Pit Stop Closed

Topics: Free cash flow, Cash flow, Tire Pages: 4 (1248 words) Published: October 24, 2012
Case 09-5a
Pit Stop Closed
Auto World Inc. (“Auto World”), a calendar year-end SEC registrant, is a leading automotive retail and service chain. Auto World operates exclusively in the automotive aftermarket industry. Auto World is engaged principally in the retail sale of automotive parts, tires, and accessories, automotive repairs and maintenance, and the installation of parts. Auto World has two primary operating unit formats: (1) Auto Boyz Retail Centers (“Auto Boyz Centers”) and (2) Pit Stop Service & Tire Centers (“Pit Stop Centers”). As of April 15, 2007, Auto World operated 120 stores consisting of 90 Auto Boyz Centers and 30 Pit Stop Centers. Auto World operates approximately 1,800,000 gross square feet of retail space. The Auto Boyz Centers average approximately 20,000 square feet per store. The 30 Pit Stop Centers offer service labor, installed merchandise, and tires. Auto World maintains distinct advertising and branding policies for each format. The Auto Boyz Centers are usually placed in high traffic areas within major metropolitan cities. Auto World invests heavily in marketing and advertising for the Auto Boyz Centers. For example, Auto World purchases commercial airtime on local and national television stations and relies heavily on local newspaper advertising, frequently including discount coupons and promotions in newspaper distributions. Auto World typically places the Pit Stop Centers within 10 miles of the Auto Boyz Centers primarily to facilitate a close supply line of parts, if needed. Auto World also relies on television and newspaper advertising for the Pit Stop Centers.

During the second quarter (on April 15, 2007), Auto World announced a decision to close all 30 freestanding Pit Stop Centers by June 30, 2007, under a new restructuring plan. The following is a copy of the press release issued by Auto World: FOR IMMEDIATE RELEASE

FROM: Cal Naughton, Jr., Investor Relations
DATE: April 15, 2007
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