Dick's Sporting Goods 2008 Annual Report Download - page 34

On November 19, 2008, the Company entered into an Eighth Amendment to its Credit Agreement, the effect of which was to increase
the aggregate revolving loan commitment by $90 million to a total of $440 million. To effectuate this increase, Wells Fargo Retail
Finance and U.S. Bancorp were added as lenders under the Credit Agreement. The increase was sought to provide additional
capacity in light of the economic environment.
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 Credit Agreement, including up to $75 million in the form of letters of credit. 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 specifi ed 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 minus the applicable margin of 0.25% or (ii) the LIBOR rate plus the applicable margin of 0.75% to 1.50%. The applicable
margins are based on the level of total borrowings during the prior three months. The Credit Agreement’s term expires July 27, 2012.
There were no outstanding borrowings under the Credit Agreement as of January 31, 2009 or February 2, 2008. Total remaining
borrowing capacity, after subtracting letters of credit as of January 31, 2009 and February 2, 2008 was $417.5 million and
$333.2 million, respectively.
The Credit Agreement contains restrictions regarding the Company’s and related subsidiaries’ ability, among other things, to merge,
consolidate or acquire non-subsidiary entities, to incur certain specifi ed types of indebtedness or liens in excess of certain specifi ed
amounts, to pay cash dividends or make distributions on the Company’s stock, to make certain investments or loans to other parties,
or to engage in certain lending, borrowing or other commercial transactions with subsidiaries, affi liates or employees. Under the
Credit Agreement, the Company may be obligated to maintain a fi xed 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 fi xtures. As of January 31, 2009, the Company
was in compliance with the terms of the Credit Agreement.
Cash fl ows generated by operations and funds available under the Company’s Credit Agreement in 2009 are used to satisfy our
capital requirements through fi scal 2009. Normal capital requirements are expected to consist primarily of capital expenditures
related to the addition of new stores, remodeling of existing stores, enhanced information technology and improved distribution
infrastructure. Currently, the Company plans to open 19 new Dick’s stores, one new Golf Galaxy store and convert 12 Chick’s
Sporting Goods stores to Dick’s Sporting Goods stores during fi scal 2009. The Company also plans to relocate one Dick’s Sporting
Goods store and three Golf Galaxy stores during fi scal 2009. The Company plans to lease all of its 2009 new stores. This level
of store expansion is signifi cantly lower than historical levels and is largely driven by the current economic conditions. Other new
business opportunities or store expansion rates substantially in excess of those presently planned may require additional funding.
The Company currently anticipates receiving landlord allowances at fi ve of its planned 2009 new stores totaling approximately
$20 million. The amount and timing of receipt of these allowances depend, among other things, upon the timing of new store
construction and the ability of landlords to satisfy their contractual obligations.
The Company currently anticipates the completion of a new corporate headquarters building by January 2010. The building will be
leased by the Company, and the project has been fi nanced by the developer except for any project scope changes requested by the
Company. The Company does not anticipate any material changes to the project scope and therefore does not anticipate any material
cash requirements in 2009 related to the new corporate headquarters building.
The Company has created a capital appropriations committee to approve all capital expenditures in excess of certain amounts and to
group and prioritize all capital projects between required, discretionary and strategic. 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 $60 million in 2009, including Golf Galaxy and Chick’s capital expenditure requirements.
DICK’S SPORTING GOODS, INC. 2008 ANNUAL REPORT
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