ATD reports loss in 2014’s third quarter

Jan. 15, 2015

American Tire Distributors Holdings Inc. (ATD) reported a net loss of $14.7 million on net sales of $1.3 billion for its third quarter ended Oct. 4, 2014. That compares to net income of $1.2 million on sales of $987.9 million for the year-ago period.

For the first nine months of the year, ATD recorded a net loss of $114.4 million on net sales of $3.7 billion. The year-ago results are not comparable because ATD’s fiscal year is based on either a 52- or 53-week period ending on the Saturday closest to each December 31. The nine months ended Oct. 4, 2014, contains operating results for 40 weeks while the nine months ended Sept. 28, 2013 contains operating results for 39 weeks.

Net sales for the quarter were up 34.1% compared to the year-ago quarter, according to the company’s third quarter 10Q filing with the Securities and Exchange Commission.

The increase in net sales was primarily driven by the combined results of new distribution centers as well as the acquisitions of Trail Tire, Extreme, Kirks Tire, RTD Edmonton, RTD Calgary, Hercules and Terry’s Tire in 2014 and the 2013 acquisitions of Wholesale Tire Distributors and Tire Distributors, Inc.

The acquisitions added $265.6 million of incremental sales in the third quarter of 2014.

Transaction expenses for the third quarter were $20.1 million and were primarily related to acquisition and integration costs as well as with expenses related to potential future acquisitions and other corporate initiatives.

The company says its increase in comparable tire unit sales of $90.2 million was primarily driven by an overall stronger sales unit environment. However, these increases were partially offset by lower net tire pricing of $20.3 million, primarily driven by competitive pricing positions in certain U.S. markets, as well as a shift in product mix in its lower priced point offerings.

In its industry overview, the company says it believes “we are experiencing the beginning of a recovery after a prolonged downturn, which began in 2008, for the replacement tire market.

“Replacement tire unit shipments were up 4.4% in the United States and 0.7% in Canada in 2013 as compared to 2012, as a rebound in the housing market, a decline in unemployment rates and increases in vehicle sales and vehicle miles driven impacted the U.S. and Canadian replacement tire markets favorably.

"The Rubber Manufacturers Association projects that replacement tire shipments will increase by approximately 2% in the United States in 2014 as compared to 2013, as demand drivers continue to strengthen.

“Going forward, we believe that long-term growth in the U.S. and Canadian replacement tire markets will continue to be driven by favorable underlying dynamics, including:

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

* increases in the number of miles driven;

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

* increases in the number of replacement tire SKUs;

* growth of the high performance tire segment; and

* shortening tire replacement cycles due to changes in product mix that increasingly favor high performance tires, which have shorter average lives.

"As part of our ongoing business strategy, we intend to expand in existing markets as well as enter into previously underserved markets and new geographic areas. Since the second half of 2010, we opened new distribution centers in 23 locations throughout the contiguous United States. We expect to continue to evaluate additional geographic markets during the remainder of 2014 and beyond.”

For more news on ATD see: "ATD's growth in Canada continues."