TBC Reports Record First Quarter Results
- Earnings Increase 14% to $0.25 per Diluted Share - Eighth Consecutive Quarter of Earnings Gains - Merchant's Integration Proceeding Ahead of Schedule
MEMPHIS, Tenn., April 23 -- TBC Corporation , one of the nation's leading marketers of automotive replacement tires, today reported record sales and earnings for the first quarter ended March 31, 2003. It marks the eighth consecutive quarter that the Company has posted a year-over-year gain in earnings per share.
Net sales in the first quarter increased 2.7% to $256.5 million compared to $249.7 million in the prior-year period. Same store sales for TBC's retail segment increased 1.6% in the first quarter. Unit tire sales declined 4.2% in the first quarter, in line with preliminary numbers reported by the industry. Net income increased 14% to $5.5 million, or $0.25 per diluted share in the current quarter, versus $4.8 million, or $0.22 per diluted share, in the first quarter of 2002.
"Our sales growth in the first quarter was primarily the result of the expansion of our Tire Kingdom and Big O retail store networks," commented Larry Day, President and Chief Executive Officer. "Demand for replacement tires continued to be soft in the first quarter and our own year-to-year sales comparisons were made more difficult by our extremely strong unit sales in the first quarter of 2002, particularly by our wholesale segment. However, we believe there is some pent up demand and that the replacement tire market will resume its historical pattern of moderate, steady growth before the end of the year. Gross margins improved significantly during the quarter as we continued to leverage our purchasing power and strengthen the contribution from our retail segment. Our bottom line also benefited from ongoing efforts to contain costs and improve operating efficiencies."
"We now have a combined total of 887 stores in our retail systems compared to 708 just one year ago," continued Mr. Day. "We added 11 Big O stores for a total of 547 locations during the first quarter and gained entry into the Michigan retail market. Strong consumer acceptance of recent product introductions at Big O resulted in solid performance from our franchise network in the period. We also added six company-operated Tire Kingdom stores in the quarter for a total of 228 locations, and on April 1, we completed our acquisition of Merchant's, Inc. with 112 retail locations that generated more than $150 million in sales last year. We are ahead of plan with Merchant's in eliminating expenses, integrating the acquired stores, retaining key managers and service employees, and introducing our own operating strategies and procedures. We are extremely pleased that the Merchant's employees are energized and receptive to the changes underway."
Mr. Day concluded, "We are a much stronger company today as a result of the initiatives taken to grow our retail business, leverage our wholesale purchasing strength, and manage costs. Our financial position is sound and our cash flow is healthy, as evidenced by the generation of $17 million in cash from operations during the first quarter. This strong cash flow, together with our capital resources, should allow us to continue to execute our retail expansion strategy, including the pursuit of attractive acquisition opportunities as well as internal store development. We expect to add 45 to 50 locations to our retail operations during the remainder of 2003, exclusive of further acquisitions.
"Based on current trends and market conditions, we expect second quarter earnings to be in the range of $0.33 to $0.35 per diluted share. At this point, it is still very early in the process of assimilating the Merchant's stores into our current operations and our expectation for full year earnings therefore remains in the range of $1.34 to $1.38 per diluted share."
About TBC: TBC Corporation is one of the nation's largest marketers of automotive replacement tires through a multi-channel strategy. The Company's retail operations include company-operated retail centers under the "Tire Kingdom" and "Merchant's Tire & Auto Centers" brands and franchised retail tire stores under the "Big O Tires" brand. TBC markets on a wholesale basis to regional tire chains and distributors serving independent tire dealers throughout the United States and in Canada and Mexico. The Company's proprietary brands of tires have a longstanding reputation for quality, safety and value.
TBC Corporation Safe Harbor Statement
This document contains "forward-looking statements," as that term is defined under the Private Securities Litigation Reform Act of 1995, regarding expectations for future financial performance, which involve uncertainty and risk. It is possible that the Company's future financial performance may differ from expectations due to a variety of factors including, but not limited to: changes in economic and business conditions in the world; increased competitive activity; consolidation within and among both competitors, suppliers and customers; unexpected changes in the replacement tire market; the Company's inability to attract as many new franchisees or open as many distribution outlets as stated in its goals; changes in the Company's ability to identify and acquire additional companies in the replacement tire industry and the failure to achieve synergies or savings anticipated in such acquisitions; fluctuations in tire prices charged by manufacturers, including fluctuations due to changes in raw material and energy prices, changes in interest and foreign exchange rates; the cyclical nature of the automotive industry and the loss of a major customer or program. It is not possible to foresee or identify all such factors. Any forward-looking statements in this report are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Prospective investors are cautioned that any such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected. The Company makes no commitment to update any forward-looking statement included herein, or to disclose any facts, events or circumstances that may affect the accuracy of any forward-looking statement. Additional information on factors that could potentially affect the Company or its financial results may be found in the Company's filings with the Securities and Exchange Commission.
TBC Corporation
Consolidated Statements Of Income
(In thousands, except per share amounts)
Three Months Ended
March 31,
(Unaudited)
2003 2002
NET SALES $256,545 $249,704
COST OF SALES 180,150 183,482
GROSS PROFIT 76,395 66,222
EXPENSES:
Distribution expenses 13,419 12,497
Selling, administrative and
retail store expenses 53,125 44,481
Interest expense - net 1,812 2,021
Other (income) expense - net (512) (364)
Total expenses 67,844 58,635
INCOME BEFORE INCOME TAXES 8,551 7,587
Provision for income taxes 3,081 2,780
NET INCOME $5,470 $4,807
EARNINGS PER SHARE -
Basic $0.26 $0.23
Diluted $0.25 $0.22
Weighted Average Common Shares
and Equivalents Outstanding 22,130 21,888
TBC Corporation
Consolidated Balance Sheets
(In Thousands)
Assets
March 31, December 31,
2003 2002
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $2,711 $2,319
Accounts and notes receivable, less allowance
for doubtful accounts of $7,996 at March 31, 2003
and $8,701 at December 31, 2002:
Related parties 16,002 16,507
Other 111,563 103,201
Total accounts and notes receivable 127,565 119,708
Inventories 188,947 170,867
Deferred income taxes 12,086 12,364
Other current assets 11,528 12,515
Total current assets 342,837 317,773
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and improvements 6,068 6,068
Buildings and leasehold improvements 29,172 28,795
Furniture and equipment 64,604 64,052
99,844 98,915
Less accumulated depreciation 45,172 42,993
Total property, plant and equipment 54,672 55,922
TRADEMARKS, NET 15,824 15,824
GOODWILL, NET 58,381 58,381
OTHER ASSETS 25,573 25,971
TOTAL ASSETS $497,287 $473,871
TBC Corporation
Consolidated Balance Sheets
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2003 2002
(Unaudited)
CURRENT LIABILITIES:
Outstanding checks, net $5,031 $4,209
Notes payable to banks 25,100 35,000
Current portion of long-term debt
and capital lease obligations 10,989 18,500
Accounts payable, trade 79,024 45,200
Federal and state income taxes payable 993 767
Other current liabilities 44,827 47,481
Total current liabilities 165,964 151,157
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, LESS CURRENT PORTION 80,961 79,700
NONCURRENT LIABILITIES 14,129 14,243
DEFERRED INCOME TAXES 5,931 5,651
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, shares issued
and outstanding - 21,455 at March 31, 2003
and 21,292 at December 31, 2002 2,145 2,129
Additional paid-in capital 18,284 16,687
Other comprehensive income (loss) (1,182) (1,281)
Retained earnings 211,055 205,585
Total stockholders' equity 230,302 223,120
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $497,287 $473,871