Menu
Microsoft strongly encourages users to switch to a different browser than Internet Explorer as it no longer meets modern web and security standards. Therefore we cannot guarantee that our site fully works in Internet Explorer. You can use Chrome or Firefox instead.

Advance Auto Parts Reports Third Quarter 2019 Results


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, today announced its


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, today announced its financial results for the third quarter ended October 5, 2019.

"The Advance team, including our network of Independent Partners, delivered our sixth consecutive quarter of net sales growth in the third quarter as a result of our unrelenting focus on the Customer. We also expanded margins and remained highly disciplined in our approach to cost reduction," said Tom Greco, President and Chief Executive Officer. "In addition to our performance improvements and margin expansion, we continue to invest in critical information technology and supply chain initiatives that are expected to unlock significant productivity over the next several years. Notably, our working capital improvements were driven by our focus on cash management across the board. I am confident in our teams’ ability to drive additional sales and margin progress. We are on track to deliver record free cash flow, resulting in a substantial year over year increase in 2019 versus the prior year. Consistent with our commitment to drive significant value growth for our shareholders, I am also pleased to announce an additional $700.0 million share repurchase authorization."

Third Quarter Highlights

  • Net sales increased 1.6% to $2.3B; Comparable store sales (a) increased 1.2%
  • Operating income increased 11.7% to $172.3M; Adjusted operating income (a) increased 5.9% to $205.1M
  • Diluted EPS increased 12.2% to $1.75; Adjusted Diluted EPS (a) increased 11.1% to $2.10

Year to Date Highlights

  • Net sales increased 1.6% to $7.6B; Comparable store sales (a) increased 1.4%
  • Operating income increased 6.0% to $551.0M; Adjusted operating income (a) increased 3.5% to $645.1M
  • Operating cash flow increased 4.0% to $708.5M
  • Diluted EPS increased 9.4% to $5.46; Adjusted Diluted EPS (a) increased 9.9% to $6.55

(a)

Comparable store sales exclude sales to independently owned Carquest locations. For a better understanding of the Company's adjusted results, refer to the reconciliation of non-GAAP adjustments in the accompanying financial tables included herein.

Third Quarter 2019 Financial Results

Net sales for the third quarter of 2019 were $2.3 billion, a 1.6% increase versus the third quarter of the prior year. Comparable store sales for the third quarter of 2019 increased 1.2%.

Adjusted gross profit margin was 43.9% of Net sales in the third quarter of 2019, a 39 basis point decrease from the third quarter of 2018. The decrease was primarily driven by an approximate $14.0 million increase in coupon redemptions in connection with the impact of the launch of the Company's enhanced loyalty program initiatives. The headwinds were partially offset by improvements in operational productivity relating to the Company's ability to leverage its supply chain. The Company's GAAP Gross profit margin decreased to 43.8% from 44.3% in the third quarter of the prior year.

Adjusted SG&A was 35.0% of Net sales in the third quarter of 2019, which improved 74 basis points as compared to the third quarter of 2018. Favorability was driven by improvements in labor related costs, occupancy expenses and insurance claims from continued progress in Team Member safety, which were slightly offset primarily by investments in information technology. The Company's GAAP SG&A of 36.3% of Net sales in the third quarter of 2019 improved from 37.5% in the third quarter of 2018.

The Company's Adjusted operating income was $205.1 million in the third quarter of 2019, an increase of 5.9% versus the third quarter of the prior year. Adjusted operating income margin increased to 8.9% of Net sales for the third quarter, an increase of 36 basis points compared to the third quarter of the prior year. On a GAAP basis, the Company's Operating income was $172.3 million, or 7.5% of Net sales, an increase of 67 basis points from the third quarter of 2018.

The Company's effective tax rate in the third quarter of 2019 was 23.1%, compared to 21.2% in the third quarter of the prior year. The Company's Adjusted Diluted EPS was $2.10 for the third quarter of 2019, an increase of 11.1% compared to the third quarter of the prior year. On a GAAP basis, the Company's Diluted EPS increased 12.2% in the third quarter of 2019 to $1.75.

Operating cash flow was $708.5 million through the third quarter of 2019 versus $681.5 million in the same period of the prior year, an increase of 4.0%. Free cash flow through the third quarter of 2019 was $539.3 million, a decrease of 6.4% compared to the same period of the prior year, primarily driven by a 61.0% increase in capital spending.

2019 Full Year Guidance

 

   

Prior Outlook

 

Updated Outlook

 

   

As of August 13, 2019

 

As of November 12, 2019

 

   

Full Year 2019

 

Full Year 2019

($ in millions)

   

Low

 

High

 

Low

 

High

Net sales

   

$

9,650

 

 

$

9,750

 

 

$

9,650

 

 

$

9,750

 

Comparable store sales

   

1.0

%

 

2.0

%

 

1.0

%

 

1.5

%

Adjusted operating income margin (a)

   

8.0

%

 

8.2

%

 

8.0

%

 

8.2

%

Income tax rate

   

24

%

 

26

%

 

24

%

 

26

%

Transformation expenses (a)

   

$

80

 

 

$

100

 

 

$

80

 

 

$

100

 

Capital expenditures

   

$

250

 

 

$

300

 

 

$

250

 

 

$

300

 

Free cash flow (a)

   

Minimum $700

 

Minimum $700

(a)

 

For a better understanding of the Company's adjusted results, refer to the reconciliation of non-GAAP adjustments in the accompanying financial tables included herein. Because of the forward-looking nature of the 2019 non-GAAP financial measures, specific quantifications of the amounts that would be required to reconcile these non-GAAP financial measures to their most directly comparable GAAP financial measures are not available at this time.

Capital Allocation

During the third quarter, the Company repurchased 1.0 million shares of its common stock at an aggregate amount of $140.0 million under the August 8, 2018 share repurchase program for an average price of $141.54. On August 7, 2019 the Company's Board of Directors authorized a new $400.0 million share repurchase program that replaced the previous $600.0 million share repurchase program. Under this new share repurchase program the Company repurchased 1.4 million shares of its common stock at an aggregate amount of $198.6 million for an average price of $136.77 per share. At the end of the third quarter of 2019, the Company had $201.4 million remaining under the share repurchase program. On November 8, 2019, the Company's Board of Directors authorized $700.0 million as an addition to the existing share repurchase program.

On November 8, 2019, the Company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on January 3, 2020 to all common shareholders of record as of December 20, 2019.

Investor Conference Call

The Company will discuss its results for the third quarter of 2019 via a webcast scheduled to begin at 8 a.m. Eastern Time on Tuesday, November 12, 2019. The webcast will be accessible via the Investor Relations page of the Company's website (www.AdvanceAutoParts.com).

For individuals unable to access the webcast, the event will be available by dialing (844) 877-5989 and referencing conference identification number 2439758. A replay of the conference call will be available on the Company's 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 5, 2019, Advance operated 4,891 stores and 152 Worldpac branches in the United States, Canada, Puerto Rico and the U.S. Virgin Islands. The Company also serves 1,260 independently owned Carquest branded stores across these locations in addition to Mexico, the Bahamas, Turks and Caicos and British Virgin 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 in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements address future events or developments, and typically use words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “forecast,” “guidance,” “outlook” or “estimate” or similar expressions. These forward-looking statements include, but are not limited to, key assumptions for future financial performance including net sales, store growth, comparable store sales, gross profit rate, SG&A, adjusted operating income, income tax rate, transformation costs, adjusted operating income rate targets, capital expenditures, inventory levels and free cash flow; statements regarding expected growth and future performance of the Company; statements regarding enhancements to stockholder value, strategic plans or initiatives, growth or profitability, productivity targets and all other statements that are not statements of historical facts. These statements are based upon assessments and assumptions of management in light of historical results and trends, current conditions and potential future developments that often involve judgment, estimates, assumptions and projections. Forward-looking statements reflect current views about the Company's plans, strategies and prospects, which are based on information currently available as of the date of this release. Except as required by law, the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Please refer to the risk factors discussed in "Item 1a. Risk Factors" in the Company's most recent Annual Report on Form 10-K, as updated by its Quarterly Reports on Form 10-Q and other filings made by the Company with the Securities and Exchange Commission, for additional factors that could materially affect the Company’s actual results. Forward-looking statements are subject to risks and uncertainties, many of which are outside its control, which could cause actual results to differ materially from these statements. Therefore, you should not place undue reliance on those statements.

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

 

 

October 5,
2019

 

December 29,
2018

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

573,726

 

 

$

896,527

 

Receivables, net

721,342

 

 

624,972

 

Inventories

4,391,093

 

 

4,362,547

 

Other current assets

140,487

 

 

198,408

 

Total current assets

5,826,648

 

 

6,082,454

 

 

 

 

 

Property and equipment, net

1,389,089

 

 

1,368,985

 

Operating lease right-of-use assets

2,335,732

 

 

 

Goodwill

991,375

 

 

990,237

 

Intangible assets, net

514,512

 

 

550,593

 

Other assets

49,446

 

 

48,379

 

 

$

11,106,802

 

 

$

9,040,648

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

3,402,538

 

 

$

3,172,790

 

Accrued expenses

579,074

 

 

623,141

 

Other current liabilities

482,301

 

 

90,019

 

Total current liabilities

4,463,913

 

 

3,885,950

 

 

 

 

 

Long-term debt

747,136

 

 

1,045,720

 

Noncurrent operating lease liabilities

1,997,721

 

 

 

Deferred income taxes

318,309

 

 

318,353

 

Other long-term liabilities

124,781

 

 

239,812

 

Total stockholders' equity

3,454,942

 

 

3,550,813

 

 

$

11,106,802

 

 

$

9,040,648

 

NOTE: These preliminary condensed consolidated balance sheets have been prepared on a basis consistent with the Company's previously prepared balance sheets filed with the Securities and Exchange Commission ("SEC"), but do not include the footnotes required by accounting principles generally accepted in the United States of America (“GAAP”).

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 5,
2019

 

October 6,
2018

 

October 5,
2019

 

October 6,
2018

Net sales

$

2,312,106

 

 

$

2,274,982

 

 

$

7,596,389

 

 

$

7,475,482

 

Cost of sales, including purchasing and warehousing costs

1,300,180

 

 

1,268,055

 

 

4,270,412

 

 

4,184,713

 

Gross profit

1,011,926

 

 

1,006,927

 

 

3,325,977

 

 

3,290,769

 

Selling, general and administrative expenses

839,598

 

 

852,686

 

 

2,774,936

 

 

2,770,747

 

Operating income

172,328

 

 

154,241

 

 

551,041

 

 

520,022

 

Other, net:

 

 

 

 

 

 

 

Interest expense

(8,443

)

 

(13,076

)

 

(32,062

)

 

(43,613

)

Other (expense) income, net

(3,145

)

 

5,755

 

 

(1,272

)

 

8,998

 

Total other, net

(11,588

)

 

(7,321

)

 

(33,334

)

 

(34,615

)

Income before provision for income taxes

160,740

 

 

146,920

 

 

517,707

 

 

485,407

 

Provision for income taxes

37,071

 

 

31,077

 

 

126,718

 

 

115,002

 

Net income

$

123,669

 

 

$

115,843

 

 

$

390,989

 

 

$

370,405

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

1.76

 

 

$

1.57

 

 

$

5.48

 

 

$

5.01

 

Weighted average common shares outstanding

70,381

 

 

73,888

 

 

71,351

 

 

73,974

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

$

1.75

 

 

$

1.56

 

 

$

5.46

 

 

$

4.99

 

Weighted average common shares outstanding

70,664

 

 

74,190

 

 

71,643

 

 

74,212

 

NOTE: 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 SEC, but do not include the footnotes required by GAAP.

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

Forty Weeks Ended

 

October 5,
2019

 

October 6,
2018

Cash flows from operating activities:

 

 

 

Net income

$

390,989

 

 

$

370,405

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

179,565

 

 

183,584

 

Share-based compensation

28,038

 

 

19,265

 

Provision for deferred income taxes

7,653

 

 

17,029

 

Other, net

16,497

 

 

7,953

 

Net change in:

 

 

 

Receivables, net

(95,280

)

 

(93,595

)

Inventories

(24,985

)

 

(22,862

)

Accounts payable

227,822

 

 

131,572

 

Accrued expenses

(29,672

)

 

122,779

 

Other assets and liabilities, net

7,919

 

 

(54,627

)

Net cash provided by operating activities

708,546

 

 

681,503

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

(169,224

)

 

(105,132

)

Proceeds from sales of property and equipment

8,714

 

 

1,450

 

Net cash used in investing activities

(160,510

)

 

(103,682

)

Cash flows from financing activities:

 

 

 

Decrease in bank overdrafts

(59,351

)

 

(11,973

)

Redemption of senior unsecured notes

(310,047

)

 

 

Dividends paid

(17,185

)

 

(17,819

)

Proceeds from the issuance of common stock

2,358

 

 

2,290

 

Tax withholdings related to the exercise of stock appreciation rights

(162

)

 

(490

)

Repurchases of common stock

(486,381

)

 

(126,482

)

Other, net

(96

)

 

814

 

Net cash used in financing activities

(870,864

)

 

(153,660

)

Effect of exchange rate changes on cash

27

 

 

(1,092

)

 

 

 

 

Net (decrease) increase in cash and cash equivalents

(322,801

)

 

423,069

 

Cash and cash equivalents, beginning of period

896,527

 

 

546,937

 

Cash and cash equivalents, end of period

$

573,726

 

 

$

970,006

 

NOTE: 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.

Reconciliation of Non-GAAP Financial Measures

The Company's financial results include certain financial measures not derived in accordance with GAAP. Non-GAAP financial measures should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing operating performance, financial position or cash flows. Management presented these non-GAAP financial measures as they believe that the presentation of its financial results that exclude (1) transformation expenses under our strategic business plan; (2) non-operational expenses associated with the integration of General Parts International, Inc. (“GPI”) and store closure and consolidation; (3) non-cash charges related to the acquired GPI intangible assets; (4) other non-recurring adjustments; and (5) nonrecurring impact of the U.S. Tax Cuts and Jobs Act (the “Act”), is useful and indicative of its base operations because the expenses vary from period to period in terms of size, nature and significance and/or relate to the integration of GPI and store closure and consolidation activity in excess of historical levels. These measures assist in comparing current operating results with past periods and with the operational performance of other companies in its industry. The disclosure of these measures allows investors to evaluate the Company's performance using the same measures management uses in developing internal budgets and forecasts and in evaluating management’s compensation. Included below is a description of the expenses that the Company have determined are not normal, recurring cash operating expenses necessary to operate its business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.

Transformation Expenses — Management expects to recognize a significant amount of transformation expenses over the next several years as they transition from integration of the Advance Auto Parts/Carquest businesses to a plan that involves a more holistic and integrated transformation of the entire Company, including Worldpac and Autopart International. These expenses will include, but not be limited to, restructuring costs, store closure costs and third-party professional services and other significant costs to integrate and streamline operating structure across the enterprise. Management is focused on several areas throughout Advance, such as supply chain and information technology.

GPI Integration and Store Closure and Consolidation Expenses — The multi-year plan to integrate the operations of GPI that the Company acquired in 2014 with Advance Auto Parts substantially ended in 2018. Due to the size of this acquisition, the Company considered these expenses to be outside of its base business. Management believed providing additional information in the form of non-GAAP measures that excluded these costs was beneficial to the users of its financial statements in evaluating the operating performance of its base business and the sustainability once the integration was complete. In addition to integration expenses, the Company incurred store closure and consolidation expenses that consisted of expenses associated with plans to convert and consolidate the Carquest stores acquired from GPI. While periodic store closures are common, these closures represented a significant program outside of the Company's typical market evaluation process. The Company believes it was useful to provide additional non-GAAP measures that excluded these costs to provide investors greater comparability of its base business and core operating performance.

U.S. Tax Reform — On December 22, 2017, the U.S. Tax Cuts and Jobs Act was signed into law. The Act amends the Internal Revenue Code of 1986 by, among other things, permanently lowering the corporate tax rate to 21% from the existing maximum rate of 35%, implementing a territorial tax system and imposing a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries. During the third quarter of 2018, and in conjunction with the completion of the Company's 2017 U.S. income tax return, the Company identified a change in estimate, in accordance with SAB 118, to amounts previously estimated for the remeasurement of the net deferred tax liability and nonrecurring repatriation tax on accumulated earnings foreign subsidiaries.

Reconciliation of Adjusted Net Income and Adjusted EPS:

 

 

 

 

 

 

 

 

Twelve Weeks Ended

 

 

Forty Weeks Ended

(in thousands, except per share data)

 

October 5,
2019

 

October 6,
2018

 

 

October 5,
2019

 

October 6,
2018

Net income (GAAP)

$

123,669

 

 

$

115,843

 

 

$

390,989

 

 

$

370,405

 

Cost of sales adjustments:

 

 

 

 

 

 

 

Transformation expenses

2,991

 

 

513

 

 

3,272

 

 

5,839

 

Other adjustment (a)

 

 

 

 

13,010

 

 

 

SG&A adjustments:

 

 

 

 

 

 

 

Transformation expenses

23,386

 

 

28,360

 

 

56,633

 

 

63,214

 

GPI integration and store closure and consolidation expenses

 

 

1,768

 

 

 

 

4,706

 

GPI amortization of acquired intangible assets

6,362

 

 

8,802

 

 

21,157

 

 

29,268

 

Other income adjustment (b)

 

 

 

 

10,756

 

 

 

Provision for income taxes on adjustments (c)

(8,185

)

 

(9,664

)

 

(26,207

)

 

(25,242

)

Impact of the Act

 

 

(5,665

)

 

 

 

(5,665

)

Adjusted net income (Non-GAAP)

$

148,223

 

 

$

139,957

 

 

$

469,610

 

 

$

442,525

 

 

 

 

 

 

 

 

 

Diluted earnings per share (GAAP)

$

1.75

 

 

$

1.56

 

 

$

5.46

 

 

$

4.99

 

Adjustments, net of tax

0.35

 

 

0.33

 

 

1.09

 

 

0.97

 

Adjusted EPS (Non-GAAP)

$

2.10

 

 

$

1.89

 

 

$

6.55

 

 

$

5.96

 

(a)

During the sixteen weeks ended April 20, 2019, the Company made an out-of-period correction, which increased Cost of sales by $13.0 million, related to received not invoiced inventory.

(b)

During the sixteen weeks ended April 20, 2019, the Company incurred charges relating to a make-whole provision and debt issuance costs of $10.1 million and $0.7 million resulting from the early redemption of its 2020 senior unsecured notes.

(c) The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.

Reconciliation of Adjusted Gross Profit:

 

 

 

 

 

 

 

 

Twelve Weeks Ended

 

Forty Weeks Ended

(in thousands)

October 5,
2019

 

October 6,
2018

 

October 5,
2019

 

October 6,
2018

Gross profit (GAAP)

$

1,011,926

 

 

$

1,006,927

 

 

$

3,325,977

 

 

$

3,290,769

 

Gross profit adjustments

2,991

 

 

513

 

 

16,282

 

 

5,839

 

Adjusted gross profit (Non-GAAP)

$

1,014,917

 

 

$

1,007,440

 

 

$

3,342,259

 

 

$

3,296,608

 

Reconciliation of Adjusted Selling, General and Administrative Expenses:

 

 

 

 

 

             

Twelve Weeks Ended

 

Forty Weeks Ended

(in thousands)

             

October 5,
2019

 

October 6,
2018

 

October 5,
2019

 

October 6,
2018

SG&A (GAAP)

             

$

839,598

 

 

$

852,686

 

 

$

2,774,936

 

 

$

2,770,747

 

SG&A adjustments

             

(29,748

)

 

(38,930

)

 

(77,790

)

 

(97,188

)

Adjusted SG&A (Non-GAAP)

             

$

809,850

 

 

$

813,756

 

 

$

2,697,146

 

 

$

2,673,559

 

Reconciliation of Adjusted Operating Income:

 

 

 

 

 

 

 

Twelve Weeks Ended

 

Forty Weeks Ended

(in thousands)

October 5,
2019

 

October 6,
2018

 

October 5,
2019

 

October 6,
2018

Operating income (GAAP)

$

172,328

 

 

$

154,241

 

 

$

551,041

 

 

$

520,022

 

Cost of sales and SG&A adjustments

32,739

 

 

39,443

 

 

94,072

 

 

103,027

 

Adjusted operating income (Non-GAAP)

$

205,067

 

 

$

193,684

 

 

$

645,113

 

 

$

623,049

 

NOTE: Adjusted gross profit, Adjusted gross profit margin (calculated by dividing Adjusted gross profit by Net sales), Adjusted SG&A, Adjusted SG&A as a percentage of Net sales, Adjusted operating income and Adjusted operating income margin (calculated by dividing Adjusted operating income by Net sales) are non-GAAP measures. Management believes these non-GAAP measures are important metrics in assessing the overall performance of the business and utilizes these metrics in its ongoing reporting. On that basis, management believes it is useful to provide these metrics to investors and prospective investors to evaluate the Company’s operating performance across periods adjusting for these items (refer to the reconciliations of non-GAAP adjustments above). These non-GAAP measures might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures reported by other companies. Non-GAAP measures should not be used by investors or third parties as the sole basis for formulating investment decisions, as they may exclude a number of important cash and non-cash recurring items.

Reconciliation of Free Cash Flow:

 

 

 

 

Forty Weeks Ended

(In thousands)

October 5,
2019

 

October 6,
2018

Cash flows from operating activities

$

708,546

 

 

$

681,503

 

Purchases of property and equipment

(169,224

)

 

(105,132

)

Free cash flow

$

539,322

 

 

$

576,371

 

NOTE: 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.

Adjusted Debt to Adjusted EBITDAR:

 

 

 

 

Four Quarters Ended

(In thousands, except adjusted debt to adjusted EBITDAR ratio)

October 5,
2019

 

December 29,
2018

Total debt

$

747,136

 

 

$

1,045,930

 

Add: Operating lease liabilities (a)

2,441,221

 

 

2,425,325

 

Adjusted debt

3,188,357

 

 

3,471,255

 

 

 

 

 

Operating income

635,294

 

 

604,275

 

Add: Adjustments (b)

117,778

 

 

107,867

 

Depreciation and amortization

234,165

 

 

238,184

 

Adjusted EBITDA

987,237

 

 

950,326

 

Rent expense

555,360

 

 

553,377

 

Share-based compensation

36,533

 

 

27,760

 

Adjusted EBITDAR

$

1,579,130

 

 

$

1,531,463

 

 

 

 

 

Adjusted Debt to Adjusted EBITDAR (c)

2.0

 

 

2.3

 

(a)   On December 30, 2018 the Company recorded operating lease liabilities of $2.4 billion upon adoption of Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-2”). As of October 5, 2019, $2.4 billion of operating lease liabilities were recorded in the Company's condensed consolidated balance sheet.
(b)  

The adjustments to the four quarters ended October 5, 2019 and December 29, 2018 include GPI integration, store consolidation costs and transformation expenses.

(c)   Ratio is derived by utilizing the operating lease liabilities recorded by the Company upon adoption of ASU 2016-02 rather than utilizing estimated capitalized lease obligations (six times rent expense), which were $3.3 billion as of October 5, 2019 and December 29, 2018. For comparability purposes, the Adjusted Debt to Adjusted EBITDAR ratio calculated using the historical estimated capitalized lease obligations would be 2.6 and 2.9 as of October 5, 2019 and December 29, 2018.

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 a 2.5 times leverage ratio and 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 5, 2019, 16 stores and branches were opened and 82 were closed or consolidated, resulting in a total of 5,043 stores and branches as of October 5, 2019, compared to a total of 5,109 stores and branches as of December 29, 2018.

Advance Auto Parts Inc. Stock

€145.00
1.400%
There is an upward development for Advance Auto Parts Inc. compared to yesterday, with an increase of €2.00 (1.400%).
With 1 Sell predictions and 0 Buy predictions the community sentiment towards the Advance Auto Parts Inc. stock is not clear.
Like: 0
Share

Business Wire, a Berkshire Hathaway company, is the global leader in press release distribution and regulatory disclosure. Investor relations, public relations, public policy and marketing professionals rely on Business Wire for secure and accurate distribution of market-moving news and multimedia.


Comments

You may not comment on this article as you either did not confirm your account yet or were blocked. If you think this is a mistake please contact us. Show more