TBC Corp. today reported record sales and earnings for the first quarter ended March 31, 2003. It marks the eighth consecutive quarter
that the company has posted a year-over-year gain in earnings per share.
Net sales in the first quarter increased 2.7% to $256.5 million compared to $249.7 million in the prior-year period. Same store sales for TBC's retail segment increased 1.6% in the first quarter. Unit tire sales declined 4.2% in
the first quarter, in line with preliminary numbers reported by the industry, the company says.
Net income increased 14% to $5.5 million, or 25 cents per diluted share in the current quarter, vs. $4.8 million, or 22 cents per diluted share, in the first quarter of 2002.
"Our sales growth in the first quarter was primarily the result of the expansion of our Tire Kingdom and Big O retail store networks," says Larry Day, president and CEO.
"Demand for replacement tires continued to be soft in the first quarter and our own year-to-year sales comparisons were made more difficult by our extremely strong unit sales in the first quarter of 2002, particularly by our wholesale segment.
"However, we believe there is some pent-up demand and that the replacement tire market will
resume its historical pattern of moderate, steady growth before the end of the year. Gross margins improved significantly during the quarter as we continued to leverage our purchasing power and strengthen the contribution from our retail segment. Our bottom line also benefited from ongoing efforts to contain costs and improve operating efficiencies.
"We now have a combined total of 887 stores in our retail systems compared to 708 just one year ago," says Day. "We added 11 Big O stores for a total of 547 locations during the first quarter and gained entry into the Michigan retail market. Strong consumer acceptance of recent product introductions at Big O resulted in solid performance from our franchise
network in the period. We also added six company-operated Tire Kingdom stores in the quarter for a total of 228 locations, and on April 1, we completed our acquisition of Merchant's Inc. with 112 retail locations that generated more than $150 million in sales last year.
"We are ahead of plan with Merchant's in
eliminating expenses, integrating the acquired stores, retaining key managers and service employees, and introducing our own operating strategies and procedures. We are extremely pleased that the Merchant's employees are
energized and receptive to the changes underway."
Day adds, "We are a much stronger company today as a result of the initiatives taken to grow our retail business, leverage our wholesale
purchasing strength, and manage costs. Our financial position is sound and our cash flow is healthy, as evidenced by the generation of $17 million in cash from operations during the first quarter. This strong cash flow, together with our capital resources, should allow us to continue to execute our retail expansion strategy, including the pursuit of attractive acquisition opportunities as well as internal store development.
"We expect to add 45 to 50 locations to our retail operations during the remainder of 2003, exclusive of further acquisitions.
"Based on current trends and market conditions, we expect second quarter earnings to be in the range of 33 cents to 35 cents per diluted share. At this point, it is still very early in the process of assimilating the Merchant's
stores into our current operations and our expectation for full year earnings therefore remains in the range of $1.34 to $1.38 per diluted share."
TBC's stock price recorded a 52-week high and low of $16.80 and $9.46, respectively, and closed yesterday at $15.53.
