CSK Auto Corp. Reports First Quarter 2004 Results; Net Income Increases 72%, Earnings Per Share Up 65% and Same Store Sales Increase 5%
PHOENIX--June 3, 2004--CSK Auto Corp. , the parent company of CSK Auto Inc., a specialty retailer in the automotive aftermarket, 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 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 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, 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 terms. In addition, we have reduced our store inventory shrinkage through improved store procedures and enhanced inventory control systems.
Operating profit 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 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, which was completed in January 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 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 $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 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 Jenkins, 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, June 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, 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 Auto Parts, Schuck's Auto Supply and Kragen Auto Parts.
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
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Basic earnings per share:
Net income $0.28 $0.17
========= =========
Shares used in computing per share amounts 46,517 45,149
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Diluted earnings per share:
Net income $0.28 $0.17
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Shares used in computing per share amounts 46,885 45,188
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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 $63,515
EBITDA and EBITDAR are calculated as follows ($ 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
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EBITDAR $ 66,602 $ 63,515
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The items excluded from EBITDA and EBITDAR are significant components of our statement of operations 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 to net cash provided by operating activities, 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
---------------------
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 $15,687
Cash paid for capital expenditures (4,352) (622)
---------- ----------
Free cash flow 10,309 15,065
========== ==========
We define net debt as total debt (including current maturities) less cash and cash equivalents. Net debt can be reconciled as follows ($ 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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