Advance Auto Parts Q2 Operating Income Rises
26 August 1998
Advance Auto Parts 2nd Quarter Operating Income Rises 53.6% on 29.6% Sales Increase
ROANOKE, Va., Aug. 25 -- Advance Holding Corporation today
reported strong increases in sales and operating income for the fiscal second
quarter (12 weeks) and first half (28 weeks) ended July 18, 1998.
Net sales for the 1998 second quarter were $255.0 million, an increase of
29.6% from the $196.7 million reported for the comparable 1997 period. This
sales growth was due to an increase in comparable store net sales of 9.4%, as
well as new store openings and store maturation. Operating profit for the
recent quarter rose 53.6% to $18.4 million, or 7.2% of net sales, compared
with $11.9 million, or 6.1% of net sales, for the year-earlier period. EBITDA
(earnings before interest, taxes, depreciation and amortization), as adjusted,
was $25.0 million for the latest quarter, up 37.9%. Primarily due to the
increase in interest expense resulting from Advance's recapitalization, net
income was $4.9 million for the 1998 second quarter, versus $6.1 million in
the 1997 period.
"The positive trend in Advance's second quarter operating results
reflected strong same-store sales increases, solid contributions from our new
stores, and the leveraging of our fixed expenses," noted Garnett E. Smith,
President and Chief Executive Officer. "For the fiscal year-to-date, we have
continued our successful growth strategy, opening 96 new stores, remodeling 25
stores and relocating four stores, bringing the total Advance Auto Parts store
network to 909 locations as of July 18, 1998. These results reflect truly
outstanding performance by the entire Advance team. We look forward to
further growth, as evidenced by our recently announced agreement to merge the
Western Auto subsidiary of Sears, Roebuck and Co. into Advance's operations."
For the first half (28 weeks) of fiscal 1998, net sales were $544.0
million, up 24.8% from the $435.9 million reported for the same 1997 period.
The increase in comparable store net sales was 6.4%. Operating profit for the
1998 first half was $31.7 million before non-recurring recapitalization
expenses, an increase of 42.6% compared with the $22.2 million recorded in the
year-earlier period. (Including recapitalization expenses, 1998 first half
operating profit was $17.7 million.) EBITDA, as adjusted, before
recapitalization expenses was $46.7 million for the recent period, rising
31.6% over the prior year. Including the increase in interest expense and the
recapitalization expenses, net income was $2.6 million for the 1998 first
half, versus $11.0 million in the 1997 period.
In a recapitalization completed in April 1998, a majority of the equity of
Advance was purchased by an investment group including Freeman Spogli & Co.
Incorporated, Ripplewood Holdings, L.L.C. and members of Advance's management.
On August 17, 1998, Advance and Sears, Roebuck and Co. jointly announced
the signing of a definitive agreement under which the Western Auto subsidiary
of Sears will be merged into Advance. The transaction, which is expected to
close by year-end subject to certain conditions, will give Advance a total of
more than 1,500 retail stores in 36 states, Puerto Rico and the U.S. Virgin
Islands; as well as nearly 800 `dealer' stores in 48 states, and revenues of
approximately $2.1 billion.
Advance Holding Corporation, which operates Advance Auto Parts stores, is
one of the largest specialty retailers of automotive parts and accessories in
the U.S. The Company serves the "do it yourself" market through more than 915
stores in 17 states, and also has a commercial delivery program serving the
"do it for me" market. Advance has achieved significant store growth while
maintaining an operating strategy characterized by superior customer service,
broad selection of quality products, and sophisticated information technology
and logistics systems.
Certain statements contained in this news release are forward-looking
statements. These statements discuss, among other things, expected growth,
store development and expansion strategy, business strategies, future revenues
and future performance. The forward-looking statements are subject to risks,
uncertainties and assumptions including, but not limited to, competitive
pressures, demand for the Company's products, the market for auto parts, the
economy in general, inflation, consumer debt levels, the weather, and other
risk factors listed from time to time in the Company's filings with the
Securities and Exchange Commission. Actual results may materially differ
from anticipated results described in these forward-looking statements.
ADVANCE HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
For the Twelve and Twenty-Eight Week Periods Ended
July 18, 1998 and July 12, 1997
(dollars in thousands)
(Unaudited)
Twelve Week Twenty-Eight Week
Period Ended Period Ended
07/18/98 07/12/97 07/18/98 07/12/97
Net sales $ 255,037 $ 196,729 $ 544,000 $ 435,880
Cost of sales 156,448 121,338 332,825 268,198
Gross profit 98,589 75,391 211,175 167,682
Selling, general and
administrative
expenses 80,235 63,444 179,521 145,478
Costs associated with the
recapitalization of
the Company -- -- 14,005 --
Operating income 18,354 11,947 17,649 22,204
Other income (expense):
Interest expense (9,509) (1,467) (12,850) (3,463)
Other 321 (102) 317 (203)
Total other expense,
net (9,188) (1,569) (12,533) (3,666)
Income before income
taxes 9,166 10,378 5,116 18,538
Income tax expense 4,241 4,245 2,543 7,583
Net income $ 4,925 $ 6,133 $ 2,573 $ 10,955
ADVANCE HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets -- July 18, 1998 and January 3, 1998
(dollars in thousands, except per share data)
07/18/98 01/03/98
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 44,790 $ 15,463
Marketable securities -- 2,025
Receivables, primarily from
vendors 24,372 19,108
Trade receivables 5,325 3,359
Inventories 348,523 280,267
Prepaid expenses and other
current assets 5,056 2,895
Refundable income taxes 2,185 1,765
Total current assets 430,251 324,882
Property and equipment, net of
accumulated amortization and
depreciation of
$89,910 and $77,940 143,176 134,896
Other assets, net of
accumulated amortization of
$668 and $0 21,490 2,054
$ 594,917 $ 461,832
Liabilities and Stockholders' (Deficit) Equity
Current liabilities:
Bank overdrafts $ -- $ 6,970
Borrowings secured by trade
receivables 5,325 3,359
Notes payable and current
portion of long-term debt -- 3,959
Current portion of deferred
revenue 3,089 1,530
Accounts payable 216,832 157,096
Accrued expenses 53,634 27,718
Deferred income taxes 2,674 3,110
Total current liabilities 281,554 203,742
Long-term debt 397,022 100,167
Deferred revenue 1,638 693
Deferred income taxes 13,357 12,839
Post-retirement benefits 1,092 843
Stockholders' (deficit) equity:
8% noncumulative, nonvoting
preferred stock, $10 par
value, redeemable by
the Company at par;
liquidation value at
par; 100,000 shares authorized;
77,300 shares issued and
outstanding at January 3, 1998 -- 773
Common stock, Class A,
voting, $.01 par value,
62,500,000 shares authorized;
12,603,800 and 2,412,500 issued
and outstanding 126 19
Common stock, Class B,
nonvoting, $.01 par value,
437,500,000 shares authorized;
0 and 21,875,000 shares issued
and outstanding -- 175
Additional paid-in capital 107,654 --
Outstanding stock options 300 --
Stockholder subscription
receivables (2,615) --
(Accumulated deficit) retained
earnings (205,211) 142,581
Total stockholders'
(deficit) equity (99,746) 143,548
$594,917 $461,832