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Dick's Sporting Goods, Inc. – ‘10-Q’ for 11/2/19

On:  Tuesday, 11/26/19, at 5:17pm ET   ·   For:  11/2/19   ·   Accession #:  1089063-19-83   ·   File #:  1-31463

Previous ‘10-Q’:  ‘10-Q’ on 8/29/19 for 8/3/19   ·   Next:  ‘10-Q’ on 6/3/20 for 5/2/20   ·   Latest:  ‘10-Q’ on 11/22/23 for 10/28/23

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  As Of               Filer                 Filing    For·On·As Docs:Size

11/26/19  Dick’s Sporting Goods, Inc.       10-Q       11/02/19   48:4.2M

Quarterly Report   —   Form 10-Q   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    807K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     22K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     22K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     17K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML     17K 
45: R1          Cover Page                                          HTML     73K 
21: R2          Consolidated Statements of Income - Unaudited       HTML     70K 
16: R3          Consolidated Statements of Comprehensive Income -   HTML     31K 
                Unaudited                                                        
31: R4          Consolidated Balance Sheets - Unaudited             HTML    129K 
43: R5          Consolidated Statements of Changes in               HTML    123K 
                Stockholders' Equity - Unaudited                                 
19: R6          Consolidated Statements of Changes in               HTML     23K 
                Stockholders' Equity - Unaudited (Parenthetical)                 
14: R7          Consolidated Statements of Cash Flows - Unaudited   HTML    112K 
28: R8          Description of Business and Basis of Presentation   HTML     28K 
46: R9          Earnings Per Common Share                           HTML     50K 
41: R10         Fair Value Measurements                             HTML     30K 
30: R11         Revenue Recognition                                 HTML     46K 
15: R12         Leases                                              HTML     61K 
20: R13         Debt                                                HTML     23K 
44: R14         Sale of Subsidiaries                                HTML     20K 
32: R15         Subsequent Event                                    HTML     19K 
17: R16         Description of Business and Basis of Presentation   HTML     22K 
                (Policies)                                                       
22: R17         Earnings Per Common Share (Tables)                  HTML     49K 
47: R18         Fair Value Measurements (Tables)                    HTML     26K 
29: R19         Revenue Recognition (Tables)                        HTML     39K 
12: R20         Leases (Tables)                                     HTML     62K 
24: R21         Description of Business and Basis of Presentation   HTML     26K 
                - New Accounting Pronouncements or Change in                     
                Accounting Principle (Details)                                   
38: R22         Earnings Per Common Share (Details)                 HTML     43K 
33: R23         Fair Value Measurements (Details)                   HTML     21K 
13: R24         Revenue Recognition (Details)                       HTML     32K 
25: R25         Revenue Recognition - Disaggregation of Revenue     HTML     28K 
                (Details)                                                        
39: R26         Leases (Details)                                    HTML     25K 
34: R27         Leases - Components of lease cost (Details)         HTML     27K 
11: R28         Leases - Other information related to operating     HTML     25K 
                leases (Details)                                                 
26: R29         Leases - Future maturities of operating lease       HTML     40K 
                liabilities (Details)                                            
23: R30         Leases - Disclosures related to periods prior to    HTML     40K 
                adoption of Leases (Topic 842) (Details)                         
18: R31         Debt (Details)                                      HTML     44K 
27: R32         Sale of Subsidiaries (Details)                      HTML     26K 
40: R33         Subsequent Event (Details)                          HTML     22K 
37: XML         IDEA XML File -- Filing Summary                      XML     78K 
42: XML         XBRL Instance -- dks-20191102x10q_htm                XML    856K 
48: EXCEL       IDEA Workbook of Financial Reports                  XLSX     42K 
 7: EX-101.CAL  XBRL Calculations -- dks-20191102_cal                XML    158K 
 8: EX-101.DEF  XBRL Definitions -- dks-20191102_def                 XML    271K 
 9: EX-101.LAB  XBRL Labels -- dks-20191102_lab                      XML    833K 
10: EX-101.PRE  XBRL Presentations -- dks-20191102_pre               XML    459K 
 6: EX-101.SCH  XBRL Schema -- dks-20191102                          XSD     78K 
36: JSON        XBRL Instance as JSON Data -- MetaLinks              193±   283K 
35: ZIP         XBRL Zipped Folder -- 0001089063-19-000083-xbrl      Zip    168K 


‘10-Q’   —   Quarterly Report
Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I. Financial Information
"Item 1. Financial Statements
"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 3. Quantitative and Qualitative Disclosures About Market Risk
"Item 4. Controls and Procedures
"Part Ii. Other Information
"Item 1. Legal Proceedings
"Item 1A. Risk Factors
"Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
"Item 6. Exhibits
"Index to Exhibits
"Signatures

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM  i 10-Q
 i 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended  i November 2, 2019
 OR
 i 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    .
 
Commission File No.  i 001-31463
 
 i  DICK’S SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
 i Delaware
 
 i 16-1241537
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
 i 345 Court Street,  i Coraopolis,  i PA  i 15108
(Address of Principal Executive Offices)
 
( i 724)  i 273-3400
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of Each Exchange on which Registered
 i Common Stock, $0.01 par value
 
 i DKS
 
 i The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 i Yes þ No o
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 i Yes þ No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 i Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company  i  Emerging growth company  i 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  i  No
 
As of November 22, 2019, Dick’s Sporting Goods, Inc. had  i 63,595,852 shares of common stock, par value $0.01 per share, and  i 24,291,123 shares of Class B common stock, par value $0.01 per share, outstanding.



INDEX TO FORM 10-Q

2


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS 

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
 
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
 
 
 
 
Net sales
 
 
$
 i 1,962,204

 
$
 i 1,857,273

 
$
 i 6,142,093

 
$
 i 5,944,480

Cost of goods sold, including occupancy and distribution costs
 
 
 i 1,381,562

 
 i 1,333,719

 
 i 4,320,571

 
 i 4,201,277

 
 
 
 
 
 
 
 
 
 
GROSS PROFIT
 
 
 i 580,642

 
 i 523,554

 
 i 1,821,522

 
 i 1,743,203

 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 i 531,704

 
 i 468,691

 
 i 1,539,934

 
 i 1,434,344

Pre-opening expenses
 
 
 i 3,313

 
 i 1,997

 
 i 4,887

 
 i 6,135

 
 
 
 
 
 
 
 
 
 
INCOME FROM OPERATIONS
 
 
 i 45,625

 
 i 52,866

 
 i 276,701

 
 i 302,724

 
 
 
 
 
 
 
 
 
 
Gain on sale of subsidiaries
 
 
( i 33,779
)
 
 i 

 
( i 33,779
)
 
 i 

Interest expense
 
 
 i 4,278

 
 i 2,606

 
 i 12,909

 
 i 8,312

Other (income) expense
 
 
( i 2,020
)
 
 i 68

 
( i 10,340
)
 
( i 1,233
)
 
 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
 
 i 77,146

 
 i 50,192

 
 i 307,911

 
 i 295,645

 
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
 
 i 19,562

 
 i 12,365

 
 i 80,268

 
 i 78,336

 
 
 
 
 
 
 
 
 
 
NET INCOME
 
 
$
 i 57,584

 
$
 i 37,827

 
$
 i 227,643

 
$
 i 217,309

 
 
 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE:
 
 
 

 
 

 
 

 
 
Basic
 
 
$
 i 0.68

 
$
 i 0.39

 
$
 i 2.57

 
$
 i 2.20

Diluted
 
 
$
 i 0.66

 
$
 i 0.39

 
$
 i 2.53

 
$
 i 2.18

 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 

 
 

 
 

 
 

Basic
 
 
 i 85,048

 
 i 96,677

 
 i 88,671

 
 i 98,926

Diluted
 
 
 i 86,601

 
 i 97,890

 
 i 90,130

 
 i 99,878

 
 
 
 
 
 
 
 
 
 


See accompanying notes to unaudited consolidated financial statements.

3


DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
 
 
 
NET INCOME
 
$
 i 57,584

 
$
 i 37,827

 
$
 i 227,643

 
$
 i 217,309

OTHER COMPREHENSIVE INCOME (LOSS):
 
 

 
 

 
 
 
 
Foreign currency translation adjustment, net of tax
 
 i 6

 
 i 2

 
 i 4

 
( i 40
)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
 
 i 6

 
 i 2

 
 i 4

 
( i 40
)
COMPREHENSIVE INCOME
 
$
 i 57,590

 
$
 i 37,829

 
$
 i 227,647

 
$
 i 217,269

 
 
 
 
 
 
 
 
 
 

See accompanying notes to unaudited consolidated financial statements.



4


DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands) 
(Unaudited)
 
 
 
ASSETS
 

 
 

 
 
CURRENT ASSETS:
 

 
 

 
 
Cash and cash equivalents
$
 i 87,622

 
$
 i 113,653

 
$
 i 92,103

Accounts receivable, net
 i 70,463

 
 i 37,970

 
 i 57,559

Income taxes receivable
 i 17,122

 
 i 6,135

 
 i 10,422

Inventories, net
 i 2,573,250

 
 i 1,824,696

 
 i 2,196,777

Prepaid expenses and other current assets
 i 128,458

 
 i 139,944

 
 i 138,468

Total current assets
 i 2,876,915

 
 i 2,122,398

 
 i 2,495,329

 
 
 
 
 
 
Property and equipment, net
 i 1,436,975

 
 i 1,565,271

 
 i 1,578,313

Operating lease assets
 i 2,378,399

 
 i 

 
 i 

Intangible assets, net
 i 123,855

 
 i 130,166

 
 i 131,763

Goodwill
 i 245,857

 
 i 250,476

 
 i 250,476

Other assets:
 

 
 

 
 
Deferred income taxes
 i 16,033

 
 i 13,243

 
 i 11,886

Other
 i 128,965

 
 i 105,595

 
 i 115,991

Total other assets
 i 144,998

 
 i 118,838

 
 i 127,877

TOTAL ASSETS
$
 i 7,206,999

 
$
 i 4,187,149

 
$
 i 4,583,758

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 

 
 

 
 
CURRENT LIABILITIES:
 

 
 

 
 
Accounts payable
$
 i 1,097,564

 
$
 i 889,908

 
$
 i 1,028,234

Accrued expenses
 i 379,774

 
 i 364,342

 
 i 350,737

Operating lease liabilities
 i 417,912

 
 i 

 
 i 

Income taxes payable
 i 2,519

 
 i 20,142

 
 i 2,078

Deferred revenue and other liabilities
 i 183,876

 
 i 230,247

 
 i 173,032

Total current liabilities
 i 2,081,645

 
 i 1,504,639

 
 i 1,554,081

LONG-TERM LIABILITIES:
 

 
 

 
 
Revolving credit borrowings
 i 719,300

 
 i 

 
 i 382,300

Long-term operating lease liabilities
 i 2,509,866

 
 i 

 
 i 

Deferred income taxes
 i 8,530

 
 i 11,776

 
 i 14,951

Other long-term liabilities
 i 178,756

 
 i 766,573

 
 i 785,384

Total long-term liabilities
 i 3,416,452

 
 i 778,349

 
 i 1,182,635

COMMITMENTS AND CONTINGENCIES
 i 

 
 i 

 
 i 

STOCKHOLDERS' EQUITY:
 

 
 

 
 
Common stock
 i 597

 
 i 693

 
 i 703

Class B common stock
 i 243

 
 i 245

 
 i 245

Additional paid-in capital
 i 1,240,864

 
 i 1,214,287

 
 i 1,204,293

Retained earnings
 i 2,599,495

 
 i 2,455,192

 
 i 2,374,336

Accumulated other comprehensive loss
( i 116
)
 
( i 120
)
 
( i 118
)
Treasury stock, at cost
( i 2,132,181
)
 
( i 1,766,136
)
 
( i 1,732,417
)
Total stockholders' equity
 i 1,708,902

 
 i 1,904,161

 
 i 1,847,042

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
 i 7,206,999

 
$
 i 4,187,149

 
$
 i 4,583,758

 
 
 
 
 
 

See accompanying notes to unaudited consolidated financial statements.

5


DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
Class B
 
Additional
 
 
 
Other
 
 
 
 
 
Common Stock
 
Common Stock
 
Paid-In
 
Retained
 
Comprehensive
 
Treasury
 
 
 
Shares
 
Dollars
 
Shares
 
Dollars
 
Capital
 
Earnings
 
Loss
 
Stock
 
Total
 i 69,304,874

 
$
 i 693

 
 i 24,541,123

 
$
 i 245

 
$
 i 1,214,287

 
$
 i 2,455,192

 
$
( i 120
)
 
$
( i 1,766,136
)
 
$
 i 1,904,161

Adjustment for cumulative effect from change in accounting principle (ASU 2016-02)

 

 

 

 

 
( i 7,953
)
 

 

 
( i 7,953
)
Exchange of Class B common stock for common stock
 i 50,000

 
 i 

 
( i 50,000
)
 
 i 

 

 

 

 

 
 i 

Exercise of stock options
 i 6,388

 
 i 

 

 

 
 i 213

 

 

 

 
 i 213

Restricted stock vested
 i 520,095

 
 i 6

 

 

 
( i 6
)
 

 

 

 
 i 

Minimum tax withholding requirements
( i 158,021
)
 
( i 1
)
 

 

 
( i 5,858
)
 

 

 

 
( i 5,859
)
Net income

 

 

 

 

 
 i 57,525

 

 

 
 i 57,525

Stock-based compensation

 

 

 

 
 i 11,907

 

 

 

 
 i 11,907

Foreign currency translation adjustment, net of taxes of $6

 

 

 

 

 

 
( i 19
)
 

 
( i 19
)
Purchase of shares for treasury
( i 2,968,198
)
 
( i 30
)
 

 

 

 

 

 
( i 107,275
)
 
( i 107,305
)
Cash dividend declared, $0.275 per common share

 

 

 

 

 
( i 26,635
)
 

 

 
( i 26,635
)
BALANCE, May 4, 2019
 i 66,755,138

 
$
 i 668

 
 i 24,491,123

 
$
 i 245

 
$
 i 1,220,543

 
$
 i 2,478,129

 
$
( i 139
)
 
$
( i 1,873,411
)
 
$
 i 1,826,035

Exercise of stock options
 i 2,001

 
 i 

 

 

 
 i 60

 

 

 

 
 i 60

Restricted stock vested
 i 20,920

 
 i 

 

 

 
 i 

 

 

 

 
 i 

Minimum tax withholding requirements
( i 6,809
)
 
 i 

 

 

 
( i 453
)
 

 

 

 
( i 453
)
Net income

 

 

 

 

 
 i 112,534

 

 

 
 i 112,534

Stock-based compensation

 

 

 

 
 i 11,175

 

 

 

 
 i 11,175

Foreign currency translation adjustment, net of taxes of ($5)

 

 

 

 

 

 
 i 17

 

 
 i 17

Purchase of shares for treasury
( i 4,485,903
)
 
( i 45
)
 

 

 

 

 

 
( i 159,274
)
 
( i 159,319
)
Cash dividend declared, $0.275 per common share

 

 

 

 

 
( i 24,963
)
 

 

 
( i 24,963
)
 i 62,285,347

 
$
 i 623

 
 i 24,491,123

 
$
 i 245

 
$
 i 1,231,325

 
$
 i 2,565,700

 
$
( i 122
)
 
$
( i 2,032,685
)
 
$
 i 1,765,086

Exchange of Class B common stock for common stock
 i 200,000

 
 i 2

 
( i 200,000
)
 
( i 2
)
 

 

 

 

 
 i 

Exercise of stock options
 i 28,875

 
 i 

 

 

 
 i 887

 

 

 

 
 i 887

Restricted stock vested
 i 1,055

 
 i 

 

 

 
 i 

 

 

 

 
 i 

Minimum tax withholding requirements
( i 232
)
 
 i 

 

 

 
( i 8
)
 

 

 

 
( i 8
)
Net income

 

 

 

 

 
 i 57,584

 

 

 
 i 57,584

Stock-based compensation

 

 

 

 
 i 8,660

 

 

 

 
 i 8,660

Foreign currency translation adjustment, net of taxes of ($2)

 

 

 

 

 

 
 i 6

 

 
 i 6

Purchase of shares for treasury
( i 2,838,191
)
 
( i 28
)
 

 

 

 

 

 
( i 99,496
)
 
( i 99,524
)
Cash dividend declared, $0.275 per common share

 

 

 

 

 
( i 23,789
)
 

 

 
( i 23,789
)
 i 59,676,854

 
$
 i 597

 
 i 24,291,123

 
$
 i 243

 
$
 i 1,240,864

 
$
 i 2,599,495

 
$
( i 116
)
 
$
( i 2,132,181
)
 
$
 i 1,708,902

 
See accompanying notes to unaudited consolidated financial statements.




6



DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)
(Amounts in thousands, except share data)
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
Class B
 
Additional
 
 
 
Other
 
 
 
 
 
Common Stock
 
Common Stock
 
Paid-In
 
Retained
 
Comprehensive
 
Treasury
 
 
 
Shares
 
Dollars
 
Shares
 
Dollars
 
Capital
 
Earnings
 
Loss
 
Stock
 
Total
 i 78,317,898

 
$
 i 783

 
 i 24,710,870

 
$
 i 247

 
$
 i 1,177,778

 
$
 i 2,205,651

 
$
( i 78
)
 
$
( i 1,442,880
)
 
$
 i 1,941,501

Adjustment for cumulative effect from change in accounting principle (ASU 2014-09)

 

 

 

 

 
 i 20,488

 

 

 
 i 20,488

Exchange of Class B common stock for common stock
 i 119,912

 
 i 1

 
( i 119,912
)
 
( i 1
)
 

 

 

 

 
 i 

Restricted stock vested
 i 399,604

 
 i 4

 

 

 
( i 4
)
 

 

 

 
 i 

Minimum tax withholding requirements
( i 118,707
)
 
( i 1
)
 

 

 
( i 3,918
)
 

 

 

 
( i 3,919
)
Net income

 

 

 

 

 
 i 60,085

 

 

 
 i 60,085

Stock-based compensation

 

 

 

 
 i 11,666

 

 

 

 
 i 11,666

Foreign currency translation adjustment, net of taxes of $7

 

 

 

 

 

 
( i 22
)
 

 
( i 22
)
Purchase of shares for treasury
( i 3,338,000
)
 
( i 33
)
 

 

 

 

 

 
( i 107,884
)
 
( i 107,917
)
Cash dividend declared, $0.225 per common share

 

 

 

 

 
( i 23,672
)
 

 

 
( i 23,672
)
BALANCE, May 5, 2018
 i 75,380,707

 
$
 i 754

 
 i 24,590,958

 
$
 i 246

 
$
 i 1,185,522

 
$
 i 2,262,552

 
$
( i 100
)
 
$
( i 1,550,764
)
 
$
 i 1,898,210

Exchange of Class B common stock for common stock
 i 49,835

 
 i 1

 
( i 49,835
)
 
( i 1
)
 

 

 

 

 
 i 

Restricted stock vested
 i 8,398

 
 i 

 

 

 
 i 

 

 

 

 
 i 

Minimum tax withholding requirements
( i 2,437
)
 
 i 

 

 

 
( i 87
)
 

 

 

 
( i 87
)
Net income

 

 

 

 

 
 i 119,397

 

 

 
 i 119,397

Stock-based compensation

 

 

 

 
 i 10,440

 

 

 

 
 i 10,440

Foreign currency translation adjustment, net of taxes of $6

 

 

 

 

 

 
( i 20
)
 

 
( i 20
)
Purchase of shares for treasury
( i 2,218,200
)
 
( i 23
)
 

 

 

 

 

 
( i 73,766
)
 
( i 73,789
)
Cash dividend declared, $0.225 per common share

 

 

 

 

 
( i 22,925
)
 

 

 
( i 22,925
)
 i 73,218,303

 
$
 i 732

 
 i 24,541,123

 
$
 i 245

 
$
 i 1,195,875

 
$
 i 2,359,024

 
$
( i 120
)
 
$
( i 1,624,530
)
 
$
 i 1,931,226

Restricted stock vested
 i 124,249

 
 i 1

 

 

 
( i 1
)
 

 

 

 
 i 

Minimum tax withholding requirements
( i 34,574
)
 
 i 

 

 

 
( i 1,258
)
 

 

 

 
( i 1,258
)
Net income

 

 

 

 

 
 i 37,827

 

 

 
 i 37,827

Stock-based compensation

 

 

 

 
 i 9,677

 

 

 

 
 i 9,677

Foreign currency translation adjustment, net of taxes of $0

 

 

 

 

 

 
 i 2

 

 
 i 2

Purchase of shares for treasury
( i 3,058,171
)
 
( i 30
)
 

 

 

 

 

 
( i 107,887
)
 
( i 107,917
)
Cash dividend declared, $0.225 per common share

 

 

 

 

 
( i 22,515
)
 

 

 
( i 22,515
)
 i 70,249,807

 
$
 i 703

 
 i 24,541,123

 
$
 i 245

 
$
 i 1,204,293

 
$
 i 2,374,336

 
$
( i 118
)
 
$
( i 1,732,417
)
 
$
 i 1,847,042


See accompanying notes to unaudited consolidated financial statements.

7


DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
39 Weeks Ended
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income
$
 i 227,643

 
$
 i 217,309

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 

 
 

Depreciation, amortization, and other
 i 201,152

 
 i 179,437

Deferred income taxes
( i 3,438
)
 
( i 726
)
Stock-based compensation
 i 31,742

 
 i 31,783

Gain on sale of subsidiaries
( i 33,779
)
 
 i 

Changes in assets and liabilities:
 

 
 

Accounts receivable
( i 22,636
)
 
( i 7,218
)
Inventories
( i 758,016
)
 
( i 466,212
)
Prepaid expenses and other assets
 i 3,822

 
 i 7,950

Accounts payable
 i 168,259

 
 i 234,859

Accrued expenses
 i 11,424

 
 i 11,152

Income taxes payable / receivable
( i 28,610
)
 
( i 14,387
)
Deferred construction allowances
 i 25,598

 
 i 23,440

Deferred revenue and other liabilities
( i 35,936
)
 
( i 56,859
)
Net cash (used in) provided by operating activities
( i 212,775
)
 
 i 160,528

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Capital expenditures
( i 165,703
)
 
( i 135,288
)
Proceeds from sale of subsidiaries, net of cash sold
 i 40,387

 
 i 

Proceeds from sale of other assets
 i 4,103

 
 i 

Deposits and purchases of other assets
( i 1,000
)
 
 i 

Net cash used in investing activities
( i 122,213
)
 
( i 135,288
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Revolving credit borrowings
 i 1,778,750

 
 i 1,723,500

Revolving credit repayments
( i 1,059,450
)
 
( i 1,341,200
)
Payments on other long-term debt and finance lease obligations
( i 3,965
)
 
( i 3,924
)
Construction allowance receipts
 i 

 
 i 

Proceeds from exercise of stock options
 i 1,160

 
 i 

Minimum tax withholding requirements
( i 6,320
)
 
( i 5,264
)
Cash paid for treasury stock
( i 366,148
)
 
( i 289,623
)
Cash dividends paid to stockholders
( i 74,540
)
 
( i 68,139
)
Increase (decrease) in bank overdraft
 i 39,466

 
( i 49,700
)
Net cash provided by (used in) financing activities
 i 308,953

 
( i 34,350
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 i 4

 
( i 40
)
NET DECREASE IN CASH AND CASH EQUIVALENTS
( i 26,031
)
 
( i 9,150
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
 i 113,653

 
 i 101,253

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
 i 87,622

 
$
 i 92,103

 
 
 
 
Supplemental disclosure of cash flow information:
 

 
 

Accrued property and equipment
$
 i 22,905

 
$
 i 14,308

Cash paid for interest
$
 i 12,427

 
$
 i 7,185

Cash paid for income taxes
$
 i 112,458

 
$
 i 97,407

 

See accompanying notes to unaudited consolidated financial statements.

8


DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.   i Description of Business and Basis of Presentation
Dick’s Sporting Goods, Inc. (together with its subsidiaries, referred to as the Company, “we”, “us” and “our” unless specified otherwise) is a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories through our dedicated associates, in-store services and unique specialty shop-in-shops. The Company also owns and operates Golf Galaxy and Field & Stream stores, as well as GameChanger, a youth sports mobile app for scheduling, communications and live scorekeeping. The Company offers its products through a content-rich eCommerce platform that is integrated with its store network and provides customers with the convenience and expertise of a 24-hour storefront. When used in this Quarterly Report on Form 10-Q, unless the context otherwise requires or otherwise specifies, any reference to “year” is to the Company’s fiscal year.
Basis of Presentation and Use of Estimates
The accompanying unaudited consolidated financial statements have been prepared in accordance with the requirements for Quarterly Reports on Form 10-Q and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim consolidated financial statements are unaudited and have been prepared on the same basis as the annual audited consolidated financial statements. In the opinion of management, such unaudited consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the interim financial information. 
The unaudited interim financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended February 2, 2019 as filed with the Securities and Exchange Commission on March 29, 2019. Operating results for the 13 and 39 weeks ended November 2, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending February 1, 2020 or any other period.
Reclassifications
Certain reclassifications have been made to prior year amounts within the unaudited Consolidated Balance Sheets and Statements of Cash Flows to conform to the current year presentation.
 i 
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which required an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about an entity’s leasing arrangements. ASU 2016-02 was effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and ASU 2018-11, Leases (Topic 842), Targeted Improvements, which affected certain aspects of the previously issued guidance. Amendments included an additional transition option that allowed entities to apply the new standard on the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings, as well as a new practical expedient for lessors. The effective date and transition requirements for ASU 2018-10 and ASU 2018-11 are the same as ASU 2016-02.
On February 3, 2019, the Company adopted ASU 2016-02 and all related amendments using the optional transition method and elected the package of practical expedients permitted under the transition guidance within the new standard. Such election allowed the Company to not reassess whether any expired or existing contracts are or contain leases, not to reassess the lease classification for any expired or existing leases, and not to reassess initial direct costs for any existing leases. The Company also elected the practical expedient related to land easements. The Company did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date.
The Company has lease agreements with non-lease components that relate to the lease components and elected the practical expedient to account for non-lease components, and the lease components to which they relate, as a single lease component for all classes of underlying assets. The Company also elected to keep short-term leases with an initial term of 12 months or less off the Consolidated Balance Sheet.
Adoption of these standards did not materially affect our consolidated net income or cash flows, but resulted in recognition of lease assets of $ i 2.5 billion and lease liabilities of $ i 3.1 billion as of February 3, 2019. In connection with the adoption, pre-existing liabilities for deferred rent and various lease incentives were reclassified as a component of the lease assets. Accordingly, the Company recorded an $ i 8.0 million adjustment to opening retained earnings, primarily resulting from the impairment of lease assets recognized at adoption. Refer to Note 5 to the unaudited Consolidated Financial Statements for additional information.
 / 

9

 
 
 
 
 
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



2.   i Earnings Per Common Share
Basic earnings per common share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed based on the weighted average number of shares of common stock outstanding, plus the effect of dilutive potential common shares outstanding during the period, using the treasury stock method. Dilutive potential common shares are stock-based awards, which include outstanding stock options, restricted stock and warrants.
 i 
The computations for basic and diluted earnings per common share were as follows for the periods presented (in thousands, except per share data): 
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
 
 
 
Net income
 
$
 i 57,584

 
$
 i 37,827

 
$
 i 227,643

 
$
 i 217,309

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
 i 85,048

 
 i 96,677

 
 i 88,671

 
 i 98,926

Dilutive effect of stock-based awards
 
 i 1,553

 
 i 1,213

 
 i 1,459

 
 i 952

Weighted average common shares outstanding - diluted
 
 i 86,601

 
 i 97,890

 
 i 90,130

 
 i 99,878

 
 
 
 
 
 
 
 
 
Earnings per common share - basic
 
$
 i 0.68

 
$
 i 0.39

 
$
 i 2.57

 
$
 i 2.20

Earnings per common share - diluted
 
$
 i 0.66

 
$
 i 0.39

 
$
 i 2.53

 
$
 i 2.18

 
 
 
 
 
 
 
 
 
Anti-dilutive stock-based awards excluded from diluted calculation
 
 i 3,234

 
 i 3,065

 
 i 3,208

 
 i 3,672


 / 

3.   i Fair Value Measurements
Accounting Standard Codification (“ASC”) 820, Fair Value Measurement and Disclosures, outlines a valuation framework and creates a fair value hierarchy for assets and liabilities as follows:
Level 1:
Observable inputs such as quoted prices in active markets;
Level 2:
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:    Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
 i 
Assets measured at fair value on a recurring basis are set forth in the table below (in thousands):
 
Level 1
 
 
Assets:
 
 
 
Deferred compensation plan assets held in trust (1)
$
 i 95,799

 
$
 i 77,324

Total assets
$
 i 95,799

 
$
 i 77,324

 
 
 
 

 / 
(1) Consists of investments in various mutual funds made by eligible individuals as part of the Company’s deferred compensation plans.
The fair value of cash and cash equivalents, accounts receivable, accounts payable, revolving credit borrowings and certain other liabilities approximated book value due to the short-term nature of these instruments at both November 2, 2019 and February 2, 2019.
The Company uses quoted prices in active markets to determine the fair value of the aforementioned assets determined to be Level 1 instruments. The Company’s policy for recognition of transfers between levels of the fair value hierarchy is to recognize any transfer at the end of the fiscal quarter in which the determination to transfer was made.

10

 
 
 
 
 
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



4.  i Revenue Recognition
Revenue is recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer and is measured as the amount of consideration to which the Company expects to be entitled in exchange for corresponding goods or services. Substantially all of the Company’s sales are single performance obligation arrangements for retail sale transactions for which the transaction price is equivalent to the stated price of the product or service, net of any stated discounts applicable at a point in time. Each sales transaction results in an implicit contract with the customer to deliver a product or service at the point of sale. Revenue from retail sales is recognized at the point of sale, net of sales tax. Sales tax amounts collected from customers that are assessed by a governmental authority are excluded from revenue. Revenue from eCommerce sales, including vendor-direct sales arrangements, is recognized upon shipment of merchandise. The Company has elected to treat shipping and handling activities occurring subsequent to the transfer of control to the customer to be accounted for as fulfillment costs. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.
Deferred gift card revenue
Revenue from gift cards and returned merchandise credits (collectively the “cards”) is deferred and recognized upon the redemption of the cards. The Company’s gift card liability was $ i 121.9 million and $ i 156.5 million as of November 2, 2019 and February 2, 2019, respectively. During the 39 weeks ended November 2, 2019 and November 3, 2018, the Company recognized $ i 6.5 million and $ i 5.1 million of gift card breakage revenue, respectively, and experienced approximately $ i 72.4 million and $ i 72.7 million of gift card redemptions that were included in its gift card liability as of February 2, 2019 and February 3, 2018, respectively. Based on the Company’s historical experience, the vast majority of gift card revenue is recognized within 12 months of deferral.
Customer loyalty program
Loyalty program points are accrued at the estimated retail value per point, net of estimated breakage. The Company estimates the breakage of loyalty points based on historical redemption rates experienced within the loyalty program, for which the estimated liability was $ i 27.9 million and $ i 32.4 million, as of November 2, 2019 and February 2, 2019, respectively. During the 39 weeks ended November 2, 2019 and November 3, 2018, the Company recognized approximately $ i 23.3 million and $ i 26.2 million, respectively, of revenue that was included in the customer loyalty program liability as of February 2, 2019 and February 3, 2018, respectively. Based on the Company’s customer loyalty program policies, the vast majority of program points earned are redeemed or expire within 12 months.
Net Sales by Category
 i 
The following table disaggregates the amount of net sales attributable to hardlines, apparel and footwear for the periods presented (in thousands):
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
 
 
 
Hardlines (1)
 
$
 i 800,489

 
$
 i 771,109

 
$
 i 2,763,156

 
$
 i 2,742,243

Apparel
 
 i 684,072

 
 i 643,301

 
 i 1,940,237

 
 i 1,835,844

Footwear
 
 i 448,616

 
 i 412,758

 
 i 1,329,782

 
 i 1,266,854

Other (2)
 
 i 29,027

 
 i 30,105

 
 i 108,918

 
 i 99,539

Total net sales
 
$
 i 1,962,204

 
$
 i 1,857,273

 
$
 i 6,142,093

 
$
 i 5,944,480


(1) 
Includes items such as sporting goods equipment, fitness equipment, golf equipment and hunting and fishing gear.
 / 
(2) 
Includes the Company’s non-merchandise sales categories, including in-store services, shipping revenues and credit card processing revenues.


11

 
 
 
 
 
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



5.  i Leases
The Company leases all of its stores,  i three of its distribution centers and certain equipment under non-cancellable operating leases that expire at various dates through 2033. The Company’s stores generally have initial lease terms of  i 10 to  i 15 years and contain multiple five-year renewal options and rent escalation provisions. The lease agreements provide primarily for the payment of minimum annual rentals, costs of utilities, property taxes, maintenance, common areas and insurance.
The Company determines whether a contract is or contains a lease at contract inception. Beginning in fiscal 2019, operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of remaining fixed lease payments over the lease term. As the rate implicit in the lease is not readily determinable in most of the Company’s leases, the Company uses its incremental borrowing rate based on the information available at a lease’s commencement date to determine the present value of lease payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The operating lease asset also includes any fixed lease payments made and includes lease incentives and incurred initial direct costs.
Operating lease expense for fixed lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred and may include certain index-based changes in rent and other non-fixed payments for services provided by the lessor. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company’s leases do not contain any material residual guarantees or material restrictive covenants.
 i 
The components of lease cost for the 13 and 39 weeks ended November 2, 2019 were as follows (in thousands):
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
 
Operating lease cost
 
$
 i 147,847

 
$
 i 443,117

Short-term lease cost
 
 i 2,121

 
 i 5,125

Variable lease cost
 
 i 30,168

 
 i 89,599

Sublease income
 
( i 1,180
)
 
( i 2,809
)
Total lease cost
 
$
 i 178,956

 
$
 i 535,032


 / 
 i 
Supplemental cash flow information related to operating leases for the 39 weeks ended November 2, 2019 were as follows (in thousands):
Cash paid for amounts included in the measurement of operating lease liabilities
 
$
 i 491,487

Non-cash operating lease assets and liabilities obtained in exchange for new or modified leases

 
$
 i 174,190


Supplemental balance sheet information related to operating leases as of November 2, 2019 were as follows:          
Weighted average remaining lease term for operating leases
 
 i 6.78 years

Weighted average discount rate for operating leases
 
 i 6.68
%

 / 

12

 
 
 
 
 
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



 i 

Future maturities of operating lease liabilities as of November 2, 2019 were as follows (in thousands):
Fiscal Year
 
 
Remainder of fiscal 2019
 
$
 i 164,583

2020
 
 i 651,035

2021
 
 i 616,415

2022
 
 i 557,709

2023
 
 i 477,952

2024
 
 i 381,572

Thereafter
 
 i 797,059

Total future undiscounted lease payments
 
 i 3,646,325

Less imputed interest
 
( i 718,547
)
      Total reported lease liability
 
$
 i 2,927,778

 
 
 

 / 

As of November 2, 2019, the Company has entered into operating leases of approximately $ i 148.8 million that have not yet commenced, primarily related to future store locations.
Total future minimum rentals under non-cancellable subleases at November 2, 2019 were $ i 58.9 million.
Disclosures related to periods prior to adoption of Leases (Topic 842)
 i 
Future minimum payments determined under the previous accounting standards for operating lease obligations, including committed leases that had not yet commenced, were as follows as of February 2, 2019 (in thousands):
Fiscal Year
 
 
2019
 
$
 i 655,516

2020
 
 i 619,189

2021
 
 i 558,633

2022
 
 i 475,830

2023
 
 i 392,826

Thereafter
 
 i 1,033,034

Total
 
$
 i 3,735,028

 
 
 

 / 

Rent expense under these operating leases totaled $ i 133.5 million and $ i 398.1 million for the 13 and 39 weeks ended November 3, 2018, respectively.

6.  i Debt
On June 28, 2019, the Company amended its existing $ i 1.25 billion senior secured revolving credit facility to extend the maturity date to June 28, 2024 and increase the borrowing capacity to $ i 1.6 billion, including providing for up to $ i 150.0 million in the form of letters of credit (the “Credit Facility”). The Credit Facility allows the Company, upon the satisfaction of certain conditions, to request an increase of up to $ i 500.0 million in borrowing availability, subject to existing or new lenders agreeing to provide such additional revolving commitments. The Credit Facility is secured by a first priority security interest in certain property and assets, including receivables, inventory, deposit accounts, securities accounts and other personal property of the Company and is guaranteed by the Company’s domestic subsidiaries.
The annual interest rates applicable to loans under the Credit Facility are, at the Company’s option, equal to a base rate or an adjusted LIBOR rate plus, in each case, an applicable margin percentage. The applicable margin percentage for base rate loans is  i 0.125% to  i 0.375% and for adjusted LIBOR rate loans is  i 1.125% to  i 1.375%, depending on the Company’s borrowing availability. As of November 2, 2019 and February 2, 2019, total remaining borrowing capacity, after subtracting letters of credit, was $ i 864.6 million and $ i 1,233.9 million, respectively.

13

 
 
 
 
 
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



The Credit Facility contains a covenant that requires the Company to maintain a minimum adjusted availability of  i 7.5% of its borrowing base. The Credit Facility also contains certain covenants that could, within specific predefined circumstances, limit the Company’s ability to, among other things: incur or guarantee additional indebtedness; pay distributions on, redeem or repurchase capital stock; redeem or repurchase subordinated debt; make certain investments; sell assets; or consolidate, merge or transfer all or substantially all of the Company’s assets. Other than in certain limited conditions, the Company is permitted under the Credit Facility to continue to pay dividends and repurchase shares pursuant to its stock repurchase program.

7.  i Sale of Subsidiaries
On August 22, 2019, the Company sold  i two of its technology subsidiaries, Blue Sombrero and Affinity Sports, to Stack Sports for $ i 45.0 million, or proceeds of $ i 40.4 million, net of cash sold. In connection with the sale, the Company entered into a long-term strategic partnership agreement pursuant to which it will serve as the official retailer of Stack Sports. Stack Sports has no affiliation with Edward W. Stack, the Company's Chairman and Chief Executive Officer. The sale resulted in a pre-tax gain of $ i 33.8 million, which is included in gain on sale of subsidiaries in the unaudited Consolidated Statements of Income.

8.   i Subsequent Event
On November 21, 2019, the Company’s Board of Directors authorized and declared a quarterly cash dividend in the amount of $ i 0.275 per share on the Company’s common stock and Class B common stock payable on December 31, 2019 to stockholders of record as of the close of business on December 13, 2019.

14



ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
FORWARD-LOOKING STATEMENTS
We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by our management involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Investors should not place undue reliance on forward-looking statements as a prediction of actual results. These statements can be identified as those that may predict, forecast, indicate or imply future results, performance or advancements and by forward-looking words such as “believe”, “anticipate”, “expect”, “estimate”, “predict”, “intend”, “plan”, “project”, “goal”, “will”, “will be”, “will continue”, “will result”, “could”, “may”, “might” or any variations of such words or other words with similar meanings. Forward-looking statements address, among other things, current expectations; planned strategic investments and growth strategies, including the continued enhancement of our digital capabilities and eCommerce platform, investments in our eCommerce fulfillment network and corporate information technology capabilities, improvements in the customer experience in both stores and online, and inventory investments in key growth categories; projections of our future profitability and results of operations; plans to open new stores and remodel existing stores; investments in our teammates and their productivity; eliminating non-essential expenses to fund our future strategic investments; the hunt industry remaining under significant pressure; the effect of changes in corporate income tax laws and tariffs; capital expenditures; the impact of the sale of Blue Sombrero and Affinity Sports; plans to return capital to stockholders through dividends or share repurchases; and borrowings under our credit facility.
The following factors, among others, in some cases have affected and in the future could affect our financial performance and actual results, and could cause actual results for fiscal 2019 and beyond to differ materially from those expressed or implied in any forward-looking statements included in this Quarterly Report on Form 10-Q or otherwise made by our management:
The dependence of our business on consumer discretionary spending;
Intense competition in the sporting goods industry and in retail, including the level of competitive promotional activity;
Disruptions to our eCommerce platform, including interruptions, delays or downtime caused by high volumes of users or transactions; deficiencies in design or implementation; or platform enhancements;
Vendors continuing to sell or increasingly selling their products directly to customers or through broadened or alternative distribution channels;
Negative reactions from our customers or vendors regarding changes to our policies related to the sale of firearms and accessories;
The results of the strategic review of our hunt business, including Field & Stream;
That our strategic plans and initiatives may initially result in a negative impact on our financial results, or that such plans and initiatives may not achieve the desired results within the anticipated time frame or at all;
Our ability to manage the impact of new tariffs or increased rates on existing tariffs;
Our vendor relationships, disruptions in our or our vendors’ supply chains, and increasing product costs, which could be caused by foreign trade issues, currency exchange rate fluctuations, increasing prices for raw materials, foreign political instability or other reasons;
Our ability to predict or effectively react to changes in consumer demand or shopping patterns;
Lack of available retail store sites on terms acceptable to us, our ability to leverage the flexibility within our existing real estate portfolio to capitalize on future real estate opportunities over the near and intermediate term as our leases come up for renewal, and other costs and risks relating to a brick and mortar retail store model;
Unauthorized disclosure of sensitive or confidential customer information;
Risks associated with our private brand offerings, including product liability and product recalls, specialty concept stores, and GameChanger;
Disruptions or other problems with our information systems;
Our ability to access adequate capital to operate and expand our business and to respond to changing business and economic conditions;
Risks and costs relating to changing laws and regulations affecting our business, including consumer products, firearms and ammunition, tax, foreign trade, labor, data protection and privacy;

15



Litigation risks for which we may not have sufficient insurance or other coverage;
Our ability to secure and protect our trademarks and other intellectual property and defend claims of intellectual property infringement;
Our ability to protect the reputation of our Company and our brands;
Our ability to attract, train, engage and retain qualified leaders and associates or the loss of Mr. Edward Stack as our Chairman and Chief Executive Officer;
Wage increases, which could adversely affect our financial results;
Disruption at our supply chain facilities or customer support center;
Poor performance of professional sports teams, professional team lockouts or strikes, or retirement, serious injury or scandal involving key athletes;
Weather-related disruptions and the seasonality of our business, as well as the current geographic concentration of Dick’s Sporting Goods stores;
Our pursuit of strategic investments or acquisitions, including the timing and costs of such investments and acquisitions; the integration of acquired businesses or companies being more difficult, time-consuming, or costly than expected; or the investments or acquisitions failing to produce the anticipated benefits within the expected time frame or at all;
We are controlled by our Chairman and Chief Executive Officer and his relatives, whose interests may differ from those of our other stockholders;
Our current anti-takeover provisions, which could prevent or delay a change in control of the Company; and
The issuance of quarterly cash dividends, and our repurchase activity, if any, pursuant to our share repurchase program.
The foregoing and additional risk factors are described in more detail in Item 1A. “Risk Factors” of this Quarterly Report and other reports or filings filed or furnished by us with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended February 2, 2019, filed on March 29, 2019. In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof. We do not assume any obligation and do not intend to update or revise any forward-looking statements whether as a result of new information, future developments or otherwise except as may be required by securities laws.

OVERVIEW
We are a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories through our dedicated associates, in-store services and unique specialty shop-in-shops. We also own and operate Golf Galaxy and Field & Stream stores, as well as GameChanger, a youth sports mobile app for scheduling, communications and live scorekeeping. We offer products through a content-rich eCommerce platform that is integrated with our store network and provides customers with the convenience and expertise of a 24-hour storefront. When used in this Quarterly Report on Form 10-Q, unless the context otherwise requires or specifies, any reference to “year” is to our fiscal year.
Our profitability is primarily influenced by the number of our store locations and selling square footage, the continued integration of eCommerce with brick and mortar stores, the growth in consolidated same store sales, which includes our eCommerce business, and the strength of our gross profit margins. We have grown from 597 Dick’s Sporting Goods stores as of November 1, 2014 to 733 Dick’s Sporting Goods stores as of November 2, 2019. Recently, we have reduced the rate at which we have opened new stores, and we intend to continue this strategy over the next few years in an effort to leverage the significant flexibility within our existing real estate portfolio to capitalize on future real estate opportunities over the near and intermediate terms as those leases come up for renewal.
In recent years, we have transitioned to an insourced eCommerce platform, allowing for continued innovation of our eCommerce websites and applications with customer experience enhancements, new releases of our mobile and tablet apps, and the development of omni-channel capabilities that integrate our online presence with our brick and mortar stores, including ship-from-store; buy-online, pick-up in-store; return-to-store and multi-channel marketing campaigns. Our eCommerce sales penetration to total net sales has increased from approximately 7% to approximately 13% for the year-to-date periods ended

16


November 1, 2014 and November 2, 2019, respectively. Approximately 80% of our eCommerce sales are generated within brick and mortar store trade areas.
The retail industry as a whole is dynamic, and sporting goods retail in particular has faced significant disruption in recent years, as several sporting goods retailers have gone out of business. Vendors have broadened their distribution into department stores and family footwear channels while continuing to grow their direct to consumer business. Weak customer demand for firearms and other hunting merchandise across the industry has slowed our growth. Further, trade tensions between the U.S. and China have resulted in either new or increased tariffs on imported products. We have responded to these challenges by focusing on driving profitable sales, emphasizing a refined merchandise assortment that delivers newness, innovation and exclusivity and have made strategic investments in our supply chain, digital capabilities, customer experience, private brands and teammates to support these efforts. We are also focused on increasing productivity and eliminating non-essential expenses to fund our future strategic investments.
As we look to the future, we are determined to continue to invest in our business to meet the changing needs of our athletes and increasing their level of engagement with the Company. We plan to further enhance our store experience by optimizing our merchandise assortment, reallocating floor space to regionally relevant and growing merchandise categories and making our stores more experiential. Our primary areas of investment during fiscal 2019 continue to be 1) enhancing the athlete experience in our stores; 2) improving our eCommerce fulfillment capabilities; and 3) implementing technology solutions that improve the athlete experience and our teammates’ productivity. We also plan to continue to focus on increasing productivity across the business to help fund these investments.
We are conducting a strategic review of our hunting business, including Field & Stream. As part of our ongoing review, we removed hunt category merchandise from approximately 135 Dick's Sporting Goods stores and reallocated the space in these stores to a localized assortment of categories and products in an effort to drive growth. In addition, we exited eight Field & Stream stores in the third quarter, which were subleased to Sportsman's Warehouse, Inc. 
How We Evaluate Our Operations
Senior management focuses on certain key indicators to monitor our performance, including:
Consolidated same store sales performance – Our management considers same store sales, which consists of both brick and mortar and eCommerce sales, to be an important indicator of our current performance. Same store sales results are important to leverage our costs, which include occupancy costs, store payroll and other store expenses. Same store sales also have a direct impact on our total net sales, net income, cash and working capital. A store is included in the same store sales calculation during the same fiscal period that it commences its 14th full month of operations. Stores that were closed or relocated during the applicable period have been excluded from same store sales results. Each relocated store is returned to the same store sales base during the fiscal period that it commences its 14th full month of operations at the new location. See further discussion of our consolidated same store sales in the “Results of Operations and Other Selected Data” section herein.
Earnings before taxes and the related operating margin – Our management views earnings before taxes and operating margin as key indicators of our performance. The key drivers of earnings before taxes are same store sales, gross profit, and our ability to control selling, general and administrative expenses. 
Cash flows from operating activities – Cash flow generation supports our general liquidity needs and funds capital expenditures for our omni-channel platform, distribution and administrative facilities, costs associated with continued improvement of information technology tools, potential strategic acquisitions or investments that may arise from time-to-time and stockholder return initiatives, including cash dividends and share repurchases. We typically generate significant cash flows from operating activities in our fourth fiscal quarter in connection with the holiday selling season and sales of cold weather sporting goods and apparel. See further discussion of our cash flows in the “Liquidity and Capital Resources and Changes in Financial Condition” section herein.
Quality of merchandise offerings – To measure acceptance of its merchandise offerings, we monitor sell-throughs, inventory turns, gross margins and markdown rates at the department and style level. This analysis helps us manage inventory levels to reduce working capital requirements and deliver optimal gross margins by improving merchandise flow and establishing appropriate price points to minimize markdowns.
Store productivity – To assess store-level performance, we monitor various indicators, including new store productivity, sales per square foot, store operating contribution margin and store cash flow.
 

17


CRITICAL ACCOUNTING POLICIES
As discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2019, filed with the Securities and Exchange Commission on March 29, 2019, we consider our policies on inventory valuation, vendor allowances, goodwill and intangible assets, impairment of long-lived assets and closed store reserves, self-insurance reserves and stock-based compensation to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. Other than the adoption of ASU 2016-02, Leases (Topic 842), on February 3, 2019 as discussed in Note 1 of our unaudited Consolidated Financial Statements, there were no significant changes to our critical accounting policies during the period ended November 2, 2019.

RESULTS OF OPERATIONS AND OTHER SELECTED DATA
Executive Summary 
Earnings per diluted share of $0.66 in the current quarter increased 69.2% compared to earnings per diluted share of $0.39 during the third quarter of 2018. Net income in the current quarter totaled $57.6 million compared to $37.8 million during the third quarter of 2018.
Net income for the current quarter included a gain of $25.0 million, net of tax, or $0.29 per diluted share, related to the sale of two of our technology subsidiaries, a charge of $6.6 million, net of tax, or $0.08 per diluted share, related to our exit from eight Field & Stream stores, and a non-cash impairment charge of $5.6 million, net of tax, or $0.07 per diluted share, to reduce the carrying value of a corporate aircraft that is held for sale to its current fair market value.
Net sales increased 5.6% to $1,962.2 million in the current quarter from $1,857.3 million during the third quarter of 2018.
Consolidated same store sales increased 6.0% from the third quarter of 2018, which included an increase of approximately 13% in eCommerce sales.
eCommerce sales penetration increased to approximately 13% of total net sales during the current quarter compared to approximately 12% of total net sales during the third quarter of 2018.
In addition, during the current quarter we:
Declared and paid a quarterly cash dividend in the amount of $0.275 per share on our common stock and Class B common stock.
Repurchased 2.8 million shares of common stock for a total of $99.5 million under the five-year $1.0 billion share repurchase program that we announced on March 16, 2016.
Sold two of our technology subsidiaries, Blue Sombrero and Affinity Sports, to Stack Sports for proceeds of $40.4 million, net of cash sold.
Exited eight Field & Stream stores and subleased the facilities to Sportsman’s Warehouse, Inc. as part of our ongoing strategic review of our hunt business.

18


The following table summarizes store openings and closings for the periods indicated:
 
39 Weeks Ended 
 November 2, 2019
 
39 Weeks Ended 
 November 3, 2018
 
Dick’s Sporting Goods
 
Specialty Concept Stores (1)
 
Total
 
Dick’s Sporting Goods
 
Specialty Concept Stores (1)
 
Total
Beginning stores
729

 
129

 
858

 
716

 
129

 
845

Q1 New stores

 
1

 
1

 
8

 

 
8

Q2 New stores
2

 

 
2

 
5

 

 
5

Q3 New stores
6

 
1

 
7

 
6

 

 
6

Closed stores (2)
4

 
9

 
13

 
3

 

 
3

Ending stores
733

 
122

 
855

 
732

 
129

 
861

 
 
 
 
 
 
 
 
 
 
 
 
Relocated stores
3

 
2

 
5

 
4

 
1

 
5

 
(1) 
Includes our Golf Galaxy and Field & Stream stores. In some markets, we operate Dick’s Sporting Goods stores adjacent to our specialty concept stores on the same property with a pass-through for customers. We refer to this format as a “combo store” and include combo store openings within both the Dick’s Sporting Goods and specialty concept store reconciliations, as applicable.

(2) 
Includes the exit from eight Field & Stream stores during the third quarter of 2019.

The following tables present selected information from the unaudited Consolidated Statements of Income as a percentage of net sales and the changes in the percentage of net sales from the prior year period, and other data, which is provided to facilitate a further understanding of our business. These tables should be read in conjunction with Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the accompanying unaudited Consolidated Financial Statements and related notes thereto.
 
 
 
 
 
Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Year 2018-2019 (A)
 
13 Weeks Ended
 
 
 
2018 (A)
 
Net sales (1)
100.00
%
 
100.00
%
 
N/A
Cost of goods sold, including occupancy and distribution costs (2)
70.41

 
71.81

 
(140)
Gross profit
29.59

 
28.19

 
140
Selling, general and administrative expenses (3)
27.10

 
25.24

 
186
Pre-opening expenses (4)
0.17

 
0.11

 
6
Income from operations
2.33

 
2.85

 
(52)
Gain on sale of subsidiaries (5)
(1.72
)
 

 
(172)
Interest expense
0.22

 
0.14

 
8
Other (income) expense
(0.10
)
 

 
(10)
Income before income taxes
3.93

 
2.70

 
123
Provision for income taxes
1.00

 
0.67

 
33
Net income
2.93
%
 
2.04
%
 
89
 
 
 
 
 
 
Other Data:
 

 
 

 
 
Consolidated same store sales increase (decrease)
6.0
%
 
(6.1
%)
 
 
Number of stores at end of period (6)
855

 
861

 
 
Total square feet at end of period (6)
42,101,780

 
42,372,767

 
 


19


 
 
 
 
 
Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Year 2018-2019 (A)
 
39 Weeks Ended
 
 
2019 (A)
 
2018 (A)
 
Net sales (1)
100.00
%
 
100.00
%
 
N/A
Cost of goods sold, including occupancy and distribution costs (2)
70.34

 
70.68

 
(34)
Gross profit
29.66

 
29.32

 
34
Selling, general and administrative expenses (3)
25.07

 
24.13

 
94
Pre-opening expenses (4)
0.08

 
0.10

 
(2)
Income from operations
4.50

 
5.09

 
(59)
Gain on sale of subsidiaries (5)
(0.55
)
 

 
(55)
Interest expense
0.21

 
0.14

 
7
Other income
(0.17
)
 
(0.02
)
 
(15)
Income before income taxes
5.01

 
4.97

 
4
Provision for income taxes
1.31

 
1.32

 
(1)
Net income
3.71
%
 
3.66
%
 
5
 
 
 
 
 
 
Other Data:
 

 
 

 
 
Consolidated same store sales increase (decrease)
3.1
%
 
(3.0
%)
 
 
Number of stores at end of period (6)
855

 
861

 
 
Total square feet at end of period (6)
42,101,780

 
42,372,767

 
 

(A) 
Column does not add due to rounding.
(1) 
Revenue from retail sales is recognized at the point of sale, net of sales tax. Revenue from eCommerce sales, including vendor-direct sales arrangements, is recognized upon shipment of merchandise. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. Revenue from gift cards and returned merchandise credits (collectively the “cards”) is deferred and recognized upon the redemption of the cards. The cards have no expiration date.
(2) 
Cost of goods sold includes: the cost of merchandise (inclusive of vendor allowances, inventory shrinkage and inventory write-downs for the lower of cost and net realizable value); freight; distribution; shipping; and store occupancy costs. We define merchandise margin as net sales less the cost of merchandise sold. Store occupancy costs include rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.
(3) 
Selling, general and administrative expenses include store and field support payroll and fringe benefits, advertising, bank card charges, operating costs associated with our internal eCommerce platform, information systems, marketing, legal, accounting, other store expenses and all expenses associated with operating our Customer Support Center.
(4) 
Pre-opening expenses, which consist primarily of rent, marketing, payroll and recruiting costs, are expensed as incurred. Rent is recognized within pre-opening expense from the date we take possession of a site through the date of store opening.
(5) 
Represents the gain recorded in connection with the sale of two technology subsidiaries, Blue Sombrero and Affinity Sports.
(6) 
Includes Dick’s Sporting Goods, Golf Galaxy, and Field & Stream stores.


20


13 Weeks Ended November 2, 2019 Compared to the 13 Weeks Ended November 3, 2018
 
Net Sales
Net sales increased 5.6% in the current quarter to $1,962.2 million from $1,857.3 million for the quarter ended November 3, 2018, due primarily to a $108.1 million, or 6.0%, increase in consolidated same store sales. This increase was partially offset by a $3.2 million decrease resulting from the closure of eight Field & Stream stores, partially offset by net sales from new stores. The 6.0% increase in consolidated same store sales included a 3.3% increase in transactions and a 2.7% increase in sales per transaction and reflected an increase of approximately 13% in eCommerce sales. eCommerce sales penetration increased to approximately 13% of total net sales during the current quarter compared to approximately 12% of total net sales during the prior year quarter.
The increase in consolidated same store sales was broad-based across hardlines, apparel and footwear, which was partially offset by a continued decline in the hunt category. Our removal of hunt category merchandise from approximately 135 Dick’s Sporting Goods stores beginning in late 2018 contributed to the decline in the category during the quarter. However, we reallocated space in these stores to a more compelling localized assortment of categories and products.
Income from Operations 
Income from operations decreased to $45.6 million in the current quarter from $52.9 million for the quarter ended November 3, 2018 for the reasons described below.
Gross profit increased 10.9% to $580.6 million in the current quarter from $523.6 million for the quarter ended November 3, 2018 and increased as a percentage of net sales by 140 basis points due primarily to occupancy leverage and improved merchandise margins, partially offset by higher eCommerce shipping fulfillment costs. Our occupancy costs, which after the cost of merchandise represents the largest expense item within our cost of goods sold, are generally fixed in nature and fluctuate based on the number of stores that we operate. Occupancy costs decreased $2.3 million in the current quarter compared to the quarter ended November 3, 2018 and increased gross profit by 87 basis points. Merchandise margins increased 60 basis points, primarily driven by fewer promotions and a favorable sales mix, which was impacted in part by our hunt business traditionally having significantly lower merchandise margin rates compared to other categories. These improvements in gross profit were partially offset by an increase in eCommerce shipping fulfillment costs incurred in connection with the opening of two new dedicated fulfillment centers.
Selling, general and administrative expenses increased 13.4% to $531.7 million in the current quarter from $468.7 million for the quarter ended November 3, 2018 and increased 186 basis points as a percentage of net sales. The current quarter included an $8.9 million pre-tax charge associated with our exit from eight Field & Stream stores and a $7.6 million non-cash fixed asset impairment charge to reduce the carrying value of a corporate aircraft held for sale to its fair market value. Apart from the enumerated items, selling, general and administrative expenses increased by 102 basis points compared to the prior year quarter, which was driven primarily by higher incentive compensation expense.
Pre-opening expenses increased to $3.3 million in the current quarter from $2.0 million for the quarter ended November 3, 2018. Pre-opening expenses in any period fluctuate depending on the timing and number of store openings and relocations. We opened seven new stores in the current quarter compared to six new stores during the quarter ended November 3, 2018.
Gain on Sale of Subsidiaries
In August 2019, we completed the sale of Blue Sombrero and Affinity Sports to Stack Sports for net proceeds of $40.4 million. In connection with the sale we recognized a pre-tax gain of $33.8 million. Refer to Note 7 to the unaudited Consolidated Financial Statements for additional information.
Other Income
Other income totaled $2.0 million in the current quarter compared to approximately $0.1 million in expense in the prior year quarter. Substantially all of the change is related to changes in our deferred compensation plan investment values, which we account for by recognizing investment income or expense and recording a corresponding charge or reduction to selling, general and administrative costs.
Income Taxes 
Our effective tax rate increased to 25.4% for the current quarter from 24.6% for the quarter ended November 3, 2018.


21


39 Weeks Ended November 2, 2019 Compared to the 39 Weeks Ended November 3, 2018
Net Sales
Net sales increased 3.3% in the current period to $6,142.1 million from $5,944.5 million for the period ended November 3, 2018, due primarily to a $176.0 million, or 3.1%, increase in consolidated same store sales. The remaining $21.6 million sales increase was primarily attributable to new stores, partially offset by store closures. The 3.1% increase in consolidated same store sales included a 1.2 % increase in transactions and a 1.9% increase in sales per transaction and reflected an increase of approximately 16% in eCommerce sales. eCommerce sales penetration increased to approximately 13% of total net sales during the current year to date period compared to approximately 11% of total net sales during the prior year period. The increase in consolidated same store sales was broad-based across hardlines, apparel and footwear, but was partially offset by a continued decline in the hunt category.
Income from Operations
Income from operations decreased to $276.7 million in the current period from $302.7 million for the period ended November 3, 2018 for the reasons described below.
Gross profit increased 4.5% to $1,821.5 million for the current period from $1,743.2 million for the period ended November 3, 2018 and increased as a percentage of net sales by 34 basis points due primarily to occupancy leverage, which was partially offset by eCommerce shipping fulfillment costs. Our occupancy costs, which after the cost of merchandise represents the largest expense item within our cost of goods sold, are generally fixed in nature and fluctuate based on the number of stores that we operate. Occupancy costs decreased $2.7 million in the current period from the period ended November 3, 2018 and increased gross profit by 47 basis points. This improvement was partially offset by an increase in eCommerce shipping fulfillment costs resulting from growth and increased penetration of eCommerce sales as compared to our total net sales and costs incurred in opening two new dedicated fulfillment centers.
Selling, general and administrative expenses increased 7.4% to $1,539.9 million in the current period from $1,434.3 million for the period ended November 3, 2018, and increased as a percentage of net sales by 94 basis points. The current period included a $15.3 million non-cash fixed asset impairment charge to reduce the carrying value of a corporate aircraft held for sale to its fair market value, an $8.9 million pre-tax charge associated with our exit from eight Field & Stream stores and a $9.1 million expense associated with changes in our deferred compensation plan investment values, for which the corresponding investment income was recognized in other income. These expenses were offset by a $6.4 million favorable settlement of a previously accrued litigation contingency. Apart from the enumerated items, selling, general and administrative expenses increased by 65 basis points compared to the prior year period, which was driven primarily by higher incentive compensation expenses, wage inflation in store payroll expense and strategic growth investments.
Pre-opening expenses decreased to $4.9 million in the current period from $6.1 million for the period ended November 3, 2018. Pre-opening expenses in any period fluctuate depending on the timing and number of new store openings and relocations. We opened ten new stores in the current period compared to 19 new stores during the prior year period.
Gain on Sale of Subsidiaries
In August 2019, we completed the sale of Blue Sombrero and Affinity Sports to Stack Sports for net proceeds of $40.4 million. In connection with the sale we recognized a pre-tax gain of $33.8 million. Refer to Note 7 to the unaudited Consolidated Financial Statements for additional information.
Other Income
Other income totaled $10.3 million in the current period compared to $1.2 million for the period ended November 3, 2018. Substantially all of the change is related to changes in our deferred compensation plan investment values, which we account for by recognizing investment income or expense and recording a corresponding charge or reduction to selling, general and administrative costs.
Income Taxes
Our effective tax rate decreased to 26.1% for the current period from 26.5% for the same period last year.

22


LIQUIDITY AND CAPITAL RESOURCES
Overview
We have a $1.6 billion senior secured revolving credit facility (the “Credit Facility”), which includes up to $150 million in the form of letters of credit. Under the Credit Facility, which is further described within Note 6 to the unaudited Consolidated Financial Statements, subject to satisfaction of certain conditions, we may request an increase of up to $500 million in additional borrowing availability.
Our liquidity and capital needs have generally been met by net cash provided by operating activities and supplemented by borrowings under the Credit Facility as seasonally necessary. We generally utilize our Credit Facility for working capital needs based primarily on the seasonal nature of our operating cash flows. Historically, our peak borrowing level has occurred early in the fourth quarter as we increase inventory in advance of the holiday selling season.
Liquidity information for the periods ended:
(in thousands)
 
Funds drawn on Credit Facility
$
1,778,750

 
$
1,723,500

Number of business days with outstanding balance on Credit Facility
188 days

 
190 days

Maximum daily amount outstanding under Credit Facility
$
719,300

 
$
382,300


Liquidity information as of the following dates:
(in thousands)
 
Outstanding borrowings under Credit Facility
$
719,300

 
$
382,300

Cash and cash equivalents
$
87,622

 
$
92,103

Remaining borrowing capacity under Credit Facility
$
864,569

 
$
851,569

Outstanding letters of credit under Credit Facility
$
16,131

 
$
16,131

 
 
 
 

We intend to allocate capital to invest in future growth, specifically growing and remodeling our store network and eCommerce business to deliver an omni-channel shopping experience, as well as other long-term strategic investments while returning capital to stockholders through share repurchases and dividends. 
Capital expenditures
We anticipate that fiscal 2019 capital expenditures will approximate $230 million on a gross basis and $200 million on a net basis, which includes tenant allowances provided by landlords. Normal capital requirements primarily relate to the development of our omni-channel platform, including investments in new and existing stores and eCommerce technology. Approximately two-thirds of our Dick’s Sporting Goods stores will be up for lease renewal at our option over the next five years, and we plan to leverage the significant flexibility within our existing real estate portfolio to capitalize on future real estate opportunities over the near and intermediate term as those leases come up for renewal. We also anticipate further improvements to our eCommerce fulfillment network and corporate information technology capabilities through additional investment.
Share repurchases
On March 16, 2016, our Board of Directors authorized a five-year share repurchase program of up to $1 billion of our common stock. During the 39 weeks ended November 2, 2019, we repurchased approximately 10.3 million shares of our common stock for $366.1 million. Under the 2016 program, we have repurchased $932.7 million of common stock and have $67.3 million remaining under this authorization.
On June 12, 2019, our Board of Directors authorized an additional five-year share repurchase program of up to $1 billion of our common stock. We intend to repurchase shares from time-to-time to offset dilution and may pursue additional repurchases of shares under favorable market conditions. Any future share repurchase programs are subject to authorization by our Board of Directors and will be dependent upon future earnings, cash flows, financial requirements and other factors.

23


Dividends
During the 39 weeks ended November 2, 2019, we paid $74.5 million of dividends to our stockholders. On November 21, 2019, our Board of Directors authorized and declared a quarterly cash dividend in the amount of $0.275 per share of common stock and Class B common stock payable on December 31, 2019 to stockholders of record as of the close of business on December 13, 2019. The declaration of future dividends and the establishment of the per share amount, record dates and payment dates for any such future dividends are subject to authorization by our Board of Directors and will be dependent upon multiple factors including future earnings, cash flows, financial requirements and other considerations.
We believe cash flows generated by operations and funds available under our Credit Facility will be sufficient to satisfy capital requirements over the next 12 months, including planned inventory investments in key growth categories, capital expenditures, share repurchases, and quarterly dividend payments to our stockholders. We may require additional funding should we pursue strategic acquisitions or undertake share repurchases, other investments or store expansion rates in excess of historical levels.
Cash Flows
Changes in cash and cash equivalents are as follows:
 
39 Weeks Ended
(in thousands)
 
Net cash (used in) provided by operating activities
$
(212,775
)
 
$
160,528

Net cash used in investing activities
(122,213
)
 
(135,288
)
Net cash provided by (used in) financing activities
308,953

 
(34,350
)
Effect of exchange rate changes on cash and cash equivalents
4

 
(40
)
Net decrease in cash and cash equivalents
$
(26,031
)
 
$
(9,150
)
Operating Activities
Operating activities consist primarily of net income, adjusted for certain non-cash items and changes in operating assets and liabilities. Adjustments to net income for non-cash items include depreciation and amortization, deferred income taxes and stock-based compensation expense, as well as gains and losses related to the disposal of assets or subsidiaries. Changes in operating assets and liabilities primarily reflect changes in inventories, accounts payable and income taxes payable or receivable, as well as other working capital changes. 
Cash flows from operating activities decreased $373.3 million for the 39 weeks ended November 2, 2019 compared to the same period last year due primarily to changes in inventory levels and accounts payable at the end of the current fiscal period, which decreased operating cash flows by $358.4 million. These changes were primarily due to strategic investments in key growth categories including footwear, apparel, baseball and golf. In addition, changes in accounts receivable at the end of the current fiscal period decreased operating cash flows by $15.4 million compared to the same period last year, primarily due to the timing of collections for vendor receivables year-over-year.
Investing Activities 
Cash used in investing activities decreased $13.1 million for the 39 weeks ended November 2, 2019 compared to the prior year period. The current period receipt of $40.4 million of proceeds from our sale of two technology subsidiaries was partially offset by a $30.4 million increase in gross capital expenditures relating to store enhancements and technology investments. See Note 7 to the unaudited Consolidated Financial Statements.
Financing Activities
Financing activities consist primarily of capital return initiatives, including our share repurchase program and cash dividend payments, cash flows generated from stock option exercises and cash activity associated with our Credit Facility. The primary reason for the increase in cash provided by financing activities compared to the prior year period was an increase in funds drawn on our Credit Facility, which funded strategic inventory investments in key categories.

24


Off-Balance Sheet Arrangements
Our off-balance sheet arrangements as of November 2, 2019 primarily relate to purchase obligations for marketing commitments, including naming rights, licenses for trademarks, minimum requirements with our third-party eCommerce fulfillment provider and technology-related and other ordinary course commitments. We have excluded these items from the unaudited Consolidated Balance Sheets in accordance with U.S. GAAP. We do not believe that any of these arrangements have, or are reasonably likely to have, a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or resources.
Contractual Obligations and Other Commercial Commitments 
We are party to many contractual obligations that involve commitments to make payments to third parties in the ordinary course of business. For a description of our contractual obligations and other commercial commitments as of February 2, 2019, see our Annual Report on Form 10-K for the fiscal year ended February 2, 2019, filed with the Securities and Exchange Commission on March 29, 2019. During the current quarter, there were no material changes with respect to these contractual obligations and other commercial commitments outside the ordinary course of business.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s market risk exposures from those reported in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2019, filed with the Securities and Exchange Commission on March 29, 2019.
 
ITEM 4.  CONTROLS AND PROCEDURES 
During the third quarter of fiscal 2019, there were no changes in the Company’s internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
During the quarter, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, November 2, 2019
There are inherent limitations in the effectiveness of any control system, including the potential for human error and the circumvention or overriding of the controls and procedures. Additionally, judgments in decision making can be faulty and breakdowns can occur because of simple errors or mistakes. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our control system can prevent or detect all errors or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies and procedures. 
PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
 
The Company is involved in various proceedings that are incidental to the normal course of its business. As of the date of this Quarterly Report on Form 10-Q, the Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.

ITEM 1A.  RISK FACTORS

Except as identified below, there have been no material changes to the risk factors affecting the Company from those disclosed in Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended February 2, 2019, filed with the Securities and Exchange Commission on March 29, 2019. The discussion of risk factors sets forth the material risks that could affect the Company’s financial condition and operations.


25


The escalating trade tensions between the U.S. and China, including the imposition of new and increased tariffs on goods imported from China, could have a negative impact on our sales and profitability.
The escalating trade tensions between the U.S. and China has resulted in both countries imposing tariffs on billions of dollars of each other’s goods. If these events continue or further action is taken to limit trade between the two countries, we may need to seek alternative suppliers or vendors, raise prices, or make changes to our operations any of which could have a material adverse effect on our results of operations, including sales and profitability.
If our product costs are adversely affected by foreign trade issues, currency exchange rate fluctuations, increasing prices for raw materials, political instability or other reasons, our sales and profitability may suffer.
A significant portion of the products that we purchase, including those purchased from domestic suppliers, as well as most of our private brand merchandise, is manufactured abroad. Foreign imports subject us to risk relating to changes in import duties, quotas, the introduction of U.S. taxes on imported goods or the extension of U.S. income taxes on our foreign suppliers’ sales of imported goods through the adoption of destination-based income tax jurisdiction, loss of “most favored nation” status with the U.S., shipment delays and shipping port constraints, labor strikes, work stoppages or other disruptions, freight cost increases and economic uncertainties. Furthermore, we could face significantly higher U.S. income and similar taxes with respect to sales of products purchased from foreign suppliers if the U.S. were to adopt a system of taxation, such as a border adjustment tax, under which the cost of imported products was not deductible in determining such products’ tax base. If such a tax system were adopted, we could also face higher prices for products manufactured or produced abroad that we purchase from our domestic suppliers if they were subject to such a tax. In addition, the U.S. government periodically considers other restrictions on the importation of products obtained by our vendors and us.
If any of these or other factors were to cause a disruption of trade from the countries in which our vendors’ supplies or our private brand products’ manufacturers are located, our inventory levels may be reduced or the cost of our products may increase. Additionally, we could be impacted by negative publicity or, in some cases, face potential liability to the extent that any foreign manufacturers from whom we directly or indirectly purchase products utilize labor, environmental, workplace safety and other practices that vary from those commonly accepted in the U.S. Also, the prices charged by foreign manufacturers may be affected by the fluctuation of their local currency against the U.S. dollar and the price of raw materials, which could cause the cost of our products to increase and negatively impact our sales or profitability.
Reference is also made to Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements” of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth repurchases of our common stock during the third quarter of 2019:
Period
 
Total Number of Shares Purchased (a)
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)
 
Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b)
 
1,407,100

 
$
33.41

 
1,407,100

 
$
1,119,807,896

 
1,132,412

 
$
36.19

 
1,132,180

 
$
1,078,829,226

 
298,911

 
$
38.57

 
298,911

 
$
1,067,300,614

Total
 
2,838,423

 
$
35.07

 
2,838,191

 
 


(a) 
Includes shares withheld from employees to satisfy minimum tax withholding obligations associated with the vesting of restricted stock during the period.
(b) 
Shares repurchased as part of our previously announced five-year $1.0 billion share repurchase program authorized by the Board of Directors on March 16, 2016. On June 12, 2019, our Board of Directors authorized an additional five-year share repurchase program of up to $1.0 billion of our common stock. The 2016 program will remain available for purchases until it is exhausted or expires after which time we may repurchase shares under the 2019 program.

26



ITEM 6.  EXHIBITS

The following exhibits are filed or furnished (as noted) as part of this Quarterly Report on Form 10-Q.

 
 
 
 
 
 
Exhibit Number
 
Description of Exhibit
 
Method of Filing
 
Certification of Edward W. Stack, Chairman and Chief Executive Officer, dated as of November 26, 2019 and made pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
Certification of Lee J. Belitsky, Executive Vice President - Chief Financial Officer, dated as of November 26, 2019 and made pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
Certification of Edward W. Stack, Chairman and Chief Executive Officer, dated as of November 26, 2019 and made pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
Furnished herewith
 
 
 
 
 
 
Certification of Lee J. Belitsky, Executive Vice President - Chief Financial Officer, dated as of November 26, 2019 and made pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
Furnished herewith
 
 
 
 
 
101.INS
 
XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
 
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
 
101.CAL
 
XBRL Taxonomy Calculation Linkbase Document
 
 
 
 
 
 
101.DEF
 
XBRL Taxonomy Definition Linkbase Document
 
 
 
 
 
 
101.LAB
 
XBRL Taxonomy Label Linkbase Document
 
 
 
 
 
 
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document
 
104
 
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
 
 
 
 
 
 
 
 
 
 
 
 

27


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on November 26, 2019 on its behalf by the undersigned, thereunto duly authorized.

DICK’S SPORTING GOODS, INC.
 
 
 
 
 
 
 
 
 
 
By:
 
 
 
 
 
 
 
 
 
 
Chairman and Chief Executive Officer
 
 
 
 
 
 
 
 
By:
 
 
 
 
 
 
 
 
 
 
Executive Vice President – Chief Financial Officer
 
 
 
(principal financial officer)
 
 
 
 
 
 
 
 

28

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
6/28/24
2/1/2010-K,  5,  DEF 14A
12/31/19SD
12/13/19
Filed on:11/26/198-K
11/22/19
11/21/198-K
For Period end:11/2/19
10/6/19
10/5/19
9/1/19
8/31/19
8/22/198-K
8/4/19
8/3/1910-Q,  4
6/28/198-K
6/12/193,  DEF 14A
5/4/1910-Q
3/29/1910-K
2/3/19
2/2/1910-K,  5
12/15/18
11/3/1810-Q
8/4/1810-Q
5/5/1810-Q
2/3/1810-K,  5,  DEF 14A
3/16/164
11/1/1410-Q
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