UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
On May 15, 2025, DICK’S Sporting Goods, Inc., a Delaware corporation (the “Company” or “DICK’S”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and
among the Company, RJS Sub LLC, a New York limited liability company and a wholly owned subsidiary of the Company (“Merger Sub”), and Foot Locker, Inc., a New York corporation (“Foot Locker”). The Merger Agreement provides that, upon the terms and
subject to the conditions set forth therein, and at the closing of the merger contemplated by the Merger Agreement, Merger Sub shall be merged with and into Foot Locker, with Foot Locker surviving as a wholly owned subsidiary of the Company (the
“Merger”).
The accompanying unaudited pro forma financial information is prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, of the Securities Act. The Unaudited Pro Forma Condensed Combined Balance Sheet is presented as if the transaction had occurred on May 3, 2025, and the Unaudited Pro Forma Condensed
Combined Statement of Operations for the thirteen weeks ended May 3, 2025 and the year ended February 1, 2025 and, are presented to give effect to the Merger as if it occurred on February 3, 2024.
The unaudited pro forma condensed combined financial information gives effect to the accounting for the Merger (the “Transaction Accounting Adjustments”) and financing impacts
(the “Financing Adjustments” and, collectively, the “Adjustments”). All terms defined in this section of the Offering Memorandum are used solely for the purposes of this section and do not apply to any other section of this Offering Memorandum.
In the accompanying unaudited pro forma condensed combined financial information, the historical consolidated financial statements of ▇▇▇▇’S and Foot Locker have been adjusted to
depict the accounting for the Merger in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The pro forma adjustments are based upon available information and certain assumptions that management
believes are reasonable under the circumstances. All adjustments are preliminary and subject to change.
Under the terms of the Merger Agreement, each share of Foot Locker common stock issued and outstanding immediately prior to the effective time (other than cancelled shares and
converted shares) will be automatically converted into the right to receive, without interest, at the election of the holder of such share of Foot Locker common stock: (a) $24.00 per share in cash or (b) 0.1168 shares of DICK’S common stock. The
election is not subject to a minimum or maximum amount of cash consideration or stock consideration. The election period will be a period of not less than twenty (20) business days ending on the date that is five (5) business days prior to ▇▇▇▇’S’
good faith estimate of the closing date of the Merger unless otherwise agreed by the parties.
The Merger Agreement provides that:
| • |
Each outstanding Foot Locker time-based restricted stock unit held by an employee and each outstanding performance stock unit will be converted based on the stock consideration into a DICK’S time-based
restricted stock unit (with any applicable performance goals being deemed achieved at levels determined under the applicable award agreement or plan if not addressed in the award agreement), which will otherwise continue to be subject to the
same terms and conditions applicable to such award;
|
| • |
Each outstanding Foot Locker restricted stock unit (including any deferred units) held by a non-employee director will become fully vested (to the extent unvested) and converted into cash based on the cash
consideration; and
|
| • |
Each outstanding in-the-money option, whether or not vested, will be cancelled and converted into the right to receive an amount in cash equal to the product of (A) the total number of shares of Foot Locker
common stock subject to such option multiplied by (B) the excess, if any, of the cash consideration over the exercise price of such option (with any Foot Locker option that is not an in-the-money option cancelled for no consideration).
|
In connection with the Merger Agreement, ▇▇▇▇’S entered into a commitment letter, dated as of May 15, 2025, among DICK’S and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Bank USA (“GS Bank”), pursuant to which
GS Bank has agreed to provide, subject to the satisfaction of customary closing conditions, up to $2.4 billion of senior bridge term loans.
The unaudited pro forma condensed combined financial information assumes that ▇▇▇▇’S does not anticipate drawing down on the senior bridge term loans but instead financing the
Merger through issuance of unsecured senior notes for an amount of $1.7 billion with a fixed interest rate of 6.4% per annum (“Debt Financing”). The Debt Financing, together with cash on hand, is assumed to be sufficient for purposes of financing
the cash consideration and expenses in connection with the Merger.
▇▇▇▇’S has not issued any unsecured senior notes or drawn down on the senior bridge term loans, and any financing related to the Merger may be different from the amount assumed
for purposes of the unaudited pro forma condensed combined financial information. These assumptions and expectations are subject to change, and the debt issuance costs to be incurred and related interest expense could vary significantly from what is
assumed in the unaudited pro forma condensed combined financial information. Other factors that are subject to change include, but are not limited to, the timing of borrowings, the amount of cash on hand at the time of the closing, and inputs to
interest rate determination on debt instruments issued.
The unaudited pro forma condensed combined financial information is presented under the following two scenarios:
| • |
Scenario A - Cash Consideration: Assumes all Foot Locker shareholders elect the right to receive the consideration of $24.00 per share in cash.
|
| • |
Scenario B - Stock Consideration: Assumes all Foot Locker shareholders elect the right to receive 0.1168 shares of DICK’S common stock.
|
The Merger will be accounted for as a business combination using the acquisition
method with ▇▇▇▇’S assumed to be the accounting acquirer in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”). Under this method of accounting, the consideration transferred will be allocated to Foot Locker’s assets acquired and liabilities assumed mostly based upon their estimated
fair values at the closing date. Any differences between the fair value of the consideration transferred and the fair value of the assets acquired, and liabilities assumed will be recorded as goodwill. The process of valuing the net assets of
Foot Locker at the closing date, the allocation of the consideration transferred, as well as evaluating accounting policies for conformity, is preliminary and represents ▇▇▇▇’S’ current best estimate and is subject to revision.
The unaudited pro forma condensed combined financial information and related notes are
provided for illustrative purposes only and do not purport to represent what the combined company’s actual results of operations or financial position would have been had the Merger been completed on the dates indicated, nor are they necessarily
indicative of the combined company’s future results of operations or financial position for any future period. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and
is evaluated. It is likely that the actual adjustments upon the completion of the Merger will differ from the pro forma adjustments, and it is possible the differences may be material.
The following unaudited pro forma condensed combined financial information gives
effect to the Merger, which includes adjustments for the following:
| • |
Certain reclassifications to conform Foot Locker’s historical financial statement presentation to ▇▇▇▇’S historical financial statement presentation;
|
| • |
Adjustments to reflect purchase accounting under ASC 805;
|
| • |
Proceeds and uses of the financing entered in connection with the Merger; and
|
| • |
Non-recurring transaction costs in connection with the Merger.
|
2
Unaudited Pro Forma Condensed Combined Balance Sheet
As of May 3, 2025
(in thousands)
|
Scenario A - Cash Consideration
|
Scenario B - Stock Consideration
|
|||||||||||||||||||||||||||||||||||||||
|
DICK’S Sporting Goods, Inc. (Historical)
|
Foot Locker, Inc. (Historical, adjusted)
|
Transaction Accounting
Adjustments
|
Notes
|
Financing
Adjustments
|
Notes
|
Pro Forma Combined
|
Transaction Accounting
Adjustments
|
Notes
|
Pro Forma Combined
|
|||||||||||||||||||||||||||||||
|
ASSETS
|
||||||||||||||||||||||||||||||||||||||||
|
CURRENT ASSETS
|
||||||||||||||||||||||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
1,035,889
|
$
|
343,000
|
$
|
(2,200,959
|
)
|
3A1
|
$
|
1,719,207
|
3
|
N
|
$ |
753,423
|
$
|
(16,776
|
)
|
3A3
|
$
|
1,218,399
|
||||||||||||||||||||
|
(56,363
|
)
|
3D
|
|
-
|
(56,363
|
)
|
3D
|
|
||||||||||||||||||||||||||||||||
|
(2,000
|
)
|
3E
|
|
-
|
(2,000
|
)
|
3E
|
|
||||||||||||||||||||||||||||||||
|
(22,551
|
)
|
3G
|
|
-
|
(22,551
|
)
|
3G
|
|
||||||||||||||||||||||||||||||||
|
(7,500
|
)
|
3H
|
|
-
|
(7,500
|
)
|
3H
|
|
||||||||||||||||||||||||||||||||
|
(55,300
|
)
|
3I
|
|
-
|
(55,300
|
)
|
3I
|
|
||||||||||||||||||||||||||||||||
|
Accounts receivable, net
|
256,554
|
174,218
|
-
|
-
|
430,772
|
-
|
430,772
|
|||||||||||||||||||||||||||||||||
|
Income taxes receivable
|
4,138
|
-
|
-
|
-
|
4,138
|
-
|
4,138
|
|||||||||||||||||||||||||||||||||
|
Inventories, net
|
3,569,353
|
1,665,000
|
-
|
-
|
5,234,353
|
-
|
5,234,353
|
|||||||||||||||||||||||||||||||||
|
Prepaid expenses and other current assets
|
164,892
|
184,782
|
-
|
-
|
349,674
|
-
|
349,674
|
|||||||||||||||||||||||||||||||||
|
Total current assets
|
5,030,826
|
2,367,000
|
(2,344,673
|
)
|
1,719,207
|
6,772,360
|
(160,490
|
)
|
7,237,336
|
|||||||||||||||||||||||||||||||
|
Property and equipment, net
|
2,268,866
|
908,000
|
105,000
|
3B
|
|
-
|
3,281,866
|
105,000
|
3B
|
|
3,281,866
|
|||||||||||||||||||||||||||||
|
Operating lease assets
|
2,396,687
|
2,099,000
|
72,000
|
3K
|
|
-
|
4,567,687
|
72,000
|
3K
|
|
4,567,687
|
|||||||||||||||||||||||||||||
|
Intangible assets, net
|
58,598
|
230,000
|
(10,000
|
)
|
3C1
|
-
|
278,598
|
(210,000
|
)
|
3C2
|
78,598
|
|||||||||||||||||||||||||||||
|
Goodwill
|
245,857
|
661,000
|
(371,660
|
)
|
3M1
|
-
|
535,197
|
(543,485
|
)
|
3M2
|
363,372
|
|||||||||||||||||||||||||||||
|
Deferred income taxes
|
29,510
|
41,000
|
(34,578
|
)
|
3L1
|
-
|
35,932
|
17,422
|
3L2
|
87,932
|
||||||||||||||||||||||||||||||
|
Other assets
|
404,238
|
252,000
|
(4,190
|
)
|
3E
|
|
-
|
596,448
|
(4,190
|
)
|
3E
|
|
596,448
|
|||||||||||||||||||||||||||
|
(55,600
|
)
|
3A2
|
-
|
(55,600
|
)
|
3A4
|
||||||||||||||||||||||||||||||||||
|
TOTAL ASSETS
|
$
|
10,434,582
|
$
|
6,558,000
|
$
|
(2,643,701
|
)
|
$
|
1,719,207
|
$
|
16,068,088
|
$
|
(779,343
|
)
|
$
|
16,213,239
|
||||||||||||||||||||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||||||||||||||||||||
|
CURRENT LIABILITIES
|
||||||||||||||||||||||||||||||||||||||||
|
Accounts payable
|
$
|
1,542,749
|
$
|
504,000
|
-
|
-
|
$
|
2,046,749
|
-
|
$
|
2,046,749
|
|||||||||||||||||||||||||||||
|
Accrued expenses
|
629,484
|
328,000
|
-
|
-
|
957,484
|
-
|
957,484
|
|||||||||||||||||||||||||||||||||
|
Current portion of debt and obligations under finance leases
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||
|
Operating lease liabilities
|
496,129
|
499,000
|
-
|
-
|
995,129
|
-
|
995,129
|
|||||||||||||||||||||||||||||||||
|
Income taxes payable
|
83,489
|
-
|
-
|
-
|
83,489
|
-
|
83,489
|
|||||||||||||||||||||||||||||||||
|
Deferred revenue and other liabilities
|
360,568
|
110,000
|
-
|
-
|
470,568
|
-
|
470,568
|
|||||||||||||||||||||||||||||||||
|
Total current liabilities
|
3,112,419
|
1,441,000
|
-
|
-
|
4,553,419
|
-
|
4,553,419
|
|||||||||||||||||||||||||||||||||
|
LONG-TERM LIABILITIES
|
||||||||||||||||||||||||||||||||||||||||
|
Revolving credit borrowings
|
-
|
-
|
-
|
|
-
|
|
-
|
- |
||||||||||||||||||||||||||||||||
|
Long-term debt and obligations under finance leases
|
1,484,462
|
440,000
|
1,670
|
3E
|
|
1,719,207
|
3
|
N
|
3,625,339
|
1,670
|
3
|
E
|
1,906,132
|
|||||||||||||||||||||||||||
|
(20,000
|
)
|
3J
|
|
-
|
(20,000
|
)
|
3
|
J
|
||||||||||||||||||||||||||||||||
|
Long-term operating lease liabilities
|
2,587,597
|
1,890,000
|
-
|
-
|
4,477,597
|
-
|
4,477,597
|
|||||||||||||||||||||||||||||||||
|
Other long-term liabilities
|
197,710
|
179,000
|
-
|
-
|
376,710
|
-
|
376,710
|
|||||||||||||||||||||||||||||||||
|
Total long-term liabilities
|
4,269,769
|
2,509,000
|
(18,330
|
)
|
1,719,207
|
8,479,646
|
(18,330
|
)
|
6,760,439
|
|||||||||||||||||||||||||||||||
|
COMMITMENTS AND CONTINGENCIES
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||
|
STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||||||||||||||||||||
|
Preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||
|
Common stock
|
556
|
808,000
|
(808,000
|
)
|
3F
|
|
-
|
556
|
106
|
3A3
|
662
|
|||||||||||||||||||||||||||||
|
|
|
- |
- |
(808,000
|
)
|
3F
|
|
|||||||||||||||||||||||||||||||||
|
Class B common stock
|
236
|
-
|
-
|
-
|
236
|
-
|
236
|
|||||||||||||||||||||||||||||||||
|
Additional paid-in capital
|
1,483,461
|
-
|
14,663
|
3A1
|
-
|
1,498,124
|
1,893,248
|
3A3
|
3,376,709
|
|||||||||||||||||||||||||||||||
|
Retained earnings
|
6,559,483
|
2,131,000
|
(56,363
|
)
|
3D
|
|
-
|
6,527,449
|
(56,363
|
)
|
3D
|
|
6,513,116
|
|||||||||||||||||||||||||||
|
(2,131,000
|
)
|
3F
|
|
-
|
(2,131,000
|
)
|
3F
|
|
||||||||||||||||||||||||||||||||
|
(22,551
|
)
|
3G
|
|
-
|
(22,551
|
)
|
3G
|
|
||||||||||||||||||||||||||||||||
|
46,880
|
3A2
|
-
|
32,547
|
3A4
|
||||||||||||||||||||||||||||||||||||
|
Accumulated other comprehensive loss
|
(430
|
)
|
(325,000
|
)
|
325,000
|
3F
|
|
-
|
(430
|
)
|
325,000
|
3F
|
|
(430
|
)
|
|||||||||||||||||||||||||
|
Treasury stock, at cost
|
(4,990,912
|
)
|
(6,000
|
)
|
6,000
|
3F
|
|
-
|
(4,990,912
|
)
|
6,000
|
3F
|
|
(4,990,912
|
)
|
|||||||||||||||||||||||||
|
Total stockholders’ equity
|
3,052,394
|
2,608,000
|
(2,625,371
|
)
|
-
|
3,035,023
|
(761,013
|
)
|
4,899,381
|
|||||||||||||||||||||||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
10,434,582
|
$
|
6,558,000
|
$
|
(2,643,701
|
)
|
$
|
1,719,207
|
$
|
16,068,088
|
$
|
(779,343
|
)
|
$
|
16,213,239
|
||||||||||||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information.
3
Unaudited Pro Forma Condensed Combined Statement of Operations
For the thirteen weeks ended May 3, 2025
(USD in thousands, except per share amounts)
|
Scenario A - Cash Consideration
|
Scenario B - Stock Consideration
|
|||||||||||||||||||||||||||||||||||||||
|
DICK’S
Sporting
Goods, Inc.
(Historical)
|
Foot Locker, Inc. (Historical, adjusted)
|
Transaction Accounting
Adjustments
|
Notes
|
Financing
Adjustments
|
Notes
|
Pro Forma Combined
|
Transaction Accounting
Adjustments
|
Notes
|
Pro Forma
Combined
|
|||||||||||||||||||||||||||||||
|
Net Sales
|
$
|
3,174,677
|
$
|
1,794,000
|
-
|
-
|
$
|
4,968,677
|
-
|
$
|
4,968,677
|
|||||||||||||||||||||||||||||
|
Cost of goods sold, including occupancy and distribution costs
|
2,009,591
|
1,312,000
|
760
|
4A
|
|
-
|
3,326,851
|
760
|
4A
|
|
3,326,851
|
|||||||||||||||||||||||||||||
|
4,500
|
4J
|
|
-
|
4,500
|
4J
|
|
||||||||||||||||||||||||||||||||||
|
GROSS PROFIT
|
1,165,086
|
482,000
|
(5,260
|
)
|
-
|
1,641,826
|
(5,260
|
)
|
1,641,826
|
|||||||||||||||||||||||||||||||
|
Selling, general and administrative expenses
|
785,528
|
753,000
|
185
|
4A
|
|
-
|
1,539,300
|
185
|
4A
|
|
1,539,079
|
|||||||||||||||||||||||||||||
|
221
|
4B1
|
-
|
||||||||||||||||||||||||||||||||||||||
|
366
|
4D
|
|
-
|
366
|
4D
|
|
||||||||||||||||||||||||||||||||||
|
Pre-opening expenses
|
13,442
|
-
|
-
|
-
|
13,442
|
-
|
13,442
|
|||||||||||||||||||||||||||||||||
|
INCOME (LOSS) FROM OPERATIONS
|
366,116
|
(271,000
|
)
|
(6,032
|
)
|
-
|
89,084
|
(5,811
|
)
|
89,305
|
||||||||||||||||||||||||||||||
|
Interest expense
|
12,138
|
6,000
|
113
|
4G
|
|
27,439
|
4L
|
|
46,387
|
113
|
4G
|
|
18,948
|
|||||||||||||||||||||||||||
|
697
|
4H
|
|
-
|
697
|
4H
|
|
||||||||||||||||||||||||||||||||||
|
Other expense (income)
|
6,256
|
(7,000
|
)
|
-
|
|
- |
|
(744
|
) |
-
|
(744
|
)
|
||||||||||||||||||||||||||||
|
INCOME (LOSS) BEFORE INCOME TAXES
|
347,722
|
(270,000
|
)
|
(6,842
|
)
|
(27,439
|
)
|
43,441
|
(6,621
|
)
|
71,101
|
|||||||||||||||||||||||||||||
|
Provision (benefit) for income taxes
|
83,434
|
93,000
|
(1,779
|
)
|
4I1
|
(7,134
|
)
|
4M
|
|
167,521
|
(1,722
|
)
|
4I2
|
174,712
|
||||||||||||||||||||||||||
|
NET INCOME (LOSS)
|
$
|
264,288
|
$
|
(363,000
|
)
|
$
|
(5,063
|
)
|
$
|
(20,305
|
)
|
$
|
(124,080
|
)
|
$
|
(4,899
|
)
|
$
|
(103,611
|
)
|
||||||||||||||||||||
|
EARNINGS (LOSS) PER COMMON SHARE:
|
||||||||||||||||||||||||||||||||||||||||
|
Basic
|
$
|
3.33
|
$
|
(3.81
|
)
|
$
|
(1.56
|
)
|
$
|
(1.15
|
)
|
|||||||||||||||||||||||||||||
|
Diluted
|
$
|
3.24
|
$
|
(3.81
|
)
|
$
|
(1.52
|
)
|
$
|
(1.12
|
)
|
|||||||||||||||||||||||||||||
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
||||||||||||||||||||||||||||||||||||||||
|
Basic
|
79,341
|
95,300
|
79,341
|
89,971
|
||||||||||||||||||||||||||||||||||||
|
Diluted
|
81,478
|
95,300
|
81,727
|
92,357
|
||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information.
4
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended February 1, 2025
(USD in thousands, except per share amounts)
|
Scenario A - Cash Consideration
|
Scenario B - Stock Consideration
|
|||||||||||||||||||||||||||||||||||||||
|
DICK’S Sporting Goods, Inc. (Historical) - USD
|
Foot Locker, Inc. (Historical) - USD
|
Transaction
Adjustments |
Notes
|
Financing
Adjustments |
Notes
|
Pro Forma Combined
|
Transaction
Adjustments |
Notes
|
Pro Forma Combined
|
|||||||||||||||||||||||||||||||
|
Net Sales
|
$
|
13,442,849
|
$
|
7,988,000
|
-
|
-
|
$
|
21,430,849
|
-
|
$
|
21,430,849
|
|||||||||||||||||||||||||||||
|
Cost of goods sold, including occupancy and distribution costs
|
8,617,153
|
5,785,000
|
8,737
|
4A
|
|
-
|
14,428,890
|
8,737
|
4A
|
|
14,428,890
|
|||||||||||||||||||||||||||||
|
18,000
|
4J
|
|
-
|
18,000
|
4J
|
|
||||||||||||||||||||||||||||||||||
|
GROSS PROFIT
|
4,825,696
|
2,203,000
|
(26,737
|
)
|
-
|
7,001,959
|
(26,737
|
)
|
7,001,959
|
|||||||||||||||||||||||||||||||
|
Selling, general and administrative expenses
|
3,294,272
|
2,100,000
|
2,296
|
4A
|
|
-
|
5,475,101
|
2,296
|
4A
|
|
5,474,216
|
|||||||||||||||||||||||||||||
|
(4,115
|
)
|
4B1
|
-
|
(5,000
|
)
|
4B2
|
||||||||||||||||||||||||||||||||||
|
48,500
|
4C
|
|
-
|
48,500
|
4C
|
|
||||||||||||||||||||||||||||||||||
|
4,097
|
4D
|
|
-
|
4,097
|
4D
|
|
||||||||||||||||||||||||||||||||||
|
22,551
|
4E
|
|
-
|
22,551
|
4E
|
|
||||||||||||||||||||||||||||||||||
|
7,500
|
4F
|
|
-
|
7,500
|
4F
|
|
||||||||||||||||||||||||||||||||||
|
Pre-opening expenses
|
57,492
|
-
|
-
|
-
|
57,492
|
-
|
57,492
|
|||||||||||||||||||||||||||||||||
|
INCOME FROM OPERATIONS
|
1,473,932
|
103,000
|
(107,566
|
)
|
-
|
1,469,366
|
(106,681
|
)
|
1,470,251
|
|||||||||||||||||||||||||||||||
|
Interest expense
|
52,987
|
24,000
|
7,863
|
4C
|
|
110,941
|
4L
|
|
198,981
|
7,863
|
4C
|
|
88,040
|
|||||||||||||||||||||||||||
|
453
|
4G
|
|
-
|
453
|
4G
|
|
||||||||||||||||||||||||||||||||||
|
2,737
|
4H
|
|
-
|
2,737
|
4H
|
|
||||||||||||||||||||||||||||||||||
|
Other expense (income)
|
(98,088
|
)
|
28,000
|
(46,880
|
)
|
4K1
|
-
|
(116,968
|
)
|
(32,547
|
)
|
4K2
|
(102,635
|
)
|
||||||||||||||||||||||||||
|
INCOME BEFORE INCOME TAXES
|
1,519,033
|
51,000
|
(71,739
|
)
|
(110,941
|
)
|
1,387,353
|
(85,187
|
)
|
1,484,846
|
||||||||||||||||||||||||||||||
|
Provision (benefit) for income taxes
|
353,725
|
33,000
|
(18,816
|
)
|
4I1
|
(28,845
|
)
|
4M
|
|
339,064
|
(18,585
|
)
|
4I2
|
368,140
|
||||||||||||||||||||||||||
|
NET INCOME (LOSS)
|
$
|
1,165,308
|
$
|
18,000
|
$
|
(52,923
|
)
|
$
|
(82,096
|
)
|
$
|
1,048,289
|
$
|
(66,602
|
)
|
$
|
1,116,706
|
|||||||||||||||||||||||
|
EARNINGS PER COMMON SHARE:
|
||||||||||||||||||||||||||||||||||||||||
|
Basic
|
$
|
14.48
|
$
|
0.19
|
$
|
13.03
|
$
|
12.26
|
||||||||||||||||||||||||||||||||
|
Diluted
|
$
|
14.05
|
$
|
0.19
|
$
|
12.61
|
$
|
11.91
|
||||||||||||||||||||||||||||||||
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
||||||||||||||||||||||||||||||||||||||||
|
Basic
|
80,468
|
95,000
|
80,468
|
91,098
|
||||||||||||||||||||||||||||||||||||
|
Diluted
|
82,929
|
95,500
|
83,113
|
93,743
|
||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information.
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
|
Note 1.
|
Basis of Presentation
|
The accompanying unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X, Pro
Forma Financial Information, of the Securities Act. The historical information of DICK’S and Foot Locker is presented in accordance with GAAP.
The unaudited pro forma condensed combined financial information is prepared using the acquisition method of accounting in accordance with the business combination accounting
guidance under ASC 805, with ▇▇▇▇’S as the accounting acquirer for the Merger. Under ASC 805, assets acquired and liabilities assumed in a business combination are recognized and measured at the Merger date fair value. Transaction costs associated
with a business combination are expensed as incurred. The excess of consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. Accordingly, the Merger consideration allocation and related
adjustments reflected in this unaudited pro forma condensed combined financial information are preliminary and subject to revision based on a final determination of fair value.
The unaudited pro forma condensed combined financial information is presented as
follows:
| • |
The unaudited pro forma condensed combined balance sheet as of May 3, 2025, was prepared based on (i) the historical unaudited condensed consolidated balance sheet of DICK’S as of May 3, 2025 and (ii) the
historical unaudited condensed consolidated balance sheet of Foot Locker as of May 3, 2025.
|
| • |
The unaudited pro forma condensed combined statement of operations for the thirteen weeks ended May 3, 2025 was prepared based on (i) the historical unaudited condensed consolidated statement of operations of
▇▇▇▇’S for the thirteen weeks ended May 3, 2025 and (ii) the historical unaudited condensed consolidated statement of operations of Foot Locker for the thirteen weeks ended May 3, 2025.
|
| • |
The unaudited pro forma condensed combined statement of operations for the year ended February 1, 2025 was prepared based on (i) the historical audited consolidated statement of operations of ▇▇▇▇’S for the
year ended February 1, 2025 and (ii) the historical audited consolidated statement of operations of Foot Locker for the year ended February 1, 2025.
|
The unaudited pro forma condensed combined financial information does not reflect any anticipated synergies or dis-synergies, operating efficiencies, or cost savings that may
result from the integration costs that may be incurred. The pro forma adjustments represent ▇▇▇▇’S’ best estimates and are based upon currently available information and certain assumptions that ▇▇▇▇’S believes are reasonable under the
circumstances.
The unaudited pro forma condensed combined financial information is provided for informational purposes only and may not be indicative of the operating results that would have
occurred if the Merger had been completed as of the dates set forth above, nor is it indicative of the future results of ▇▇▇▇’S following the Merger. In determining the preliminary estimate of fair values of assets acquired and liabilities assumed
of Foot Locker, ▇▇▇▇’S used publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions. The pro forma purchase price allocation relating to the Merger is preliminary and subject to
change, as additional information becomes available and as additional analyses are performed. There can be no assurances that the valuations will not result in material changes to this purchase price allocation. Any increase or decrease in fair
values of the net assets as compared with the unaudited pro forma condensed combined financial information may change the amount of the total acquisition consideration allocated to goodwill and other assets and liabilities and may impact the
Unaudited Pro Forma Condensed Combined Statements of Operations due to adjustments in the depreciation and amortization expense of the adjusted assets.
6
|
Note 2.
|
Accounting Policies and Reclassifications
|
During the preparation of this unaudited pro forma condensed combined financial information, management performed a preliminary review of Foot Locker’s financial information to
identify differences in accounting policies compared to those of ▇▇▇▇’S and differences in financial statement presentation compared to the presentation of ▇▇▇▇’S. At the time of preparing the unaudited pro forma condensed combined financial
information, other than the adjustments described herein, ▇▇▇▇’S is not aware of any other material differences. However, ▇▇▇▇’S will continue to perform its detailed review of Foot Locker’s accounting policies. Upon completion of that review,
differences may be identified between the accounting policies of ▇▇▇▇’S and Foot Locker that when conformed could have a material impact on the unaudited pro forma condensed combined financial information.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of May 3, 2025
(in thousands)
|
DICK’S Sporting Goods, Inc.
|
Foot Locker, Inc.
|
Foot Locker, Inc.
|
Reclassification Adjustments
|
Notes
|
Foot Locker, Inc.
|
|||||||||||||
|
Assets
|
||||||||||||||||||
|
Current assets
|
||||||||||||||||||
|
Cash and cash equivalents
|
Cash and cash equivalents
|
$
|
343,000
|
$
|
343,000
|
|||||||||||||
|
Accounts receivable, net
|
-
|
174,218
|
(2f
|
)
|
174,218
|
|||||||||||||
|
Income taxes receivable
|
-
|
-
|
||||||||||||||||
|
Inventories, net
|
Merchandise inventories
|
1,665,000
|
1,665,000
|
|||||||||||||||
|
Prepaid expenses and other current assets
|
Other current assets
|
359,000
|
(174,218
|
)
|
(2f
|
)
|
184,782
|
|||||||||||
|
Total Current assets
|
2,367,000
|
-
|
2,367,000
|
|||||||||||||||
|
Property and equipment, net
|
Property and equipment, net
|
908,000
|
908,000
|
|||||||||||||||
|
Operating lease assets
|
Operating lease right-of-use assets
|
2,099,000
|
2,099,000
|
|||||||||||||||
|
Intangible assets, net
|
Other intangible assets, net
|
230,000
|
230,000
|
|||||||||||||||
|
Goodwill
|
Goodwill
|
661,000
|
661,000
|
|||||||||||||||
|
Deferred income taxes
|
Deferred taxes
|
41,000
|
41,000
|
|||||||||||||||
|
Other assets
|
Other assets
|
137,000
|
115,000
|
(2b
|
)
|
252,000
|
||||||||||||
|
|
Minority investments |
115,000
|
(115,000
|
)
|
(2b
|
)
|
-
|
|||||||||||
|
Total Assets
|
$
|
6,558,000
|
-
|
$
|
6,558,000
|
|||||||||||||
|
Liabilities and Stockholders’ equity
|
||||||||||||||||||
|
Current liabilities
|
||||||||||||||||||
|
Accounts payable
|
Accounts payable
|
504,000
|
504,000
|
|||||||||||||||
|
Accrued expenses
|
Accrued and other liabilities
|
433,000
|
(50,000
|
)
|
(2a
|
)
|
328,000
|
|||||||||||
|
(26,000
|
)
|
(2d
|
)
|
|||||||||||||||
|
(29,000
|
)
|
(2e
|
)
|
|||||||||||||||
|
Operating lease liabilities
|
Current portion of lease obligations
|
499,000
|
499,000
|
|||||||||||||||
|
|
Current portion of debt and obligations under finance leases |
5,000
|
(5,000
|
)
|
(2c
|
)
|
-
|
|||||||||||
|
Income taxes payable
|
-
|
-
|
||||||||||||||||
|
Deferred revenue and other liabilities
|
50,000
|
(2a
|
)
|
110,000
|
||||||||||||||
|
5,000
|
(2c
|
)
|
||||||||||||||||
|
26,000
|
(2d
|
)
|
||||||||||||||||
|
29,000
|
(2e
|
)
|
||||||||||||||||
|
Total Current liabilities
|
1,441,000
|
-
|
1,441,000
|
|||||||||||||||
|
Revolving credit borrowings
|
||||||||||||||||||
|
Long-term operating lease liabilities
|
Long-term lease obligations
|
1,890,000
|
1,890,000
|
|||||||||||||||
|
|
Long-term debt and obligations under finance leases |
440,000
|
440,000
|
|||||||||||||||
|
Other long-term liabilities
|
Other liabilities
|
179,000
|
179,000
|
|||||||||||||||
|
Total Long-term liabilities
|
2,509,000
|
-
|
2,509,000
|
|||||||||||||||
|
Commitments and contingencies
|
||||||||||||||||||
|
Stockholders’ Equity
|
||||||||||||||||||
|
Common stock
|
Common stock
|
808,000
|
808,000
|
|||||||||||||||
|
Class B common stock
|
-
|
|||||||||||||||||
|
Additional paid-in capital
|
-
|
-
|
-
|
|||||||||||||||
|
Retained earnings
|
Retained earnings
|
2,131,000
|
-
|
2,131,000
|
||||||||||||||
|
Accumulated other comprehensive loss
|
Accumulated other comprehensive loss
|
(325,000
|
)
|
(325,000
|
)
|
|||||||||||||
|
Treasury stock, at cost
|
Treasury stock at cost
|
(6,000
|
)
|
(6,000
|
)
|
|||||||||||||
|
Total stockholders’ equity
|
2,608,000
|
-
|
2,608,000
|
|||||||||||||||
|
Total liabilities and stockholders’ equity
|
$
|
6,558,000
|
-
|
$
|
6,558,000
|
|||||||||||||
|
(2a)
|
Reclassification of Customer Loyalty Program from “Accrued and Other Liabilities” to “Deferred revenue and other liabilities”.
|
|
(2b)
|
Reclassification of “Minority Investments” to “Other assets”.
|
7
|
(2c)
|
Reclassification of “Current portion of debt and obligations under finance leases” to “Deferred revenue and other liabilities”.
|
|
(2d)
|
Reclassification of Gift Card Liability from “Accrued and Other Liabilities” to “Deferred revenue and other liabilities”.
|
|
(2e)
|
Reclassification of Customer Deposit from “Accrued and Other Liabilities” to “Deferred revenue and other liabilities”.
|
|
(2f)
|
Reclassification of Net Receivables from “Other current assets” to “Accounts receivable, net”.
|
8
Unaudited Pro Forma Condensed Combined Statement of Operations
For the thirteen weeks ended May 3, 2025
(in thousands)
|
DICK’S Sporting Goods, Inc.
|
Foot Locker, Inc.
|
Foot Locker, Inc.
|
Reclassification Adjustments
|
Notes
|
Foot Locker, Inc.
|
|||||||||||||
|
Net Sales
|
Sales
|
$
|
1,788,000
|
$
|
6,000
|
(2g
|
)
|
$
|
1,794,000
|
|||||||||
|
|
Other revenue |
6,000
|
(6,000
|
)
|
(2g
|
)
|
-
|
|||||||||||
|
Cost of goods sold, including occupancy and distribution costs
|
Cost of sales
|
1,280,000
|
41,000
|
(2h
|
)
|
1,312,000
|
||||||||||||
|
(9,000
|
)
|
(2k
|
)
|
|||||||||||||||
|
GROSS PROFIT
|
514,000
|
(32,000
|
)
|
482,000
|
||||||||||||||
|
Selling, general and administrative expenses
|
Selling, general and administrative expenses
|
458,000
|
10,000
|
(2h
|
)
|
753,000
|
||||||||||||
|
276,000
|
(2i
|
)
|
||||||||||||||||
|
9,000
|
(2k
|
)
|
||||||||||||||||
|
|
Depreciation and amortization |
51,000
|
(51,000
|
)
|
(2h
|
)
|
-
|
|||||||||||
|
|
Impairment and other |
276,000
|
(276,000
|
)
|
(2i
|
)
|
-
|
|||||||||||
|
Pre-opening expenses
|
-
|
-
|
||||||||||||||||
|
INCOME FROM OPERATIONS
|
(271,000
|
)
|
-
|
(271,000
|
)
|
|||||||||||||
|
Interest expense
|
Interest expense, net
|
2,000
|
4,000
|
(2j
|
)
|
6,000
|
||||||||||||
|
Other expense (income)
|
Other expense (income), net
|
(3,000
|
)
|
(4,000
|
)
|
(2j
|
)
|
(7,000
|
)
|
|||||||||
|
INCOME BEFORE INCOME TAXES
|
(270,000
|
)
|
-
|
(270,000
|
)
|
|||||||||||||
|
Provision for income taxes
|
Income tax expense (benefit)
|
93,000
|
93,000
|
|||||||||||||||
|
NET INCOME
|
$ | (363,000 |
) |
|
- |
|
$
|
(363,000
|
)
|
|||||||||
|
(2g)
|
Reclassification from “Other revenue” to “Net Sales”.
|
|
(2h)
|
Reclassification of Depreciation expense from “Depreciation and amortization” to “Selling, general and administrative expenses” and “Cost of goods sold, including occupancy and
distribution costs” for Non-Store Assets and Store Assets, respectively.
|
|
(2i)
|
Reclassification from “Impairment and other” to “Selling, general and administrative expenses”.
|
|
(2j)
|
Reclassification of Interest income from “Interest expense, net” to “Other expense (income)”.
|
|
(2k)
|
Reclassification of buyers’ compensation from “Cost of goods sold, including occupancy and distribution costs” to “Selling, general and administrative expenses”.
|
9
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended February 1, 2025
(in thousands)
|
DICK’S Sporting Goods, Inc.
|
Foot Locker, Inc.
|
Foot Locker, Inc.
|
Reclassification Adjustments
|
Notes
|
Foot Locker, Inc.
|
|||||||||||||
|
Net Sales
|
Sales
|
$
|
7,971,000
|
$
|
17,000
|
(2l
|
)
|
$
|
7,988,000
|
|||||||||
|
|
Licensing revenue |
17,000
|
(17,000
|
)
|
(2l
|
)
|
-
|
|||||||||||
|
Cost of goods sold, including occupancy and distribution costs
|
Cost of sales
|
5,666,000
|
156,000
|
(2m
|
)
|
5,785,000
|
||||||||||||
|
(37,000
|
)
|
(2q
|
)
|
|||||||||||||||
|
GROSS PROFIT
|
2,322,000
|
(119,000
|
)
|
2,203,000
|
||||||||||||||
|
Selling, general and administrative expenses
|
Selling, general and administrative expenses
|
1,920,000
|
41,000
|
(2m
|
)
|
2,100,000
|
||||||||||||
|
5,000
|
(2n
|
)
|
||||||||||||||||
|
97,000
|
(2o
|
)
|
||||||||||||||||
|
37,000
|
(2q
|
)
|
||||||||||||||||
|
|
Depreciation and amortization |
202,000
|
(197,000
|
)
|
(2m
|
)
|
-
|
|||||||||||
|
(5,000
|
)
|
(2n
|
)
|
|||||||||||||||
|
|
Impairment and other |
97,000
|
(97,000
|
)
|
(2o
|
)
|
-
|
|||||||||||
|
Pre-opening expenses
|
-
|
-
|
||||||||||||||||
|
INCOME FROM OPERATIONS
|
103,000
|
-
|
103,000
|
|||||||||||||||
|
Interest expense
|
Interest expense, net
|
8,000
|
16,000
|
(2p
|
)
|
24,000
|
||||||||||||
|
Other expense (income)
|
Other expense (income), net
|
44,000
|
(16,000
|
)
|
(2p
|
)
|
28,000
|
|||||||||||
|
INCOME BEFORE INCOME TAXES
|
51,000
|
-
|
51,000
|
|||||||||||||||
|
Provision for income taxes
|
Income tax expense (benefit)
|
33,000
|
33,000
|
|||||||||||||||
|
NET INCOME
|
$
|
18,000
|
-
|
$
|
18,000
|
|||||||||||||
|
(2l)
|
Reclassification from “Licensing revenue” to “Net Sales”.
|
|
(2m)
|
Reclassification of Depreciation expense from “Depreciation and amortization” to “Selling, general and administrative expenses” and “Cost of goods sold, including occupancy and
distribution costs” for Non-Store Assets and Store Assets, respectively.
|
|
(2n)
|
Reclassification of Amortization expense from “Depreciation and amortization” to “Selling, general and administrative expenses”.
|
|
(2o)
|
Reclassification from “Impairment and other” to “Selling, general and administrative expenses”.
|
|
(2p)
|
Reclassification of Interest income from “Interest expense, net” to “Other expense (income)”.
|
|
(2q)
|
Reclassification of buyers’ compensation from “Cost of goods sold, including occupancy and distribution costs” to “Selling, general and administrative expenses”.
|
10
Note 3. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
Transaction Accounting Adjustments
The adjustments included in the Unaudited Pro Forma Condensed Combined Balance Sheet as of May 3, 2025 are detailed below:
(3A1) The accounting for the Merger is based on currently available information and is considered preliminary. The final accounting for the Merger may
differ materially from that presented in these unaudited pro forma condensed combined financial information. Refer to the following table for the preliminary estimated fair value of consideration transferred under the cash consideration scenario:
Scenario A: Cash Consideration
|
(in thousands, except per share data; figures below may not foot due to rounding of shares)
|
As of May 3, 2025
|
|||
|
Foot Locker’s shares outstanding as of May 31, 2025
|
95,278
|
|||
|
Existing equity interest in Foot Locker’s by ▇▇▇▇’S (1)
|
(4,270)
|
|
||
|
Foot Locker’s shares outstanding as of May 31, 2025, excluding shares owned by ▇▇▇▇’S
|
91,008
|
|||
|
Price per share as per Merger Agreement (actual amount)
|
$
|
24.00
|
||
|
Cash Consideration paid to shareholders
|
$
|
2,184,183
|
||
|
Add: Settlement of equity awards (2)
|
$
|
16,776
|
||
|
Adjusted Cash consideration paid to shareholders
|
$
|
2,200,959
|
||
|
Add: Fair value of existing equity interest held by ▇▇▇▇’S (3)
|
$
|
102,480
|
||
|
Add: Pre-combination value of replaced equity awards (4)
|
$
|
14,663
|
||
|
Fair value of consideration transferred
|
$
|
2,318,102
|
||
| (1) |
During the 13 weeks ended May 3, 2025, ▇▇▇▇’S purchased 4.3 million shares of Foot Locker common stock.
|
| (2) |
Represents the estimated fair value of outstanding deferred stock unit awards granted under the Foot Locker 2007 Stock Incentive Plan (“Foot Locker DSU Awards”), restricted stock unit awards granted under the Foot Locker 2007 Stock
Incentive Plan or granted as an inducement award (“Foot Locker RSU Awards”), performance stock unit awards granted under the Foot Locker 2007 Stock Incentive Plan or granted as an inducement award (“Foot Locker PSU Awards”), and
in-the-money options that are expected to be settled in cash at close.
|
| (3) |
Represents the estimated fair value of the 4.3 million shares of Foot Locker common stock held by ▇▇▇▇’S based on the Merger consideration.
|
| (4) |
Represents the estimated fair value of outstanding Foot Locker RSU Awards (other than non-employee director Foot Locker RSU Awards) and Foot Locker PSU Awards granted to employees attributable to pre-combination services.
|
(3A2) In connection with ▇▇▇▇’S’ purchase of 4.3 million shares of Foot Locker common stock, this adjustment reflects the elimination of ▇▇▇▇’S’ investment.
The associated increase in retained earnings is related to the gain recorded in the Unaudited Pro Forma Condensed Combined Statement of Operations for the year end February 1, 2025. Refer to 4K1 for more information.
11
(3A3) The accounting for the Merger is based on currently available information and is considered preliminary. The final accounting for the Merger may
differ materially from that presented in these unaudited pro forma condensed combined financial information. Refer to the following table for the preliminary estimated fair value of consideration transferred under the stock consideration scenario:
Scenario B: Stock Consideration
|
(in thousands, except per share data; figures below may not foot due to rounding of shares)
|
As of May 3, 2025
|
|||
|
Foot Locker’s shares outstanding as of May 31, 2025
|
95,278
|
|||
|
Existing equity interest in Foot Locker’s by ▇▇▇▇’S (1)
|
(4,270)
|
|
||
|
Foot Locker’s shares outstanding as of May 31, 2025, excluding shares owned by ▇▇▇▇’S
|
91,008
|
|||
|
Exchange ratio as per Merger Agreement
|
0.1168
|
|||
|
Total estimated outstanding shares
|
10,630
|
|||
|
▇▇▇▇’S stock price as of June 13, 2025
|
$
|
176.74
|
||
|
Share consideration
|
$
|
1,878,691
|
||
|
Add: Accelerated vesting of equity awards (2)
|
$
|
16,776
|
||
|
Add: Fair value of existing equity interest held by ▇▇▇▇’S (3)
|
$
|
88,147
|
||
|
Add: Pre-combination value of replaced equity awards (4)
|
$
|
14,663
|
||
|
Fair value of consideration transferred
|
$
|
1,998,277
|
||
| (1) |
During the 13 weeks ended May 3, 2025, ▇▇▇▇’S purchased 4.3 million shares of Foot Locker common stock.
|
| (2) |
Represents the estimated fair value of outstanding Foot Locker DSU Awards and Foot Locker RSU Awards granted to non-employee directors as well as in-the-money options granted to employees. These Foot Locker RSU Awards will accelerate
vest and be settled in cash upon closing.
|
| (3) |
Represents the estimated fair value of the 4.3 million shares of Foot Locker common stock held by ▇▇▇▇’S based on the Merger consideration.
|
| (4) |
Represents the estimated fair value of outstanding Foot Locker RSU Awards (other than non-employee director Foot Locker RSU Awards) and Foot Locker PSU Awards granted to employees attributable to pre-combination services.
|
(3A4) In connection with ▇▇▇▇’S purchase of 4.3 million shares of Foot Locker common stock, this adjustment reflects the elimination of ▇▇▇▇’S’ investment.
The associated increase in retained earnings is related to the gain recorded in the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended February 1, 2025. Refer to 4K2 for more
information.
|
(In thousands)
|
As of May 3, 2025
|
|||
|
Common stock
|
106
|
|||
|
Additional paid-in-capital
|
1,893,248
|
|||
|
Cash
|
16,776
|
|||
The actual value of DICK’S common stock to be issued will depend on the per share price of DICK’S common stock at the closing date of the Merger, and therefore, the actual stock consideration will
fluctuate with the market price of DICK’S common stock until the Merger is completed. The following table shows the effect of changes in DICK’S stock price and the resulting impact on the estimated stock consideration:
|
(In thousands, except per share data)
|
||||||||
|
Share Price Sensitivity
|
’DICK’S Stock Price
|
Consideration Transferred
|
||||||
|
As presented
|
$
|
176.74
|
1,998,277
|
|||||
|
10% increase
|
$
|
194.41
|
2,186,146
|
|||||
|
10% decrease
|
$
|
159.07
|
1,810,408
|
|||||
12
Preliminary Purchase Price Allocation
The determination of the fair value of the identifiable assets of Foot Locker and the allocation of the estimated Merger consideration to these identifiable assets and liabilities is preliminary
and is pending finalization of various estimates, inputs and analyses. The final purchase price allocation will be determined when ▇▇▇▇’S has completed the detailed valuations and necessary calculations. The final Merger consideration allocation
may be materially different than that reflected in the preliminary estimated Merger consideration allocation presented herein. Any increase or decrease in fair values of the net assets as compared with the unaudited pro forma condensed combined
financial information may change the allocation of total Merger consideration to goodwill and other assets and liabilities and may impact the combined company statement of operations due to adjustments in the depreciation and amortization of the
adjusted assets.
|
(In thousands)
|
Scenario A - Cash
Consideration
Fair value
|
Scenario B - Stock
Consideration
Fair value
|
||||||
|
Cash and cash equivalents
|
$
|
343,000
|
$
|
343,000
|
||||
|
Accounts receivable, net
|
174,218
|
174,218
|
||||||
|
Inventories, net
|
1,665,000
|
1,665,000
|
||||||
|
Prepaid expenses and other current assets
|
184,782
|
184,782
|
||||||
|
Property and equipment, net
|
1,013,000
|
1,013,000
|
||||||
|
Operating lease assets
|
2,171,000
|
2,171,000
|
||||||
|
Deferred income taxes
|
6,422
|
58,422
|
||||||
|
Intangible assets, net
|
220,000
|
20,000
|
||||||
|
Other assets
|
247,810
|
247,810
|
||||||
|
Total assets
|
$
|
6,025,232
|
$
|
5,877,232
|
||||
|
Accounts payable
|
504,000
|
504,000
|
||||||
|
Accrued expenses
|
390,800
|
390,800
|
||||||
|
Current portion of lease obligations
|
499,000
|
499,000
|
||||||
|
Deferred revenue and other liabilities
|
110,000
|
110,000
|
||||||
|
Long-term debt and obligations under finance leases
|
423,670
|
423,670
|
||||||
|
Long-term operating lease liabilities
|
1,890,000
|
1,890,000
|
||||||
|
Other long-term liabilities
|
179,000
|
179,000
|
||||||
|
Net assets acquired
|
2,028,762
|
1,880,762
|
||||||
|
Goodwill
|
289,340
|
117,515
|
||||||
|
Fair value of consideration transferred
|
$
|
2,318,102
|
$
|
1,998,277
|
||||
Goodwill represents the excess of the preliminary estimated Merger consideration over the estimated fair value of the underlying net assets acquired. Goodwill will not be amortized but instead
will be reviewed for impairment annually, or more frequently if facts and circumstances warrant a review. Goodwill is attributable to the assembled workforce of Foot Locker, planned growth in new markets, and synergies expected to be achieved from
the combined operations of DICK’S and Foot Locker. ▇▇▇▇▇▇▇▇ recognized in the Merger is not expected to be deductible for tax purposes.
(3B) Reflects the preliminary estimated fair value adjustment to property and equipment acquired in the Merger. The fair value of property and equipment is
subject to change.
Fair value of Property and Equipment, net:
|
(In thousands)
|
Carrying Value as
on May 3, 2025
|
Step-up Value
|
Fair Value
|
|||||||||
|
Land
|
$
|
3,000
|
$
|
2,000
|
$
|
5,000
|
||||||
|
Buildings
|
30,000
|
13,000
|
43,000
|
|||||||||
|
Furniture, fixtures, equipment
|
356,000
|
54,000
|
410,000
|
|||||||||
|
Software development costs
|
60,000
|
-
|
60,000
|
|||||||||
|
Assets under finance leases
|
45,000
|
-
|
45,000
|
|||||||||
|
Alterations to leased and owned buildings
|
414,000
|
36,000
|
450,000
|
|||||||||
|
Total property, plant and equipment acquired and pro forma adjustment
|
$
|
908,000
|
$
|
105,000
|
$
|
1,013,000
|
||||||
13
(3C1) Reflects the preliminary estimated asset fair value adjustment to the identifiable intangible assets acquired, primarily consisting of customer
relationships, developed technology, and tradenames and trademarks. The fair value of intangible assets is subject to change as ▇▇▇▇’S finalizes various estimates, inputs and analyses.
Scenario A: Cash Consideration
Fair Value of Intangible Assets:
|
(In thousands)
|
Carrying Value as
on May 3, 2025
|
Step-up/(down)
|
Fair Value
|
|||||||||
|
Lease acquisition costs
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Developed technology
|
-
|
5,000
|
5,000
|
|||||||||
|
Customer relationships
|
-
|
5,000
|
5,000
|
|||||||||
|
Trademarks & tradenames
|
230,000
|
(20,000)
|
|
210,000
|
||||||||
|
Total identifiable intangible assets and pro forma adjustment
|
$
|
230,000
|
$
|
(10,000)
|
|
$
|
220,000
|
|||||
(3C2) Reflects the preliminary estimated asset fair value adjustment to the identifiable intangible assets acquired, primarily consisting of customer
relationships, developed technology, and tradenames and trademarks. The fair value of intangible assets is subject to change as ▇▇▇▇’S finalizes various estimates, inputs and analyses.
Scenario B: Stock Consideration
Fair Value of Intangible Assets:
|
(In thousands)
|
Carrying Value as
on May 3, 2025
|
Step-down
|
Fair Value
|
|||||||||
|
Lease acquisition costs
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Developed technology
|
-
|
-
|
-
|
|||||||||
|
Customer relationships
|
-
|
-
|
-
|
|||||||||
|
Trademarks & tradenames
|
230,000
|
(210,000)
|
|
20,000
|
||||||||
|
Total identifiable intangible assets and pro forma adjustment
|
$
|
230,000
|
$
|
(210,000)
|
|
$
|
20,000
|
|||||
(3D) Reflects one-time non-recurring transaction-related costs of approximately $56.4 million incurred prior to, or concurrent with, the closing of the
Merger including bank fees, legal fees, consulting fees, structuring & upfront fees paid for senior bridge term loans, exchange fee related to senior note exchange and other transaction costs estimated to be incurred by ▇▇▇▇’S. No amount was
incurred or accrued for as of the balance sheet date.
(3E) Reflects a $2.0 million decrease to Cash against the decrease in Long-term debt and obligations under finance leases related to the payment made to
noteholders for the bond fee associated with the exchange of the Foot Locker Notes; a $3.7 million increase to Long-term debt and obligations under finance leases against the increase in goodwill related to the reversal of outstanding deferred
financing cost balance of the Foot Locker Notes’; and a $4.2 million decrease to Other assets against the increase in Goodwill related to the reversal of outstanding deferred financing cost balance of Foot Locker’s revolving credit facility.
(3F) Reflects the elimination of Foot Locker’s historical equity.
(3G) Reflects the cash payment for the severance benefits total $22.6 million including severance pay and the acceleration of replaced awards by executives.
(3H) Reflects increase in the liabilities assumed of $7.5 million related to retention bonus for certain Foot Locker employees and associated payment at
close of the Merger.
14
(3I) Reflects increase in the liabilities assumed of $55.3 million related to estimated seller’s transaction costs and associated payment at close of the
Merger.
(3J) Reflects the fair value adjustment of $20.0 million related to the Foot Locker Notes assumed and not extinguished as of the closing of the Merger.
(3K) Reflects a preliminary purchase accounting adjustment of $72.0 million to record favorable contractual lease balance when compared to market terms.
(3L1) Represents a $34.6 million adjustment to deferred tax liabilities under Scenario A primarily as a result of the pro forma adjustments for assets
acquired and liabilities assumed—specifically, relative to fair market value adjustments to assets and an adjustment to the acquired deferred tax liability for Goodwill which resets as a result of the Merger. These estimates are preliminary as
adjustments to our deferred taxes could change due to further refinement of our statutory income tax rates used to measure our deferred taxes, changes in judgment regarding realizability of assets, and changes in the estimates of the fair values of
assets acquired and liabilities assumed that may occur in conjunction with the closing of the Merger. These changes in estimates could be material.
(3L2) Represents a $17.4 million adjustment to deferred tax assets under Scenario B primarily as a result of the pro forma adjustments for assets acquired
and liabilities assumed—specifically, relative to fair market value adjustments to assets and an adjustment to the acquired deferred tax liability for goodwill which resets as a result of the Merger. These estimates are preliminary as adjustments
to our deferred taxes could change due to further refinement of our statutory income tax rates used to measure our deferred taxes, changes in judgment regarding realizability of assets, and changes in the estimates of the fair values of assets
acquired and liabilities assumed that may occur in conjunction with the closing of the Merger. These changes in estimates could be material.
(3M1, 3M2) Represents the adjustment to goodwill based on the purchase price allocation in respect of both Scenario A and B, as described above.
|
(In thousands)
|
Scenario A - Cash
Consideration
Amounts
|
Scenario B - Stock
Consideration
Amounts
|
||||||
|
Goodwill resulting from the Merger
|
$
|
289,340
|
$
|
117,515
|
||||
|
Less: Elimination of Foot Locker’s historical Goodwill
|
(661,000
|
)
|
(661,000)
|
|
||||
|
Pro forma adjustment
|
$
|
(371,660
|
)
|
$
|
(543,485)
|
|
||
Financing Adjustments
(3N) Reflects the adjustment related to the net proceeds received from the Debt Financing issued as part of the financing for the cash consideration in
Scenario A, as described above.
|
(In thousands)
|
As of May 3, 2025
|
|||
|
Proceeds from the Unsecured Senior Notes
|
$
|
1,732,000
|
||
|
Payment of financing costs
|
(12,793)
|
|
||
|
Pro forma adjustment
|
$
|
1,719,207
|
||
15
Note 4. Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations
The adjustments included in the Unaudited Pro Forma Condensed Combined Statements of Operations for the thirteen weeks ended May 3, 2025 and for the year ended February 1, 2025 and are as follows:
Transaction Accounting Adjustments
(4A) Reflects adjustment to depreciation expense, on a straight line-basis based on the preliminary fair value of Property and equipment, net and the
related useful life. Depreciation expense is split between “Cost of goods sold, including occupancy and distribution costs” and “Selling, general and administrative expenses”.
|
(In thousands)
|
Useful Life
|
Fair Value
|
Incremental
Depreciation
Expense for the
Thirteen Weeks
Ended May 3,
2025
|
Incremental
Depreciation
Expense for the
Year Ended
February 1,
2025
|
||||||||||||
|
Land
|
n/a
|
$
|
5,000
|
$
|
-
|
$
|
-
|
|||||||||
|
Buildings
|
Max 50
|
43,000
|
328
|
1,313
|
||||||||||||
|
Furniture, fixtures, equipment
|
3 - 10
|
410,000
|
34,500
|
138,000
|
||||||||||||
|
Software development costs
|
2 - 5
|
60,000
|
7,500
|
30,000
|
||||||||||||
|
Assets under finance leases
|
7 - 10
|
45,000
|
1,250
|
5,000
|
||||||||||||
|
Alterations to leased and owned buildings
|
7
|
450,000
|
8,500
|
34,000
|
||||||||||||
|
Total property and equipment acquired
|
1,013,000
|
52,078
|
208,313
|
|||||||||||||
|
Less: Historical depreciation expense
|
(51,133
|
)
|
(197,280)
|
|
||||||||||||
|
Pro forma adjustment for incremental depreciation expense
|
$
|
945
|
$
|
11,033
|
||||||||||||
(4B1, 4B2) Reflects adjustment to amortization expense, on a straight-line basis based on the preliminary fair value of Intangible assets, net and the
related useful life.
Scenario A: Cash Consideration
|
(In thousands)
|
Useful Life
|
Fair Value
|
Amortization
Expense for the
Thirteen Weeks
Ended May 3,
2025
|
Amortization
Expense for the
Year Ended
February 1,
2025
|
||||||||||||
|
Lease acquisition costs
|
n/a
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||
|
Developed technology
|
10
|
5,000
|
125
|
500
|
||||||||||||
|
Customer relationships
|
13
|
5,000
|
96
|
385
|
||||||||||||
|
Trademarks & tradenames
|
n/a
|
210,000
|
-
|
-
|
||||||||||||
|
Total identifiable intangible assets
|
|
220,000
|
221
|
885
|
||||||||||||
|
Less: Historical Amortization expense
|
5,000
|
|||||||||||||||
|
Pro forma adjustment for incremental amortization expense
|
$
|
221
|
$
|
(4,115)
|
|
|||||||||||
Scenario B: Stock Consideration
|
(In thousands)
|
Useful Life
|
Fair Value
|
Amortization
Expense for the
Thirteen Weeks
Ended May 3,
2025
|
Amortization
Expense for the
Year Ended
February 1,
2025
|
||||||||||||
|
Lease acquisition costs
|
n/a
|
-
|
-
|
-
|
||||||||||||
|
Developed technology
|
10
|
-
|
-
|
-
|
||||||||||||
|
Customer relationships
|
13
|
-
|
-
|
-
|
||||||||||||
|
Trademarks & tradenames
|
n/a
|
20,000
|
-
|
-
|
||||||||||||
|
Total identifiable intangible assets
|
20,000
|
-
|
-
|
|||||||||||||
|
Less: Historical Amortization expense
|
$
|
5,000
|
||||||||||||||
|
Pro forma adjustment for incremental amortization expense
|
$
|
(5,000)
|
|
|||||||||||||
16
(4C) Reflects estimated non-recurring transaction-related expenses of $56.4 million incurred by ▇▇▇▇’S, including legal, accounting and regulatory fees
directly associated with the Merger. Out of these expenses, $48.5 million are charged under Selling, general and administrative expenses and $7.9 million pertaining to structuring & upfront fee on senior bridge term loans are charged as
Interest expense. These non-recurring expenses are not anticipated to affect the Unaudited Pro Forma Condensed Combined Statement of Operations beyond twelve months after the closing date.
(4D) Represents the adjustment to record the elimination of Foot Locker’s historical stock-based compensation expense and recognition of new stock-based
compensation expense for the post-combination portion of the Foot Locker RSU Awards and Foot Locker PSU Awards that are expected to be replaced by ▇▇▇▇’S RSUs, respectively, at the closing of the Merger.
|
(In thousands)
|
For the Thirteen Weeks
Ended May 3, 2025
|
For the Year Ended
February 1, 2025
|
||||||
|
Post-combination stock-based compensation expense
|
$
|
4,461
|
$
|
18,621
|
||||
|
Less: Historical stock-based compensation expense
|
(4,095)
|
|
(14,524)
|
|
||||
|
Pro forma adjustment
|
$
|
366
|
$
|
4,097
|
||||
(4E) Represents the adjustment to ▇▇▇▇’S selling, general and administrative expenses to record a one-time post-combination expense related to paid
severance costs of $22.6 million for executives of Foot Locker, including cash severance and the acceleration of unvested Foot Locker RSU Awards and Foot Locker PSU Awards held by executives.
(4F) The adjustment represents $7.5 million of additional cash retention bonus to certain employees of Foot Locker that remain employed six months after the
closing of the Merger.
(4G) Reflects the adjustment to record amortization of exchange fee of $0.1 million and $0.4 million out of the total of $2.0 million, incurred on the same
for the thirteen weeks ended May 3, 2025 and for the year ended February 1, 2025, respectively.
(4H) Reflects the adjustment to record interest expense for accretion of the preliminary fair value of the Foot Locker Notes assumed and not extinguished as
of the closing of the Merger. In addition, this also reflects the reversal of historical amortization of transaction fees related to both the Foot Locker Notes and Foot Locker’s revolving credit facility, recorded in the income statement of Foot
Locker for the thirteen weeks ended May 3, 2025 and for the year ended February 1, 2025, respectively.
(4I1) Reflects estimated income tax impact of $1.8 million and $18.8 million related to the transaction accounting adjustments for the thirteen weeks ended
May 3, 2025 and for the year ended February 1, 2025, respectively. Tax-related adjustments are based upon an estimated statutory tax rate of 26% and include the tax impacts of certain non-deductible compensation and transaction costs. The
estimated blended statutory tax rate used for the unaudited pro forma condensed combined financial information will likely vary from the actual effective tax rates in periods as of and subsequent to the completion of the Merger.
(4I2) Reflects estimated income tax impact of $1.7 million and $18.6 million related to the transaction accounting adjustments for the thirteen weeks ended
May 3, 2025 and for the year ended February 1, 2025, respectively. Tax-related adjustments are based upon an estimated statutory tax rate of 26% and include the tax impacts of certain non-deductible compensation and transaction costs. The
estimated blended statutory tax rate used for the unaudited pro forma condensed combined financial information will likely vary from the actual effective tax rates in periods as of and subsequent to the completion of the Merger.
(4J) Represents an adjustment of $4.5 million and $18.0 million to record amortization expense for favorable contractual lease term when compared to market
for the thirteen weeks ended May 3, 2025 and for the year ended February 1, 2025, respectively.
17
(4K1) Represents the recognition of one-time gain associated with ▇▇▇▇’S’ investment in Foot Locker reflected in the Unaudited Pro Forma Condensed Combined
Statement of Operations for the year end February 1, 2025.
Refer to the following table for the calculation of the gain under the cash consideration in Scenario A:
|
(in thousands)
|
For the Year Ended
February 1, 2025
|
|||
|
Fair value of ▇▇▇▇’S’ investment in Foot Locker based on the cash consideration
|
$
|
102,480
|
||
|
Carrying value of ▇▇▇▇’S’ investment in Foot Locker as of May 3, 2025
|
55,600
|
|||
|
Gain on investment
|
$
|
46,880
|
||
(4K2) Represents the recognition of one-time gain associated with ▇▇▇▇’S’ investment in Foot Locker reflected in the Unaudited Pro Forma Condensed Combined
Statement of Operations for the year end February 1, 2025.
Refer to the following table for the calculation of the gain under the stock consideration in Scenario B:
|
(in thousands)
|
For the Year Ended
February 1, 2025
|
|||
|
Fair value of ▇▇▇▇’S’ investment in Foot Locker based on the stock consideration
|
$
|
88,147
|
||
|
Carrying value of ▇▇▇▇’S’ investment in Foot Locker as of May 3, 2025
|
55,600
|
|||
|
Gain on investment
|
$
|
32,547
|
||
Financing Adjustments
(4L) Reflects the adjustment related to the interest expense and amortization of issuance costs related to the Debt Financing assumed as part of financing
the cash consideration in Scenario A, as described above.
|
(In thousands)
|
For the Thirteen Weeks
Ended May 3, 2025
|
For the Year Ended
February 1, 2025
|
||||||
|
Interest expense on Unsecured Senior Notes
|
$
|
27,290
|
$
|
110,365
|
||||
|
Amortization of debt issuance costs on Unsecured Senior Notes
|
149
|
576
|
||||||
|
Pro forma adjustment
|
$
|
27,439
|
$
|
110,941
|
||||
(4M) Reflects estimated income tax impact of $7.1 million and $28.8 million related to the financing adjustments for the thirteen weeks ended May 3, 2025
and for the year ended February 1, 2025, respectively. Tax-related adjustments are based upon an estimated statutory tax rate of 26%. The estimated blended statutory tax rate used for the unaudited pro forma condensed combined financial
information will likely vary from the actual effective tax rates in periods as of and subsequent to the completion of the Merger.
Note 5. Earnings Per Share
The following tables set forth the computation of pro forma basic and diluted earnings per share for the thirteen weeks ended May 3, 2025.
|
(in thousands, except per share data)
|
Scenario A - Cash
Consideration for the
Thirteen Weeks
Ended May 3,
2025
|
Scenario B - Stock
Consideration for the
Thirteen Weeks
Ended May 3,
2025
|
||||||
| Numerator (basic and diluted): | ||||||||
|
Pro forma net loss attributable to common shares
|
$
|
(124,081)
|
|
$
|
(103,612)
|
|
||
|
Denominator:
|
||||||||
|
Weighted-average number of common shares outstanding - basic
|
79,341
|
89,971
|
||||||
|
Weighted-average number of common shares outstanding - diluted
|
81,727
|
92,357
|
||||||
|
Pro forma loss per share:
|
||||||||
|
Basic
|
$
|
(1.56)
|
|
$
|
(1.15)
|
|
||
|
Diluted
|
$
|
(1.52)
|
|
$
|
(1.12)
|
|
||
18
| (in thousands) |
Scenario A- Cash
Consideration for the
Thirteen Weeks
Ended May 3,
2025
|
Scenario B- Stock
Consideration for the
Thirteen Weeks
Ended May 3,
2025
|
||||||
|
Denominator for Basic
|
||||||||
|
Historical weighted-average number of common shares outstanding
|
79,341
|
79,341
|
||||||
|
Shares of DICK’S common stock issued as consideration transferred
|
-
|
10,630
|
||||||
|
Total weighted average common shares outstanding (basic):
|
79,341
|
89,971
|
||||||
|
Denominator for Diluted
|
||||||||
|
Historical weighted-average number of common shares outstanding
|
81,478
|
81,478
|
||||||
|
Shares of DICK’S common stock issued as consideration transferred
|
-
|
10,630
|
||||||
|
Replacement of Foot Locker PSU Awards and Foot Locker RSU Awards
|
249
|
249
|
||||||
|
Total weighted average common shares outstanding (diluted):
|
81,727
|
92,357
|
||||||
The following tables set forth the computation of pro forma basic and diluted earnings per share for the year ended February 1, 2025.
|
|
Scenario A - Cash
Consideration for the
Year Ended
February 1,
2025
|
Scenario B - Stock
Consideration for the
Year Ended
February 1,
2025
|
||||||
| Numerator (basic and diluted): | ||||||||
|
Pro forma net income attributable to common shares
|
$
|
1,048,289
|
$
|
1,116,706
|
||||
|
Denominator:
|
||||||||
|
Weighted-average number of common shares outstanding - basic
|
80,468
|
91,098
|
||||||
|
Weighted-average number of common shares outstanding - diluted
|
83,113
|
93,743
|
||||||
|
Pro forma earnings per share:
|
||||||||
|
Basic
|
$
|
13.03
|
$
|
12.26
|
||||
|
Diluted
|
$
|
12.61
|
$
|
11.91
|
||||
|
(in thousands)
|
Scenario A - Cash
Consideration for the
Year Ended
February 1,
2025
|
Scenario B - Stock
Consideration for the
Year Ended
February 1,
2025
|
||||||
|
Denominator for Basic
|
||||||||
|
Historical weighted-average number of common shares outstanding
|
80,468
|
80,468
|
||||||
|
Shares of DICK’S common stock issued as consideration transferred
|
-
|
10,630
|
||||||
|
Total weighted average common shares outstanding (basic):
|
80,468
|
91,098
|
||||||
|
Denominator for Diluted
|
||||||||
|
Historical weighted-average number of common shares outstanding
|
82,929
|
82,929
|
||||||
|
Shares of DICK’S common stock issued as consideration transferred
|
-
|
10,630
|
||||||
|
Replacement of Foot Locker PSU Awards and Foot Locker RSU Awards
|
184
|
184
|
||||||
|
Total weighted average common shares outstanding (diluted):
|
83,113
|
93,743
|
||||||
19