The Sports Authority, for its third fiscal quarter reported a net loss of $2.2 million, or 9 cents per
diluted share, including the effect of after-tax merger integration costs of $2.9 million, or $0.11 per diluted share compared with a net loss of $0.31 per diluted share in the prior year’s third quarter, which included the effect of after-tax merger integration costs of $12.0 million, or $0.49 per diluted share. Excluding merger
integration costs, net income for the third quarter was $0.7 million, or $0.03 per diluted share, compared with net income of $4.4 million, or $0.17 per diluted share, in the prior year’s third quarter.
Total sales for the third quarter were $545.0 million compared with $552.5 million in the prior year’s third quarter. Third quarter
comparable store sales for the Company decreased 1.9% from last year’s
results.
On August 4, 2003, Gart Sports Company and The Sports Authority,
Inc. (TSA) announced that they had completed a merger of equals. The
results of both the third quarter of 2004 and 2003 represent the
performance of the merged company. The results of the nine months ended October 30, 2004 represent the performance of the merged company while the results for the nine months ended November 1, 2003 represent the merged company for the third quarter and stand-alone results for Gart Sports Company for the first six months.
Net income for the 39 weeks ended October 30, 2004, was $8.6 million, or $0.33 per diluted share, including the effect of after-tax merger integration costs of $13.3 million, or $0.50 per diluted share, compared with $0.10 per diluted share in the prior year’s comparable
period, which included the effect of after-tax merger integration costs of $13.0 million, or $0.76 per diluted share, and included income related to non-recurring events and a related tax benefit of $1.9 million, or $0.11 per diluted share. Excluding these items, diluted earnings per share for the 39 weeks ended October 30, 2004 was $0.83 compared with $0.75 per fully diluted share in the prior year’s comparable period. Pro forma combined earnings for the prior year’s comparable period were $0.50 per diluted share. Pro forma amounts are computed as if TSA had been acquired at the beginning of the prior year period and exclude merger integration costs and other non-recurring items.
Total sales for the 39 weeks ended October 30, 2004 were $1.7 billion compared with $1.0 billion in the prior year’s comparable period. Year-to-date comparable store sales for the combined company decreased 1.9% from last year’s combined company results.
The Company opened 7 stores and closed 3 stores during the quarter to arrive at a total of 390 stores as of October 30, 2004.
Doug Morton, Chairman and Chief Executive Officer of the Sports Authority, stated, “We are pleased with our ability to achieve results within our previous guidance range, despite the impact of four hurricanes in the Southeast which affected a significant number of stores during the quarter. Our store remodel program continues to meet
expectations, our fitness business has improved and our statement shoe walls continue to drive comps and margin expansion in our footwear category. As we head into the holiday selling season we believe that we are well positioned from a merchandising perspective and we are
encouraged by the initial trends of our expanded winter sports offerings in the TSA stores.”
Mr. Morton concluded, “We are also very excited to have David Campisi on board as President of Merchandising. David’s many years of experience with a number of premier retailers and his strong reputation in the marketplace will be an invaluable asset to the Company.”
For the fourth quarter of fiscal 2004, the Company is confirming its forecast of flat comparable store sales, net income of approximately $28.5 million, and diluted EPS of $1.08 based on 26.4 million diluted shares outstanding in the quarter.
For fiscal year 2004, the Company expects to report net income of approximately $50.6 million, and diluted EPS of $1.91, based on an estimated 26.5 million diluted shares outstanding. All earnings estimates are exclusive of merger integration costs. The Company currently expects to open 22 new stores during the year and expects to close up to a total of 12 stores. The number of stores in operation at the end of fiscal 2004 is expected to be 394 representing 16.5 million square feet.
None of the forecasted pro forma diluted earnings per share amounts include merger integration costs. We believe that we will not incur additional merger integration
costs subsequent to the fiscal period ended October 30, 2004. A reconciliation of the forecasted pro forma diluted earnings per share amounts, for the periods described above, to the most comparable financial measure calculated in accordance with GAAP, diluted earnings per share including tax effected merger integration costs is presented below.
Guidance for the 2004 Fourth Quarter ending January 29, 2005: Diluted EPS before merger integration expenses $1.08 Per share merger integration expenses, tax effected $0.00 Diluted EPS $1.08 Guidance for the 2004 Fiscal year ending January 29, 2005: Diluted EPS before merger integration expenses $1.91 Per share merger integration expenses, tax effected $0.50 Diluted EPS $1.41
The Sports Authority, Inc.
Condensed Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
----------------------------------------------------------------------
13 Weeks Ended 39 Weeks Ended
--------------------------- ------------------------
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
---------------------------------------------------------
Net sales $ 545,041 $ 552,534 $ 1,722,107 $ 1,048,480
Cost of goods
sold,
buying, and
occupancy 398,306 405,818 1,248,231 773,484
----------- ----------- ----------- -----------
Gross
profit 146,735 146,716 473,876 274,996
Gross
profit % 26.9% 26.6% 27.5% 26.2%
Operating
expenses:
Selling,
general and
admini-
strative
expenses 139,344 135,610 422,208 247,315
Selling,
general and
admini-
strative
expenses % 25.6% 24.5% 24.5% 23.6%
Integration
costs 4,774 19,677 21,750 21,354
Store pre-
opening
expenses 1,075 426 2,461 996
----------- ----------- ----------- -----------
Operating
income 1,542 (8,997) 27,457 5,331
Non-operating
income
(expense):
Interest (5,522) (3,855) (14,648) (8,005)
Other
income 341 309 1,284 2,828
----------- ----------- ----------- -----------
Income before
income taxes (3,639) (12,543) 14,093 154
Income tax
expense 1,419 4,892 (5,497) 1,643
----------- ----------- ----------- -----------
Net income $ (2,220) $ (7,651) $ 8,596 $ 1,797
=========== =========== =========== ===========
Earnings per
share:
Basic $ (0.09) $ (0.31) $ 0.34 $ 0.11
=========== =========== =========== ===========
Diluted $ (0.09) $ (0.31) $ 0.33 $ 0.10
