Discount Auto Parts, Inc. Reports Fiscal 2002 First Quarter Results
LAKELAND, Fla.--Sept. 18, 2001--Discount Auto Parts, Inc. today announced results for the Company's first quarter ended August 28, 2001.Total sales for the first quarter of fiscal 2002 increased 3.8% to $173.4 million, as compared to $167.1 million a year earlier. Comparable store sales increased 1.9% for the first quarter of fiscal 2002 as compared to the first quarter of fiscal year 2001. Such comparable store sales growth was generated on a relatively equal basis from both DIY and commercial sales. The balance of the increase in total sales for the first quarter was attributable to sales from new stores opened since the beginning of the respective periods in fiscal 2001. At August 28, 2001, the Company had 668 stores in operation as compared to 653 stores at August 29, 2000.
Gross profit for the first quarter of fiscal 2002 increased 8.2% to $69.2 million as compared to $63.9 million for the first quarter of fiscal 2001. As a percentage of sales, gross profit was 39.9% for the first quarter of fiscal 2002 as compared to 38.3% for the first quarter of fiscal 2001. Gross profit for the first quarter of fiscal 2002 was positively impacted as a result of the Company's supply chain initiatives implemented in the latter half of fiscal 2001 and lower inventory shrinkage expense. These positive impacts were offset in part by overall lower vendor incentives primarily stemming from the reduced number of store openings and additional operating expenses associated with the Company's second distribution center which became operational in the fourth quarter of fiscal 2001.
Selling, general and administrative ("SG&A") expenses increased as a percentage of sales from 31.6% in the first quarter of fiscal 2001 to 32.8% in the first quarter of fiscal 2002. The increase in SG&A expenses as a percentage of sales for the first quarter was primarily the result of (1) net rent related to the February 2001 sale/leaseback of 101 of the Company's store locations exceeding the historical cost depreciation expense associated with such store locations prior to the sale/leaseback, and (2) increased health and workers' compensation insurance costs.
Income from operations for the first quarter of fiscal 2002 increased 11.6% to $12.4 million as compared to $11.1 million for the first quarter of fiscal 2001. After giving pro forma effect to the sale/leaseback and the operating lease for the Company's second distribution center which did not exist in the first quarter of fiscal 2001, operating income for the first quarter of fiscal 2002 increased 33%.
EBITDA (income from operations plus depreciation and amortization) for the first quarter of fiscal 2002 increased 7.2% to $18.4 million from $17.2 million for the first quarter of fiscal 2001. After giving pro forma effect to the sale/leaseback and the operating lease for the Company's second distribution center, EBITDA for the first quarter of fiscal 2002 increased 20%.
Interest expense for the first quarter of fiscal 2002 decreased 40.6% to $3.3 million as compared to $5.6 million for the first quarter of fiscal 2001. The decrease was due to overall lower borrowings for the first quarter of fiscal 2002, which resulted primarily from the paydown in debt with the proceeds of the February 2001 sale/leaseback closing, and overall lower interest rates on the Company's variable rate debt.
As a result of the above factors, income before extraordinary loss for the first quarter of fiscal 2002 increased 64.0% to $5.9 million or $.35 per share as compared to $3.6 million or $.21 per share for the first quarter of fiscal 2001.
As previously announced, on August 7, 2001, the Company entered into a definitive agreement with Advance Holding Corporation, Advance Auto Parts, Inc., Advance Stores Company, Incorporated and AAP Acquisition Corporation (collectively "Advance") under which the Company would be acquired by Advance in a merger transaction. Advance is the second largest retailer and supplier of automotive replacement parts, maintenance items and accessories in the nation, with over 1,700 stores in 38 states. Terms of the agreement call for each share of Discount Auto Parts common stock to be exchanged for $7.50 in cash and 0.2577 shares of common stock of Advance Auto Parts, Inc., a holding company which has been formed to own and operate the combined companies. The transaction has been approved by the boards of directors of both companies and is subject to approval by shareholders of Discount Auto Parts, clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. The transaction is expected to close in the fourth calendar quarter of 2001.
As a result of expenses incurred in connection with the above described transaction, the Company reported an extraordinary loss in the first quarter of fiscal 2002, gross of a $340,000 income tax benefit, of $943,000. Additional extraordinary expenses associated with the described transaction are expected to be incurred during the second quarter of fiscal 2002.
Taking into account all of the above described factors, net income for the first quarter of fiscal 2002 increased 47.1% to $5.3 million or $.31 per diluted share as compared to $3.6 million or $.21 per diluted share for the first quarter of fiscal 2001.
During the first quarter of fiscal 2002, the Company added 3 new mini-depot stores and closed one mini-depot store. As of August 28, 2001, the Company had 668 stores in operation.
Discount Auto Parts will host a one-hour conference call beginning at 11 a.m. (EST) today to discuss the results of the quarter. The opportunity to listen to the conference call over the Internet is available by going directly to discountautoparts.net/investor.html and click on the StreetEvents link or go to streetevents.com. The call will also be available by dialing (800) 374-1487, reference reservation number 1842637. In addition, a replay of the call will be available by dialing (800) 642-1687, reference reservation number 1842637, through Friday, September 28, 2001.
Discount Auto Parts, Inc. is one of the Southeast's leading specialty retailers and suppliers of automotive replacement parts, maintenance items and accessories to both DIY consumers and professional mechanics and service technicians. The Company currently operates stores located throughout Florida, Georgia, Mississippi, Alabama, Louisiana and South Carolina.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In Thousands, Except Per Share Amounts)
Thirteen Weeks Ended
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August 28 August 29
2001 2000
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Net sales $ 173,381 $ 167,074
Cost of sales, including distribution costs 104,189 103,150
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Gross profit 69,192 63,924
Selling, general and administrative expenses 56,830 52,850
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Income from operations 12,362 11,074
Other income, net 100 85
Interest expense (3,318) (5,583)
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Income before income taxes 9,144 5,576
Income taxes 3,290 2,007
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Income before extraordinary loss 5,854 3,569
Extraordinary loss, net of income tax benefit (603) -
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Net income $ 5,251 $ 3,569
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Net income per basic share from:
Income before extraordinary loss $ .35 $ 0.21
Extraordinary loss (.04) -
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Net income $ .31 $ 0.21
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Net income per diluted share from:
Income before extraordinary loss $ .35 $ 0.21
Extraordinary loss (.04) -
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Net income $ .31 $ 0.21
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Average common shares outstanding 16,708 16,695
Dilutive effect of stock options 156 -
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Average common shares outstanding -
assuming dilution 16,864 16,695
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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In Thousands)
August 28 May 29
2001 2001
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Assets
Current assets:
Cash $ 6,372 $ 9,669
Inventories 243,053 242,718
Prepaid expenses and other current assets 18,734 14,391
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Total current assets 268,159 266,778
Property and equipment 513,102 507,255
Less allowances for depreciation and
amortization (128,639) (122,742)
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384,463 384,513
Other assets 4,431 4,638
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Total assets $ 657,053 $ 655,929
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Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 75,609 $ 96,442
Other current liabilities 25,105 25,286
Current maturities of long-term debt 1,200 1,200
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Total current liabilities 101,914 122,928
Deferred gain on sale/leaseback 5,874 5,966
Deferred income taxes 13,333 13,273
Long-term debt 209,608 192,900
Total stockholders' equity 326,324 320,862
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Total liabilities and stockholders' equity $ 657,053 $ 655,929
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