The new Sports Authority, Inc. reported Q2 results for the Gart portion of the business only, stating that the quarter is a “lost quarter” for the former TSA business. Combined company results for the new Sports Authority will be provided beginning with the third quarter.
Second quarter net income, including the effect of one time merger integration costs of $1.7 million, or $0.08 per fully diluted share, totaled $5.3 million, or $0.42 per fully diluted share. Excluding one time merger integration costs, second quarter net income was $6.3 million or $0.50 per fully diluted share, compared with $0.48 per fully diluted share in the prior year's quarter.
Total sales for the 13 weeks ended August 2, 2003 increased 2.2% to $267.5 million compared with $261.7 million in the prior year's second quarter. Second quarter comparable store sales decreased 0.6% from last year.
Net income for the 26 weeks ended August 2, 2003, including the effect of one time merger integration costs of $1.7 million, or $0.08 per fully diluted share, and income related to non-recurring events and a related tax benefit of $2.0 million or $0.15 per fully diluted share, totaled $9.4 million, or $0.75 per fully diluted share. Excluding these items, fully diluted earnings per share for the 26 weeks was $0.68 compared with $0.72 per fully diluted share in the prior year's comparable period.
Total sales for the 26 weeks ended August 2, 2003 decreased 2.1% to $495.9 million compared with $506.7 million in the prior year's 26 weeks. Year-to-date comparable store sales decreased 4.5% from the same period last year.
Doug Morton, Vice Chairman and Chief Executive Officer of The Sports Authority stated, “We are pleased we were able to deliver a slight earnings per share improvement during the quarter, excluding one-time merger integration costs, versus the prior year. Comparable store sales were strong during the quarter in the outdoor and exercise categories, however, soft sales of athletic footwear and skates continued to put pressure on the top-line. Despite the challenging sales environment, we produced a 40 basis point gross margin rate improvement during the quarter while achieving inventory per square foot levels that are 2.3% less than the prior year.”
Mr. Morton concluded, “As we begin the third quarter, we are encouraged by recent trends in both comp store sales and margins for the recently combined companies. We remain dedicated to fully maximizing our strong position in the market and capitalizing on the many opportunities that lie ahead.”
For the second half of 2003, the Company is forecasting sales for the merged entity to be approximately $530 million in the third quarter and earnings to be between $0.03 and $0.05 per fully diluted share based upon fully diluted shares of 25.5 million. 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 25.5 million. For fiscal year 2003, the Company expects earnings to be between $1.85 and $1.90 per fully diluted share based upon fully diluted shares of 19.3 million. All earnings estimates are exclusive of one-time merger integration costs.
For fiscal year 2004, the Company is forecasting sales to be approximately $2.6 billion and earnings to be approximately $2.50 per fully diluted share based upon fully diluted shares of 25.8 million. All earnings estimates are exclusive of one-time merger integration costs.
Gart Sports Company
Condensed Consolidated Statements of Operations
(Dollars in thousands, except share and per share data)
13 Weeks Ended 26 Weeks Ended
----------------------- -----------------------
August 2, August 3, August 2, August 3,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net sales $267,514 $261,705 $495,946 $506,682
Cost of goods sold,
buying, and occupancy 196,822 193,646 367,673 377,169
----------- ----------- ----------- -----------
Gross profit 70,692 68,059 128,273 129,513
Gross profit % 26.4% 26.0% 25.9% 25.6%
Operating expenses:
Selling, general
and
administrative
expenses 58,277 55,318 111,700 109,904
Selling, general
and
administrative
expenses % 21.8% 21.1% 22.5% 21.7%
Integration costs 1,676 - 1,676 -
Store pre-opening
expenses 475 192 570 373
----------- ----------- ----------- -----------
Operating income 10,264 12,549 14,327 19,236
Non-operating income
(expense):
Interest (2,134) (2,432) (4,149) (5,116)
Other income 478 231 2,519 439
----------- ----------- ----------- -----------
Income before income
taxes 8,608 10,348 12,697 14,559
Income tax expense (3,348) (4,014) (3,248) (5,635)
----------- ----------- ----------- -----------
Net income $5,260 $6,334 $9,449 $8,924
=========== =========== =========== ===========
Earnings per share:
Basic $0.44 $0.52 $0.80 $0.77
=========== =========== =========== ===========
Diluted $0.42 $0.48 $0.75 $0.72
Pro-forma results for the 13 Pro-forma results for the 26 weeks
weeks ended August 2, 2003, ended August 2, 2003, excluding
excluding the effect of the the effect of the one time
one time integration costs integration costs associated with
associated with the merger the merger with The Sports
with The Sports Authority: Authority and the effect of
non-recurring settlements,
the associated tax benefit and
utilizing statutory tax rates:
Income before income
taxes as reported $8,608 $12,697
Integration costs 1,676 1,676
Expected non-recurring
settlements included
above - (373) (1)
----------- -----------
Pro-forma income before
income taxes 10,284 14,000
Income tax expense
at statutory tax
rates (3,993) (5,424) (2)
----------- -----------
Pro forma net income $6,291 $8,576
=========== ===========
Pro forma earnings per
share:
Basic $0.53 $0.72
=========== ===========
Diluted $0.50 $0.68
=========== ===========
Basic weighted average
shares outstanding 11,900,165 11,885,250
=========== ===========
Diluted weighted
average shares
outstanding 12,621,076 12,538,241
=========== ===========
(1) Includes a non-recurring expense of $1.5 million, related to the
settlement of two wage and hour lawsuits in California and $1.9
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 $1.7 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.
