~ Second Quarter Sales of $248.6 Million and EPS
of $.53, in-line with Company Guidance ~~ Completes Acquisition of
26 North Carolina-based Stores and four Wholesale Centers ~~ Fiscal
2017 Acquisitions Represent $135 Million of Annualized Sales ~~
Initiates Third Quarter Fiscal 2017 EPS Guidance of $.51 to $.55 ~~
Adjusts Fiscal 2017 EPS Guidance to $2.00 to $2.10 ~~ Raises Fiscal
2017 Sales Guidance to $1.035 billion at midpoint from $1.015
billion ~
Monro Muffler Brake, Inc. (Nasdaq:MNRO), a leading provider of
automotive undercar repair and tire services, today announced
financial results for its second quarter ended September 24, 2016.
Second Quarter Results
Sales for the second quarter of fiscal 2017
increased 3.9% to $248.6 million, as compared to $239.2 million for
the second quarter of fiscal 2016. The total sales increase for the
second quarter of $9.4 million was due to an increase in sales from
new stores of $22.3 million, including sales from recently acquired
stores of $20.1 million, partially offset by a comparable store
sales decrease of 4.3%, versus an increase of 2.1% in the prior
year. Comparable store sales were flat for tires, but declined
approximately 2% for maintenance services, 6% for alignments, 13%
for brakes and 13% for front end/shocks.
Gross margin decreased 190 basis points to 40.2%
in the second quarter, as compared to 42.1% in the prior year
period, primarily due to the impact of recent acquisitions,
negative comparable store sales and sales mix shift to the lower
margin tire and maintenance categories. Total operating expenses
increased by $1.5 million to $68.1 million, or 27.4% of sales, as
compared to $66.6 million, or 27.9% of sales in the prior year
period. The dollar increase represents expenses from 68 net new
stores as compared to the prior year period, largely offset by
diligent cost control. On a comparable store basis, total operating
expenses declined by approximately $2 million during the second
quarter.
Operating income was $31.9 million, or 12.8% of
sales, as compared to $34.1 million, or 14.3% of sales in the prior
year period. Interest expense was $4.5 million as compared to $3.8
million for the second quarter of fiscal 2016.
Net income for the second quarter was $17.5
million, as compared to $18.9 million in the same period of the
prior year. Diluted earnings per share for the quarter were $.53,
within the Company’s previously announced guidance range of $.53 to
$.58. This compares to diluted earnings per share of $.57 in the
second quarter of fiscal 2016. Net income for the second quarter of
fiscal 2017 reflects an effective tax rate of 36.3%, as compared to
38.0% for the prior year period.
The Company opened 36 Company-operated locations
and closed three Company-operated locations during the second
quarter, ending the quarter with 1,097 Company-operated stores and
131 franchised Car-X stores. The new stores include the acquisition
of 26 Clark Tire retail and commercial tire and service locations
as well as 10 new greenfield locations.
John Van Heel, President and Chief Executive
Officer stated, “Despite the difficult operating environment, our
bottom-line focus, diligent cost control and successful integration
of our recent acquisitions allowed us to deliver sales and earnings
within our guidance range. While we are not satisfied with our
comparable store sales results, we did see incremental improvement
as we moved through the quarter, with the month of September down
2.6%. Importantly, the disparity in top-line trends between our
Northern and Southern markets narrowed in the second quarter, with
continued positive comparable store sales in the South and improved
trends in the North. This was supported by stronger tire sales as
we moved through the quarter, driven by higher tire units, ending
the quarter with an increase of 3% in comparable tire sales in the
month of September. October month-to-date comparable store sales
are down approximately 3% versus an increase of 3.7% in the same
period during the prior year, with Hurricane Matthew negatively
impacting this year by approximately 1%.”
First Six Months Results
For the six-month period, sales increased 2.1%
to $485.5 million from $475.7 million in the same period of the
prior year. Comparable store sales decreased 5.6% and the operating
margin was 13.0% of sales versus 14.2% in the prior year period.
Gross margin for the first six months was 40.8% of sales versus
42.1% in the prior year period, but 42.3% in the current year on a
comparable store basis. Net income for the first six months of
fiscal 2017 was $34.3 million, or $1.03 per diluted share, as
compared to $37.7 million, or $1.14 per diluted share in the
comparable period of fiscal 2016.
Acquisitions Update
In the second quarter, the Company completed the
acquisition of 26 Clark Tire retail and commercial tire and service
stores and one retread plant, which significantly increases Monro’s
store concentration in western North Carolina. The Company also
acquired four wholesale centers as part of the transaction,
significantly increasing its tire purchasing and distribution
efficiencies. Now that the acquisition has been completed, Monro
expects Clark Tire to add approximately $85 million in annualized
sales.
On a combined basis, the Company’s acquisitions
completed and announced to date in fiscal 2017 are expected to add
approximately $135 million in annualized sales and represent 14% in
annualized sales growth. Additionally, fiscal 2017 acquisitions are
expected to increase the Company’s tire purchases by approximately
25%, primarily due to the wholesale business, further strengthening
the Company’s tire assortment opportunities and cost
competitiveness.
Company Outlook
Based on current visibility, business and
economic trends, and recently completed acquisitions, the Company
now anticipates fiscal 2017 sales to be in the range of $1.03
billion to $1.04 billion versus the previous guidance range of
$1.00 billion to $1.03 billion. Fiscal 2017 sales guidance assumes
a comparable store sales decline in the range of 2.5% to 1.5%, as
compared to prior guidance of a decline of 2.0% to flat. As a
result of its revised comparable store sales guidance and expected
additional costs related to acquisitions, the Company also adjusted
its fiscal 2017 diluted earnings per share expectation to the range
of $2.00 to $2.10 from the previous guidance of $2.05 to $2.20, as
compared to $2.00 in fiscal 2016. This estimate is based on 33.4
million weighted diluted average shares outstanding.
For the third quarter of fiscal 2017, the
Company anticipates sales to be in the range of $280 million to
$285 million and comparable store sales to increase 1.0% to 2.5%,
compared to a decrease of 2.5% in the third quarter of fiscal 2016.
Importantly, sales comparisons ease significantly as the combined
comparable store sales for November and December of the prior year
decreased 5%. The Company expects diluted earnings per share for
the third quarter to be between $.51 and $.55, as compared to $.46
in the same prior year period, an increase of 10% to 20%.
Mr. Van Heel continued, “While this has been a
difficult year thus far, we see the opportunity for positive
comparable store sales trends for the remainder of the year as
prior year comparisons ease due to the mild winter weather
throughout our markets last year. In this challenging operating
environment, we continue to leverage our flexible business model
and pursue attractive acquisition opportunities we see in the
marketplace. We are pleased that in just the first half of the
fiscal year, we have opened a net 68 stores, two retread facilities
and four wholesale centers through acquisitions and greenfield
growth. Our fiscal 2017 acquisitions represent $135 million or 14%
in annualized sales growth and approximately 25% growth in tire
units. We are confident that these new locations, combined with our
robust acquisition pipeline, will allow us to drive even greater
economies of scale and sales and earnings growth for many years to
come.”
Earnings Conference Call and
Webcast
The Company will host a conference call and
audio webcast on Thursday, October 20, 2016 at 11:00 a.m. Eastern
Time. The conference call may be accessed by dialing 1-888-500-6973
and using the required pass code 7819885. A replay will be
available approximately one hour after the recording through
Thursday, November 3, 2016 and can be accessed by dialing
1-844-512-2921. The live conference call and replay can also be
accessed via audio webcast at the Investor Information section of
the Company’s website, located at www.monro.com. An archive will be
available at this website through November 3, 2016.
About Monro Muffler Brake
Monro Muffler Brake operates a chain of stores
providing automotive undercar repair and tire services in the
United States, operating under the brand names of Monro Muffler
Brake and Service, Mr. Tire, Tread Quarters Discount Tires,
Autotire, Tire Warehouse, Tire Barn, Ken Towery’s Tire and Auto
Care, The Tire Choice and Car-X. The Company currently operates
1,102 Company stores in 26 states and is the franchisor of 131
Car-X stores in ten states. Monro's stores provide a full range of
services for brake systems, steering and suspension systems, tires,
exhaust systems and many vehicle maintenance services and certain
locations specialize in providing commercial tire and maintenance
services. Through Tires Now, the Company also engages in wholesale
tire distribution.
The statements contained in this press release that are not
historical facts may contain statements of future expectations and
other forward-looking statements made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to risks, uncertainties and
other important factors that could cause actual results to differ
materially from those expressed. These factors include, but are not
necessarily limited to, product demand, dependence on and
competition within the primary markets in which the Company's
stores are located, the need for and costs associated with store
renovations and other capital expenditures, the effect of economic
conditions, seasonality, the impact of competitive services and
pricing, product development, parts supply restraints or
difficulties, industry regulation, risks relating to leverage and
debt service (including sensitivity to fluctuations in interest
rates),continued availability of capital resources and financing,
risks relating to integration of acquired businesses and other
factors set forth elsewhere herein and in the Company’s Securities
and Exchange Commission filings, including the Company’s annual
report on Form 10-K for the fiscal year ended March 26, 2016.
MONRO MUFFLER BRAKE, INC.Financial
Highlights(Unaudited)(Dollars and share counts in thousands) |
|
|
|
|
Quarter Ended Fiscal September |
|
|
|
|
|
|
2016 |
|
|
|
|
2015 |
|
% Change |
|
|
|
|
|
|
|
|
|
Sales |
$ |
|
248,584 |
|
|
$ |
|
239,155 |
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
Cost of
sales, including distribution and occupancy costs |
|
|
148,587 |
|
|
|
|
138,430 |
|
|
7.3 |
% |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
99,997 |
|
|
|
|
100,725 |
|
|
(0.7 |
)% |
|
|
|
|
|
|
|
|
|
Operating,
selling, general and administrative expenses |
|
|
68,072 |
|
|
|
|
66,632 |
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
Operating
income |
|
|
31,925 |
|
|
|
|
34,093 |
|
|
(6.4 |
)% |
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
4,488 |
|
|
|
|
3,758 |
|
|
19.4 |
% |
|
|
|
|
|
|
|
|
|
Other
income, net |
|
|
(126 |
) |
|
|
|
(103 |
) |
|
22.3 |
% |
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
|
27,563 |
|
|
|
|
30,438 |
|
|
(9.4 |
)% |
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
|
10,019 |
|
|
|
|
11,566 |
|
|
(13.4 |
)% |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
|
17,544 |
|
|
$ |
|
18,872 |
|
|
(7.0 |
)% |
|
|
|
|
|
|
|
|
|
Diluted
earnings per share: |
$ |
.53 |
|
$ |
.57 |
|
(7.0 |
)% |
|
|
|
|
|
|
|
|
|
Weighted
average number of diluted shares outstanding |
|
|
33,317 |
|
|
|
|
33,160 |
|
|
|
|
|
|
|
|
|
|
|
Number of
stores open (at end of quarter) |
|
|
1,097 |
|
|
|
|
1,029 |
|
|
|
MONRO MUFFLER BRAKE, INC.Financial
Highlights(Unaudited)(Dollars and share counts in thousands) |
|
|
|
|
Six Months Ended Fiscal September |
|
|
|
|
|
|
2016 |
|
|
|
|
2015 |
|
% Change |
|
|
|
|
|
|
|
|
|
Sales |
$ |
|
485,477 |
|
|
$ |
|
475,675 |
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
Cost of
sales, including distribution and occupancy costs |
|
|
287,412 |
|
|
|
|
275,232 |
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
198,065 |
|
|
|
|
200,443 |
|
|
(1.2 |
)% |
|
|
|
|
|
|
|
|
|
Operating,
selling, general and administrative expenses |
|
|
134,846 |
|
|
|
|
132,743 |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
Operating
income |
|
|
63,219 |
|
|
|
|
67,700 |
|
|
(6.6 |
)% |
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
8,972 |
|
|
|
|
7,150 |
|
|
25.5 |
% |
|
|
|
|
|
|
|
|
|
Other
income, net |
|
|
(280 |
) |
|
|
|
(209 |
) |
|
34.0 |
% |
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
|
54,527 |
|
|
|
|
60,759 |
|
|
(10.3 |
)% |
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
|
20,228 |
|
|
|
|
23,088 |
|
|
(12.4 |
)% |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
|
34,299 |
|
|
$ |
|
37,671 |
|
|
(9.0 |
)% |
|
|
|
|
|
|
|
|
|
Diluted
earnings per share: |
$ |
|
1.03 |
|
|
$ |
|
1.14 |
|
|
(9.6 |
)% |
|
|
|
|
|
|
|
|
|
Weighted
average number of diluted shares outstanding |
|
|
33,326 |
|
|
|
|
33,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONRO MUFFLER BRAKE, INC.Financial
Highlights(Unaudited)(Dollars in thousands) |
|
|
|
|
|
|
September 24, |
|
|
March 26, |
|
|
|
|
|
2016 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
7,226 |
|
$ |
7,985 |
|
|
|
|
|
|
|
|
|
|
Inventories |
|
146,376 |
|
|
129,035 |
|
|
|
|
|
|
|
|
|
|
Other
current assets |
|
47,396 |
|
|
33,055 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets |
|
200,998 |
|
|
170,075 |
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net |
|
373,906 |
|
|
351,582 |
|
|
|
|
|
|
|
|
|
Other
non-current assets |
|
578,800 |
|
|
477,781 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
1,153,704 |
|
$ |
999,438 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
$ |
180,000 |
|
$ |
167,571 |
|
|
|
|
|
|
|
|
|
Capital
leases and financing obligations |
|
186,123 |
|
|
165,730 |
|
|
|
|
|
|
|
|
|
Other
long-term debt |
|
197,471 |
|
|
103,315 |
|
|
|
|
|
|
|
|
|
Other
long-term liabilities |
|
26,605 |
|
|
26,627 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
590,199 |
|
|
463,243 |
|
|
|
|
|
|
|
|
|
Total
shareholders' equity |
|
563,505 |
|
|
536,195 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
1,153,704 |
|
$ |
999,438 |
CONTACT:
John Van Heel
Chief Executive Officer
(585) 647-6400
Robert Gross
Executive Chairman
(585) 647-6400
Catherine D’Amico
Executive Vice President – Finance
Chief Financial Officer
(585) 647-6400
Investors and Media: Effie Veres
FTI Consulting
(212) 850-5600
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