Discount Auto Parts, Inc. Reports Fiscal 1999 Third Quarter Results
23 March 1999
Discount Auto Parts, Inc. Reports Fiscal 1999 Third Quarter Results
LAKELAND, Fla.--March 23, 1999--Discount Auto Parts, Inc. today announced results for the Company's third quarter ended March 2, 1999.Total sales for the third quarter of fiscal 1999 increased 15.5% to a record $127.4 million, as compared to $110.3 million a year earlier. Comparable store sales (which include sales from the Company's commercial delivery program) increased 1% for the third quarter of fiscal 1999 as compared to the third quarter of fiscal year 1998. Total sales for the first nine months of fiscal 1999 increased 14.0% to $370.7 million, from $325.3 million a year earlier. Comparable store sales increased 2% for the first nine months of fiscal 1999 as compared to the first nine months of fiscal 1998. The balance of the increase in total sales for the third quarter and first nine months of fiscal 1999 was attributable to new stores opened since the beginning of the respective periods in fiscal 1998, as well as sales associated with the Rose Auto Parts stores which were acquired effective September 28, 1998.
Gross profit for the third quarter of fiscal 1999 increased 22.6% to $53.2 million as compared to $43.4 million for the third quarter of fiscal 1998. As a percentage of sales, gross profit was 41.8% for the third quarter of fiscal 1999 as compared to 39.3% for the third quarter of fiscal 1998. Gross profit for the first nine months of fiscal 1999 increased 19.6% to $152.1 million as compared to $127.1 million a year earlier. As a percentage of sales, gross profit was 41.0% for the first nine months of fiscal 1999 as compared to 39.1% for the comparable period a year earlier.
The improvement in gross margins for the third quarter and first nine months of fiscal 1999 was due in part to overall lower product cost, a shift in merchandising strategies to promote higher gross margin product offerings, vendor incentives associated with the Rose Auto store openings and a shift in vendor cooperative advertising allowances to direct product cost reductions.
Selling, general and administrative ("SG&A") expenses increased as a percentage of sales from 28.4% in the third quarter of fiscal 1998 to 30.6% in the third quarter of fiscal 1999. SG&A expenses increased as a percentage of sales from 27.8% for the first nine months of fiscal 1998 to 29.9% for the first nine months of fiscal 1999. The increase is primarily due to the expenses incurred related to the implementation 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 third quarter of fiscal 1999 increased 17.4% to $14.2 million as compared to $12.1 million for the third quarter of fiscal 1998. Income from operations for the first nine months of fiscal 1999 increased 11.9% to $41.2 million as compared to $36.8 million for the first nine months of fiscal 1998. Operating margins for the third quarter of fiscal 1999 were 11.1% as compared to 11.0% for the third quarter of fiscal 1998. Operating margins for the first nine months of fiscal 1999 were 11.1% as compared to 11.3% for the first nine months of fiscal 1998. Operating margins for both the third quarter and first nine months of fiscal 1999 were negatively impacted by the implementation of the Company's commercial delivery program. Excluding the impact of the commercial delivery program, operating margins were 12.5% for the third quarter of fiscal 1999 and 12.2% for the first nine months of fiscal 1999.
Interest expense for the third quarter of fiscal 1999 was $3.6 million as compared to $2.8 million for the third quarter of fiscal 1998. Interest expense for the first nine months of fiscal 1999 was $9.3 million as compared to $7.5 million during the first nine months of fiscal 1998. The increase was primarily the result of increased borrowings associated with new store growth and the costs associated with the recently completed expansion of the Company's existing distribution center and corporate office space.
Other income for the third quarter and first nine months of fiscal 1998 included a $4.0 million fee received from the termination of the proposed acquisition of Hi-Lo Automotive, Inc., less related expenses.
As a result of the termination fee received in the third quarter of fiscal 1998, net income for the third quarter of fiscal 1999 decreased to $6.7 million or $.40 per diluted share as compared to $7.0 million or $.42 per diluted share reported for the third quarter of fiscal 1998. Net income for the first nine months of fiscal 1999 increased to $19.9 million or $1.18 per diluted share as compared to $19.5 million or $1.17 per diluted share for the first nine months of fiscal 1998.
During the third quarter of fiscal 1999, the Company added 19 mini-depot stores. As of March 2, 1999, the Company had 537 stores in operation consisting of 24 depot stores and 513 mini-depot stores. For all of fiscal year 1999, the Company expects to add approximately 105 stores, of which 85 had been added as of March 2, 1999. For fiscal 2000 the Company expects to add approximately 80 to 90 stores.
Discount Auto Parts, Inc. is one of the Southeast's leading specialty retailers of automotive replacement parts, maintenance items and accessories for the DIY consumer. The Company currently operates 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", "believe" 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.
DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
3/2/99 3/3/98 3/2/99 3/3/98
Net sales $ 127,380 $ 110,329 $ 370,709 $ 325,306
Cost of sales,
including
distribution costs 74,177 66,942 218,626 198,167
------- ------- ------- -------
Gross profit 53,203 43,387 152,083 127,139
Selling, general
and administrative
expenses 39,017 31,301 110,862 90,316
------- ------- ------- -------
Income from
operations 14,186 12,086 41,221 36,823
Other income, net 280 2,063 411 2,379
Interest expense (3,552) (2,812) (9,279) (7,479)
------- ------- ------- -------
Income before
income taxes 10,914 11,337 32,353 31,723
Income taxes 4,213 4,365 12,488 12,213
------- ------- ------- -------
Net income $ 6,701 $ 6,972 $ 19,865 $ 19,510
======= ======= ======= =======
Net income per share:
Basic $ 0.40 $ 0.42 $ 1.19 $ 1.18
======= ======= ======= =======
Diluted $ 0.40 $ 0.42 $ 1.18 $ 1.17
======= ======= ======= =======
Average number of shares:
Basic 16,648 16,605 16,641 16,600
======= ======= ======= =======
Assuming Dilution 16,771 16,696 16,800 16,687
======= ======= ======= =======
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 2 June 2
1998 1997
------- --------
Assets
Current assets:
Cash and cash equivalents $ 7,007 $ 5,064
Inventories 214,750 172,027
Prepaid expenses and
other current assets 17,657 17,657
------- --------
Total current assets 238,862 194,748
Property and equipment 439,036 379,991
Less allowances for
depreciation and amortization (78,334) (65,472)
------- --------
360,702 314,519
Other assets 5,116 2,468
------- --------
Total assets $ 604,680 $ 511,735
======= ========
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 67,450 $ 67,083
Other current liabilities 19,690 19,603
Current maturities
of long-term debt 2,400 2,400
-------- --------
Total current liabilities 89,540 89,086
Deferred income taxes 5,069 5,069
Long-term debt 232,856 160,695
Total stockholders' equity 277,215 256,885
-------- --------
Total liabilities and
stockholders' equity $ 604,680 $ 511,735
========= =========