Exhibit 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 2007 RESULTS
Net Income Up 29 percent to $7.0 million, or $0.61 per Diluted Share
Second Quarter Performance Summary | |
| | Three Months Ended | |
($ in thousands, except per share amounts) | | Aug. 26, 2006 | | Aug. 27, 2005 | |
Net sales | | $ | 95,646 | | $ | 69,635 | |
Comparable store sales% increase1 | | 0.8 | % | 7.4 | % |
Net income | | $ | 7,001 | | $ | 5,447 | |
Diluted EPS | | $ | 0.61 | | $ | 0.59 | |
Pro-Forma Diluted EPS2 | | NA | | $ | 0.49 | |
1 A new or relocated store is included in comparable store results after it has been in operation for 12 full fiscal months following the month of the store’s grand opening weekend, typically a store’s 13th full month of operations.
2 Pro-forma results for the quarter ended Aug. 27, 2005 are presented as if the company’s initial public offering and the conversion of preferred stock into shares of common stock had occurred immediately prior to the beginning of the quarter. Pro-forma results are not a measure of performance presented in accordance with GAAP and are intended to be a supplement, but not a substitute for net income or other financial data prepared in accordance with GAAP. The company believes the use of pro-forma results provides a consistent measure of profitability as well as 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 as of Aug. 3, 2005.
EDEN PRAIRIE, Minn. — (Sept. 19, 2006) — Golf Galaxy, Inc. (Nasdaq: GGXY), a leading golf specialty retailer, today announced its financial results for the second quarter ended Aug. 26, 2006.
Net sales for the second quarter of fiscal 2007 increased 37.4 percent to $95.6 million, compared with $69.6 million for the same period of the prior year. Comparable store sales increased 0.8 percent for the fiscal second quarter, compared to an increase of 7.4 percent for the second quarter of fiscal 2006. The current quarter marked the company’s fourteenth consecutive quarter of comparable store sales increases.
The company reported net income for the second quarter of $7.0 million, or 61 cents per diluted share, compared to net income of $5.4 million, or 59 cents per diluted share, for the second quarter of fiscal 2006. Giving effect to the conversion of preferred shares and the company’s initial public offering as of the beginning of fiscal 2006, the company’s pro-forma diluted earnings per share for the second quarter of fiscal 2006 would have been 49 cents. A reconciliation of pro-forma net income and earnings per share is provided in a table that follows.
“Thanks to outstanding execution by our employees, we produced solid earnings performance this quarter despite a more cautious consumer environment,” said Randy Zanatta, Golf Galaxy’s president and chief executive officer. “Our improvement in gross margins, effective inventory management and diligent expense control demonstrates the depth of our management teams and the strength of our operating model. We are pleased to see a strengthening of our sales trend which began in mid-August and has continued into September.”
Net sales for the six months ended Aug. 26, 2006 increased 39.0 percent to $178.2 million, compared with $128.2 million in the 2006 fiscal period. Golf Galaxy reported net income of $9.6 million, or 83 cents per diluted share for the six months ended Aug. 26, 2006, compared with net income of $7.1 million, or 83 cents per diluted share, for the six months ended Aug. 27, 2005. Pro-forma diluted earnings per share were 64 cents for the six months of fiscal 2006. Comparable store sales increased 0.9 percent in the first six months of fiscal 2007, compared to an increase of 8.8 percent in the same period of fiscal 2006.
Company Outlook
The company said that for the third quarter ending Nov. 25, 2006:
· Net sales are currently expected to be $45 million to $50 million, an increase of 42 percent to 57 percent over the third quarter of fiscal 2006;
· Comparable store sales are currently expected to increase in the mid single digits; and
· The company currently expects a net loss of $2.7 million to $2.3 million, or 25 cents to 21 cents per diluted share (assuming 11.0 million weighted average shares outstanding). The company typically reports a net loss in its third quarter as a result of the seasonality of its business.
The company said that for the fiscal year ending March 3, 2007, a 53-week period:
· Net sales are currently expected to be $285 million to $295 million, compared with its prior estimate of $292 million to $300 million; and
· Comparable store sales are now estimated to increase 2 percent to 4 percent, compared with the prior estimate of 3 percent to 5 percent; and
· The company reaffirmed its previous guidance of net income for fiscal 2007 of $6.8 million to $7.3 million, or 60 cents to 64 cents per diluted share (assuming 11.4 million weighted average shares outstanding). Golf Galaxy’s guidance on net income for fiscal 2007 includes estimated expenses of approximately $900,000, or 8 cents per diluted share, from the expensing of stock options.
Conference Call and Webcast
Golf Galaxy will hold its second quarter earnings conference call at 10 a.m. CDT today, Sept. 19, 2006. Interested parties may listen to the call by dialing 866-383-8119 or international 617-597-5344 (passcode: 61547201). 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. 26. The replay number is 888-286-8010 or international 617-801-6888 (passcode: 14888743). The webcast will be archived on www.GolfGalaxy.com for approximately one year.
About Golf Galaxy
Golf Galaxy, Inc., based in Eden Prairie, Minn., is a multi-channel golf specialty retailer. The company currently operates 61 stores in 24 states, ecommerce websites and catalog operations. 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. The GolfWorks, a leading brand for golf club components, clubmaking tools and technical information, is a wholly owned subsidiary of Golf Galaxy. For more information, visit www.GolfGalaxy.com and www.GolfWorks.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; loss of key management; and the company’s ability to successfully integrate acquired companies, including The GolfWorks. 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 annual report on Form 10-K filed with the Securities and Exchange Commission on May 3, 2006. 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 STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Amounts)
| | Three Months Ended
(Unaudited) | | Six Months Ended
(Unaudited) | |
| | Aug. 26, 2006 | | Aug. 27, 2005 | | Aug. 26, 2006 | | Aug. 27, 2005 | |
Net sales | | $ | 95,646 | | $ | 69,635 | | $ | 178,163 | | $ | 128,205 | |
Cost of sales | | 64,322 | | 47,565 | | 120,541 | | 87,907 | |
Gross profit | | 31,324 | | 22,070 | | 57,622 | | 40,298 | |
Operating expenses: | | | | | | | | | |
Retail operating | | 14,895 | | 10,773 | | 30,712 | | 21,705 | |
General and administrative | | 4,457 | | 2,155 | | 8,939 | | 5,257 | |
Preopening | | 126 | | 40 | | 1,774 | | 1,350 | |
Income from operations | | 11,846 | | 9,102 | | 16,197 | | 11,986 | |
Interest income, net | | 75 | | 100 | | 83 | | 115 | |
Income before income taxes | | 11,921 | | 9,202 | | 16,280 | | 12,101 | |
Income tax expense | | (4,920 | ) | (3,755 | ) | (6,707 | ) | (4,961 | ) |
Net income | | 7,001 | | 5,447 | | 9,573 | | 7,140 | |
Less preferred stock dividends | | — | | (723 | ) | — | | (1,721 | ) |
Net income applicable to common shareholders | | $ | 7,001 | | $ | 4,724 | | $ | 9,573 | | $ | 5,419 | |
Net income per share: | | | | | | | | | |
Basic | | $ | 0.64 | | $ | 0.98 | | $ | 0.87 | | $ | 1.62 | |
Diluted | | $ | 0.61 | | $ | 0.59 | | $ | 0.83 | | $ | 0.83 | |
Weighted average number of shares outstanding: | | | | | | | | | |
Basic | | 10,999,356 | | 4,801,458 | | 10,945,096 | | 3,342,714 | |
Diluted | | 11,432,419 | | 9,211,662 | | 11,487,024 | | 8,634,726 | |
GOLF GALAXY, INC.
CONDENSED BALANCE SHEETS
(In Thousands)
| | Aug. 26,
2006
Unaudited | | Aug. 27,
2005
Unaudited | | Feb. 25,
2006(1) | |
Assets | | | | | | | |
Current Assets: | | | | | | | |
Cash and cash equivalents | | $ | 9,850 | | $ | 26,387 | | $ | 11,075 | |
Accounts receivable, net | | 9,794 | | 8,118 | | 4,523 | |
Inventories, net | | 55,141 | | 36,694 | | 45,278 | |
Other current assets | | 3,729 | | 3,967 | | 5,196 | |
| | 78,514 | | 75,166 | | 66,072 | |
| | | | | | | |
Property and equipment, net | | 39,813 | | 23,434 | | 35,218 | |
Goodwill & intangible assets, net | | 9,512 | | — | | — | |
Deferred tax assets & other | | 5,292 | | 2,562 | | 5,257 | |
| | | | | | | |
Total assets | | $ | 133,131 | | $ | 101,162 | | $ | 106,547 | |
| | | | | | | |
Liabilities and stockholders’ equity | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | $ | 27,582 | | $ | 21,984 | | $ | 23,224 | |
Accrued liabilities | | 16,801 | | 12,183 | | 16,453 | |
Total current liabilities | | 44,383 | | 34,167 | | 39,677 | |
| | | | | | | |
Deferred rent credits and other | | 16,824 | | 10,664 | | 12,177 | |
Redeemable convertible preferred stock, including accumulated preferred stock dividends | | — | | — | | — | |
Stockholders’ Equity | | 71,924 | | 56,331 | | 54,693 | |
| | | | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 133,131 | | $ | 101,162 | | $ | 106,547 | |
(1) The Balance Sheet as of February 25, 2006 has been condensed from the audited financial statements.
GOLF GALAXY, INC.
CONDENSED STATEMENTS OF OPERATIONS — UNAUDITED
PRO-FORMA EARNINGS PER SHARE
(In Thousands, Except Share and Per Share Amounts)
| | Three Months
Ended
(Unaudited) | | Six Months
Ended
(Unaudited) | |
| | August 27,
2005 | | August 27,
2005 | |
Pro-Forma Information(1) | | | | | |
Pro-forma net income applicable to common shareholders | | $ | 5,447 | | $ | 7,140 | |
Pro-forma net income per share: | | | | | |
Basic | | $ | 0.51 | | $ | 0.67 | |
Diluted | | $ | 0.49 | | $ | 0.64 | |
Pro-forma weighted average number of shares outstanding: | | | | | |
Basic | | 10,636,436 | | 10,636,436 | |
Diluted | | 11,211,662 | | 11,134,726 | |
| | | | | |
Reconciliation of pro-forma information to GAAP | | | | | |
Net income applicable to common shareholders (GAAP) | | $ | 4,724 | | $ | 5,419 | |
Preferred Stock Dividends | | 723 | | 1,721 | |
Net income applicable to common shareholders (Pro-forma) | | $ | 5,447 | | $ | 7,140 | |
Basic | | | | | |
Weighted average number of shares outstanding (GAAP) | | 4,801,458 | | 3,342,714 | |
Conversion of preferred stock to common | | 3,834,978 | | 4,793,722 | |
Weighted average additional shares issued in IPO | | 2,000,000 | | 2,500,000 | |
Weighted average number of shares outstanding (Pro-forma) | | 10,636,436 | | 10,636,436 | |
Diluted | | | | | |
Weighted average number of shares outstanding (GAAP) | | 9,211,662 | | 8,634,726 | |
Weighted average additional shares issued in IPO | | 2,000,000 | | 2,500,000 | |
Weighted average number of shares outstanding (Pro-forma) | | 11,211,662 | | 11,134,726 | |
(1) Pro-forma results for the three and six-month periods ended Aug. 27, 2005 are presented as if the company’s initial public offering and the conversion of preferred stock into shares of common stock had occurred immediately prior to the beginning of fiscal 2006. Pro-forma results are not a measure of performance presented in accordance with GAAP and are intended to be a supplement, but not a substitute for net income or other financial data prepared in accordance with GAAP. The company believes the use of pro-forma results provides a consistent measure of profitability as well as 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 as of Aug. 3, 2005.
