Dick's Sporting Goods 2006 Annual Report Download - page 48

Goodwill and Intangible Assets – In accordance with SFAS No. 142, “Accounting for Goodwill and Other Intangible Assets,” the
Company will continue to assess on an annual basis whether goodwill is impaired. Additional impairment assessments may be
performed on an interim basis if the Company deems it necessary. Finite-lived intangible assets are amortized over their estimated
useful economic lives and are reviewed for impairment when factors indicate that an impairment may have occurred. No
impairment of goodwill or intangible assets was recorded during fiscal 2006, 2005 or 2004.
Investments – Investments consist of shares of unregistered common stock and is carried at fair value within other assets in
accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Fair value at the acquisition date
was based upon the publicly quoted equity price of GSI Commerce Inc. (“GSI”) stock, less a discount resulting from the unregistered
character of the stock. This discount was based on an independent appraisal obtained by the Company. Unrealized holding gains
and losses on the stock are included in other comprehensive income and are shown as a component of stockholders’ equity as of
the end of each fiscal year (see Note 13).
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, deferred liabilities related to
construction allowances, unamortized capitalized rent during construction that was previously capitalized prior to the adoption of
FSP 13-1, amounts deferred relating to the investment in GSI (see Note 13) and advance payments under the terms of building
sale-leaseback agreements. Deferred liabilities related to construction allowances and capitalized rent, net of related amortization,
was $100.1 million at February 3, 2007 and $73.3 million at January 28, 2006. Deferred revenue related to gift cards at February 3, 2007
and January 28, 2006 was $72.3 million and $58.1 million, respectively.
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 rent, marketing, payroll and recruiting costs, are
expensed as incurred.
Merger Integration and Store Closing Costs – Merger integration and store closing costs include the expense of closing Dick’s stores
in connection with the Galyan’s acquisition, advertising the re-branding of Galyan’s stores, duplicative administrative costs, recruiting
and system conversion costs. These costs were $37.8 and $20.3 for fiscal 2005 and 2004, respectively.
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 grants stock options to purchase common stock under the Company’s 2002 Stock
Option Plan (the “Plan”). The Company also has an employee stock purchase plan (“ESPP”) which provides for eligible employees
to purchase shares of the Company’s common stock.
Prior to the January 29, 2006 adoption of the Financial Accounting Standards Board (“FASB”) Statement No. 123(R), “Share-Based
Payment” (“SFAS 123R”), the Company accounted 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, because 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, and any purchase discounts under the Company’s ESPP plan were within statutory limits, no compensation
expense was recognized by the Company for stock-based compensation. As permitted by SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”), stock-based compensation was included as a proforma disclosure in the notes to the consolidated
financial statements.
DICK’S SPORTING GOODS, INC. 2006 ANNUAL REPORT
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