Advance Auto Parts Reports Fourth Quarter and Record Full Year 2021 Results

Full Year Net Sales Increased 8.8% to $11.0 Billion; Comparable Store Sales Increased 10.7%
Operating Cash Flow Increased 14.7% to $1.1 Billion; Free Cash Flow Increased 17.2% to $822.6 Million
Returned $1.0 Billion in Cash to Shareholders

$1.0 Billion Increase to Existing Share Repurchase Authorization
Quarterly Cash Dividend Increased 50% to $1.50 Per Share

RALEIGH, N.C.--()--Advance Auto Parts, Inc. (NYSE: AAP), a leading automotive aftermarket parts provider in North America, that serves both professional installer and do-it-yourself customers, announced its financial results for the fourth quarter (12 weeks) and full year (52 weeks) ended January 1, 2022. The company's 2020 results in both the fourth quarter (13 weeks) and full year (53 weeks) include an additional week.

"Advance had a strong fourth quarter and delivered a record year in 2021 across all key metrics. We remained focused throughout the year on the execution of the strategy we outlined last April to deliver top quartile total shareholder return. Thanks to the dedication of our team members and Independent partners, our business is substantially stronger and better positioned today than it was prior to the pandemic,” said Tom Greco, president and chief executive officer. “We closed the year with a record $11.0 billion in net sales and approximately 159 basis points in adjusted operating income margin expansion relative to the comparative 52 weeks in 2020. We also returned a record $1.0 billion in cash to shareholders through share repurchases and quarterly cash dividends. In addition, we've now granted over 24,000 stock awards to frontline team members, valued at over $60 million upon grant since the inception of our Fuel the Frontline program. This investment creates an ownership culture that helps enable Advance to remain an employer of choice for the long-term."

“As we begin 2022, we remain focused on the disciplined execution of our strategic plan. While we are still navigating uncertain times as it relates to macroeconomic factors, including significant inflation, the investments we've made in differentiating our business will continue to provide competitive advantage for Advance. We believe these investments, along with industry tailwinds, such as improvement in miles driven and an aging fleet will enable us to continue to drive profitable growth and total shareholder return.”

Fourth Quarter and Full Year 2021 Operating Results (1, 2)

Fourth quarter 2021 Net sales totaled $2.4 billion, a 1.3% increase compared with the fourth quarter of the prior year. Excluding sales from the additional week in the fourth quarter 2020, Net sales increased 8.6%. Comparable store sales growth for the fourth quarter 2021 was 8.2%. For full year 2021, Net sales of $11.0 billion increased 8.8% from full year 2020. On a comparative 52-week basis, Net sales increased 10.6%. Full year 2021 Comparable store sales growth was 10.7%.

The company's GAAP Gross profit margin decreased to 44.7% from 45.8% in the fourth quarter of the prior year. Adjusted gross profit increased 12.1% from the comparative 12 weeks in the fourth quarter of 2020 to $1.1 billion in the fourth quarter of 2021. Adjusted gross profit margin was 46.8% of Net sales in the fourth quarter of 2021, a 145 basis point increase from the comparative 12 weeks in the fourth quarter of 2020, primarily driven by improvements in category management including strategic pricing, inventory related and owned brand expansion. This was partially offset by ongoing inflationary costs, unfavorable channel mix and the lapping of shrink benefits in the fourth quarter of the prior year. GAAP Gross profit margin increased 47 basis points to 44.8% for full year 2021, while Adjusted gross profit margin for full year 2021 was 46.0%, a 175 basis point improvement from the comparative 52 weeks in the prior year.

The company's GAAP SG&A for the fourth quarter of 2021 was 40.0% of Net sales compared with 39.4% for the prior year quarter. Adjusted SG&A increased 10.0% from the comparative 12 weeks in the fourth quarter of 2020 to $946.0 million in the fourth quarter of 2021. As a percentage of Net sales, Adjusted SG&A was 39.5% in the fourth quarter of 2021, which deleveraged 49 basis points from the comparative 12 weeks in the fourth quarter of 2020. This was primarily driven by higher labor related costs due to wage inflation, increased incentive compensation and start-up costs associated with our new store openings. These were partially offset by a year over year decrease in COVID-19 expenses. The company's full year 2021 GAAP SG&A was 37.2% of Net sales compared with 36.9% for full year 2020. For full year 2021, Adjusted SG&A as a percentage of Net sales was 36.4%, a 16 basis point deleverage from the comparative 52 weeks in 2020.

On a GAAP basis, the company's fourth quarter Operating income was $112.5 million, a decrease of 25.9% compared with the fourth quarter of the prior year. Fourth quarter 2021 Operating income margin was 4.7%, a 173 basis point decrease from the fourth quarter 2020. The company's Adjusted operating income was $176.8 million in the fourth quarter of 2021, an increase of 24.8% relative to the comparative 12 weeks in the fourth quarter of 2020. Fourth quarter 2021 Adjusted operating income margin increased to 7.4%, an improvement of 96 basis points from the comparative 12 weeks in the prior year. The company's full year 2021 GAAP Operating income was $838.7 million, which was 7.6% of Net sales, and increased 21 basis points compared with full year 2020. Full year 2021 Adjusted operating income was $1.1 billion, an increase of 32.5% from the comparative 52 weeks in 2020. Full year 2021 Adjusted operating income margin increased to 9.6%, an improvement of 159 basis points from the comparative 52 weeks in 2020.

The company's effective tax rate in the fourth quarter of 2021 was 18.3%. On a GAAP basis, the company's Diluted EPS decreased 21.2% to $1.30 in the fourth quarter of 2021. The company's Adjusted diluted EPS was $2.07 in the fourth quarter of 2021, an increase of 35.4% compared with the comparative 12 weeks in the same quarter of the prior year. The effective tax rate for full year 2021 was 23.6%. The company's Diluted EPS on a GAAP basis increased 33.8% to $9.55 year over year. Full year 2021 Adjusted diluted EPS was $12.02, an increase of 47.9% from the comparative 52 weeks in 2020.

Operating cash flow was $1.1 billion for the full year 2021 versus $969.7 million for the full year 2020, an increase of 14.7%. Free cash flow for the full year 2021 was $822.6 million, an increase of 17.2% compared with full year 2020.

(1)

For comparative purposes, adjusted results for 2020 are provided on a 12- or 52-week basis; GAAP and Free cash flow results are as reported. Please refer to the company's fourth quarter and full year adjusted results in the accompanying financial tables included herein.

(2)

Comparable store sales exclude sales to independently owned Carquest locations.

Capital Allocation

During 2021, the company repurchased a total of 4.6 million shares of its common stock for an aggregate amount of $886.7 million, or an average price of $192.92 per share. At the end of the fourth quarter of 2021, the company had $545.5 million remaining under the share repurchase program. On February 8, 2022, the company’s Board of Directors authorized an additional $1.0 billion to the existing share repurchase program.

On February 14, 2022, the company's Board of Directors declared a 50% increase to the company's quarterly cash dividend to $1.50 per share to be paid on April 1, 2022 to shareholders of record as of March 18, 2022.

Full Year 2022 Guidance

"Today we are introducing our full year 2022 guidance," said Jeff Shepherd, executive vice president and chief financial officer. "We believe that we are well positioned to deliver growth building off our record 2021 results and the ongoing execution of our strategic initiatives. We're encouraged by the first four weeks of 2022 with comp sales trending above the top-end of our full year guidance range as the growth drivers of our industry remain positive. However our guide also takes into consideration macroeconomic uncertainty related to the acceleration of inflation across the economy and the impact it could have on our core customer."

 

 

2022

($ in millions, except per share data)

 

Low

 

High

Net sales

 

$

11,200

 

 

$

11,500

 

Comparable store sales

 

 

1.0

%

 

 

3.0

%

Adjusted operating income margin (1)

 

 

10.0

%

 

 

10.2

%

Income tax rate

 

 

24.0

%

 

 

26.0

%

Adjusted diluted EPS (1, 2)

 

$

13.20

 

 

$

13.75

 

Capital expenditures

 

$

300

 

 

$

350

 

Free cash flow (1)

 

Minimum $775

Share repurchases

 

$

500

 

 

$

700

 

New store and branch openings

 

 

125

 

 

 

150

 

(1)

For a better understanding of the company's adjusted results, refer to the reconciliation of non-GAAP adjustments in the accompanying financial tables included herein. Because of the forward-looking nature of the 2022 non-GAAP financial measures, specific quantification of the amounts that would be required to reconcile these non-GAAP financial measures to their most directly comparable GAAP financial measures are not available at this time.

(2)

Assumes weighted-average shares outstanding as of February 11, 2022, including 1.1 million shares repurchased subsequent to January 1, 2022 and excludes any future share repurchases made by the company.

Investor Conference Call

The company will detail its results for the fourth quarter and full year 2021 via a webcast scheduled to begin at 8 a.m. Eastern Time on Tuesday, February 15, 2022. The webcast will be accessible via the Investor Relations page of the company's website (ir.AdvanceAutoParts.com).

To join by phone, please pre-register online for dial-in and passcode information. Upon registering, participants will receive a confirmation with call details and a registrant ID. While registration is open through the live call, the company suggests registering a day in advance or at minimum 10 minutes before the start of the call. A replay of the conference call will be available on the company's Investor Relations website for one year.

About Advance Auto Parts

Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installer and do-it-yourself customers. As of January 1, 2022, Advance operated 4,706 stores and 266 Worldpac branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The company also served 1,317 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands. Additional information about Advance, including employment opportunities, customer services, and online shopping for parts, accessories and other offerings can be found at www.AdvanceAutoParts.com.

Forward-Looking Statements

Certain statements herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identifiable by words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "guidance," "intend," "likely," "may," "plan," "position," "possible," "potential," "probable," "project," "should," "strategy," "will," or similar language. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about the company's strategic initiatives, operational plans and objectives, expectations for economic conditions and recovery and future business and financial performance, as well as statements regarding underlying assumptions related thereto. Forward-looking statements reflect the company's views based on historical results, current information and assumptions related to future developments. Except as may be required by law, the company undertakes no obligation to update any forward-looking statements made herein. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. They include, among others, factors related to the timing and implementation of strategic initiatives, including with respect to labor shortages or disruptions and the impact on our ability to complete store openings, the highly competitive nature of the company's industry, demand for the company's products and services, complexities in its inventory and supply chain, challenges with transforming and growing its business and factors related to the current global COVID-19 pandemic. Please refer to "Item 1A. Risk Factors." of the company's most recent Annual Report on Form 10-K, as updated by its Quarterly Report on Form 10-Q and other filings made by the company with the Securities and Exchange Commission, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

 

 

 

 

January 1,
2022 (1)

 

January 2,
2021 (2)

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

601,428

 

$

834,992

Receivables, net

 

 

782,785

 

 

749,999

Inventories

 

 

4,659,018

 

 

4,538,199

Other current assets

 

 

232,245

 

 

146,811

Total current assets

 

 

6,275,476

 

 

6,270,001

Property and equipment, net

 

 

1,528,311

 

 

1,462,602

Operating lease right-of-use assets

 

 

2,671,810

 

 

2,379,987

Goodwill

 

 

993,744

 

 

993,590

Other intangible assets, net

 

 

651,217

 

 

681,127

Other assets

 

 

73,651

 

 

52,329

Total assets

 

$

12,194,209

 

$

11,839,636

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

3,922,007

 

$

3,640,639

Accrued expenses

 

 

777,051

 

 

606,804

Other current liabilities

 

 

481,249

 

 

496,472

Total current liabilities

 

 

5,180,307

 

 

4,743,915

Long-term debt

 

 

1,034,320

 

 

1,032,984

Non-current operating lease liabilities

 

 

2,337,651

 

 

2,014,499

Deferred income taxes

 

 

410,606

 

 

342,445

Other long-term liabilities

 

 

103,034

 

 

146,281

Total stockholders' equity

 

 

3,128,291

 

 

3,559,512

Total liabilities and stockholders’ equity

 

$

12,194,209

 

$

11,839,636

(1)

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

(2)

The balance sheet at January 2, 2021 has been derived from the audited consolidated financial statements at that date, but does not include the footnotes required by GAAP.

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Twelve
Weeks Ended

 

Thirteen
Weeks Ended

 

Fifty-Two
Weeks Ended

 

Fifty-Three
Weeks Ended

 

 

January 1,
2022 (1)

 

January 2,
2021 (1)

 

January 1,
2022 (1)

 

January 2,
2021 (1)

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,396,975

 

 

$

2,365,131

 

 

$

10,997,989

 

 

$

10,106,321

 

Cost of sales

 

 

1,324,858

 

 

 

1,281,435

 

 

 

6,069,241

 

 

 

5,624,707

 

Gross profit

 

 

1,072,117

 

 

 

1,083,696

 

 

 

4,928,748

 

 

 

4,481,614

 

Selling, general and administrative expenses

 

 

959,655

 

 

 

931,870

 

 

 

4,090,031

 

 

 

3,731,707

 

Operating income

 

 

112,462

 

 

 

151,826

 

 

 

838,717

 

 

 

749,907

 

Other, net:

 

 

 

 

 

 

 

 

Interest expense

 

 

(9,705

)

 

 

(9,297

)

 

 

(37,791

)

 

 

(46,886

)

Loss on early redemptions of senior unsecured notes

 

 

 

 

 

 

 

 

 

 

 

(48,022

)

Other (expense) income, net

 

 

(2,791

)

 

 

(1,786

)

 

 

4,999

 

 

 

(3,984

)

Total other, net

 

 

(12,496

)

 

 

(11,083

)

 

 

(32,792

)

 

 

(98,892

)

Income before provision for income taxes

 

 

99,966

 

 

 

140,743

 

 

 

805,925

 

 

 

651,015

 

Provision for income taxes

 

 

(18,296

)

 

 

(28,747

)

 

 

(189,817

)

 

 

(157,994

)

Net income

 

$

81,670

 

 

$

111,996

 

 

$

616,108

 

 

$

493,021

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

1.31

 

 

$

1.66

 

 

$

9.62

 

 

$

7.17

 

Weighted average common shares outstanding

 

 

62,272

 

 

 

67,581

 

 

 

64,028

 

 

 

68,748

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

1.30

 

 

$

1.65

 

 

$

9.55

 

 

$

7.14

 

Weighted average common shares outstanding

 

 

62,845

 

 

 

67,929

 

 

 

64,509

 

 

 

69,003

 

(1)

These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with the company's previously prepared statements of operations filed with the SEC, but do not include the footnotes required by GAAP.

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Year Ended

 

 

January 1,
2022 (1)

 

January 2,
2021 (1)

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$ 616,108

 

$ 493,021

Depreciation and amortization

 

259,933

 

250,081

Share-based compensation

 

63,067

 

45,271

Loss on early redemption of senior unsecured notes

 

 

48,022

Provision for deferred income taxes

 

68,202

 

8,136

Other, net

 

964

 

6,194

Net change in:

 

 

 

 

Receivables, net

 

(32,652)

 

(59,014)

Inventories

 

(120,272)

 

(101,449)

Accounts payable

 

281,064

 

216,488

Accrued expenses

 

109,983

 

78,507

Other assets and liabilities, net

 

(134,135)

 

(15,569)

Net cash provided by operating activities

 

1,112,262

 

969,688

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

(289,639)

 

(267,576)

Purchase of an indefinite-lived intangible asset

 

 

(230)

Proceeds from sales of property and equipment

 

2,325

 

909

Net cash used in investing activities

 

(287,314)

 

(266,897)

Cash flows from financing activities:

 

 

 

 

Redemption of senior unsecured note

 

 

(602,568)

Borrowings under credit facilities

 

 

500,000

Payments on credit facilities

 

 

(500,000)

Proceeds from issuance of senior unsecured notes, net

 

 

847,092

Dividends paid

 

(160,925)

 

(56,347)

Proceeds from the issuance of common stock

 

3,074

 

3,270

Repurchases of common stock

 

(906,208)

 

(469,691)

Other, net

 

(53)

 

(7,753)

Net cash used in financing activities

 

(1,064,112)

 

(285,997)

Effect of exchange rate changes on cash

 

5,600

 

(467)

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(233,564)

 

416,327

Cash and cash equivalents, beginning of period

 

834,992

 

418,665

Cash and cash equivalents, end of period

 

$ 601,428

 

$ 834,992

(1)

This preliminary condensed consolidated statement of cash flows has been prepared on a basis consistent with the company's previously prepared statements of operations filed with the SEC, but does not include the footnotes required by GAAP.

Reconciliation of Non-GAAP Financial Measures

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

LIFO Impacts — Beginning in the first quarter of 2021, to assist in comparing the company's current operating results with the operational performance of other companies in the industry, the impact of LIFO on the company's results of operations is a reconciling item to arrive at non-GAAP financial measures.

Transformation Expenses — Costs incurred in connection with the company's business plan that focuses on specific transformative activities that relate to the integration and streamlining of its operating structure across the enterprise, that the company does not view to be normal cash operating expenses. These expenses include, but are not limited to the following:

  • Restructuring costs - Costs primarily relating to the early termination of lease obligations, asset impairment charges, other facility closure costs and team member severance in connection with our voluntary retirement program and continued optimization of our organization.
  • Third-party professional services - Costs primarily relating to services rendered by vendors for assisting the company with the development of various information technology and supply chain projects in connection with the company's enterprise integration initiatives.
  • Other significant costs - Costs primarily relating to accelerated depreciation of various legacy information technology and supply chain systems in connection with the company's enterprise integration initiatives and temporary off-site workspace for project teams who are primarily working on the development of specific transformative activities that relate to the integration and streamlining of the company's operating structure across the enterprise.

GPI Amortization of Acquired Intangible Assets — As part of the company's acquisition of GPI, the company obtained various intangible assets, including customer relationships, non-compete contracts and favorable lease agreements, which they expect to be subject to amortization through 2025.

Reconciliation of Adjusted Net Income and Adjusted EPS:

 

 

 

 

 

 

 

 

Twelve
Weeks Ended

 

Thirteen
Weeks Ended

 

Fifty-Two
Weeks Ended

 

Fifty-Three
Weeks Ended

(in thousands, except per share data)

 

January 1, 2022

 

January 2, 2021

 

January 1, 2022

 

January 2, 2021

Net income (GAAP)

 

$

81,670

 

 

$

111,996

 

 

$

616,108

 

 

$

493,021

 

Cost of sales adjustments:

 

 

 

 

 

 

 

 

LIFO impacts (1)

 

 

50,704

 

 

 

(9,909

)

 

 

122,303

 

 

 

(13,817

)

Transformation expenses:

 

 

 

 

 

 

 

 

Other significant costs

 

 

(3

)

 

 

1,534

 

 

 

2,608

 

 

 

3,161

 

SG&A adjustments:

 

 

 

 

 

 

 

 

GPI amortization of acquired intangible assets

 

 

6,341

 

 

 

6,251

 

 

 

27,587

 

 

 

27,337

 

Transformation expenses:

 

 

 

 

 

 

 

 

Restructuring costs

 

 

244

 

 

 

4,544

 

 

 

27,307

 

 

 

16,765

 

Third-party professional services

 

 

5,705

 

 

 

5,193

 

 

 

24,099

 

 

 

14,117

 

Other significant costs

 

 

1,390

 

 

 

2,405

 

 

 

8,796

 

 

 

15,965

 

Other income adjustment (2)

 

 

 

 

 

 

 

 

 

 

 

48,022

 

Provision for income taxes on adjustments (3)

 

 

(16,095

)

 

 

(2,505

)

 

 

(53,175

)

 

 

(27,888

)

Adjusted net income (Non-GAAP)

 

$

129,956

 

 

$

119,509

 

 

$

775,633

 

 

$

576,683

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share (GAAP)

 

$

1.30

 

 

$

1.65

 

 

$

9.55

 

 

$

7.14

 

Adjustments, net of tax

 

 

0.77

 

 

 

0.11

 

 

 

2.47

 

 

 

1.22

 

Adjusted diluted earnings per share (Non-GAAP)

 

$

2.07

 

 

$

1.76

 

 

$

12.02

 

 

$

8.36

 

(1)

The 13- and 53-weeks ended January 2, 2021 non-GAAP expenses have been adjusted to be comparable with the company's 2021 presentation.

(2)

During 2020, the company incurred charges relating to a make-whole provision and tender premiums of $46.3 million and debt issuance costs of $1.7 million resulting from the early redemption of the company's 2022 and 2023 senior unsecured notes.

(3)

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

Reconciliation of Adjusted Gross Profit:

 

 

 

 

 

 

Twelve
Weeks Ended

 

Thirteen
Weeks Ended

 

Fifty-Two
Weeks Ended

 

Fifty-Three
Weeks Ended

(in thousands)

 

January 1, 2022

 

January 2, 2021

 

January 1, 2022

 

January 2, 2021

Gross profit (GAAP)

 

$

1,072,117

 

$

1,083,696

 

 

$

4,928,748

 

$

4,481,614

 

Gross profit adjustments

 

 

50,701

 

 

(8,375

)

 

 

124,911

 

 

(10,656

)

Adjusted gross profit (Non-GAAP)

 

$

1,122,818

 

$

1,075,321

 

 

$

5,053,659

 

$

4,470,958

 

Reconciliation of Adjusted Selling, General and Administrative Expenses:

 

 

Twelve
Weeks Ended

 

Thirteen
Weeks Ended

 

Fifty-Two
Weeks Ended

 

Fifty-Three
Weeks Ended

(in thousands)

 

January 1, 2022

 

January 2, 2021

 

January 1, 2022

 

January 2, 2021

SG&A (GAAP)

 

$

959,655

 

 

$

931,870

 

 

$

4,090,031

 

 

$

3,731,707

 

SG&A adjustments

 

 

(13,680

)

 

 

(18,393

)

 

 

(87,789

)

 

 

(74,184

)

Adjusted SG&A (Non-GAAP)

 

$

945,975

 

 

$

913,477

 

 

$

4,002,242

 

 

$

3,657,523

 

Reconciliation of Adjusted Operating Income:

 

 

 

 

 

 

 

 

Twelve
Weeks Ended

 

Thirteen
Weeks Ended

 

Fifty-Two
Weeks Ended

 

Fifty-Three
Weeks Ended

(in thousands)

 

January 1, 2022

 

January 2, 2021

 

January 1, 2022

 

January 2, 2021

Operating income (GAAP)

 

$

112,462

 

$

151,826

 

$

838,717

 

$

749,907

Cost of sales and SG&A adjustments

 

 

64,381

 

 

10,018

 

 

212,700

 

 

63,528

Adjusted operating income (Non-GAAP)

 

$

176,843

 

$

161,844

 

$

1,051,417

 

$

813,435

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

Reconciliation of Free Cash Flow:

 

 

 

 

 

 

Fifty-Two
Weeks Ended

 

Fifty-Three
Weeks Ended

(in thousands)

 

January 1, 2022

 

January 2, 2021

Cash flows from operating activities

 

$

1,112,262

 

 

$

969,688

 

Purchases of property and equipment

 

 

(289,639

)

 

 

(267,576

)

Free cash flow

 

$

822,623

 

 

$

702,112

 

NOTE: Management uses Free cash flow as a measure of its liquidity and believes it is a useful indicator to investors or potential investors of the company's ability to implement growth strategies and service debt. Free cash flow is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in the company's condensed consolidated statement of cash flows as a measure of liquidity.

Fourth Quarter 2021 Adjusted Results (1)

 

 

 

 

 

 

 

 

Twelve
Weeks Ended

 

Thirteen
Weeks Ended (2)

 

Twelve
Weeks Ended (3)

($ in thousands, except per share data)

 

January 1, 2022

 

January 2, 2021

 

January 2, 2021

Adjusted gross profit

 

$

1,122,818

 

 

$

1,075,321

 

 

$

1,001,723

 

Adjusted gross profit margin

 

 

46.8

%

 

 

45.5

%

 

 

45.4

%

Adjusted SG&A

 

$

945,975

 

 

$

913,477

 

 

$

860,002

 

Adjusted SG&A as a % of net sales

 

 

39.5

%

 

 

38.6

%

 

 

39.0

%

Adjusted operating income

 

$

176,843

 

 

$

161,844

 

 

$

141,721

 

Adjusted operating income margin

 

 

7.4

%

 

 

6.8

%

 

 

6.4

%

Adjusted diluted EPS

 

$

2.07

 

 

$

1.76

 

 

$

1.53

 

(1)

For a better understanding of the company's adjusted results, refer to the reconciliation of non-GAAP adjustments in the accompanying financial tables included herein.

(2)

The 53rd week in 2020 contributed $158.5 million in Net sales.

(3)

For comparative purposes, adjusted results for fourth quarter 2020 are provided on a 12-week basis.

Full Year 2021 Adjusted Results (1)

 

 

 

 

 

 

 

 

Fifty-Two
Weeks Ended

 

Fifty-Three
Weeks Ended (2)

 

Fifty-Two
Weeks Ended (3)

($ in thousands, except per share data)

 

January 1, 2022

 

January 2, 2021

 

January 2, 2021

Adjusted gross profit

 

$

5,053,659

 

 

$

4,470,958

 

 

$

4,397,360

 

Adjusted gross profit margin

 

 

46.0

%

 

 

44.2

%

 

 

44.2

%

Adjusted SG&A

 

$

4,002,242

 

 

$

3,657,523

 

 

$

3,604,048

 

Adjusted SG&A as a % of net sales

 

 

36.4

%

 

 

36.2

%

 

 

36.2

%

Adjusted operating income

 

$

1,051,417

 

 

$

813,435

 

 

$

793,312

 

Adjusted operating income margin

 

 

9.6

%

 

 

8.0

%

 

 

8.0

%

Adjusted diluted EPS

 

$

12.02

 

 

$

8.36

 

 

$

8.13

 

(1)

For a better understanding of the company's adjusted results, refer to the reconciliation of non-GAAP adjustments in the aforementioned financial tables included herein.

(2)

The 53rd week in 2020 contributed $158.5 million in Net sales.

(3)

For comparative purposes, adjusted results for full year 2020 are provided on a 52-week basis.

Adjusted Debt to Adjusted EBITDAR:

 

 

 

 

 

 

Four Quarters Ended

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

 

January 1, 2022

 

January 2, 2021

Total GAAP debt

 

$

1,034,320

 

 

$

1,032,984

Add: Operating lease liabilities

 

 

2,802,772

 

 

 

2,477,087

Adjusted debt

 

 

3,837,092

 

 

 

3,510,071

 

 

 

 

 

GAAP Net income

 

 

616,108

 

 

 

493,021

Depreciation and amortization

 

 

259,933

 

 

 

250,081

Interest expense

 

 

37,791

 

 

 

46,886

Other (income) expense, net

 

 

(4,999

)

 

 

3,984

Provision for income taxes

 

 

189,817

 

 

 

157,994

Restructuring costs

 

 

27,307

 

 

 

16,765

Third-party professional services

 

 

24,099

 

 

 

14,117

Other significant costs

 

 

11,404

 

 

 

19,126

Transformation expenses

 

 

62,810

 

 

 

50,008

Other adjustments (1)

 

 

 

 

 

48,022

Total net adjustments

 

 

545,352

 

 

 

556,975

Adjusted EBITDA

 

 

1,161,460

 

 

 

1,049,996

Rent expense

 

 

565,945

 

 

 

553,751

Share-based compensation

 

 

63,067

 

 

 

45,271

Adjusted EBITDAR

 

$

1,790,472

 

 

$

1,649,018

 

 

 

 

 

Adjusted Debt to Adjusted EBITDAR

 

 

2.1

 

 

 

2.1

(1)

The adjustments to the four quarters ended January 2, 2021 represent charges incurred resulting from the early redemption of the company's 2022 and 2023 senior unsecured notes.

NOTE: Management believes its Adjusted Debt to Adjusted EBITDAR ratio (“leverage ratio”) is a key financial metric for debt securities, as reviewed by rating agencies, and believes its debt levels are best analyzed using this measure. The company’s goal is to maintain an investment grade rating. The company's credit rating directly impacts the interest rates on borrowings under its existing credit facility and could impact the company's ability to obtain additional funding. If the company was unable to maintain its investment grade rating this could negatively impact future performance and limit growth opportunities. Similar measures are utilized in the calculation of the financial covenants and ratios contained in the company's financing arrangements. The leverage ratio calculated by the company is a non-GAAP measure and should not be considered a substitute for debt to net earnings, net earnings or debt as determined in accordance with GAAP. The company adjusts the calculation to remove rent expense and to add back the company’s existing operating lease liabilities related to their right-of-use assets to provide a more meaningful comparison with the company’s peers and to account for differences in debt structures and leasing arrangements. The company’s calculation of its leverage ratio might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures by other companies.

Store Information:

During the fifty-two weeks ended January 1, 2022, 39 stores and branches were opened and 43 were closed or consolidated, resulting in a total of 4,972 stores and branches as of January 1, 2022, compared with a total of 4,976 stores and branches as of January 2, 2021.

The below table summarizes the changes in the number of company-operated stores and branches during the twelve and fifty-two weeks ended January 1, 2022:

 

 

Twelve Weeks Ended

 

 

AAP

 

AI

 

CARQUEST

 

WORLDPAC (1)

 

Total

October 9, 2021

 

4,298

 

 

81

 

 

348

 

 

234

 

 

4,961

 

New

 

11

 

 

 

 

1

 

 

2

 

 

14

 

Closed

 

(1

)

 

 

 

 

 

 

 

(1

)

Consolidated

 

(1

)

 

 

 

(1

)

 

 

 

(2

)

Converted

 

1

 

 

(30

)

 

(1

)

 

30

 

 

 

Relocated

 

 

 

 

 

 

 

 

 

 

January 1, 2022

 

4,308

 

 

51

 

 

347

 

 

266

 

 

4,972

 

 

 

 

Fifty-Two Weeks Ended

 

 

AAP

 

AI

 

CARQUEST

 

WORLDPAC (1)

 

Total

January 2, 2021

 

4,287

 

 

161

 

 

358

 

 

170

 

 

4,976

 

New

 

28

 

 

 

 

3

 

 

8

 

 

39

 

Closed

 

(11

)

 

(21

)

 

(6

)

 

(1

)

 

(39

)

Consolidated

 

(2

)

 

 

 

(2

)

 

 

 

(4

)

Converted

 

1

 

 

(88

)

 

(1

)

 

88

 

 

 

Relocated

 

5

 

 

(1

)

 

(5

)

 

1

 

 

 

January 1, 2022

 

4,308

 

 

51

 

 

347

 

 

266

 

 

4,972

 

(1) Certain converted AI locations will remain branded as AI going forward.

 

Contacts

Investor Relations:
Elisabeth Eisleben
T: (919) 227-5466
E: invrelations@advanceautoparts.com

Media:
Darryl Carr
T: (984) 389-7207
E: darryl.carr@advance-auto.com

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Contacts

Investor Relations:
Elisabeth Eisleben
T: (919) 227-5466
E: invrelations@advanceautoparts.com

Media:
Darryl Carr
T: (984) 389-7207
E: darryl.carr@advance-auto.com