Dick's Sporting Goods 2007 Annual Report Download - page 36

Dick’s Sporting Goods, Inc. | 2007 Annual Report34
OUTLOOK
Full Year 2008 Comparisons to Fiscal 2007
• Based on an estimated 121 million diluted shares outstanding, the Company anticipates reporting consolidated earnings per
diluted share of approximately $1.49–1.54. This represents an approximate 12–16% increase over earnings per diluted share for
the full year 2007 of $1.33.
• Comparable store sales, which include Dick’s Sporting Goods and Golf Galaxy stores, are expected to be approximately flat to
an increase of 1%. The Golf Galaxy stores will be included in the comparable store sales calculation beginning in the first quarter
of 2008. The comparable store sales calculation excludes the Chick’s Sporting Goods stores.
• The Company expects to open approximately 46 new Dick’s Sporting Goods stores, ten new Golf Galaxy stores and relocate one
Dick’s store in 2008.
Newly Issued Accounting Standards
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)
No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R significantly changes the accounting for business
combinations in a number of areas, including the treatment of contingent consideration, preacquisition contingencies, transaction
costs, in-process research and development and restructuring costs. In addition, under SFAS 141R, changes in an acquired entity’s
deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. SFAS 141R is
effective for fiscal years beginning after December 15, 2008. We will adopt SFAS 141R beginning in the first quarter of fiscal 2009.
This standard will change our accounting treatment for business combinations on a prospective basis, including the treatment of
any income tax adjustments related to past acquisitions.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes
a framework for measuring fair value and expands disclosures about fair value measurements; however, SFAS 157 does not require
any new fair value measurements. The requirements of SFAS 157 are first effective as of the beginning of our 2008 fiscal year.
However, in February 2008 the FASB decided that an entity need not apply this standard to nonrecurring nonfinancial assets and
liabilities until the subsequent year. Accordingly, our adoption of SFAS 157 is limited to financial assets and liabilities. We do not
believe that the initial adoption of SFAS 157 will have a material impact on our financial statements. However, we are still in the
process of evaluating this standard with respect to its effect on nonrecurring nonfinancial assets and liabilities and therefore have
not yet determined the impact that it will have on our financial statements upon full adoption.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”).
SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. We do not believe that the adoption of SFAS 159 will have a material
impact on our financial statements.
Critical Accounting Policies and Use of Estimates
The Company’s significant accounting policies are described in Note 1 of the Consolidated Financial Statements, which were
prepared in accordance with accounting principles generally accepted in the United States of America. Critical accounting policies
are those that the Company believes are both most important to the portrayal of the Company’s financial condition and results
of operations, and require the Company’s most difficult, subjective or complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those
policies may result in materially different amounts being reported under different conditions or using different assumptions.
The Company considers the following policies to be the most critical in understanding the judgments that are involved in preparing
its consolidated financial statements.
Inventory Valuation The Company values inventory using the lower of weighted average cost or market method. Market price is
generally based on the current selling price of the merchandise. The Company regularly reviews inventories to determine if the
carrying value of the inventory exceeds market value and the Company records a reserve to reduce the carrying value to its market
price, as necessary. Historically, the Company has rarely experienced significant occurrences of obsolescence or slow moving inventory.
However, future changes, such as customer merchandise preference, unseasonable weather patterns, economic conditions or business
trends could cause the Company’s inventory to be exposed to obsolescence or slow moving merchandise.