Advance Auto Parts 2004 Annual Report Download - page 24

22
Management’s฀Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀Results฀of฀Operations฀(continued)
Quarterly฀Financial฀Results฀(unaudited)฀(in฀thousands,฀except฀per฀share฀data)
16฀Weeks฀฀
Ended฀฀
4/24/2004
12฀Weeks฀฀
Ended฀฀
7/17/2004
12฀Weeks฀฀
Ended฀฀
10/9/2004
12฀Weeks฀฀
Ended฀฀
1/1/2005
16฀Weeks฀฀
Ended฀฀
4/19/2003
12฀Weeks฀฀
Ended฀฀
7/12/2003
12฀Weeks฀฀
Ended฀฀
10/4/2003
13฀Weeks฀฀
Ended฀฀
1/3/2004
Net฀sales฀............................................. $1,122,918 $908,412 $890,161 $848,806 $1,005,968 $827,348 $839,101 $821,279
Gross฀profit฀........................................ 520,898 422,302 416,515 393,656 463,989 379,474 386,928 374,127
Net฀income฀......................................... $฀ 51,291 $฀ 53,235 $฀ 51,393 $฀ 32,069 $฀ 5,041 $฀ 43,458 $฀ 45,164 $฀ 31,272
Net฀income฀per฀share:
฀ Basic฀............................................... $฀ 0.69 $฀ ฀ ฀ 0.71 $฀ ฀ ฀ 0.69 $฀ ฀ ฀ 0.44 $฀ 0.07 $฀ ฀ ฀ 0.60 $฀ ฀ ฀ 0.61 $฀ ฀ ฀ 0.42
฀ Diluted฀........................................... $฀ 0.68 $฀ ฀ ฀ 0.70 $฀ ฀ ฀ 0.68 $฀ ฀ ฀ 0.43 $฀ 0.07 $฀ ฀ ฀ 0.58 $฀ ฀ ฀ 0.60 $฀ ฀ ฀ 0.41
Liquidity฀and฀Capital฀Resources
Overview฀of฀Liquidity
฀ Our฀primary฀cash฀requirements฀include฀the฀purchase฀of฀
inventory,฀capital฀expenditures,฀repurchasing฀shares฀under฀
our฀stock฀repurchase฀program฀and฀contractual฀obligations.฀
We฀have฀financed฀these฀requirements฀primarily฀through฀a฀
combination฀ of฀ cash฀ generated฀ from฀ operations฀ and฀ bor-
rowings฀under฀our฀senior฀credit฀facility.
฀ At฀January฀1,฀2005,฀our฀cash฀balance฀was฀$56.3฀million,฀
an฀increase฀of฀$44.8฀million฀compared฀to฀2003.฀Our฀cash฀
balance฀increased฀primarily฀due฀to฀our฀increased฀earnings฀
in฀ 2004,฀ as฀ well฀ as฀ a฀ decrease฀ in฀ cash฀ used฀ to฀ repay฀ or฀
redeem฀indebtedness฀compared฀to฀2003.฀In฀2003,฀we฀used฀
available฀funds฀combined฀with฀borrowings฀under฀our฀senior฀
credit฀ facility฀ to฀ redeem฀ our฀ senior฀ discount฀ debentures฀
and฀senior฀subordinated฀notes.฀At฀January฀1,฀2005,฀we฀had฀
outstanding฀ indebtedness฀ consisting฀ of฀ borrowings฀ of฀
$470.0฀million฀under฀our฀senior฀credit฀facility,฀an฀increase฀
of฀ $25.0฀ million฀ from฀ 2003.฀ Additionally,฀ we฀ had฀ $38.8฀
million฀in฀letters฀of฀credit฀outstanding,฀which฀reduced฀our฀
availability฀ under฀ the฀ revolving฀ credit฀ facility฀ to฀ $161.2฀
million.฀Our฀availability฀under฀our฀revolving฀credit฀facility฀
increased฀by฀$38.8฀million฀from฀$122.4฀at฀the฀end฀of฀fiscal฀
2003฀due฀to฀the฀increase฀in฀our฀revolving฀credit฀facility฀from฀
$160.0฀ million฀ to฀ $200.0฀ million.฀ This฀ increase฀ resulted฀
from฀the฀refinancing฀of฀our฀senior฀credit฀facility,฀which฀gives฀
us฀additional฀funds฀for฀our฀primary฀cash฀requirements.
Capital฀Expenditures
฀ Our฀primary฀capital฀requirements฀have฀been฀the฀funding฀
of฀our฀ continued฀store฀ expansion฀program,฀ including฀new฀
store฀ openings฀ and฀ store฀ acquisitions,฀ store฀ relocations฀฀
and฀ remodels,฀ inventory฀ requirements,฀ the฀ construction฀
and฀upgrading฀of฀distribution฀centers,฀the฀development฀and฀
implementation฀ of฀ proprietary฀ information฀ systems฀ and฀
our฀strategic฀acquisitions.
฀ Our฀ capital฀ expenditures฀ were฀ $179.8฀ million฀ in฀ 2004.฀
These฀amounts฀included฀costs฀of฀$50.0฀million฀for฀the฀con-
struction฀ and฀ preparation฀ of฀ our฀ northeastern฀ distribution฀
center฀ and฀ additional฀ amounts฀ related฀ to฀ new฀ store฀ open-
ings,฀ the฀ upgrade฀ of฀ our฀ information฀ systems,฀ remodels฀
and฀relocations฀of฀existing฀stores,฀including฀our฀continued฀
physical฀ conversion฀ of฀ stores฀ acquired฀ in฀ the฀ Discount฀
acquisition฀ to฀ our฀ Advance฀ Auto฀ Parts฀ store฀ format.฀ In฀
2005,฀ we฀ anticipate฀ that฀ our฀ capital฀ expenditures฀ will฀ be฀
approximately฀$180.0฀million฀to฀$200.0฀million.
฀ Our฀new฀stores,฀if฀leased,฀require฀capital฀expenditures฀of฀
approximately฀$160,000฀per฀store฀and฀an฀inventory฀invest-
ment฀ of฀ approximately฀ $170,000฀ per฀ store,฀ net฀ of฀ vendor฀
payables.฀A฀portion฀of฀the฀inventory฀investment฀is฀held฀at฀฀
a฀ distribution฀ facility.฀ Pre-opening฀ expenses,฀ consisting฀
primarily฀ of฀ store฀ set-up฀ costs฀ and฀ training฀ of฀ new฀ store฀
team฀ members,฀ average฀ approximately฀ $20,000฀ per฀ store฀
and฀are฀expensed฀when฀incurred.
฀ Our฀future฀capital฀requirements฀will฀depend฀on฀the฀num-
ber฀ of฀ new฀ stores฀ we฀ open฀ or฀ acquire฀ and฀ the฀ timing฀ of฀
those฀ openings฀ or฀ acquisitions฀ within฀ a฀ given฀ year.฀ We฀
opened฀ 125฀ new฀ stores฀ each฀ year฀ during฀ 2004฀ and฀ 2003.฀
We฀anticipate฀adding฀approximately฀150฀to฀175฀new฀stores฀
during฀ 2005฀ primarily฀ through฀ new฀ store฀ openings฀ and฀
selective฀acquisitions.
Vendor฀Financing฀Program
฀ Historically,฀we฀have฀negotiated฀extended฀payment฀terms฀
from฀suppliers฀that฀help฀finance฀inventory฀growth,฀and฀we฀
believe฀that฀we฀will฀be฀able฀to฀continue฀financing฀much฀of฀
our฀ inventory฀ growth฀ through฀ such฀ extended฀ payment฀
terms.฀During฀the฀first฀quarter฀of฀fiscal฀2004,฀we฀entered฀
into฀a฀short-term฀financing฀program฀with฀a฀bank,฀allowing฀
us฀ to฀ extend฀ our฀ payment฀ terms฀ on฀ certain฀ merchandise฀
purchases.฀Under฀this฀program,฀we฀issue฀negotiable฀instru-
ments฀ to฀ our฀ vendors฀ in฀ lieu฀ of฀ a฀ cash฀ payment.฀ Each฀฀
vendor฀ is฀ able฀ to฀ present฀ the฀ instrument฀ to฀ the฀ bank฀ for฀฀