This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Advance Auto Parts Inc. (AAP: chart) on February 14, 2008.

Management:

- Vice President Finance and Investor Relations: Jud Neistrum
- President and CEO: Darren Jackson
- EVP Customer Development Officer: Elwyn Murray
- EVP Customer Experience Officer: Jim Wade
- EVP and Chief Financial Officer: Mike Norona

Key Investors Issues

- Earnings were down 1.7%, to $34.8 million or 35 cents a share.
- Sales were 2.9% up from the prior year to $1.05 billion.
- The share repurchase authorization currently stands at $105 million and the Board declared a regular quarterly cash dividend of 6 cents per share to be paid on April 4, 2008.

Full Year Highlights:

- Total revenue increased to $4.8 billion from $4.6 billion last year.
- Earnings were $238 million or $2.28 a share, up 3% from $231 million or $2.16 a share in 2006.
- The company repurchased 8.3 million shares or 8% of its outstanding shares at an aggregate cost of $286 million, or $34.27 per share.

Fourth Quarter Highlights

Sales were $1.05 billion, from $1.02 billion in the prior year driven by 196 new store and partially offset by comparable store sales which declined by 0.4% compared to an increase of 1.6% last year.

- Commercial sales grew consistently in the 8% to 9% range through the entire quarter as expected.
- DIY comparables were negative 3.1% compared to negative 0.3% last year following a step change in December in DIY sales, negatively impacted during the holiday season as consumers shifted their limited purchasing dollars to other priorities during this time.
- The DIY business is currently running down 2% versus the 6% decline over the holidays as the tough economic environment continues to hamper DIY sales.

Commercial comparables were 8.2% over 7.9% last year as the firm’s focus remains on getting the commercial comparables to consistently sustain a double digit run rate.

- Commercial sales including auto part international represented 27% of total sales and including AI were $288.1 million, a 13% increase over last year.
- Currently, about 83% of Advance store have Commercial programs compared to 81% for the fourth quarter last year.
- On a geographic basis, comparables continue to be stronger in the North and Midwest and weaker in other markets.
- The trends in Florida and the Gulf Coast continue to lag the company, weighing down the comps by a half percentage point.
- Overall, the mix of business or product sales helped offset strategic price changes to become more competitive in the parts business.

Interest expense was $8.2 million or slightly higher compared to $7.8 million last year as boring costs averaged 6%.

- Earnings were down 1.7%, to $34.8 million or 35 cents a share from $35.3 million or 34 cents a share in the prior year as EPS strengthened marginally due to a reduction in outstanding shares.
- SG&A expenses per store declined modestly in the quarter, offsetting higher inflation costs.
- Overall inventory investment per store declined slightly for the year as increased parts availability was offset by the removal of less productive inventory.

The firm repurchased two million shares or 2% of the total outstanding at an average price of $37.10 for a total expenditure of $75 million.

- Since the end of 2007, the firm has repurchased another four point six million shares at an average price of $34.04 for a total expenditure of $155 million.
- The share repurchase authorization currently stands at $105 million and the Board declared a regular quarterly cash dividend of 6 cents per share to be paid on April 4, 2008.
- Inventory increased 4.5% on a sales increase of 3.2%, due to parts availability initiative somewhat offset by the focus plan to improve inventory productivity.
- Capital expenditures were $73 million as cash flows improved $151 million to $234 million resulting from lower capital spending and working capital improvements.

Strategic Insights:

- The firm’s future will require a more adaptive customer driven model to succeed in the future.
- In turning around the business, the firm will focus on the customer by embracing a customer focus culture and strategy.
- The biggest opportunity is driving top line sales growth given that sales per square foot and per employee are in the bottom half of the industry despite all the capital investments over the last several years.

The strategy will be guided by the DIY and Commercial customer needs and will require it to prioritize availability excellence, having a superior experience and an efficient enterprise.

- The streamlining of the cost structure in the corporate offices, the elimination of the Advance Television and improved trends in self insurance is starting to pay dividends.
- On the other hand, simplification of the store operating model, the transformation of the supply chain and the organization around the customer are all in the initial stages.