Discount Auto Parts, Inc. Reports Fiscal 2000 Second Quarter Results
15 December 1999
Discount Auto Parts, Inc. Reports Fiscal 2000 Second Quarter Results
LAKELAND, Fla.--Dec. 15, 1999--Discount Auto Parts, Inc. today announced results for the Company's second quarter ended November 30, 1999.Total sales for the second quarter of fiscal 2000 increased 18.6% to a record $142.6 million, as compared to $120.3 million a year earlier. Comparable store sales increased 4.5% for the second quarter of fiscal 2000 as compared to the second quarter of fiscal year 1999. Total sales for the first six months of fiscal 2000 increased 17.6% to $286.3 million, from $243.3 million a year earlier. Comparable store sales increased 2.4% for the first six months of fiscal 2000 as compared to the first six months of fiscal 1999. Sales, as well as earnings, for the second quarter and the first six months of fiscal 2000 were negatively impacted by the store closings resulting from Hurricanes Floyd and Irene. Fortunately, the Company's stores suffered only minor physical damage from the hurricanes that occurred during September and October. Comparable store sales results include sales from the Company's commercial delivery program. The balance of the increase in total sales for the second quarter and the first six months of fiscal 2000 was attributable to new stores opened since the beginning of the respective periods in fiscal 1999. At November 30, 1999, the Company had 602 stores in operation, compared with 558 stores at June 1, 1999 and 518 stores at December 1, 1998.
Gross profit for the second quarter of fiscal 2000 increased 19.8% to $58.5 million as compared to $48.9 million for the second quarter of fiscal 1999. As a percentage of sales, gross profit was 41.0% for the second quarter of fiscal 2000 as compared to 40.6% for the second quarter of fiscal 1999. Gross profit for the first six months of fiscal 2000 increased 19.1% to $117.0 million as compared to $98.2 million a year earlier. As a percentage of sales, gross profit was 40.9% for the first six months of fiscal 2000 as compared to 40.4% a year earlier.
Selling, general and administrative ("SG&A") expenses increased as a percentage of sales from 30.6% in the second quarter of fiscal 1999 to 31.5% in the second quarter of fiscal 2000. SG&A expenses increased as a percentage of sales from 29.5% for the first six months of fiscal 1999 to 31.0% for the first six months of fiscal 2000. The increase is primarily due to the expenses incurred related to the continued implementation and expansion of the Company's commercial delivery program for the first six months of fiscal 2000 as compared to the first six months of fiscal 1999.
Income from operations for the second quarter of fiscal 2000 increased 12.1% to $13.5 million as compared to $12.1 million for the second quarter of fiscal 1999. Income from operations for the first six months of fiscal 2000 increased 7.3% to $28.3 million as compared to $26.4 million for the first six months of fiscal 1999.
Interest expense for the second quarter of fiscal 2000 was $4.2 million as compared to $3.1 million for the second quarter of fiscal 1999. Interest expense for the first six months of fiscal 2000 was $7.8 million as compared to $5.7 million during the first six months 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 an accounting change for the second quarter of fiscal 2000 was $6.0 million or $.36 per diluted share as compared to $5.6 million or $.33 per diluted share reported for the second quarter of fiscal 1999. Income before the cumulative effect of an accounting change for the first six months of fiscal 2000 increased to $13.4 million or $.80 per diluted share as compared to $12.7 million or $.76 per diluted share for the first six months 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 the 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.
Taking into account all of the above described factors, the Company reported net income for the second quarter of fiscal 2000 of $6.0 million or $.36 per diluted share as compared to $5.6, million or $.33 per diluted share for the second quarter of fiscal 1999. Net income for the first six months of fiscal 2000 was $13.4 million or $.80 per diluted share as compared to $4.5 million or $.27 per diluted share for the first six months of fiscal 1999.
During the second quarter of fiscal 2000, the Company added 22 mini-depot stores. As of November 30, 1999, the Company had 602 stores in operation consisting of 30 depot stores and 572 mini-depot stores. For fiscal year 2000 the Company expects to add a total of approximately 80 to 90 stores, of which 44 had been added as of November 30, 1999.
The Company also reported that Warren Shatzer has resigned from the Board of Directors as a result of increased time commitments demanded by other business interests that Mr. Shatzer has been pursuing. Mr. Fontaine thanked Mr. Shatzer for his time and contribution made during his tenure.
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 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, 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, weather, 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 Twenty-Six Twenty-Six
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
Nov. 30 Dec. 1 Nov. 30 Dec. 1
1999 1998 1999 1998
Net sales $ 142,643 $ 120,290 $ 286,268 $ 243,329
Cost of sales, including
distribution costs 84,096 71,434 169,294 145,129
Gross profit 58,547 48,856 116,974 98,200
Selling, general and
administrative expenses 45,003 36,776 88,697 71,845
Income from operations 13,544 12,080 28,277 26,355
Other income, net 173 107 811 131
Interest expense (4,157) (3,065) (7,808) (5,727)
Income before income taxes
and cumulative effect of
change in accounting
principle 9,560 9,122 21,280 20,759
Income taxes 3,540 3,521 7,914 8,013
Income before cumulative
effect of change in
accounting principle 6,020 5,601 13,366 12,746
Cumulative effect of change
in accounting principle,
net of income tax benefit -- -- -- (8,245)
Net income $ 6,020 $ 5,601 $ 13,366 $ 4,501
Net income per basic
share from:
Income before cumulative
effect of change in
accounting principle $ 0.36 $ 0.34 $ 0.80 $ 0.77
Cumulative effect of
change in accounting
principle -- -- -- (0.50)
Net income $ 0.36 $ 0.34 $ 0.80 $ 0.27
Net income per diluted
share from:
Income before cumulative
effect of change
in accounting principle $ 0.36 $ 0.33 $ 0.80 $ 0.76
Cumulative effect of
change in accounting
principle -- -- -- (0.49)
Net income $ 0.36 $ 0.33 $ 0.80 $ 0.27
Average common shares
outstanding 16,693 16,641 16,692 16,638
Dilutive effect of stock
options -- 161 58 177
Average common shares
outstanding - assuming
dilution 16,693 16,802 16,750 16,815
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
November 30 June 1
1999 1999
Assets
Current assets:
Cash and cash equivalents $ 7,275 $ 8,795
Inventories 225,270 209,028
Prepaid expenses and other
current assets 18,490 22,773
Total current assets 251,035 240,596
Property and equipment 494,588 457,994
Less allowances for
depreciation and amortization (94,273) (83,417)
400,315 374,577
Other assets 5,661 5,141
Total assets $ 657,011 $ 620,314
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 66,338 $ 87,867
Other current liabilities 18,124 21,390
Current maturities of long-term
debt 2,400 2,400
Total current liabilities 86,862 111,657
Deferred income taxes 7,581 7,091
Long-term debt 272,397 224,800
Total stockholders' equity 290,171 276,766
Total liabilities and
stockholders' equity $ 657,011 $ 620,314