Dick's Sporting Goods, Inc. announced that it expects to record a pre-tax non-cash impairment charge based upon unaudited, preliminary year-end estimates in the range of approximately $165 million to $180 million that will decrease net income by $144 million to $153 million, or approximately $1.29 to $1.37 per diluted share in fiscal 2008. The deterioration of the economy, combined with projections of a continuing trend, has created a shortfall in the fair value estimations for certain assets, such as goodwill, property and equipment, and other intangible assets below their current book value.
The company's estimated pre-tax non-cash impairment charge consists of approximately $140 million to $150 million for goodwill and other intangible assets acquired as part of the Golf Galaxy acquisition in February 2007 and approximately $25 million to $30 million for the write-down of Golf Galaxy, Dick's Sporting Goods, and Chick's Sporting Goods store assets. The company's estimates were developed in accordance with Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” and No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”.
Store closures are not anticipated as a result of the impairment of store assets. Additionally, the company's liquidity position is not adversely affected by this non-cash charge.
Fourth Quarter 2008 Unaudited Preliminary Estimates
Comparable store sales for the fourth quarter decreased approximately 8.6%, within the expected range previously estimated by the company on Nov. 20, 2008 of a decline of approximately 10% to 6%. The comparable store sales calculation for the fourth quarter includes Golf Galaxy stores and excludes the Chick's Sporting Goods stores.
Comparable store sales for the full year, which include Dick's Sporting Goods stores only, decreased approximately 4.8% compared to estimates given on Nov. 20, 2008 of a decline of approximately 5 to 4%. The comparable store sales calculation for the full year excludes the Golf Galaxy and Chick's Sporting Goods stores.
Excluding the asset impairment charge described above, the company anticipates that fourth quarter 2008 consolidated earnings per diluted share will be at least at the midpoint of its previously-announced estimated range of 49 cents to 56 cents per diluted share excluding costs from the Golf Galaxy and Chick's Sporting Goods integration, or 47 cents to 54 cents per diluted share including the Golf Galaxy and Chick's Sporting Goods integration costs. As expected, the company ended fiscal 2008 without any outstanding borrowings on its revolving credit facility and reduced its inventory per square foot in line with the fourth quarter decline in comparable store sales.
