Discount Auto Parts, Inc. Reports Q4 Results
6 July 1998
Discount Auto Parts, Inc. Reports Fiscal 1998 Year End and Fourth Quarter Results
LAKELAND, Fla.--July 6, 1998--Discount Auto Parts, Inc. today announced results for the Company's fiscal year and fourth quarter ended June 2, 1998. Total sales for the fourth quarter of fiscal 1998 increased 13.7% to a record $122.2 million, as compared to $107.4 million a year earlier. Traditional Do-It-Yourself ("DIY") retail sales for the fourth quarter of fiscal 1998 increased 16.8% over the comparable fiscal 1997 period. Traditional DIY comparable store sales increased 6.5% for the fourth quarter of fiscal 1998 as compared to the fourth quarter of fiscal 1997. The balance of the increase in DIY sales for the fourth quarter of fiscal 1998 is the result of sales associated with new stores. As of June 2, 1998 the Company had 452 stores as compared to 400 stores at the end of fiscal 1997.Commercial sales of R-12 freon represented approximately $2.8 million or 2.6% of total sales for the fourth quarter of fiscal 1997, and were negligible in the fourth quarter of fiscal 1998. When including commercial sales of freon in comparable store sales for the fourth quarter of fiscal 1997, comparable store sales would have reflected an increase of 3.7%.
Total sales for fiscal year 1998 increased 10.4% to $447.5 million, as compared to $405.2 million for fiscal year 1997. Fiscal year 1997 contained fifty three weeks versus the fifty two weeks in fiscal year 1998. In addition, commercial sales of R-12 freon represented approximately $32.7 million or 8.1% of the total sales for fiscal year 1997. Such commercial sales were negligible for fiscal year 1998. Excluding the impact of such commercial sales and the extra week in fiscal 1997, traditional DIY retail sales for fiscal year 1998 increased 22.5% over the comparable fiscal 1997 period.
Traditional DIY comparable store sales increased 7.7% for fiscal year 1998 as compared to fiscal year 1997, after excluding the effect of the extra week. When including commercial sales of freon in comparable store sales for fiscal year 1997, comparable store sales would have reflected a decrease of 1.9% for fiscal year 1998.
Gross profit for the fourth quarter of fiscal 1998 increased to $48.9 million as compared to $40.0 million a year earlier. As a percentage of sales, gross profit was 40.1% for the fourth quarter of fiscal 1998 as compared to 37.2% a year earlier. Gross profit for fiscal year 1998 increased to $176.1 million as compared to $148.5 million a year earlier. As a percentage of sales, gross profit was 39.3% for fiscal year 1998 as compared to 36.7% a year earlier.
The improvement in gross margins for the fourth quarter of fiscal 1998 and fiscal year 1998 was due in part to the higher level of commercial sales of R-12 freon in the fiscal 1997 comparable periods, which generally had lower gross margins due to the product's commodity nature. Excluding the impact of commercial freon sales in fiscal 1997, the gross margin would have been 37.8% for the fourth quarter of fiscal 1997 and 38.0% for fiscal year 1997.
"We are very pleased with the positive DIY sales and gross margin trends we experienced during fiscal year 1998", commented Bill Perkins, President and COO. "We believe these trends, coupled with the accelerated roll-out of our commercial delivery program, should help to position us for even stronger results in fiscal 1999".
Selling, general and administrative ("SG&A") expenses increased as a percentage of sales from 26.1% in the fourth quarter of fiscal 1997 to 27.7% in the fourth quarter of fiscal 1998. SG&A expenses increased as a percentage of sales from 25.0% in fiscal year 1997 to 27.7% in fiscal year 1998. The increase was primarily the result of higher levels of commercial sales of R-12 freon in the fourth quarter of fiscal 1997 and fiscal year 1997. Such commercial sales generally had very limited associated SG&A expenses. In addition, the Company incurred expenses in the fourth quarter and for all of fiscal 1998 related to the development and roll-out of the Company's commercial delivery program. Excluding the commercial sales of R-12 freon, SG&A expenses as a percentage of sales for the fourth quarter and fiscal year 1997 would have been 26.8% and 27.2%, respectively.
Income from operations for the fourth quarter of fiscal 1998 increased 26.3% to $15.1 million as compared to $12.0 million for the fourth quarter of fiscal 1997. Income from operations for fiscal year 1998 increased 10.1% to $52.0 million as compared to $47.2 million for fiscal year 1997. Income from operations for the fourth quarter and fiscal year 1997 include earnings associated with commercial sales of freon while similar sales generally were not made in fiscal 1998. The fiscal 1997 income from operations also reflect an extra week of results. When excluding the impact of such commercial sales and the effects of the extra week of operations in the fiscal 1997 period, traditional DIY operating income (which reflects operating income exclusive of commercial freon sales and associated cost of sales) increased 29.5% and 31.6% for the fourth quarter and fiscal year 1998, respectively, over the comparable period results.
During the fourth quarter of fiscal 1997, the Company reported a $20.5 million charge against earnings associated with the settlement of a lawsuit brought by Airgas, Inc. and certain Airgas affiliates against several defendants, including the Company and one of its employees.
Other income for fiscal year 1998 primarily included the previously reported $4.0 million fee received from the termination of the proposed acquisition of Hi-Lo Automotive, Inc., less related expenses.
Interest expense for the fourth quarter of fiscal 1998 was $2.7 million as compared to $1.8 million for the comparable fiscal 1997 period. Interest expense for fiscal year 1998 was $10.2 million as compared to $6.1 million for fiscal year 1997. The increase for both periods was primarily the result of increased borrowings associated with new store growth, the expansion of the Company's existing distribution center, and the September 1997 funding of the amounts due pursuant to the terms of the settlement agreement with Airgas.
Net income for the fourth quarter of fiscal 1998 was $7.7 million or $.46 per diluted share as compared to a loss of $6.2 million or a loss of $.37 per diluted share reported for the comparable fiscal 1997 period. Net income for fiscal year 1998 was $27.2 million or $1.63 per diluted share as compared to $12.7 million or $.77 per diluted share reported for fiscal year 1997.
During the fourth quarter of fiscal 1998, the Company opened 17 new mini-depot stores, bringing the fiscal year 1998 total to 53 new stores. As of June 2, 1998, the Company had 452 stores in operation consisting of 23 depot stores and 429 mini-depot stores. During fiscal year 1998, the Company closed one store. For fiscal year 1999, the Company expects to open approximately 75 new stores.
Discount Auto Parts, Inc. is one of the Southeast's leading specialty retailers of automotive replacement parts, maintenance items and accessories for the Do-It-Yourself ("DIY") consumer. The Company currently operates 458 stores located throughout Florida, Georgia, Alabama, Mississippi and South Carolina.
Forward Looking Statements
This release may contain forward looking statements which reflect the current views of the Company with respect to certain events that could have an effect on the Company's future financial performance. These statements include the words "expects", "should", and similar expressions. Any such forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated.
These risks and uncertainties include increased competition, extent of the market demand for auto parts, availability of inventory supply, propriety of inventory mix, adequacy and perception of customer service, product quality and defect experience, availability of and ability to take advantage of vendor pricing programs and incentives, rate of new store openings, cannibalization of store sites, mix of types of merchandise sold, governmental regulation, new store development, performance of information systems, effectiveness of deliveries from the distribution center, ability to hire, train and retain qualified team members, availability of quality store sites, ability to complete timely expansion of the distribution center, ability to successfully roll-out the commercial delivery service, credit risk associated with the commercial delivery service, environmental risks, availability of expanded and extended credit facilities, legal expenses associated with material matters and disputes, expenses associated with investigations concerning freon matters, potential for liability with respect to these matters and other risks.