TBCC Tbc Corp (MM)

TBC Reports Second Quarter Results ~ Results In-Line with Previous Guidance and Company Reiterates Full-Year Earnings Outlook Before Change in Accounting Treatments ~ PALM BEACH GARDENS, Fla., July 26 /PRNewswire-FirstCall/ -- TBC Corporation (NASDAQ:TBCC), one of the nation's leading marketers of automotive replacement tires, today reported sales and earnings for the second quarter and six months ended June 30, 2004. Net sales in the second quarter increased 38.8% to $456.5 million compared to $328.8 million in the prior-year period. TBC's total unit tire sales increased 18.4% in the second quarter, compared to unit shipments by tire manufacturers which increased 6.9% based on preliminary reports. Same store sales for TBC's retail segment increased 1.1% in the second quarter. Net income increased 14.5% to $9.1 million, or $0.39 per diluted share, in the current quarter versus $8.0 million, or $0.35 per diluted share, in the second quarter of 2003. Earnings in the 2004 second quarter reflect the negative impact of Emerging Issues Task Force ("EITF") 02-16, of $0.08 per diluted share related to the Company's new purchase agreement with a major supplier, partially offset by the company wide adoption of the first-in first- out ("FIFO") inventory costing method which added $0.04 per diluted share in the period. Excluding the change in accounting treatments, TBC would have reported $0.43 per diluted share in the second quarter, consistent with its previous guidance for the period in the range of $0.40 to $0.43 per diluted share. The results for 2003 have been restated to reflect the company wide adoption of the FIFO inventory costing method. The Company's wholesale business was strong in the quarter, highlighted by the performance of the private brands division which benefited from new account activity, favorable pricing and solid cost controls. The retail business posted positive comparable store sales and experienced increased demand for its services offerings. The introduction of private brand tires and the expansion of mechanical service offerings for the 225 acquired NTB stores continued on plan. "We achieved our financial goals for the period and are pleased with the Company's performance, particularly in light of a challenging retail environment," commented Larry Day, TBC President and Chief Executive Officer. "While we expect these market conditions to continue in the near term, we are confident of our ability to realize our 2004 performance objectives through the contribution from our newly acquired retail locations, favorable product and service mix, and rigorous cost controls. As we move ahead, we look forward to benefiting from improved operating leverage in our retail operations while we remain active in growing our store base." For the six months ended June 30, 2004, net sales rose 52.1% to $890.3 million compared to $585.4 million in the prior-year period. Total unit tire sales increased 24.8% compared to an industry increase of approximately 7.3% based on preliminary results. Retail same-store sales increased 3.5% in 2004. Net income grew 16.2% to $14.6 million, or $0.63 per diluted share, versus $12.6 million, or $0.56, reported a year ago. Results for the first six months of 2004 reflect the negative impact of EITF 02-16 of $0.08 per diluted share related to the Company's new purchase agreement with a major supplier, partially offset by the company wide adoption of the FIFO inventory costing method which added $0.02 per diluted share. Excluding the change in accounting treatments, TBC would have reported $0.69 per diluted share in the first half of 2004. The results for 2003 have been restated to reflect the company wide adoption of the FIFO inventory costing method. At June 30, 2004, the Company had a combined total of 1,168 stores in its retail network with 598 Company-operated locations and 570 franchised Big O stores, representing a 29% increase in the Company's store base, or 262 locations, since June 30, 2003. Exclusive of any further acquisitions, the Company expects to add an additional 25 to 30 retail locations in the second half of 2004. For the 2004 full year, the Company expects earnings in the range of $1.78 to $1.84 per diluted share that includes $.06 per diluted share for the impact of both EITF 02-16 and the company wide adoption of the FIFO inventory costing method. Excluding these costs, the Company's full-year outlook remains unchanged from its previous guidance of $1.84 to $1.90. Earnings for the third quarter are expected in the range of $0.59 to $0.62 per diluted share. TBC Corporation will host a conference call on Tuesday, July 27, 2004, at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time, to discuss second quarter results. A live Webcast of the conference call will be available by visiting the Company's Web site, http://www.tbccorp.com/. The Webcast will be archived at TBC's Web site until August 27, 2004. About TBC: TBC Corporation is one of the nation's largest marketers of automotive replacement tires through a multi-channel strategy. The Company's retail operations include company-operated retail centers under the "Tire Kingdom," "Merchant's Tire & Auto Centers" and "National Tire & Battery" brands and franchised retail tire stores under the "Big O Tires" brand. TBC markets on a wholesale basis to regional tire chains and distributors serving independent tire dealers throughout the United States and in Canada and Mexico. The Company's proprietary brands of tires have a longstanding reputation for quality, safety and value. TBC Corporation Safe Harbor Statement This document contains "forward-looking statements," as that term is defined under the Private Securities Litigation Reform Act of 1995, regarding expectations for future financial performance, which involve uncertainty and risk. It is possible that the Company's future financial performance may differ from expectations due to a variety of factors including, but not limited to: changes in economic and business conditions in the world; increased competitive activity; consolidation within and among competitors, suppliers and customers; unexpected changes in the replacement tire market; the Company's inability to attract as many new franchisees or open as many distribution outlets as stated in its goals; changes in the Company's ability to identify and acquire additional companies in the replacement tire industry and successfully integrate acquisitions and achieve anticipated synergies or savings; fluctuations in tire prices charged by manufacturers, including fluctuations due to changes in raw material and energy prices, changes in interest and foreign exchange rates; the cyclical nature of the automotive industry and the loss of a major customer or program. It is not possible to foresee or identify all such factors. Any forward-looking statements in this release are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Prospective investors are cautioned that any such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected. The Company makes no commitment to update any forward-looking statement included herein, or to disclose any facts, events or circumstances that may affect the accuracy of any forward-looking statement. Additional information on factors that could potentially affect the Company or its financial results may be found in the Company's filings with the Securities and Exchange Commission. TBC CORPORATION RESTATED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, RESTATED RESTATED RESTATED 2004 2003 2004 2003 NET SALES $456,490 $328,843 $890,331 $585,388 COST OF SALES 281,289 219,987 553,264 401,540 GROSS PROFIT 175,201 108,856 337,067 183,848 EXPENSES: Distribution expenses 18,790 15,361 36,756 28,780 Selling, administrative and retail store expenses 137,824 79,539 269,773 132,664 Interest expense - net 5,103 2,448 9,205 4,260 Other (income) expense - net (653) (907) (1,371) (1,419) Total expenses 161,064 96,441 314,363 164,285 INCOME BEFORE INCOME TAXES 14,137 12,415 22,704 19,563 Provision for income taxes 5,006 4,439 8,074 6,976 NET INCOME $9,131 $7,976 $14,630 $12,587 EARNINGS PER SHARE - Basic $0.41 $0.37 $0.66 $0.59 Diluted $0.39 $0.35 $0.63 $0.56 Weighted Average Common Shares Oustanding - Basic 22,204 21,590 22,112 21,484 Diluted 23,329 22,604 23,292 22,367 TBC CORPORATION RESTATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) ASSETS RESTATED June 30, December 31, 2004 2003 (Unaudited) (Unaudited) CURRENT ASSETS: Cash and cash equivalents $3,430 $2,645 Accounts and notes receivable, less allowance for doubtful accounts of $9,275 at June 30, 2004 and $8,260 at December 31, 2003 Related parties 23,915 12,535 Other 128,071 109,962 Total accounts and notes receivable 151,986 122,497 Inventories 288,426 264,810 Refundable federal and state income taxes - 296 Deferred income taxes 13,657 11,359 Other current assets 12,138 11,136 Total current assets 469,637 412,743 PROPERTY, PLANT AND EQUIPMENT, AT COST: Land and improvements 12,100 12,100 Buildings and leasehold improvements 111,782 100,379 Furniture and equipment 103,923 93,710 227,805 206,189 Less accumulated depreciation 68,576 56,618 Total property, plant and equipment 159,229 149,571 TRADEMARKS, NET 15,824 15,824 GOODWILL, NET 169,029 169,184 OTHER ASSETS 37,725 34,368 TOTAL ASSETS $851,444 $781,690 TBC CORPORATION RESTATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY RESTATED June 30, December 31, 2004 2003 (Unaudited) (Unaudited) CURRENT LIABILITIES: Outstanding checks, net $19,051 $11,411 Notes payable to banks 73,800 29,100 Current portion of long-term debt and capital lease obligations 37,178 28,723 Accounts payable, trade 111,259 114,708 Other current liabilities 96,353 91,730 Total current liabilities 337,641 275,672 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION 187,969 208,620 NONCURRENT LIABILITIES 33,157 26,400 DEFERRED INCOME TAXES 10,379 7,890 STOCKHOLDERS' EQUITY: Common stock, $0.10 par value, shares issued and outstanding - 22,245 at June 30, 2004 and 21,905 at December 31, 2003 2,224 2,190 Additional paid-in capital 28,177 23,898 Other comprehensive income (loss) (1,390) (1,637) Retained earnings 253,287 238,657 Total stockholders' equity 282,298 263,108 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $851,444 $781,690 SUPPLEMENTARY INFORMATION Adoption of FIFO Inventory Costing Method Consistent with TBC's current approach within its retail subsidiaries, the Company has chosen to adopt the first-in first out ("FIFO") inventory costing method effective January 1, 2004. Management believes the FIFO methodology provides a more current inventory valuation at period end and more effectively matches revenues with expenses. As per the Company's stated objectives, the retail segment will continue to become a larger portion of its revenues. TBC's retail segment currently makes up 65% of its sales and approximately 60% of its inventories, which are already valued on a FIFO basis. EITF 02-16 On March 20, 2003, the Emerging Issues Task Force ("EITF") issued its final version of EITF 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor," which states that cash consideration received from a vendor is presumed to be a reduction of the price of the vendor's products or services and should, therefore, be characterized as a reduction of cost of goods sold and a portion of these amounts be capitalized into ending inventory. This EITF 02-16 is effective for volume-based rebate agreements entered into after November 21, 2002 and for all other vendor allowances entered into or modified after December 31, 2002. The Company has been working with its major vendors to transition to a more seamless, fully integrated tire distribution system. The final piece was put in place as the Company entered into a new supply agreement with a major vendor in the second quarter of 2004, which required the accounting treatment of EITF 02-16. Earnings in the second quarter of 2004 reflect the impact of EITF 02-16 of $.08 per diluted share related to the new purchase agreement. Historically, the Company recognized vendor allowances as they were earned, based on the fulfillment of the related obligations of the agreement. The adoption of EITF 02-16 last year did not materially impact net earnings in fiscal year 2003. As required by EITF 02-16, the Company has begun capitalizing the allowances afforded it under this new agreement. Due to the substantial amount of purchases and related vendor allowances received pursuant to this new agreement, the application of EITF 02-16 to this agreement reduced diluted earnings per share by $.08 in the second quarter of 2004. TBC CORPORATION SUPPLEMENTARY DATA (In thousands, except percentages and store counts) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, RESTATED RESTATED RESTATED 2004 2003 2004 2003 RECONCILIATION OF EBITDA TO NET INCOME: EBITDA $26,062 $19,943 $45,477 $32,451 Less - Depreciation and Amortization 6,822 5,080 13,568 8,628 Interest Expense - net 5,103 2,448 9,205 4,260 Provision for Income Taxes 5,006 4,439 8,074 6,976 NET INCOME $9,131 $7,976 $14,630 $12,587 SEGMENT INFORMATION: NET SALES - Retail $294,391 $185,421 $577,532 $311,923 Wholesale 162,099 143,422 312,799 273,465 Consolidated $456,490 $328,843 $890,331 $585,388 EBITDA - Retail $15,657 $12,401 $28,330 $20,134 Wholesale 10,405 7,542 17,147 12,317 Consolidated $26,062 $19,943 $45,477 $32,451 CAPITAL EXPENDITURES $7,446 $7,663 $14,292 $10,097 RETAIL SAME-STORE SALES % CHANGE 1.1% 0.4% 3.5% 0.8% RETAIL STORE COUNTS, at end of period Company Operated Stores 598 346 Franchised Big O Stores 570 560 Total 1,168 906 DATASOURCE: TBC Corporation CONTACT: Thomas W. Garvey, Executive V.P. & Chief Financial Officer of TBC Corporation, +1-561-227-0955; or Investors: Betsy Brod or Jonathan Schaffer, both of Brod & Schaffer, LLC, +1-212-750-5800, for TBC Corporation Web site: http://www.tbccorp.com/

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