U.S. News: Replacement Tire Chain Reports Record Results

TBC Corporation one of the nation’s leading marketers of automotive replacement tires, today reported record sales and earnings for the fourth quarter and year ended December 31, 2003. It marks the eleventh consecutive quarter that the Company has posted a year-over-year gain in earnings per share.
Net sales in the fourth quarter increased 33.5% to $370.7 million, compared to $277.8 million in the prior-year period. Same store sales for TBC’s retail segment increased 4.5% in the fourth quarter. TBC’s total unit tire sales increased 10.7% in the fourth quarter, compared to a 2.2% increase in unit shipments by tire manufacturers based on preliminary reports. Net income increased 17.1% to $9.5 million, or $0.41 per diluted share, in the current quarter, versus $8.1 million, or $0.37 per diluted share, in the fourth quarter of 2002. All figures in U.S. dollars.
Larry Day, TBC president and chief executive officer, commented, “During the fourth quarter, we completed the acquisition of the 225 National Tire & Battery (NTB) retail stores and in January 2004 began the process of converting and integrating them into our existing retail store network. We are currently ahead of schedule with the conversion effort and are delighted by the progress we have made. We are dedicating significant management resources to ensure the success of this endeavour and are confident that the conversion process will be completed before the middle of the year. NTB’s contribution to TBC’s 2003 results for the one month after the acquisition was approximately $0.01 per diluted share and helped to partially offset the impact of a fourth quarter charge of $0.02 per diluted share associated with the Company’s exit from a joint venture.”
For the year ended December 31, 2003, net sales rose 18.8% to $1.3 billion compared to $1.1 billion in the prior year. Retail same-store sales increased 2.1%, and total unit tire sales increased 4.5%, compared to a 1.7% increase in unit shipments by tire manufacturers. Net income in 2003 increased 21.8% to $33.4 million, or $1.47 per diluted share, versus $27.4 million, or $1.25 per diluted share, in 2002. In addition to the acquired NTB stores, the Company added 24 new locations to its combined retail store networks during the fourth quarter and ended 2003 with 591 Company-operated locations and 576 Big O franchised stores.
The total of 1,167 retail locations represented a 54% increase compared to 758 which the Company had at the end of 2002. Included in the Company-operated store system at the end of 2003 were 253 Tire Kingdom stores, 113 Merchant’s Tire locations, and 225 NTB stores. In 2004, the Company expects to add approximately 20 stores to its Company-operated retail system and another 25 to 30 locations to its Big O franchised network. For 2004, the Company reiterates its previous earnings guidance for the full year of $1.80 to $1.90 per diluted share, with first quarter earnings expected in the range of $0.25 to $0.27 per diluted share. The Company expects to continue generating solid cash flow in 2004, which will be used primarily to reduce indebtedness.
Day concluded, “In the second half of 2004, we expect a solid earnings contribution from the NTB stores upon completion of the integration and conversion process and the introduction of new products and services at all the NTB locations. Many of the duplicate costs that we are now incurring will be eliminated at that point and potential disruptions to Tire Kingdom’s existing operations will no longer be a factor. While we are still very early in the store conversion and integration process, we believe that we should be able to meet or possibly exceed our previously estimated 2004 earnings contribution from the NTB stores of $0.15 per diluted share.”