Advance Auto Parts 2009 Annual Report Download - page 44

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31
Interest Expense
Interest expense for Fiscal 2008 was $33.7 million, or 0.7% of net sales, as compared to $34.8 million, or 0.7%
of net sales, in Fiscal 2007. The decrease in interest expense was a result of lower average borrowing rates partially
offset by higher average outstanding borrowings as compared to Fiscal 2007.
Income Taxes
Income tax expense for Fiscal 2008 was $142.7 million, as compared to $144.3 million for Fiscal 2007. Our
effective income tax rate was 37.5% and 37.7% for Fiscal 2008 and Fiscal 2007, respectively.
Net Income
Net income for Fiscal 2008 was $238.0 million, or $2.49 per diluted share, as compared to $238.3 million, or
$2.28 per diluted share, for Fiscal 2007. As a percentage of net sales, net income for Fiscal 2008 was 4.6%, as
compared to 4.9% for Fiscal 2007. The increase in diluted earnings per share was primarily due to a reduced share
count as a result of the shares repurchased during Fiscal 2007. Net income and diluted earnings per share for Fiscal
2008 were reduced by the non-cash inventory adjustment of $23.7 million (net of tax) and $0.25, respectively. Our
results from the 53rd week contributed approximately $9.6 million of net income and earnings per diluted share of
$0.10.
Quarterly Consolidated Financial Results (in thousands, except per share data)
16-Weeks 12-Weeks 12-Weeks 13-Weeks 16-Weeks 12-Weeks 12-Weeks 12-Weeks
Ended Ended Ended Ended Ended Ended Ended Ended
4/19/2008 7/12/2008 10/4/2008 1/3/2009 4/25/2009 7/18/2009 10/10/2009 1/2/2010
Net sales 1,526,132$ 1,235,783$ 1,187,952$ 1,192,388$ 1,683,636$ 1,322,844$ 1,262,576$ 1,143,567$
Gross profi
t
(1)
724,854 586,282 562,175 525,813 821,988 652,650 621,459 548,129
Net income 82,086 75,386 56,155 24,411 93,585 80,330 61,979 34,479
Net income per share:
Basic 0.86$ 0.79$ 0.59$ 0.26$ 0.99$ 0.84$ 0.65$ 0.37$
Diluted
(2)
0.86$ 0.78$ 0.58$ 0.26$ 0.98$ 0.83$ 0.65$ 0.36$
(1) Effective first quarter of Fiscal 2009, we implemented a change in accounting principle for costs included in inventory.
Accordingly, we have retrospectively applied the change in accounting principle to all prior periods presented herein
related to gross profit.
(2) Our diluted earnings per share reported for the second and third quarters of Fiscal 2008 have been reduced by $0.01,
respectively, as a result of the adoption of the two-class method. Refer to Footnote 14 of our consolidated financial
statements for further discussion of this adoption.
Liquidity and Capital Resources
Overview of Liquidity
Our primary cash requirements to maintain our current operations include payroll and benefits, the purchase of
inventory, contractual obligations and capital expenditures as well as the payment of quarterly cash dividends and
estimated income taxes. In addition, we have used available funds to repay borrowings under our revolving credit
facility and periodically repurchase shares of our common stock under our stock repurchase program. We have
funded these requirements primarily through cash generated from operations, supplemented by borrowings under
our credit facilities as needed. We believe funds generated from our expected results of operations, available cash
and cash equivalents, and available borrowings under our revolving credit facility will be sufficient to fund our
primary obligations for the next fiscal year.