Advance Auto Parts 2008 Annual Report Download - page 45

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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. We have a short-term financing program with a bank for certain merchandise purchases. In
substance, the program allows us to borrow money from the bank to finance purchases from our vendors. This
program allows us to further reduce our working capital invested in current inventory levels and finance future
inventory growth. At January 3, 2009 and December 29, 2007, $136.4 million and $153.5 million, respectively, was
payable to the bank by us under this program.
We are anticipating the balance in financed vendor accounts payable to diminish as we transition our
merchandise vendors to a customer-managed services arrangement, or vendor program, entered into during the
fourth quarter of fiscal 2008. Under this vendor program, a third party provides an accounts payable tracking system
which facilitates participating suppliers’ ability to finance our payment obligations with designated third-party
financial institutions. Participating suppliers may, at their sole discretion, make offers to participating financial
institutions to finance one or more of our payment obligations prior to their scheduled due dates at a discounted
price. Our obligations to suppliers, including amounts due and scheduled payment dates, are not impacted by
suppliers’ decisions to finance our accounts payable due to them under this arrangement. Our goal in entering into
this arrangement is to capture overall supply chain savings in the form of pricing, payment terms or vendor funding,
created by facilitating our suppliers’ ability to finance payment obligations at more favorable discount rates, while
providing them with greater working capital flexibility.
As of January 3, 2009, we had $14.3 million in outstanding payables under our vendor program and had
remaining availability of approximately $25 million. It is possible any ongoing or worsening deterioration in the
credit markets could adversely impact our ability to secure funding for any of these programs, which would reduce
our anticipated savings, including but not limited to, causing us to increase our borrowings under our revolving
credit facility.
Stock Repurchase Program
On May 15, 2008, our Board of Directors authorized a new $250 million stock repurchase program. The new
program cancelled and replaced the remaining portion of our previous $500 million stock repurchase program
(authorized on August 8, 2007). This program allows us to repurchase our common stock on the open market or in
privately negotiated transactions from time to time in accordance with the requirements of the Securities and
Exchange Commission.
During fiscal 2008, we repurchased 6.1 million shares of common stock at an aggregate cost of $216.5 million,
or an average price of $35.28 per share, of which 4.6 million shares of common stock were repurchased under the
previous $500 million stock repurchase program during the first quarter of fiscal 2008. After May 15, 2008, we
repurchased 1.5 million shares of common stock for $61.1 million, leaving $188.9 million remaining under our
current $250 million stock repurchase program, excluding related expenses. Additionally, during fiscal 2008 we
settled $3.0 million on shares repurchased prior to the end of fiscal 2007.
Cash Dividend
On February 15, 2006, our Board of Directors declared a quarterly cash dividend, the first in our history. We
have paid quarterly dividends of $0.06 per share to stockholders of record for each of our subsequent quarters.
Subsequent to January 3, 2009, our Board of Directors declared a quarterly dividend of $0.06 per share to be paid on
April 10, 2009 to all common stockholders of record as of March 27, 2009.
Analysis of Cash Flows
A summary and analysis of our cash flows for fiscal 2008, 2007 and 2006 is reflected in the table and following
discussion.