Dick's Sporting Goods 2003 Annual Report Download

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Dick’s Sporting Goods, Inc. 2003 Annual Report

Table of contents

  • Page 1
    Dick's Sporting Goods, Inc. 2003 Annual Report

  • Page 2
    ...) Net sales Gross profit margin Income from operations Net income Diluted earnings applicable to common stockholders Diluted weighted average shares outstanding Total cash and cash equivalents Total debt including capitalized lease obligations Total stockholders' equity Inventory turnover Return on...

  • Page 3
    dks 03ar 1 goal Our goal is to be the #1 sports and fitness specialty retailer for all athletes and outdoor enthusiasts through the relentless improvement of everything we do.

  • Page 4
    ...our Golf Pro Shops one of over 150 PGA pros that we employ. We also employ 175 bike technicians, and we're excited about our initiative to capitalize on the fitness business as we plan to have certified fitness trainers in every store by the end of 2004. Our emphasis on serving customers with sports...

  • Page 5
    .... In 2003 we added a number of key members to what was already a strong and experienced management team. Bill Newlin (Executive Vice President & Chief Administrative Officer), Bill Dandy (Senior Vice President & Chief Marketing Officer) and Jerel Hollens (Senior Vice President - Supply Chain) are...

  • Page 6
    Leading golf brands ...breakthrough technology dks 03ar 4

  • Page 7
    dks 03ar 5 tradition Step inside a Dick's Pro Shop and get your hands on the latest advances and biggest names in golf equipment and apparel. Our PGA pros and other associates deliver the expertise and insight to keep you looking and playing your best.

  • Page 8
    Passionate ...in pursuit of success dks 03ar 6

  • Page 9
    dks 03ar 7 authentic Visit the Sportsman's Lodge and enjoy the broad selection of hunting, camping and fishing gear, boots, equipment and accessories. Our hunting and fishing experts will guide you to exactly the right product for success and safety in the great outdoors.

  • Page 10
    Relentless ...exceeding expectations dks 03ar 8

  • Page 11
    Move on over to the Fitness center at Dick's for a wide selection of treadmills, elliptical trainers and other home exercise equipment. Whether it's a home gym or a yoga mat, hand weights or a heavy bag, our knowledgeable exercise staff knows what it takes to keep you and your workout routine going ...

  • Page 12
    Driven ...go the extra mile dks 03ar 10

  • Page 13
    ... wall inside a Dick's store and view the wide breadth of product we offer to enhance your performance in every sport and season. Choose from all kinds of athletic and lifestyle shoes, skates, boots and more. Whatever your interest, we've got your style and size in all the top brands, backed by our...

  • Page 14
    Teamwork ...toward a personal best dks 03ar 12

  • Page 15
    ... around a Dick's store and feel again how great it is to compete. Athletes today recognize that getting to the next level requires the right support and equipment. From our merchandise selection to local sponsorships and team packets, we help our customers perform at the top of their game. attitude

  • Page 16
    ... about their sport, and by creating a shopping experience unlike any other. Dick's "store-within-a-store" specialty shops combine the convenience, broad assortment, and competitive prices of large format stores with the brand names, deep product selection and knowledgeable customer service of...

  • Page 17
    ...enhance and enjoy their game. As with all of our product selection, we offer the highest quality golf equipment and latest innovations. This approach differentiates us from mass merchandisers. By catering to such a wide array of customers, we can offer all of our vendor's new products, with enhanced...

  • Page 18
    ... lodge Customers value the knowledgeable conversation - about what's new and what's working - found inside a Dick's Sportsman's Lodge every bit as much as the purchase itself. We apply that same attention to detail in our overall store design and selection. We believe that our compelling new store...

  • Page 19
    ...fitness experts at Dick's recognize that staying fit requires commitment and sacrifice, and plenty of choices. In addition to major national brands - Pro-Form, Fitness Quest, and Everlast - we offer private label brands of Private label products have grown to represent more than 10 percent of sales...

  • Page 20
    ... We deliver on our in-stock promise thanks to the diligent and coordinated efforts between our buyers, planners and store operations staffs. Our distribution and inventory management ensures that stores and products are replenished in a timely manner. For customers, that means experiencing the broad...

  • Page 21
    ...goal remains clear - to redefine sports and fitness specialty retailing for all athletes and outdoor enthusiasts through quality brands, information, As with our front-line associates, experience counts at the senior management level. Our executive management team averages 11 years of experience in...

  • Page 22
    ...apparel At Dick's, we pay close attention to detail, from the fit of our athletic apparel lines to the layouts and sight lines of each department. Our merchandising approach stimulates cross-selling by making it easier for customers to see the great selection of top name brands throughout our stores...

  • Page 23
    .... The best people. National and private label brands that keep our customers performing at the top of their game. A store design that celebrates the authentic athlete and outdoor enthusiast. Our commitment to these fundamentals provides Dick's with a significant competitive advantage. It's the...

  • Page 24
    Dick's Sporting Goods, Inc. is the leading full-line sporting goods retailer in the eastern half of the United States with 163 stores in 27 states. 1 dks 03ar 22 1 Cost of Goods Sold/Average Inventories over the last five quarters.

  • Page 25
    2003 financial report dks 03ar 23 2003 CONTENTS 24 25 33 33 34 35 36 37 38 40 50 52 Five-Year Financial Summary Management's Discussion and Analysis of Financial Condition and Results of Operations Independent Auditors' Report Management's Responsibilities Report Consolidated Statements of ...

  • Page 26
    ...) Number of stores at end of period Total square feet at end of period Net sales per square foot OTHER DATA: 2.1% 5.1% 3.6% 3.0% (0.6%) 163 141 125 105 83 7,919,138 6,807,021 6,149,044 5,303,124 4,355,072 $ 193 $ 192 $ 186 $ 180 $ 175 Gross profit margin Operating margin Inventory turnover...

  • Page 27
    ... Act of 1995. See page 31,"Forward-Looking Statements." OVERVIEW The Company 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 January 31, 2004, the Company operated 163...

  • Page 28
    ...team sports, women's apparel, water sports, paintball and licensed apparel recording the largest increases. These increases were partly offset by lower sales of in-line skates, hunting equipment... Internet commerce service provider due to a decline in the value of that company's publicly traded stock....

  • Page 29
    ... taxes payable related to the increase in taxable income in 2003 as compared to 2002. The cash ï¬,ow from operating the Company's stores is a significant source of liquidity, and will continue to be used in 2004 primarily to purchase inventory, make capital improvements and open new stores. All...

  • Page 30
    ... credit facility, net proceeds from the initial public offering, and proceeds from transactions in the Company's common stock. During 2003, the Company received proceeds of $15.9 million from the exercise of employee stock options and purchases of common stock under the employee stock purchase plan...

  • Page 31
    account agreements, and a trademark security agreement) by interests in substantially all of the Company's personal property excluding store and distribution center equipment and fixtures, including the pledge of the stock of our wholly owned subsidiary, American Sports Licensing, Inc. As of ...

  • Page 32
    ... terms. Amounts expected to be received from vendors relating to the purchase of merchandise inventories are recognized as a reduction of cost of goods sold as the merchandise is sold. Amounts that represent a reimbursement of costs incurred, such as advertising, are recorded as a reduction to the...

  • Page 33
    ... the sporting goods industry and actions by our competitors; our inability to manage our growth, open new stores on a timely basis and expand successfully in new and existing markets; the availability of retail store sites on terms acceptable to us; the cost of real estate and other items related to...

  • Page 34
    .... Significant portions of the Company's net sales and profits are realized during the fourth quarter of the Company's fiscal year, which is due, in part, to the holiday selling season and, in part, to our sales of cold weather sporting goods and apparel. Any decrease in fiscal fourth quarter...

  • Page 35
    independent auditors' report / management's responsibilities report TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF DICK'S SPORTING GOODS, INC.: We have audited the accompanying consolidated balance sheets of Dick's Sporting Goods, Inc. and subsidiary as of January 31, 2004 and February 1, 2003, and...

  • Page 36
    ...2003 February 2, 2002 (Dollars in thousands, except per share data) Net sales Cost of goods sold, including occupancy and distribution costs Gross pro... two-for-one stock split - see Note 16) Basic Diluted Weighted average common shares outstanding: (adjusted for two-for-one stock split - see Note ...

  • Page 37
    ... 31, 2004 February 1, 2003 (Dollars in thousands, except per share data) ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Inventories, net Deferred income taxes Prepaid expenses and other current assets Total current assets Property and equipment, net Construction in...

  • Page 38
    ... 1, 2003 February 2, 2002 (Dollars in thousands) Net income Other comprehensive income: Unrealized gain (loss) on securities available-for-sale, net of tax Reclassification adjustment for losses realized in net income due to the write-down of the non-cash investment to its fair value, net...

  • Page 39
    ... from sale of common stock in initial public offering Proceeds from sale of common stock under employee stock purchase plan Proceeds from exercise of stock options Repayment of note receivable for common stock Increase in bank overdraft Transaction costs related to initial public offering Net...

  • Page 40
    ...$480 - BALANCE, February 1, 2003 25,134,048 Exchange of Class B common stock for common stock 1,254,372 Sale of common stock under stock plans 238,906 Exercise of stock options, including tax benefit of $29,861 6,425,556 Transaction costs related to initial public offering - Net income - Unrealized...

  • Page 41
    Additional Paid-In Capital (Accumulated Deficit) Retained Earnings Note Receivable for Common Stock Accumulated Other Comprehensive Income (Loss) Total $ 89,973 6,139 - - 96,112 - 27,881 4,412 18 1,446 - - - 129,869 - 2,471 43,225 183 - - $ 175,748 $ (51,...

  • Page 42
    ... February 1, 2003, respectively. Inventories Inventories are stated at the lower of weighted average cost or market. Inventory cost consists of the direct cost of merchandise including freight. Inventories are net of shrinkage, obsolescence, sales returns and other valuations and vendor allowances...

  • Page 43
    ... comprised of gift cards, deferred rent, which represents the difference between rent paid and the amounts expensed for operating leases, amounts deferred relating to the investment in GSI (see Note 11) and advance payments under the terms of building sale-leaseback agreements. Self-Insurance The...

  • Page 44
    ... upon the redemption of the gift card. Sales are recorded net of estimated returns. Revenue from layaway sales is recognized upon receipt of final payment from the customer. Advertising Costs Production costs of advertising and the costs to run the advertisements are expensed the first time...

  • Page 45
    ...London Interbank Offering Rate ("LIBOR"), plus the applicable margin (0% for the prime rate option or 1.25% for LIBOR as of January 31, 2004). Borrowings are collateralized by the assets of the Company, excluding store and distribution center equipment and fixtures that have a net carrying value of...

  • Page 46
    ... entered into sale-leaseback transactions related to store fixtures, buildings and equipment that resulted in cash receipts of $14,726,000, $6,417,000, and $10,254,000 for fiscal 2003, 2002 and 2001, respectively. Scheduled lease payments due (including lease commitments for 23 stores not yet...

  • Page 47
    ... day or the last business day of the semi-annual offering period. Employees may purchase shares having a fair market value of up to $25,000 for all purchases ending within the same calendar year. No compensation expense is recorded in connection with the plan. The total number of shares issuable...

  • Page 48
    ..., and 5,000,000 shares of preferred stock. Upon completion of the Company's initial public offering in fiscal 2002, the Company has two classes of common stock, the existing common stock and a new class of Class B common stock. The holders of common stock generally have rights identical to holders...

  • Page 49
    ... the fair value of the GSI stock and its cost as deferred revenue to be amortized over the 10-year term of the agreement. Deferred revenue at January 31, 2004 and February 1, 2003 was $3,192,000 and $3,618,000, respectively. In total, the number of shares the Company holds represents less than...

  • Page 50
    ...,000 and $6,136,000 for fiscal 2003, 2002 and 2001, respectively. Income tax payments during fiscal 2003, 2002 and 2001 were $12,424,000, $22,370,000 and $14,481,000, respectively. During fiscal 2001, stock options representing 5,724,748 shares were exercised in exchange for a note receivable in...

  • Page 51
    ... effect upon conversion. The initial offering of $155.0 million issue price of convertible notes were sold on February 11, 2004 in a private, unregistered offering to "qualified institutional buyers," along with the subsequent exercise by the initial purchasers of such offering of their option to...

  • Page 52
    ... 15, 2002 when the Company completed its initial public offering, and the related reduction in interest expense due to the application of the net proceeds thereof. The reconciliations of the pro-forma financial information to the most directly comparable GAAP financial information is presented...

  • Page 53
    Return On Invested Capital (ROIC) 2003 2002 2001 2000 1999 1998 (Dollars in thousands) Net income Discontinued operations Non-recurring charge (Gain) on sale... at 8x annual rent expense Total debt and operating leases capitalized at 8x annual rent expense ...stock (denominator). The after-tax amounts ...

  • Page 54
    ...nancial measure. ANNUAL MEETING Deloitte & Touche LLP 2500 One PPG Place Pittsburgh, PA 15222 COMMON STOCK June 2nd at 1:30 p.m. Wyndham Hotel 777 Aten Road Coraopolis, PA FORM 10-K The shares of Dick's Sporting Goods, Inc. common stock are listed and traded on the New York Stock Exchange (NYSE...

  • Page 55
    ... Officer Bill Dandy Senior Vice President and Chief Marketing Officer Eileen Gabriel Senior Vice President and Chief Information Officer Jeffrey R. Hennion Senior Vice President Strategic Planning Jerel Hollens Senior Vice President Supply Chain Joseph J. Queri, Jr. Senior Vice President Real Estate...

  • Page 56
    Dick's Sporting Goods, Inc. 200 Industry Drive, RIDC Park West, Pittsburgh, PA 15275 412.809.0100 www.dickssportinggoods.com