Dick's Sporting Goods 2006 Annual Report Download - page 35

Goodwill, Intangible Assets and Impairment of Long-Lived Assets Goodwill and other finite-lived intangible assets are tested for
impairment on an annual basis. Our evaluation of goodwill for impairment requires accounting judgments and financial estimates
in determining the fair value of the reporting unit. If these judgments or estimates change in the future, we may be required to
record impairment charges for these assets.
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 flows. Assets are reviewed at the lowest level for which cash flows can
be identified, which is the store level. In determining future cash flows, significant 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.
Business Combinations Our acquisitions are accounted for under the purchase method of accounting. The assets and liabilities
are adjusted to their fair values and the excess of the purchase price over the net assets acquired is recorded as goodwill.
The determination of fair value involves the use of an independent appraisal, estimates and assumptions which we believe
provided a reasonable basis for determining fair value.
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 income.
Forward-Looking Statements
We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995)
contained in this Annual Report 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 financial results may
differ materially from those expressed or implied in any such forward-looking statements. Accordingly, 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
things, our expectations, our growth strategies, including our plans to open new stores, our efforts to increase profit margins and
return on invested capital, plans to grow our private label business, projections of our future profitability, results of operations,
capital expenditures or our financial condition or other “forward-looking” information and includes statements about revenues,
earnings, spending, margins, liquidity, store openings and operations, inventory, private label products, our actions, plans or strategies.
The following factors, among others, in some cases have affected and in the future could affect our financial performance and
actual results and could cause actual results for 2007 and beyond to differ materially from those expressed or implied in any
forward-looking statements included in this report or otherwise made by our management: the intense competition in the sporting
goods industry and actions by our competitors; our inability to manage our growth, open new stores on a timely basis and expand
successfully in new and existing markets; the availability of retail store sites on terms acceptable to us; the cost of real estate and
other items related to our stores; our ability to access adequate capital; changes in consumer demand; risks relating to product
liability claims and the availability of sufficient insurance coverage relating to those claims; our relationships with our suppliers,
distributors and manufacturers and their ability to provide us with sufficient quantities of products; any serious disruption at our
distribution or return facilities; the seasonality of our business; the potential impact of natural disasters or national and international
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