CSK Auto Corporation Reports First Quarter Fiscal 2001
Financial Results
PHOENIX, June 7 CSK Auto Corporation , 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 2001.
Net sales for the thirteen weeks ended May 6, 2001 (the "first quarter of
fiscal 2001") were $356.1 million compared to $356.4 million in the thirteen
weeks of fiscal 2000 (the "first quarter of fiscal 2000"). The flat sales
performance for the period reflects a comparable store sales decrease of 1%
and a slightly increased store count. The Company's sales for the first eight
weeks of the quarter were lower than expected, principally due to shortfalls
in the California market, where above normal rainfall hampered sales. Sales
levels beginning in week nine of the first quarter improved to mid-single
digit comps and this trend has been maintained through the first part of the
second quarter. During the first quarter of fiscal 2001, CSK Auto opened
4 stores, relocated 5 stores and closed 1 store in addition to those closed
due to relocation. At May 6, 2001, the Company had 1,155 stores in operation,
compared to 1,138 at the end of the first quarter of fiscal 2000.
Gross profit was $168.6 million, or 47.3% of net sales, in the first
quarter as compared to $173.5 million, or 48.7% of net sales, in the first
quarter of fiscal 2000. The lower gross profit margin rate is related to
lower-than-expected cash discounts and vendor credits due to the
lower-than-expected sales. In addition, the Company's change of its
advertising strategy to emphasize promotional discounts through newspaper
advertising to increase retail customer count had the effect of reducing the
realized gross profit margin during the period. Also, increased freight and
fuel costs negatively impacted transportation and distribution costs, which
further reduced gross profit margin.
Operating profit for the first quarter of fiscal 2001 totaled
$23.3 million, or 6.6% of net sales, excluding non-recurring expenses,
compared to $35.2 million, or 9.9% of net sales, for the first quarter of
fiscal 2000, excluding non-recurring expenses. The decrease in operating
profit resulted from lower gross profit margins as discussed above, higher
payroll related expenses, increased advertising expense and increased utility
expenses, particularly in the California market. During the first quarter of
2001, the Company incurred $3.2 million of expenses consisting of: (1) store
closing costs of $1.8 million relating to longer-than-expected vacancy periods
at stores closed as a result of acquisitions; (2) a $1.2 million loss on the
disposition of certain acquired fixed assets; and (3) $0.2 million of
transition and integration costs relating to prior acquisitions. In the first
quarter of fiscal 2000, the Company incurred $11.4 million of non-recurring
expenses associated with the transition and integration of stores acquired in
fiscal 1999.
Interest expense for the first quarter of fiscal 2001 increased to
$16.7 million from $14.6 million for the first quarter of fiscal 2000,
primarily due to higher interest spreads as a result of the December 2000
senior credit facility amendment and higher LIBOR rate contracts associated
with certain borrowings that renewed in May and June of 2001, pursuant to the
terms of the senior credit facility.
Excluding the non-recurring items discussed above, net income for the
first quarter of fiscal 2001 was $4.3 million or $0.16 per diluted common
share. This compares to net income of $12.7 million or $0.46 per diluted
common share in the first quarter of fiscal 2000, exclusive of non-recurring
charges. Net income for the first quarter of fiscal 2001, inclusive of all
charges, decreased to $2.3 million, or $0.08 per diluted common share, from
$5.7 million, or $0.20 per diluted common share, for the first quarter of
fiscal 2000.
"Although we are disappointed with our first quarter fiscal 2001 financial
results, we have in place strategies that we believe will enable the Company
to achieve its previously stated financial goals for fiscal 2001," said
Maynard Jenkins, Chairman and Chief Executive Officer of CSK Auto Corporation.
"Specifically, we will limit new store growth so we can focus on our
previously stated objectives of increasing comparable store and commercial
sales, and increasing inventory turns. These initiatives are expected to
result in lower debt levels and improved operating performance."
CSK Auto Corporation is the parent company of CSK Auto, Inc., a specialty
retailer in the automotive aftermarket. As of May 6, 2001, the Company
operated 1,155 stores in 19 states under the brand names Checker Auto Parts,
Schuck's Auto Supply and Kragen Auto Parts.
CSK AUTO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share data)
(As Adjusted)
Thirteen Weeks Ended Thirteen Weeks Ended
May 6, April 30, May 6, April 30,
2001 2000 2001(1) 2000(2)
Net sales $356,121 $356,354 $356,121 $356,354
Cost of sales 187,535 182,811 187,535 182,811
Gross profit 168,586 173,543 168,586 173,543
Other costs and expenses:
Operating and
administrative 144,671 135,354 143,511 135,354
Store closing costs 2,295 1,845 545 1,845
Transition and
integration expenses 250 11,447 -- --
Goodwill amortization 1,183 1,112 1,183 1,112
Operating profit 20,187 23,785 23,347 35,232
Interest expense, net 16,747 14,558 16,747 14,558
Income before
income taxes 3,440 9,227 6,600 20,674
Income tax expense 1,187 3,552 2,277 7,959
Net income $2,253 $5,675 $4,323 $12,715
Basic earnings per share:
Net income $0.08 $0.20 $0.16 $0.46
Shares used in
computing per
share amounts 27,841,178 27,836,587 27,841,178 27,836,587
Diluted earnings per share:
Net income $0.08 $0.20 $0.16 $0.46
Shares used in
computing per
share amounts 27,841,178 27,836,587 27,841,178 27,836,587
(1) The "as adjusted" column excludes from operating and administrative
expense: A $1.2 million loss on the disposition of certain fixed
assets and $0.2 million of transition and integration expenses
relating to prior acquisitions. Excluded from store closing costs
were $1.8 million of excess costs due to longer vacancy periods at
stores closed as a result of acquisition.
(2) The "as adjusted" column excludes $11.4 million of transition and
integration expenses. These expenses were incurred at acquired
stores to replace store systems, re-merchandise stores, train
associates and conduct other activities associated with the
integration of acquired stores into the Company's operations.
