aap10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form 10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For
the quarterly period ended October 6, 2007
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For
the transition period from ________ to ________.
Commission
file number 001-16797
ADVANCE
AUTO PARTS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
54-2049910
(I.R.S.
Employer
Identification No.)
|
5008
Airport Road, Roanoke, Virginia 24012
(Address
of Principal Executive Offices)
(Zip
Code)
(540)
362-4911
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
name, former address and former fiscal year, if changed since last
report).
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
x
No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large
accelerated filer x
Accelerated filer p
Non-accelerated filer p
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
p
No
x
As
of
November 12,
2007,
the registrant had outstanding 100,149,491
shares
of Common Stock, par value $0.0001 per share (the only class of common stock
of
the registrant outstanding).
ITEM
1. |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
ADVANCE AUTO PARTS, INC. AND
SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
October 6,
2007 and December 30, 2006
(in
thousands, except per share data)
(unaudited)
|
|
October
6,
|
|
|
December
30,
|
|
Assets
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
14,836
|
|
|
$ |
11,128
|
|
Receivables,
net
|
|
|
76,982
|
|
|
|
97,046
|
|
Inventories,
net
|
|
|
1,540,666
|
|
|
|
1,463,340
|
|
Other
current assets
|
|
|
43,805
|
|
|
|
40,459
|
|
Total
current assets
|
|
|
1,676,289
|
|
|
|
1,611,973
|
|
Property
and equipment, net of accumulated depreciation of
|
|
|
|
|
|
|
|
|
$736,489
and $670,571
|
|
|
1,016,712
|
|
|
|
994,977
|
|
Assets
held for sale
|
|
|
2,390
|
|
|
|
1,548
|
|
Goodwill
|
|
|
33,718
|
|
|
|
33,718
|
|
Intangible
assets, net
|
|
|
27,095
|
|
|
|
27,926
|
|
Other
assets, net
|
|
|
10,362
|
|
|
|
12,539
|
|
|
|
$ |
2,766,566
|
|
|
$ |
2,682,681
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Bank
overdrafts
|
|
$ |
349
|
|
|
$ |
34,206
|
|
Current
portion of long-term debt
|
|
|
661
|
|
|
|
67
|
|
Financed
vendor accounts payable
|
|
|
153,324
|
|
|
|
127,543
|
|
Accounts
payable
|
|
|
708,095
|
|
|
|
651,587
|
|
Accrued
expenses
|
|
|
304,810
|
|
|
|
252,975
|
|
Other
current liabilities
|
|
|
40,121
|
|
|
|
47,042
|
|
Total
current liabilities
|
|
|
1,207,360
|
|
|
|
1,113,420
|
|
Long-term
debt
|
|
|
433,774
|
|
|
|
477,173
|
|
Other
long-term liabilities
|
|
|
60,042
|
|
|
|
61,234
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, nonvoting, $0.0001 par value,
|
|
|
|
|
|
|
|
|
10,000
shares authorized; no shares issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, voting, $0.0001 par value, 200,000
|
|
|
|
|
|
|
|
|
shares
authorized; 100,927 shares issued and outstanding
|
|
|
|
|
|
|
|
|
in
2007 and 105,351 issued and outstanding in 2006
|
|
|
10
|
|
|
|
11
|
|
Additional
paid-in capital
|
|
|
267,396
|
|
|
|
414,153
|
|
Accumulated
other comprehensive income
|
|
|
2,308
|
|
|
|
3,472
|
|
Retained
earnings
|
|
|
795,676
|
|
|
|
613,218
|
|
Total
stockholders' equity
|
|
|
1,065,390
|
|
|
|
1,030,854
|
|
|
|
$ |
2,766,566
|
|
|
$ |
2,682,681
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to the condensed consolidated financial
statements
are
an
integral part of these statements.
Condensed
Consolidated Statements of
Operations
For
the Twelve and Forty Week Periods Ended
October 6,
2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
|
|
Twelve
Week Periods Ended
|
|
|
Forty
Week Periods Ended
|
|
|
|
October
6,
|
|
|
October
7,
|
|
|
October
6,
|
|
|
October
7,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
1,158,043
|
|
|
$ |
1,099,486
|
|
|
$ |
3,796,022
|
|
|
$ |
3,600,353
|
|
Cost
of sales, including purchasing and warehousing
costs
|
|
|
602,930
|
|
|
|
569,280
|
|
|
|
1,968,645
|
|
|
|
1,877,620
|
|
Gross
profit
|
|
|
555,113
|
|
|
|
530,206
|
|
|
|
1,827,377
|
|
|
|
1,722,733
|
|
Selling,
general and administrative expenses
|
|
|
454,734
|
|
|
|
427,685
|
|
|
|
1,474,495
|
|
|
|
1,383,468
|
|
Operating
income
|
|
|
100,379
|
|
|
|
102,521
|
|
|
|
352,882
|
|
|
|
339,265
|
|
Other,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(7,968 |
) |
|
|
(9,232 |
) |
|
|
(26,634 |
) |
|
|
(28,147 |
) |
Gain
on extinguishment of debt, net
|
|
|
-
|
|
|
|
986
|
|
|
|
-
|
|
|
|
986
|
|
Other
income, net
|
|
|
353
|
|
|
|
154
|
|
|
|
1,203
|
|
|
|
753
|
|
Total
other, net
|
|
|
(7,615 |
) |
|
|
(8,092 |
) |
|
|
(25,431 |
) |
|
|
(26,408 |
) |
Income
before provision for income taxes
|
|
|
92,764
|
|
|
|
94,429
|
|
|
|
327,451
|
|
|
|
312,857
|
|
Provision
for income taxes
|
|
|
33,724
|
|
|
|
35,482
|
|
|
|
123,886
|
|
|
|
116,893
|
|
Net
income
|
|
$ |
59,040
|
|
|
$ |
58,947
|
|
|
$ |
203,565
|
|
|
$ |
195,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.58
|
|
|
$ |
0.56
|
|
|
$ |
1.94
|
|
|
$ |
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$ |
0.57
|
|
|
$ |
0.56
|
|
|
$ |
1.92
|
|
|
$ |
1.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
common shares outstanding
|
|
|
102,546
|
|
|
|
105,112
|
|
|
|
104,987
|
|
|
|
106,380
|
|
Dilutive
effect of share-based compensation
|
|
|
635
|
|
|
|
939
|
|
|
|
866
|
|
|
|
1,175
|
|
Average
common shares outstanding - assuming dilution
|
|
|
103,181
|
|
|
|
106,051
|
|
|
|
105,853
|
|
|
|
107,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to the condensed consolidated financial
statements
are
an
integral part of these statements.
Condensed
Consolidated Statements of Cash
Flows
For
the Forty Week Periods Ended
October 6,
2007 and October 7, 2006
(in
thousands)
(unaudited)
|
|
Forty
Week Periods Ended
|
|
|
|
October
6,
|
|
|
October
7,
|
|
|
|
2007
|
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
203,565
|
|
|
$ |
195,964
|
|
Adjustments
to reconcile net income to net cash provided by
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
113,404
|
|
|
|
104,156
|
|
Amortization
of deferred debt issuance costs
|
|
|
173
|
|
|
|
482
|
|
Share-based
compensation
|
|
|
14,318
|
|
|
|
14,473
|
|
Loss
on disposal of property and equipment, net
|
|
|
9,074
|
|
|
|
1,520
|
|
Benefit
for deferred income taxes
|
|
|
(21,141 |
) |
|
|
(2,332 |
) |
Excess
tax benefit from share-based compensation
|
|
|
(11,133 |
) |
|
|
(4,398 |
) |
Loss
on extinguishment of debt
|
|
|
-
|
|
|
|
1,887
|
|
Net
decrease (increase) in:
|
|
|
|
|
|
|
|
|
Receivables,
net
|
|
|
14,317
|
|
|
|
10,995
|
|
Inventories,
net
|
|
|
(77,326 |
) |
|
|
(90,966 |
) |
Other
assets
|
|
|
(985 |
) |
|
|
9,031
|
|
Net
increase (decrease) in:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
56,508
|
|
|
|
40,472
|
|
Accrued
expenses
|
|
|
71,708
|
|
|
|
17,056
|
|
Other
liabilities
|
|
|
5,296
|
|
|
|
(1,337 |
) |
Net
cash provided by operating activities
|
|
|
377,778
|
|
|
|
297,003
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(146,520 |
) |
|
|
(200,784 |
) |
Insurance
proceeds related to damaged property
|
|
|
6,636
|
|
|
|
-
|
|
Business
acquisitions, net of cash acquired
|
|
|
-
|
|
|
|
(12,500 |
) |
Proceeds
from sales of property and equipment
|
|
|
1,761
|
|
|
|
8,726
|
|
Net
cash used in investing activities
|
|
|
(138,123 |
) |
|
|
(204,558 |
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Decrease
in bank overdrafts
|
|
|
(33,857 |
) |
|
|
(13,481 |
) |
Increase
in financed vendor accounts payable
|
|
|
25,781
|
|
|
|
21,385
|
|
Early
extinguishment of debt
|
|
|
-
|
|
|
|
(433,775 |
) |
Dividends
paid
|
|
|
(25,152 |
) |
|
|
(19,153 |
) |
Net
borrowings (payments) on note payable
|
|
|
4,395
|
|
|
|
(49 |
) |
Borrowings
under credit facilities
|
|
|
258,100
|
|
|
|
580,575
|
|
Payments
on credit facilities
|
|
|
(305,300 |
) |
|
|
(134,625 |
) |
Payment
of debt related costs
|
|
|
-
|
|
|
|
(1,078 |
) |
Proceeds
from the issuance of common stock, primarily exercise
|
|
|
|
|
|
|
|
|
of
stock options
|
|
|
39,711
|
|
|
|
14,100
|
|
Excess
tax benefit from share-based compensation
|
|
|
11,133
|
|
|
|
4,398
|
|
Repurchase
of common stock
|
|
|
(211,225 |
) |
|
|
(137,560 |
) |
Other
|
|
|
467
|
|
|
|
22
|
|
Net
cash used in financing activities
|
|
|
(235,947 |
) |
|
|
(119,241 |
) |
Net
increase (decrease) in cash and cash equivalents
|
|
|
3,708
|
|
|
|
(26,796 |
) |
Cash
and cash equivalents, beginning of period
|
|
|
11,128
|
|
|
|
40,783
|
|
Cash
and cash equivalents, end of period
|
|
$ |
14,836
|
|
|
$ |
13,987
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to the condensed consolidated financial
statements
are
an
integral part of these statements.
Advance
Auto Parts, Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows -
(Continued)
For
the Forty Week Periods Ended
October 6,
2007 and October 7, 2006
(in
thousands)
(unaudited)
|
|
Forty
Week Periods Ended
|
|
|
|
October
6,
|
|
|
October
7,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
23,523
|
|
|
$ |
23,415
|
|
Income
tax payments, net
|
|
|
123,156
|
|
|
|
101,322
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
Accrued
purchases of property and equipment
|
|
|
24,107
|
|
|
|
31,958
|
|
Retirement
of common stock
|
|
|
211,225
|
|
|
|
192,339
|
|
Reclassification
of other comprehensive income
|
|
|
(1,164 |
) |
|
|
(2,428 |
) |
Adoption
of FIN No. 48, net of tax
|
|
|
2,275
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to the condensed consolidated financial
statements
are
an
integral part of these statements.
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
1. |
Basis
of Presentation:
|
The
accompanying condensed consolidated financial statements include the
accounts of
Advance Auto Parts, Inc. and its wholly owned subsidiaries, or the
Company. All significant intercompany balances and transactions have
been eliminated in consolidation.
The
condensed consolidated balance sheets as of October 6, 2007 and December
30,
2006, the condensed consolidated statements of operations for the twelve
and
forty-week periods ended October 6, 2007 and October 7, 2006, and the
condensed
consolidated statements of cash flows for the forty-week periods ended
October
6, 2007 and October 7, 2006, have been prepared by the Company. In
the opinion of management, all adjustments, consisting of only normal
recurring
adjustments, necessary for a fair presentation of the financial position
of the
Company, the results of its operations and cash flows have been
made.
Certain
information and footnote disclosures normally included in financial
statements
prepared in accordance with accounting principles generally accepted
in the
United States of America have been condensed or omitted. These
financial statements should be read in conjunction with the financial
statements
and notes thereto included in the Company’s consolidated financial statements
for the fiscal year ended December 30, 2006.
The
results of operations for the interim periods are not necessarily indicative
of
the operating results to be expected for the full fiscal year.
Cost
of Sales and Selling, General and Administrative Expenses
The
following table illustrates the primary costs classified in each major
expense
category:
Cost
of Sales
|
|
SG&A
|
|
|
|
|
|
|
|
|
●
|
Total
cost of merchandise sold including:
|
|
●
|
Payroll
and benefit costs for retail and corporate
|
|
–
|
Freight
expenses associated with moving
|
|
|
team
members;
|
|
|
merchandise
inventories from our vendors to
|
|
●
|
Occupancy
costs of retail and corporate facilities;
|
|
|
our
distribution center,
|
|
●
|
Depreciation
related to retail and corporate assets;
|
|
–
|
Vendor
incentives, and
|
|
●
|
Advertising;
|
|
–
|
Cash
discounts on payments to vendors;
|
|
●
|
Costs
associated with our commercial delivery
|
●
|
Inventory
shrinkage;
|
|
|
program,
including payroll and benefit costs,
|
●
|
Warranty
costs;
|
|
|
and
transportation expenses associated with moving
|
●
|
Costs
associated with operating our distribution
|
|
|
merchandise
inventories from our retail stores to
|
|
network,
including payroll and benefit costs,
|
|
|
our
customer locations;
|
|
occupancy
costs and depreciation; and
|
|
●
|
Freight
expenses associated with moving
|
●
|
Freight
expenses associated with moving
|
|
|
merchandise
inventories from our Local Area
|
|
merchandise
inventories from our distribution
|
|
Warehouses,
or LAWs, and Parts Delivered Quickly
|
|
center
to our retail stores. |
|
|
warehouses,
or PDQs, to our retail stores after the
|
|
|
|
|
|
|
customer
has special-ordered the merchandise;
|
|
|
|
|
|
●
|
Self-insurance
costs;
|
|
|
|
|
|
●
|
Professional
services; and
|
|
|
|
|
|
●
|
Other
administrative costs, such as credit card
|
|
|
|
|
|
|
service
fees, supplies, travel and lodging.
|
|
|
|
|
|
|
|
|
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management
to make
estimates and assumptions that affect the reported amounts of assets
and
liabilities and the disclosure of contingent assets and liabilities
at the date
of the financial statements and the reported amounts of revenues and
expenses
during the reporting period. Actual results could differ from those
estimates.
Vendor
Incentives
The
Company receives incentives in the form of reductions to amounts owed
and/or
payments from vendors related to cooperative advertising allowances,
volume
rebates and other promotional considerations. The Company accounts
for vendor
incentives in accordance with Emerging Issues Task Force, or EITF,
No. 02-16,
“Accounting by a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor.” Many of the incentives are under long-term agreements
(terms in excess of one year), while others are negotiated on an annual
basis.
Cooperative advertising allowances and volume rebates are earned based
on
inventory purchases and initially recorded as a reduction to inventory.
The
deferred amounts are included as a reduction to cost of sales as the
inventory
is sold.
The
Company recognizes other promotional incentives earned under long-term
agreements as a reduction to cost of sales. These incentives are recognized
based on the cumulative net purchases as a percentage of total estimated
net
purchases over the life of the agreement. The Company's margins could
be
impacted positively or negatively if actual purchases or results from
any one
year differ from its estimates; however, the impact over the life of
the
agreement would be the same. Short-term incentives (terms less than
one year)
are recognized as a reduction to cost of sales over the course of the
agreements.
Amounts
received or receivable from vendors that are not yet earned are reflected
as
deferred revenue in the accompanying condensed consolidated balance
sheets. Management's estimate of the portion of deferred revenue that
will be realized within one year of the balance sheet date has been
included in
other current liabilities in the accompanying condensed consolidated
balance
sheets. Earned amounts that are receivable from vendors are included
in
receivables, net on the accompanying condensed consolidated balance
sheets,
except for that portion expected to be received after one year, which
is
included in other assets, net on the accompanying condensed consolidated
balance
sheets.
Preopening
Expenses
Preopening
expenses, which consist primarily of payroll and occupancy costs, are
expensed
as incurred.
Warranty
Costs
The
Company's vendors are primarily responsible for warranty claims. Warranty
costs
relating to merchandise (primarily batteries) sold under warranty,
which are not
covered by vendors' warranties, are estimated based on the Company's
historical
experience and are recorded in the period the product is sold. The
following
table presents changes in the Company’s warranty reserves.
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
|
|
October
6,
2007
|
|
|
December
30,
2006
|
|
|
|
|
(40
weeks ended)
|
|
|
(52
weeks ended)
|
|
|
|
|
|
|
|
|
|
|
Warranty
reserve, beginning of period
|
|
$ |
13,069
|
|
|
$ |
11,352
|
|
|
Reserves
established
|
|
|
17,630
|
|
|
|
17,352
|
|
|
Reserves
utilized
|
|
|
(14,550 |
) |
|
|
(15,635 |
) |
|
|
|
|
|
|
|
|
|
|
|
Warranty
reserve, end of period
|
|
$ |
16,149
|
|
|
$ |
13,069
|
|
|
Sales
Returns and Allowances
The
Company’s accounting policy for sales returns and allowances consists of
establishing reserves for estimated returns at the time of sale.
The Company
anticipates returns based on current sales levels and the Company’s historical
return experience on a specific product basis.
Earnings
Per Share of Common Stock
Basic
earnings per share of common stock has been computed based on the
weighted-average number of common shares outstanding, less stock
held in
treasury and shares of non-vested restricted stock, during the
period. Diluted earnings per share of common stock reflects the
increase in the weighted-average number of shares of common stock
outstanding,
outstanding deferred stock units and the impact of outstanding stock
options,
stock appreciation rights and shares of non-vested restricted stock,
calculated
on the treasury stock method.
Hedge
Activities
The
Company utilizes interest rate swaps to limit its cash flow risk
on its variable
rate debt. In accordance with Statement of Financial Accounting Standards,
or SFAS, No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” the fair value of the Company’s outstanding hedges is recorded as
an asset or liability in the accompanying condensed consolidated
balance sheets
at October 6, 2007 and December 30, 2006, respectively. The Company
uses the
“matched terms” accounting method as provided by Derivative Implementation Group
Issue No. G9, “Assuming No Ineffectiveness When Critical Terms of the Hedging
Instrument and the Hedge Transaction Match in a Cash Flow Hedge” for the
interest rate swaps. Accordingly, the Company has matched the
critical terms of each hedge instrument to the hedged debt. The Company
uses the
90-day, adjusted LIBOR interest rate and has the intent and ability
to continue
to use this rate on its hedged borrowings. Therefore, the Company
has recorded
all adjustments to the fair value of the hedge instruments in accumulated
other
comprehensive income through the maturity date of the applicable
hedge
arrangement.
The
fair
value of the interest rate swaps at October 6, 2007 and December
30, 2006 was a
liability of $1,208 and an asset of $251, respectively. Any amounts
received or
paid under these hedges will be recorded in the statement of operations
as
earned or incurred.
Based
on
the estimated current and future fair values of the hedge arrangements
at
October 6, 2007, the Company estimates amounts currently included
in accumulated
other comprehensive income that will be reclassified to earnings
in the next 12
months will consist of a loss of $126 associated with the interest
rate
swaps.
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
Financed
Vendor Accounts Payable
The
Company is party to a short-term financing program with a bank allowing
it to
extend its payment terms on certain merchandise purchases. The substance
of the
program is for the Company to borrow money from the bank to finance
purchases
from vendors. The Company records any discount given by the vendor
to the value
of its inventory and accretes this discount to the resulting short-term
payable
to the bank through interest expense over the extended term. At October
6, 2007
and December 30, 2006, $153,324 and $127,543, respectively, was payable
to the
bank by the Company under this program and is included in the accompanying
condensed consolidated balance sheets as Financed Vendor Accounts
Payable.
New
Accounting Pronouncements
In
February 2007, the Financial Accounting Standards Board, or FASB,
issued SFAS
No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.”
SFAS No. 159 permits entities to choose to measure many financial
instruments
and certain other items at fair value. SFAS No. 159 is effective
for fiscal
years beginning after November 15, 2007. The Company is currently
evaluating the
impact, if any, of adopting SFAS No. 159.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment
of FASB
Statements No. 87, 88, 106, and 132(R).” SFAS No. 158 requires recognition of
the overfunded or underfunded status of defined benefit postretirement
plans as
an asset or liability in the statement of financial position and
to recognize
changes in that funded status in comprehensive income in the year
in which the
changes occur. SFAS No. 158 also requires measurement of the funded
status of a
plan as of the date of the statement of financial position. The Company
adopted
the recognition provisions of SFAS No. 158 on December 30, 2006.
SFAS No. 158 is
effective for the measurement date provisions for fiscal years ending
after
December 15, 2008. The Company is currently evaluating the impact
of adopting
the measurement date provisions of SFAS No. 158.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.”
SFAS No. 157 clarifies the definition of fair value, establishes
a framework for
measuring fair value, and expands the disclosures on fair value measurements.
SFAS No. 157 is effective for fiscal years beginning after November 15,
2007. The Company is currently evaluating the impact, if any, of
adopting SFAS
No. 157.
On
December 31, 2006, the Company adopted the provisions of FASB Interpretation
No.
48, “Accounting for Uncertainty in Income Taxes,” or FIN 48. FIN 48
clarifies the accounting and reporting for income taxes recognized
in accordance
with SFAS No. 109, “Accounting for Income Taxes.” The interpretation
prescribes a recognition threshold and measurement attribute for
the financial
statement recognition, measurement, presentation and disclosure of
uncertain tax
positions taken or expected to be taken in income tax returns.
As
a
result of the adoption of FIN 48 on December 31, 2006, the Company
recorded an
increase of $2,275 to the liability for unrecognized tax benefits
and a
corresponding decrease in its balance of retained earnings. As of
December 31,
2006, the gross amount of unrecognized tax benefits was $16,453. The
entire amount, if recognized, would affect the effective tax
rate. The amount of unrecognized tax benefits did not materially
change from December 31, 2006 to October 6, 2007.
Prior
to
December 31, 2006, the Company classified interest associated with
tax
contingencies in interest expense. The Company has not previously
provided for any penalties associated with tax contingencies unless
considered
probable. With the adoption of FIN 48, the Company provides for
interest and penalties as a part of
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
income
tax expense. As of December 31, 2006, the gross amount of accrued
interest and
penalties related to unrecognized tax benefits was $4,172, of which
$2,946 was
attributed to interest.
During
the next 12 months, it is possible that the Company could conclude
on $2,000 to
$3,000 of the contingencies associated with unrecognized tax uncertainties
(including tax benefits, interest and penalties). The majority of
these resolutions would be achieved through the completion of current
income tax
examinations.
The
Company and its subsidiaries file a consolidated U.S. federal income
tax return
and state returns, some of which are on a consolidated basis, in
the 40 states
which have retail operations, plus Puerto Rico and the Virgin
Islands. Numerous localities require income tax
returns. The examination of the Company’s U.S. federal tax returns
for the 3-year period ending 2003 was completed in March 2006. With
respect to state and local jurisdictions, the Company and its subsidiaries
are
generally not subject to exam for any years prior to 2001.
3. |
Share-Based
Compensation:
|
The
Company accounts for its share-based compensation plans in accordance
with the
provisions of SFAS No. 123R, “Share-Based Payment.” Historically, the Company
has granted fixed stock options and deferred stock units, or DSUs,
to its
employees under these plans. During the forty weeks ended October
6, 2007, the
Company granted stock appreciation rights, or SARs, and shares
of restricted
stock as allowed under the Company’s long-term incentive plan. The
Company also granted stock options and DSUs to members of its Board
of Directors
and interim President and Chief Executive Officer. Total share-based
compensation expense included in selling, general and administrative
expenses in
the accompanying condensed consolidated statements of operations
for the twelve
and forty weeks ended October 6, 2007 was $3,906 and $14,318, respectively.
Total share-based compensation expense included in selling, general
and
administrative expenses in the accompanying condensed consolidated
statements of
operations for the twelve and forty weeks ended October 7, 2006
was $4,581 and
$14,473, respectively.
SARs
During
the forty weeks ended October 6, 2007, the Company granted 1,451
SARs to
employees at a weighted average conversion price of $38.05. The
Company
calculated the fair value of the granted SARs using the Black-Scholes
pricing
model and will amortize the fair value compensation over the requisite
service
period using the straight-line method. The SARs vest over a three-year
period in
equal installments beginning on the first anniversary of the grant
date and
contain no post-vesting restrictions other than normal trading
black-out periods
prescribed by the Company’s corporate governance policies. Additionally, the
SARs expire on the seventh anniversary of the grant date.
The
weighted average grant-date fair value of each SAR was $11.37. At
October 6, 2007, the remaining compensation expense to be recognized
for this
grant, net of estimated forfeitures, is $9,458. The Company used
the following
Black-Scholes option-pricing assumptions to determine the fair
value of each SAR
and stock option during the forty weeks ended October 6,
2007:
Black-Scholes
Option Valuation Assumptions (1)
|
|
October
6,
2007
|
|
|
|
Risk-free
interest rate (2)
|
|
4.8%
|
Expected
dividend yield (3)
|
|
0.6%
|
Expected
stock price volatility (4)
|
|
29.0%
|
Expected
life of stock options and SARs (in months) (5)
|
|
51
|
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
(1) |
|
Forfeitures
are based on historical experience. |
(2) |
|
The
risk-free interest rate is based on a U.S. Treasury constant
maturity
interest rate whose term is consistent with the expected life
of the
Company’s stock options. |
(3) |
|
The
Company declared its first ever cash dividend beginning in
its first
quarter of 2006. |
(4) |
|
Expected
volatility is based on the historical volatility of the Company’s common
stock for the period consistent with the expected life of the
Company’s
stock options and SARs. |
(5) |
|
The
expected life of the Company’s stock options and SARs represents the
estimated period of time until exercise and is based on the
Company’s
historical experience of such stock
options. |
Restricted
Stock
During
the forty weeks ended October 6, 2007, the Company granted 154 shares
of
restricted stock to employees. These shares vest at the end of a
three-year period. During this period, holders of the restricted
stock are
entitled to dividend and voting rights. Shares of the restricted
stock are
restricted until they vest and cannot be sold by the recipient until
the
restriction has lapsed at the end of the three-year period.
The
weighted average grant-date fair value of each share of restricted
stock was
$38.28, the market price of the Company’s stock on the date of grant. At October
6, 2007, the remaining compensation expense to be recognized for
this grant, net
of estimated forfeitures, is $3,481. As the compensation is amortized
over the
vesting period, additional paid-in capital is recognized accordingly.
Shares of
restricted stock are not included as shares outstanding in the calculation
of
basic earnings per share, but are included in the number of shares
used to
calculate diluted earnings per share, if dilutive.
Stock
Options and DSUs
During
the forty weeks ended October 6,
2007, the Company granted 75 stock options and 8 DSU’s to members of its Board
of Directors, including its interim Chairman of the Board, President
and Chief
Executive Officer. The exercise price of the options is $41.64, the
market price
of the Company’s underlying common stock on the date of grant. The options vest
over a three-year period and expire on the seventh anniversary of
the date of
grant. The Company determined the fair value of each stock option
using the same
Black-Scholes option-pricing assumptions as were used to value the
SARs. The
grant-date fair value of each stock option was $12.22.
The
DSUs were awarded at a price of
$41.64, the market price of the Company’s underlying common stock on the date of
grant. The DSUs are immediately vested upon issuance but are held
on behalf of
the director until he or she ceases to be a director. The DSUs are
then
distributed to the director following his or her last date of
service.
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
Receivables
consist of the following:
|
|
October
6,
2007
|
|
|
December
30,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
13,149
|
|
|
|
|
|
|
|
|
|
73,724
|
|
|
Installment
|
|
|
-
|
|
|
|
2,336 |
|
|
Insurance
recovery
|
|
|
-
|
|
|
|
9,676 |
|
|
|
|
|
4,807
|
|
|
|
2,801 |
|
|
Total
receivables
|
|
|
81,961
|
|
|
|
101,686 |
|
|
Less:
Allowance for doubtful accounts
|
|
|
(4,979 |
) |
|
|
(4,640 |
) |
|
|
|
$ |
|
|
|
$ |
97,046
|
|
|
5. |
Goodwill
and Intangible Assets:
|
The
carrying amount and accumulated amortization of acquired
intangible assets as of
October 6, 2007 include:
|
|
As
of October 6, 2007
|
|
|
Acquired
intangible assets
|
|
Gross
Carrying
|
|
|
Accumulated
|
|
|
Net
Book
|
|
|
subject
to amortization:
|
|
Amount
|
|
|
Amortization
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
relationships
|
|
$ |
9,600
|
|
|
$ |
(1,915 |
) |
|
$ |
7,685
|
|
|
Other
|
|
|
885
|
|
|
|
(275 |
) |
|
|
610
|
|
|
Total
|
|
$ |
10,485
|
|
|
$ |
(2,190 |
) |
|
$ |
8,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired
intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
not
subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark
and tradenames
|
|
$ |
18,800
|
|
|
$ |
-
|
|
|
$ |
18,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
$ |
29,285
|
|
|
$ |
(2,190 |
) |
|
$ |
27,095
|
|
|
The
Company recorded amortization expense of $250 and $831
for acquired intangible
assets for the twelve and forty weeks ended October 6,
2007, respectively. The
table below shows expected amortization expense for the
next five years for
acquired intangible assets recorded as of October 6,
2007.
2007
|
|
$ |
256
|
2008
|
|
$ |
1,087
|
2009
|
|
$ |
1,087
|
2010
|
|
$ |
1,059
|
2011
|
|
$ |
967
|
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
The
changes in the carrying amount of goodwill for the forty
weeks ended October 6,
2007 are as follows:
|
|
AAP
Segment
|
|
|
AI
Segment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 30, 2006
|
|
$ |
16,093
|
|
|
$ |
17,625
|
|
|
$ |
33,718
|
|
Fiscal
2007 activity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance
at October 6, 2007
|
|
$ |
16,093
|
|
|
$ |
17,625
|
|
|
$ |
33,718
|
|
Inventories
are stated at the lower of cost or market, cost being
determined using the
last-in, first-out ("LIFO") method for approximately
93% of inventories at both
October 6, 2007 and December 30, 2006. Under the LIFO
method, the Company’s cost
of sales reflects the costs of the most currently purchased
inventories while
the inventory carrying balance represents the costs
relating to prices paid in
prior years. The Company’s costs to acquire inventory have been generally
decreasing in recent years as a result of the Company’s significant growth.
Accordingly, the cost to replace inventory is less
than the LIFO balances
carried for similar product. As a result of the LIFO
method and the ability to
obtain lower product costs, the Company recorded reductions
to cost of sales of
$13,254 and $8,967 for the forty weeks ended October
6, 2007 and October 7,
2006, respectively.
An
actual
valuation of inventory under the LIFO method can be
made only at the end of each
fiscal year based on the inventory levels and costs
at that
time. Accordingly, interim LIFO calculations must be based
on
management’s estimates of expected fiscal year-end inventory levels
and
costs.
The
remaining inventories are comprised of product cores,
which consist of the
non-consumable portion of certain parts and batteries
and are valued under the
first-in, first-out ("FIFO") method. Core values are included as part
of the Company’s merchandise costs and are either passed on to the
customer or
returned to the vendor. Additionally, these products are not subject
to the frequent cost changes like the Company’s other merchandise inventory,
thus there is no material difference from applying
either the LIFO or FIFO
valuation methods.
The
Company capitalizes certain purchasing and warehousing
costs into
inventory. Purchasing and warehousing costs included in inventory,
at
FIFO, at October 6, 2007 and December 30, 2006, were
$100,121 and $95,576,
respectively. Inventories consist of the following:
|
|
October
6,
2007
|
|
|
December
30,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
1,380,573
|
|
|
Adjustments
to state inventories at LIFO
|
|
|
|
|
|
|
82,767
|
|
|
|
|
$ |
|
|
|
$ |
1,463,340
|
|
|
|
|
|
|
|
|
|
|
|
|
Replacement
cost approximated FIFO cost at October 6, 2007, and
December 30,
2006.
Inventory
quantities are tracked through a perpetual inventory
system. The
Company uses a cycle counting program in all distribution
centers, PDQs, LAWs
and retail stores to ensure the accuracy of the perpetual
inventory quantities
of both merchandise and core inventory.
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
The
Company establishes reserves for estimated shrink based
on historical accuracy
and effectiveness of the cycle counting program. The
Company also establishes
reserves for potentially excess and obsolete inventories
based on current
inventory levels and the historical analysis of product
sales and current market
conditions. The nature of the Company’s inventory is such that the risk of
obsolescence is minimal and excess inventory has historically
been returned to
the Company’s vendors for credit. The Company provides reserves when
less than
full credit is expected from a vendor or when liquidating
product will result in
retail prices below recorded costs. The Company’s reserves against inventory for
these matters were $34,015 and $31,376 at October 6,
2007 and December 30, 2006,
respectively.
Long-term
debt consists of the following:
|
|
October
6,
2007
|
|
|
December
30,
2006
|
|
|
Senior
Debt:
|
|
|
|
|
|
|
|
Revolving
facility at variable interest rates (6.23%
and 6.13% at October 6, 2007
and December 30, 2006, respectively)
due October
2011
|
|
$ |
429,600
|
|
|
$ |
476,800
|
|
|
Other
|
|
|
4,835
|
|
|
|
440
|
|
|
|
|
|
434,435
|
|
|
|
477,240
|
|
|
Less:
Current portion of long-term debt
|
|
|
(661 |
) |
|
|
(67 |
) |
|
Long-term
debt, excluding current portion
|
|
$ |
433,774
|
|
|
$ |
477,173
|
|
|
As
of
October 6, 2007, the Company had outstanding $429,600
under its revolving credit
facility, $4,835 under an economic development note
and $84,951 in letters of
credit outstanding, which reduced availability under
the revolving credit
facility to $235,449. In addition to the letters of
credit, the Company
maintains approximately $2,229 in surety bonds issued
by its insurance provider
primarily to utility providers and the departments
of revenue for certain
states. These letters of credit and surety bonds generally
have a term of one
year or less.
The
Company entered into its current $750,000 unsecured
five-year revolving credit
facility in October 2006 with Advance Stores Company,
Incorporated, a subsidiary
of the Company, serving as the borrower. The revolver
replaced the Company’s
term loans and revolver under the previous credit facility.
The revolving credit
facility provides for the issuance of letters of credit
with a sub limit of
$300,000 and swingline loans in an amount not to exceed
$50,000. The Company may
also request, subject to certain lender consent, that
the total revolving
commitment be increased by an amount not exceeding
$250,000 during the term of
the credit agreement. Voluntary prepayments and voluntary
reductions of the
revolving balance are permitted in whole or in part,
at the Company’s option, in
minimum principal amounts as specified in the revolving
credit
facility.
The
interest rates on borrowings under the revolving credit
facility will be based,
at the Company’s option, on an adjusted LIBOR rate, plus a margin,
or an
alternate base rate, plus a margin. The current margin
is 0.75% and 0.0% per
annum for the adjusted LIBOR and alternate base rate
borrowings, respectively.
The Company has elected to use the 90-day adjusted
LIBOR rate and has the
ability and intent to continue to use this rate on
its hedged borrowings. A
commitment fee will be charged on the unused portion
of the revolver, payable in
arrears. The current commitment fee rate is 0.150%
per annum. Under the terms of
the revolving credit facility, the interest rate spread
and commitment fee will
be based on the Company’s credit rating. The revolving facility terminates
on
October 5, 2011.
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
The
revolving credit facility is fully and unconditionally
guaranteed by Advance
Auto Parts, Inc. The facility contains covenants restricting
the ability of the
Company and its subsidiaries to, among other things,
(1) create, incur or assume
additional debt (including hedging arrangements), (2)
incur liens or engage in
sale-leaseback transactions, (3) make loans and investments,
(4) guarantee
obligations, (5) engage in certain mergers, acquisitions
and asset sales, (6)
engage in transactions with affiliates, (7) change
the nature of the Company’s
business and the business conducted by its subsidiaries
and (8) change the
holding company status of the Company. The Company
is required to comply with
financial covenants with respect to a maximum leverage
ratio and a minimum
consolidated coverage ratio. The revolving credit facility
also provides for
customary events of default, including non-payment
defaults, covenant defaults
and cross-defaults to the Company’s other material indebtedness.
The
Company was in compliance with the above covenants
under the revolving credit
facility at October 6, 2007.
The
Company includes in comprehensive income the changes
in fair value of the
Company’s interest rate swaps and the amortization of prior
service credits
related to its postretirement plan as a result of adopting
of SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements No. 87, 88,
106, and 132(R)” at December
30, 2006.
Comprehensive
income for the twelve and forty weeks ended October
6, 2007 and October 7, 2006
is as follows:
|
|
Twelve
Weeks Ended
|
|
|
Forty
Weeks Ended
|
|
|
|
October
6,
2007
|
|
|
October
7,
2006
|
|
|
October
6,
2007
|
|
|
October
7,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
59,040
|
|
|
$ |
58,947
|
|
|
$ |
203,565
|
|
|
$ |
195,964
|
|
Unrealized
(loss) gain on hedge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
arrangements,
net of tax
|
|
|
(3,044 |
) |
|
|
(1,468 |
) |
|
|
(889 |
) |
|
|
445
|
|
Reclassification
of net gain on hedge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
arrangements
into earnings, before tax
|
|
|
-
|
|
|
|
(2,873 |
) |
|
|
-
|
|
|
|
(2,873 |
) |
Amortization
of negative prior service cost, net of tax
|
|
|
(83 |
) |
|
|
- |
|
|
|
(275 |
) |
|
|
-
|
|
Comprehensive
income
|
|
$ |
55,913
|
|
|
$ |
54,606
|
|
|
$ |
202,401
|
|
|
$ |
193,536
|
|
9. |
Stock
Repurchase Program:
|
During
the twelve weeks ended October 6, 2007, the Company's
Board of Directors
authorized a new stock repurchase program of up to
$500,000 of the Company's
common stock plus related expenses. The new program
cancelled and replaced the
remaining portion of the previous $300,000 stock
repurchase program. The program
allows the Company to repurchase its common stock
on the open market or in
privately negotiated transactions from time to time
in accordance with the
requirements of the Securities and Exchange Commission.
During the twelve weeks
ended October 6, 2007, the Company repurchased 6,233
shares of common stock at
an aggregate cost of $207,327, or an average price
of $33.26 per share, of which
1,235 shares of common stock were repurchased under
the previous $300,000 stock
repurchase program. During the forty weeks ended
October 6, 2007, the Company
repurchased 6,328 shares of common stock at an aggregate
cost of $211,225, or an
average price of $33.38 per share, of which 1,330
shares of common stock were
repurchased under the previous $300,000 stock
repurchase program.
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
During
the twelve weeks ended October 6, 2007, the Company
retired all 6,328 shares
repurchased under the stock repurchase programs.
At October 6, 2007, the Company
had $335,151 remaining under the current stock repurchase
program. Subsequent to
October 6, 2007, the Company repurchased 841 shares
of common stock at an
aggregate cost of $29,997, or an average price of
$35.66 per share.
The
Company provides certain health and life insurance
benefits for eligible retired
team members through a postretirement plan, or the
Plan. These benefits are
subject to deductibles, co-payment provisions and
other limitations. The Plan
has no assets and is funded on a cash basis as benefits
are paid. The
Company’s postretirement liability is calculated annually
by a third-party
actuary. The discount rate utilized at December 30, 2006 was
5.5%,
and remained unchanged through the forty weeks ended
October 6, 2007. The
Company expects fiscal 2007 plan contributions to
completely offset benefits
paid, consistent with fiscal 2006.
The
components of net periodic postretirement benefit
cost for the twelve and forty
weeks ended October 6, 2007, and October 7, 2006
respectively, are as
follows:
|
|
Twelve
Weeks Ended
|
|
|
Forty
Weeks Ended
|
|
|
|
October
6, 2007
|
|
|
October
7, 2006
|
|
|
October
6, 2007
|
|
|
October
7, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
cost
|
|
$ |
127
|
|
|
$ |
167
|
|
|
$ |
423
|
|
|
$ |
558
|
|
Amortization
of negative prior service cost
|
|
|
(134 |
) |
|
|
(134 |
) |
|
|
(447 |
) |
|
|
(447 |
) |
Amortization
of unrecognized net losses
|
|
|
-
|
|
|
|
49
|
|
|
|
-
|
|
|
|
162
|
|
Net
periodic postretirement benefit cost
|
|
$ |
(7 |
) |
|
$ |
82
|
|
|
$ |
(24 |
) |
|
$ |
273
|
|
11. |
Segment
and Related Information:
|
The
Company has the following two reportable segments:
Advance Auto Parts, or AAP,
and Autopart International, or AI. The AAP segment
is comprised of store
operations within the United States, Puerto Rico
and the Virgin Islands which
operate under the trade names “Advance Auto Parts,” “Advance Discount Auto
Parts” and “Western Auto.” These stores offer a broad selection of brand name
and proprietary automotive replacement parts, accessories
and maintenance items
for domestic and imported cars and light trucks,
with no significant
concentration in any specific product area.
The
AI
segment consists solely of the operations of Autopart
International, which
operates as an independent, wholly-owned subsidiary.
AI’s business serves the
commercial market in addition to warehouse distributors
and jobbers located
throughout the Northeastern region of the United
States.
The
Company evaluates each of its segment’s financial performance based on net sales
and operating profit for purposes of making decisions
and allocating resources.
The accounting policies of the reportable segments
are the same as those
described in the summary of significant accounting
policies in Note
1.
The
following table summarizes financial information
for each of the Company's
business segments for the twelve and forty weeks
ended October 6, 2007 and
October 7, 2006, respectively.
Advance
Auto Parts, Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial
Statements
For
the Twelve and Forty Week Periods Ended
October 6, 2007 and October 7, 2006
(in
thousands, except per share data)
(unaudited)
|
|
Twelve
Week Periods Ended
|
|
October
6, 2007
|
|
AAP
|
|
|
AI
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
1,124,110
|
|
|
$ |
33,933
|
|
|
$ |
-
|
|
|
$ |
1,158,043
|
|
Operating
income
|
|
|
99,801
|
|
|
|
578
|
|
|
|
-
|
|
|
|
100,379
|
|
Segment
assets
|
|
|
2,623,256
|
|
|
|
143,310
|
|
|
|
-
|
|
|
|
2,766,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
7, 2006
|
|
AAP
|
|
|
AI
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
1,071,698
|
|
|
$ |
27,788
|
|
|
$ |
-
|
|
|
$ |
1,099,486
|
|
Operating
income
|
|
|
102,054
|
|
|
|
467
|
|
|
|
-
|
|
|
|
102,521
|
|
Segment
assets
|
|
|
2,550,896
|
|
|
|
110,689
|
|
|
|
-
|
|
|
|
2,661,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forty
Week Periods Ended
|
|
October
6, 2007
|
|
AAP
|
|
|
AI
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
3,692,208
|
|
|
$ |
103,814
|
|
|
$ |
-
|
|
|
$ |
3,796,022
|
|
Operating
income (loss)
|
|
|
352,906
|
|
|
|
(24 |
) |
|
|
-
|
|
|
|
352,882
|
|
Segment
assets
|
|
|
2,623,256
|
|
|
|
143,310
|
|
|
|
-
|
|
|
|
2,766,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
7, 2006
|
|
AAP
|
|
|
AI
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
3,514,692
|
|
|
$ |
85,661
|
|
|
$ |
-
|
|
|
$ |
3,600,353
|
|
Operating
income
|
|
|
336,724
|
|
|
|
2,541
|
|
|
|
-
|
|
|
|
339,265
|
|
Segment
assets
|
|
|
2,550,896
|
|
|
|
110,689
|
|
|
|
-
|
|
|
|
2,661,585
|
|
The
following discussion of our consolidated historical results of operations
and
financial condition should be read in conjunction with our unaudited condensed
consolidated financial statements and the notes thereto included elsewhere
in
this report. Our first quarter consists of 16 weeks and our other
three quarters consist of 12 weeks each.
Certain
statements in this report are "forward-looking statements" within the meaning
of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are usually identified by the use
of
words such as "will," "anticipates," "believes," "estimates," "expects,"
"projects," "forecasts," "plans," "intends," "should" or similar
expressions. We intend those forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements contained
in the
Private Securities Litigation Reform Act of 1995 and are included in this
statement for purposes of complying with these safe harbor
provisions.
These
forward-looking statements reflect current views about our plans, strategies
and
prospects, which are based on the information currently available and on
current
assumptions.
Although
we believe that our plans, intentions and expectations as reflected in
or
suggested by those forward-looking statements are reasonable, we can give
no
assurance that the plans, intentions or expectations will be
achieved. Listed below and discussed in our annual report on
Form 10-K for the year ended December 30, 2006 are some important risks,
uncertainties and contingencies which could cause our actual results,
performances or achievements to be materially different from the forward-looking
statements made in this report. These risks, uncertainties and
contingencies include, but are not limited to, the following:
· the
implementation of our business strategies and goals;
· our
ability to expand our business;
· competitive
pricing and other competitive pressures;
· a
decrease in demand for our products;
· the
occurrence of natural disasters and/or extended periods of unfavorable
weather;
· our
ability to obtain affordable insurance against the financial impacts of
natural
disasters;
· the
availability of suitable real estate locations;
· our
overall credit rating;
· deterioration
in general economic conditions;
· our
ability to attract and retain qualified team members;
· integration
of acquisitions;
· our
relationship with our vendors;
· our
involvement as a defendant in litigation or incurrence of judgments, fines
or
legal costs;
· adherence
to the restrictions and covenants imposed under our revolving credit facility;
and
· acts
of
terrorism.
We
assume
no obligation to update publicly any forward-looking statements, whether
as a
result of new information, future events or otherwise. In evaluating
forward-looking statements, you should consider these risks and uncertainties,
together with the other risks described from time to time in our other
reports
and documents filed with the Securities and Exchange Commission, and you
should
not place undue reliance on those statements.
Management
Overview
During
the third quarter of fiscal 2007, we recorded earnings per diluted share
of
$0.57 compared to $0.56 for the same quarter of fiscal 2006. Our third
quarter
operating results included expenses of $0.04 per diluted share related
to
severance and asset write-off costs associated with our strategic
plan. We continue to generate significant operating cash flow to
allow us to invest in business initiatives and return capital to shareholders
through cash dividends and share repurchases. We remain focused on
increasing our sales, earnings and return on invested capital and believe
our
initiatives introduced in the second quarter are beginning to have a positive
impact on these goals.
Specific
updates on these initiatives, among other recent developments, during our
third
quarter are discussed below:
Sales
Initiatives – We began implementing our plan to increase “do-it-yourself,”
or DIY, and “do-it-for-me,” or DIFM, sales through improving parts availability
with an emphasis on late model and foreign vehicles. Our enhanced parts
availability will be funded partially from available working capital as we
transition from other less productive inventory. We believe our DIFM business
has started to improve although we continue to face a challenging macroeconomic
environment, including higher fuel and insurance costs. In order to structure
our DIFM business for further growth, we continue to examine store staffing
and
training, compensation policies and truck utilization. Commercial
sales represented approximately 27% of our total sales for the twelve weeks
ended October 6, 2007 as compared to approximately 25% for the same quarter
last
year. At October 6, 2007, we operated commercial programs in 83% of
our total stores compared to approximately 82% for the prior year quarter.
Lastly, we began improving the productivity and efficiency of our sales floor
in
our stores by aligning functions performed by our sales associates with our
increased parts focus.
SG&A
Reductions – We took significant steps towards reducing our selling,
general and administrative expense structure during the third
quarter. We eliminated 250 positions at our store support center and
other field support areas and terminated our Advance TV network, which together
resulted in $6.3 million of expense recognized in our third quarter operating
results. Additionally, we reduced our real estate development through
opening fewer new stores, relocating fewer stores and stopping the store
remodel
program. Lastly, we completed the further reduction and reallocation
of certain advertising expenditures.
Return
on Invested Capital Improvements – We eliminated certain information
technology, logistics and other investments that did not demonstrate acceptable
returns. During the third quarter, we stopped our store remodel program while
we
more closely examine the sales results and overall return from these
remodels. Additionally, we have delayed the opening of our ninth
distribution center to the beginning of 2010 as a result of fewer new stores
openings planned through 2008.
Stock
Repurchase Program – During the third quarter, our Board of Directors
authorized a new stock repurchase program of up to $500 million of our common
stock plus related expenses. The program, which became effective
August 8, 2007, replaced the remaining portion of a $300 million stock
repurchase program. During the third quarter, we repurchased 6.2 million
shares
of common stock for $207 million. As of October 6, 2007, we had $335 million
remaining on the current share repurchase program.
Consolidated
Operating Results and Key Metrics
The
following table highlights certain consolidated operating results and key
metrics for the twelve and forty weeks ended October 6, 2007, and October
7,
2006.
|
|
Twelve
Weeks Ended
|
|
|
Forty
Weeks Ended
|
|
|
|
October
6, 2007
|
|
|
October
7, 2006
|
|
|
October
6, 2007
|
|
|
October
7, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
net
sales (in thousands)
|
|
|
$1,158,043
|
|
|
|
$1,099,486
|
|
|
|
$3,796,022
|
|
|
|
$3,600,353
|
|
Total
commercial net
sales (in thousands)
|
|
|
$314,052
|
|
|
|
$277,894
|
|
|
|
$1,002,498
|
|
|
|
$900,483
|
|
Comparable
store net sales growth
|
|
|
1.1% |
|
|
|
1.4% |
|
|
|
1.2% |
|
|
|
2.3% |
|
DIY
comparable store net sales growth
|
|
|
(1.0%) |
|
|
|
(0.6%) |
|
|
|
(0.4%) |
|
|
|
(0.3%) |
|
DIFM
comparable store net sales growth
|
|
|
8.0% |
|
|
|
8.7% |
|
|
|
6.2% |
|
|
|
11.7% |
|
Average
net sales per store
(in thousands)
|
|
|
$1,542
|
|
|
|
$1,561
|
|
|
|
$1,542
|
|
|
|
$1,561
|
|
Inventory
per store
(in thousands)
|
|
|
$477
|
|
|
|
$483
|
|
|
|
$477
|
|
|
|
$483
|
|
Inventory
turnover
|
|
|
1.67
|
|
|
|
1.69
|
|
|
|
1.67
|
|
|
|
1.69
|
|
Gross
margin
|
|
|
47.9% |
|
|
|
48.2% |
|
|
|
48.1% |
|
|
|
47.8% |
|
Operating
margin
|
|
|
8.7% |
|
|
|
9.3% |
|
|
|
9.3% |
|
|
|
9.4% |
|
Note: These
metrics should be reviewed along with the footnotes to the table setting
forth
our selected store data in Item 6. "Selected Financial Data" in our annual
report on Form 10-K for the fiscal year ended December 30, 2006, which was
filed
with the SEC on February 28, 2007. The footnotes contain descriptions regarding
the calculation of
these
metrics. Average net sales per store and inventory turnover for the
interim periods presented above were calculated using results of operations
from
the last 13 accounting periods.
Operating
Segments
We
conduct our operations in two reportable segments: Advance Auto Parts, or
AAP,
and Autopart International, or AI. The AAP segment is comprised of
our store operations within the United States, Puerto Rico and the Virgin
Islands, which operate under the trade names “Advance Auto Parts,” “Advance
Discount Auto Parts” and “Western Auto.” The AI segment consists solely of the
operations of Autopart International, which operates as an independent,
wholly-owned subsidiary.
AAP
Segment
At
October 6, 2007, we operated 3,124 stores within the United States, Puerto
Rico
and the Virgin Islands. We operated 3,091 stores throughout 40 states in
the
Northeastern, Southeastern and Midwestern regions of the United
States. These stores operated under the “Advance Auto Parts” trade
name except for certain stores in the state of Florida, which operated under
the
“Advance Discount Auto Parts” trade name. These stores offer a broad selection
of brand name and proprietary automotive replacement parts, accessories and
maintenance items for domestic and imported cars and light trucks, with no
significant concentration in any specific product area. In addition, we operated
33 stores under the “Western Auto” and “Advance Auto Parts” trade names, located
primarily in Puerto Rico and the Virgin Islands, or Offshore. The Western
Auto
stores offer automotive tires and service in addition to automotive parts,
accessories and maintenance items.
The
following table sets forth information about our stores, including the number
of
new, closed and relocated stores, during the twelve and forty weeks ended
October 6, 2007. We lease approximately 81% of our stores.
|
|
Twelve
Weeks
Ended
October
6, 2007
|
|
|
Forty
Weeks
Ended
October
6, 2007
|
|
Number
of stores at beginning of period
|
|
|
3,087
|
|
|
|
2,995
|
|
New
Stores
|
|
|
39
|
|
|
|
139
|
|
Closed
Stores
|
|
|
(2 |
) |
|
|
(10 |
) |
Number
of stores, end of period
|
|
|
3,124
|
|
|
|
3,124
|
|
Relocated
stores
|
|
|
5
|
|
|
|
24
|
|
Stores
with commercial programs
|
|
|
2,571
|
|
|
|
2,571
|
|
AI
Segment
At
October 6, 2007, we operated 104 stores throughout New England and New York.
These stores operated under the “Autopart International” trade name. These
stores offer a broad selection of brand name and proprietary automotive
replacement parts, accessories and maintenance items for domestic and imported
cars and light trucks, with a greater focus on imported parts. AI primarily
serves the commercial market from its retail locations and additionally through
a wholesale distribution network.
The
following table sets forth information about our stores, including the number
of
new and closed stores, during the twelve and forty weeks ended October 6,
2007.
|
|
Twelve
Weeks
Ended
October
6, 2007
|
|
|
Forty
Weeks
Ended
October
6, 2007
|
|
Number
of stores at beginning of period
|
|
|
100
|
|
|
|
87
|
|
New
Stores
|
|
|
4
|
|
|
|
17
|
|
Closed
Stores
|
|
|
-
|
|
|
|
-
|
|
Number
of stores, end of period
|
|
|
104
|
|
|
|
104
|
|
Stores
with commercial programs
|
|
|
104
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
We
anticipate that we will add a total of approximately 190 to 200 new AAP and
AI
stores during 2007 primarily through new store openings.
Critical
Accounting Policies
Our
financial statements have been prepared in accordance with accounting policies
generally accepted in the United States of America. Our discussion and analysis
of the financial condition and results of operations are based on these
financial statements. The preparation of these financial statements requires
the
application of accounting policies in addition to certain estimates and
judgments by our management. Our estimates and judgments are based on currently
available information, historical results and other assumptions we believe
are
reasonable. Actual results could differ from these estimates. During the
forty
weeks ended October 6, 2007, we consistently applied the critical accounting
policies discussed in our annual report on Form 10-K for the year ended December
30, 2006. For a complete discussion regarding these critical accounting
policies, refer to this annual report on Form 10-K.
Components
of Statement of Operations
Net
Sales
Net
sales
consist primarily of comparable store sales and new store net sales. We
calculate comparable store sales based on the change in net sales starting
once
a store has been open for 13 complete accounting periods. We include relocations
in comparable store sales from the original date of opening. We exclude from
comparable store sales the net sales from the Offshore and AI
stores.
Cost
of Sales
Our
cost
of sales consists of merchandise costs, net of incentives under vendor programs,
inventory shrinkage and warehouse and distribution expenses. Gross profit
as a
percentage of net sales may be affected by variations in our product mix,
price
changes in response to competitive factors and fluctuations in merchandise
costs
and vendor programs. We seek to avoid fluctuation in merchandise
costs and instability of supply by entering into long-term purchase agreements
with vendors when we believe it is advantageous. Our gross profit may not
be
comparable to those of our competitors due to differences in industry practice
regarding the classification of certain costs. See Note 1 in our condensed
consolidated financial statements for additional discussion of these
costs.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses consist of store payroll, store occupancy
(including rent), advertising expenses, other store expenses and general
and
administrative expenses, including salaries and related benefits of store
support center team members, share-based compensation expense, store support
center administrative office expenses, data processing, professional expenses
and other related expenses.
Results
of Operations
The
following table sets forth certain of our operating data expressed as a
percentage of net sales for the periods indicated.
|
|
Twelve
Week Periods Ended
|
|
|
Forty
Week Periods Ended
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
October
6, 2007
|
|
|
October
7, 2006
|
|
|
October
6, 2007
|
|
|
October
7, 2006
|
|
Net
sales
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost
of sales, including purchasing and warehousing costs
|
|
|
52.1
|
|
|
|
51.8
|
|
|
|
51.9
|
|
|
|
52.2
|
|
Gross
profit
|
|
|
47.9
|
|
|
|
48.2
|
|
|
|
48.1
|
|
|
|
47.8
|
|
Selling,
general and administrative expenses
|
|
|
39.3
|
|
|
|
38.9
|
|
|
|
38.8
|
|
|
|
38.4
|
|
Operating
income
|
|
|
8.7
|
|
|
|
9.3
|
|
|
|
9.3
|
|
|
|
9.4
|
|
Interest
expense
|
|
|
(0.7 |
) |
|
|
(0.8 |
) |
|
|
(0.6 |
) |
|
|
(0.8 |
) |
Gain
on extinguishment of debt, net
|
|
|
0.0
|
|
|
|
0.1
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Other
income (expense), net
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Provision
for income taxes
|
|
|
2.9
|
|
|
|
3.2
|
|
|
|
3.3
|
|
|
|
3.2
|
|
Net
income
|
|
|
5.1 |
% |
|
|
5.4 |
% |
|
|
5.4 |
% |
|
|
5.4 |
% |
Twelve
Weeks Ended October 6, 2007 Compared to Twelve Weeks Ended October 7,
2006
Net
sales
for the twelve weeks ended October 6, 2007 were $1,158.0 million, an
increase of $58.6 million, or 5.3%, as compared to net sales for the twelve
weeks ended October 7, 2006. The net sales increase was due to an increase
in
comparable store sales of 1.1% and contributions from our new AAP and AI
stores
opened within the last year. The comparable store sales increase was
driven by an increase in average ticket sales and customer traffic in our
DIFM
business and an increase in average ticket sales by our DIY customers offset
by
a decrease in DIY customer count. AI produced sales of $33.9 million, an
increase of $6.1 million, or 22.1%. AI’s sales increase was primarily
driven by our acceleration of new-store growth throughout 2006 and forty
weeks ended October 6, 2007.
Gross
profit for the twelve weeks ended October 6, 2007 was $555.1 million, or
47.9%
of net sales, as compared to $530.2 million, or 48.2% of net sales, for the
twelve weeks ended October 7, 2006. The decrease in gross profit as a percentage
of net sales was due primarily to a less favorable merchandise sales mix
as
compared to the prior year and less vendor incentives recognized as a result
of
lower inventory purchases. We continue to closely manage our overall inventory
levels to our recent sales trends while maintaining adequate levels of inventory
to support our parts initiative as discussed in the Management Overview.
Additionally, commercial sales represented a 2% higher portion of our
consolidated sales for the third quarter relative to the prior year, which
generate a slightly lower gross profit as compared to our DIY
sales.
Selling,
general and administrative expenses increased to $454.7 million, or 39.3%
of net
sales, for the twelve weeks ended October 6, 2007, from $427.7 million, or
38.9%
of net sales, for the twelve weeks ended October 7, 2006. As a percentage
of net
sales, selling, general and administrative expenses included 0.5% of severance
and asset write-off costs associated with our SG&A reduction initiatives. We
also experienced an increase in certain fixed occupancy costs, as a percentage
of net sales during the third quarter, offset by reduced advertising
expense.
Operating
income for the twelve weeks ended October 6, 2007 was $100.4 million, or
8.7% of
net sales, as compared to $102.5 million, or 9.3% of net sales, for the twelve
weeks ended October 7, 2006. This decrease in operating income, as a percentage
of net sales, was reflective of a decrease in gross profit and higher selling,
general and administrative expenses as previously discussed. AAP produced
operating income of $99.8 million, or 8.9% of net sales, for the twelve weeks
ended October 6, 2007 as compared to $102.1 million, or 9.5% of net sales,
for
the twelve weeks ended October 7, 2006. AI generated operating income of
$0.6
million for the twelve weeks ended October 6, 2007 as compared to operating
income of $0.5 million for the same period last year. Operating income increased
only slightly due to less than anticipated sales and the reinvestment of
resources to accelerate AI’s store growth and roll out of certain AI
branded product.
Interest
expense for the twelve weeks ended October 6, 2007 was $8.0 million, or 0.7%
of
net sales, as compared to $9.2 million, or 0.8% of net sales, for the twelve
weeks ended October 7, 2006. The decrease in interest expense is a result
of
lower average outstanding borrowings and lower average borrowing rates during
the twelve weeks ended October 6, 2007 compared to the same period ended
October
7, 2006.
Income
tax expense for the twelve weeks ended October 6, 2007 was $33.7 million,
as
compared to $35.5 million for the twelve weeks ended October 7, 2006. Our
effective income tax rate was 36.4% for the twelve weeks ended October 6,
2007
compared to 37.6% for the same period ended October 7, 2006. This lower rate
was
primarily reflective of adjustments made in connection with the filing of
our
consolidated income tax return and the completion of certain state income
tax
audits.
We
generated net income of $59.0 million, or $0.57 per diluted share, for the
twelve weeks ended October 6, 2007, as compared to $58.9 million, or $0.56
per
diluted share, for the twelve weeks ended October 7, 2006. As a percentage
of
net sales, net income for the twelve weeks ended October 6, 2007 was 5.1%,
as
compared to 5.4% for the twelve weeks ended October 7, 2006.
Forty
Weeks Ended October 6, 2007 Compared to Forty Weeks Ended October 7,
2006
Net
sales
for the forty weeks ended October 6, 2007 were $3,796.0 million, an
increase of $195.7 million, or 5.4%, as compared to net sales for the forty
weeks ended October 7, 2006. The net sales increase was due to an increase
in
comparable store sales of 1.2% and contributions from our new AAP and AI
stores
opened within the last year. The comparable store sales increase was
driven by an increase in average ticket sales and customer traffic in our
DIFM
business and an increase in average ticket sales by our DIY customers offset
by
a decrease in DIY customer count. AI produced sales of $103.8
million, an increase of $18.2 million, or 21.2%. AI’s sales increase
was primarily driven by our acceleration of new-store growth throughout 2006
and forty weeks ended October 6, 2007.
Gross
profit for the forty weeks ended October 6, 2007 was $1,827.4 million, or
48.1%
of net sales, as compared to $1,722.7 million, or 47.8% of net sales, for
the
forty weeks ended October 7, 2006. The increase in gross profit as a percentage
of net sales reflects favorable results achieved through category management
throughout most of the 40-week period, including improved procurement costs
and
a positive shift in sales mix, and lower logistics expense.
Selling,
general and administrative expenses increased to $1,474.5 million, or 38.8%
of
net sales, for the forty weeks ended October 6, 2007, from $1,383.5 million,
or
38.4% of net sales, for the forty weeks ended October 7, 2006. As a percentage
of net sales, selling, general and administrative expenses included 0.2%
of
severance and asset write-off costs associated with our SG&A reduction
initiatives. We also experienced an increase in certain fixed occupancy costs,
as a percentage of net sales during the forty weeks ended October 6, 2007,
offset by reduced advertising expense.
Operating
income for the forty weeks ended October 6, 2007 was $352.9 million, or 9.3%
of
net sales, as compared to $339.3 million, or 9.4% of net sales, for the forty
weeks ended October 7, 2006. This decrease in operating income, as a percentage
of net sales, was reflective of higher selling, general and administrative
expenses as previously discussed partially offset by an increase in gross
profit. AAP produced operating income of $352.9 million, or 9.6% of net sales,
for the forty weeks ended October 6, 2007 as compared to $336.7 million,
or 9.6%
of net sales, for the forty weeks ended October 7, 2006. AI generated no
operating income for the forty weeks ended October 6, 2007 as compared to
operating income of $2.5 million for the same period last year. This decrease
in
operating income was primarily driven by less than anticipated sales, additional
expenses associated with the transition to AI’s new distribution center earlier
in 2007 and the reinvestment of resources to accelerate AI’s store growth and
roll out of certain AI branded product.
Interest
expense for the forty weeks ended October 6, 2007 was $26.6 million, or 0.6%
of
net sales, as compared to $28.1 million, or 0.8% of net sales, for the forty
weeks ended October 7, 2006. The decrease in interest
expense
is a result of lower average outstanding borrowings and lower average borrowing
rates during the forty weeks ended October 6, 2007 compared to the same period
ended October 7, 2006.
Income
tax expense for the forty weeks ended October 6, 2007 was $123.9 million,
as
compared to $116.9 million for the forty weeks ended October 7, 2006. Our
effective income tax rate was 37.8% for the forty weeks ended October 6,
2007
compared to 37.4% for the same period ended October 7, 2006.
We
generated net income of $203.6 million, or $1.92 per diluted share, for the
forty weeks ended October 6, 2007, as compared to $196.0 million, or $1.82
per
diluted share, for the forty weeks ended October 7, 2006. As a percentage
of net
sales, net income was 5.4% for both the forty weeks ended October 6, 2007
and
the forty weeks ended October 7, 2006.
Liquidity
and Capital Resources
Our
primary cash requirements include the purchase of inventory, capital
expenditures, payment of cash dividends and contractual obligations. In
addition, we have used available funds to repurchase shares of common stock
under our stock repurchase program and to pay quarterly cash dividends. We
have
funded these requirements primarily through cash generated from operations
supplemented by borrowings under our credit facilities as needed. We believe
funds generated from our expected results of operations, available cash and
cash
equivalents and available borrowings under our revolving credit facility
will be
sufficient to fund our primary obligations for the next year.
At
October 6, 2007, our cash and cash equivalents balance was $14.8 million,
an increase of $3.7 million compared to December 30, 2006. This increase
resulted from an increase in cash flow from operations and proceeds from
the
exercise of stock options partially offset by the continued investment in
property and equipment, reduction in our revolving credit facility balance
and
return of capital to our shareholders through the payment of dividends and
repurchase of common stock during the forty weeks ended October 6, 2007.
At
October 6, 2007, we had outstanding indebtedness primarily consisting of
borrowings of $429.6 million under our revolving credit facility. Additionally,
we had $85.0 million in letters of credit outstanding, which reduced our
total
availability under the revolving credit facility to $235.4 million.
During
the forty weeks ended October 6, 2007, we paid $25.2 million in quarterly
cash
dividends. Subsequent to October 6, 2007, our Board of Directors declared
a
quarterly dividend of $0.06 per share to be paid on January 4, 2008 to all
common stockholders of record as of December 21, 2007.
Capital
Expenditures
Our
primary capital requirements have been the funding of our continued store
expansion program, including new store openings and store acquisitions, store
relocations and remodels, inventory requirements, the construction and upgrading
of distribution centers, the development and implementation of proprietary
information systems and our acquisitions.
Our
capital expenditures were $146.5 million for the forty weeks ended October
6,
2007. These amounts included costs related to new store openings, the upgrade
of
our information systems, and remodels and relocations of existing stores.
During
the forty weeks ended October 6, 2007, we opened an aggregate of 156 AAP
and AI
stores, remodeled 73 AAP stores and relocated 24 AAP stores. In 2007, we
anticipate that our capital expenditures will be approximately $215 to $225
million, including an estimated $25 million for our ninth distribution center
we
expect to open in early 2010.
Our
future capital requirements will
depend in large part on the number of and timing for new stores we open or
acquire within a given year and the number of stores we relocate or
remodel. We anticipate adding an aggregate of approximately 190 to
200 new AAP and AI stores and relocating 30 AAP stores during 2007. During
the third quarter, we stopped our store remodel program while we more closely
examine the sales results and overall return from these remodels. We have
also eliminated certain information technology, logistics and other investments
that did not demonstrate acceptable returns. Additionally, we have delayed
the
opening of our ninth distribution
center
to
the beginning of 2010 as a result of fewer new stores openings planned through
2008.
Vendor
Financing Program
Historically,
we have negotiated extended payment terms from suppliers that help finance
inventory growth, and we believe that we will be able to continue financing
much
of our inventory growth through such extended payment terms. We have a
short-term financing program with a bank for certain merchandise purchases.
In
substance, the program allows us to borrow money from the bank to finance
purchases from our vendors. This program allows us to reduce further our
working
capital invested in current inventory levels and finance future inventory
growth. Our revolving credit facility does not restrict availability under
this program. At October 6, 2007, $153.3 million was payable to the bank
by us
under this program.
Stock
Repurchase Program
During
the twelve weeks ended October 6, 2007, our Board of Directors authorized
a new
stock repurchase program of up to $500 million of our common stock plus related
expenses. The new program cancelled and replaced the remaining portion of
the
previous $300 million stock repurchase program. The program allows us to
repurchase our common stock on the open market or in privately negotiated
transactions from time to time in accordance with the requirements of the
Securities and Exchange Commission.
During
the twelve weeks ended October 6, 2007, we repurchased 6.2 million shares
of
common stock at an aggregate cost of $207.3 million, or an average price
of
$33.26 per share, of which 1.2 million shares of common stock were repurchased
under the previous $300 million stock repurchase program. During the forty
weeks
ended October 6, 2007, we repurchased 6.3 million shares of common stock
at an
aggregate cost of $211.2 million, or an average price of $33.38 per share,
of
which 1.3 million shares of common stock were repurchased under the previous
$300 million stock repurchase program.
During
the twelve weeks ended October 6, 2007, we retired all 6.3 million shares
repurchased under the stock repurchase programs. At October 6, 2007, we had
$335.2 million remaining under the current stock repurchase program. Subsequent
to October 6, 2007, we repurchased 0.8 million shares of common stock at
an
aggregate cost of $30.0 million, or an average price of $35.66 per
share.
Analysis
of Cash Flows
An
analysis of our cash flows for the forty-week period ended October 6, 2007
as
compared to the forty-week period ended October 7, 2006 is included
below.
|
|
Forty
Week Periods Ended
|
|
|
|
October
6, 2007
|
|
|
October
7, 2006
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
$ |
377.8
|
|
|
$ |
297.0
|
|
Cash
flows from investing activities
|
|
|
(138.1 |
) |
|
|
(204.6 |
) |
Cash
flows from financing activities
|
|
|
(236.0 |
) |
|
|
(119.2 |
) |
Net
increase (decrease) in cash and
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
$ |
3.7
|
|
|
$ |
(26.8 |
) |
Operating
Activities
For
the
forty weeks ended October 6, 2007, net cash provided by operating activities
increased $80.8 million to $377.8 million, as compared to the forty weeks
ended
October 7, 2006. Net income increased by $7.6 million during the forty weeks
ended October 6, 2007 as compared to the comparable period in 2006. Significant
changes in working capital resulted in the following sources of
cash:
|
·
|
a
$29.7 million increase in cash flows from inventory, net
of accounts
payable, reflective of our slow down of inventory growth
in line with our
current sales trends; and
|
|
·
|
a
$54.6 million increase in cash flows comprised of other
movements in
working capital, primarily including an increase in accrued
operating
expenses and the payment of a $6.3 million cash dividend
accrued at
December 30, 2006.
|
Investing
Activities
For
the
forty weeks ended October 6, 2007, net cash used in investing activities
decreased by $66.5 million to $138.1 million, as compared to the forty weeks
ended October 7, 2006. Significant components of this decrease consisted
of:
|
·
|
a
decrease in capital expenditures of $54.3 million
resulting primarily from
less spending on capital assets in our store locations,
impact of the
reduced scope in remodels and fewer relocations as
compared to the
comparable periods in the prior year; and
|
|
·
|
the
decrease of a $12.5 million business acquisition
payment in
2006.
|
Financing
Activities
For
the
forty weeks ended October 6, 2007, net cash used in financing activities
increased by $116.8 million to $236.0 million, as compared to the forty weeks
ended October 7, 2006.
Cash
flows from financing activities increased as result of:
|
·
|
an
increase of $25.6 million from the issuance of common
stock, primarily
resulting from the increase in exercise of stock
options;
and
|
|
·
|
a
$6.7 million cash inflow from excess tax benefits
realized from the
increase in exercise of stock
options.
|
Cash
flows from financing activities decreased as result of:
|
·
|
a
$20.4 million cash outflow resulting from the
timing of bank
overdrafts;
|
|
·
|
an
increase in net borrowings under our credit
facility of $59.4
million;
|
|
·
|
an
additional $73.7 million of common stock repurchases;
and |
|
·
|
$6.0
million of additional cash dividends paid due primarily
to the timing in
payments. |
Off-Balance-Sheet
Arrangements
As
of October 6, 2007, we had no
off-balance-sheet arrangements as defined in S-K Item 303 of the SEC
regulations. We include other off-balance-sheet arrangements in our contractual
obligation table including operating lease payments, interest payments on
our
credit facility and letters of credit outstanding.
Contractual
Obligations
In
addition to our revolving credit facility, we also utilize operating leases
as
another source of financing. The amounts payable under these operating leases
are included in our schedule of contractual obligations. Our
future
contractual obligations related to long-term debt, operating leases and other
contractual obligations at October 6, 2007 were as follows:
Contractual
Obligations
|
|
Total
|
|
Fiscal
2007
|
|
Fiscal
2008
|
|
Fiscal
2009
|
|
Fiscal
2010
|
|
Fiscal
2011
|
|
Thereafter
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
$ |
434,435
|
|
$ |
109
|
|
$ |
721
|
|
$ |
684
|
|
$ |
704
|
|
$ |
430,262
|
|
$ |
1,955
|
|
Interest
payments
|
|
$ |
100,697
|
|
$ |
5,866
|
|
$ |
24,172
|
|
$ |
23,988
|
|
$ |
24,616
|
|
$ |
22,052
|
|
$ |
3
|
|
Letters
of credit
|
|
$ |
84,951
|
|
$ |
-
|
|
$ |
84,951
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
Operating
leases (1)
|
|
$ |
2,127,130
|
|
$ |
44,043
|
|
$ |
260,430
|
|
$ |
231,338
|
|
$ |
213,182
|
|
$ |
191,102
|
|
$ |
1,187,035
|
|
Purchase
obligations (2)
|
|
$ |
10,683
|
|
$ |
1,956
|
|
$ |
8,727
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
Other
long-term liabilities(3)
|
|
$ |
60,042
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
(1)
|
We
lease certain store locations, distribution centers, office space,
equipment and vehicles. Our property leases generally contain renewal
and
escalation clauses and other lease concessions. These provisions
are
considered in our calculation of our minimum lease payments which
are
recognized as expense on a straight-line basis over the applicable
lease
term. In accordance with SFAS No. 13. “Accounting for Leases,” as amended
by SFAS No. 29, “Determine Contingent Rental,” any lease payments that are
based upon an existing index or rate are included in our minimum
lease
payment calculations.
|
(2)
|
For
the purposes of this table, purchase obligations are defined as
agreements
that are enforceable and legally binding and that specify all significant
terms, including: fixed or minimum quantities to be purchased;
fixed,
minimum or variable price provisions; and the approximate timing
of the
transaction. Our open purchase orders are based on current inventory
or
operational needs and are fulfilled by our vendors within short
periods of
time. We currently do not have minimum purchase commitments under
our
vendor supply agreements nor are our open purchase orders for goods
and
services binding agreements. Accordingly, we have excluded open
purchase
orders from this table. The purchase obligations consist of the
amount of
fuel required to be purchased by us under certain fixed price fuel
supply agreements and certain commitments for training and development.
All of these agreements expire by the end
of 2008.
|
(3)
|
Primarily
includes employee benefit accruals, restructuring and closed store
liabilities and deferred income taxes for which no contractual
payment
schedule exists and we expect the payments to occur beyond twelve
months
from October 6, 2007. Additionally, other long-term liabilities
included
$16.5 million of unrecognized income tax benefits as a result of
our
adoption of FIN 48 on December 31, 2006. The amount of unrecognized
tax
benefits did not materially change from December 31, 2006 to October
6,
2007. During the next 12 months, it is possible that we could conclude
on
$2 to $3 million of the contingencies associated with these tax
uncertainties, a portion of which may be settled in cash. We do
not
anticipate any significant impact on our liquidity and capital
resources
due to the conclusion of these tax
matters.
|
Long
Term Debt
Our
primary source of financing is a $750 million unsecured five-year revolving
credit facility with our subsidiary, Advance Stores Company, Incorporated,
serving as the borrower. This facility replaced the term loans and revolver
under our previous credit facility. Additionally, the facility provides for
the issuance of letters of credit with a sub limit of $300 million and swingline
loans in an amount not to exceed $50 million. We may also request, subject
to
certain lender consent, that the total revolving commitment be increased
by an
amount not exceeding $250 million during the term of the credit agreement.
Voluntary prepayments and voluntary reductions of the revolving balance are
permitted in whole or in part, at our option, in minimum principal amounts
as
specified in the revolving credit facility.
As
of
October 6, 2007, we had outstanding $429.6 million under the revolver, $4.8
million under an economic development note payable and $85.0 million in letters
of credit outstanding, which reduced availability under the revolver to $235.4
million. At October 6, 2007, we also have interest rate swaps in place that
effectively fix our interest rate exposure on approximately 52% of our bank
debt.
The
interest rates on the borrowings under the revolving credit facility are
based, at our option, on an adjusted LIBOR rate, plus a margin, or an alternate
base rate, plus a margin. The current margin is 0.75% and 0.0% per annum
for the
adjusted LIBOR and alternate base rate borrowings, respectively. We have
elected
to use the 90-
day
adjusted LIBOR rate and have the ability and intent to continue to use this
rate
on our hedged borrowings. A commitment fee will be charged on the unused
portion
of the revolver, payable in arrears. The current commitment fee rate is 0.150%
per annum. Under the terms of the revolving credit facility, the interest
rate
spread and commitment fee will be based on our credit rating. The revolving
facility terminates on October 5, 2011.
The
revolving credit facility is fully and unconditionally guaranteed by Advance
Auto Parts, Inc. The facility contains covenants restricting the ability
of us
and our subsidiaries to, among other things, (1) create, incur or assume
additional debt (including hedging arrangements), (2) incur liens or engage
in
sale-leaseback transactions, (3) make loans and investments, (4) guarantee
obligations, (5) engage in certain mergers, acquisitions and asset sales,
(6)
engage in transactions with affiliates, (7) change the nature of our business
and the business conducted by its subsidiaries and (8) change our holding
company status. The revolving credit facility also provides for customary
events
of default, including non-payment defaults, covenant defaults and cross-defaults
to our other material indebtedness.
We
are
required to comply with financial covenants in the revolving credit facility
with respect to (a) a maximum leverage ratio and (b) a minimum consolidated
coverage ratio. We were in compliance with the above covenants under the
revolving credit facility at October 6, 2007.
Credit
Ratings
At
October 6, 2007, we had a credit rating from Standard & Poor’s of BB+ and a
credit rating of Ba1 from Moody’s Investor Service. The current pricing grid
used to determine our borrowing rates under our revolving credit facility
is
based on such credit ratings. If these credit ratings decline, our interest
expense may increase. Conversely, if these credit ratings improve, our interest
expense may decrease.
Seasonality
Our
business is somewhat seasonal in nature, with the highest sales occurring
in the
spring and summer months. In addition, our business can be affected by weather
conditions. While unusually heavy precipitation tends to soften sales as
elective maintenance is deferred during such periods, extremely hot or cold
weather tends to enhance sales by causing automotive parts to fail at an
accelerated rate.
New
Accounting Pronouncements
Effective
December 31, 2006, the Company adopted the provisions of FIN 48. FIN 48
clarifies the accounting and reporting for income taxes recognized in accordance
with Statement of Financial Accounting Standards, or SFAS, No. 109, “Accounting
for Income Taxes.” The interpretation prescribes a recognition threshold
and measurement attribute for the financial statement recognition, measurement,
presentation and disclosure of uncertain tax positions taken or expected
to be
taken in income tax returns. As a result of the adoption of FIN 48 on December
31, 2006, we recorded an increase of $2.3 million to the liability for
unrecognized tax benefits and a corresponding decrease in our balance of
retained earnings. For a complete discussion of the adoption of FIN 48, see
Note
2 of our condensed consolidated financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to
choose to measure many financial instruments and certain other items at fair
value. SFAS No. 159 is effective for fiscal years beginning after November
15,
2007. We are currently evaluating the impact, if any, of adopting SFAS No.
159.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106, and 132(R).” SFAS No. 158 requires recognition of
the overfunded or underfunded status of defined benefit postretirement plans
as
an asset or liability in the statement of financial position and to recognize
changes in that funded status in comprehensive income in the year in which
the
changes occur. SFAS No. 158 also requires measurement of the funded status
of a
plan as of the date of the statement of financial position. We adopted the
recognition provisions of SFAS No. 158 on December 30, 2006. SFAS No. 158
is
effective for the measurement date provisions for fiscal years ending
after
December
15, 2008. We are currently evaluating the impact of adopting the measurement
date provisions of SFAS No. 158.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.”
SFAS No. 157 clarifies the definition of fair value, establishes a framework
for
measuring fair value, and expands the disclosures on fair value measurements.
SFAS No. 157 is effective for fiscal years beginning after November 15,
2007. We are currently evaluating the impact, if any, of adopting SFAS No.
157.
|
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
For
information regarding market risk see “Item 7A. Quantitative and Qualitative
Disclosures About Market Risks” in the Company’s Annual Report on Form 10-K for
the year ended December 30, 2006. At October 6, 2007, there had not been
a
material change to the information regarding market risk disclosed in the
Company’s Annual Report on Form 10-K for the year ended December 30,
2006.
Disclosure
controls and procedures are our controls and other procedures that are designed
to ensure that information required to be disclosed by us in our reports
that we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed
by
us in our reports that we file or submit under the Securities Exchange Act
of
1934 is accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure. Our management evaluated,
with
the participation of our principal executive officer and principal financial
officer, the effectiveness of our disclosure controls and procedures as of
the
end of the period covered by this report. Based on this evaluation, our
principal executive officer and our principal financial officer have concluded
that, as of the end of the period covered by this report, our disclosure
controls and procedures were effective.
During
the quarter ended October 6, 2007, we upgraded the operating system we use
to
perform certain accounting and reporting functions, such as general ledger,
procurement, accounts payable and fixed asset
accounting. Additionally, the application and associated
infrastructure now resides off-site in a third-party data
center. Based on management’s evaluation, the necessary steps have
been taken to monitor and maintain appropriate internal control over financial
reporting during this period of change.
Other
than as described above, there were no changes in the Company’s internal control
over financial reporting that occurred during the quarter ended October 6,
2007
that have materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
|
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
The
following table sets forth the information with respect to repurchases
of our
common stock for the quarter ended October 6, 2007 (amounts in thousands,
except
per share amounts):
Period
|
|
Total
Number of Shares
Purchased
|
|
|
Average
Price
Paid
per
Share (1)
|
|
|
Total
Number of
Shares
Purchased as Part of Publicly Announced Plans or Programs (2)
|
|
|
Maximum
Dollar
Value
that May Yet
Be
Purchased Under
the
Plans or Programs
(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
15, 2007, to August 11, 2007
|
|
|
1,235
|
|
|
$ |
34.24
|
|
|
|
1,235
|
|
|
$ |
57,801
|
|
August
12, 2007, to September 8, 2007
|
|
|
4,998
|
|
|
|
32.98
|
|
|
|
4,998
|
|
|
|
335,151
|
|
September
9, 2007, to October 6, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
335,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,233
|
|
|
$ |
33.23
|
|
|
|
6,233
|
|
|
$ |
335,151
|
|
(1) |
|
Average
price paid per share excludes related expenses paid on previous
repurchases. |
(2) |
|
All
of the above repurchases were made on the open market at prevailing
market
rates plus related expenses under our stock repurchase program, which
authorized the repurchase of up to $500 million in common
stock. Our stock repurchase program was authorized by our Board
of Directors and publicly announced on August 8, 2007 which replaced
the
remaining portion of the $300 million stock repurchase program authorized
by our Board of Directors and announced on August 17,
2005.
|
(3) |
|
The
maximum dollar value yet to be purchased under our stock repurchase
program excludes related expenses paid on previous purchases or
anticipated expenses on future purchases. |
|
3.1
|
(1)
|
Restated
Certificate of Incorporation of Advance Auto Parts, Inc. ("Advance
Auto")(as amended on May 19, 2004).
|
|
|
|
|
|
3.2
|
(2)
|
Bylaws
of Advance Auto (as amended on November 15, 2006).
|
|
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant
to Section
906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
(1) Filed
on May 20, 2004 as an exhibit to Current Report on Form 8-K of
Advance
Auto.
|
|
(2) Filed
on February 28, 2007 as an exhibit to the Annual Report on Form
10-K of
Advance Auto.
|
|
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
ADVANCE
AUTO PARTS, INC. |
|
|
|
November
15, 2007 |
By: |
/s/
Michael O. Moore
|
|
Michael
O. Moore
Executive
Vice President, Chief Financial
Officer
|
EXHIBIT
INDEX
Exhibit
Number
|
|
Exhibit
Description
|
|
|
|
3.1
|
(1)
|
Restated
Certificate of Incorporation of Advance Auto (as amended on May
19,
2004).
|
|
|
|
3.2
|
(2)
|
Bylaws
of Advance Auto (as amended on November 15, 2006).
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant
to Section
906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
(1)
Filed on May 20, 2004 as an exhibit to Current Report on Form
8-K of
Advance Auto.
|
(2)
Filed on February 28, 2007 as an exhibit to the Annual Report
on Form 10-K
of Advance Auto.
|
|
|
|