Dick's Sporting Goods 2010 Annual Report Download - page 49

Results of Operations
The following table presents for the periods indicated selected items in the Consolidated Statements of Operations as a
percentage of the Company’s net sales, as well as the basis point change in percentage of net sales from the prior year:
2010 2009 2008
(A)
Basis Point
Increase /
(Decrease) in
Percentage of
Net Sales
from Prior Year
2009-2010
Basis Point
Increase /
(Decrease) in
Percentage of
Net Sales
from Prior Year
2008-2009
(A)
Fiscal Year
Net sales (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00% 100.00% 100.00% N/A N/A
Cost of goods sold, including occupancy and distribution
costs (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70.25 72.42 71.33 (217) 109
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.75 27.58 28.67 217 (109)
Selling, general and administrative expenses (3) . . . . . . . . . . 23.18 22.03 22.47 115 (44)
Impairment of goodwill and other intangible assets (4) . . . . . — — 3.98 — (398)
Impairment of store assets (5) . . . . . . . . . . . . . . . . . . . . . . . — — 0.70 — (70)
Merger and integration costs(6) . . . . . . . . . . . . . . . . . . . . . . — 0.23 0.38 (23) (15)
Pre-opening expenses (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.22 0.21 0.39 1 (18)
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.35 5.11 0.74 124 437
Gain on sale of asset (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (0.06) — 6
Interest expense (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.29 0.10 0.42 19 (32)
Other (income) expense (10) . . . . . . . . . . . . . . . . . . . . . . . . . (0.05) (0.05) 0.04 — (9)
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 6.11 5.06 0.33 105 473
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2.37 1.99 1.30 38 69
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.74% 3.07% (0.97)% 67 404
(A) Column does not add due to rounding
(1) Revenue from retail sales is recognized at the point of sale, net of sales tax. Revenue from e-commerce sales is recognized
upon shipment of merchandise and any service related revenue is recognized primarily as the services are performed. A
provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period
that the related sales are recorded. Revenue from gift cards and returned merchandise credits (collectively the “cards”) are
deferred and recognized upon the redemption of the cards. These cards have no expiration date. Income from unredeemed
cards is recognized in the Consolidated Statements of Operations in selling, general and administrative expenses at the
point at which redemption becomes remote. The Company performs an evaluation of the aging of the unredeemed cards,
based on the elapsed time from the date of original issuance, to determine when redemption is remote.
(2) Cost of goods sold includes the cost of merchandise, inventory shrinkage and obsolescence, freight, distribution and store
occupancy costs. Store occupancy costs include rent, common area maintenance charges, real estate and other asset-based
taxes, store maintenance, utilities, depreciation, fixture lease expenses and certain insurance expenses.
(3) Selling, general and administrative expenses include store and field support payroll and fringe benefits, advertising, bank
card charges, information systems, marketing, legal, accounting, other store expenses and all expenses associated with
operating the Company’s corporate headquarters. Selling, general and administrative expenses for fiscal 2010 also include
expenses relating to future lease obligations and asset impairment charges resulting from the closure of 12 underperform-
ing Golf Galaxy stores as well as a litigation settlement charge.
(4) Impairment of goodwill and other intangible assets is attributable to the impairment of Golf Galaxy’s goodwill and other
intangible assets.
(5) Impairment of store assets in connection with certain underperforming Dick’s Sporting Goods, Golf Galaxy and Chick’s
Sporting Goods stores.
(6) Merger and integration costs primarily include duplicative administrative costs, management and advertising expenses asso-
ciated with the conversions from Chick’s stores to Dick’s stores, and severance and system conversion costs related to the
operational consolidation of Golf Galaxy and Chick’s with the Company’s pre-existing business.
(7) Pre-opening expenses consist primarily of rent, marketing, payroll and recruiting costs incurred prior to a new store open-
ing which are expensed as incurred.
Dick’s Sporting Goods, Inc. ¬2010 Annual Report 29