DICK'S SPORTING GOODS, INC. 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, current expectations; planned strategic investments and growth strategies, including the continued enhancement of our digital capabilities and eCommerce platform, investments in our eCommerce fulfillment network and corporate information technology capabilities, improvements in the customer experience in both stores and online, and inventory investments in key growth categories; projections of our future profitability and results of operations; plans to open new stores and remodel existing stores; investments in our teammates and their productivity; eliminating non-essential expenses to fund our future strategic investments; the hunt industry remaining under significant pressure; the effect of changes in corporate income tax laws and tariffs; capital expenditures; the impact of the sale of Blue Sombrero andAffinity Sports ; plans to return capital to stockholders through dividends or share repurchases; and borrowings under our credit facility. 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 2019 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 dependence of our business on consumer discretionary spending; ? Intense competition in the sporting goods industry and in retail, including the level of competitive promotional activity;
? 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;
? Negative reactions from our customers or vendors regarding changes to our
policies related to the sale of firearms and accessories;
? The results of the strategic review of our hunt business, including Field
& Stream;
? That our strategic plans and initiatives may initially result in a
negative impact on our financial results, or that such plans andinitiatives may not achieve the desired results within the anticipated
time frame or at all;
• Our ability to manage the impact of new tariffs or increased rates on
existing tariffs;
• Our vendor relationships, disruptions in our or our vendors' supply
chains, and increasing product costs, which could be caused by foreign
trade issues, currency exchange rate fluctuations, increasing prices for
raw materials, foreign political instability or other reasons;
• Our ability to predict or effectively react to changes in consumer demand
or shopping patterns;
? Lack of available retail store sites on terms acceptable to us, our
ability to leverage the flexibility within our existing real estateportfolio 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 private brand offerings, including product
liability and product recalls, specialty concept stores, and GameChanger;
? Disruptions or other problems with our information systems;
? Our ability to access adequate capital to operate and expand our business
and to respond to changing business and economic conditions;
? 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;
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? 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 or the loss of Mr. Edward Stack as our Chairman and Chief
Executive Officer;
? Wage increases, which could adversely affect our financial results;
? Disruption at our supply chain facilities or customer support center;
? Poor performance of professional sports teams, professional team lockouts
or strikes, or retirement, serious injury or scandal involving key
athletes;
? Weather-related disruptions and the seasonality of our business, as well
as the current geographic concentration of
? Our pursuit of strategic investments or acquisitions, including the timing
and costs of such investments and acquisitions; the integration of
acquired businesses or companies being more difficult, time-consuming, or
costly than expected; or the investments or acquisitions failing to
produce the anticipated benefits within the expected time frame or at all;
? We are controlled by our Chairman and Chief Executive Officer and his
relatives, whose interests may differ from those of our other
stockholders;
? Our current anti-takeover provisions, which could prevent or delay a
change in control of the Company; and
? The issuance of quarterly cash dividends, and our repurchase activity, if
any, pursuant to our share repurchase program.
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 theSecurities and Exchange Commission , including our Annual Report on Form 10-K for the year endedFebruary 2, 2019 , filed onMarch 29, 2019 . 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.
OVERVIEW
We are a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories through our dedicated associates, in-store services and unique specialty shop-in-shops. We also own and operate Golf Galaxy andField & Stream stores, as well as GameChanger, a youth sports mobile app for scheduling, communications and live scorekeeping. We offer products through a content-rich eCommerce platform that is integrated with our store network and provides customers with the convenience and expertise 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 the number of our store locations and selling square footage, the continued integration of eCommerce with brick and mortar stores, the growth in consolidated same store sales, which includes our eCommerce business, and the strength of our gross profit margins. We have grown from 597Dick's Sporting Goods stores as ofNovember 1, 2014 to 733Dick's Sporting Goods stores as ofNovember 2, 2019 . Recently, we have reduced the rate at which we have opened new stores, and we intend to continue this strategy over the next few years in an effort to leverage the significant flexibility within our existing real estate portfolio to capitalize on future real estate opportunities over the near and intermediate terms as those leases come up for renewal. In recent years, we have transitioned to an insourced eCommerce platform, allowing for continued innovation of our eCommerce websites and applications with customer experience enhancements, new releases of our mobile and tablet apps, and the development of omni-channel capabilities that integrate our online presence with our brick and mortar stores, including ship-from-store; buy-online, pick-up in-store; return-to-store and multi-channel marketing campaigns. Our eCommerce sales penetration to total net sales has increased from approximately 7% to approximately 13% for the year-to-date periods ended 16
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November 1, 2014 andNovember 2, 2019 , respectively. Approximately 80% of our eCommerce sales are generated within brick and mortar store trade areas. The retail industry as a whole is dynamic, and sporting goods retail in particular has faced significant disruption in recent years, as several sporting goods retailers have gone out of business. Vendors have broadened their distribution into department stores and family footwear channels while continuing to grow their direct to consumer business. Weak customer demand for firearms and other hunting merchandise across the industry has slowed our growth. Further, trade tensions between theU.S. andChina have resulted in either new or increased tariffs on imported products. We have responded to these challenges by focusing on driving profitable sales, emphasizing a refined merchandise assortment that delivers newness, innovation and exclusivity and have made strategic investments in our supply chain, digital capabilities, customer experience, private brands and teammates to support these efforts. We are also focused on increasing productivity and eliminating non-essential expenses to fund our future strategic investments. As we look to the future, we are determined to continue to invest in our business to meet the changing needs of our athletes and increasing their level of engagement with the Company. We plan to further enhance our store experience by optimizing our merchandise assortment, reallocating floor space to regionally relevant and growing merchandise categories and making our stores more experiential. Our primary areas of investment during fiscal 2019 continue to be 1) enhancing the athlete experience in our stores; 2) improving our eCommerce fulfillment capabilities; and 3) implementing technology solutions that improve the athlete experience and our teammates' productivity. We also plan to continue to focus on increasing productivity across the business to help fund these investments. We are conducting a strategic review of our hunting business, includingField & Stream . As part of our ongoing review, we removed hunt category merchandise from approximately 135Dick's Sporting Goods stores and reallocated the space in these stores to a localized assortment of categories and products in an effort to drive growth. In addition, we exited eightField & Stream stores in the third quarter, which were subleased toSportsman's Warehouse, Inc. 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 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 ouromni-channel platform, 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. We typically generate significant cash flows from
operating activities in our fourth fiscal quarter in connection with the
holiday selling season and sales of cold weather sporting goods and
apparel. See further discussion of our cash flows in the "Liquidity andCapital Resources and Changes in Financial Condition" section herein.
? Quality of merchandise offerings - To measure acceptance of its
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 capitalrequirements and deliver optimal gross margins by improving merchandise
flow 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.
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Table of Contents CRITICAL ACCOUNTING POLICIES As discussed in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2019 , filed with theSecurities and Exchange Commission onMarch 29, 2019 , we consider our policies on inventory valuation, vendor allowances, goodwill and intangible assets, impairment of long-lived assets and closed store reserves, 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. Other than the adoption of ASU 2016-02, Leases (Topic 842), onFebruary 3, 2019 as discussed in Note 1 of our unaudited Consolidated Financial Statements, there were no significant changes to our critical accounting policies during the period endedNovember 2, 2019 . RESULTS OF OPERATIONS AND OTHER SELECTED DATA Executive Summary ? Earnings per diluted share of$0.66 in the current quarter increased 69.2%
compared to earnings per diluted share of
of 2018. Net income in the current quarter totaled
to
• Net income for the current quarter included a gain of$25.0 million , net of tax, or$0.29 per diluted share, related to the sale of two of our technology subsidiaries, a charge of$6.6 million , net of tax, or$0.08 per diluted share, related to our exit from eightField & Stream stores, and a non-cash impairment charge of$5.6 million , net of tax, or$0.07 per diluted share, to reduce the carrying value of a corporate aircraft that is held for sale to its current fair market value.
• Net sales increased 5.6% to
• Consolidated same store sales increased 6.0% from the third quarter
of 2018, which included an increase of approximately 13% in
eCommerce sales.
• eCommerce sales penetration increased to approximately 13% of total
net sales during the current quarter compared to approximately 12%
of total net sales during the third quarter of 2018.
• In addition, during the current quarter we:
• Declared and paid a quarterly cash dividend in the amount of$0.275 per share on our common stock and Class B common stock. • Repurchased 2.8 million shares of common stock for a total of$99.5 million under the five-year$1.0 billion share repurchase program that we announced onMarch 16, 2016 . • Sold two of our technology subsidiaries, Blue Sombrero and Affinity Sports, toStack Sports for proceeds of$40.4 million , net of cash sold. • Exited eightField & Stream stores and subleased the
facilities to
Sportsman's Warehouse, Inc. as part of our ongoing strategic review of our hunt business. 18
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? The following table summarizes store openings and closings for the periods
indicated:
39 Weeks Ended 39 Weeks Ended
November 2, 2019 November 3, 2018
Dick's Specialty Dick's Specialty
Sporting Concept Stores Sporting Concept Stores
Goods (1) Total Goods (1) Total
Beginning stores 729 129 858 716 129 845
Q1 New stores - 1 1 8 - 8
Q2 New stores 2 - 2 5 - 5
Q3 New stores 6 1 7 6 - 6
Closed stores (2) 4 9 13 3 - 3
Ending stores 733 122 855 732 129 861
Relocated stores 3 2 5 4 1 5
(1) Includes our Golf Galaxy and Field & Stream stores. In some markets, we
operate
stores on the same property with a pass-through for customers. 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.
(2) Includes the exit from eight Field & Stream stores during the third
quarter of 2019.
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 prior year period, and other data, which
is 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
Increase /
(Decrease)
13 Weeks Ended in
Percentage
of Net Sales
from Prior
Year
November 2, November 3, 2018-2019
2019 (A) 2018 (A) (A)
Net sales (1) 100.00 % 100.00 % N/A
Cost of goods sold, including occupancy and
distribution costs (2) 70.41 71.81 (140)
Gross profit 29.59 28.19
140
Selling, general and administrative expenses (3) 27.10 25.24 186 Pre-opening expenses (4) 0.17 0.11 6 Income from operations 2.33 2.85 (52) Gain on sale of subsidiaries (5) (1.72 ) - (172) Interest expense 0.22 0.14 8 Other (income) expense (0.10 ) - (10) Income before income taxes 3.93 2.70 123 Provision for income taxes 1.00 0.67 33 Net income 2.93 % 2.04 % 89 Other Data: Consolidated same store sales increase (decrease) 6.0 % (6.1
%)
Number of stores at end of period (6) 855 861
Total square feet at end of period (6) 42,101,780 42,372,767
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Basis Point
Increase /
(Decrease)
39 Weeks Ended in
Percentage
of Net Sales
from Prior
Year
November 2, November 3, 2018-2019
2019 (A) 2018 (A) (A)
Net sales (1) 100.00 % 100.00 % N/A
Cost of goods sold, including occupancy and
distribution costs (2) 70.34 70.68 (34)
Gross profit 29.66 29.32
34
Selling, general and administrative expenses (3) 25.07 24.13 94 Pre-opening expenses (4) 0.08 0.10 (2) Income from operations 4.50 5.09 (59) Gain on sale of subsidiaries (5) (0.55 ) - (55) Interest expense 0.21 0.14 7 Other income (0.17 ) (0.02 ) (15) Income before income taxes 5.01 4.97 4 Provision for income taxes 1.31 1.32 (1) Net income 3.71 % 3.66 % 5 Other Data: Consolidated same store sales increase (decrease) 3.1 % (3.0
%)
Number of stores at end of period (6) 855 861
Total square feet at end of period (6) 42,101,780 42,372,767
(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 and 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 of store opening.
(5) Represents the gain recorded in connection with the sale of two technology
subsidiaries, Blue Sombrero and
(6) Includes Dick's Sporting Goods, Golf Galaxy, and
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13 Weeks Ended
Net Sales Net sales increased 5.6% in the current quarter to$1,962.2 million from$1,857.3 million for the quarter endedNovember 3, 2018 , due primarily to a$108.1 million , or 6.0%, increase in consolidated same store sales. This increase was partially offset by a$3.2 million decrease resulting from the closure of eightField & Stream stores, partially offset by net sales from new stores. The 6.0% increase in consolidated same store sales included a 3.3% increase in transactions and a 2.7% increase in sales per transaction and reflected an increase of approximately 13% in eCommerce sales. eCommerce sales penetration increased to approximately 13% of total net sales during the current quarter compared to approximately 12% of total net sales during the prior year quarter. The increase in consolidated same store sales was broad-based across hardlines, apparel and footwear, which was partially offset by a continued decline in the hunt category. Our removal of hunt category merchandise from approximately 135Dick's Sporting Goods stores beginning in late 2018 contributed to the decline in the category during the quarter. However, we reallocated space in these stores to a more compelling localized assortment of categories and products. Income from Operations Income from operations decreased to$45.6 million in the current quarter from$52.9 million for the quarter endedNovember 3, 2018 for the reasons described below. Gross profit increased 10.9% to$580.6 million in the current quarter from$523.6 million for the quarter endedNovember 3, 2018 and increased as a percentage of net sales by 140 basis points due primarily to occupancy leverage and improved merchandise margins, partially offset by higher eCommerce shipping fulfillment costs. Our occupancy costs, which after the cost of merchandise represents the largest expense item within our cost of goods sold, are generally fixed in nature and fluctuate based on the number of stores that we operate. Occupancy costs decreased$2.3 million in the current quarter compared to the quarter endedNovember 3, 2018 and increased gross profit by 87 basis points. Merchandise margins increased 60 basis points, primarily driven by fewer promotions and a favorable sales mix, which was impacted in part by our hunt business traditionally having significantly lower merchandise margin rates compared to other categories. These improvements in gross profit were partially offset by an increase in eCommerce shipping fulfillment costs incurred in connection with the opening of two new dedicated fulfillment centers. Selling, general and administrative expenses increased 13.4% to$531.7 million in the current quarter from$468.7 million for the quarter endedNovember 3, 2018 and increased 186 basis points as a percentage of net sales. The current quarter included an$8.9 million pre-tax charge associated with our exit from eightField & Stream stores and a$7.6 million non-cash fixed asset impairment charge to reduce the carrying value of a corporate aircraft held for sale to its fair market value. Apart from the enumerated items, selling, general and administrative expenses increased by 102 basis points compared to the prior year quarter, which was driven primarily by higher incentive compensation expense. Pre-opening expenses increased to$3.3 million in the current quarter from$2.0 million for the quarter endedNovember 3, 2018 . Pre-opening expenses in any period fluctuate depending on the timing and number of store openings and relocations. We opened seven new stores in the current quarter compared to six new stores during the quarter endedNovember 3, 2018 . Gain on Sale of Subsidiaries InAugust 2019 , we completed the sale of Blue Sombrero andAffinity Sports toStack Sports for net proceeds of$40.4 million . In connection with the sale we recognized a pre-tax gain of$33.8 million . Refer to Note 7 to the unaudited Consolidated Financial Statements for additional information. Other Income Other income totaled$2.0 million in the current quarter compared to approximately$0.1 million in expense in the prior year quarter. Substantially all of the change is related to changes in our deferred compensation plan investment values, which we account for by recognizing investment income or expense and recording a corresponding charge or reduction to selling, general and administrative costs. Income Taxes Our effective tax rate increased to 25.4% for the current quarter from 24.6% for the quarter endedNovember 3, 2018 . 21
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39 Weeks EndedNovember 2, 2019 Compared to the 39 Weeks EndedNovember 3, 2018 Net Sales Net sales increased 3.3% in the current period to$6,142.1 million from$5,944.5 million for the period endedNovember 3, 2018 , due primarily to a$176.0 million , or 3.1%, increase in consolidated same store sales. The remaining$21.6 million sales increase was primarily attributable to new stores, partially offset by store closures. The 3.1% increase in consolidated same store sales included a 1.2 % increase in transactions and a 1.9% increase in sales per transaction and reflected an increase of approximately 16% in eCommerce sales. eCommerce sales penetration increased to approximately 13% of total net sales during the current year to date period compared to approximately 11% of total net sales during the prior year period. The increase in consolidated same store sales was broad-based across hardlines, apparel and footwear, but was partially offset by a continued decline in the hunt category. Income from Operations Income from operations decreased to$276.7 million in the current period from$302.7 million for the period endedNovember 3, 2018 for the reasons described below. Gross profit increased 4.5% to$1,821.5 million for the current period from$1,743.2 million for the period endedNovember 3, 2018 and increased as a percentage of net sales by 34 basis points due primarily to occupancy leverage, which was partially offset by eCommerce shipping fulfillment costs. Our occupancy costs, which after the cost of merchandise represents the largest expense item within our cost of goods sold, are generally fixed in nature and fluctuate based on the number of stores that we operate. Occupancy costs decreased$2.7 million in the current period from the period endedNovember 3, 2018 and increased gross profit by 47 basis points. This improvement was partially offset by an increase in eCommerce shipping fulfillment costs resulting from growth and increased penetration of eCommerce sales as compared to our total net sales and costs incurred in opening two new dedicated fulfillment centers. Selling, general and administrative expenses increased 7.4% to$1,539.9 million in the current period from$1,434.3 million for the period endedNovember 3, 2018 , and increased as a percentage of net sales by 94 basis points. The current period included a$15.3 million non-cash fixed asset impairment charge to reduce the carrying value of a corporate aircraft held for sale to its fair market value, an$8.9 million pre-tax charge associated with our exit from eightField & Stream stores and a$9.1 million expense associated with changes in our deferred compensation plan investment values, for which the corresponding investment income was recognized in other income. These expenses were offset by a$6.4 million favorable settlement of a previously accrued litigation contingency. Apart from the enumerated items, selling, general and administrative expenses increased by 65 basis points compared to the prior year period, which was driven primarily by higher incentive compensation expenses, wage inflation in store payroll expense and strategic growth investments. Pre-opening expenses decreased to$4.9 million in the current period from$6.1 million for the period endedNovember 3, 2018 . Pre-opening expenses in any period fluctuate depending on the timing and number of new store openings and relocations. We opened ten new stores in the current period compared to 19 new stores during the prior year period. Gain on Sale of Subsidiaries InAugust 2019 , we completed the sale of Blue Sombrero andAffinity Sports toStack Sports for net proceeds of$40.4 million . In connection with the sale we recognized a pre-tax gain of$33.8 million . Refer to Note 7 to the unaudited Consolidated Financial Statements for additional information. Other Income Other income totaled$10.3 million in the current period compared to$1.2 million for the period endedNovember 3, 2018 . Substantially all of the change is related to changes in our deferred compensation plan investment values, which we account for by recognizing investment income or expense and recording a corresponding charge or reduction to selling, general and administrative costs. Income Taxes Our effective tax rate decreased to 26.1% for the current period from 26.5% for the same period last year. 22
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LIQUIDITY AND CAPITAL RESOURCES Overview We have a$1.6 billion senior secured revolving credit facility (the "Credit Facility"), which includes up to$150 million in the form of letters of credit. Under the Credit Facility, which is further described within Note 6 to the unaudited Consolidated Financial Statements, subject to satisfaction of certain conditions, we may request an increase of up to$500 million in additional borrowing availability. Our liquidity and capital needs have generally been met by net cash provided by operating activities and supplemented by borrowings under the Credit Facility as seasonally necessary. We generally utilize our Credit Facility for working capital needs based primarily on the seasonal nature of our operating cash flows. Historically, our peak borrowing level has occurred early in the fourth quarter as we increase inventory in advance of the holiday selling season. Liquidity information for the periods ended:November 2 ,November 3 , (in thousands) 2019
2018
Funds drawn on Credit Facility$ 1,778,750
188 days
190 days
Maximum daily amount outstanding under Credit Facility
Liquidity information as of the following dates:
November 2 ,November 3 , (in thousands) 2019
2018
Outstanding borrowings under Credit Facility
$ 87,622 $
92,103
Remaining borrowing capacity under Credit Facility
We intend to allocate capital to invest in future growth, specifically growing and remodeling our store network and eCommerce business to deliver an omni-channel shopping experience, as well as other long-term strategic investments while returning capital to stockholders through share repurchases and dividends. Capital expenditures We anticipate that fiscal 2019 capital expenditures will approximate$230 million on a gross basis and$200 million on a net basis, which includes tenant allowances provided by landlords. Normal capital requirements primarily relate to the development of our omni-channel platform, including investments in new and existing stores and eCommerce technology. Approximately two-thirds of ourDick'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 over the near and intermediate term as those leases come up for renewal. We also anticipate further improvements to our eCommerce fulfillment network and corporate information technology capabilities through additional investment. Share repurchases OnMarch 16, 2016 , our Board of Directors authorized a five-year share repurchase program of up to$1 billion of our common stock. During the 39 weeks endedNovember 2, 2019 , we repurchased approximately 10.3 million shares of our common stock for$366.1 million . Under the 2016 program, we have repurchased$932.7 million of common stock and have$67.3 million remaining under this authorization. OnJune 12, 2019 , our Board of Directors authorized an additional five-year share repurchase program of up to$1 billion of our common stock. We intend to repurchase shares from time-to-time to offset dilution and may pursue additional repurchases of shares under favorable market conditions. 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. 23
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Table of Contents Dividends During the 39 weeks endedNovember 2, 2019 , we paid$74.5 million of dividends to our stockholders. OnNovember 21, 2019 , our Board of Directors authorized and declared a quarterly cash dividend in the amount of$0.275 per share of common stock and Class B common stock payable onDecember 31, 2019 to stockholders of record as of the close of business onDecember 13, 2019 . 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 will be dependent upon multiple factors including future earnings, cash flows, financial requirements and other considerations. We believe cash flows generated by operations and funds available under our Credit Facility will be sufficient to satisfy capital requirements over the next 12 months, including planned inventory investments in key growth categories, capital expenditures, share repurchases, and quarterly dividend payments to our stockholders. We may require additional funding should we pursue strategic acquisitions or undertake share repurchases, other investments or store expansion rates in excess of historical levels. Cash Flows Changes in cash and cash equivalents are as follows: 39 Weeks Ended November 2, November 3, (in thousands) 2019 2018
Net cash (used in) provided by operating activities
$ 160,528 Net cash used in investing activities (122,213 ) (135,288 ) Net cash provided by (used in) financing activities 308,953 (34,350 ) Effect of exchange rate changes on cash and cash equivalents 4 (40 ) Net decrease in cash and cash equivalents$ (26,031 )
Operating Activities Operating activities consist primarily of net income, adjusted for certain non-cash items and changes in operating assets and liabilities. Adjustments to net income for non-cash items include depreciation and amortization, deferred income taxes and stock-based compensation expense, as well as gains and losses related to the disposal of assets or subsidiaries. Changes in operating assets and liabilities primarily reflect changes in inventories, accounts payable and income taxes payable or receivable, as well as other working capital changes. Cash flows from operating activities decreased$373.3 million for the 39 weeks endedNovember 2, 2019 compared to the same period last year due primarily to changes in inventory levels and accounts payable at the end of the current fiscal period, which decreased operating cash flows by$358.4 million . These changes were primarily due to strategic investments in key growth categories including footwear, apparel, baseball and golf. In addition, changes in accounts receivable at the end of the current fiscal period decreased operating cash flows by$15.4 million compared to the same period last year, primarily due to the timing of collections for vendor receivables year-over-year. Investing Activities Cash used in investing activities decreased$13.1 million for the 39 weeks endedNovember 2, 2019 compared to the prior year period. The current period receipt of$40.4 million of proceeds from our sale of two technology subsidiaries was partially offset by a$30.4 million increase in gross capital expenditures relating to store enhancements and technology investments. See Note 7 to the unaudited Consolidated Financial Statements. Financing Activities Financing activities consist primarily of capital return initiatives, including our share repurchase program and cash dividend payments, cash flows generated from stock option exercises and cash activity associated with our Credit Facility. The primary reason for the increase in cash provided by financing activities compared to the prior year period was an increase in funds drawn on our Credit Facility, which funded strategic inventory investments in key categories. 24
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Off-Balance Sheet Arrangements Our off-balance sheet arrangements as ofNovember 2, 2019 primarily relate to purchase obligations for marketing commitments, including naming rights, licenses for trademarks, minimum requirements with our third-party eCommerce fulfillment provider and technology-related and other ordinary course commitments. We have excluded these items from the unaudited Consolidated Balance Sheets in accordance withU.S. GAAP. We do not believe that any of these arrangements have, or are reasonably likely to have, a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or resources. Contractual Obligations and Other Commercial Commitments We are party to many contractual obligations that involve commitments to make payments to third parties in the ordinary course of business. For a description of our contractual obligations and other commercial commitments as ofFebruary 2, 2019 , see our Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2019 , filed with theSecurities and Exchange Commission onMarch 29, 2019 . During the current quarter, there were no material changes with respect to these contractual obligations and other commercial commitments outside the ordinary course of business.
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