Dick's Sporting Goods 2005 Annual Report Download - page 36

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Interest Rate Risk
The Company’s net exposure to interest rate risk will consist primarily of borrowings under the senior secured revolving credit
facility. The Company’s senior secured revolving credit facility bears interest at rates that are benchmarked either to U.S. short-
term floating rate interest rates or one-month LIBOR rates, at the Company’s election. There were no borrowings outstanding
under the senior secured revolving credit facility as of January 28, 2006. Outstanding borrowings under the senior secured
revolving credit facility were $76.1 million as of January 29, 2005. The impact on the Company’s annual net income of a
hypothetical one percentage point interest rate change on the average outstanding balances under the senior secured revolving
credit facility would be approximately $0.8 million based upon fiscal 2005 average borrowings.
Credit Risk
In February 2004, the Company sold $172.5 million issue price of senior unsecured convertible notes due 2024 (“convertible
notes”). In conjunction with the issuance of these convertible notes, we also entered into a five year convertible bond hedge
and a five year separate warrant transaction with one of the initial purchasers (“the counterparty”) and/or certain of its affiliates.
Subject to the movement in our common stock price, we could be exposed to credit risk arising out of net settlement of the
convertible bond hedge and separate warrant transaction in our favor. Based on our review of the possible net settlements and
the credit strength of the counterparty and its affiliates, we believe that we do not have a material exposure to credit risk as a
result of these share option transactions.
Impact of Inflation
The Company does not believe that operating results have been materially affected by inflation during the preceding three
fiscal years. There can be no assurance, however, that operating results will not be adversely affected by inflation in the future.
Tax Matters
Presently, the Company does not believe that there are any tax matters that could materially affect the consolidated
financial statements.
Seasonality and Quarterly Results
The Company’s business is subject to seasonal fluctuations. 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 sales, whether because of a slow
holiday selling season, unseasonable weather conditions, or otherwise, could have a material adverse effect on our business,
financial condition and operating results for the entire fiscal year.
dick’s sporting goods, inc. 2005 annual report
34
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK