CSK Auto Corp. Reports Third Quarter 2005 Results
PHOENIX--Dec. 5, 2005--CSK Auto Corp. , the parent company of CSK Auto Inc., a specialty retailer in the automotive aftermarket, today reported its financial results for the third quarter of fiscal 2005.Financial Results
Net sales for the 13 weeks ended Oct. 30, 2005 (the "third quarter of fiscal 2005") increased 1.7% to $408.3 million from $401.5 million for the 13 weeks ended Oct. 31, 2004 (the "third quarter of fiscal 2004"). Same store sales for the third quarter of fiscal 2005 increased 0.4% over the third quarter of fiscal 2004, consisting of an increase of 7.5% in commercial same store sales and a decline of 1.0% in retail same store sales.
Net sales for the 39 weeks ended Oct. 30, 2005, increased 1.4% to $1,224.6 million from $1,207.6 million for the 39 weeks ended Oct. 31, 2004. Same store sales for the 39 weeks of fiscal 2005 increased 0.1% compared to the 39 weeks of fiscal 2004, consisting of an increase of 7.8% in commercial same store sales and a decline of 1.4% in retail same store sales.
Since Oct. 31, 2004, we have added 26 net new stores (based on year-to-year end of third quarter store count), which contributed to the increase in our sales for the third quarter and the 39 weeks of fiscal 2005. Sales of discretionary items such as wipers, jacks and ramps, and certain power tools declined, which we believe was due to high gasoline prices.
During the third quarter of fiscal 2005, gross profit increased $0.3 million to $188.2 million, or 46.1% of net sales, compared to $187.9 million, or 46.8% of net sales, for the third quarter of fiscal 2004. The decline in gross margin rate is primarily attributed to less vendor allowances, a result of lower purchase levels, and to a higher balance of commercial sales, which carry lower gross margin rates. Also during the third quarter of fiscal 2005, we recorded a $1.5 million customer product returns allowance, which negatively impacted our gross margins. Partially offsetting these amounts was lower shrink resulting from improved store procedures and enhanced inventory control systems.
During the 39 weeks of fiscal 2005, gross profit decreased by $9.5 million to $561.2 million, or 45.8% of net sales, compared to $570.7 million, or 47.3% of net sales, for the 39 weeks of fiscal 2004. The decline in gross margin rate is primarily attributed to less vendor allowances, a result of lower purchase levels, and to a higher balance of commercial sales, which carry lower gross margin rates. The customer product returns allowance, described above, negatively impacted our gross margins for the 39 weeks of fiscal 2005.
Operating and administrative expenses for the third quarter of fiscal 2005 were $162.5 million, or 39.8% of net sales, compared to $158.9 million, or 39.6% of net sales, for the third quarter of fiscal 2004. Operating and administrative expenses for the 39 weeks of fiscal 2005 were $481.4 million, or 39.3% of net sales, compared to $478.1 million, or 39.6% of net sales, for the 39 weeks of fiscal 2004. The amount of our operating expenses increased primarily as a result of the addition of 26 net new stores since Oct. 31, 2004.
Interest expense for the third quarter of fiscal 2005 decreased to $7.6 million from $8.2 million in the third quarter of fiscal 2004. Interest expense for the 39 weeks of fiscal 2005 decreased to $24.5 million from $24.8 million in the 39 weeks of fiscal 2004. Interest expense decreased primarily as a result of lower outstanding balances, partially offset by higher variable interest rates.
Net income for the third quarter of fiscal 2005 was $10.5 million, or $0.24 per diluted common share, compared to net income of $12.2 million, or $0.27 per diluted common share, for the third quarter of fiscal 2004. Net income for the 39 weeks of fiscal 2005 was $31.6 million, or $0.70 per diluted common share, compared to net income of $40.3 million or $0.87 per diluted common share, for the 39 weeks of fiscal 2004. During the third quarter of fiscal 2005, the above described customer product returns allowance (net of income tax) negatively impacted earnings per fully diluted share by $0.02. During the 39 weeks of fiscal 2005, we incurred charges of $1.6 million relating to a loss on debt retirement resulting from our second quarter 2005 refinancing, approximately $0.7 million of severance costs and the customer product returns allowance. These charges (net of income tax) negatively impacted net income and fully diluted earnings per share for the 39 weeks of fiscal 2005 by $2.3 million and $0.05, respectively.
"While we are not pleased with our sales performance for the third quarter, we continue to see strength in our commercial sales business" said Maynard Jenkins, chairman and chief executive officer of CSK Auto Corp. "We believe that the higher gas prices have negatively impacted our retail sales, however, our expense control initiatives are proving to be effective and we continue to focus on improving our inventory mix. In addition, we are excited about our pending acquisition of Murray's Discount Auto Stores Inc. and the anticipated synergies, which we believe will increase value to our shareholders."
CSK Auto Corp. is the parent company of CSK Auto Inc., a specialty retailer in the automotive aftermarket. As of Oct. 3, 20050, 2005, we operated 1,151 stores in 19 states under the brand names Checker Auto Parts, Schuck's Auto Supply, and Kragen Auto Parts. We also operated four value concept retail stores under the brand name Pay N Save.
CSK AUTO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------- ------------------------
Oct. 30, Oct. 31, Oct. 30, Oct. 31,
2005 2004 2005 2004
---------- ---------- ----------- -----------
Net sales $ 408,318 $ 401,457 $1,224,567 $1,207,568
Cost of sales 220,079 213,551 663,379 636,899
--------- --------- ---------- ----------
Gross profit 188,239 187,906 561,188 570,669
Other costs and
expenses:
Operating and
administrative 162,521 158,879 481,351 478,089
Store closing
costs 910 721 1,879 1,608
--------- --------- ---------- ----------
Operating profit 24,808 28,306 77,958 90,972
Interest expense,
net 7,585 8,217 24,455 24,797
Loss on debt
retirement -- -- 1,600 --
--------- --------- ---------- ----------
Income before income
taxes 17,223 20,089 51,903 66,175
Income tax expense 6,706 7,862 20,283 25,869
--------- --------- ---------- ----------
Net income $ 10,517 $ 12,227 $ 31,620 $ 40,306
========= ========= ========== ==========
Basic earnings per
share:
Net income per
share $ 0.24 $ 0.27 $ 0.71 $ 0.88
========= ========= ========== ==========
Shares used in
computing per share
amounts 43,787 45,126 44,683 45,939
========= ========= ========== ==========
Diluted earnings per
share:
Net income per
share $ 0.24 $ 0.27 $ 0.70 $ 0.87
========= ========= ========== ==========
Shares used in
computing per share
amounts 44,121 45,269 45,049 46,211
========= ========= ========== ==========
The following table provides certain financial information:
Selected Financial Data:
($ in thousands)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------- -----------------------
Oct. 30, Oct. 31, Oct. 30, Oct. 31,
2005 2004 2005 2004
---------- ---------- ----------- ----------
Cash $ 19,287 $ 54,673 $ 19,287 $ 54,673
Inventory (excluding
supplies) $ 563,039 $ 547,562 $ 563,039 $ 547,562
Accounts payable $ 204,186 $ 183,557 $ 204,186 $ 183,557
Interest expense, net $ 7,585 $ 8,217 $ 24,455 $ 24,797
Depreciation and
amortization (net of
deferred financing
costs) $ 8,530 $ 8,758 $ 25,422 $ 26,543
Rent expense $ 28,802 $ 27,670 $ 85,636 $ 83,364
Cash provided by
operating activities $ 48,164 $ 20,872 $ 127,209 $ 74,421
Capital expenditures $ 10,666 $ 4,242 $ 24,322 $ 18,770
Availability under
revolving credit
facility $ 190,441 $ 115,038 $ 190,441 $ 115,038
Total debt (including
capital leases) $ 395,087 $ 511,265 $ 395,087 $ 511,265
