As part of improved procurement costs, LIFO was a $3.3 million credit in this year''s quarter compared to a $5.6 million credit in last year''s quarter.

SG&A expense rate rose 41 basis points compared to last year.

This increase was primarily due to a 50 basis point increase in fixed expenses as a result of low comparable store sales and expenses of $1.5 million or 13 basis points related to the CEO transition and other severance costs. These items were partially offset by savings in other expense lines.

Interest expense net of interest income was $6.9 million compared to $8.8 million last year, primarily due to lower borrowing rates and higher cash balances this year compared to last year.

Approximately 65% of debt is hedged to fixed rates and current borrowing cost is just over 6% at today''s rate.

Income tax rate was 38.3% as compared to 38.1% last year.

In terms of the key components balance sheet and cash flow statement, inventory increased 8.9% on a sale increase of 5.6%, in line with performance in the first quarter. The rate of inventory growth was greater than the sales growth due to expanded parts assortments in selected stores, sales, coming in below expectations and an inventory build in the new AI distribution center during its opening.

- Accounts payable to inventory ratio was 57.1% compared to 57% last year.
- CapEx was $39.8 million, lower than the $54.1 million spent last year.

The company repurchased 95,000 shares.

The Board of Directors approved a $500 million share repurchase program which replaces the $300 million share repurchase program which is nearly completed. The company expects to continue to return capital to shareholders through dividends and share repurchases.

The company is improving parts availability to better meet the needs of core customer segments.

The company has developed and is implementing a plan to increase parts availability in stores. It believes this will drive improvement in both DIY and commercial sales. The plan is focused on greater late model and foreign vehicle coverage as well as being more aggressive in getting parts into stores and closer to customers.

The company is increasing parts availability. It has implemented an aggressive program to free up dollars invested in less productive inventory to fund a portion of this investment. To increase parts availability and inventory productivity over the longer term, the company has reprioritized information technology projects to improve custom mix, merchandising and inventory management tools.

The company is increasing commercial focus to take greater advantage of the full potential of the large and growing commercial market. It believes that over the last few quarters, the company has missed meaningful opportunities to drive commercial sales and as a result comparable store sales growth in this area has slowed. While 5% to 6% comparable store sales are respectable, the company believes they fall short of potential in this area. Increased parts availability will be a component of this improvement.

Commercial research as well as continued learnings from Autopart International gives more insight on how to further grow this business.

The company is changing previous focus on the front room.

As part of ongoing business review, the company has begun to improve the efficiency of work on the sales floor or front room portion of stores. The company is streamlining front room assortments where applicable and reducing the frequency of tasks such as planogram changes. This wok in improving efficiency and sales productivity will continue throughout the remainder of the year.

The company will make more progress on reducing SG&A and improving return on invested capital throughout company by realigning investments to the customer segments that provide the greatest opportunity of return. To have a meaningful impact, the company must make structural changes in how it operates instead of just marginal reductions through business as usual. Over the past several weeks, the company has made decisions in a number of areas that will reduce certain SG&A expenses by more than $20 million in the second half of 2007 and over $50 million in 2008 and that will reduce CapEx investment by $20 million in the second half of 2007 and over $65 million in 2008.

Some of those decisions are as follows. There company announced a reduction in field and store support center of 250 positions, including 175 field positions and 75 budgeted and open positions which are now closed. None of these positions are in stores. The company is assisting this group of team members to transition to the next step in their careers. The company will reduce new store growth in 2007 to 190 to 200 stores and in 2008 to 140 to 150 Advance Auto Parts and Autopart International stores. The company is anticipating relocating 20 stores in 2008 compared to 35 in 2007.

The company has halted 2010 store remodel program because research showed customers are not giving credit for this investment and recent sales show it is not delivering the expected results.