Dick's Sporting Goods 2003 Annual Report Download - page 43

Deferred Revenue and Other Liabilities Deferred revenue and other liabilities is primarily comprised of gift cards,
deferred rent, which represents the difference between rent paid and the amounts expensed for operating leases,
amounts deferred relating to the investment in GSI (see Note 11) and advance payments under the terms of building
sale-leaseback agreements.
Self-Insurance The Company is self-insured for certain losses related to health, workers’ compensation and general
liability insurance, although we maintain stop-loss coverage with third-party insurers to limit our liability exposure.
Liabilities associated with these losses are estimated in part by considering historical claims experience, industry
factors, severity factors and other actuarial assumptions.
Pre-opening Expenses Pre-opening expenses, which consist primarily of marketing, payroll and recruiting costs,
are expensed as incurred.
Stock Split On February 10, 2004, the Company’s Board of Directors approved a two-for-one stock split, in the form
of a stock dividend, of the Company’s common shares for stockholders of record on March 19, 2004. The split was
effected by issuing our stockholders of record one additional share of common stock for every share of common stock
held, and one additional share of Class B common stock for every share of Class B common stock held. The applicable
share and per-share data for all periods included herein have been restated to give effect to this stock split (see Note 16).
Earnings Per Share The computation of basic earnings per share is based on the weighted average number of shares
outstanding during the period. The computation of diluted earnings per share is based on the weighted average number
of shares outstanding plus the incremental shares that would be outstanding assuming the exercise of dilutive stock
options and warrants, calculated by applying the treasury stock method.
Stock-Based Compensation The Company accounts for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and
related Interpretations. Accordingly, no compensation expense has been recognized where the exercise price of the
option was equal to or greater than the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee
compensation (see Note 7):
January 31, February 1, February 2,
Fiscal Year Ended 2004 2003 2002
(Dollars in thousands, except per share data)
Net income, as reported $52,819 $38,264 $ 23,471
Deduct: Total stock-based employee
compensation expense determined under the
fair value based method for all awards, net
of related tax effects (3,908) (1,825) (1,020)
Pro-forma net income $48,911 $36,439 $ 22,451
Earnings per share:
Basic income applicable to common shareholders – as reported $1.18 $ 1.08 $ 0.73
Basic income applicable to common shareholders – pro-forma $1.09 $ 1.03 $ 0.70
Diluted income applicable to common shareholders – as reported $1.05 $ 0.93 $ 0.66
Diluted income applicable to common shareholders – pro-forma $0.97 $ 0.89 $ 0.63
The fair value of stock-based awards to employees is estimated on the date of grant using the Black-Scholes option-
pricing model with the following weighted average assumptions:
Employee Stock Options Employee Stock Purchase Plan
2003 2002 2001 2003 2002 2001
Expected life (years) 3-5 7.5 7.5 0.50 0.02 - 0.50 –
Expected volatility 48% - 62% 60% – 32% - 47% 60% –
Risk-free interest rate 2.20% - 3.52% 3.50% - 3.51% 5.20% 0.96% - 1.02% 1.23% - 1.66% –
Expected dividend yield ––––––
Weighted average
fair values $10.73 $ 4.31 $ – $ 5.02 $ 1.67 $ –
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