OREANDA-NEWS. Advance Auto Parts, Inc. (NYSE: AAP), a leading automotive aftermarket parts provider in North America, serving both professional installer and do-it-yourself customers, today announced its financial results for the second quarter ended July 16, 2016. Second quarter GAAP earnings per diluted share (Diluted EPS) were $1.68. Second quarter Adjusted earnings per diluted share (Adjusted EPS) were $1.90 which exclude $0.08 of amortization of acquired intangible assets and integration and restructuring costs of $0.14, primarily associated with the acquisition of General Parts International, Inc. (General Parts).

“Our second quarter results were not acceptable and we are moving thoughtfully and swiftly to make the necessary changes across a number of critical areas within the organization to alter the trajectory of the business and improve our operating performance," said Tom Greco, Chief Executive Officer. “There’s a heightened sense of urgency and accountability throughout the organization and we are taking decisive actions to deliver near-term improvement with a focus on accelerating our commercial growth and improving our execution.”

Greco continued, “I continue to be energized by the immense opportunity for improvement. The actions we need to take are well within our control and we are focused on building the right foundation for the long term. We are hard at work constructing a comprehensive strategic plan, which will help us reliably and consistently deliver industry leading performance and unparalleled customer service going forward. We remain confident in our business, our people and the opportunity that lies ahead to create long-term value."

Second Quarter 2016 Highlights

Total sales for the second quarter decreased 4.8% to $2.26 billion, as compared with total sales during the second quarter of fiscal 2015 of $2.37 billion. The sales decline was driven by the comparable store sales decrease of 4.1%, the store closures in 2015 and the effect of Carquest consolidations. The sales decline was partially offset by new store and Worldpac branch openings.

The Company's Gross Profit rate was 44.8% of sales during the second quarter as compared to 45.9% during the second quarter last year. The 110 basis-point decrease in gross profit rate was primarily the result of supply chain expense deleverage due to the comparable store sales decline and higher supply chain operating expenses.

On a GAAP basis, the Company's SG&A rate was 35.2% of sales during the second quarter as compared to 35.0% during the same period last year. The 14 basis-point increase was driven primarily by fixed cost deleverage due to our comparable store sales decline and higher self-insurance expense partially offset by lower incentive compensation costs and the Company's continued cost reduction initiatives and expense reduction actions to offset lower sales. The Company's Adjusted SG&A rate was 34.0% of sales during the second quarter as compared to 33.8% during the same period last year.

On a GAAP basis, the Company's operating income during the second quarter of $216.7 million decreased 15.7% versus the second quarter of fiscal 2015. On a GAAP basis, the Operating Income rate was 9.6% during the second quarter as compared to 10.8% during the second quarter of fiscal 2015. The Company's Adjusted Operating Income was $243.1 million during the second quarter, a decrease of 14.8% versus the second quarter of fiscal 2015. As a percentage of sales, Adjusted Operating Income in the second quarter was 10.8% versus 12.0% during the second quarter of fiscal 2015.

Operating cash flow decreased approximately 41.7% to $192.9 million through the second quarter of fiscal 2016 from $330.8 million through the second quarter of fiscal 2015. Free cash flow was $55.0 million through the second quarter of fiscal 2016 compared to $216.3 million through the second quarter of fiscal 2015. Capital expenditures through the second quarter of fiscal 2016 were $137.9 million as compared to $114.5 million through the second quarter of fiscal 2015.

Store Information

As of July 16, 2016, the Company operated 5,066 stores and 126 Worldpac branches and served approximately 1,300 independently owned Carquest stores. The below table summarizes the changes in the number of the company-operated stores and branches during the twenty-eight weeks ended July 16, 2016.

Dividend

On August 9, 2016, the Company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on October 7, 2016 to stockholders of record as of September 23, 2016.

Advance Names Robert Cushing to Lead Commercial Business

The Company also announced that Robert (Bob) B. Cushing, who currently serves as President, Worldpac, has been promoted to the newly created position of Executive Vice President, Commercial. In this new role, Mr. Cushing will report to Tom Greco, Chief Executive Officer, and will oversee all of the Company’s Commercial operations, including Autopart International and continue to lead Worldpac.

“The consolidation of all of our Commercial operations under one leader will enable us to implement a more holistic Commercial strategy and enhance our ability to serve customers,” said Greco. “Bob is uniquely qualified to lead this effort. He has a proven track record of delivering results including establishing Worldpac as one of the premier import distributors of original equipment and aftermarket parts to Commercial customers. Bob’s customer-focused approach, along with his expertise in developing an integrated e-commerce platform and leveraging technology to more effectively meet customer demands will be critical as we work to deliver improved results. We have valuable and distinctive commercial assets and I am excited that Bob will focus on using those assets to our competitive advantage.”

Mr. Cushing joined Worldpac via the acquisition of Metrix Parts Warehouse, Inc. in 1999 and was named President in January 2008. Prior to serving as President, Mr. Cushing served as Executive Vice President, Sales and Operations for the U.S. and Canada Worldpac operations and its affiliates from 1999 to 2007. Prior to joining Worldpac, Mr. Cushing held executive-level sales, marketing and operations positions with Metrix, Interco and Robert Bosch Corporation.

About Advance Auto Parts

Advance Auto Parts, Inc., a leading automotive aftermarket parts provider in North America, serves both professional installer and do-it-yourself customers. As of July 16, 2016, Advance operated 5,066 stores and 126 Worldpac branches and served approximately 1,300 independently owned Carquest branded stores in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. Advance employs approximately 74,000 Team Members.