~ First Quarter Sales Increase 18% to a Record
$278.5 Million ~~ First Quarter EPS of $.53, Including $.02 of
Costs Related to Management Transition, versus $.50 in Prior Year
Period ~~ Adjusts Fiscal 2018 Diluted EPS Guidance to $2.05 to
$2.20, as a result of $.06 in Management Transition Costs ~~ Signs
Definitive Agreements to Acquire 20 Stores with Annualized Sales of
$13 Million ~
Monro Muffler Brake, Inc. (Nasdaq:MNRO), a leading provider of
automotive undercar repair and tire services, today provided
financial results for its first quarter ended June 24, 2017.
First Quarter Results
Sales for the first quarter of fiscal 2018
increased 18.4% to $278.5 million, as compared to $235.3 million
for the first quarter of fiscal 2017. The total sales increase for
the first quarter of $43.2 million was due to sales from new stores
of $41.5 million, including sales from recent acquisitions of $34.8
million and a comparable store sales increase of 1.4%, as compared
to a decrease of 6.9% in the prior year period. Comparable store
sales increased approximately 6% for brakes, 3% for front
end/shocks, were flat for tires and maintenance services and
decreased approximately 2% for alignments.
Gross margin decreased 120 basis points to 40.5%
in the first quarter from 41.7% in the prior year period, primarily
due to the impact of sales mix from recent acquisitions. On a
comparable store basis, gross margin increased approximately 110
basis points largely due to the benefit of lower material costs as
a percentage of sales. Total operating expenses increased by $12.4
million to $79.1 million, or 28.4% of sales, and remained flat as a
percentage of sales compared to the same period last year. The
year-over-year dollar increase represents expenses from 55 net new
stores and fees related to the management transition. On a
comparable store basis, excluding management transition costs,
total operating expenses increased approximately $2.9 million,
primarily due to increases in performance-based store manager
compensation and advertising expense.
Operating income was $33.7 million, or 12.1% of
sales, or 12.4% excluding management transition costs, as compared
to $31.3 million, or 13.3% of sales in the prior year period.
Interest expense was $5.7 million as compared to $4.5 million for
the first quarter of fiscal 2017.
Net income for the first quarter of fiscal 2018
was $17.6 million, as compared to $16.8 million in the same period
of the prior year. Diluted earnings per share for the quarter were
$.53, or $.55 when adjusting for $.02 per share in management
transition costs, achieving the higher end of the Company’s
guidance range of $.52 to $.56. This compares to diluted earnings
per share of $.50 in the first quarter of fiscal 2017 and
represents a 10% increase in earnings per share year-over-year. Net
income for the first quarter of fiscal 2018 reflects an effective
tax rate of 37.2%, as compared to 37.9% in the prior year
period.
During the first quarter of fiscal 2018, the
Company opened seven and closed six Company-operated locations,
ending the quarter with 1,119 Company-operated stores.
John Van Heel, President and Chief Executive
Officer stated, “We are pleased to report that the outperformance
of our recent acquisitions and positive comparable store sales in
the first quarter, combined with our continued focus on margin
improvement, enabled us to deliver earnings per share at the high
end of our guidance range, when adjusting for management transition
costs. These positive trends have continued into July with an
increase in comparable store sales of approximately 1.5%
quarter-to-date and higher margins in both our tire and service
categories.”
Acquisitions Update
The Company also announced today that it has
signed definitive agreements to acquire 20 stores, including eight
from an existing Car-X franchisee. These stores fill-in the
existing markets of Michigan, Illinois and Indiana and are expected
to add approximately $13 million in annualized sales, representing
a sales mix of 95% service and 5% tires. Twelve of these stores
will operate under the Monro name and the remaining eight will
continue to operate under the Car-X brand. The acquisitions are
expected to close in the second quarter of fiscal 2018 and be
breakeven to diluted earnings per share in fiscal 2018.
Leadership Transition
As previously announced on June 28, 2017, the
Company’s Board of Directors elected Brett Ponton as Monro’s next
President and Chief Executive Officer. Mr. Ponton will join Monro
as President on August 1, 2017 and assume the role of Chief
Executive Officer on October 2, 2017. Mr. Ponton will succeed John
Van Heel, who will serve as an advisor to Monro until March 31,
2018. Lead director Robert Mellor was also elected as independent
Chairman of the Board of Directors, as Robert Gross, prior
Executive Chairman, will retire from the Board and the Company at
the conclusion of the annual shareholder meeting on August 15,
2017.
Company Outlook
Based on current visibility, business and
economic trends, and recently completed and announced acquisitions,
the Company anticipates fiscal 2018 sales to be in the range of
$1.135 billion to $1.155 billion, an increase of 11% to 13% as
compared to fiscal 2017 sales. In light of comparable store sales
trends fiscal year-to-date, guidance for fiscal 2018 comparable
store sales has been revised to an increase in the range of 1.5% to
2.5% on a 52-week basis (3.5% to 4.5% including an extra week in
the fourth quarter), as compared to prior guidance of an increase
of 2.0% to 4.0% on a 52-week basis (4% to 6% including an extra
week in the fourth quarter).
The Company has also updated its fiscal 2018
diluted earnings per share guidance to be in the range of $2.05 to
$2.20, to reflect $0.06 in incremental costs related to the
management transition and the revised comparable store sales
guidance. This compares to previous guidance of $2.10 to $2.30. The
diluted earnings per share guidance continues to include
approximately $.10 of contribution from the 53rd week, $.15 to $.19
in accretion from recent acquisitions and is based on 33.4 million
diluted weighted average shares outstanding. At the midpoint of the
range, the revised guidance represents a 15% increase in diluted
earnings per share, as compared to $1.85 in fiscal 2017.
For the second quarter of fiscal 2018, the
Company anticipates sales to be in the range of $278 million to
$285 million, representing an increase of 13% to 16%, over sales of
$246 million in the second quarter of fiscal 2017. Fiscal 2018
second quarter sales guidance is based on a comparable store sales
increase of 1.0% to 2.5%, as compared to a 4.3% decline in the
prior year period. The Company expects diluted earnings per share
for the second quarter to be in the range of $.52 to $.56, which
includes $.02 of management transition costs and assumes slight
accretion from recent acquisitions. This compares to diluted
earnings per share of $.53 in the second quarter of fiscal 2017.
Mr. Van Heel concluded, “I am confident that our
team will be able to effectively leverage Monro’s unique business
model and capitalize on the significant opportunities for
profitable growth both organically and through accretive
acquisitions and greenfield expansion. The outlook for the industry
remains positive, with the total vehicles in operation,
particularly those six years old and older, set to grow
significantly over the next several years. Going forward, the
Company is well positioned to build on this strong foundation and
deliver value to our customers, associates and shareholders.”
Earnings Conference Call and
Webcast
The Company will host a conference call and
audio webcast on Thursday, July 20, 2017 at 11:00 a.m. Eastern
Time. The conference call may be accessed by dialing 1-888-724-9516
and using the required pass code 7223013. A replay will be
available approximately one hour after the recording through
Thursday, August 3, 2017 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 August 3, 2017.
About Monro Muffler Brake
Headquartered in Rochester, New York, Monro is a
chain of 1,119 Company-operated stores, 114 franchised locations,
five wholesale locations, two retread facilities and 14
dealer-operated stores providing automotive undercar repair and
tire sales and services. The Company operates in 27 states, serving
the Mid-Atlantic and New England states and portions of the Great
Lakes, Midwest and Southeast. The predecessor to the Company was
founded by Charles J. August in 1957 as a Midas Muffler franchise.
In 1966, Monro began to diversify into a full line of undercar
repair services. The Company has experienced significant growth in
recent years through acquisitions and, to a lesser extent, the
opening of new construction stores. The Company went public in 1991
and trades on NASDAQ under the symbol MNRO.
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 can be identified by such words and
phrases as “expected,” “estimate,” “guidance,” “outlook,”
“anticipate,” “project,” “believe,” “could,” “may,”, “intend”,
“plan” and other similar words or phrases. 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 25, 2017. Except as required
by law, the Company does not undertake and specifically disclaims
any obligation to update any forward-looking statement to reflect
the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
MONRO MUFFLER BRAKE, INC. |
Financial Highlights |
(Unaudited) |
(Dollars and share counts in thousands) |
|
|
|
|
|
|
|
|
Quarter Ended Fiscal June |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
% Change |
|
|
|
|
|
|
|
|
|
Sales |
$ |
278,491 |
|
|
$ |
235,290 |
|
18.4 |
% |
|
|
|
|
|
|
|
|
|
Cost of
sales, including distribution and occupancy costs |
|
165,607 |
|
|
|
137,222 |
|
20.7 |
% |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
112,884 |
|
|
|
98,068 |
|
15.1 |
% |
|
|
|
|
|
|
|
|
|
Operating,
selling, general and administrative expenses |
|
79,135 |
|
|
|
66,773 |
|
18.5 |
% |
|
|
|
|
|
|
|
|
|
Operating
income |
|
33,749 |
|
|
|
31,295 |
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
5,742 |
|
|
|
4,485 |
|
28.0 |
% |
|
|
|
|
|
|
|
|
|
Other
income, net |
|
(11 |
) |
|
|
(154 |
) |
(92.6 |
)% |
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
28,018 |
|
|
|
26,964 |
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
10,433 |
|
|
|
10,209 |
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
17,585 |
|
|
$ |
16,755 |
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
Diluted
earnings per share: |
$ |
.53 |
|
$ |
.50 |
6.0 |
% |
|
|
|
|
|
|
|
|
|
Weighted
average number of diluted shares outstanding |
|
33,292 |
|
|
|
33,327 |
|
|
|
|
|
|
|
|
|
|
|
Number of
stores open (at end of quarter) |
|
1,119 |
|
|
|
1,064 |
|
|
|
|
|
|
|
|
|
|
|
MONRO MUFFLER BRAKE, INC. |
Financial Highlights |
(Unaudited) |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 24, |
|
|
March 25, |
|
|
|
|
|
2017 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
6,553 |
|
$ |
8,995 |
|
|
|
|
|
|
|
|
|
|
Inventories |
|
146,107 |
|
|
142,604 |
|
|
|
|
|
|
|
|
|
|
Other
current assets |
|
48,287 |
|
|
47,631 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets |
|
200,947 |
|
|
199,230 |
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net |
|
399,359 |
|
|
394,634 |
|
|
|
|
|
|
|
|
|
Other
non-current assets |
|
591,364 |
|
|
591,400 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
1,191,670 |
|
$ |
1,185,264 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
$ |
197,866 |
|
$ |
185,893 |
|
|
|
|
|
|
|
|
|
Capital
leases and financing obligations |
|
219,162 |
|
|
213,166 |
|
|
|
|
|
|
|
|
|
Other
long-term debt |
|
157,997 |
|
|
182,337 |
|
|
|
|
|
|
|
|
|
Other
long-term liabilities |
|
22,697 |
|
|
22,614 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
597,722 |
|
|
604,010 |
|
|
|
|
|
|
|
|
|
Total
shareholders' equity |
|
593,948 |
|
|
581,254 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
1,191,670 |
|
$ |
1,185,264 |
CONTACT:
John Van Heel
Chief Executive Officer
(585) 647-6400
Brian D’Ambrosia
Senior Vice President – Finance
Chief Financial Officer
(585) 647-6400
Investors and Media: Effie Veres
FTI Consulting
(212) 850-5600
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