Discount Auto Parts, Inc. Reports Fiscal 1999 Q1 Results
15 September 1998
Discount Auto Parts, Inc. Reports Fiscal 1999 First Quarter Results
LAKELAND, Fla.--Sept. 15, 1998--Discount Auto Parts, Inc. today announced results for the Company's first quarter ended September 1, 1998. Total sales for the first quarter of fiscal 1999 increased 12.1% to a record $123.0 million, as compared to $109.7 million a year earlier. Comparable store sales increased 2.7% for the first quarter of fiscal 1999 as compared to the first quarter of fiscal year. The Company emphasized that comparable store sales for the first quarter of fiscal 1999 are being compared to a comparable traditional DIY store sales increase of 11.7% in the first quarter of fiscal 1998.
Gross profit for the first quarter of fiscal 1999 increased to $49.7 million as compared to $42.4 million a year earlier. As a percentage of sales, gross profit was 40.4% for the first quarter of fiscal 1999 as compared to 38.6% a year earlier.
The improvement in gross margins for the first quarter of fiscal 1999 was due in part to overall lower product cost, a shift in merchandising strategies to promote higher gross margin product offerings and a shift in vendor cooperative advertising allowances to direct product cost reductions.
"We are very pleased with the continuing improvement in our gross margins which began in the fourth quarter of fiscal 1998 and continued to improve in the first quarter of 1999", commented Bill Perkins, President and COO. "In addition, we are pleased with our continuing market share increases in both existing and new markets and our new store openings."
Selling, general and administrative ("SG&A") expenses increased as a percentage of sales from 27.0% in the first quarter of fiscal 1998 to 28.5% in the first quarter of fiscal 1999. The increase is primarily due to the expenses incurred related to the development and rollout of the Company's commercial delivery program and the shift in cooperative advertising credits to direct product purchase price reductions.
Income from operations for the first quarter of fiscal 1999 increased 13.9% to $14.6 million as compared to $12.8 million for the first quarter of fiscal 1998. Operating margins for the first quarter of 1999 were 11.9% as compared to 11.7% for the first quarter of 1998.
Interest expense for the first quarter of fiscal 1999 was $2.7 million as compared to $2.1 million for the comparable fiscal 1998 period. The increase was primarily the result of increased borrowings associated with new store growth and the costs associated with the expansion of the Company's existing distribution center.
Net income for the first quarter of fiscal 1999 was $7.3 million or $.44 per diluted share as compared to $6.5 million or $.39 per diluted share reported for the comparable fiscal 1998 period.
During the first quarter of fiscal 1999, the Company opened 20 new mini-depot stores. As of September 1, 1998, the Company had 472 stores in operation consisting of 23 depot stores and 449 mini-depot stores. For all of fiscal year 1999, the Company expects to open approximately 75 new stores.
In July 1998, the Company completed the expansion of its distribution center to double its size. The expanded distribution center, which comprises approximately 600,00 square feet, should be capable of serving approximately 675 stores. Additional office space, support facilities and extension of the merchandise handling systems are in the process of being completed. When the expanded center becomes fully operational in the fall of 1998, the expanded distribution center will also provide service to the Company's express warehouses, and will be utilized to support its commercial delivery program.
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 476 stores located throughout Florida, Georgia, Alabama, Mississippi, South Carolina and Louisiana.
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 word "expects" 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 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
Thirteen Thirteen
Weeks Weeks
Ended Ended
9/1/98 9/2/97
Net sales $ 123,039 $ 109,737
Cost of sales, including
distribution costs 73,365 67,335
Gross profit 49,674 42,402
Selling, general and
administrative expenses 35,069 29,577
Income from operations 14,605 12,825
Other income (expense), net 24 (276)
Interest expense (2,662) (2,053)
Income (loss) before income taxes 11,967 10,496
Income taxes (benefit) 4,619 4,046
Net income (loss) $ 7,348 $ 6,450
Net income (loss) per share:
Basic $ 0.44 $ 0.39
Diluted $ 0.44 $ 0.39
Average number of shares:
Basic 16,634 16,594
Assuming Dilution 16,828 16,650
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands) Sept. 1 June 2
1998 1998
Assets
Current assets:
Cash and cash equivalents $ 4,830 $ 5,064
Inventories 178,071 172,027
Prepaid expenses and
other current assets 22,081 17,657
Total current assets 204,982 194,748
Property and equipment 400,820 379,991
Less allowances for
depreciation and amortization (69,378) (65,472)
331,442 314,519
Other assets 2,433 2,468
Total assets $ 538,857 $ 511,735
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 58,507 $ 67,083
Other current liabilities 22,031 19,603
Current maturities
of long-term debt 2,400 2,400
Total current liabilities 82,938 89,086
Deferred income taxes 5,069 5,069
Long-term debt 186,479 160,695
Total stockholders' equity 264,371 256,885
Total liabilities
and stockholders' equity $ 538,857 $ 511,735