<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 3, 1997 OR
/ / 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 333-22511
CSK AUTO, INC.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
ARIZONA 86 - 0221312
- -------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
645 E. MISSOURI AVE. SUITE 400, PHOENIX, ARIZONA 85012
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (602) 265 - 9200
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 X NO ___
As of September 12, 1997, CSK Auto,Inc. had 50,000 shares of redeemable
preferred stock and 2,000 shares of common stock outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CSK AUTO, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF CSK GROUP, LTD.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
AUGUST 3, FEBRUARY 2,
1997 1997
--------- ---------
<S> <C> <C>
Cash and cash equivalents $ 6,598 $ 5,223
Receivables, net of allowances of $2,307 and $1,768, respectively 35,119 28,511
Inventories 280,909 268,214
Assets held for sale 5,208 5,971
Prepaid expenses and other assets 10,647 10,139
--------- ---------
Total current assets 338,481 318,058
--------- ---------
Property and equipment, net 76,311 71,363
Leasehold interests, net 12,008 12,683
Deferred income taxes 17,101 18,089
Other assets, net 18,659 19,350
--------- ---------
Total assets $ 462,560 $ 439,543
========= =========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Accounts payable $ 115,027 $ 120,998
Outstanding checks 15,531 7,004
Accrued payroll and related expenses 17,146 15,851
Accrued expenses and other current liabilities 45,351 44,444
Current maturities of amounts due under credit agreement 1,000 1,000
Current maturities of capital lease obligations 7,798 7,007
Due to affiliates 1,000 --
Deferred income taxes 597 597
--------- ---------
Total current liabilities 203,450 196,901
--------- ---------
Amount due under credit agreement 159,500 137,000
Obligations under capital leases 14,158 15,673
Obligations under senior notes 125,000 125,000
Due to affiliates -- 1,000
Other 18,612 20,675
--------- ---------
Total non-current liabilities 317,270 299,348
--------- ---------
Commitments and contingencies
Stockholder's deficit:
Redeemable preferred stock, $.01 par value, 206,500 shares authorized, 50,000
shares issued and outstanding, liquidation preference redeemable
at $1,000 per share, 12% cumulative dividend 1 1
Common stock, $.01 par value, 20,000 shares authorized, 2,000 shares issued
and outstanding 1 1
Additional paid-in capital 1,501 1,501
Stockholder receivable (5,966) (5,966)
Accumulated deficit (53,697) (52,243)
--------- ---------
Total stockholder's deficit (58,160) (56,706)
--------- ---------
Total liabilities and stockholder's deficit $ 462,560 $ 439,543
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE> 3
CSK AUTO, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF CSK GROUP, LTD.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------------------- ----------------------------------
AUGUST 3, 1997 JULY 28, 1996 AUGUST 3, 1997 JULY 28, 1996
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net Sales $217,944 $200,895 $419,557 $390,080
Costs and expenses:
Cost of sales 124,745 118,395 242,246 232,104
Operating and administrative 81,100 75,454 158,195 144,904
-------- -------- -------- --------
Operating profit 12,099 7,046 19,116 13,072
Interest expense 8,406 3,520 16,548 7,115
-------- -------- -------- --------
Income before income taxes 3,693 3,526 2,568 5,957
Income tax expense 1,445 1,413 988 2,345
-------- -------- -------- --------
Net income $ 2,248 $ 2,113 $ 1,580 $ 3,612
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 4
CSK AUTO, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF CSK GROUP, LTD.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------------------
AUGUST 3, 1997 JULY 28, 1996
-------------- -------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 1,580 $ 3,612
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment 8,585 8,669
Amortization of leasehold interests 675 1,020
Amortization of deferred financing costs 904 558
Amortization of other deferred charges 328 108
Deferred income taxes 988 2,021
Change in operating assets and liabilities:
Accounts receivable (6,608) (1,724)
Inventories (12,695) 178
Prepaid expenses and other current assets (508) (4)
Accounts payable (5,971) (13,633)
Outstanding checks 8,527 (6,692)
Accrued payroll,accrued expenses and other
current liabilities 2,201 4,126
Due to affiliate -- 13,133
Other (1,305) (125)
-------- ---------
Net cash provided by (used in) operating activities (3,299) 11,247
-------- ---------
Cash flows used in investing activities:
Capital expenditures (6,781) (2,547)
Expenditures for assets held for sale (6,505) (16,875)
Proceeds from sale of property and equipment and
assets held for sale 2,980 15,390
Other investing activities (22) (13)
-------- ---------
Net cash used in investing activities (10,328) (4,045)
-------- ---------
Cash flows provided by (used in) financing activities:
Proceeds provided from debt 32,000 440,800
Payments of debt (9,500) (443,897)
Payment of dividends on preferred stock (3,033) --
Payments on capital lease obligations (3,600) (2,736)
Other (865) (589)
-------- ---------
Net cash provided by (used in) financing activities 15,002 (6,422)
-------- ---------
Net increase in cash and cash equivalents 1,375 780
Cash and cash equivalents, beginning of period 5,223 4,364
======== =========
Cash and cash equivalents, end of period $ 6,598 $ 5,144
======== =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 5
CSK AUTO, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF CSK GROUP, LTD.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TWENTY-SIX WEEKS ENDED AUGUST 3, 1997
CSK Auto, Inc., formerly known as Northern Automotive Corporation (the
"Company"), is a specialty retailer of automotive aftermarket parts and
accessories. At August 3, 1997, the Company operated 591 stores in 12
Western states. The Company operates as a fully integrated chain under
three tradenames. Checker Auto Parts operates in the Southwest and Rocky
Mountain states; Schuck's Auto Supply operates in the Pacific Northwest;
and Kragen Auto Parts operates primarily in California. The Company is a
wholly-owned subsidiary of CSK Group, Ltd. ("Holdings").
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"), but do not include all
information and footnotes required by generally accepted accounting
principles. In the opinion of management, the condensed consolidated
financial statements reflect all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of the Company's
financial position and the results of its operations. The accompanying
condensed consolidated financial statements should be read in conjunction
with the financial statements and related notes thereto for the fiscal
year ended February 2, 1997, as included in the Company's Registration
Statement on Form S-4 that became effective May 13, 1997.
2. INVENTORIES
Inventories are valued at the lower of cost or market, cost being
determined utilizing the last-in, first-out (LIFO) method. An actual
valuation of inventory under the LIFO method can only be calculated at the
end of a fiscal year based upon the inventory levels and costs at that
time. Accordingly, interim LIFO calculations included herein are based on
management's estimates of expected year-end inventory levels and costs.
The replacement cost of inventories approximated $237.6 million and $225.6
million at August 3, 1997 and February 2, 1997, respectively.
3. REGISTRATION AND EXCHANGE OF SENIOR SUBORDINATED NOTES
On October 30, 1996, the Company issued $125.0 million of 11% Senior
Subordinated Notes (the "Old Notes"). The Old Notes were sold in a
transaction not registered under the Securities Act of 1933, as amended
(the "Act") in reliance upon an exemption from registration under the Act.
Pursuant to a Registration Rights Agreement entered into by the Company,
the Company's subsidiaries and the initial purchasers of the Old Notes,
the Company was required to offer to exchange all outstanding 11% Senior
Subordinated Notes, due November 1, 2006 for 11% Series A Senior
Subordinated Notes, due November 1, 2006 (the "Notes") in a transaction
registered under the Act. The Company's registration statement was filed
with the SEC on February 28, 1997 and was declared effective on May 13,
1997. The declaration of effectiveness commenced an Exchange Period for
the tender of Old Notes for Notes which expired on June 16, 1997 with all
Old Notes having been tendered. The terms of the Notes are substantially
identical in all material respects to the terms of the Old Notes, except
that the Notes are more readily transferable as a result of the
registration of their issuance under the Act.
<PAGE> 6
CSK AUTO, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF CSK GROUP, LTD.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
All of the Company's subsidiaries have fully and unconditionally
guaranteed the Notes on a joint and several basis. The subsidiaries do not
have any material assets or liabilities or conduct any material
operations. As management believes that separate financial information
regarding these subsidiaries is immaterial and that the guarantees do not
enhance the likelihood that the interest on or principal of the Notes will
be paid, no separate financial information regarding the Company's
subsidiaries has been presented herein.
4. EARNINGS PER SHARE
Comparative earnings per share have not been presented because the
information is not considered to be meaningful.
5. ACCRUED DIVIDENDS - 12% CUMULATIVE REDEEMABLE PREFERRED STOCK
As of August 3, 1997, dividends totaling $3.0 million have been accrued
against the accumulated deficit, of which, $1.5 million is unpaid.
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company's business is seasonal in nature, with the highest sales occurring
in the summer months of June through August when average weekly sales per store
have historically been higher than in the slowest period of December through
February. The Company's business is also affected by weather conditions because
unusually severe weather tends to reduce sales as elective maintenance is
postponed during such periods. However, extremely hot or cold weather can
enhance sales by causing parts to fail and demand for seasonal products to
increase.
Results of Operations
The following table expresses the statements of operations as a percentage of
sales for the periods shown:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------- ------------------------
AUGUST 3, JULY 28, AUGUST 3, JULY 28,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 57.2% 58.9% 57.7% 59.5%
------ ------ ------ ------
Gross profit 42.8% 41.1% 42.3% 40.5%
Operating and administrative 37.2% 37.6% 37.7% 37.1%
------ ------ ------ ------
Operating profit 5.6% 3.5% 4.6% 3.4%
Interest expense 3.9% 1.7% 3.9% 1.8%
------ ------ ------ ------
Income before income taxes 1.7% 1.8% 0.7% 1.6%
Income tax expense 0.7% 0.7% 0.2% 0.6%
------ ------ ------ ------
Net income 1.0% 1.1% 0.5% 1.0%
====== ====== ====== ======
</TABLE>
THIRTEEN WEEKS ENDED AUGUST 3,1997 COMPARED TO THIRTEEN WEEKS ENDED JULY 28,1996
Net sales for the thirteen weeks ended August 3, 1997 ("second quarter of fiscal
1997") increased $17.0 million or 8.5% over Net sales for the thirteen week
period ended July 28, 1996 as the result of an increase in comparable store
sales of 5.5% or $10.9 million and an increase in net sales from new stores of
$6.1 million. Sales to commercial customers increased 33.1% to $30.6 million for
the thirteen weeks ended August 3, 1997 from $23.0 million for the comparable
period of fiscal 1996. During the second quarter of fiscal 1997, the Company
opened 11 new stores, relocated 9 stores to larger facilities, sold 4 stores and
closed 2 stores in addition to those closed due to relocations. As of August 3,
1997, the Company had 591 stores in operation.
<PAGE> 8
Gross profit for the second quarter of fiscal 1997 was $93.2 million or 42.8% of
net sales, compared to $82.5 million or 41.1% of net sales for the comparable
period of fiscal 1996. The increase in gross profit percentage resulted from an
increase in sales of automotive hard parts which produce a higher gross profit
percentage than other product categories and generally higher margins on
commodity products such as oils and antifreeze. Gross profit was also favorably
impacted by continued improvement in efficiencies realized from new warehousing
and distribution systems. Warehouse and distribution costs decreased as a
percentage of net sales to 3.3% for the second quarter of fiscal 1997 from 3.8%
for the comparable period of fiscal 1996. The Company has also been able to
obtain reduced product pricing from certain of its vendors as a result of the
Company's improving financial performance and quicker payment of accounts
payable.
Operating and administrative expenses increased by $5.6 million, but decreased
to 37.2% of net sales for the second quarter of fiscal 1997 compared to 37.6% of
net sales for the comparable period of fiscal 1996. This increase in dollar
amount was primarily the result of the incremental operating costs of new
stores.
Operating profit increased to $12.1 million or 5.6% of net sales for the second
quarter of fiscal 1997 compared to $7.0 million or 3.5% of net sales for the
comparable period of fiscal 1996.
Interest expense for the second quarter of fiscal 1997 totaled $8.4 million
compared to $3.5 million for the second quarter of fiscal 1996. The increase in
interest expense was the result of the issuance of approximately $190.3 million
of new debt primarily in connection with certain acquisition and financing
transactions more fully described in the Company's Registration Statement
on Form S-4, dated May 13, 1997 and higher effective interest rates.
As a result of the above factors, net income increased to $2.2 million for the
second quarter of fiscal 1997 compared to net income of $2.1 million for the
second quarter of fiscal 1996.
In addition, as a result of the above factors, earnings before interest, taxes,
depreciation and amortization ("EBITDA") increased by $5.5 million or 46.0% to
$17.5 million in the second quarter of fiscal 1997 from $12.0 million in the
comparable period of fiscal 1996. EBITDA is used by the Company for the purpose
of analyzing operating performance, leverage and liquidity. Additionally, the
Company's $200.0 million Credit Facility contains various restrictive covenants
which are based upon EBITDA as defined in the Credit Facility. EBITDA is not a
measure of financial performance under generally accepted accounting principles
and should not be considered an alternative to net income as a measure of the
Company's operating performance. EBITDA for the second quarter of fiscal 1997
includes an add back of $0.39 million of fees incurred in merger and acquisition
activities ("M&A fees"), as provided for in the Credit Facility definition of
EBITDA.
TWENTY-SIX WEEKS ENDED AUGUST 3,1997 COMPARED TO TWENTY-SIX WEEKS ENDED JULY
28,1996
Net sales for the twenty-six weeks ended August 3, 1997 increased $29.5 million
or 7.6% over Net sales for the twenty-six week period ended July 28, 1996 as the
result of an increase in comparable store sales of 5.0% or $19.1 million and an
increase in net sales from new stores of $10.4 million. Sales to commercial
customers increased 33.1% to $57.7 million for the twenty-six weeks ended August
3, 1997 from $43.4 million for the comparable period of fiscal 1996. During the
twenty-six weeks ended August 3, 1997, the Company opened 19 new stores,
relocated 16 stores to larger facilities, sold 4 stores and closed 4 stores in
addition to those closed due to relocations. As of August 3, 1997, the Company
had 591 stores in operation.
<PAGE> 9
Gross profit for the twenty-six week period ended August 3, 1997 was $177.3
million or 42.3% of net sales, compared to $158.0 million or 40.5% of net sales
for the comparable period of fiscal 1996. The increase in gross profit
percentage resulted from an increase in sales of automotive hard parts which
produce a higher gross profit percentage than other product categories. Gross
profit was also favorably impacted by continued improvement in efficiencies
realized from new warehousing and distribution systems. Warehouse and
distribution costs decreased as a percentage of net sales to 3.5% for the
twenty-six weeks ended August 3,1997 from 3.8% for the comparable period of
fiscal 1996. The Company has also been able to obtain reduced product pricing
from certain of its vendors as a result of the Company's improving financial
performance and quicker payment of accounts payable.
Operating and administrative expenses increased by $13.3 million to 37.7% of net
sales for the twenty-six weeks ended August 3, 1997 compared to 37.1% of net
sales for the comparable period of fiscal 1996. This increase was primarily the
result of increased advertising expense, the increased costs of the new store
based information systems and the incremental operating costs of new stores.
Advertising expenditures increased by $2.4 million during the twenty-six weeks
ended August 3,1997 due to an increase in television and radio advertising.
Operating profit increased to $19.1 million or 4.6% of net sales for the
twenty-six weeks ended August 3, 1997 compared to $13.1 million or 3.4% of net
sales for the comparable period of fiscal 1996.
Interest expense for the twenty-six weeks ended August 3, 1997 totaled $16.5
million compared to $7.1 million for the comparable period of fiscal 1996. The
increase in interest expense was the result of the issuance of new debt
primarily in connection with certain acquisition and financing transactions more
fully described in the Company's Registration Statement on Form S-4, dated May
13, 1997 and higher effective interest rates.
As a result of the above factors, net income of $1.6 million was realized for
the twenty-six weeks ended August 3, 1997 compared to net income of $3.6 million
for the comparable period of fiscal 1996.
In addition, as a result of the above factors, EBITDA increased by $6.3 million
or 27.8% to $29.2 million, including M&A fees of $0.5 million, for the
twenty-six weeks ended August 3, 1997, from $22.9 million for the comparable
period of 1996.
Liquidity and Capital Resources
The Company's primary cash needs have been for the funding of working capital
requirements (primarily inventory) and store fixtures and leasehold improvements
associated with its store expansion and relocation program, the expansion of its
sales to commercial customers and the increase in the number of hard parts SKU's
in its stores. Historically, the Company has financed its growth and
infrastructure requirements through internally generated funds, funds borrowed
under its various credit agreements, funds obtained from an affiliate of a
shareholder of Holdings through sale-leaseback and other transactions, and lease
arrangements with third parties.
The Company believes that it has sufficient liquidity to fund its debt service
obligations and continue to implement its growth strategy. In addition to its
operating cash flow and borrowing capacity under the $200.0 million Credit
Facility, the Company has access to a $50.0 million off-balance sheet revolving
lease facility provided by an affiliate of a shareholder of Holdings to support
its store relocation and store expansion plan. The Company believes that this
facility will provide the capital necessary to meet its growth and relocation
plans for the foreseeable future. The terms of the facility were set in the
arm's-length negotiations leading to the acquisition of a majority interest in
Holdings, and the Company believes such terms to be as favorable to it as
<PAGE> 10
could have been obtained from unaffiliated third parties. The facility may be
terminated at the option of either party to the agreement upon, among other
things, the occurrence of any initial public offering of any class of the
Company's equity securities or upon the making of a material beneficial
modification to the Credit Facility. As of August 3, 1997, availability under
the revolving lease facility had been reduced by $17.8 million relating to 25
new store sites in various stages of completion.
For the twenty-six week period ended August 3,1997, net cash used in operating
activities was $3.3 million compared to $11.2 million of cash provided by
operating activities in the comparable period of fiscal 1996. The largest
component of the change in cash flow from operating activities relates to
inventories, where $12.7 million of cash was used in 1997 to acquire inventory,
whereas $0.2 million of cash was generated in fiscal 1996 as the result of
decreasing inventory balances. Inventories are increasing to support newly added
stores and an expanded offering of hard parts SKU's. Net cash used in investing
activities totaled $10.3 million in the twenty-six week period ended August 3,
1997 compared to $4.0 million in the comparable 1996 period. The increase in
cash used in investing activities was the result of generally larger
disbursements for capital expenditures and a change in the method of financing
new store acquisitions as a result of the off-balance sheet revolving lease
facility. Net cash provided by financing activities totaled $15.0 million in the
twenty-six weeks ended August 3,1997 compared to net cash used of $6.4 million
in the comparable period of fiscal 1996. In the 1997 period, net cash provided
by financing activities was comprised primarily of $32.0 million of revolving
credit facility borrowings, offset by $9.5 million of debt repayments, $3.0
million of dividend payments on the Company's preferred stock, $3.6 million of
payments on capital lease obligations and $0.9 million of other activity. In the
1996 period, payments of debt and capital lease obligations exceeded borrowings
by approximately $5.8 million and $0.6 million of other financing activities
were incurred.
<PAGE> 11
Part II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS NONE
Item 2. CHANGES IN SECURITIES NONE
Item 3. DEFAULTS UPON SENIOR SECURITIES NONE
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE
Item 5. OTHER INFORMATION NONE
Item 6. EXHIBITS AND REPORTS ON FORM 8 - K
(a) Exhibits:
3.01* Amended and Restated Articles of Incorporation of the
Company.
3.02* Amended and Restated By-laws of the Company
4.01 First Amendment, dated as of June 4,1997, to and of the
Credit Agreement, dated as of October 30, 1996 (as
amended, supplemented, or otherwise modified from time
to time, the "Credit Agreement"), among the Company, the
several lenders from time to time parties thereto
(the"Lenders"), and The Chase Manhattan Bank, as
administrative agent for the Lenders.
4.02 Amendment No. 2, dated as of July 23, 1997, to and of
the Credit Agreement.
4.03* Indenture by and among the Company, Kragen Auto Supply
Co. ("Kragen"), Schuck's Distribution Co. ("Schuck's"),
and Wells Fargo Bank, N.A., as Trustee, dated as of
October 30, 1996.
4.04* Form of 11% Series A Senior Subordinated Note, Due 2006.
4.05* Registration Rights Agreement, dated October 30, 1996
among the Company, Kragen, Schuck's and the Initial
Purchasers named therein.
11.01 Statement of Computation of Ratio of Earnings to Fixed
Charges
27.01 Financial Data Schedule
(b) Reports on Form 8-K: None
* Incorporated herein by reference to the Company's
registration statement on Form S-4 (File No. 333-22511)
<PAGE> 12
SIGNATURE
---------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CSK Auto, Inc.
By : /s/ James G. Bazlen
--------------------------------------
James G. Bazlen
President and Chief Financial Officer
DATED: September 12, 1997
<PAGE> 1
Exhibit 4.01
FIRST AMENDMENT, dated as of June 4, 1997 (this "Amendment"),
to and of the Credit Agreement, dated as of October 30, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement";
terms used herein and not otherwise defined herein are used herein as therein
defined), among CSK AUTO, INC., an Arizona corporation (the "Company"), the
several lenders from time to time parties thereto (the "Lenders"), and THE CHASE
MANHATTAN BANK, a New York banking corporation, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the Company has requested that Lenders and the
Administrative Agent consent to certain matters regarding certain provisions of
the Credit Agreement; and
WHEREAS, the Lenders party hereto and the Administrative Agent
are willing to consent to such matters and to amend the Credit Agreement, but
only on, and subject to, the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual premises and
mutual agreements contained herein and for other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company, the
Lenders party hereto and the Administrative Agent hereby agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) Amendment to Subsection 1.1 (Defined Terms). Subsection
1.1 is hereby amended by deleting from the definition of "Interest Coverage
Ratio" the following words:
"THE FIRST DAY OF THE FIRST FISCAL QUARTER COMMENCING ON OR AFTER THE
CLOSING DATE"
and substituting the following words therefor:
"OCTOBER 28, 1996"; and
(b) Amendment to Subsection 8.8 (Consolidated EBITDA).
Subsection 8.8 is hereby amended by deleting the following words:
"THE FIRST DAY OF THE FIRST FISCAL QUARTER COMMENCING ON OR AFTER THE
CLOSING DATE"
and substituting the following words therefor:
"OCTOBER 28, 1996".
SECTION 2. REPRESENTATIONS AND WARRANTIES. To induce the
Lenders to enter into this Amendment, the Company hereby represents and warrants
to the Lenders as of the date hereof that the representations and warranties
made by the Company in the Credit Agreement are true and correct in all material
respects on and as of the date hereof, after giving effect to the
<PAGE> 2
effectiveness of this Amendment, as if made on and as of the date hereof unless
expressly stated to relate to an earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date.
SECTION 3. EXPENSES. The Company agrees to pay or reimburse
the Administrative Agent for all of its reasonable out-of-pocket costs and
expenses incurred in connection with this Amendment, including, without
limitation, the reasonable fees and disbursements of Simpson, Thacher &
Bartlett, counsel to the Administrative Agent.
SECTION 4. CREDIT DOCUMENT ACKNOWLEDGMENT. The Administrative
Agent shall receive from each Credit Party with respect to the Credit Documents
to which it is a party an acknowledgment and consent substantially in the form
of Exhibit A hereto to the execution, delivery and performance of this Amendment
and the transactions contemplated hereby and that such execution, delivery and
performance shall not affect such Credit Party's obligations under any Credit
Document.
SECTION 5. EFFECTIVENESS. This Amendment shall become
effective as of May 1, 1997 upon the date that the Administrative Agent shall
have received counterparts of this Amendment, duly executed by the Company, the
Required Lenders and the Administrative Agent.
SECTION 6. CONTINUING EFFECT OF CREDIT AGREEMENT. Except for
the amendments expressly provided herein, the Credit Agreement shall continue to
be, and shall remain, in full force and effect in accordance with its terms.
SECTION 7. COUNTERPARTS. This Amendment may be executed in any
number of counterparts by the parties hereto, and all of said counterparts, when
taken together, shall be deemed to constitute one and the same instrument.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
FIRST AMENDMENT TO CSK AUTO, INC. CREDIT AGREEMENT
A-2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the date first above written.
CSK AUTO, INC.
By: /s/ James G. Bazlen
----------------------------------------
Name: James G. Bazlen
Title: President
THE CHASE MANHATTAN BANK,
as Administrative Agent and a Lender
By: /s/ William P. Rindfuss
----------------------------------------
Name: William P. Rindfuss
Title: Vice President
AMARA-1 FINANCE, LTD.
By: /s/ Andrew Wignall
----------------------------------------
Name: Andrew Ian Wignall
Title: Director
BANK POLSKA KASA OPIEKI S.A. - PEKAO
GROUP S.A.,
New York Branch
By: /s/ William A. Shea
----------------------------------------
Name: William A. Shea
Title: Vice President, Senior Lending
Officer
FIRST AMENDMENT TO CSK AUTO, INC. CREDIT AGREEMENT
A-3
<PAGE> 4
CHL LOAN TRADING
By:
----------------------------------------
Name:
Title:
CITIBANK, N.A.
By: /s/ Hans L. Christensen
----------------------------------------
Name: Hans L. Christensen
Title: Vice President
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company, its
Investment Manager
By: /s/ TCW Asset Management Company
----------------------------------------
Name:
Title:
DLJ CAPITAL FUNDING, INC.
By: /s/ Stephen P. Hickey
----------------------------------------
Name: Stephen P. Hickey
Title: Managing Director
FIRST AMENDMENT TO CSK AUTO, INC. CREDIT AGREEMENT
--------------------------------------------------
A-4
<PAGE> 5
BANKBOSTON, N.A.
By: /s/ Diane J. Exter
----------------------------------------
Name: Diane J. Exter
Title: Managing Director
FLEET BANK, NATIONAL ASSOCIATION
By: /s/ James C. Silva
----------------------------------------
Name: James C. Silva
Title: Assistant Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ James E. Urban
----------------------------------------
Name: James E. Urban
Title: Authorized Signer
LEHMAN COMERCIAL PAPER INC.
By: /s/ Michele Swanson
----------------------------------------
Name: Michele Swanson
Title: Authorized Signatory
FIRST AMENDMENT TO CSK AUTO, INC. CREDIT AGREEMENT
A-5
<PAGE> 6
MERRILL LYNCH PRIME RATE PORTFOLIO,
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By: /s/ Anne McCarthy
----------------------------------------
Name: Anne McCarthy
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ Anne McCarthy
----------------------------------------
Name: Anne McCarthy
Title: Authorized Signatory
ML CBO IV (CAYMAN) LTD.
By: /s/ James Dondero
----------------------------------------
Name: James Dondero, CPA, CFA
Title: President, Protective Asset
Management. L.L.C.
NATIONAL BANK OF CANADA, A CANADIAN CHARTERED
BANK, NEW YORK BRANCH
By: /s/ Thomas H. Hopkins
----------------------------------------
Thomas H. Hopkins
Vice President
/s/ Glenn S. Borroughs
----------------------------------------
Name: Glenn S. Borroughs
Title: Vice President
FIRST AMENDMENT TO CSK AUTO, INC. CREDIT AGREEMENT
A-6
<PAGE> 7
NATIONAL WESTMINSTER BANK, PLC
By: /s/ David Yewer
----------------------------------------
Name: David Yewer
Title: Senior Vice President
PRIME INCOME TRUST
By: /s/ Rafael Scolari
----------------------------------------
Name: Rafael Scolari
Title: V.P. Portfolio Manager
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS, B.V.
By: Chancellor LGT Senior Secured Management
Inc. as Portfolio Advisor
By: /s/ Christopher E. Jansen
----------------------------------------
Name: Christopher E. Jansen
Title: Managing Director
SENIOR DEBT PORTFOLIO,
By: Boston Management and Research,
as Investment Advisor
By: /s/ Scott H. Page
----------------------------------------
Name: Scott H. Page
Title: Vice President
FIRST AMENDMENT TO CSK AUTO, INC. CREDIT AGREEMENT
A-7
<PAGE> 8
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ Van Kampen American Capital
----------------------------------------
Name:
Title:
FIRST AMENDMENT TO CSK AUTO, INC. CREDIT AGREEMENT
A-8
<PAGE> 1
Exhibit 4.02
AMENDMENT NO. 2, dated as of July 23, 1997 (this "Amendment"), to and
of the Credit Agreement, dated as of October 30, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"; terms used
herein and not otherwise defined herein are used herein as therein defined),
among CSK AUTO, INC., an Arizona corporation (the "Company"), the several
lenders from time to time parties thereto (the "Lenders"), and THE CHASE
MANHATTAN BANK, a New York banking corporation, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the Company has requested that the Lenders and the
Administrative Agent consent to certain matters regarding certain provisions of
the Credit Agreement; and
WHEREAS, the Lenders party hereto and the Administrative Agent are
willing to consent to such matters and to amend the Credit Agreement, but only
on, and subject to, the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual premises and mutual
agreements contained herein and for other valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Company, the Lenders party
hereto and the Administrative Agent hereby agree as follows:
SECTION 1. AMENDMENT TO SUBSECTION 8.9 (DEBT TO EBITDA) OF THE CREDIT
AGREEMENT. Subsection 8.9 is hereby amended by deleting, in its entirety, the
first proviso thereof and substituting the following therefor: "PROVIDED, THAT
(i) FOR THE FIRST FISCAL QUARTER SET FORTH BELOW, CONSOLIDATED EBITDA FOR THE
PERIOD OF FOUR FISCAL QUARTERS ENDING ON THE LAST DAY OF SUCH FISCAL QUARTER
SHALL BE DEEMED TO BE THE SUM OF THE CONSOLIDATED EBITDA FOR SUCH FISCAL
QUARTER PLUS THE CONSOLIDATED EBITDA FOR THE IMMEDIATELY PRECEDING FISCAL
QUARTER, MULTIPLIED BY TWO, AND (ii) FOR THE SECOND FISCAL QUARTER SET FORTH
BELOW, CONSOLIDATED EBITDA FOR THE PERIOD OF FOUR FISCAL QUARTERS ENDING ON THE
LAST DAY OF SUCH FISCAL QUARTER SHALL BE DEEMED TO BE THE SUM OF THE
CONSOLIDATED EBITDA FOR SUCH FISCAL QUARTER PLUS THE CONSOLIDATED EBITDA FOR
THE TWO IMMEDIATELY PRECEDING FISCAL QUARTERS, MULTIPLIED BY FOUR THIRDS;".
SECTION 2. EFFECTIVENESS. This Amendment shall become effective as of
May 1, 1997 upon the date that the Administrative Agent shall have received
counterparts of this Amendment, duly executed by the Company, the Required
Lenders and the Administrative Agent.
SECTION 3. CONTINUING EFFECT OF CREDIT AGREEMENT. Except for the
amendments expressly provided herein, the Credit Agreement shall continue to
be, and shall remain, in full force and effect in accordance with its terms.
SECTION 4. COUNTERPARTS. This Amendment may be executed in any number
of counterparts by the parties hereto, and all of said counterparts, when taken
together, shall be deemed to constitute one and the same instrument.
<PAGE> 2
2
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
CSK AUTO, INC.
By: /s/ James G. Bazlen
----------------------------------
Name: James G. Bazlen
Title: President & C.O.O.
THE CHASE MANHATTAN BANK, as
Administrative Agent and a Lender
By: /s/ William P. Rindfuss
---------------------------------
Name: William P. Rindfuss
Title: Vice President
AMARA-1 FINANCE, LTD.
By: /s/ Andrew Ian Wignall
---------------------------------
Name: Andrew Ian Wignall
Title: Director
BANK POLSKA KASA OPIEKI S.A. -
PEKAO GROUP S.A., New York Branch
By: /s/ William A. Shea
----------------------------------
Name: William A. Shea
Title: Vice President,
Senior Leading Officer
<PAGE> 3
3
CHL LOAN TRADING
By:
-----------------------------
Name:
Title:
CITIBANK, N.A.
By: /s/ Hans L. Christensen
-----------------------------
Name: Hans L. Christensen
Title: Vice President
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company, its
Investment Manager
By: /s/ Justin L. Driscoll
-----------------------------
Name: Justin L. Driscoll
Title: Senior Vice President
DLJ CAPITAL FUNDING, INC.
By: /s/ Stephen P. Hickey
-----------------------------
Name: Stephen P. Hickey
Title: Managing Director
BANKBOSTON, N.A.
By: /s/ Diane J. Exter
-----------------------------
Name: Diane J. Exter
Title: Managing Director
<PAGE> 4
4
FLEET BANK, NATIONAL ASSOCIATION
By: /s/ James C. Silva
---------------------------------
Name: James C. Silva
Title: AVP
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ John E. Urban
---------------------------------
Name: John E. Urban
Title: Authorized Signer
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Michele Swanson
---------------------------------
Name: Michele Swanson
Title: Authorized Signatory
MERRILL LYNCH PRIME RATE PORTFOLIO,
By: Merrill Lynch Asset
Management, L.P., as
Investment Advisor
By: /s/ Anne McCarthy
---------------------------------
Name: Anne McCarthy
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Anne McCarthy
---------------------------------
Name: Anne McCarthy
Title: Authorized Signatory
<PAGE> 5
5
ML CBO IV (CAYMAN) LTD.
By Protective Asset Management, L.L.C.
As Collateral Manager
By: /s/ James Dondero
---------------------------------
Name: James Dondero CPA, CFA
Title: President
Protective Asset Management, L.L.C.
NATIONAL BANK OF CANADA, A
CANADIAN CHARTERED BANK, NEW YORK
BRANCH
By: /s/ Thomas H. Hopkins
---------------------------------
Name: Thomas H. Hopkins
Title: Vice President
By: /s/ Beth Pease
---------------------------------
Name: Beth Pease
Title: Vice President
NATIONAL WESTMINSTER BANK, PLC
By: /s/ W. Wakefield Smith
---------------------------------
Name: W. Wakefield Smith
Title: Vice President
PRIME INCOME TRUST
By: /s/ Rafael Scolari
---------------------------------
Name: Rafael Scolari
Title: V.P. Portfolio Manager
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS, B.V.
By: Chancellor LGT Senior Secured Management, Inc.
as Portfolio Advisor
By: /s/ Christopher E. Jansen
---------------------------------
Name: Christopher E. Jansen
Title: Managing Director
<PAGE> 6
6
SENIOR DEBT PORTFOLIO,
By: Boston Management and
Research, as Investment
Advisor
By: /s/ Scott H. Page
-------------------------------
Name: Scott H. Page
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ Van Kampen American Capital
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 11.01
CSK AUTO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------- -------------
AUGUST 3, 1997 JULY 28, 1996
---------------- -------------
<S> <C> <C>
Income (loss) before income taxes $ 3,693 $ 3,526
Fixed charges
Interest expense 8,406 3,520
Interest portion of rentals 4,878 4,294
------- -------
Total fixed charges 13,284 7,814
------- -------
Earnings before income taxes and fixed charges $16,977 $11,340
Ratio of earnings to fixed charges (1) 1.28 1.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS, CONDENSED CONSOLIDATED BALANCE SHEET AND
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWENTY-SIX WEEKS
ENDED AUGUST 3, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1998
<PERIOD-START> FEB-03-1997
<PERIOD-END> AUG-03-1997
<CASH> 6,598
<SECURITIES> 0
<RECEIVABLES> 37,426
<ALLOWANCES> (2,307)
<INVENTORY> 280,909
<CURRENT-ASSETS> 338,481
<PP&E> 163,201
<DEPRECIATION> (86,890)
<TOTAL-ASSETS> 462,560
<CURRENT-LIABILITIES> 203,450
<BONDS> 0
0
1
<COMMON> 1
<OTHER-SE> (58,162)
<TOTAL-LIABILITY-AND-EQUITY> 462,560
<SALES> 419,557
<TOTAL-REVENUES> 419,557
<CGS> 242,246
<TOTAL-COSTS> 400,441
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,548
<INCOME-PRETAX> 2,568
<INCOME-TAX> 988
<INCOME-CONTINUING> 1,580
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,580
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
