FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 |
For the Quarterly Period Ended November 1, 2008
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File No. 001-31463
DICKS SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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16-1241537 |
(State or Other Jurisdiction of
incorporation or Organization)
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(I.R.S. Employer
Identification No.) |
300 Industry Drive, RIDC Park West, Pittsburgh, Pennsylvania 15275
(Address of Principal Executive Offices)
(724) 273-3400
(Registrants Telephone Number, including Area Code)
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 a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act)
Yes o No þ
The number of shares of common stock, par value $0.01 per share, and Class B common stock, par
value $0.01 per share, outstanding as of November 21, 2008 was
85,726,691 and 26,223,868, respectively.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DICKS SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME UNAUDITED
(Amounts in thousands, except per share data)
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13 Weeks Ended |
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39 Weeks Ended |
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November 1, |
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November 3, |
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November 1, |
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November 3, |
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2008 |
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2007 |
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2008 |
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2007 |
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Net sales |
|
$ |
924,191 |
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$ |
838,831 |
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$ |
2,922,596 |
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$ |
2,675,806 |
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Cost of goods sold, including occupancy
and distribution costs |
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671,091 |
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600,168 |
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2,090,731 |
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1,894,063 |
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GROSS PROFIT |
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253,100 |
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238,663 |
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831,865 |
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781,743 |
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Selling, general and administrative expenses |
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228,861 |
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209,303 |
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686,495 |
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620,059 |
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Pre-opening expenses |
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7,541 |
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7,678 |
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16,146 |
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17,518 |
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Merger and integration costs |
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3,096 |
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5,975 |
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INCOME FROM OPERATIONS |
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13,602 |
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21,682 |
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123,249 |
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144,166 |
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Interest expense, net |
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2,902 |
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1,725 |
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6,989 |
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8,560 |
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Gain on sale of asset |
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(2,356 |
) |
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INCOME BEFORE INCOME TAXES |
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10,700 |
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19,957 |
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118,616 |
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135,606 |
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Provision for income taxes |
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3,307 |
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7,724 |
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49,334 |
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53,741 |
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NET INCOME |
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$ |
7,393 |
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|
$ |
12,233 |
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$ |
69,282 |
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$ |
81,865 |
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EARNINGS PER COMMON SHARE: |
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Basic |
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$ |
0.07 |
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$ |
0.11 |
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$ |
0.62 |
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$ |
0.75 |
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Diluted |
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$ |
0.06 |
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$ |
0.10 |
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$ |
0.59 |
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$ |
0.71 |
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING: |
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Basic |
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111,906 |
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110,804 |
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111,556 |
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108,827 |
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Diluted |
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116,774 |
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118,305 |
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116,979 |
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116,092 |
|
See accompanying notes to unaudited consolidated financial statements.
3
DICKS SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
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November 1, |
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February 2, |
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2008 |
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2008 |
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(unaudited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
41,646 |
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$ |
50,307 |
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Accounts receivable, net |
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85,872 |
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|
62,035 |
|
Income taxes receivable |
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|
31,521 |
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Inventories, net |
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1,142,233 |
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|
887,364 |
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Prepaid expenses and other current assets |
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45,579 |
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50,274 |
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Deferred income taxes |
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18,360 |
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|
19,714 |
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Total current assets |
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1,365,211 |
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1,069,694 |
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Property and equipment, net |
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550,070 |
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|
531,779 |
|
Construction in progress leased facilities |
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1,627 |
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|
23,744 |
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Intangible assets |
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|
99,000 |
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|
80,038 |
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Goodwill |
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303,736 |
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304,366 |
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Other assets: |
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Deferred income taxes |
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25,908 |
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|
6,366 |
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Investments |
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|
1,905 |
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|
3,225 |
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Other |
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|
22,726 |
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|
16,423 |
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Total other assets |
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50,539 |
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|
26,014 |
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TOTAL ASSETS |
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$ |
2,370,183 |
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$ |
2,035,635 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
|
$ |
509,214 |
|
|
$ |
365,750 |
|
Accrued expenses |
|
|
210,780 |
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|
|
228,816 |
|
Deferred revenue and other liabilities |
|
|
77,719 |
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|
104,549 |
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Income taxes payable |
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|
62,583 |
|
Current portion of other long-term debt and capital leases |
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|
219 |
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|
250 |
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Total current liabilities |
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797,932 |
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|
761,948 |
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|
LONG-TERM LIABILITIES: |
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Senior convertible notes |
|
|
172,500 |
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|
172,500 |
|
Revolving credit borrowings |
|
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184,827 |
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Other long-term debt and capital leases |
|
|
8,441 |
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|
8,685 |
|
Non-cash obligations for construction in progress leased facilities |
|
|
1,627 |
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|
|
23,744 |
|
Deferred revenue and other long-term liabilities |
|
|
213,937 |
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|
180,238 |
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|
|
|
|
|
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|
Total long-term liabilities |
|
|
581,332 |
|
|
|
385,167 |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS EQUITY: |
|
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|
|
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Common stock |
|
|
857 |
|
|
|
848 |
|
Class B common stock |
|
|
262 |
|
|
|
263 |
|
Additional paid-in capital |
|
|
450,510 |
|
|
|
416,423 |
|
Retained earnings |
|
|
538,256 |
|
|
|
468,974 |
|
Accumulated other comprehensive income |
|
|
1,034 |
|
|
|
2,012 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
990,919 |
|
|
|
888,520 |
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|
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
|
$ |
2,370,183 |
|
|
$ |
2,035,635 |
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
4
DICKS SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME UNAUDITED
(Dollars in thousands)
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
|
|
November 1, |
|
|
November 3, |
|
|
November 1, |
|
|
November 3, |
|
|
|
2008 |
|
|
2007 |
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|
2008 |
|
|
2007 |
|
NET INCOME |
|
$ |
7,393 |
|
|
$ |
12,233 |
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|
$ |
69,282 |
|
|
$ |
81,865 |
|
OTHER COMPREHENSIVE (LOSS) INCOME: |
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|
|
|
|
|
|
|
|
|
|
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|
Unrealized (loss)
gain on
available-for-sale
securities, net of
tax |
|
|
(575 |
) |
|
|
763 |
|
|
|
(856 |
) |
|
|
1,406 |
|
Foreign currency
translation
adjustment, net of
tax |
|
|
(114 |
) |
|
|
112 |
|
|
|
(122 |
) |
|
|
174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME |
|
$ |
6,704 |
|
|
$ |
13,108 |
|
|
$ |
68,304 |
|
|
$ |
83,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
5
DICKS SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY UNAUDITED
(Dollars in thousands)
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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Accumulated |
|
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|
Class B |
|
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Additional |
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Other |
|
|
|
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Dollars |
|
|
Shares |
|
|
Dollars |
|
|
Capital |
|
|
Earnings |
|
|
Income |
|
|
Total |
|
BALANCE, February 3, 2007 |
|
|
79,382,554 |
|
|
$ |
794 |
|
|
|
26,787,680 |
|
|
$ |
268 |
|
|
$ |
302,235 |
|
|
$ |
315,453 |
|
|
$ |
1,800 |
|
|
$ |
620,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of
adoption of FIN 48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,515 |
) |
|
|
|
|
|
|
(1,515 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED BALANCE,
February
3, 2007 |
|
|
79,382,554 |
|
|
$ |
794 |
|
|
|
26,787,680 |
|
|
$ |
268 |
|
|
$ |
302,235 |
|
|
$ |
313,938 |
|
|
$ |
1,800 |
|
|
|
619,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange of Class B
common stock for
common stock |
|
|
480,200 |
|
|
|
5 |
|
|
|
(480,200 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options issued for
acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,117 |
|
|
|
|
|
|
|
|
|
|
|
9,117 |
|
Sale of common stock under
stock plan |
|
|
204,955 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
4,505 |
|
|
|
|
|
|
|
|
|
|
|
4,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
4,769,933 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
30,212 |
|
|
|
|
|
|
|
|
|
|
|
30,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit on convertible note
bond hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,811 |
|
|
|
|
|
|
|
|
|
|
|
2,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,036 |
|
|
|
|
|
|
|
155,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,039 |
|
|
|
|
|
|
|
|
|
|
|
29,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax benefit from exercise
of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,504 |
|
|
|
|
|
|
|
|
|
|
|
38,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment,
net of taxes of $87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134 |
|
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on securities
available-for-sale, net
of taxes
of $46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78 |
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, February 2, 2008 |
|
|
84,837,642 |
|
|
$ |
848 |
|
|
|
26,307,480 |
|
|
$ |
263 |
|
|
$ |
416,423 |
|
|
$ |
468,974 |
|
|
$ |
2,012 |
|
|
$ |
888,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange of Class B
common stock for
common stock |
|
|
83,612 |
|
|
|
1 |
|
|
|
(83,612 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock under
stock plan |
|
|
198,037 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2,984 |
|
|
|
|
|
|
|
|
|
|
|
2,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
605,838 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
6,970 |
|
|
|
|
|
|
|
|
|
|
|
6,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit on convertible note
bond hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,248 |
|
|
|
|
|
|
|
|
|
|
|
2,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,282 |
|
|
|
|
|
|
|
69,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,199 |
|
|
|
|
|
|
|
|
|
|
|
20,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax benefit from exercise
of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,686 |
|
|
|
|
|
|
|
|
|
|
|
1,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment,
net of taxes of $75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(122 |
) |
|
|
(122 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on securities
available-for-sale, net of
taxes
of $461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(856 |
) |
|
|
(856 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, November 1, 2008 |
|
|
85,725,129 |
|
|
$ |
857 |
|
|
|
26,223,868 |
|
|
$ |
262 |
|
|
$ |
450,510 |
|
|
$ |
538,256 |
|
|
$ |
1,034 |
|
|
$ |
990,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
6
DICKS SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended |
|
|
|
November 1, |
|
|
November 3, |
|
|
|
2008 |
|
|
2007 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
69,282 |
|
|
$ |
81,865 |
|
Adjustments to reconcile net income
to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
65,826 |
|
|
|
55,567 |
|
Deferred income taxes |
|
|
(17,901 |
) |
|
|
(12,920 |
) |
Stock-based compensation |
|
|
20,199 |
|
|
|
22,490 |
|
Excess tax benefit from stock-based compensation |
|
|
(1,537 |
) |
|
|
(34,606 |
) |
Tax benefit from exercise of stock options |
|
|
333 |
|
|
|
4,902 |
|
Tax benefit from convertible bond hedge |
|
|
2,248 |
|
|
|
2,084 |
|
Gain on sale of asset |
|
|
(2,356 |
) |
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(1,685 |
) |
|
|
(24,857 |
) |
Inventories |
|
|
(254,869 |
) |
|
|
(312,379 |
) |
Prepaid expenses and other assets |
|
|
(9,135 |
) |
|
|
2,875 |
|
Accounts payable |
|
|
137,360 |
|
|
|
150,745 |
|
Accrued expenses |
|
|
(16,045 |
) |
|
|
17,068 |
|
Income taxes payable/receivable |
|
|
(91,695 |
) |
|
|
45,220 |
|
Deferred construction allowances |
|
|
17,452 |
|
|
|
28,388 |
|
Deferred revenue and other liabilities |
|
|
(5,303 |
) |
|
|
(8,813 |
) |
|
|
|
|
|
|
|
Net cash
(used in) provided by operating activities |
|
|
(87,826 |
) |
|
|
17,629 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(159,928 |
) |
|
|
(119,959 |
) |
Purchase of corporate aircraft |
|
|
(25,107 |
) |
|
|
|
|
Proceeds from sale of corporate aircraft |
|
|
27,463 |
|
|
|
|
|
Proceeds from sale-leaseback transactions |
|
|
24,278 |
|
|
|
17,568 |
|
Payment for purchase of Golf Galaxy, net of $4,859 cash acquired |
|
|
|
|
|
|
(222,095 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(133,294 |
) |
|
|
(324,486 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Revolving credit borrowings, net |
|
|
184,827 |
|
|
|
140,313 |
|
Payments on other long-term debt and capital leases |
|
|
(273 |
) |
|
|
(140 |
) |
Construction allowance receipts |
|
|
10,424 |
|
|
|
8,324 |
|
Proceeds from sale of common stock under employee stock purchase plan |
|
|
2,986 |
|
|
|
2,466 |
|
Proceeds from exercise of stock options |
|
|
6,976 |
|
|
|
29,568 |
|
Excess tax benefit from stock-based compensation |
|
|
1,537 |
|
|
|
34,606 |
|
Increase (decrease) in bank overdraft |
|
|
6,104 |
|
|
|
(4,739 |
) |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
212,581 |
|
|
|
210,398 |
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS |
|
|
(122 |
) |
|
|
174 |
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(8,661 |
) |
|
|
(96,285 |
) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
|
50,307 |
|
|
|
135,942 |
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
41,646 |
|
|
$ |
39,657 |
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Construction in progress leased facilities |
|
$ |
(22,117 |
) |
|
$ |
92 |
|
Accrued property and equipment |
|
$ |
(7,966 |
) |
|
$ |
(4,835 |
) |
Cash paid for interest |
|
$ |
6,511 |
|
|
$ |
9,239 |
|
Cash paid for income taxes |
|
$ |
160,850 |
|
|
$ |
10,346 |
|
Stock
options issued for acquisition (net of tax benefit upon exercise) |
|
$ |
7,123 |
|
|
$ |
9,117 |
|
See accompanying notes to unaudited consolidated financial statements.
7
DICKS SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Company
Dicks Sporting Goods, Inc. (together with its subsidiaries, the Company) is a specialty retailer
selling sporting goods, footwear and apparel through its 483 stores, the majority of which are
located throughout the eastern half of the United States. On February 13, 2007, the Company
acquired Golf Galaxy, Inc. (Golf Galaxy) by means of merger of our wholly-owned subsidiary with
and into Golf Galaxy. On November 30, 2007, the Company acquired all of the outstanding stock of
Chicks Sporting Goods, Inc. (Chicks). The unaudited Consolidated Statements of Income include
the operations of Golf Galaxy and Chicks from their dates of acquisition forward.
Unless otherwise specified, any reference to year is to our fiscal year and when used in this Form
10-Q and unless the context otherwise requires, the terms Dicks, we, us, the Company and
our refer to Dicks Sporting Goods, Inc. and its wholly-owned subsidiaries.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared by us, in
accordance with the requirements for Form 10-Q and do not include all the disclosures normally
required in annual consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America. The interim financial information
as of November 1, 2008 and for the 13 and 39 weeks ended November 1, 2008 and November 3, 2007 is
unaudited and has been prepared on the same basis as the audited financial statements. In the
opinion of management, such unaudited information includes all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the interim financial
information. This financial information should be read in conjunction with the audited
consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for
the year ended February 2, 2008 as filed with the Securities and Exchange Commission on March 27,
2008. Operating results for the 13 and 39 weeks ended November 1, 2008 are not necessarily
indicative of the results that may be expected for the year ending January 31, 2009 or any other
period.
3. Newly Issued Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines
fair value, establishes a framework for measuring fair value and expands disclosures about fair
value measurements; however, SFAS 157 does not require any new fair value measurements. SFAS
No. 157, as issued, is effective for fiscal years beginning after November 15, 2007. FASB Staff
Position (FSP) FAS No. 157-2 was issued in February 2008 and deferred the effective date of SFAS
No. 157 to fiscal years beginning after November 15, 2008 for nonfinancial assets and nonfinancial
liabilities. Accordingly, as of February 3, 2008, the Company adopted SFAS No. 157 for financial
assets and liabilities only. As of November 1, 2008, the Companys financial assets subject to SFAS
No. 157 consisted of assets held by the Company in trust related to the Companys deferred
compensation plans, for which a corresponding liability exists, and the Companys holdings of
unregistered common stock of GSI Commerce Inc. (GSI), totaling $8.8 million and $1.9 million,
respectively. The assets held in trust are classified as having Level 1 inputs, as the fair value
is based on quoted prices in active markets for identical assets. The unregistered common stock is
classified as having Level 3 inputs, as the pricing inputs are unobservable for the investment and
include situations where there is little, if any, market activity for the investment. The inputs
into the determination of fair value require significant management judgment or estimation. The
adoption of SFAS No. 157 for financial assets and financial liabilities did not have a significant
impact on the Companys results of operations, financial condition or liquidity. The adoption of
SFAS No. 157 in 2009 for nonfinancial assets and nonfinancial liabilities is also not expected to
have a significant impact on the Companys results of operations, financial condition or liquidity.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS 159). SFAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value. SFAS 159 was effective as of the beginning of
our 2008 fiscal year, and did not have a material impact on the Companys financial statements.
8
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
141R). SFAS 141R significantly changes the accounting for business combinations in a number of
areas including the treatment of contingent consideration, preacquisition contingencies,
transaction costs, in-process research and development and restructuring costs. In addition, under
SFAS 141R, changes in an acquired entitys deferred tax assets and uncertain tax positions after
the measurement period will impact income tax expense. SFAS 141R is effective for fiscal years
beginning after December 15, 2008. We will adopt SFAS 141R beginning in the first quarter of
fiscal 2009. This standard will change our accounting treatment for business combinations on a
prospective basis, including the treatment of any income tax adjustments related to past
acquisitions.
In April 2008, the FASB issued FASB Staff Position (FSP) No. FAS 142-3, Determination of the
Useful Life of Intangible Assets (FSP No. FAS 142-3). FSP No. FAS 142-3 requires companies
estimating the useful life of a recognized intangible asset to consider their historical experience
in renewing or extending similar arrangements or, in the absence of historical experience, to
consider assumptions that market participants would use about renewal or extension as adjusted for
entity-specific factors. FSP No. FAS 142-3 is effective as of the beginning of our 2009 fiscal
year. We are currently evaluating the potential impact, if any, of the adoption of FSP No. FAS
142-3 on our consolidated financial statements.
In May 2008, the FASB issued FSP No. APB 14-1 Accounting for Convertible Debt Instruments That May
Be Settled in Cash Upon Conversion (Including Partial Cash Settlements) (previously FSP APB 14-a),
which will change the accounting treatment for convertible securities which the issuer may settle
fully or partially in cash. Under the final FSP, cash settled convertible securities will be
separated into their debt and equity components. The value assigned to the debt component will be
the estimated fair value, as of the issuance date, of a similar debt instrument without the
conversion feature, and the difference between the proceeds for the convertible debt and the amount
reflected as a debt liability will be recorded as additional paid-in capital. As a result, the debt
will be recorded at a discount reflecting its below market coupon interest rate. The debt will
subsequently be accreted to its par value over its expected life, with the rate of interest that
reflects the market rate at issuance being reflected on the income statement. This change in
methodology will affect the calculations of net income and earnings per share for many issuers of
cash settled convertible securities. The FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The
Company is currently evaluating the impact of the adoption of FSP No. APB 14-1 on the Companys
financial statements.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS 162). SFAS 162 identifies the sources of accounting principles and the
framework for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally accepted accounting
principles (GAAP) (the GAAP hierarchy). SFAS 162 directs
the hierarchy to the entity, rather than the independent auditors, as
the entity is responsible for selecting accounting principles for
financial statements that are presented in conformity with GAAP.
SFAS 162 is effective 60 days following the Securities
and Exchange Commissions approval of the Public Company Accounting Oversight Board amendments to
AU section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles. We are currently evaluating the provisions of SFAS 162 and assessing the impact, if
any, it may have on our financial position and results of operations.
4. Acquisitions, Goodwill and Other Intangible Assets
On February 13, 2007, Dicks Sporting Goods, Inc. acquired Golf Galaxy, which became a wholly-owned
subsidiary of Dicks by means of a merger of Dicks wholly-owned subsidiary with and into Golf
Galaxy. The Company paid approximately $227.0 million in connection with the acquisition, which
was financed using approximately $79 million of cash and cash equivalents and the balance from
borrowings under our revolving line of credit.
The acquisition was accounted for using the purchase method in accordance with SFAS No. 141,
Business Combinations, with Dicks as the accounting acquirer. Accordingly, the purchase price
has been allocated to tangible and identifiable intangible assets acquired and liabilities assumed
based on their estimated fair values at the date of the acquisition. The excess of the purchase
price over the fair value of net assets acquired was recorded as goodwill. Goodwill and
identifiable intangible assets recorded in the acquisition will be tested periodically for
impairment as required by SFAS No. 142, Goodwill and Other Intangible Assets. Based upon the
purchase price allocation, the Company recorded $111.7 million of goodwill as a result of the
acquisition. None of the goodwill is deductible for tax purposes. The Company received an
independent appraisal for certain assets to determine their fair value. The purchase price
allocation is final, except for any potential income tax changes that may arise. The following
table summarizes estimated fair values of the assets acquired and liabilities assumed (in
thousands):
9
|
|
|
|
|
Inventory |
|
$ |
70,711 |
|
Other current assets (including cash) |
|
|
19,685 |
|
Property and equipment, net |
|
|
47,875 |
|
Other long term assets, excluding goodwill and other intangible assets |
|
|
246 |
|
Trade name |
|
|
65,749 |
|
Customer lists and other intangibles |
|
|
5,659 |
|
Goodwill |
|
|
111,742 |
|
Accounts payable |
|
|
(33,890 |
) |
Accrued expenses |
|
|
(14,063 |
) |
Other current liabilities |
|
|
(10,049 |
) |
Other long-term liabilities |
|
|
(29,329 |
) |
|
|
|
|
Fair value of net assets acquired, including intangibles |
|
$ |
234,336 |
|
|
|
|
|
The customer list is being amortized over 12 years. In addition, the trade name is an
indefinite-lived intangible asset, which will not be amortized. The amortization of intangible
assets is included in selling, general and administrative expenses.
On November 30, 2007, the Company acquired all of the outstanding stock of Chicks for
approximately $69.2 million.
The acquisition of Chicks is being accounted for using the purchase method in accordance with SFAS
No. 141, Business Combinations. Accordingly, we recorded the net assets at their estimated fair
values, and included operating results in our unaudited Consolidated Statements of Income from the
date of acquisition. We allocated the purchase price on a preliminary basis using information
currently available. The Company is in the process of obtaining an independent appraisal for
certain assets, including intangibles not yet identified, and refining its internal fair value
estimates; therefore, the allocation of the purchase price is preliminary and the final allocation
will likely differ. Based on the preliminary purchase price allocation, the Company has recorded
$34.7 million of goodwill as a result of the acquisition. None of the goodwill is deductible for
tax purposes.
The Company acquired trademarks for $18 million during fiscal 2008 covering certain golf equipment,
golf balls, golf accessories and other sporting goods and equipment. The trademarks are
indefinite-lived intangible assets, which will not be amortized.
5. Golf Galaxy Integration
The Company recorded $3.1 million and $6.0 million in merger and integration costs in the
accompanying unaudited Consolidated Statements of Income for the 13
and 39 weeks ended November 1, 2008, respectively. These integration costs include the expense of
consolidating Golf Galaxys headquarters into our corporate headquarters, and primarily include
severance, retention and system conversion costs. In addition, the Company recorded $2.6 million
in the provision for income taxes for the 39 weeks ended November 1, 2008 reflecting the tax impact
of non-deductible executive separation costs resulting from the departure of certain executive
officers of Golf Galaxy during July 2008.
6. Store Closing and Relocation Reserves
On a stores closing or relocation date, estimated lease termination and other costs to close or
relocate a store are recorded in cost of goods sold, including occupancy and distribution costs on
the Consolidated Statements of Income. The components of accrued lease termination and other costs
primarily include future minimum lease payments, maintenance costs and taxes from the date of
closure or relocation to the end of the remaining lease term, net of contractual or estimated
sublease income. The liability is discounted using a credit-adjusted risk-free rate of interest.
The assumptions used in the calculation of the accrued lease termination and other costs are
evaluated each quarter. Any changes in these assumptions are recorded in cost of goods sold,
including occupancy and distribution costs on the Consolidated Statements of Income.
10
The following table summarizes the activity in fiscal 2008 and 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended |
|
|
|
November 1, |
|
|
November 3, |
|
|
|
2008 |
|
|
2007 |
|
Accrued store closing and relocation
reserves, beginning of period |
|
$ |
29,840 |
|
|
$ |
26,096 |
|
Expense charged to earnings |
|
|
|
|
|
|
3,239 |
|
Cash payments |
|
|
(2,121 |
) |
|
|
(4,326 |
) |
Interest accretion and other changes in assumptions |
|
|
2,036 |
|
|
|
580 |
|
|
|
|
|
|
|
|
Accrued store closing and relocation reserves, end of period |
|
|
29,755 |
|
|
|
25,589 |
|
Less: current portion of accrued store closing and relocation reserves |
|
|
(7,072 |
) |
|
|
(7,849 |
) |
|
|
|
|
|
|
|
Long-term portion of accrued store closing and relocation reserves |
|
$ |
22,683 |
|
|
$ |
17,740 |
|
|
|
|
|
|
|
|
The current portion of accrued store closing and relocation reserves is recorded in accrued
expenses and the long-term portion is recorded in long-term deferred revenue and other liabilities
in the Consolidated Balance Sheets.
7. Stock-Based Compensation and Employee Stock Plans
Total pre-tax stock-based compensation expense recognized for the 13 weeks ended November 1, 2008
and November 3, 2007 was $5.0 million and $7.7 million, respectively, and includes Employee Stock
Purchase Plan (ESPP) expense of $0.4 million and $0.3 million, respectively. Total pre-tax stock-based
compensation expense recognized for the 39 weeks ended November 1, 2008 and November 3, 2007 was
$20.1 million and $22.5 million, respectively, and includes ESPP expense of
$1.4 million and $1.1 million, respectively. The expense was recorded in selling, general and
administrative expenses and merger and integration costs in the unaudited Consolidated Statements
of Income. The related total tax benefit for the 13 weeks ended November 1, 2008 and November 3,
2007 was $2.0 million and $3.0 million, respectively. The related total tax benefit for the 39
weeks ended November 1, 2008 and November 3, 2007 was $8.0 million and $8.5 million, respectively.
The fair value of stock-based awards to employees is estimated on the date of grant using the
Black-Scholes-option-pricing model with the following assumptions for awards issued during the
period noted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Options |
|
ESPP |
|
|
13 Weeks Ended |
|
13 Weeks Ended |
|
|
November 1, |
|
November 3, |
|
November 1, |
|
November 3, |
Black - Scholes Valuation Assumptions (1) |
|
2008 |
|
2007 |
|
2008 |
|
2007 |
Expected life (years) (2) |
|
|
5.03 - 5.26 |
|
|
|
5.29 |
|
|
|
|
|
|
|
|
|
Expected volatility (3) |
|
|
35.89% - 37.85 |
% |
|
|
36.01% - 36.34 |
% |
|
|
|
|
|
|
|
|
Weighted average volatility |
|
|
36.87 |
% |
|
|
36.33 |
% |
|
|
|
|
|
|
|
|
Risk-free interest rate (4) |
|
|
2.90% - 3.11 |
% |
|
|
4.04% - 4.51 |
% |
|
|
|
|
|
|
|
|
Expected dividend yield |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair values |
|
$ |
8.23 |
|
|
$ |
13.23 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Options |
|
ESPP |
|
|
39 Weeks Ended |
|
39 Weeks Ended |
|
|
November 1, |
|
November 3, |
|
November 1, |
|
November 3, |
Black - Scholes Valuation Assumptions (1) |
|
2008 |
|
2007 |
|
2008 |
|
2007 |
Expected life (years) (2) |
|
|
5.03 - 7.00 |
|
|
|
5.29 |
|
|
|
0.50 |
|
|
|
0.50 |
|
Expected volatility (3) |
|
|
35.89% - 37.85 |
% |
|
|
36.08% - 37.39 |
% |
|
|
53.93 |
% |
|
|
25.66 |
% |
Weighted average volatility |
|
|
36.19 |
% |
|
|
36.96 |
% |
|
|
53.93 |
% |
|
|
25.66 |
% |
Risk-free interest rate (4) |
|
|
2.61% - 3.11 |
% |
|
|
4.04% - 4.94 |
% |
|
|
2.13 |
% |
|
|
5.02 |
% |
Expected dividend yield |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair values |
|
$ |
10.48 |
|
|
$ |
11.43 |
|
|
$ |
5.08 |
|
|
$ |
6.47 |
|
11
|
|
|
(1) |
|
This table excludes valuation assumptions related to the assumption of outstanding Golf
Galaxy options by Dicks in conjunction with the acquisition of Golf Galaxy on February 13,
2007. |
|
(2) |
|
The expected life of the option represents the estimated period of time until exercise
and is based on historical experience of the similar awards. |
|
(3) |
|
Beginning on the date of adoption of FASB Statement No. 123(R), Share-Based Payment
(SFAS 123R), expected volatility is based on the historical volatility of the Companys
common stock since the inception of the Companys shares being publicly traded in October
2002. |
|
(4) |
|
The risk-free interest rate is based on the implied yield available on U.S. Treasury
constant maturity interest rates whose term is consistent with the expected life of the
stock options. |
The assumptions used to calculate the fair value of options granted are evaluated and revised, as
necessary, to reflect market conditions and experience.
Stock Options
The following summarizes all stock option transactions from February 2, 2008 through November 1,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
|
|
|
|
Shares |
|
|
Exercise |
|
|
Contractual |
|
|
Aggregate |
|
|
|
Subject to |
|
|
Price per |
|
|
Life |
|
|
Intrinsic Value (in |
|
|
|
Options |
|
|
Share |
|
|
(Years) |
|
|
thousands) |
|
Outstanding, February 2, 2008 |
|
|
19,276,445 |
|
|
$ |
14.66 |
|
|
|
6.35 |
|
|
$ |
352,494 |
|
Granted |
|
|
759,455 |
|
|
|
27.58 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(605,838 |
) |
|
|
11.49 |
|
|
|
|
|
|
|
|
|
Forfeited / Expired |
|
|
(691,612 |
) |
|
|
22.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, November 1, 2008 |
|
|
18,738,450 |
|
|
$ |
14.99 |
|
|
|
5.67 |
|
|
$ |
6,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, November 1, 2008 |
|
|
13,944,423 |
|
|
$ |
11.47 |
|
|
|
4.91 |
|
|
$ |
53,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above is based on the Companys closing stock price for
the last business day of the period indicated. As of November 1, 2008, total unrecognized
stock-based compensation expense related to nonvested stock options was approximately
$38.1 million, before income taxes, and is expected to be recognized over a weighted average period
of approximately 2.32 years.
Restricted Stock
The following table summarizes all restricted stock transactions from February 2, 2008 through
November 1, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Number of |
|
|
Grant Date |
|
|
Contractual Life |
|
|
Intrinsic Value (in |
|
|
|
Shares |
|
|
Fair Value |
|
|
(Years) |
|
|
thousands) |
|
Nonvested, February 2, 2008 |
|
|
300,000 |
|
|
$ |
26.01 |
|
|
|
2.03 |
|
|
$ |
9,879 |
|
Granted |
|
|
408,014 |
|
|
|
27.59 |
|
|
|
|
|
|
|
|
|
Vested |
|
|
(150,000 |
) |
|
|
26.01 |
|
|
|
|
|
|
|
|
|
Forfeited / Expired |
|
|
(183,431 |
) |
|
|
26.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested, November 1, 2008 |
|
|
374,583 |
|
|
$ |
27.56 |
|
|
|
2.41 |
|
|
$ |
5,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the 39 weeks ended November 1, 2008, the Company issued 408,014 shares of restricted stock
to eligible employees, which shares of common stock are subject to forfeiture until the end of an
applicable vesting period, which is determined based on the employees continuing employment. The
awards vest on the third anniversary of the date of grant. As of November 1, 2008, total
unrecognized stock-based compensation expense related to nonvested shares of restricted stock was
12
approximately $8.8 million, before income taxes, which is expected to be recognized over a weighted
average period of approximately 2.41 years.
Effective July 18, 2008, two executives at the Companys Golf Galaxy subsidiary stepped down from
their positions. Stock options granted to these executives exercisable for up to 630,000 shares of
the Companys common stock at an exercise price of $27.30 per share and all stock options
previously granted to these executives that were exercisable for Golf Galaxy common stock
(converted to options exercisable for Companys common stock as a result of the acquisition of Golf
Galaxy by the Company) became fully vested upon their departure. The 150,000 shares of restricted
common stock granted to these executives on February 13, 2007 that were to vest based only on the
passage of time also became fully vested. The executives forfeited any rights to an additional
150,000 shares of restricted common stock granted to them on February 13, 2007 that were to vest
based on the attainment of certain performance metrics. The accelerated vesting of these stock
options and restricted stock net of the reversal of previously recognized compensation expense for
these individuals resulted in a pre-tax charge of $0.5 million, which is recorded in merger and
integration costs on the Consolidated Statements of Income.
8. Earnings per Share
The computation of basic earnings per share is based on the number of weighted average common
shares outstanding during the period. The computation of diluted earnings per share is based upon
the weighted average number of shares outstanding plus the incremental shares that would be
outstanding assuming exercise of dilutive stock options, restricted stock and warrants. The number
of incremental shares from the assumed exercise of stock options and warrants is calculated by
applying the treasury stock method. The aggregate number of shares, totaling 8,776,048, that the
Company could be obligated to issue upon conversion of our $172.5 million issue price of senior
convertible notes was excluded from calculations for the 13 and 39 weeks ended November 1, 2008 and
November 3, 2007. The computations for basic and diluted earnings per share are as follows (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
|
|
November 1, |
|
|
November 3, |
|
|
November 1, |
|
|
November 3, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Net income |
|
$ |
7,393 |
|
|
$ |
12,233 |
|
|
$ |
69,282 |
|
|
$ |
81,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (for basic calculation) |
|
|
111,906 |
|
|
|
110,804 |
|
|
|
111,556 |
|
|
|
108,827 |
|
Dilutive effect of outstanding stock options, restricted stock and
warrants |
|
|
4,868 |
|
|
|
7,501 |
|
|
|
5,423 |
|
|
|
7,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (for diluted calculation) |
|
|
116,774 |
|
|
|
118,305 |
|
|
|
116,979 |
|
|
|
116,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share basic |
|
$ |
0.07 |
|
|
$ |
0.11 |
|
|
$ |
0.62 |
|
|
$ |
0.75 |
|
Net earnings per common share diluted |
|
$ |
0.06 |
|
|
$ |
0.10 |
|
|
$ |
0.59 |
|
|
$ |
0.71 |
|
Potential dilutive shares are excluded from the computation of earnings per share if their effect
is anti-dilutive. Anti-dilutive options and restricted stock excluded from the calculation of
earnings per share for the 13 weeks ended November 1, 2008 and November 3, 2007 were 5.6 million
and 4.3 million, respectively. Anti-dilutive options and restricted stock excluded from the
calculation of earnings per share for the 39 weeks ended November 1, 2008 and November 3, 2007 were
5.3 million and 4.4 million, respectively.
9. Interest Expense, net
Interest expense, net is comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
|
|
November 1, |
|
|
November 3, |
|
|
November 1, |
|
|
November 3, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Interest expense |
|
$ |
2,986 |
|
|
$ |
2,284 |
|
|
$ |
7,167 |
|
|
$ |
10,342 |
|
Interest income |
|
|
84 |
|
|
|
559 |
|
|
|
178 |
|
|
|
1,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
$ |
2,902 |
|
|
$ |
1,725 |
|
|
$ |
6,989 |
|
|
$ |
8,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
10. Income Taxes
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (FIN 48), an interpretation of FASB Statement No. 109 (SFAS 109), on February 4,
2007. As a result of the implementation of FIN 48, the Company recognized no material adjustment
in the liability for unrecognized income tax benefits. At the adoption date of February 4, 2007,
the Company had $12.0 million of unrecognized tax benefits, of which approximately $9.1 million
would affect our effective tax rate if recognized. At November 1, 2008, the Company had $7.7
million of unrecognized tax benefits, a reduction of $2.6 million from the previous quarter after
negotiating settlements with certain state jurisdictions. The reduction in the liability was
recorded through cash payments and a decrease to tax expense. Over the next twelve months,
management anticipates that it is reasonably possible that the amount of unrecognized tax benefits
could be reduced by approximately $51,000, none of which would have a material effect on the
Companys effective tax rate.
The Company recognizes interest and penalties related to uncertain tax positions in income tax
expense. As of November 1, 2008 the Company had approximately $1.4 million of accrued interest
related to uncertain tax positions.
The tax years 2004 2007 remain open to examination by the major taxing jurisdictions to which we
are subject.
The provision for income taxes for the 39 weeks ended November 1, 2008 includes $2.6 million
related to the tax impact of non deductible executive separation costs resulting from the departure
of certain executive officers of Golf Galaxy during July 2008.
11. Commitments and Contingencies
The Company enters into licensing agreements for exclusive or preferential rights to use certain
trademarks extending through 2020. Under specific agreements, the Company is obligated to pay
annual guaranteed minimum royalties. The aggregate amount of required minimum royalty payments at
November 1, 2008 is as follows (in thousands):
|
|
|
|
Fiscal Year |
|
|
|
Remainder of 2008 |
|
$ |
2,170 |
2009 |
|
|
9,456 |
2010 |
|
|
10,790 |
2011 |
|
|
12,115 |
2012 |
|
|
14,935 |
Thereafter |
|
|
40,644 |
|
|
|
|
|
$ |
90,110 |
|
|
|
Also, the Company is required to pay additional royalties when the royalties that are based on the
qualified purchases or retail sales (depending on the agreement) exceed the guaranteed minimum.
Payments made under agreements requiring minimum guaranteed contractual amounts were $2.9 million
and $0.7 million for the 13 weeks ended November 1, 2008 and November 3, 2007, respectively, and
$5.9 million and $1.6 million for the 39 weeks ended November 1, 2008 and November 3, 2007,
respectively.
As of February 2, 2008, the Company also had certain naming rights and other marketing commitments
extending through 2026 of $91.8 million. Payments made under these commitments were $7.2 million
and $12.7 million for the 13 and 39 weeks ended November 1, 2008. Payments under these commitments
are scheduled to be made as follows: remainder of 2008, $6.4 million; 2009, $19.7 million; 2010,
$5.0 million; 2011, $5.0 million; 2012, $5.3 million; thereafter, $37.7 million.
The Company is involved in legal proceedings incidental to the normal conduct of its business.
Although the outcome of any pending legal proceedings cannot be predicted with certainty,
management believes that adequate insurance coverage is maintained and that the ultimate resolution
of these matters will not have a material adverse effect on the Companys liquidity, financial
position or results of operations.
12. Stock Split
On September 12, 2007, the Companys Board of Directors declared a two-for-one stock split, in the
form of a stock dividend, of the Companys common shares for stockholders of record on September
28, 2007. The split became effective on
October 19, 2007 by issuing our stockholders of record one additional share of common stock for
every share of common
14
stock held, and one additional share of Class B common stock for every share
of Class B common stock held. The applicable share and per-share data for all periods included
herein have been restated to give effect to this stock split.
13. Subsequent Event
On November 19, 2008, the Company entered into an Eighth Amendment (the Eighth Amendment) to its
Second Amended and Restated Credit Agreement, dated July 28, 2004 (as amended, the Credit
Agreement), among the Company, certain lenders and General Electric Capital Corporation as agent.
The purpose of the Eighth Amendment to the Credit Agreement was to increase the Aggregate Revolving
Loan Commitment, as defined in the Credit Agreement, by $90 million, to a total of $440 million.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
We caution that any forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by our
management involve risks and uncertainties and are subject to change based on various important
factors, many of which may be beyond our control. Accordingly, our future performance and
financial results may differ materially from those expressed or implied in any such forward-looking
statements. Investors should not place undue reliance on forward-looking statements as a
prediction of actual results. You can identify these statements as those that may predict,
forecast, indicate or imply future results, performance or advancements and by forward-looking
words such as believe, anticipate, expect, estimate, predict, intend, plan,
project, will, will be, will continue, will result, could, may, might or any
variations of such words or other words with similar meanings. Forward-looking statements address,
among other things, our expectations, our growth strategies, including our plans to open new
stores, our efforts to increase profit margins and return on invested capital, plans to grow our
private label business, projections of our future profitability, results of operations, capital
expenditures or our financial condition or other forward-looking information and includes
statements about revenues, earnings, spending, margins, liquidity, store openings and operations,
inventory, private label products, our actions, plans or strategies.
The following factors, among others, in some cases have affected and in the future could affect our
financial performance and actual results and could cause actual results for fiscal 2008 and beyond
to differ materially from those expressed or implied in any forward-looking statements included in
this report or otherwise made by our management: changes in macroeconomic factors and market
conditions, including the housing market and fuel costs, that impact the level of consumer spending
for the types of merchandise sold by the company; potential volatility in our stock price and the
tightening of availability and higher costs associated with current and new sources of credit
resulting from uncertainty in financial markets; the intense competition in the sporting goods
industry and actions by our competitors; the availability of retail store sites on terms acceptable
to us; the cost of real estate and other items related to our stores; our inability to manage our
growth, open new stores on a timely basis and expand successfully in new and existing markets;
changes in consumer demand; changes in general economic and business conditions and in the
specialty retail or sporting goods industry in particular, including the potential impact of
natural disasters or national and international security concerns on us or the retail environment;
unauthorized disclosure of sensitive or confidential information; risks and costs relating to
product liability claims and the availability of sufficient insurance coverage relating to those
claims and risks relating to the regulation of the products we sell, such as hunting rifles and
ammunition; our relationships with our suppliers, distributors and manufacturers and their ability
to provide us with sufficient quantities of products and risks associated with relying on foreign
sources of production; currency exchange rate fluctuations; costs and risks associated with
increased or changing laws and regulations affecting our business, including those relating to the
sale of consumer products and childrens products; risks relating to problems with or disruption of
our current management information systems; any serious disruption at our distribution or return
facilities; the seasonality of our business; regional risks because our stores are generally
concentrated in the eastern half of the United States; the outcome of litigation or legal actions
against us; risks relating to operational and financial restrictions imposed by our Credit
Agreement; factors associated with our pursuit of strategic acquisitions and risks, costs and
uncertainties associated with combining businesses and/or assimilating acquired companies; our
ability to access adequate capital; the loss of our key executives, especially Edward W. Stack, our
Chairman, Chief Executive Officer and President; our ability to meet our labor needs; risks related
to the economic impact or the effect on the U.S. retail environment relating to instability and
conflict in the Middle East or elsewhere; that we are controlled by our Chief Executive Officer and
his relatives, whose interests may differ from our stockholders; our quarterly operating results
and comparable store sales may fluctuate substantially; our current anti-takeover provisions could
prevent or delay a change-in-control of the Company; our ability to repay or make the cash
payments under our senior convertible notes; various risks associated with our exclusive brand
offerings; changes in our business strategies and other factors discussed in other reports or
filings filed by us with the
Securities and Exchange Commission.
15
In addition, we operate in a highly competitive and rapidly changing environment; therefore, new
risk factors can arise, and it is not possible for management to predict all such risk factors, nor
to assess the impact of all such risk factors on our business or the extent to which any individual
risk factor, or combination of factors, may cause results to differ materially from those contained
in any forward-looking statement. We do not assume any obligation and do not intend to update any
forward-looking statements except as may be required by the securities laws.
On February 13, 2007, Dicks acquired Golf Galaxy, which became a wholly-owned subsidiary of Dicks
by means of a merger of Dicks subsidiary with and into Golf Galaxy. On November 30, 2007, Dicks
acquired all of the outstanding stock of Chicks, which also became a wholly-owned subsidiary of
Dicks. Due to these acquisitions, additional risks and uncertainties arise that could affect our
financial performance and actual results and could cause actual results for fiscal 2008 and beyond
to differ materially from those expressed or implied in any forward-looking statements included in
this report or otherwise made by our management. Such risks, which are difficult to predict with a
level of certainty and may be greater than expected, include, among others, risk and costs
associated with combining businesses and/or with assimilating acquired companies (including our
ability to estimate future integration costs related to the integration of the operations and
achieving expected future cost savings from the integration).
OVERVIEW
Dicks is an authentic full-line sporting goods retailer offering a broad assortment of brand name
sporting goods equipment, apparel and footwear in a specialty store environment. Unless otherwise
specified, any reference to year is to our fiscal year and when used in this Form 10-Q and unless
the context otherwise requires, the terms Dicks, we, us, the Company and our refer to
Dicks Sporting Goods, Inc. and its wholly-owned subsidiaries.
On February 13, 2007, the Company acquired Golf Galaxy by means of merger of our wholly-owned
subsidiary with and into Golf Galaxy. On November 30, 2007, the Company completed its acquisition
of Chicks. The unaudited Consolidated Statements of Income for fiscal 2007 include the results of
Golf Galaxy and Chicks from their respective dates of acquisition forward.
As of November 1, 2008 we operated 384 Dicks Sporting Goods stores, 85 Golf Galaxy stores and 14
Chicks stores, with approximately 23.5 million square feet, in 41 states, the majority of which
are located throughout the eastern half of the United States.
On September 12, 2007, the Companys board of directors approved a two-for-one stock split of the
Companys common stock and Class B common stock in the form of a stock dividend. The split was
affected by issuing our stockholders of record as of September 28, 2007 one additional share of
common stock for every share of common stock held, and one additional share of Class B common stock
for every share of Class B common stock held. The applicable share and per-share data for fiscal
2007 included herein have been restated to give effect to this stock split.
Due to the seasonal nature of our business, interim results are not necessarily indicative of
results for the entire fiscal year. Our revenue and earnings are typically greater during our
fiscal fourth quarter, which includes the majority of the holiday selling season.
We believe that the U.S economy is facing very challenging times, and that general economic
conditions could deteriorate further. We believe these conditions have had, and will continue to
have, an adverse impact on spending by the customers we serve. Because of these challenges, we
continue to review and adjust our business activities to address the changing economic environment
and, as a result we believe we are prudently growing our business, carefully managing inventory and
liquidity and enforcing expense controls. Due to the uncertainty in the overall economic
environment and the unpredictability of consumer behavior, it is very difficult for us to predict
how our business may perform in the future. Our business and financial performance may be
adversely affected by current and future economic conditions that cause a decline in business and
consumer spending, including a reduction in the availability of credit, increased unemployment
levels, higher energy and fuel costs, rising interest rates, financial market volatility and
recession. In addition, because macro-economic factors can impact charges we are required to take
relating to asset impairments, these events could lead to impairment charges.
CRITICAL ACCOUNTING POLICIES
As discussed in Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operations section of the Companys Annual Report on Form 10-K for the fiscal year ended February
2, 2008, the Company considers its
policies on inventory valuation, vendor allowances, goodwill, intangible assets and impairment of
long-lived assets, business combinations, self-insurance reserves, stock-based compensation and
uncertain tax positions to be the most critical in
16
understanding the judgments that are involved in
preparing its consolidated financial statements. There have been no changes in the Companys
critical accounting policies during the period ended November 1, 2008.
RESULTS OF OPERATIONS AND OTHER SELECTED DATA
Executive Summary
Net income for the current quarter ended November 1, 2008 decreased to $7.4 million and earnings
per diluted share decreased to $0.06, as compared to net income of $12.2 million, or $0.10 per
diluted share for the 13 weeks ended November 3, 2007. Net income for the 13 weeks ended November
1, 2008 includes $1.9 million of merger and integration costs, net of tax.
Net sales for the current quarter increased 10% to $924.2 million, due primarily to new store
sales, which include Chicks Sporting Goods in fiscal 2008, partially offset by a comparable store
sales decrease of 2.8%. Golf Galaxy was included in the Companys comparable store sales
calculation beginning in the second quarter of 2008 and will be included in the full year
comparable store sales calculation beginning in fiscal 2009.
As a percentage of net sales, gross profit decreased 106 basis points to 27.39% for the quarter,
due primarily to higher occupancy expense caused by deleverage related to the comparable store
sales decline in the current quarter and higher freight and distribution costs related to the start
up of a new distribution center in Atlanta, Georgia during the second quarter, partially offset by
merchandise margin improvements.
We ended the third quarter with $184.8 million of outstanding borrowings on our Credit Agreement.
There were no outstanding borrowings as of February 2, 2008.
The following represents a reconciliation of beginning and ending stores for the periods indicated:
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|
|
|
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|
|
|
|
|
|
39 Weeks Ended |
|
39 Weeks Ended |
|
|
November 1, 2008 |
|
November 3, 2007 |
|
|
Dicks Sporting |
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|
|
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|
|
|
|
|
|
Dicks Sporting |
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|
|
|
|
|
Goods |
|
Golf Galaxy |
|
Chicks |
|
Total |
|
Goods |
|
Golf Galaxy |
|
Total |
Beginning stores |
|
|
340 |
|
|
|
79 |
|
|
|
15 |
|
|
|
434 |
|
|
|
294 |
|
|
|
65 |
|
|
|
359 |
|
Q1 New |
|
|
8 |
|
|
|
4 |
|
|
|
|
|
|
|
12 |
|
|
|
15 |
|
|
|
10 |
|
|
|
25 |
|
Q2 New |
|
|
9 |
|
|
|
1 |
|
|
|
|
|
|
|
10 |
|
|
|
6 |
|
|
|
2 |
|
|
|
8 |
|
Q3 New |
|
|
26 |
|
|
|
1 |
|
|
|
|
|
|
|
27 |
|
|
|
25 |
|
|
|
|
|
|
|
25 |
|
Q3 Converted |
|
|
1 |
|
|
|
|
|
|
|
(1 |
) |
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Ending stores |
|
|
384 |
|
|
|
85 |
|
|
|
14 |
|
|
|
483 |
|
|
|
340 |
|
|
|
77 |
|
|
|
417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Relocated stores |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
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|
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The following table presents, for the periods indicated, items in the unaudited Consolidated
Statements of Income as a percentage of the Companys net sales, as well as the basis point change
in the percentage of net sales from the prior years period. In addition, other selected data is
provided to facilitate a further understanding of our business. These tables should be read in
conjunction with the following managements discussion and analysis and the unaudited consolidated
financial statements and related notes thereto.
17
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Basis Point |
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Increase / |
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|
|
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|
(Decrease) in |
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|
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|
|
|
|
|
|
|
Percentage of |
|
|
13 Weeks Ended |
|
Net Sales |
|
|
November 1, |
|
November 3, |
|
from Prior Year |
|
|
2008 (1) |
|
2007 (1) |
|
2007-2008 (1) |
Net sales (2) |
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
N/A |
|
Cost of goods sold, including occupancy and distribution costs (3) |
|
|
72.61 |
|
|
|
71.55 |
|
|
|
106 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
27.39 |
|
|
|
28.45 |
|
|
|
(106 |
) |
Selling, general and administrative expenses (4) |
|
|
24.76 |
|
|
|
24.95 |
|
|
|
(19 |
) |
Pre-opening expenses (5) |
|
|
0.82 |
|
|
|
0.92 |
|
|
|
(10 |
) |
Merger and integration costs (6) |
|
|
0.33 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
Income from operations |
|
|
1.47 |
|
|
|
2.58 |
|
|
|
(111 |
) |
Interest expense, net (8) |
|
|
0.31 |
|
|
|
0.21 |
|
|
|
10 |
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
1.16 |
|
|
|
2.38 |
|
|
|
(122 |
) |
Provision for income taxes |
|
|
0.36 |
|
|
|
0.92 |
|
|
|
(56 |
) |
|
|
|
|
|
|
|
Net income |
|
|
0.80 |
% |
|
|
1.46 |
% |
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Comparable store net sales decrease (9) |
|
|
-2.8 |
% |
|
|
-2.5 |
% |
|
|
|
|
Number of stores at end of period (10) |
|
|
483 |
|
|
|
417 |
|
|
|
|
|
Total square feet at end of period (10) |
|
|
23,531 |
|
|
|
20,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Point |
|
|
|
|
|
|
|
|
|
|
Increase / |
|
|
|
|
|
|
|
|
|
|
(Decrease) in |
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
39 Weeks Ended |
|
Net Sales |
|
|
November 1, |
|
November 3, |
|
from Prior Year |
|
|
2008 (1) |
|
2007 (1) |
|
2007-2008 (1) |
Net sales (2) |
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
N/A |
|
Cost of goods sold, including occupancy and distribution costs (3) |
|
|
71.54 |
|
|
|
70.78 |
|
|
|
76 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
28.46 |
|
|
|
29.22 |
|
|
|
(76 |
) |
Selling, general and administrative expenses (4) |
|
|
23.49 |
|
|
|
23.17 |
|
|
|
32 |
|
Pre-opening expenses (5) |
|
|
0.55 |
|
|
|
0.65 |
|
|
|
(10 |
) |
Merger and integration costs (6) |
|
|
0.20 |
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
Income from operations |
|
|
4.22 |
|
|
|
5.39 |
|
|
|
(117 |
) |
Gain on sale of asset (7) |
|
|
(0.08 |
) |
|
|
|
|
|
|
(8 |
) |
Interest expense, net (8) |
|
|
0.24 |
|
|
|
0.32 |
|
|
|
(8 |
) |
|
|
|
|
|
|
|
Income before income taxes |
|
|
4.06 |
|
|
|
5.07 |
|
|
|
(101 |
) |
Provision for income taxes |
|
|
1.69 |
|
|
|
2.01 |
|
|
|
(32 |
) |
|
|
|
|
|
|
|
Net income |
|
|
2.37 |
% |
|
|
3.06 |
% |
|
|
(69 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Comparable
store net sales (decrease) increase (9) |
|
|
-3.7 |
% |
|
|
2.3 |
% |
|
|
|
|
Number of stores at end of period (10) |
|
|
483 |
|
|
|
417 |
|
|
|
|
|
Total square feet at end of period (10) |
|
|
23,531 |
|
|
|
20,287 |
|
|
|
|
|
|
|
|
(1) |
|
Column does not add due to rounding. |
|
(2) |
|
Revenue from retail sales is recognized at the point of sale, net of sales tax. A
provision for anticipated
merchandise returns is provided through a reduction of sales and cost of sales in the period
that the related sales are recorded. Revenue from gift cards and returned merchandise credits
(collectively the cards), is deferred and recognized upon the redemption of the cards. These
cards have no expiration date. Income from unredeemed cards is recognized in the unaudited
Consolidated Statements of Income in selling, general and administrative expenses at the point at
which redemption becomes |
18
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|
|
|
|
remote. The Company performs an evaluation of the aging of the unredeemed cards, based on the
elapsed time from the date of original issuance, to determine when redemption is remote. |
|
(3) |
|
Cost of goods sold includes the cost of merchandise, inventory shrinkage and
obsolescence, freight, distribution and store occupancy costs. Store occupancy costs include rent,
common area maintenance charges, real estate and other asset based taxes, store maintenance,
utilities, depreciation and amortization, fixture lease expenses and certain insurance expenses. |
|
(4) |
|
Selling, general and administrative expenses include store and field support payroll and
fringe benefits, advertising, bank card charges, information systems, marketing, legal, accounting,
other store expenses, stock-based compensation expense and all expenses associated with operating
the Companys corporate headquarters. |
|
(5) |
|
Pre-opening expenses consist primarily of rent, marketing, payroll and recruiting costs
incurred prior to a new or relocated store opening. |
|
(6) |
|
Merger and integration costs primarily include severance, retention and system conversion
costs incurred to consolidate Golf Galaxys headquarters into our corporate headquarters. |
|
(7) |
|
Gain on sale of asset resulted from the Company exercising a buy out option on an aircraft
lease and subsequently selling the aircraft. |
|
(8) |
|
Interest expense, net, results primarily from interest on our senior convertible notes
and Credit Agreement. |
|
(9) |
|
A store is considered for inclusion in the measurement of comparable store sales
beginning in the stores 14th full month of operations after its grand opening.
Comparable store sales are for stores that opened at least 13 months prior to the beginning of the
period noted. Stores that were relocated during the applicable period have been excluded from
comparable store sales. Each relocated store is returned to the comparable store base after its
14th full month of operations at that new location. |
|
(10) |
|
The store count and footage amounts include Golf Galaxy for fiscal 2008 and 2007 and
Chicks for fiscal 2008. |
13 Weeks Ended November 1, 2008 Compared to the 13 Weeks Ended November 3, 2007
Net Income
Net income for the current quarter decreased to
$7.4 million and earnings per diluted share
decreased to $0.06, as compared to net income of $12.2 million,
or $0.10 per diluted share for the
13 weeks ended November 3, 2007. The decrease was primarily due to an increase in selling, general
and administrative expenses and merger and integration costs incurred to consolidate Golf Galaxys
headquarters into our corporate headquarters.
Net Sales
Net sales for the quarter increased 10% to $924.2 million, due primarily to the opening of new
stores, which include Chicks Sporting Goods in fiscal 2008, partially offset by a comparable store
sales decrease of 2.8%. Golf Galaxy is included in the Companys comparable store sales calculation
beginning in the second quarter of 2008 and will be included in the full year comparable store
sales calculation beginning in fiscal 2009.
The decrease in comparable store sales is mostly attributable to sales decreases in exercise,
casual footwear, kids athletic footwear (which was affected by the Companys decision to exit the
Heelys wheeled shoe business in 2007) and golf equipment and accessories. These sales decreases
were partially offset by increases in athletic footwear (excluding Heelys), lodge outdoor
categories and outerwear and outerwear accessories that benefited from colder weather.
Income from Operations
Income from operations decreased to $13.6 million for the quarter from $21.7 million for the 13
weeks ended November 3, 2007. The decrease was primarily due to a $19.6 million increase in
selling, general and administrative expenses and $3.1 million of merger and integration costs
incurred in consolidating Golf Galaxys headquarters into our corporate headquarters, partially
offset by a $14.4 million increase in gross profit.
Gross profit increased 6% to $253.1 million for the quarter from $238.7 million for the 13 weeks
ended November 3, 2007. As a percentage of sales, gross profit decreased 106 basis points in the
current quarter. The 106 basis point decrease in gross profit is due primarily to a 106 basis
point increase in occupancy expenses caused by the deleverage related to the
19
comparable store sales decline in the current quarter. Freight and distribution costs increased 4
basis points due to the opening of a new distribution center in Atlanta, Georgia in the second
quarter, partially offset by initiatives to improve freight efficiencies. These gross profit
decreases were partially offset by merchandise margin improvements across several of the Companys
product categories (13 basis points).
Selling, general and administrative expenses increased 9% to $228.9 million for the current quarter
from $209.3 million for the 13 weeks ended November 3, 2007. As a percentage of sales, selling,
general and administrative expenses decreased 19 basis points in the current quarter. The 19 basis
point decrease is due primarily to decreases in advertising costs (55 basis points) and
administrative costs, including payroll (27 basis points) as the Company took steps to reduce costs
during a declining comparable sales environment. These selling, general and administrative expense
decreases were partially offset by a 56 basis point increase in store payroll and other store costs
that deleveraged as a result of the comparable store sales decrease.
Pre-opening expenses decreased to $7.5 million for the quarter from $7.7 million for the 13 weeks
ended November 3, 2007. Pre-opening expense is impacted by the timing of new stores which open in
preceding and subsequent quarters.
Interest Expense, net
Interest expense, net, was $2.9 million for the quarter as compared to $1.7 million for the 13
weeks ended November 3, 2007. The Company recognizes interest income or interest expense to
reflect changes in the investment value of assets held in its deferred compensation plans. The
Company recognized higher interest expense totaling $0.9 million in the current quarter compared to
the 13 weeks ended November 3, 2007 due to overall stock market value declines which impacted the
deferred compensation plan investment values. This was partially offset by lower interest expense
related to the Companys Credit Agreement. The Companys average borrowings outstanding on our
Credit Agreement were $46.0 million for both the 13 weeks ended November 1, 2008 and the 13 weeks
ended November 3, 2007. The average interest rate on the Credit Agreement decreased by 171 basis
points compared to last year, primarily reflecting the decrease in LIBOR rates in the current
quarter compared to last year.
Income Taxes
The Companys effective tax rate was 30.9% for the 13 weeks ended November 1, 2008 as compared to
38.7% for the same period last year. The current quarters effective tax rate is impacted by the
favorable resolution of state income tax audits that were previously reserved as uncertain tax
positions.
39 Weeks Ended November 1, 2008 Compared to the 39 Weeks Ended November 3, 2007
Net Income
Net income decreased to $69.3 million and earnings per diluted share decreased to $0.59, as
compared to net income of $81.9 million, or $0.71 per diluted share for the 39 weeks ended November
3, 2007. The decrease was primarily due to an increase in selling, general and administrative
expenses and merger and integration costs incurred in consolidating Golf Galaxys headquarters into
our corporate headquarters, partially offset by an increase in net sales and gross profit.
Net Sales
Net sales increased 9% to $2,922.6 million, due primarily to new store sales, which include Chicks
Sporting Goods in fiscal 2008, partially offset by a comparable store sales decrease of 3.7%. Golf
Galaxy was included in the Companys comparable store sales calculation beginning in the second
quarter of 2008 and will be included in the full year comparable store sales calculation beginning
in fiscal 2009.
The decrease in comparable store sales is mostly attributable to sales decreases in exercise,
casual footwear, kids athletic footwear (which was affected by the Companys decision to exit the
Heelys wheeled shoe business in 2007) and golf equipment and accessories. These sales decreases
were partially offset by increases in athletic footwear, baseball and outerwear and outerwear
accessories that benefited from colder weather.
Income from Operations
Income from operations decreased to
$123.2 million from $144.2 million for the 39 weeks ended
November 3, 2007. The decrease was primarily due to a $66.4 million increase in selling, general
and administrative expenses and $6.0 million of merger and integration costs incurred in
consolidating Golf Galaxys headquarters into our corporate headquarters, partially
offset by a $50.1 million increase in gross profit.
20
Gross profit increased 6% to $831.9 million for the quarter from $781.7 million for the 39 weeks
ended November 3, 2007. As a percentage of sales, gross profit decreased 76 basis points in the
current year to date period. The 76 basis point decrease is due primarily to a 111 basis point
increase in occupancy expenses caused by the deleverage related to the comparable store sales
decline for the 39 weeks ended November 1, 2008. These gross profit decreases were partially
offset by merchandise margin improvements across several of the Companys product categories (30
basis points) and a decrease in freight and distribution costs (3 basis points) as initiatives to
improve fright efficiencies more than offset costs related to the opening of a new distribution
center in Atlanta, Georgia in the second quarter.
Selling, general and administrative expenses increased 11% to $686.5 million from $620.1 million
for the 39 weeks ended November 3, 2007. The 32 basis point increase is due primarily to a 70
basis point increase in store payroll costs that deleveraged as a result of the comparable store
sales decrease partially offset by lower advertising expenses as the Company took steps to reduce
costs during a declining comparable sales environment.
Pre-opening expenses decreased to $16.1 million from $17.5 million for the 39 weeks ended November
3, 2007. Pre-opening expense is affected by the timing of new stores which open in preceding and
subsequent quarters.
Gain on Sale of Asset
The Company exercised its early buy out rights on an aircraft lease during the first quarter of
fiscal 2008. The Company recognized a $2.4 million pre-tax gain on the subsequent sale of the
aircraft.
Interest Expense, net
Interest expense, net, was $7.0 million as compared to $8.6 million for the 39 weeks ended November
3, 2007. The Companys average borrowings outstanding on our Credit Agreement decreased to $64.1
million from $97.8 million for the 39 weeks ended November 3, 2007, primarily due to borrowings
made in fiscal 2007 to fund the acquisition of Golf Galaxy. The average interest rate on the
Credit Agreement decreased by 287 basis points compared to last year, primarily reflecting the
decrease in LIBOR rates in the current quarter compared to last year as well as the reduction in
applicable Credit Agreement interest rates charged to the Company that were amended in July 2007.
Income Taxes
The Companys effective tax rate was 41.6% for the 39 weeks ended November 1, 2008 as compared to
39.6% for the same period last year. This years effective tax rate is impacted by non deductible
executive separation costs that increased income tax expense by $2.6 million partially offset by
the favorable resolution of state income tax audits that were previously reserved as uncertain tax
positions.
LIQUIDITY AND CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
Our primary capital requirements are for inventory, capital improvements, and pre-opening expenses
to support expansion plans, as well as for various investments in store remodeling, store fixtures
and ongoing infrastructure improvements.
The change in cash and cash equivalents is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended |
|
|
|
November 1, |
|
|
November 3, |
|
|
|
2008 |
|
|
2007 |
|
Net cash (used in) provided by operating activities |
|
$ |
(87,826 |
) |
|
$ |
17,629 |
|
Net cash used in investing activities |
|
|
(133,294 |
) |
|
|
(324,486 |
) |
Net cash provided by financing activities |
|
|
212,581 |
|
|
|
210,398 |
|
Effect of exchange rate changes on cash |
|
|
(122 |
) |
|
|
174 |
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
$ |
(8,661 |
) |
|
$ |
(96,285 |
) |
|
|
|
|
|
|
|
21
Operating Activities
Cash flow from operations is seasonal in our business. Typically, we use cash flow from operations
to increase inventory in advance of peak selling seasons, with the pre-Christmas inventory increase
being the largest. In the fourth quarter, inventory levels are reduced in connection with
Christmas sales and this inventory reduction, combined with proportionately higher net income,
typically produces significant positive cash flow.
Cash used in operating activities for the 39 weeks ended November 1, 2008 totaled $87.8 million.
The increase in inventory during the period used $254.9 million while the seasonal increase in
accounts payable provided $137.4 million. The decrease in income taxes payable, due to the timing
of payments and a higher federal extension payment, used $91.7 million. The $10.9 million decrease
in the cash provided by deferred construction allowances is impacted by the number of stores with
landlord allowances and the timing of the receipt of the allowances. Net income for the 39 weeks
ended November 1, 2008 provided $69.3 million, and the non-cash charge for depreciation and
amortization totaled $65.8 million.
The annual cash flow from operating the Companys stores is a significant source of liquidity, and
will continue to be used in 2008 primarily to purchase inventory, make capital improvements and
open new stores. All of the Companys revenues are realized at the point-of-sale in the stores.
Investing Activities
Cash used in investing activities for the 39 weeks ended November 1, 2008 decreased by $191.2
million to $133.3 million as the 39 weeks ended November 3, 2007 reflected payments of $222.1
million, net of $4.9 million cash acquired relating to the purchase of Golf Galaxy. The Companys
gross capital expenditures used $159.9 million during the 39 weeks ended November 1, 2008. We use
cash in investing activities to build new stores and remodel or relocate existing stores. Net cash
used in investing activities also includes purchases of information technology assets and
expenditures for distribution facilities and corporate headquarters.
We opened 49 stores during the 39 weeks ended November 1, 2008 as compared to opening 58 stores
during the 39 weeks ended November 3, 2007. Sale-leaseback transactions covering store fixtures,
buildings, distribution equipment and information technology assets also have the effect of
returning to the Company, cash which was previously invested in these assets. The Company received
$24.3 million of proceeds for these transactions during the 39 weeks ended November 1, 2008.
Cash requirements in 2008, other than normal operating expenses, are expected to consist primarily
of capital expenditures related to the addition of new stores, enhanced information technology and
improved distribution infrastructure. The Company plans to open 43 new Dicks stores, ten new Golf
Galaxy stores, relocate one Dicks store and convert one Chicks store to a Dicks store in 2008.
The Company also presently anticipates incurring additional expenditures for remodeling existing
stores. While there can be no assurance that current expectations will be realized, the Company
expects capital expenditures, net of deferred construction allowances and proceeds from sale
leaseback transactions, to be approximately $125 million in 2008, including Golf Galaxy and Chicks
capital expenditure requirements.
Financing Activities
Cash provided by financing activities for the 39 weeks ended November 1, 2008 totaled $212.6
million primarily reflecting net borrowings under the Credit Agreement of $184.8 million and the
receipt of $10.4 million of construction allowances prior to the completion of the sale-leaseback
transactions for stores where the Company is deemed to be the owner during the construction period.
Financing activities also consisted of proceeds from transactions in the Companys common stock
and the excess tax benefit from stock-based compensation. As stock option grants are exercised,
the Company will continue to receive proceeds and a tax deduction; however, the amounts and the
timing cannot be predicted.
The Companys liquidity and capital needs have generally been met by cash from operating
activities, the proceeds from the convertible notes and borrowings under the Credit Agreement,
including up to $75 million in the form of letters of credit. Borrowing availability under the
Credit Agreement is generally limited to the lesser of 70% of the Companys eligible inventory or
85% of the Companys inventorys liquidation value, in each case net of specified reserves and less
any letters of credit outstanding. Interest on outstanding indebtedness under the Credit Agreement
currently accrues, at the Companys option, at a rate based on either (i) the prime corporate
lending rate or (ii) the LIBOR rate plus 0.75% to 1.50% based on the level of total borrowings
during the prior three months. The Credit Agreements term expires July 27, 2012.
Borrowings under the Credit Agreement were $184.8 million as of November 1, 2008. There were no
outstanding borrowings under the Credit Agreement as of February 2, 2008. Total remaining
borrowing capacity, after subtracting letters of credit as of November 1, 2008 and February 2,
2008, was $148.3 million and $333.2 million, respectively.
22
The Credit Agreement contains restrictions regarding the Companys and related subsidiaries
ability, among other things, to merge, consolidate or acquire certain non-subsidiary entities, to
incur certain specified types of indebtedness or liens in excess of certain specified amounts, to
pay dividends or make distributions on the Companys stock, to make certain investments or loans to
other parties, or to engage in lending, borrowing or other commercial transactions with
subsidiaries, affiliates or employees. Under the Credit Agreement, the Company may be obligated to
maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 in certain circumstances. The
obligations of the Company under the Credit Agreement are secured by interests in substantially all
of the Companys personal property excluding store and distribution center equipment and fixtures.
As of November 1, 2008, the Company was in compliance with the terms of the Credit Agreement.
On November 19, 2008, the Company amended the Credit Agreement among the Company, certain lenders
and General Electric Capital Corporation as agent. The purpose of the amendment was to increase
the Aggregate Revolving Loan Commitment by $90 million, to a total of $440 million.
The Company believes that cash flows generated from operations and funds available under our Credit
Agreement will be sufficient to satisfy our capital requirements through fiscal 2008. Other new
business opportunities or store expansion rates substantially in excess of those presently planned
may require additional funding.
In February 2004, the Company completed a private offering of $172.5 million issue price of senior
unsecured convertible notes due 2024 (notes). The notes bear interest at an annual rate of 2.375%
of the issue price payable semi-annually on August 18th and February 18th of each year until
February 18, 2009. After February 18, 2009, the notes do not pay cash interest, but the initial
principal amount of the notes will accrete daily at an original issue discount rate of 2.625% per
year, until maturity on February 18, 2024, when a holder will
receive $1,000 per note. The conversion threshold trigger price set
forth in the notes and accompanying indenture, which permit the notes
to be converted by the holders in the event the Companys stock
price exceeds $23.59 per share, has been met,
and as such the notes are currently eligible and will remain eligible
for conversion for so long as they remain outstanding.
The note holders have the right to elect to put the notes to the Company on February 18, 2009 at
$676.25 per $1,000 face amount. The note holders must deliver written notice of their intent to
put the notes to the Company at any time from the opening of business on the date that is 20
business days prior to February 18, 2009 until the close of business on February 17, 2009.
The notes
will mature on February 18, 2024, unless earlier converted, put
or redeemed. The
Company may redeem the notes at any time on or after February 18, 2009, at its option, at a
redemption price equal to the sum of the issue price, accreted original issue discount and any
accrued cash interest, if any.
The Company believes that it has adequate availability under its Credit Agreement in the event the
note holders elect to convert the notes or put the notes to the
Company or if the Company redeems the notes as described above.
Off-Balance Sheet Arrangements, Contractual Obligations and Other Commercial Commitments
The Companys off-balance sheet contractual obligations and commercial commitments as of November
1, 2008 primarily relate to operating lease obligations, letters of credit and future minimum
guaranteed contractual payments. The Company has excluded these items from the consolidated
balance sheets in accordance with generally accepted accounting principles.
OUTLOOK
The Companys current outlook for 2008 is based on current expectations and includes
forward-looking statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Although the Company believes that comments reflected in such
forward-looking statements are reasonable, it can give no assurance that such expectations will
prove to be correct.
Considering current business trends, the uncertainty in the overall economic environment and the
unpredictability of consumer behavior approaching the holiday season, the Company lowered its
guidance for the year and the fourth quarter.
23
Full Year 2008 Comparisons to Fiscal 2007
|
|
|
Based on an estimated 117 million diluted shares outstanding, the Company currently
anticipates reporting consolidated earnings per diluted share of approximately $1.13 -
1.20, excluding costs from the Golf Galaxy integration. The Company anticipates
reporting earnings per diluted share of approximately $1.06 - 1.13, including the
integration costs. Earnings per diluted share for the full year 2007 were $1.33. |
|
|
|
|
Comparable store sales, which include Dicks Sporting Goods stores only, are
expected to decrease approximately 5 to 4%. The comparable store sales calculation for
the full year excludes the Golf Galaxy and Chicks Sporting Goods stores. |
|
|
|
|
The Company has opened 43 new Dicks Sporting Goods stores, relocated one Dicks
Sporting Goods store and converted one Chicks Sporting Goods store to a Dicks
Sporting Goods store, completing the new store program for Dicks Sporting Goods stores
in 2008. The Company expects to open ten new Golf Galaxy stores in 2008. |
Fourth Quarter 2008
|
|
|
Based on an estimated 117 million diluted shares outstanding, the Company
anticipates reporting consolidated earnings per diluted share of approximately $0.49 -
0.56, excluding costs from the Golf Galaxy integration. The Company anticipates
reporting earnings per diluted share of approximately $0.47 - 0.54, including the Golf
Galaxy integration costs. Earnings per diluted share for the fourth quarter of 2007
were $0.62. |
|
|
|
Comparable store sales are expected to decrease approximately 10 to 6%, which compares to
a 3.4% increase in the fourth quarter last year, as adjusted for the shifted retail
calendar. The comparable store sales calculation for the fourth quarter includes Golf
Galaxy stores and excludes the Chicks Sporting Goods stores. |
|
|
|
|
The Company expects to open four new Golf Galaxy Stores |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Companys market risk exposures from those reported in
our Annual Report on Form 10-K for the year ended February 2, 2008. However, the Company could be
exposed to credit risk in the event of nonperformance by counterparties under its credit agreement
and the nonperformance of the counterparty to our convertible bond hedge which we entered into in
connection with our 2004 convertible notes. The creditworthiness of these counterparties is subject
to continuing review. Currently, there is tremendous uncertainty in the financial and capital
markets. The uncertainty in the market brings additional potential risks to the Company, including
higher costs of credit, potential counterparty defaults, and potential commercial bank failures.
We have received no indication that any such events will occur that would negatively impact the
counterparties in our current credit agreement or the bond hedge; however, the possibility does
exist.
ITEM 4. CONTROLS AND PROCEDURES
During the third quarter of fiscal 2008, there were no changes in the Companys internal control
over financial reporting that materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.
During the quarter, the Company carried out an evaluation, under the supervision and with the
participation of the Companys management, including the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of the disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the Exchange Act). Based upon that evaluation, management, the Companys Chief
Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and
procedures were effective as of the end of the period covered by this report (November 1, 2008).
On November 30, 2007, the Company acquired all of the outstanding stock of Chicks. The Company is
currently integrating the processes, systems and controls relating to Chicks into the Companys
existing system of internal controls and procedures. As a result, the Companys internal controls
over financial reporting and the scope of management and the Companys assessment of the
effectiveness of the Companys disclosure controls and procedures for the end of the period covered
by this report included all of the Companys business except for Chicks, which represented
approximately 2% of total assets and 3% of total revenues as of and for the 39 weeks ended November
1, 2008.
24
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in two cases which make claims concerning alleged failures to pay wages
and overtime wages as required by the Fair Labor Standards Act (FLSA) and applicable state labor
law. The cases were filed in May and November of 2005 in the U.S. District Court for the Western
District of New York (Tamara Barrus v. Dicks Sporting Goods, Inc. and Galyans Trading Company,
Inc. (Barrus) and Daniel Parks v. Dicks Sporting Goods, Inc. (Parks)). In September and
October 2006, respectively, a magistrate judge for the U.S. District Court for the Western District
of New York conditionally certified classes for notice purposes under the FLSA in the Barrus and
Parks cases, which the U.S. District Judge upheld. In the Barrus case, the parties and the Court
agreed to stay the litigation pending an attempt to resolve all claims through mediation. Mediation
sessions were held in April and August 2007 and November 2008. The parties to the Barrus case have
continued to work through a mediators office and independently in an effort to determine whether
the matter can be resolved through settlement. If settlement does not occur, litigation will
resume. In the Parks case, the parties reached an agreement in principle to settle the case on a
class-wide basis, subject to execution of formal settlement documents and Court approval of the
proposed settlement.
We currently believe that none of these cases properly represent class actions, and we plan to
vigorously defend these cases. Our management believes that the final resolution of these matters
would not have a material effect on our consolidated financial position or liquidity or results of
operations.
In addition to the above matters, various claims and lawsuits arising in the normal course of
business are pending against us. The subject matter of these proceedings primarily includes
commercial, intellectual property, lease disputes and employment issues. The results of those other
proceedings are not expected to have a material adverse effect on our consolidated financial
position, liquidity or results of operations.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report and the risk factor set forth below,
you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our
Annual Report on Form 10-K for the year ended February 2, 2008 as filed with the Securities and
Exchange Commission on March 27, 2008, which could materially affect our business, financial
condition, financial results or future performance. Reference is made to Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking
Statements of this report which is incorporated herein by reference.
Economic conditions may cause a decline in business and consumer spending which could adversely
affect our business and financial performance
Our operating results are impacted by the relative condition of the U.S. economy. Our business and
financial performance may be adversely affected by current and future economic conditions that
cause a decline in business and consumer spending, including a reduction in the availability of
credit, increased unemployment levels, higher energy and fuel costs, rising interest rates,
financial market volatility and recession. Additionally, we may experience difficulties in
operating and growing our operations to react to economic pressures in the U.S.
ITEM 6. EXHIBITS
(a) Exhibits. The Exhibits listed in the Index to Exhibits, which appears on page 27 and is
incorporated herein by reference, are filed as part of this Form 10-Q.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on
November 26, 2008 on its behalf by the
undersigned, thereunto duly authorized.
|
|
|
|
|
DICKS SPORTING GOODS, INC. |
|
|
|
|
|
|
|
By:
|
|
/s/ EDWARD W. STACK
Edward W. Stack
|
|
|
|
|
Chairman of the Board, Chief Executive Officer, President and Director |
|
|
|
|
|
|
|
By: |
|
/s/ TIMOTHY E. KULLMAN |
|
|
|
|
|
|
|
|
|
Timothy E. Kullman |
|
|
|
|
Executive
Vice President, Finance, Administration and
Chief Financial Officer (principal financial and accounting
officer) |
|
|
26
INDEX TO EXHIBITS
|
|
|
|
|
Exhibit Number |
|
Description of Exhibit |
|
Method of Filing |
10.1
|
|
Eighth Amendment to the
Second Amended and Restated
Credit Agreement, dated
November 19, 2008
|
|
Incorporated by reference
to Exhibit 10.1 to the
Registrants Form 8-K,
File No. 001-31463, filed
on November 19, 2008 |
|
|
|
|
|
10.2
|
|
Agreement and General
Release by and among the
Company and Randall K.
Zanatta dated June 26, 2008
|
|
Filed herewith |
|
|
|
|
|
31.1
|
|
Certification of Edward W.
Stack, Chairman, Chief
Executive Officer and
President, dated as of
November 26, 2008 and made
pursuant to Rule 13a-14 of
the Securities Exchange Act
of 1934, as adopted
pursuant to Section 302 of
the Sarbanes-Oxley Act of
2002
|
|
Filed herewith |
|
|
|
|
|
31.2
|
|
Certification of Timothy E.
Kullman, Executive Vice
President, Finance,
Administration and Chief
Financial Officer, dated as
of November 26, 2008 and
made pursuant to Rule
13a-14 of the Securities
Exchange Act of 1934, as
adopted pursuant to Section
302 of the Sarbanes-Oxley
Act of 2002
|
|
Filed herewith |
|
|
|
|
|
32.1
|
|
Certification of Edward W.
Stack, Chairman, Chief
Executive Officer and
President, dated as of
November 26, 2008 and made
pursuant to Section 1350,
Chapter 63 of Title 18,
United States Code, as
adopted pursuant to Section
906 of the Sarbanes-Oxley
Act of 2002
|
|
Filed herewith |
|
|
|
|
|
32.2
|
|
Certification of Timothy E.
Kullman, Executive Vice
President, Finance,
Administration and Chief
Financial Officer, dated as
of November 26, 2008 and
made pursuant to Section 1350,
Chapter 63 of Title 18,
United States Code, as
adopted pursuant to Section
906 of the Sarbanes-Oxley
Act of 2002
|
|
Filed herewith |
|
|
|
|
|
27