Advance Auto Parts announced its financial results for the first quarter ended April 19. First quarter comparable earnings per diluted share (EPS) were $2.25, an increase of 35.5 percent versus the first quarter last year.
These first quarter comparable results exclude $0.11 of amortization of acquired intangible assets, integration costs of $0.10 associated with the acquisition of General Parts International Inc. (General Parts) and $0.03 of integration costs associated with the integration of B.W.P. Distributors Inc. (BWP). Consistent with its comparable sales policy, the company will not include the sales from General Parts in its comparable sales results in 2014.
"The General Parts acquisition coupled with strong execution from our team members delivered comparable cash EPS growth of approximately 36 percent and an increase in comparable store sales of 2.4 percent in the quarter," said Darren R. Jackson, chief executive officer. "We are off to an encouraging start to the year and remain focused on our core business outcomes while making positive progress with our integration of General Parts. Together, our operational and integration momentum position our business for a strong 2014.”
As of April 19, 2014, the company operated 5,276 company-operated stores and 105 Worldpac branches, and served approximately 1,400 independently owned Carquest stores.
First quarter 2014 highlights
Total sales for the first quarter increased 47.3 percent to $2.97 billion, as compared with total sales during the first quarter of fiscal 2013 of $2.02 billion. The sales increase was driven by the acquisition of General Parts, solid execution delivering a comparable same store sales increase of 2.4 percent and the addition of new stores over the past 12 months.
The company's gross profit rate was 45.6 percent of sales during the first quarter as compared to 50.0 percent during the first quarter last year. The 446 basis-point decrease in gross profit rate was the result of 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.
The company's comparable SG&A rate was 36.0 percent of sales during the first quarter as compared to 39.8 percent during the same period last year. The 383 basis-point decrease was the result of the acquired General Parts business having a lower SG&A infrastructure and fixed cost leverage from the positive sales performance, partially offset by higher occupancy costs driven by harsh winter weather. On a GAAP basis, the company's SG&A rate was 37.0 percent of sales during the first quarter as compared to 39.9 percent during the same period last year.
The company's comparable operating income was $284.4 million during the first quarter, an increase of 38.2 percent versus the first quarter of fiscal 2013. As a percentage of sales, comparable operating income in the first quarter was 9.6 percent compared to 10.2 percent during the first quarter of fiscal 2013. On a GAAP basis, the company's operating income during the first quarter of $255.8 million increased 25.4 percent versus the first quarter of fiscal 2013. As a percentage of sales, operating income was 8.6 percent during the first quarter as compared to 10.1 percent during the first quarter of fiscal 2013.
In the first quarter, the company generated $81.1 million in operating cash flow compared to $135.3 million in the first quarter of fiscal 2013. Free cash flow in the first quarter was $20.6 million versus $81.3 million in the first quarter last year. This decrease in free cash flow was primarily due to an increase in owned inventory, a decrease in accrued expenses, offset by an increase in net income. Capital expenditures in the first quarter were $60.5 million as compared to $63.1 million in the first quarter of fiscal 2013.
“We are pleased with the progress we made during the first quarter as a combined team post acquisition with General Parts that allowed us to deliver positive sales performance and approximately 38 percent growth in operating income dollars,” said Mike Norona, executive vice president and chief financial officer. “Our base business and integration work continue to progress well and our synergy work is on-track further reinforcing our confidence in driving long term value from the acquisition. Given our performance in the first quarter and the execution momentum we continue to build, we are raising our full year guidance for comparable cash EPS to be in the range of $7.30 - $7.50.”
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