TBC Reports Second Quarter Sales and Earnings
PALM BEACH GARDENS, Fla., Aug. 15, 2005 -- TBC Corporation , one of the nation's leading marketers of automotive replacement tires, today reported sales and earnings for the second quarter ended June 30, 2005 that were in line with the Company's previous expectations.
Net sales in the second quarter increased 5.7% to $482.4 million, compared to $456.5 million in the prior-year period. Same store sales for TBC's retail segment increased 4.1% in the second quarter of 2005. TBC's total unit tire sales were flat in the second quarter of 2005, while unit shipments by tire manufacturers increased 2.7% based on preliminary reports. Management believes that the increase in unit shipments by tire manufacturers was attributed to buying in anticipation of manufacturer price increases. Net income increased 33.6% to $12.1 million, or $0.52 per diluted share, in the recent quarter, versus $9.0 million, or $0.39 per diluted share, in the second quarter of 2004. Reported earnings in the 2004 second quarter reflect the negative impact of Emerging Issues Task Force ("EITF") 02-16, of $0.08 per diluted share related to the Company's purchase agreement with a major supplier. Excluding this charge, TBC would have reported $0.47 per diluted share in the 2004 second quarter.
Second quarter results reflect strong wholesale performance driven by price increases, gains in the specialty tire business, and a solid contribution from Carroll Tire, TBC's regional wholesale distributor. The Company's retail business benefited from a favorable mix of higher priced performance tires as well as increased mechanical services revenue. These benefits helped to offset the continued competitive pressures in certain markets that are making it difficult to pass on all of the supplier cost increases.
Larry Day, TBC President and Chief Executive Officer, commented, "Our wholesale business remained strong during the period and price increases instituted at the beginning of July are holding. We are particularly pleased with Carroll Tire's performance, which reflects their ongoing commitment to improvement in execution and training."
"After a slow start to the quarter, our retail operations turned in a much improved performance in June. Operating profitability within retail benefited from our return to normalized levels of advertising spending this quarter along with the increased contribution of higher margin performance tire sales and mechanical services revenue."
For the six months ended June 30, 2005, net sales rose 6.6% to $948.7 million compared to $890.3 million last year. Total unit tire sales increased 1.2% compared to an industry increase of approximately 3.1 % based on preliminary results. Retail same-store sales increased 3.4% in 2005. Net income grew 25.7% to $18.1 million, or $0.78 per diluted share, versus $14.4 million, or $0.62 per diluted share, reported a year ago. Reported results for the first six months of 2004 reflect the negative impact of EITF 02-16 of $0.08 per diluted share related to the Company's purchase agreement with a major supplier. Excluding this charge, TBC would have reported $0.70 per diluted share in the first half of 2004.
At June 30, 2005, the Company had a combined total of 1,175 stores in its retail network with 613 Company-operated locations and 562 franchised Big O stores.
For the full year of 2005, the Company expects earnings at the lower end of its previously forecasted range of $2.08 to $2.15 per diluted share. Earnings in the third quarter of 2005 are forecast to be in the range of $0.65 to $0.68 per diluted share.
Mr. Day concluded, "We have narrowed our full year guidance to reflect anticipated challenges to price increases at our retail locations in certain markets due to competitive pressures. In terms of store count, we still expect to grow our Company-operated base according to plan for 2005. However, we are now forecasting a net reduction in Big O's store count similar in size to last year's decline as our new franchise development team ramps up its efforts and we continue to evaluate relationships with underperforming franchisees."
TBC Corporation will host a conference call on Tuesday, August 16, 2005, at 9:00 a.m. Eastern time, to discuss second quarter 2005 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 September 15, 2005.
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
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(Restated) (Restated)
2005 2004 2005 2004
NET SALES $482,375 $456,490 $948,747 $890,331
COST OF SALES 299,768 282,260 592,036 555,084
GROSS PROFIT 182,607 174,230 356,711 335,247
EXPENSES:
Distribution expenses 19,274 17,819 38,164 34,936
Selling, administrative and
retail store expenses 140,917 137,979 283,109 270,083
Interest expense - net 5,032 5,103 9,983 9,205
Other (income) expense - net (1,585) (653) (3,018) (1,371)
Total expenses 163,638 160,248 328,238 312,853
INCOME BEFORE INCOME TAXES 18,969 13,982 28,473 22,394
Provision for income taxes 6,905 4,951 10,336 7,963
NET INCOME $12,064 $9,031 $18,137 $14,431
EARNINGS PER SHARE -
Basic $0.54 $0.41 $0.81 $0.65
Diluted $0.52 $0.39 $0.78 $0.62
Weighted Average Common Shares
Outstanding -
Basic 22,461 22,204 22,408 22,112
Diluted 23,418 23,329 23,402 23,292
TBC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
ASSETS
June 30, December 31,
2005 2004
(Unaudited) (Unaudited)
(Restated)
CURRENT ASSETS:
Cash and cash equivalents $1,435 $2,832
Accounts and notes receivable,
less allowance for doubtful
accounts of $9,948 at June 30, 2005
and $9,307 at December 31, 2004
Related parties 22,965 32,149
Other 129,806 117,812
Total accounts and notes
receivable 152,771 149,961
Inventories 299,420 291,745
Refundable federal and state
income taxes 697 -
Deferred income taxes 26,705 24,790
Other current assets 14,134 19,270
Total current assets 495,162 488,598
PROPERTY, PLANT AND EQUIPMENT, AT
COST:
Land and improvements 7,794 10,400
Buildings and leasehold
improvements 109,864 110,478
Furniture and equipment 109,512 105,232
227,170 226,110
Less accumulated depreciation 85,236 73,662
Total property, plant and
equipment 141,934 152,448
TRADEMARKS, NET 15,824 15,824
GOODWILL, NET 168,641 168,552
OTHER ASSETS 43,219 39,331
TOTAL ASSETS $864,780 $864,753
TBC CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2005 2004
(Unaudited) (Unaudited)
(Restated)
CURRENT LIABILITIES:
Outstanding checks, net $10,851 $30,368
Notes payable to banks 80,705 41,013
Current portion of long-term debt
and capital lease obligations 16,330 41,216
Accounts payable, trade 122,164 128,656
Federal and State Income Taxes
Payable - 17,790
Warranty reserves 19,501 19,667
Other current liabilities 81,311 71,278
Total current liabilities 330,862 349,988
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, LESS CURRENT PORTION 164,338 167,349
NONCURRENT LIABILITIES 36,056 34,383
DEFERRED INCOME TAXES 10,931 10,366
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value,
shares issued and outstanding -
22,470 at June 30, 2005
and 22,312 at December 31, 2004 2,247 2,231
Additional paid-in capital 30,561 28,882
Deferred compensation (1,116) (789)
Other comprehensive income (loss) (1,149) (1,570)
Retained earnings 292,050 273,913
Total stockholders' equity 322,593 302,667
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $864,780 $864,753
TBC CORPORATION
SUPPLEMENTARY DATA
(In thousands, except percentages and store counts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(Restated) (Restated)
2005 2004 2005 2004
RECONCILIATION OF EBITDA TO NET
INCOME:
EBITDA $30,946 $25,914 $52,410 $45,181
Less - Depreciation and
Amortization 6,945 6,829 13,954 13,582
Interest Expense - net 5,032 5,103 9,983 9,205
Provision for Income
Taxes 6,905 4,951 10,336 7,963
NET INCOME $12,064 $9,031 $18,137 $14,431
SEGMENT INFORMATION:
NET SALES -
Retail $315,303 $298,755 $608,463 $584,371
Wholesale $167,072 157,735 $340,284 305,960
Consolidated $482,375 $456,490 $948,747 $890,331
EBITDA -
Retail $19,642 $15,330 $32,510 $27,908
Wholesale 11,304 10,584 19,900 17,273
Consolidated $30,946 $25,914 $52,410 $45,181
CAPITAL EXPENDITURES $5,129 $7,446 $9,070 $14,292
RETAIL SAME-STORE SALES % CHANGE 4.1% 1.1% 3.4% 3.5%
RETAIL STORE COUNTS, at end of
period
Company Operated Stores 613 598
Franchised Big O Stores 562 570
Total 1,175 1,168