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 uncertain impact of inflation and its impact on consumer discretionary spending; supply chain disruptions, including factory closures and port congestion, which are resulting in rising container and transportation costs; 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 and our plans to add new retail concepts and experiential stores; 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 and relocations; plans to return capital to stockholders through dividends and in 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 2022 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 COVID-19 on our business, operations and financial results, including the 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; ?Challenging macroeconomic conditions, including inflationary pressures and supply chain constraints, due to COVID-19, the conflict in Ukraine or otherwise; decreases in consumer demand for our products; and the effectiveness of measures to mitigate such impact on our 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 COVID-19;
?Lawsuits or other claims arising out of our response to COVID-19;
?Disruptions to our e-commerce platform, including interruptions, delays or downtime caused by high user or transaction volumes; deficiencies in design or implementation; or platform improvements;
?Sellers continue to sell or increasingly sell their products directly to customers or through expanded or alternative distribution channels;
?Adverse feedback from our customers or suppliers regarding changes to our policies or our advocacy efforts related to the sale of firearms and accessories;
? That our strategic plans and initiatives may initially negatively impact our financial results, or that such plans and initiatives may not achieve the desired results in a timely manner or at all;
•The impact of an increase in 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;
13
--------------------------------------------------------------------------------
Table of Contents
? 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 related to changes in laws and regulations affecting our business, including consumer products; firearms and ammunition; taxation, foreign trade; work; Data protection; privacy; and environmental, social and governance issues;
?Litigation risks for which we do not have sufficient insurance or other coverage;
?Our ability to secure and protect our trademarks and other intellectual property rights and defend intellectual property infringement claims;
?Our ability to protect the reputation of our Company and our brands;
?Our ability to attract, develop, engage and retain qualified officers and associates due to current or otherwise labor challenges or loss of Edward Stack or Lauren Hobart as executive corporate officers;
?The impact of salary increases on our financial results;
?Disruptions to our supply chain facilities or customer care center;
?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 major sporting events or organized youth and adult sports programs due to COVID-19 or otherwise; ?Weather-related disruptions, unusual seasonal weather patterns and the overall 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 close associates, whose interests may differ from those of our other shareholders;
?Risks related to our indebtedness, including the senior notes due 2032 (the "2032 Notes") and senior notes due 2052 (the "2052 Notes" and together with the 2032 Notes, the "Senior Notes"), the Convertible Senior Notes and the related bond hedge and warrant transactions;
?Our current anti-takeover provisions, which could prevent or delay a change of control of the Company; and
? The issuance of special or quarterly cash dividends and our buyback activities, if any, in accordance with our share buyback 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 29, 2022, filed on March 23, 2022 (our "2021 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.
PREVIEW
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, Public Lands and Going Going Gone! specialty
concept stores and sell our products both online and through our mobile apps. We
also own and operate DICK'S House of Sport and Golf Galaxy Performance Center,
as well as GameChanger, a youth sports mobile app for video streaming,
scorekeeping, scheduling and communications. 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.
14
--------------------------------------------------------------------------------
Table of Contents
Our profitability is primarily influenced by growth in comparable store sales,
the strength of gross margins derived from our omni-channel platform and our
ability to manage expenses. As part of our ongoing real estate strategy, over
the past few years we have reduced the rate at which we open new stores, and as
of April 30, 2022, we operated 729 DICK'S Sporting Goods stores and 129 other
specialty concept stores across the United States. Our recent real estate
strategy allows us to leverage the flexibility within our existing real estate
portfolio by capitalizing on favorable opportunities as leases come up for
renewal. In 2022, we expect our real estate strategy will continue to also
include growth in new retail concepts and experiential stores. Our eCommerce
platform allows for continued innovation and enhancements to our 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 or curbside and multi-channel
marketing campaigns. During the current quarter, our stores enabled over 90% of
total sales, serving both our in-store athletes and providing over 800 forward
points of distribution for digital fulfillment of orders.
Macroeconomic outlook
The macroeconomic environment in which we operate remains uncertain. COVID-19 has disrupted global labor markets and supply chains, including factory closures and port congestion, which has resulted in longer transit times and rising container and transportation costs that we expect will continue to remain elevated in the near term. Additionally, fuel prices continue to rise and have been affected by the ongoing conflict in Ukraine, contributing to an inflationary environment. Although we have successfully managed these issues thus far, the longer term effect of these challenges and any actions to mitigate them may impact consumer discretionary spending behavior. Our revised fiscal 2022 outlook contemplates this uncertainty, as we continue to actively monitor this rapidly evolving environment.
How we evaluate our operations
Senior management focuses on certain key indicators to monitor our performance, including:
?Comparable store sales performance - Our management considers comparable store sales, which includes online sales, to be an important indicator of our current performance. Comparable store sales results are important to leverage our costs, which include occupancy costs, store payroll and other store expenses. Comparable store sales also have a direct impact on our total net sales, net income, cash and working capital. A store is included in the comparable store sales calculation during the same fiscal period that it commences its 14th full month of operations. Relocated stores are included in the comparable store sales calculation from the open date of the original location. Stores that were permanently closed during the applicable period have been excluded from comparable store sales results. See further discussion of our comparable store sales in the "Results of Operations and Other Selected Data" section herein. ?Earnings before taxes and the related operating margin - Our management views operating margin and earnings before taxes as key indicators of our performance. The key drivers of earnings before taxes are comparable 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, which include investments in new and existing stores and our eCommerce channel, distribution and administrative facilities, continuous improvements to 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 experience lower operating cash flows in our third fiscal quarter due to increased inventory purchases in advance of the holiday selling season, which typically normalizes in our fourth fiscal quarter. See further discussion of our cash flows in the "Liquidity and Capital Resources" section herein. ?Quality of merchandise offerings - To measure effectiveness 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 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 performance at the store level, we monitor a variety of metrics, including new store productivity, sales per square foot, store operating contribution margin, and store cash flow.
CRITICAL ACCOUNTING METHODS
As discussed in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Company's 2021 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.
15
--------------------------------------------------------------------------------
Table of Contents
RESULTS OF OPERATIONS AND OTHER SELECTED DATA
Summary
•Net sales decreased 7.5% to $2.70 billion in the current quarter from $2.92 billion during the first quarter of 2021, which included a decrease in comparable store sales of 8.4% following a 117% increase in the same period last year. •In the current quarter, we reported net income of $260.6 million, or $2.47 per diluted share, compared to $361.8 million, or $3.41 per diluted share, during the first quarter of 2021. •In consideration of our adoption of ASU 2020-06 in fiscal 2022, current quarter earnings per diluted share assumes that our Convertible Senior Notes are settled in shares of our common stock. As a result, the current quarter earnings per diluted share excludes $8.2 million of interest expense, net of tax, and includes 17.1 million diluted shares related to the Convertible Senior Notes, which together, decreased earnings per diluted share by $0.38 during the first quarter of 2022. Due to our intent to settle the principal of the Convertible Senior Notes in cash and the shares we expect to receive from our convertible bond hedge, which is designed to offset dilution, we do not expect the Convertible Senior Notes will have a dilutive effect upon conversion. •Net income in the first quarter of 2021 included approximately $13 million of pre-tax COVID-related safety costs, or $0.09 per diluted share, net of tax. Additionally, the first quarter of 2021 included $5.4 million of non-cash interest expense, net of tax, and earnings per diluted share included 9.2 million shares related to the Convertible Senior Notes that are designed to be offset at conversion by our bond hedge, which together decreased earnings per diluted share by $0.38 in the prior year quarter.
•During the first quarter of 2022, we:
•Exchanged $100 million aggregate principal amount of our 3.25% Convertible Senior Notes and unwound the applicable portion of the convertible bond hedge and warrants for $100 million of cash and 1.8 million shares of our common stock;
• Declared and paid a quarterly cash dividend in the amount of $0.4875 per share of our common stock and class B common stock; and,
• Repurchased 0.4 million common shares for a total cost of $42.2 million under our share buyback program.
•The following table summarizes store openings and permanent store closures for
the periods indicated:
Fiscal 2022 Fiscal 2021
DICK'S Sporting Specialty Concept DICK'S Sporting Specialty Concept
Goods (1) Stores (2) Total Goods (1) Stores (2) Total
Beginning stores 730 131 861 728 126 854
Q1 New stores - 1 1 2 - 2
Closed stores 1 3 4 - 1 1
Ending stores 729 129 858 730 125 855
Relocated stores 1 - 1 3 - 3
(1)Includes two DICK’S House of Sport stores.
(2)Includes our Golf Galaxy, Field & Stream, Public Lands and Going Going Gone!
stores, and excludes temporary Warehouse Sale store locations. 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 our athletes. 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. As of April 30, 2022, the Company operated 25 combo stores.
16
--------------------------------------------------------------------------------
Table of Contents
The following table presents 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 2021 period, and other data,
and is provided to facilitate a further understanding of our business. This
table 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.
13 Weeks Ended Basis Point Change
in Percentage of
Net Sales from
May 1, Prior Year
April 30, 2022 2021 (A) 2021-2022 (A)
Net sales (1) 100.00 % 100.00 % N/A
Cost of goods sold, including occupancy and distribution costs (2)
63.53 62.70 83 Gross profit 36.47 37.30 (83) Selling, general and administrative expenses (3) 22.79 20.84 195 Pre-opening expenses (4) 0.11 0.15 (4) Income from operations 13.57 16.30 (273) Interest expense 0.95 0.46 49 Other expense (income) 0.33 (0.25) 58 Income before income taxes 12.29 16.10 (381) Provision for income taxes 2.64 3.70 (106) Net income 9.65 % 12.39 % (274) Other Data: Comparable store sales (decrease) increase (5) (8.4 %) 117.1 % Number of stores at end of period (6) 858 855 Total square feet at end of period (6) 42,306,455 42,096,539
(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 or 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 the store opens. (5)Beginning in fiscal 2022, we revised our method for determining comparable store sales calculations to include relocated store locations. Prior year information is revised to reflect this change for comparability purposes. See additional details in Exhibit 99.2 of Form 8-K as filed with the SEC on March 8, 2022.
(6) Includes our DICK’S Sporting GoodsGalaxy Golf, Field and flow, Public Lands and Going Going Gone! stores. Excludes temporary locations.
17
--------------------------------------------------------------------------------
Table of Contents
13 weeks completed April 30, 2022 Compared to 13 weeks ended May 1, 2021
Net sales
Net sales decreased approximately 7.5% to $2,700.2 million in the current quarter from $2,918.7 million in the quarter ended May 1, 2021, due primarily to a $239.1 million, or 8.4%, decrease in comparable store sales, partially offset by a $20.6 million increase in net sales primarily attributable to new stores. The decrease in comparable store sales included a 6.4% decrease in transactions and a 2.0% decrease in sales per transaction and reflects last year's favorable sales impact following government stimulus payments as well as anticipated sales normalization in certain categories, including fitness and outdoor equipment.
Income from operations
Operating profit decreased to $366.5 million in the current quarter compared to $475.8 million for the quarter ended May 1, 2021.
Gross profit decreased to $984.7 million in the current quarter from $1,088.6 million for the quarter ended May 1, 2021 and decreased as a percentage of net sales by approximately 83 basis points. Merchandise margins increased 143 basis points as a result of our differentiated product assortment combined with our disciplined promotional strategies, as well as favorable sales mix. These merchandise margin improvements, however, were more than offset by a 103 basis point increase in supply chain related costs, primarily due to continuing global disruptions following the start of COVID-19, and occupancy deleverage of 94 basis points. Occupancy costs, which after the cost of merchandise represents the largest item within our cost of goods sold, are generally fixed on a per store basis and fluctuate based on the number of stores that we operate. Our occupancy costs increased $6.4 million compared to the prior year quarter. Selling, general and administrative expenses increased to $615.3 million in the current quarter from $608.3 million during the first quarter of 2021, and increased as a percentage of net sales by 195 basis points primarily due to the decrease in net sales. The $7.0 million increase was driven by investments in hourly wage rates and talent to support our growth strategies, along with higher brand-building marketing expenses, offset by lower incentive compensation expense and a $17 million net cost reduction compared to the prior year quarter related to changes in the investment values of our deferred compensation plans, for which the corresponding investment change was recognized in Other Expense. In addition, selling, general and administrative expense included approximately $13 million of COVID-related costs in the prior year quarter.
Interest charges
Interest expense increased to $25.6 million in the current quarter from $13.4 million in the prior year quarter. The increase was primarily due to $13.8 million of interest expense related to the $1.5 billion Senior Notes issued during the fourth quarter of 2021. Current quarter interest expense also included a $5.8 million inducement charge related to the exchange of $100 million aggregate principal amount of the Convertible Senior Notes, which was offset by a $6.5 million decrease in non-cash interest expense due to our adoption of ASU 2020-06; see Part I. Item 1. Financial Statements, Note 1-Description of Business and Basis of Presentation for additional details.
Other expenses (income)
Other expense totaled $9.0 million in the current quarter compared to other income of $7.4 million in the prior year quarter. Substantially all of the change was due to changes in our deferred compensation plan investment values, which we account for by recognizing investment income or expense and recording an offsetting charge or reduction to selling, general and administrative costs.
Income taxes
Our effective tax rate decreased to 21.5% in the current quarter from 23.0% in
the quarter ended May 1, 2021. The current quarter effective tax rate was
favorably impacted by the vesting of employee equity awards at a higher share
price than awards that vested in the prior year quarter.
18
--------------------------------------------------------------------------------
Table of Contents
CASH AND CAPITAL RESOURCES
Our cash on hand at April 30, 2022 was $2.25 billion. We believe that we have sufficient cash flows from operations and cash on hand to operate our business for at least the next twelve months, supplemented by funds available under our unsecured $1.6 billion revolving credit facility (the "Credit Facility"), if necessary. We may require additional funding should we pursue strategic acquisitions, settle all or a portion of the Convertible Senior Notes, undertake share repurchases, pursue other investments or engage in store expansion rates in excess of historical levels.
The following sections describe the potential short-term and long-term impacts on our liquidity and capital needs.
Leases
We lease all of our stores, three of our distribution centers and certain equipment under non-cancellable operating leases that expire at various dates through 2033. Over 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.
Revolving credit facility
We have available to us a $1.6 billion Credit Facility, which includes a maximum amount of $75 million to be issued in the form of letters of credit. Loans under the Credit Facility bear interest at an alternate base rate or an adjusted secured overnight financing rate plus, in each case, an applicable margin percentage. As of April 30, 2022, there were no borrowings outstanding under the Credit Facility, and we have total remaining borrowing capacity, after adjusting for $16.1 million of standby letters of credit, of $1.58 billion. We were in compliance with all covenants under the Credit Facility agreement at April 30, 2022. Senior Notes As of April 30, 2022, we have $750 million principal amount of senior notes due 2032 (the "2032 Notes") and $750 million of senior notes due 2052 outstanding (the "2052 Notes" and together with the 2032 Notes, the "Senior Notes"). Cash interest accrues at a rate of 3.15% per year on the 2032 Notes and 4.10% per year on the 2052 Notes, each of which are payable semi-annually in arrears on January 15 and July 15.
Senior Convertible Bonds due 2025
Following our exchange of $100 million principal amount in cash during April
2022, we have an aggregate principal amount of $475 million of Convertible
Senior Notes outstanding. Cash interest accrues at a rate of 3.25% per annum,
payable semi-annually in arrears on April 15 and October 15. We currently
anticipate that we will repay the principal amount of the Convertible Senior
Notes in cash, whether in connection with an early conversion of such notes or
repayment at maturity, using excess cash, free cash flow and borrowings on our
Credit Facility to minimize share dilution. However, we may need to pursue
additional sources of liquidity to repay the Convertible Senior Notes in cash at
their maturity date or upon early conversion, as applicable.
As of April 30, 2022, the stock price conditions under which the Convertible
Senior Notes could be convertible at the holders' option were met. However, we
have not received any material conversion requests through the filing date of
this Form 10-Q. There can be no assurance that any capital required to repay our
Convertible Senior Notes will be available on terms that are favorable to us, or
at all.
Capital Expenditures
Our capital expenditures are primarily allocated toward the development of our
omni-channel platform, including investments in new and existing stores and
eCommerce technology, while we have also invested in our supply chain and
corporate technology capabilities. During the first quarter of fiscal 2022,
capital expenditures totaled $73.8 million on a gross basis and $53.9 million on
a net basis, which includes tenant allowances provided by landlords.
We anticipate that fiscal 2022 gross capital expenditures will be in a range of
$400 to $425 million, and $340 to $365 million on a net basis, which includes
tenant allowances provided by landlords. We expect our expenditures to be
concentrated on improvements within our existing stores and new store
development, as well as on continued investments in technology to enhance our
store fulfillment and in-store pickup capabilities.
19
--------------------------------------------------------------------------------
Table of Contents Share Repurchases From time-to-time, we may opportunistically repurchase shares of our common stock under favorable market conditions. During the first quarter of fiscal 2022, we repurchased approximately 0.4 million shares of our common stock at a cost of $42.2 million. We currently operate under a $2.0 billion share repurchase program that was authorized by the Board of Directors on December 16, 2021. As of April 30, 2022, the available amount remaining under the December 2021 authorization was $1.81 billion. 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.
Dividends
In the 13 weeks ended April 30, 2022we payed $46.1 million dividends to our shareholders. On May 24, 2022our Board of Directors has authorized and declared a quarterly cash dividend in the amount of $0.4875 per common share and Class B common share, payable on June 24, 2022 to shareholders of record at the close of business on June 10, 2022.
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 are dependent upon multiple factors including future earnings, cash flows, financial requirements and other considerations. Supply Chain Financing We have entered into supply chain financing arrangements with several financial institutions, whereby suppliers have the opportunity to settle outstanding payment obligations early at a discount. In turn, we settle invoices with the financial institutions in accordance with the original supplier payment terms. Our rights and obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. Our liability associated with the funded participation in the arrangements, which is presented within accounts payable on the Consolidated Balance Sheet, was $98.3 million and $76.0 million as of April 30, 2022 and January 29, 2022, respectively.
Cash flow
Changes in cash and cash equivalents are as follows:
13 Weeks Ended
April 30, May 1,
(in millions) 2022 2021
Net cash (used in) provided by operating activities $ (60.3) $ 447.4
Net cash used in investing activities (70.3)
(73.4)
Net cash used in financing activities (261.3)
(173.3)
Effect of exchange rate changes on cash and cash equivalents -
–
Net (decrease) increase in cash and cash equivalents $ (391.9) $ 200.7 Operating Activities Cash from operating activities decreased $507.7 million for the 13 weeks ended April 30, 2022 compared to the same period in the prior year. The decrease was primarily due to a $269.7 million increase in cash payments for inventory and accounts payable to replenish inventory levels after a 28.3% sales increase in fiscal 2021 and supply chain disruptions following the start of COVID-19. The remaining decrease in cash from operating activities was primarily driven by lower earnings in the current period, year-over-year changes in incentive compensation accruals and corresponding payments, and the timing of marketing and deferred compensation plan payments.
Investing activities
Cash used in investing activities decreased $3.1 million for the 13 weeks ended
April 30, 2022 compared to the same period last year. Gross capital expenditures
for the current period include investments in store technology and facilities,
offset by last year's investments in merchandise presentation and improving the
fitting and lesson experience in our golf business.
20
--------------------------------------------------------------------------------
Table of Contents Financing Activities Financing activities have historically consisted of capital return initiatives, including share repurchases and cash dividend payments, cash flows generated from stock option exercises and cash activity associated with our Credit Facility, or other financing sources. Cash used in financing activities increased $87.9 million for the 13 weeks ended April 30, 2022 compared to the prior year period, primarily driven by payment for the exchange of $100 million aggregate principal amount of our Convertible Senior Notes in April 2022.
© Edgar Online, source Previews
