Chief Auto Parts Announces Q3 Results
12 November 1997
Chief Auto Parts Announces Third Quarter 1997 Results
DALLAS, Nov. 12 -- Chief Auto Parts Inc., one of the nation's
largest auto parts and accessories retail chains, today announced results for
the third quarter and nine months ended September 28, 1997. Net income
increased to $706,000 in the third quarter of 1997 from a loss of $3.3 million
in the third quarter of 1996. For the nine months ended September 28, 1997,
net income increased to $1.3 million from a loss of $838,000 during the same
period in 1996. Sales for the quarter and year-to-date increased
approximately 7% in 1997 from 1996, to $122.8 million and $352.9 million,
respectively.
CHIEF AUTO PARTS INC.
Interim Financial Results for
The Nine Months Ended September 28, 1997
Three Months Ended Nine Months Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
Net sales $122,770 $114,729 $352,946 $330,495
Cost of goods sold,
warehousing and
distribution 72,682 66,752 206,149 191,106
Gross profit 50,088 47,977 146,797 139,389
Selling, general
and administrative 40,561 48,169 123,957 126,514
Depreciation and amortization 3,492 2,973 10,153 8,443
Operating income (loss) 6,035 (3,165) 12,687 4,432
Interest expense, net 4,836 1,657 10,365 4,499
Other (income) expense, net (20) 1 35 71
Income (loss) before
income taxes 1,219 (4,823) 2,287 (138)
Income tax expense (benefit) 513 (1,555) 963 700
Net income (loss) $ 706 $ (3,268) $ 1,324 $ (838)
EBITDA (A) $ 9,547 $ 6,807 $ 22,805 $ 19,804
(A) Excludes $7.0 million non-cash provision for store closings in the
third quarter of 1996.
Three Months Ended September 28, 1997 vs. Three Months Ended
September 29, 1996
Net sales increased by $8.0 million, or 7.0%, to $122.8 million in the
third quarter of 1997 from $114.7 million in the third quarter of 1996. The
increase was due primarily to growth in the Company's store base, as well as a
2.9% increase in comparable store sales. There were 553 stores open at
September 28, 1997 compared to 539 at September 29, 1996. During the third
quarter of 1997, the Company opened 11 new stores (including the relocation of
5 stores) and closed 8 stores (including the relocations). Gross profit
increased by $2.1 million, or 4.4%, to $50.1 million in the third quarter of
1997 from $48.0 million in the third quarter of 1996, primarily as a result of
sales volume increases. Gross profit margin decreased due to higher markdowns
and sales discounts in the third quarter of 1997 compared to the third quarter
of 1996, as well as lower purchasing incentives provided by vendors relating
to store remodeling.
Selling, general and administrative ("SG&A") expenses decreased by $7.6
million, or 15.8%, to $40.6 million in the third quarter of 1997 from $48.2
million in the third quarter of 1996. The decrease was principally due to a
$7.0 million non-cash provision for store closings in 1996, which had no
equivalent in 1997. The provision related primarily to the Company's exit from
the Little Rock market in 1996. Excluding the non-cash provision in 1996, SG&A
decreased by $608,000, or 1.5% in the third quarter of 1997 as compared to the
third quarter of 1996. The decrease was due primarily to a decrease in net
advertising expense and a credit to expense from the negotiation of favorable
lease terminations relating to several closed stores, partially offset by
increases in store labor and occupancy costs due to increased sales volume and
new stores. As a percentage of net sales, SG&A expenses improved to 33.0% for
the third quarter of 1997 from 42.0% for the third quarter of 1996, due
principally to the non-cash provision of $7.0 million noted above. Excluding
the non-cash provision, SG&A expenses were 35.9% for the third quarter of
1996.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $2.7 million, or 40.3%, to $9.5 million in the third quarter of
1997 from $6.8 million (excluding the $7.0 million non-cash provision for
store closings) in the third quarter of 1996, due to the factors discussed
above. EBITDA is used by the Company for the purpose of analyzing operating
performance, leverage and liquidity.
Depreciation and amortization expense increased by $519,000, or 17.5%, to
$3.5 million in the third quarter of 1997 from $3.0 million in the third
quarter of 1996. This increase was primarily due to an increase in the
depreciable asset base, including leasehold improvements and furniture and
equipment, resulting from extensive store remodeling throughout fiscal 1996,
as well as to an increase in the number of stores open. Interest expense
increased by $3.2 million, or 192.0%, to $4.8 million in the third quarter of
1997 from $1.7 million in the third quarter of 1996. This increase was due
primarily to the sale of $130 million of 10.5% Senior Notes in May 1997, in
conjunction with a recapitalization of the Company, which resulted in an
increase to long-term debt. Total debt was $180.3 million at September 28,
1997 (including $18.0 million of capitalized lease obligations).
Net income increased by $4.0 million, to $706,000 in the third quarter of
1997 from a loss of $3.3 million in the third quarter of 1996, due to the
factors discussed above.
Nine Months Ended September 28, 1997 vs. Nine Months Ended
September 29, 1996
Net sales increased by $22.5 million, or 6.8%, to $352.9 million in 1997
from $330.5 million in 1996. The increase was due primarily to growth in the
Company's store base, as well as a 2.1% increase in comparable store sales.
During 1997, the Company opened 29 new stores (including the relocation of 10
stores) and closed 20 stores (including the relocations). Gross profit
increased by $7.4 million, or 5.3%, to $146.8 million in 1997 from $139.4
million in 1996, primarily as a result of sales volume increases. Gross profit
margin decreased slightly due to higher markdowns and sales discounts in 1997
compared to 1996, as well as lower purchasing incentives provided by vendors
relating to store remodeling.
SG&A expenses decreased by $2.6 million, or 2.0%, to $124.0 million in
1997 from $126.5 million in 1996. The decrease was principally due to a $7.0
million non-cash provision for store closings in 1996 as noted above, which
had no equivalent in 1997. The provision related primarily to the Company's
exit from the Little Rock market in 1996. Excluding the non-cash provision in
1996, SG&A increased by $4.4 million, or 3.7% in 1997 as compared to 1996. The
increase was due primarily to an increase in sales volume and a corresponding
increase in related expenses such as store labor and occupancy costs,
partially offset by a decrease in net advertising expense and a credit to
expense from the negotiation of favorable lease terminations relating to
several closed stores. As a percentage of net sales, SG&A expenses improved to
35.1% for 1997 from 38.3% for 1996, due principally to the non-cash provision
noted above. Excluding the non-cash provision, SG&A expenses were 36.2% for
1996.
EBITDA increased by $3.0 million, or 15.1%, to $22.8 million in 1997 from
$19.8 million (excluding the $7.0 million non-cash provision for store
closings) in 1996, due to the factors discussed above.
Depreciation and amortization expense increased by $1.7 million, or 20.3%,
to $10.2 million in 1997 from $8.4 million in 1996. This increase was
primarily due to an increase in the depreciable asset base, including
leasehold improvements and furniture and equipment, resulting from extensive
store remodeling throughout fiscal 1996, as well as to an increase in the
number of stores open. Interest expense increased by $5.9 million, or 130.4%,
to $10.4 million in 1997 from $4.5 million in 1996. This increase was due
primarily to the sale of $130 million of 10.5% Senior Notes in May 1997, in
conjunction with a recapitalization of the Company, which resulted in an
increase to long-term debt.
Net income increased by $2.2 million, to $1.3 million in 1997 from a loss
of $838,000 in 1996, due to the factors discussed above.
Chief Auto Parts Inc. is engaged in the sale and distribution of
automotive parts to the retail and wholesale aftermarket through a chain of
553 stores (located primarily in California and Texas) at September 28, 1997.
For further information, please contact Thomas A. Hough, Senior Vice President
and Chief Financial Officer.
SOURCE Chief Auto Parts Inc.