CSK Auto Corp. Reports Fourth Quarter and Fiscal 2004 Results
PHOENIX--May 3, 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 fourth quarter and fiscal year ended Jan. 30, 2005.The financial results presented for the 13 weeks and fiscal year ended Jan. 30, 2005 include, as previously announced, our change in inventory valuation method from Last-in, First-out ("LIFO") to First-in, First-out ("FIFO") and corrections relating to lease accounting, vendor allowance recognition periods and certain previously recorded vendor allowances. The following financial information described as being on an "as adjusted basis" is adjusted for certain items described below and in the accompanying tables.
Financial Results
Net sales for the 13 weeks ended Jan. 30, 2005 (the "fourth quarter of fiscal 2004") were $369.9 million as compared to $372.3 million for the 13 weeks ended Feb. 1, 2004 (the "fourth quarter of fiscal 2003"). Net sales for the fiscal year ended Jan. 30, 2005 ("fiscal 2004") were $1,577.5 million as compared to $1,578.1 million for the fiscal year ended Feb. 1, 2004 ("fiscal 2003"). Same store sales decreased 1.9% for the fourth quarter and decreased 0.7% for the fiscal year. Retail same stores sales decreased by 3.0% for the fourth quarter and decreased by 1.2% for the full year, and commercial same store sales increased by 4.3% for the fourth quarter and 1.8% full year.
Gross profit was $163.1 million, for the fourth quarter of fiscal 2004 as compared to $172.8 million, for the fourth quarter of fiscal 2003. Gross profit for fiscal 2004 was $733.9 million as compared to $717.1 million for the same period of fiscal 2003.
Operating and administrative expenses were $157.3 million for the fourth quarter of fiscal 2004 as compared to $156.9 million for the same period of fiscal 2003. Operating and administrative expenses were $635.5 million and $619.9 million for fiscal 2004 and fiscal 2003, respectively.
The operating profit for the fourth quarter of fiscal 2004 was $5.2 million compared to an operating profit of $3.5 million for the fourth quarter of fiscal 2003. Operating profit for fiscal 2004 totaled $96.1 million (6.1% of net sales) compared to $84.5 million (5.3% of net sales) for fiscal 2003.
On a GAAP basis, the net loss for the fourth quarter of fiscal 2004 was $3.4 million, or $(0.07) per diluted common share, compared to a net loss of $31.8 million, or $(0.68) per diluted common share, for the fourth quarter of fiscal 2003.
GAAP net income for fiscal 2004 was $36.9 million or $0.80 per diluted common share, compared to a GAAP net loss of $9.6 million, or $(0.21) per diluted common share, in fiscal 2003.
Other key financial performance indicators which have shown improvement year-over-year include: (1) net cash provided by operating activities which increased by $49.3 million to $101.9 million in fiscal 2004 from $52.6 million in fiscal 2003; (2) capital expenditures increased to $26.3 million in fiscal 2004 from $19.0 million in fiscal 2003; (3) adjusted free cash flow (a non-GAAP measure defined below) increased $3.7 million to $76.5 million in fiscal 2004 from $72.8 million in fiscal 2003; and (4) net debt (a non-GAAP measure defined below) was reduced by $48.7 million in fiscal 2004 to $440.8 million from $489.5 million in fiscal 2003. Additional information on these items is presented in the attached tables.
"Our fiscal 2004 financial performance was adversely affected by a difficult sales environment. The sales trends have continued to improve in the first quarter of fiscal 2005. We remain optimistic about the sales outlook and the strength of our business. In spite of the tough environment, we continue to generate strong free cash flow," said Maynard Jenkins, chairman and chief executive officer of CSK Auto Corp. "We are focused on addressing issues within our control such as our inventory mix, average ticket and customer service. Also, we have increased our advertising exposure and have instituted a new incentive program for our sales associates to help increase sales."
Accounting Change and Restatement of Financial Results
Inventory Accounting
Effective the fourth quarter of fiscal 2004, we elected to change our method of inventory valuation from LIFO to FIFO. We believe that FIFO is a preferable method that better measures the cost of such inventories, results in a better matching of revenues and cost of sales, and more accurately reflects our financial position. Accordingly, our fourth quarter 2004 financial results are prepared on the FIFO basis and we have retroactively restated previously reported financial results to conform to this presentation.
Accounting Corrections
As included in our Annual Report on Form 10-K filed on May 2, 2005, we have retroactively restated previously reported financial results to correct our accounting for leases and vendor allowances.
Outlook
For fiscal year 2005, we are forecasting same store sales increases of approximately 3%, and we are expecting to open or relocate approximately 50 stores. We expect our net income to be between $51.5 and $57.5 million. This will result in diluted earnings per common share of between $1.12 and $1.22, assuming approximately 46.0 million diluted shares outstanding. The full-year forecast is taking in consideration the impact of a reduction of $2.4 million or $0.04 per share impact of the lease accounting. This assumes that diluted earnings per common share for the first quarter of fiscal 2005 will be between $0.16 and $0.19. Free cash flow (as defined below) in fiscal year 2005 is expected to be between $80 and $90 million. We 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 Tuesday, May 3, 2005 at 5 p.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 7 p.m. (ET) Tuesday, May 3, 2005 through 8 p.m. (ET) Wednesday, May 4, 2005 by dialing 888-266-2081, passcode 698897. (If retrieving digital replay outside of the United States, please dial 703-925-2533, passcode 698897.)
CSK Auto Corp. is the parent company of CSK Auto Inc., a specialty retailer in the automotive aftermarket. As of Jan. 3, 20050, 2005, the company operated 1,134 stores in 19 states under the brand names Checker Auto Parts, Schuck's Auto Supply and Kragen Auto Parts.
-- Tables Follow --
CSK AUTO CORP. AND SUBSIDIARIES
(in thousands except per share data)
Thirteen Weeks Ended Fiscal Year Ended
-------------------- -----------------------
Jan. 30, Feb. 1, Jan. 30, Feb. 1,
2005 2004 2005(1) 2004(1)
--------- ---------- ----------- -----------
(Restated) (Restated)
Net sales $369,892 $372,343 $1,577,460 $1,578,056
Cost of sales 206,833 199,538 843,600 860,952
--------- ---------- ----------- -----------
Gross profit 163,059 172,805 733,860 717,104
Other costs and expenses
Operating and
administrative 157,320 156,938 635,541 619,932
Store closing costs 583 12,330 2,191 12,669
--------- ---------- ----------- -----------
Operating profit 5,156 3,537 96,128 84,503
Interest expense, net 8,663 11,775 33,460 52,418
Loss on debt retirement 1,026 45,179 1,026 49,494
--------- ---------- ----------- -----------
Income (loss) before
income taxes (4,533) (53,417) 61,642 (17,409)
Income tax (expense)
benefit 1,108 21,650 (24,761) (7,854)
--------- ---------- ----------- -----------
Net income (loss) $(3,425) $(31,767) $36,881 $(9,555)
========= ========== =========== ===========
Basic earnings per share:
Net income $(0.07) $(0.68) $0.81 $(0.21)
Shares used 45,035 46,440 45,713 45,658
Diluted earnings per
share:
Net income $(0.07) $(0.68) $0.80 $(0.21)
Shares used 45,035 46,440 46,002 45,658
(1) Impact of our accounting change and corrections to after-tax net income for the first three quarters in fiscal 2004 and the full year in fiscal 2003 is $0.9 and $11.2 million, respectively.
Selected Financial Data:
($ in thousands)
Thirteen Weeks Ended Fiscal Year Ended
------------------------ -------------------
Jan. 30, Feb. 1, Jan. 30, Feb. 1,
2005 2004 2005 2004
-------------- --------- --------- ---------
Cash $56,548 $37,221 $56,548 $37,221
FIFO inventory $538,354 $522,849 $538,354 $522,849
Accounts payable $178,444 $177,150 $178,444 $177,150
Interest expense, net $8,663 $11,775 $33,460 $52,418
Capital expenditures $9,932 $8,422 $26,331 $18,990
Availability under
revolving credit facility $114,035 $120,068 $114,035 $120,068
Total debt (including
current maturities) $497,313 $526,726 $497,313 $526,726
Net debt (total debt
less cash) $440,765 $489,505 $440,765 $489,505
We define free cash flow as net cash provided by operating activities less cash paid for capital expenditures. We adjusted free cash flow for premiums paid on the early retirement of debt to compare free cash flow as generated by our normal operations. Free cash flow can be reconciled to net cash provided by operating activities as follows ($ in thousands):
Reconciliation of Free Cash Flow:
Fiscal Year Ended
--------------------
Jan. 30, Feb. 1,
2005 2004
---------- ---------
Net cash provided by operating activities $101,936 $52,578
Cash paid for capital expenditures (26,331) (18,990)
---------- ---------
Free cash flow 75,605 33,588
========== =========
Cash paid on early retirement of debt 895 39,176
---------- ---------
Adjusted free cash flow $ 76,500 $ 72,764
========== =========
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:
Fiscal Year Ended
----------------------
Jan. 30, Feb. 1,
2005 2004
----------- ----------
Total debt (including current maturities) $497,313 $526,726
Cash and cash equivalents (56,548) (37,221)
----------- ----------
Net debt $440,765 $489,505
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