Dick's Sporting Goods 2008 Annual Report Download - page 53

Intangible assets that have been determined to have indefi nite lives are also not subject to amortization and are reviewed at least
annually for potential impairment, as mentioned above. The fair value of the Company’s intangible assets are estimated and
compared to their carrying value. The Company estimates the fair value of these intangible assets based on an income approach
using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a
royalty in order to exploit the related benefi ts of these types of assets. This approach is dependent on a number of factors, including
estimates of future growth and trends, royalty rates in the category of intellectual property, discount rates and other variables.
The Company recognizes an impairment charge when the estimated fair value of the intangible asset is less than the carrying value.
As a result of the impairment analysis performed in connection with the Company’s intangible assets with indefi nite lives, the
Company determined that the carrying value of the trade name related to its Golf Galaxy reporting unit exceeded its estimated fair
value. Accordingly, during 2008, the Company recorded a non-cash impairment charge of $49.9 million ($30.7 million after-tax) to
reduce the value of the trade name to its estimated fair value. No impairment charges were recorded for indefi nite-lived intangible
assets during the years ended February 2, 2008 and February 3, 2007.
The Company’s intangible assets that are subject to amortization primarily include customer lists and favorable leases. As a result
of the impairment analysis performed in connection with the Company’s intangible assets, the Company determined that the
carrying value of the customer list related to its Golf Galaxy reporting unit exceeded its estimated fair value. As a result, the
Company recorded a non-cash impairment charge of $3.1 million ($1.9 million after-tax) in fi scal 2008 to reduce the value of the
customer list to its estimated fair value. No impairment charges were recorded for fi nite-lived intangible assets during the years
ended February 2, 2008 and February 3, 2007.
Investments – Investments consist of shares of unregistered common stock and is 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. 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 fi scal year (see Note 15).
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 capitalized prior to the adoption of
FSP 13-1, amounts deferred relating to the investment in GSI (see Note 15) 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
$105.6 million at January 31, 2009 and $102.8 million at February 2, 2008. Deferred revenue related to gift cards at January 31, 2009
and February 2, 2008 was $91.6 million and $96.6 million, respectively. Deferred rent, including deferred pre-opening rent, at
January 31, 2009 and February 2, 2008 was $42.9 million and $34.9 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.
Stock Split – On September 12, 2007, the Company’s Board of Directors declared a two-for-one stock split, in the form of a stock
dividend, of the Company’s common shares for stockholders of record on September 28, 2007. The split became effective on
October 19, 2007 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. Par value of the stock
remains at $0.01 per share. Accordingly, an immaterial reclassifi cation was made from additional paid-in capital to common stock
for the cumulative number of shares issued as of January 31, 2009. The capital accounts, share data, and earnings per share data in
this report give effect to the stock split, applied retroactively, to all periods presented. The applicable share and per-share data for
all periods included herein have been restated to give effect to this stock split.
DICK’S SPORTING GOODS, INC. 2008 ANNUAL REPORT 51