Advance Auto Parts reports second quarter 2014 results

Advance Auto Parts announced its financial results for the second quarter ended July 12, 2014. Second quarter comparable cash earnings per diluted share (EPS) were $2.08, an increase of 30.0% versus the second quarter last year.

These second quarter comparable results exclude $0.08 of amortization of acquired intangible assets, integration costs of $0.08 associated with the acquisition of General Parts International, Inc. (General Parts) and $0.02 of integration costs associated with the integration of B.W.P. Distributors, Inc. (BWP).

"We are pleased with our second quarter performance led by strong execution from our Team Members delivering Comparable Cash EPS growth of 30% and an increase in comparable store sales of 2.6% in the quarter," said Darren R. Jackson, Chief Executive Officer. "We remain on pace against our base business expectations, integration milestones and with our financial performance.”

Second quarter 2014 highlights

Total sales for the second quarter increased 51.5% to $2.35 billion, as compared with total sales during the second quarter of fiscal 2013 of $1.55 billion. The sales increase was driven by the acquisition of General Parts, solid execution delivering a comparable store sales increase of 2.6% and the addition of new stores over the past 12 months. Year-to-date, total sales increased 49.2% to $5.32 billion, compared with total sales of $3.56 billion over the same period last year.

The Company's gross profit rate was 45.2% of sales during the second quarter as compared to 50.3% during the second quarter last year. The 505 basis-point decrease in gross profit rate was primarily due to the higher mix of commercial sales which has a lower gross margin rate resulting from the acquisition of General Parts partially offset by synergy savings in the quarter. Year-to-date, the Company's gross profit rate was 45.4%, a 472 basis-point decrease over the same period last year.

The Company's Comparable SG&A rate was 34.0% of sales during the second quarter as compared to 37.6% during the same period last year. The 358 basis-point decrease was the result of the acquired General Parts business having a lower SG&A costs and fixed cost leverage from the positive sales performance, partially offset by higher incentive compensation due to our better sales performance. On a GAAP basis, the Company's SG&A rate was 35.0% of sales during the second quarter as compared to 37.7% during the same period last year. Year-to-date, the Company's Comparable SG&A rate was 35.1% versus 38.9% during the same period last year. Year-to-date, the Company's GAAP SG&A rate was 36.1% versus 39.0% during the same period last year.

The Company's Comparable Operating Income was $262.7 million during the second quarter, an increase of 34.0% versus the second quarter of fiscal 2013. As a percentage of sales, Comparable Operating Income in the second quarter was 11.2% compared to 12.7% during the second quarter of fiscal 2013. On a GAAP basis, the Company's operating income during the second quarter of $240.7 million increased 23.6% versus the second quarter of fiscal 2013. On a GAAP basis, the Operating Income rate was 10.3% during the second quarter as compared to 12.6% during the second quarter of fiscal 2013. Year-to-date, the Company's Comparable Operating Income rate was 10.3% versus 11.3% during the same period last year. Year-to-date, the Company's GAAP Operating Income rate was 9.3% versus 11.2% during the same period last year.

Operating cash flow increased approximately 3% to $320.6 million from $310.1 million through the second quarter of fiscal 2013. Free cash flow increased approximately 8% to $214.3 million from $198.2 million through the second quarter of fiscal 2013. Capital expenditures through the second quarter were $106.3 million as compared to $111.9 million through the second quarter of fiscal 2013.

“We are pleased with the continued progress made during our second quarter delivering positive sales performance and approximately 34% growth in Comparable Operating Income dollars,” said Mike Norona, Executive Vice President and Chief Financial Officer. “We continue to stay focused on our base business while meeting our integration milestones to date and remain confident in achieving our full year synergy estimates. Given our performance in the first half of the year and the execution and integration momentum we continue to build, we are raising our full year guidance for Comparable Cash EPS to be in the range of $7.50 - $7.60.”

Store information

As of July 12, 2014, the Company operated 5,289 company-operated stores and 106 Worldpac branches, and served approximately 1,400 independently-owned Carquest stores. The below table summarizes the changes in the number of the company-operated stores and branches during the twenty-eight weeks ended July 12, 2014.

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