ENGLEWOOD, Colo.–(BUSINESS WIRE)–March 17, 2004–The Sports Authority, Inc. (NYSE:TSA), today announced results for its fourth quarter and year ended January 31, 2004.
— Fourth quarter comparable store sales increased 0.2%
— Fourth quarter diluted EPS of $1.08, excluding merger integration costs, compares to the Company’s previous guidance of $1.04 to $1.06
— Fourth quarter diluted EPS of $0.55 per share, including merger integration costs
— Fiscal year 2004 EPS guidance increased to a range of $2.57 to $2.62 per diluted share, excluding merger integration costs, versus prior guidance of $2.55 to $2.60 per diluted share
On August 4, 2003, Gart Sports Company and The Sports Authority, Inc. (TSA) announced that they had completed a merger of equals. The results for the 13 weeks ended January 31, 2004, 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 52 weeks ended January 31, 2004, including comparable store sales, include the combined company since August 4, 2003, and stand-alone results for Gart Sports Company for the first six months. These results compare to the 2002 fiscal year when Gart Sports Company was a stand-alone company.
Fourth quarter net income of $14.6 million, or $0.55 per diluted share, includes the effect of after-tax, merger integration costs of $13.7 million, or $0.52 per diluted share. Excluding merger integration costs, fourth quarter net income was $28.3 million, or $1.08 per diluted share, compared with $1.03 per diluted share in the prior year’s quarter, as reported by the former Gart Sports Company on a stand-alone basis, and pro-forma combined net income for the prior year’s quarter of $0.77 per diluted share.
Total sales for the 13 weeks ended January 31, 2004 increased 125% to $712.0 million compared with $316.8 million in the prior year’s fourth quarter as reported by the former Gart Sports Company on a stand-alone basis. Fourth quarter comparable store sales for the combined company increased 0.2% from last year’s combined company results.
The Company opened six stores during the fourth quarter, for a total of 14 new store openings in 2003. The Company also closed five former TSA and two former Gart Sports stores during the quarter to arrive at a total number of stores in operation as of January 31, 2004 of 384 stores in 45 states.
Doug Morton, Vice Chairman and Chief Executive Officer of The Sports Authority stated, “We are pleased with our fourth quarter results given the on-going efforts to integrate the two companies. Our results were primarily driven by strong sales in hunting, ski apparel, snowboards and footwear. We are also very encouraged with the initial results realized from the introduction of an enhanced offering of winter product in the northeast.”
Net income for the 52 weeks ended January 31, 2004, including the effect of after-tax, merger integration costs of $26.7 million, or $1.37 per diluted share, and income related to non-recurring events and a related tax benefit of $1.9 million, or $0.10 per diluted share, totaled $16.4 million, or $0.84 per diluted share. Excluding these items, net income was $41.2 million, or $2.11 per diluted share, for the 52 weeks ended January 31, 2004 compared with $1.86 per 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 52 weeks ended January 31, 2004 increased 67% to $1,760.4 million compared with $1,051.2 million in the prior year’s 52 weeks as reported by the former Gart Sports Company on a stand-alone basis. Year-to-date comparable store sales decreased 0.7%, which represents a year-over-year comparison of the combined company results for the third and fourth quarters and the former Gart Sports Company on a stand-alone basis for the first six months.
The Company is forecasting sales in the first quarter of fcal 2004 to be in the range of $585 to $590 million and comparable store sales to increase approximately 2%. The Company expects to report net income of $8.7 to $9.0 million, and diluted EPS of $0.33 to $0.34, based on 26.4 million diluted shares outstanding in the quarter. All earnings estimates are exclusive of merger integration costs. The Company expects to open seven new stores during the quarter, which will be offset by a like number of closures related to the ongoing merger integration process.
For fiscal year 2004, the Company expects sales to be approximately $2.6 billion and comparable store sales to increase approximately 2%. The Company expects to report net income in the range of $68.4 to $69.7 million, and diluted EPS between $2.57 to $2.62, based on an estimated 26.6 million diluted shares outstanding. All earnings estimates are exclusive of merger integration costs. The Company expects to open 23 new stores during the year and expects to close 15 stores. The number of stores in operation at the end of fiscal 2004 is expected to be 392.
Mr. Morton concluded, “The merger integration process is progressing well and we continue to be optimistic with the level of synergies that will be realized from combining the two companies. We remain enthusiastic about the prospects for our new company as we move ahead with a stronger operating platform for growth.”
To supplement our condensed consolidated statements of income 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 tables following). These adjustments to our GAAP results are made with the intent of providing a more complete understanding of the underlying operational results. Also, we have disclosed pro forma combined results for the 13 weeks ended February 1, 2003, to provide an additional basis for comparison of our current fourth quarter results. These non-GAAP measures have been reconciled to the most comparable GAAP measure as required under SEC rules regarding the use of non-GAAP financial measures. 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 diluted earnings per share amounts include merger integration costs. While we estimate that we will incur additional merger integration costs ranging from $3.8 to $6.8 million, after tax, from now through the fiscal period ending October 30, 2004, we are unable to predict, with a high degree of certainty, the timing of these merger integration costs by fiscal quarter. Consequently, we are unable to provide a reconciliation of the forecasted pro forma diluted earnings per share amounts, for the periods described above, to the most comparable financial measure calculated in accordance with GAAP, diluted earnings per share including tax effected merger integration costs. The forecasted pro forma 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 January 31, 2004 The Sports Authority operated 384 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.==mmerce agreements. In addition, a joint venture with AEON Co., Ltd. operates “The Sports Authority” stores in Japan under a licensing agreement.==