CSK AUTO CORP - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended November 2, 2003

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number 001-13927

CSK Auto Corporation

(Exact name of registrant as specified in its charter)


Delaware		86-0765798
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

645 E. Missouri Ave. Suite 400, Phoenix, Arizona		85012
(Address of principal executive offices)		(Zip Code)

(602) 265-9200

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year,

if changed since last reports)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes þ No o

As of December 5, 2003, CSK Auto Corporation had 46,449,795 shares of common stock outstanding.

TABLE OF CONTENTS


PART I
	FINANCIAL INFORMATION
	CONSOLIDATED BALANCE SHEETS
	CONSOLIDATED STATEMENTS OF OPERATIONS
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 3. Defaults upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT INDEX
Ex-31.01
Ex-31.02
Ex-32.01

TABLE OF CONTENTS


		Page

PART I — Financial Information
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets		2
	Consolidated Statements of Operations		3
	Consolidated Statement of Stockholders’ Equity		4
	Consolidated Statements of Cash Flows		5
	Notes to Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
Item 4.	Controls and Procedures		21
PART II — Other Information
Item 1.	Legal Proceedings		21
Item 2.	Changes in Securities and Use of Proceeds		21
Item 3.	Defaults upon Senior Securities		21
Item 4.	Submission of Matters to a Vote of Security Holders		21
Item 5.	Other Information		21
Item 6.	Exhibits and Reports on Form 8-K		22
Signature			24

PART I

FINANCIAL INFORMATION


Item 1.	*Financial Statements*

CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


			November 2,			February 2,
			2003			2003

			(Unaudited)
ASSETS
Cash and cash equivalents			$	46,852		$	15,519
Receivables, net of allowances of $1,939 and $2,736, respectively				111,105			111,639
Inventories				684,051			650,783
Prepaid expenses and other current assets				19,234			14,871

	Total current assets			861,242			792,812

Property and equipment, net				122,507			130,745
Leasehold interests, net				12,684			14,017
Goodwill				127,069			127,069
Other assets, net				20,530			27,379

	Total assets		$	1,144,032		$	1,092,022

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable			$	154,963		$	164,430
Accrued payroll and related expenses				41,199			41,421
Accrued expenses and other current liabilities				54,062			41,602
Deferred income taxes				15,438			6,006
Current maturities of senior credit facility				2,000			—
Current maturities of capital lease obligations				10,641			10,604

	Total current liabilities			278,303			264,063

Long term debt, less current maturities				480,182			492,607
Obligations under capital leases				14,286			21,756
Deferred income taxes				13,310			3,464
Other				6,887			7,950

	Total non-current liabilities			514,665			525,777

Commitments and contingencies
Stockholders’ equity:
	Common stock, $0.01 par value, 58,000,000 shares authorized, 46,287,247 and 45,148,230 shares issued and outstanding at November 2, 2003 and February 2, 2003, respectively			463			452
	Additional paid-in capital			463,555			448,279
	Stockholder receivable			(126	)		(342	)
	Accumulated deficit			(112,828	)		(146,207	)

		Total stockholders’ equity		351,064			302,182

		Total liabilities and stockholders’ equity	$	1,144,032		$	1,092,022

The accompanying notes are an integral part of these consolidated financial statements.

CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)



		Thirteen Weeks Ended				Thirty-Nine Weeks Ended

		November 2,		November 3,		November 2,		November 3,
		2003		2002		2003		2002

Net sales		$	409,750	$	383,045	$	1,205,713	$	1,156,901
Cost of sales			217,565		202,266		644,802		628,924

Gross profit			192,185		180,779		560,911		527,977
Other costs and expenses:
	Operating and administrative		154,886		149,367		462,084		443,570
	Store closing costs		203		12		339		551
	Loss on sale of stores		—		—		—		847
	Secondary stock offering costs		182		—		182		265

Operating profit			36,914		31,400		98,306		82,744
Interest expense			12,396		14,243		39,583		48,201
Loss on debt retirement			—		—		4,315		6,008

Income before income taxes			24,518		17,157		54,408		28,535
Income tax expense			9,476		6,471		21,029		10,382

Net income		$	15,042	$	10,686	$	33,379	$	18,153

Basic earnings per share:
	Net income	$	0.33	$	0.24	$	0.74	$	0.46

Shares used in computing per share amounts			45,826,604		45,154,866		45,396,383		39,129,499

Diluted earnings per share:
	Net income	$	0.33	$	0.24	$	0.73	$	0.46

Shares used in computing per share amounts			46,238,571		45,313,673		45,619,257		39,236,096

The accompanying notes are an integral part of these consolidated financial statements.

CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)



	Common Stock				Additional
					Paid-in		Stockholder			Accumulated			Total
	Shares		Amount		Capital		Receivable			Deficit			Equity

Balances at February 2, 2003		45,148,230	$	452	$	448,279	$	(342	)	$	(146,207	)	$	302,182
Exercise of stock options (unaudited)		1,138,090		11		13,404		—			—			13,415
Issuances of restricted stock (unaudited)		927		—		13		—			—			13
Tax benefit relating to stock option exercises (unaudited)		—		—		1,859		—			—			1,859
Repayment of receivable (unaudited)		—		—		—		216			—			216
Net income (unaudited)		—		—		—		—			33,379			33,379

Balances at November 2, 2003 (unaudited)		46,287,247	$	463	$	463,555	$	(126	)	$	(112,828	)	$	351,064

The accompanying notes are an integral part of these consolidated financial statements.

CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



				Thirty-Nine Weeks Ended

				November 2,			November 3,
				2003			2002

Cash flows from operating activities:
	Net income			$	33,379		$	18,153
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization of property and equipment			22,999			23,944
		Amortization of deferred financing costs			3,201			4,044
		Amortization of long term debt fair market value adjustment			(807	)		—
		Amortization of other items			2,897			2,817
		Accretion of discount			702			682
		Write downs on disposals of property, equipment and other assets			683			769
		Tax benefit relating to stock options			1,859			—
		Write off of debt issuance costs			2,268			1,640
		Premium paid on early retirement of debt			(350	)		(4,368	)
		Loss on sale of stores			—			847
		Proceeds from interest rate swap termination			6,031			—
		Deferred income taxes			19,278			10,941
		Change in operating assets and liabilities:
			Receivables		534			(18,161	)
			Inventories		(33,268	)		(43,487	)
			Prepaid expenses and other current assets		(4,363	)		3,047
			Accounts payable		(9,467	)		17,813
			Accrued payroll, accrued expenses and other current liabilities		12,238			(1,115	)
			Other operating activities		1,249			3,321

		Net cash provided by operating activities			59,063			20,887

Cash flows from investing activities:
	Capital expenditures				(10,568	)		(5,681	)
	Proceeds from sale of property and equipment				26			2,188
	Proceeds from sale of stores				—			4,217
	Other investing activities				(2,568	)		(2,699	)

		Net cash used in investing activities			(13,110	)		(1,975	)

Cash flows from financing activities:
	Borrowings under Senior Credit Facility				291,000			247,000
	Payments under Senior Credit Facility				(293,000	)		(265,000	)
	Issuance of common stock in public offering				—			82,540
	Underwriters’ discount and other financing costs				—			(4,398	)
	Retirement of 11% Senior Subordinated Notes				(9,547	)		(71,703	)
	Payment of debt issuance costs				(4,162	)		(1,113	)
	Payments on capital lease obligations				(12,335	)		(7,565	)
	Loan to stockholder				—			(125	)
	Proceeds from repayment of stockholder receivable				216			334
	Proceeds from exercise of stock options				13,415			161
	Other financing activities				(207	)		43

		Net cash used in financing activities			(14,620	)		(19,826	)

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