Despite a slight decline in operating earnings and an 8-percent drop in sales, American Tire Distributors Inc. posted net income of $1.9 million for the second quarter.
The net result compares with a loss of $12.6 million a year ago, when the firm took an $11.2 million charge to cover losses on the sale of its Winston Tire Co. retail chain. The first-half net profit was $31.1 million vs. a loss of $21.2 million in 2001.
American Tire said the second- quarter sales decline reflects both lower overall industry shipments and reduced sales to Winston, which was sold in May 2001.
For the six months ended June 29, American Tire reported a tripling of operating income, to $13.1 million, on 7.1-percent lower sales of $529.1 million. The boost in income came primarily from reduced overhead costs related to the consolidation of all management operations at the company's new headquarters in Huntersville, American Tire said in its second quarter 10-Q filing with the Securities and Exchange Commission.
Industrywide aftermarket shipments of passenger and light truck tires were down 7.4 percent for the quarter and 1.7 percent for the six months, American Tire said.
American Tire did not make a forecast for the remainder of 2002, but did caution that ``margin decreases are primarily attributable to an increase in competitive activity as the company's primary competitors fight to hold market share in a declining market.''
Separately, American Tire disclosed it provided Winston Tire-which filed for Chapter 11 bankruptcy protection in January-with $2 million in credit toward continued purchases of merchandise from American Tire.
As of June 29, the 10-Q filing reveals American Tire is pursuing collection of $2.8 million that Performance Management Inc. still owes from the $10 million purchase price for Winston.
In addition, American Tire moved recently to secure assignments or sublease agreements on a ``substantial amount'' of leases of Winston stores for which it still remains liable as a guarantor.
The filing put the value of these obligations at $17 million and cautioned that ``due to the inherent uncertainties of the bankruptcy process, (American Tire) may be exposed to additional liabilities, which are currently not known or quantifiable.''