Consumer Tires Wholesale Distribution

ATD posts net loss in 1Q; sales improve 14.5%

Order Reprints

American Tire Distributors Holdings Inc. (ATD) posted a net loss of $5.5 million on net sales of $640.8 million for its first quarter ended April 4, 2011. That compares to a net loss of nearly $1.9 million on sales of $559.6 million for the same period last year.

The company reported operating income of $7.2 million, 26.1% lower than in 1Q 2010.

ATD says it is well positioned  to achieve above market results in both contracting and expanding market demand cycles.

"The U.S. replacement tire market has historically experienced stable growth and favorable pricing dynamics. From 1955 through 2010, U.S. replacement tire unit shipments increased by an average of approximately 2.8% per year.

"However, during challenging economic periods, consumers may opt to defer replacement tire purchases or purchase less costly brand tires. Since the onset of the economic downturn in 2008, we have seen increased economic uncertainty, increased unemployment and rising fuel prices. These factors have impacted the availability of consumer credit and have changed consumer spending of disposable income, thus impacting our business and the industry as a whole.

"The economic environment has been showing signs of stabilization," says the company. "We experienced modest year-over-year unit volume growth in 2010 and modest quarter-over-quarter unit volume growth in 2011, which reflects an economy slowly reemerging from the severe economic downturn.

"The return to established driving habits and longer vehicle life has led to moderate growth in the U.S. replacement tire market compared with prior years. However, the price of oil and related fuel prices continues to be volatile and high, potentially affecting miles driven."

ATD believes growth in the replacement tire market in the United States will be driven positively by increases in:

* the number and average age of passenger cars and light trucks;

* the number of miles driven;

* the number of licensed drivers as the U.S. population continues to grow; and

* the number of replacement tire SKUs.

Growth in the high performance tire segment and "shortening tire replacement cycles due to changes in product mix that increasingly favor high performance tires" also will be "favorable underlying dynamics" going forward.

"Despite the current market environment, we have a solid infrastructure, an extensive and efficient distribution network, and a broad product offering. Our growth strategy, coupled with our access to capital and our scalable platform, enables us to continue to expand in existing markets as well as in new geographic areas.

"In addition, we are investing in technology and new sales channels which will help fuel our future growth," adds the company.

ATD is a wholly owned subsidiary of TPG Capital L.P. For more information on ATD, visit www.atd-us.com.

You must login or register in order to post a comment.