Exhibit No. 99.1
FOR IMMEDIATE RELEASE
Contact:
Investors:
Rick Nordvold
Golf Galaxy, Inc.
952-941-8848
Investors and media:
Susan Eich
For Golf Galaxy, Inc.
612-285-4188
GOLF GALAXY ANNOUNCES SECOND QUARTER FISCAL 2006 RESULTS
Company Reports Second Quarter Net Income of $5.4 million
Second Quarter Net Sales Increase More Than 46 Percent
EDEN PRAIRIE, Minn. – (Sept. 22, 2005) – Golf Galaxy, Inc. (Nasdaq: GGXY), a golf specialty retailer, today announced its financial results for the second quarter of fiscal 2006.
Net sales for the second quarter of fiscal 2006 increased 46.5 percent to $69.6 million, compared to $47.5 million in the same period of the prior year. The company reported net income for the quarter of $5.4 million, or 59 cents per diluted share on a GAAP basis, compared with net income of $3.5 million, or 46 cents per diluted share on a GAAP basis, in the second quarter of the prior year. Giving effect to the conversion of preferred shares and the company’s initial public offering as of the beginning of each period presented, pro-forma diluted earnings per share in the second quarter of fiscal 2006 increased 48.5 percent to 49 cents, compared with pro-forma diluted earnings per share of 33 cents in the second quarter of fiscal 2005. A reconciliation of pro-forma earnings per share is provided in a table that follows.
Comparable store sales increased 7.4 percent for the second quarter of fiscal 2006 compared to an increase of 5.9 percent for the second quarter of fiscal 2005. The company considers a store to become comparable in its 13th full month of operations.
Net sales for the six months ended Aug. 27, 2005 increased 49.1 percent to $128.2 million, compared with $86.0 million in the 2005 fiscal period. Golf Galaxy reported net income of $7.1 million, or 83 cents per diluted share on a GAAP basis, for the six months ended Aug. 27, 2005, compared with net income of $4.6 million, or 60 cents per diluted share on a GAAP basis, for the first six months of the prior fiscal year. Pro-forma diluted earnings per share for the six months of fiscal 2006 increased 48.8 percent to 64 cents, compared to 43 cents per diluted share for the six months ended Aug. 28, 2004. Comparable store sales increased 8.8 percent in the first six-months of fiscal 2006, compared to an increase of 6.6 percent in the same period of fiscal 2005.
“We are pleased with our results in the second quarter, which is our most important quarter from both a sales and profit standpoint,” said Randy Zanatta, president, chief executive officer and chairman. “We not only achieved strong sales and earnings in the quarter, but also completed our initial public offering. We believe this demonstrates the capacity of the company and the depth of the Golf Galaxy team.”
Golf Galaxy opened 11 new stores in the first six months of the fiscal year. At the end of second quarter fiscal 2006 Golf Galaxy operated 45 stores in 19 states.
On Aug. 3, 2005, Golf Galaxy completed its initial public offering of 4,542,500 shares of common stock, of which 3,000,000 were offered by the company, at a price of $14.00 per share. As part of the offering, existing preferred stock was converted to common stock and a portion of the proceeds of the offering was used to pay accumulated dividends to preferred shareholders.
Company Outlook
The company said that for the third quarter of fiscal 2006:
• Sales are currently expected to be $30 million to $32 million, an increase of 48 percent to 58 percent over the third quarter of fiscal 2005;
• Comparable store sales are currently expected to increase 2 percent to 6 percent; and
• The company currently expects a net loss of $2.2 million to $1.8 million.
The company further said that for fiscal 2006:
• Sales are currently expected to be $197 million to $202 million, an increase of 48 percent to 52 percent over fiscal 2005;
• Comparable store sales are currently expected to increase 6 percent to 8 percent;
• Net income is currently expected to be $4.5 million to $5.1 million; and
• The company remains on track to open 16 new stores in the current fiscal year, having recently announced four stores to be opened in November 2005.
Golf Galaxy said that sales were negatively affected in the weeks following Hurricane Katrina. Furthermore, higher gasoline and energy prices are resulting in higher freight costs and utilities expenses at the company’s stores, and may impact consumer spending. The company’s outlook for fiscal 2006 reflects the company’s best estimates at this time of the anticipated impact of these events on its future results.
Conference Call and Webcast
Golf Galaxy will hold its second quarter earnings conference call at 10am CDT today, Sept. 22, 2005. Interested parties may listen to the call by dialing 866-800-8652 or international 617-614-2705 (passcode: 56110018). A live webcast will also be available on www.golfgalaxy.com. Interested parties should dial into the conference call or access the webcast approximately 10-15 minutes before the scheduled start time. A replay will be available approximately one hour after the conference call concludes and will remain available through Sept. 29. The replay number is 888-286-8010 or international 617-801-6888 (passcode: 50710641). The webcast will be archived on www.golfgalaxy.com for approximately one year.
About Golf Galaxy, Inc.
Golf Galaxy, Inc., based in Eden Prairie, Minn., owns and operates golf specialty retail stores. The company currently operates 45 stores in 19 states and an ecommerce website. The company’s Everything for the Game® merchandising strategy offers a comprehensive selection of competitively priced brand name golf equipment, accessories, apparel, golf services, and golf instruction by on-staff certified PGA professionals in a unique interactive store environment. For more information visit www.golfgalaxy.com
Cautionary Statement
This news release contains forward-looking statements about Golf Galaxy and readers should not place undue reliance on any forward-looking statements that are current only as of the date made. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those expressed in forward-looking statements. The factors listed below, among others, could cause the company’s actual financial performance to differ materially from that expressed in any forward-looking statement: A decline in the popularity of golf or golf-related products and services; limitations imposed by suppliers on the amount or variety of products; failure by suppliers to develop and introduce new products or if new products result in excessive close-outs of existing inventories; seasonal fluctuation in demand for products; weather conditions; ability to successfully implement growth plan; competition in the golf and sporting goods industry; a decline in discretionary spending; availability of adequate capital to fund growth; and loss of key management. Additional information concerning these and other factors that could cause actual results to differ materially from those in the forward-looking statements is included in the company’s prospectus in its Form S-1 Registration Statement on file with the Securities and Exchange Commission. The foregoing list should not be construed as exhaustive and Golf Galaxy disclaims any obligation subsequently to revise or update any previously made forward-looking statements, whether as a result of new information, future events or otherwise.
Tables Follow
GOLF GALAXY, INC.
CONDENSED BALANCE SHEETS
(In Thousands)
|
| August 27, |
| August 28, |
| February 26, |
| |||
|
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|
|
|
|
|
| |||
Assets |
|
|
|
|
|
|
| |||
Current assets: |
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| $ | 26,387 |
| $ | 14,084 |
| $ | 3,245 |
|
Accounts receivable, net |
| 8,118 |
| 3,845 |
| 3,455 |
| |||
Inventories, net |
| 36,694 |
| 21,774 |
| 30,415 |
| |||
Prepaid expenses and other current assets |
| 3,967 |
| 4,673 |
| 3,510 |
| |||
Total current assets |
| 75,166 |
| 44,376 |
| 40,625 |
| |||
Property and equipment, net |
| 23,434 |
| 13,576 |
| 21,832 |
| |||
Other assets |
| 2,562 |
| 2,141 |
| 2,680 |
| |||
Total assets |
| $ | 101,162 |
| $ | 60,093 |
| $ | 65,137 |
|
|
|
|
|
|
|
|
| |||
Liabilities and shareholders’ equity (deficit) |
|
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|
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|
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Current liabilities: |
|
|
|
|
|
|
| |||
Accounts payable |
| $ | 21,984 |
| $ | 16,877 |
| $ | 15,826 |
|
Accrued liabilities |
| 12,183 |
| 10,151 |
| 11,675 |
| |||
Total current liabilities |
| 34,167 |
| 27,028 |
| 27,501 |
| |||
Deferred rent credits and other |
| 10,664 |
| 5,299 |
| 6,831 |
| |||
Redeemable convertible preferred stock, including accumulated preferred stock dividends |
| — |
| 46,865 |
| 48,741 |
| |||
Shareholders’ equity (deficit) |
| 56,331 |
| (19,099 | ) | (17,936 | ) | |||
Total liabilities and shareholders’ equity |
| $ | 101,162 |
| $ | 60,093 |
| $ | 65,137 |
|
(1) The Balance Sheet as of February 26, 2005 has been condensed from the audited financial statements.
GOLF GALAXY, INC.
CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
(In Thousands, Except Share and Per Share Amounts)
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| August 27, |
| August 28, |
| August 27, |
| August 28, |
| ||||
Net sales |
| $ | 69,635 |
| $ | 47,540 |
| $ | 128,205 |
| $ | 85,959 |
|
Cost of sales |
| 47,565 |
| 32,665 |
| 87,907 |
| 59,521 |
| ||||
Gross profit |
| 22,070 |
| 14,875 |
| 40,298 |
| 26,438 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Store operating |
| 10,773 |
| 7,127 |
| 21,705 |
| 14,099 |
| ||||
General and administrative |
| 2,155 |
| 1,842 |
| 5,257 |
| 3,989 |
| ||||
Preopening |
| 40 |
| 46 |
| 1,350 |
| 564 |
| ||||
Income from operations |
| 9,102 |
| 5,860 |
| 11,986 |
| 7,786 |
| ||||
Interest income (expense), net |
| 100 |
| 4 |
| 115 |
| (32 | ) | ||||
Income before income taxes |
| 9,202 |
| 5,864 |
| 12,101 |
| 7,754 |
| ||||
Income tax expense |
| (3,755 | ) | (2,351 | ) | (4,961 | ) | (3,116 | ) | ||||
Net income |
| 5,447 |
| 3,513 |
| 7,140 |
| 4,638 |
| ||||
Less preferred stock dividends |
| (723 | ) | (919 | ) | (1,721 | ) | (1,820 | ) | ||||
Net income applicable to common shareholders |
| $ | 4,724 |
| $ | 2,594 |
| $ | 5,419 |
| $ | 2,818 |
|
Net income per share: |
|
|
|
|
|
|
|
|
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Basic |
| $ | 0.98 |
| $ | 1.39 |
| $ | 1.62 |
| $ | 1.51 |
|
Diluted |
| $ | 0.59 |
| $ | 0.46 |
| $ | 0.83 |
| $ | 0.60 |
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 4,801,458 |
| 1,861,945 |
| 3,342,714 |
| 1,861,945 |
| ||||
Diluted |
| 9,211,662 |
| 7,703,512 |
| 8,634,726 |
| 7,703,512 |
| ||||
GOLF GALAXY, INC.
CONDENSED STATEMENTS OF OPERATIONS – UNAUDITED
PRO-FORMA EARNINGS PER SHARE
(In Thousands, Except Share and Per Share Amounts)
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| August 27, |
| August 28, |
| August 27, |
| August 28, |
| ||||
Pro-Forma Information (1) |
|
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Pro-forma net income applicable to common shareholders |
| $ | 5,447 |
| $ | 3,513 |
| $ | 7,140 |
| $ | 4,638 |
|
Pro-forma net income per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.51 |
| $ | 0.33 |
| $ | 0.67 |
| $ | 0.44 |
|
Diluted |
| $ | 0.49 |
| $ | 0.33 |
| $ | 0.64 |
| $ | 0.43 |
|
Pro-forma weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 10,636,436 |
| 10,614,412 |
| 10,636,436 |
| 10,614,412 |
| ||||
Diluted |
| 11,211,662 |
| 10,703,512 |
| 11,134,726 |
| 10,703,512 |
| ||||
|
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|
| ||||
Reconciliation of pro-forma information to GAAP |
|
|
|
|
|
|
|
|
| ||||
Net income applicable to common shareholders (GAAP) |
| $ | 4,724 |
| $ | 2,594 |
| $ | 5,419 |
| $ | 2,818 |
|
Preferred Stock Dividends |
| 723 |
| 919 |
| 1,721 |
| 1,820 |
| ||||
Net income applicable to common shareholders (Pro-forma) |
| $ | 5,447 |
| $ | 3,513 |
| $ | 7,140 |
| $ | 4,638 |
|
Basic |
|
|
|
|
|
|
|
|
| ||||
Weighted average number of shares outstanding (GAAP) |
| 4,801,458 |
| 1,861,945 |
| 3,342,714 |
| 1,861,945 |
| ||||
Conversion of preferred stock to common |
| 3,834,978 |
| 5,752,467 |
| 4,793,722 |
| 5,752,467 |
| ||||
Weighted average additional shares issued in IPO |
| 2,000,000 |
| 3,000,000 |
| 2,500,000 |
| 3,000,000 |
| ||||
Weighted average number of shares outstanding (Pro-forma) |
| 10,636,436 |
| 10,614,412 |
| 10,636,436 |
| 10,614,412 |
| ||||
Diluted |
|
|
|
|
|
|
|
|
| ||||
Weighted average number of shares outstanding (GAAP) |
| 9,211,662 |
| 7,703,512 |
| 8,634,726 |
| 7,703,512 |
| ||||
Weighted average additional shares issued in IPO |
| 2,000,000 |
| 3,000,000 |
| 2,500,000 |
| 3,000,000 |
| ||||
Weighted average number of shares outstanding (Pro-forma) |
| 11,211,662 |
| 10,703,512 |
| 11,134,726 |
| 10,703,512 |
| ||||
(1) The Company believes the use of pro-forma results provides important supplemental information due to the significant increase in common shares outstanding resulting from the Company’s initial public offering and the conversion of the convertible preferred stock into shares of common stock effective on August 3, 2005. The pro-forma information is presented as if these events had occurred immediately prior to the beginning of each period presented.