Pep Boys Reports 2008 Q2 Results
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Operating Results Second Quarter
Sales
Sales were $500.0 million as compared to $552.1 million in 2007. Comparable sales decreased 7.5%, including an 8.0% comparable merchandise sales decrease and a 5.2% comparable service revenue decrease. In accordance with GAAP, merchandise sales includes merchandise sold through both our retail and service center lines of business and service revenue is limited to labor sales. Re-categorizing Sales into the respective lines of business from which they are generated, comparable Service Center Revenue (labor plus installed merchandise and tires) decreased 1.9%, while comparable Retail Sales (DIY and Commercial) decreased 11.6%. Earnings From Continuing Operations Before Income Taxes Earnings From Continuing Operations Before Income Taxes were $6.6 million as compared to $6.3 million in 2007. The results reflect disciplined spending control, reduced interest expense as a result of paying down debt, a $4.1 million gain from the disposition of assets and improved product margin rates. These benefits were largely offset by gross profit pressure associated with the reduction in sales.
Net Earnings
Net Earnings From Continuing Operations increased to $5.8 million or $0.11 per share (basic and diluted) as compared to $3.9 million or $0.07 per share (basic and diluted) in 2007. Net Earnings increased to $5.4 million or $0.10 per share (basic and diluted) as compared to $4.2 million or $0.08 per share (basic and diluted) in 2007. Net Earnings From Continuing Operations and Net Earnings for the second quarter of 2008 include a one-time $2.2 million tax benefit resulting from the recording, during this quarter, of a deferred tax asset due to a June 2007 state tax law change.
First Half Sales
Sales were $998.1 million as compared to $1,091.7 million in 2007. Comparable sales decreased 6.6%, including a 7.1% comparable merchandise sales decrease and a 4.0% comparable service revenue decrease. In accordance with GAAP, merchandise sales includes merchandise sold through both our retail and service center lines of business and service revenue is limited to labor sales. Re-categorizing Sales into the respective lines of business from which they are generated, comparable Service Center Revenue (labor plus installed merchandise and tires) decreased 0.6%, while comparable Retail Sales (DIY and Commercial) decreased 10.9%. Earnings From Continuing Operations Before Income Taxes Earnings From Continuing Operations Before Income Taxes were $16.0 million as compared to $11.4 million in 2007. The results reflect disciplined spending control, reduced interest expense as a result of paying down debt, gains from the disposition of assets and improved product margin rates. These benefits were largely offset by the gross profit pressure associated with the reduction in sales.
Net Earnings
Net Earnings From Continuing Operations increased to $11.0 million or $0.21 per share (basic and diluted) as compared to $7.0 million or $0.13 per share (basic and diluted) in 2007. Net Earnings increased to $10.1 million or $0.19 per share (basic and diluted) as compared to $7.4 million or $0.14 per share in 2007. Net Earnings From Continuing Operations and Net Earnings for the first half of 2008 include a one-time $2.2 million tax benefit resulting from the recording, during the second quarter, of a deferred tax asset due to a June 2007 state tax law change.
Commentary
Interim CEO Mike Odell said, “During the quarter, we continued to improve our customer service, which is key to our future success. CSI scores increased, reflecting our “Customer First” focus. While we are pleased with the progress we made transforming our sales floors to re-establish ourselves as the dominant solutions provider for the automotive aftermarket customer, we are disappointed with our sales results, which were impacted by the disruption, coupled with the general pullback in consumer spending. However, those core automotive categories that have been re-assorted are showing positive trends. And we expect to complete the re-assortment of our core automotive categories by the end of this third quarter. Our remaining non-core clearance inventory is down to $1.2 million, and is being returned to our distribution centers for liquidation. “We also continue to tightly control spending resulting in SG&A being well below prior year levels.” CFO Ray Arthur commented, “During the quarter, we settled our synthetic lease obligation through a combined use of $41.1 million of cash on hand and $76.0 million of cash generated from a sale leaseback transaction of 22 properties. This resulted in a $73.9 million increase of availability under our revolving credit agreement and settled the only material debt maturity due until 2013.” Pep Boys has over 560 retail stores and approximately 6,000 service bays in 35 states and Puerto Rico. Along with its full-service vehicle maintenance and repair capabilities, the Company also serves the commercial auto parts delivery market and is one of the leading sellers of replacement tires in the United States. Customers can find the nearest location by calling 1-800-PEP-BOYS or by visiting www.pepboys.com.
Pep Boys Financial Highlights
Millions of Dollars Except Per Share Amounts
Thirteen weeks ended
August 2, 2008
August 4, 2007
Total Revenues $ 500.0 $ 552.1
Net Earnings From Continuing Operations $ 5.8 $ 3.9
Basic Earnings Per Share:
Average Shares 52,153,000 51,652,000
Net Earnings From Continuing Operations $ 0.11 $ 0.07
Diluted Earnings Per Share:
Average Shares 52,236,000 53,264,000
Net Earnings From Continuing Operations $ 0.11 $ 0.07
Pep Boys Financial Highlights
Millions of Dollars Except Per Share Amounts
Twenty-six weeks ended
August 2, 2008
August 4, 2007
Total Revenues $ 998.1 $ 1,091.7
Net Earnings From Continuing Operations $ 11.0 $ 7.0
Basic Earnings Per Share:
Average Shares 52,109,000 52,387,000
Net Earnings From Continuing Operations $ 0.21 $ 0.13
Diluted Earnings Per Share:
Average Shares 52,204,000 52,949,000
Net Earnings From Continuing Operations $ 0.21 $ 0.13