Dick's Sporting Goods 2010 Annual Report Download - page 36

limited to the lesser of 70% of our eligible inventory or 85% of our inventory’s liquidation value, in each case net of specified
reserves and less any letters of credit outstanding, and therefore opportunities for increased cash flows from reduced inventories
would be partially offset by reduced availability under our senior secured revolving credit facility.
In the event of our insolvency, liquidation, dissolution or reorganization, the lenders under our senior secured revolving credit
facility would be entitled to payment in full from our assets before distributions, if any, were made to our stockholders.
If we are unable to generate sufficient cash flows from operations in the future, and if availability under our current senior
secured revolving credit facility is not sufficient, we may have to obtain additional financing. We cannot assure you that we could
obtain refinancing or additional financing on favorable terms or at all. Recent distress in the worldwide financial markets may
result in continued diminished liquidity and credit availability. Furthermore, a downturn in the equity and debt markets and
tightening of credit markets could make it difficult to obtain additional financing or raise capital, and thus we cannot be certain
that additional funds will be available if needed or available on acceptable terms. Our liquidity or access to capital could also be
adversely affected by other unforeseen changes in the financial markets and global economy. Although our current senior secured
revolving credit facility does not expire until 2012, continued or future market distress could jeopardize the counterparty
obligations of one or more of the banks participating in our facility, which could have an adverse effect on our business if we are
not able to replace such credit facility or find other sources of liquidity on acceptable terms.
Intense competition in the sporting goods industry could limit our growth and reduce our profitability.
The market for sporting goods retailers is highly fragmented and intensely competitive. Our current and prospective competitors
include many large companies, some of which have substantially greater market presence, name recognition, and financial,
marketing and other resources than us. We compete directly or indirectly with the following categories of companies:
•large format sporting goods stores and chains;
•traditional sporting goods stores and chains;
•specialty stores;
•mass merchants;
•catalog and Internet-based retailers; and
•sporting goods brands that sell direct to consumers.
Pressure from our competitors could require us to reduce our prices or increase our spending for advertising and promotion.
Increased competition in markets in which we have stores or the adoption by competitors of innovative store formats, aggressive
pricing strategies and retail sale methods, such as the Internet, could cause us to lose market share and could have a material
adverse effect on our business, financial condition, results of operations and cash flows.
Lack of available retail store sites on terms acceptable to us, rising real estate prices and other costs and risks relating to new
store openings could severely limit our growth opportunities.
Our strategy includes opening stores in new and existing markets. We must successfully choose store sites, execute favorable
real estate transactions on terms that are acceptable to us, hire competent personnel and effectively open and operate these new
stores. Our plans to increase our number of retail stores will depend in part on the availability of existing retail stores or store
sites. A lack of available financing on terms acceptable to real estate developers or a tightening credit market may adversely
affect the retail sites available to us. We cannot assure you that stores or sites will be available to us, or that they will be
available on terms acceptable to us. If additional retail store sites are unavailable on acceptable terms, we may not be able to
carry out a significant part of our growth strategy. Rising real estate costs and acquisition, construction and development costs
could also inhibit our ability to grow. If we fail to locate desirable sites, obtain lease rights to these sites on terms acceptable to
us, hire adequate personnel and open and effectively operate these new stores, our financial performance could be adversely
affected.
In addition, our expansion in new and existing markets may present competitive, distribution, merchandising and regulatory
challenges that differ from our current challenges, including competition among our stores, diminished novelty of our store
design and concept, added strain on our distribution centers, additional information to be processed by our management
information systems and diversion of management attention from operations, such as the control of inventory levels in our stores.
New stores in new markets, where we are less familiar with the target customer and less well-known, may face different or
additional risks and increased costs compared to stores operated in existing markets or new stores in existing markets.
16 Dick’s Sporting Goods, Inc. ¬2010 Annual Report