TBC Reports Third Quarter Results
-Net Income Increases 9% Including Impact of Hurricanes-
-NTB Performs In Line with Company Expectations-
-Company Updates 2004 Financial Guidance-
PALM BEACH GARDENS, Fla., Oct. 25 -- TBC Corporation , one of the nation's leading marketers of automotive replacement tires, today reported sales and earnings for the third quarter and nine months ended September 30, 2004.
Net sales in the third quarter increased 31.5% to $476.5 million compared to $362.4 million in the prior-year period. TBC continued to increase market share as evidenced by the 9.9% total unit tire sales increase compared to the 3.6% decrease in unit shipments by tire manufacturers in the third quarter based on preliminary reports. Same store sales for TBC's retail segment decreased 1.7% in the third quarter primarily due to the effects of Hurricanes Charley, Frances, Ivan and Jeanne.
Net income increased 9.0% to $10.9 million, or $0.47 per diluted share, during the current quarter versus $10.0 million, or $0.44 per diluted share, in the third quarter of 2003. Earnings in the current quarter reflect a negative impact of $0.12 per diluted share due to the four major hurricanes, which is in line with the Company's previously issued guidance on October 4, 2004. The results for 2003 have been restated to reflect the company-wide adoption of the FIFO inventory costing method.
The Company's wholesale business generated improved profitability for the quarter due to favorable pricing and sales mix, as well as aggressive cost containment, despite a decline in unit sales. Inclement weather in Florida and the Eastern United States affected the Company's retail business. However, NTB performed in line with Company expectations.
"In a retail environment that remains challenging and despite unprecedented hurricane activity, we delivered strong top- and bottom-line growth over last year," commented Larry Day, TBC President and Chief Executive Officer. "We see opportunities at our retail locations for upside in both pricing and product/service mix. Additionally, we expect a solid fourth quarter contribution from NTB which continues to execute on plan and we are encouraged by the foundation established. However, overall retail demand for tires continues to be challenging due to the short-term effects of higher gasoline prices. As a result, we have adjusted our fourth quarter and full- year outlook to reflect these market factors."
For the nine months ended September 30, 2004, net sales rose 44.2% to $1,366.8 million compared to $947.8 million in the prior-year period. Total unit tire sales increased 19.1% during the nine months ended September 30, 2004 compared to a 3.4% increase in unit shipments by tire manufacturers based on preliminary reports. Same store sales for TBC's retail segment increased 1.7% for the nine months ended September 30, 2004. Net income grew 13.0% to $25.6 million, or $1.10 per diluted share, versus $22.6 million, or $1.00 per diluted share, reported a year ago. Results for the first nine months of 2004 reflect the $0.12 per diluted share negative impact from the four major hurricanes, the negative impact of EITF 02-16 of $0.08 per diluted share related to the Company's new purchase agreement with a major supplier, partially offset by the company-wide adoption of the FIFO inventory costing method which added $0.02 per diluted share. Excluding the impact of the hurricanes and the change in accounting treatments, TBC would have reported $1.28 per diluted share in the first nine months of 2004. The results for 2003 have been restated to reflect the company-wide adoption of the FIFO inventory costing method.
For the 2004 full year, the Company expects earnings to be in the range of $1.60 to $1.64 per diluted share which includes both the $0.12 per diluted share impact of the hurricanes and the $0.06 per diluted share for the impact of both EITF 02-16 and the company-wide adoption of the FIFO inventory costing method. Earnings for the fourth quarter are expected to be in the range of $0.50 to $0.54 per diluted share.
At September 30, 2004, the Company had a combined total of 1,171 stores in its retail network with 602 Company-operated locations and 569 franchised Big O stores, representing a 28% increase in the Company's store base, or 253 locations, since September 30, 2003. Exclusive of any further acquisitions, the Company expects to add an additional 11 retail locations in the last quarter of 2004.
TBC Corporation will host a conference call on Tuesday, October 26, 2004, at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time, to discuss third quarter results. A live Webcast of the conference call will be available by visiting the Company's Web site, http://www.tbccorp.com/. The Webcast will be archived at TBC's Web site until November 26, 2004.
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", "Merchant's Tire & Auto Centers" and "National Tire & Battery" 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 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 successfully integrate acquisitions and achieve anticipated synergies or savings; 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 release 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
RESTATED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
RESTATED RESTATED
2004 2003 2004 2003
NET SALES $476,464 $362,401 $1,366,795 $947,789
COST OF SALES 301,213 247,748 854,477 649,288
GROSS PROFIT 175,251 114,653 512,318 298,501
EXPENSES:
Distribution expenses 18,044 15,811 54,800 44,591
Selling, administrative and
retail store expenses 137,606 81,154 407,379 213,818
Interest expense - net 4,690 2,786 13,895 7,046
Other (income) expense - net (1,904) (869) (3,275) (2,288)
Total expenses 158,436 98,882 472,799 263,167
INCOME BEFORE INCOME TAXES 16,815 15,771 39,519 35,334
Provision for income taxes 5,893 5,751 13,967 12,727
NET INCOME $10,922 $10,020 $25,552 $22,607
EARNINGS PER SHARE -
Basic $0.49 $0.46 $1.15 $1.05
Diluted $0.47 $0.44 $1.10 $1.00
Weighted Average Common Shares
Outstanding -
Basic 22,254 21,759 22,159 21,576
Diluted 23,237 22,970 23,274 22,568
TBC CORPORATION
RESTATED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
ASSETS
RESTATED
September 30, December 31,
2004 2003
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $3,204 $2,645
Accounts and notes receivable, less
allowance for doubtful accounts of
$9,700 at September 30, 2004 and
$8,260 at December 31, 2003
Related parties 27,335 12,535
Other 128,130 109,962
Total accounts and notes receivable 155,465 122,497
Inventories 284,870 264,810
Refundable federal and state
income taxes - 296
Deferred income taxes 15,233 11,359
Other current assets 12,611 10,346
Total current assets 471,383 411,953
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and improvements 11,284 12,100
Buildings and leasehold improvements 110,595 103,669
Furniture and equipment 106,266 93,710
228,145 209,479
Less accumulated depreciation 73,878 56,618
Total property, plant and equipment 154,267 152,861
TRADEMARKS, NET 15,824 15,824
GOODWILL, NET 169,532 169,184
OTHER ASSETS 39,490 34,368
TOTAL ASSETS $850,496 $784,190
TBC CORPORATION
RESTATED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
RESTATED
September 30, December 31,
2004 2003
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Outstanding checks, net $12,979 $11,411
Notes payable to banks 72,100 29,100
Current portion of long-term debt
and
capital lease obligations 39,195 28,723
Accounts payable, trade 103,129 114,708
Other current liabilities 107,158 91,730
Total current liabilities 334,561 275,672
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, LESS CURRENT PORTION 176,289 208,620
NONCURRENT LIABILITIES 34,810 28,900
DEFERRED INCOME TAXES 11,190 7,890
STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value, shares issued
and outstanding - 22,266 at September 30,
2004 and 21,905 at December 31, 2003 2,227 2,190
Additional paid-in capital 28,491 23,898
Other comprehensive income (loss) (1,281) (1,637)
Retained earnings 264,209 238,657
Total stockholders' equity 293,646 263,108
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $850,496 $784,190
TBC CORPORATION
SUPPLEMENTARY DATA
(In thousands, except percentages and store counts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
RESTATED RESTATED
2004 2003 2004 2003
RECONCILIATION OF EBITDA TO
NET INCOME:
EBITDA $27,917 $23,632 $73,393 $56,083
Less- Depreciation and
Amortization 6,412 5,075 19,979 13,703
Interest Expense - net 4,690 2,786 13,895 7,046
Provision for Income Taxes 5,893 5,751 13,967 12,727
NET INCOME $10,922 $10,020 $25,552 $22,607
SEGMENT INFORMATION:
NET SALES -
Retail $304,000 $191,444 $881,532 $503,367
Wholesale $172,464 $170,957 $485,263 $444,422
Consolidated $476,464 $362,401 $1,366,795 $947,789
EBITDA -
Retail $18,618 $14,996 $46,949 $35,131
Wholesale $9,299 $8,636 $26,444 $20,952
Consolidated $27,917 $23,632 $73,393 $56,083
CAPITAL EXPENDITURES $3,824 $4,488 $18,116 $14,585
RETAIL SAME-STORE SALES % CHANGE -1.7% 1.7% 1.7% 1.1%
RETAIL STORE COUNTS, at end of period
Company Operated Stores 602 357
Franchised Big O Stores 569 561
Total 1,171 918