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Advance Auto Parts Reports Third Quarter Fiscal 2011 Diluted EPS Increase of 37% to $1.41; Operating Income Rate Expands 167 basis points to 12.1%

ROANOKE, Va., Nov 09, 2011 (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 third quarter ended October 8, 2011.Third quarter earnings per diluted share (EPS) were $1.41 which was a 37% increase over the third quarter last year.

Third Quarter Performance Summary
Twelve Weeks Ended Forty Weeks Ended
October 8, 2011 October 9, 2010 October 8, 2011 October 9, 2010
Sales (in millions) $ 1,465.0 $ 1,406.5 $ 4,842.9 $ 4,655.1
Comp Store Sales % 2.2 % 9.9 % 2.0 % 7.8 %
Gross Profit % 49.5 % 50.3 % 49.9 % 50.1 %
SG&A % 37.3 % 39.9 % 38.5 % 39.4 %
Operating Income % 12.1 % 10.5 % 11.4 % 10.8 %
Diluted EPS $ 1.41 $ 1.03 $ 4.19 $ 3.37
Avg Diluted Shares (in thousands) 74,730 84,802 78,058 87,953

"I would like to thank our team for delivering strong third quarter results that include solid top line sales and accelerated earnings results," said Darren R. Jackson, Chief Executive Officer."As a company, we will continue to be focused on customer service and executing the business with consistency and excellence."

Third Quarter and Year-to-Date Highlights

Total sales for the third quarter increased 4.2% to $1.46 billion, compared with total sales of $1.41 billion during the third quarter of fiscal 2010. The sales increase reflects the net addition of 105 new stores during the past 12 months and a comparable store sales gain of 2.2% on top of a 9.9% comparable store sales gain during the third quarter of fiscal 2010. Year-to-date, comparable store sales increased 2.0% which was on top of a 7.8% increase over the same period in fiscal 2010.

The Company's gross profit rate was 49.5% of sales during the third quarter as compared to 50.3% during the third quarter last year. The 87 basis-point decline in the gross profit rate was driven by increased shrink, increased supply chain expenses due to investments in Hubs and higher fuel costs, commodity price inflation and the related timing of the Company's retail price changes.Year-to-date, the Company's gross profit rate was 49.9% versus 50.1% during the same period in fiscal 2010.

The Company's SG&A rate was 37.3% of sales during the third quarter as compared to 39.9% during the same period last year. This 254 basis-point decrease was primarily due to reduced incentive compensation as a result of the Company's lower revenue growth versus the third quarter last year, productivity improvements from the Company's customer-driven labor model which includes the anniversary of investment rollout expenses and a decrease in support costs.The expense reductions were partially offset by increased strategic investments in support of the Company's Service Leadership and Superior Availability strategies.Year-to-date, the Company's SG&A rate decreased 85 basis points to 38.5% from 39.4% during the same period in fiscal 2010.

The Company's operating income during the third quarter increased 20.8% to $177.8 million, or 167 basis points on a rate basis, to 12.1% of total sales as compared to 10.5% during the third quarter of fiscal 2010.Year-to-date, the Company's operating income rate was 11.4% versus 10.8% during the same period last year.

Operating cash flow through the third quarter was $611.0 million versus $596.5 million last year.Free cash flow through the third quarter decreased 24.2% to $354.8 million from $467.8 million last year.The decrease in free cash flow was driven primarily by the change in owned inventory this year versus last year as well as higher capital expenditures.Capital expenditures were $207.5 million through the third quarter as compared to $147.2 million through the third quarter of fiscal 2010.This increase was primarily driven by investments in the Company's supply chain, existing stores and information technology.

"We are pleased with our strong business performance and execution that drove a 21% increase in operating income and a 37% increase in EPS," said Mike Norona, Executive Vice President and Chief Financial Officer."Our performance during our third quarter shows we are on the right path and reinforces our commitment to accelerate growth, improve profitability and drive shareholder value.Given our strong third quarter results, we now anticipate our annual 2011 EPS outlook to be $4.90 to $4.95."

Comparable Key Financial Metrics and Statistics (1)
Twelve Weeks Ended Forty Weeks Ended Fifty-Two Weeks Ended
October 8, 2011 October 9, 2010 October 8, 2011 October 9, 2010 FY 2010 FY 2009
Sales Growth % 4.2 % 11.4 % 4.0 % 9.0 % 9.5 % 7.1 %
Sales per Store $ 1,702 $ 1,667 $ 1,702 $ 1,667 $ 1,697 $ 1,595
Operating Income per Store $ 177 $ 162 $ 177 $ 162 $ 168 $ 142
Return on Invested Capital 18.8 % 17.3 % 18.8 % 17.3 % 17.5 % 15.1 %
Gross Margin Return on Inventory $ 5.76 $ 4.89 $ 5.76 $ 4.89 $ 5.05 $ 3.98
Total Store Square Footage, end of period 26,533 25,809 26,533 25,809 25,950 24,973
Total Team Members, end of period 52,386 50,605 52,386 50,605 51,017 48,771

(1)

In thousands except for gross margin return on inventory and total Team Members. The financial metrics have been reported on a comparable basis to exclude the impact of store divestiture expenses in fiscal 2009. 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. Refer to the presentation of the financial metrics on a GAAP basis, definitions of the financial metrics and reconciliation of the financial results reported on a comparable basis to the GAAP basis in the accompanying financial statements in this press release.

Store Information

During the third quarter, the Company opened 20 stores, and closed 2 stores.As of October 8, 2011, the Company's total store count was 3,645 including 203 Autopart International stores.

Share Repurchases

During the third quarter, the Company repurchased 1.7 million shares of itscommon stock at an aggregate cost of $100 million, or an average price of $58.81 per share. At the end of the third quarter, the Company had $200 million remaining under the $300.0 million share repurchase authorization approved by the Board of Directors in August 2011. Through the fiscal third quarter of 2011 the Company has repurchased 9.9 million shares of its common stock at an aggregate cost of $609.7 million, or an average price of $61.51 per share.

Dividend

On November 8, 2011, the Company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on January 6, 2012 to stockholders of record as of December 23, 2011.

Investor Conference Call

The Company will host a conference call on Thursday, November 10, 2011 at 10:00 a.m. Eastern Standard 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 November 10, 2012.

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 October 8, 2011, the Company operated 3,645 stores in 39 states, Puerto Rico, and the Virgin Islands.Additional information about the Company, employment opportunities, customer services, and online shopping for parts and accessories 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 2011.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, 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 January 1, 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)
October 8, January 1, October 9,
2011 2011 2010

Assets
Current assets:
Cash and cash equivalents $ 65,929 $ 59,209 $ 194,502
Receivables, net 131,409 124,227 115,731
Inventories, net 2,109,721 1,863,870 1,839,498
Other current assets 67,063 76,965 51,931
Total current assets 2,374,122 2,124,271 2,201,662
Property and equipment, net 1,191,453 1,143,170 1,104,380
Assets held for sale 707 1,472 1,472
Goodwill 51,378 34,387 34,387
Intangible assets, net 29,122 25,360 25,583
Other assets, net 31,286 25,557 26,841
$ 3,678,068 $ 3,354,217 $ 3,394,325

Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 949 $ 973 $ 1,176
Financed vendor accounts payable - 31,648 50,310
Accounts payable 1,586,058 1,292,113 1,255,608
Accrued expenses (a) 390,283 404,086 429,262
Other current liabilities (a) 128,338 119,229 91,508
Total current liabilities 2,105,628 1,848,049 1,827,864
Long-term debt 599,438 300,851 301,043
Other long-term liabilities(a) 195,376 165,943 123,380
Total stockholders' equity 777,626 1,039,374 1,142,038
$ 3,678,068 $ 3,354,217 $ 3,394,325
(a) Effective January 1, 2011, the Company reclassified $50.3 million of its self-insurance liability from Accrued expenses to Other long-term liabilities because the timing of future payments had become predictable based on historical patterns. Due to the maturity of the program, the Company can now rely upon these historical patterns in determining the current portion of these liabilities. This reclassification was partially offset by the related income tax impact.
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
October 8, 2011 and October 9, 2010
(in thousands, except per share data)

(unaudited)
October 8, October 9,
2011 2010
Net sales $ 1,464,988 $ 1,406,511
Cost of sales, including purchasing and warehousing costs 740,485 698,726
Gross profit 724,503 707,785
Selling, general and administrative expenses 546,683 560,563
Operating income 177,820 147,222
Other, net:
Interest expense (8,150 ) (7,002 )
Other expense, net (614 ) (293 )
Total other, net (8,764 ) (7,295 )
Income before provision for income taxes 169,056 139,927
Provision for income taxes 63,503 52,329
Net income $ 105,553 $ 87,598
Basic earnings per share (a) $ 1.43 $ 1.04
Diluted earnings per share (a) $ 1.41 $ 1.03
Average common shares outstanding (a) 73,381 83,695
Average common shares outstanding - assuming dilution (a) 74,730 84,802

( a )

 Average common shares outstanding is calculated based on the weighted average number of shares outstanding during the quarter. At October 8, 2011 and October 9, 2010, we had 72,443 and 84,016 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.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Forty Week Periods Ended
October 8, 2011 and October 9, 2010
(in thousands, except per share data)
(unaudited)
October 8, October 9,
2011 2010
Net sales $ 4,842,890 $ 4,655,073
Cost of sales, including purchasing and warehousing costs 2,424,338 2,321,243
Gross profit 2,418,552 2,333,830
Selling, general and administrative expenses 1,865,828 1,832,834
Operating income 552,724 500,996
Other, net:
Interest expense (25,876 ) (20,134 )
Other expense, net (771 ) (1,471 )
Total other, net (26,647 ) (21,605 )
Income before provision for income taxes 526,077 479,391
Provision for income taxes 197,834 181,451
Net income $ 328,243 $ 297,940
Basic earnings per share (a) $ 4.27 $ 3.41
Diluted earnings per share (a) $ 4.19 $ 3.37
Average common shares outstanding (a) 76,595 87,011
Average common shares outstanding - assuming dilution (a) 78,058 87,953
( a ) Average common shares outstanding is calculated based on the weighted average number of shares outstanding during the year-to-date period. At October 8, 2011 and October 9, 2010, we had 72,443 and 84,016 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.
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Forty Week Periods Ended
October 8, 2011 and October 9, 2010
(in thousands)
(unaudited)
October 8, October 9,
2011 2010
Cash flows from operating activities:
Net income $ 328,243 $ 297,940
Depreciation and amortization 134,480 125,441
Share-based compensation 14,232 15,741
Provision for deferred income taxes 45,374 25,526
Excess tax benefit from share-based compensation (5,099 ) (3,965 )
Other non-cash adjustments to net income 4,153 5,720
(Increase) decrease in:
Receivables, net (6,854 ) (23,171 )
Inventories, net (245,851 ) (207,631 )
Other assets 17,715 10,790
Increase in:
Accounts payable 293,609 289,334
Accrued expenses 14,720 58,164
Other liabilities 16,260 2,605
Net cash provided by operating activities 610,982 596,494
Cash flows from investing activities:
Purchases of property and equipment (207,505 ) (147,158 )
Business acquisition, net of cash acquired (18,170 ) -
Proceeds from sales of property and equipment 1,114 197
Net cash used in investing activities (224,561 ) (146,961 )
Cash flows from financing activities:
Decrease in bank overdrafts (9,555 ) (4,620 )
(Decrease) increase in financed vendor accounts payable (31,648 ) 18,218
Issuance of senior unsecured notes - 298,761
Early extinguishment of debt - (200,000 )
Net borrowings (payments) on credit facilities 299,200 -
Payment of debt related costs (3,656 ) (4,572 )
Dividends paid (18,541 ) (21,027 )
Proceeds from the issuance of common stock, primarily exercise
of stock options 9,301 33,160
Excess tax benefit from share-based compensation 5,099 3,965
Repurchase of common stock (629,189 ) (478,080 )
Other (712 ) (854 )
Net cash used in financing activities (379,701 ) (355,049 )
Net increase in cash and cash equivalents 6,720 94,484
Cash and cash equivalents, beginning of period 59,209 100,018
Cash and cash equivalents, end of period $ 65,929 $ 194,502
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
Forty Week Periods Ended
October 8, 2011 and October 9, 2010
(in thousands, except per share data)
(unaudited)

Reconciliation of Free Cash Flow:
October 8, October 9,
2011 2010
Cash flows from operating activities $ 610,982 $ 596,494
Cash flows used in investing activities (224,561 ) (146,961 )
386,421 449,533
(Decrease) increase in financed vendor accounts payable (31,648 ) 18,218
Free cash flow $ 354,773 $ 467,751
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.
Key Financial Metrics and Statistics(1):
Twelve Weeks Ended Forty Weeks Ended Fifty-Two Weeks Ended
October 8, 2011 October 9, 2010 October 8, 2011 October 9, 2010 FY 2010 FY 2009
Sales Growth % 4.2 % 11.4 % 4.0 % 9.0 % 9.5 % 5.3 %
Sales per Store (2)(3) $ 1,702 $ 1,667 $ 1,702 $ 1,667 $ 1,697 $ 1,595
Operating Income per Store (2)(4) $ 177 $ 160 $ 177 $ 160 $ 168 $ 134
Return on Invested Capital (2)(5) 18.8 % 17.3 % 18.8 % 17.3 % 17.5 % 14.6 %
Gross Margin Return on Inventory (2)(6) $ 5.76 $ 4.89 $ 5.76 $ 4.89 $ 5.05 $ 3.98
Total Store Square Footage, end of period 26,533 25,809 26,533 25,809 25,950 24,973
Total Team Members, end of period 52,386 50,605 52,386 50,605 51,017 48,771
(1) In thousands except for gross margin return on inventory and total Team Members. These financial metrics have been reported on a GAAP basis which include the impact of store divestiture expenses in fiscal 2009. These financial metrics should be read in conjunction with our financial metrics presented on a comparable basis earlier in this press release. Refer to the "Selected Consolidated Data" on page 18 of our 2010 Form 10-K for further explanation of these items.
(2) The financial metrics presented are calculated on an annual basis and accordingly reflect the last four quarters completed.
(3) Sales per store is calculated as net sales divided by an average of beginning and ending store count.
(4) Operating income per store is calculated as operating income divided by an average of beginning and ending store count.
(5) Return on invested capital (ROIC) is calculated in detail in these supplemental financial schedules.
(6) 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.

Detail of Return on Invested Capital (ROIC) Calculation:
Last Four Quarters Ended
October 8, 2011 October 9, 2010
As Reported As Reported Comparable Adjustments (a) Comparable
Net income $ 376,353 $ 332,419 $ 2,498 $ 334,917
Add:
After-tax interest expense and other, net 20,529 16,366 - 16,366
After-tax rent expense 192,777 187,923 - 187,923
After-Tax Operating Earnings 589,659 536,708 2,498 539,206
Average assets (less cash) 3,405,982 3,074,754 13,029 3,087,783
Less: Average liabilities (excluding total debt) (2,125,062 ) (1,771,977 ) (4,936 ) (1,776,913 )
Add: Capitalized lease obligation (rent expense * 6) (b) 1,855,242 1,800,276 - 1,800,276
Total Invested Capital 3,136,162 3,103,053 8,093 3,111,146
ROIC 18.8 % 17.3 % - 17.3 %
Rent expense $ 309,207 $ 300,046 $ - $ 300,046
Interest expense and other, net $ 32,920 $ 26,147 $ - $ 26,147
( a ) The Company has also presented its ROIC calculation on a comparable basis which excludes the impact of store divestiture expenses in fiscal 2009. Refer to the "Selected Consolidated Data" on page 18 of our 2010 Form 10-K for further explanation of these items.
( b ) Capitalized lease obligation is estimated as annualized rent expense for the applicable period times six years.
Note: Management uses ROIC to evaluate return on investments to the business and believes it is a useful indicator to stockholders given the future investments the Company plans to make in areas including information technology, supply chain and stores. ROIC is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in our condensed consolidated financial statements. Management believes our comparable results of operations are a useful indicator to stockholders for consistency purposes.

SOURCE: Advance Auto Parts, Inc. 

Advance Auto Parts, Inc.
Media Contact:
Shelly Whitaker, APR
Direct 540-561-8452
shelly.whitaker@advanceautoparts.com
or
Investor Contact:
Joshua Moore
Direct 952-715-5076
Joshua.moore@advanceautoparts.com