EXHIBIT 99.4
DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | | May 29
2001
| | | November 27 2001
| |
| | | (In thousands) | |
ASSETS
| | | | | | |
| Current assets: | | | | | | | | |
| Cash | | $ | 9,669 | | | $ | 9,377 | |
| Inventories | | | 242,718 | | | | 240,529 | |
| Prepaid expenses and other current assets | | | 14,391 | | | | 14,633 | |
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| Total current assets | | | 266,778 | | | | 264,539 | |
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| Property and equipment | | | 507,255 | | | | 515,897 | |
| Less allowances for depreciation and amortization | | | (122,742 | ) | | | (134,798 | ) |
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|
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| | | | 384,513 | | | | 381,099 | |
| Other assets | | | 4,638 | | | | 4,525 | |
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| Total assets | | $ | 655,929 | | | $ | 650,163 | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY
| | | | | | |
| Current liabilities: | | | | | | | | |
| Trade accounts payable | | $ | 96,442 | | | $ | 79,141 | |
| Other current liabilities | | | 25,286 | | | | 24,204 | |
| Current maturities of long-term debt | | | 1,200 | | | | 1,200 | |
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| Total current liabilities | | | 122,928 | | | | 104,545 | |
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| Deferred gain on sale/leaseback | | | 5,966 | | | | 5,812 | |
| Deferred income taxes | | | 13,273 | | | | 13,331 | |
| Long-term debt | | | 192,900 | | | | 195,989 | |
| Stockholders’ equity: | | | | | | | | |
| Preferred stock | | | — | | | | — | |
| Common stock | | | 167 | | | | 167 | |
| Additional paid-in capital | | | 142,429 | | | | 142,917 | |
| Retained earnings | | | 178,266 | | | | 187,402 | |
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| Total stockholders’ equity | | | 320,862 | | | | 330,486 | |
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| Total liabilities and stockholders’ equity | | $ | 655,929 | | | $ | 650,163 | |
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See accompanying notes.
DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | | Twenty-six Weeks Ended
| |
| | | November 28 2000
| | | November 27 2001
| |
| | | (In thousands, except per share amounts) | |
| Net sales | | $ | 328,024 | | | $ | 338,545 | |
| Cost of sales, including distribution costs | | | 200,736 | | | | 203,945 | |
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| Gross profit | | | 127,288 | | | | 134,600 | |
| Selling, general and administrative expenses | | | 106,727 | | | | 113,394 | |
| Merger related expenses | | | — | | | | 1,264 | |
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| Income from operations | | | 20,561 | | | | 19,942 | |
| Other income, net | | | 120 | | | | 221 | |
| Interest expense | | | (11,541 | ) | | | (5,892 | ) |
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| Income before income taxes | | | 9,140 | | | | 14,271 | |
| Income taxes | | | 3,290 | | | | 5,135 | |
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| Net income | | $ | 5,850 | | | $ | 9,136 | |
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| Net income per share: | | | | | | | | |
| Basic net income per common share | | $ | 0.35 | | | $ | 0.55 | |
| Diluted net income per common share | | $ | 0.35 | | | $ | 0.54 | |
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| Average common shares outstanding | | | 16,696 | | | | 16,708 | |
| Dilutive effect of stock options | | | — | | | | 187 | |
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| Average common shares outstanding—assuming dilution | | | 16,696 | | | | 16,895 | |
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See accompanying notes.
2
DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | Twenty-Six Weeks Ended
| |
| | | November 28 2000
| | | November 27 2001
| |
| | | (in thousands) | |
| Operating activities | | | | | | | | |
| Net income | | $ | 5,850 | | | $ | 9,136 | |
| Adjustments to reconcile net income to net cash used in operating activities: | | | | | | | | |
| Deferred income tax benefit | | | 185 | | | | (2 | ) |
| Depreciation and amortization | | | 12,328 | | | | 12,391 | |
| Gain on disposals of property and equipment | | | (14 | ) | | | (198 | ) |
| Amortization of deferred gain on sale/leaseback | | | — | | | | (154 | ) |
| Changes in operating assets and liabilities: | | | | | | | | |
| Decrease in inventories | | | 5,187 | | | | 2,189 | |
| Increase in prepaid expenses and other current assets | | | (2,728 | ) | | | 89 | |
| Decrease (increase) in other assets | | | (1,115 | ) | | | (160 | ) |
| Decrease in trade accounts payable | | | (37,338 | ) | | | (17,301 | ) |
| Decrease in other current liabilities | | | 47 | | | | (1,141 | ) |
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| Net cash (used in) provided by operating activities | | | (17,598 | ) | | | 4,849 | |
|
| Investing activities | | | | | | | | |
| Proceeds from sales of property and equipment | | | 744 | | | | 1,258 | |
| Purchases of property and equipment | | | (20,757 | ) | | | (9,765 | ) |
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| Net cash used in investing activities | | | (20,013 | ) | | | (8,507 | ) |
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| Financing activities | | | | | | | | |
| Proceeds from short-term borrowings and long-term debt | | | 60,236 | | | | 39,108 | |
| Payments of short-term borrowings and long-term debt | | | (29,608 | ) | | | (36,019 | ) |
| Proceeds from other issuances of common stock | | | 20 | | | | 277 | |
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| Net cash provided by financing activities | | | 30,648 | | | | 3,366 | |
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| Net decrease in cash | | | (6,963 | ) | | | (292 | ) |
| Cash at beginning of period | | | 12,612 | | | | 9,669 | |
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| Cash at end of period | | $ | 5,649 | | | $ | 9,377 | |
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See accompanying notes.
3
DISCOUNT AUTO PARTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) November 27, 2001
1. BASISOF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Discount Auto Parts, Inc. (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended May 29, 2001.
Operating results for the twenty-six-week period ended November 27, 2001 are not necessarily indicative of the results that may be expected for the entire fiscal year.
2. SALE/LEASEBACK TRANSACTION
On February 27, 2001, the Company completed a sale/leaseback transaction. Under the terms of the transaction, the Company sold 101 properties, including land, buildings, and improvements, for a net price of approximately $62.2 million. The stores were leased back from the purchaser under non-cancelable operating leases with lease terms of 22.5 years each. The sale of the properties generated a gain for financial reporting purposes, net of expenses incurred, of $6.0 million, which gain has been deferred and is being amortized over the lease term.
3. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
| | | May 29, 2001
| | | November 27, 2001
| |
| Revolving credit agreements | | $ | 140,500 | | | $ | 144,789 | |
| Senior term notes | | | 50,000 | | | | 50,000 | |
| Senior secured notes | | | 3,600 | | | | 2,400 | |
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| | | | 194,100 | | | | 197,189 | |
| Less current maturities | | | (1,200 | ) | | | (1,200 | ) |
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| | | $ | 192,900 | | | $ | 195,989 | |
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Effective July 29, 1999, the Company entered into a five year $265 million unsecured revolving credit agreement (the Revolver). The rate of interest payable under the Revolver is a function of LIBOR or the prime rate of the lead agent bank, at the option of the Company. During the term of the Revolver, the Company is also obligated to pay a fee, which fluctuates based on the Company’s debt-to-capitalization ratio, for the unused portion of the Revolver.
Effective August 8, 1997, the Company issued $50 million of senior term notes (the Notes). The Notes provide for interest at a fixed rate of 7.46%, payable semi-annually, with semi-annual principal payments of $7.1 million, beginning July 15, 2004.
4
DISCOUNT AUTO PARTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
November 27, 2001
3. LONG-TERM DEBT — CONTINUED
At May 29, 2001 and November 27, 2001, the Company’s weighted average interest rate on its borrowings under the revolving credit agreement was 7.1% and 3.4%, respectively.
As of November 27, 2001, the Company had approximately $120.2 million of available borrowings.
As of November 27, 2001, the Company has outstanding a senior secured note of $2.4 million. The note provides for interest at a fixed rate of 9.8%, payable quarterly, with annual principal payments of $1.2 million due on May 31. The note is collateralized by a first mortgage on certain store properties, equipment and fixtures.
The Company’s debt agreements contain various restrictions, including the maintenance of certain financial ratios and restrictions on dividends, with which the Company is in compliance.
4. PENDING MERGER
On August 7, 2001, the Company entered into a definitive agreement with Advance Holding Corporation, Advance Auto Parts, Inc., Advance Stores Company, Incorporated and AAP Acquisition Corporation (collectively, Advance) under which the Company will be acquired by Advance in a merger transaction. Terms of the agreement call for each share of Discount Auto Parts common stock to be exchanged for $7.50 in cash and 0.2577 shares of common stock of Advance Auto Parts, Inc., a holding company which has been formed to own and operate the combined companies. The transaction has been approved by the boards of directors of both companies and is subject to approval by shareholders of the Company, and other customary closing conditions. The Hart-Scott-Rodino Antitrust Improvements Act of 1976 waiting period expired September 18, 2001. The transaction closed on November 28, 2001.
As a result of the above described transaction, the Company incurred expenses in the first twenty-six weeks of fiscal 2002 of approximately $1.3 million.
5. COMPREHENSIVE INCOME
Comprehensive income for the periods presented equals net income.
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