Dick's Sporting Goods 2006 Annual Report Download - page 32

During 2006, we opened 39 stores and relocated two stores compared to opening 26 stores and the relocation of four stores during
2005. Sale-leaseback transactions covering store fixtures, buildings and information technology assets also have the effect of
returning to the Company cash previously invested in these assets. There were no building sale-leasebacks during 2006 or 2005.
The Company also generated $1.9 million in proceeds from the sale of a portion of the Company’s non-cash investment in its third-
party Internet commerce service provider during 2005.
Financing Activities
Cash provided in financing activities increased by $130.5 million to $72.4 million primarily due to a decrease in revolving credit
payments of $76.1 million as the Company had no outstanding borrowings at February 3, 2007 or January 28, 2006. In addition,
the Company received $23.0 million of proceeds from the exercise of stock options, an increase of $15.6 million in 2006
compared to 2005.
The Company’s liquidity and capital needs have generally been met by cash from operating activities, the proceeds from the
convertible notes and borrowings under the $350 million Credit Agreement. Borrowing availability under the Credit Agreement is
generally limited to the lesser of 70% of the Company’s eligible inventory or 85% of the Company’s inventory’s liquidation value,
in each case net of specified reserves and less any letters of credit outstanding. Interest on outstanding indebtedness under the
Credit Agreement currently accrues, at the Company’s option, at a rate based on either (i) the prime corporate lending rate or
(ii) at the LIBOR rate plus 1.25% to 1.75% based on the level of total borrowings during the prior three months. The Credit
Agreement’s term expires May 30, 2008.
There were no outstanding borrowings under the Credit Agreement as of February 3, 2007 and January 28, 2006. Total remaining
borrowing capacity, after subtracting letters of credit as of February 3, 2007 and January 28, 2006 was $333.5 million and
$275.6 million, respectively.
The Credit Agreement contains restrictions regarding the Company’s and related subsidiary’s ability, among other things, to merge,
consolidate or acquire non-subsidiary entities, to incur certain specified types of indebtedness or liens in excess of certain specified
amounts, to pay dividends or make distributions on the Company’s stock, to make certain investments or loans to other parties,
or to engage in lending, borrowing or other commercial transactions with subsidiaries, affiliates or employees. Under the Credit
Agreement, the Company is obligated to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 in certain circumstances.
The obligations of the Company under the Credit Agreement are secured by interests in substantially all of the Company’s personal
property excluding store and distribution center equipment and fixtures. As of February 3, 2007, the Company was in compliance
with the terms of the Credit Agreement.
Cash requirements in 2007, other than normal operating expenses, are expected to consist primarily of capital expenditures related
to the addition of new stores, enhanced information technology and improved distribution infrastructure. The Company plans to
open 45 new stores and relocate one store during 2007. The Company also anticipates incurring additional expenditures for Dick’s
remodeling or relocating certain existing stores. The Company also plans to open 17 new Golf Galaxy stores during 2007. While
there can be no assurance that current expectations will be realized, the Company expects capital expenditures, net of deferred
construction allowances and proceeds from sale leaseback transactions, to be approximately $130 million in 2007, including Golf
Galaxy capital expenditure requirements.
The Company believes that cash flows generated from operations and funds available under our credit facility will be sufficient
to satisfy our capital requirements through fiscal 2007. Other new business opportunities or store expansion rates substantially
in excess of those presently planned may require additional funding.
Off-Balance Sheet Arrangements
The Company’s off-balance sheet contractual obligations and commercial commitments as of February 3, 2007 relate to operating
lease obligations, future minimum guaranteed contractual payments and letters of credit. The Company has excluded these items
from the balance sheet in accordance with generally accepted accounting principles.
DICK’S SPORTING GOODS, INC. 2006 ANNUAL REPORT
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