Discount Auto Parts, Inc. Reports Fiscal 2000 First Quarter Results
21 September 1999
Discount Auto Parts, Inc. Reports Fiscal 2000 First Quarter Results
LAKELAND, Fla.--Sept. 21, 1999--Discount Auto Parts, Inc. (NYSE-DAP) today announced results for the Company's first quarter ended August 31, 1999. Total sales for the first quarter of fiscal 2000 increased 16.7% to a record $143.6 million, as compared to $123.0 million a year earlier.Comparable store sales increased 1% for the first quarter of fiscal 2000. Comparable store sales results include sales from the Company's commercial delivery program. The balance of the increase in total sales for the first quarter was attributable to new stores opened since the beginning of fiscal 1999. At August 31, 1999, the Company had 580 stores in operation, compared with 472 stores at September 1, 1998 and 452 stores at June 2, 1998.
Gross profit for the first quarter of fiscal 2000 increased 18.4% to $58.4 million as compared to $49.3 million for the first quarter of fiscal 1999. As a percentage of sales, gross profit was 40.7% for the first quarter of fiscal 2000 as compared to 40.1% for the first quarter of fiscal 1999.
Selling, general and administrative ("SG&A") expenses increased as a percentage of sales from 28.5% in the first quarter of fiscal 1999 to 30.4% in the first quarter of fiscal 2000. The increase is primarily due to the expenses incurred related to the implementation and expansion of the Company's commercial delivery program and somewhat lower do-it-yourself ("DIY") comparable store sales for the first quarter of fiscal 2000 as compared to the 1999 quarter, thus impacting the ability of the Company to leverage these expenses.
Income from operations for the first quarter of fiscal 2000 was $14.7 million as compared to $14.3 million for the first quarter of fiscal 1999. Operating margins for the first quarter of fiscal 2000 were 10.3% as compared to 11.6% for the first quarter of fiscal 1999.
Operating income and the resulting margins for both the first quarter of fiscal 2000 and the first quarter of fiscal 1999 were negatively impacted by the implementation and expansion of the Company's commercial delivery program. Excluding the impact of the commercial delivery program, operating margins were approximately 11.4% for the first quarter of fiscal 2000 versus approximately 12.2% for the first quarter of fiscal 1999.
Interest expense for the first quarter of fiscal 2000 was $3.7 million as compared to $2.7 million for the first quarter of fiscal 1999. The increase was the result of increased borrowings primarily associated with new store growth and higher interest rates.
Income before the cumulative effect of a change in accounting method for the first quarter of fiscal 2000 was $7.3 million or $.44 per diluted share as compared to $7.1 million or $.42 per diluted share reported for the first quarter of fiscal 1999.
During the fourth quarter of fiscal 1999, the Company implemented a change in its method of accounting for store inventories from the first-in, first-out method calculated using a form of the retail inventory method to the weighted cost method. The Company believes the new method for computing inventory is preferable because it provides for better matching of revenues and expenses. The Company made this change in connection with new store-level perpetual inventory systems installed throughout fiscal 1999. Accordingly, it is believed that the new inventory valuation method will better correspond with the Company's current operating practices for store inventory management. As a result of this change in accounting method, the Company reported a non-cash, fiscal 1999 after tax charge of $8.2 million, or $.49 per diluted share which is reflected as of the beginning of the year and which represents the beginning of the 1999 fiscal year impact of the change in accounting method.
The Company reported net income of $7.3 million, or $.44 per diluted share for the first quarter of fiscal 2000 as compared to, for the reasons described above, a net loss of $1.1 million, or $.07 per diluted share for the first quarter of fiscal 1999.
During the first quarter of fiscal 2000, the Company added 22 mini-depot stores. As of August 31, 1999, the Company had 580 stores in operation consisting of 28 depot stores and 552 mini-depot stores. For fiscal 2000 the Company expects to add a total of approximately 80 to 90 stores.
Commenting on the recent hurricane activity in the southeastern United States, President Bill Perkins stated "We were fortunate to have had only minimal physical damage to certain of our store locations, and, as always, our Team responded admirably. However, because of the mandatory evacuations in many of our operating areas we had approximately 265 stores closed for at least some period during hurricane Floyd. As a result, sales and earnings may be impacted slightly for the second quarter of fiscal 2000."
Discount Auto Parts, Inc. is one of the Southeast's leading specialty retailers and suppliers of automotive replacement parts, maintenance items and accessories to both DIY consumers and professional mechanics and service technicians. The Company currently operates stores located throughout Florida, Georgia, Mississippi, Alabama, Louisiana 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", "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, but are not limited to, increased competition, extent of 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, sourcing availability, rate of new store openings, cannibalization of store sites, mix of types of merchandise sold, governmental regulation of products, 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 implement the commercial delivery service, credit risk associated with the commercial delivery service, environmental risks, availability of expanded and extended credit facilities, Year 2000 compliance issues, expenses associated with investigations concerning freon matters, and 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 Ended Weeks Ended
--------- ---------
August 31 September 1
1999 1998
Net sales $ 143,625 $ 123,039
Cost of sales, including
distribution costs 85,198 73,695
--------- ---------
Gross profit 58,427 49,344
Selling, general and
administrative expenses 43,694 35,069
--------- ---------
Income from
operations 14,733 14,275
Other income, net 638 24
Interest expense (3,651) (2,662)
--------- ---------
Income before income taxes
and cumulative effect of
change in accounting
principle 11,720 11,637
Income taxes 4,374 4,492
--------- ---------
Income before cumulative
effect of change in
accounting principle 7,346 7,145
Cumulative effect of
change in accounting
principle, net of
income tax benefit -- (8,245)
--------- ---------
Net income (loss) $ 7,346 $ (1,100)
========= =========
Net income (loss) per
basic share from:
Income before cumulative
effect of change in
accounting principle $ 0.44 $ 0.43
Cumulative effect
of change in
accounting principle -- (0.50)
--------- ---------
Net income (loss) $ 0.44 $ (0.07)
========= =========
Net income (loss) per
diluted share from:
Income before
cumulative effect
of change in
accounting principle $ 0.44 $ 0.42
Cumulative effect of
change in accounting
principle -- (0.49)
--------- ---------
Net income (loss) $ 0.44 $ (0.07)
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Average common shares
outstanding 16,690 16,634
Dilutive effect of
stock options 117 194
--------- ---------
Average common shares
outstanding
- assuming dilution 16,807 16,828
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CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
August 31 June 1
1999 1999
---------------- -----------------
Assets
Current assets:
Cash and cash equivalents $ 6,776 $ 8,795
Inventories 221,084 209,028
Prepaid expenses and
other current assets 21,728 22,773
--------- ---------
Total current assets 249,588 240,596
Property and equipment 475,732 457,994
Less allowances for
depreciation and amortization (88,727) (83,417)
--------- ---------
387,005 374,577
Other assets 5,761 5,141
--------- ---------
Total assets $ 642,354 $ 620,314
========= =========
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 72,568 $ 87,867
Other current liabilities 21,878 21,390
Current maturities of
long-term debt 2,400 2,400
--------- ---------
Total current liabilities 96,846 111,657
Deferred income taxes 7,091 7,091
Long-term debt 254,305 224,800
Total stockholders' equity 284,112 276,766
--------- ---------
Total liabilities and
stockholders' equity $ 642,354 $ 620,314
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