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11.11.2009 21:15:00
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Advance Auto Parts Third Quarter Comparable Store Sales Increase 4.7%; Year-to-Date Free Cash Flow Increased 53% to $414 Million
Advance Auto Parts, Inc. (NYSE:AAP), a leading retailer of automotive aftermarket parts, accessories, batteries, and maintenance items, today announced its financial results for the third quarter ended October 10, 2009. Third quarter earnings per diluted share (EPS) were $0.65 which included a $0.04 charge related to store divestitures. Excluding the impact of the store divestitures, EPS increased 19% to $0.69. On a year-to-date basis and excluding the $0.15 impact of store divestitures, EPS increased 17% to $2.61 on top of a 16% increase in EPS last year.
| Third Quarter and Year-to-Date Performance Summary | ||||||||||||
| Twelve Weeks Ended | Forty Weeks Ended | |||||||||||
| October 10, | October 4, | October 10, | October 4, | |||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
| Sales(in millions) | $ | 1,262.6 | $ | 1,188.0 | $ | 4,269.1 | $ | 3,949.9 | ||||
| Comp Store Sales % | 4.7% | (0.1%) | 6.1% | 1.1% | ||||||||
| Gross Profit %(1) | 49.2% | 47.3% | 49.1% | 47.4% | ||||||||
| SG&A %(1) | 40.9% | 39.3% | 39.8% | 38.1% | ||||||||
| Operating Income % | 8.3% | 8.1% | 9.3% | 9.3% | ||||||||
| Diluted EPS(2) | $ | 0.65 | $ | 0.58 | $ | 2.46 | $ | 2.23 | ||||
| (1) | The Company has retrospectively applied a change in accounting principle made in the first quarter for costs included in inventory to all prior periods presented herein related to cost of sales and selling, general and administrative expenses (SG&A). Refer to the accompanying financial statements included in this press release for further explanation. | |
| (2) | For the twelve and forty weeks ended October 10, 2009, diluted EPS includes a $0.04 and $0.15 charge, respectively, related to store divestitures. In addition, the Company’s adoption of the two-class method of calculating earnings per share during the first quarter 2009 decreased the Company’s diluted EPS for the twelve weeks ended October 4, 2008 by $0.01. | |
"I am very proud of our Team Members’ ability to drive continuous improvements in customer satisfaction and Team Member engagement. Their ability to revitalize our core values and actions to drive our four strategies resulted in strong top line growth, a 53% increase in free cash flow and a 100 basis-point increase on our return on invested capital,” said Darren R. Jackson, Chief Executive Officer.
Third Quarter and Year-to-Date Highlights
Total sales for the third quarter increased 6.3% to $1.26 billion, compared with total sales of $1.19 billion in the third quarter of fiscal year 2008. The sales increase reflected the net addition of 66 new stores during the past 12 months and a comparable store sales gain of 4.7% compared to a decrease of 0.1% during the third quarter last year. Adjusting for the calendar shift due to the 53rd week last year, third quarter comparable store sales increased approximately 5.2%. The 4.7% comparable store sales gain was comprised of an 11.8% increase in Commercial and a 1.7% increase in do-it-yourself (DIY). This compares to a 10.8% increase in Commercial and a 4.1% decrease in DIY during the third quarter last year. Year-to-date comparable store sales increased 6.1% driven by a 14.9% increase in Commercial and a 2.4% increase in DIY.
The Company’s gross profit rate was 49.2% of sales during the third quarter as compared to 47.3% in the prior year, which reflects a 190 basis-point improvement. The 190 basis-point improvement was primarily due to continued investments in pricing and merchandising capabilities, parts availability, decreased inventory shrink and improved store execution. Year-to-date, the Company’s gross profit rate was 49.1%, or 167 basis points favorable to the same period in fiscal 2008.
The Company’s SG&A rate was 40.9% of sales during the third quarter as compared to 39.3% during the third quarter last year. Excluding the impact of store divestitures, the Company’s SG&A rate increased 110 basis points. This increase was driven by higher incentive compensation, increased investments in store labor and Commercial Sales force, higher medical expenses and continued investments to improve the Company’s gross profit rate and to launch the Company’s new E-commerce website. The SG&A rate increase was partially offset by lower advertising expenses and occupancy expense leverage as a result of the Company’s 4.7% comparable store sales increase. Year-to-date, the Company’s SG&A rate was 39.8% versus 38.1% during the same period last year. Excluding the impact of store divestitures, the year-to-date SG&A rate was 39.3%.
Operating cash flow through the third quarter increased 67% to $628.5 million from $375.8 million through the same period last year. Free cash flow through the third quarter was $414.0 million or a 53% increase through the same period last year. This increase was primarily driven by an improvement in working capital management, increased deferred taxes and an increase in net income. The increase in free cash flow, allowed the Company to decrease its total outstanding bank debt by $192 million over the past year. Capital expenditures were $132.6 million through the third quarter. This compares to capital expenditures of $137.0 million in 2008, a decrease of $4.4 million primarily due to the timing of new store development, partially offset by routine spending on existing stores and Information Technology investments.
"Our third quarter marked our seventh consecutive quarter of double-digit Commercial comp sales growth, our third consecutive quarter of positive DIY comps and our fourth consecutive quarter of strong gross profit rate improvements. These results fueled our third consecutive quarter of double-digit operating income and EPS growth on a comparable basis. We are pleased with the $414 million year-to-date free cash flow we generated and the fact that we continued to strengthen our balance sheet while making solid progress on our goal to obtain investment grade ratings,” said Mike Norona, Executive Vice President and Chief Financial Officer.
| Key Financial Metrics and Statistics (1) | ||||||||||||||||||||||||
| Twelve | Comparable | Forty | Comparable | Comparable | ||||||||||||||||||||
| Weeks Ended | Twelve Weeks Ended | Weeks Ended | Forty Weeks Ended | Fifty-Two Weeks Ended | ||||||||||||||||||||
| October 10, | October 10, | October 4, | October 10, | October 10, | October 4, | |||||||||||||||||||
| 2009 | 2009 | 2008 | 2009 | 2009 | 2008 | FY 2008 | FY 2007 | |||||||||||||||||
| Sales Growth % | 6.3% | 6.3% | 2.6% | 8.1% | 8.1% | 4.1% | 6.1% | 4.9% | ||||||||||||||||
| Sales per Square Foot (2)(3) | $ | 217 | $ | 217 | $ | 207 | $ | 217 | $ | 217 | $ | 207 | $ | 208 | $ | 207 | ||||||||
| DIY Comp % | 1.7% | 1.7% | (4.1%) | 2.4% | 2.4% | (2.6%) | (2.3%) | (1.1%) | ||||||||||||||||
| Commercial Comp % | 11.8% | 11.8% | 10.8% | 14.9% | 14.9% | 11.6% | 12.1% | 6.2% | ||||||||||||||||
| Operating Income per Team Member (2)(4) | $ | 9.13 | $ | 10.04 | $ | 9.25 | $ | 9.13 | $ | 10.04 | $ | 9.25 | $ | 9.49 | $ | 9.40 | ||||||||
| SG&A per Store (2)(5)(6) | $ | 643 | $ | 629 | $ | 584 | $ | 643 | $ | 629 | $ | 584 | $ | 590 | $ | 581 | ||||||||
| Return on Invested Capital (2)(7) | 14.4% | 15.1% | 14.1% | 14.4% | 15.1% | 14.1% | 14.0% | 13.7% | ||||||||||||||||
| Gross Margin Return on Inventory (2)(5)(8) | $ | 3.95 | $ | 3.83 | $ | 3.46 | $ | 3.95 | $ | 3.83 | $ | 3.46 | $ | 3.37 | $ | 3.29 | ||||||||
| Total Store Square Footage, end of period | 24,952 | 24,952 | 24,627 | 24,952 | 24,952 | 24,627 | 24,711 | 23,982 | ||||||||||||||||
| Total Team Members, end of period | 49,341 | 49,341 | 47,886 | 49,341 | 49,341 | 47,886 | 47,582 | 44,141 | ||||||||||||||||
| (1) | In thousands except for sales per square foot, gross margin return on inventory and total Team Members. | |
| (2) | The financial metrics presented are calculated on an annual basis and accordingly reflect the last four quarters completed. The Company has presented its financial metrics on a comparable basis as a result of certain non-comparable items included in its financial results for the last four quarters. Third quarter and year-to-date 2009 comparable results exclude expenses associated with the store divestitures as discussed later in this press release. Fiscal 2008 comparable results exclude the additional week of business (53rd week) as well as a non-cash inventory adjustment resulting from a change in inventory management approach for slow-moving inventory. | |
| (3) | Sales per square foot is calculated as net sales divided by an average of beginning and ending store square footage. | |
| (4) | Operating income per Team Member is calculated as operating income divided by an average of beginning and ending Team Members. | |
| (5) | The Company has retroactively applied the change in accounting principle made in the first quarter 2009 to all financial metrics presented herein containing cost of sales and SG&A as explained in the accompanying financial statements included in this press release. | |
| (6) | SG&A per store is calculated as SG&A divided by the average of beginning and ending store count. | |
| (7) | Return on invested capital (ROIC) is calculated in detail in the accompanying financial statements included in this press release. | |
| (8) | Gross margin return on inventory is calculated as gross profit divided by an average of beginning and ending inventory, net of accounts payable and financed vendor accounts payable. | |
Store Information
During the third quarter, the Company opened 24 stores, including 9 Autopart International stores. The Company also closed 13 stores. As of October 10, 2009, the Company’s total store count was 3,418 including 151 Autopart International stores.
Share Repurchases
Under the Company’s share repurchase authorization plan, the Company repurchased 879,910 shares of its common stock during the third quarter at an aggregate cost of $35.2 million, or an average price of $40.00 per share. At the end of the third quarter, the Company had $139.4 million available from the $250 million share repurchase authorization approved by the Board of Directors in May 2008.
2009 Store Divestitures
As a result of the previously announced store divestiture initiative, the Company closed 12 stores during the quarter and expects to divest a total of 40 to 50 unprofitable stores in 2009 that are delivering unacceptable strategic or financial results. During the third quarter, the Company recorded a $0.04 EPS charge primarily due to lease exit costs for the 12 stores that were closed during the quarter. Year-to-date, the Company has closed 36 stores which resulted in a $0.15 EPS charge. The Company estimates that the incremental store divestitures will result in a $0.15 to $0.22 charge to EPS in fiscal 2009.
Dividend
On November 10, 2009, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on January 8, 2010 to stockholders of record as of December 24, 2009.
Investor Conference Call
The Company will host a conference call on Thursday, November 12, 2009 at 10:00 a.m. Eastern Time to discuss its quarterly results. To listen to the live call, please log on to the Company’s website, www.AdvanceAutoParts.com, or dial (866) 908-1AAP. The call will be archived on the Company’s website until November 12, 2010.
About Advance Auto Parts
Headquartered in Roanoke, Va., Advance Auto Parts, Inc., a leading automotive aftermarket retailer of parts, accessories, batteries, and maintenance items in the United States, serves both the do-it-yourself and professional installer markets. As of October 10, 2009, the Company operated 3,418 stores in 39 states, Puerto Rico, and the Virgin Islands. Additional information about the Company, employment opportunities, customer services, and online shopping for parts and accessories can be found on the Company’s website at www.AdvanceAutoParts.com.
Certain statements contained in this release are forward-looking statements, as that statement is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events or developments, and typically use words such as believe, anticipate, expect, intend, plan, forecast, outlook or estimate. These statements discuss, among other things, expected growth and future performance, including store growth, capital expenditures, comparable store sales, SG&A, operating income, gross profit rate, free cash flow, profitability and earnings per diluted share for fiscal year 2009. These forward-looking statements are subject to risks, uncertainties and assumptions including, but not limited to, competitive pressures, demand for the Company’s products, the market for auto parts, the economy in general, inflation, consumer debt levels, the weather, acts of terrorism, availability of suitable real estate, dependence on foreign suppliers and other factors disclosed in the Company’s 10-K for the fiscal year ended January 3, 2009 on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results described in these forward-looking statements. The Company intends these forward-looking statements to speak only as of the time of this news release and does not undertake to update or revise them as more information becomes available.
| Advance Auto Parts, Inc. and Subsidiaries | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (in thousands) | |||||||||
| (unaudited) | |||||||||
| October 10, | January 3, | October 4, | |||||||
| 2009 | 2009 | 2008 | |||||||
|
Assets |
|||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 216,215 | $ | 37,358 | $ | 21,307 | |||
| Receivables, net | 92,993 | 97,203 | 93,778 | ||||||
| Inventories, net | 1,657,067 | 1,623,088 | 1,717,656 | ||||||
| Other current assets | 46,381 | 49,977 | 46,078 | ||||||
| Total current assets | 2,012,656 | 1,807,626 | 1,878,819 | ||||||
| Property and equipment, net | 1,070,217 | 1,071,405 | 1,053,789 | ||||||
| Assets held for sale | 3,062 | 2,301 | 2,295 | ||||||
| Goodwill | 34,387 | 34,603 | 34,603 | ||||||
| Intangible assets, net | 26,670 | 27,567 | 27,888 | ||||||
| Other assets, net | 18,906 | 20,563 | 10,865 | ||||||
| $ | 3,165,898 | $ | 2,964,065 | $ | 3,008,259 | ||||
|
Liabilities and Stockholders' Equity |
|||||||||
| Current liabilities: | |||||||||
| Bank overdrafts | $ | - | $ | 20,588 | $ | - | |||
| Current portion of long-term debt | 1,307 | 1,003 | 680 | ||||||
| Financed vendor accounts payable | 51,953 | 136,386 | 181,929 | ||||||
| Accounts payable | 959,692 | 791,330 | 853,839 | ||||||
| Accrued expenses | 400,965 | 372,510 | 335,454 | ||||||
| Other current liabilities | 59,041 | 43,177 | 50,560 | ||||||
| Total current liabilities | 1,472,958 | 1,364,994 | 1,422,462 | ||||||
| Long-term debt | 278,149 | 455,161 | 470,494 | ||||||
| Other long-term liabilities | 122,235 | 68,744 | 57,792 | ||||||
| Total stockholders' equity | 1,292,556 | 1,075,166 | 1,057,511 | ||||||
| $ | 3,165,898 | $ | 2,964,065 | $ | 3,008,259 | ||||
| NOTE: These preliminary condensed consolidated balance sheets have been prepared on a basis consistent with our previously prepared balance sheets filed with the Securities and Exchange Commission for our prior quarter and annual report, but do not include the footnotes required by generally accepted accounting principles, or GAAP, for complete financial statements. |
| Advance Auto Parts, Inc. and Subsidiaries | |||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||
| Twelve Week Periods Ended | |||||||||||||
| October 10, 2009 and October 4, 2008 | |||||||||||||
| (in thousands, except per share data) | |||||||||||||
| (unaudited) | |||||||||||||
| October 10, | October 4, | ||||||||||||
| 2009 | 2008 | ||||||||||||
| Net sales | $ | 1,262,576 | $ | 1,187,952 | |||||||||
| Cost of sales, including purchasing and warehousing costs (a) | 641,117 | 625,777 | |||||||||||
| Gross profit (a) | 621,459 | 562,175 | |||||||||||
| Selling, general and administrative expenses (a) | 516,604 | 466,278 | |||||||||||
| Operating income | 104,855 | 95,897 | |||||||||||
| Other, net: | |||||||||||||
| Interest expense | (5,339 | ) | (6,672 | ) | |||||||||
| Other income (expense), net | 487 | (223 | ) | ||||||||||
| Total other, net | (4,852 | ) | (6,895 | ) | |||||||||
| Income before provision for income taxes | 100,003 | 89,002 | |||||||||||
| Provision for income taxes | 38,024 | 32,847 | |||||||||||
| Net income | $ | 61,979 | $ | 56,155 | |||||||||
| Basic earnings per share (b) | $ | 0.65 | $ | 0.59 | |||||||||
| Diluted earnings per share (b) | $ | 0.65 | $ | 0.58 | |||||||||
| Average common shares outstanding (b) | 94,656 | 95,019 | |||||||||||
| Average common shares outstanding - assuming dilution (b) | 95,474 | 95,758 | |||||||||||
| (a) | Effective first quarter 2009, the Company implemented a change in accounting principle for costs included in inventory. The table below represents the impact of the accounting change on previously reported amounts (in thousands): | ||||||||||||
| As Previously | |||||||||||||
| Twelve week period ended October 4, 2008: | Reported | Adjustments | As Adjusted | ||||||||||
| Cost of sales, including purchasing and warehousing costs | $ | 610,833 | $ | 14,944 | $ | 625,777 | |||||||
| Gross profit | 577,119 | (14,944 | ) | 562,175 | |||||||||
| Selling, general and administrative expenses | 481,222 | (14,944 | ) | 466,278 | |||||||||
| (b) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 10, 2009 and October 4, 2008, we had 94,663 and 94,678 shares outstanding, respectively. Effective first quarter 2009, the Company adopted the two-class method of calculating its earnings per share. Accordingly, the Company reduced its net income by $309 and $215 for the twelve weeks ended October 10, 2009 and October 4, 2008, respectively, for purposes of calculating its basic and diluted earnings per share. As a result of this adoption, the Company's diluted earnings per share for the twelve weeks ended October 4, 2008 has been reduced by $0.01. | ||||||||||||
| NOTE: These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with our previously prepared statements of operations filed with the Securities and Exchange Commission for our prior quarter and annual report, except for the change in accounting principle for inventory costs, but do not include the footnotes required by GAAP for complete financial statements. | |||||||||||||
| Advance Auto Parts, Inc. and Subsidiaries | |||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||
| Forty Week Periods Ended | |||||||||||||
| October 10, 2009 and October 4, 2008 | |||||||||||||
| (in thousands, except per share data) | |||||||||||||
| (unaudited) | |||||||||||||
| October 10, | October 4, | ||||||||||||
| 2009 | 2008 | ||||||||||||
| Net sales | $ | 4,269,056 | $ | 3,949,867 | |||||||||
| Cost of sales, including purchasing and warehousing costs (a) | 2,172,959 | 2,076,555 | |||||||||||
| Gross profit (a) | 2,096,097 | 1,873,312 | |||||||||||
| Selling, general and administrative expenses (a) | 1,698,885 | 1,505,178 | |||||||||||
| Operating income | 397,212 | 368,134 | |||||||||||
| Other, net: | |||||||||||||
| Interest expense | (18,430 | ) | (26,247 | ) | |||||||||
| Other income (expense), net | 633 | (287 | ) | ||||||||||
| Total other, net | (17,797 | ) | (26,534 | ) | |||||||||
| Income before provision for income taxes | 379,415 | 341,600 | |||||||||||
| Provision for income taxes | 143,521 | 127,973 | |||||||||||
| Net income | $ | 235,894 | $ | 213,627 | |||||||||
| Basic earnings per share (b) | $ | 2.48 | $ | 2.24 | |||||||||
| Diluted earnings per share (b) | $ | 2.46 | $ | 2.23 | |||||||||
| Average common shares outstanding (b) | 94,647 | 95,003 | |||||||||||
| Average common shares outstanding - assuming dilution (b) | 95,325 | 95,669 | |||||||||||
| (a) | Effective first quarter 2009, the Company implemented a change in accounting principle for costs included in inventory. The table below represents the impact of the accounting change on previously reported amounts (in thousands): | ||||||||||||
|
As Previously |
|||||||||||||
| Forty week period ended October 4, 2008: | Reported | Adjustments | As Adjusted | ||||||||||
| Cost of sales, including purchasing and warehousing costs | $ | 2,028,459 | $ | 48,096 | $ | 2,076,555 | |||||||
| Gross profit | 1,921,408 | (48,096 | ) | 1,873,312 | |||||||||
| Selling, general and administrative expenses | 1,553,274 | (48,096 | ) | 1,505,178 | |||||||||
| (b) | Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At October 10, 2009 and October 4, 2008, we had 94,663 and 94,678 shares outstanding, respectively. Effective first quarter 2009, the Company adopted the two-class method of calculating its earnings per share. Accordingly, the Company reduced its net income by $1,214 and $740 for the forty weeks ended October 10, 2009 and October 4, 2008, respectively, for purposes of calculating its basic and diluted earnings per share. As a result of this adoption, the Company's basic earnings per share for the forty weeks ended October 4, 2008 has been reduced by $0.01. | ||||||||||||
| NOTE: These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with our previously prepared statements of operations filed with the Securities and Exchange Commission for our prior quarter and annual report, except for the change in accounting principle for inventory costs, but do not include the footnotes required by GAAP for complete financial statements. | |||||||||||||
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| Forty Week Periods Ended | ||||||||
| October 10, 2009 and October 4, 2008 | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| October 10, | October 4, | |||||||
| 2009 | 2008 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 235,894 | $ | 213,627 | ||||
| Depreciation and amortization | 114,856 | 113,297 | ||||||
| Share-based compensation | 13,446 | 13,405 | ||||||
| Provision (benefit) for deferred income taxes | 56,013 | (1,465 | ) | |||||
| Excess tax benefit from share-based compensation | (2,531 | ) | (8,994 | ) | ||||
| Other non-cash adjustments to net income | 8,256 | 1,549 | ||||||
| Decrease (increase) in: | ||||||||
| Receivables, net | 4,210 | (8,518 | ) | |||||
| Inventories, net | (33,979 | ) | (187,741 | ) | ||||
| Other assets | 4,988 | 7,501 | ||||||
| Increase in: | ||||||||
| Accounts payable | 168,362 | 164,869 | ||||||
| Accrued expenses | 43,576 | 60,656 | ||||||
| Other liabilities | 15,359 | 7,658 | ||||||
| Net cash provided by operating activities | 628,450 | 375,844 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (132,622 | ) | (136,954 | ) | ||||
| Proceeds from sales of property and equipment | 2,565 | 6,351 | ||||||
| Other | - | (3,413 | ) | |||||
| Net cash used in investing activities | (130,057 | ) | (134,016 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Decrease in bank overdrafts | (20,565 | ) | (30,000 | ) | ||||
| (Decrease) increase in financed vendor accounts payable | (84,433 | ) | 28,380 | |||||
| Dividends paid | (22,772 | ) | (23,155 | ) | ||||
| Net payments on credit facilities | (176,500 | ) | (34,000 | ) | ||||
|
Proceeds from the issuance of common stock, primarily exercise of stock options |
31,978 | 34,533 | ||||||
| Excess tax benefit from share-based compensation | 2,531 | 8,994 | ||||||
| Repurchase of common stock | (49,567 | ) | (219,429 | ) | ||||
| Other | (208 | ) | (498 | ) | ||||
| Net cash used in financing activities | (319,536 | ) | (235,175 | ) | ||||
| Net increase in cash and cash equivalents | 178,857 | 6,653 | ||||||
| Cash and cash equivalents, beginning of period | 37,358 | 14,654 | ||||||
| Cash and cash equivalents, end of period | $ | 216,215 | $ | 21,307 | ||||
| NOTE: These preliminary condensed consolidated statements of cash flows have been prepared on a consistent basis with previously prepared statements of cash flows filed with the Securities and Exchange Commission for our prior quarter and annual report, but do not include the footnotes required by GAAP for complete financial statements. |
| Advance Auto Parts, Inc. and Subsidiaries | ||||||||||||||||||||
| Supplemental Financial Schedules | ||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
|
Reconciliation of Free Cash Flow: |
||||||||||||||||||||
| Forty Week | ||||||||||||||||||||
| Periods Ended | ||||||||||||||||||||
| October 10, | October 4, | |||||||||||||||||||
| 2009 | 2008 | |||||||||||||||||||
| Cash flows from operating activities | $ | 628,450 | $ | 375,844 | ||||||||||||||||
| Cash flows used in investing activities | (130,057 | ) | (134,016 | ) | ||||||||||||||||
| 498,393 | 241,828 | |||||||||||||||||||
| (Decrease) increase in financed vendor accounts payable | (84,433 | ) | 28,380 | |||||||||||||||||
| Free cash flow | $ | 413,960 | $ | 270,208 | ||||||||||||||||
| Note: Management uses free cash flow as a measure of our liquidity and believes it is a useful indicator to stockholders of our ability to implement our growth strategies and service our debt. Free cash flow is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in our condensed consolidated statement of cash flows. | ||||||||||||||||||||
|
Detail of Return on Invested Capital (ROIC) Calculation: |
||||||||||||||||||||
| Last Four Quarters Ended | ||||||||||||||||||||
| Comparable | ||||||||||||||||||||
| October 10, | Comparable | October 10, | October 4, | |||||||||||||||||
| 2009 |
Adjustments (a) |
2009 | 2008 | |||||||||||||||||
| Net income | $ | 260,305 | $ | 27,872 | $ | 288,177 | $ | 248,379 | ||||||||||||
| Add: | ||||||||||||||||||||
| After-tax interest expense and other, net | 15,897 | (322 | ) | 15,575 | 21,846 | |||||||||||||||
| After-tax rent expense | 183,159 | - | 183,159 | 172,131 | ||||||||||||||||
| After-Tax Operating Earnings | 459,361 | 27,550 | 486,911 | 442,356 | ||||||||||||||||
| Average assets (less cash) | 2,968,318 | 29,859 | 2,998,177 | 2,869,342 | ||||||||||||||||
| Less: Average liabilities (excluding total debt) | (1,536,731 | ) | (11,103 | ) | (1,547,834 | ) | (1,373,158 | ) | ||||||||||||
| Add: Capitalized lease obligation (rent expense * 6) (b) | 1,765,260 | - | 1,765,260 | 1,649,862 | ||||||||||||||||
| Total Invested Capital | 3,196,847 | 18,756 | 3,215,603 | 3,146,046 | ||||||||||||||||
| ROIC | 14.4 | % | - | 15.1 | % | 14.1 | % | |||||||||||||
| Rent expense | $ | 294,210 | - | $ | 294,210 | $ | 274,977 | |||||||||||||
| Interest expense and other, net | 25,499 | (511 | ) | 24,988 | 34,899 | |||||||||||||||
|
(a) |
The Company has also presented its ROIC calculation on a comparable basis as a result of certain non-comparable items included in its financial results for the last four quarters ended October 10, 2009. The comparable results for the last four quarters ended October 10, 2009 exclude year-to-date 2009 expenses associated with the store divestiture plan as discussed on page 5 of this release, the additional week of business (53rd week) of fiscal 2008 and the fiscal 2008 non-cash inventory adjustment resulting from a change in inventory management approach for slow moving inventory. | |
|
(b) |
Capitalized lease obligation is estimated as annualized rent expense for the applicable period times six years. | |
| Note: Management uses ROIC to evaluate return on investments to the business and believes it is a useful indicator to stockholders given the future investments the Company plans to make in areas including information technology, supply chain and stores. ROIC is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in our condensed consolidated financial statements. Management believes our comparable results of operations are a useful indicator to stockholders for consistency purposes. | ||
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