CAO Csk Auto Corp

CSK Auto Corporation (the �Company�) (NYSE:CAO), the parent company of CSK Auto, Inc., today reported net sales of $427.0 million for its fourth quarter of fiscal 2007 ended February 3, 2008, a decrease of 9.6%, or $45.2 million compared to the fourth quarter of fiscal 2006. The decrease in net sales was primarily due to one additional week of sales in the fourth quarter of fiscal 2006, which resulted in additional sales of approximately $34.3 million. Same store sales decreased 3.5% for the quarter, comprised of a decrease of 4.9% in retail same store sales and an increase of 3.1% in commercial same store sales. For the quarter the Company reported a net loss of $12.3 million, or $0.28 loss per diluted common share compared to a net loss of $1.3 million or $0.03 loss per diluted common share for the same period last year. Gross profit as a percentage of sales increased to 47.2% from 46.9% last year. The Company recorded a pre-tax charge in the fourth quarter of fiscal 2007 for the settlement of its class action securities litigation consisting of $10.0 million in cash and $1.7 million in Company stock. The Company�s primary insurer under its directors and officers liability insurance policy will pay the entire cash component of the settlement, in addition to $5.0 million in litigation and regulatory-related defense costs. The Company expects to recognize a pre-tax gain of $15.0 million in its results of operations in the first quarter of fiscal 2008. For the fiscal year ended February 3, 2008, net sales were $1,851.6 million, a decrease of 2.9% from the prior year. For fiscal 2007, net income decreased by $17.4 million to a net loss of $11.2 million, resulting in a $0.25 loss per diluted common share for the fiscal year. Our 2007 fiscal year consisted of 52 weeks as compared to our fiscal year 2006, which had 53 weeks. Safe Harbour Portions of this release may constitute �forward-looking statements� as defined by federal law. Although the Company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the �safe harbor� protections provided under the Private Securities Litigation Reform Act of 1995. Additional information about issues that could lead to material changes in the Company�s performance is contained in the Company�s filings with the Securities and Exchange Commission. The Company makes no commitment to revise or update any forward looking statement in order to reflect events or circumstances after the date any such statement is made. About CSK Auto CSK Auto Corporation is the parent company of CSK Auto, Inc., a specialty retailer in the U.S. automotive aftermarket industry. As of February 3, 2008 the Company operated 1,349 stores in 22 states under the brand names Checker Auto Parts, Schuck's Auto Supply, Kragen Auto Parts and Murray�s Discount Auto Stores. - Financial Tables Follow - CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS � � Fiscal Year Ended February 3, February 4, � 2008 � � 2007 � (In thousands, except share and per share data) � Net sales $ 1,851,647 $ 1,907,776 Cost of sales � 984,649 � � 1,011,712 � Gross profit 866,998 896,064 Other costs and expenses: Operating and administrative 804,265 788,400 Investigation and restatement costs 12,348 25,739 Securities class action settlement 11,700 - Store closing costs � 1,983 � � 1,487 � Operating profit 36,702 80,438 Interest expense 54,163 48,767 Loss on debt retirement � - � � 19,450 � Income (loss) before income taxes and cumulative effect of change in accounting principle (17,461 ) 12,221 Income tax expense (benefit) � (6,309 ) � 4,991 � Income (loss) before cumulative effect of change in accounting principle (11,152 ) 7,230 Cumulative effect of change in accounting principle, net of tax � - � � (966 ) Net income (loss) $ (11,152 ) $ 6,264 � � Basic earnings (loss) per share: Income (loss) before cumulative effect of change in accounting principle $ (0.25 ) $ 0.16 Cumulative effect of change in accounting principle � - � � (0.02 ) Net income (loss) per share $ (0.25 ) $ 0.14 � Shares used in computing per share amounts � 43,971,417 � � 43,876,533 � � Diluted earnings (loss) per share: Income (loss) before cumulative effect of change in accounting principle $ (0.25 ) $ 0.16 Cumulative effect of change in accounting principle � - � � (0.02 ) Net income (loss) per share $ (0.25 ) $ 0.14 � Shares used in computing per share amounts � 43,971,417 � � 44,129,278 � � � Thirteen Weeks Ended Fourteen Weeks Ended February 3, February 4, � 2008 � � 2007 � (In thousands, except share and per share data) � Net sales $ 426,999 $ 472,191 Cost of sales � 225,542 � � 250,762 � Gross profit 201,457 221,429 Other costs and expenses: Operating and administrative 193,360 205,585 Investigation and restatement costs 1,725 3,371 Securities class action settlement 11,700 - Store closing costs � 230 � � 442 � Operating profit (loss) (5,558 ) 12,031 Interest expense 14,491 14,139 Loss on debt retirement � - � � 24 � Loss before income taxes (20,049 ) (2,132 ) Income tax benefit � (7,751 ) � (864 ) Income (loss) before cumulative effect of change in accounting principle (12,298 ) (1,268 ) Cumulative effect of change in accounting principle, net of tax � - � � - � Net loss $ (12,298 ) $ (1,268 ) � Basic and diluted loss per share: Loss before cumulative effect of change in accounting principle $ (0.28 ) $ (0.03 ) Cumulative effect of change in accounting principle � - � � - � Basic and diluted loss per share $ (0.28 ) $ (0.03 ) Shares used in computing per share amounts � 44,018,817 � � 43,936,674 � CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS � � � � February 3, February 4, � 2008 � � 2007 � (In thousands, except share data) ASSETS � Cash and cash equivalents $ 16,520 $ 20,169 Receivables, net 37,322 43,898 Inventories 494,651 502,787 Deferred income taxes 50,649 46,500 Prepaid expenses and other current assets � 35,842 � � 31,585 � Total current assets 634,984 644,939 � Property and equipment, net 165,115 174,409 Intangibles, net 63,020 67,507 Goodwill 224,937 224,937 Deferred income taxes 15,380 4,200 Other assets, net � 35,254 � � 35,770 � Total assets $ 1,138,690 � $ 1,151,762 � � LIABILITIES AND STOCKHOLDERS' EQUITY � Accounts payable $ 236,879 $ 260,146 Accrued payroll and related expenses 57,593 60,306 Accrued expenses and other current liabilities 107,211 81,569 Current maturities of long-term debt 50,551 56,098 Current maturities of capital lease obligations � 6,351 � � 8,761 � Total current liabilities � 458,585 � � 466,880 � � Long-term debt 452,420 451,367 Obligations under capital leases 9,866 15,275 Other liabilities � 53,281 � � 46,730 � Total non-current liabilities � 515,567 � � 513,372 � � Commitments and contingencies � Stockholders' equity: Common stock, $0.01 par value, 90,000,000 shares authorized, 44,030,644 and 43,950,751 shares issued and outstanding at February 3, 2008 and February 4, 2007, respectively � 440 440 Additional paid-in capital 438,092 433,912 Accumulated deficit � (273,994 ) � (262,842 ) Total stockholders' equity � 164,538 � � 171,510 � � Total liabilities and stockholders' equity $ 1,138,690 � $ 1,151,762 � CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS � � � � � � Fiscal Year Ended February 3, February 4, January 29, � 2008 � � 2007 � � 2006 � (In thousands) Cash flows provided by (used in) operating activities: Net income (loss) $ (11,152 ) $ 6,264 $ 57,790 Adjustments: Depreciation and amortization on property and equipment 40,668 40,645 36,628 Amortization of other items 5,513 7,585 4,231 Amortization of debt discount and deferred financing costs 5,701 4,539 2,161 Stock-based compensation expense 2,779 4,972 571 Tax benefit relating to exercise of stock options - - 231 Write downs of property, equipment and other assets 4,459 3,354 2,145 Loss on debt retirement - 8,496 1,600 Deferred income taxes (6,593 ) 3,771 36,008 Changes in operating assets and liabilities: Receivables 8,126 (13,412 ) 6,747 Inventories 8,136 3,652 (23,588 ) Prepaid expenses and other current assets (4,257 ) (11,538 ) 7,616 Accounts payable (23,267 ) 51,639 17,329 Accrued payroll, accrued expenses and other current liabilities 23,816 4,838 9,987 Other operating activities � 185 � � (5,165 ) � 2,867 � Net cash provided by operating activities � 54,114 � � 109,640 � � 162,323 � � Cash flows used in investing activities: Capital expenditures (34,772 ) (37,529 ) (36,775 ) Business acquisitions, net of cash acquired - (4,292 ) (177,658 ) Other investing activities � (1,623 ) � (1,778 ) � (1,499 ) Net cash used in investing activities � (36,395 ) � (43,599 ) � (215,932 ) � Cash flows provided by (used in) financing activities: Payments under senior credit facility - term loan - - (252,450 ) Borrowings under senior credit facility - line of credit 258,300 84,800 230,300 Payments under senior credit facility - line of credit (263,800 ) (126,800 ) (136,300 ) Borrowings under term loan facility - 350,000 - Payments under term loan facility (3,478 ) (875 ) - Payment of debt financing costs (5,376 ) (13,166 ) (9,612 ) Proceeds from issuance of 4.625% exchangeable notes - - 100,000 Proceeds from issuance of 3.375% exchangeable notes - - 125,000 Retirement of 3.375% exchangeable notes - (125,000 ) - Retirement of 7% senior notes - (225,000 ) - Payments on capital lease obligations (8,513 ) (10,301 ) (10,893 ) Proceeds from seller financing arrangements 2,145 428 3,164 Payments on seller financing arrangements (685 ) (484 ) (381 ) Proceeds from repayment of stockholder receivable - - 10 Proceeds from exercise of stock options 443 1,196 1,130 Purchase of common stock - - (25,029 ) Net proceeds from termination of common stock call option and warrants - 1,555 - Premium on common stock call option - - (26,992 ) Premium from common stock warrants - - 17,820 Other financing activities � (404 ) � (189 ) � (423 ) Net cash (used in) provided by financing activities � (21,368 ) � (63,836 ) � 15,344 � � Net increase (decrease) in cash (3,649 ) 2,205 (38,265 ) Cash and cash equivalents, beginning of period � 20,169 � � 17,964 � � 56,229 � Cash and cash equivalents, end of period $ 16,520 � $ 20,169 � $ 17,964 � The following table provides certain financial information not derived in accordance with GAAP. We have included calculations of these non-GAAP measures and reconciliations to the most comparable GAAP financial measures. We believe that EBITDA is a recognized supplemental measurement tool widely used by analysts and investors to help evaluate a company's overall operating performance, its ability to incur and service debt, and its capacity for making capital expenditures. We use EBITDA, in addition to operating income and cash flows from operating activities, to assess our performance relative to our competitors and relative to our own performance in prior periods. We believe that it is important for investors to have the opportunity to evaluate us using the same measures. EBITDA is calculated as follows ($ in thousands): Preliminary Calculation of EBITDA: Thirteen Weeks Ended � Fourteen Weeks Ended � Fiscal Year Ended February 3, 2008 February 4, 2007 February 3, 2008 � � February 4, 2007 � Income (loss) before income taxes and cumulative effect of change in accounting principle $ (20,049 ) $ (2,132 ) $ (17,461 ) $ 12,221 Interest expense 14,491 14,139 54,163 48,767 Depreciation 9,648 10,491 40,668 40,645 Amortization � 1,480 � � 847 � � 5,513 � � 7,585 EBITDA � 5,570 � � 23,345 � � 82,883 � � 109,218 � Non-cash stock compensation expense 1,036 1,647 2,779 4,972 Investigation and restatement 1,725 3,371 12,348 25,739 Asset retirements and impairment 789 457 4,732 3,902 Securities class action settlement 11,700 - 11,700 - Non-recurring charges � 1,263 � � 24 � � 4,853 � � 21,287 EBITDA, as adjusted $ 22,083 � $ 28,844 � $ 119,295 � $ 165,118 EBITDA, and EBITDA as adjusted, do not represent funds available for our discretionary use and are not intended to represent or to be used as substitute for net income or cash flow from operations data as measured under GAAP. The Company�s definition of EBITDA as adjusted, is consistent with the definitions applied in our term loan facility. The items excluded from EBITDA, and EBITDA as adjusted, are significant components of our statement of operations and must be considered in performing a comprehensive assessment of our overall financial performance. EBITDA, and EBITDA as adjusted, and the associated year-to-year trends should not be considered in isolation. EBITDA, and EBITDA as adjusted, may differ in method of calculation from similarly titled measures used by other companies.