Advance Auto Parts today announced its financial results for the first quarter ended April 25, 2015. First quarter comparable cash earnings per diluted share (Comparable Cash EPS) were $2.39, an increase of 6.2% versus the first quarter last year. These first quarter comparable results exclude $0.11 of amortization of acquired intangible assets and integration costs of $0.28 primarily associated with the acquisition of General Parts International, Inc. (General Parts).
“I would like to thank all our Team Members for their hard work during the first quarter of 2015,” said Darren R. Jackson, Chief Executive Officer. “As we enter our second year of the General Parts integration, we remain very confident with the growth, service and earnings potential of the combined companies. We have undertaken the industry’s largest acquisition and just completed our heaviest quarter of integration activities to-date. Our first quarter comparable store sales increased 0.7% and Comparable Cash EPS grew 6.2% to $2.39. While these results did not meet our high expectations, we remain confident in our integration plan and are focused on executing the foundational work necessary to deliver the full potential of the combination. ”
First quarter 2015 highlights
Total sales for the first quarter increased 2.3% to $3.04 billion, as compared with total sales during the first quarter of fiscal 2014 of $2.97 billion. The sales increase was driven by the addition of new stores over the past 12 months and a comparable store sales increase of 0.7%. Our sales were unfavorably impacted primarily from integration activities and unfavorable weather.
The Company's Gross Profit rate was 45.9% of sales during the first quarter as compared to 45.6% during the first quarter last year. The 31 basis-point increase in gross profit rate was primarily due to achieved merchandise cost synergies partially offset by the costs from our new Hartford, CT distribution center, which opened in late 2014.
The Company's Comparable SG&A rate was 35.7% of sales during the first quarter as compared to 36.0% during the same period last year. The 26 basis-point decrease was primarily the result of achieved cost synergies and lower incentive compensation partially offset by slightly higher advertising expenses. On a GAAP basis, the Company's SG&A rate was 37.2% of sales during the first quarter as compared to 37.0% during the same period last year.
The Company's Comparable Operating Income was $308.3 million during the first quarter, an increase of 8.4% versus the first quarter of fiscal 2014. As a percentage of sales, Comparable Operating Income in the first quarter was 10.1% compared to 9.6% during the first quarter of fiscal 2014. On a GAAP basis, the Company's operating income during the first quarter of $262.5 million increased 2.6% versus the first quarter of fiscal 2014. On a GAAP basis, the Operating Income rate was 8.6% during the first quarter as compared to 8.6% during the first quarter of fiscal 2014.
Operating cash flow increased approximately 26.0% to $102.2 million in the first quarter of fiscal 2015 from $81.1 million in the first quarter of fiscal 2014. Free cash flow increased to $45.2 million in the first quarter of fiscal 2015 from $20.6 million in the first quarter of fiscal 2014. Capital expenditures in the first quarter of fiscal 2015 were $57.0 million as compared to $60.5 million for the first quarter of fiscal 2014.
“Our first quarter results were softer than we expected primarily driven by the change impacts of our integration activities,” said Mike Norona, Executive Vice President and Chief Financial Officer. "Despite the softness, we were pleased that we delivered our synergy expectations and grew our Comparable Operating Income 8.4%”
2015 full-year outlook
The Company’s integration activities have progressed to the operational phase of aligning the Company’s people, processes, systems and capabilities to a common foundation. These integration activities are an integral and necessary next step for the Company to leverage the full potential of the acquisition. In the first quarter of 2015, the Company executed a number of simultaneous customer-facing organizational changes including product and price alignment, integrating field organizational structures, aligning compensation programs and changing aspects of its customer processes. These activities were more taxing on the Company and impacted the first quarter results.
"Turning to the balance of the year, we do expect to see some continued short term business volatility from our integration activities, given that these changes were sequenced throughout the first quarter and our teams were still working through the changes as we exited the quarter," said Mike Norona, Executive Vice President and Chief Financial Officer. "It is prudent to build in the earnings miss we experienced in our first quarter and also factor in some continued integration headwinds into our results, primarily impacting commercial sales. We now expect our annual comparable store sales to be at the low end of the previously communicated range. As part of this outlook, we expect our share count to be 73.7 million shares, our tax rate to be in the range of 37.5% - 38% and our full-year interest expense to be approximately $64 million. As a result, we are revising our full year Comparable Cash EPS outlook down to $8.10 to $8.30. We are confident in our team’s ability to execute and our revised full year outlook reflects our best view of the short term change impacts from the integration. Our 2015 synergy estimates remain unchanged at $45 million to $55 million for the full year."
As of April 25, 2015, the Company operated 5,235 stores and 115 Worldpac branches and served approximately 1,300 independently-owned Carquest stores.
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