The Sports Authority, Inc. reported that total sales for the 13 weeks ended November 1, 2003 increased 143%
to $552.5 million compared with $227.8 million in the prior year's third quarter as reported by the former Gart Sports Company on a stand-alone basis. Third quarter comparable store sales for the combined company increased 1.7% from last year's combined company results.
The third quarter net loss of $7.7 million, or $0.31 per share,includes the effect of after-tax, merger integration costs of $12.1 million, or $0.50 per share. Excluding merger integration costs, third quarter net income was $4.4 million, or $0.17 per fully diluted share, compared with $0.11 per fully diluted share in the prior year's
quarter, as reported by the former Gart Sports Company on a
stand-alone basis.
On August 4, 2003, Gart Sports Company and The Sports Authority,
Inc. announced that they had completed a merger of equals. The results
for the third quarter of 2003 represent the performance of the new,
consolidated company, while the year ago results reflect Gart Sports
Company on a stand-alone basis. The results for the nine months
include the combined company for the third quarter and stand-alone
results for Gart Sports Company for the first six months. This
compares to the prior year when Garts Sports Company was a stand-alone
company.
Net income for the 39 weeks ended November 1, 2003, including the
effect of after-tax, merger integration costs of $13.0 million, or
$0.76 per fully diluted share, and income related to non-recurring
events and a related tax benefit, of $1.9 million or $0.11 per fully
diluted share, totaled $1.8 million, or $0.10 per fully diluted share.
Excluding these items, year to date net income was $12.9 million or
$0.75 per fully diluted share compared with $0.82 per fully diluted
share in the prior year's comparable period as reported by the former
Gart Sports Company on a stand-alone basis.
Total sales for the 39 weeks ended November 1, 2003 increased 43%
to $1,048.5 million compared with $734.4 million in the prior year's
39 weeks as reported by the former Gart Sports Company on a
stand-alone basis. Year to date comparable store sales decreased 1.3%,
which represents a year-over-year comparison of the combined company
results for the third quarter and the former Gart Sports Company on a
stand-alone basis for the first six months.
Doug Morton, Vice Chairman and Chief Executive Officer of The
Sports Authority stated, “We are pleased with our third quarter
results as they reflect the progress we have made in integrating the
operations of the two companies. Our sales results were driven by
strong sales in active sportswear and outdoor categories, as well as
continued improvement in team sports and exercise related hard goods.
In addition, our store inventories continue to be well-managed as
evidenced by levels that are approximately two-percent lower than the
prior year's combined levels, on a per square foot basis.”
Mr. Morton concluded, “We are pleased with the pace and the
progress of our merger integration process and look forward to further
leveraging the strengths of our recently combined companies. We remain
encouraged about the prospects for our new company as we move ahead
with a stronger operating platform for growth.”
The Company is forecasting sales in the fourth quarter to be
approximately $720 million and earnings to be between $1.04 and $1.06
per fully diluted share based upon fully diluted shares of 26.3
million. For fiscal year 2003, the Company expects earnings to be
between $2.06 and $2.08 per fully diluted share based upon fully
diluted shares of 19.6 million. All earnings estimates are exclusive
of merger integration costs.
The Company's earnings per share guidance for fiscal year 2004 has
been revised upwards to a range between $2.55 and $2.60 per fully
diluted share. All earnings estimates are exclusive of merger
integration costs. The Company is forecasting sales to be
approximately $2.6 billion for fiscal year 2004.
To supplement our condensed consolidated statements of operations
presented on a basis in accordance with accounting principles
generally accepted in the United States of America (“GAAP”), we have
disclosed additional non-GAAP measures of net income and earnings per
share adjusted to exclude merger integration costs and certain other
non-recurring costs and income we believe appropriate to enhance an
overall understanding of our financial performance (see income
statement table following). These adjustments to our GAAP results are
made with the intent of providing a more complete understanding of the
underlying operational results. The presentation of this additional
information is not meant to be considered in isolation or as a
substitute for net income or diluted earnings per share prepared in
accordance with GAAP.
As disclosed above in this release, none of the forecasted pro
forma fully diluted earnings per share amounts include merger
integration costs. While we estimate that we will incur additional
merger integration costs ranging from $11.4 to $14.5 million, after
tax, from now through the fiscal period ending July 31, 2004, we are
unable to predict, with a high degree of certainty, the timing or
magnitude of these merger integration costs by fiscal quarter or
fiscal year. Consequently, we are unable to provide a reconciliation
of the forecasted pro forma fully diluted earnings per share amounts,
for the periods described above, to the most comparable financial
measure calculated in accordance with GAAP, fully diluted earnings per
share including tax effected merger integration costs. The forecasted
pro forma fully diluted amounts were calculated without consideration
of tax effected merger integration costs.
Sports Authority
Condensed Consolidated Statements of Operations
(Dollars in thousands, except share and per share data)
(unaudited)
13 Weeks Ended 39 Weeks Ended
-----------------------------------------------
November 1, November 2, November 1, November 2,
2003 2002 2003 2002
-----------------------------------------------
Net sales $552,534 $227,762 $1,048,480 $734,443
Cost of goods sold,
buying, and occupancy 405,818 170,795 773,484 547,963
----------- ---------------------------------
Gross profit 146,716 56,967 274,996 186,480
Gross profit % 26.6% 25.0% 26.2% 25.4%
Operating expenses:
Selling, general
and
administrative
expenses 135,610 53,016 247,315 162,920
Selling, general
and
administrative
expenses % 24.5% 23.3% 23.6% 22.2%
Merger integration
costs 19,677 - 21,354 -
Store pre-opening
expenses 426 291 996 664
----------- ---------------------------------
Operating (loss) income (8,997) 3,660 5,331 22,896
Non-operating income
(expense):
Interest (3,855) (1,542) (8,005) (6,658)
Other income 309 191 2,828 630
----------- ---------------------------------
(Loss) income before
income taxes (12,543) 2,309 154 16,868
Income tax benefit
(expense) 4,892 (912) 1,643 (6,547)
----------- ---------------------------------
Net (loss) income $(7,651) - $1,397 $1,797 $10,321
=========== =================================
(Loss) earnings per
share:
Basic $(0.31) $0.12 $0.11 $0.88
=========== =================================
Diluted $(0.31) $0.11 $0.10 $0.82
=========== =================================
Basic weighted average
shares outstanding 24,408,686 12,076,645 16,059,729 11,734,135
=========== =================================
Diluted weighted
average shares
outstanding 24,408,686 12,755,349 17,189,259 12,563,849
=========== =================================
Reconciliation of GAAP measure to pro forma,
non-GAAP measure:
------------------------------------------------
Pro-forma results for the 13 weeks Pro-forma results for the 39
ended November 1, 2003, weeks ended November 1, 2003,
excluding the effect of merger excluding the effect of merger
integration costs: integration costs and the
effect of non-recurring
settlements, the associated tax
benefit and utilizing statutory
tax rates:
(Loss) income before
income taxes as
reported $(12,543) $154
Merger integration
costs 19,677 21,354
Non-recurring
settlements included
above - (373) (1)
----------- -----------
Pro-forma income before
income taxes 7,134 21,135
Income tax expense
at statutory tax
rates (2,782) (8,243) (2)
----------- -----------
Pro forma net income $4,352 $12,892
=========== ===========
Pro forma earnings per
share:
Basic $0.18 $0.80
=========== ===========
Diluted $0.17 $0.75
=========== ===========
Basic weighted average
shares outstanding 24,408,686 16,059,729
=========== ===========
Diluted weighted
average shares
outstanding 25,601,815 (3) 17,189,259
=========== ===========
(1) Includes a non-recurring expense of $1.5 million, related to the
settlement of two wage and hour lawsuits in California, and
$1.873 million of non-recurring interest income related to the
settlement of a tax dispute with Gart's former parent (Thrifty
Payless Holdings, Inc., a subsidiary of RiteAid Corporation).
(2) Adjusted to exclude a non-recurring tax benefit of $1.674 million
related to the settlement of a tax dispute with Gart's former
parent (Thrifty Payless Holdings, Inc., a subsidiary of Rite Aid
Corporation)and to record tax expense at statutory rates.
(3) Includes the dilutive effect of stock options and restricted
stock, totaling 1,193,129 shares. The dilutive effect was not
included to calculate the loss per share under GAAP, because to
do so would be anti-dilutive.
