Safelite Glass Corp. Reports Quarter Ended October 2, 1999 Results
17 November 1999
Safelite Glass Corp. Reports Quarter Ended October 2, 1999 Results
COLUMBUS, Ohio, Nov. 16 -- Safelite Glass Corp., the leader
in the automotive glass replacement and repair industry, reported today the
results for its fiscal quarter ended October 2, 1999.
Quarter Ended October 2, 1999 Results
The Company reported total sales of $241.3 million for its fiscal second
quarter ended October 2, 1999, a 4% increase from $231.8 million in the
quarter ended October 3, 1998. Installation and related services sales of
$230.2 million were 5% greater than the second quarter of the prior year. The
increase in installation and related services was due to a 4% increase in
replacement unit sales, partially offset by lower pricing. Substantially all
of the unit growth for the quarter came from the Company's network sales.
Overall market conditions in the auto glass replacement industry remained soft
during the quarter as both pricing levels and unit volumes were down from the
prior year. Wholesale revenues for the quarter fell approximately
$1.3 million to $11.1 million as a result of lower unit sales.
Safelite's fiscal second quarter earnings before interest, taxes,
depreciation, amortization, restructuring and other one-time charges
("Adjusted EBITDA") were $17.6 million, equal to those in the quarter ended
October 3, 1998. Adjusted EBITDA was adversely impacted by the lower
industry-wide pricing levels described above, a higher mix of network business
which carries lower profit margins compared with work performed at Company
owned service centers and increased selling, general and administrative
expenses. The increase in selling, general and administrative expenses was
attributable primarily to investment in higher advertising costs and increased
staffing in the Company's national call centers to support recent Master
Provider contract awards. Lower product costs offset a portion of these
items. Operating income of $11.7 million was $3.0 million higher than the
prior year period. Prior year operating income was negatively impacted by
$3.3 million of restructuring and other one-time charges. Net loss for the
fiscal second quarter was $0.5 million, a $1.8 million improvement over the
prior year.
For the six months ended October 2, 1999, total sales were $480.4 million,
an increase of $7.4 million or 2% over the six months ended October 3, 1998.
Adjusted EBITDA for the six months ended October 2, 1999 was $40.5 million,
compared to $46.5 million for the six months ended October 3, 1998. Net
income for the six months ended October 2, 1999 was $1.8 million, an increase
of $0.7 million or 64% over the six months ended October 3, 1998.
"Second quarter results, while even with last year on an Adjusted EBITDA
basis, were at the low end of our expectations," said John F. Barlow,
Safelite's Chief Executive Officer. "Low industry demand and continuing
industry-wide pricing pressures in a soft market environment prevented us from
achieving earnings improvement."
In a recent filing with the Securities and Exchange Commission, Safelite
also disclosed that Allstate Insurance has advised Safelite that it does not
intend to renew its Best Effort Agreement with Safelite for auto glass repair,
replacement, and administrative services when the current contract expires in
October 2000. Sales to Allstate during the fiscal year ended March 1999
totaled $120 million or 14% of sales for the fiscal year. In light of this
development and current industry conditions, Safelite is taking actions to
reduce its overall cost structure. These actions include closing of 110-150
unnecessary service center locations, streamlining field based administrative
functions, and reducing corporate administrative activities. The Company
expects that it will record restructuring charges of between $25 million and
$30 million in the quarter ended January 1, 2000 related to this effort.
"While we are obviously disappointed with Allstate's decision, we believe
that we will be able to retain some portion of this business after our
contract expires," stated Barlow. "Although overall sales volume will likely
be reduced by a significant amount, we are taking the actions necessary to
appropriately re-align our cost structure to reflect this development as well
as the soft market conditions. In addition, we will continue our focus on
sales growth, enhancing our key client relationships, growth of Repair Medics
and expansion into secondary markets through our Mobile Pro initiative."
Cautionary Statement
Readers are cautioned that there are statements contained in this document
which are "forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking
statements include statements which are predictive in nature, which depend
upon or refer to future events or conditions, which include words such as
"expects," "anticipates," "intends," "plans," "believes," "estimates," or
similar expressions. In addition, any statements concerning future financial
performance (including future revenues, earnings or growth rates), ongoing
business strategies or prospects, and possible future Company actions, which
may be provided by management are also forward-looking statements as defined
by the Act. Forward-looking statements are based on current expectations and
projections about future events and are subject to risks, uncertainties, and
assumptions about the Company, economic and market factors and the industries
in which Safelite does business, among other things. These statements are not
guaranties of future performance and Safelite has no specific intention to
update these statements.
These forward-looking statements, like any forward-looking statements,
involve risks and uncertainties that could cause actual results to differ
materially from those projected or anticipated. The risks and uncertainties
include product demand, regulatory uncertainties, the effect of economic
conditions, the impact of competitive products and pricing, changes in
customers' ordering patterns and costs and expenses associated with any Year
2000 issues associated with Safelite, including updating software and hardware
and potential system interruptions. This list should not be construed as
exhaustive.
SAFELITE GLASS CORP.
STATEMENTS OF INCOME
($ IN MILLIONS)
Quarter Ended
October 2, 1999 October 3, 1998
Sales $241.3 $231.8
Cost of sales 178.9 171.5
Gross profit 62.4 60.3
Selling, general
& administrative expenses 50.7 48.3
Other operating expenses(a) -- 2.6
Restructuring -- 0.7
Operating income 11.7 8.7
Interest expense (11.5) (11.3)
Interest income 0.1 0.1
Income before income taxes 0.3 (2.5)
Income tax provision (0.8) 0.2
Net income $(0.5) $(2.3)
Depreciation and amortization $5.8 $5.6
Capital expenditures $5.9 $5.1
Adjusted EBITDA $17.6 $17.6
(a) Other operating expenses consist of one-time integration costs
associated with the Vistar Merger.
SAFELITE GLASS CORP.
STATEMENTS OF INCOME
($ IN MILLIONS)
Six Months Ended
October 2, 1999 October 3, 1998
Sales $480.4 $473.0
Cost of sales 351.6 342.3
Gross profit 128.8 130.7
Selling, general
& administrative expenses 99.9 95.8
Other operating expenses(a) -- 3.6
Restructuring -- 4.2
Operating income 28.9 27.1
Interest expense (23.0) (22.4)
Interest income 0.2 0.2
Income before income taxes 6.1 4.9
Income tax provision (4.3) (3.8)
Net income $1.8 $1.1
Depreciation and amortization $11.6 $11.6
Capital expenditures $9.6 $9.3
Adjusted EBITDA $40.5 $46.5
(a) Other operating expenses consist of one-time integration costs
associated with the Vistar Merger.
SAFELITE GLASS CORP.
BALANCE SHEETS
($ IN MILLIONS)
October 2, 1999 April 3, 1999
ASSETS
CURRENT ASSETS:
Cash and short term investments $3.1 $2.9
Accounts receivable, net 71.0 70.3
Inventories 55.6 50.4
Other 14.5 20.0
Total 144.2 143.6
PROPERTY, PLANT AND
EQUIPMENT, NET 66.5 64.1
INTANGIBLE ASSETS, NET 275.9 280.8
OTHER 81.5 85.3
TOTAL ASSETS $568.1 $573.8
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $56.0 $50.3
Accrued expenses 34.2 36.1
Current portion of long-term debt 2.7 4.5
Total 92.9 90.9
LONG-TERM DEBT, less current
portion 474.4 482.8
OTHER LONG TERM LIABILITIES 5.5 6.6
STOCKHOLDERS' EQUITY (DEFICIT) (4.7) (6.5)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $568.1 $573.8