Big 5 Sporting Goods Corporation fourth quarter net sales were $218.9 million versus net sales of $217.6 million for the fourth quarter of fiscal 2004. Fiscal 2004 included 53 weeks, with the extra week included in the Company's fourth quarter. On a comparable 13-week basis for both fiscal 2005 and fiscal 2004, net sales for the quarter increased by $12.4 million, or 6.0%, and same store sales increased 1.5%. This same store sales increase represented the Company's 40th consecutive quarter of positive same store sales comparisons. Net income for the fourth quarter of fiscal 2005 was $7.7 million, or 34 cents per diluted share, compared with net income of $9.5 million, or 42 cents per diluted share, for the fiscal 2004 fourth quarter.
Fourth quarter sales were negatively affected by unfavorable winter weather comparisons in California and the southwest, which were partially offset by favorable winter weather comparisons in the northwest. Sales of non-winter-related products were generally in line with the Company's expectations for the quarter.
Fourth quarter fiscal 2005 results include the impact of approximately $4.5 million (pretax), or $0.12 per diluted share, of expenses directly attributable to the Company's transition to its new distribution center. These increased expenses resulted from the need to devote additional labor to minimize disruption of product flow to the Company's stores during the holiday period, duplicate facility costs from simultaneously operating two distribution center facilities, transition-related trucking and incremental depreciation charges. Costs related to Sarbanes-Oxley compliance work for 2005 also were concentrated into the fiscal 2005 fourth quarter and fiscal 2006 first quarter.
Income comparisons for the fourth quarter also were affected by the amount of inventory cost capitalization of warehouse expenses, primarily due to higher costs related to the Company's transition to its new distribution center. This increased fiscal 2005 fourth quarter pretax profit by $0.8 million, or $0.02 per diluted share, compared to the same period of the prior year. Income for the fiscal 2004 fourth quarter includes a charge of $1.3 million (pretax), or $0.03 per diluted share, associated with the redemption of $33.1 million principal amount of the Company's 10.875% senior notes.
For the 52 weeks ended January 1, 2006, net sales increased by $31.8 million, or 4.1%, to $814.0 million from $782.2 million for the corresponding 53-week 2004 fiscal year. On a comparable 52-week basis for both fiscal 2005 and fiscal 2004, net sales for the year increased by $45.9 million, or 6.0%, and same store sales increased 2.4%. Net income for fiscal 2005 was $27.5 million, or $1.21 per diluted share, versus net income for fiscal 2004 of $33.5 million, or $1.47 per diluted share.
Results for fiscal 2005 include the impact of approximately $6.7 million (pretax), or $0.18 per diluted share, of expenses directly attributable to the Company's transition to its new distribution center, and costs of approximately $3.9 million (pretax), or $0.10 per diluted share, for legal, audit and other expenses relating to the Company's restatement.
Income comparisons for fiscal 2005 also were affected by the amount of inventory cost capitalization of warehouse expenses, primarily due to higher costs related to the Company's transition to its new distribution center. This increased fiscal 2005 pretax profit by $2.2 million, or $0.06 per diluted share, compared to the prior year. Additionally, results for fiscal 2005 benefited from the Company's recording in the third quarter of $1.8 million (pretax) in proceeds from the settlement of a claim related to the required relocation of one of the Company's stores following an eminent domain action by a city redevelopment agency, which increased the Company's income by $0.05 per diluted share. Income for fiscal 2004 includes charges totaling $2.1 million (pretax), or $0.06 per diluted share, associated with the redemption of $48.1 million principal amount of the Company's 10.875% senior notes.
During the fourth quarter of 2005, construction was completed on the Company's new distribution center located in Riverside, California. During the first quarter of 2006, the Company completed its transition to the new distribution center, and the Company is now running all distribution operations out of the new facility. All product is being received into and shipped out of the new facility, all existing distribution center product has been moved into the new facility and the old facility has been closed.
“While our results reflect the significant challenges we faced during 2005, we are confident in our overall business model and believe that our investments have placed us in a strong position to grow our business,” said Steven G. Miller, the Company's Chairman, President and Chief Executive Officer. “Our team worked extremely hard to complete the enormous transition to our new distribution center on schedule with as little disruption of product flow to our stores as possible during the busy holiday season and into the first quarter. This effort proved more costly than we had previously anticipated, but we are pleased to have achieved solid sales growth through the transition. We are now making refinements to improve productivity and efficiency at the new distribution center, and we look forward to servicing our growing store base with this facility for years to come. Although we expect our bottom line for 2006 to be impacted by continued expense pressures, we are very pleased that our sales for the first quarter are off to a strong start, and we feel well positioned to carry this sales momentum into the second quarter.”
The Company expects to realize same store sales growth in the low to mid-single digit range for the first quarter and full year of fiscal 2006, and earnings per diluted share of $1.23 to $1.33 for the full year. This full-year earnings guidance reflects the costs associated with the Company's transition to its new distribution center and with the commencement of operations at a substantially larger distribution facility, higher than expected audit-related expenses following the Company's previously completed restatement of prior period financials and higher interest costs resulting from rising interest rates. Full-year earnings guidance also reflects the expected impact of the implementation of new accounting rules requiring the expensing of stock options and the expected impact of a substantially lower benefit from inventory cost capitalization than the Company experienced in fiscal 2005.
The Company opened ten new stores during the fiscal 2005 fourth quarter, bringing its year-end store count to 324 stores. The Company anticipates opening two new stores during the first quarter of 2006, and opening a total of approximately 20 new stores during fiscal 2006.
BIG 5 SPORTING GOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except earnings per share data)
13 Weeks Ended 14 Weeks Ended
January 1, 2006 January 2, 2005
Net sales $218,913 $217,596
Cost of goods sold, buying and
occupancy, excluding
depreciation and amortization, shown
separately below 144,517 139,067
Gross profit 74,396 78,529
Selling and administrative 54,887 56,642
Depreciation and amortization 4,808 3,378
Operating income 14,701 18,509
Premium and unamortized financing
fees related
to redemption of debt -- 1,275
Other income (53) --
Interest expense, net 1,990 1,639
Income before income taxes 12,764 15,595
Income tax 5,027 6,142
Net income $7,737 $9,453
Earnings per share:
Basic $0.34 $0.42
Diluted $0.34 $0.42
Shares used to calculate earnings per
share:
Basic 22,687 22,674
Diluted 22,793 22,811
