-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Chma3IHjMSbihMjw69GJVMdCSWMY0mq3O3TvC7TCEOl7zd6tq+q7OxaBfRhUwBs7 PLcgliybHkoz7lnP+S55Dg== 0000950142-07-001333.txt : 20070607 0000950142-07-001333.hdr.sgml : 20070607 20070606212559 ACCESSION NUMBER: 0000950142-07-001333 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20070607 DATE AS OF CHANGE: 20070606 GROUP MEMBERS: KARSCH CAPITAL MANAGEMENT, LP GROUP MEMBERS: KARSCH MANAGEMENT GP, LLC GROUP MEMBERS: MICHAEL A. KARSCH SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CSK AUTO CORP CENTRAL INDEX KEY: 0001051848 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 860765798 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-55039 FILM NUMBER: 07905273 BUSINESS ADDRESS: STREET 1: 645 E MISSOURI AVENUE CITY: PHOENIX STATE: AZ ZIP: 85012 BUSINESS PHONE: 6022659200 MAIL ADDRESS: STREET 1: 645 E MISSOURI AVENUE CITY: PHOENIX STATE: AZ ZIP: 85012 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KARSCH CAPITAL MANAGEMENT LP CENTRAL INDEX KEY: 0001167235 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 110 EAST 59TH STREET STREET 2: 22ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 sc13da3_csk.txt AMENDMENT NO. 3 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D/A Under the Securities Exchange Act of 1934 (Amendment No. 3) CSK AUTO CORPORATION - ------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.01 per share - ------------------------------------------------------------------------------- (Title of Class of Securities) 125965103 - ------------------------------------------------------------------------------- (CUSIP Number) Michael A. Karsch c/o Karsch Capital Management, LP 110 East 59th Street 22nd Floor New York, NY 10022 (212) 507-9782 - ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) JUNE 7, 2007 - ------------------------------------------------------------------------------- (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1 (e), 13d-1(f) or 13d-1 (g), check the following box. This box should not be checked off. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the NOTES). ================================================================================ - --------------------- ----------------- CUSIP No. 125965103 Schedule 13D Page 2 of 6 - --------------------- ----------------- - -------------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Karsch Capital Management, LP - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- ------------------------------------------------ SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED 4,082,730 ------------------------------------------------ BY EACH REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- ------------------------------------------------ WITH 10 SHARED DISPOSITIVE POWER 4,082,730 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,082,730 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.3* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN, IA - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT - --------------------- ----------------- CUSIP No. 125965103 Schedule 13D Page 3 of 6 - --------------------- ----------------- - -------------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Karsch Management GP, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- ------------------------------------------------ SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED 4,082,730 ------------------------------------------------ BY EACH REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- ------------------------------------------------ WITH 10 SHARED DISPOSITIVE POWER 4,082,730 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,082,730 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.3* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT - --------------------- ----------------- CUSIP No. 125965103 Schedule 13D Page 4 of 6 - --------------------- ----------------- - -------------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Michael A. Karsch - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- ------------------------------------------------ SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED 4,082,730 ------------------------------------------------ BY EACH REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- ------------------------------------------------ WITH 10 SHARED DISPOSITIVE POWER 4,082,730 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,082,730 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.3* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT - --------------------- ----------------- CUSIP No. 125965103 Schedule 13D Page 5 of 6 - --------------------- ----------------- This Amendment No. 3 ("Amendment") amends and supplements the Schedule 13D filed on October 10, 2006 by Karsch Capital Management, LP ("Karsch Capital"), Karsch Management GP, LLC and Michael A. Karsch (collectively, the "Reporting Persons") as amended by Amendment No. 1 to Schedule 13D on October 24, 2006 and Amendment No. 2 to Schedule 13D on February 20, 2007 (as amended, the "Schedule 13D"), relating to the shares of common stock, par value $.01 per share, of CSK Auto Corporation, a Delaware corporation (the "Issuer"), in the following respects only: ITEM 4. PURPOSE OF TRANSACTION. Item 4 of the Schedule 13D is amended to add the following information: On June 7, 2007, Karsch Capital sent a letter to the Board in which it again urged the Board to undertake a review of the Issuer's strategic alternatives but also indicated that a delay in consummating a sale transaction might be advisable if the Board retains a new CEO that Karsch believes has the expertise to effectuate an improvement in the operating performance of the Issuer and consequently improve the sale price achievable in a strategic transaction involving the Issuer. A copy of Karsch Capital's letter to the Board dated June 7, 2007, is attached to this Schedule 13D as Exhibit 5. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Item 7 of Schedule 13D is hereby amended to add the following: Exhibit 5 Letter dated June 7, 2007 from Karsch Capital to the Board of Directors of CSK Auto Corporation - --------------------- ----------------- CUSIP No. 125965103 Schedule 13D Page 6 of 6 - --------------------- ----------------- S I G N A T U R E S After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete, and correct. Date: June 7, 2007 KARSCH CAPITAL MANAGEMENT, LP KARSCH MANAGEMENT GP, LLC By: Karsch Management GP, LLC General Partner By: /s/ Michael A. Karsch By: /s/ Michael A. Karsch ------------------------ ------------------------ Michael A. Karsch Michael A. Karsch Managing Member Managing Member /s/ Michael A. Karsch ------------------------ Michael A. Karsch EX-99 2 ex5_sc13da3.txt EXHIBIT 5 EXHIBIT 5 --------- June 7, 2007 CSK Auto Corporation c/o Legal Department, Randi V. Morrison Attention: Board of Directors 645 East Missouri Avenue, Suite 400 Phoenix, AZ 85012 To The Board of Directors of CSK Auto Corporation ("CSK Auto" or the "Company"): Karsch Capital Management, LP(1), as a holder of 9.32% of the outstanding common stock of CSK Auto's common stock, has continued to monitor the activities of the Company and its Board of Directors very closely. To this end, we urge the Board to take action in the near future that demonstrates a genuine commitment to enhancing shareholder value. In particular, we believe the Board should conduct a review of strategic alternatives in which it weighs the relative merits of selling the Company versus giving a new management team time to turn around the business. It is increasingly evident that, under the right management team, such a turnaround should be relatively easy to achieve because of the tremendous opportunity to improve CSK Auto's operating margins. We continue to believe a sale of the company would be successful for the following two reasons (see our letter to the Board, dated October 9, 2006, for more detail): 1) The company is highly attractive to other publicly-traded auto parts retailers given their historical success with mergers, significant synergies that could be achieved from a transaction and the extreme difficulty in replicating CSK Auto's West Coast real estate presence; 2) CSK Auto is highly attractive to private equity firms given historically successful deals in the auto parts industry, the highly predictable and strong free cash flow generation characteristics of the business, robust capital markets and very attractive valuation. As indicated in our letter to the Board dated February 20, 2007 we have received numerous inquiries about CSK Auto that lead us to believe that there is genuine interest from private equity firms in acquiring the Company. We believe CSK Auto's takeout value is at a substantial premium to today's price. However, having reviewed the recently released financial statements in which historical operating results were revised upwardly, we recognize the merit in considering the alternative of turning around the Company under a new management team and potentially receiving a much greater premium. With the leadership and vision of an above-average CEO, we believe CSK Auto could execute a very achievable operating margin of 9% in 2009 and retain its current 8x forward multiple on our EBITDA projections, which would result in a stock price well above $30 per share over the next 18 months. Depressed operating margins should swiftly return to 2004 operating margin levels of 8.3% given that the unsuccessful integration of Murray's has temporarily reduced EBITDA from that unit and prevented the full realization of synergies, the 2006 EBITDA includes one-time integration costs, associates have been distracted by significant senior management turnover and a commensurate lack of direction, and difficult trends in the auto parts industry in 2006 resulted in de-leverage of fixed costs. Under the direction of a high quality CEO, the company should be able to surpass the 8.3% operating margin levels it generated in 2004 under a subpar management team given that its category management efforts are inferior to competitors, direct sourcing and private label penetration stand below peers, buying from vendors can be improved, sales mix can be shifted more toward higher-margin hard parts versus lower-margin discretionary and front-end product, and below-peer sales per store can be enhanced through better merchandising, marketing, adjacencies, attachment rates and store-level - -------- (1) Karsch Capital Management, LP ("KCM"), a Delaware limited partnership, is an investment adviser registered under the Investment Advisers Act of 1940, as amended. KCM serves as the management company to three Delaware limited partnerships and serves as the investment manager to three Cayman Islands exempted companies. KCM is also an investment adviser to several managed accounts. compensation programs. Lastly, we believe an 8x forward EBITDA multiple is very reasonable given the quality of the auto parts business and the valuation of relevant competitors. Auto parts is a large, fragmented, predictable industry with very little influence from Wal-Mart and rational, margin-focused companies that do not use price as a weapon to gain market share, all of which beget high margins, returns on capital and free cash flow. This unique type of industry backdrop provides turnarounds with a greater probability of success and less risk whereas industries with heavy promotional activity such as home furnishings have witnessed a number of failed turnarounds. A sale of CSK Auto may still be the best option for shareholders, depending on where the bids fall, given the time value benefit of receiving a solid premium today versus an even better premium in 18 months, the execution risk that a new CEO could fail to improve operating margins, and the additional returns for CSK Auto shareholders if they were to possibly receive stock in one of the high-quality strategic buyers, whose stock should appreciate significantly in the years following the transaction given the notable earnings accretion and strategic value. Therefore, we believe a strategic review should be initiated so that both options can be properly considered and evaluated. We believe the board has a very poor track record given two accounting probes, a near bankruptcy and a stock that has dramatically underperformed its key competitors, and therefore, we cannot presume for certain that the Board can execute hiring a high quality CEO. We expect to meet the new CEO immediately after that person is hired. If the Board hires a CEO that we do not believe is adequate for the turnaround, and does not conduct a strategic review, we will strongly consider all of our options including a proxy fight to replace some or all members of the Board. Sincerely, /s/ Michael Karsch - --------------------- Michael Karsch -----END PRIVACY-ENHANCED MESSAGE-----