CSK Auto Reports Record Second Quarter Fiscal 1999 Financial Results
1 September 1999
CSK Auto Corporation Reports Record Second Quarter Fiscal 1999 Financial Results
PHOENIX, Aug. 31 -- CSK Auto Corporation , the
parent company of CSK Auto, Inc., today reported record financial results for
the second quarter of fiscal 1999.
Thirteen Weeks Ended August 1, 1999
Net sales for the thirteen weeks ended August 1, 1999, increased 19% to
$302.3 million from $254.7 million in the second quarter of fiscal 1998.
Comparable store sales increased 6% in the second quarter of fiscal 1999. As a
result of the acquisition of the Big Wheel/Rossi business on June 30,1999, and
new store openings, the number of stores operated by the Company increased to
926 stores at August 1, 1999, from 747 stores at August 2, 1998.
Excluding $0.6 million of transition and integration expenses incurred as
a result of the acquisition of the Big Wheel/Rossi business, operating profit
for the second quarter of fiscal 1999 totaled $29.4 million, or 9.7% of net
sales, compared to $22.2 million, or 8.7% of net sales, for the second 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.
Interest expense for the second quarter of fiscal 1999 increased to
$8.1 million from $7.4 million for the second quarter of fiscal 1998,
primarily due to increased debt levels.
Excluding the transition and integration expenses incurred with respect to
the Big Wheel/Rossi stores, net income for the second quarter of fiscal 1999
was $13.1 million, or $0.46 per diluted common share. This compares to net
income of $9.3 million, or $0.33 per diluted common share, for the second
quarter of fiscal 1998. Including the one-time charges, net income for the
second quarter of fiscal 1999 was $12.7 million, or $0.44 per diluted common
share.
During the second quarter of fiscal 1999, the Company opened 18 new
stores, relocated 6 stores, expanded 3 stores and acquired 86 stores.
Twenty-six Weeks Ended August 1, 1999
Net sales for the twenty-six weeks ended August 1, 1999, increased 16% to
$571.7 million from $493.1 million for the comparable period of fiscal 1998.
Comparable store sales increased 5% for the twenty-six weeks ended August 1,
1999.
Operating profit, excluding the $0.6 million of Big Wheel/Rossi transition
and integration expenses, increased to $52.6 million, or 9.2% of net sales,
for the twenty-six weeks ended August 1, 1999 from $36.9 million, or 7.5% of
net sales, excluding $6.7 million of non-recurring charges for the comparable
period of fiscal 1998. 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.
Net income for the twenty-six weeks ended August 1, 1999, excluding Big
Wheel/Rossi transition costs and the cumulative effect of a change in
accounting for store pre-opening expenses, increased to $22.9 million or
$0.80 per diluted common share from $12.8 million, or $0.45 per diluted common
share, excluding non-recurring charges, for the comparable period of fiscal
1998. Inclusive of all non-recurring charges, net income for the twenty-six
weeks ended August 1, 1999 increased to $21.8 million or $0.76 per diluted
common share from $1.8 million, or $0.07 per diluted common share.
"We are very pleased with our second quarter and year-to-date fiscal 1999
financial results," said Maynard Jenkins, Chairman and Chief Executive Officer
of CSK Auto Corporation. "We are particularly pleased with our comparable
store sales increase of 6% for the quarter. We continue to make progress in
improving our gross profit margins which are benefitting from increased vendor
support and more favorable pricing terms. In addition, our commercial sales
program continues to grow rapidly and now represents over 18% of our net
sales."
Acquisitions
On June 30, 1999, the Company's wholly-owned subsidiary, CSK Auto, Inc.,
acquired 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.
Separately, after the close of the second quarter, the Company announced
on August 16, 1999, that its wholly-owned subsidiary, CSK Auto, Inc., had
entered into a definitive agreement to purchase Automotive Information Systems
(AIS), a premier provider of diagnostic vehicle repair information to
automotive technicians, automotive replacement parts manufacturers, automotive
test equipment manufacturers, the Do-It-Yourself consumer and Microsoft
Corporation's "CarPoint" website. The transaction is expected to close in
September 1999.
"Automotive Information Systems is the nation's leading provider of
diagnostic information with the most comprehensive database of repair problems
and solutions for vehicles that are out of warranty," said Maynard Jenkins.
"We believe that one key to continuing our rapid growth is to provide our
retail customers, commercial customers and our Internet customers with the
highest quality diagnostic information available to help them identify
problems correctly and obtain the parts they need efficiently. The
combination of AIS and its tremendous knowledge base with CSK and its retail
and technical expertise will allow us to create a state-of-the-art vehicle
diagnostic system that will be both useful and easy to use."
On August 23, 1999, the Company announced that its wholly-owned subsidiary
CSK Auto, Inc. had entered into a definitive agreement to acquire the
subsidiary of PACCAR Inc. which operates 192 stores in 6 Western States under
the tradenames Grand Auto Supply and Al's Auto Supply. The closing, which is
subject to the satisfaction of customary conditions, is expected to occur in
October 1999. Following the completion of the transaction, CSK Auto will
employ over 14,000 people and operate more than 1,100 stores.
"The acquisition of Grand Auto Supply and Al's Auto Supply is consistent
with our strategic plan to build our business and improve profitability
through accretive acquisitions and significant new store openings," said
Maynard Jenkins. "They are an excellent fit with CSK in that Grand and Al's
strategy of offering quality name brand products is similar to CSK's, and
their average store size is slightly larger than CSK's prototype. This will
result in a relatively easy conversion to CSK's merchandising format."
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)
Thirteen Weeks Ended Thirteen Weeks Ended
August 1, August 2, August 1, August 2,
1999 1998 1999 1998
Net sales $302,322 $254,701 $302,322 $254,701
Cost of sales 159,593 137,040 159,593 137,040
Gross profit 142,729 117,661 142,729 117,661
Other costs and expenses:
Operating and
administrative 113,329 95,422 113,329 95,422
Transition and
integration expenses 619 -- -- --
Write-off of unamortized
management fee -- -- -- --
Operating profit 28,781 22,239 29,400 22,239
Interest expense, net 8,143 7,410 8,143 7,410
Income before income
taxes, extraordinary loss
and cumulative effect of
change in accounting
principle 20,638 14,829 21,257 14,829
Income tax expense 7,945 5,487 8,183 5,487
Income before extraordinary
loss and cumulative effect
of change in accounting
principle 12,693 9,342 13,074 9,342
Extraordinary loss, net
of income taxes -- -- -- --
Income before cumulative
effect of change in
accounting principle 12,693 9,342 13,074 9,342
Cumulative effect of
change in accounting
principle, net of
income taxes -- -- -- --
Net income $12,693 $9,342 $13,074 $9,342
Basic earnings (loss) per share:
Income before extraordinary
loss and cumulative effect
of change in accounting
principle $0.46 $0.34 $0.47 $0.34
Extraordinary loss,
net of income taxes -- -- -- --
Income before cumulative
effect of change
in accounting principle 0.46 0.34 0.47 0.34
Cumulative effect of
change in accounting
principle, net of
income taxes -- -- -- --
Net income $0.46 $0.34 $0.47 $0.34
Shares used in computing
per share amounts 27,814,773 27,738,388 27,814,773 27,738,388
Diluted earnings
(loss) per share:
Income before extraordinary
loss and cumulative effect
of change in
accounting principle $0.44 $0.33 $0.46 $0.33
Extraordinary loss,
net of income taxes -- -- -- --
Income before cumulative
effect of change in
accounting principle 0.44 0.33 0.46 0.33
Cumulative effect of
change in accounting
principle, net of
income taxes -- -- -- --
Net income $0.44 $0.33 $0.46 $0.33
Shares used in computing
per share amounts 28,673,234 28,662,448 28,673,234 28,662,448
CSK AUTO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share data)
(As Adjusted)
Twenty-six Weeks Ended Twenty-six Weeks Ended
August 1, August 2, August 1, August 2,
1999 1998 1999 1998
Net sales $571,724 $493,124 $571,724 $493,124
Cost of sales 298,844 267,746 298,844 267,746
Gross profit 272,880 225,378 272,880 225,378
Other costs and expenses:
Operating and
administrative 220,257 188,445 220,257 188,445
Transition and
integration expenses 619 3,075 -- --
Write-off of unamortized
management fee -- 3,643 -- --
Operating profit 52,004 30,215 52,623 36,933
Interest expense, net 15,492 16,608 15,492 16,608
Income before income
taxes, extraordinary loss
and cumulative effect
of change in
accounting principle 36,512 13,607 37,131 20,325
Income tax expense 13,957 5,017 14,194 7,494
Income before
extraordinary loss and
cumulative effect
of change in
accounting principle 22,555 8,590 22,937 12,831
Extraordinary loss,
net of $4,236 of
income taxes -- (6,767) -- --
Income before cumulative
effect of change in
accounting principle 22,555 1,823 22,937 12,831
Cumulative effect of
change in accounting
principle, net of
$468 of income taxes (741) -- -- --
Net income $21,814 $1,823 $22,937 $12,831
Basic earnings (loss) per share:
Income before extraordinary
loss and cumulative
effect of change
in accounting principle $0.81 $0.33 $0.83 $0.46
Extraordinary loss, net
of income taxes -- (0.26) -- --
Income before cumulative
effect of change
in accounting principle 0.81 0.07 0.83 0.46
Cumulative effect of
change in accounting
principle, net of
income taxes (0.03) -- -- --
Net income $0.78 $0.07 $0.83 $0.46
Shares used in computing
per share amounts 27,800,049 25,653,223 27,800,049 27,738,388
Diluted earnings (loss) per share:
Income before extraordinary
loss and cumulative
effect of change
in accounting principle $0.78 $0.32 $0.80 $0.45
Extraordinary loss,
net of income taxes -- (0.25) -- --
Income before cumulative
effect of change in
accounting principle 0.78 0.07 0.80 0.45
Cumulative effect of
change in accounting
principle, net of
income taxes (0.02) -- -- --
Net income $0.76 $0.07 $0.80 $0.45
Shares used in computing
per share amounts 28,804,643 26,578,154 28,804,643 28,662,448