Net Sales Increased 23.4% to $3.3 billion,
Comparable Store Sales Increased by 24.7%
Operating Income Margin Increased 466 basis
points; Adjusted Operating Income Margin Increased 478 basis
points
Diluted EPS Increased 346.0% to $2.81; Adjusted
Diluted EPS Increased 234.0% to $3.34
Advance Auto Parts, Inc. (NYSE: AAP), a leading automotive
aftermarket parts provider in North America, that serves both
professional installer and do-it-yourself customers, today
announced its financial results for the first quarter ended April
24, 2021.
"In the first quarter of 2021, we delivered record-breaking
sales growth across our business, as both DIY and professional
customers turned to Advance for their automotive needs amid a
strong industry backdrop," said Tom Greco, president and chief
executive officer. "I want to thank all our team members and
independent partners for their relentless focus on execution during
the quarter. In addition to the positive macro environment, our
significant investments in both the business and our team over the
past several years led to an improved customer experience and
margin expansion. We delivered comparable store sales growth in the
first quarter of 24.7% and adjusted operating income margin
expansion of 478 basis points. Robust consumer demand, on-going
cost control and operational improvements helped enable both gross
margin and SG&A expense leverage, resulting in an all-time high
for quarterly adjusted diluted EPS.
"Our commitment and actions to protect the financial strength of
the business during the pandemic resulted in first quarter free
cash flow of $259 million. In addition, we returned $204 million to
our shareholders through the combination of share repurchases and
our quarterly cash dividend of $0.25 per share. Based on the health
of our balance sheet and the confidence in our continued cash
generation, our board recently approved an additional $1 billion
share repurchase authorization and a significant increase in our
quarterly cash dividend. We're committed to a balanced approach in
returning cash to shareholders and our recent actions are a
testament to that commitment. Building on the strength of our
brands and our diversified digital and physical asset base, we
remain focused on the execution of the long-term strategy we
discussed in April to drive total shareholder returns for years to
come."
Q1 2021 Highlights (1)
- Net sales increased 23.4% to $3.3 billion
- Comparable store sales (2) increased 24.7%; On a two-year
stack, Comparable store sales increased 15.4%
- Operating income increased 221.5% to $252.1 million; Operating
income margin expanded 466 basis points to 7.6%
- Adjusted operating income (2) increased 164.0% to $298.8
million; Adjusted operating income margin (2) expanded 478 basis
points to 9.0%
- Diluted EPS increased 346.0% to $2.81; Adjusted Diluted EPS (2)
increased 234.0% to $3.34
- Operating cash flow increased to $329.9 million from $10.9
million; Free cash flow (2) increased to $259.0 million from
$(72.1) million
- Returned approximately $203.5 million to shareholders through
the combination of share repurchases and the company’s quarterly
cash dividend
_______________________________________
1
All comparisons are based on the same time period in the prior
year. Beginning in the first quarter of 2021, the impact of LIFO on
the company's results of operations is included as a reconciling
item to arrive at its non-GAAP financial measures. For further
information, refer to the reconciliation of non-GAAP adjustments in
the accompanying financial tables included herein.
2
Comparable store sales exclude sales to independently owned
Carquest locations. For a better understanding of the company's
adjusted results, refer to the reconciliation of non-GAAP
adjustments in the accompanying financial tables included herein.
First Quarter 2021 Operating Results
Net sales for the first quarter of 2021 were $3.3 billion, a
23.4% increase versus the first quarter of the prior year.
Comparable store sales for the first quarter of 2021 increased
24.7%.
Adjusted gross profit increased 26.0% to $1.5 billion. Adjusted
gross profit margin was 44.8% of Net sales in the first quarter of
2021, a 91 basis point increase from the first quarter of 2020,
driven by an increase in net sales, improvements in supply chain
leverage, pricing actions, channel mix as well as material cost
optimization. These improvements were slightly offset by
unfavorable inventory related costs, product mix and headwinds
associated with shrink and defectives. The company's GAAP Gross
profit margin increased to 44.6% from 43.5% in the first quarter of
2020.
Adjusted SG&A increased $121.9 million to $1.2 billion.
Adjusted SG&A was 35.8% of Net sales in the first quarter of
2021, which improved 387 basis points as compared to the first
quarter of 2020. The improvement was driven by fixed cost leverage
primarily related to payroll and rent as well as lower insurance
and claims related expenses from the company's continued efforts on
safety. The savings were partially offset by an increase in field
bonus, marketing investments as well as an increase in third-party
and service contracts related to IT transformational plans. The
company's GAAP SG&A was 37.0% of Net sales in the first quarter
of 2021 compared to 40.6% in the first quarter of 2020.
The company's Adjusted operating income was $298.8 million in
the first quarter of 2021, including approximately $16 million in
COVID-19 related expenses, compared to $113.2 million in the first
quarter of the prior year. Adjusted operating income margin of 9.0%
of Net sales in the first quarter of 2021 increased 478 basis
points for the first quarter for 2021 compared to the first quarter
of the prior year. On a GAAP basis, the company's Operating income
was $252.1 million, or 7.6% of Net sales, an increase of 466 basis
points compared to the first quarter of 2020.
The company's effective tax rate in the first quarter of 2021
was 24.3%, compared to 27.6% in the first quarter of the prior
year. The company's Adjusted diluted EPS was $3.34 for the first
quarter of 2021, an increase of 234.0% compared to the first
quarter of the prior year. On a GAAP basis, the company's Diluted
EPS increased 346.0% to $2.81.
Year to date Operating cash flow was $329.9 million through the
first quarter of 2021 versus $10.9 million in the same period of
the prior year. The increase was primarily driven by the increased
cash generated from operations and other working capital
improvements. Free cash flow through the first quarter of 2021 was
$259.0 million.
Capital Allocation
On April 19, 2021, the company's Board of Directors approved an
additional share repurchase authorization of $1.0 billion. During
the first quarter of 2021, the company repurchased approximately
1.1 million shares of its common stock for an aggregate amount of
approximately $170.4 million, or an average price of $157.84 per
share. At the end of the first quarter of 2021, the company had
approximately $1.3 billion remaining under the share repurchase
program.
On April 19, 2021 the company's Board of Directors declared a
regular cash dividend of $1.00 per share to be paid on July 2, 2021
to all common stockholders of record as of June 18, 2021.
Updated 2021 Full Year Guidance
"We continue to see top-line sales strength in the early weeks
of the second quarter of 2021," said Jeff Shepherd, executive vice
president and chief financial officer. "Through the first four
weeks of Q2, our comp sales continue to trend in the mid-teens and
on a two-year stack are comparable with our Q1 2021 increase of
15.4%. While we're still anticipating significant volatility
throughout the balance of this year due to macro-economic factors,
we're again updating our full year guidance to reflect this
continued top-line momentum."
Prior Outlook
Updated Outlook
As of April 20, 2021
As of June 2, 2021
Full Year 2021
Full Year 2021
($ in millions)
Low
High
Low
High
Net sales
$10,200
$10,400
$10,400
$10,600
Comparable store sales
2.0%
4.0%
4.0%
6.0%
Adjusted operating income margin (1)
8.9%
9.1%
9.0%
9.2%
Income tax rate
24%
26%
24%
26%
Capital expenditures
$300
$350
$300
$350
Free cash flow (1)
Minimum $575
Minimum $575
New store openings
100
150
100
150
(1)
For a better understanding of the company's adjusted results, refer
to the reconciliation of non-GAAP adjustments in the accompanying
financial tables included herein. Because of the forward-looking
nature of the 2021 non-GAAP financial measures, specific
quantification of the amounts that would be required to reconcile
these non-GAAP financial measures to their most directly comparable
GAAP financial measures are not available at this time.
Investor Conference Call
The company will host a webcast to discuss its results for the
first quarter of 2021 and other business updates scheduled to begin
at 8 a.m. Eastern Time on Wednesday, June 2, 2021. The webcast will
be accessible via the Investor Relations page of the company's
website (www.AdvanceAutoParts.com).
To join by phone, please pre-register
online for dial-in and passcode information. Upon
registering, participants will receive a confirmation with call
details and a registrant ID. While registration is open through the
live call, the company suggests registering a day in advance or at
minimum 10 minutes before the start of the call. A replay of the
conference call will be available on the Advance website for one
year.
About Advance Auto Parts
Advance Auto Parts, Inc. is a leading automotive aftermarket
parts provider that serves both professional installer and
do-it-yourself customers. As of April 24, 2021, Advance operated
4,793 stores and 178 Worldpac branches in the United States,
Canada, Puerto Rico and the U.S. Virgin Islands. The company also
serves 1,285 independently owned Carquest branded stores across
these locations in addition to Mexico, Grand Cayman, the Bahamas,
Turks and Caicos and the British Virgin Islands. Additional
information about Advance, including employment opportunities,
customer services, and online shopping for parts, accessories and
other offerings can be found at www.AdvanceAutoParts.com.
Forward-Looking Statements
Certain statements herein are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are usually identifiable by
words such as “anticipate,” “believe,” “could,” “estimate,”
“expect,” “forecast,” "guidance," “intend,” “likely,” “may,”
“plan,” “position,” “possible,” “potential,” “probable,” “project,”
“should,” “strategy,” “will,” or similar language. All statements
other than statements of historical fact are forward-looking
statements, including, but not limited to, statements about the
company's strategic initiatives, operational plans and objectives,
expectations for economic recovery and future business and
financial performance, as well as statements regarding underlying
assumptions related thereto. Forward-looking statements reflect the
company's views based on historical results, current information
and assumptions related to future developments. Except as may be
required by law, the company undertakes no obligation to update any
forward-looking statements made herein. Forward-looking statements
are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those projected or implied
by the forward-looking statements. They include, among others,
factors related to the timing and implementation of strategic
initiatives, the highly competitive nature of the company's
industry, demand for the company's products and services,
complexities in its inventory and supply chain, challenges with
transforming and growing its business and factors related to the
current global pandemic. Please refer to “Item 1A. Risk Factors.”
of the company's most recent Annual Report on Form 10-K for a
description of these and other risks and uncertainties that could
cause actual results to differ materially from those projected or
implied by the forward-looking statements
Advance Auto Parts, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
April 24, 2021 (1)
January 2, 2021 (2)
Assets
Current assets:
Cash and cash equivalents
$
880,233
$
834,992
Receivables, net
804,826
749,999
Inventories
4,476,656
4,538,199
Other current assets
149,003
146,811
Total current assets
6,310,718
6,270,001
Property and equipment, net
1,463,990
1,462,602
Operating lease right-of-use
assets
2,378,964
2,379,987
Goodwill
994,530
993,590
Intangible assets, net
672,455
681,127
Other assets
47,831
52,329
$
11,868,488
$
11,839,636
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
3,737,853
$
3,640,639
Accrued expenses
603,327
606,804
Other current liabilities
451,243
496,472
Total current liabilities
4,792,423
4,743,915
Long-term debt
1,033,369
1,032,984
Noncurrent operating lease
liabilities
2,035,785
2,014,499
Deferred income taxes
357,343
342,445
Other long-term liabilities
148,001
146,281
Total stockholders' equity
3,501,567
3,559,512
$
11,868,488
$
11,839,636
(1)
This preliminary condensed consolidated balance sheet has been
prepared on a basis consistent with the company's previously
prepared consolidated balance sheets filed with the Securities and
Exchange Commission (“SEC”), but does not include the footnotes
required by accounting principles generally accepted in the United
States of America (“GAAP”).
(2)
The balance sheet at January 2, 2021 has been derived from the
audited consolidated financial statements at that date, but does
not include the footnotes required by GAAP.
Advance Auto Parts, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(in thousands, except per share
data)
(unaudited)
Sixteen Weeks Ended
April 24, 2021 (1)
April 18, 2020 (1)
Net sales
$
3,330,370
$
2,697,882
Cost of sales, including purchasing and
warehousing costs
1,845,444
1,525,149
Gross profit
1,484,926
1,172,733
Selling, general and administrative
expenses
1,232,797
1,094,308
Operating income
252,129
78,425
Other, net:
Interest expense
(11,191)
(12,243)
Other income (expense), net
4,836
(5,989)
Total other, net
(6,355)
(18,232)
Income before provision for income
taxes
245,774
60,193
Provision for income taxes
59,844
16,605
Net income
$
185,930
$
43,588
Basic earnings per common share
$
2.83
$
0.63
Weighted average common shares
outstanding
65,688
69,181
Diluted earnings per common share
$
2.81
$
0.63
Weighted average common shares
outstanding
66,102
69,392
(1)
These preliminary condensed consolidated statements of operations
have been prepared on a basis consistent with the company's
previously prepared consolidated statements of operations filed
with the SEC, but do not include the footnotes required by GAAP.
Advance Auto Parts, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Sixteen Weeks Ended
April 24, 2021 (1)
April 18, 2020 (1)
Net income
$
185,930
$
43,588
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
77,253
78,579
Share-based compensation
16,260
13,809
Provision for deferred income taxes
14,660
146
Other, net
5,275
1,415
Net change in:
Receivables, net
(53,982)
59,303
Inventories
63,883
(104,899)
Accounts payable
96,094
(112,459)
Accrued expenses
(50,949)
(1,824)
Other assets and liabilities, net
(24,492)
33,250
Net cash provided by operating
activities
329,932
10,908
Cash flows from investing
activities:
Purchases of property and equipment
(70,884)
(82,973)
Purchase of an indefinite-lived intangible
asset
—
(230)
Proceeds from sales of property and
equipment
590
71
Net cash used in investing activities
(70,294)
(83,132)
Cash flows from financing
activities:
Proceeds from borrowing on revolving
credit facility
—
500,000
Proceeds from issuances of senior
unsecured notes, net
—
498,240
Dividends paid
(33,146)
(21,593)
Proceeds from the issuance of common
stock
—
735
Repurchases of common stock
(183,647)
(35,761)
Other, net
104
(4,763)
Net cash (used in) provided by financing
activities
(216,689)
936,858
Effect of exchange rate changes on
cash
2,292
(3,461)
Net increase in cash and cash
equivalents
45,241
861,173
Cash and cash equivalents,
beginning of period
834,992
418,665
Cash and cash equivalents, end of
period
$
880,233
$
1,279,838
(1)
These preliminary condensed consolidated statements of cash flows
have been prepared on a consistent basis with the company's
previously prepared consolidated statements of cash flows filed
with the SEC, but do not include the footnotes required by GAAP.
Reconciliation of Non-GAAP Financial
Measures
The company's financial results include certain financial
measures not derived in accordance with accounting principles
generally accepted in the United States of America (“GAAP”).
Non-GAAP financial measures should not be used as a substitute for
GAAP financial measures, or considered in isolation, for the
purpose of analyzing the company's operating performance, financial
position or cash flows. The company has presented these non-GAAP
financial measures as it believes that the presentation of its
financial results that exclude (1) LIFO impacts; (2) transformation
expenses under the company's strategic business plan; (3) non-cash
amortization related to the acquired General Parts International,
Inc. (“GPI”) intangible assets; and (4) other non-recurring
adjustments is useful and indicative of the company's base
operations because the expenses vary from period to period in terms
of size, nature and significance and/or relate to store closure and
consolidation activity in excess of historical levels. These
measures assist in comparing the company's current operating
results with past periods and with the operational performance of
other companies in its industry. The disclosure of these measures
allows investors to evaluate the company's performance using the
same measures management uses in developing internal budgets and
forecasts and in evaluating management’s compensation. Included
below is a description of the expenses that the company has
determined are not normal, recurring cash operating expenses
necessary to operate its business and the rationale for why
providing these measures is useful to investors as a supplement to
the GAAP measures.
LIFO impacts — Beginning in the
first quarter of 2021, to assist in comparing the company's current
operating results with the operational performance of other
companies in the industry, the impact of LIFO on the company's
results of operations is a reconciling item to arrive at non-GAAP
financial measures.
Transformation expenses — Costs
incurred in connection with the company's business plan that
focuses on specific transformative activities that relate to the
integration and streamlining of its operating structure across the
enterprise, that the company does not view to be normal cash
operating expenses. These expenses include, but not be limited to
the following:
- Restructuring costs - Costs primarily relating to the early
termination of lease obligations, asset impairment charges, other
facility closure costs and team member severance in connection with
our voluntary retirement program and continued optimization of our
organization.
- Third-party professional services - Costs primarily relating to
services rendered by vendors for assisting the company with the
development of various information technology and supply chain
projects in connection with the company's enterprise integration
initiatives.
- Other significant costs - Costs primarily relating to
accelerated depreciation of various legacy information technology
and supply chain systems in connection with the company's
enterprise integration initiatives and temporary off-site workspace
for project teams who are primarily working on the development of
specific transformative activities that relate to the integration
and streamlining of the company's operating structure across the
enterprise.
GPI amortization of acquired intangible
assets — As part of the company's acquisition of GPI, the
company obtained various intangible assets, including customer
relationships, non-compete contracts and favorable lease
agreements, which they expect to be subject to amortization through
2025.
Reconciliation of
Adjusted Net Income and Adjusted EPS:
Sixteen Weeks Ended
(in thousands, except per share
data)
April 24, 2021
April 18, 2020
Net income (GAAP)
$
185,930
$
43,588
Cost of sales adjustments:
Transformation expenses:
LIFO impacts (1)
3,147
8,837
Other significant costs
2,303
1,253
SG&A adjustments:
GPI amortization of acquired intangible
assets
8,547
8,443
Transformation expenses:
Restructuring costs
20,742
4,064
Third-party professional services
8,034
2,983
Other significant costs
3,883
9,160
Other income adjustment
(36)
—
Provision for income taxes on adjustments
(2)
(11,655)
(8,685)
Adjusted net income (Non-GAAP)
$
220,895
$
69,643
Diluted earnings per share (GAAP)
$
2.81
$
0.63
Adjustments, net of tax
0.53
0.37
Adjusted EPS (Non-GAAP)
$
3.34
$
1.00
(1)
The sixteen weeks ended April 18, 2020 non-GAAP expenses have been
adjusted for the $8.8 million LIFO impact to be comparable with the
company's 2021 presentation.
(2)
The income tax impact of non-GAAP adjustments is calculated using
the estimated tax rate in effect for the respective non-GAAP
adjustments.
Reconciliation of
Adjusted Gross Profit:
Sixteen Weeks Ended
(in thousands)
April 24, 2021
April 18, 2020
Gross profit (GAAP)
$
1,484,926
$
1,172,733
Gross profit adjustments
5,450
10,090
Adjusted gross profit (Non-GAAP)
$
1,490,376
$
1,182,823
Reconciliation of
Adjusted Selling, General and Administrative
Expenses:
Sixteen Weeks Ended
(in thousands)
April 24, 2021
April 18, 2020
SG&A (GAAP)
$
1,232,797
$
1,094,308
SG&A adjustments
(41,206)
(24,650)
Adjusted SG&A (Non-GAAP)
$
1,191,591
$
1,069,658
Reconciliation of
Adjusted Operating Income:
Sixteen Weeks Ended
(in thousands)
April 24, 2021
April 18, 2020
Operating income (GAAP)
$
252,129
$
78,425
Cost of sales and SG&A adjustments
46,656
34,741
Adjusted operating income (Non-GAAP)
$
298,785
$
113,166
NOTE: Adjusted gross profit, Adjusted gross profit margin
(calculated by dividing Adjusted gross profit by Net sales),
Adjusted SG&A, Adjusted SG&A as a percentage of Net sales,
Adjusted operating income and Adjusted operating income margin
(calculated by dividing Adjusted operating income by Net sales) are
non-GAAP measures. Management believes these non-GAAP measures are
important metrics in assessing the overall performance of the
business and utilizes these metrics in its ongoing reporting. On
that basis, management believes it is useful to provide these
metrics to investors and prospective investors to evaluate the
company’s operating performance across periods adjusting for these
items (refer to the reconciliations of non-GAAP adjustments above).
These non-GAAP measures might not be calculated in the same manner
as, and thus might not be comparable to, similarly titled measures
reported by other companies. Non-GAAP measures should not be used
by investors or third parties as the sole basis for formulating
investment decisions, as they may exclude a number of important
cash and non-cash recurring items.
Reconciliation of Free Cash
Flow:
Sixteen Weeks Ended
(In thousands)
April 24, 2021
April 18, 2020
Cash flows from operating activities
$
329,932
$
10,908
Purchases of property and equipment
(70,884)
(82,973)
Free cash flow
$
259,048
$
(72,065)
NOTE: Management uses Free cash flow as a measure of its
liquidity and believes it is a useful indicator to investors or
potential investors of the company's ability to implement growth
strategies and service 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 the company's condensed consolidated
statement of cash flows as a measure of liquidity.
Adjusted Debt to Adjusted
EBITDAR:
Four Quarters Ended
(In thousands, except adjusted
debt to adjusted EBITDAR ratio)
April 24, 2021
January 2, 2021
Total GAAP debt
$
1,033,369
$
1,032,984
Add: Operating lease liabilities
2,460,951
2,477,087
Adjusted debt
3,494,320
3,510,071
GAAP Net income
635,363
493,021
Depreciation and amortization
248,755
250,081
Interest expense
45,834
46,886
Other income (expense), net
(6,842)
3,984
Provision for income taxes
201,233
157,994
Restructuring costs
33,443
16,765
Third-party professional services
19,168
14,117
Other significant costs
14,899
19,126
Transformation expenses
67,510
50,008
Other adjustments (1)
47,986
48,022
Total net adjustments
604,476
556,975
Adjusted EBITDA
1,239,839
1,049,996
Rent expense
553,590
553,751
Share-based compensation
47,722
45,271
Adjusted EBITDAR
$
1,841,151
$
1,649,018
Adjusted Debt to Adjusted
EBITDAR
1.9
2.1
(1)
The adjustments to the four quarters ended April 24, 2021 and
January 2, 2021 represent charges incurred resulting from the early
redemption of the company's 2022 and 2023 senior unsecured notes.
NOTE: Management believes its Adjusted Debt to Adjusted EBITDAR
ratio (“leverage ratio”) is a key financial metric for debt
securities, as reviewed by rating agencies, and believes its debt
levels are best analyzed using this measure. The company’s goal is
to maintain an investment grade rating. The company's credit rating
directly impacts the interest rates on borrowings under its
existing credit facility and could impact the company's ability to
obtain additional funding. If the company was unable to maintain
its investment grade rating this could negatively impact future
performance and limit growth opportunities. Similar measures are
utilized in the calculation of the financial covenants and ratios
contained in the company's financing arrangements. 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
adjusts the calculation to remove rent expense and to add back the
company’s existing operating lease liabilities related to their
right-of-use assets to provide a more meaningful comparison with
the company’s peers and to account for differences in debt
structures and leasing arrangements. 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.
Store Information
During the sixteen weeks ended April 24, 2021, 9 stores and
branches were opened and 14 were closed or consolidated, resulting
in a total of 4,971 stores and branches as of April 24, 2021,
compared to a total of 4,976 stores and branches as of January 2,
2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210602005531/en/
Investor Relations Contact: Elisabeth Eisleben T: (919)
227-5466 E: invrelations@advanceautoparts.com Media Contact:
Darryl Carr T: (984) 389-7207 E:
AAPCommunications@advance-auto.com
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