Dick's Sporting Goods 2003 Annual Report Download - page 49

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9. EARNINGS PER COMMON SHARE
Earnings per common share is calculated using the principles of SFAS No. 128, “Earnings Per Share” (“EPS”). The
number of incremental shares from the assumed exercise of stock options is calculated by applying the treasury stock
method. The earnings per share calculations are as follows:
Fiscal Year 2003 2002 2001
(In thousands, except per share data)
Earnings per common share – Basic:
Net income $52,819 $38,264 $ 23,471
Weighted average common shares outstanding 44,774 35,458 32,018
Earnings per common share $1.18 $ 1.08 $ 0.73
Earnings per common share – Diluted:
Net income $52,819 $38,264 $ 23,471
Weighted average common shares outstanding – basic 44,774 35,458 32,018
Stock options and warrants 5,506 5,500 3,718
Weighted average common shares outstanding 50,280 40,958 35,736
Earnings per common share $1.05 $ 0.93 $ 0.66
10. DISCONTINUED OPERATIONS OF DICKSSPORTINGGOODS.COM
During January 2001, the Board of Directors approved a plan to discontinue the operations of DSG Holdings LLC,
also known as DicksSportingGoods.com, by ceasing its operations in April 2001. The equity interest in operations of
DicksSportingGoods.com, the operations as a wholly owned subsidiary, the operations as a component of the Company,
and the loss on disposal have been classified as “Discontinued Operations” in the fiscal 2000 Consolidated Statements of
Income. During fiscal 2001, the operations of DSG Holdings LLC ceased and the net assets of discontinued operations
were realized in an amount that was not materially different from that recorded as of February 3, 2001. Cash flows in
connection with the discontinued operations are reported separately in the Consolidated Statements of Cash Flows.
11. INVESTMENTS
In April 2001, the Company entered into an Internet commerce agreement with GSI. Under the terms of this 10-year
agreement, GSI is responsible for all financial and operational aspects of the Internet site which operates under the
domain name “DicksSportingGoods.com,” which name has been licensed to GSI by the Company. The Company and
GSI entered into a royalty arrangement that was subsequently converted into an equity ownership at a price that was
less than the GSI market value per share. The equity ownership consists of restricted, unregistered common stock of
GSI and warrants to purchase unregistered common stock of GSI (see Note 1). The Company recognized the difference
between the fair value of the GSI stock and its cost as deferred revenue to be amortized over the 10-year term of the
agreement. Deferred revenue at January 31, 2004 and February 1, 2003 was $3,192,000 and $3,618,000, respectively.
In total, the number of shares the Company holds represents less than 5% of GSI’s outstanding common stock.
The Company regularly evaluates the carrying value of its investment in GSI. During fiscal 2002, the carrying value of
GSI exceeded the fair value and the decline in fair value was deemed to be other-than-temporary. The Company wrote
down the value of the investment to its fair value, recording a non-cash charge of $2,447,000 for the other-than-
temporary reduction in fair value of GSI.
During fiscal 2003, the Company realized a gain of $3,536,000 resulting from the sale of a portion of the Company’s
investment in GSI.
12. RETIREMENT SAVINGS PLAN
The Company’s retirement savings plan, established pursuant to Section 401(k) of the Internal Revenue Code, covers
all employees who have completed one year of service and have attained 21 years of age. Under the terms of the
retirement savings plan, the Company provides a matching contribution equal to 50% of each participant’s contribution
up to 10% of the participant’s compensation, and may make a discretionary contribution. Total expense recorded under
the plan was $1,887,000, $1,201,000 and $1,272,000 for fiscal 2003, 2002 and 2001, respectively. The fiscal 2003
expense included a discretionary contribution of $594,000.