CSK Auto Corp. Reports Fourth Quarter and Fiscal 2004 Results.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 fourth quarter and fiscal year ended Jan. 30, 2005. The financial results presented for the 13 weeks and fiscal year ended Jan. 30, 2005 include, as previously announced, our change in inventory valuation method from Last-in, First-out last-in, first-out n. A method of inventory accounting in which the most recently acquired items are assumed to have been the first sold. In a period of rising prices, this method yields a lower ending inventory, a higher cost of goods sold, a lower ("LIFO (Last In-First Out) A queueing method in which the next item to be retrieved is the item most recently placed in the queue. Contrast with FIFO. LIFO - stack ") to First-in, First-out first-in, first-out n. A method of inventory accounting in which the oldest remaining items are assumed to have been the first sold. In a period of rising prices, this method yields a higher ending inventory, a lower cost of goods sold, a higher gross ("FIFO (First In First Out) A storage method that retrieves the item stored for the longest time. Contrast with LIFO. See traffic engineering methods. FIFO - first-in first-out ") and corrections relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc lease accounting, vendor allowance recognition periods and certain previously recorded vendor allowances. The following financial information described as being on an "as adjusted basis" is adjusted for certain items described below and in the accompanying tables. Financial Results 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 Jan. 30, 2005 (the "fourth quarter of fiscal 2004") were $369.9 million as compared to $372.3 million for the 13 weeks ended Feb. 1, 2004 (the "fourth quarter of fiscal 2003"). Net sales for the fiscal year ended Jan. 30, 2005 ("fiscal 2004") were $1,577.5 million as compared to $1,578.1 million for the fiscal year ended Feb. 1, 2004 ("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 1.9% for the fourth quarter and decreased 0.7% for the fiscal year. Retail same stores sales decreased by 3.0% for the fourth quarter and decreased by 1.2% for the full year, and commercial same store sales increased by 4.3% for the fourth quarter and 1.8% full year. Gross profit was $163.1 million, for the fourth quarter of fiscal 2004 as compared to $172.8 million, for the fourth quarter of fiscal 2003. Gross profit for fiscal 2004 was $733.9 million as compared to $717.1 million for the same period of fiscal 2003. Operating and administrative expenses were $157.3 million for the fourth quarter of fiscal 2004 as compared to $156.9 million for the same period of fiscal 2003. Operating and administrative expenses were $635.5 million and $619.9 million for fiscal 2004 and fiscal 2003, respectively. The 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 fourth quarter of fiscal 2004 was $5.2 million compared to an operating profit of $3.5 million for the fourth quarter of fiscal 2003. Operating profit for fiscal 2004 totaled $96.1 million (6.1% of net sales) compared to $84.5 million (5.3% of net sales) for fiscal 2003. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, the net loss for the fourth quarter of fiscal 2004 was $3.4 million, or $(0.07) 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 a net loss of $31.8 million, or $(0.68) per diluted common share, for the fourth quarter of fiscal 2003. GAAP net income for fiscal 2004 was $36.9 million or $0.80 per diluted common share, compared to a GAAP net loss of $9.6 million, or $(0.21) per diluted common share, in fiscal 2003. Other key financial performance indicators which have shown improvement year-over-year include: (1) net cash provided by operating activities which increased by $49.3 million to $101.9 million in fiscal 2004 from $52.6 million in fiscal 2003; (2) capital expenditures increased to $26.3 million in fiscal 2004 from $19.0 million in fiscal 2003; (3) adjusted free cash flow (a non-GAAP measure defined below) increased $3.7 million to $76.5 million in fiscal 2004 from $72.8 million in fiscal 2003; and (4) net debt (a non-GAAP measure defined below) was reduced by $48.7 million in fiscal 2004 to $440.8 million from $489.5 million in fiscal 2003. Additional information on these items is presented in the attached tables. "Our fiscal 2004 financial performance was adversely affected by a difficult sales environment. The sales trends have continued to improve in the first quarter of fiscal 2005. We remain optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the sales outlook and the strength of our business. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite the tough environment, we continue to generate strong free cash flow," 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 focused on addressing issues within our control such as our inventory mix, average ticket and customer service. Also, we have increased our advertising exposure and have instituted a new incentive program for our sales associates to help increase sales." Accounting Change and Restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of Financial Results Inventory Accounting Effective the fourth quarter of fiscal 2004, we elected to change our method of inventory valuation from LIFO to FIFO. We believe that FIFO is a preferable method that better measures the cost of such inventories, results in a better matching of revenues and cost of sales, and more accurately reflects our financial position. Accordingly, our fourth quarter 2004 financial results are prepared on the FIFO basis and we have retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin restated previously reported financial results to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" this presentation. Accounting Corrections As included in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed on May 2, 2005, we have retroactively restated previously reported financial results to correct our accounting for leases and vendor allowances. Outlook For fiscal year 2005, we are forecasting same store sales increases of approximately 3%, and we are expecting to open or relocate re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. approximately 50 stores. We expect our net income to be between $51.5 and $57.5 million. This will result in diluted earnings per common share of between $1.12 and $1.22, assuming approximately 46.0 million diluted shares outstanding. The full-year forecast is taking in consideration the impact of a reduction of $2.4 million or $0.04 per share impact of the lease accounting. This assumes that diluted earnings per common share for the first quarter of fiscal 2005 will be between $0.16 and $0.19. Free cash flow (as defined below) in fiscal year 2005 is expected to be between $80 and $90 million. We 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 Tuesday, May 3, 2005 at 5 p.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 7 p.m. (ET) Tuesday, May 3, 2005 through 8 p.m. (ET) Wednesday, May 4, 2005 by dialing 888-266-2081, passcode 698897. (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 703-925-2533, passcode 698897.) CSK Auto Corp. is the parent company of CSK Auto Inc., a specialty retailer in the automotive aftermarket. As of Jan. 30, 2005, the company operated 1,134 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. . These statements discuss, among other things, expected growth, store development and expansion 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 our products, the overall condition of the economy, timing and number of equity awards issued, factors affecting the import of products, 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, risks related to compliance with Section 404 of the Sarbanes-Oxley Act See SOX. , 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 matters. Actual results may differ materially from anticipated results described in these forward-looking statements. Additional information regarding these and other risks is contained in the company's periodic filings with the SEC. --Tables Follow --
CSK AUTO CORP. AND SUBSIDIARIES
(in thousands except per share data)
Thirteen Weeks Ended Fiscal Year Ended
-------------------- -----------------------
Jan. 30, Feb. 1, Jan. 30, Feb. 1,
2005 2004 2005(1) 2004(1)
--------- ---------- ----------- -----------
(Restated) (Restated)
Net sales $369,892 $372,343 $1,577,460 $1,578,056
Cost of sales 206,833 199,538 843,600 860,952
--------- ---------- ----------- -----------
Gross profit 163,059 172,805 733,860 717,104
Other costs and expenses
Operating and
administrative 157,320 156,938 635,541 619,932
Store closing costs 583 12,330 2,191 12,669
--------- ---------- ----------- -----------
Operating profit 5,156 3,537 96,128 84,503
Interest expense, net 8,663 11,775 33,460 52,418
Loss on debt retirement 1,026 45,179 1,026 49,494
--------- ---------- ----------- -----------
Income (loss) before
income taxes (4,533) (53,417) 61,642 (17,409)
Income tax (expense)
benefit 1,108 21,650 (24,761) (7,854)
--------- ---------- ----------- -----------
Net income (loss) $(3,425) $(31,767) $36,881 $(9,555)
========= ========== =========== ===========
Basic earnings per share:
Net income $(0.07) $(0.68) $0.81 $(0.21)
Shares used 45,035 46,440 45,713 45,658
Diluted earnings per
share:
Net income $(0.07) $(0.68) $0.80 $(0.21)
Shares used 45,035 46,440 46,002 45,658
(1) Impact of our accounting change and corrections to after-tax net income for the first three quarters in fiscal 2004 and the full year in fiscal 2003 is $0.9 and $11.2 million, respectively.
Selected Financial Data:
($ in thousands)
Thirteen Weeks Ended Fiscal Year Ended
------------------------ -------------------
Jan. 30, Feb. 1, Jan. 30, Feb. 1,
2005 2004 2005 2004
-------------- --------- --------- ---------
Cash $56,548 $37,221 $56,548 $37,221
FIFO inventory $538,354 $522,849 $538,354 $522,849
Accounts payable $178,444 $177,150 $178,444 $177,150
Interest expense, net $8,663 $11,775 $33,460 $52,418
Capital expenditures $9,932 $8,422 $26,331 $18,990
Availability under
revolving credit facility $114,035 $120,068 $114,035 $120,068
Total debt (including
current maturities) $497,313 $526,726 $497,313 $526,726
Net debt (total debt
less cash) $440,765 $489,505 $440,765 $489,505
We define free cash flow as net cash provided by operating activities less cash paid for capital expenditures. We adjusted free cash flow for premiums paid on the early retirement of debt to compare free cash flow as generated by our normal operations Generally and collectively, the broad functions that a combatant commander undertakes when assigned responsibility for a given geographic or functional area. Except as otherwise qualified in certain unified command plan paragraphs that relate to particular commands, "normal operations" of . Free cash flow can be reconciled to net cash provided by operating activities as follows ($ in thousands):
Reconciliation of Free Cash Flow:
Fiscal Year Ended
--------------------
Jan. 30, Feb. 1,
2005 2004
---------- ---------
Net cash provided by operating activities $101,936 $52,578
Cash paid for capital expenditures (26,331) (18,990)
---------- ---------
Free cash flow 75,605 33,588
========== =========
Cash paid on early retirement of debt 895 39,176
---------- ---------
Adjusted free cash flow $ 76,500 $ 72,764
========== =========
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:
Fiscal Year Ended
----------------------
Jan. 30, Feb. 1,
2005 2004
----------- ----------
Total debt (including current maturities) $497,313 $526,726
Cash and cash equivalents (56,548) (37,221)
----------- ----------
Net debt $440,765 $489,505
=========== ==========
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