Discount Auto Parts, Inc. Reports Fiscal 2000 Third Quarter Results
21 March 2000
Discount Auto Parts, Inc. Reports Fiscal 2000 Third Quarter Results
LAKELAND, Fla.--March 20, 2000--Discount Auto Parts, Inc. today announced results for the Company's third quarter ended February 29, 2000.Total sales for the third quarter of fiscal 2000 increased 15.7% to a record $147.4 million, as compared to $127.4 million a year earlier. Comparable store sales increased 5.6% for the third quarter of fiscal 2000 as compared to the third quarter of fiscal year 1999. Total sales for the first nine months of fiscal 2000 increased 17.0% to $433.6 million, from $370.7 million a year earlier. Comparable store sales increased 2.7% for the first nine months of fiscal 2000 as compared to the first nine months of fiscal 1999. Comparable store sales results include sales from the Company's commercial delivery program. The balance of the increase in total sales for the third quarter and the first nine months of fiscal 2000 was attributable to sales from new stores opened since the beginning of the respective periods in fiscal 1999. At February 29, 2000, the Company had 621 stores in operation, compared with 558 stores at June 1, 1999 and 537 stores at March 2, 1999.
"We saw a greater than expected impact of typical holiday seasonality on our sales, which affected our ability to leverage some expenses," said Bill Perkins, president and COO. "However, we're very pleased with comps, which bumped back up again to more than 8% in February. Our commercial business continues to grow nicely, a 23% increase in customers in the third quarter as compared to the second quarter. And, we opened our 100th store in Georgia, and continue to expand our retail market presence in other states."
Gross profit for the third quarter of fiscal 2000 increased 11.0% to $58.7 million as compared to $52.9 million for the third quarter of fiscal 1999. As a percentage of sales, gross profit was 39.8% for the third quarter of fiscal 2000 as compared to 41.5% for the third quarter of fiscal 1999. Gross profit for the third quarter of fiscal 1999 included additional vendor incentives associated with the Company's fiscal 1999 purchase of the Rose Automotive stores. Gross profit for the third quarter of fiscal 2000 was impacted by higher product distribution costs. Gross profit for the first nine months of fiscal 2000 increased 16.3% to $175.7 million as compared to $151.1 million a year earlier. As a percentage of sales, gross profit was 40.5% for the first nine months of fiscal 2000 as compared to 40.8% a year earlier.
Selling, general and administrative ("SG&A") expenses increased as a percentage of sales from 30.6% in the third quarter of fiscal 1999 to 31.2% in the third quarter of fiscal 2000. SG&A expenses increased as a percentage of sales from 29.9% for the first nine months of fiscal 1999 to 31.1% for the first nine 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 fiscal 2000 periods as compared to the fiscal 1999 periods, as well as a loss during December and January of the Company's ability to leverage certain expenses during those periods as a result of lower than anticipated sales.
Income from operations for the third quarter of fiscal 2000 was $12.7 million as compared to $13.9 million for the third quarter of fiscal 1999. Income from operations for the first nine months of fiscal 2000 was $41.0 million as compared to $40.2 million for the first nine months of fiscal 1999.
Interest expense for the third quarter of fiscal 2000 was $5.1 million as compared to $3.6 million for the third quarter of fiscal 1999. Interest expense for the first nine months of fiscal 2000 was $13.0 million as compared to $9.3 million during the first nine months of fiscal 1999. The increase was the result of increased borrowings primarily associated with new store growth and in part the result of higher interest rates.
Income before the cumulative effect of an accounting change for the third quarter of fiscal 2000 was $5.8 million or $.35 per diluted share as compared to $6.5 million or $.39 per diluted share reported for the third quarter of fiscal 1999. Income before the cumulative effect of an accounting change for the first nine months of fiscal 2000 was $19.2 million or $1.15 per diluted share as compared to $19.2 million or $1.14 per diluted share for the first nine 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 third quarter of fiscal 2000 of $5.8 million or $.35 per diluted share as compared to $6.5 million or $.39 per diluted share for the third quarter of fiscal 1999. Net income for the first nine months of fiscal 2000 was $19.2 million or $1.15 per diluted share as compared to $11.0 million or $.65 per diluted share for the first nine months of fiscal 1999.
During the third quarter of fiscal 2000, the Company added 19 mini-depot stores. As of February 29, 2000, the Company had 621 stores in operation. For fiscal year 2000, the Company expects to add a total of approximately 80 to 90 stores, of which 63 had been added as of February 29, 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 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, inventory shrinkage, 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, 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 Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
----------- ----------- ----------- -----------
February 29 March 2 February 29 March 2
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net sales $ 147,374 $ 127,380 $ 433,642 $ 370,709
Cost of sales,
including
distribution
costs 88,691 74,507 257,985 219,636
--------- --------- --------- ---------
Gross profit 58,683 52,873 175,657 151,073
Selling,
general and
administrative
expenses 45,996 39,017 134,693 110,862
--------- --------- --------- ---------
Income from
operations 12,687 13,856 40,964 40,211
Other income,
net 1,679 280 2,490 411
Interest expense (5,143) (3,552) (12,951) (9,279)
--------- --------- --------- ---------
Income before
income taxes
and cumulative
effect of
change in
accounting
principle 9,223 10,584 30,503 31,343
Income taxes 3,410 4,086 11,324 12,099
--------- --------- --------- ---------
Income before
cumulative
effect of
change in
accounting
principle 5,813 6,498 19,179 19,244
Cumulative effect
of change in
accounting
principle,
net of income
tax benefit -- -- -- (8,245)
--------- --------- --------- ---------
Net income $ 5,813 $ 6,498 $ 19,179 $ 10,999
========= ========= ========= =========
Net income per
basic share
from:
Income before
cumulative
effect of
change in
accounting
principle $ 0.35 $ 0.39 $ 1.15 $ 1.16
Cumulative
effect of
change in
accounting
principle -- -- -- (0.50)
--------- --------- --------- ---------
Net income $ 0.35 $ 0.39 $ 1.15 $ 0.66
========= ========= ========= =========
Net income per
diluted share
from:
Income before
cumulative
effect of
change in
accounting
principle $ 0.35 $ 0.39 $ 1.15 $ 1.14
Cumulative
effect of
change in
accounting
principle -- -- -- (0.49)
--------- --------- --------- ---------
Net income $ 0.35 $ 0.39 $ 1.15 $ 0.65
========= ========= ========= =========
Average common
shares
outstanding 16,696 16,648 16,693 16,641
Dilutive effect
of stock
options 1 123 39 159
--------- --------- --------- ---------
Average common
shares
outstanding -
assuming
dilution 16,697 16,771 16,732 16,800
========= ========= ========= =========
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
February 29 June 1
2000 1999
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 6,494 $ 8,795
Inventories 246,366 209,028
Prepaid expenses and other
current assets 20,025 22,773
--------- ---------
Total current assets 272,885 240,596
Property and equipment 508,204 457,994
Less allowances for depreciation
and amortization (99,353) (83,417)
--------- ---------
408,851 374,577
Other assets 5,520 5,141
--------- ---------
Total assets $ 687,256 $ 620,314
========= =========
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 76,876 $ 87,867
Other current liabilities 17,382 21,390
Current maturities of long-term
debt 2,400 2,400
--------- ---------
Total current liabilities 96,658 111,657
Deferred income taxes 8,061 7,091
Long-term debt 286,485 224,800
Total stockholders' equity 296,052 276,766
--------- ---------
Total liabilities and stockholders'
equity $ 687,256 $ 620,314
========= =========