DICK'S Sporting Goods Reports Second Quarter Results - 47 ABC - Delmarva's Choice

DICK'S Sporting Goods Reports Second Quarter Results

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SOURCE DICK'S Sporting Goods, Inc.

- Consolidated non-GAAP earnings per diluted share totaled $0.67, at the high end of guidance of $0.62 to 0.67

- Consolidated same store sales increased 3.2%

- Company repurchased $100 million of common stock and declared a $0.125 per share quarterly dividend

- Company records charges as it restructures its golf business

PITTSBURGH, Aug. 19, 2014 /PRNewswire/ -- DICK'S Sporting Goods, Inc. (NYSE: DKS), the largest U.S. based full-line omni-channel sporting goods retailer, today reported sales and earnings results for the second quarter ended August 2, 2014.

Second Quarter Results

The Company reported consolidated non-GAAP net income for the second quarter ended August 2, 2014 of $81.7 million, or $0.67 per diluted share, excluding golf restructuring charges, compared to the Company's expectations provided on May 20, 2014 of $0.62 to 0.67 per diluted share. For the second quarter ended August 3, 2013, the Company reported consolidated non-GAAP net income of $88.9 million, or $0.71 per diluted share, excluding an asset impairment charge.

On a GAAP basis, the Company reported consolidated net income for the second quarter ended August 2, 2014 of $69.5 million, or $0.57 per diluted share. For the second quarter ended August 3, 2013, the Company reported consolidated net income of $84.2 million, or $0.67 per diluted share. The GAAP to non-GAAP reconciliations are included in a table later in the release under the heading "Non-GAAP Net Income and Earnings Per Share Reconciliations."

Net sales for the second quarter of 2014 increased 10.3% to approximately $1.7 billion. Consolidated same store sales increased 3.2%, compared to the Company's guidance of an approximate 1 to 3% increase. Same store sales for DICK'S Sporting Goods increased 4.1%, while Golf Galaxy decreased 9.3%. Second quarter 2013 consolidated same store sales decreased 0.4%, adjusted for the shifted retail calendar due to the 53rd week in 2012.

"Our second quarter results came in at the high end of our expectations," said Edward W. Stack, Chairman and CEO. "As anticipated, the golf and hunting businesses continued to experience negative comps. However, excluding these two categories, the remainder of the business delivered a 7.8% same store sales increase. We saw significant strength in several areas, including categories that have received more space within our stores, such as women's and youth athletic apparel."

Mr. Stack continued, "The headwinds in our hunting business continued in the second quarter. However, as we look at the entirety of our outdoor business, strength in other outdoor categories offset the declines in hunting, and our total outdoor comps were flat for the quarter. This gives us confidence and enthusiasm for the outdoor business as we continue to grow our Field & Stream and DICK'S stores."

Golf Restructuring

In the second quarter, the Company recorded pre-tax charges totaling $20.4 million related to the restructuring of its golf business. These actions were taken to align the cost structure with current and expected trends in golf. 

The pre-tax charges include:

  • A $14.3 million non-cash impairment of trademarks and store assets used in the Company's golf business;
  • Severance charges totaling $3.7 million relating to the elimination of specific golf positions from the DICK'S stores, and from the combination of DICK'S golf and Golf Galaxy corporate and administrative functions; and,
  • A $2.4 million write-down of golf-related inventory.

Mr. Stack concluded, "We have consolidated our Golf Galaxy merchandising, marketing and store operations into DICK'S Sporting Goods. In addition, we have eliminated specific staff in our golf area within our DICK'S Sporting Goods stores. These changes are necessitated by the current and expected trends in golf. We will invest these cost savings into other aspects of our store operations and into the growth areas of our business."

Omni-channel Development

eCommerce penetration for the second quarter of 2014 was 6.3% of total sales, compared to 5.6% in the second quarter last year.

In the second quarter, the Company opened eight new DICK'S Sporting Goods stores and one new Field & Stream store. These stores are listed in a table later in the release under the heading "Store Count and Square Footage." The Company also relocated three DICK'S Sporting Goods stores during the second quarter. As of August 2, 2014, the Company operated 574 DICK'S Sporting Goods stores in 46 states, with approximately 30.9 million square feet and 79 Golf Galaxy stores in 29 states, with approximately 1.4 million square feet.

Balance Sheet

The Company ended the second quarter of 2014 with $100 million in cash and cash equivalents and no outstanding borrowings under its revolving credit facility. This compares to cash and cash equivalents of approximately $135 million and no outstanding borrowings under its $500 million revolving credit facility at the end of the second quarter of 2013. Over the course of the past twelve months, the Company utilized capital to invest in omni-channel growth, including Field & Stream stores, and returned over $360 million to shareholders through share repurchases and quarterly dividends.

Total inventory was 11.2% higher at the end of the second quarter of 2014 as compared to the end of the second quarter of 2013. Approximately 2% of inventory growth reflects inventory to support Field & Stream, including the seven new stores scheduled to open in the third quarter.

Year-to-Date Results

The Company reported consolidated non-GAAP net income for the 26 weeks ended August 2, 2014 of $143.0 million, or $1.17 per diluted share. For the 26 weeks ended August 3, 2013, the Company reported consolidated non-GAAP net income of $149.4 million, or $1.19 per diluted share.

On a GAAP basis, the Company reported consolidated net income for the 26 weeks ended August 2, 2014 of $139.5 million, or $1.14 per diluted share. For the 26 weeks ended August 3, 2013, on a GAAP basis, the Company reported consolidated net income of $149.0 million, or $1.18 per diluted share. The GAAP to non-GAAP reconciliations are included in a table later in the release under the heading "Non-GAAP Net Income and Earnings Per Share Reconciliations."

Net sales for the 26 weeks ended August 2, 2014 increased 9.2% from last year's period to $3.1 billion due to the opening of new stores coupled with a consolidated same store sales increase of 2.4%.

Capital Allocation

In the second quarter of 2014, the Company repurchased approximately 2.2 million shares of its common stock at an average cost of $44.51 per share, for a total cost of $100.0 million. To date, the Company has repurchased $380.6 million of common stock under its $1 billion share repurchase authorization.

On August 14, 2014, the Company's Board of Directors authorized and declared a quarterly dividend in the amount of $0.125 per share on the Company's Common Stock and Class B Common Stock. The dividend is payable in cash on September 26, 2014 to stockholders of record at the close of business on September 5, 2014.

Current 2014 Outlook

The Company's current outlook for 2014 is based on current expectations and includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as described later in this release. Although the Company believes that the expectations and other comments reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations or comments will prove to be correct. 

For the second half of 2014, the Company is cautiously optimistic although it does expect, due to the cautious consumer, an increase in promotional activity with margins and advertising expense continuing to be under pressure and impacting earnings per diluted share by approximately $0.04.

  • Full Year 2014
    • Based on an estimated 122 million diluted shares outstanding, the Company currently anticipates reporting consolidated non-GAAP earnings per diluted share of approximately $2.70 to 2.85, excluding a gain on the sale of an asset and golf restructuring charges. For the 52 weeks ended February 1, 2014, the Company reported consolidated earnings per diluted share of $2.69
    • Consolidated same store sales are currently expected to increase approximately 1 to 3%, compared to a 1.9% increase in fiscal 2013.
    • The Company now expects to open approximately 46 new DICK'S Sporting Goods stores, relocate five DICK'S Sporting Goods stores and remodel five DICK'S Sporting Goods stores in 2014. The Company also expects to open approximately eight new Field & Stream stores, relocate two Golf Galaxy stores and open one new Golf Galaxy store in 2014.
  • Third Quarter 2014 
    • Based on an estimated 121 million diluted shares outstanding, the Company currently anticipates reporting consolidated earnings per diluted share of approximately $0.38 to 0.42 in the third quarter of 2014, compared to consolidated earnings per diluted share of $0.40 in the third quarter of 2013.
    • Consolidated same store sales are currently expected to increase approximately 1 to 3% in the third quarter of 2014, as compared to a 3.3% increase in the third quarter of 2013, adjusted for the shifted retail calendar due to the 53rd week in 2012.
    • The Company expects to open approximately 24 new DICK'S Sporting Goods stores, relocate one DICK's Sporting Goods store and remodel five DICK's Sporting Goods stores in the third quarter of 2014. The Company also expects to open seven new Field & Stream stores and one new Golf Galaxy store, and relocate one Golf Galaxy store in the third quarter of 2014.
  • Capital Expenditures
    • In 2014, the Company now anticipates capital expenditures to be approximately $340 million on a gross basis and approximately $245 million on a net basis.

Conference Call Info

The Company will host a conference call today at 10:00 a.m. Eastern Time to discuss the second quarter results. Investors will have the opportunity to listen to the earnings conference call over the internet through the Company's website located at www.DICKS.com/Investors. To listen to the live call, please go to the website at least fifteen minutes early to register and download and install any necessary audio software.

In addition to the webcast, the call can be accessed by dialing (877) 443-5743 (domestic callers) or (412) 902-6617 (international callers) and requesting the "DICK'S Sporting Goods Earnings Call."

For those who cannot listen to the live webcast, it will be archived on the Company's website for approximately 30 days. In addition, a dial-in replay of the call will be available. To listen to the replay, investors should dial (877) 344-7529 (domestic callers) or (412) 317-0088 (international callers) and enter confirmation code 10049787. The dial-in replay will be available for approximately 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 or otherwise made by our management in connection with the subject matter of this release are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond our control. Our future performance and financial results may differ materially from those included in any such forward-looking statements and such forward-looking statements should not be relied upon by investors 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", "goal", "will", "will be", "will continue", "will result", "could", "may", "might" or other words with similar meanings. Forward-looking statements include statements regarding, among other things, the Company's expectations for the continuation of negative trends and challenges in the golf business and the hunting business, the Company's confidence in the outdoor business, the investment of cost savings as a result of the restructuring of the Company's golf business, the Company's expectation for a cautious consumer and increased promotional activity, the Company's future performance, growth in the omni-channel network, number of new store openings and capital expenditures.

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 2014 and beyond to differ materially from those expressed or implied in any forward-looking statements included in this release or otherwise made by our management: economic and financial uncertainties may cause a decline in consumer spending; intense competition in the sporting goods industry; changes in consumer demand or shopping patterns; limitations on the availability of attractive store locations and/or lease terms; unauthorized disclosure of sensitive or confidential customer information; risks relating to our private brand offerings; disruptions with our eCommerce services provider or of our information systems; access to adequate capital; changing laws and regulations affecting our business including the regulation of consumer products; factors affecting our vendors; litigation risks; foreign trade issues and currency exchange rate fluctuations; the loss of our key executives, especially Edward W. Stack, our Chairman and Chief Executive Officer; protection of our intellectual property; ability to attract and retain qualified business leaders; disruption at our distribution centers; developments with sports leagues, professional athletes or sports superstars; weather and seasonality of our business; risks associated with strategic investments or acquisitions; risks associated with being a controlled company; our anti-takeover provisions; our current intention to issue quarterly cash dividends; and our share repurchase activity, if any.

Known and unknown risks and uncertainties are more fully described in the Company's Annual Report on Form 10-K for the year ended February 1, 2014 as filed with the Securities and Exchange Commission ("SEC") on March 28, 2014 and in other reports filed with the SEC. 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 or assess the impact of all such risk factors. Forward-looking statements included in this release are made as of the date of this release. We do not assume any obligation and do not intend to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by the securities laws.

About DICK'S Sporting Goods, Inc.

Founded in 1948, DICK'S Sporting Goods, Inc. is a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories. As of August 2, 2014, the Company operated 574 DICK'S Sporting Goods locations across the United States, serving and inspiring athletes and outdoor enthusiasts to achieve their personal best through a blend of dedicated associates, in-store services and unique specialty shop-in-shops dedicated to Team Sports, Athletic Apparel, Golf, Lodge/Outdoor, Fitness and Footwear.

Headquartered in Pittsburgh, PA, DICK'S also owns and operates Golf Galaxy, Field & Stream and True Runner specialty stores. DICK'S offers its products through a content-rich eCommerce platform that is integrated with its store network and provides customers with the convenience and expertise of a 24-hour storefront. DICK'S Sporting Goods, Inc. news releases are available at www.DICKS.com/Investors. The Company's website is not part of this release.

Contacts:

Anne-Marie Megela, Vice President – Treasury Services and Investor Relations, or
Scott W. McKinney, Director of Investor Relations
DICK'S Sporting Goods, Inc.
investors@dcsg.com
(724) 273-3400

 

 


DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(In thousands, except per share data)






13 Weeks Ended



August 2,
 2014


% of
Sales


August 3,
 2013


% of

Sales (1)














Net sales


$

1,688,890



100.00

%


$

1,531,431



100.00

%

Cost of goods sold, including occupancy and
  distribution costs


1,186,334



70.24



1,052,101



68.70















GROSS PROFIT


502,556



29.76



479,330



31.30















Selling, general and administrative expenses


383,054



22.68



336,950



22.00


Pre-opening expenses


7,940



0.47



5,285



0.35















INCOME FROM OPERATIONS


111,562



6.61



137,095



8.95















Interest expense


763



0.05



716



0.05


Other income


(2,013)



(0.12)



(1,735)



(0.11)















INCOME BEFORE INCOME TAXES


112,812



6.68



138,114



9.02















Provision for income taxes


43,345



2.57



53,951



3.52















NET INCOME


$

69,467



4.11

%


$

84,163



5.50

%














EARNINGS PER COMMON SHARE:













Basic


$

0.58






$

0.68





Diluted


$

0.57






$

0.67


















WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING:













Basic


119,950






122,901





Diluted


121,840






125,593


















Cash dividend declared per share


$

0.125






$

0.125


















(1) Column does not add due to rounding

 

 

DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(In thousands, except per share data)






26 Weeks Ended



August 2,
 2014


% of

Sales


August 3,
2013


% of

Sales (1)














Net sales


$

3,127,798



100.00

%


$

2,865,132



100.00

%

Cost of goods sold, including occupancy and
  distribution costs


2,184,359



69.84



1,974,149



68.90















GROSS PROFIT


943,439



30.16



890,983



31.10















Selling, general and administrative expenses


705,643



22.56



649,658



22.67


Pre-opening expenses


14,146



0.45



6,614



0.23















INCOME FROM OPERATIONS


223,650



7.15



234,711



8.19















Interest expense


1,372



0.04



1,385



0.05


Other income


(4,377)



(0.14)



(7,940)



(0.28)















INCOME BEFORE INCOME TAXES


226,655



7.25



241,266



8.42















Provision for income taxes


87,205



2.79



92,282



3.22















NET INCOME


$

139,450



4.46

%


$

148,984



5.20

%














EARNINGS PER COMMON SHARE:













Basic


$

1.16






$

1.21





Diluted


$

1.14






$

1.18


















WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING:













Basic


120,544






122,802





Diluted


122,600






125,728


















Cash dividends declared per share


$

0.250






$

0.250


















(1) Column does not add due to rounding

 

 


DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(Dollars in thousands)










August 2,
 2014


August 3,
 2013


February 1,
 2014

ASSETS










CURRENT ASSETS:










Cash and cash equivalents


$

100,132



$

134,765



$

181,731


Accounts receivable, net


102,248



84,956



60,779


Income taxes receivable


6,328



2,455



7,275


Inventories, net


1,418,660



1,275,215



1,232,065


Prepaid expenses and other current assets


90,369



109,146



99,386


Deferred income taxes


39,423



46,138



38,835


Total current assets


1,757,160



1,652,675



1,620,071












Property and equipment, net


1,138,182



937,310



1,084,529


Intangible assets, net


84,901



97,858



98,255


Goodwill


200,594



200,594



200,594


Other assets:










Deferred income taxes


3,169



4,114



2,477


Other


71,477



126,920



65,561


Total other assets


74,646



131,034



68,038


TOTAL ASSETS


$

3,255,483



$

3,019,471



$

3,071,487












LIABILITIES AND STOCKHOLDERS' EQUITY










CURRENT LIABILITIES:










Accounts payable


$

688,442



$

598,263



$

562,439


Accrued expenses


305,937



295,010



265,040


Deferred revenue and other liabilities


125,258



111,101



154,384


Income taxes payable


12,784



12,777



19,825


Current portion of other long-term debt and leasing obligations


461



8,300



899


Total current liabilities


1,132,882



1,025,451



1,002,587


LONG-TERM LIABILITIES:










Other long-term debt and leasing obligations


6,232



6,360



6,476


Deferred income taxes


18,473



8,449



38,617


Deferred revenue and other liabilities


401,021



314,756



331,628


Total long-term liabilities


425,726



329,565



376,721


COMMITMENTS AND CONTINGENCIES










STOCKHOLDERS' EQUITY:










Common stock


941



981



961


Class B common stock


249



249



249


Additional paid-in capital


979,696



913,580



958,943


Retained earnings


1,296,434



1,030,108



1,187,514


Accumulated other comprehensive income


40



81



24


Treasury stock, at cost


(580,485)



(280,544)



(455,512)


Total stockholders' equity


1,696,875



1,664,455



1,692,179


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

3,255,483



$

3,019,471



$

3,071,487












 

 

DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollars in thousands)






26 Weeks Ended



August 2,
 2014


August 3,
 2013

CASH FLOWS FROM OPERATING ACTIVITIES:







Net income


$

139,450



$

148,984


Adjustments to reconcile net income to net cash provided by operating activities







Depreciation and amortization


89,771



76,314


Deferred income taxes


(21,424)



(14,545)


Stock-based compensation


12,915



13,925


Excess tax benefit from exercise of stock options


(6,588)



(15,475)


Tax benefit from exercise of stock options


22



102


Gain on sale of asset


(14,428)



-


Other non-cash items


290



290


Changes in assets and liabilities:







Accounts receivable


(11,023)



(21,690)


Inventories


(186,595)



(179,029)


Prepaid expenses and other assets


(10,980)



(12,738)


Accounts payable


133,245



83,458


Accrued expenses


7,697



(15,561)


Income taxes payable / receivable


494



(27,212)


Deferred construction allowances


44,934



12,756


Deferred revenue and other liabilities


(25,561)



(44,173)


Net cash provided by operating activities


152,219



5,406


CASH FLOWS FROM INVESTING ACTIVITIES:







Capital expenditures


(150,382)



(95,479)


Proceeds from sale of other assets


73,392



11,000


Deposits and purchases of other assets


(79)



(48,469)


Net cash used in investing activities


(77,069)



(132,948)


CASH FLOWS FROM FINANCING ACTIVITIES:







Payments on other long-term debt and leasing obligations


(682)



(1,615)


Construction allowance receipts


-



-


Proceeds from exercise of stock options


8,879



22,736


Excess tax benefit from exercise of stock options


6,588



15,475


Minimum tax withholding requirements


(7,645)



(12,877)


Cash paid for treasury stock


(124,999)



(80,603)


Cash dividends paid to stockholders


(31,664)



(33,550)


(Decrease) increase in bank overdraft


(7,242)



7,558


Net cash used in financing activities


(156,765)



(82,876)


EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


16



(31)


NET DECREASE IN CASH AND CASH EQUIVALENTS


(81,599)



(210,449)


CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


181,731



345,214


CASH AND CASH EQUIVALENTS, END OF PERIOD


$

100,132



$

134,765


 

 

Store Count and Square Footage

The stores that opened during the second quarter of 2014 are as follows:

Store


Market


Concept

Pleasant Hill, CA


San Francisco


DICK'S Sporting Goods

Culpeper, VA


Culpeper


DICK'S Sporting Goods

Arden, NC


Asheville


DICK'S Sporting Goods

Lawrence, KS


Lawrence


DICK'S Sporting Goods

Chicago (South Loop), IL


Chicago


DICK'S Sporting Goods

Seabrook, NH


Portsmouth


DICK'S Sporting Goods

Clermont, FL


Orlando


DICK'S Sporting Goods

South San Antonio, TX


San Antonio


DICK'S Sporting Goods

Erie, PA


Erie


Field & Stream

 

The following represents a reconciliation of beginning and ending stores and square footage for the periods indicated:

Store Count:



Fiscal 2014


Fiscal 2013



DICK'S
Sporting
Goods


Golf Galaxy /
Specialty Store
Concepts
(1)


Total


DICK'S
Sporting
Goods


Golf Galaxy /
Specialty Store
Concepts
(1)


Total

Beginning stores


558



84



642



518



83



601


Q1 New stores


8



-



8



2



-



2


Q2 New stores


8



1



9



7



-



7


Ending stores


574



85



659



527



83



610





















Relocated stores


4



1



5



-



-



-




























Square Footage:

(in millions)
















DICK'S
Sporting
Goods


Golf Galaxy /
Specialty Store
Concepts
(1)


Total (2)

Q1 2013


28.3



1.4



29.7


Q2 2013


28.7



1.4



30.0


Q3 2013


29.9



1.5



31.4


Q4 2013


30.1



1.5



31.6


Q1 2014


30.6



1.5



32.1


Q2 2014


30.9



1.6



32.5




(1)

Includes the Company's Field & Stream and True Runner stores.

(2)

Column may not add due to rounding.

 

 

Non-GAAP Financial Measures

In addition to reporting the Company's financial results in accordance with generally accepted accounting principles ("GAAP"), the Company provides information regarding net income and earnings per diluted share adjusted for certain non-recurring, infrequent or unusual items; earnings before interest, taxes and depreciation, adjusted to exclude certain non-recurring, infrequent or unusual items ("adjusted EBITDA"), and a reconciliation from the Company's gross capital expenditures, net of tenant allowances. These measures are considered non-GAAP and are not preferable to GAAP financial information; however, the Company believes this information provides additional measures of performance that the Company's management, analysts and investors can use to compare core operating results between reporting periods. These non-GAAP measures are provided below and on the Company's website at www.DICKS.com/Investors.

 


Non-GAAP Net Income and Earnings Per Share Reconciliations:

(in thousands, except per share data):






Fiscal 2014



13 Weeks Ended August 2, 2014













As Reported


Golf
Restructuring
Charges


Non-GAAP
Total

Net sales


$

1,688,890



$

-



$

1,688,890


Cost of goods sold, including occupancy and
  distribution costs


1,186,334



(2,405)



1,183,929












GROSS PROFIT


502,556



2,405



504,961












Selling, general and administrative expenses


383,054



(17,960)



365,094


Pre-opening expenses


7,940



-



7,940












INCOME FROM OPERATIONS


111,562



20,365



131,927












Interest expense


763



-



763


Other income


(2,013)



-



(2,013)












INCOME BEFORE INCOME TAXES


112,812



20,365



133,177












Provision for income taxes


43,345



8,146



51,491












NET INCOME


$

69,467



$

12,219



$

81,686












EARNINGS PER COMMON SHARE:










Basic


$

0.58






$

0.68


Diluted


$

0.57






$

0.67












WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING:










Basic


119,950






119,950


Diluted


121,840






121,840


 

During the second quarter of 2014, the Company recorded pre-tax restructuring charges of $20.4 million including a $14.3 million non-cash impairment of trademarks and store assets, severance charges of $3.7 million resulting from the elimination of specific staff in the golf area of its DICK'S stores and consolidation of DICK'S golf and Golf Galaxy corporate and administrative functions, and a $2.4 million write-down of excess golf inventories. The provision for income taxes was calculated at 40%, which approximates the Company's blended tax rate.

 



Fiscal 2014



26 Weeks Ended August 2, 2014
















As
Reported


Gain on Sale of
Asset


Golf
Restructuring
Charges


Non-GAAP
Total

Net sales


$

3,127,798



$

-



$

-



$

3,127,798


Cost of goods sold, including
  occupancy and distribution costs


2,184,359



-



(2,405)



2,181,954















GROSS PROFIT


943,439



-



2,405



945,844















Selling, general and administrative
  expenses


705,643



14,428



(17,960)



702,111


Pre-opening expenses


14,146



-



-



14,146















INCOME FROM OPERATIONS


223,650



(14,428)



20,365



229,587















Interest expense


1,372



-



-



1,372


Other income


(4,377)



-



-



(4,377)















INCOME BEFORE INCOME
  TAXES


226,655



(14,428)



20,365



232,592















Provision for income taxes


87,205



(5,771)



8,146



89,580















NET INCOME


$

139,450



$

(8,657)



$

12,219



$

143,012















EARNINGS PER COMMON
  SHARE:













Basic


$

1.16









$

1.19


Diluted


$

1.14









$

1.17















WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING:













Basic


120,544









120,544


Diluted


122,600









122,600


 

During the first quarter of 2014, the Company recorded a pre-tax $14.4 million gain on sale of a corporate aircraft. During the second quarter of 2014, the Company recorded pre-tax restructuring charges of $20.4 million including a $14.3 million non-cash impairment of trademarks and store assets, severance charges of $3.7 million resulting from the elimination of specific staff in the golf area of its DICK'S stores and consolidation of  DICK'S golf and Golf Galaxy corporate and administrative functions, and a $2.4 million write-down of excess golf inventories. The provision for income taxes for the aforementioned adjustments were calculated at 40%, which approximates the Company's blended tax rate.

 



Fiscal 2013



13 Weeks Ended August 3, 2013














As Reported



Asset
Impairment
Charge


Non-GAAP
Total

Net sales


$

1,531,431




$

-



$

1,531,431


Cost of goods sold, including occupancy and
  distribution costs


1,052,101




-



1,052,101













GROSS PROFIT


479,330




-



479,330













Selling, general and administrative expenses


336,950




(7,881)



329,069


Pre-opening expenses


5,285




-



5,285













INCOME FROM OPERATIONS


137,095




7,881



144,976













Interest expense


716




-



716


Other income


(1,735)




-



(1,735)













INCOME BEFORE INCOME TAXES


138,114




7,881



145,995













Provision for income taxes


53,951




3,152



57,103













NET INCOME


$

84,163




$

4,729



$

88,892













EARNINGS PER COMMON SHARE:











Basic


$

0.68







$

0.72


Diluted


$

0.67







$

0.71













WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING:











Basic


122,901







122,901


Diluted


125,593







125,593


 

During the second quarter of 2013, the Company recorded a pre-tax $7.9 million non-cash impairment charge to reduce the carrying value of a corporate aircraft held for sale to fair market value. The provision for income taxes was calculated at 40%, which approximates the Company's blended tax rate.




Fiscal 2013



26 Weeks Ended August 3, 2013
















As Reported


Recovery of
Previously
Impaired Asset


Asset
Impairment
Charge


Non-GAAP
Total

Net sales


$

2,865,132



$

-



$

-



$

2,865,132


Cost of goods sold, including
  occupancy and distribution costs


1,974,149



-



-



1,974,149















GROSS PROFIT


890,983



-



-



890,983















Selling, general and administrative
  expenses


649,658



-



(7,881)



641,777


Pre-opening expenses


6,614



-



-



6,614















INCOME FROM OPERATIONS


234,711



-



7,881



242,592















Interest expense


1,385



-



-



1,385


Other income


(7,940)



4,342



-



(3,598)















INCOME BEFORE INCOME
  TAXES


241,266



(4,342)



7,881



244,805















Provision for income taxes


92,282



-



3,152



95,434















NET INCOME


$

148,984



$

(4,342)



$

4,729



$

149,371















EARNINGS PER COMMON
  SHARE:













Basic


$

1.21









$

1.22


Diluted


$

1.18









$

1.19















WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING:













Basic


122,802









122,802


Diluted


125,728









125,728


 

During the first quarter of 2013, the Company determined that it would recover $4.3 million of its investment in JJB Sports, which it had previously fully impaired. There is no related tax expense as the Company reversed a portion of the deferred tax valuation allowance it had previously recorded for net capital loss carryforwards it did not expect to realize at the time its investment in JJB Sports was fully impaired. During the second quarter of 2013, the Company recorded a pre-tax $7.9 million non-cash impairment charge to reduce the carrying value of a corporate aircraft held for sale to fair market value. The provision for income taxes was calculated at 40%, which approximates the Company's blended tax rate.

Adjusted EBITDA

Adjusted EBITDA should not be considered as an alternative to net income or any other generally accepted accounting principles measure of performance or liquidity. Adjusted EBITDA, as the Company has calculated it, may not be comparable to similarly titled measures reported by other companies. Adjusted 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, capital investments and certain non-recurring, infrequent or unusual items.

 



13 Weeks Ended



August 2,
 2014


August 3,
 2013



(dollars in thousands)

Net income


$

69,467



$

84,163


Provision for income taxes


43,345



53,951


Interest expense


763



716


Depreciation and amortization


52,912



43,506


EBITDA


$

166,487



$

182,336


Add: Golf restructuring charges


6,043



-


Adjusted EBITDA, as defined


$

172,530



$

182,336









% decrease in adjusted EBITDA


(5)%













26 Weeks Ended



August 2,
 2014


August 3,
 2013



(dollars in thousands)

Net income


$

139,450



$

148,984


Provision for income taxes


87,205



92,282


Interest expense


1,372



1,385


Depreciation and amortization


89,771



76,314


EBITDA


$

317,798



$

318,965


Less: Recovery of previously impaired asset


-



(4,342)


Less: Gain on sale of asset


(14,428)



-


Add: Golf restructuring charges


6,043



-


Adjusted EBITDA, as defined


$

309,413



$

314,623









% decrease in adjusted EBITDA


(2)%





 

Reconciliation of Gross Capital Expenditures to Net Capital Expenditures

The following table represents a reconciliation of the Company's gross capital expenditures to its capital expenditures, net of tenant allowances.

 



26 Weeks Ended



August 2,
 2014


August 3,
 2013



(dollars in thousands)

Gross capital expenditures


$

(150,382)



$

(95,479)


Proceeds from sale-leaseback transactions


-



-


Deferred construction allowances


44,934



12,756


Construction allowance receipts


-



-


Net capital expenditures


$

(105,448)



$

(82,723)


 

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