CSK Auto Corporation Reports Fourth Quarter and Fiscal 2001 Financial Results
PHOENIX, March 21 CSK Auto Corporation, the parent company of CSK Auto, Inc., a specialty retailer in the automotive aftermarket, today reported its financial results for the fourth quarter and fiscal year ended February 3, 2002.
The Company noted the following highlights of the fourth quarter:
* Net sales were $334.0 million;
* Increasing same store sales trend with a 4% increase in the fourth
quarter of fiscal 2001 and mid-to-high single digit increases to date
for the first quarter of fiscal 2002;
* Net income, excluding certain items, was $2.1 million; including all
items, a net loss of $1.5 million was incurred;
* The Company completed a refinancing of its capital structure; and
* EBITDA, as adjusted, was approximately $31.0 million for the quarter,
and approximately $131.0 million for fiscal 2001, consistent with the
Company's previous guidance.
Refinancing
As previously announced, the Company consummated on December 21, 2001 several transactions to refinance its capital structure. This refinancing, which reduced total debt, eliminated scheduled bank debt amortization payments prior to December 2004, extended debt maturities and enhanced liquidity, was comprised of the following components:
* A new $300.0 million senior secured, asset based credit facility
comprised of a $170.0 million non-amortizing term loan and a
$130.0 million revolving credit facility. This new senior credit
facility matures in December 2004.
* $280.0 million of 12% senior notes due in 2006.
* $50.0 million principal amount of 7% convertible subordinated
debentures due December 2006 were issued to certain investors,
including an affiliate of Investcorp, one of CSK Auto Corporation's
principal stockholders. CSK Auto Corporation expects to require these
investors to convert their debentures into CSK Auto Corporation common
stock following satisfaction of certain conditions, including the
effectiveness of a registration statement covering the shares of
common stock underlying these debentures. Management currently expects
that satisfaction of these conditions will occur within 150 days of
the closing.
* CSK Auto Corporation converted $30.0 million aggregate principal
amount of already outstanding 7% convertible subordinated notes due
September 1, 2006 into approximately 4.5 million shares of CSK Auto
Corporation common stock, bringing total common shares outstanding to
approximately 32.4 million shares.
``Fiscal 2001 was a very challenging year for CSK Auto. We are very encouraged about the steps we put in place to improve our operating performance,'' said Maynard Jenkins, Chairman and Chief Executive Officer of CSK Auto Corporation. ``During the year, we implemented our Profitability Enhancement Program, which has refocused the entire Company on reducing operating expenses, maximizing cash flow generation and increasing return on assets. As a result of our December 2001 refinancing, we were able to improve relationships with our vendors and eliminate many out-of-stock conditions that pressured the Company's sales. Since the completion of the refinancing, our comparable store sales increases have been running in the mid-to-high single digits. In addition, our same store retail customer counts have become positive. This improved sales performance reflects our improved inventory position and the generally favorable dynamics in the U.S. automotive aftermarket sector.''
Fourth Quarter Ended February 3, 2002
The fourth quarter ended February 3, 2002 (``fourth quarter of fiscal 2001'') consisted of 13 weeks, whereas the fourth quarter ended February 4, 2001 (``fourth quarter of fiscal 2000'') consisted of 14 weeks. Net sales in the fourth quarter of fiscal 2001 decreased 5% to $334.0 million from sales of $352.1 million in the fourth quarter of fiscal 2000, primarily as a result of the additional week in the 2000 period. Same store sales increased 4%.
For the fourth quarter of fiscal 2001, gross profit was $161.2 million, or 48.3% of net sales, as compared to $163.4 million, or 46.4% of net sales (or $169.2 million, excluding non-recurring items described in the attached tables, or 48.1% of net sales), in the fourth quarter of fiscal 2000.
Operating and administrative expenses decreased by $3.0 million, or by 2.1%, in the fiscal 2001 quarter compared to the fiscal 2000 quarter. Excluding the non-recurring items in each year that are described in the attached tables, operating and administrative expenses decreased by $3.9 million, or by 2.7%, in the fiscal 2001 fourth quarter as compared to the fiscal 2000 fourth quarter. The decline in expenses reflects one less week of variable operating expenses in the fiscal 2001 quarter, as well as the impact of the Company's efforts to reduce its operating costs through its previously announced Profitability Enhancement Program.
Operating profit for the fourth quarter of fiscal 2001 totaled $18.8 million, or 5.6% of net sales, compared to $7.7 million, or 2.2% of net sales (or $22.9 million, or 6.5% of net sales, excluding non-recurring items described in the attached tables) for the fourth quarter of fiscal 2000. The decrease in operating profit reflected the additional week of activity during the fourth quarter of fiscal 2000 versus the fiscal 2001 period.
Interest expense for the fourth quarter of fiscal 2001 decreased to $15.9 million from $17.1 million in the fourth quarter of fiscal 2000. Interest expense was approximately $1.2 million lower in the fourth quarter of fiscal 2001 than in the fourth quarter of fiscal 2000 because the fiscal 2001 quarter consisted of 13 weeks whereas the fiscal 2000 quarter consisted of 14 weeks. Also, variable interest rates during the fiscal 2001 quarter were lower than during the fiscal 2000 quarter. The effect of the lower interest rates was partially offset by higher outstanding balances in fiscal 2001 versus fiscal 2000.
Net loss for the fourth quarter of fiscal 2001 was $1.5 million, or $0.05 per diluted common share, compared to a loss of $5.1 million, or $0.18 per diluted common share, in the fourth quarter of fiscal 2000. Excluding the non-recurring items described in the attached tables for each period, net income for the fourth quarter of fiscal 2001 was $2.1 million, or $0.07 per diluted common share, compared to net income of $4.6 million, or $0.17 per diluted common share, for the fourth quarter of fiscal 2000.
As a result of the issuance of additional shares of common stock in connection with the refinancing, weighted average diluted outstanding common shares were approximately 2.2 million shares higher in the fiscal 2001 fourth quarter than in the fiscal 2000 fourth quarter.
Fiscal 2001
Fiscal 2001 consisted of 52 weeks whereas fiscal 2000 consisted of 53 weeks. Net sales in comparable 52-week periods increased 1% to $1.44 billion in fiscal 2001 from $1.42 billion in fiscal 2000. Same store sales increased 1% during fiscal 2001. At February 3, 2002, the Company had 1,130 stores in operation, compared to 1,152 at the end of fiscal 2000. During fiscal 2001, the Company opened 10 stores, relocated 13 stores, expanded two stores, and closed 32 stores in addition to the stores closed due to relocation, including 28 of the 36 stores scheduled to be closed as part of the Profitability Enhancement Program.
Gross profit for fiscal 2001 was $648.0 million, or 45.0% of net sales (or $671.1 million, or 46.6% of net sales, excluding the non-recurring items described in the attached tables), as compared to $683.1 million, or 47.0% of net sales, ($688.4 million, or 47.7% of net sales, excluding the non-recurring items described in the attached tables) in fiscal 2000. The lower realized gross profit margin resulted from reduced vendor allowances and cash discounts during the year due to lower than typical in-stock inventory levels over much of the fiscal year. These lower in-stock inventory levels were due in part to the Company's diminished liquidity position, which improved significantly after the completion of the December 2001 refinancing.
Operating profit for fiscal 2001 was $38.7 million, or 2.7% of net sales (or $88.3 million, or 6.1% of net sales, excluding non-recurring charges,), compared to $70.7 million, or 4.9% of net sales (or $116.1 million, or 8.0% of net sales, excluding non-recurring charges), for fiscal 2000. The decrease in operating profit resulted primarily from the lower gross profit level, as discussed above.
Net loss for fiscal 2001 was $17.2 million, or $0.61 per diluted share, compared to net income of $5.0 million, or $0.18 per diluted share, in fiscal 2000. Excluding the non-recurring charges described in the attached tables, net income for fiscal 2001 was $17.6 million, or $0.56 per diluted common share, compared to net income of $35.0 million, or $1.26 per diluted common share, in fiscal 2000. As a result of the issuance of additional shares of common stock in connection with the refinancing, weighted average diluted common shares outstanding were approximately 4.5 million shares higher in fiscal 2001 than in fiscal 2000. These additional outstanding shares had the effect of reducing adjusted diluted earnings per share by approximately $0.07 per diluted common share for the full fiscal year.
Fiscal 2002 Outlook
Based on current industry sales trends, the new capital resources and the operating initiatives CSK Auto has implemented as part of the Profitability Enhancement Program, the Company believes it is operationally and financially well positioned for a successful fiscal 2002. Fiscal 2002 net sales are expected to increase approximately 5% on a same-store basis. In addition, earnings before interest and taxes are expected to increase approximately 20% and net income is expected to increase to a range of $25 million to $27 million. This would generate EBITDA of approximately $145 million, and free cash flow (cash flows from operations less capital expenditures) for the reduction of debt of approximately $57 million, for the full fiscal year 2002. The Company is estimating a diluted share count of approximately 38.3 million shares for fiscal 2002.
CSK Auto Corporation is the parent company of CSK Auto, Inc., a specialty retailer in the automotive aftermarket. As of February 3, 2002, the Company operated 1,130 stores in 19 states under the brand names Checker Auto Parts, Schuck's Auto Supply and Kragen Auto Parts.
Certain statements contained in this release are forward-looking statements. They discuss, among other things, expected growth, future store development and relocation 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 the Company's products, the state of the economy, inflation, consumer debt levels and the weather. Actual results may differ materially from anticipated results described in these forward-looking statements.
Conference Call
In conjunction with this release, the Company will hold a conference call for the investing public. Interested parties may hear a replay of the conference call from 8:30 p.m. (ET) Thursday March 21, 2002 through 8:00 p.m. (ET) Friday March 22, 2002 by dialing (800) 615-3210 and using access code 5849385. Additionally, a simultaneous webcast of the conference call will be available commencing at 5:00 p.m. (ET) on March 21, 2002 at http://www.cskauto.com by pointing one's browser and clicking on ``Company'', ``Investor Info'' and then ``Conference Call''.
-- Table Follows --
CSK AUTO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share data)
(As Adjusted)
Quarter Ended (1) Quarter Ended (1)
February 3, February 4, February 3, February 4,
2002 2001 2002 (2) 2001 (3)
Net sales $334,001 $352,055 $334,001 $351,963
Cost of sales 172,774 188,684 172,774 182,766
Gross profit 161,227 163,371 161,227 169,197
Other costs and
expenses:
Operating and
administrative 142,643 145,680 141,143 145,048
Store closing &
restructuring costs (1,390) 48 146 48
Legal settlement -- 8,800 -- --
Goodwill amortization 1,198 1,179 1,198 1,179
Operating profit 18,776 7,664 18,740 22,922
Interest expense, net 15,881 17,077 15,379 17,077
Equity in loss of
joint venture -- 1,264 -- --
Income (loss) before
income taxes and
extraordinary loss 2,895 (10,677) 3,361 5,845
Income tax expense
(benefit) (4) 1,300 (5,605) 1,277 1,227
Income (loss) before
extraordinary loss 1,595 (5,072) 2,084 4,618
Extraordinary loss,
net of $1,964 of
income taxes (5) (3,137) -- -- --
Net income (loss) $(1,542) $(5,072) $2,084 $4,618
Basic earnings
per share:
Income (loss) before
extraordinary loss $0.05 $(0.18) $0.07 $0.17
Extraordinary loss,
net of $1,964 of
income taxes (0.10) -- -- --
Net income (loss) $(0.05) $(0.18) $0.07 $0.17
Shares used in
computing per share
amounts 30,056,149 27,840,691 30,056,149 27,840,691
Diluted earnings
per share:
Income (loss)
before
extraordinary
loss $0.05 $(0.18) $0.07 $0.17
Extraordinary loss,
net of $1,964 of
income taxes (0.10) -- -- --
Net income (loss) $(0.05) $(0.18) $0.07 $0.17
Shares used in
computing per
share amounts 30,056,149 27,840,691 30,121,210 27,840,691
1) The quarter ended February 3, 2002 included 13 weeks, whereas the
quarter ended February 4, 2001 included 14 weeks.
2) The "as adjusted" column excludes: (i) $1.5 million in bad debt
expense associated with the bankruptcy of a large commercial
customer; (ii) a $3.1 million extraordinary loss, net of income
taxes, to write off unamortized deferred financing costs associated
with our previously existing senior credit facility; (iii) a
$1.5 million reduction in store closing costs due to two stores
previously identified for closure that are currently under contract
for sale; and (iv) $0.5 million of interest expense and amortization
of deferred financing costs associated with the $50.0 million of 7%
convertible debentures.
3) The "as adjusted" column excludes: (i) $0.09 million of sales made by
acquired automotive service centers that the Company closed;
(ii) $5.9 million of cost of sales, $0.2 million of cost associated
with the excluded automotive service center sales and $5.7 million of
non-cash charges associated with the liquidation of certain acquired
inventory that the Company was not able to return to vendors at full
carrying value; (iii) $0.6 million of operating expenses,
$0.2 million of expenses in automotive service centers that the
Company had closed and $0.4 million of bad debt expense associated
with the bankruptcy of a commercial customer; (iv) $8.8 million
relating to the settlement of a class action lawsuit; and (v) a
$1.3 million non-cash charge relating to the write off of the
Company's joint venture investment.
4) The actual effective tax rate differs from the "as adjusted"
effective tax rate primarily as a result of the non-deductibility of
$0.5 million of interest expense associated with the $50.0 million of
7% convertible subordinated debentures.
5) The current year extraordinary loss is a write off of $5.1 million of
unamortized deferred financing costs associated with our previously
existing senior credit facility, net of a $2.0 million income tax
benefit.
CSK AUTO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share data)
(As Adjusted)
Fiscal Year Ended (1) Fiscal Year Ended (1)
February 3, February 4, February 3, February 4,
2002 2001 2002 (2) 2001 (3)
Net sales $1,438,585 $1,452,109 $1,438,585 $1,444,499
Cost of sales 790,585 769,043 767,493 756,118
Gross profit 648,000 683,066 671,092 688,381
Other costs and expenses:
Operating and
administrative 579,884 568,873 577,224 565,173
Store closing &
restructuring costs 22,392 6,060 731 2,333
Legal settlement 2,000 8,800 -- --
Transition and
integration
expenses (4) 250 23,818 -- --
Goodwill amortization 4,807 4,799 4,807 4,799
Operating profit 38,667 70,716 88,330 116,076
Interest expense 61,608 62,355 61,106 62,355
Equity in loss of
joint venture -- 3,168 -- --
Income (loss) before
income taxes and
extraordinary loss (22,941) 5,193 27,224 53,721
Income tax expense
(benefit) (5) (8,886) 193 9,656 18,718
Income (loss) before
extraordinary loss (14,055) 5,000 17,568 35,003
Extraordinary loss,
net of $1,964 of
income taxes (6) (3,137) -- -- --
Net income (loss) $(17,192) $5,000 $17,568 $35,003
Basic earnings
per share:
Income (loss) before
extraordinary loss $(0.50) $0.18 $0.62 $1.26
Extraordinary loss,
net of $1,964 of
income taxes (0.11) -- -- --
Net income (loss) $(0.61) $0.18 $0.62 $1.26
Shares used in
computing per share
amounts 28,390,582 27,839,348 28,390,582 27,839,348
Diluted earnings
per share (7):
Income (loss) before
extraordinary loss $(0.50) $0.18 $0.56 $1.26
Extraordinary loss,
net of $1,964 of
income taxes (0.11) -- -- --
Net income (loss) $(0.61) $0.18 $0.56 $1.26
Shares used in
computing per
share amounts 28,390,582 27,839,348 32,386,818 27,839,348
1) The fiscal year ended February 3, 2002 included 52 weeks, whereas the
fiscal year ended February 4, 2001 included 53 weeks.
2) The "as adjusted" column excludes: (i) $23.1 million in cost of
sales, $21.9 million from the Profitability Enhancement Program and a
$1.2 million LIFO inventory adjustment related to an inventory
devaluation; (ii) $2.6 million in operating and administrative costs,
$1.1 million related to a loss on the disposition of certain fixed
assets and $1.5 million of bad debt expense associated with the
bankruptcy of a large commercial customer; (iii) $21.7 million in
store closing and restructuring costs, $19.5 million for store
closings and $2.0 million in restructuring costs all of which are
part of the Profitability Enhancement Program, $1.7 million of excess
costs due to longer vacancy periods at stores closed as a result of
acquisitions, and a $1.5 million reduction in store closing costs due
to two stores previously identified for closure that are currently
under contract for sale; (iv) $2.0 million for certain legal
settlements; (v) a $3.1 million extraordinary loss, net of income
taxes, to write-off unamortized deferred financing costs associated
with our previously existing senior credit facility; and (vi)
$0.5 million of interest expense and amortization of deferred
financing costs associated with the $50.0 million of 7% convertible
debentures.
3) The "as adjusted" column excludes: (i) $7.6 million of sales made by
acquired automotive service centers that the Company closed; (ii)
$12.9 million of cost of sales, $7.2 million of cost associated with
the excluded automotive service center sales and $5.7 million of
non-cash charges associated with the liquidation of certain acquired
inventory that the Company was not able to return to vendors at full
carrying value; (iii) $3.7 million of operating expenses,
$3.3 million of expenses for automotive service centers that the
Company had closed and $0.4 million of bad debt expense associated
with the bankruptcy of a commercial customer; (iv) $3.7 million of
store closing costs incurred with respect to CSK stores that
overlapped with acquired stores; (v) $8.8 million relating to the
settlement of a class action lawsuit; and (v) a $3.2 million non-cash
charge relating to the write off of the Company's joint venture
investment.
4) Reflects costs incurred to replace store systems, re-merchandise
stores, train employees and conduct other activities associated with
the integration of acquired stores into the Company's operations.
These costs are also excluded from the "as adjusted" column.
5) The actual effective tax rate differs from the "as adjusted"
effective tax rate primarily as a result of the non-deductibility of
$0.5 million of interest expense associated with the $50.0 million of
7% convertible subordinated debentures.
6) The current year extraordinary loss is a write off of $5.1 million of
unamortized deferred financing costs associated with our previously
existing senior credit facility, net of a $2.0 million income tax
benefit.
7) The "as adjusted" diluted earnings per share assumes the weighted
conversion of the $30.0 million convertible notes as well as an add
back of $0.5 million of related interest expense, net of income tax.
Selected Financial Data:
($ in thousands)
Quarter Year Quarter Year
Ended Ended Ended Ended
February 3, February 3, February 4, February 4,
2002 2002 2001 2001
EBITDA, as adjusted $31,007 $131,042 $33,835 $156,902
Depreciation $8,580 $32,799 $8,885 $33,120
Amortization (net of
deferred financing
costs) $2,150 $8,347 $2,029 $7,707
FIFO inventory $525,434 $525,434 $539,349 $539,349
Interest expense $15,881 $61,608 $17,077 $62,355
Cash interest $14,060 $57,128 $16,438 $60,130
Capital expenditures $1,982 $12,200 $7,603 $32,080
Availability under
revolving credit
facility $65,371 $65,371 $10,900 $10,900
Total debt (including
current maturities
and excluding
convertible debt) $622,218 $622,218 $647,881 $647,881
Calculation of EBITDA, as adjusted:
($ in thousands)
Quarter Year Quarter Year
Ended Ended Ended Ended
February 3, February 3, February 4, February 4,
2002 2002 2001 2001
Operating profit $18,776 $38,667 $7,664 $70,716
Depreciation $8,580 $32,799 $8,885 $33,120
Amortization (net of
deferred financing
costs) $2,150 $8,347 $2,029 $7,707
EBITDA $29,506 $79,813 $18,578 $111,543
Non-recurring and
non-cash items $1,501 $51,229 $15,257 $45,359
EBITDA, as adjusted $31,007 $131,042 $33,835 $156,902
EBITDA, as adjusted, has been calculated in accordance with the terms of the Company's senior credit facility and may differ in method of calculation from similarly titled measures used by other companies.