CORRECTING and REPLACING Advance Auto Parts Reports First Quarter 2024 Results
The updated release reads:
A DVANCE AUTO PARTS REPORTS FIRST QUARTER 2024 RESULTS
“Our team continues to execute against our decisive actions, including commencing our supply chain consolidation and making meaningful progress toward the potential sale of Worldpac,” said Shane O’Kelly, president and chief executive officer. “While the industry experienced a slower start to 2024 compared with our expectations, the actions we began in the back half of last year will help us streamline our operations for the long term. Our leadership team and I continue to focus on improving the core fundamentals of our business while reducing costs, which is reflected in our year-over-year SG&A reduction. As previously announced, we are reinvesting a portion of the savings back into the foundation of our business, including frontline compensation and training. We also made progress on our other decisive actions, including beginning three of our DC to market hub conversions.
“We continue to work on improving our overall performance by removing complexities and distractions to increase our value proposition and deliver shareholder value. We recognize we still have significant work ahead of us, however the actions we're taking will put us on the path to delivering improved results. I want to thank all our team members for their continued commitment to serving our customers as we navigate through this pivotal year for Advance.”
First Quarter 2024 Results (1,2)
First quarter 2024 net sales totaled
The company's gross profit decreased 2.2% to
SG&A expenses were
The company's operating income was
The company's effective tax rate was 33.2%, compared with 28.5% in the first quarter of 2023. The higher effective income tax rate was due to a discrete charge for share-based compensation. The company's diluted EPS was
Net cash provided by operating activities was
Capital Allocation
On
__________________________________ | |
(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 exclude sales fulfilled by distribution centers to independently owned |
(2) |
As reported in the company’s fourth quarter and full year 2023 earnings release, the company corrected non-material errors in certain previously reported financials. All comparisons are based on the corrected historical results as presented in the company’s prior earnings release dated |
Full Year 2024 Guidance
|
|
As of |
||||||
($ in millions, except per share data) |
|
Low |
|
High |
||||
Net sales |
|
$ |
11,300 |
|
|
$ |
11,400 |
|
Comparable store sales(1) |
|
|
0.0 |
% |
|
|
1.0 |
% |
Operating income margin |
|
|
3.2 |
% |
|
|
3.5 |
% |
Diluted EPS |
|
$ |
3.75 |
|
|
$ |
4.25 |
|
Capital expenditures |
|
$ |
200 |
|
|
$ |
250 |
|
Free cash flow (2) |
|
Minimum |
(1) |
Comparable store sales include locations open for 13 complete accounting periods and exclude sales fulfilled by distribution centers to independently owned |
|
(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 first quarter ended
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
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 the company’s strategic initiatives, including cost reduction initiatives, the company's ability to complete the potential divestitures of
|
|||||
Condensed Consolidated Balance Sheets |
|||||
(In thousands) |
|||||
|
|||||
|
|
|
|
||
|
(Unaudited) |
|
(Audited) |
||
Assets |
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
451,003 |
|
$ |
503,471 |
Receivables, net |
|
825,384 |
|
|
800,141 |
Inventories |
|
4,828,314 |
|
|
4,857,702 |
Other current assets |
|
236,507 |
|
|
215,707 |
Total current assets |
|
6,341,208 |
|
|
6,377,021 |
Property and equipment, net |
|
1,611,251 |
|
|
1,648,546 |
Operating lease right-of-use assets |
|
2,589,504 |
|
|
2,578,776 |
|
|
989,921 |
|
|
991,743 |
Other intangible assets, net |
|
583,547 |
|
|
593,341 |
Other assets |
|
85,679 |
|
|
86,899 |
Total assets |
$ |
12,201,110 |
|
$ |
12,276,326 |
Liabilities and Stockholders' Equity |
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable |
$ |
4,031,299 |
|
$ |
4,177,974 |
Accrued expenses |
|
668,205 |
|
|
671,237 |
Other current liabilities |
|
510,345 |
|
|
458,194 |
Total current liabilities |
|
5,209,849 |
|
|
5,307,405 |
Long-term debt |
|
1,787,221 |
|
|
1,786,361 |
Noncurrent operating lease liabilities |
|
2,191,201 |
|
|
2,215,766 |
Deferred income taxes |
|
364,564 |
|
|
362,542 |
Other long-term liabilities |
|
83,625 |
|
|
84,524 |
Total stockholders' equity |
|
2,564,650 |
|
|
2,519,728 |
Total liabilities and stockholders’ equity |
$ |
12,201,110 |
|
$ |
12,276,326 |
(1) |
These condensed consolidated balance sheets have been prepared on a basis consistent with the company's previously prepared consolidated balance sheets filed with the |
|
|||||||
Condensed Consolidated Statements of Operations |
|||||||
(In thousands, except per share data) (unaudited) |
|||||||
|
|||||||
|
Sixteen Weeks Ended |
||||||
|
|
|
|
||||
Net sales |
$ |
3,406,254 |
|
|
$ |
3,417,594 |
|
Cost of sales, including purchasing and warehousing costs |
|
1,977,180 |
|
|
|
1,955,666 |
|
Gross profit |
|
1,429,074 |
|
|
|
1,461,928 |
|
Selling, general and administrative expenses |
|
1,343,053 |
|
|
|
1,363,990 |
|
Operating income |
|
86,021 |
|
|
|
97,938 |
|
Other, net: |
|
|
|
||||
Interest expense |
|
(24,875 |
) |
|
|
(29,718 |
) |
Other expense, net |
|
(1,290 |
) |
|
|
(674 |
) |
Total other, net |
|
(26,165 |
) |
|
|
(30,392 |
) |
Income before provision for income taxes |
|
59,856 |
|
|
|
67,546 |
|
Provision for income taxes |
|
19,844 |
|
|
|
19,223 |
|
Net income |
$ |
40,012 |
|
|
$ |
48,323 |
|
|
|
|
|
||||
Basic earnings per common share |
$ |
0.67 |
|
|
$ |
0.81 |
|
Weighted-average common shares outstanding |
|
59,558 |
|
|
|
59,334 |
|
|
|
|
|
||||
Diluted earnings per common share |
$ |
0.67 |
|
|
$ |
0.81 |
|
Weighted-average common shares outstanding |
|
59,841 |
|
|
|
59,544 |
|
(1) |
The condensed consolidated statement of operations for the sixteen weeks ended |
|
|||||||
Condensed Consolidated Statements of Cash Flows |
|||||||
(In thousands) (unaudited) |
|||||||
|
|
|
|
||||
|
Sixteen Weeks Ended |
||||||
|
|
|
|
||||
Cash flows from operating activities: |
|
|
|
||||
Net income |
$ |
40,012 |
|
|
$ |
48,323 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
|
94,711 |
|
|
|
92,554 |
|
Share-based compensation |
|
16,696 |
|
|
|
16,524 |
|
(Gain) Loss on property and equipment, net |
|
(18,368 |
) |
|
|
90 |
|
Provision for deferred income taxes |
|
2,637 |
|
|
|
6,899 |
|
Other, net |
|
1,164 |
|
|
|
849 |
|
Net change in: |
|
|
|
||||
Receivables, net |
|
(27,469 |
) |
|
|
(85,827 |
) |
Inventories |
|
20,017 |
|
|
|
(104,355 |
) |
Accounts payable |
|
(141,323 |
) |
|
|
(424,190 |
) |
Accrued expenses |
|
1,270 |
|
|
|
89,666 |
|
Other assets and liabilities, net |
|
13,341 |
|
|
|
(23,057 |
) |
Net cash provided by (used in) operating activities |
|
2,688 |
|
|
|
(382,524 |
) |
Cash flows from investing activities: |
|
|
|
||||
Purchases of property and equipment |
|
(48,957 |
) |
|
|
(89,996 |
) |
Proceeds from sales of property and equipment |
|
10,028 |
|
|
|
325 |
|
Net cash used in investing activities |
|
(38,929 |
) |
|
|
(89,671 |
) |
Cash flows from financing activities: |
|
|
|
||||
Borrowings under credit facilities |
|
— |
|
|
|
2,886,000 |
|
Payments on credit facilities |
|
— |
|
|
|
(2,955,000 |
) |
Borrowings on senior unsecured notes |
|
— |
|
|
|
599,571 |
|
Dividends paid |
|
(14,966 |
) |
|
|
(89,487 |
) |
Purchases of noncontrolling interests |
|
(7,149 |
) |
|
|
— |
|
Proceeds from the issuance of common stock |
|
946 |
|
|
|
1,100 |
|
Repurchases of common stock |
|
(3,338 |
) |
|
|
(12,605 |
) |
Other, net |
|
(1,137 |
) |
|
|
(4,377 |
) |
Net cash (used in) provided by financing activities |
|
(25,644 |
) |
|
|
425,202 |
|
Effect of exchange rate changes on cash |
|
9,417 |
|
|
|
68 |
|
Net decrease in cash and cash equivalents |
|
(52,468 |
) |
|
|
(46,925 |
) |
Cash and cash equivalents, beginning of period |
|
503,471 |
|
|
|
270,805 |
|
Cash and cash equivalents, end of period |
$ |
451,003 |
|
|
$ |
223,880 |
|
(1) |
The condensed consolidated statement of cash flows for the sixteen weeks ended |
Restatement of Previously Issued Financial Statements
During the fiscal year ended
Condensed Consolidated Statement of Operations |
|||||||||
|
|||||||||
|
Sixteen Weeks Ended |
||||||||
|
As Previously
|
|
Adjustments |
|
As Corrected |
||||
Cost of sales |
$ |
1,946,931 |
|
$ |
8,735 |
|
|
$ |
1,955,666 |
Gross profit |
|
1,470,663 |
|
|
(8,735 |
) |
|
|
1,461,928 |
Selling, general and administrative expenses |
|
1,380,664 |
|
|
(16,674 |
) |
|
|
1,363,990 |
Operating income |
|
89,999 |
|
|
7,939 |
|
|
|
97,938 |
Income before provision for income taxes |
|
59,607 |
|
|
7,939 |
|
|
|
67,546 |
Provision for income taxes |
|
16,956 |
|
|
2,267 |
|
|
|
19,223 |
Net income |
$ |
42,651 |
|
$ |
5,672 |
|
|
$ |
48,323 |
|
|
|
|
|
|
||||
Basic earnings per share |
$ |
0.72 |
|
$ |
0.09 |
|
|
$ |
0.81 |
Diluted earnings per common share |
$ |
0.72 |
|
$ |
0.09 |
|
|
$ |
0.81 |
Condensed Consolidated Statement of Cash Flows |
|||||||||||
Sixteen Weeks Ended |
|||||||||||
|
As Previously
|
|
Adjustments |
|
As Corrected |
||||||
Net income |
$ |
42,651 |
|
|
$ |
5,672 |
|
|
$ |
48,323 |
|
Other, net |
|
391 |
|
|
|
458 |
|
|
|
849 |
|
Net change in: |
|
|
|
|
|
||||||
Receivables, net |
|
(83,370 |
) |
|
|
(2,457 |
) |
|
|
(85,827 |
) |
Inventories, net |
|
(100,178 |
) |
|
|
(4,177 |
) |
|
|
(104,355 |
) |
Accounts payable |
|
(440,995 |
) |
|
|
16,805 |
|
|
|
(424,190 |
) |
Accrued expenses |
|
85,035 |
|
|
|
4,631 |
|
|
|
89,666 |
|
Other assets and liabilities, net |
|
1,534 |
|
|
|
(24,591 |
) |
|
|
(23,057 |
) |
Net cash used in operating activities |
|
(378,865 |
) |
|
|
(3,659 |
) |
|
|
(382,524 |
) |
Other, net |
|
(3,919 |
) |
|
|
(458 |
) |
|
|
(4,377 |
) |
Net cash used in financing activities |
|
425,660 |
|
|
|
(458 |
) |
|
|
425,202 |
|
Effect of exchange rate changes on cash |
|
93 |
|
|
|
(25 |
) |
|
|
68 |
|
Net decrease in cash and cash equivalents |
|
(42,783 |
) |
|
|
(4,142 |
) |
|
|
(46,925 |
) |
Cash and cash equivalents, beginning of period |
|
269,282 |
|
|
|
1,523 |
|
|
|
270,805 |
|
Cash and cash equivalents, end of period |
$ |
226,499 |
|
|
$ |
(2,619 |
) |
|
$ |
223,880 |
|
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) |
|
|
|
||||
|
Sixteen Weeks Ended |
||||||
(in thousands) |
|
|
|
||||
Cash flows provided by operating activities |
$ |
2,688 |
|
|
$ |
(382,524 |
) |
Purchases of property and equipment |
|
(48,957 |
) |
|
|
(89,996 |
) |
Free cash flow |
$ |
(46,269 |
) |
|
$ |
(472,520 |
) |
Adjusted Debt to Adjusted EBITDAR: (1) |
|
|
|
||||
|
Four Quarters Ended |
||||||
(In thousands, except adjusted debt to adjusted EBITDAR ratio) |
|
|
|
||||
Total GAAP debt |
$ |
1,787,221 |
|
|
$ |
1,786,361 |
|
Add: Operating lease liabilities |
|
2,692,672 |
|
|
|
2,660,827 |
|
Adjusted debt |
$ |
4,479,893 |
|
|
$ |
4,447,188 |
|
|
|
|
|
||||
GAAP Net income |
$ |
21,424 |
|
|
$ |
29,735 |
|
Depreciation and amortization |
|
308,610 |
|
|
|
306,454 |
|
Interest expense |
|
83,212 |
|
|
|
88,055 |
|
Other income (expense), net |
|
(4,909 |
) |
|
|
(5,525 |
) |
Provision for income taxes |
|
2,734 |
|
|
|
2,112 |
|
Rent expense |
|
628,144 |
|
|
|
613,859 |
|
Share-based compensation |
|
45,819 |
|
|
|
45,647 |
|
Other nonrecurring charges (2) |
|
21,697 |
|
|
|
12,419 |
|
Transformation related charges |
|
29,684 |
|
|
|
29,719 |
|
Adjusted EBITDAR |
$ |
1,136,414 |
|
|
$ |
1,122,475 |
|
|
|
|
|
||||
Adjusted Debt to Adjusted EBITDAR |
|
3.9 |
|
|
|
4.0 |
|
(1) |
The four quarters 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, 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 may not be calculated in the same manner as other companies, and thus may not be comparable to similarly titled measures used by other companies.
Store Information
During the sixteen weeks ended
The below table summarizes the changes in the number of company-operated store and branch locations during the sixteen weeks ended
|
|
AAP |
|
|
|
|
|
Total |
||||
|
|
4,484 |
|
|
302 |
|
|
321 |
|
|
5,107 |
|
New |
|
7 |
|
|
— |
|
|
— |
|
|
7 |
|
Closed |
|
(9 |
) |
|
(7 |
) |
|
(1 |
) |
|
(17 |
) |
Relocated |
|
1 |
|
|
(1 |
) |
|
— |
|
|
— |
|
|
|
4,483 |
|
|
294 |
|
|
320 |
|
|
5,097 |
|
(1) |
Certain converted |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240528100872/en/
Investor Relations Contact:
T: (919) 227-5466
E: invrelations@advanceautoparts.com
Media Contact:
T: (984) 389-7207
E: AAPCommunications@advance-auto.com
Source: