Advance Auto Parts Reports Third Quarter 2023 Results and Provides Updates on Strategic and Operational Review
Q3 Net Sales Increased 2.9% to $2.7 Billion; Comparable Store Sales Increased 1.2%
Executing on New $150 Million Cost Reduction Program
Initiates Sale Processes for Worldpac and Canadian Business
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, announced its financial results for the third quarter ended October 7, 2023.
"Since joining Advance, I have partnered with the board and management team to move with speed in conducting a comprehensive review of the business," said Shane O'Kelly, president and chief executive officer. "We are taking decisive actions to position Advance for long-term success and create meaningful value for our shareholders. Today we are announcing initial actions from our review process that will allow us to capitalize on significant opportunities ahead. First, we are launching a new cost reduction program that we expect will generate at least $150 million in savings on an annualized basis. We expect to reinvest up to $50 million of these savings in our team members with a clear focus on improving the retention of our frontline team members. At the same time, we have made a strategic decision to focus on our blended box business model and are therefore initiating separate sale processes for Worldpac as well as our Canadian business.
"We are committed to stabilizing the company and returning Advance to profitable growth, and our frontline team's passion and extensive knowledge is integral to how we succeed. Seeing our frontline team members in action delivering for customers, coupled with robust industry fundamentals and strong vendor relationships, has reaffirmed my optimism that by making rigorous strategic and operational decisions now, Advance will be well positioned to capitalize on the opportunities ahead and deliver value for shareholders."
Third Quarter 2023 Results (1)
Third quarter 2023 Net sales totaled $2.7 billion, a 2.9% increase compared with the third quarter of the prior year. Comparable store sales increased to 1.2%.
Gross profit decreased 16.3% to $1.0 billion. Gross profit margin was 36.3% of Net sales compared with 44.6% of Net sales in the third quarter of the prior year. This was primarily driven by a change in estimate for inventory reserves that resulted in a one-time impact of approximately $119 million. In addition, the company incurred higher product costs that were not fully covered by pricing actions and elevated supply chain costs. This was partially offset by a reduction in LIFO-related expenses.
SG&A expenses were $1.0 billion, which were 37.9% of Net sales compared with 38.2% in the third quarter of the prior year.
The company's Operating loss was $43.7 million, or (1.6)% of Net sales, compared with 6.5% in the third quarter of the prior year.
The company's effective tax rate was 24.4%, compared with 24.7% in the third quarter of the prior year. The company's Diluted loss per share was $(0.82), compared with Diluted earnings per share of $1.92 in the third quarter of the prior year.
Net cash provided by operating activities was $30.4 million through the third quarter of 2023 versus $483.1 million in the same period of the prior year. This was primarily driven by lower Net income and an increase in cash used in working capital. Through the third quarter of 2023, Free cash flow was an outflow of $156.8 million compared with an inflow of $149.5 million in the same period of the prior year.
All comparisons are based on the corrected results of the same time period in the prior year as depicted in the financial tables herein, which include the correction of non-material errors the company discovered in previously reported results.
Strategic Review Update
The company has initiated separate sale processes for the potential divestiture of Worldpac and the company's Canada business. Worldpac, a leading automotive wholesale distributor of original equipment and aftermarket parts for all makes/all models, is highly recognized for its world class technology, catalog, product brand assortment and training. The company's Canadian business, which predominantly serves commercial customers, goes to market under the Carquest banner.
The company has engaged Centerview Partners to assist in the sale processes. The company has not set a timetable for the conclusion of the sale processes and does not intend to comment on or provide updates regarding these matters unless and until the processes are concluded or it determines that further disclosure is appropriate or required.
(1) Comparable store sales include locations open for 13 complete accounting periods and excludes sales to independently owned Carquest locations.
Capital Allocation
On October 31, 2023, the company declared a regular cash dividend of $0.25 per share to be paid on January 26, 2024 to all common stockholders of record as of January 12, 2024.
Full Year 2023 Guidance
Tony Iskander, interim chief financial officer, said, "Based on our year-to-date results and current business trends, we are adjusting our previously provided full year outlook ranges. Our updates include the impact of non-recurring expenses in Q3 as well as continued pressure in Q4 from higher product costs that we do not expect to offset with price. We are taking significant steps to improve our cost structure and remain focused on returning the business to profitable growth."
|
Prior FY 2023 Outlook |
|
Updated FY 2023 Outlook |
||||||||||||
|
As of August 23, 2023 |
|
As of November 15, 2023 |
||||||||||||
($ in millions, except per share data) |
Low |
|
High |
|
Low |
|
High |
||||||||
Net sales |
|
11,250 |
|
|
$ |
11,350 |
|
|
$ |
11,250 |
|
|
$ |
11,300 |
|
Comparable store sales (1) |
|
(0.5 |
)% |
|
|
0.5 |
% |
|
|
(0.5 |
)% |
|
|
0.0 |
% |
Operating income margin |
|
4.0 |
% |
|
|
4.3 |
% |
|
|
1.8 |
% |
|
|
2.0 |
% |
Income tax rate |
|
25.0 |
% |
|
|
25.0 |
% |
|
|
25.0 |
% |
|
|
25.0 |
% |
Diluted EPS |
|
4.50 |
|
|
$ |
5.10 |
|
|
$ |
1.40 |
|
|
$ |
1.80 |
|
Capital expenditures |
|
200 |
|
|
$ |
250 |
|
|
$ |
200 |
|
|
$ |
250 |
|
Free cash flow (2) |
|
150 |
|
|
$ |
250 |
|
|
$ |
50 |
|
|
$ |
100 |
|
New store and branch openings |
|
40 |
|
|
|
60 |
|
|
|
55 |
|
|
|
65 |
|
(1) |
Comparable store sales include locations open for 13 complete accounting periods and excludes sales to independently owned Carquest locations. |
|
(2) |
Free cash flow is a non-GAAP measure. For a better understanding of the company's non-GAAP adjustments, refer to the reconciliation of non-GAAP financial measures in the accompanying financial tables included herein. |
Investor Conference Call
The company will detail its results for the third quarter ended October 7, 2023 via a webcast scheduled to begin at 8 a.m. Eastern Time on Wednesday, November 15, 2023. The webcast will be accessible via the Investor Relations page of the company's website (ir.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 company's Investor Relations 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 October 7, 2023 Advance operated 4,785 stores and 320 Worldpac branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The company also served 1,307 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean 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 our strategic initiatives, operational plans and objectives, including cost reduction initiatives, our ability to complete the potential divestiture of Worldpac and the company's Canada business and expectations for economic conditions, future business results and future financial performance, as well as statements regarding underlying assumptions related thereto. Forward-looking statements reflect our 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 company's leadership transition, the timing and implementation of strategic initiatives, our ability to hire, train and retain qualified employees, deterioration of general macroeconomic conditions, the highly competitive nature of our industry, demand for our products and services, complexities in our inventory and supply chain and challenges with transforming and growing our business. Please refer to "Item 1A. Risk Factors" of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as updated by our subsequent filings with the SEC, 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) |
|||||
|
|||||
|
October 7,
|
|
December 31,
|
||
Assets |
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
317,528 |
|
$ |
269,282 |
Receivables, net |
|
868,305 |
|
|
698,613 |
Inventories, net |
|
4,940,037 |
|
|
4,911,053 |
Other current assets |
|
185,249 |
|
|
163,695 |
Total current assets |
|
6,311,119 |
|
|
6,042,643 |
Property and equipment, net |
|
1,663,080 |
|
|
1,690,139 |
Operating lease right-of-use assets |
|
2,600,946 |
|
|
2,607,690 |
Goodwill |
|
989,934 |
|
|
990,471 |
Other intangible assets, net |
|
598,699 |
|
|
620,901 |
Other assets |
|
75,809 |
|
|
62,429 |
Total assets |
$ |
12,239,587 |
|
$ |
12,014,273 |
Liabilities and Stockholders' Equity |
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable |
$ |
3,942,591 |
|
$ |
4,136,415 |
Accrued expenses |
|
712,112 |
|
|
641,099 |
Current portion of long-term debt |
|
— |
|
|
185,000 |
Other current liabilities |
|
478,603 |
|
|
427,480 |
Total current liabilities |
|
5,133,306 |
|
|
5,389,994 |
Long-term debt |
|
1,785,717 |
|
|
1,188,283 |
Noncurrent operating lease liabilities |
|
2,209,899 |
|
|
2,278,318 |
Deferred income taxes |
|
382,840 |
|
|
415,997 |
Other long-term liabilities |
|
87,669 |
|
|
87,214 |
Total stockholders' equity |
|
2,640,156 |
|
|
2,654,467 |
Total liabilities and stockholders' equity |
$ |
12,239,587 |
|
$ |
12,014,273 |
(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 December 31, 2022 has been derived from the audited consolidated financial statements at that date, but does not include the footnotes required by GAAP. |
|
(3) |
The balance sheet at December 31, 2022 reflects the corrected results as depicted in the financial tables herein, which include the correction of non-material errors the company discovered in previously reported results. |
Advance Auto Parts, Inc. and Subsidiaries |
|||||||||||||||
Condensed Consolidated Statements of Operations |
|||||||||||||||
(In thousands, except per share data) (unaudited) |
|||||||||||||||
|
|
|
|
|
|||||||||||
|
Twelve Weeks Ended |
|
Forty Weeks Ended |
||||||||||||
|
October 7, 2023 (1) |
|
October 8, 2022 (1,2) |
|
October 7, 2023 (1) |
|
October 8, 2022 (1,2) |
||||||||
Net sales |
$ |
2,719,079 |
|
|
$ |
2,641,341 |
|
|
$ |
8,822,738 |
|
|
$ |
8,680,977 |
|
Cost of sales, including purchasing and warehousing costs |
|
1,732,420 |
|
|
|
1,462,094 |
|
|
|
5,220,200 |
|
|
|
4,821,037 |
|
Gross profit |
|
986,659 |
|
|
|
1,179,247 |
|
|
|
3,602,538 |
|
|
|
3,859,940 |
|
Selling, general and administrative expenses (2) |
|
1,030,355 |
|
|
|
1,008,226 |
|
|
|
3,407,445 |
|
|
|
3,301,959 |
|
Operating (loss) income |
|
(43,696 |
) |
|
|
171,021 |
|
|
|
195,093 |
|
|
|
557,981 |
|
Other expense, net: |
|
|
|
|
|
|
|
||||||||
Interest expense |
|
(19,407 |
) |
|
|
(12,039 |
) |
|
|
(69,993 |
) |
|
|
(35,114 |
) |
Loss on early redemption of senior unsecured notes |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,408 |
) |
Other income (expense), net |
|
(1,216 |
) |
|
|
(5,054 |
) |
|
|
(206 |
) |
|
|
(5,282 |
) |
Total other, net |
|
(20,623 |
) |
|
|
(17,093 |
) |
|
|
(70,199 |
) |
|
|
(47,804 |
) |
(Loss) Income before provision for income taxes |
|
(64,319 |
) |
|
|
153,928 |
|
|
|
124,894 |
|
|
|
510,177 |
|
Provision for income taxes |
|
(15,686 |
) |
|
|
38,047 |
|
|
|
34,649 |
|
|
|
123,383 |
|
Net (loss) income |
$ |
(48,633 |
) |
|
$ |
115,881 |
|
|
$ |
90,245 |
|
|
$ |
386,794 |
|
|
|
|
|
|
|
|
|
||||||||
Basic (loss) earnings per common share |
$ |
(0.82 |
) |
|
$ |
1.93 |
|
|
$ |
1.52 |
|
|
$ |
6.38 |
|
Weighted-average common shares outstanding |
|
59,474 |
|
|
|
60,053 |
|
|
|
59,411 |
|
|
|
60,656 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted (loss) earnings per common share |
$ |
(0.82 |
) |
|
$ |
1.92 |
|
|
$ |
1.51 |
|
|
$ |
6.34 |
|
Weighted-average common shares outstanding |
|
59,630 |
|
|
|
60,384 |
|
|
|
59,588 |
|
|
|
61,045 |
|
(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. |
|
(2) |
The twelve and forty weeks ended October 8, 2022 reflect the corrected results as depicted in the financial tables herein, which include the correction of the non-material errors the company discovered in previously reported results. |
Advance Auto Parts, Inc. and Subsidiaries |
|||||||
Condensed Consolidated Statements of Cash Flows |
|||||||
(In thousands) (unaudited) |
|||||||
|
|
|
|
||||
|
Forty Weeks Ended |
||||||
|
October 7, 2023 (1) |
|
October 8, 2022 (1,2) |
||||
Cash flows from operating activities: |
|
|
|
||||
Net income |
$ |
90,245 |
|
|
$ |
386,794 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
|
234,976 |
|
|
|
215,224 |
|
Share-based compensation |
|
37,435 |
|
|
|
40,291 |
|
Loss and impairment on property and equipment, net |
|
1,886 |
|
|
|
2,858 |
|
Loss on early redemption of senior unsecured notes |
|
— |
|
|
|
7,408 |
|
Provision for deferred income taxes |
|
(33,059 |
) |
|
|
24,144 |
|
Other, net |
|
1,499 |
|
|
|
2,064 |
|
Net change in: |
|
|
|
||||
Receivables, net |
|
(170,371 |
) |
|
|
(64,107 |
) |
Inventories, net |
|
(41,025 |
) |
|
|
(274,926 |
) |
Accounts payable |
|
(191,871 |
) |
|
|
177,103 |
|
Accrued expenses |
|
145,704 |
|
|
|
(27,576 |
) |
Other assets and liabilities, net |
|
(45,015 |
) |
|
|
(6,183 |
) |
Net cash provided by operating activities |
|
30,404 |
|
|
|
483,094 |
|
Cash flows from investing activities: |
|
|
|
||||
Purchases of property and equipment |
|
(187,201 |
) |
|
|
(333,639 |
) |
Proceeds from sales of property and equipment |
|
2,001 |
|
|
|
1,821 |
|
Net cash used in investing activities |
|
(185,200 |
) |
|
|
(331,818 |
) |
Cash flows from financing activities: |
|
|
|
||||
Borrowings under credit facilities |
|
4,805,000 |
|
|
|
1,123,000 |
|
Payments on credit facilities |
|
(4,990,000 |
) |
|
|
(938,000 |
) |
Borrowings on senior unsecured notes |
|
599,571 |
|
|
|
348,618 |
|
Payments on senior unsecured notes |
|
— |
|
|
|
(201,081 |
) |
Dividends paid |
|
(194,322 |
) |
|
|
(336,230 |
) |
Repurchases of common stock |
|
(14,237 |
) |
|
|
(542,608 |
) |
Other, net |
|
(1,028 |
) |
|
|
463 |
|
Net cash provided by (used in) financing activities |
|
204,984 |
|
|
|
(545,838 |
) |
Effect of exchange rate changes on cash |
|
(1,942 |
) |
|
|
(15,662 |
) |
Net increase (decrease) in cash and cash equivalents |
|
48,246 |
|
|
|
(410,224 |
) |
Cash and cash equivalents, beginning of period |
|
269,282 |
|
|
|
601,428 |
|
Cash and cash equivalents, end of period |
$ |
317,528 |
|
|
$ |
191,204 |
|
(1) |
These preliminary condensed consolidated statements of cash flows have been prepared on a consistent basis with the company's previously prepared statements of cash flows filed with the SEC, but do not include the footnotes required by GAAP. |
|
(2) |
The forty weeks ended October 8, 2022 reflect the corrected results as depicted in the financial tables herein, which include the correction of the non-material error the company discovered in previously reported results. |
Restatement of Previously Issued Financial Statements
In connection with the preparation of the financial statements for the third quarter of 2023, the company identified additional errors impacting cost of sales and selling, general and administrative costs. The company evaluated the errors and determined that the related impacts were not material to the previously issued consolidated financial statements for any prior period. A summary of the corrections to the impacted financial statement line items in our previously issued Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statement of Cash Flows for the year ended December 31, 2022 included in previously filed Annual Reports on Form 10-K and Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements of Changes in Stockholders' Equity and Condensed Consolidated Statements of Cash Flows for periods presented below, which were presented in previously filed Quarterly Reports on Form 10-Q, are as follows:
Corrected Condensed Consolidated Balance Sheet |
|||||||||||
October 8, 2022 |
|||||||||||
|
As Previously Reported |
Adjustments |
As Corrected |
||||||||
Assets |
|
|
|
||||||||
Receivables, net |
$ |
845,667 |
|
$ |
(2,795 |
) |
$ |
842,872 |
|
||
Total current assets |
|
6,162,520 |
|
|
(2,795 |
) |
|
6,159,725 |
|
||
Total assets |
$ |
12,132,079 |
|
$ |
(2,795 |
) |
$ |
12,129,284 |
|
||
|
|
|
|
||||||||
Liabilities and Stockholders' Equity |
|
|
|
||||||||
Accounts payable |
$ |
4,097,412 |
|
$ |
(16,579 |
) |
$ |
4,080,833 |
|
||
Accrued expenses |
|
681,216 |
|
|
10,312 |
|
|
691,528 |
|
||
Total current liabilities |
|
5,442,901 |
|
|
(6,267 |
) |
|
5,436,634 |
|
||
Total liabilities |
|
9,416,004 |
|
|
(6,267 |
) |
|
9,409,737 |
|
||
| Accumulated other comprehensive loss | (54,298 |
) | 6,364 |
(47,934 |
) | ||||||
Retained earnings |
|
4,726,823 |
|
|
(2,892 |
) |
|
4,723,931 |
|
||
Total stockholders' equity |
|
2,716,075 |
|
|
3,472 |
|
|
2,719,547 |
|
||
Total liabilities and stockholders' equity |
$ |
12,132,079 |
|
$ |
(2,795 |
) |
$ |
12,129,284 |
|
||
Corrected Condensed Consolidated Balance Sheet |
||||||||||
December 31, 2022 |
||||||||||
|
As Previously Reported |
|
Adjustments |
|
As Corrected |
|||||
Assets |
|
|
|
|
|
|||||
Inventories, net |
$ |
4,915,262 |
|
$ |
(4,209 |
) |
|
$ |
4,911,0523 |
|
Total current assets |
|
6,046,852 |
|
|
(4,209 |
) |
|
|
6,042,643 |
|
Total assets |
|
12,018,482 |
|
|
(4,209 |
) |
|
|
12,014,273 |
|
|
|
|
|
|
|
|||||
Liabilities and Stockholders' Equity |
|
|
|
|
|
|||||
Accounts payable |
|
4,123,462 |
|
|
12,953 |
|
|
|
4,136,415 |
|
Accrued expenses |
|
634,447 |
|
|
6,652 |
|
|
|
641,099 |
|
Total current liabilities |
|
5,370,389 |
|
|
19,605 |
|
|
|
5,389,994 |
|
Total liabilities |
|
9,340,201 |
|
|
19,605 |
|
|
|
9,359,806 |
|
Retained earnings |
|
4,744,624 |
|
|
(23,814 |
) |
|
|
4,720,810 |
|
Total stockholders' equity |
|
2,678,281 |
|
|
(23,814 |
) |
|
|
2,654,467 |
|
Total liabilities and stockholders' equity |
$ |
12,018,482 |
|
$ |
(4,209 |
) |
|
$ |
12,014,273 |
|
Corrected Condensed Consolidated Statement of Operations |
|||||||||||||||||||
October 8, 2022 |
|||||||||||||||||||
|
Twelve Weeks Ended |
|
Forty Weeks Ended |
||||||||||||||||
|
As Previously Reported |
Adjustments |
As Corrected |
|
As Previously Reported |
Adjustments |
As Corrected |
||||||||||||
Cost of sales |
$ |
1,461,490 |
|
$ |
604 |
|
$ |
1,462,094 |
|
|
$ |
4,808,888 |
|
$ |
12,149 |
|
$ |
4,821,037 |
|
Gross profit |
|
1,179,851 |
|
|
(604 |
) |
|
1,179,247 |
|
|
|
3,872,089 |
|
|
(12,149 |
) |
|
3,859,940 |
|
Selling, general and administrative expenses |
|
1,002,653 |
|
|
5,573 |
|
|
1,008,226 |
|
|
|
3,289,940 |
|
|
12,019 |
|
|
3,301,959 |
|
Operating income |
|
177,198 |
|
|
(6,177 |
) |
|
171,021 |
|
|
|
582,149 |
|
|
(24,168 |
) |
|
557,981 |
|
Other income (expense), net |
|
(17,741 |
) |
|
12,687 |
|
|
(5,054 |
) |
|
|
(18,314 |
) |
|
13,032 |
|
|
(5,282 |
) |
Total other, net |
|
(29,780 |
) |
|
12,687 |
|
|
(17,093 |
) |
|
|
(60,836 |
) |
|
13,032 |
|
|
(47,804 |
) |
Income before provision for income taxes |
|
147,418 |
|
|
6,510 |
|
|
153,928 |
|
|
|
521,313 |
|
|
(11,136 |
) |
|
510,177 |
|
Provision for income taxes |
|
36,436 |
|
|
1,611 |
|
|
38,047 |
|
|
|
126,137 |
|
|
(2,754 |
) |
|
123,383 |
|
Net income |
$ |
110,982 |
|
$ |
4,899 |
|
$ |
115,881 |
|
|
$ |
395,176 |
|
$ |
(8,382 |
) |
$ |
386,794 |
|
|
|
|
|
|
|
|
|
||||||||||||
Basic earnings per share |
$ |
1.85 |
|
$ |
0.08 |
|
$ |
1.93 |
|
|
$ |
6.52 |
|
$ |
(0.14 |
) |
$ |
6.38 |
|
Basic weighted average shares |
|
60,053 |
|
|
|
60,053 |
|
|
|
60,656 |
|
|
|
60,656 |
|
||||
|
|
|
|
|
|
|
|
||||||||||||
Diluted earnings per common share |
$ |
1.84 |
|
$ |
0.08 |
|
|
1.92 |
|
|
$ |
6.47 |
|
$ |
(0.13 |
) |
|
6.34 |
|
Diluted weighted average shares |
60,384 |
|
|
60,384 |
|
|
61,045 |
|
|
61,045 |
|
||||||||
Corrected Statement of Cash Flows (unaudited) |
|||||||||||
Forty Weeks Ended October 8, 2022 |
|||||||||||
|
As Previously Reported |
|
Adjustments |
|
As Corrected |
||||||
Net income |
$ |
395,176 |
|
|
$ |
(8,382 |
) |
|
$ |
386,794 |
|
Net change in: |
|
|
|
|
|
||||||
Receivables, net |
|
(66,902 |
) |
|
|
(22,402 |
) |
|
|
(89,304 |
) |
Inventories |
|
(284,271 |
) |
|
|
34,542 |
|
|
|
(249,729 |
) |
Accounts payable |
|
187,331 |
|
|
|
(10,228 |
) |
|
|
177,103 |
|
Accrued expenses |
|
(34,046 |
) |
|
|
6,470 |
|
|
|
(27,576 |
) |
Net cash provided by operating activities |
$ |
483,094 |
|
|
$ |
— |
|
|
$ |
483,094 |
|
Reconciliation of Non-GAAP Financial Measure
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"). 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.
Reconciliation of Free Cash Flow: (1) |
|
|
|
||||
|
Forty Weeks Ended |
||||||
(in thousands) |
October 7, 2023 |
|
October 8, 2022 |
||||
Cash flows provided by operating activities |
$ |
30,404 |
|
|
$ |
483,094 |
|
Purchases of property and equipment |
|
(187,201 |
) |
|
|
(333,639 |
) |
Free cash flow |
$ |
(156,797 |
) |
|
$ |
149,455 |
|
Adjusted Debt to Adjusted EBITDAR: (1,2) |
|
|
|
||||
|
Four Quarters Ended |
||||||
(In thousands, except adjusted debt to adjusted EBITDAR ratio) |
October 7, 2023 |
|
December 31, 2022 |
||||
Total GAAP debt |
$ |
1,785,717 |
|
$ |
1,373,283 |
||
Add: Operating lease liabilities |
|
2,675,921 |
|
|
2,692,861 |
||
Adjusted debt |
$ |
4,461,638 |
|
$ |
4,066,144 |
||
|
|
|
|
||||
GAAP Net income |
$ |
176,664 |
|
$ |
473,213 |
||
Depreciation and amortization |
|
302,670 |
|
|
283,800 |
||
Interest expense |
|
85,938 |
|
|
51,060 |
||
Other (income) expense, net |
|
2,348 |
|
|
|
7,242 |
|
Provision for income taxes |
|
48,445 |
|
|
137,180 |
||
Rent expense |
|
600,261 |
|
|
594,838 |
||
Share-based compensation |
|
48,122 |
|
|
50,978 |
||
Other noncash charges |
|
59,975 |
|
|
7,408 |
||
Transformation related charges |
|
26,367 |
|
|
— |
||
Adjusted EBITDAR |
$ |
1,350,148 |
|
$ |
1,605,259 |
||
|
|
|
|
||||
Adjusted Debt to Adjusted EBITDAR |
|
3.3 |
|
|
2.5 |
||
(1) |
The forty weeks ended October 8, 2022 and four quarters ended December 31, 2022 reflect the corrected results as depicted in the financial tables herein, which include the correction of non-material errors the company discovered in previously reported results. |
|
(2) |
Beginning in first quarter 2023, the company no longer excludes transformation-related activities in non-GAAP measures. Prior period has been recast to conform to current year presentation. |
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 forty weeks ended October 7, 2023, 51 stores and branches were opened and 32 were closed, resulting in a total of 5,105 stores and branches as of October 7, 2023, compared with a total of 5,086 stores and branches as of December 31, 2022.
The below table summarizes the changes in the number of company-operated store and branch locations during the twelve and forty weeks ended October 7, 2023:
|
|
Twelve Weeks Ended |
|||||||||
|
|
AAP |
|
CARQUEST |
|
WORLDPAC (1) |
|
Total |
|||
July 15, 2023 |
|
4,471 |
|
|
319 |
|
|
319 |
|
5,109 |
|
New |
|
10 |
|
|
1 |
|
|
1 |
|
12 |
|
Closed |
|
(5 |
) |
|
(11 |
) |
|
— |
|
(16 |
) |
Relocated |
|
1 |
|
|
(1 |
) |
|
— |
|
— |
|
October 7, 2023 |
|
4,477 |
|
|
308 |
|
|
320 |
|
5,105 |
|
|
|
Forty Weeks Ended |
|||||||||
|
|
AAP |
|
CARQUEST |
|
WORLDPAC (1) |
|
Total |
|||
December 31, 2022 |
|
4,440 |
|
|
330 |
|
|
316 |
|
5,086 |
|
New |
|
46 |
|
|
1 |
|
|
4 |
|
51 |
|
Closed |
|
(10 |
) |
|
(22 |
) |
|
— |
|
(32 |
) |
Relocated |
|
1 |
|
|
(1 |
) |
|
— |
|
— |
|
October 7, 2023 |
|
4,477 |
|
|
308 |
|
|
320 |
|
5,105 |
|
(1) Certain converted Autopart International ("AI") locations will remain branded as AI going forward. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20231114437879/en/