ENGLEWOOD, Colo.–(BUSINESS WIRE)–Dec. 2, 2003–The Sports Authority, Inc. (NYSE:TSA), today announced results for its third quarter ended November 1, 2003 and updated fiscal year 2004 guidance.
— Third quarter comparable store sales increased 1.7%
— Diluted EPS of $0.17, excluding merger integration costs, compares to analyst consensus estimates of $0.14
— Loss of $0.31 per share, including merger integration costs
— Fiscal year 2004 EPS guidance increased to a range between $2.55 and $2.60 per fully diluted share, excluding merger integration costs
On August 4, 2003, Gart Sports Company and The Sports Authority, Inc. announced that they had completed a merger of equals. The results for the third quarter of 2003 represent the performance of the new, consolidated company, while the year ago results reflect Gart Sports Company on a stand-alone basis. The results for the nine months include the combined company for the third quarter and stand-alone results for Gart Sports Company for the first six months. This compares to the prior year when Garts Sports Company was a stand-alone company.
Third quarter net loss of $7.7 million, or $0.31 per share, includes the effect of after-tax, merger integration costs of $12.1 million, or $0.50 per share. Excluding merger integration costs, third quarter net income was $4.4 million, or $0.17 per fully diluted share, compared with $0.11 per fully diluted share in the prior year’s quarter, as reported by the former Gart Sports Company on a stand-alone basis.
Total sales for the 13 weeks ended November 1, 2003 increased 143% to $552.5 million compared with $227.8 million in the prior year’s third quarter as reported by the former Gart Sports Company on a stand-alone basis. Third quarter comparable store sales for the combined company increased 1.7% from last year’s combined company results.
Net income for the 39 weeks ended November 1, 2003, including the effect of after-tax, merger integration costs of $13.0 million, or $0.76 per fully diluted share, and income related to non-recurring events and a related tax benefit, of $1.9 million or $0.11 per fully diluted share, totaled $1.8 million, or $0.10 per fully diluted share. Excluding these items, year to date net income was $12.9 million or $0.75 per fully diluted share compared with $0.82 per fully diluted share in the prior year’s comparable period as reported by the former Gart Sports Company on a stand-alone basis.
Total sales for the 39 weeks ended November 1, 2003 increased 43% to $1,048.5 million compared with $734.4 million in the prior year’s 39 weeks as reported by the former Gart Sports Company on a stand-alone basis. Year to date comparable store sales decreased 1.3%, which represents a year-over-year comparison of the combined company results for the third quarter and the former Gart Sports Company on a stand-alone basis for the first six months.
Doug Morton, Vice Chairman and Chief Executive Officer of The Sports Authority stated, “We are pleased with our third quarter results as they reflect the progress we have made in integrating the operations of the two companies. Our sales results were driven by strong sales in active sportswear and outdoor categories, as well as continued improvement in team sports and exercise related hard goods. In addition, our store inventories continue to be well-managed as evidenced by levels that are approximately two-percent lower than the prior year’s combined levels, on a per square foot basis.”
Mr. Morton concluded, “We are pleased with the pace and the progress of our merger integration process and look forward to further leveraging the strengths of our recently combined companies. We remain encouraged about the prospects for our new company as we move ahead with a stronger operating platform for growth.”
The Company is forecasting sales in the fourth quarter to be approximately $720 million and earnings to be between $1.004 and $1.06 per fully diluted share based upon fully diluted shares of 26.3 million. For fiscal year 2003, the Company expects earnings to be between $2.06 and $2.08 per fully diluted share based upon fully diluted shares of 19.6 million. All earnings estimates are exclusive of merger integration costs.
The Company’s earnings per share guidance for fiscal year 2004 has been revised upwards to a range between $2.55 and $2.60 per fully diluted share. All earnings estimates are exclusive of merger integration costs. The Company is forecasting sales to be approximately $2.6 billion for fiscal year 2004.
To supplement our condensed consolidated statements of operations presented on a basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we have disclosed additional non-GAAP measures of net income and earnings per share adjusted to exclude merger integration costs and certain other non-recurring costs and income we believe appropriate to enhance an overall understanding of our financial performance (see income statement table following). These adjustments to our GAAP results are made with the intent of providing a more complete understanding of the underlying operational results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or diluted earnings per share prepared in accordance with GAAP.
As disclosed above in this release, none of the forecasted pro forma fully diluted earnings per share amounts include merger integration costs. While we estimate that we will incur additional merger integration costs ranging from $11.4 to $14.5 million, after tax, from now through the fiscal period ending July 31, 2004, we are unable to predict, with a high degree of certainty, the timing or magnitude of these merger integration costs by fiscal quarter or fiscal year. Consequently, we are unable to provide a reconciliation of the forecasted pro forma fully diluted earnings per share amounts, for the periods described above, to the most comparable financial measure calculated in accordance with GAAP, fully diluted earnings per share including tax effected merger integration costs. The forecasted pro forma fully diluted amounts were calculated without consideration of tax effected merger integration costs.
The Sports Authority, headquartered in Englewood, CO, is one of the nation’s largest full-line sporting goods retailers offering a comprehensive high-quality assortment of brand name sporting apparel and equipment at competitive prices. As of December 1, 2003 The Sports Authority operates 389 stores in 45 states under The Sports Authority(R), Gart Sports(R), Sportmart(R) and Oshman’s(R) names. The Company’s e-tailing websites, located at thesportsauthority.com, gartsports.com, sportmart.com and oshmans.com, are operated by GSI Commerce, Inc. under license and e-commerce agreements. In addition, a joint venture with AEON Co., Ltd. operates “The Sports Authority” stores in Japan under a licensing agreement.