands) 73,682 73,399 73,665 73,374
(1)
Fiscal 2015 and 2014 include certain
non-comparable expenses. The Comparable SG&A, Comparable
Operating Income and Comparable Cash EPS for the twelve weeks ended
July 18, 2015 and July 12, 2014, respectively, have been reported
on a comparable basis to exclude General Parts integration and
store consolidation costs of $18.6 million and $12.2 million,
respectively, and General Parts amortization of acquired intangible
assets of $9.8 million and $9.9 million, respectively. The
Comparable SG&A, Comparable Operating Income and Comparable
Cash EPS for the twenty-eight weeks ended July 18, 2015 and July
12, 2014, respectively, have been reported on a comparable basis to
exclude General Parts integration and store consolidation costs of
$51.3 million and $27.7 million, respectively, and General Parts
amortization of acquired intangible assets of $22.9 million and
$22.9 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.
“I would like to thank all our Team Members for their hard work
during the second quarter of 2015,” said Darren R. Jackson, Chief
Executive Officer. “Our second quarter comparable store sales
increased 1.0% and Comparable Cash EPS grew 9.1% to $2.27. These
results were in-line with our expectations given the continuing
demands of the General Parts integration. Our integration continues
to be on-track overall along with our sales and profitability.”
Second Quarter 2015 Highlights
Total sales for the second quarter increased 1.0% to $2.37
billion, as compared with total sales during the second quarter of
fiscal 2014 of $2.35 billion. The sales increase was driven by the
addition of new stores over the past 12 months and a comparable
store sales increase of 1.0% partially offset by changes in our
independent store count. Our comparable store sales were negatively
impacted by 34 basis points due to foreign currency fluctuations
from our Canadian operations.
The Company's Gross Profit rate was 45.9% of sales during the
second quarter as compared to 45.2% during the second quarter last
year. The 64 basis-point increase in gross profit rate was
primarily the result of lower product acquisition costs, inclusive
of the Company's ongoing merchandise cost synergy savings.
The Company's Comparable SG&A rate was 33.8% of sales during
the second quarter as compared to 34.0% during the same period last
year. The 22 basis-point decrease was primarily the result of lower
insurance costs and overall lower administrative costs driven by
synergy savings partially offset by expense de-leverage as a result
of our low comparable store sales growth. On a GAAP basis, the
Company's SG&A rate was 35.0% of sales during the second
quarter as compared to 35.0% during the same period last year.
The Company's Comparable Operating Income was $285.5 million
during the second quarter, an increase of 8.7% versus the second
quarter of fiscal 2014. As a percentage of sales, Comparable
Operating Income in the second quarter was 12.0% compared to 11.2%
during the second quarter of fiscal 2014. On a GAAP basis, the
Company's operating income during the second quarter of $257.0
million increased 6.8% versus the second quarter of fiscal 2014. On
a GAAP basis, the Operating Income rate was 10.8% during the second
quarter as compared to 10.3% during the second quarter of fiscal
2014.
Operating cash flow increased approximately 3.2% to $330.8
million through the second quarter of fiscal 2015 from $320.6
million through the second quarter of fiscal 2014. Free cash flow
increased to $216.3 million through the second quarter of fiscal
2015 from $214.3 million through the second quarter of fiscal 2014.
Capital expenditures through the second quarter of fiscal 2015 were
$114.5 million as compared to $106.3 million through the second
quarter of fiscal 2014.
“Our teams once again delivered on our synergy expectations,
expanded our core gross margins and demonstrated expense discipline
to grow our Comparable Operating Income 8.7% in the quarter,” said
Mike Norona, Executive Vice President and Chief Financial Officer.
“We continue to stay focused on our base business while meeting our
integration milestones and remain on pace to deliver against our
full-year guidance for Comparable Cash EPS in the range of $8.10 to
$8.30 including achievement of our full-year synergy targets.”
2015 Full-Year Outlook
The Company is maintaining its full-year guidance for Comparable
Cash EPS of $8.10 to $8.30. As part of its on-going process of
store evaluations, the Company has identified, and is subsequently
planning to close 50 stores in the latter part of 2015 in line with
the Company's accelerated efforts to achieve its 12% comparable
operating profit target in 2016. The one-time expense impact
of these closures is expected to be between $16 and $20 million in
2015. This effectively increases the 2015 full-year estimates for
one-time expenses from the original outlook of $75 to $85 million
disclosed in the Company's fourth quarter 2014 earnings release to
now be between $91 to $105 million.
Store Information
As of July 18, 2015, the Company operated 5,252 stores and
117 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 twenty-eight weeks ended July 18, 2015.
AAP AI BWP
CARQUEST WORLDPAC Total January 3,
2015 3,888 210 38 1,125 111
5,372 New 35 1 — 21 6 63 Closed (7 ) — — (1 ) — (8 )
Consolidated (1 ) (25 ) (2 ) (30 ) — (58 ) Converted 57 (4 )
(1 ) (52 ) — —
July 18, 2015 3,972
182 35 1,063
117 5,369
Dividend
On August 12, 2015, the Company's Board of Directors
declared a regular quarterly cash dividend of $0.06 per share to be
paid on October 2, 2015 to stockholders of record as of
September 18, 2015.
Investor Conference Call
The Company will host a conference call on Thursday, August 13,
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 August 13, 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 July 18, 2015 Advance operated 5,252 stores
and 117 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 76,000 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,
comparable operating income rate targets 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)
July 18, January 3,
July 12, 2015 2015 2014
Assets
Current assets: Cash and cash equivalents $ 114,536 $
104,671 $ 67,446 Receivables, net 653,309 579,825 621,702
Inventories, net 4,119,592 3,936,955 3,936,035 Other current assets
90,491 119,589 90,098 Total current assets 4,977,928
4,741,040 4,715,281
Property and equipment, net
1,400,342 1,432,030 1,422,083
Goodwill 991,742 995,426
1,000,456
Intangible assets, net 714,702 748,125 779,401
Other assets, net 83,161 45,737 52,052 $
8,167,875 $ 7,962,358 $ 7,969,273
Liabilities and
Stockholders' Equity
Current liabilities: Current portion of long-term
debt $ 591 $ 582 $ 70,694 Accounts payable 3,174,411 3,095,365
3,054,064 Accrued expenses 547,848 520,673 572,912 Other current
liabilities 156,908 126,446 77,017 Total current
liabilities 3,879,758 3,743,066 3,774,687
Long-term
debt 1,453,044 1,636,311 1,797,795
Other long-term
liabilities 545,944 580,069 582,266
Total stockholders'
equity 2,289,129 2,002,912 1,814,525 $ 8,167,875
$ 7,962,358 $ 7,969,273
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 July 12, 2014 have been adjusted for
opening balance sheet entries made subsequent to our second quarter
ended July 12, 2014.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Twelve
Week Periods Ended July 18, 2015 and July 12, 2014 (in
thousands, except per share data) (unaudited)
Q2 2015 Q2 2014 As
Reported
ComparableAdjustments
(a)
Comparable As Reported
ComparableAdjustments
(a)
Comparable Net sales $ 2,370,037 $ — $ 2,370,037 $
2,347,697 $ — $ 2,347,697 Cost of sales 1,282,748 —
1,282,748 1,285,589 — 1,285,589
Gross profit
1,087,289 — 1,087,289 1,062,108 — 1,062,108 Selling, general and
administrative expenses 830,240 (28,425 ) 801,815
821,435 (22,068 ) 799,367 Operating income 257,049
28,425 285,474 240,673 22,068
262,741 Other, net: Interest expense (15,438 ) — (15,438 )
(16,861 ) — (16,861 ) Other (expense) income, net (3,808 ) —
(3,808 ) 208 — 208 Total other, net (19,246 )
— (19,246 ) (16,653 ) — (16,653 ) Income before
provision for income taxes 237,803 28,425 266,228 224,020 22,068
246,088 Provision for income taxes 87,805 10,801
98,606 84,532 8,386 92,918 Net income $
149,998 $ 17,624 $ 167,622 $ 139,488 $
13,682 $ 153,170 Basic earnings per share (b)
$ 2.04 $ 0.24 $ 2.28 $ 1.91 $ 0.19 $ 2.09 Diluted earnings per
share (b) $ 2.03 $ 0.24 $ 2.27 $ 1.89 $ 0.19 $ 2.08 Average
common shares outstanding (b) 73,183 73,183 73,183 72,930 72,930
72,930 Average diluted common shares outstanding (b) 73,682 73,682
73,682 73,399 73,399 73,399
(a)
The comparable adjustments to Selling,
general and administrative expenses for Q2 2015 include General
Parts integration and store consolidation costs of $18.6 million
and General Parts amortization of acquired intangible assets of
$9.8 million. The comparable adjustments to Selling, general and
administrative expenses for Q2 2014 include General Parts
integration and store consolidation costs of $12.2 million and
General Parts amortization of acquired intangible assets of $9.9
million.
(b)
Average common shares outstanding is
calculated based on the weighted average number of shares
outstanding during the quarter. At July 18, 2015 and July 12, 2014,
we had 73,204 and 72,976 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 Operations
Twenty-Eight Week Periods Ended July 18, 2015 and July
12, 2014 (in thousands, except per share data) (unaudited)
2015 2014
As Reported
ComparableAdjustments
(a)
Comparable As Reported
ComparableAdjustments
(a)
Comparable Net sales $ 5,408,270 $ — $ 5,408,270 $
5,317,196 $ — $ 5,317,196 Cost of sales 2,927,057 —
2,927,057 2,901,966 — 2,901,966 Gross
profit 2,481,213 — 2,481,213 2,415,230 — 2,415,230 Selling, general
and administrative expenses 1,961,636 (74,176 ) 1,887,460
1,918,755 (50,605 ) 1,868,150 Operating income
519,577 74,176 593,753 496,475 50,605
547,080 Other, net: Interest expense (37,215 ) —
(37,215 ) (40,503 ) — (40,503 ) Other (expense) income, net (5,716
) — (5,716 ) 811 — 811 Total other, net
(42,931 ) — (42,931 ) (39,692 ) — (39,692 ) Income
before provision for income taxes 476,646 74,176 550,822 456,783
50,605 507,388 Provision for income taxes 178,536 28,187
206,723 169,569 19,230 188,799
Net income $ 298,110 $ 45,989 $ 344,099 $
287,214 $ 31,375 $ 318,589 Basic
earnings per share (b) $ 4.06 $ 0.62 $ 4.69 $ 3.93 $ 0.43 $ 4.36
Diluted earnings per share (b) $ 4.03 $ 0.62 $ 4.65 $ 3.90 $ 0.43 $
4.33 Average common shares outstanding (b) 73,148 73,148
73,148 72,895 72,895 72,895 Average diluted common shares
outstanding (b) 73,665 73,665 73,665 73,374 73,374 73,374
(a)
The comparable adjustments to Selling,
general and administrative expenses for year-to-date 2015 include
General Parts integration and store consolidation costs of $51.3
million and General Parts amortization of acquired intangible
assets of $22.9 million. The comparable adjustments to Selling,
general and administrative expenses for year-to-date 2014 include
General Parts integration and store consolidation costs of $27.7
million and General Parts amortization of acquired intangible
assets of $22.9 million.
(b)
Average common shares outstanding is
calculated based on the weighted average number of shares
outstanding during the year-to-date period. At July 18, 2015 and
July 12, 2014, we had 73,204 and 72,976 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
Twenty-Eight Week Periods Ended July 18, 2015 and July
12, 2014 (in thousands) (unaudited)
July
18, July 12, 2015 2014 Cash
flows from operating activities: Net income $ 298,110 $ 287,214
Depreciation and amortization 145,860 152,703 Share-based
compensation 17,726 12,363 (Benefit) provision for deferred income
taxes (8,481 ) 12,201 Excess tax benefit from share-based
compensation (8,435 ) (5,138 ) Other non-cash adjustments to net
income 8,459 2,391 Increase in: Receivables, net (76,124 ) (87,365
) Inventories, net (182,504 ) (217,372 ) Other assets (10,498 )
(39,048 ) Increase in: Accounts payable 85,907 169,352 Accrued
expenses 55,741 32,181 Other liabilities 5,055 1,079
Net cash provided by operating activities 330,816 320,561
Cash flows from investing activities: Purchases of property
and equipment (114,535 ) (106,270 ) Business acquisitions, net of
cash acquired (16,431 ) (2,059,184 ) Proceeds from sales of
property and equipment 477 130 Net cash used in
investing activities (130,489 ) (2,165,324 )
Cash flows from
financing activities: Increase in bank overdrafts 9,880 6,221
Net (payments) borrowings on credit facilities (183,400 ) 815,000
Dividends paid (13,227 ) (13,178 ) Proceeds from the issuance of
common stock, primarily for employee stock purchase plan 2,512
4,208 Tax withholdings related to the exercise of stock
appreciation rights (9,589 ) (4,120 ) Excess tax benefit from
share-based compensation 8,435 5,138 Repurchase of common stock
(1,734 ) (757 ) Contingent consideration related to previous
business acquisitions — (10,047 ) Other (207 ) (406 ) Net cash
(used in) provided by financing activities (187,330 ) 802,059
Effect of exchange rate changes on cash (3,132 )
(2,321 )
Net increase (decrease) in cash and cash
equivalents 9,865 (1,045,025 )
Cash and cash equivalents,
beginning of period 104,671 1,112,471
Cash and
cash equivalents, end of period $ 114,536 $ 67,446
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 18, 2015 and July 12, 2014 (in
thousands) (unaudited)
Reconciliation of
Free Cash Flow:
July 18, 2015 July 12, 2014
Cash flows from operating activities $ 330,816 $ 320,561
Purchases of property and equipment (114,535 ) (106,270 ) Free cash
flow $ 216,281 $ 214,291
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 July 18, January 3, 2015
2015 (Four Quarters Ended) (53 Weeks Ended) Total debt $
1,453,635 $ 1,636,893 Add: Capitalized lease obligation (rent
expense * 6) 3,155,292 3,038,904 Adjusted debt 4,608,927
4,675,797 Operating income 874,812 851,710 Add: Comparable
adjustments (a) 105,827 82,234 Depreciation and amortization
277,859 284,693 EBITDA 1,258,498 1,218,637 Rent expense
(less favorable lease amortization of $4,923 and $4,972,
respectively) 525,882 506,484 EBITDAR $ 1,784,380 $
1,725,121
Adjusted Debt to EBITDAR 2.6
2.7
(a)
The comparable adjustments to the four
quarters ended July 18, 2015 include General Parts integration and
store consolidation costs of $105.8 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.
Second Quarter
Performance Summary on a GAAP
Basis(a):
Twelve Weeks Ended Twenty-Eight Weeks Ended
July 18, July 12, July 18, July 12,
2015 2014 2015 2014 Sales
(in millions) $ 2,370.0 $ 2,347.7 $ 5,408.3 $ 5,317.2
Comp Store Sales % 1.0 % 2.6 % 0.8 % 2.5 %
Gross
Profit (in millions) $ 1,087.3 $ 1,062.1 $ 2,481.2 $ 2,415.2
SG&A (in millions) $ 830.2 $ 821.4 $ 1,961.6 $
1,918.8
Operating Income (in millions) $ 257.0 $
240.7 $ 519.6 $ 496.5
Diluted EPS $ 2.03 $ 1.89 $
4.03 $ 3.90
Avg Diluted Shares (in thousands) 73,682
73,399 73,665 73,374
(a)
These financial measures for the twelve
weeks ended July 18, 2015 have been reported on a GAAP basis which
includes the impact of General Parts integration and store
consolidation costs of $18.6 million and General Parts amortization
of acquired intangible assets of $9.8 million. These financial
measures for the twelve weeks ended July 12, 2014 have been
reported on a GAAP basis which includes the impact of General Parts
integration and store consolidation costs of $12.2 million and
General Parts amortization of acquired intangible assets of $9.9
million. These financial measures for the twenty-eight weeks ended
July 18, 2015 have been reported on a GAAP basis which includes the
impact of General Parts integration and store consolidation costs
of $51.3 million and General Parts amortization of acquired
intangible assets of $22.9 million. These financial measures for
the twenty-eight weeks ended July 12, 2014 have been reported on a
GAAP basis which includes the impact of General Parts integration
and store consolidation costs of $27.7 million and General Parts
amortization of acquired intangible assets of $22.9 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/20150813005348/en/
Advance Auto Parts, Inc.Media ContactLaurie Stacy,
540-561-8452laurie.stacy@advanceautoparts.comorInvestor
ContactZaheed Mawani,
919-573-3848zaheed.mawani@advanceautoparts.com
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