EX-99.1 2 l23268aexv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1
 
     
  PRESS RELEASE
Dick’s Sporting Goods Reports Third Quarter Results:
  •   EPS Increases to $0.14 from $0.02 Proforma Last Year
  •   Comparable Store Sales Increase 8.9%
  •   Agrees to Acquire Golf Galaxy
PITTSBURGH, Pa., November 13, 2006 — Dick’s Sporting Goods, Inc. (NYSE: DKS) today reported sales and earnings results for the third quarter ended October 28, 2006.
Third Quarter Results
Net income for the third quarter ended October 28, 2006 was $7.8 million and earnings per share was $0.14, as compared to prior year proforma net income of $0.9 million, or $0.02 per share (which has been adjusted for $0.06 of stock option expense per share as if the Company expensed stock options). Earnings guidance provided on August 15, 2006 was for earnings per share of approximately $0.03 — 0.04.
On a GAAP basis, net income increased to $7.8 million and earnings per share increased to $0.14, as compared to prior year net income (excluding stock option expense) of $4.2 million, or $0.08 per share.
Net sales for the quarter increased 22% to $708.3 million while comparable store sales increased 8.9%. The former Galyan’s stores are included in the third quarter comparable store sales calculation. Comparable store sales guidance provided on August 15, 2006 was for an increase of approximately 3 — 4%.
“I am very pleased with the performance of our team across all functional areas as measured by a variety of metrics. Earnings per share, comp store sales and inventory per square foot were all noteworthy. It is important to note that the weather was very much in our favor as was new product introductions for football and soccer. Certainly, some of the fourth quarter business shifted to the third quarter. That said, we executed well while opening a record 26 stores in the quarter,” said Edward W. Stack, Chairman and CEO.
New Stores
In the third quarter, the Company opened 26 single-level stores (23 in existing markets and three in new markets) which completes the new store openings for the year. The stores that opened in the third quarter are listed in a table later in the release under the heading “Store Count and Square Footage”.
As of October 28, 2006, the Company operated 294 stores, with approximately 16.7 million square feet, in 34 states.
Year-to-Date Results
Net income for the 39 weeks ended October 28, 2006 increased 48% to $44.9 million and earnings per share increased 46% to $0.82, as compared to prior year proforma net income of $30.3 million, or $0.56 per share (which has been adjusted for $0.19 of stock option expense per share as if the Company expensed stock options, and excludes merger integration and store closing costs and gain on sale of investment).

 

 

On a GAAP basis, net income increased to $44.9 million and earnings per share increased to $0.82, as compared to prior year net income of $19.0 million, or $0.35 per share which included $37.8 million pre-tax of merger integration costs and a $1.8 million pre-tax gain on sale of investment.
Net sales increased 18% to $2,088 million while comparable store sales increased 7.7%. The former Galyan’s stores are not included in the year-to-date comparable store sales calculation as they were not in the comp store base at the beginning of 2006.
Acquisition of Golf Galaxy, Inc.
Dick’s and Golf Galaxy, Inc. (Nasdaq: GGXY) have entered into a definitive agreement and plan of merger. Under the terms of the agreement, each outstanding share of Golf Galaxy common stock will be converted into the right to receive $18.82 per share in cash, without interest.
Dick’s offer represents a premium of 19% over Golf Galaxy’s closing stock price as of November 10, 2006. Based on approximately 11.7 million outstanding Golf Galaxy shares, the transaction would be valued at approximately $225 million. The transaction will be financed using our existing credit facility.
Completion of the transaction is contingent upon various conditions, which are more fully set forth in the merger agreement, and includes, among other things, approval of the transaction by Golf Galaxy’s shareholders. The merger transaction is anticipated to be completed not before February 6, 2007, subject to Hart-Scott-Rodino approval under United States antitrust laws and customary closing conditions.
Certain holders of Golf Galaxy’s common stock have entered into a voting agreement with Dick’s where they have agreed to vote 19.9% of the outstanding common stock in favor of the merger at the special shareholders meeting.
Golf Galaxy currently operates 61 stores in 24 states, ecommerce websites and catalog operations, and generated $250 million in sales during the last 12 months ended August 26, 2006.
Dick’s management anticipates that the acquisition will be accretive in fiscal 2007. Earnings guidance will be provided with our year end earnings release in March in connection with our standard practice.
“Golf Galaxy is a rapidly growing, profitable company which we believe is the best in the specialty golf category. The passion with which Dick’s Sporting Goods and Golf Galaxy associates serve the enthusiast golfer make this transaction a big win for shareholders and golf enthusiasts alike,” said Edward W. Stack, Chairman and CEO.
Peter J. Solomon Securities Company Limited provided financial advisory services to Dick’s Sporting Goods in connection with the transaction.
2006 Outlook
The Company’s current outlook for 2006 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 as described later in this release. 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. The earnings outlook does not include the combined results of Dick’s and Golf Galaxy and excludes any merger-related expenses that may be incurred pursuant to the merger.
  •   Full Year 2006 Comparisons to Fiscal 2005
  •   We are increasing earnings guidance for the full year as a result of our third quarter performance. Based on an estimated 55 million shares outstanding, the Company is increasing earnings guidance from the previous guidance of approximately $1.84 — 1.88 to the new guidance of approximately $1.95 — 1.98 per share (which includes $0.26 of stock option expense per share). This represents an approximate 30% increase over fiscal 2005 proforma earnings per share of $1.50 (which has been adjusted for $0.25 of stock option expense per share as if the Company expensed stock options, and excludes merger integration and store closing costs and gain on sale of investment).

 

 

  •   Comparable store sales are expected to increase approximately 6% on a 52-week to 52-week comparative basis.
  •   The Company opened 39 new stores year-to-date which completes the new store openings for the year. Two stores were relocated in the first quarter of 2006.
  •   Fourth Quarter 2006 — 14 Week Quarter
  •   Based on an estimated 56 million shares outstanding, the Company is providing earnings guidance of approximately $1.13 — 1.16 per share (which includes $0.06 of stock option expense per share). This represents an approximate 22% increase over fourth quarter 2005 proforma earnings per share of $0.94 (which has been adjusted for $0.06 of stock option expense per share as if the Company expensed stock options).
  •   Comparable store sales are expected to increase approximately 2 — 3% on a 13-week to 13-week comparative basis.
Conference Call Info
The Company will be hosting a conference call today at 5:00 pm Eastern Time to discuss the third quarter results. Investors will have the opportunity to listen to the earnings conference call over the internet through the Company’s web site located at http://www.dickssportinggoods.com/investors. To listen to the live call, please go to the web site at least fifteen minutes early to register, download and install any necessary audio software.
For those who cannot listen to the live broadcast, the webcast will be archived on the Company’s web site for approximately 30 days. In addition, a dial-in replay will be available shortly after the call. To listen, investors should dial (888) 286-8010 (domestic callers) or (617) 801-6888 (international callers) and enter confirmation code 25488141. The dial-in replay will be available for 30 days following the live call.
Forward-Looking Statements Involving Known and Unknown Risks and Uncertainties
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “guidance,” “estimate,” “intend,” “predict,” and “continue” or similar words. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company’s actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in the Company’s Annual Report on Form 10-K for the year ended January 28, 2006 as filed with the Securities and Exchange Commission on March 23, 2006 and those references herein to our planned merger with Golf Galaxy. The Company disclaims any obligation and does not intend to update any forward-looking statements except as may be required by the securities laws.
About Dick’s Sporting Goods, Inc.
Pittsburgh-based Dick’s Sporting Goods, Inc. 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. As of October 28, 2006, the Company operated 294 stores in 34 states primarily throughout the Eastern half of the U.S.
Dick’s Sporting Goods, Inc. news releases are available at http://www.dickssportinggoods.com/ (click on the Investor Relations link at the bottom of the home page).
Contact:
Michael F. Hines, EVP — Chief Financial Officer or
Dennis Magulick, Director, Investor Relations
724-273-3400
investors@dcsg.com

 

 

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME — UNAUDITED
(In thousands, except per share data)
                                 
    13 Weeks Ended     39 Weeks Ended  
    October 28,     October 29,     October 28,     October 29,  
    2006     2005     2006     2005  
 
                                
Net sales
   $ 708,343     $ 582,665     $ 2,087,888     $ 1,775,480  
Cost of goods sold, including occupancy and distribution costs
     517,008       429,211       1,511,490       1,295,638  
 
                        
 
                                
GROSS PROFIT
     191,335       153,454       576,398       479,842  
 
                                
Selling, general and administrative expenses
     167,393       136,564       478,868       392,282  
Pre-opening expenses
     8,333       6,022       14,936       10,259  
Merger integration and store closing costs
     —       —       —       37,790  
 
                        
 
                                
INCOME FROM OPERATIONS
     15,609       10,868       82,594       39,511  
 
                                
Gain on sale of investment
     —       —       —       (1,844 )
Interest expense, net
     2,617       3,896       7,772       9,771  
 
                        
 
                                
INCOME BEFORE INCOME TAXES
     12,992       6,972       74,822       31,584  
 
                                
Provision for income taxes
     5,197       2,789       29,929       12,634  
 
                        
 
                                
NET INCOME
   $ 7,795     $ 4,183     $ 44,893     $ 18,950  
 
                        
 
                                
EARNINGS PER COMMON SHARE:
                                
Basic
   $ 0.15     $ 0.08     $ 0.88     $ 0.38  
Diluted
   $ 0.14     $ 0.08     $ 0.82     $ 0.35  
 
                                
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
                                
Basic
     51,272       50,120       50,812       49,652  
Diluted
     55,437       53,947       54,973       53,917  

 

 

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
                         
    October 28,     October 29,     January 28,  
    2006     2005     2006  
    (unaudited)     (unaudited)          
 
                        
ASSETS
                        
CURRENT ASSETS:
                        
Cash and cash equivalents
   $ 35,137     $ 32,009     $ 36,564  
Accounts receivable, net
     62,922       55,366       29,365  
Income taxes receivable
     16,100       5,637       —  
Inventories, net
     787,103       674,877       535,698  
Prepaid expenses and other current assets
     19,241       14,236       11,961  
Deferred income taxes
     —       12,411       429  
 
                  
Total current assets
     920,503       794,536       614,017  
 
                        
Property and equipment, net
     425,970       363,113       370,277  
Construction in progress — leased facilities
     22,229       5,524       7,338  
Goodwill
     156,628       157,500       156,628  
Other assets
     52,455       42,863       39,529  
 
                  
TOTAL ASSETS
   $ 1,577,785     $ 1,363,536     $ 1,187,789  
 
                  
 
                        
LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
CURRENT LIABILITIES:
                        
Accounts payable
   $ 384,727     $ 332,446     $ 253,395  
Accrued expenses
     190,370       138,744       136,520  
Deferred revenue and other liabilities
     50,461       39,556       62,792  
Income taxes payable
     —       —       18,381  
Current portion of other long-term debt and capital leases
     141       560       181  
 
                  
Total current liabilities
     625,699       511,306       471,269  
 
                  
LONG-TERM LIABILITIES:
                        
Senior convertible notes
     172,500       172,500       172,500  
Revolving credit borrowings
     101,823       202,570       —  
Other long-term debt and capital leases
     8,412       8,356       8,520  
Non-cash obligations for construction in progress — leased facilities
     22,229       5,524       7,338  
Deferred revenue and other liabilities
     140,793       105,957       113,369  
 
                  
Total long-term liabilities
     445,757       494,907       301,727  
 
                  
STOCKHOLDERS’ EQUITY:
                        
Common stock
     380       364       365  
Class B common stock
     135       138       137  
Additional paid-in capital
     256,091       206,280       209,526  
Retained earnings
     247,735       148,812       202,842  
Accumulated other comprehensive income
     1,988       1,729       1,923  
 
                  
Total stockholders’ equity
     506,329       357,323       414,793  
 
                  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 1,577,785     $ 1,363,536     $ 1,187,789  
 
                  

 

 

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(Dollars in thousands)
                 
    39 Weeks Ended  
    October 28,     October 29,  
    2006     2005  
CASH FLOWS FROM OPERATING ACTIVITIES:
                
Net income
   $ 44,893     $ 18,950  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                
Depreciation and amortization
     39,378       36,542  
Deferred income taxes
     (11,109 )     (13,983 )
Stock-based compensation
     18,719       —  
Excess tax benefit from stock-based compensation
     (11,776 )     —  
Tax benefit from exercise of stock options
     996       14,193  
Gain on sale of investment
     —       (1,844 )
Other non-cash items
     1,951       1,841  
Changes in assets and liabilities:
                
Accounts receivable
     5,947       (17,449 )
Inventories
     (251,405 )     (217,051 )
Prepaid expenses and other assets
     (9,546 )     (4,940 )
Accounts payable
     128,303       96,778  
Accrued expenses
     32,353       7,348  
Income taxes payable
     (5,663 )     —  
Deferred construction allowances
     26,554       3,623  
Deferred revenue and other liabilities
     (3,646 )     3,608  
 
            
Net cash provided by (used in) operating activities
     5,949       (72,384 )
 
            
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Capital expenditures
     (136,175 )     (93,716 )
Proceeds from sale-leaseback transactions
     14,075       18,070  
Increase in recoverable costs from developed properties
     (14,892 )     (662 )
Proceeds from sale of investment
     —       1,922  
 
            
Net cash used in investing activities
     (136,992 )     (74,386 )
 
            
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Revolving credit borrowings, net
     101,823       126,476  
Payments on other long-term debt and capital leases
     (148 )     (345 )
Proceeds from exercise of stock options
     11,038       6,804  
Proceeds from sale of common stock under employee stock purchase plan
     2,098       2,135  
Excess tax benefit from stock-based compensation
     11,776       —  
Increase in bank overdraft
     3,029       24,823  
 
            
Net cash provided by financing activities
     129,616       159,893  
 
            
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
     (1,427 )     13,123  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
     36,564       18,886  
 
            
CASH AND CASH EQUIVALENTS, END OF PERIOD
   $ 35,137     $ 32,009  
 
            
Supplemental disclosure of cash flow information:
                
Construction in progress — leased facilities
   $ 14,891     $ (9,709 )
Accrued property and equipment
   $ 21,497     $ (10,286 )
Cash paid for interest
   $ 6,905     $ 12,464  
Cash paid for income taxes
   $ 60,940     $ 4,304  

 

 

Store Count and Square Footage
The stores that opened during the third quarter are as follows:
             
Store
  Market   Store   Market
 
           
Altoona, PA
  Altoona   Brighton, MI   Detroit
Alpharetta, GA
  Atlanta   Grand Rapids, MI   Grand Rapids
Fayetteville, GA
  Atlanta   Maple Grove, MN   Minneapolis
Newnan, GA
  Atlanta   Franklin, TN   Nashville
Birmingham, AL
  Birmingham   Madison, TN   Nashville
Dedham, MA
  Boston   Cherry Hill, NJ   Philadelphia
Arlington Heights, IL
  Chicago   Pittsfield, MA   Pittsfield
Deer Park, IL
  Chicago   Topsham, ME   Portland
Merrillville, IN
  Chicago   Apex, NC   Raleigh
Tinley Park, IL
  Chicago   Christiansburg, VA   Roanoke
Strongsville, OH
  Cleveland   Salisbury, MD   Salisbury
Grove City, OH
  Columbus   Williamsport, PA   Wilkes-Barre
Longmont, CO
  Denver   Jacksonville, NC   Wilmington
The following represents a reconciliation of beginning and ending stores and square footage for the periods indicated:
                                                                 
    Fiscal 2006     Fiscal 2005  
    Q1     Q2     Q3     Total     Q1     Q2     Q3     Total  
Beginning stores
     255       263       268       255       234       236       239       234  
New
     8       5       26       39       7       3       16       26  
Closed
     —       —       —       —       (5 )     —       —       (5 )
 
                                                
Ending stores
     263       268       294       294       236       239       255       255  
 
                                                
Relocated stores
     2       —       —       2       —       1       3       4  
 
                                                
 
Square Footage:
(in millions)
                         
    Fiscal 2006   Fiscal 2005   % Increase
Q1
    15.2       13.6       12 %
Q2
    15.5       13.8       12 %
Q3
    16.7       14.7       14 %
Reconciliation of Non-GAAP Financial Measures
The Company has provided non-GAAP financial information in this earnings release which includes net income and earnings per share adjusted for merger integration and store closing costs, gain on sale of investment and stock option expense had the Company applied SFAS 123, “Accounting for Stock-Based Compensation” in fiscal 2005. The proforma financial information is considered non-GAAP and is not preferable to GAAP financial information; however, the Company believes this information provides additional measures of performance that the Company’s management and investors can use to compare core, operating results between reporting periods. A reconciliation of these non-GAAP measures to the applicable GAAP measures are provided below and on the Company’s website at http://www.dickssportinggoods.com/ (click on the Investor Relations link at the bottom of the home page).

 

 

Proforma Net Income, Earnings Per Share and EBITDA Reconciliations
     Proforma Net Income and Proforma Earnings Per Share Reconciliation
     (dollars in thousands, except per share data):
                                 
    13 Weeks Ended     39 Weeks Ended  
    October 29, 2005     October 29, 2005  
            Per             Per  
    Amounts     Share     Amounts     Share  
Net income and earnings per share (GAAP)
   $ 4,183     $ 0.08     $ 18,950     $ 0.35  
Less: Stock option expense, after tax
     (3,277 )     (0.06 )     (10,202 )     (0.19 )
Add: Merger integration and store closing costs (Galyan’s), after tax
     —       —       22,674       0.42  
Less: Gain on sale of investment, after tax
     —       —       (1,106 )     (0.02 )
 
                        
Proforma net income and earnings per share
   $ 906     $ 0.02     $ 30,316     $ 0.56  
 
                        
 
                                
                                 
    13 Weeks Ended     52 Weeks Ended  
    January 28, 2006     January 28, 2006  
            Per             Per  
    Amounts     Share     Amounts     Share  
Net income and earnings per share (GAAP)
   $ 54,030     $ 1.00     $ 72,980     $ 1.35  
Less: Stock option expense, after tax
     (3,282 )     (0.06 )     (13,484 )     (0.25 )
Add: Merger integration and store closing costs (Galyan’s), after tax
     —       —       22,674       0.42  
Less: Gain on sale of investment, after tax
     —       —       (1,106 )     (0.02 )
 
                        
Proforma net income and earnings per share
   $ 50,748     $ 0.94     $ 81,064     $ 1.50  
 
                        
EBITDA
EBITDA should not be considered as an alternative to net income or any other generally accepted accounting principles measure of performance or liquidity. EBITDA, as the Company has calculated it, may not be comparable to similarly titled measures reported by other companies. EBITDA is a key metric used by the Company that provides a measurement of profitability that eliminates the effect of changes resulting from financing decisions, tax regulations, and capital investments.
                         
    Q3  
EBITDA   2006     2005
(GAAP)		     2005
(Proforma) /1		  
    (dollars in thousands)  
Net income
   $ 7,795     $ 4,183     $ 4,183  
Provision for income taxes
     5,197       2,789       2,789  
Interest expense, net
     2,617       3,896       3,896  
Depreciation and amortization
     13,132       12,218       12,218  
Less: Stock option expense (fiscal 2005)
     —       —       (5,462 )
 
                  
EBITDA
   $ 28,741     $ 23,086     $ 17,624  
 
                  
GAAP EBITDA % increase over GAAP Prior Year
     24 %                
GAAP EBITDA % increase over Proforma Prior Year
     63 %                
                         
    YTD  
EBITDA   2006     2005
(GAAP)		     2005
(Proforma) /1		  
    (dollars in thousands)  
Net income
   $ 44,893     $ 18,950     $ 18,950  
Provision for income taxes
     29,929       12,634       12,634  
Interest expense, net
     7,772       9,771       9,771  
Depreciation and amortization
     39,378       36,542       36,542  
Less: Depreciation and amortization (merger integration)
     —       —       (869 )
Add: Merger integration and store closing costs
     —       —       37,790  
Less: Gain on sale of investment
     —       —       (1,844 )
Less: Stock option expense (fiscal 2005)
     —       —       (17,003 )
 
                  
EBITDA
   $ 121,972     $ 77,897     $ 95,971  
 
                  
GAAP EBITDA % increase over GAAP Prior Year
     57 %                
GAAP EBITDA % increase over Proforma Prior Year
     27 %                
/1     Proforma adjusts for merger integration and store closing costs related to the Galyan’s acquisition in 2004, gain on sale of investment and the effect of expensing stock options as if we had applied SFAS 123, “Accounting for Stock-Based Compensation”, in fiscal 2005.