Dick's Sporting Goods 2004 Annual Report Download - page 48

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46
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.
Newly Issued Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R,
“Share-Based Payment” (“SFAS 123R”), a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS 123R will require
the Company to, among other things, measure all employee stock-based compensation awards using a fair value method and record such
expense in the Company’s consolidated financial statements. The provisions of SFAS 123R are effective for the first interim or annual
reporting period that begins after June 15, 2005; therefore, the Company will adopt the new requirements at the beginning of its third
quarter of fiscal 2005. The Company is currently analyzing the impact of expensing stock options, which is based on a number of factors,
including the Company’s stock price, and will not be determined until the end of the second quarter of fiscal 2005. Based on current
information, however, the Company estimates the cost in the second half of the year to be approximately $0.12 - $0.14 per share.
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. Dick’s paid $351.6 million, net of cash acquired of $17.9 million, to fund and consummate
the Galyan’s acquisition, including the repayment of $57.2 million of Galyan’s indebtedness. The Company obtained approximately
$193 million of these funds from cash and cash equivalents, investments and the balance from borrowings under its revolving line
of credit.
The primary reasons for the acquisition of Galyan’s, and the primary factors that contributed to a purchase price that resulted in
recognition of goodwill were:
The acquisition provided broader real estate coverage in our existing geographic footprint, creating new in-fill opportunities as well as
a quicker entry into key markets such as Chicago, Atlanta, Minneapolis, Dallas and Denver, capitalizing on Galyan’s premium quality
real estate;
The acquisition improved our logistics capabilities, with the addition of a second full-service distribution center in Plainfield, IN to serve
the western portion of the chain; and
The acquisition creates meaningful margin improvement opportunities due to lower merchandise costs as we order in larger volumes,
intend to have fewer markdowns due to improved inventory control and create leverage of advertising and general and administrative
expenditures.
notes to consolidated financial statements continued