Advance Auto Parts Reports Fourth Quarter and Fiscal 2012 Results

Advance Auto Parts Reports Fourth Quarter and Fiscal 2012 Results

ROANOKE, Va.--(BUSINESS WIRE)-- Advance Auto Parts, Inc. (NYS: AAP) , a leading retailer of automotive aftermarket parts, accessories, batteries, and maintenance items, today announced its financial results for the fourth quarter and fiscal year ended December 29, 2012. Fourth quarter earnings per diluted share (EPS) were $0.88 which was a 2.2% decrease versus the fourth quarter last year. For fiscal 2012, EPS was $5.22 which was an increase of 2.2% over the same period last year.

Fourth Quarter Performance Summary

Twelve Weeks Ended

Fifty-Two Weeks Ended

December 29,

December 31,

December 29,

December 31,

2012

2011

2012

2011

Sales(in millions)

$

1,329.2

$

1,327.6

$

6,205.0

$

6,170.5

Comp Store Sales %

(1.9

%)

2.9

%

(0.8

%)

2.2

%

Gross Profit %

49.9

%

49.0

%

49.9

%

49.7

%

SG&A %

41.4

%

40.6

%

39.3

%

39.0

%

Operating Income %

8.5

%

8.4

%

10.6

%

10.8

%

Diluted EPS

$

0.88

$

0.90

$

5.22

$

5.11

Avg Diluted Shares(in thousands)

74,002

73,807

74,062

77,071

"We are pleased that our fourth quarter profitability results exceeded our expectations. Our comparable sales trends continued to improve sequentially, after adjusting for the holiday shift in our fourth quarter, as well as our operating profits," said Darren R. Jackson, President and Chief Executive Officer. "Overall fiscal 2012 was a challenging environment, which is reflected in our results. Yet we achieved many key milestones that position us for a strong future. Those achievements include the launch of our in-house commercial credit program, the opening of our new distribution center in Remington, Indiana, improvements in our commercial customer satisfaction, the market entry into the boroughs of New York and the acquisition of BWP which closed after our fiscal year ended. These milestones are significant steps which will allow us to more effectively compete in the larger and faster growing Commercial market."


Fourth Quarter and Fiscal 2012 Highlights

Total sales for the fourth quarter increased 0.1% to $1.33 billion, as compared with total sales during the fourth quarter of fiscal 2011. The sales increase reflected a comparable store sales decrease of 1.9% versus a comparable store sales increase of 2.9% during the fourth quarter of fiscal 2011, partially offset by the net addition of 132 new stores over the past 12 months. For fiscal 2012, total sales increased 0.6% to $6.21 billion, compared with total sales of $6.17 billion during fiscal 2011.

The Company's gross profit rate was 49.9% of sales during the fourth quarter as compared to 49.0% during the fourth quarter last year. The 87 basis-point increase in gross profit rate was primarily due to improvements in shrink and supply chain efficiencies. The supply chain efficiencies, which were driven by an increase in the volume of inventory handled during the quarter, more than offset the increase in supply chain costs associated with the opening of the Company's new distribution center and increased new store openings. For fiscal 2012, the Company's gross profit rate was 49.9%, compared with 49.7% in fiscal 2011.

The Company's SG&A rate was 41.4% of sales during the fourth quarter as compared to 40.6% during the same period last year. The 79 basis-point increase was primarily due to expense deleverage as a result of the Company's 1.9% comp store sales decline, increased new store openings and costs associated with the Company's acquisition related activities during the quarter, partially offset by lower incentive compensation. For fiscal 2012, the Company's SG&A rate was 39.3% versus 39.0% during fiscal 2011.

The Company's operating income during the fourth quarter of $113.2 million increased 1.1% versus the fourth quarter of fiscal 2011. On a rate basis, operating income was 8.5% of total sales as compared to 8.4% during the fourth quarter of fiscal 2011. For fiscal 2012, the Company's operating income rate was 10.6% versus 10.8% during fiscal 2011.

Operating cash flow decreased 17.3% to $685.3 million from $828.8 million through the fourth quarter of fiscal 2011. Free cash flow was $412.3 million versus $507.2 million through the fourth quarter of fiscal 2011. Capital expenditures were $271.2 million as compared to $268.1 million through the fourth quarter of fiscal 2011.

"2012 was a challenging year for our company primarily driven by the ongoing softness in our colder weather markets and decreased consumer demand for auto parts. While we are disappointed we did not achieve our growth and profitability expectations for the year, we are encouraged by our improved sales performance trends versus the market," said Mike Norona, Executive Vice President and Chief Financial Officer. "Our decision to maintain our investment profile through the course of the year is driven by our confidence in the long-term industry fundamentals and provides us with a strong foundation to build upon as we head into fiscal 2013."

Comparable Key Financial Metrics and Statistics(1)

Twelve Weeks Ended

Fifty-Two Weeks Ended

December 29,

December 31,

2012

2011

FY 2012

FY 2011

FY 2010

Sales Growth %

0.1

%

4.5

%

0.6

%

4.1

%

9.5

%

Sales per Store(2)

$

1,664

$

1,708

$

1,664

$

1,708

$

1,697

Operating Income per Store(3)

$

176

$

184

$

176

$

184

$

168

Return on Invested Capital(4)

19.4

%

19.5

%

19.4

%

19.5

%

17.5

%

Gross Margin Return on Inventory(5)

9.3

6.6

9.3

6.6

5.1

Total Store Square Footage, end of period

27,806

26,663

27,806

26,663

25,950

Total Team Members, end of period

53,473

52,002

53,473

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 fourth quarter, the Company added 67 stores, including eight Autopart International stores. For fiscal 2012, the Company added 137 stores, including 21 Autopart International stores. As of December 29, 2012, the Company's total store count was 3,794 including 218 Autopart International stores. For the year, the Company closed five stores.

2013 Annual Financial Outlook

The Company has provided the following annual financial outlook and certain key assumptions for fiscal 2013.

Fiscal 2013 Annual Financial Outlook and Key Assumptions

New Stores

170 - 190 (155 - 165 Advance Auto Parts stores, 10 - 15 Autopart International stores); excludes 124 BWP stores acquired on December 31, 2012

Comparable Store Sales

Low-single digits

Operating EPS

$5.45 - $5.60; excludes BWP integration costs

Reported EPS

$5.30 - $5.45; includes BWP integration costs of $0.15 - $0.20

Capital Expenditures

$275 million - $300 million

Diluted Share Count

Approximately 74 million shares

In fiscal 2013, the Company anticipates a low-single digit increase in comparable store sales driven by continued strong Commercial sales growth. The Company expects a modest increase in gross profit rate. The Company expects its rate of growth in SG&A dollars per store to increase three to five percent.

As a result of the acquisition of BWP Distributors, Inc. (BWP), the Company estimates that BWP will add roughly $170 million to $180 million of revenue in fiscal 2013. The Company anticipates BWP will generate positive operating income when excluding the impact of one-time integration costs. Additionally, the Company anticipates free cash flow will be a minimum of $375 million, excluding the net acquisition price of BWP, which was approximately one times the anticipated additional revenue from BWP in fiscal 2013.

"Our 2013 annual operating EPS outlook will be in the range of $5.45 to $5.60 per share excluding one-time integration costs for BWP of approximately $0.15 to $.20 per share. On a reported basis, including the BWP one-time integration costs, our EPS outlook is expected to be $5.30 to $5.45," said Mike Norona, Executive Vice President and Chief Financial Officer. "Consistent with our historical practice, our outlook does not reflect any anticipated share repurchase activity. However, we plan to continue our historical practice of opportunistically repurchasing shares in a disciplined manner, which could positively impact our 2013 annual EPS outlook."

Share Repurchase Program

As of December 29, 2012, the Company had approximately $492 million available on the Company's $500 million share repurchase program authorized by the Company's Board of Directors on May 14, 2012.

Dividend

On February 5, 2013, the Company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on April 5, 2013 to stockholders of record as of March 22, 2013.

Investor Conference Call

The Company will host a conference call on Thursday, February 7, 2013 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 February 7, 2014.

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 December 29, 2012, the Company operated 3,794 stores in 39 states, Puerto Rico, and the Virgin 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 2013. 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.

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

December 29,

December 31,

2012

2011

Assets

Current assets:

Cash and cash equivalents

$

598,111

$

57,901

Receivables, net

229,866

140,007

Inventories, net

2,308,609

2,043,158

Other current assets

47,614

52,754

Total current assets

3,184,200

2,293,820

Property and equipment, net

1,291,759

1,223,099

Assets held for sale

788

615

Goodwill

76,389

76,389

Intangible assets, net

28,845

31,380

Other assets, net

31,833

30,451

$

4,613,814

$

3,655,754

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt

$

627

$

848

Accounts payable

2,029,814

1,653,183

Accrued expenses

379,639

385,746

Other current liabilities

149,558

148,098

Total current liabilities

2,559,638

2,187,875

Long-term debt

604,461

415,136

Other long-term liabilities

239,021

204,829

Total stockholders' equity

1,210,694

847,914

$

4,613,814

$

3,655,754

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

December 29, 2012 and December 31, 2011

(in thousands, except per share data)

(unaudited)

December 29,

December 31,

2012

2011

Net sales

$

1,329,201

$

1,327,572

Cost of sales, including purchasing and warehousing costs

666,046

676,834

Gross profit

663,155

650,738

Selling, general and administrative expenses

549,959

538,820

Operating income

113,196

111,918

Other, net:

Interest expense

(7,992

)

(5,073

)

Other (expense) income, net

(159

)

314

Total other, net

(8,151

)

(4,759

)

Income before provision for income taxes

105,045

107,159

Provision for income taxes

39,990

40,720

Net income

$

65,055

$

66,439

Basic earnings per share (a)

$

0.89

$

0.92

Diluted earnings per share (a)

$

0.88

$

0.90

Average common shares outstanding (a)

73,221

72,394

Average common shares outstanding - assuming dilution (a)

74,002

73,807

(a)

Average common shares outstanding is calculated based on the weighted average number of shares outstanding during the quarter. At December 29, 2012 and December 31, 2011, we had 73,383 and 72,799 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.