Sports Authority (NYSE:TSA)
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The Sports Authority, Inc. (NYSE:TSA), today announced
results for its third fiscal quarter ended October 29, 2005.
-- Diluted EPS of $0.13 vs. previous guidance of $0.09 and $0.01
for last year, excluding integration costs
-- Comparable store sales increase of 1.2%
-- Merchandise inventories reduced $52.3 million (-8.3% on a per
square foot basis) vs. third quarter last year
-- Long-term debt reduced $70.2 million vs. third quarter last
year
Net income for the third quarter was $3.5 million, or $0.13 per
diluted share, compared with a net loss of $2.8 million, or $0.11 per
diluted share, including merger integration costs, in the prior year's
third quarter. Excluding the effect of after-tax merger integration
costs of $2.9 million, or $0.11 per diluted share, net income for the
prior year's third quarter was $0.2 million, or $0.01 per diluted
share.
Total sales for the third quarter were $560.0 million compared
with $545.0 million in the prior year's third quarter, an increase of
$15.0 million, or 2.8%. Third quarter comparable store sales for the
Company increased 1.2%.
Net income for the 39 weeks ended October 29, 2005 was $25.6
million, or $0.96 per diluted share, compared with net income of $8.2
million, or $0.31 per diluted share, including merger integration
costs, in the prior year's comparable period. Excluding the effect of
after-tax merger integration costs of $13.3 million, or $0.50 per
diluted share, net income for the prior year's 39 weeks was $21.4
million, or $0.81 per diluted share.
Total sales for the 39 weeks ended October 29, 2005 were $1.77
billion compared with $1.72 billion in the prior year's comparable
period, an increase of $46.0 million, or 2.7%. Comparable store sales
for the 39 weeks ended October 29, 2005 increased 1.0%.
The Company opened five stores during the third quarter to arrive
at a total number of stores in operation as of October 29, 2005 of 397
stores in 45 states.
Doug Morton, Chief Executive Officer commented, "Our ability to
exceed earnings expectations for the third quarter was driven by
significant improvements in merchandise gross margins along with well
controlled expenses. Our top-line benefited from strong sales of
active apparel, fitness, golf, ski apparel, and team sports. We are
also pleased with our progress in reducing merchandise inventories and
long-term debt."
Mr. Morton concluded, "We continue to focus on the initiatives we
implemented during the year including: re-branding the store base in
several major markets, implementing new merchandising and supply chain
initiatives, enhancing our marketing and advertising, reducing
one-time promotional events and continuing our remodel program. As we
enter the important holiday season, we remain committed to
successfully executing our business plan and driving increased
shareholder value."
Guidance for Fiscal Year 2005
For the fourth quarter of fiscal 2005, the Company is forecasting
comparable store sales of 1% to 2% and total sales of $730.0 to $740.0
million. The Company is comfortable with the current analyst consensus
estimate of $1.07 per diluted share. The Company expects to open two
new stores, relocate one store, and close two stores during the
quarter.
For fiscal year 2005, the Company is forecasting comparable store
sales to increase approximately 1% and diluted EPS of $2.03, based on
an estimated 26.7 million diluted shares outstanding. The Company
expects to open thirteen new stores, relocate four stores and close
eight stores during the year.
Non-GAAP Financial Measures
To supplement our condensed consolidated statements of operations
presented on a basis in accordance with accounting principles
generally accepted in the United States of America ("GAAP"), we have
disclosed additional non-GAAP measures of net income and earnings per
share adjusted to exclude merger integration costs we believe
appropriate to enhance an overall understanding of our financial
performance (see income statement tables following). These adjustments
to our GAAP results are made with the intent of providing a more
complete understanding of the underlying operational results. These
non-GAAP measures have been reconciled to the most comparable GAAP
measure as required under SEC rules regarding the use of non-GAAP
financial measures. The presentation of this additional information is
not meant to be considered in isolation or as a substitute for net
income or diluted earnings per share prepared in accordance with GAAP.
The Sports Authority, headquartered in Englewood, CO, is one of
the nation's largest full-line sporting goods retailers offering a
comprehensive high-quality assortment of brand name sporting apparel
and equipment at competitive prices. As of October 29, 2005, The
Sports Authority operated 397 stores in 45 states under The Sports
Authority(R), Gart Sports(R), Sportmart(R) and Oshman's(R) names. The
Company's e-tailing websites, located at thesportsauthority.com,
gartsports.com, sportmart.com and oshmans.com, are operated by GSI
Commerce, Inc. under license and e-commerce agreements. In addition, a
joint venture with AEON Co., Ltd. operates "The Sports Authority"
stores in Japan under a licensing agreement.
This announcement contains, in addition to historical information,
certain forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those
currently anticipated as a result of a number of factors, including
risks and uncertainties discussed in The Sports Authority's filings
with the Securities and Exchange Commission. Those risks include,
among other things,, rapidly changing accounting rules, regulations
and interpretations, the competitive environment in the sporting goods
industry in general and in the specific market areas of the Company,
consumer confidence, changes in discretionary consumer spending,
changes in costs of goods and services and economic conditions in
general, and in the companies' specific market areas and unseasonable
weather. The Company assumes no obligation to update any
forward-looking statements as a result of new information or future
events or developments.
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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 29, October 30, October 29, October 30,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales $ 559,977 $ 545,041 $ 1,768,242 $ 1,722,107
Cost of goods
sold, buying,
and occupancy 404,645 398,677 1,278,003 1,248,120
------------ ------------ ------------ ------------
Gross profit 155,332 146,364 490,239 473,987
Gross profit % 27.7% 26.9% 27.7% 27.5%
Operating expenses:
Selling,
general and
administrative
expenses 143,154 139,353 430,269 422,235
Selling,
general and
administrative
expenses % 25.6% 25.6% 24.3% 24.5%
Integration
costs - 4,774 - 21,750
Store pre-
opening
expenses 1,344 1,562 2,522 3,243
------------ ------------ ------------ ------------
Operating income 10,834 675 57,448 26,759
Non-operating
income (expense):
Interest (5,908) (5,522) (16,750) (14,648)
Other income 798 341 1,664 1,284
------------ ------------ ------------ ------------
Income (loss)
before income
taxes 5,724 (4,506) 42,362 13,395
Income tax
(expense)
benefit (2,261) 1,753 (16,733) (5,228)
------------ ------------ ------------ ------------
Net income (loss) $ 3,463 $ (2,753) $ 25,629 $ 8,167
============ ============ ============ ============
Earnings (loss)
per share:
Basic $ 0.13 $ (0.11) $ 0.98 $ 0.32
============ ============ ============ ============
Diluted $ 0.13 $ (0.11) $ 0.96 $ 0.31
============ ============ ============ ============
Basic weighted
average shares
outstanding 26,309,199 25,821,965 26,078,375 25,639,714
============ ============ ============ ============
Diluted weighted
average shares
outstanding 26,899,828 25,821,965 26,783,328 26,375,278
============ ============ ============ ============
Reconciliation of GAAP measures to pro forma, non-GAAP measures:
----------------------------------------------------------------
Results of operations for the 13 and 39 weeks ended October 30, 2004
include merger integration costs. In order to present comparable
results year over year, the following table provides a reconciliation
of GAAP basis net income to pro forma net income excluding these
costs, and including income tax expense at effective tax rates.
Income (loss)
before income
taxes as reported $ (4,506) $ 13,395
Integration
costs 4,774 21,750
------------ ------------
Pro forma income
before income
taxes 268 35,145
Income tax
expense at
effective tax
rates (105) (13,707)
------------ ------------
Pro forma net
income $ 163 $ 21,438
============ ============
Pro forma earnings
per share:
Basic $ 0.01 $ 0.84
============ ============
Diluted $ 0.01 $ 0.81
============ ============
Basic weighted
average shares
outstanding 25,821,965 25,639,714
============ ============
Diluted weighted
average shares
outstanding 26,301,365 (1) 26,375,278
============ ============
(1) Includes the dilutive effect of stock options and restricted
stock, totaling 479,400 shares. The dilutive effect was not
included to calculate the loss per share under GAAP, because to do
so would be anti-dilutive.
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The Sports Authority, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
October 29, January 29, October 30,
2005 2005 2004
------------ ------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 28,263 $ 24,838 $ 24,340
Merchandise inventories 803,506 728,853 855,826
Other current assets 135,014 128,969 162,225
------------ ------------- ------------
Total current assets 966,783 882,660 1,042,391
Property and equipment, net 300,065 256,312 253,805
Other long-term assets 285,908 312,209 291,061
------------ ------------- ------------
Total assets $ 1,552,756 $ 1,451,181 $ 1,587,257
============ ============= ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 337,926 $ 339,492 $ 385,990
Other current liabilities 175,627 187,650 176,353
------------ ------------- ------------
Total current
liabilities 513,553 527,142 562,343
Long-term debt 378,239 305,383 448,458
Other long-term liabilities 136,732 133,647 118,506
------------ ------------- ------------
Total liabilities 1,028,524 966,172 1,129,307
------------ ------------- ------------
Total stockholders'
equity 524,232 485,009 457,950
------------ ------------- ------------
Total
liabilities
and
stockholders'
equity $ 1,552,756 $ 1,451,181 $ 1,587,257
============ ============= ============
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