CSK Auto Corporation Announces First Quarter 2008 Financial Results

CSK Auto Corporation (the "Company”) (NYSE:CAO), the parent company of CSK Auto, Inc., today reported net sales of $461.1 million for its first quarter of fiscal 2008 ended May 4, 2008, a decrease of 2.5%, or $11.9 million compared to the first quarter of fiscal 2007. The decrease in net sales was primarily due to decreased same store sales, which were partially offset by sales from nine net new stores added from May 7, 2007 through May 4, 2008. Total same store sales declined by 3.1% for the quarter, comprised of a decrease of 5.1% in retail same store sales and an increase of 6.1% in commercial same store sales. For the quarter, the Company reported net income of $5.4 million, or $0.12 per diluted common share, compared to net income of $1.7 million, or $0.04 per diluted common share, for the same period last year. Gross profit as a percentage of sales increased to 47.1% from 46.6% for the same period last year. The Company recognized a pre-tax gain of $15.0 million in its results of operations in the first quarter of fiscal 2008. 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 $10.0 million cash component of the settlement, in addition to $5.0 million in related litigation and regulatory legal expenses all of which had previously been expensed. Safe Harbor 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 May 4, 2008, the Company operated 1,345 stores in 22 states under the brand names Checker Auto Parts, Schuck's Auto Supply, Kragen Auto Parts and Murray’s Discount Auto Stores. CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)     Thirteen Weeks Ended May 4, May 6, 2008 2007 Net sales $ 461,104 $ 473,035 Cost of sales   243,801     252,437 Gross profit 217,303 220,598 Other costs and expenses: Operating and administrative 205,810 199,234 Investigation, litigation and restatement costs 983 4,564 Insurance recovery (15,000 ) - Store closing costs   785     706 Operating profit 24,725 16,094 Interest expense, net   15,445     13,322 Income before income taxes 9,280 2,772 Income tax expense   3,913     1,102 Net income $ 5,367   $ 1,670   Earnings per common share: Basic $ 0.12   $ 0.04 Diluted $ 0.12   $ 0.04   Weighted average shares outstanding: Basic   44,032     43,951 Diluted   44,101     44,697 CSK AUTO CORPORATION AND SUBSIDIARIES     CONSOLIDATED BALANCE SHEET (In thousands, except share data) (Unaudited) May 4, February 3, 2008 2008 ASSETS Cash and cash equivalents $ 19,679 $ 16,520 Receivables, net 36,721 37,322 Inventories, net 549,002 494,651 Deferred income taxes 44,527 50,649 Prepaid expenses and other current assets   50,434     35,842   Total current assets 700,363 634,984   Property and equipment, net 159,267 165,115 Intangibles, net 61,905 63,020 Goodwill 224,937 224,937 Deferred income taxes 17,288 15,380 Other assets, net   33,667     35,254   Total assets $ 1,197,427   $ 1,138,690     LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 291,225 $ 236,879 Accrued payroll and related expenses 59,666 57,593 Accrued expenses and other current liabilities 98,950 107,211 Current maturities of long-term debt 493,443 50,551 Current maturities of capital lease obligations   5,982     6,351   Total current liabilities   949,266     458,585     Long-term debt 16,131 452,420 Obligations under capital leases 8,469 9,866 Other liabilities   52,662     53,281   Total non-current liabilities   77,262     515,567     Commitments and contingencies   Stockholders' equity: Common stock, $0.01 par value, 90,000,000 shares authorized, 44,035,913 and 44,030,644 shares issued and outstanding at May 4, 2008 and February 3, 2008, respectively   440 440 Additional paid-in capital 439,086 438,092 Accumulated deficit   (268,627 )   (273,994 ) Total stockholders' equity   170,899     164,538   Total liabilities and stockholders' equity $ 1,197,427   $ 1,138,690   CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)         Thirteen Weeks Ended May 4,   May 6, 2008 2007 Cash flows provided by (used in) operating activities: Net income $ 5,367 $ 1,670 Adjustments: Depreciation and amortization on property and equipment 9,395 9,947 Amortization of other items 1,384 1,336 Amortization of debt discount and deferred financing costs 1,782 1,319 Stock-based compensation expense 1,244 1,367 Write downs of property, equipment and other assets 447 1,398 Deferred income taxes 3,756 1,046 Changes in operating assets and liabilities: Receivables (229 ) (2,344 ) Inventories (54,351 ) (25,559 ) Prepaid expenses and other current assets (14,592 ) (773 ) Accounts payable 54,347 13,630 Accrued payroll, accrued expenses and other current liabilities (6,401 ) 4,838 Other operating activities   189     (192 ) Net cash provided by operating activities   2,338     7,683     Cash flows used in investing activities: Capital expenditures (4,046 ) (8,858 ) Other investing activities   (320 )   (477 ) Net cash used in investing activities   (4,366 )   (9,335 )   Cash flows provided by (used in) financing activities: Borrowings under senior credit facility - line of credit 85,900 65,600 Payments under senior credit facility - line of credit (79,400 ) (57,100 ) Payments under term loan facility (864 ) (873 ) Payment of debt financing costs (125 ) - Payments on capital lease obligations (1,694 ) (2,684 ) Proceeds from seller financing arrangements 1,550 - Payments on seller financing arrangements (168 ) (156 ) Proceeds from exercise of stock options 40 - Other financing activities   (52 )   (44 ) Net cash provided by financing activities   5,187     4,743     Net increase in cash 3,159 3,091 Cash and cash equivalents, beginning of period   16,520     20,169   Cash and cash equivalents, end of period $ 19,679   $ 23,260   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): Calculation of EBITDA:       Thirteen weeks ended May 4, 2008 May 6, 2007 Income before income taxes $ 9,280 $ 2,772 Interest expense, net 15,445 13,322 Depreciation 9,395 9,947 Amortization   1,384     1,336 EBITDA   35,504     27,377   Non-cash stock compensation expense 1,244 1,367 Investigation, litigation and restatement costs 983 4,564 Insurance recovery (15,000 ) - Asset retirements and impairment 466 982 Non-recurring charges   2,729     - EBITDA, as adjusted $ 25,926   $ 34,290 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.