10-Q 1 dks-20211030.htm 10-Q dks-20211030
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 30, 2021
OR
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. 001-31463
 DICK’S SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware16-1241537
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
 
345 Court Street, Coraopolis, PA 15108
(Address of Principal Executive Offices)
 
(724) 273-3400
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of Each Exchange on which Registered
Common Stock, $0.01 par valueDKSThe 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.
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).
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.

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

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  No
 
As of November 19, 2021, DICK’S Sporting Goods, Inc. had 62,910,296 shares of common stock, par value $0.01 per share, and 23,695,633 shares of Class B common stock, par value $0.01 per share, outstanding.
1


2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS 

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
 13 Weeks Ended39 Weeks Ended
 October 30,
2021
October 31,
2020
October 30,
2021
October 31,
2020
Net sales
$2,747,647 $2,412,112 $8,941,208 $6,458,712 
Cost of goods sold, including occupancy and distribution costs1,691,071 1,569,938 5,488,928 4,460,336 
GROSS PROFIT1,056,576 842,174 3,452,280 1,998,376 
Selling, general and administrative expenses
631,943 591,117 1,880,505 1,537,371 
Pre-opening expenses
4,765 4,964 12,545 9,728 
INCOME FROM OPERATIONS419,868 246,093 1,559,230 451,277 
Interest expense
13,789 12,769 40,971 35,496 
Other (income) expense(1,748)(3,746)(15,893)(4,731)
INCOME BEFORE INCOME TAXES407,827 237,070 1,534,152 420,512 
Provision for income taxes91,314 59,854 360,374 109,875 
NET INCOME$316,513 $177,216 $1,173,778 $310,637 
EARNINGS PER COMMON SHARE:  
Basic
$3.79 $2.10 $13.93 $3.69 
Diluted
$2.78 $1.84 $10.70 $3.44 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  
Basic
83,537 84,422 84,266 84,095 
Diluted
113,664 96,571 109,648 90,430 


See accompanying notes to unaudited consolidated financial statements.
3

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
 13 Weeks Ended39 Weeks Ended
 October 30,
2021
October 31,
2020
October 30,
2021
October 31,
2020
NET INCOME$316,513 $177,216 $1,173,778 $310,637 
OTHER COMPREHENSIVE INCOME:  
Foreign currency translation adjustment, net of tax15 16 58 6 
TOTAL OTHER COMPREHENSIVE INCOME15 16 58 6 
COMPREHENSIVE INCOME$316,528 $177,232 $1,173,836 $310,643 
 

See accompanying notes to unaudited consolidated financial statements.


4

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands) 
(Unaudited)
October 30,
2021
January 30,
2021
October 31,
2020
ASSETS  
CURRENT ASSETS:  
Cash and cash equivalents$1,372,892 $1,658,067 $1,059,994 
Accounts receivable, net89,479 53,149 77,212 
Income taxes receivable683 6,396 5,453 
Inventories, net2,490,438 1,953,568 2,319,992 
Prepaid expenses and other current assets92,673 88,470 82,648 
Total current assets4,046,165 3,759,650 3,545,299 
Property and equipment, net1,314,567 1,300,265 1,336,676 
Operating lease assets2,070,135 2,149,913 2,177,006 
Intangible assets, net87,195 90,051 91,585 
Goodwill245,857 245,857 245,857 
Deferred income taxes42,862 51,475 27,717 
Other assets192,498 155,648 141,350 
TOTAL ASSETS$7,999,279 $7,752,859 $7,565,490 
LIABILITIES AND STOCKHOLDERS' EQUITY  
CURRENT LIABILITIES:  
Accounts payable$1,399,716 $1,258,093 $1,394,904 
Accrued expenses522,010 518,134 449,304 
Operating lease liabilities478,674 472,670 474,803 
Income taxes payable28,430 40,997 24,805 
Deferred revenue and other liabilities239,472 260,304 193,956 
Total current liabilities2,668,302 2,550,198 2,537,772 
LONG-TERM LIABILITIES:   
Revolving credit borrowings   
       Convertible senior notes due 2025441,186 418,493 411,256 
Long-term operating lease liabilities2,135,515 2,259,308 2,310,318 
Other long-term liabilities223,459 185,326 184,505 
Total long-term liabilities2,800,160 2,863,127 2,906,079 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:  
Common stock586 612 608 
Class B common stock237 237 239 
Additional paid-in capital1,476,701 1,442,298 1,415,909 
Retained earnings3,647,621 3,064,702 2,873,263 
Accumulated other comprehensive income (loss)9 (49)(114)
Treasury stock, at cost(2,594,337)(2,168,266)(2,168,266)
Total stockholders' equity2,530,817 2,339,534 2,121,639 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$7,999,279 $7,752,859 $7,565,490 
See accompanying notes to unaudited consolidated financial statements.
5

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)
       Accumulated  
   Class BAdditional Other  
 Common StockCommon StockPaid-InRetainedComprehensiveTreasury 
 SharesDollarsSharesDollarsCapitalEarnings(Loss) IncomeStockTotal
BALANCE, January 30, 202161,195 $612 23,736 $237 $1,442,298 $3,064,702 $(49)$(2,168,266)$2,339,534 
Exercise of stock options297 3 — — 12,330 — — — 12,333 
Restricted stock vested791 8 — — (8)— — —  
Minimum tax withholding requirements(237)(3)— — (18,598)— — — (18,601)
Net income— — — — — 361,756 — — 361,756 
Stock-based compensation— — — — 12,870 — — — 12,870 
Foreign currency translation adjustment, net of taxes of $(20)
— — — — — — 64 — 64 
Purchase of shares for treasury(1,030)(10)— — — — — (76,831)(76,841)
Cash dividend declared, $0.3625 per common share
— — — — — (32,391)— — (32,391)
BALANCE, May 1, 202161,016 $610 23,736 $237 $1,448,892 $3,394,067 $15 $(2,245,097)$2,598,724 
Exchange of Class B common stock for common stock40  (40) — — — —  
Exercise of stock options189 2 — — 8,313 — — — 8,315 
Restricted stock vested31 1 — — (1)— — —  
Minimum tax withholding requirements(10)— — — (1,531)— — — (1,531)
Net income— — — — — 495,509 — — 495,509 
Stock-based compensation— — — — 12,544 — — — 12,544 
Foreign currency translation adjustment, net of taxes of $6
— — — — — — (21)— (21)
Purchase of shares for treasury(808)(8)— — — — — (75,838)(75,846)
Cash dividend declared, $0.3625 per common share
— — — — — (32,319)— — (32,319)
BALANCE, July 31, 202160,458 $605 23,696 $237 $1,468,217 $3,857,257 $(6)$(2,320,935)$3,005,375 
Exercise of stock options114 1 — — 4,281 — — — 4,282 
Restricted stock vested305 3 — — (3)— — —  
Minimum tax withholding requirements(80)(1)— — (9,760)— — — (9,761)
Net income— — — — — 316,513 — — 316,513 
Stock-based compensation— — — — 13,966 — — — 13,966 
Foreign currency translation adjustment, net of taxes of $(4)
— — — — — — 15 — 15 
Purchase of shares for treasury(2,173)(22)— — — — — (273,402)(273,424)
Cash dividends declared, $5.9375 per common share
— — — — — (526,149)— — (526,149)
BALANCE, October 30, 202158,624 $586 23,696 $237 $1,476,701 $3,647,621 $9 $(2,594,337)$2,530,817 




See accompanying notes to unaudited consolidated financial statements.








6

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)
(in thousands)
(Unaudited)
       Accumulated  
   Class BAdditional Other  
 Common StockCommon StockPaid-InRetainedComprehensiveTreasury 
 SharesDollarsSharesDollarsCapitalEarningsLossStockTotal
BALANCE, February 1, 202059,256 $593 24,291 $243 $1,253,867 $2,645,281 $(120)$(2,168,266)$1,731,598 
Equity component value of convertible note issuance— — — — 160,693 — — — 160,693 
Purchase of convertible note hedge— — — — (161,057)— — — (161,057)
Sale of common stock warrants— — — — 105,225 — — — 105,225 
Restricted stock vested745 7 — — (7)— — —  
Minimum tax withholding requirements(185)(2)— — (3,388)— — — (3,390)
Net loss— — — — — (143,422)— — (143,422)
Stock-based compensation— — — — 9,235 — — — 9,235 
Foreign currency translation adjustment, net of taxes of $20
— — — — — — (63)— (63)
Cash dividend declared, $0.3125 per common share
— — — — — (26,794)— — (26,794)
BALANCE, May 2, 202059,816 $598 24,291 $243 $1,364,568 $2,475,065 $(183)$(2,168,266)$1,672,025 
Exchange of Class B common stock for common stock200 2 (200)(2)— — — —  
Exercise of stock options28  — — 939 — — — 939 
Restricted stock vested26 1 — — (1)— — —  
Minimum tax withholding requirements(8) — — (294)— — — (294)
Net income— — — — — 276,843 — — 276,843 
Stock-based compensation— — — — 8,214 — — — 8,214 
Foreign currency translation adjustment, net of taxes of $(17)
— — — — — — 53 — 53 
Cash dividend declared, $0.3125 per common share
— — — — — (27,484)— — (27,484)
BALANCE, August 1, 202060,062 $601 24,091 $241 $1,373,426 $2,724,424 $(130)$(2,168,266)$1,930,296 
Exchange of Class B common stock for common stock225 2 (225)(2)— — — —  
Exercise of stock options515 5 — — 24,528 — — — 24,533 
Restricted stock vested14  — —  — — —  
Minimum tax withholding requirements(4) — — (227)— — — (227)
Net income— — — — — 177,216 — — 177,216 
Stock-based compensation— — — — 18,182 — — — 18,182 
Foreign currency translation adjustment, net of taxes of $(5)
— — — — — — 16 — 16 
Cash dividend declared, $0.3125 per common share
— — — — — (28,377)— — (28,377)
BALANCE, October 31, 202060,812 $608 23,866 $239 $1,415,909 $2,873,263 $(114)$(2,168,266)$2,121,639 




See accompanying notes to unaudited consolidated financial statements.
7

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
39 Weeks Ended
 October 30,
2021
October 31,
2020
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$1,173,778 $310,637 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation, amortization, and other237,666 239,666 
Amortization of convertible notes discount and issuance costs
22,693 14,345 
Non-cash lease costs(80,734)(1,199)
Deferred income taxes8,613 (22,492)
Stock-based compensation39,380 35,631 
Changes in assets and liabilities:  
Accounts receivable(20,655)(12,099)
Inventories(536,870)(121,435)
Prepaid expenses and other assets(7,995)(384)
Accounts payable194,084 381,383 
Accrued expenses(13,918)30,035 
Income taxes payable / receivable(6,854)14,659 
Construction allowances provided by landlords
27,677 42,314 
Deferred revenue and other liabilities(30,219)6,454 
Net cash provided by operating activities1,006,646 917,515 
CASH FLOWS FROM INVESTING ACTIVITIES:  
 Capital expenditures(231,087)(156,444)
Proceeds from sale of other assets9,671  
 Deposits and other investing activities
(19,130)(96)
Net cash used in investing activities(240,546)(156,540)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Revolving credit borrowings 1,291,700 
Revolving credit repayments (1,515,800)
Proceeds from issuance of convertible notes 575,000 
Payments for purchase of bond hedges (161,057)
Proceeds from issuance of warrants 105,225 
Transaction costs paid in connection with convertible notes issuance (17,396)
    Payments on other long-term debt and finance lease obligations(553)(612)
 Proceeds from exercise of stock options24,930 25,472 
Minimum tax withholding requirements(29,893)(3,911)
Cash paid for treasury stock(426,111) 
Cash dividends paid to stockholders(567,245)(80,874)
(Decrease) increase in bank overdraft(52,461)11,932 
Net cash (used in) provided by financing activities(1,051,333)229,679 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS58 6 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(285,175)990,660 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD1,658,067 69,334 
CASH AND CASH EQUIVALENTS, END OF PERIOD$1,372,892 $1,059,994 
Supplemental disclosure of cash flow information:  
Accrued property and equipment$44,545 $36,523 
Cash paid for interest$21,870 $19,459 
Cash paid for income taxes$364,875 $119,734 
 

See accompanying notes to unaudited consolidated financial statements.
8

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

1.  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 a blend of dedicated teammates, in-store services and unique specialty shop-in-shops. The Company also owns and operates Golf Galaxy, Field & Stream and Public Lands specialty stores, as well as GameChanger, a youth sports mobile app for video streaming, scorekeeping, scheduling and communications. In addition, the Company offers its products through an eCommerce platform that is integrated with its store network, providing athletes with expertise as well as the convenience 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 a “year” is to the Company’s fiscal year.
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed 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 January 30, 2021 as filed with the Securities and Exchange Commission on March 24, 2021. Operating results for the 13 and 39 weeks ended October 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 29, 2022 or any other period.
COVID-19
The pandemic caused by the coronavirus and its variants (“COVID-19”) continues to evolve. The effect that the COVID-19 pandemic may have on the Company’s future business remains uncertain, including the long-term economic outlook, inflation and its impact on consumer discretionary spending behavior when the pandemic ends. Additionally, the COVID-19 pandemic has disrupted global supply chains, including factory closures and port congestion that have resulted in longer transit times and rising container and transportation costs. Although the Company has successfully managed these challenges thus far, the Company’s ability to continue to replenish its inventory to meet current levels of consumer demand could be impacted by further delays or disruptions to the flow of products from key vendor partners and vertical brand sources. Accordingly, the Company currently cannot estimate the full impact that the COVID-19 pandemic may have on its financial condition and future results of operations, and it will continue to actively monitor its impact to the Company’s business.
Recently Adopted Accounting Pronouncements
Income Taxes
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This update simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standard Codification (“ASC”) 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 during the first quarter of 2021. The adoption did not have a significant impact on the Company’s financial condition, results of operations, cash flows or disclosures.

9

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


Recently Issued Accounting Pronouncements
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The amendments in this ASU can be applied anytime between the first quarter of fiscal 2020 and the fourth quarter of fiscal 2022 and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The impact of Topic 848 on the Company's financial statements and related disclosures is not expected to be significant.
Convertible Instruments
In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. It is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years, and it permits the use of either the modified retrospective or fully retrospective method of transition. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company will adopt the ASU in fiscal 2022 using the modified retrospective transition method and is currently evaluating the impact that adoption will have on its financial statements, but anticipates it will result in a reduction in non-cash interest expense related to the Company’s convertible senior notes due 2025 (the “Convertible Senior Notes”).

2.  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 include shares the Company could be obligated to issue from its Convertible Senior Notes and warrants, and stock-based awards, such as stock options and restricted stock. Dilutive potential common shares are excluded from the computation of earnings per share if their effect is anti-dilutive.
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 Ended39 Weeks Ended
October 30,
2021
October 31,
2020
October 30,
2021
October 31,
2020
Net income$316,513 $177,216 $1,173,778 $310,637 
Weighted average common shares outstanding - basic
83,537 84,422 84,266 84,095 
Dilutive effect of stock-based awards
6,791 5,248 6,498 3,662 
Dilutive effect of Convertible Senior Notes and warrants23,336 6,901 18,884 2,673 
Weighted average common shares outstanding - diluted
113,664 96,571 109,648 90,430 
Earnings per common share - basic$3.79 $2.10 $13.93 $3.69 
Earnings per common share - diluted$2.78 $1.84 $10.70 $3.44 
Stock-based awards excluded from diluted shares1 532 55 2,237 
For the 13 weeks and 39 weeks ended October 30, 2021, the dilutive effect of the Convertible Senior Notes included approximately 12.8 million and 10.9 million shares, respectively, that are designed to be offset at settlement by shares delivered from the bond hedge purchased by the Company. The shares provided by the bond hedge are anti-dilutive; accordingly, they are not treated as a reduction to diluted weighted average shares outstanding for any periods presented.
10

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


3.  Fair Value Measurements
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.
Recurring
The Company measures its deferred compensation plan assets held in trust at fair value on a recurring basis using Level 1 inputs. Such assets consist of investments in various mutual funds made by eligible individuals as part of the Company’s deferred compensation plans. As of October 30, 2021 and January 30, 2021, the fair value of the Company’s deferred compensation plans was $150.7 million and $125.7 million, respectively, as determined by quoted prices in active markets.
In April 2020, the Company issued the Convertible Senior Notes, which have an aggregate principal amount of $575.0 million. Based on Level 2 inputs, the fair value of the Convertible Senior Notes on October 30, 2021 was approximately $2.2 billion compared to their carrying value of $441.2 million, which excluded amounts classified within additional paid-in capital. Because the closing price of the Company’s common stock of $124.21 as of the end of the third quarter exceeded the conversion price of $32.91, the if-converted value exceeded the principal amount of the Convertible Senior Notes by approximately $1.6 billion at October 30, 2021.
Due to the short-term nature of these instruments, the fair value of cash and cash equivalents, accounts receivable, accounts payable and certain other liabilities approximated their carrying values at both October 30, 2021 and January 30, 2021.
Nonrecurring
Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis may include property and equipment, goodwill and other intangible assets, equity and other assets. These assets are required to be assessed for impairment when events or circumstances indicate that the carrying value may not be recoverable, and at least annually for goodwill and indefinite-lived intangible assets. In the event that an impairment is required, the asset is adjusted to fair value, using Level 3 inputs.

4. Leases
The Company leases all of its stores, 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 10 to 15 years and contain multiple five-year renewal options and rent escalation provisions. The lease agreements are primarily for the payment of minimum annual rentals, costs of utilities, property taxes, maintenance, common areas and insurance.
In response to the COVID-19 pandemic, the Company negotiated rent deferrals with its landlords, which reduced payments for the 39 weeks ended October 31, 2020. Supplemental cash flow information related to operating leases for the 39 weeks ended October 30, 2021 and October 31, 2020 were as follows (in millions):
39 Weeks Ended
October 30,
2021
October 31,
2020
Cash paid for amounts included in the measurement of operating lease liabilities$511.8 $441.8 
Non-cash operating lease assets and liabilities obtained in exchange for new or modified leases
$273.6 $219.0 

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


5.  Subsequent Event
On November 22, 2021, the Company's Board of Directors authorized and declared a quarterly cash dividend in the amount of $0.4375 per share on the Company's common stock and Class B common stock. The dividend is payable on December 29, 2021 to stockholders of record as of the close of business on December 10, 2021.

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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, the impact to consumer demand and our supply chain due to the pandemic caused by the coronavirus and its variants (“COVID-19”), including inflationary impacts, changes to consumer demand and store traffic and supply chain disruptions; investments to enhance the athlete experience, to improve our eCommerce fulfillment capabilities, and to implement technology solutions supporting the athlete experience and our teammates’ productivity; the continued improvements to the functionality and performance of our own eCommerce platform; plans to invest in our vertical brands with improved space in-store, increased marketing, and expansion into additional product categories; anticipated COVID-19 safety costs for the year; plans to leverage our real estate portfolio to capitalize on future opportunities in the near and intermediate term as our existing leases come up for renewal; the impact of the issuance of the Convertible Senior Notes, entering into the bond hedge and warrant transactions, and our intention to repay the principal outstanding amounts of the Convertible Senior Notes using excess cash, free cash flow and borrowings on our Credit Facility; projections of our future profitability; projected capital expenditures; anticipated store openings, relocations, and closings; plans to return capital to stockholders through dividends and share repurchases; and our future results of operations and financial condition.
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 2021 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 impact of the duration and scope of the COVID-19 pandemic on our business, operations and financial results, including the potential impact due to disruptions in our or our vendors' supply chains and due to restrictions imposed by federal, state, and local governments in response to increases in the number of COVID-19 cases in areas in which we operate;
The impact an economic downturn, inflationary pressures, and supply chain constraints resulting from the COVID-19 pandemic might have on our business and consumer demand for our products, and the effectiveness of stimulus payments and other measures to mitigate the impact of the COVID-19 pandemic might have on business and consumer spending;
The dependence of our business on consumer discretionary spending, the impact of a decrease in discretionary spending due to inflation or otherwise on our business, and our ability to predict or effectively react to changes in consumer demand or shopping patterns, including the short-term and long-term impact due to the COVID-19 pandemic;
Intense competition in the sporting goods industry and in retail, including competition for talent and the level of competitive promotional activity;
Increasing product costs, which could be caused by numerous reasons including foreign trade issues, currency exchange rate fluctuations, increasing prices for materials due to inflation or other reasons, supply chain delays and constraints, or foreign political instability;
Store closures due to the COVID-19 pandemic or civil disturbances;
Lawsuits or other claims arising from our response to the COVID-19 pandemic;
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;
13

Negative reactions from our customers or vendors regarding changes to our policies or advocacy efforts related to the sale of firearms and accessories;
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;
The potential impact of an increase to corporate tax rates;
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 vertical brand offerings, including product liability and product recalls, specialty concept stores, and GameChanger;
Disruptions or other problems with our information systems;
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;
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 due to current labor challenges or otherwise or the loss of Edward Stack or Lauren Hobart as executive officers;
Wage increases, which could adversely affect our financial results;
Disruption at our supply chain facilities or customer support center;
Disruption or cancellation of organized youth and adult sports programs as a result of the COVID-19 pandemic;
Poor performance of professional sports teams, professional team lockouts or strikes, retirement, serious injury or scandal involving key athletes, and disruptions to or cancellations of sports leagues and major sporting events due to the COVID-19 pandemic or otherwise;
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;
We are controlled by our Executive Chairman and his relatives, whose interests may differ from those of our other stockholders;
Risks related to our indebtedness, including the Convertible Senior Notes and the related bond hedge and warrant transactions;
Our current anti-takeover provisions, which could prevent or delay a change in control of the Company; and
The issuance of special or quarterly cash dividends and our repurchase activity, if any, pursuant to our share repurchase programs.
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 January 30, 2021, filed on March 24, 2021 (our “2020 Annual Report”). 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.

14

OVERVIEW
We are a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories. In addition to DICK’S Sporting Goods stores, we own and operate Golf Galaxy, Field & Stream and Public Lands specialty stores, as well as GameChanger, a youth sports mobile app for video streaming, scorekeeping, scheduling and communications. We also offer our products through an eCommerce platform that is integrated with our store network, providing our customers, referred to as our athletes, with the expertise and convenience 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 growth in consolidated same store sales, the strength of our gross margins derived from our omni-channel platform and our ability to control expenses. We have grown from 676 DICK’S Sporting Goods stores as of October 29, 2016 to 734 DICK’S Sporting Goods stores as of October 30, 2021. Our current real estate strategy has resulted in a reduction to the rate at which we open new DICK’S Sporting Goods stores in recent years. We intend to continue this strategy over the next few years, which will allow us to continue to leverage the significant flexibility within our existing real estate portfolio to capitalize on future real estate opportunities as leases come up for renewal. Our future real estate strategy will also include growth in new retail concepts and experiential store prototypes, including Public Lands and our House of Sport prototype. We deploy an in-house eCommerce platform, which allows for continued innovation and enhancements to our eCommerce websites and applications, new releases of our mobile and tablet apps, and the development of omni-channel capabilities that further integrate our online presence with our brick and mortar stores to increase athlete engagement, including ship-from-store; buy-online, pick-up in store and multi-channel marketing campaigns. We also implemented curbside pickup and returns in fiscal 2020 as additional alternatives for our athletes in response to the COVID-19 pandemic, which we have retained in fiscal 2021.
Our eCommerce sales penetration to total net sales increased from approximately 10% in fiscal 2015 to approximately 16% in fiscal 2019. Our eCommerce sales growth further accelerated during the COVID-19 pandemic. Compared to the 39 weeks ended November 2, 2019, eCommerce sales increased 115%, and eCommerce penetration has grown from 13% of total net sales in the 2019 year to date period to 19% for the 2021 year to date period. Approximately 70% of online sales during fiscal 2021 were fulfilled directly by our stores, which serve as localized points of distribution, and our stores enabled over 90% of our current quarter sales through online fulfillment and in-person sales.
COVID-19 Update
Following temporary store closures in March, April and May of 2020 due to the COVID-19 pandemic, our differentiated product assortment, supply chain, technological capabilities and omni-channel platform enabled us to capitalize on strong consumer demand across golf, outdoor activities, home fitness and active lifestyle categories, which resulted in a consolidated same store sales increase of 9.9% in fiscal 2020 as compared to fiscal 2019. These positive trends have continued into fiscal 2021, which, coupled with a resurgence in our team sports and licensed businesses due to the return of many youth and professional sports leagues across the country and economic stimulus measures, have resulted in a 45.6% increase in year to date net sales compared to the fiscal 2019 period, or a consolidated same store sales increase of 36.6% compared to the prior year period, during which our stores were temporarily closed.
In response to the COVID-19 pandemic, we closed our corporate headquarters, referred to as our customer support center, and performed our corporate support functions under remote work arrangements, which continue in a hybrid form today. We also implemented additional safety and cleaning protocols at our stores, distribution centers and corporate offices, and provided a 15% pay premium to our store and distribution center teammates through the end of fiscal 2020. We have incurred pre-tax COVID-related costs of $15 million thus far in fiscal 2021, compared to $124 million of similar costs in the year to date period ended October 31, 2020. Following the conclusion of our temporary 15% pay premium program, in fiscal 2021 we transitioned store and distribution center teammates to compensation programs with a longer-term focus, including an accelerated annual merit increase and higher wages. COVID-related costs decreased significantly beginning in the second quarter of 2021 compared to prior periods in consideration of guidance from the Centers for Disease Control and Prevention.
The effect that the COVID-19 pandemic may have on our future business remains uncertain, including the long-term economic outlook, inflation and its impact on consumer discretionary spending behavior when the pandemic ends. Additionally, COVID-19 has disrupted global supply chains, including factory closures and port congestion that have resulted in longer transit times and rising container and transportation costs, which we expect will remain elevated through at least the end of fiscal 2021. Although we have successfully managed these challenges thus far, our ability to continue to replenish our inventory to meet current levels of consumer demand could be impacted by further delays or disruptions to the flow of products from our key vendor partners and our vertical brand sources. Our current year outlook contemplates this uncertainty, and we plan to continue to actively manage any impacts of COVID-19 on our business.
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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 permanently 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, including investments in new and existing stores and in our eCommerce business, 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. See further discussion of our cash flows in the “Liquidity and Capital Resources” section herein.
Quality of merchandise offerings – To measure acceptance of our merchandise offerings, we monitor sell-throughs, inventory turns, gross margins and markdown rates at the department and style level. This analysis helps us to manage inventory levels to reduce working capital requirements and deliver optimal gross margins by improving merchandise flow, ensuring our in-stock positions are strong for key high demand items, 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.
 
CRITICAL ACCOUNTING POLICIES
As discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s 2020 Annual Report, we consider our policies on inventory valuation, business development allowances, goodwill and intangible assets, impairment of long-lived assets, 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. 

16

RESULTS OF OPERATIONS AND OTHER SELECTED DATA
Due to temporary store closures and other actions taken in fiscal 2020 in response to the emergence of the COVID-19 pandemic, our fiscal 2021 operating plan was based on our 2019 results. Accordingly, we have also included comparative results from fiscal 2019 in our discussion of quarterly and year to date results of operations for fiscal 2021.
Executive Summary 
Net sales increased 13.9% to $2.75 billion in the current quarter from $2.41 billion during the third quarter of 2020 and increased 40.0% from $1.96 billion during the third quarter of 2019.
Consolidated same store sales increased 12.2% from the third quarter of 2020, which was on top of a 23.2% year-over-year consolidated same store sales increase in last year’s quarter. Third quarter 2019 consolidated same store sales increased 6.0% compared to the 2018 quarter.
eCommerce sales increased 97% in the current quarter compared to the third quarter of 2019 and 1% compared to the third quarter of 2020.
In the current quarter, we reported net income of $316.5 million, or $2.78 per diluted share, compared to $177.2 million, or $1.84 per diluted share, during the third quarter of 2020. Net income was $57.6 million, or $0.66 per diluted share, in the third quarter of 2019.
The current quarter included $5.7 million of non-cash interest expense, net of tax, and earnings per diluted share included 12.8 million shares related to our Convertible Senior Notes that are designed to be offset at their conversion by our bond hedge. Together, these items decreased current quarter earnings per diluted share by $0.41.
Third quarter 2020 included $4.9 million of non-cash interest expense, net of tax, and earnings per diluted share included 6.0 million shares related to our Convertible Senior Notes that are designed to be offset at their conversion by our bond hedge. Together, these items decreased earnings per diluted share by $0.17 in the prior year quarter.
Third quarter 2020 results included approximately $48 million of pre-tax teammate compensation and safety costs related to COVID-19, or $0.37 per diluted share, net of tax.
During the third quarter of 2021, we:
Declared and paid $503 million in dividends, including a quarterly dividend and a special dividend in the amount of $5.50 per share, on our common stock and Class B common stock. The quarterly dividend in the amount of $0.4375 per share represented a 21% increase over our previous quarterly dividend per share;
Repurchased 2.17 million shares of common stock under our current repurchase program for a total of $273.4 million; and
Launched Public Lands, a new specialty omni-channel retail concept focusing on the active outdoor category.
17

The following table summarizes store openings and permanent store closures for the periods indicated:
Fiscal 2021Fiscal 2020
 
DICK’S Sporting Goods (1)
Specialty Concept Stores (2)
TotalDICK’S Sporting Goods
Specialty Concept Stores (2)
Total
Beginning stores
728 126 854 726 124 850 
Q1 New stores
— 
Q2 New stores
— 
Q3 New stores
11 
Closed stores — 
Ending stores
734 132 866 732 129 861 
Relocated stores— 12 15 
(1)Includes two new DICK'S House of Sport store prototypes which were relocations of former DICK'S Sporting Goods stores.
(2)Includes our Golf Galaxy, Field & Stream and Public Lands stores, as well as our outlet stores, excluding temporary locations. In some markets we operate DICK'S Sporting Goods stores adjacent to specialty concept stores on the same property with a pass-through for athletes. We refer to this format as a "combo store" and includes combo store openings within both the DICK'S Sporting Goods and specialty concept store reconciliations, as applicable.

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 comparable 2020 and 2019 periods, and other data, and are 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 Change in Percentage of Net Sales from Prior Year 2020-2021 (A)
Basis Point Change in Percentage of Net Sales from Two Years Ago 2019-2021 (A)
 13 Weeks Ended
 October 30, 2021
October 31, 2020 (A)
November 2,
2019 (A)
Net sales (1)
100.00 %100.00 %100.00 %N/AN/A
Cost of goods sold, including occupancy and distribution costs (2)
61.55 65.09 70.41 (354)(886)
Gross profit
38.45 34.91 29.59 354886
Selling, general and administrative expenses (3)
23.00 24.51 27.10 (151)