How We're Doing Page 2 Winning Strategy Page 8 TRAK's 100 Days Page 13
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How We’re Doing page 2 Winning Strategy page 8 TRAK’s 100 Days page 13 Stockholder Information: Corporate Offices: 5673 Airport Road Roanoke, Virginia 24012 ADVANCE 540-362-4911 Internet Site: http://www.AdvanceAutoParts.com Annual Meeting: AUTO PARTS May 20, 2003 2002 Annual Review Wyndham Roanoke Hotel 2801 Hershberger Road, NW Roanoke, Virginia 24017 Registrar and Transfer Agent: Mellon Investor Services, LLC 200 Galleria Parkway Suite 1900 Atlanta, Georgia 30339 1-800-298-6813 TDD for Hearing-Impaired: 1-800-231-5469 2002 Foreign Stockholders: 201-329-8660 Advance Auto Parts TDD Foreign Stockholders: 201-329-8354 Common Stock: Ticker Symbol: AAP annual Listing: New York Stock Exchange Independent Accountants: Deloitte & Touche, LLP 1750 Tysons Blvd. McLean, Virginia 22102 REVIEW 2 5 3 6 1 4 10 7 8 9 Pictured on front cover: 1. Thermon Knighten, Vice President, Store Merchandising 2. Axel Oberg, Manager, Warranty Claims 3. John Payne, Manager, Customer Contact Center 4. Gray Turner, Vice President, Commercial Sales 5. Jose Feliciano, Division Manager 6. Elayne McFalls, Senior Business Analyst-Logistics & Replenishment 7. Tammy Finley, Vice President, Team Member Relations 8. Arlene Sumner, Sales Associate 9. Brian Leavens, Store Manager 10. Darlene Demarest, Director, Lease Administration NumberNumber ofof Stores Stores 2,484 2,435 1,729 1,617 1,5 67 We’re ready.We’re ready with quality parts at value prices. We’re test batteries, starters, alternators, sensors, and ignition ready with friendly Team Members who know their modules. Whatever the customers’ problem, we have a stuff.5 We’reYear ready Financials with clean, conveniently located solution. No wonder they keep coming back. stores. 5-Year Compounded 1998 1999 2000 2001 2002 GrowthWe 2002 now have more 2001 than 2,400 2000 attractive 1999 locations in 1998 37 We’re ready in Advance. Advance Auto Parts offers one states. During 2002,(in thousands, we opened except 110 per sharenew data)stores. And we We’re of theStatement largest of Operations selections Data: of brand name and private also relocated 39 to more convenient sites in existing mar- Net sales……………………………………………………... 28.1% $ 3,287,883 $ 2,517,639 $ 2,288,022 $2,206,945 $ 1,220,759 label auto parts, accessories, and maintenance items in kets. Because it’s more important to us to be a neighbor- NetSales Sales (in billions) $3.3 Gross profit (1) ……………………………………………… 33.6% 1,447,994 1,076,026 895,895 802,832 454,561 (in billions) the Comparableautomotive operating aftermarket. income (2) More ……………………………39.8% than 120,000 items hood 237,517 store than123,770 a national 94,374 one. That’s62,351 why we’re always62,208 in all.Comparable net income (3)…………………………………...56.5% $ improving 97,138 $ our 38,088 stores, $ making 17,596 them$ brighter, 154 $and 16,197 more inviting. We’ve always attracted the smart DIYers; now $2.5 ready Comparable net income per diluted share (3)…………………. $ 2.68 $ 1.31 $ 0.62 $ 0.01 $ 0.87 $2.3 $2.2 ButW iteighted isn’t enoughaverage diluted to have shares the outstanding…………………. right products. We have to current 36,188 initiatives29,158 include 28,611 educating more28,269 customers18,606 to provide customers great value. Our recent category man- help them maintain a safe fuel-efficient vehicle. agementSelected initiatives Store Data: are optimizing our pricing, increasing our Comparableproduct selection, store sales improvinggrowth ………………………………. our merchandising, and 5.5% 6.2% 4.4% 10.3% 7.8% with a Number of stores, end of period………………………………. 2,435 2,484 1,729 1,617 1,567 $1.2 enhancingStores with our commercial inventory delivery productivity. program, end of period ……………………………………But 1,411 what really1,370 sets us apart1,210 is that we’re1,094 a big company532 We’reTotal ready retail storein Advance. square footage,Our entireend team is focused on our with small town values. Founded in 1929, Advance Auto of period (in thousands) …………………………………... 18,108 18,717 13,325 12,476 12,084 customers’ needs. “Ring, ring” is our way of reminding Parts is built on honesty and integrity. Our team members Average net retail sales per store (4) …………………………. $ 1,303 $ 1,346 $ 1,295 $ 1,267 $ 1,270 1998 1999 2000 2001 2002 winning TeamAverage Members net retail to sales answer per square all calls foot within (5)…………………… three rings. And $ care 174 about $ their 175communities, $ 168 proved $ by 164 the $$8 million 172 a customer has to be greeted within 10 feet of entering our we’ve raised, with the help of our customers, for the Balance Sheet Data: storeInventory……………………………………………………… for us to earn a “Perfect 10.” $ 1,048,803Juvenile Diabetes$ 982,000 Research $ 788,914 Foundation $ 749,447 since $1995. 726,172 But Comparable Store Sales Net working capital ……………………………………………they 462,896 also care442,099 about their318,583 customers. 355,608 And about310,113 each Comparable Store Sales team! OnceTotal we assets……………………………………………………. make our customers feel welcome, we focus on 1,965,225other. We’re 1,950,615 ready to take1,356,360 the next step1,348,629 to an even1,265,355 higher solvingTotal nettheir debt problem. (6) ……………………………………………… Trained Team Members ask the level 722,506 of success!972,368 582,539 627,467 485,476 Total stockholders' equity …………………………………….. 468,356 288,571 156,271 133,954 159,091 right questions and give sound advice. They’re also eager to In 2002, more than 190 million 10.3% customers chose Advance Auto Parts Footnotes 7.8% 6.2% (1) Gross profit for fiscal 2001 excludes the non-recurring charge of $9,099 associated with our supply chain initiatives recorded in the fourth quarter. 5.5% for their automotive needs. Proof that 4.4% (2) Comparable operating income excludes certain non-recurring charges as included in the following reconciliation of this measurement to our operating when customers come through our doors, income presented under generally accepted accounting policies in our financial statements included in the accompanying annual report on form 10-K. we have what it takes to win them over – 2002 2001(a) 2000 1999 1998 1998 1999 2000 2001 2002 and keep them coming back. Comparable operating income $ 237,517 $ 123,770 $ 94,374 $ 62,351 $ 62,208 Supply chain initiatives - (10,492) - - - Impairment of assets held for sale - (10,700) (856) - - Recapitalization expenses - - - - (14,277) Merger related restructuring (597) (3,719) - - (6,774) ComparableComparable Operations Operating Income Income We’re ready with quality parts at value prices. We’re We now have more than 2,400 attractive locations in But what really sets us apart is that we’re a big com- Merger and integration (34,935) (1,135) - (41,034) (7,788) (in(in millions)millions) Private company expenses - - - - (845) ready with friendly Team Members who know their 37 states. During 2002, we opened 110 new stores. pany with small town values. Founded in 1929, $237.5 Stock option compensation - (8,611) (729) (1,082) (695) $237,517 stuff. We’re ready with clean, conveniently And we also relocated 39 to more convenient sites in Advance Auto Parts is built on honesty and integrity. Operating income $ 201,985 $ 89,113 $ 92,789 $ 20,235 $ 31,829 located stores. existing markets. We keep our stores looking great Our Team Members care about their communities, with our GOLD standard, having a “Grand Opening proved by the $8 million we’ve raised, with the help (a) Fiscal 2001 excludes only the non-recurring charges taken during the fourth quarter. We’re ready in Advance. Advance Auto Parts offers Look Daily.” of our customers, for the Juvenile Diabetes Research For more information see the fiscal 2001 financial statements and accompanying footnotes. $123,770$123.8 one of the largest selections of brand name and Foundation since 1995. But they also care about their (3) Comparable net income excludes the nonrecurring items in footnote (1) and (2) above and the extraordinary items and cumulative effect of a change $94.4 private label auto parts, accessories, and mainte- customers. And about each other. in accounting principle. The following is a reconciliation of comparable net income to net income presented under generally accepted accounting policies in $94,374 nance items in the automotive aftermarket. More our financial statements included in the accompanying annual report on form 10-K. $62,208$62.2 $62,351$62.4 than 120,000 items in all. We’re ready in Advance. 2002 2001(a) 2000 1999 1998 But it isn’t enough to have the right products. We have Comparable net income $ 97,138 $ 38,088 $ 17,596 $ 154 $ 16,197 Maine 7 Vermont 3 Add back non-recurring items from footnote (1) and (2) (35,532) (34,657) (1,585) (42,116) (30,379) 1998 1999 2000 2001 2002 to provide customers great value. Our recent category Tax impact of non-recurring items 13,786 13,758 615 16,636 12,000 management initiatives are optimizing our pricing, New Hampshire 4 Extraordinary items, net of tax (10,373) (3,682) 2,933 - - Wisconsin South Dakota 6 Massachusetts 21 Cumulative effect of a change in accounting principle, Comparable Earnings Per Share increasing our product selection, improving our mer- 18 New York 98 Rhode Island 3 Wyoming 2 Michigan net of tax - (2,065) - - - Connecticut 23 chandising, and enhancing our inventory productivity. 49 Net income $ 65,019 $ 11,442 $ 19,559 $ (25,326) $ (2,182) Iowa 24 Pennsylvania 135 Comparable Earnings per Share Nebraska 17 New Jersey 22 Ohio 145 We’re ready in Advance. Our entire team is focused Illinois 23 Indiana Delaware 5 Net income per diluted share $ 1.80 $ 0.39 $ 0.68 $ (0.90) $ (0.12) Colorado 15 71 West Maryland 60 Virginia Virginia 150 on our customers’ needs.