CSK Auto Corp. Reports Fiscal 2004 Second Quarter Net Income Increases 28% Compared to Second Quarter of Fiscal 2003.PHOENIX -- 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 second quarter of fiscal 2004. Financial Results Thirteen Weeks Ended Aug. 1, 2004 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 13 weeks ended Aug. 1, 2004 (the "second quarter of fiscal 2004") were $409.1 million, compared to $418.5 million for the 13 weeks ended Aug. 3, 2003 (the "second 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 decreased 2.5% in the second quarter of fiscal 2004 as compared to the second quarter of fiscal 2003. Gross profit was $191.3 million, or 46.8% of net sales, in the second quarter of fiscal 2004 as compared to $193.7 million, or 46.3% of net sales, in the second quarter of fiscal 2003. Gross profit, as a percent to sales, increased over the second quarter of fiscal 2003 due to lower product acquisition costs on selected items and our continued reduction in 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. as a result of 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 second quarter of fiscal 2004 decreased to $30.3 million compared to $35.2 million for the second quarter of fiscal 2003. The decrease in operating profit primarily relates to our decline in sales and higher payroll rates and benefit-related expenses. Interest expense for the second quarter of fiscal 2004 decreased to $7.6 million from $13.3 million in the second quarter of fiscal 2003 due to lower interest expense achieved as a result of our January January: see month. 2004 refinancing Refinancing An extension and/or increase in amount of existing debt. . Net income for the second quarter of fiscal 2004 was $13.9 million, or $0.30 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. share, compared to net income of $10.8 million, or $0.24 per diluted share, for the second quarter of fiscal 2003. Net income for the second quarter of fiscal 2003 was negatively impacted by $4.3 million of costs related to debt retirement. On a comparable basis, net income was $13.9 million, or $0.30 per diluted share, for the second quarter of fiscal 2004 as compared to $13.5 million, or $0.30 per diluted share, for the second quarter of fiscal 2003. During the second quarter of fiscal 2004, we repurchased approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1.3 million shares of our common stock for approximately $19.8 million under our previously announced $25 million stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program. "This is a reflection of our board's confidence in the company's financial strength and our overall commitment to our shareholders. We believe that the purchase of shares of our common stock represents a highly effective use of our cash," 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. "We are disappointed in our second quarter sales results," said Jenkins. "Since the beginning of the second quarter, we have experienced slower than anticipated sales, particularly in our heat-related product categories. We believe our sales have been negatively impacted by higher gas prices and milder summer temperatures in many of our key markets. "However, we remain positive about the strength and growth potential of the retail automotive aftermarket industry. We plan to remain focused on our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. objectives of maximizing the productivity within our existing stores, acceleration of our new store growth which will allow us to further leverage our fixed expenses over an increasing store base, and debt reduction. Rather than overreact o·ver·re·act v. To react with unnecessary or inappropriate force, emotional display, or violence. to what we believe are short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. sales fluctuations, we plan to continue to manage our business toward achievement of these longer-term goals. We remain committed to our ongoing long-term merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. and marketing efforts and will continue to focus on successful implementation of our existing strategies." Twenty-six Weeks Ended Aug. 1, 2004 Net sales for the 26 weeks ended Aug. 1, 2004 (the "first half of fiscal 2004") were $806.1 million, compared to $796.0 million for the 26 weeks ended Aug. 3, 2003 (the "first half of fiscal 2003"). Same store sales increased 1.1% as compared to the first half of fiscal 2003. Gross profit was $379.9 million, or 47.1% of net sales, in the first half of fiscal 2004 as compared to $368.7 million, or 46.3% of net sales, in the first half of fiscal 2003. We have continued to increase gross margin rates year over year as a result of lower inventory acquisition costs and reduced store inventory shrinkage as a result of improved store procedures and enhanced inventory control systems. Operating and administrative expenses were $319.2 million in the first half of fiscal 2004 as compared to $307.2 million in the first half of fiscal 2003. The increase in operating and administrative expenses is primarily the result of our increased store count and higher payroll rates and benefit-related expenses. Operating profit for the first half of fiscal 2004 totaled $59.8 million, or 7.4% of net sales, compared to $61.4 million, or 7.7% of net sales, for the first half of fiscal 2003. Interest expense for the first half of fiscal 2004 decreased to $15.8 million from $27.2 million in the first half of fiscal 2003 due to lower interest expense achieved as a result of our January 2004 refinancing. Net income for the first half of fiscal 2004 was $26.8 million, or $0.57 per diluted share, compared to net income of $18.3 million, or $0.41 per diluted share, for the first half of fiscal 2003. As mentioned, net income for the second quarter of fiscal 2003 was negatively impacted by $4.3 million of costs related to debt retirement. On a comparable basis, net income was $26.8 million, or $0.57 per diluted share, for the first half of fiscal 2004 as compared to $21.0 million, or $0.46 per diluted share, for the first half of fiscal 2003. Outlook Based on current sales trends and in recognition of our 7.8% same store sales increase in the second half of fiscal 2003, we would expect same store sales to decline 2.0% to 3.5% during the third quarter and to be flat to negative 2% for the fourth quarter. Assuming these results, we expect full year net income between $52.0 million and $56.0 million (approximately $1.13 to $1.22 per diluted share). We also now expect free cash flow (a non-GAAP measure, defined and described further below) for fiscal 2004 of between $70.0 million and $80.0 million. Conference Call In conjunction with this release, we will hold a quarterly conference call for the investing public commencing at 5 p.m. (ET) on Thursday Thursday: see week. , Sept. 2, 2004. Interested parties may hear a replay of the conference call from 7 p.m. (ET) Thursday, Sept. 2, 2004 through 12 a.m. (ET) Saturday Saturday: see week; Sabbath. , Sept. 4, 2004 by dialing 877-519-4471 and using passcode 5091122. (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 5091122.) Additionally, a simultaneous webcast of the conference call will be available at www.cskauto.com by clicking on "Investors" and then "Conference Call." This webcast will be archived for five days. CSK Auto Corp. is the parent company of CSK Auto Inc., a specialty retailer in the automotive aftermarket. As of Aug. 1, 2004, we operated 1,123 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 and impacts, demand for our products, factors impacting procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. of import products, fluctuations in and the overall condition of the economy, timing and number of equity awards issued and the market value of such awards, inflation, consumer debt levels, factors impacting consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. and driving habits, conditions affecting new store development, weather conditions, and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. matters. 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 data)
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
Aug. 1, Aug. 3, Aug. 1, Aug. 3,
2004 2003 2004 2003
------------------ ------------------
Net sales $409,057 $418,514 $806,111 $795,963
Cost of sales 217,740 224,812 426,198 427,237
-------- -------- -------- --------
Gross profit 191,317 193,702 379,913 368,726
Other costs and expenses:
Operating and administrative 160,437 158,475 319,182 307,198
Store closing costs 561 43 887 136
-------- -------- -------- --------
Operating profit 30,319 35,184 59,844 61,392
Interest expense, net 7,592 13,251 15,847 27,187
Loss on debt retirement -- 4,315 -- 4,315
-------- -------- -------- --------
Income before income taxes 22,727 17,618 43,997 29,890
Income tax expense 8,869 6,804 17,186 11,553
-------- -------- -------- --------
Net income $13,858 $10,814 $26,811 $18,337
======== ======== ======== ========
Basic earnings per share:
Net income $0.30 $0.24 $0.58 $0.41
======== ======== ======== ========
Shares used in computing per
share amounts 46,184 45,217 46,349 45,183
======== ======== ======== ========
Diluted earnings per share:
Net income $0.30 $0.24 $0.57 $0.41
======== ======== ======== ========
Shares used in computing per
share amounts 46,466 45,499 46,675 45,274
During the periods presented we incurred certain costs, which we have excluded below for comparability. In order to evaluate our operating performance, we have adjusted income before income taxes to remove the effect of these non-comparable items to more accurately compare our operating performance from period to period.
Comparable Basis
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
Aug. 1, Aug. 3, Aug. 1, Aug. 3,
2004 2003 2004 2003
------------------ ------------------
Income before income taxes $22,727 $17,618 $43,997 $29,890
Non-comparable items:
Loss on debt retirement -- 4,315 -- 4,315
-------- -------- -------- --------
Comparable income before income
taxes 22,727 21,933 43,997 34,205
Income tax expense, adjusted 8,869 8,471 17,186 13,220
-------- -------- -------- --------
Net income - comparable basis $13,858 $13,462 $26,811 $20,985
======== ======== ======== ========
Diluted earnings per share -
comparable basis:
Net income - comparable basis $0.30 $0.30 $0.57 $0.46
======== ======== ======== ========
Shares used in computing per
share amounts 46,466 45,499 46,675 45,274
======== ======== ======== ========
Non-comparable items consist of charges relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of deferred financing fees and redemption premiums redemption premium See call premium. associated with the redemption of our 11% Senior Subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. Notes and other costs associated with our June June: see month. 2003 refinancing.
Selected Financial Data:
($ in thousands)
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
Aug. 1, Aug. 3, Aug. 1, Aug. 3,
2004 2003 2004 2003
------------------ ------------------
Cash $44,615 $36,024 $44,615 $36,024
FIFO inventory $572,309 $568,600 $572,309 $568,600
Accounts payable $206,022 $183,117 $206,022 $183,117
Interest expense, net $7,592 $13,251 $15,847 $27,187
Capital expenditures $8,479 $4,180 $12,831 $4,802
Availability under revolving
credit facility $113,616 $104,014 $113,616 $104,014
Total debt (including current
maturities) $501,680 $513,889 $501,680 $513,889
Net debt (total debt less cash) $457,065 $477,865 $457,065 $477,865
EBITDA (as adjusted) $37,869 $43,883 $75,758 $78,729
EBITDAR (as adjusted) $66,800 $72,340 $133,402 $135,855
We believe that EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become , as adjusted, and EBITDAR Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring Costs - EBITDAR An indicator of a company's financial performance calculated as: = Revenue - Expenses (excluding tax, interest, depreciation, amortization, and restructuring costs) , as adjusted, are recognized supplemental measurement tools widely used by analysts and investors to help evaluate a company's overall operating performance, its ability to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. and service debt, and its capacity for making capital expenditures. We use EBITDA, as adjusted, and EBITDAR, as adjusted, in addition to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and cash flows from operating activities, to monitor compliance with certain financial covenants and to assess our performance relative to our competitors and relative to our own performance in prior periods. We believe that it is important for investors to have the opportunity to evaluate us using the same measures. EBITDA, as adjusted, and EBITDAR, as adjusted, are calculated as follows ($ in thousands):
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
Aug. 1, Aug. 3, Aug. 1, Aug. 3,
2004 2003 2004 2003
------------------ ------------------
Calculation of EBITDA, as
adjusted and EBITDAR, as
adjusted:
Income before income taxes $22,727 $17,618 $43,997 $29,890
Interest expense, net 7,592 13,251 15,847 27,187
Depreciation 6,449 7,725 13,781 15,437
Amortization (net of
deferred financing costs) 1,101 974 2,133 1,900
-------- -------- -------- --------
EBITDA 37,869 39,568 75,758 74,414
======== ======== ======== ========
Non-comparable items -- 4,315 -- 4,315
-------- -------- -------- --------
EBITDA (as adjusted) 37,869 43,883 75,758 78,729
======== ======== ======== ========
Rent expense 28,931 28,457 57,644 57,126
-------- --------- -------- --------
EBITDAR (as adjusted) $66,800 $72,340 $133,402 $135,855
======== ========= ======== ========
EBITDA, as adjusted, and EBITDAR, as adjusted, do not represent funds available for our discretionary use and are not intended to represent or to be used as a substitute for net income or cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses data as measured under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . The items excluded from EBITDA, as adjusted, and EBITDAR, as adjusted, are significant components of our statement of operations See Income statement. and must be considered in performing a comprehensive assessment of our overall financial performance. EBITDA, as adjusted, EBITDAR, as adjusted, and the associated year-to-year trends should not be considered in isolation. EBITDA, as adjusted, has been calculated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the terms of our senior credit facility and may differ in method of calculation from similarly titled measures used by other companies. EBITDA can be reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. to net cash provided by operations, which we believe to be the most directly comparable financial measure calculated and presented in accordance with GAAP, as follows ($ in thousands):
Reconciliation of EBITDA:
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
Aug. 1, Aug. 3, Aug. 1, Aug. 3,
2004 2003 2004 2003
------------------ ------------------
EBITDA $37,869 $39,568 $75,758 $74,414
Cash interest payments (11,367) (17,562) (14,942) (24,962)
Cash tax payments (821) (687) (46) (687)
Other non-cash expenses 434 505 775 862
Other changes in operating
assets and liabilities 11,625 7,981 (9,144) (4,135)
-------- -------- -------- --------
Net cash flow provided by
operating activities $37,740 $29,805 $52,401 $45,492
======== ======== ======== ========
We define free cash flow as net cash provided by operating activities less cash paid for capital expenditures. Free cash may differ in method of calculation from similarly titled measures used by other companies. Free cash flow can be reconciled to net cash provided by operating activities as follows ($ in thousands):
Reconciliation of Free Cash Flow:
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
Aug. 1, Aug. 3, Aug. 1, Aug. 3,
2004 2003 2004 2003
------------------ ------------------
Net cash provided by operating
activities $37,740 $29,805 $52,401 $45,492
Cash paid for capital
expenditures (8,479) (4,180) (12,831) (4,802)
-------- -------- -------- --------
Free cash flow $29,261 $25,625 $39,570 $40,690
======== ======== ======== ========
We define net debt as total debt (including current maturities) less cash and cash equivalents. Net debt may differ in method of calculation from similarly titled measures used by other companies. Net debt can be reconciled as follows ($ in thousands):
Reconciliation of Net
Debt:
Aug. 1, Aug.3,
2004 2003
-------- --------
Total debt (including
current maturities) $501,680 $513,889
Cash and cash
equivalents (44,615) (36,024)
-------- --------
Net debt $ 457,065 $ 477,865
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