Dick's Sporting Goods 2006 Annual Report Download - page 31

Liquidity and Capital Resources
Our primary capital requirements are for working capital, capital improvements and to support expansion plans, as well as for
various investments in store remodeling, store fixtures and ongoing infrastructure improvements. The Company’s main source of
liquidity in 2006 and 2005 was our net cash provided by financing activities.
The change in cash and cash equivalents is as follows:
February 3, January 28, January 29,
Fiscal Year Ended 2007 20062005
Net cash provided by operating activities $196,216 $169,530 $ 107,841
Net cash used in investing activities (169,191) (93,718) (414,772)
Net cash provided (used in) by financing activities 72,353 (58,134) 232,143
Net increase (decrease) in cash and cash equivalents $ 99,378 $17,678 $(74,788)
Operating Activities
Cash flow from operations is seasonal in our business. Typically, we use cash flow from operations to increase inventory in advance
of peak selling seasons, with the pre-Christmas inventory increase being the largest. In the fourth quarter, inventory levels are
reduced in connection with Christmas sales and this inventory reduction, combined with proportionately higher net income, typically
produces significantly positive cash flow.
Cash provided by operating activities increased by $26.7 million in 2006 to $196.2 million, which consists primarily of higher net
income of $39.6 million and an increase in the change in assets and liabilities of $16.1 million.
Changes in Assets and Liabilities The primary factors contributing to the increase in the change in assets and liabilities were the
change in accounts receivable, accrued expenses and deferred construction allowances, partially offset by an increase in the change
in inventory and prepaid expenses.
The increase in the change in accrued expenses was primarily due to higher bonus expense, an increase in advertising accruals and
an increase in capital accruals due to higher store count and an increase in the number of new stores planned for 2007 compared
to 2006. The increase in deferred construction allowances is primarily related to higher tenant allowances associated with our 2006
stores compared to 2005. Partially offsetting these cash inflows was the increase in inventory, which was primarily due to higher
store count and business initiatives that accelerated inventory receipts at the end of 2006 compared to 2005 and the increase in
prepaid expenses as a result of the 53rd week, which caused the first week of February 2007 to fall into fiscal January 2006.
The cash flows from operating the Company’s stores is a significant source of liquidity, and will continue to be used in 2007
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 $75.5 million in 2006 to $169.2 million. Net capital expenditures increased
$72.3 million due to an increase in capital expenditures of $78.3 million and partially offset by an increase in sale-leaseback
proceeds of $6.0 million.
Purchases of property and equipment were $190.3 million in fiscal 2006, $112.0 million in fiscal 2005 and $104.9 million in
fiscal 2004. Capital expenditures in fiscal 2006 relate primarily to the opening of 39 new stores and the relocation of two stores,
information systems and administrative and distribution facilities. The Company generated proceeds from the sale and leaseback
of property and equipment, primarily its store fixtures, totaling $24.8 million, $18.8 million and $35.7 million in fiscal 2006, 2005
and 2004, respectively. In addition, the Company recognized landlord reimbursements totaling $55.9 million, $53.1 million and
$69.2 million in fiscal 2006, 2005 and 2004, respectively.
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