Advance Auto Parts Reports Fourth Quarter and Full Year 2023 Results
“As we closed out 2023, we continued to act with a sense of urgency to stabilize the business and position the company to return to profitable growth,” said
“We continue to advance our ongoing operational and strategic review of the business, including the separate sales processes for
Fourth Quarter and Full Year 2023 Results (1)
Fourth quarter 2023 Net sales totaled
The company's Gross profit decreased 11.9% from the fourth quarter of the prior year to
The company's SG&A was
The company's fourth quarter Operating loss was
The company's effective tax rate in the fourth quarter of 2023 was 42.3%. The company's Diluted loss per share was
Net cash provided by operating activities was
During management’s review, the company identified issues with certain previously reported financials. All comparisons are based on the corrected historical results as depicted in the financial tables herein, which include the correction of non-material errors in previously reported results.
The company filed a Form 12b-25 with the
(1) All comparisons are based on the same time period in the prior year. Comparable store sales include locations open for 13 complete accounting periods and excludes sales to independently owned
Capital Allocation
On
Subsequent Events
On
Full Year 2024 Guidance (1)
"In 2024, we are refining our operational improvement plans and building on the decisive actions we have taken to turn around the company’s performance. We are committed to improving overall productivity and taking a disciplined approach to reducing expenses, which will support our focus on investing in our team members. Our 2024 full year guidance is reflective of the steps we must take to reset the business and solidify our foundation for the long term," said
|
|
2024 |
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($ in millions, except per share data) |
|
Low |
|
High |
||||
Net sales |
|
$ |
11,300 |
|
|
$ |
11,400 |
|
Comparable store sales (2) |
|
|
0.0 |
% |
|
|
1.0 |
% |
Operating income margin |
|
|
3.2 |
% |
|
|
3.5 |
% |
Diluted EPS |
|
$ |
3.75 |
|
|
$ |
4.25 |
|
Capital expenditures |
|
$ |
200 |
|
|
$ |
250 |
|
Free cash flow (3) |
|
Minimum |
(1) |
The company is providing guidance as of |
(2) |
Comparable store sales include locations open for 13 complete accounting periods and excludes sales to independently owned |
(3) |
Free cash flow is a non-GAAP measure. For a better understanding of the company's adjusted results, refer to the reconciliation of non-GAAP adjustment in the accompanying financial tables included herein. |
Investor Conference Call
The company will detail its results for the fourth quarter and full year 2023 via a webcast scheduled to begin at
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 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
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, our ability to complete the potential divestiture of
|
||||||
Condensed Consolidated Balance Sheets |
||||||
(in thousands) |
||||||
(unaudited) |
||||||
|
|
|
|
|
||
|
|
|
|
|
||
Assets |
|
|
||||
Current assets: |
|
|
|
|
||
Cash and cash equivalents |
|
$ |
503,471 |
|
$ |
270,805 |
Receivables, net |
|
|
800,141 |
|
|
684,048 |
Inventories |
|
|
4,857,702 |
|
|
4,896,269 |
Other current assets |
|
|
215,707 |
|
|
163,695 |
Total current assets |
|
|
6,377,021 |
|
|
6,014,817 |
Property and equipment, net |
|
|
1,648,546 |
|
|
1,690,139 |
Operating lease right-of-use assets |
|
|
2,578,776 |
|
|
2,607,690 |
|
|
|
991,743 |
|
|
990,471 |
Other intangible assets, net |
|
|
593,341 |
|
|
620,901 |
Other assets |
|
|
86,899 |
|
|
62,429 |
Total assets |
|
$ |
12,276,326 |
|
$ |
11,986,447 |
Liabilities and Stockholders' Equity |
|
|
|
|
||
Current liabilities: |
|
|
|
|
||
Accounts payable |
|
$ |
4,177,974 |
|
$ |
4,178,907 |
Accrued expenses |
|
|
671,237 |
|
|
629,464 |
Current portion of long-term debt |
|
|
— |
|
|
185,000 |
Other current liabilities |
|
|
458,194 |
|
|
427,480 |
Total current liabilities |
|
|
5,307,405 |
|
|
5,420,851 |
Long-term debt |
|
|
1,786,361 |
|
|
1,188,283 |
Non-current operating lease liabilities |
|
|
2,215,766 |
|
|
2,278,318 |
Deferred income taxes |
|
|
362,542 |
|
|
410,749 |
Other long-term liabilities |
|
|
84,524 |
|
|
89,054 |
Total stockholders' equity |
|
|
2,519,728 |
|
|
2,599,192 |
Total liabilities and stockholders’ equity |
|
$ |
12,276,326 |
|
$ |
11,986,447 |
(1) |
This preliminary condensed consolidated balance sheet has been prepared on a basis consistent with the company's previously prepared balance sheets filed with the |
(2) |
The fifty-two weeks ended |
|
||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||
(in thousands, except per share data) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Twelve Weeks Ended |
|
Twelve Weeks Ended |
|
Fifty-Two Weeks Ended |
|
Fifty-Two Weeks Ended |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net sales |
|
$ |
2,464,869 |
|
|
$ |
2,473,745 |
|
|
$ |
11,287,607 |
|
|
$ |
11,154,722 |
|
Cost of sales |
|
|
1,514,028 |
|
|
|
1,394,853 |
|
|
|
6,764,105 |
|
|
|
6,222,487 |
|
Gross profit |
|
|
950,841 |
|
|
|
1,078,892 |
|
|
|
4,523,502 |
|
|
|
4,932,235 |
|
Selling, general and administrative expenses |
|
|
999,407 |
|
|
|
959,583 |
|
|
|
4,409,125 |
|
|
|
4,261,982 |
|
Operating (loss) income |
|
|
(48,566 |
) |
|
|
119,309 |
|
|
|
114,377 |
|
|
|
670,253 |
|
Other, net: |
|
|
|
|
|
|
|
|
||||||||
Interest expense |
|
|
(18,062 |
) |
|
|
(15,946 |
) |
|
|
(88,055 |
) |
|
|
(51,060 |
) |
Loss on early redemptions of senior unsecured notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,408 |
) |
Other income (expense), net |
|
|
5,731 |
|
|
|
(2,141 |
) |
|
|
5,525 |
|
|
|
(7,423 |
) |
Total other, net |
|
|
(12,331 |
) |
|
|
(18,087 |
) |
|
|
(82,530 |
) |
|
|
(65,891 |
) |
(Loss) Income before provision for income taxes |
|
|
(60,897 |
) |
|
|
101,222 |
|
|
|
31,847 |
|
|
|
604,362 |
|
Provision for income taxes |
|
|
(25,770 |
) |
|
|
18,318 |
|
|
|
2,112 |
|
|
|
139,960 |
|
Net (loss) income |
|
$ |
(35,127 |
) |
|
$ |
82,904 |
|
|
$ |
29,735 |
|
|
$ |
464,402 |
|
|
|
|
|
|
|
|
|
|
||||||||
Basic (loss) earnings per common share |
|
$ |
(0.59 |
) |
|
$ |
1.40 |
|
|
$ |
0.50 |
|
|
$ |
7.70 |
|
Weighted average common shares outstanding |
|
|
59,504 |
|
|
|
59,333 |
|
|
|
59,432 |
|
|
|
60,351 |
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted (loss) earnings per common share |
|
$ |
(0.59 |
) |
|
$ |
1.39 |
|
|
$ |
0.50 |
|
|
$ |
7.65 |
|
Weighted average common shares outstanding |
|
|
59,675 |
|
|
|
59,623 |
|
|
|
59,608 |
|
|
|
60,717 |
|
(1) |
These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with the company's previously prepared statements of operations filed with the |
(2) |
The twelve weeks ended |
|
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(in thousands) |
||||||||
(unaudited) |
||||||||
|
|
Fifty-Two Weeks Ended |
||||||
|
|
|
|
|
||||
|
|
|
|
|
||||
Cash flows from operating activities: |
|
|
|
|
||||
Net income |
|
$ |
29,735 |
|
|
$ |
464,402 |
|
Depreciation and amortization |
|
|
306,454 |
|
|
|
283,800 |
|
Share-based compensation |
|
|
45,647 |
|
|
|
50,978 |
|
Loss on early redemption of senior unsecured notes |
|
|
— |
|
|
|
7,408 |
|
Provision for deferred income taxes |
|
|
(47,782 |
) |
|
|
16,528 |
|
Other, net |
|
|
2,813 |
|
|
|
6,168 |
|
Net change in: |
|
|
|
|
||||
Receivables, net |
|
|
(114,665 |
) |
|
|
67,147 |
|
Inventories |
|
|
44,821 |
|
|
|
(229,643 |
) |
Accounts payable |
|
|
(4,645 |
) |
|
|
227,774 |
|
Accrued expenses |
|
|
115,673 |
|
|
|
(167,723 |
) |
Other assets and liabilities, net |
|
|
(91,987 |
) |
|
|
9,732 |
|
Net cash provided by operating activities |
|
|
286,064 |
|
|
|
736,571 |
|
Cash flows from investing activities: |
|
|
|
|
||||
Purchases of property and equipment |
|
|
(242,411 |
) |
|
|
(424,061 |
) |
Purchase of intangible asset |
|
|
— |
|
|
|
(1,900 |
) |
Proceeds from sales of property and equipment |
|
|
6,922 |
|
|
|
1,513 |
|
Net cash used in investing activities |
|
|
(235,489 |
) |
|
|
(424,448 |
) |
Cash flows from financing activities: |
|
|
|
|
||||
Payments on senior unsecured notes |
|
|
— |
|
|
|
(201,081 |
) |
Borrowings under credit facilities |
|
|
4,805,000 |
|
|
|
2,035,000 |
|
Payments on credit facilities |
|
|
(4,990,000 |
) |
|
|
(1,850,000 |
) |
Proceeds from issuance of senior unsecured notes, net |
|
|
599,571 |
|
|
|
348,618 |
|
Dividends paid |
|
|
(209,293 |
) |
|
|
(336,230 |
) |
Repurchases of common stock |
|
|
(14,518 |
) |
|
|
(618,480 |
) |
Other, net |
|
|
(182 |
) |
|
|
1,469 |
|
Net cash provided by (used in) financing activities |
|
|
190,578 |
|
|
|
(620,704 |
) |
Effect of exchange rate changes on cash |
|
|
(8,487 |
) |
|
|
(8,664 |
) |
|
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents |
|
|
232,666 |
|
|
|
(317,245 |
) |
Cash and cash equivalents, beginning of period |
|
|
270,805 |
|
|
|
588,050 |
|
Cash and cash equivalents, end of period |
|
$ |
503,471 |
|
|
$ |
270,805 |
|
(1) |
This preliminary condensed consolidated statement of cash flows has been prepared on a basis consistent with the company's previously prepared statements of operations filed with the |
(2) |
The fifty-two weeks ended |
Restatement of Previously Issued Financial Statements
In connection with the preparation of the financial statements for the fourth quarter of 2023, the company identified additional errors primarily 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 Consolidated Balance Sheet as of
Condensed Consolidated Balance Sheet |
|||||||||||
|
|||||||||||
|
As Previously Reported |
|
Adjustments |
|
As Corrected |
||||||
Assets |
|
|
|
|
|
||||||
Cash and cash equivalents |
$ |
269,282 |
|
|
$ |
1,523 |
|
|
$ |
270,805 |
|
Receivables, net |
|
698,613 |
|
|
|
(14,565 |
) |
|
|
684,048 |
|
Inventories, net |
|
4,915,262 |
|
|
|
(18,993 |
) |
|
|
4,896,269 |
|
Total current assets |
|
6,046,852 |
|
|
|
(32,035 |
) |
|
|
6,014,817 |
|
Total assets |
$ |
12,018,482 |
|
|
$ |
(32,035 |
) |
|
$ |
11,986,447 |
|
|
|
|
|
|
|
||||||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
||||||
Accounts payable |
$ |
4,123,462 |
|
|
$ |
55,445 |
|
|
$ |
4,178,907 |
|
Accrued expenses |
|
634,447 |
|
|
|
(4,983 |
) |
|
|
629,464 |
|
Total current liabilities |
|
5,370,389 |
|
|
|
50,462 |
|
|
|
5,420,851 |
|
Deferred income taxes |
|
415,997 |
|
|
|
(5,248 |
) |
|
|
410,749 |
|
Other long-term liabilities |
|
87,214 |
|
|
|
1,840 |
|
|
|
89,054 |
|
Total liabilities |
|
9,340,201 |
|
|
|
47,054 |
|
|
|
9,387,255 |
|
Accumulated other comprehensive loss |
|
(45,143 |
) |
|
|
448 |
|
|
|
(44,695 |
) |
Retained earnings |
|
4,744,624 |
|
|
|
(79,537 |
) |
|
|
4,665,087 |
|
Total stockholders’ equity |
|
2,678,281 |
|
|
|
(79,089 |
) |
|
|
2,599,192 |
|
Total liabilities and stockholders’ equity |
$ |
12,018,482 |
|
|
$ |
(32,035 |
) |
|
$ |
11,986,447 |
|
Condensed Consolidated Statement of Operations |
|||||||||||||||||||||||
|
|||||||||||||||||||||||
|
Twelve Weeks Ended |
|
Fifty-Two Weeks Ended |
||||||||||||||||||||
|
As Previously Reported |
|
Adjustments |
|
As Corrected |
|
As Previously Reported |
|
Adjustments |
|
As Corrected |
||||||||||||
Cost of sales |
$ |
1,383,734 |
|
|
$ |
11,119 |
|
|
$ |
1,394,853 |
|
|
$ |
6,192,622 |
|
|
$ |
29,865 |
|
|
$ |
6,222,487 |
|
Gross profit |
|
1,090,011 |
|
|
|
(11,119 |
) |
|
|
1,078,892 |
|
|
|
4,962,100 |
|
|
|
(29,865 |
) |
|
|
4,932,235 |
|
Selling, general and administrative expenses |
|
958,009 |
|
|
|
1,574 |
|
|
|
959,583 |
|
|
|
4,247,949 |
|
|
|
14,033 |
|
|
|
4,261,982 |
|
Operating income |
|
132,002 |
|
|
|
(12,693 |
) |
|
|
119,309 |
|
|
|
714,151 |
|
|
|
(43,898 |
) |
|
|
670,253 |
|
Other (expense) income, net |
|
11,320 |
|
|
|
(13,461 |
) |
|
|
(2,141 |
) |
|
|
(6,996 |
) |
|
|
(427 |
) |
|
|
(7,423 |
) |
Total other, net |
|
(4,626 |
) |
|
|
(13,461 |
) |
|
|
(18,087 |
) |
|
|
(65,464 |
) |
|
|
(427 |
) |
|
|
(65,891 |
) |
Income before provision for income taxes |
|
127,376 |
|
|
|
(26,154 |
) |
|
|
101,222 |
|
|
|
648,687 |
|
|
|
(44,325 |
) |
|
|
604,362 |
|
Provision for income taxes |
|
20,679 |
|
|
|
(2,361 |
) |
|
|
18,318 |
|
|
|
(146,815 |
) |
|
|
6,855 |
|
|
|
(139,960 |
) |
Net income |
$ |
106,697 |
|
|
$ |
(23,793 |
) |
|
$ |
82,904 |
|
|
$ |
501,872 |
|
|
$ |
(37,470 |
) |
|
$ |
464,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic earnings per share |
$ |
1.80 |
|
|
$ |
(0.40 |
) |
|
$ |
1.40 |
|
|
$ |
8.32 |
|
|
$ |
(0.62 |
) |
|
$ |
7.70 |
|
Diluted earnings per common share |
$ |
1.79 |
|
|
$ |
(0.40 |
) |
|
$ |
1.39 |
|
|
$ |
8.27 |
|
|
$ |
(0.62 |
) |
|
$ |
7.65 |
|
Condensed Consolidated Statement of Cash Flows |
|||||||||||
Fifty-Two Weeks Ended |
|||||||||||
|
As Previously Reported |
|
Adjustments |
|
As Corrected |
||||||
Net income |
$ |
501,872 |
|
|
$ |
(37,470 |
) |
|
$ |
464,402 |
|
Provision for deferred income taxes |
|
6,338 |
|
|
|
10,190 |
|
|
|
16,528 |
|
Net change in: |
|
|
|
|
|
||||||
Receivables, net |
|
81,254 |
|
|
|
(14,107 |
) |
|
|
67,147 |
|
Inventories, net |
|
(272,253 |
) |
|
|
42,610 |
|
|
|
(229,643 |
) |
Accounts payable |
|
212,568 |
|
|
|
15,206 |
|
|
|
227,774 |
|
Accrued expenses |
|
(165,643 |
) |
|
|
(2,080 |
) |
|
|
(167,723 |
) |
Net cash provided by operating activities |
|
722,222 |
|
|
|
14,349 |
|
|
|
736,571 |
|
Effect of exchange rate changes on cash |
|
(9,216 |
) |
|
|
552 |
|
|
|
(8,664 |
) |
Net (decrease) increase in cash and cash equivalents |
|
(332,146 |
) |
|
|
14,901 |
|
|
|
(317,245 |
) |
Cash and cash equivalents, beginning of period |
|
601,428 |
|
|
|
(13,378 |
) |
|
|
588,050 |
|
Cash and cash equivalents, end of period |
$ |
269,282 |
|
|
$ |
1,523 |
|
|
$ |
270,805 |
|
Reconciliation of Non-GAAP Financial Measures
The company's financial results include certain financial measures not derived in accordance with accounting principles generally accepted in
Reconciliation of Free Cash Flow: (1) |
|
|
|
|
||||
|
|
Fifty-Two Weeks Ended |
||||||
(in thousands) |
|
|
|
|
||||
Cash flows from operating activities |
|
$ |
286,064 |
|
|
$ |
736,571 |
|
Purchases of property and equipment |
|
|
(242,411 |
) |
|
|
(424,061 |
) |
Free cash flow |
|
$ |
43,653 |
|
|
$ |
312,510 |
|
Adjusted Debt to Adjusted EBITDAR Ratio: (1) |
|
|
|
|
||||
|
|
Four Quarters Ended |
||||||
(in thousands, except adjusted debt to adjusted EBITDAR ratio) |
|
|
|
|
||||
Total GAAP debt |
|
$ |
1,786,361 |
|
|
$ |
1,373,283 |
|
Add: Operating lease liabilities |
|
|
2,660,827 |
|
|
|
2,692,861 |
|
Adjusted debt |
|
$ |
4,447,188 |
|
|
$ |
4,066,144 |
|
|
|
|
|
|
||||
GAAP Net income |
|
$ |
29,735 |
|
|
$ |
464,402 |
|
Depreciation and amortization |
|
|
306,454 |
|
|
|
283,800 |
|
Interest expense |
|
|
88,055 |
|
|
|
51,060 |
|
Other expense (income), net |
|
|
(5,525 |
) |
|
|
7,423 |
|
Provision for income taxes |
|
|
2,112 |
|
|
|
139,960 |
|
Rent expense |
|
|
613,859 |
|
|
|
594,838 |
|
Share-based compensation |
|
|
45,647 |
|
|
|
50,978 |
|
Other nonrecurring charges(2) |
|
|
12,419 |
|
|
|
7,408 |
|
Transformation related charges |
|
|
29,719 |
|
|
|
37,083 |
|
Adjusted EBITDAR |
|
$ |
1,122,475 |
|
|
$ |
1,636,952 |
|
|
|
|
|
|
||||
Adjusted debt to adjusted EBITDAR ratio |
|
|
4.0 |
|
|
|
2.5 |
|
(1) |
The fifty-two weeks ended |
(2) |
The adjustments to the four quarters ended |
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 fifty-two weeks ended
The below table summarizes the changes in the number of company-operated stores and branches during the twelve and fifty-two weeks ended
|
|
Twelve Weeks Ended |
|||||||||
|
|
AAP |
|
|
|
|
|
Total |
|||
|
|
4,477 |
|
|
308 |
|
|
320 |
|
5,105 |
|
New |
|
9 |
|
|
— |
|
|
1 |
|
10 |
|
Closed |
|
(3 |
) |
|
(5 |
) |
|
— |
|
(8 |
) |
Relocated |
|
1 |
|
|
(1 |
) |
|
— |
|
— |
|
|
|
4,484 |
|
|
302 |
|
|
321 |
|
5,107 |
|
|
|
Fifty-Two Weeks Ended |
|||||||||
|
|
AAP |
|
|
|
|
|
Total |
|||
|
|
4,440 |
|
|
330 |
|
|
316 |
|
5,086 |
|
New |
|
55 |
|
|
1 |
|
|
5 |
|
61 |
|
Closed |
|
(13 |
) |
|
(27 |
) |
|
— |
|
(40 |
) |
Relocated |
|
2 |
|
|
(2 |
) |
|
— |
|
— |
|
|
|
4,484 |
|
|
302 |
|
|
321 |
|
5,107 |
|
(1) |
Certain converted |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240227515136/en/
Investor Relations Contact:
T: (919) 227-5466
E: invrelations@advanceautoparts.com
Media Contact:
T: (984) 389-7207
E: darryl.carr@advance-auto.com
Source: