Dick's Sporting Goods 2008 Annual Report Download - page 41

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Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company’s net exposure to interest rate risk will consist primarily of borrowings under the Credit Agreement. The Company’s
Credit Agreement bears interest at rates that are benchmarked either to U.S. short-term fl oating rate interest rates or one-month
LIBOR rates, at the Company’s election. There were no borrowings outstanding under the Credit Agreement as of January 31, 2009
and February 2, 2008. 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 Credit Agreement would be approximately $0.8 million based upon fi scal 2008
average borrowings.
Credit Risk
In February 2004, the Company sold $172.5 million issue price of senior unsecured convertible notes due 2024. In conjunction with
the issuance of these Notes, we also entered into a fi ve-year convertible bond hedge and a fi ve-year separate warrant transaction
with one of the initial purchasers (“the counterparty”) and/or certain of its affi liates. Subject to the movement in our common stock
price, we were exposed to credit risk arising out of net settlement of the convertible bond hedge and separate warrant transaction
in our favor. The Company repaid substantially all of the Notes on February 18, 2009.
Impact of Infl ation
The Company does not believe that operating results have been materially affected by infl ation during the preceding three fi scal
years. There can be no assurance, however, that operating results will not be adversely affected by infl ation in the future.
Tax Matters
Presently, the Company does not believe that there are any tax matters that could materially affect the consolidated fi nancial statements.
Seasonality and Quarterly Results
The Company’s business is subject to seasonal fl uctuations. Signifi cant portions of the Company’s net sales and profi ts are realized
during the fourth quarter of the Company’s fi scal 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 fi scal 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, fi nancial condition
and operating results for the entire fi scal year.
DICK’S SPORTING GOODS, INC. 2008 ANNUAL REPORT 39