Dick's Sporting Goods 2004 Annual Report Download - page 29

DICK’S SPORTING GOODS, INC. 2004 ANNUAL REPORT 27
Tax benefit from the exercise of stock options decreased by $14.0 million. As options granted under the Company’s stock plans are
exercised, the Company will continue to receive a tax deduction; however, the amounts and the timing cannot be predicted.
Changes in Assets and Liabilities The primary factors contributing to the decrease in the change in assets and liabilities were the change
in inventory along with a decrease in the change in accrued expenses, partially offset by a change in deferred revenue and other liabilities
primarily due to an increase in construction allowances along with the change in accounts payable and income taxes payable.
The increase in the change in inventory was primarily due to an increase in in-transit inventory compared to last year. The decrease in the
change in accrued expenses was primarily related to a decrease in Galyan’s accrued expenses from the acquisition date to the end of the
year partially offset by an increase in accrued property and equipment. The change in accounts payable was primarily due to an increase
in the change in in-transit inventory. The change in income taxes payable was primarily related to the decrease in the tax benefit from the
exercise of stock options and changes in deferred taxes.
The cash flows from operating the Company’s stores are a significant source of liquidity, and will continue to be used in 2005 primarily to
purchase inventory, make capital improvements and open new stores. All of the Company’s revenues are realized at the point-of-sale in
the stores.
Investing Activities
Cash used in investing activities increased by $368.7 million in 2004 to $414.8 million due primarily to the payment for the purchase of
Galyan’s of $351.6 million, net of $17.9 million cash acquired. Net capital expenditures increased $16.9 million as proceeds from sale-
leaseback transactions increased $21.0 million while capital expenditures increased $37.9 million. We use cash in investing activities to
build new stores and remodel or relocate existing stores. Furthermore, net cash used in investing activities includes purchases of
information technology assets and expenditures for distribution facilities and corporate headquarters. The following table presents the
major categories of capital expenditure activities:
January 29, January 31,
Fiscal Year Ended 2005 2004
New, relocated and remodeled stores $ 72,542 $ 43,753
Future stores 1,402 6,922
Existing stores 5,719 6,642
Information systems 12,400 8,860
Administration and distribution 12,881 887
$ 104,944 $ 67,064
During 2004, we opened 29 stores, relocated three stores, acquired 48 Galyan’s stores, closed three Dick’s stores and closed three
Galyan’s stores, resulting in an ending store count of 234 stores in 33 states. Two of the Dick’s store closures were not related to the
Galyan’s acquisition. One was closed as its replacement was opened in 2003, and the second was closed due to poor performance.
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. During 2004, we completed four building sale-leaseback transactions that generated
proceeds of $21.7 million, of which $15.2 million of the capital expenditures were incurred in 2003. The increase in new, relocated and
remodeled stores is primarily due to an increase in construction allowances and conversion of the Galyan’s stores to Dick’s stores. The
increase in information systems capital expenditures is primarily related to the implementation of the new merchandising system. The
increase in administration and distribution capital expenditures is primarily related to the new corporate headquarters that opened during
June of 2004 and the conversion of the Plainfield distribution center.
The Company also generated $12.0 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 2004 as compared to $4.2 million in proceeds during 2003.