Quick Hits …
(A few short items to get us started this week)
• Jefferies LLC has issued its latest projection of September and October driving volume. Its model predicts that September vehicle miles traveled was 242.10 billion miles (down 11% year-over-year), with an upper limit of 253.80 billion miles and a lower limit of 231.00 billion miles. Jefferies’ model also predicts that October vehicle miles traveled was 252.50 billion miles (down 11% year-over-year), with an upper limit of 264.20 billion miles and a lower limit of 240.00 billion miles.
• According to Jefferies’ November 2020 Monthly Tune-Up report, recent channel conversations imply a slowing pace for automotive aftermarket growth as October progressed, attributable to the fading impact of stimulus, election uncertainty and coronavirus increases. While spending was still up year-over-year in most DIY and DIFM checks, it appears the record summer stimulus spend decelerated in the third quarter from a July peak.
• Carol Yancey is the Atlanta Business Chronicle’s Public Company CFO of the Year for 2020. Yancey is executive vice president and CFO of the Genuine Parts Company (GPC).
• Bill Giles, executive vice president and CFO of AutoZone Inc., is the 2020 recipient of the Memphis Business Journal’s CFO of the Year Lifetime Achievement Award. Giles has been AutoZone’s finance chief since 2006.
• The AASA Technology Council has presented its inaugural Technology Innovation Award to OptiCat LLC for its development of automated load sheets. The award recognizes aftermarket companies that demonstrate meaningful innovation in business processes, including e-commerce, inventory management, catalog management, business intelligence and data analytics.
• MEMA has honored U.S. Rep. Terri Sewell (D-AL) with its 2020 Joseph M. Magliochetti Industry Champion Award for her leadership on behalf of U.S. automotive and heavy-duty suppliers in 2020.
MEMA Honors Three With Top Award
MEMA presented its top honor, the Triangle Award, to the following executives for their government advocacy efforts and leadership …
• James Kamsickas, chairman and CEO of Dana Inc.
• Mike Mansuetti, president of Robert Bosch.
• Don Walker, retiring CEO of Magna International.
The association lauded the three for their work shaping language in the U.S.-Mexico-Canada Agreement (USMCA) and their role in restarting operations following the coronavirus pandemic industry shutdown.
“For more than 45 years, the Triangle Award has been given periodically to that person or persons, or organization, whom MEMA and our divisions choose to honor for selfless contribution to the vehicle supplier industry,” said MEMA President and CEO Bill Long. “This year, as we faced unprecedented challenges, the presentation of the awards is even more meaningful. All three of these leaders helped amplify the voice of vehicle suppliers on the national stage.”
Highline Aftermarket, Warren Distribution Combination Complete
Pritzker Private Capital (PPC) has completed its previously announced acquisitions of Highline Aftermarket Holdings and Warren Distribution. PPC and co-investors invested alongside members of the Highline and Warren management teams. Financial terms of the transactions were not disclosed.
Headquartered in Omaha, NE, Warren is billed as one of the largest private-label blenders and one of the largest independent motor oil, lubricants, and automotive chemicals manufacturers and suppliers in North America. Warren is a private-label supplier for some of the largest retailers, marketers and lubricant distributors in North America. It has customers in over 30 countries and the capacity to produce millions of gallons of bulk and packaged lubricants from more than 1.10 million square feet of manufacturing and distribution facilities in Iowa, West Virginia, Alabama and Texas.
Memphis-based Highline has 15 distribution centers and eight manufacturing facilities. The combined Highline and Warren organization has 27 facilities across North America offering more than 22,000 SKUs. Darcy Curran, Highline’s current CEO, leads the combined business.
Harris Williams advised Highline, a portfolio company of The Sterling Group, on its sale to PPC.
Harris Williams is a global investment bank specializing in mergers and acquisitions advisory services. The transaction was led by Joe Conner, Jeff Kidd, Nicholas Petrick and Trey Balson of Harris Williams’ transportation and logistics group in addition to Bob Baltimore, Graham Gillam and Kel Wilburn of Harris Williams’ specialty distribution group.
J.P. Morgan Securities was the financial adviser to PPC as well as lead arranger for the debt financing with respect to the transaction.
PPC partners with middle-market companies based in North America with leading positions in the manufactured products, services and healthcare sectors. PPC has experience in the auto care sector from its current partnership with PLZ Aeroscience, a specialty aerosol product manufacturer that counts the automotive aftermarket as one of its core markets.
Advance Auto Parts Reports Strong 10.2%
Q3 Comp-Store Sales Gain
Advance Auto Parts saw its net income rise 19.3% to $147.48 million in the third quarter of 2020, with adjusted net income up 31.4%.
Gross profit increased 11.5% to $1.13 billion, with adjusted gross profit up 11.2%. Adjusted gross margin grew 50 basis points to 44.4% for the third quarter ended Oct. 3, 2020, attributable to favorable pricing actions and supply chain efficiencies.
Net sales increased 9.9% to $2.54 billion. Comparable-store sales rose 10.2%, led by the DIY omnichannel business. The comp-store sales growth was the strongest Advance has reported in 15 years.
President and Chief Executive Officer Tom Greco told analysts on the company’s Nov. 10 earnings call that Advance experienced positive comps across every region, with the Gulf Coast, Central and Southeast posting strong double-digit comp growth. The Northeast, Mid-Atlantic and West regions turned in mid-to-high single-digit comps, which was below Advance’s overall comp growth for the quarter.
“As we noted in Q2, there remains a wide gap between our highest- and lowest-performing regions, although this narrowed in Q3 to approximately 900 basis points on average between the six regions I just mentioned,” Greco said. “The good news is that the Northeast, which is our largest region, had the most improvement of any region in the quarter versus Q2. As we examine the broader auto parts industry and total retail data, the performance of these lower-growth geographies has been more impacted by COVID-19 and is consistent with our internal results.”
On a category basis, Greco said Advance saw sales strength in batteries, as well as continued growth in appearance and optics, which began in the second quarter of 2020 when stay-at-home orders were implemented.
The company’s professional business came through with mid-single-digit net sales growth for the third quarter of 2020, following a decline in the 2020 second quarter that was related to the temporary closure of repair shops across North America. Greco also noted that Carquest Independent had a strong quarter, adding that 36 stores have been converted over to Carquest year-to-date.
Advance’s DIY omnichannel business experienced another quarter of double-digit net sales growth in the third quarter of 2020. “Based on the syndicated data available to us, we drove meaningful share gains throughout the quarter,” Greco told analysts on the call. “Our DIY initiatives start with DieHard. While we believe DieHard is benefiting our performance in all channels, we can clearly see improvements in our DIY battery share.”
LOOKING AHEAD … Greco said that, through the first four weeks of the 2020 fourth quarter, comps have remained positive across all channels, coming in around mid-single digits, which would mark a moderation from the low-double-digit gain reported in the third quarter of 2020. The deceleration has occurred more on the DIY side of Advance’s business than on the professional side.
“As a reminder, Q4 tends to be our most volatile quarter each year, primarily due to fluctuations in weather,” Greco advised. “In addition, we remain sensitive to potential volatility from external factors in the current environment, particularly those related to the future spread of COVID and the possibility of heightened stay-at-home orders in the near term.”
The company is not issuing full-year guidance because of uncertainty around the pandemic and its effect on the overall economy.
MISCELLANEOUS … Other items of interest from Advance’s third-quarter financial results and earnings call …
• Greco said management continues to address opportunities to optimize its organizational structure, including support contracts and professional fees. “Consistent with this, we made the decision to consolidate our field structure from two divisions to one in May. In early October, we further streamlined our sales structure from 12 to eight regions,” he told analysts on the call. “We believe that these moves enable us to serve our customers with even greater effectiveness, efficiency and flexibility.”
• He also noted one conclusion that arose from an internal investigation of corporate expenses in light of the pandemic. “During COVID, we limited companywide travel, which will continue for the balance of the year,” Greco said. “Going forward, we intend to leverage virtual options and do not plan to return to pre-COVID levels of travel.”
• In terms of supply chain, he said Advance is making progress with management’s cross-banner replenishment initiative, nearly a third of the plan having been completed. “We are on track to complete approximately 40% of identified stores by the end of the year, with completion and full run-rate expected to be realized by Q4 2021,” Greco said.
• He also stated that implementation of a single warehouse management system (WMS) is “well underway” following a temporary pause related to the pandemic. “Our team mobilized to adjust our plans, which now includes virtual implementation capabilities,” Greco said. “We are installing a new WMS starting with our 11 largest DCs, of which we expect four to be completed this year. Based on what we know today, we expect to finish the entire WMS implementation by the end of 2022.”
• In terms of category management, Greco said Advance made progress during the quarter on its own-brand expansion. “We expect to finish 2020 with a significant increase in own-brand SKUs and to further enhance our SKU mix next year,” he noted. “Our margin rate on own-brand SKUs is meaningfully higher than comparable applications in their respective categories. This will enable further growth in margin rate in the years to come.”
• Greco also reported continued year-over-year growth from active Speed Perks members following the rollout of the new program in summer 2019. “We are seeing a steady increase in members graduating to the elite and VIP levels,” he said on the call. “Our graduation rates improved by more than 20% year-over-year, reflecting important share-of-wallet gains with heavy DIYers.”
• During the 12 weeks ended Oct. 3, 2020, the company repurchased 700,000 shares of its common stock at an aggregate cost of $109.6 million, or an average price of $153.06 per share, in connection with its share repurchase program. At the end of the quarter, Advance had $752.20 million remaining in the program. — Marc Vincent
Advance Appoints Chief Inclusion, Diversity Officer
Advance Auto Parts has appointed Dena LaMar as a vice president and its chief inclusion and diversity officer. LaMar, who joined the company in 2017, was regional vice president for the Great Lakes region.
“Dena has a deep field leadership background in retail, both inside and outside of Advance, and her leadership and enthusiasm for building a high-performing, diverse workforce made her an ideal candidate for this role,” President and Chief Executive Officer Tom Greco told analysts on the company’s Nov. 10 earnings call.
LaMar joined Advance from the GetGo Cafe & Market division of grocer Giant Eagle, where she was vice president of operations. Before joining GetGo/Giant Eagle, Dena was a regional general manager for Walmart.
First Brands Planning AWDA Promo In Support Of University Of The Aftermarket Foundation
The First Brands Group (formerly the Trico Group) plans to introduce a new customer program at the upcoming AWDA virtual event.
For every new line customer commitment signed by March 31, 2021, First Brands will donate $500 in the name of the customer to the University of the Aftermarket Foundation. Qualifying brands are Anco wiper blades, Autolite spark plugs, Carter fuel and water pumps, Fram filtration products, LuberFiner filtration products, Raybestos complete brake solutions, StrongArm lift supports and Trico wiper blades.
Glenn Barco, vice president of sales at First Brands, said the initiative gives the company an opportunity to help its customers grow their businesses and strengthen the technician community at the same time. “We recognize that the future of our industry is dependent upon having skilled professional technicians to keep motorists on the road,” Barco said.
CarParts.com Reports Record Gross Margin,
Net Sales Up 69.5%
CarParts.com’s robust sales momentum continued in the third quarter of 2020 with net sales increasing 69.5% to $117.41 million, primarily driven by revenue growth from its flagship website, which is the company’s fastest-growing channel, growing 105% year-over-year.
Management ascribed its sales growth to three major consumer behavior changes: a shift from DIFM to DIY, a secular shift from offline shopping to online and a shift from public transportation to personal transportation. However, CEO Lev Peker emphasized on the company’s Nov. 9 earnings call that these trends do not dictate CarParts.com’s ability to execute.
“We delivered strong results in Q1, pre-COVID, with house brands up 42% and immediately following the first stimulus package when discretionary income improved,” Peker told analysts on the call. “As stimulus and the additional benefits expired at the end of July, we continued to see strong trends in our business. Our weekly sales demand was consistent throughout the third quarter. We also saw no significant difference in sales geographically based on location and shelter-in-place orders.”
For the quarter, gross profit soared 103.9% to a record $43.12 million, and gross margin rose 620 basis points to a record 36.7%, attributable to product mix, channel mix and logistics optimization. Notably, it was CarParts.com’s seventh consecutive quarter of gross margin expansion.
“At the product level, we have maintained our focus on higher-margin, private-label parts or what we now call our house brands, which continue to make up the majority of our sales,” Peker said. “And as we mentioned last quarter, we’re excited to begin ramping our hard parts business. We recently kicked off our TrueDrive brand and look forward to introducing expanded SKU offerings over the next several months under the Drive, SureStop and JC Whitney brand umbrellas.”
Turning our attention to the company’s bottom line, we note that CarParts.com was able to turn a $1.42-million net loss a year ago into $1.39 million in net income for the three months ended Sept. 26, 2020 — a year-over-year increase of $2.81 million. Meanwhile, the company’s adjusted EBITDA climbed 288.6% to $5.13 million, and its adjusted EBITDA margin rose from 1.9% to 4.4% year-over-year.
From an operational perspective, COO and CFO David Meniane told analysts that the third quarter of 2020 was strong from a demand standpoint, noting that CarParts.com’s network operated at full capacity, both from an inbound and outbound perspective. “From an inventory standpoint, with the buys we placed in Q2, our replacement parts were in a stronger position, but our hard parts inventory continued to lag due to longer lead times,” he said. “We expect our inventory position to continue improving over the next two quarters.”
Meniane also stated that the company’s new Texas distribution center build-out and ramp-up are on schedule. “We’re happy to announce that we’re now receiving seven days a week and have already shipped over 10,000 packages quarter-to-date,” he said on the call. “We expect Texas outbound volume to grow as more inventory is received.”
Peker noted that improving speed to customers is making a difference in terms of sales. “We had a theory that getting closer to the customer would increase sales, and that theory is proving out right now,” he said. “Texas shipped over 10,000 packages already, and we’re getting the majority of those packages to customers within Texas in one day. So, we’re seeing pretty good results.”
According to Meniane, the new Texas DC is currently operating at about 10% to 15% capacity. The goal is to get it up to 65% to 80% capacity by the end of 2020.
Peker told analysts that management has completed a study to determine optimal locations to open DCs in order to ship to 90% of CarParts.com’s customers in one day. He indicated that the company will begin determining where to open next after Texas has rolled out.
In related news, MySpace co-founder Josh Berman has stepped down from the CarParts.com board of directors. Berman has been a director since 2007. He was one of CarParts.com’s first board members following the company’s decision to go public. According to an SEC filing dated Nov. 13, “Berman’s resignation was to pursue other opportunities and did not result from any disagreements with management or the board.”
Joining the CarParts.com board is Lisa Costa, chief information officer of the U.S. Military’s Special Operations Command. Costa is an independent director under the listing standards of the Nasdaq Global Market, according to CarParts.com. — Marc Vincent
Dorian Drake Retained As Export Management Company
Old World Industries (Northbrook, IL) — parent company to the aftermarket brands Peak and BlueDEF, among others — has appointed Dorian Drake International of White Plains, NY as its export management company for select global markets, with a special focus on the Middle East, Africa and the Caribbean.
Dorian Drake will act as Old World’s sales and marketing arm in its territories, with a particular emphasis on building brand recognition and distribution in each market. According to Gabriel Huertas del Pino, Old World’s international business development manager, the strategic partnership will launch the company into greater growth and expansion.
Knut Sauer, Dorian Drake’s automotive group manager, said there is a significant international market potential for high-quality, U.S.-made coolants and antifreeze products. “The Peak brand fills a void in our current product offering, and we’re eager to present this to a number of our distributors worldwide,” Sauer stated.
Dorian Drake manages international sales and marketing, customer service, credit and collections, and traffic and logistics for manufacturers selling in markets outside the United States. The firm deploys stand-alone sales teams in five distinct industries: automotive products, foodservice equipment and supplies, hardware and lawn and garden products, industrial and environmental, and medical products.
Icahn Auto’s Q3 Parts Sales Fell 14.2% Largely Due To Store Closures
The Icahn Automotive Group reported a narrower net loss for the third quarter of 2020 (-$26 million compared to -$48 million a year ago). Adjusted EBITDA improved from -$23 million in the third quarter of 2019 to +$6 million for the three months ended Sept. 30, 2020. It should be noted that Icahn Automotive’s adjusted EBITDA figure excludes losses associated with closed stores.
Gross margin decreased 7.6% to $194 million. Yet as a percentage of net sales and other revenue from operations, Icahn Auto’s gross margin increased from 28% to 29% on a year-over-year basis.
A subsidiary of Icahn Enterprises, Icahn Auto is engaged in the retail and wholesale distribution of auto parts (AutoPlus and Pep Boys) as well as providing automotive repair and maintenance services (AAMCO, Precision Tune and Pep Boys). Its third-quarter 2020 net sales and other revenue from operations declined by $84 million (or 11.3%) to $660 million.
Aftermarket parts sales fell by $55 million (or 14.2%) to $333 million due, in large part, to significant closure activities during the quarter. Store closures related to management’s “transformation plan” accounted for $48 million of the year-over-year decrease. On an organic basis, aftermarket parts sales declined by $7 million, attributable to a $6 million (or 2%) downturn in commercial sales and a $1 million (or 1%) decrease in retail sales.
Automotive services revenue decreased by $29 million (or 8.1%) to $327 million, which was primarily organic as the coronavirus pandemic and the impacts of the actions taken by governments and others significantly impacted revenue.
Icahn Enterprises CFO SungHwan Cho said on the business’ Nov. 6 earnings call that Icahn Auto continues to push forward with a multi-year transformation plan designed to restructure its operations and improve profitability.
“Icahn Auto accelerated closures of certain parts stores, adjusted store hours and staffing to match reduced demand, implemented significant cost-savings measures and reduced capital spending to minimum levels,” Cho said. “All these initiatives helped Icahn Auto offset the impact of a significant sales decline and position the company for profitability as sales return.”
Management’s transformation plan includes operating the automotive services and aftermarket parts businesses separately, streamlining Icahn Auto’s corporate and field support teams, facility closures, consolidations and conversions, inventory optimization actions, and refocusing the auto parts business on core markets.
In a Nov. 6 filing with the SEC, Icahn Enterprises laid out the following priorities for its Icahn Auto subsidiary …
• Positioning the service business to take advantage of opportunities in the DIFM market and vehicle fleets.
• Optimizing the value of the commercial parts distribution business in certain high-volume core markets.
• Exiting the auto parts distribution business in certain low-volume, non-core markets.
• Improving inventory management across Icahn Auto’s parts and tire distribution network.
• Investment in customer experience initiatives, such as enhanced customer loyalty programs and selective upgrades in facilities.
• Investment in employees with a focus on training and career development.
• Business process improvements, including investments in supply chain and information technology capabilities.
Keith Cozza, president and CEO of Icahn Enterprises, told analysts on the call that Icahn Auto has made “significant” progress separating its automotive service business from its aftermarket parts business. He said the separation should be substantially complete by year’s end. — Marc Vincent
Mighty Selects JohnDow As Vendor
JohnDow Industries (Barberton, OH) is now a preferred vendor for Mighty Distributing System of America. This makes JohnDow’s catalog of more than 6,000 part numbers available to the over 110 Mighty Auto Parts franchisees and company operations across 44 states. This includes used-oil handling equipment, fuel storage items, EuroVent exhaust extraction products, shop equipment, Dynamic service parts and shop supplies, and professional LED work lights.
Valvoline’s Quick Lubes Sales Return To Pre-Pandemic Growth Rates
The Quick Lubes segment of Valvoline Inc. generated $254 million in sales for the fiscal fourth quarter ended Sept. 30, 2020 — an increase of 14.4% compared to the same period a year ago. Systemwide same-store sales grew 8.3%, returning to pre-pandemic growth rates as share gains have continued, according to Valvoline CEO Sam Mitchell.
Same-store sales growth for company-owned shops was 8.9% on top of 9.5% growth a year ago for a two-year stack of +18.4%. Same-store sales growth for franchised shops was 7.9% on top of 10.4% growth a year ago for a two-year stack of +18.3%.
The year-over-year gains in same-store sales were attributable to increases in both average ticket and transactions. According to management, premium mix, pricing and an uptick in revenue from non-oil-change services led to the improvement in average ticket, while transactions benefited from share gains tied to new customer acquisitions.
Full-year systemwide same-store sales grew 2.3%, giving Valvoline a 14th consecutive year of annual same-store sales growth.
Meanwhile, Quick Lubes’ fourth-quarter operating income increased 15% to $55 million, and its EBITDA rose 16% to $67 million. Higher sales, coupled with a 130-basis-point improvement in gross margins, drove the growth in EBITDA, according to management.
NETWORK GROWTH … Quick Lubes ended the quarter with 1,462 total company-owned and franchised shops — an increase of 30 for the quarter and an increase of 77 year-over-year.
The year-over-year increase in shops includes 36 newly built company locations, which is consistent with expectations given at the beginning of the fiscal year. It’s worth noting that 22 of these shops opened in the fiscal fourth quarter, indicating an acceleration to the pace of unit growth.
Management’s long-range goal is to build 50 new company shops per year.
On Valvoline’s Oct. 29 earnings call, Mitchell called the merger and acquisition market very attractive right now, especially in terms of smaller, less sophisticated operators.
“The work that we’ve been doing over the last couple of years to accelerate our growth through M&A and build a reputation as a great company to work with, to sell your business to … we see continued opportunities moving into 2021,” he said. “We have worked hard to develop relationships and that reputation and build that pipeline. So, that’s why we’re pretty aggressive with our store growth forecast for 2021.”
LOOKING AHEAD … Mitchell told analysts on the call that Quick Lubes is off to a good start for the new fiscal year with continued “strong” same-store sales performance in October from a combination of growth in transactions and ticket.
For the new fiscal year, Valvoline expects substantial top- and bottom-line growth from its Quick Lubes business, buoyed by recovery from coronavirus impacts and strong operational performance.
Specifically, management expects 140 to 160 new shop additions, including company-owned, franchise and acquisition. Quick Lubes systemwide same-store sales growth is forecast at 12% to 14% (6% to 8% normalizing for pandemic impacts in the March to May 2020 period).
“The durability of the Valvoline business model was reflected in our rapid recovery from the depths of the COVID-19 impacts, ending the year with outstanding results that drove year-over-year growth in profitability,” Mitchell told analysts. “We have strong momentum as we begin fiscal 2021, and we see next year as an inflection point for the company. Our shift to a service-driven business is accelerating and will drive faster growth in the future, including expected double-digit adjusted EBITDA growth next year.”
It’s interesting to note that Valvoline expects Quick Lubes to generate more than half of the company’s adjusted EBITDA in fiscal 2021.
BATTERIES … Management expects Quick Lubes to complete the rollout of a new battery program across all of its company shops by the end of the 2020 calendar year. In calendar year 2021, the initiative will roll out across all of its franchise shops as well.
“We’ve been selling batteries for some time, but not nearly to the level that we felt we could with the right testing equipment and with the right supply chain,” Mitchell said. “So, we’ve made some investments that are really starting to pay off. In the early markets that have rolled out, we are doubling the sales of batteries versus where we were before. So, there’s some really nice upside as we go into 2021 and beyond with the battery program.” — Marc Vincent
Motorcar Parts Of America Reports Higher Net Sales, Net Income
For the 2021 fiscal second quarter ended Sept. 30, 2020, Motorcar Parts of America (MPA) saw its net sales increase by $4.36 million (or 2.9%) to a record $154.73 million. This included $12.78 in core revenue related to a realignment of inventory at two customer DCs with expected future sales benefits as product mix changes. According to management, MPA’s fiscal 2021 second-quarter 2020 net sales were negatively impacted by challenges related to the coronavirus pandemic.
A closer look at MPA’s top-line results shows that …
• Rotating electrical products accounted for 80% of MPA’s total sales for the quarter — up from 7% a year ago.
• Wheel hub products accounted for 12% of MPA’s total sales – down from 15% a year ago.
• Brake-related products accounted for 7% of MPA’s total sales – up from 6%.
• Other products accounted for 1% of MPA’s total sales – down from 2%.
Gross profit increased by $3.15 million (or 8.6%) to $39.73 million, with gross margin growing from 24.3% to 25.7% on a year-over-year basis. MPA’s net income rose by $9.00 million (or 145.3%) to $15.18 million.
Chairman, President and CEO Selwyn Joffe told analysts on the company’s Nov. 9 earnings call that MPA’s fiscal 2021 second-quarter performance was gratifying given the sharp impact of coronavirus on its business — and across the automotive sector — in the fiscal 2021 first quarter. “Even with the impact of the global pandemic and related uncertainties, we remain cautiously optimistic as we continue to execute our strategic growth initiatives,” Joffe said.
He spoke of the completion of MPA’s strategic build-out in Mexico and commencement of brake caliper production in October. “We are dedicated and focused on our current customer commitments and are excited by the interest we are receiving for calipers from new customers, as well as new opportunities in all of our other existing product lines,” Joffe said.
Joffe also stated that MPA is making good progress on the integration of Dixie Electric and the rollout of its heavy-duty program. Further, he said that the company’s hard parts aftermarket program in Mexico, through its new EPICQ subsidiary, continues to gain momentum, adding that it has expanded its product offering since the initial introduction of rotating electrical in this market. “While still a small percentage of our overall business, we’re excited by the opportunities,” Joffe noted.
MPA is not issuing formal guidance at this time because of the uncertainty brought about by the pandemic. However, Joffe told analysts on the call that the 2021 fiscal third quarter is off to a strong start and that management is optimistic about the second half of the fiscal year.
In related news, MPA has resumed its stock buyback program, which had $21.30 million in availability on Nov. 9, 2020. — Marc Vincent
Tenneco Plans $500M Notes Offering
Tenneco Inc. on Nov. 12 announced plans to offer $500 million in 7.875% senior secured notes due 2029. The notes will be sold to investors at par. The offering, which is subject to market and other customary conditions, is expected to close Nov. 30, 2020.
The notes and related subsidiary guarantees will be secured by first-priority security interests in substantially all of Tenneco’s and subsidiary guarantors’ assets, subject to certain exclusions. Tenneco intends to use net proceeds from the offering to redeem all of its outstanding 4.875% senior secured notes due 2022, including the payment of premiums, accrued and unpaid interest, and expenses related to such redemption.
GSP North America Hires Product, Catalog Manager
GSP North America has announced Alyssa Corser as its new product and catalog manager. In this capacity, Corser has strategic management responsibilities over the AdvantEdge brand loaded strut program offered by GSP North America.
She comes to GSP with over a decade of aftermarket product and catalog management expertise. This includes more than three years as North American aftermarket product manager at Tenneco Inc., responsible for product marketing strategy tied to new and current product introductions, executing launch processes, competitive analysis and market pricing strategies.
NGK Appoints Senior VP To Explore New Market Entry
NGK Spark Plugs (U.S.A.) has promoted Kent Howard to senior vice president of strategic growth and partnerships, a newly created role. He is tasked with developing new partnerships and pathways to strategically grow the NGK business in four fields: environment and energy, mobility, medical, and communications.
Howard was senior vice president of OEM, cutting tools and tech center. He has been with NGK for 23 years.
AirPro Appoints Josh McFarlin As Executive VP Of Operations
Josh McFarlin is now the executive vice president of operations at AirPro Diagnostics. McFarlin, who joined AirPro in 2019, was vice president of strategic business operations. Prior to that, he was the director of curriculum and product development at I-CAR. McFarlin also spent eight years as a curriculum manager for Raytheon Professional Services.
AACF Plans To Continue Virtual Golf Fundraiser Event
TR Wholesale Solutions won the inaugural Automotive Aftermarket Charitable Foundation (AACF) Top Contender National Championship, a virtual gold tournament held at Topgolf centers across the United States. More than 200 golfers from 17 locations participated in the event, which raised funds for industry families in need.
The winning team, TR Wholesale Solutions, was at a location in Indianapolis, while runners up Federated Auto Parts played in Richmond, VA, and Interstate Batteries played in Columbus.
“We plan to continue this event next year, in addition to our Annual Charity Golf Tournament,” said Tyler Reeves, board trustee. “We saw such a positive response, had well over 200 golfers at 17 locations and feel there is endless potential to grow this event in the years to come.”
BedWood Adds President/COO
BedWood (Hopkinsville, KY) has announced B.J. Elmore as its president and COO. Elmore has over 20 years of experience in the automotive industry, most recently as vice president and general manager of Jasper, IN-based Ridetech. He is charged with strengthening channel partnerships, increasing strategic alliances and expanding BedWood’s global sales presence.
Company founder and CEO Jeff Major will continue his role and involvement in the business.
BedWood manufactures and distributes wooden bed floor kits for pickups from 1917 to present.
Wheel Pros Purchases Performance Replicas Inc.
Wheel Pros has acquired the assets of Performance Replicas Inc., a distributor of factory reproduction wheels that has longstanding relationships with national retailers and online retailers, according to Wheel Pros.
Wheel Pros — a designer, manufacturer and distributor of branded automotive aftermarket wheels, performance tires and accessories — currently has Performance Replicas wheels in its catalog. According to a Nov. 9 announcement, management expects Performance Replicas to see “extraordinary growth” from Wheel Pros’ distribution and marketing.
“Adding Performance Replicas to the Wheel Pros family helps us better serve our enthusiast customers who drive a wide range of vehicles and desire a variety of styles,” said Randy White, CEO and co-founder of Wheel Pros. “By offering factory reproduction wheels in addition to our 22 proprietary wheel brands, we not only cater to all driver types, but we also simplify the shopping experience, serving as the one-stop-shop for enthusiasts’ different wheel needs.”
Wheel Pros is backed by the Clearlake Capital Group, an investment firm that provides long-term capital to businesses across a number of sectors, including industrial, technology and consumer. Clearlake has roughly $25 billion in assets under management.
Financial terms of the Performance Replicas transaction were not disclosed.
French Nexus Members Unite
Nexus Automotive International has announced the creation of a new organization, Nexus Automotive France, to increase development opportunities with the Nexus community in France. The founding shareholders of Nexus Automotive France are …
• Alternative Autoparts, which includes one national platform and 13 regional platforms, 105 distributor members, and 47 technical facilities.
• ID Rechange, a group of more than 220 distributors throughout France supported by eight regional platforms.
• Apprau, which has a network of six independent regional platforms.
• Aniel, a bodywork specialist.
The new organization has tapped Philippe Guyot, one of the founders of Nexus Automotive International, as its CEO, opting for an external leader to help ensure neutrality in decision-making. At Nexus Automotive International, Guyot was executive director of global business development.
Initially, Nexus Automotive France is taking on joint supplier negotiations, as well as the pooling of back office costs like logistics and transportation. Centralized billing is being contemplated, as well as the eventual development of synergies with Nexus members in the fast-fit and retail sectors.
Nexus Automotive France has already landed two new members: Exadis, which has a network of eight logistics platforms covering all of France; and Mannes, an independent German parts specialist.
Indicted Reynolds And Reynolds CEO Bob Brockman Steps Down
Bob Brockman has stepped down as CEO of Reynolds and Reynolds, the company announced on Nov. 6. This comes about a month after Brockman was indicted by a federal grand jury in San Francisco on charges of tax evasion, wire fraud, money laundering and other offenses. He is accused of using offshore bank accounts to conceal approximately $2 billion in capital gains income.
Dayton, OH-based Reynolds and Reynolds is a provider of automobile dealership software, services and forms.
To replace Brockman, Reynolds and Reynolds has turned to President and COO Tommy Barras. A longtime company executive, Barras will retain the titles of president and COO in addition to CEO.
He became Reynolds and Reynolds’ president and COO back in June. Prior to that, Barras was the company’s executive vice president of software development.
Brockman pleaded not guilty in a virtual court appearance Oct. 15. He has been arraigned and has surrendered his passport.
According to the indictment, Brockman used offshore entities to hide income earned on investments in private equity funds and directed untaxed capital gains income to secret bank accounts.
The indictment also claims that between 2008 and 2010, Brockman engaged in a so-called scheme to obtain roughly $67.80 million in the software company’s debt securities.
Brockman as CEO was restricted from purchasing any of the company’s debt securities without prior notice, full disclosure and amending the associated credit agreements, the U.S. Department of Justice noted in an Oct. 15 statement regarding the case. According to the indictment, Brockman used a third party to circumvent these requirements, to acquire the debt securities and to conceal economic information from sellers.
The indictment further alleges that Brockman used non-public information about the software company to make decisions about purchasing the debt. In addition, Brockman is accused of persuading another person to alter, destroy, and mutilate documents and computer evidence in an attempt to impair the use of such evidence in a grand jury investigation.
Brockman is charged with conspiracy; seven counts of tax evasion; six counts of failing to file foreign bank account reports; 20 counts of wire fraud affecting a financial institution; two counts of concealment money laundering and tax evasion money laundering; and one count each of international concealment money laundering, evidence tampering, and destruction of evidence.
The indictment merely alleges that crimes have been committed. Brockman is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, he potentially faces a substantial period of incarceration, as well as restitution and criminal forfeiture.
Asbury Auto Reports 2% Decrease In Same-Store Customer-Pay Revenue
For the third quarter of 2020, the Asbury Automotive Group reported $237.20 million in parts and service revenue — an increase of $9.60 million (or 4.2%) compared to the same period a year ago.
However, on a same-store basis, Asbury’s parts and service revenue declined by $5.80 million (or 2.7%) to $209.00 million, with customer-pay down $3.30 million (or 2%), wholesale parts down $1.30 million (or 4%) and warranty down $1.20 million (or 3%).
According to management, Asbury’s parts and service business has been negatively impacted by a combination of people driving fewer miles and customer fears of being more susceptible to contracting coronavirus in public locations.
Senior Vice President of Operations Dan Clara told analysts on Asbury’s Oct. 27 earnings call that, although the company’s parts and service revenue decreased for the quarter, business improved each month. “In the month of September, our same-store parts and service revenue was up 8% over last year,” Clara said.
On the call, President and CEO David Hult noted that parts and service revenue was up mid-single digits in October.
Total parts and service gross profit increased 2.7% to $145.30 million. Gross margin rose from 47.3% to 48.7% on a year-over-year basis, excluding reconditioning and preparation. Yet, same-store parts and service gross profit declined by $6.30 million (or 4.7%) to $127.10 million. Gross margin grew from 47.6% a year ago to 48.0% for the three months ended Sept. 30, 2020, excluding reconditioning and preparation.
On a same-store basis, customer-pay gross profit decreased 2.4% to $74.00 million, wholesale parts gross profit declined 3.7% to $5.20 million and warranty gross profit was unchanged at $21.10 million.
As of Sept. 30, 2020, Duluth, GA-based Asbury owned and operated 113 new vehicle franchises (90 dealership locations) representing 31 automobile brands in addition to 25 collision repair centers. Its locations are present in 16 metropolitan markets across nine states.
Group 1 Auto’s U.S. Same-Store Customer-Pay Sales Fell 1.6% In Q3
Group 1 Automotive reported $375.60 million in total parts and service sales for the third quarter of 2020 — a decrease of 2.1% compared to the same period a year ago. On a same-store basis, total parts and service sales declined 2.6% to $367.30 million. Adjusting for foreign currency, total same-store parts and service sales were down 2.5%.
U.S. parts and service sales decreased 2.7% to $306.40 million in the third quarter. On a same-store basis, U.S. sales declined 3.3% to $302.50 million, attributable to a 23.4% drop in collision revenue and a 1.6% decline in both customer-pay and warranty revenue. This was partially offset by a 4.4% increase in wholesale parts revenue.
Total parts and service gross profit decreased 0.9% to $206.20 million, while gross margin increased from 54.3% to 54.9% on a year-over-year basis. Same-store gross profit declined 2.0% to $201.00 million, with gross margin increasing from 54.4% to 54.7% year-over-year.
U.S. parts and service gross profit declined 3.1% to $166.30 million, with gross margin slipping from 54.5% to 54.3% on a year-over-year basis. Same-store U.S. parts and service gross profit fell 4.0% to $163.80 million, with same-store gross margin decreasing from 54.5% to 54.1% year-over-year.
Group 1 owned and operated 185 automotive dealerships, 241 franchises, and 49 collision centers in the United States, United Kingdom and Brazil as of Sept. 30. In the United States, there were 119 dealerships.
OEConnection Buys Business Intelligence Provider
Richfield, OH-based OEConnection (OEC) has acquired Summit Consulting International (SCI), a business intelligence consulting and solutions provider to the automotive industry. Headquartered in Dallas, SCI focuses on the way automotive OEMs, dealers and their customers receive, manage, distribute and communicate information. The company’s services are designed to increase clients’ sales, improve customer satisfaction and strengthen owner loyalty.
“SCI has an incredible reputation with its clients in the business intelligence space, and we are extremely happy to be joining forces. Together, we are better positioned to serve all our customers,” said OEC President and CEO Patrick Brown. “We are excited to partner with Bob McDonald and the SCI team to expand our collective [business intelligence] capabilities.”
Alltech Automotive LLC is seeking a Director of Sales for the Traditional and Buying Group segments of the North American Automotive Aftermarket. This position will oversee sales to all Strategic partners from our global manufacturing footprint. … (more) … Click here to find out more.
The applicant will be responsible for developing and executing product strategies, objectives, budgets and promotions for a variety of product lines throughout the product lifecycle. … (more) … Click here to find out more.
Alltech Automotive LLC, a dynamic global automotive supplier, is seeking an experienced Catalog Manager from the automotive industry. This individual will be responsible for researching and updating data for all hard parts product lines and maintaining both a print version and online database that is compatible with Activant, Wrench Head and ACES/PIES formats … (more) … Click here to find out more.
Alltech Automotive LLC, a dynamic global automotive supplier, is seeking a Regional Sales Manager to represent products it sells into the Automotive Aftermarket. The Regional Sales Manager is responsible for the execution of the corporate sales and marketing plan. As a sales manager, you will direct all sales-related activities within the assigned region. … (more) … Click here to find out more.
Looking to augment Inside sales/telemarketing/customer support for group approved programs. Make calls to jobber level accounts from home. Great for a retired factory or independent rep looking to supplement income by working 20 to 25 hours/wk. … (more) … Click here to find out more.
People Watching 11/16/20
• Heather King has joined JohnDow Industries as its director of marketing, responsible for establishing and leading the marketing direction for the JohnDow brand and its affiliated products. King was associate manager of marketing for OEConnection LLC.
• Jenna Jefferies, the 2020 SheIsSEMA Woman of the Year, has joined Pertronix as national account manager. Jefferies was a national account manager for Pilot Automotive and before that, a national account manager with K&N Engineering.
• Robert Lindsley, an account executive with Interstate Batteries, has joined CAWA’s Manufacturers’ Advisory Council.
• Veteran aftermarket publisher Andrew Ross has joined the AIA Canada High Fives for Kids Foundation board of directors. Ross is the publisher and director of content for CHAT Integrated Media, publisher of Indie Garage and Jobber Nation and creator of The Great Canadian Aftermarket Trade Show virtual event.
• Jasper Engines & Transmissions has appointed Jason Nord as its vice president of people services and a member of the company’s executive committee. Nord has been with Jasper for 23 years, most recently as director of people services.
• Standard Motor Products (SMP) is awarding $5,000 scholarships to the winners of its fourth annual Standard “Bigger, Better Diesel” Automotive Scholarship Contest. The winning students are Nathan Hannan of New Underwood, SD; Jean-Claude Pierret of Pasco, WA; MacKenzie Odonnalof Mesa, AZ; and Benjamin Bressel of Happy Valley, OR.
News Briefs 11/16/20
• Grant Brothers Sales is celebrating its 75th anniversary.
• Champion Brands has announced All-Midwest Sales of Strongsville, OH as its rep agency for the southeastern United States.
• Meyer Distributing has added a cross-dock in Bridgeport, WV. The facility has a direct, next-day feed from Meyer’s Jasper, IN distribution hub, which houses a large inventory of automotive accessories, exhaust products and RV parts.
• Red Line Synthetic Oil has announced a partnership with Oil Changers, a quick-lube chain with 50 shops in California and Hawaii. The deal calls for Red Line to supply its high-performance oil for use on all types of vehicles seen in Oil Changers network.
• Strickland Brothers 10 Minute Oil Change has announced its first set of franchise owners in Massachusetts, Zac and Alyssa Bohlen, who plan to open three Strickland Brothers service centers in the Foxboro area.
• VIP Tires & Service has opened a new store in Brookline, MA. It’s the company’s fifth store in the state and 61st in New England.
• AYD has launched a line of air springs to complement its CV product portfolio that includes steering and suspension parts, fifth-wheel repair kits, king pin sets, brake dust covers and air tanks.
• Pulstar LLC has announced a new line of fine-wire iridium, high-power spark plugs for the automotive market. The new line replaces Pulstar’s Inconel spark plugs and will be available for pre-order beginning Dec. 1.
• Innova Electronics Corp. has launched its first tablet, the Innova 7111 Smart Diagnostic System, which allows users to find information by category, including emissions system status, vehicle codes and severity, to name a few. The tablet also includes direct, built-in premium access to Innova’s RepairSolutions2 knowledgebase.
• Horton, a provider of cooling fans and fan drive technology, has joined the OptiCat Network. There are now more than 930 supplier brands in OptiCat’s secure data repository for use by supplier-approved data receiver channel partners.
• In advance of its centennial anniversary in 2021, Pep Boys has begun selling commemorative calendars featuring vehicles and milestones from the company’s 100 years in operation. A portion of the proceeds from the calendar sales will be donated to the Bob Woodruff Foundation, which offers workforce development and reintegration programs for soldiers returning to civilian life. The calendars are available for sale at Pep Boys stores and online.
• Phillips Industries is supporting the Wyakin Foundation, which assists military personnel transition back into civilian life, by donating a portion of the proceeds from select products. Phillips’ premium tracker spring kits will be the first of these limited-edition products. To learn more about the “Green Give Back” Campaign, visit Phillipsind.com/giving-back.
Financial Briefs 11/16/20
• Gates Industrial Corp. reported 3.6% growth in global automotive replacement channel sales for the third quarter of 2020. North American automotive replacement channel sales were up 2.6%. CEO Ivo Jurek told analysts on Gates’ Nov. 3 earnings call that the trend remained positive in October, as the momentum Gates saw exiting the third quarter has continued. “We have really not seen any fundamental restocking in [North America, Europe and China],” Jurek said regarding the automotive aftermarket, adding that underlying demand is driving sales.
• For the third quarter of 2020, the Americas segment of Horizon Global Corp. saw its net sales rise 23.8% to $119.14 million (up 24.3% in constant currency). Automotive OES sales rose 52.0% to $2.98 million, while aftermarket sales increased 31.5% to $35.39 million. Retail sales rose 28.9% to $34.29 million, and e-commerce sales increased 26.6% to $15.24 million. Segment gross profit increased 90.9% to $32.96 million, while gross margin expanded from 17.9% to 27.7% on a year-over-year basis.
• The Safety-Kleen unit of Clean Harbors Inc. reported $251.64 million in direct revenue for the third quarter of 2020 — a decrease of $54.51 million (or 17.8%) compared to the year-ago period, attributable to reduced demand for oil-related products and Safety-Kleen’s core services. Notably, containerized waste and vacuum services decreased by $15.40 million and parts washer service revenue decreased by $6.30 million. However, direct revenue from used motor oil collections increased by $15.90 million because of pricing increases. Safety-Kleen’s adjusted EBITDA declined 15.5% to $68.76 million on a year-over-year basis.
• The BorgWarner Inc. board of directors has declared a quarterly cash dividend of $0.17 per share of common stock. The dividend is payable Dec. 15 to shareholders of record on Dec. 1.
Event & Trade Show Briefs 11/16/20
• Content, sessions and exhibitors from the AAPEX Virtual Experience are accessible on-demand through Dec. 5.
• Brady Ranweiler and his 1963 Chevrolet Full Custom 2 Door Wagon won the 2020 SEMA Battle of the Builders competition at SEMA360.
• U.S. Rep. Haley Stevens (D-MI) will address the AASA Aftermarket IP Forum on Thursday, Nov. 19, discussing the election, manufacturing and intellectual property protection. Click here to register for the forum.
• The California Air Resources Board (CARB) will host a public workshop Thursday, Nov. 19 to discuss the proposed adoption of certification fees for emissions-related aftermarket parts, retrofits and at-berth technology. The workshop will be directed toward the aftermarket parts and retrofit parts industry. Click here for more information about the workshop.
• The Auto Care Association on Dec. 3 will host a State of the Aftermarket Town Hall with CAWA, Michigan Automotive Parts Association, Automotive Parts and Service Association of Illinois, Wisconsin Automotive Parts Association, Automotive Aftermarket Association of the Mid-South, Automotive Aftermarket Association Southeast and the Alabama Tire Dealers Association. This presentation will address the auto parts and services industry and the impact of the coronavirus pandemic, as well as state and federal legislative and regulatory proposals. Click here for more information or to register for the event.