CSK Auto Corporation Reports Record Sales and Earnings for 1999 Third Quarter
1 December 1999
CSK Auto Corporation Reports Record Sales and Earnings for 1999 Third Quarter
- Earnings Per Share of $0.49 for the Quarter, Excluding
Acquisition-Related Charges -
PHOENIX, Dec. 1 -- CSK Auto Corporation , the
parent company of CSK Auto, Inc., today reported record sales and earnings for
its third quarter of fiscal 1999.
Thirteen Weeks Ended October 31, 1999
Net sales for the thirteen weeks ended October 31, 1999, increased 26% to
$331.3 million from $263.1 million for the third quarter of fiscal 1998.
Comparable store sales increased 2% in the third quarter of fiscal 1999
reflecting soft sales for the first half of the quarter due to unseasonable
temperatures in most of our markets. Comparable store sales improved
throughout the remainder of the quarter such that over the past nine weeks
they have reached mid single-digit levels. The Company's recently acquired
stores contributed $38.0 million of net sales during the portions of the
quarter that the Company owned and operated them.
As a result of the acquisition of the Big Wheel/Rossi business on June
30,1999, the acquisition of the Al's and Grand Auto Supply business on October
1, 1999, and new store openings, the number of stores operated by the Company
increased to 1,120 stores at October 31, 1999, from 773 stores at November 1,
1998. During the third quarter of fiscal 1999, the Company acquired 194
stores, opened 22 new stores, relocated 8 stores, expanded 1 store and closed
22 of the acquired stores in addition to stores closed due to relocations.
With respect to the integration efforts underway for the acquired stores, the
systems conversions are complete for the Big Wheel/Rossi stores with the re-
merchandising of the stores to be completed by the end of December 1999.
Systems conversions are complete for 125 of the Al's and Grand Auto Supply
stores with the remainder to be completed in December 1999 and the merchandise
conversions will be completed during the first quarter of fiscal 2000.
Excluding $3.6 million of transition and integration expenses incurred as
a result of the acquisition of the Big Wheel/Rossi and Al's and Grand Auto
Supply businesses, operating profit for the third quarter of fiscal 1999
totaled $34.0 million, or
10.3% of net sales, compared to $23.5 million, or 8.9% of net sales, for the
third quarter of fiscal 1998. The increase in operating profit resulted
primarily from a leveraging of fixed costs over an expanding sales base. The
operating profit for the third quarter of fiscal 1999 also reflected goodwill
amortization charges of
$0.4 million associated with the recent acquisitions.
Interest expense for the third quarter of fiscal 1999 increased to $11.5
million from $6.9 million for the third quarter of fiscal 1998, primarily due
to increased debt levels that were incurred to finance the recent
acquisitions.
Excluding the transition and integration expenses incurred with respect to
the recent acquisitions, net income for the third quarter of fiscal 1999 was
$13.9 million, or $0.49 per diluted common share. This compares to net income
of $10.5 million, or $0.37 per diluted common share, for the third quarter of
fiscal 1998. Including the one-time charges, net income for the third quarter
of fiscal 1999 was $11.7 million, or $0.41 per diluted common share.
Thirty-nine Weeks Ended October 31, 1999
Net sales for the thirty-nine weeks ended October 31, 1999, increased 19%
to $903.0 million from $756.3 million for the comparable period of fiscal
1998. Comparable store sales increased 4% for the thirty-nine weeks ended
October 31, 1999. The Company's recently acquired stores contributed $45.5
million of net sales during the portions of the fiscal year that the Company
owned and operated them.
Operating profit, excluding $4.2 million of transition and integration
expenses related to the recent acquisitions, increased to $86.7 million, or
9.6% of net sales, for the thirty-nine weeks ended October 31, 1999, from
$60.4 million, or 8.0% of net sales, excluding $6.7 million of non-recurring
charges for the comparable period of fiscal 1998. The increase in operating
profit resulted from a leveraging of fixed costs over an expanding sales base
and 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 thirty-nine weeks ended October 31, 1999
increased to $27.0 million from $23.5 million for the comparable period of
fiscal 1998, primarily due to increased debt levels that were incurred to
finance the recent acquisitions.
Net income for the thirty-nine weeks ended October 31, 1999, excluding
acquisition-related transition and integration costs and the cumulative effect
of a change in accounting for store pre-opening expenses, increased to $36.8
million or $1.28 per diluted common share from $23.4 million, or $0.82 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 thirty-nine weeks ended October 31, 1999 increased to $33.5 million or
$1.17 per diluted common share from $12.4 million, or $0.45 per diluted common
share for the comparable period of fiscal 1998.
On September 28, 1999, the Company announced that its wholly-owned
subsidiary, CSK Auto, Inc., had entered into a definitive agreement with
Microsoft Corp. through which its wholly-owned subsidiary,
CSKAUTO.COM, Inc., will be the exclusive auto parts e-commerce provider
promoted on MSN CarPoint, the premier automotive shopping and information site
on the Internet. This agreement represents another important step in the
implementation of the Company's Internet strategy that began in June 1999,
with the launch of CSKAUTO.COM, the first e-commerce site backed by a major
automotive aftermarket parts retailer. This was followed in mid-August by the
Company's acquisition of Automotive Information Systems (AIS), the premier
provider of diagnostic vehicle repair information to professional automotive
repair technicians. AIS is an important content provider to MSN CarPoint
delivering reliability and maintenance data under the brand name Identifix.
"We are very pleased with our third quarter and year-to-date fiscal 1999
financial results," said Maynard Jenkins, Chairman and Chief Executive Officer
of CSK Auto Corporation. "With the recently completed acquisition of the Al's
and Grand Auto Supply business, we have strengthened our position as the
leading auto parts retailer in the Western U.S. We continue to make progress
in improving our gross profit margins which are benefiting from increased
vendor support and more favorable pricing terms. In addition, our commercial
sales program continues to grow rapidly and now represents almost 20% of total
sales of the CSK Auto base stores."
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) Note 1
Thirteen Weeks Ended Thirteen Weeks Ended
October 31, November 1, October 31, November 1,
1999 1998 1999 1998
Net sales $ 331,320 $ 263,142 $ 331,320 $ 263,142
Cost of sales 170,946 136,111 170,946 136,111
Gross profit 160,374 127,031 160,374 127,031
Other costs and expenses:
Operating and
administrative 125,895 103,521 125,895 103,521
Transition and
integration expenses 3,551 -- -- --
Goodwill amortization 432 -- 432 --
Operating profit 30,496 23,510 34,047 23,510
Interest expense, net 11,524 6,924 11,524 6,924
Income before income
taxes 18,972 16,586 22,523 16,586
Income tax expense 7,304 6,059 8,671 6,059
Net income $ 11,668 $ 10,527 $ 13,852 $ 10,527
Basic earnings per share:
Net income $ 0.42 $ 0.38 $ 0.50 $ 0.38
Shares used in
computing per share
amounts 27,826,096 27,738,468 27,826,096 27,738,468
Diluted earnings
per share:
Net income $ 0.41 $ 0.37 $ 0.49 $ 0.37
Shares used in
computing per
share amounts 28,502,784 28,579,609 28,502,784 28,579,609
Note 1. The "As Adjusted" columns reflect the exclusion from earnings of
the impact of transition and integration expense, extraordinary items, the
cumulative effect of accounting changes and other one-time expense items.
CSK AUTO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share data)
(As Adjusted) Note 1
Thirty-nine Weeks Ended Thirty-nine Weeks Ended
October 31, November 1, October 31, November 1,
1999 1998 1999 1998
Net sales $ 903,044 $ 756,266 $ 903,044 $ 756,266
Cost of sales 469,790 403,857 469,790 403,857
Gross profit 433,254 352,409 433,254 352,409
Other costs and expenses:
Operating and
administrative 346,152 291,966 346,152 291,966
Transition and
integration expenses 4,170 3,075 -- --
Goodwill amortization 432 -- 432 --
Write-off of
unamortized
management fee -- 3,643 -- --
Operating profit 82,500 53,725 86,670 60,443
Interest expense, net 27,016 23,532 27,016 23,532
Income before income
taxes, extraordinary
loss and cumulative
effect of change in
accounting principle 55,484 30,193 59,654 36,911
Income tax expense 21,261 11,076 22,859 13,553
Income before
extraordinary loss
and cumulative effect
of change in accounting
principle 34,223 19,117 36,795 23,358
Extraordinary loss, net
of $4,236 of income taxes -- (6,767) -- --
Income before cumulative
effect of change in
accounting principle 34,223 12,350 36,795 23,358
Cumulative effect of
change in accounting
principle, net of
$468 of income taxes (741) -- -- --
Net income $ 33,482 $ 12,350 $ 36,795 $ 23,358
Basic earnings (loss)
per share:
Income before
extraordinary loss
and cumulative effect
of change in
accounting
principle $ 1.23 $ 0.73 $ 1.32 $ 0.84
Extraordinary loss,
net of income taxes -- (0.26) -- --
Income before
cumulative effect
of change in
accounting principle 1.23 0.47 1.32 0.84
Cumulative effect of
change in accounting
principle, net of
income taxes (0.03) -- -- --
Net income $ 1.20 $ 0.47 $ 1.32 $ 0.84
Shares used in
computing per share
amounts 27,808,757 26,348,305 27,808,757 27,738,415
Diluted earnings
(loss) per share:
Income before
extraordinary loss
and cumulative
effect of change
in accounting
principle $ 1.19 $ 0.70 $ 1.28 $ 0.82
Extraordinary loss,
net of income taxes -- (0.25) -- --
Income before
cumulative effect
of change in
accounting principle 1.19 0.45 1.28 0.82
Cumulative effect of
change in
accounting
principle, net of
income taxes (0.02) -- -- --
Net income $ 1.17 $ 0.45 $ 1.28 $ 0.82
Shares used in
computing per
share amounts 28,708,125 27,253,660 28,708,125 28,643,770
Note 1. The "As Adjusted" columns reflect the exclusion from earnings of
the impact of transition and integration expense, extraordinary items, the
cumulative effect of accounting changes and other one-time expense items.