Exhibit 99.1
CSK AUTO CORPORATION ANNOUNCES ENTRY INTO CREDIT AGREEMENT WAIVER AND OTHER DEVELOPMENTS WITH
RESPECT TO FINANCING, AND PROVIDES UPDATE ON ACCOUNTING INVESTIGATION AND PRELIMINARY FISCAL 2005
FINANCIAL INFORMATION
PHOENIX, AZ, May 22, 2006 — CSK Auto Corporation (NYSE: CAO) announced today that its wholly owned
subsidiary, CSK Auto, Inc., entered into a temporary waiver (“Waiver”) for a stated time period
with the lenders under its Second Amended and Restated Credit Agreement (the “Credit Agreement”)
with respect to the stated time period under the Credit Agreement to deliver the Company’s
financial statements for its fiscal year 2005 and first quarter of fiscal 2006. The Company, which
previously announced the delay of its filing with the SEC of its annual report on Form 10-K for the
fiscal year 2005, requested the Waiver to provide additional time to complete its fiscal 2005
financial statements and required assessment of internal control over financial reporting and its
first quarter fiscal 2006 financial statements in light of the ongoing investigation by the Audit
Committee of the Company’s Board of Directors into certain accounting errors and irregularities as
described in the Company’s March 27, 2006 press release and Form 8-K.
The Waiver provides for the Company’s continued access to borrowings under its revolving Credit
Agreement, as well as a waiver of any default or event of default under the Credit Agreement that
might arise as a result of any necessary restatement of prior financial statements provided such
restatements are within the scope of the matters discussed in the Company’s prior press release.
The Company incurred no fees in connection with the Waiver. The Company has previously stated that
it expects that its financial results for each of the two fiscal years 2003 and 2004, selected
consolidated financial data for each of the five fiscal years 2001 through 2005 and interim
financial information for each of its quarters in fiscal year 2004 and for the first three quarters
of fiscal 2005 will need to be restated in order to account properly for the matters identified in
connection with the investigation. Accordingly, as previously indicated, the above previously
issued financial statements and information should no longer be relied upon.
In addition to the Credit Agreement, the indentures governing certain of CSK Auto, Inc.’s other
outstanding indebtedness contain SEC filing obligations with respect to the Company’s annual and
quarterly financial information. As previously announced as being anticipated, the Company has
received notices of default under these indentures. More specifically, the Company has received
notices of default under the indentures covering $100 million principal amount of 4 5/8%
exchangeable notes and $125 million principal amount of 3 3/8% exchangeable notes. The holders of
these exchangeable notes will have the right to accelerate payment of their notes if the Company
does not file its fiscal 2005 financial statements by July 2, 2006. The Company also received a
notice from the trustee under the indenture covering $225 million principal amount of its 7% senior
notes (the “7% indenture”) alleging a default under such indenture, but has advised the trustee
that the 7% indenture does not provide for a default due to a delay in filing financial statements
with the SEC or the trustee.
In view of these developments and the fact that, based on the present status of the investigation,
it now appears unlikely that the Company will file its financial statements with the SEC prior to
July 2, 2006, the Company is in discussions for alternative financing arrangements in the event any
of its outstanding indebtedness is accelerated. Based on discussions to date and in light of the
Company’s strong balance sheet and cash flow, the Company believes that alternative financing will
be available, if necessary. The Company has obtained a “highly confident” letter from a major
investment banking firm indicating a high degree of confidence that the Company can secure
alternative financing arrangements, if necessary. No fees were incurred by the Company in
connection with obtaining this letter.
Preliminary Financial Highlights
Due to the aforementioned investigation, the Company will continue to defer the release of its
financial results for the fourth quarter and full year fiscal 2005 and expects to defer release of
its financial results for the first quarter of 2006 ended April 30, 2006. However, based on
preliminary information, the Company currently expects to report free cash flow of approximately
$121 million (a non-GAAP measure, which consists of net cash provided by operating activities of
approximately $154 million less capital expenditures of $33 million) for fiscal 2005 relative to
the Company’s prior projected free cash flow estimate of approximately $85 million. The increase
over prior projections resulted from increased cash flow from operations primarily due to lower
than projected inventory levels and a one-time cash flow benefit of approximately $30 million due
to the accelerated collection of fiscal 2005 vendor allowances. Pretax income for fiscal 2005 is
expected to be in the range of $60 million to $72 million, reflecting our current estimate of the
effect the accounting errors and irregularities noted in the investigation to date will have on our
fiscal 2005 results, none of which will impact cash flow information described above. Pretax income
reflects depreciation and amortization of approximately $35 million and interest expense of
approximately $33 million. The foregoing information is preliminary and subject to completion of
the Audit Committee’s investigation and the audit of our financial statements for fiscal 2005.
The Company also reports the following preliminary net sales results for the first quarter of
fiscal 2006 ended April 30, 2006. Total sales for the first quarter of fiscal 2006 were $454.1
million compared to $397.2 million for the first quarter of fiscal 2005. All of the increase in
first quarter sales was attributable to sales from Murray’s Discount Auto Stores, which the Company
acquired in December 2005. Excluding sales from the Murray’s stores, same store sales for the
first quarter of fiscal 2006 declined 2.3%, consisting of an increase of 5.6% in commercial same
store sales and a decline of 4.0% in retail same store sales. The Company believes that its fiscal
2006 first quarter sales have been negatively impacted by areas of unusually wet weather and
persistently higher gasoline prices, particularly in the western United States where many of the
Company’s stores are located. Ten net new stores were opened in the first quarter and we anticipate
opening twelve net new stores in the second quarter of 2006. As of May 16, 2006, CSK Auto, Inc. had
approximately $132 million of availability under its Credit Agreement with $66 million in
borrowings under the revolving credit facility and $32 million in letters of credit outstanding
under its Credit Agreement.
The financial highlights presented in this press release are preliminary and are subject to change
based on the completion of the Audit Committee investigation, the completion of our fiscal 2005
annual and 2006 first quarter financial statements and the completion of the independent audit of
our fiscal 2005 financial statements. This data should not be viewed as a substitute for full
financial statements.
Status of Audit Committee Investigation
At this time, no facts have been developed that would indicate that any of the following items
would have a material adverse effect on historical revenues or cash flows or on the Company’s
ongoing or future business operations. As previously announced, the Company’s Audit Committee, with
the assistance of independent counsel and a separate accounting firm, is conducting an
investigation of accounting errors and irregularities that must be completed before our financial
statements and reports can be finalized and issued. Although that investigation is ongoing, to
date, the Audit Committee has not discovered any facts indicating that there are errors or
irregularities material in amount outside of the inventory and vendor allowance areas. Results of
the investigation to date, which are not yet final, indicate that the probable maximum
overstatements relative to the Company’s previously filed
October 31, 2005
balance sheet are as follows: In-transit Inventory — $28 million, Other Inventory Accounts
— $40 million and Vendor Allowances — $12 million.
In addition, the Company has identified in the course of its year-end close process an estimated
overstatement of between $3 million and $7 million of store surplus fixtures and supplies,
the majority of which appears to have accumulated in periods prior to fiscal 2003.
As noted in previous releases, the Company will be evaluating whether any of the matters identified
in the course of the Audit Committee’s investigation were the result of one or more material
weaknesses in its internal controls in addition to those previously reported in its fiscal 2004
Form 10-K. Based on current information, the Company would expect to identify additional material
weaknesses in its internal controls at January 29, 2006. The Company will conclude its evaluation
and report its findings in this regard when it files its fiscal 2005 Form 10-K.
Engagement of Evercore Financial Advisors L.L.C.
The Company also announced that it engaged Evercore Financial Advisors L.L.C. as an advisor to
assist the Company in its dealings with its debt holders and related matters.
Annual Meeting of Stockholders
The Company expects to announce the date of its 2006 Annual Stockholders’ Meeting as soon as
practicable after the filing of its 2005 Form 10-K.
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. As indicated
previously and above, additional inquiry and analysis is being conducted by the Company and the
Audit Committee before any definitive conclusions can be reached as to the time periods and amounts
involved relative to the accounting errors and irregularities that have been identified. In
addition, there can be no assurance that additional matters will not be identified that require
further analysis relative to their impact on previously issued financial statements or that the
amounts involved and nature and extent of the accounting errors and irregularities may not
ultimately differ materially from that described above.
CSK Auto Corporation is the parent company of CSK Auto, Inc., a specialty retailer in the
automotive aftermarket. As of April 30, 2006, the Company operated 1,288 stores in 22 states under
the brand names Checker Auto Parts, Schuck’s Auto Supply, Kragen Auto Parts and Murray’s Discount
Auto Stores.
Investor Contact: Brenda Bonn — Manager, Investor Relations 602-631-7483
Media Contact: Ashton Partners — Mike Banas 312-553-6704