CSK Auto Reports Third Quarter Fiscal 2000 Financial Results
8 December 2000
CSK Auto Corporation Reports Third Quarter Fiscal 2000 Financial Results
PHOENIX, Dec. 7 CSK Auto Corporation , the
parent company of CSK Auto, Inc., a leading specialty retailer in the
automotive aftermarket, today reported its financial results for the third
quarter of fiscal 2000. The Company highlighted the following:
-- Net sales were $368.9 million reflecting comparable store sales
increases of 2% and a net total sales increase of approximately 11%;
-- Commercial sales increased 13% year over year and 11% on a comparable
store basis reflecting an increase in relative market share in a
difficult competitive and economic environment;
-- Adjusted fully diluted earnings per share was $0.29, in line with
estimates;
-- Integration efforts for all acquired stores are now complete.
Thirteen Weeks Ended October 29, 2000
Net sales for the thirteen weeks ended October 29, 2000, increased
approximately 11% to $368.9 million from $331.3 million in the third quarter
of fiscal 1999. Comparable store sales increased 2% during the third quarter
of fiscal 2000. The number of stores operated by the Company increased to
1,147 at October 29, 2000, from 1,120 stores at October 31, 1999. The increase
reflects the acquisition of the All Car stores (22 units) in the first quarter
of fiscal 2000 and new store openings. Commercial sales increased 13% to
$64.7 million for the thirteen weeks ended October 29, 2000 in spite of a
challenging economic environment. The Company continues to add new customers
to its commercial sales portfolio and believes that the growth being realized
in this business is the result of market share gains.
During the third quarter, the Company incurred charges for (i)
non-recurring acquisition-related transition expenses of $1.3 million, (ii)
$0.6 million of operating losses of automotive service centers that the
Company is exiting, and (iii) a non-cash charge of $1.2 million to record its
proportionate equity share of the losses of the PartsAmerica.com joint venture
in which the Company participates. Excluding these items, operating profit for
the third quarter of fiscal 2000 totaled $27.7 million, compared to
$34.3 million, for the third quarter of fiscal 1999. The decrease in operating
profit resulted from lower gross profit contribution due to the sale of
inventories of the acquired companies that were purchased without the benefit
of customary allowances from vendors.
Interest expense for the third quarter of fiscal 2000 increased to
$15.5 million from $11.5 million for the third quarter of fiscal 1999,
primarily due to increased debt levels and higher variable interest rates.
Excluding the above-described non-recurring charges, net income for the
third quarter of fiscal 2000 was $7.9 million, or $0.29 per diluted common
share. This compares to net income of $14.0 million, or $0.49 per diluted
common share, for the third quarter of fiscal 1999. Including the one-time
charges, net income for the third quarter of fiscal 2000 was $5.9 million, or
$0.21 per diluted common share.
During the third quarter of fiscal 2000, the Company opened 8 new stores,
relocated 7 stores, expanded 3 stores, and closed 4 stores in addition to
those closed due to relocation. Integration efforts for all acquired stores,
including the AllCar stores, were completed during the quarter.
Thirty-nine Weeks Ended October 29, 2000
Net sales for the thirty-nine weeks ended October 29, 2000, increased
approximately 22% to $1,100.1 million from $903.0 million for the comparable
period of fiscal 1999. Comparable store sales increased 2% for the thirty-nine
weeks ended October 29, 2000.
During the thirty-nine week period, the Company incurred: (i) $23.8
million of acquisition-related transition and integration expenses, (ii)
$3.7 million of acquisition-related store closing costs, (iii) $2.6 million of
operating losses incurred by automotive service centers that have closed or
will be closed, and (iv) non-cash charges of $1.9 million to record its
proportionate equity share of the losses of the PartsAmerica.com joint venture
in which the Company participates. Excluding these items, operating profit
increased to $93.2 million for the thirty-nine weeks ended October 29, 2000
from $86.9 million for the comparable period of fiscal 1999. Inclusive of all
items, operating profit declined to $61.1 million for the first three quarters
of fiscal 2000 from $82.5 million for the comparable period of fiscal 1999.
Interest expense for the thirty-nine weeks ended October 29, 2000
increased to $45.3 million from $27.0 million for the comparable period of
fiscal 1999, primarily due to increased debt levels and higher variable
interest rates.
Net income for the thirty-nine weeks ended October 29, 2000, excluding all
of the non-recurring items discussed above that affected operating profit,
decreased to $30.4 million or $1.09 per diluted common share from
$36.9 million, or $1.29 per diluted common share, excluding non-recurring
charges, for the comparable period of fiscal 1999. Inclusive of all
non-recurring charges, net income for the thirty-nine weeks ended October 29,
2000 totaled $10.1 million, or $0.36 per diluted common share, compared to net
income of $33.5 million, or $1.17 per diluted common share, for the comparable
period of fiscal 1999.
"Excluding non-recurring charges, the Company achieved the consensus of
analysts' earnings estimates for the quarter, as compiled by First Call. We
are not, however, at all satisfied with our current results," said Maynard
Jenkins, Chairman and Chief Executive Officer of CSK Auto Corporation. "The
soft sales trends that the Company experienced in the second quarter have
continued but despite this softness we were able to produce 2% comparable
store sales growth for the third quarter, in large part due to the continued
growth of our commercial sales program. We believe that these conditions are
being felt throughout the industry, including by our suppliers and
competitors. Despite these conditions, we are maintaining our focus on
serving our customers, operating our stores efficiently and making necessary
cost reductions to improve our operating results."
Outlook
The Company expects comparable store sales increases of approximately 3%
for the fourth quarter of the fiscal year with the increases being driven by
the commercial sales program and increasing comparable store sales of the
acquired stores. Total net sales for fiscal 2000 are expected to approximate
$1.47 billion. Gross profit margins are expected to remain consistent with the
third quarter run rate and earnings per diluted common share are expected to
approximate $1.30 for the full fiscal year, excluding non-recurring charges,
which is in line with the consensus of analysts' estimates as compiled by
First Call.
For fiscal 2001, the Company's preliminary projection assumes 50-75 new,
relocated, expanded or acquired stores and comparable store sales growth of
approximately 3% which results in total net sales growth of 7%. Gross profit
margins are expected to remain flat with fiscal 2000 margin rates. Earnings
per share are expected to increase approximately 15% and free cash flow
generation is expected to approximate $70.0 million.
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
October 29, October 31, October 29, October 31,
2000 1999 2000 (1) 1999 (2)
Net sales $368,898 $331,320 $367,782 $330,663
Cost of sales 196,200 170,946 195,092 170,326
Gross profit 172,698 160,374 172,690 160,337
Other costs and
expenses:
Operating and
administrative 144,440 125,661 143,784 125,393
Store closing costs 149 234 149 234
Transition and
integration
expenses (3) 1,308 3,551 -- --
Equity in
loss of
joint venture 1,188 -- -- --
Goodwill amortization 1,092 432 1,092 432
Operating profit 24,521 30,496 27,665 34,278
Interest expense, net 15,457 11,524 15,457 11,524
Income before income
taxes 9,064 18,972 12,208 22,754
Income tax expense 3,172 7,304 4,273 8,760
Net income $5,892 $11,668 $7,935 $13,994
Basic earnings
per share:
Net income $0.21 $0.42 $0.29 $0.50
Shares used in
computing per share
amounts 27,839,484 27,826,096 27,839,484 27,826,096
Diluted earnings
per share:
Net income $0.21 $0.41 $0.29 $0.49
Shares used in
computing per
share amounts 27,839,484 28,502,784 27,839,484 28,502,784
(1) The "As adjusted" column excludes: (i) $1.116 million of sales made
by acquired automotive service centers that the Company has closed or
will be closing; (ii) $1.108 million of cost of sales associated with
the excluded sales; (iii) $0.656 million of operating expenses of the
automotive service centers that the Company has closed or will be
closing; (iv) $1.3 million of transition and integration expenses
associated with the Company's acquisitions; and (v) a $1.2 million
charge relating to the Company's proportionate equity share of the
joint venture in which it participates.
(2) The "As adjusted" column excludes: (i) $0.657 million of sales made
by acquired automotive service centers that the Company has closed or
will be closing; (ii) $0.620 million of cost of sales associated with
the excluded sales; (iii) $0.268 million of operating expenses of the
automotive service centers that the Company has closed or will be
closing; and (iv) $3.6 million of transition and integration expenses
associated with the Company's acquisitions.
(3) 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.
CSK AUTO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share data)
(As adjusted)
Thirty-nine Weeks Ended Thirty-nine Weeks Ended
October 29, October 31, October 29, October 31,
2000 1999 2000 (1) 1999 (2)
Net sales $1,100,054 $903,044 $1,092,536 $902,387
Cost of sales 580,359 469,790 573,352 469,170
Gross profit 519,695 433,254 519,184 433,217
Other costs and
expenses:
Operating and
administrative 423,193 344,420 420,125 344,152
Store closing costs 6,012 1,445 2,285 1,445
Transition and
integration
expenses (3) 23,818 4,170 -- --
Equity in loss
of joint venture 1,904 -- -- --
Goodwill amortization 3,620 719 3,620 719
Operating profit 61,148 82,500 93,154 86,901
Interest expense, net 45,278 27,016 45,278 27,016
Income before
income taxes and
cumulative
effect of change in
accounting principle 15,870 55,484 47,876 59,885
Income tax expense 5,798 21,261 17,491 22,947
Income before cumulative
effect of change in
accounting principle 10,072 34,223 30,385 36,938
Cumulative effect of
change in accounting
principle, net of $468
of income taxes (4) -- (741) -- --
Net income $10,072 $33,482 $30,385 $36,938
Basic earnings
(loss) per share:
Income before
cumulative effect
of change in
accounting principle $0.36 $1.23 $1.09 $1.33
Cumulative effect of
change in accounting
principle, net of
income taxes -- (0.03) -- --
Net income $0.36 $1.20 $1.09 $1.33
Shares used in
computing per share
amounts 27,839,084 27,808,757 27,839,084 27,808,757
Diluted earnings
(loss) per share:
Income before cumulative
effect of change in
accounting principle $0.36 $1.19 $1.09 $1.29
Cumulative effect of
change in accounting
principle, net of
income taxes -- (0.02) -- --
Net income $0.36 $1.17 $1.09 $1.29
Shares used in computing
per share amounts 27,839,084 28,708,125 27,839,084 28,708,125
(1) The "As adjusted" column excludes: (i) $7.518 million of sales made by
acquired automotive service centers that the Company has closed or
will be closing; (ii) $7.007 million of cost of sales associated with
the excluded sales; (iii) $3.068 million of operating expenses of the
automotive service centers that the Company has closed or will be
closing; (iv) $3.7 million of store closing costs incurred with
respect to CSK stores that overlap with acquired stores; (v)
$23.8 million of transition and integration expenses associated with
the Company's acquisitions; and (vi) a $1.9 million charge relating to
the Company's proportionate equity share of the joint venture in which
it participates.
(2) The "As adjusted" column excludes: (i) $0.657 million of sales made
by acquired automotive service centers that the Company has closed or
will be closing; (ii) $0.620 million of cost of sales associated with
the excluded sales; (iii) $0.268 million of operating expenses of the
automotive service centers that the Company has closed or will be
closing; (iv) $4.2 million of transition and integration expenses
associated with the Company's acquisitions; and (v) $0.741 million
relating to the cumulative effect of change in accounting principle,
net of income taxes.
(3) 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.
(4) Reflects the cumulative effect of a change in the method of accounting
for store pre-opening costs.