CSK Auto Corporation (the “Company”) (NYSE:CAO), the parent company of CSK Auto, Inc., today reported net sales of $427.0 million for its fourth quarter of fiscal 2007 ended February 3, 2008, a decrease of 9.6%, or $45.2 million compared to the fourth quarter of fiscal 2006. The decrease in net sales was primarily due to one additional week of sales in the fourth quarter of fiscal 2006, which resulted in additional sales of approximately $34.3 million. Same store sales decreased 3.5% for the quarter, comprised of a decrease of 4.9% in retail same store sales and an increase of 3.1% in commercial same store sales.
For the quarter the Company reported a net loss of $12.3 million, or $0.28 loss per diluted common share compared to a net loss of $1.3 million or $0.03 loss per diluted common share for the same period last year. Gross profit as a percentage of sales increased to 47.2% from 46.9% last year.
The Company recorded a pre-tax charge in the fourth quarter of fiscal 2007 for the settlement of its class action securities litigation consisting of $10.0 million in cash and $1.7 million in Company stock. The Company’s primary insurer under its directors and officers liability insurance policy will pay the entire cash component of the settlement, in addition to $5.0 million in litigation and regulatory-related defense costs. The Company expects to recognize a pre-tax gain of $15.0 million in its results of operations in the first quarter of fiscal 2008.
For the fiscal year ended February 3, 2008, net sales were $1,851.6 million, a decrease of 2.9% from the prior year. For fiscal 2007, net income decreased by $17.4 million to a net loss of $11.2 million, resulting in a $0.25 loss per diluted common share for the fiscal year. Our 2007 fiscal year consisted of 52 weeks as compared to our fiscal year 2006, which had 53 weeks.
Safe Harbour
Portions of this release may constitute “forward-looking statements” as defined by federal law. Although the Company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the “safe harbor” protections provided under the Private Securities Litigation Reform Act of 1995. Additional information about issues that could lead to material changes in the Company’s performance is contained in the Company’s filings with the Securities and Exchange Commission. The Company makes no commitment to revise or update any forward looking statement in order to reflect events or circumstances after the date any such statement is made.
About CSK Auto
CSK Auto Corporation is the parent company of CSK Auto, Inc., a specialty retailer in the U.S. automotive aftermarket industry. As of February 3, 2008 the Company operated 1,349 stores in 22 states under the brand names Checker Auto Parts, Schuck's Auto Supply, Kragen Auto Parts and Murray’s Discount Auto Stores.
- Financial Tables Follow -
| CSK AUTO CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
| | | | | |
| | Fiscal Year Ended |
| | February 3, | | | February 4, |
| | | 2008 | | | | | 2007 | |
| | (In thousands, except share and per share data) |
| | | | | |
| Net sales | $ | 1,851,647 | | | | $ | 1,907,776 | |
| Cost of sales | | 984,649 | | | | | 1,011,712 | |
| Gross profit | | 866,998 | | | | | 896,064 | |
| Other costs and expenses: | | | | |
| Operating and administrative | | 804,265 | | | | | 788,400 | |
| Investigation and restatement costs | | 12,348 | | | | | 25,739 | |
| Securities class action settlement | | 11,700 | | | | | - | |
| Store closing costs | | 1,983 | | | | | 1,487 | |
| Operating profit | | 36,702 | | | | | 80,438 | |
| Interest expense | | 54,163 | | | | | 48,767 | |
| Loss on debt retirement | | - | | | | | 19,450 | |
| Income (loss) before income taxes and cumulative effect of change in accounting principle | | | | |
| | (17,461 | ) | | | | 12,221 | |
| Income tax expense (benefit) | | (6,309 | ) | | | | 4,991 | |
| Income (loss) before cumulative effect of change in accounting principle | | (11,152 | ) | | | | 7,230 | |
| Cumulative effect of change in accounting principle, net of tax | | - | | | | | (966 | ) |
| Net income (loss) | $ | (11,152 | ) | | | $ | 6,264 | |
| | | | | |
| Basic earnings (loss) per share: | | | | |
| Income (loss) before cumulative effect of change in accounting principle | $ | (0.25 | ) | | | $ | 0.16 | |
| Cumulative effect of change in accounting principle | | - | | | | | (0.02 | ) |
| Net income (loss) per share | $ | (0.25 | ) | | | $ | 0.14 | |
| Shares used in computing per share amounts | | 43,971,417 | | | | | 43,876,533 | |
| | | | | |
| Diluted earnings (loss) per share: | | | | |
| Income (loss) before cumulative effect of change in accounting principle | $ | (0.25 | ) | | | $ | 0.16 | |
| Cumulative effect of change in accounting principle | | - | | | | | (0.02 | ) |
| Net income (loss) per share | $ | (0.25 | ) | | | $ | 0.14 | |
| Shares used in computing per share amounts | | 43,971,417 | | | | | 44,129,278 | |
| | | | | |
| | | | | |
| | Thirteen Weeks Ended | | | Fourteen Weeks Ended |
| | February 3, | | | February 4, |
| | | 2008 | | | | | 2007 | |
| | (In thousands, except share and per share data) |
| | | | | |
| Net sales | $ | 426,999 | | | | $ | 472,191 | |
| Cost of sales | | 225,542 | | | | | 250,762 | |
| Gross profit | | 201,457 | | | | | 221,429 | |
| Other costs and expenses: | | | | |
| Operating and administrative | | 193,360 | | | | | 205,585 | |
| Investigation and restatement costs | | 1,725 | | | | | 3,371 | |
| Securities class action settlement | | 11,700 | | | | | - | |
| Store closing costs | | 230 | | | | | 442 | |
| Operating profit (loss) | | (5,558 | ) | | | | 12,031 | |
| Interest expense | | 14,491 | | | | | 14,139 | |
| Loss on debt retirement | | - | | | | | 24 | |
| Loss before income taxes | | (20,049 | ) | | | | (2,132 | ) |
| Income tax benefit | | (7,751 | ) | | | | (864 | ) |
| Income (loss) before cumulative effect of change in accounting principle | | (12,298 | ) | | | | (1,268 | ) |
| Cumulative effect of change in accounting principle, net of tax | | - | | | | | - | |
| Net loss | $ | (12,298 | ) | | | $ | (1,268 | ) |
| | | | | |
| Basic and diluted loss per share: | | | | |
| Loss before cumulative effect of change in accounting principle | $ | (0.28 | ) | | | $ | (0.03 | ) |
| Cumulative effect of change in accounting principle | | - | | | | | - | |
| Basic and diluted loss per share | $ | (0.28 | ) | | | $ | (0.03 | ) |
| Shares used in computing per share amounts | | 44,018,817 | | | | | 43,936,674 | |
| CSK AUTO CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| | | | | | |
| | | | | | |
| | | February 3, | | | February 4, |
| | | | 2008 | | | | | 2007 | |
| | | (In thousands, except share data) |
| ASSETS |
| | | | | | |
| Cash and cash equivalents | $ | 16,520 | | | | $ | 20,169 | |
| Receivables, net | | 37,322 | | | | | 43,898 | |
| Inventories | | 494,651 | | | | | 502,787 | |
| Deferred income taxes | | 50,649 | | | | | 46,500 | |
| Prepaid expenses and other current assets | | 35,842 | | | | | 31,585 | |
| | Total current assets | | 634,984 | | | | | 644,939 | |
| | | | | | |
| Property and equipment, net | | 165,115 | | | | | 174,409 | |
| Intangibles, net | | 63,020 | | | | | 67,507 | |
| Goodwill | | 224,937 | | | | | 224,937 | |
| Deferred income taxes | | 15,380 | | | | | 4,200 | |
| Other assets, net | | 35,254 | | | | | 35,770 | |
| | Total assets | $ | 1,138,690 | | | | $ | 1,151,762 | |
| | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY |
| | | | | | |
| Accounts payable | $ | 236,879 | | | | $ | 260,146 | |
| Accrued payroll and related expenses | | 57,593 | | | | | 60,306 | |
| Accrued expenses and other current liabilities | | 107,211 | | | | | 81,569 | |
| Current maturities of long-term debt | | 50,551 | | | | | 56,098 | |
| Current maturities of capital lease obligations | | 6,351 | | | | | 8,761 | |
| | Total current liabilities | | 458,585 | | | | | 466,880 | |
| | | | | | |
| Long-term debt | | 452,420 | | | | | 451,367 | |
| Obligations under capital leases | | 9,866 | | | | | 15,275 | |
| Other liabilities | | 53,281 | | | | | 46,730 | |
| | Total non-current liabilities | | 515,567 | | | | | 513,372 | |
| | | | | | |
| Commitments and contingencies | | | | |
| | | | | | |
| Stockholders' equity: | | | | |
| Common stock, $0.01 par value, 90,000,000 shares authorized, 44,030,644 and 43,950,751 shares issued and outstanding at February 3, 2008 and February 4, 2007, respectively | | | | |
| | | | |
| | 440 | | | | | 440 | |
| Additional paid-in capital | | 438,092 | | | | | 433,912 | |
| Accumulated deficit | | (273,994 | ) | | | | (262,842 | ) |
| | Total stockholders' equity | | 164,538 | | | | | 171,510 | |
| | | | | | |
| | Total liabilities and stockholders' equity | $ | 1,138,690 | | | | $ | 1,151,762 | |
| CSK AUTO CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENT OF CASH FLOWS |
| | | | | | | | | | |
| | | | Fiscal Year Ended |
| | | | February 3, | | | February 4, | | | January 29, |
| | | | | 2008 | | | | | 2007 | | | | | 2006 | |
| | | | (In thousands) |
| Cash flows provided by (used in) operating activities: | | | | | | | |
| Net income (loss) | $ | (11,152 | ) | | | $ | 6,264 | | | | $ | 57,790 | |
| Adjustments: | | | | | | | |
| | Depreciation and amortization on property and equipment | | 40,668 | | | | | 40,645 | | | | | 36,628 | |
| | Amortization of other items | | 5,513 | | | | | 7,585 | | | | | 4,231 | |
| | Amortization of debt discount and deferred financing costs | | 5,701 | | | | | 4,539 | | | | | 2,161 | |
| | Stock-based compensation expense | | 2,779 | | | | | 4,972 | | | | | 571 | |
| | Tax benefit relating to exercise of stock options | | - | | | | | - | | | | | 231 | |
| | Write downs of property, equipment and other assets | | 4,459 | | | | | 3,354 | | | | | 2,145 | |
| | Loss on debt retirement | | - | | | | | 8,496 | | | | | 1,600 | |
| | Deferred income taxes | | (6,593 | ) | | | | 3,771 | | | | | 36,008 | |
| | Changes in operating assets and liabilities: | | | | | | | |
| | | Receivables | | 8,126 | | | | | (13,412 | ) | | | | 6,747 | |
| | | Inventories | | 8,136 | | | | | 3,652 | | | | | (23,588 | ) |
| | | Prepaid expenses and other current assets | | (4,257 | ) | | | | (11,538 | ) | | | | 7,616 | |
| | | Accounts payable | | (23,267 | ) | | | | 51,639 | | | | | 17,329 | |
| | | Accrued payroll, accrued expenses and other current liabilities | | 23,816 | | | | | 4,838 | | | | | 9,987 | |
| | | Other operating activities | | 185 | | | | | (5,165 | ) | | | | 2,867 | |
| Net cash provided by operating activities | | 54,114 | | | | | 109,640 | | | | | 162,323 | |
| | | | | | | | | | |
| Cash flows used in investing activities: | | | | | | | |
| | Capital expenditures | | (34,772 | ) | | | | (37,529 | ) | | | | (36,775 | ) |
| | Business acquisitions, net of cash acquired | | - | | | | | (4,292 | ) | | | | (177,658 | ) |
| | Other investing activities | | (1,623 | ) | | | | (1,778 | ) | | | | (1,499 | ) |
| Net cash used in investing activities | | (36,395 | ) | | | | (43,599 | ) | | | | (215,932 | ) |
| | | | | | | | | | |
| Cash flows provided by (used in) financing activities: | | | | | | | |
| | Payments under senior credit facility - term loan | | - | | | | | - | | | | | (252,450 | ) |
| | Borrowings under senior credit facility - line of credit | | 258,300 | | | | | 84,800 | | | | | 230,300 | |
| | Payments under senior credit facility - line of credit | | (263,800 | ) | | | | (126,800 | ) | | | | (136,300 | ) |
| | Borrowings under term loan facility | | - | | | | | 350,000 | | | | | - | |
| | Payments under term loan facility | | (3,478 | ) | | | | (875 | ) | | | | - | |
| | Payment of debt financing costs | | (5,376 | ) | | | | (13,166 | ) | | | | (9,612 | ) |
| | Proceeds from issuance of 4.625% exchangeable notes | | - | | | | | - | | | | | 100,000 | |
| | Proceeds from issuance of 3.375% exchangeable notes | | - | | | | | - | | | | | 125,000 | |
| | Retirement of 3.375% exchangeable notes | | - | | | | | (125,000 | ) | | | | - | |
| | Retirement of 7% senior notes | | - | | | | | (225,000 | ) | | | | - | |
| | Payments on capital lease obligations | | (8,513 | ) | | | | (10,301 | ) | | | | (10,893 | ) |
| | Proceeds from seller financing arrangements | | 2,145 | | | | | 428 | | | | | 3,164 | |
| | Payments on seller financing arrangements | | (685 | ) | | | | (484 | ) | | | | (381 | ) |
| | Proceeds from repayment of stockholder receivable | | - | | | | | - | | | | | 10 | |
| | Proceeds from exercise of stock options | | 443 | | | | | 1,196 | | | | | 1,130 | |
| | Purchase of common stock | | - | | | | | - | | | | | (25,029 | ) |
| | Net proceeds from termination of common stock call option and warrants | | | | | | | |
| | | - | | | | | 1,555 | | | | | - | |
| | Premium on common stock call option | | - | | | | | - | | | | | (26,992 | ) |
| | Premium from common stock warrants | | - | | | | | - | | | | | 17,820 | |
| | Other financing activities | | (404 | ) | | | | (189 | ) | | | | (423 | ) |
| Net cash (used in) provided by financing activities | | (21,368 | ) | | | | (63,836 | ) | | | | 15,344 | |
| | | | | | | | | | |
| Net increase (decrease) in cash | | (3,649 | ) | | | | 2,205 | | | | | (38,265 | ) |
| Cash and cash equivalents, beginning of period | | 20,169 | | | | | 17,964 | | | | | 56,229 | |
| Cash and cash equivalents, end of period | $ | 16,520 | | | | $ | 20,169 | | | | $ | 17,964 | |
The following table provides certain financial information not derived in accordance with GAAP. We have included calculations of these non-GAAP measures and reconciliations to the most comparable GAAP financial measures.
We believe that EBITDA is a recognized supplemental measurement tool widely used by analysts and investors to help evaluate a company's overall operating performance, its ability to incur and service debt, and its capacity for making capital expenditures. We use EBITDA, in addition to operating income and cash flows from operating activities, 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 is calculated as follows ($ in thousands):
| Preliminary Calculation of EBITDA: |
| | | Thirteen Weeks Ended | | Fourteen Weeks Ended | | Fiscal Year Ended |
| | | February 3, 2008 | | | February 4, 2007 | | | February 3, 2008 | | | February 4, 2007 |
| | | | | | | | | | | | |
| Income (loss) before income taxes and cumulative effect of change in accounting principle | $ | (20,049 | ) | | | $ | (2,132 | ) | | | $ | (17,461 | ) | | | $ | 12,221 |
| Interest expense | | | 14,491 | | | | | 14,139 | | | | | 54,163 | | | | | 48,767 |
| Depreciation | | | 9,648 | | | | | 10,491 | | | | | 40,668 | | | | | 40,645 |
| Amortization | | | 1,480 | | | | | 847 | | | | | 5,513 | | | | | 7,585 |
| EBITDA | | | 5,570 | | | | | 23,345 | | | | | 82,883 | | | | | 109,218 |
| | | | | | | | | | | | |
| Non-cash stock compensation expense | | 1,036 | | | | | 1,647 | | | | | 2,779 | | | | | 4,972 |
| Investigation and restatement | | | 1,725 | | | | | 3,371 | | | | | 12,348 | | | | | 25,739 |
| Asset retirements and impairment | | | 789 | | | | | 457 | | | | | 4,732 | | | | | 3,902 |
| Securities class action settlement | | | 11,700 | | | | | - | | | | | 11,700 | | | | | - |
| Non-recurring charges | | | 1,263 | | | | | 24 | | | | | 4,853 | | | | | 21,287 |
| EBITDA, as adjusted | | $ | 22,083 | | | | $ | 28,844 | | | | $ | 119,295 | | | | $ | 165,118 |
EBITDA, and EBITDA as adjusted, do not represent funds available for our discretionary use and are not intended to represent or to be used as substitute for net income or cash flow from operations data as measured under GAAP. The Company’s definition of EBITDA as adjusted, is consistent with the definitions applied in our term loan facility. The items excluded from EBITDA, and EBITDA as adjusted, are significant components of our statement of operations and must be considered in performing a comprehensive assessment of our overall financial performance. EBITDA, and EBITDA as adjusted, and the associated year-to-year trends should not be considered in isolation. EBITDA, and EBITDA as adjusted, may differ in method of calculation from similarly titled measures used by other companies.
CSK Auto Corporation, Phoenix
Manager, Investor Relations
Brenda Bonn, 602-631-7483
