The New Aports Authroity reported fourth quarter net income of $14.6 million, or $0.55 per diluted share, includes the effect of after-tax, merger integration costs of $13.7 million, or $0.52 per diluted share. Excluding merger integration costs, fourth quarter net income was $28.3 million, or $1.08 per diluted share, compared with $1.03 per diluted share in the prior year's quarter, as reported by the former Gart Sports Company on a stand-alone basis, and pro-forma combined net income for the prior year's quarter of $0.77 per diluted share.
Total sales for the 13 weeks ended January 31, 2004 increased 125% to $712.0 million compared with $316.8 million in the prior year's fourth quarter as reported by the former Gart Sports Company on a stand-alone basis. Fourth quarter comparable store sales for the combined company increased 0.2% from last year's combined company results.
The Company opened six stores during the fourth quarter, for a total of 14 new store openings in 2003. The Company also closed five former TSA and two former Gart Sports stores during the quarter to arrive at a total number of stores in operation as of January 31, 2004 of 384 stores in 45 states.
Doug Morton, Vice Chairman and Chief Executive Officer of The Sports Authority stated, “We are pleased with our fourth quarter results given the on-going efforts to integrate the two companies. Our results were primarily driven by strong sales in hunting, ski apparel, snowboards and footwear. We are also very encouraged with the initial results realized from the introduction of an enhanced offering of winter product in the northeast.”
Net income for the 52 weeks ended January 31, 2004, including the effect of after-tax, merger integration costs of $26.7 million, or $1.37 per diluted share, and income related to non-recurring events and a related tax benefit of $1.9 million, or $0.10 per diluted share, totaled $16.4 million, or $0.84 per diluted share. Excluding these items, net income was $41.2 million, or $2.11 per diluted share, for the 52 weeks ended January 31, 2004 compared with $1.86 per 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 52 weeks ended January 31, 2004 increased 67% to $1,760.4 million compared with $1,051.2 million in the prior year's 52 weeks as reported by the former Gart Sports Company on a stand-alone basis. Year-to-date comparable store sales decreased 0.7%, which represents a year-over-year comparison of the combined company results for the third and fourth quarters and the former Gart Sports Company on a stand-alone basis for the first six months.
The Company is forecasting sales in the first quarter of fiscal 2004 to be in the range of $585 to $590 million and comparable store sales to increase approximately 2%. The Company expects to report net income of $8.7 to $9.0 million, and diluted EPS of $0.33 to $0.34, based on 26.4 million diluted shares outstanding in the quarter. All earnings estimates are exclusive of merger integration costs. The Company expects to open seven new stores during the quarter, which will be offset by a like number of closures related to the ongoing merger integration process.
For fiscal year 2004, the Company expects sales to be approximately $2.6 billion and comparable store sales to increase approximately 2%. The Company expects to report net income in the range of $68.4 to $69.7 million, and diluted EPS between $2.57 to $2.62, based on an estimated 26.6 million diluted shares outstanding. All earnings estimates are exclusive of merger integration costs. The Company expects to open 23 new stores during the year and expects to close 15 stores. The number of stores in operation at the end of fiscal 2004 is expected to be 392.
Mr. Morton concluded, “The merger integration process is progressing well and we continue to be optimistic with the level of synergies that will be realized from combining the two companies. We remain enthusiastic about the prospects for our new company as we move ahead with a stronger operating platform for growth.”
The Sports Authority, Inc.
Condensed Consolidated Statements of Income
(Dollars in thousands, except share and per share data)13 Weeks Ended 52 Weeks Ended
---------------------- -------------------------January 31, February 1, January 31, February 1,
2004 2003 2004 2003
----------------------- ------------------------
Net sales $ 711,970 $ 316,800 $ 1,760,450 $ 1,051,244
Cost of goods sold,
buying, and occupancy 501,237 228,376 1,274,721 776,340
----------- ----------- ----------- -----------
Gross profit 210,733 88,424 485,729 274,904
Gross profit % 29.6% 27.9% 27.6% 26.2%
Operating expenses:
Selling, general
and administrative
expenses 160,155 64,865 407,471 227,785
Selling, general
and administrative
expenses % 22.5% 20.5% 23.1% 21.7%
Merger integration
costs 22,453 - 43,807 -
Store pre-opening
expenses 555 533 1,552 1,197
----------- ----------- ----------- -----------
Operating income 27,570 23,026 32,899 45,922
Non-operating income
(expense):
Interest (4,323) (2,507) (12,327) (9,166)
Other income 686 413 3,514 1,043
----------- ----------- ----------- -----------
Income before income
taxes 23,933 20,932 24,086 37,799
Income tax expense (9,363) (8,086) (7,719) (14,632)
----------- ----------- ----------- -----------
Net income $ 14,570 $ 12,846 $ 16,367 $ 23,167
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.58 $ 1.08 $ 0.89 $ 1.97
=========== =========== =========== ===========
Diluted $ 0.55 $ 1.03 $ 0.84 $ 1.86
=========== =========== =========== ===========
Basic weighted average
shares outstanding 25,057,498 11,865,527 18,309,174 11,766,983
=========== =========== =========== ===========
Diluted weighted
average shares
outstanding 26,291,323 12,441,734 19,479,695 12,427,086
=========== =========== =========== ===========Reconciliation of GAAP measures to pro forma, non-GAAP measures:
-----------------------------------------------------------------Pro-forma results for the 13 Pro-forma results for the 52
weeks ended January 31, 2004, weeks ended January 31, 2004,
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:Income before income taxes
as reported $ 23,933 $ 24,086
Merger integration costs 22,453 43,807
Non-recurring settlements
included above - (373) (1)
----------- -----------
Pro-forma income before
income taxes 46,386 67,520
Income tax expense at
statutory tax rates (18,091) (26,333) (2)
----------- -----------
Pro forma net income $ 28,295 $ 41,187
=========== ===========
Pro forma earnings per
share:
Basic $ 1.13 $ 2.25
=========== ===========
Diluted $ 1.08 $ 2.11
=========== ===========
Basic weighted average
shares outstanding 25,057,498 18,309,174
=========== ===========
Diluted weighted average
shares outstanding 26,291,323 19,479,695
=========== ===========(1) Includes a non-recurring expense of $1.5 million, related to the
proposed 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.Reconciliation of GAAP measures to pro forma non-GAAP measures
(continued):Pro-forma combined results for the 13
weeks ended February 1, 2003
---------------------------------------Former Former Pro-forma
Sports Gart combined
Authority Sports
Company
------------------------------
Earnings before income taxes, as
reported $ 12,327 $20,932 $ 33,259
Pro-forma income tax expense at 39% (4,808) (8,163) (12,971)
--------- ------- -----------
Pro-forma net income $ 7,519 $12,769 $ 20,288
========= ======= ===========Pro forma earnings per share:
Basic 0.81
===========
Diluted 0.77
===========
