Dick's Sporting Goods 2006 Annual Report Download - page 51

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Segment Information — The Company is a specialty retailer that offers a broad range of products in its specialty retail stores in the
eastern United States. Given the economic characteristics of the store formats, the similar nature of the products sold, the type of
customer, and method of distribution, the operations of the Company are one reportable segment. The following table sets forth the
approximate amount of net sales attributable to hardlines, apparel and footwear for the periods presented:
Fiscal Year
Merchandise Category 2006 2005 2004
(Dollars in millions)
Hardlines $1,768 $1,497 $ 1,216
Apparel 811 672 530
Footwear 535 456 363
Total net sales $ 3,114 $ 2,625 $ 2,109
Newly Issued Accounting Pronouncements — In June 2006, the EITF reached a consensus on Issue No. 06-3 (“EITF 06-3”),
“Disclosure Requirements for Taxes Assessed by a Governmental Authority on Revenue-Producing Transactions,” which provides
that entities should present such taxes on either a gross or net basis based on their accounting policies. The Company’s accounting
policy is to record such taxes on a net basis. EITF 06-3 is effective for interim and annual reporting periods beginning after
December 15, 2006. The implementation of EITF 06-3 in the first quarter of fiscal 2007 will not have a material impact on our
financial statements.
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an
interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” and it seeks to reduce the diversity in practice associated with
certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN 48 requires expanded disclosure with
respect to the uncertainty in income taxes and is effective as of the beginning of our 2007 fiscal year. The cumulative effect, if any, of
adopting FIN 48 will be recorded as an adjustment to retained earnings as of the beginning of fiscal 2007. The Company expects that
the financial impact of applying the provisions of FIN 48 to all tax positions will not be material upon the initial adoption of FIN 48.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, established
a framework for measuring fair value and expands disclosures about fair value measurements; however, SFAS 157 does not require
any new fair value measurements. SFAS 157 is effective as of the beginning of our 2008 fiscal year. We are currently evaluating the
impact, if any, that SFAS 157 will have on our financial statements.
2. Acquisition
On July 29, 2004, Dick’s Sporting Goods, Inc. acquired all of the common stock of Galyan’s for $16.75 per share in cash, and Galyan’s
became a wholly owned subsidiary of Dick’s. The Company has recorded $156.6 of goodwill as the excess of the purchase price of
$369.6 million over the fair value of the net amounts assigned to assets acquired and liabilities assumed. The Company received an
independent appraisal for certain assets to determine their fair value. The purchase price allocation is final, except for any potential
income tax changes that may arise. The following table summarizes the fair values of the assets acquired and liabilities assumed:
(In thousands)
Inventory $ 158,780
Other current assets 65,603
Property and equipment, net 157,211
Other long-term assets, excluding goodwill 4,458
Goodwill 156,628
Favorable leases 5,310
Accounts payable (93,944)
Accrued expenses (61,223)
Other current liabilities (9,937)
Long-term debt (5,859)
Other long-term liabilities (7,455)
Fair value of net assets acquired, including intangibles $ 369,572