Advance Auto Parts 2005 Annual Report Download - page 6

ASE (Automotive Service Excellence)-certified Team Members.
Our Customers enjoy the confidence and peace of mind that
comes with getting the right advice from these knowledgeable,
certified parts specialists.
In addition, we recognize the importance of building diversity
in our team as we expand and serve an increasingly diverse
Customer base. We actively recruit bilingual Team Members,
and with multi-language skills, our team is better able to serve
Customers by providing the vital interaction needed to choose
parts and products to perform repairs properly.
We are proud to say all these initiatives and programs, plus our
more than 70 years of Customer-focused retailing continue to
generate strong results. In 2005, we achieved the following:
L Increased our sales by 13.1% to $4.26 billion, comprised
of 79% to our Do-It-Yourself Customers and 21% to our
Commercial Customers.
L Expanded our operating margin to 9.6% of sales from 8.7%
last year.
L Raised our earnings per share to $2.13 from $1.66 last year,
a 28% increase.
In addition to self-funding our growth and driving strong finan-
cial performance, we returned capital to our Stockholders
through our stock repurchase plan. Since mid-2004, Advance
has repurchased approximately 8.5 million shares at an average
price of $29 per share. Our strong and stable cash flow also
led us to begin paying a quarterly cash dividend in early 2006.
Our improved financial performance and Customer satisfaction
levels are complemented by robust industry dynamics. The
automobile continues to be integral to our daily lives and
industry data reflects this, showing an increased number of
cars, trucks and SUVs on the road today, as well as growth in
miles driven per vehicle.
Our Customers also are keeping their vehicles longer. The
average age of vehicles continues to increase, now reaching a
record high of 9.4 years in 2004 versus 8.5 years in 1994.
Over 70% of vehicles on the road today have more than
75,000 miles on them.
What does all this mean for Advance? It means these older
vehicles that are out of warranty are in need of frequent
maintenance, which increases the total market for auto parts.
Owners of these older but still reliable vehicles have a vested
interest in maintaining their vehicles for their transportation
needs. In 2005, this was particularly apparent with Advance
posting very strong sales gains despite record high gas prices.
In the coming year, we will continue to drive enhanced
Customer Service by opening an anticipated 170 to 180 new
stores and remodeling 200 to 225 stores to our 2010 format.
We also expect to relocate 50 existing stores to new locations
which are more convenient for our Customers.
Advance’s commitment to provide industry-leading Customer
Service is evident in our quest to continuously improve our
business. We believe we have a bright future ahead and look
forward to sharing our successes with you.
In closing, I would like to extend my gratitude to our Team
Members and Customers as well as to you, our Stockholders.
To my fellow Team Members, thank you for your commitment
to serving our Customers with unparalleled focus and
dedication. You are the primary reason our Customers keep
coming back. To our Customers, thank you for your loyalty
and continued patronage. We will continue to find ways to
serve you even better. To our Stockholders, thank you for your
interest, support and confidence in Advance Auto Parts. You
have my personal commitment to make Advance a special
place for our Team Members to work, for our Customers to
shop and for you to invest.
Sincerely,
Michael N. Coppola
President, Chief Executive Officer and
Chief Customer Representative
—Continued from page 3
Advance Auto Parts is committed to being a special place for our
team to work and our Customers to shop.
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