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41
INFLATION AND SEASONALITY
For the last three fiscal years, we have been successful, in many cases, in reducing the effects of merchandise cost increases
principally by taking advantage of vendor incentive programs, economies of scale resulting from increased volume of purchases and
selective forward buying. To the extent our acquisition cost increased due to base commodity price increases industry-wide, we have
typically been able to pass along these increased costs through higher retail prices for the affected products. As a result, we do not
believe our operations have been materially, adversely affected by inflation.
To some extent, our business is seasonal primarily as a result of the impact of weather conditions on customer buying patterns. While
we have historically realized operating profits in each quarter of the year, our store sales and profits have historically been higher in
the second and third quarters (April through September) than in the first and fourth quarters (October through March) of the year.
QUARTERLY RESULTS
The following table sets forth certain quarterly unaudited operating data for fiscal 2011 and 2010. The unaudited quarterly
information includes all adjustments which management considers necessary for a fair presentation of the information shown. The
unaudited operating data presented below should be read in conjunction with our consolidated financial statements and related notes
included elsewhere in this annual report, and the other financial information included therein.
Comparable store sales 5.7% 4.4% 4.8% 3.3%
Sales $ 1,382,738 $ 1,479,318 $ 1,535,453 $ 1,391,307
Gross profit 669,781 718,661 754,210 694,697
Former CSK officer clawback - - - (2,798)
Operating income 196,437 222,368 241,050 206,911
Write-off of debt issuance costs (21,626) - - -
Termination of interest rate swap agreements (4,237) - - -
Net income 102,474 133,772 148,439 122,988
Earnings per share – basic $ 0.73 $ 0.97 $ 1.12 $ 0.96
Earnings per share – assuming dilution $ 0.72 $ 0.96 $ 1.10 $ 0.94
Comparable store sales 6.9% 7.9% 11.1% 9.2%
Sales $ 1,280,067 $ 1,381,241 $ 1,425,887 $ 1,310,330
Gross profit 618,347 672,633 693,415 636,597
Legacy CSK DOJ investigation charge - 15,000 5,900 -
Operating income 168,445 181,164 199,031 164,136
Gain on settlement of note receivable - - - 11,639
Net income 97,476 99,595 116,542 105,760
Earnings per share – basic $ 0.71 $ 0.72 $ 0.84 $ 0.76
Earnings per share – assuming dilution $ 0.70 $ 0.71 $ 0.82 $ 0.74
Quarter
Quarter
Quarter
Quarter
Fiscal 2011
First
Second
Third
Fourth
(In thousands, except per share and comparable store sales data)
Fiscal 2010
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
(In thousands, except per share and comparable store sales data)
RECENT ACCOUNTING PRONOUNCEMENTS
In January of 2010, the Financial Accounting Standards Board (―FASB‖) issued Accounting Standards Update (―ASU‖) No. 2010-06,
Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (―2010-06‖). ASU
2010-06 amends Subtopic 820-10, requiring additional disclosures regarding fair value measurements such as transfers in and out of
Levels 1 and 2, as well as separate disclosures about activity relating to Level 3 measurements. ASU 2010-06 clarifies existing
disclosure requirements related to the level of disaggregation and input valuation techniques. The updated guidance was effective for
interim and annual periods beginning after December 15, 2009, with the exception of the new Level 3 activity disclosures, which were
effective for interim and annual periods beginning after December 15, 2010. The application of this guidance affected disclosures
only and therefore, did not have an impact on our consolidated financial condition, results of operations or cash flows.
In May of 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and International Financial Reporting Standards (―2011-04‖). ASU 2011-04 was issued to bring the
definition of fair value, the guidance for fair value measurement and the disclosure requirements under U.S. GAAP and International
Financial Reporting Standards (―IFRS‖) in line with one another. ASU 2011-04 also enhanced the disclosure requirements for
FORM 10-K