CSK Auto Corporation Reports Record First Quarter Fiscal 1999 Financial Results
3 June 1999
CSK Auto Corporation Reports Record First Quarter Fiscal 1999 Financial Results
PHOENIX, June 2 -- CSK Auto Corporation , the
parent company of CSK Auto, Inc., today reported record financial results for
the first quarter of fiscal 1999.
Net sales for the thirteen weeks ended May 2, 1999, increased 13.0% to
$269.4 million from $238.4 million in the first quarter of fiscal 1998. As a
result of new store openings, the number of stores operated by the Company
increased to 822 stores at May 2, 1999, from 730 stores at May 3, 1998.
Comparable store sales increased 4% in the first quarter of fiscal 1999.
Operating profit for the first quarter of fiscal 1999 totaled $23.2
million, or 8.6% of net sales, compared to $14.7 million, excluding one-time
charges, or 6.2% of net sales, for the first quarter of fiscal 1998. The
increase in operating profit resulted primarily from continued improvement in
gross profit margins arising from the Company's ability to obtain generally
better pricing and more favorable terms and support from its vendors. During
the first quarter of fiscal 1998, the Company incurred $3.1 million of
expenses associated with the integration of the stores acquired in December
1997 from Trak Auto Corporation and a $3.6 million non-recurring charge
associated with the termination of a management agreement as a result of the
Company's initial public offering.
Interest expense for the first quarter of fiscal 1999 decreased to
$7.3 million from $9.2 million for the first quarter of fiscal 1998, primarily
due to reduced debt levels and lower variable interest rates.
Net income for the first quarter of fiscal 1999 was $9.1 million, or
$0.32 per diluted common share. Excluding a one-time charge for the
cumulative effect of a change in the method of accounting for store pre-
opening expenses which was required as a result of a new accounting
pronouncement that is effective for fiscal 1999, net income for the first
quarter of fiscal 1999 was $9.9 million, or $0.34 per diluted common share.
This compares to net income of $3.4 million, or $0.12 per diluted common
share, excluding one-time charges of $6.7 million and an extraordinary loss of
$6.8 million, net of taxes, for the first quarter of fiscal 1998. The fiscal
1998 $6.8 million extraordinary loss, net of taxes, was associated with
premiums paid to noteholders and the write-off of debt-issuance costs produced
by the early retirement of debt made possible by the Company's initial public
offering.
During the first quarter of fiscal 1999, the Company opened 17 new stores,
relocated 5 stores, expanded 4 stores, acquired 2 stores and closed 4 stores
in addition to those closed due to relocations.
"We are very pleased with our first quarter fiscal 1999 financial
results," said Maynard Jenkins, Chairman and Chief Executive Officer of CSK
Auto Corporation. "These results represent the most profitable first quarter
that we have ever had. We are pleased with our comparable store sales
increase of 4% for the quarter and we expect to continue to achieve this level
of comparable store sales throughout the year. We continue to make progress
in improving our gross profit margins which are benefitting from increased
vendor support and more favorable pricing terms."
On May 17, 1999, the Company announced that its wholly-owned subsidiary,
CSK Auto, Inc., entered into a definitive agreement to acquire substantially
all of the assets of Apsco Products Company dba Big Wheel/Rossi, the leading
retailer of auto parts in the Northern Plains states. Big Wheel/Rossi
operates 86 stores in Minnesota, North Dakota and Wisconsin. The acquisition
of the Big Wheel/Rossi stores gives the Company an immediate presence of scale
in a strategically important market adjacent to its current operations.
As previously announced, CSK Auto, Inc. will pay approximately $60 million
in cash for the assets, and will fund the purchase through its senior credit
facility which will be increased. CSK will also assume certain indebtedness
of Big Wheel/Rossi of approximately $5 million.
The Company plans to introduce to the newly acquired stores its commercial
sales program in which it offers a broad product selection to professional
installers, repair shops and fleet operators. Big Wheel/Rossi currently has
minimal commercial sales while commercial sales represent approximately 18% of
CSK's sales.
The Company intends to utilize Big Wheel/Rossi's existing distribution
center in the Minneapolis area which CSK believes is capable of supporting
significantly more stores than the existing Big Wheel/Rossi stores.
"This acquisition of the Big Wheel/Rossi business will provide CSK with an
excellent platform for growth in the Northern Plains/Midwest market," said
Maynard Jenkins. "This transaction is consistent with our strategic plan to
build our business and improve our profitability through accretive
acquisitions and significant new store openings. Big Wheel/Rossi, the leading
auto parts retailer in the Northern Plains states with quality personnel, name
brand product, and an average store size in excess of 6,500 square feet, will
be a great addition to the CSK family. We will leverage CSK's expertise in
commercial sales, distribution and information technology, and take advantage
of synergistic opportunities."
The closing, which is subject to the satisfaction of certain conditions,
is expected to occur in late June or early July. Following the completion of
the transaction, CSK Auto will employ approximately 12,000 people in more than
900 stores, three major distribution centers and several regional distribution
centers.
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.
CSK AUTO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share data)
As Adjusted for
One-Time Charges
Thirteen Weeks Ended Thirteen Weeks Ended
May 2, May 3, May 2, May 3,
1999 1998 1999 1998
Net sales $269,402 $238,423 $269,402 $238,423
Cost of sales 139,251 130,706 139,251 130,706
Gross profit 130,151 107,717 130,151 107,717
Other costs and expenses:
Operating and
administrative 106,928 93,023 106,928 93,023
Transition and
integration expenses -- 3,075 -- --
Write-off of unamortized
management fee -- 3,643 -- --
Total other costs
and expenses 106,928 99,741 106,928 93,023
Operating profit 23,223 7,976 23,223 14,694
Interest expense, net 7,349 9,198 7,349 9,198
Income (loss) before income taxes,
extraordinary loss and
cumulative effect of change
in accounting principle 15,874 (1,222) 15,874 5,496
Income tax expense
(benefit) 6,012 (470) 6,012 2,116
Income (loss) before extraordinary
loss and cumulative effect of
change in accounting
principle 9,862 (752) 9,862 3,380
Extraordinary loss, net of
$4,236 of income taxes -- (6,767) -- --
Income (loss) before cumulative
effect of change in
accounting principle 9,862 (7,519) 9,862 3,380
Cumulative effect of change
in accounting principle, net
of $468 of income taxes (741) -- -- --
Net income (loss) $9,121 $(7,519) $9,862 $3,380
Basic earnings (loss) per share:
Income (loss) before extraordinary
loss and cumulative effect of
change in accounting
principle $0.36 $(0.03) $0.36 $0.12
Extraordinary loss,
net of income taxes -- (0.29) -- --
Income (loss) before cumulative
effect of change in
accounting principle 0.36 (0.32) 0.36 0.12
Cumulative effect of change in
accounting principle,
net of income taxes (0.03) -- -- --
Net income (loss) $0.33 $(0.32) $0.36 $0.12
Shares used in computing
per share amounts 27,785,264 23,568,058 27,785,264 27,738,388
Diluted earnings (loss) per share:
Income (loss) before
extraordinary loss and
cumulative effect of change
in accounting principle $0.34 $(0.03) $0.34 $0.12
Extraordinary loss,
net of income taxes -- (0.29) -- --
Income (loss) before cumulative
effect of change in
accounting principle 0.34 (0.32) 0.34 0.12
Cumulative effect of change
in accounting principle,
net of income taxes (0.02) -- -- --
Net income (loss) $0.32 $(0.32) $0.34 $0.12
Shares used in computing
per share amounts 28,867,765 23,568,058 28,867,765 28,434,650