Advance Auto Parts Reports First Quarter 2019 Results
Business Wire 22-May-2019 6:30 AM
Net Sales Increased 2.7% to $3.0B; Comparable Store Sales Increased 2.7%Operating
Income Increased 4.9% to $207.9M; Adjusted Operating Income Increased
8.7% to $243.6M
Diluted EPS Increased 7.6% to $1.98; Adjusted Diluted EPS Increased
17.1% to $2.46Operating Cash Flow Increased 32.8% to $204.5M; Free
Cash Flow Increased 19.9% to $143.2M
Advance Auto Parts, Inc. (NYSE:AAP), a leading automotive aftermarket
parts provider in North America, that serves both professional installer
and do-it-yourself customers, today announced its financial results for
the first quarter ended April 20, 2019.
"We delivered our fourth consecutive quarter of increased top line sales
and gross profit expansion," said Tom Greco, President and Chief
Executive Officer. "Our free cash flow improved by nearly 20% as a
result of our continued disciplined approach to cash management. The
early progress against our strategic transformation agenda is becoming
more evident throughout our culture and in our improving results. We saw
positive improvement in our comp sales performance while we continue to
drive margin expansion. Despite inflationary headwinds, our team's
diligent efforts on operational improvement to reduce costs is evident
in our first quarter SG&A results where we continued to leverage store
labor in the quarter and further reduce insurance and claims expense
through improved safety initiatives. I am confident our more than 70,000
Team Members will enable continued success for AAP throughout 2019 and
beyond through their focus and commitment to our Mission, Passion
for Customers…Passion for Yes!"
First Quarter Highlights
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Net sales increased 2.7% to $3.0B; Comparable store sales (a)
increased 2.7%
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Operating income increased 4.9% to $207.9M; Operating income margin
expansion of 15 bps to 7.0%
-
Adjusted operating income (a) increased 8.7% to $243.6M;
Adjusted operating income margin expansion of 46 bps to 8.3%
-
Diluted EPS increased 7.6% to $1.98; Adjusted Diluted EPS (a)
increased 17.1% to $2.46
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(a)
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Comparable store sales exclude sales to independently owned
Carquest locations. For a better understanding of the Company's
adjusted results, refer to the reconciliation of non-GAAP
adjustments in the accompanying financial tables included herein.
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First Quarter 2019 Highlights
Net sales for the first quarter of 2019 were $3.0 billion, a 2.7%
increase versus the first quarter of the prior year. Comparable store
sales for the first quarter of 2019 increased 2.7%.
Adjusted gross profit margin was 44.6% of Net sales in the first quarter
of 2019, a 37 basis point increase from the first quarter of 2018. The
increase was primarily driven by favorable product margin and improved
inventory management, partially offset by supply chain headwinds due to
planned wage investments. The Company's GAAP Gross profit margin
decreased to 44.2% from 44.3% in the first quarter of the prior year.
Adjusted SG&A was 36.4% of Net sales in the first quarter of 2019, an
improvement of 8 basis points as compared to the first quarter of 2018.
The improvement was driven by leveraging store labor and lower insurance
and claims expenses, which were partially offset by an increase in
professional fees related to investments in IT infrastructure. The
Company's GAAP SG&A of 37.2% of Net sales improved from 37.4% in the
same quarter of the prior year.
The Company's Adjusted operating income was $243.6 million in the first
quarter of 2019, an increase of 8.7% versus the first quarter of the
prior year. Adjusted operating income margin improved to 8.3% of Net
sales for the first quarter, an increase of 46 basis points compared to
the first quarter of the prior year. On a GAAP basis, the Company's
Operating income was $207.9 million, 7.0% of Net sales, an increase of
15 basis points from the first quarter of 2018.
The Company's effective tax rate in the first quarter of 2019 was 25.3%,
compared to 24.5% in the first quarter of the prior year. The Company's
Adjusted Diluted EPS was $2.46 for the first quarter of 2019, an
increase of 17.1% compared to the first quarter of the prior year. On a
GAAP basis, the Company's Diluted EPS increased 7.6% to $1.98.
Operating cash flow was $204.5 million in the first quarter of 2019
versus $154.0 million in the same period of the prior year, an increase
of 32.8%. Free cash flow in the first quarter of 2019 was $143.2
million, an increase of 19.9% compared to the same period of the prior
year.
2019 Full Year Guidance
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Full Year 2019
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($ in millions)
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Low
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High
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Net sales
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$
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9,650
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$
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9,800
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Comparable store sales
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1.0
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%
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2.5
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%
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Adjusted operating income margin (a)
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8.0
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%
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8.4
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%
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Income tax rate
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24
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%
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26
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%
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Transformation expenses (a)
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$
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80
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$
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100
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Capital expenditures
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$
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250
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$
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300
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Free cash flow (a)
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Minimum $650
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(a)
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For a better understanding of the Company's adjusted results,
refer to the reconciliation of non-GAAP adjustments in the
accompanying financial tables included herein. Because of the
forward-looking nature of the 2019 non-GAAP financial measures,
specific quantifications of the amounts that would be required to
reconcile these non-GAAP financial measures to their most directly
comparable GAAP financial measures are not available at this time.
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Capital Allocation
On August 8, 2018, the Company's Board of Directors authorized a $600
million share repurchase program. Under this program, the Company
repurchased 0.8 million shares of its common stock for $127.2 million
during the first quarter. At the end of the first quarter of 2019, the
Company had $200 million remaining under the share repurchase program.
On May 14, 2019, the Company's Board of Directors declared a regular
quarterly cash dividend of $0.06 per share to be paid on July 5, 2019 to
all common shareholders of record as of June 21, 2019.
On February 28, 2019, the Company redeemed all of the $300.0 million
aggregate principal amount of its outstanding 2020 senior unsecured
notes. The Company incurred charges relating to a make-whole provision
and debt issuance costs of $10.1 million and $0.7 million resulting from
the early redemption of the 2020 senior unsecured notes.
Investor Conference Call
The Company will discuss its results for the first quarter of 2019 via a
webcast scheduled to begin at 8 a.m. Eastern Time on Wednesday, May 22,
2019. The webcast will be accessible via the Investor Relations page of
the Company's website (www.AdvanceAutoParts.com).
For individuals unable to access the webcast, the event will be
available by dialing (844) 877-5989 and referencing conference
identification number 1584508. A replay of the conference call will be
available on the Company's website for one year.
About Advance Auto Parts
Advance Auto Parts, Inc. is a leading automotive aftermarket parts
provider that serves both professional installer and do-it-yourself
customers. As of April 20, 2019, Advance operated 4,931 stores and 146
Worldpac branches in the United States, Canada, Puerto Rico and the U.S.
Virgin Islands. The Company also serves 1,238 independently owned
Carquest branded stores across these locations in addition to Mexico,
the Bahamas, Turks and Caicos, and British Virgin Islands. Additional
information about Advance, including employment opportunities, customer
services, and online shopping for parts, accessories and other offerings
can be found at www.AdvanceAutoParts.com.
Forward-Looking Statements
Certain statements in this report are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of
1995. All statements, other than statements of historical facts, may be
forward-looking statements. Forward-looking statements address future
events or developments, and typically use words such as "believe,"
"anticipate," "expect," "intend," "plan," "forecast," "guidance,"
"outlook" or "estimate" or similar expressions. These forward-looking
statements include, but are not limited to, key assumptions for future
financial performance including net sales, store growth, comparable
store sales, gross profit rate, SG&A, adjusted operating income, income
tax rate, transformation costs, adjusted operating income rate targets,
capital expenditures, inventory levels and free cash flow; statements
regarding expected growth and future performance of the Company;
statements regarding enhancements to stockholder value, strategic plans
or initiatives, growth or profitability, productivity targets and all
other statements that are not statements of historical facts. These
statements are based upon assessments and assumptions of management in
light of historical results and trends, current conditions and potential
future developments that often involve judgment, estimates, assumptions
and projections. Forward-looking statements reflect current views about
our plans, strategies and prospects, which are based on information
currently available as of the date of this release. Except as required
by law, the Company undertakes no obligation to update any
forward-looking statements to reflect events or circumstances after the
date of such statements. Please refer to the risk factors discussed in
"Item 1a. Risk Factors" in the Company's most recent Annual Report on
Form 10-K, as updated by its Quarterly Report on Form 10-Q and other
filings made by the Company with the Securities and Exchange Commission
for additional factors that could materially affect the Company's actual
results. Forward-looking statements are subject to risks and
uncertainties, many of which are outside its control, which could cause
actual results to differ materially from these statements. Therefore,
you should not place undue reliance on those statements.
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Advance Auto Parts, Inc. and Subsidiaries
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Condensed Consolidated Balance Sheets
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(in thousands)
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(unaudited)
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April 20, 2019
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December 29, 2018
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Assets
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Current assets:
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Cash and cash equivalents
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$
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537,330
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$
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896,527
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Receivables, net
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684,419
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624,972
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Inventories
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4,433,981
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4,362,547
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Other current assets
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126,108
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198,408
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Total current assets
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5,781,838
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6,082,454
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Property and equipment, net
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1,363,128
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1,368,985
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Operating lease right-of-use assets
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2,371,362
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—
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Goodwill
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991,240
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990,237
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Intangible assets, net
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527,702
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550,593
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Other assets
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46,241
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48,379
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$
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11,081,511
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$
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9,040,648
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Liabilities and Stockholders' Equity
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Current liabilities:
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Accounts payable
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$
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3,276,955
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$
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3,172,790
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Accrued expenses
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530,277
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623,141
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Other current liabilities
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491,645
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90,019
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Total current liabilities
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4,298,877
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3,885,950
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Long-term debt
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746,767
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1,045,720
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Noncurrent operating lease liabilities
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2,054,173
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—
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Deferred income taxes
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310,404
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318,353
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Other long-term liabilities
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124,067
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239,812
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Total stockholders' equity
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3,547,223
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3,550,813
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$
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11,081,511
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$
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9,040,648
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NOTE: These preliminary condensed consolidated balance sheets
have been prepared on a basis consistent with the Company's
previously prepared balance sheets filed with the Securities and
Exchange Commission ("SEC"), but do not include the footnotes
required by accounting principles generally accepted in the United
States of America ("GAAP").
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Advance Auto Parts, Inc. and Subsidiaries
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Condensed Consolidated Statements of Operations
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(in thousands, except per share data)
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(unaudited)
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Sixteen Weeks Ended
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April 20, 2019
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April 21, 2018
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Net sales
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$
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2,952,036
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$
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2,873,848
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Cost of sales, including purchasing and warehousing costs
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1,647,424
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1,601,564
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Gross profit
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1,304,612
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1,272,284
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Selling, general and administrative expenses
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1,096,672
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1,074,043
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Operating income
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207,940
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198,241
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Other, net:
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Interest expense
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(14,944
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)
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(17,682
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)
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Other (expense) income, net
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(2,238
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)
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458
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Total other, net
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(17,182
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)
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(17,224
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)
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Income before provision for income taxes
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190,758
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181,017
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Provision for income taxes
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48,258
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44,290
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Net income
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$
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142,500
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$
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136,727
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|
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Basic earnings per common share
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$
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1.99
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|
|
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$
|
1.85
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Weighted average common shares outstanding
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|
|
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71,787
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|
|
|
|
73,979
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|
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Diluted earnings per common share
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$
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1.98
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|
|
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$
|
1.84
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Weighted average common shares outstanding
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|
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72,103
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|
|
|
|
74,205
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NOTE: These preliminary condensed consolidated statements of
operations have been prepared on a basis consistent with the
Company's previously prepared statements of operations filed with
the SEC, but do not include the footnotes required by GAAP for
complete financial statements.
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Advance Auto Parts, Inc. and Subsidiaries
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Condensed Consolidated Statements of Cash Flows
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(in thousands)
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(unaudited)
|
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Sixteen Weeks Ended
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|
|
April 20, 2019
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April 21, 2018
|
|
|
|
|
|
|
|
|
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Cash flows from operating activities:
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|
|
|
|
|
|
|
Net income
|
|
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$
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142,500
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|
|
|
$
|
136,727
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|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
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|
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Depreciation and amortization
|
|
|
|
69,885
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|
|
|
|
71,692
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|
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Share-based compensation
|
|
|
|
10,984
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|
|
|
|
7,642
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|
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(Benefit) provision for deferred income taxes
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|
|
|
(250
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)
|
|
|
|
7,340
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Other, net
|
|
|
|
11,473
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|
|
|
|
3,880
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|
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Net change in:
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
|
(58,757
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)
|
|
|
|
(14,012
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)
|
|
Inventories
|
|
|
|
(68,742
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)
|
|
|
|
(64,369
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)
|
|
Accounts payable
|
|
|
|
102,941
|
|
|
|
|
(2,948
|
)
|
|
Accrued expenses
|
|
|
|
(62,751
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)
|
|
|
|
20,765
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|
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Other assets and liabilities, net
|
|
|
|
57,259
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|
|
|
|
(12,747
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)
|
|
Net cash provided by operating activities
|
|
|
|
204,542
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|
|
|
|
153,970
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|
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Cash flows from investing activities:
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
(61,312
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)
|
|
|
|
(34,474
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)
|
|
Proceeds from sales of property and equipment
|
|
|
|
553
|
|
|
|
|
530
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|
|
Net cash used in investing activities
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|
(60,759
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)
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|
|
|
(33,944
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)
|
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Cash flows from financing activities:
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|
|
|
|
|
|
|
Decrease in bank overdrafts
|
|
|
|
(50,578
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)
|
|
|
|
(12,101
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)
|
|
Redemption of senior unsecured notes
|
|
|
|
(310,047
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)
|
|
|
|
—
|
|
|
Dividends paid
|
|
|
|
(8,723
|
)
|
|
|
|
(8,930
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)
|
|
Proceeds from the issuance of common stock
|
|
|
|
678
|
|
|
|
|
754
|
|
|
Tax withholdings related to the exercise of stock appreciation rights
|
|
|
|
(99
|
)
|
|
|
|
(93
|
)
|
|
Repurchases of common stock
|
|
|
|
(134,291
|
)
|
|
|
|
(5,224
|
)
|
|
Other, net
|
|
|
|
(116
|
)
|
|
|
|
(1,163
|
)
|
|
Net cash used in financing activities
|
|
|
|
(503,176
|
)
|
|
|
|
(26,757
|
)
|
|
Effect of exchange rate changes on cash
|
|
|
|
196
|
|
|
|
|
(1,063
|
)
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
(359,197
|
)
|
|
|
|
92,206
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
896,527
|
|
|
|
|
546,937
|
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
537,330
|
|
|
|
$
|
639,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE: These preliminary condensed consolidated statements of
cash flows have been prepared on a consistent basis with the
Company's previously prepared statements of cash flows filed with
the SEC, but do not include the footnotes required by GAAP for
complete financial statements.
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|
Reconciliation of Non-GAAP Financial Measures
The Company's financial results include certain financial measures not
derived in accordance with GAAP. Non-GAAP financial measures should not
be used as a substitute for GAAP financial measures, or considered in
isolation, for the purpose of analyzing operating performance, financial
position or cash flows. Management presented these non-GAAP financial
measures as they believe that the presentation of its financial results
that exclude (1) transformation expenses under its strategic business
plan; (2) non-operational expenses associated with the integration of
General Parts International ("GPI") and store closure and consolidation;
(3) non-cash charges related to the acquired GPI intangible assets; and
(4) other non-recurring adjustments is useful and indicative of its base
operations because the expenses vary from period to period in terms of
size, nature and significance and/or relate to the integration of GPI
and store closure and consolidation activity in excess of historical
levels. These measures assist in comparing current operating results
with past periods and with the operational performance of other
companies in its industry. The disclosure of these measures allows
investors to evaluate the Company's performance using the same measures
management uses in developing internal budgets and forecasts and in
evaluating management's compensation. Included below is a description of
the expenses that the Company have determined are not normal, recurring
cash operating expenses necessary to operate its business and the
rationale for why providing these measures is useful to investors as a
supplement to the GAAP measures.
Transformation Expenses - Management
expects to recognize a significant amount of transformation expenses
over the next several years as they transition from integration of the
Advance Auto Parts/Carquest businesses to a plan that involves a more
holistic and integrated transformation of the entire Company, including
Worldpac and Autopart International. These expenses will include, but
not be limited to, restructuring costs, store closure costs and
third-party professional services and other significant costs to
integrate and streamline our operating structure across the enterprise.
Management is focused on several areas throughout Advance, such as
supply chain and information technology.
GPI Integration and Store Closure and
Consolidation Expenses - The multi-year plan to integrate the
operations of GPI that the Company acquired in 2014 with Advance Auto
Parts substantially ended in 2018. Due to the size of this acquisition,
the Company considered these expenses to be outside of its base
business. Management believed providing additional information in the
form of non-GAAP measures that excluded these costs was beneficial to
the users of its financial statements in evaluating the operating
performance of its base business and the sustainability once the
integration was complete. In addition to integration expenses, the
Company incurred store closure and consolidation expenses that consisted
of expenses associated with plans to convert and consolidate the
Carquest stores acquired from GPI. While periodic store closures are
common, these closures represent a significant program outside of the
Company's typical market evaluation process. The Company believes it was
useful to provide additional non-GAAP measures that excluded these costs
to provide investors greater comparability of its base business and core
operating performance.
|
|
|
Reconciliation of Adjusted Net Income and
Adjusted EPS:
|
|
|
|
|
Sixteen Weeks Ended
|
|
(in thousands, except per share data)
|
|
|
April 20, 2019
|
|
|
April 21, 2018
|
|
Net income (GAAP)
|
|
|
$
|
142,500
|
|
|
|
$
|
136,727
|
|
|
Cost of sales adjustments:
|
|
|
|
|
|
|
|
Transformation expenses
|
|
|
|
281
|
|
|
|
|
—
|
|
|
Other adjustment (a)
|
|
|
|
13,009
|
|
|
|
|
—
|
|
|
SG&A adjustments:
|
|
|
|
|
|
|
|
Transformation expenses
|
|
|
|
13,930
|
|
|
|
|
11,880
|
|
|
GPI integration and store closure and consolidation expenses
|
|
|
|
—
|
|
|
|
|
2,222
|
|
|
GPI amortization of acquired intangible assets
|
|
|
|
8,459
|
|
|
|
|
11,716
|
|
|
Other income adjustment (b)
|
|
|
|
10,756
|
|
|
|
|
—
|
|
|
Provision for income taxes on adjustments (c)
|
|
|
|
(11,609
|
)
|
|
|
|
(6,454
|
)
|
|
Adjusted net income (Non-GAAP)
|
|
|
$
|
177,326
|
|
|
|
$
|
156,091
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share (GAAP)
|
|
|
$
|
1.98
|
|
|
|
$
|
1.84
|
|
|
Adjustments, net of tax
|
|
|
|
0.48
|
|
|
|
|
0.26
|
|
|
Adjusted EPS (Non-GAAP)
|
|
|
$
|
2.46
|
|
|
|
$
|
2.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Table amounts may not foot due to rounding.
|
|
|
|
(a)
|
|
During the sixteen weeks ended April 20, 2019, the Company made
an out-of-period correction, which increased Accounts payable and
increased Cost of sales by $13.0 million, related to received not
invoiced inventory.
|
|
|
|
|
|
(b)
|
|
During the sixteen weeks ended April 20, 2019, the Company
incurred charges relating to a make-whole provision and debt
issuance costs of $10.1 million and $0.7 million resulting from
the early redemption of its 2020 senior unsecured notes.
|
|
|
|
|
|
(c)
|
|
The income tax impact of non-GAAP adjustments is calculated
using the estimated tax rate in effect for the respective non-GAAP
adjustments.
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Gross Profit:
|
|
|
|
|
|
|
|
Sixteen Weeks Ended
|
|
(in thousands)
|
|
|
April 20, 2019
|
|
|
April 21, 2018
|
|
Gross profit (GAAP)
|
|
|
$
|
1,304,612
|
|
|
|
$
|
1,272,284
|
|
|
Gross profit adjustments
|
|
|
|
13,290
|
|
|
|
|
—
|
|
|
Adjusted gross profit (Non-GAAP)
|
|
|
$
|
1,317,902
|
|
|
|
$
|
1,272,284
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Selling,
General and Administrative Expenses:
|
|
|
|
|
|
|
|
Sixteen Weeks Ended
|
|
(in thousands)
|
|
|
April 20, 2019
|
|
|
April 21, 2018
|
|
SG&A (GAAP)
|
|
|
$
|
1,096,672
|
|
|
|
$
|
1,074,043
|
|
|
SG&A adjustments
|
|
|
|
(22,389
|
)
|
|
|
|
(25,818
|
)
|
|
Adjusted SG&A (Non-GAAP)
|
|
|
$
|
1,074,283
|
|
|
|
$
|
1,048,225
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Operating
Income:
|
|
|
|
|
|
|
|
Sixteen Weeks Ended
|
|
(in thousands)
|
|
|
April 20, 2019
|
|
|
April 21, 2018
|
|
Operating income (GAAP)
|
|
|
$
|
207,940
|
|
|
|
$
|
198,241
|
|
|
Cost of sales and SG&A adjustments
|
|
|
|
35,679
|
|
|
|
|
25,818
|
|
|
Adjusted operating income (Non-GAAP)
|
|
|
$
|
243,619
|
|
|
|
$
|
224,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE: Adjusted gross profit, Adjusted gross profit margin
(calculated by dividing Adjusted gross profit by Net sales),
Adjusted SG&A, Adjusted SG&A as a percentage of Net sales,
Adjusted operating income and Adjusted operating income margin
(calculated by dividing Adjusted operating income by Net sales)
are non-GAAP measures. Management believes these non-GAAP measures
are important metrics in assessing the overall performance of the
business and utilizes these metrics in its ongoing reporting. On
that basis, Management believes it is useful to provide these
metrics to investors and prospective investors to evaluate the
Company's operating performance across periods adjusting for these
items (refer to the reconciliation of non-GAAP adjustments above).
These non-GAAP measures might not be calculated in the same manner
as, and thus might not be comparable to, similarly titled measures
reported by other companies. Non-GAAP measures should not be used
by investors or third parties as the sole basis for formulating
investment decisions, as they may exclude a number of important
cash and non-cash recurring items.
|
|
|
|
Reconciliation of Free Cash Flow:
|
|
|
|
|
|
|
|
|
|
|
Sixteen Weeks Ended
|
|
(In thousands)
|
|
|
April 20, 2019
|
|
|
April 21, 2018
|
|
Cash flows from operating activities
|
|
|
$
|
204,542
|
|
|
|
$
|
153,970
|
|
|
Purchases of property and equipment
|
|
|
|
(61,312
|
)
|
|
|
|
(34,474
|
)
|
|
Free cash flow
|
|
|
$
|
143,230
|
|
|
|
$
|
119,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE: Management uses Free cash flow as a measure of its
liquidity and believes it is a useful indicator to investors or
potential investors of the Company's ability to implement growth
strategies and service debt. Free cash flow is a non-GAAP measure
and should be considered in addition to, but not as a substitute
for, information contained in the Company's condensed consolidated
statement of cash flows as a measure of liquidity.
|
|
|
|
Adjusted Debt to Adjusted EBITDAR:
|
|
|
|
|
|
|
|
|
|
|
Four Quarters Ended
|
|
(In thousands, except adjusted debt to adjusted EBITDAR ratio)
|
|
|
April 20, 2019
|
|
|
December 29, 2018
|
|
Total debt
|
|
|
$
|
746,830
|
|
|
$
|
1,045,930
|
|
Add: Operating lease liabilities (a)
|
|
|
|
2,503,875
|
|
|
|
2,425,325
|
|
Adjusted debt
|
|
|
|
3,250,705
|
|
|
|
3,471,255
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
613,974
|
|
|
|
604,275
|
|
Add: Adjustments (b)
|
|
|
|
131,742
|
|
|
|
107,867
|
|
Depreciation and amortization
|
|
|
|
236,377
|
|
|
|
238,184
|
|
Adjusted EBITDA
|
|
|
|
982,093
|
|
|
|
950,326
|
|
Rent expense
|
|
|
|
554,960
|
|
|
|
553,377
|
|
Share-based compensation
|
|
|
|
31,102
|
|
|
|
27,760
|
|
Adjusted EBITDAR
|
|
|
$
|
1,568,155
|
|
|
$
|
1,531,463
|
|
|
|
|
|
|
|
|
|
Adjusted Debt to Adjusted EBITDAR (c)
|
|
|
|
2.1
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
On December 30, 2018 the Company recorded operating lease
liabilities of $2.4 billion upon adoption of Accounting Standards
Update 2016-02, Leases (Topic 842) ("ASU 2016-2"). As of April 20,
2019, $2.5 billion of operating lease liabilities were recorded in
the Company's condensed consolidated balance sheet.
|
|
(b)
|
|
The adjustments to the four quarters ended April 20, 2019 and
December 29, 2018 include GPI integration, store consolidation
costs and transformation expenses.
|
|
(c)
|
|
Ratio is derived by utilizing the operating lease liabilities
recorded by the Company upon adoption of ASU 2016-02 rather than
utilizing estimated capitalized lease obligations (six times rent
expense), which were $3.3 billion as of April 20, 2019 and
December 29, 2018. For comparability purposes, the Adjusted Debt
to Adjusted EBITDAR ratio calculated using the historical
estimated capitalized lease obligations would be 2.6 and 2.9 as of
April 20, 2019 and December 29, 2018.
|
|
|
|
|
|
NOTE: Management believes its Adjusted Debt to Adjusted EBITDAR
ratio ("leverage ratio") is a key financial metric for debt
securities, as reviewed by rating agencies, and believes its debt
levels are best analyzed using this measure. The Company's goal is
to maintain a 2.5 times leverage ratio and investment grade
rating. The Company's credit rating directly impacts the interest
rates on borrowings under its existing credit facility and could
impact the Company's ability to obtain additional funding. If the
Company was unable to maintain its investment grade rating this
could negatively impact future performance and limit growth
opportunities. Similar measures are utilized in the calculation of
the financial covenants and ratios contained in the Company's
financing arrangements. The leverage ratio calculated by the
Company is a non-GAAP measure and should not be considered a
substitute for debt to net earnings, net earnings or debt as
determined in accordance with GAAP. The Company adjusts the
calculation to remove rent expense and to add back the Company's
existing operating lease liabilities related to their right-of-use
assets to provide a more meaningful comparison with the Company's
peers and to account for differences in debt structures and
leasing arrangements. The Company's calculation of its leverage
ratio might not be calculated in the same manner as, and thus
might not be comparable to, similarly titled measures by other
companies.
|
|
|
Store Information:
During the sixteen weeks ended April 20, 2019, 6 stores and branches
were opened and 38 were closed or consolidated, resulting in a total of
5,077 stores and branches as of April 20, 2019, compared to a total of
5,109 stores and branches as of December 29, 2018.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190522005242/en/
