Dick's Sporting Goods 2010 Annual Report Download - page 84

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and $0.7 million, respectively, for the accrual of interest and penalties in its Consolidated Statements of Operations. The Company
has federal, state and local examinations currently ongoing. It is possible that these examinations may be resolved within
12 months. Due to the potential for resolution of these examinations, and the expiration of various statutes of limitation, it is
reasonably possible that $5.4 million of the Company’s gross unrecognized tax benefits and interest at January 29, 2011 could be
recognized within the next 12 months. The Company does not anticipate that changes in its unrecognized tax benefits will have a
material impact on the Consolidated Statements of Operations during fiscal 2011.
The Internal Revenue Service is currently examining tax years 2007 and 2008 and the audit is expected to close in fiscal 2011. The
Company and its subsidiaries file income tax returns on a combined, unitary or stand-alone basis in multiple state and local
jurisdictions, which generally have statutes of limitations ranging from 3 to 5 years. Various state income tax returns are currently
in the process of examination or administrative appeal. Management does not anticipate any potential settlement to result in a
material change to the Company’s financial position.
11. Earnings per Common Share
The computations for basic and diluted earnings per share are as follows (in thousands, except per share data):
2010 2009 2008
Fiscal Year Ended
Earnings per common share — Basic:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $182,077 $135,359 $ (39,865)
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,236 113,184 111,662
Earnings (loss) per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.57 $ 1.20 $ (0.36)
Earnings per common share — Diluted:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $182,077 $135,359 $ (39,865)
Weighted average common shares outstanding — Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,236 113,184 111,662
Dilutive effect of stock-based awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,488 4,771 —
Weighted average common shares outstanding — Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,724 117,955 111,662
Earnings (loss) per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.50 $ 1.15 $ (0.36)
For fiscal years 2010 and 2009, 3.2 million and 6.4 million shares, respectively, were attributable to outstanding stock-based
awards that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-
dilutive. Due to the net loss for fiscal 2008, 19.0 million shares were excluded from the calculation of diluted loss per share, as
these shares were anti-dilutive.
12. Investments
In April 2001, the Company entered into a 10-year Internet commerce agreement with GSI. Under the terms of this agreement,
GSI was responsible for all financial and operational aspects of the Company’s 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 (see Note 2). The Company recognizes the difference between the fair value of the
GSI stock that it purchased and its cost as deferred revenue. Deferred revenue at January 29, 2011 and January 30, 2010 was
$0.9 million and $1.0 million, respectively. In total, the number of shares the Company holds represents less than 5% of GSI’s
outstanding common stock. In August 2008, the Company amended its agreement with GSI. Under the terms of the amended
agreement, in addition to extending the term of the agreement to February 1, 2024 and certain other amendments, the Company
assumed operational responsibility for its Internet commerce business effective February 1, 2009, including merchandise
procurement, assortment and pricing, while GSI became primarily responsible for hosting and maintaining the website, order
fulfillment and customer service. GSI is paid a transaction fee by the Company based on the value and type of orders placed
through the website. The deferred revenue is being amortized through the term of the amended agreement.
64 Dick’s Sporting Goods, Inc. ¬2010 Annual Report
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)