Message #4 From:
NewsBot Date: February 15, 2007 04:15:00 AM
AAP News Advance Auto Parts Reports Fourth Quarter and Annual Results
ROANOKE, Va.--(BUSINESS WIRE)--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 fiscal fourth quarter and year ended December 30, 2006.
Earnings per diluted share for the fourth quarter were $0.33, compared to $0.36 last year. This year’s fourth quarter results include $0.03 per share of stock-option expense, whereas last year’s quarter does not include pro forma stock-option expense of $0.02 per share.
In the fourth quarter, sales increased to $1.02 billion from $964 million last year. Comparable-store sales increased 1.6% in the quarter, comprised of a 0.3% decrease in do-it-yourself (DIY) and a 7.9% increase in do-it-for-me (DIFM). The 1.6% comparable-store sales increase compares to a 6.3% increase in last year’s fourth quarter.
“2006 proved to be a challenging year, as sales did not meet our expectations," said Mike Coppola, Chairman, President and CEO. "Our soft sales results hindered our ability to leverage expenses. We have embarked on a comprehensive assessment of our business, customers and capabilities, to better identify opportunities to allocate our capital and improve our performance.”
Fourth quarter gross margin was 47.1% of sales, a 40 basis point improvement compared to last year’s quarter, primarily reflecting improved procurement costs, ongoing category management initiatives and logistics efficiencies.
Fourth quarter selling, general and administrative (SG&A) expenses were 40.8% of sales, compared to 39.4% in fourth quarter 2005. This reflects approximately 70 basis points loss of leverage on rent, depreciation and other fixed costs from modest comparable-store sales. In addition, SG&A was unfavorably impacted by higher costs for workers’ compensation and auto liability, which in total accounted for another 75 basis points. Non-comparable stock-option expense also increased SG&A in this year’s quarter by 45 basis points. Reductions in several other cost items partly offset the expense increases.
2006 Annual Results
For the year, sales grew to $4.62 billion from $4.26 billion last year. Comparable-store sales increased 2.1% over this time, comprised of a 0.3% decrease in DIY and a 10.8% increase in DIFM. The 2.1% comparable-store sales increase compares to an 8.7% increase in 2005. Gross margin expanded by approximately 50 basis points to 47.7%, while SG&A grew 120 basis points to 38.9% of sales, inclusive of 40 basis points of non-comparable stock-option expense. Earnings per share for the year are $2.16 (inclusive of 11 cents of non-comparable stock-option expense), compared to $2.13 in 2005 (which did not include pro forma stock-option expense of nine cents).
Store Information
During the fourth quarter, the Company opened 53 new stores, of which seven were Autopart International (AI) stores. The Company also relocated 16 existing stores, and remodeled 12 stores to the innovative Advance 2010 format in the fourth quarter. For the year, the Company relocated 47 stores, remodeled 189 stores, closed five stores, and opened 215 new stores, of which 25 were AI locations; AI now operates 87 stores. As of December 30, 2006, 1,956 (or 65%) of the Company’s Advance stores are 2010-format stores, and more than 81% of the Company’s Advance stores offer commercial delivery programs.
“During this slower sales environment, we will invest in our store base at a more conservative pace in 2007 until we complete our re-assessment to determine how we can best allocate our capital going forward," Coppola said. “We have developed a lower-cost remodel program, which we believe can continue to drive sales improvements, while delivering a better return on investment. We also plan to open, remodel, and relocate fewer stores in 2007, which we believe will improve our SG&A and return on capital performance.”
Guidance
The Company is basing its earnings guidance on comparable-store sales for the first quarter and the year in the low single-digit range. First quarter comparisons represent our most-challenging year-over-year sales comparison. Quarter-to-date results are running within that range. For the first quarter, the Company anticipates modest gross margin improvement, and a slowing rate of growth in SG&A as compared to the fourth quarter. The Company forecasts first-quarter 2007 earnings per diluted share in the range of $0.68 to $0.72, which compares to $0.68 in last year’s first quarter. As previously disclosed, last year’s first quarter earnings per share benefited by approximately two cents from the resolution of certain tax contingencies.
For 2007, the Company anticipates new-store growth in the 200-210 range, from the opening of both Advance and AI stores. In addition, the Company expects to remodel approximately 150 stores and relocate approximately 35 existing stores. With comparable-store sales gains in the low single-digit range for the year, the Company would expect top-line growth to be in the high single digits, with earnings growth in the 10% to 15% range (EPS of $2.38 to $2.48).
Dividend
On February 14, 2007, the Company’s Board of Directors declared a regular quarterly cash dividend of six cents per share be paid on April 6, 2007 to stockholders of record as of March 23, 2007.
Investor Conference Call
The Company will host a conference call on February 15, 2007, at 8:00 a.m. Eastern Standard Time to discuss its quarterly results. To listen to the live call, please log on to the Company’s Web site, www.AdvanceAutoParts.com, or dial (866) 908-1AAP. The call will be archived on the Company’s Web site until February 14, 2008.
About Advance Auto Parts
Headquartered in Roanoke, Va., Advance Auto Parts is the second-largest retailer of automotive aftermarket parts, accessories, batteries, and maintenance items in the United States, based on store count and sales. As of December 30, 2006, the Company operated 3,082 stores in 40 states, Puerto Rico, and the Virgin Islands. The Company serves both the do-it-yourself and professional installer markets.
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, comparable-store sales, gross margin and SG&A rates, and earnings per share for first-quarter 2007 and fiscal year 2007.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, acts of terrorism, 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, 2005, on file with the Securities and Exchange Commission.Actual results may differ materially from anticipated results described in these forward-looking statements.The Company intends these forward-looking statements to speak only as of the time of this news release and does not undertake to update or revise them, as more information becomes available.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 30,
December 31,
2006
2005
Assets
Current assets:
Cash and cash equivalents
$
11,128
$
40,783
Receivables, net
97,046
94,689
Inventories, net
1,463,340
1,367,099
Other current assets
40,459
45,369
Total current assets
1,611,973
1,547,940
Property and equipment, net
994,977
898,851
Assets held for sale
1,548
8,198
Goodwill
33,765
67,094
Intangible assets, net
27,926
-
Other assets, net
12,492
20,066
$
2,682,681
$
2,542,149
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdrafts
$
34,206
$
50,170
Current portion of long-term debt
67
32,760
Financed vendor accounts payable
127,543
119,351
Accounts payable
651,587
629,248
Accrued expenses
252,975
265,437
Other current liabilities
47,042
44,498
Total current liabilities
1,113,420
1,141,464
Long-term debt
477,173
406,040
Other long-term liabilities
61,234
74,874
Total stockholders' equity
1,030,854
919,771
$
2,682,681
$
2,542,149
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 reports except for the effect of adopting Financial Accounting Standards Board's Statement No. 123 (revised 2004), "Share-Based Payment," (SFAS 123R) as of January 1, 2006, but do not include the footnotes required by generally accepted accounting principles for complete financial statements.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Twelve Week Periods Ended
December 30, 2006 and December 31, 2005
(in thousands, except per share data)
(unaudited)
December 30,
December 31,
2006
2005
Net sales
$
1,016,150
$
963,725
Cost of sales, including purchasing and warehousing costs
537,719
513,643
Gross profit
478,431
450,082
Selling, general and administrative expenses
409,767
379,614
Share-based compensation
4,579
126
Operating income
64,085
70,342
Other, net:
Interest expense
(7,845)
(7,702)
Other income, net
818
517
Total other, net
(7,027)
(7,185)
Income before provision for income taxes
57,058
63,157
Provision for income taxes
21,704
23,801
Net income
$
35,354
$
39,356
Basic earnings per share (a)
$
0.34
$
0.36
Diluted earnings per share (a)
$
0.33
$
0.36
Average common shares outstanding (b)
105,292
108,280
Dilutive effect of stock options
949
1,498
Average common shares outstanding - assuming dilution
106,241
109,778
(a)Basic and diluted earnings per share include $0.03 of share-based compensation for the twelve weeks ended December 30, 2006. The twelve weeks ended December 31, 2005 include only nominal share-based compensation prior to the adoption of SFAS 123R on January 1, 2006. On a pro forma basis, share-based compensation for the twelve weeks ended December 31, 2005 was $0.02 per basic and diluted share.
(b)Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At December 30, 2006 and December 31, 2005, we had 105,351 and 108,198 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 reports except for the effect of adopting SFAS 123R as of January 1, 2006, but do not include the footnotes required by generally accepted accounting principles for complete financial statements.
