TSA Sports Authority New

The Sports Authority, Inc. (NYSE:TSA), today announced results for its third fiscal quarter ended October 29, 2005. -- Diluted EPS of $0.13 vs. previous guidance of $0.09 and $0.01 for last year, excluding integration costs -- Comparable store sales increase of 1.2% -- Merchandise inventories reduced $52.3 million (-8.3% on a per square foot basis) vs. third quarter last year -- Long-term debt reduced $70.2 million vs. third quarter last year Net income for the third quarter was $3.5 million, or $0.13 per diluted share, compared with a net loss of $2.8 million, or $0.11 per diluted share, including merger integration costs, in the prior year's third quarter. Excluding the effect of after-tax merger integration costs of $2.9 million, or $0.11 per diluted share, net income for the prior year's third quarter was $0.2 million, or $0.01 per diluted share. Total sales for the third quarter were $560.0 million compared with $545.0 million in the prior year's third quarter, an increase of $15.0 million, or 2.8%. Third quarter comparable store sales for the Company increased 1.2%. Net income for the 39 weeks ended October 29, 2005 was $25.6 million, or $0.96 per diluted share, compared with net income of $8.2 million, or $0.31 per diluted share, including merger integration costs, in the prior year's comparable period. Excluding the effect of after-tax merger integration costs of $13.3 million, or $0.50 per diluted share, net income for the prior year's 39 weeks was $21.4 million, or $0.81 per diluted share. Total sales for the 39 weeks ended October 29, 2005 were $1.77 billion compared with $1.72 billion in the prior year's comparable period, an increase of $46.0 million, or 2.7%. Comparable store sales for the 39 weeks ended October 29, 2005 increased 1.0%. The Company opened five stores during the third quarter to arrive at a total number of stores in operation as of October 29, 2005 of 397 stores in 45 states. Doug Morton, Chief Executive Officer commented, "Our ability to exceed earnings expectations for the third quarter was driven by significant improvements in merchandise gross margins along with well controlled expenses. Our top-line benefited from strong sales of active apparel, fitness, golf, ski apparel, and team sports. We are also pleased with our progress in reducing merchandise inventories and long-term debt." Mr. Morton concluded, "We continue to focus on the initiatives we implemented during the year including: re-branding the store base in several major markets, implementing new merchandising and supply chain initiatives, enhancing our marketing and advertising, reducing one-time promotional events and continuing our remodel program. As we enter the important holiday season, we remain committed to successfully executing our business plan and driving increased shareholder value." Guidance for Fiscal Year 2005 For the fourth quarter of fiscal 2005, the Company is forecasting comparable store sales of 1% to 2% and total sales of $730.0 to $740.0 million. The Company is comfortable with the current analyst consensus estimate of $1.07 per diluted share. The Company expects to open two new stores, relocate one store, and close two stores during the quarter. For fiscal year 2005, the Company is forecasting comparable store sales to increase approximately 1% and diluted EPS of $2.03, based on an estimated 26.7 million diluted shares outstanding. The Company expects to open thirteen new stores, relocate four stores and close eight stores during the year. Non-GAAP Financial Measures 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 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. 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. 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 October 29, 2005, The Sports Authority operated 397 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. This announcement contains, in addition to historical information, certain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those currently anticipated as a result of a number of factors, including risks and uncertainties discussed in The Sports Authority's filings with the Securities and Exchange Commission. Those risks include, among other things,, rapidly changing accounting rules, regulations and interpretations, the competitive environment in the sporting goods industry in general and in the specific market areas of the Company, consumer confidence, changes in discretionary consumer spending, changes in costs of goods and services and economic conditions in general, and in the companies' specific market areas and unseasonable weather. The Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. -0- *T The Sports Authority, Inc. Condensed Consolidated Statements of Income (Dollars in thousands, except share and per share data) 13 Weeks Ended 39 Weeks Ended ------------------------- ------------------------- October 29, October 30, October 29, October 30, 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Net sales $ 559,977 $ 545,041 $ 1,768,242 $ 1,722,107 Cost of goods sold, buying, and occupancy 404,645 398,677 1,278,003 1,248,120 ------------ ------------ ------------ ------------ Gross profit 155,332 146,364 490,239 473,987 Gross profit % 27.7% 26.9% 27.7% 27.5% Operating expenses: Selling, general and administrative expenses 143,154 139,353 430,269 422,235 Selling, general and administrative expenses % 25.6% 25.6% 24.3% 24.5% Integration costs - 4,774 - 21,750 Store pre- opening expenses 1,344 1,562 2,522 3,243 ------------ ------------ ------------ ------------ Operating income 10,834 675 57,448 26,759 Non-operating income (expense): Interest (5,908) (5,522) (16,750) (14,648) Other income 798 341 1,664 1,284 ------------ ------------ ------------ ------------ Income (loss) before income taxes 5,724 (4,506) 42,362 13,395 Income tax (expense) benefit (2,261) 1,753 (16,733) (5,228) ------------ ------------ ------------ ------------ Net income (loss) $ 3,463 $ (2,753) $ 25,629 $ 8,167 ============ ============ ============ ============ Earnings (loss) per share: Basic $ 0.13 $ (0.11) $ 0.98 $ 0.32 ============ ============ ============ ============ Diluted $ 0.13 $ (0.11) $ 0.96 $ 0.31 ============ ============ ============ ============ Basic weighted average shares outstanding 26,309,199 25,821,965 26,078,375 25,639,714 ============ ============ ============ ============ Diluted weighted average shares outstanding 26,899,828 25,821,965 26,783,328 26,375,278 ============ ============ ============ ============ Reconciliation of GAAP measures to pro forma, non-GAAP measures: ---------------------------------------------------------------- Results of operations for the 13 and 39 weeks ended October 30, 2004 include merger integration costs. In order to present comparable results year over year, the following table provides a reconciliation of GAAP basis net income to pro forma net income excluding these costs, and including income tax expense at effective tax rates. Income (loss) before income taxes as reported $ (4,506) $ 13,395 Integration costs 4,774 21,750 ------------ ------------ Pro forma income before income taxes 268 35,145 Income tax expense at effective tax rates (105) (13,707) ------------ ------------ Pro forma net income $ 163 $ 21,438 ============ ============ Pro forma earnings per share: Basic $ 0.01 $ 0.84 ============ ============ Diluted $ 0.01 $ 0.81 ============ ============ Basic weighted average shares outstanding 25,821,965 25,639,714 ============ ============ Diluted weighted average shares outstanding 26,301,365 (1) 26,375,278 ============ ============ (1) Includes the dilutive effect of stock options and restricted stock, totaling 479,400 shares. The dilutive effect was not included to calculate the loss per share under GAAP, because to do so would be anti-dilutive. *T -0- *T The Sports Authority, Inc. Condensed Consolidated Balance Sheets (Dollars in thousands) October 29, January 29, October 30, 2005 2005 2004 ------------ ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 28,263 $ 24,838 $ 24,340 Merchandise inventories 803,506 728,853 855,826 Other current assets 135,014 128,969 162,225 ------------ ------------- ------------ Total current assets 966,783 882,660 1,042,391 Property and equipment, net 300,065 256,312 253,805 Other long-term assets 285,908 312,209 291,061 ------------ ------------- ------------ Total assets $ 1,552,756 $ 1,451,181 $ 1,587,257 ============ ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 337,926 $ 339,492 $ 385,990 Other current liabilities 175,627 187,650 176,353 ------------ ------------- ------------ Total current liabilities 513,553 527,142 562,343 Long-term debt 378,239 305,383 448,458 Other long-term liabilities 136,732 133,647 118,506 ------------ ------------- ------------ Total liabilities 1,028,524 966,172 1,129,307 ------------ ------------- ------------ Total stockholders' equity 524,232 485,009 457,950 ------------ ------------- ------------ Total liabilities and stockholders' equity $ 1,552,756 $ 1,451,181 $ 1,587,257 ============ ============= ============ *T