Advance Auto Parts Reports Second Quarter Fiscal 2013 Diluted EPS Increase of 18.7% to $1.59

Advance Auto Parts Reports Second Quarter Fiscal 2013 Diluted EPS Increase of 18.7% to $1.59

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 second quarter ended July 13, 2013. Second quarter earnings per diluted share (EPS) were $1.59, which was an 18.7% increase versus the second quarter last year and includes a $0.01 impact resulting from the integration expenses for B.W.P. Distributors, Inc. (BWP).

Second Quarter Performance Summary

Twelve Weeks Ended

Twenty-Eight Weeks Ended

July 13,

July 14,

July 13,

July 14,

2013

2012

2013

2012

Sales(in millions)

$

1,549.6

$

1,461.0

$

3,564.9

$

3,418.3

Comp Store Sales %

(0.3

%)

(2.7

%)

(2.0

%)

0.0

%

Gross Profit %

50.3

%

49.9

%

50.1

%

50.0

%

SG&A %

37.7

%

38.3

%

39.0

%

38.5

%

Operating Income %

12.6

%

11.6

%

11.2

%

11.5

%

Diluted EPS

$

1.59

$

1.34

$

3.23

$

3.14

Avg Diluted Shares(in thousands)

73,343

74,084

73,607

74,157

"Our sales grew 6.1% and operating income increased 15.1% in the second quarter. We are pleased with our profit improvement despite our comparable store sales being essentially flat," said Darren R. Jackson, Chief Executive Officer. "The positive comparable sales growth at the start of the quarter was offset by weaker demand in the balance of the quarter including sales shortfalls in key seasonal categories. While the macroeconomic environment continued to impact our customers we continue to be encouraged by the strong long-term fundamentals of our industry and remain focused on improving our sales performance as we continue to improve our profitability."


Fiscal Second Quarter and Year-to-Date Highlights

Total sales for the second quarter increased 6.1% to $1.55 billion, as compared with total sales during the second quarter of fiscal 2012 of $1.46 billion. The sales increase was driven by the acquisition of BWP and the net addition of 175 new stores over the past 12 months, partially offset by a comparable store sales decrease of 0.3% versus a comparable store sales decrease of 2.7% during the second quarter of fiscal 2012. Year-to-date, total sales increased 4.3% to $3.56 billion, compared with total sales of $3.42 billion over the same period last year.

The Company's gross profit rate was 50.3% of sales during the second quarter as compared to 49.9% during the second quarter last year. The 40 basis-point increase in gross profit rate was primarily driven by increased merchandise margins due to lower acquisition costs and a favorable product mix partially offset by planned increases in supply chain costs related to the full operations of the Company's new distribution center and the impact of BWP sales, which have a lower gross margin rate as a result of their much higher mix of Commercial sales. Year-to-date, the Company's gross profit rate was 50.1%, a 13 basis-point increase over the same period in fiscal 2012.

The Company's SG&A rate was 37.7% of sales during the second quarter as compared to 38.3% during the same period last year. The 58 basis-point decrease was primarily driven by the timing of last year's Company-wide leadership meeting, lower marketing expense, increased labor productivity and lower credit card fees as a result of the insourcing of the Company's commercial credit program. These were partially offset by higher incentive compensation and expense deleverage as a result of the 0.3% comparable store sales decline and increased new store openings. Year-to-date, the Company's SG&A rate was 39.0% versus 38.5% during the same period last year.

The Company's operating income during the second quarter of $194.7 million increased 15.1% versus the second quarter of fiscal 2012. On a rate basis, operating income was 12.6% of total sales as compared to 11.6% during the second quarter of fiscal 2012. Year-to-date the Company's operating income rate was 11.2% versus 11.5% during the same period last year.

Operating cash flow decreased 24.6% to $310.1 million from $411.4 million through the second quarter of fiscal 2012. Free cash flow was $27.9 million versus $265.4 million through the second quarter of fiscal 2012. This decrease in free cash flow was primarily due to the Company's acquisition of BWP which occurred at the beginning of the fiscal year. Capital expenditures were $111.9 million as compared to $146.3 million through the second quarter of fiscal 2012.

"We are pleased that we were able to exceed our profit expectations for the quarter," said Mike Norona, Executive Vice President and Chief Financial Officer. "Despite softer sales than we expected in the back half of the quarter, our gross profit improvements and disciplined focus on expense management allowed us to increase our earnings per share 18.7% and our operating margins by 98 bps during the quarter. Our long-term operating income rate goal is to achieve 12% and our progress in the quarter is a solid step in the right direction."

Comparable Key Financial Metrics and Statistics(1)

Twelve Weeks Ended

Twenty-Eight Weeks Ended

Fifty-Two Weeks Ended

July 13,

July 14,

July 13,

July 14,

2013

2012

2013

2012

FY 2012

FY 2011

Sales Growth %

6.1

%

(1.3

%)

4.3

%

1.2

%

0.6

%

4.1

%

Sales per Store(2)

$

1,654

$

1,697

$

1,654

$

1,697

$

1,664

$

1,708

Operating Income per Store(3)

$

172

$

187

$

172

$

187

$

176

$

184

Return on Invested Capital(4)

18.5

%

19.9

%

18.5

%

19.9

%

19.4

%

19.5

%

Gross Margin Return on Inventory(5)

8.9

7.0

8.9

7.0

9.3

6.6

Total Store Square Footage, end of period

29,204

26,927

29,204

26,927

27,806

26,663

Total Team Members, end of period

54,250

53,464

54,250

53,464

53,473

52,002

(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 second quarter, the Company opened 26 stores, including 5 Autopart International stores, and closed 5 stores. As of July 13, 2013, the Company's total store count was 3,990 including 227 Autopart International stores.

Share Repurchase Program

Year-to-date, the Company repurchased approximately 1.0 million shares of its common stock at an aggregate cost of $74.5 million, or an average price of $77.38 per share.As of July 13, 2013, the Company had approximately $418 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 August 6, 2013, the Company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on October 4, 2013 to stockholders of record as of September 20, 2013.

Investor Conference Call

The Company will host a conference call on Thursday, August 8, 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 August 8, 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 July 13, 2013, the Company operated 3,990 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 29, 2012 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)

July 13,

December 29,

July 14,

2013

2012

2012

Assets

Current assets:

Cash and cash equivalents

$

520,969

$

598,111

$

448,594

Receivables, net

281,714

229,866

159,349

Inventories, net

2,407,041

2,308,609

2,096,341

Other current assets

66,555

47,614

60,883

Total current assets

3,276,279

3,184,200

2,765,167

Property and equipment, net

1,285,029

1,291,759

1,263,680

Assets held for sale

2,237

788

788

Goodwill

199,791

76,389

76,389

Intangible assets, net

56,155

28,845

29,468

Other assets, net

32,797

31,833

33,654

$

4,852,288

$

4,613,814

$

4,169,146

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt

$

878

$

627

$

760

Accounts payable

2,048,202

2,029,814

1,738,101

Accrued expenses

450,253

379,639

417,663

Other current liabilities

140,332

149,558

135,517

Total current liabilities

2,639,665

2,559,638

2,292,041

Long-term debt

604,117

604,461

599,696

Other long-term liabilities

239,527

239,021

218,308

Total stockholders' equity

1,368,979

1,210,694

1,059,101

$

4,852,288

$

4,613,814

$

4,169,146

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

July 13, 2013 and July 14, 2012

(in thousands, except per share data)

(unaudited)

July 13,

July 14,

2013

2012

Net sales

$

1,549,553

$

1,460,983

Cost of sales, including purchasing and warehousing costs

770,330

732,125

Gross profit

779,223

728,858

Selling, general and administrative expenses

584,541

559,663

Operating income

194,682

169,195

Other, net:

Interest expense

(8,024

)

(7,947

)

Other income (expense), net

365

(55

)

Total other, net

(7,659

)

(8,002

)

Income before provision for income taxes

187,023

161,193

Provision for income taxes

70,152

61,587

Net income

$

116,871

$

99,606

Basic earnings per share (a)

$

1.60

$

1.36

Diluted earnings per share (a)

$

1.59

$

1.34

Average common shares outstanding (a)

72,930

73,150

Average common shares outstanding - assuming dilution (a)

73,343

74,084