APS Holding Announces Comprehensive Restructuring Plan to Achieve Profitability
13 August 1997
APS Holding Announces Comprehensive Restructuring Plan to Achieve Profitability
* UNPROFITABLE FACILITIES TO BE CLOSED; WORKFORCE REDUCED
* LOSS FROM OPERATIONS EXPECTED FOR SECOND QUARTER
* HUBBARD HOWE NAMED CEO
* COMPANY HAS SIGNED AMENDMENT TO BANK CREDIT AGREEMENT
HOUSTON, Aug. 13 -- APS Holding Corporation (APS)
today announced that it is implementing a comprehensive
restructuring plan that will focus on a return to profitability. The plan
will result in the closure of approximately 15 underperforming company-owned
stores and 50 Installers' Service Warehouse (ISW(R)) units, as well as
substantial workforce reductions. In other developments, Hubbard C. Howe,
Chairman of the Company and the acting CEO, has been appointed Chief Executive
Officer. APS also announced that it expects to report a loss for the fiscal
quarter ended July 25, 1997, as well as a restructuring charge, and confirmed
that it received lender approval of its previously announced proposed
amendment of its bank credit agreement.
Mr. Howe stated, "Since March, we have conducted a thorough review of all
aspects of the Company's operations, with the goal of crafting a comprehensive
plan for reducing costs and achieving profitability. The management team has
created a four-point blueprint for the Company's turnaround, and is motivated
and fully committed to successfully implementing this plan. In addition, we
are continuing to identify other ways to run the business on a more efficient
basis and enhance service to our customers.
"This fiscal year will be a time of significant transition, which will not
come without its costs," Howe added. Prior to a pretax charge of
approximately $11,500,000 relating to the planned store and ISW closures and
other restructuring activities, the Company expects its second quarter
financial results will reflect a loss in the range of $0.11 to $0.13 per
share. While the Company is in the process of finalizing its results, a
portion of the loss is attributable to an overall sales decline of 6 percent,
from $234.3 million to $220.4 million. A reduction in same store sales at the
Company owned Big A stores contributed to this decline.
"We believe that the Company's key stakeholders - its investors,
employees, customers, vendors and lenders - will understand that these strong
actions are necessary to position APS for renewed growth and improved
financial results going forward," Howe said. He added that the Company's
restructuring plan includes four principal initiatives:
* First, APS is significantly reconfiguring its ISW business unit.
Substantial organizational and operational changes are being implemented
throughout the ISW division, with a focus on reducing costs, increasing
operating efficiencies and improving profitability, the Company said. As part
of the reconfiguration, ISW will source substantial amounts of inventory from
the Company's distribution centers, expanding product availability and
reducing total dollar investment in system-wide inventory. The majority of
the inventory reduction of $30 million previously announced by the Company
will occur at the ISW units. Additionally, a comprehensive review of current
and potential profitability of each unit was performed, and as a result 50
underperforming ISW's will be closed, according to the Company. Of the
remaining units, which number approximately 210, over 85 percent were
profitable before interest, taxes and corporate overhead allocation during the
six months ended July 25, 1997. "This reaffirms management's belief that this
concept, which caters exclusively to the needs of the professional service
technician, is viable," Howe said.
* Second, APS said it is closing 15 company owned Big A(R) stores which do
not have the potential to provide an adequate return on investment.
* Third, APS has implemented company-wide cost controls and is taking
steps to significantly reduce SG&A expense, including field and corporate
level staff and other cost reductions. The Company said that it believes the
total annualized overhead cuts will be greater than $7.0 million, which is in
addition to cost cutting measures previously announced.
* Fourth, the Company is implementing new management information systems
according to a comprehensive plan developed with its outside consultant
Cambridge Technology Partners. APS said it believes the multi-year plan will
provide significant cost and operating improvements, as well as enhance its
ability to continue delivering excellent service to its customers.
Howe reaffirmed the Company's commitment to its independently owned Big A
Auto Parts stores. "The fundamental business of APS has been, and will
continue to be the delivery of high quality automotive parts and services to
our store owners," he said. "The primary focus in our Big A program is to
provide a specific product offering that fits their needs, with high fill
rates on their orders."
Commenting on the Board's search for a CEO, director Joseph P. Flannery
who headed the process said, "Bard Howe has extensive distribution experience
and asset management skills, and is widely recognized for his experience with
companies in transition, like APS. He is very familiar with the Company,
having been Chairman for the past five years. The Board is very pleased that
he has agreed to lead the Company through the restructuring process."
APS also confirmed that, as previously announced, it had requested its
bank lenders to agree to amend its credit agreement to modify various
financial covenants, and that the amendment was approved in July 1997. John
Hendrix, the Company's Chief Financial Officer, said, "We are very pleased
with the support provided by our bank group and their understanding of and
cooperation with management's action plans."
APS Holding Corporation is a nationally recognized distributor of Big A(R)
brand and manufacturers' branded automotive replacement parts, as well as
tools, equipment, supplies and accessories. It sells to approximately 1,750
associated auto parts stores through 28 distribution centers. After the
closures announced today, the Company will operate approximately 280 company
owned Big A stores and 210 ISW units.
This news release contains forward-looking statements that involve risks
and uncertainties. Actual results, events and performance could differ
materially from those contemplated by these forward-looking statements. Among
the factors that could cause actual results, events and performance to differ
materially are the risks and uncertainties discussed in this news release and
those detailed from time to time in the Company's filings with the Securities
and Exchange Commission, including the Company's annual report on Form 10-K
for the fiscal year ended January 25,1997, and to the Company's quarterly
report on Form 10-Q for the quarterly period ended April 25, 1997, and in the
Company's other public reports and statements.
SOURCE APS Holding Corporation