Dick's Sporting Goods 2003 Annual Report Download - page 27

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dks 03ar 25
management’s discussion and analysis of
financial condition and results of operations
The following discussion and analysis should be read in conjunction with “Selected Consolidated Financial and Other
Data” and our consolidated financial statements and related notes appearing elsewhere in this report. This Annual
Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform 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 stores in 27 states throughout the eastern half of the United States. The Company’s fiscal year ends on the
Saturday closest to January 31, which generally results in a 52-week fiscal year. However, every five or six years, the
fiscal year is 53 weeks. On February 10, 2004, the Company’s board of directors approved a two-for-one stock split, in
the form of a stock dividend, of the Company’s common stock and Class B common stock effected in the form of a
stock dividend. The split was effected by issuing our stockholders of record on March 19, 2004 one additional share of
common stock for every share of common stock held, and one additional share of Class B common stock for every
share of Class B common stock held. The applicable share and per-share data included herein have been retroactively
restated to give effect to this stock split.
RESULTS OF OPERATIONS
The following table presents for the periods indicated selected items in the consolidated statements of income as a
percentage of the Company’s net sales:
Fiscal Year 2003 2002 2001
Net sales 100.0% 100.0% 100.0%
Cost of goods sold, including occupancy and distribution costs 72.3 73.5 75.5
Gross profit 27.7 26.5 24.5
Selling, general and administrative expenses 21.4 20.7 19.8
Pre-opening expenses 0.4 0.4 0.5
Income from operations 5.9 5.4 4.2
(Gain) on sale / loss on write-down of non-cash investment (0.2) 0.2 –
Interest expense, net 0.1 0.2 0.6
Income before income taxes 6.0 5.0 3.6
Provision for income taxes 2.4 2.0 1.5
Net income 3.6% 3.0% 2.1%
Cost of goods sold includes the cost of merchandise, inventory shrinkage, freight, distribution and store occupancy
costs. Store occupancy costs include rent, common area maintenance charges, real estate and other asset-based
taxes, store maintenance, utilities, depreciation, fixture lease expenses and certain insurance expenses.
Selling, general and administrative expenses include store and field support payroll and fringe benefits, advertising,
bank card charges, information systems, marketing, legal, accounting, other store expenses and all expenses
associated with operating the Company’s corporate headquarters.
Pre-opening expenses consist primarily of marketing, payroll and recruiting costs incurred prior to a new store opening.