In reaction to Allstates decision not to renew its Best Effort Agreement for auto
glass replacement (see USGlass, November 1999, page 16), repair and administrative
services, Safelite Glass Corporation of Columbus, OH, has decided to cut costs by closing
110-150 store locations nationwide, streamlining field based administrative functions and
reducing corporate administrative activities.
In its third quarter financial report, Safelite said its sales to Allstate totaled $120 million or 14 percent of its sales for the fiscal year. The company expects to record restructuring charges between $25 million and $30 million in the quarter that ends January 1, 2000.
While we are obviously disappointed with Allstates decision, we believe that we will be able to retain some portion of this business after our contract expires, said John Barlow, Safelites chief executive officer. Although overall sales volume will likely be reduced by a significant amount, we are taking actions necessary to appropriately re-align our cost structure to reflect this development as well as the market conditions. In addition, we will continue our focus on sales growth, enhancing our key client relationships, growth of Repair Medics and expansion into secondary markets through our Mobile Pro initiative.
In related news, Safelite reported total sales of $241.3 million for its fiscal 1999 second quarter, which is a four percent increase over the $231.8 million figure it posted last year. The company posted a five percent increase in installation and related services compared to the second quarter of last year. The increase in installation and related service sales was due to a four percent increase in replacement unit sales that was partially offset by lower pricing. In addition, the company said all of its unit growth for the quarter came through network pricing.
Safelite posted a $0.5 million loss during the quarter, which was an improvement compared to last years loss of $2.3 million during the same time period. Its adjusted EBITDA for the quarter was $17.6 million, which was inline with the total from last year. However, the company said its results were affected by lower industry-wide pricing, a higher mix of network business and increased selling, general and administrative expenses. The company said investment in call center staffing and increased advertising costs were primarily responsible for the increased selling, general and administrative costs.
Second quarter results, while even with last year on Adjusted EBITDA basis, were at the low end of our expectations, said Barlow. Low industry demand and continuing industry-wide pricing pressures in a soft market environment prevented us from achieving earnings improvement.
Safelites total sales for the first six months of 1999 was $480.4 million, an increase of $7.4 million compared with the first six months of 1998. Adjusted EDITDA for the period was $40.5 million, compared to $46.5 million for the first six months of 1998.
The European Commission has approved Belgian car distributor DIeterens
acquisition of South Africas Plate Glass and Shatterproof Industries Ltd., whose
largest subsidiary is automotive glass giant Belron International. Belron owns Safelite
Glass Corporation of Columbus, OH.
The Commission found that the activities of the parties overlap only in the repair and replacement of car glass in Belgium, the commission said in a statement. Its inquiry, however, concluded that competition on this market would not be altered by the merger.
The National Highway Traffic Safety Administration (NHTSA) has released an updated
report titled Ejection Mitigation Using Advanced Glazing: Status Report II. After
extensive testing, NHTSA says advanced glazing systems for side lites, which includes
laminated glass, may yield significant safety benefits by reducing partial or complete
ejections through side lites.
According to The Washington Post, the agency is currently testing four types of glazing to determine how to best keep passengers inside vehicles during a crash. NHTSA is also determining the effects laminated glazing will have on vehicle occupants, including when a persons head hits the window and rebounds.
NHTSA says approximately 7,300 people were killed from 1992 to 1996 in these type of ejections, while these glazing systems could save between 500 and 1,300 lives per year. The Washington Post reports that the increased use of Sport Utility Vehicles (SUVs) has forced NHTSA to take a closer look at how to prevent ejections during rollovers.
Monro Muffler Brake Inc. of Rochester, NY, is moving into the auto glass industry by
offering auto glass service in two cities with plans to expand to 60 locations. The
company, which provides muffler and brake service, will bring in an outside glass shop to
perform auto glass repair and replacement at its service centers. Initially, the service
was kicked off in Rochester, NY, and Pittsburgh.
We began testing windshield repair and replacement services through a joint venture operating as Monro Auto Glass beginning in November, said Robert Gross, president and chief executive officer of Monro Muffler Brake. This service will be a customer convenience offered initially at approximately 60 locations in conjunction with a major
automotive glass repair and replacement company. The arrangement should add incrementally to Monros profitability through referral fees and should further build brand equity and enhance our service offerings.
Nationwide Insurance announced that it is temporarily suspending the specification of
non-Original Equipment Manufacture (OEM) crash parts in the repair of damaged vehicles.
This follows an earlier suspension of non-OEM parts from State Farm Mutual Insurance
Company of Bloomington, IL. While a State Farm memo specifically lists glass as one of the
products not covered by its suspension of non-OEM products, Nationwide does not refer to
glass in its statement.
Michigan Shops Launch Petition Drive
GlassChoice, a coalition of auto glass shops, based in Westland, MI, has launched a petition in an effort to get a right-to-choose law for automobile owners there. The association wants Michigan to join 38 other states around the country that allow automobile owners to select automobile glass repair shops of their choice without steering by the insurance company.
The petition asks the Michigan Legislature to enact a law that would guarantee that insurance companies who operate in the state will not restrict policyholders access to auto glass repair or replacement facilities, will not require auto glass work is done in a particular facility, will disclose that policyholders have a right to choose their auto glass facility, will not intimidate or coerce customers and must provide payment to the auto glass facility at a reasonable price.
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