Citing improved gross margin and same store sales, Advance Auto Parts, the second largest auto parts chain in the U.S., reported record second quarter results. Advance Auto Parts, Inc. today announced it achieved earnings per diluted share of $1.16 for the second quarter ended July 12, 2003, after non-recurring expenses of $0.05 per diluted share associated with the Discount Auto Parts’ integration. Commenting on the second quarter results, Larry Castellani, the company’s chairman and chief executive officer, said, “Our team proved this quarter that even in a challenging sales environment we can achieve our goal of expanding our operating margins. Our category management initiatives are running ahead of plan. We have developed a game plan to expand our sales growth and we see tremendous opportunities for the future.” Year-to-date earnings per diluted share rose to $1.31, after non-recurring expenses of $0.79 per diluted share resulting from the early redemption of outstanding notes and debentures and $0.10 per diluted share in integration expenses. Comparable earnings per diluted share rose by 57.1% to $1.21 in the second quarter from $0.77 last year. All figures in U.S. dollars. Year-to-date comparable earnings per diluted share rose 65.4% to $2.20 compared to $1.33 last year. Comparable results do not include the non-recurring expenses associated with the Discount Auto Parts’ integration and the early redemption of notes and debentures, as reconciled on the accompanying statements. The company uses these non-GAAP- comparable measures as an indication of its earnings from recurring operations and believes it is important to the company’s stockholders due to the non- recurring nature and significance of the excluded expenses. Sales increased 5.9% in the second quarter to $839.2 million compared to $792.7 million last year. Same store sales grew 2.0% in the second quarter on top of 5.0% in the same quarter last year. The Discount Auto Parts stores, which are in the comparable store base this year, produced a comparable store sales increase of 6.6% during the second quarter compared to 3.7% last year. Year-to-date sales increased 4.2% to $1,872.7 million compared to $1,796.8 million last year as same store sales rose 1.5% compared to 6.5% during the same period last year. During the second quarter, gross margin increased 140 basis points to 45.4% compared to 44.0% last year as the company reaped the benefits of its category management initiatives and leveraged its logistics expenses. Year- to-date, gross margin improved 160 basis points to 45.3% from 43.7% last year. As a result of the strong gross margin improvement, comparable operating income increased 24.6% in the second quarter to $80.9 million from $64.9 million in the same quarter last year, generating an operating margin increase of 140 basis points to 9.6%. On a GAAP basis, operating income increased 36.2% to $78.0 million. Comparable net income rose 60.2% in the second quarter to $45.2 million from $28.2 million in the second quarter last year. On a GAAP basis, net income increased 172.6% to $43.5 million in the second quarter, which included $1.8 million of after-tax non-recurring integration expenses associated with the Discount Auto Parts’ acquisition. Year-to-date comparable net income increased 70.7% to $81.2 million compared to $47.6 million last year. On a GAAP basis, net income increased 73.0% to $48.5 million, which included $3.9 million of after-tax non-recurring integration expenses associated with the Discount Auto Parts’ acquisition and $28.8 million of after-tax non-recurring expenses related to the early redemption of outstanding notes and debentures in the first quarter. Year-to-date, the company generated $234.3 million in free cash flow, including $140.2 million in the second quarter. These results do not include the non-recurring cash expenses of $36.9 million associated with the early redemption of the company’s high interest bearing notes and debentures in the first quarter of 2003. Including these non-recurring expenses, year-to-date the company generated $197.4 million in free cash flow. Free cash flow is calculated as cash provided by operating activities reduced by cash used in investing activities. The company expects to be a slight user of cash in the second half of the year and raised its 2003 fiscal year guidance for free cash flow to $170 million. During the quarter 27 new stores were opened, six stores were relocated, and one store was closed resulting in an ending store count of 2,482. Year- to-date, the company has opened 60 new stores, relocated 18 stores, and closed 13 stores. The company expects to open 125 stores this year, relocate approximately 40 stores, and close 25 stores. The company also issued comparable earnings per diluted share guidance for the third quarter in the range of $1.18 to $1.22 compared to $0.92 last year, a 28% to 33% increase. Due to its strong earnings growth during the first half of 2003, the company’s comparable earnings per diluted share guidance for the full year has increased to a range of $4.01 to $4.11 compared to its previous guidance of $3.85 to $3.95 per diluted share. This guidance excludes the non-recurring expenses of the redemption of notes and debentures, integration expenses, and the positive effect of the 53rd week in the fourth quarter. On a GAAP basis, the company raised its earnings per diluted share guidance to $3.14 to $3.22, which includes the non-recurring expenses associated with the redemption of bonds and debentures in the first quarter and integration expenses related to the Discount Auto Parts acquisition. The company will host a conference call this evening, August 6, 2003, at 5:00 p.m. Eastern Standard Time to discuss its second quarter results. To listen to the live webcast please log on to http://www.advanceautoparts.com.