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Dick's Sporting Goods Reports Second Quarter Results:

- EPS Increases 77% over Last Year to $0.83 - Comparable Store Sales Increase 7.2% - Increases Full Year Guidance PITTSBURGH, Aug. 21 /PRNewswire-FirstCall/ -- Dick's Sporting Goods, Inc. (NYSE: DKS) today reported sales and earnings results for the second quarter ended August 4, 2007. The results include the operating results of Golf Galaxy for 2007 from the acquisition date, but not for 2006 as Golf Galaxy was acquired on February 13, 2007. Second Quarter Results Net income increased 87% to $47.9 million and earnings per diluted share increased 77% to $0.83, compared to prior year net income of $25.7 million, or $0.47 per diluted share. Earnings guidance provided on May 23, 2007 was for earnings per diluted share of $0.74 - 0.77. The operating results of Golf Galaxy are included in the current period results. Net sales for the quarter increased 38% to $1,013.4 million due to a comparable store sales increase of 7.2% (or 5.8% adjusting for the shifted retail calendar, compared to a 6.5% increase in Q2 last year), the opening of new stores, and the inclusion of Golf Galaxy in this years' quarterly results (which will be included in Dick's Sporting Goods comparable store sales calculation beginning in Q2 2008). Comparable store sales for Golf Galaxy on a proforma basis increased 4.7%, or 5.5% after adjusting for the shifted retail calendar. "The Dick's Sporting Goods portfolio of businesses produced an outstanding second quarter. We achieved increased sales not only in golf but across most of our businesses, delivered gross margin improvements, provided operating expense leverage and solid inventory management. In addition, Golf Galaxy delivered strong sales and earnings in their seasonally largest quarter. I would like to commend all of our team members for their efforts in driving the results for our second quarter," said Edward W. Stack, Chairman and CEO. New Stores In the second quarter, the Company opened six Dick's Sporting Goods stores and two Golf Galaxy stores. The stores that opened in the second quarter are listed in a table later in the release under the heading "Store Count and Square Footage". Year-to-Date Results Net income for the 26 weeks ended August 4, 2007 increased 88% to $69.6 million and earnings per diluted share increased 78% to $1.21, as compared to prior year net income of $37.1 million, or $0.68 per diluted share. The operating results of Golf Galaxy have been included in the results beginning with the February 13, 2007 date of acquisition. Net sales increased 33% to $1,837.0 million due to a comparable store sales increase of 4.7% (or 3.1% adjusting for the shifted retail calendar, compared to a 6.9% increase year-to-date last year), the opening of new stores, and the inclusion of Golf Galaxy in this year's results. Comparable store sales for Golf Galaxy on a proforma basis increased 4.7%, or 3.0% after adjusting for the shifted retail calendar. Current 2007 Outlook The Company's current outlook for 2007 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 2007 - (52-Week Year) Comparisons to Fiscal 2006 - (53-Week Year) -- We are currently increasing earnings guidance for the full year. Based on an estimated 58 million shares outstanding, the Company is increasing its consolidated earnings per diluted share guidance from the previous estimate of $2.37 - 2.40 to the new estimate of approximately $2.47 - 2.50. This new range represents an approximate 23% increase over earnings per diluted share for the full year 2006 of $2.03 and includes the expected results of Golf Galaxy, which we continue to expect to be approximately $0.02 per diluted share accretive for the year. -- Comparable store sales for Dick's Sporting Goods stores are expected to increase approximately 2% compared to a 6.0% increase last year. -- The Company expects to open 45 new Dick's Sporting Goods stores, 16 new Golf Galaxy stores and relocate one Dick's Sporting Goods store in 2007. -- Third Quarter 2007 -- Based on an estimated 59 million diluted shares outstanding, the Company anticipates consolidated earnings per diluted share of approximately $0.09 - 0.12, as compared to $0.14 in 2006. The year- over-year comparison is impacted by several factors, including the shift in the 2007 retail calendar, which positively impacted Q1 and Q2 this year and is offset in Q3 and Q4. Further, the inclusion of Golf Galaxy is approximately $0.02 per share dilutive in the third quarter. -- Comparable store sales for Dick's Sporting Goods stores are expected to decrease approximately 1 - 3%, or be approximately flat to down 2%, adjusting for the shifted retail calendar which compares to a 8.9% increase in Q3 last year. Golf Galaxy will be included in the quarterly comparable store base beginning in Q2 2008, which will be the first full quarter following the anniversary of the date of acquisition. -- The Company expects to open 24 new Dick's Sporting Goods stores and one new Golf Galaxy store. Conference Call Info The Company will be hosting a conference call today at 10:00 am eastern time to discuss the second quarter results. Investors will have the opportunity to listen to the earnings conference call over the internet through the Company's web site located at http://www.dickssportinggoods.com/investors. To listen to the live call, please go to the web site at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, the webcast will be archived on the Company's web site for approximately 30 days. In addition, a dial-in replay will be available shortly after the call. To listen, investors should dial (888) 286-8010 (domestic callers) or (617) 801-6888 (international callers) and enter confirmation code 68541751. The dial-in replay will be available for 30 days following the live call. Forward-Looking Statements Involving Known and Unknown Risks and Uncertainties Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "guidance," "estimate," "intend," "predict," and "continue" or similar words. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in the Company's Annual Report on Amendment No. 1 to Form 10-K/A for the year ended February 3, 2007 as filed with the Securities and Exchange Commission on June 5, 2007. The Company disclaims any obligation and does not intend to update any forward-looking statements except as may be required by the securities laws. Company Convertible Notes The Company's stock price has triggered an optional conversion right with respect to the Company's Senior Convertible Notes due 2024, which if exercised will not currently have any dilutive effect on the Company's outstanding shares, but may cause a dilutive effect if exercised in the future. We do not anticipate that the outstanding notes will be exercised under this optional right. This disclosure constitutes any notice required to be given by the Company under its Indenture dated as of February 18, 2004 with respect to the Company's Senior Convertible Notes due 2024. About Dick's Sporting Goods, Inc. Dick's Sporting Goods, Inc. is an authentic full-line sporting goods retailer offering a broad assortment of brand name sporting goods equipment, apparel, and footwear in a specialty store environment. As of August 4, 2007, the Company operated 315 stores in 34 states primarily throughout the eastern half of the U.S. The Company also owns Golf Galaxy, a multi-channel golf specialty retailer, with 77 stores in 29 states, ecommerce websites and catalog operations. Dick's Sporting Goods, Inc. news releases are available at http://www.dickssportinggoods.com/ (click on the Investor Relations link at the top of the home page). Contact: Timothy E. Kullman, SVP - Chief Financial Officer or Dennis Magulick, Director, Investor Relations 724-273-3400 investors@dcsg.com DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED (In thousands, except per share data) 13 Weeks Ended ----------------------------------------- August 4, % of July 29, % of 2007 Sales 2006 Sales ----------- ------- --------- ------- Net sales $1,013,421 100.00% $734,047 100.00% Cost of goods sold, including occupancy and distribution costs 714,761 70.53 526,650 71.75 ----------- ------- --------- ------- GROSS PROFIT 298,660 29.47 207,397 28.25 Selling, general and administrative expenses 212,747 20.99 159,239 21.69 Pre-opening expenses 2,719 0.27 2,451 0.33 ----------- ------- --------- ------- INCOME FROM OPERATIONS 83,194 8.21 45,707 6.23 Interest expense, net 3,629 0.36 2,906 0.40 ----------- ------- --------- ------- INCOME BEFORE INCOME TAXES 79,565 7.85 42,801 5.83 Provision for income taxes 31,635 3.12 17,120 2.33 ----------- ------- --------- ------- NET INCOME $47,930 4.73% $25,681 3.50% =========== ======= ========= ======= EARNINGS PER COMMON SHARE: Basic $0.88 $0.51 Diluted $0.83 $0.47 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 54,290 50,746 Diluted 57,764 54,887 26 Weeks Ended ------------------------------------------ August 4, % of July 29, % of 2007 Sales(1) 2006 Sales(1) ---------- ------- ---------- ------- Net sales $1,836,975 100.00% $1,379,545 100.00% Cost of goods sold, including occupancy and distribution costs 1,293,896 70.44 994,482 72.09 ---------- ------- ---------- ------- GROSS PROFIT 543,079 29.56 385,063 27.91 Selling, general and administrative expenses 410,755 22.36 311,474 22.58 Pre-opening expenses 9,840 0.54 6,604 0.48 ---------- ------- ---------- ------- INCOME FROM OPERATIONS 122,484 6.67 66,985 4.86 Interest expense, net 6,835 0.37 5,155 0.37 ---------- ------- ---------- ------- INCOME BEFORE INCOME TAXES 115,649 6.30 61,830 4.48 Provision for income taxes 46,017 2.51 24,732 1.79 ---------- ------- ---------- ------- NET INCOME $69,632 3.79% $37,098 2.69% ========== ======= ========== ======= EARNINGS PER COMMON SHARE: Basic $1.29 $0.73 Diluted $1.21 $0.68 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 53,920 50,583 Diluted 57,493 54,742 (1) Column does not add due to rounding DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) August 4, July 29, February 3, 2007 2006 2007 ----------- ----------- ----------- (unaudited) (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $50,489 $32,926 $135,942 Accounts receivable, net 62,514 53,091 39,687 Income taxes receivable - - 15,671 Inventories, net 791,654 636,839 641,464 Prepaid expenses and other current assets 41,811 18,133 37,015 Deferred income taxes 1,079 3,954 - ----------- ----------- ----------- Total current assets 947,547 744,943 869,779 Property and equipment, net 499,109 392,412 433,071 Construction in progress - leased facilities 7,681 11,254 13,087 Goodwill 320,156 156,628 156,628 Other assets 71,658 47,900 51,700 ----------- ----------- ----------- TOTAL ASSETS $1,846,151 $1,353,137 $1,524,265 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $357,184 $296,221 $286,668 Accrued expenses 208,061 166,756 190,365 Deferred revenue and other liabilities 74,631 51,325 87,798 Income taxes payable 2,717 4,940 - Current portion of other long-term debt and capital leases 152 141 152 ----------- ----------- ----------- Total current liabilities 642,745 519,383 564,983 ----------- ----------- ----------- LONG-TERM LIABILITIES: Senior convertible notes 172,500 172,500 172,500 Revolving credit borrowings 52,307 41,430 - Other long-term debt and capital leases 8,320 8,444 8,365 Non-cash obligations for construction in progress - leased facilities 7,681 11,254 13,087 Deferred revenue and other liabilities 187,994 121,695 144,780 ----------- ----------- ----------- Total long-term liabilities 428,802 355,323 338,732 ----------- ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock 419 373 397 Class B common stock 133 136 134 Additional paid-in capital 387,977 236,620 302,766 Retained earnings 383,570 239,940 315,453 Accumulated other comprehensive income 2,505 1,362 1,800 ----------- ----------- ----------- Total stockholders' equity 774,604 478,431 620,550 ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,846,151 $1,353,137 $1,524,265 =========== =========== =========== DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (Dollars in thousands) 26 Weeks Ended ------------------------- August 4, July 29, 2007 2006 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $69,632 $ 37,098 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 38,036 26,246 Deferred income taxes (10,391) (10,419) Stock-based compensation 14,781 12,525 Excess tax benefit from stock-based compensation (30,592) (4,419) Tax benefit from exercise of stock options 3,745 609 Other non-cash items 1,370 1,288 Changes in assets and liabilities: Accounts receivable (12,056) (5,179) Inventories (79,217) (101,141) Prepaid expenses and other assets (2,550) (9,024) Accounts payable 57,967 49,135 Accrued expenses 1,527 15,015 Income taxes payable / receivable 46,551 (8,196) Deferred construction allowances 22,593 4,967 Deferred revenue and other liabilities (8,460) (6,485) ---------- ---------- Net cash provided by operating activities 112,936 2,020 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (76,884) (63,712) Proceeds from sale-leaseback transactions 9,226 4,583 Payment for purchase of Golf Galaxy, net of $4,859 cash acquired (221,461) - ---------- ---------- Net cash used in investing activities (289,119) (59,129) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Revolving credit borrowings, net 52,307 41,430 Payments on other long-term debt and capital leases (97) (116) Construction allowance receipts 2,699 5,799 Proceeds from sale of common stock under employee stock purchase plan 2,466 2,098 Proceeds from exercise of stock options 24,712 6,150 Excess tax benefit from stock-based compensation 30,592 4,419 Decrease in bank overdraft (22,013) (6,309) ---------- ---------- Net cash provided by financing activities 90,666 53,471 ---------- ---------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 64 - ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (85,453) (3,638) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 135,942 36,564 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $50,489 $ 32,926 ========== ========== Supplemental non-cash investing and financing activities: Construction in progress - leased facilities $(5,406) $3,916 Accrued property and equipment $1,027 $ 15,223 Cash paid for interest $7,509 $4,551 Cash paid for income taxes $5,426 $ 42,083 Store Count and Square Footage The stores that opened during the second quarter of 2007 are as follows: ---------------------------------- ---------------------------------- DICK'S SPORTING GOODS GOLF GALAXY ---------------------------------- ---------------------------------- Store Market Store Market ------------------- ----------- ------------------- ------------ Lake Grove, NY Long Island Sacramento, CA Sacramento Concord, NC Charlotte San Diego, CA San Diego Millville, NJ Jersey South Flower Mound, TX Dallas Oswego, IL Chicago Murfreesboro, TN Nashville The following represents a reconciliation of beginning and ending stores and square footage for the periods indicated: Q2 YTD -------------------------------------------------- Fiscal Fiscal 2007 2006 -------- ----------- ------ ---------- Dick's Dick's Sporting Sporting Goods Golf Galaxy Total Goods -------- ----------- ------ ---------- Beginning stores 294 65 359 255 Q1 New 15 10 25 8 Q2 New 6 2 8 5 -------- ----------- ------ ---------- Ending stores 315 77 392 268 ======== =========== ====== ========== Relocated stores 1 - 1 - ======== =========== ====== ========== Square Footage: (in millions) Dick's Sporting Goods Golf Galaxy Total --------------- ----------- ------- Q1 2006 15.2 0.9 16.1 Q2 2006 15.5 0.9 16.4 Q3 2006 16.7 0.9 17.6 Q4 2006 16.7 0.9 17.6 ---------- --------------- ----------- ------- Q1 2007 17.4 1.1 18.5 Q2 2007 17.8 1.1 18.9 Summary Proforma Financial Information The following unaudited proforma summary presents information as if Golf Galaxy had been acquired at the beginning of the periods presented. Proforma Results for 13 and 26 Weeks Ended July 29, 2006 - Unaudited (1) (In thousands, except per share amounts) 13 Weeks Ended Dick's Sporting Goods Golf Galaxy Consolidated ------------------------------------------- ----------- ------------ Net Sales $734,047 $100,171 $834,218 Net Income 25,681 4,872 30,553 Basic earnings per share $0.51 $0.60 Diluted earnings per share $0.47 $0.56 Weighted Average Common Shares Outstanding Basic 50,746 - 50,746 Diluted 54,887 - 54,887 26 Weeks Ended Dick's Sporting Goods Golf Galaxy Consolidated ------------------------------------------- ----------- ------------ Net Sales $1,379,545 $164,299 $1,543,844 Net Income 37,098 4,456 41,554 Basic earnings per share $0.73 $0.82 Diluted earnings per share $0.68 $0.76 Weighted Average Common Shares Outstanding Basic 50,583 - 50,583 Diluted 54,742 - 54,742 (1) The unaudited proforma results present information as if Golf Galaxy had been acquired at the beginning of the periods. The proforma amounts include certain reclassifications to Golf Galaxy amounts to conform them to the Company's reporting calendar, an increase in pre- tax interest expense for the 13 and 26 weeks ended of $2,853 and $5,620 respectively, to reflect the increase in borrowings under the amended credit facility to finance the acquisition as if it had occurred at the beginning of the periods and use of the statutory tax rate of the Company in effect during the periods presented to determine net income. The proforma amounts do not reflect any benefits from economies which might be achieved from combining the operations. The proforma information does not necessarily reflect the actual results that would have occurred had the companies been combined during the periods presented, nor is it necessarily indicative of the future results of operations of the combined companies. Non-GAAP Financial Measures The Company has provided non-GAAP financial information in this earnings release which includes comparable store sales as if Golf Galaxy had been acquired at the beginning of the periods presented. The proforma financial information is considered non-GAAP and is not preferable to GAAP financial information; however, the Company believes this information provides additional measures of performance that the Company's management and investors can use to compare core, operating results between reporting periods. These non-GAAP measures are provided below and on the Company's website at http://www.dickssportinggoods.com/ (click on the Investor Relations link at the top of the home page). The Company's website is not part of this press release. Proforma Comparable Store Sales Dick's Sporting Golf Goods Galaxy Consolidated -------- ------ ------------ 13 weeks ended July 29, 2006 6.5% 0.4% 6.0% 13 weeks ended August 4, 2007 7.2% 4.7% 7.0% 26 weeks ended July 29, 2006 6.9% 0.1% 6.2% 26 weeks ended August 4, 2007 4.7% 4.7% 4.7% The proforma comparable store sales present information as if Golf Galaxy had been acquired at the beginning of the periods presented. The sales have been adjusted to conform to the Company's reporting calendar and method of reporting comparable sales. Golf Galaxy will be included in the quarterly comparable store base beginning in Q2 2008, which will be the first full quarter following the anniversary of the date of acquisition. EBITDA EBITDA should not be considered as an alternative to net income or any other generally accepted accounting principles measure of performance or liquidity. EBITDA, as the Company has calculated it, may not be comparable to similarly titled measures reported by other companies. EBITDA is a key metric used by the Company that provides a measurement of profitability that eliminates the effect of changes resulting from financing decisions, tax regulations, and capital investments. 13 Weeks Ended August 4, July 29, EBITDA 2007 2006 --------------------------------- ---------- --------- (dollars in thousands) Net income $47,930 $25,681 Provision for income taxes 31,635 17,120 Interest expense, net 3,629 2,906 Depreciation and amortization 21,634 13,737 ---------- --------- EBITDA $104,828 $59,444 ========== ========= % increase in EBITDA 76% 26 Weeks Ended August 4, July 29, EBITDA 2007 2006 --------------------------------- ---------- --------- (dollars in thousands) Net income $69,632 $37,098 Provision for income taxes 46,017 24,732 Interest expense, net 6,835 5,155 Depreciation and amortization 38,036 26,246 ---------- --------- EBITDA $160,520 $93,231 ========== ========= % increase in EBITDA 72% Reconciliation of Gross Capital Expenditures to Capital Expenditures The following table represents a reconciliation of the Company's gross capital expenditures to its capital expenditures, net of tenant allowances. 26 Weeks Ended ------------------------- August 4, July 29, 2007 2006 ----------- ---------- (dollars in thousands) Gross capital expenditures $(76,884) $(63,712) Proceeds from sale-leaseback transactions 9,226 4,583 Changes in deferred construction allowances 22,593 4,967 Construction allowance receipts 2,699 5,799 ----------- ---------- Net capital expenditures $(42,366) $(48,363) =========== ========== SOURCE Dick's Sporting Goods, Inc. CONTACT: Timothy E. Kullman, SVP - Chief Financial Officer, or, Dennis Magulick, Director, Investor Relations, +1-724-273-3400, investors@dcsg.com, both of Dick's Sporting Goods, Inc. Web site: http://www.dickssportinggoods.com http://www.dickssportinggoods.com/investors (DKS)