Dick's Sporting Goods 2008 Annual Report Download - page 39

value of the reporting unit’s goodwill and compare it to the carrying value of the reporting unit’s goodwill. The activities in the second
step include valuing the tangible and intangible assets and liabilities of the impaired reporting unit based on their fair value and
determining the fair value of the impaired reporting unit’s goodwill based upon the residual of the summed identifi ed tangible and
intangible assets and liabilities.
Intangible assets that have been determined to have indefi nite lives are also not subject to amortization and are reviewed at least
annually for potential impairment, as mentioned above. The fair value of the Company’s intangible assets are estimated and
compared to their carrying value. The Company estimates the fair value of these intangible assets based on an income approach
using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a
royalty in order to exploit the related benefi ts of these types of assets. This approach is dependent on a number of factors, including
estimates of future growth and trends, royalty rates in the category of intellectual property, discount rates and other variables. The
Company recognizes an impairment charge when the estimated fair value of the intangible asset is less than the carrying value.
Impairment of Long-Lived Assets and Closed Store Reserves The Company reviews long-lived assets whenever events and circumstances
indicate that the carrying value of these assets may not be recoverable based on estimated undiscounted future cash fl ows. Assets are
reviewed at the lowest level for which cash fl ows can be identifi ed, which is the store level. In determining future cash fl ows, signifi cant
estimates are made by the Company with respect to future operating results of each store over its remaining lease term. If such
assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets.
Based on an analysis of current and future store performance, management periodically evaluates the need to close underperforming
stores. Reserves are established when the Company ceases to use the location for the present value of any remaining operating lease
obligations, net of estimated sublease income, as prescribed by SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal
Activities.” If the timing or amount of actual sublease income differs from estimated amounts, this could result in an increase or
decrease in the related reserves.
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.
Stock-Based Compensation The Company accounts for stock-based compensation in accordance with the fair value recognition provisions
of SFAS 123R. The Company uses the Black-Scholes option-pricing model which requires the input of assumptions. These assumptions
include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the
estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not
complete their vesting requirements (“forfeitures”). Changes in the assumptions can materially affect the estimate of fair value of
stock-based compensation and consequently, the related amount recognized in the Consolidated Statements of Operations.
Uncertain Tax Positions We account for uncertain tax positions in accordance with FIN 48. The application of income tax law is
inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make
many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding
income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially
affect amounts recognized in the Consolidated Balance Sheets and Statements of Operations.
Forward-Looking Statements
We caution that any forward-looking statements (as such term is defi ned in the Private Securities Litigation Reform Act of 1995)
contained in this Annual Report on Form 10-K or made by our management involve risks and uncertainties and are subject to change
based on various important factors, many of which may be beyond our control. Accordingly, our future performance and fi nancial
results may differ materially from those expressed or implied in any such forward-looking statements. Investors should not place
undue reliance on forward-looking statements as a prediction of actual results. You can identify these statements as those that may
predict, forecast, indicate or imply future results, performance or advancements and by forward-looking words such as “believe,”
“anticipate,” “expect,” “estimate,” “predict,” “intend,” “plan,” “project,” “will,” “will be,” “will continue,” “will result,” “could,” “may,”
“might” or any variations of such words or other words with similar meanings. Forward-looking statements address, among other
DICK’S SPORTING GOODS, INC. 2008 ANNUAL REPORT 37