Dick's Sporting Goods 2005 Annual Report Download - page 47

Goodwill and Intangible Assets – In accordance with SFAS No. 142, “Accounting for Goodwill and Other Intangible Assets,”
the Company will continue to assess on an annual basis whether goodwill acquired in the acquisition of Galyan’s is impaired.
Additional impairment assessments may be performed on an interim basis if the Company deems it necessary. Finite-lived
intangible assets are amortized over their estimated useful economic lives and are periodically reviewed for impairment. No
impairment of goodwill or intangible assets was recorded during the years ended January 28, 2006 and January 29, 2005.
Investments – Investments consist of shares of unregistered common stock and are carried at fair value within other assets in
accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”. Fair value at the acquisition
date was based upon the publicly quoted equity price of GSI Commerce Inc. (“GSI”) stock, less a discount resulting from the
unregistered character of the stock. This discount was based on an independent appraisal obtained by the Company.
Unrealized holding gains and losses on the stock are included in other comprehensive income and are shown as a component
of stockholders’ equity as of the end of each fiscal year (see Note 12).
Deferred Revenue and Other Liabilities – Deferred revenue and other liabilities is primarily comprised of gift cards, deferred
rent, which represents the difference between rent paid and the amounts expensed for operating leases, deferred liabilities
related to construction allowances, unamortized capitalized rent during construction that was previously required to be
capitalized prior to the adoption of FSP 13-1, amounts deferred relating to the investment in GSI (see Note 12) and advance
payments under the terms of building sale-leaseback agreements. Deferred liabilities related to construction allowances and
capitalized rent, net of related amortization, was $73.3 million at both January 28, 2006 and January 29, 2005. Deferred
revenue related to gift cards at January 28, 2006 and January 29, 2005 was $58.1 million and $47.0 million, respectively.
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.
Pre-opening Expenses – Pre-opening expenses, which consist primarily of rent, marketing, payroll and recruiting costs, are
expensed as incurred.
Merger Integration and Store Closing Costs – Merger integration and store closing costs include the expense of closing Dick’s
stores in connection with the Galyan’s acquisition, advertising the re-branding of Galyan’s stores, duplicative administrative
costs, recruiting and system conversion costs. These costs were $37.8 million, $20.3 and $0 for fiscal 2005, 2004 and 2003
respectively.
Stock Split – On February 10, 2004, the Company’s Board of Directors approved a two-for-one stock split, in the form of a stock
dividend of the Company’s common shares for stockholders of record as of March 19, 2004. The split was affected by issuing
our stockholders of record one additional share of common stock for every share of common stock held, and one additional
share of Class B common stock for every share of Class B common stock held. The applicable share and per-share data for
periods prior to fiscal 2004 included herein have been restated to give effect to this stock split.
Earnings Per Share – The computation of basic earnings per share is based on the weighted average number of shares
outstanding during the period. The computation of diluted earnings per share is based on the weighted average number of
shares outstanding plus the incremental shares that would be outstanding assuming the exercise of dilutive stock options and
warrants, calculated by applying the treasury stock method.
dick’s sporting goods, inc. 2005 annual report
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