Advance Auto Parts 2009 Annual Report Download - page 43

Download and view the complete annual report

Please find page 43 of the 2009 Advance Auto Parts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

30
Net Income
Net income for Fiscal 2009 was $270.4 million, or $2.83 per diluted share, for Fiscal 2009, as compared to
$238.0 million, or $2.49 per diluted share, for Fiscal 2008. As a percentage of net sales, net income for Fiscal 2009
was 5.0%, as compared to 4.6% for Fiscal 2008. The increase in diluted earnings per share was primarily due to
growth in our operating income.
Fiscal 2008 Compared to Fiscal 2007
Net Sales
Net sales for Fiscal 2008 were $5,142.3 million, an increase of $297.9 million, or 6.1%, over net sales for Fiscal
2007. The net sales increase was due to contributions from the 107 net new AAP and AI stores opened within Fiscal
2008, $88.8 million in sales from the 53rd week and an increase in comparable store sales of 1.5%.
AAP produced sales of $4,976.6 million, an increase of $267.2 million, or 5.7%, over Fiscal 2007. AAP’s sales
increase was primarily driven by a 1.3% comparable store sales increase, $86.5 million in sales from the 53rd week
and sales from the 90 net new stores opened within Fiscal 2008. The AAP comparable store sales increase was
driven by (i) an increase in average ticket sales and customer traffic in our Commercial business and (ii) an increase
in average ticket sales by our DIY customers offset by a decrease in DIY customer count. AI produced sales of
$165.7 million, an increase of $30.6 million, or 22.7%, over Fiscal 2007. AI’s sales increase was primarily driven by
a 9.2% comparable store sales increase, $2.3 million in sales from the 53rd week and sales from 17 net new stores
opened within Fiscal 2008.
Gross Profit
Gross profit for Fiscal 2008 was $2,399.1 million, or 46.7% of net sales, as compared to $2,258.7 million, or
46.6% of net sales, in Fiscal 2007, increasing slightly from an implemented change in accounting principle for costs
included in inventory beginning in the first quarter of Fiscal 2009 and retrospectively applied to all prior periods
presented herein related to gross profit. Gross profit for Fiscal 2008 reflects a reduction of $37.5 million, or 73 basis
points resulting from a non-cash inventory adjustment. Offsetting this reduction in gross profit as a percentage of net
sales were improvements in gross profit from more effective pricing, decreased inventory shrink, and higher sales
from AI, which generated a higher gross profit rate. The impact on gross profit from the 53rd week was
approximately $44.0 million and did not materially affect our gross profit rate.
SG&A
SG&A expenses for Fiscal 2008 were $1,984.2 million, or 38.6% of net sales, as compared to $1,842.3 million,
or 38.0% of net sales, for Fiscal 2007, or an increase of 56 basis points. The increase in SG&A expenses as a
percentage of net sales was driven primarily by investments in strategic initiatives, increased incentive compensation
and legal settlement costs partially offset by favorable medical costs. Our SG&A rate for Fiscal 2008 was favorably
impacted by approximately 14 basis points from the 53rd week as a result of not including an additional week of
fixed expenses that are typically expensed in a 52-week year.
Operating Income
Operating income for Fiscal 2008 was $414.9 million, or 8.1% of net sales, as compared to $416.4 million, or
8.6% of net sales, in Fiscal 2007, or a decrease of 53 basis points. AAP produced operating income of $410.7
million, or 8.3% of net sales, for Fiscal 2008 as compared to $417.2 million, or 8.9% of net sales, in Fiscal 2007. AI
generated operating income for Fiscal 2008 of $4.2 million as compared to an operating loss of $0.8 million in
Fiscal 2007. Operating income for AI increased primarily due to its positive sales results for the year and a decrease
in payroll expense as a percentage of sales. Our overall operating income was reduced by a non-cash inventory
adjustment of $37.5 million while results from the 53rd week contributed approximately $15.8 million to our
operating income.