Advance Auto Parts Third Quarter Operating Profit Rises
24 November 1998
Advance Auto Parts Third Quarter Operating Profit Rises 64.3% on 25.4% Sales Increase
ROANOKE, Va., Nov. 23 -- Advance Holding Corporation, a
specialty retailer of automotive parts and accessories under the Advance Auto
Parts name, today reported strong increases in sales and operating income for
the fiscal third quarter (12 weeks) and year-to-date (40 weeks) ended
October 10, 1998.
Net sales for the 1998 third quarter were $258.8 million, an increase of
25.4% from the $206.4 million reported for the comparable period in 1997.
This sales growth was due to an increase in comparable store net sales of
5.8%, as well as new store openings and store maturation. Operating profit
for the recent quarter rose 64.3% to $16.9 million, or 6.5% of net sales,
compared with $10.3 million, or 5.0% of net sales, for the year-earlier
period. EBITDA (earnings before interest, taxes, depreciation and
amortization), as adjusted, was $23.9 million for the latest quarter, up
44.2%. Primarily due to the increase in interest expense resulting from
Advance's recapitalization, net income was $4.1 million for the 1998 third
quarter, versus $5.3 million in the 1997 period.
"Advance continued to enjoy solid same-store sales growth and increasing
productivity from our new stores during the third quarter," stated Garnett E.
Smith, President and Chief Executive Officer. "Control of warehouse and
delivery expenses contributed to an improvement in the gross profit margin to
38.0% from 37.7%, while SG&A expenses declined to 31.4% from 32.7% of net
sales.
Continuing our expansion, we opened 29 new stores, remodeled 11 stores and
relocated one store during the third quarter. On a year-to-date basis, we
have opened 125 stores, bringing the total store count to 936. Our merger
with Western Auto was completed on November 2, 1998 and we plan to quickly
integrate the acquired Parts America and Western Auto Stores."
For the first three quarters (40 weeks) of fiscal 1998, net sales were
$802.8 million, up 25.0% from the $642.3 million reported for the same 1997
period. The increase in comparable store net sales was 6.2%. Operating
profit for the first 40 weeks in 1998 was $49.5 million before non-recurring
recapitalization expenses, an increase of 52.3% compared with the
$32.5 million recorded in the year-earlier period. (Including
recapitalization expenses, 1998 year-to-date operating profit was
$35.3 million.) EBITDA, as adjusted, before recapitalization expenses was
$70.6 million for the recent period, rising 35.6% over the prior year. Due to
the increase in interest expense and the recapitalization expenses, net income
was $6.7 million for the 1998 period, versus $16.3 million in the 1997 period.
On November 2, 1998, Advance completed the previously announced
acquisition of the Western Auto Supply Company subsidiary of Sears, Roebeck &
Co. Western Auto was acquired for $175.0 million in cash and approximately
40.6% of the common stock of Advance. As a result, Advance now operates a
total of more than 1,500 retail stores under the Advance Auto Parts, Parts
America and Western Auto names in 37 states, Puerto Rico and the U.S. Virgin
Islands, as well as nearly 775 'dealer' stores in 48 states.
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.
Advance Holding Corporation, which operates Advance Auto Parts stores, is
the second largest specialty retailer of automotive parts and accessories in
the U.S. The Company serves the "do it yourself" market through its retail
stores 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 Forty Week Periods Ended
October 10, 1998 and October 4, 1997
(dollars in thousands)
(Unaudited)
Twelve Week Forty Week
Period Ended Period Ended
10/10/98 10/04/97 10/10/98 10/04/97
Net sales $258,839 $206,409 $802,839 $642,289
Cost of sales 160,464 128,692 493,289 396,890
Gross profit 98,375 77,717 309,550 245,399
Selling, general and
administrative expenses81,205 67,406 260,017 212,884
Expenses associated with
Recapitalization 225 -- 14,230 --
Operating income 16,945 10,311 35,303 32,515
Other income (expense):
Interest expense (10,116) (1,190) (23,675) (4,653)
Other 543 (94) 860(297)
Total other expense,
net (9,573) (1,284) (22,815) (4,950)
Income before income taxes7,372 9,027 12,488 27,565
Income tax expense 3,279 3,692 5,822 11,275
Net income 4,093 5,335 6,666 16,290
ADVANCE HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets - October 10, 1998 and
January 3, 1998
(dollars in thousands)
10/10/98 01/03/98
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $38,408 $15,463
Marketable securities -- 2,025
Receivables, primarily
from vendors 23,590 19,108
Trade receivables 5,672 3,359
Inventories 363,113 280,267
Prepaid expenses and other
current assets 9,603 2,895
Refundable income taxes 220 1,765
Total current assets 440,606 324,882
Property and equipment, net of
accumulated amortization and
depreciation of $96,260 and
$77,940 146,881 134,896
Other assets, net of accumulated
amortization of $1,254 and $0 22,330 2,054
$609,817 $461,832
Liabilities and Stockholders'
(Deficit) Equity
Current liabilities:
Bank overdrafts $-- $6,970
Borrowings secured by trade
receivables 5,672 3,359
Notes payable and current
portion of long-term debt -- 3,959
Current portion of deferred
revenue 2,256 1,530
Accounts payable 217,415 157,096
Accrued expenses 62,270 27,718
Deferred income taxes 2,909 3,110
Total current liabilities 290,522 203,742
Long-term debt 398,796 100,167
Deferred revenue 1,638 693
Deferred income taxes 12,986 12,839
Post-retirement benefits 1,198 843
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 --
Stockholder subscription
receivables (2,528) --
Outstanding stock options 3,731 --
Unamortized stock option
compensation (3,188) --
(Accumulated deficit) retained
earnings (201,118) 142,581
Total stockholders' (deficit)
equity (95,323) 143,548
$609,817 $461,832