CSK Auto Corp. Reports First Quarter 2004 Results; Net Income Increases 72%, Earnings Per Share Up 65% and Same Store Sales Increase 5%.Business Editors/Automotive Writers PHOENIX--(BUSINESS WIRE)--June 3, 2004 CSK Auto CSK Auto Inc. is the largest specialty retailer of automotive parts and accessories in the western United States and one of the largest retailers of such products in the entire country. Corp. (NYSE NYSE See: New York Stock Exchange : CAO), the parent company of CSK Auto Inc., a specialty retailer in the automotive aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. , today reported its financial results for the first quarter of fiscal 2004. Financial Results Sales for the 13 weeks ended May 2, 2004 (the "first quarter of fiscal 2004") increased $19.7 million to $397.1 million from $377.4 million for the 13 weeks ended May 4, 2003 (the "first quarter of fiscal 2003"). Same store sales Same Store Sales A statistic used in retail industry analysis. It compares sales of stores that have been open for a year or more. Notes: This statistic allows investors to determine what portion of new sales has come from sales growth and what portion from the opening of for the first quarter of fiscal 2004 increased 5.0% compared to the first quarter of fiscal 2003. The sales increases are a result of strong sales in core product categories such as batteries, brakes, shocks and rotating ro·tate v. ro·tat·ed, ro·tat·ing, ro·tates v.intr. 1. To turn around on an axis or center. 2. electric parts and our increasing commercial sales. Additionally, sales were positively impacted by our ability to increase our dollar average sale per customer and attract new customers to our stores through our new and innovative product offerings. Gross profit increased $13.6 million to $188.6 million, or 47.5% of net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight , for the first quarter of fiscal 2004 from $175.0 million, or 46.4% of net sales, for the first quarter of fiscal 2003. The increased gross margin dollars and rate are a result of our continuing efforts to lower the acquisition costs in our core product categories and our ability to acquire our promotional products upon more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms. In addition, we have reduced our store inventory shrinkage Shrinkage The amount by which inventory on hand is shorter than the amount of inventory recorded. Notes: The missing inventory could be due to theft, damage, or book keeping errors. through improved store procedures and enhanced inventory control systems. Operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for the first quarter of fiscal 2004 totaled $29.5 million, or 7.4% of net sales, compared to $26.2 million, or 6.9% of net sales, for the first quarter of fiscal 2003. Operating profit was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted during the first quarter of fiscal 2004 as a result of higher gross margin dollars, which was partially offset by higher incentive payments and benefit costs associated with our employee compensation programs. Interest expense for the first quarter of fiscal 2004 decreased by $5.6 million to $8.3 million compared to $13.9 million for the same period last year. This reduction is primarily the result of our recent refinancing Refinancing An extension and/or increase in amount of existing debt. , which was completed in January January: see month. 2004, and our improved financial condition, which has reduced our borrowing requirements. Net income for the first quarter of fiscal 2004 was $13.0 million, or $0.28 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share, compared to net income of $7.5 million, or $0.17 per diluted common share, for the first quarter of fiscal 2003. Compared to the first quarter of fiscal 2003, we reduced inventory by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $10.4 million, or 2%, while same store sales increased by 5%. Also, net debt (defined as debt less cash and cash equivalents) declined 7% or $36.1 million to $464.9 million from $501.0 million at May 4, 2003. As of May 2, 2004, we had no borrowings under our revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. "We are pleased and encouraged by our first quarter financial results. We achieved a 5% same store sales increase over the same period last year and significantly improved our gross profit year over year," said Maynard Maynard can refer to: It is a surname used across the English-speaking world. Places in the United States of America:
n. 1. A name of contempt for a flatterer of persons high in social or official life; as, the Jenkins employed by a newspaper s>. , chairman and chief executive officer of CSK Auto Corp. "The focus of our efforts for the remainder of the fiscal year will be on increasing our gross profit dollars, controlling our costs and maximizing our cash flow." Outlook For the full year, we are forecasting same store sales increases in the range of 3.5% to 4.0%. Assuming we achieve those same store sales increases, we are forecasting increased full-year net income of between $67.0 million and $70.0 million, which would result in earnings per diluted common share of between $1.44 and $1.48, assuming approximately 47.0 million diluted shares outstanding. Earnings per diluted common share for the second quarter of fiscal 2004 are expected to be between $0.38 and $0.40. Free cash flow (as defined below) in fiscal year 2004 is expected to be between $80.0 and $85.0 million. We currently expect to use this excess cash primarily to reduce outstanding debt. Conference Call In conjunction with this release, the company will hold a conference call on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , June June: see month. 4, 2004, at 10 a.m. (ET) for the investing public. Investors may listen to a simultaneous webcast at www.cskauto.com. Click on "Investors," then click "Conference Call." This webcast will be archived for five days. Interested parties may hear a replay of the conference call from 12 p.m. (ET) Friday, June 4, 2004, through 5 p.m. (ET) Friday, June 4, 2004, by dialing 877-519-4471, passcode 4800984. (If retrieving digital replay outside of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , please dial 973-341-3080, passcode 4800984.) CSK Auto Corp. is the parent company of CSK Auto Inc., a specialty retailer in the automotive aftermarket. As of May 2, 2004, the company operated 1,117 stores in 19 states under the brand names Checker check·er n. 1. a. One, such as an inspector or examiner, that checks. b. One that receives items for temporary safekeeping or for shipment: a baggage checker. 2. Auto Parts Auto parts are components of automobiles. They mainly are, in alphabetic order (only car specific articles or articles with car section):
Certain statements contained in this release are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . They discuss, among other things, expected growth, future store development and relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. strategy, business strategies, future revenues and future performance. The forward-looking statements are subject to risks, uncertainties and assumptions, including, but not limited to, competitive pressures, demand for the company's products, the state of the economy, inflation, consumer debt levels and the weather. Actual results may differ materially from anticipated results described in these forward-looking statements.
CSK AUTO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands except per share amounts)
13 Weeks Ended
-------------------
May 2, May 4,
2004 2003
--------- ---------
Net sales $397,054 $377,449
Cost of sales 208,458 202,425
--------- ---------
Gross profit 188,596 175,024
Other costs and expenses:
Operating and administrative 158,745 148,723
Store closing costs 326 93
--------- ---------
Operating profit 29,525 26,208
Interest expense, net 8,255 13,936
--------- ---------
Income before income taxes 21,270 12,272
Income tax expense 8,317 4,749
--------- ---------
Net income $12,953 $7,523
========= =========
Basic earnings per share:
Net income $0.28 $0.17
========= =========
Shares used in computing per share amounts 46,517 45,149
========= =========
Diluted earnings per share:
Net income $0.28 $0.17
========= =========
Shares used in computing per share amounts 46,885 45,188
========= =========
Selected Financial
Data
-------------------
13 Weeks Ended
-------------------
May 2, May 4,
2004 2003
--------- ---------
Cash $43,561 $14,868
FIFO inventory $556,776 $567,163
Accounts payable $188,079 $181,786
Interest expense, net $8,255 $13,936
Capital expenditures $4,352 $622
Availability under revolving credit facility $113,381 $83,727
Total debt (including current maturities) $508,490 $515,861
Net debt (total debt less cash) $464,929 $500,993
EBITDA $37,889 $34,846
EBITDAR $66,602 $63,515
We regularly utilize non-GAAP financial measures ("these measures") such as EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become , EBITDAR Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring Costs - EBITDAR An indicator of a company's financial performance calculated as: = Revenue - Expenses (excluding tax, interest, depreciation, amortization, and restructuring costs) , free cash flow and net debt. We believe these measures are recognized supplemental measurement tools widely used by analysts and investors to help evaluate a company's overall operating performance, its ability to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. and service debt, and its capacity for making capital expenditures. We use these measures, in addition to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and cash flows from operating activities, to assess our performance relative to our competitors and relative to our own performance in prior periods. In addition, EBITDA and EBITDAR are used to monitor compliance with certain of our financial covenants under our senior credit facility. These measures do not represent funds available for our discretionary use and are not intended to represent or to be used as a substitute for net income or cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses data as measured under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . These measures and the associated year-to-year trends should not be considered in isolation. These measures may differ in method of calculation from similarly titled measures used by other companies. We believe that it is important for investors to have the opportunity to evaluate us using these measures.
EBITDA and EBITDAR are calculated as follows ($ in thousands):
13 Weeks Ended
---------------------
May 2, May 4,
2004 2003
---------- ----------
Calculation of EBITDA and EBITDAR:
Income before income taxes $21,270 $12,272
Interest expense, net 8,255 13,936
Depreciation 7,332 7,712
Amortization (net of deferred financing costs)
1,032 926
---------- ----------
EBITDA 37,889 34,846
========== ==========
Rent expense 28,713 28,669
---------- ----------
EBITDAR $ 66,602 $ 63,515
========== ==========
The items excluded from EBITDA and EBITDAR are significant components of our statement of operations See Income statement. and must be considered in performing a comprehensive assessment of our overall financial performance. The presentation is not intended to be a measure of GAAP performance. EBITDA can be reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. to net cash provided by operating activities, which we believe to be the most directly comparable financial measure calculated and presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP, as follows ($ in thousands):
Reconciliation of EBITDA:
13 Weeks Ended
---------------------
May 2, May 4,
2004 2003
---------- ----------
EBITDA $37,889 $34,846
Cash interest payments (3,575) (7,400)
Tax refund 775 --
Other non-cash expenses 235 359
Other changes in operating assets and liabilities (20,663) (12,118)
---------- ----------
Net cash flow provided by operating activities $ 14,661 $ 15,687
========== ==========
We define free cash flow as net cash provided by operating activities less cash paid for capital expenditures. Free cash flow can be reconciled to net cash provided by operating activities as follows ($ in thousands):
Reconciliation of Free Cash Flow:
13 Weeks Ended
---------------------
May 2, May 4,
2004 2003
---------- ----------
Net cash provided by operating activities $14,661 $15,687
Cash paid for capital expenditures (4,352) (622)
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Free cash flow 10,309 15,065
========== ==========
We define net debt as total debt (including current maturities) less cash and cash equivalents. Net debt can be reconciled as follows ($ in thousands):
Reconciliation of Net Debt:
May 2, May 4,
2004 2003
----------- -----------
Total debt (including current maturities) $508,490 $515,861
Cash and cash equivalents (43,561) (14,868)
----------- -----------
Net debt $ 464,929 $ 500,993
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