Analysis and Comparison of Financing Activities: Dick's Sporting Goods

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Current Liabilities

Accounts payable increased 13.13% from 2005 to 2006 which can be expected from a sales increase of 18.64%. Accounts payable actually decreased 2.52% as a percentage of total liabilities and equity which shows the company is paying its bills quicker than it did the previous year. Accrued expenses and deferred revenue both increased by approximately 39% in 2006 which was much higher than the sales increase. Accrued expenses consist of accrued payroll, accrued property and equipment and other accrued expenses which increased 43.76%, 49.76% and 34.26%, respectively, from 2005 to 2006. These increases can be attributed to the opening of 39 new stores during 2006. Construction allowances and capitalized rent increased 36.56% during 2006, from $73.3 million to $100.1 million. Deferred revenue related to gift cards increased 24.44%, from $58.1 million in 2005 to $72.3 million in 2006. These accounts account for 74.13% of the total deferred expense accounts. Increases can be attributed to expansion and increases in sales revenue. The Company’s current ratio was 1.30 and 1.54 for years 2005 and 2006, respectively, which reveals improved liquidity during 2006.

Long-term Liabilities

The only account that showed significant change from 2005 to 2006 was non-cash obligations for construction in progress – leased facilities which can also be attributed to the Company’s expansion. All long-term liability accounts remained relatively identical as a percent of total liabilities and equity. Senior convertible notes account for 50.93% of the Company’s total long-term liabilities. On February 18, 2004, the Company completed a private offering of $172.5 million issue price of senior unsecured convertible notes due February 18, 2024. The notes were sold at an $82.6 million discount and have a total face amount of $255.1 million. The Company’s other debt includes a note payable in the amount of $708,000, including $46,000 of the current portion. The terms of this note are monthly installment of $4,000, including interest at 4%, through 2020. Two buildings are leased under a capital lease that was entered into May 1, 1986 and expires April 2021. The Company also has a capital lease for a store location with a fixed interest rate of 10.6% which matures ion 2024. The Company’s commitment and contingencies include licensing agreements for the exclusive rights to use certain trademarks which the company will pay a minimum annual royalty fee of $1 million. The Company’s ratio of assets-to-long-term liabilities was 3.93 and 4.50 for years 2005 and 2006, respectively. The company improved its liquidity position in 2006 as long-term accounted for 22.22% of assets, as compared to 25.40% in 2005.

Stockholders’ Equity

At fiscal year end 2006, the Company has 39,691,277 shares of common stock issued and outstanding, 13,393,840 of Class B common stock and no shares of preferred. The Company’s shares trade on the New York Stock Exchange with the ticker symbol DKS. The average trade volume is 1,974,200 and the 52 week stock price range is $24.00 to $36.78. Earning per share of $2.03 were reported for 2006, up $0.68, or 50.37%, from 2005. The Company financed more of its assets with equity during 2006 as witnessed by a assets-to-equity ratio of 2.46, as compared to 2.86 during 2005.

Capital Structure Issues

The Company’s overall capital structure improved during 2006. Return on equity improved from 11.76% in 2005 to 18.14% in 2006. The debt-to-equity ratio improved from 2.86 in 2005 to 1.46 in 2006 and the debt-to-assets ratio improved from 65.08% to 59.29%. The Company is growing its asset base using heavier amounts of equity and less debt than in the recent past.