Dick's Sporting Goods 2007 Annual Report Download - page 66

Dick’s Sporting Goods, Inc. | 2007 Annual Report64
As of February 2, 2008, the liability for uncertain tax positions included $2.1 million for the accrual of interest and penalties.
During the year ended February 2, 2008, the Company recorded $0.9 million for the accrual of interest and penalties in its
Consolidated Statements of Income. 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 $5.7 million of the Company’s gross unrecognized tax
benefits at February 2, 2008 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 Income during fiscal 2008.
The tax years 2003–2006 remain open to examination by the major taxing jurisdictions to which we are subject.
13. Interest Expense, net
Interest expense, net is comprised of the following:
2007 2006 2005
(In thousands)
Interest expense $ 12,856 $ 10,836 $ 13,196
Interest income (1,566) (811) (237)
Interest expense, net $ 11,290 $ 10,025 $ 12,959
14. Earnings per Common Share
The computation of basic earnings per share is based on the number of weighted average common shares outstanding during the
period. The computation of diluted earnings per share is based upon the weighted average number of shares outstanding plus the
incremental shares that would be outstanding assuming exercise of dilutive stock options. The number of incremental shares from
the assumed exercise of stock options is calculated by applying the treasury stock method. The aggregate number of shares, totaling
8,776,048, that the Company could be obligated to issue upon conversion of our $172.5 million issue price of senior convertible
notes was excluded from the calculations for fiscal 2007, 2006 and 2005. The computations for basic and diluted earnings per share
are as follows:
Fiscal Year Ended 2007 2006 2005
(In thousands, except per share data)
Earnings per common share – Basic:
Net income $155,036 $ 112,611 $ 72,980
Weighted average common shares outstanding 109,383 102,512 99,584
Earnings per common share $1.42$ 1.10 $ 0.73
Earnings per common share – Diluted:
Net income $155,036 $ 112,611 $ 72,980
Weighted average common shares outstanding – Basic 109,383 102,512 99,584
Stock options, restricted stock and warrants 7, 121 8,278 8,374
Weighted average common shares outstanding – Diluted 116,504 110,790 107,958
Earnings per common share $ 1.33 $ 1.02 $ 0.68
Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. Anti-dilutive options
totaled 4.5 million and 0.4 million for fiscal 2007 and 2006, respectively. There were no anti-dilutive options in fiscal 2005.
15. Investments
In April 2001, the Company entered into an Internet commerce agreement with GSI. Under the terms of this 10-year agreement, GSI is
responsible for all financial and operational aspects of the 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
and warrants to purchase unregistered common stock of GSI (see Note 1). The Company recognized the difference between the fair
value of the GSI stock and its cost as deferred revenue to be amortized over the 10-year term of the agreement. Deferred revenue
at February 2, 2008 and February 3, 2007 was $1.5 million and $1.9 million, respectively. In total, the number of shares the Company
holds represents less than 5% of GSI’s outstanding common stock.