Dick's Sporting Goods 2006 Annual Report Download - page 61

12. Earnings per Common Share
The computation of basic earnings per share is based on the number of weighted average common shares outstanding during the
period. The computation of diluted earnings per share is based upon the weighted average number of shares outstanding plus the
incremental shares that would be outstanding assuming exercise of dilutive stock options. The number of incremental shares from
the assumed exercise of stock options is calculated by applying the treasury stock method. The aggregate number of shares, totaling
4,388,024, that the Company could be obligated to issue upon conversion of our $172.5 million issue price of senior convertible
notes was excluded from calculations for the year ended February 3, 2007. The computations for basic and diluted earnings per
share are as follows:
Fiscal Year Ended 2006 2005 2004
(In thousands, except per share data)
Earnings per common share – Basic:
Net income $ 112,611 $72,980 $ 68,905
Weighted average common shares outstanding 51,256 49,792 47,978
Earnings per common share $2.20 $1.47 $ 1.44
Earnings per common share – Diluted:
Net income $ 112,611 $72,980 $ 68,905
Weighted average common shares outstanding – basic 51,256 49,792 47,978
Stock options 4,139 4,187 4,943
Weighted average common shares outstanding – diluted 55,395 53,979 52,921
Earnings per common share $2.03 $1.35 $ 1.30
Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. Anti-dilutive options
totaled 0.2 million for fiscal 2006. There were no anti-dilutive options in fiscal 2005 or 2004.
13. 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 permitted the Company, at its election, to purchase an equity ownership in GSI at a price that was less than
the GSI market value per share in lieu of royalties until Internet sales reached a predefined amount. The equity ownership consists
of 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 February 3, 2007 and January 28, 2006 was $1.9 million and $2.3 million, respectively.
In total, the number of shares the Company holds represents less than 5% of GSI’s outstanding common stock.
During fiscal 2005 and 2004, the Company realized a pre-tax gain of $1.8 million and $11.0 million, respectively, resulting from the
sale of a portion of the Company’s investment in GSI.
14. 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 $3.0 million, $2.6 million
and $1.8 million for fiscal 2006, 2005 and 2004, respectively.
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