Dick’s Sporting Goods, Inc. reported that net income for the fourth quarter ended February 1, 2003 increased 48% to $19.1 million, or $0.82 per diluted share, compared to $12.9 million or $0.67 per diluted share for the quarter ended February 2, 2002. Sales increased 16% to $395.2 million. Comparable store sales increased 4.9%.
As previously reported, earnings for this period include a $2.4 million pre-tax charge against the Company’s non-cash investment in its third-party internet commerce provider due to a decline in the value of that company’s publicly traded stock. The Company had converted a royalty arrangement with that provider into an equity investment that resulted in this non-cash investment which is more fully described in the Company’s final prospectus dated October 15, 2002. This charge, after the tax effect, resulted in a reduction of net income of $1.4 million or $0.06 per diluted share.
Pro-forma net income for the fourth quarter increased 46% to $19.1 million and pro-forma earnings per share increased 39% to $0.82 per diluted share, (excluding the charge, net income would have been $20.5 million or $0.88 per diluted share) compared to pro-forma net income of $13.0 million or $0.59 per diluted share.
Pro-forma results include a reduction of interest expense and an increase in diluted shares as if the Company had consummated its initial public offering at the beginning of each period rather than on the October 15, 2002 effective date.
Sales for the year ended February 1, 2003 increased 18% to $1,273 million from $1,075 million last year. Comparable stores sales increased 5.1% over last fiscal year.
Net income for the year ended February 1, 2003 on a GAAP basis was $38.3 million, or $1.87 per diluted share. This compares to $23.5 million, or $1.31 per diluted share, in the prior year.
Pro-forma net income for the year ended February 1, 2003 increased 59% to $38.6 million and earnings per share increased 54% to $1.72 per diluted share, (net income of $40.1 million or $1.78 per diluted share, excluding the charge) compared to pro-forma net income of $24.3 million, or $1.12 per diluted share, in the prior year.
“A 46% increase in pro-forma net income in the fourth quarter is a terrific finish to a year where pro-forma net income increased by almost 60%. In spite of a difficult holiday environment for the retail industry as a whole, our associates were able to optimize favorable weather conditions and deliver a strong quarter,” said Edward W. Stack, Chairman and CEO.
“Return on invested capital, inventory turns and margin rates are the three key metrics we continue to focus on. Each of these improved significantly over the past year. Return on Invested Capital (with store leases capitalized) increased to 11.8% from 10.7% last year. Inventory turns increased 8 basis points to an industry leading 3.83 times, while gross profit margins increased 356 basis points for the fourth quarter due primarily to optimizing the favorable winter weather conditions,” added Mr. Stack.
The Company also announced the acquisition of the Walter Hagen trademark that the Company had been licensing since October, 2001. Walter Hagen was one of the most colorful sports personages of his time and is credited with doing more than any other golfer of his time to raise the social standing of his profession, winning 11 professional major tournaments among his 40 total PGA wins and serving as captain for the American team in the Ryder Cup 6 times.
“Our private label business has been growing rapidly, and the acquisition of the Walter Hagen name and trademark will enable us to increase our offerings in our golf apparel, club and accessory businesses by building on the existing brand’s reputation for quality and innovation,” said Mr. Stack.
The Company’s current outlook for 2003 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.
Full Year 2003 * The Company expects to open 20 new stores during the year. * Comparable sales are expected to increase approximately 2-3%. * Based on a projected 23.9 million diluted shares outstanding, the Company expects to report EPS for the full year in line with the current First Call consensus estimate of $1.95 per diluted share, compared to pro-forma EPS of $1.72 in the prior year, or $1.78 excluding the charge against an investment. First Quarter 2003 * The Company expects to open 8 stores during the first quarter. * Net income is expected to be $5.9 - $6.4 million, compared to last year's pro-forma net income of $4.9 million in the first quarter, an increase of 20 - 31%. * Based on a projected 23.6 million diluted shares outstanding, EPS for the first quarter is expected to be $0.25 - $0.27 per diluted share, a 14 - 23% increase over $0.22 in the prior year's first quarter.
DICK's SPORTING GOODS, INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except for per share amounts) GAAP Pro-Forma 13 Weeks Ended 13 Weeks Ended February February February February 1, 2, 1, 2, 2003 2002 2003 2002 Sales $395,209 $340,523 $395,209 $340,523 Cost of goods sold, including occupancy and distribution costs 280,339 253,641 280,339 253,641 GROSS PROFIT 114,870 86,882 114,870 86,882 Selling, general and administrative expenses 79,748 63,807 79,748 63,807 Pre-opening expenses 692 661 692 661 INCOME FROM OPERATIONS 34,430 22,414 34,430 22,414 Loss on write-down of non-cash investment 2,447 -- 2,447 -- Interest expense, net 217 885 217 667 INCOME BEFORE INCOME TAXES 31,766 21,529 31,766 21,747 Provision for income taxes 12,706 8,612 12,706 8,699 NET INCOME $19,060 $12,917 $19,060 $13,048