Advance Auto Parts Q3 Sales Rise, Backs View; To Buy General Parts For $2.04 Bln

(RTTNews) - Advance Auto Parts Inc. (AAP) Wednesday said its third-quarter sales increased from last year, above market view, and that it expects 17.4 percent increase in earnings per share. The company also reconfirmed its fiscal 2013 forecast.

The automotive aftermarket retailer further said it has agreed to acquire privately held General Parts International, Inc. in a cash deal with an enterprise value of $2.04 billion.

Raleigh, North Carolina-based General Parts is a distributor and supplier of original equipment and aftermarket replacement products operating under the Carquest and Worldpac brands. The boards of both companies approved the deal, which would create the largest automotive aftermarket parts provider in North America with combined sales of over $9.2 billion.

Advance expects the acquisition will result in approximately $160 million of annual run-rate synergies to be fully realized within three years after closing. The acquisition would also generate considerable free cash flow and deliver significant estimated FY14 Cash earnings per share accretion of more than 20 percent excluding costs, and a percentage increase in the low teens including costs.

The transaction is expected to close by late 2013 or early 2014, subject to regulatory approvals and customary closing conditions.

Advance said it intends to finance the acquisition through a combination of senior notes, bank debt and existing cash on hand.

Advance Chief Executive Officer Darren Jackson stated that O. Temple Sloan III, president of General Parts will continue as its president, reporting to Jackson and would join the Advance Board of Directors.

Jackson said, "The addition of 1,246 company operated stores and 1,418 independently owned CARQUEST locations provides us with an immediate platform and scale across North America, full market coverage and the opportunity to position ourselves as the market leader in the commercial business."

Regarding its third-quarter preliminary results, Advance said its sales increased 4.3 percent to $1.52 billion from last year's $1.46 billion. On average, 17 analysts polled by Thomson Reuters expected sales of $1.55 billion for the quarter. Analysts' estimates typically exclude special items

The company attributed the growth in sales to the acquisition of B.W.P. Distributors, Inc. and the net addition of 170 new stores over the past 12 months. This was partially offset by a comparable store sales decrease of 2 percent, compared to last year's decrease of 1.8 percent.

Advance expects third-quarter operating income to increase 13.5 percent to $170.7 million and earnings per share to increase 17.4 percent to $1.42. The projected earnings include $0.04 per share of transaction related expenses related to its pending acquisition of General Parts and $0.02 of BWP integration expense. Analysts expect earnings of $1.30 per share for the quarter.

Advance is slated to release its third quarter earnings on October 31.

The company also reaffirmed its previously released fiscal 2013 earnings per share outlook of $5.30 to $5.45, while analysts look for $5.53 per share.

Advance Auto Parts shares closed Tuesday's trading at $82.50, down $1.11 or 1.33 percent.