Dick's Sporting Goods 2011 Annual Report Download - page 79

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
Investments – Investments primarily consisted of shares of unregistered common stock of GSI
Commerce, Inc. (‘‘GSI’’) and were carried at fair value within other assets, based upon the publicly
quoted equity price of GSI’s stock. Unrealized holding gains and losses on the stock were included in
other comprehensive income and reflected as a component of stockholders’ equity. The Company
liquidated its GSI investment during fiscal 2011 (see Note 12). Gross unrealized holding gains at
January 29, 2011 were $10.5 million.
Deferred Revenue and Other Liabilities – Deferred revenue and other liabilities is primarily comprised of
deferred liabilities related to construction allowances, gift cards, deferred rent, which represents the
difference between rent paid and the amounts expensed for operating leases, and liabilities for future
rent payments for closed store locations. Deferred liabilities related to construction allowances, net of
related amortization, at January 28, 2012 and January 29, 2011 were $127.7 million and $114.3 million,
respectively. Deferred revenue related to gift cards at January 28, 2012 and January 29, 2011 was
$112.6 million and $104.0 million, respectively. Deferred rent, including deferred pre-opening rent, at
January 28, 2012 and January 29, 2011 was $59.5 million and $54.8 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 and Integration Costs – The Company recorded $10.1 million of merger and integration costs
during fiscal 2009. These costs relate to the integration of Chick’s Sporting Goods, Inc. (‘‘Chick’s’’)
operations and include duplicative administrative costs and management, advertising and severance
expenses associated with the conversions from Chick’s stores to Dick’s stores.
Earnings Per Share – Basic earnings per common share is computed based on the weighted average
number of shares of common stock outstanding during the period. Diluted earnings per common share
is computed based on the weighted average number of shares of common stock, plus the effect of
dilutive potential common shares outstanding during the period, using the treasury stock method.
Dilutive potential common shares include outstanding stock options, restricted stock and warrants.
Stock-Based Compensation – The Company has the ability to grant restricted shares of common stock
and stock options to purchase common stock under the Dick’s Sporting Goods, Inc. Amended and
Restated 2002 Stock and Incentive Plan and the Golf Galaxy, Inc. 2004 Incentive Plan (the ‘‘Plans’’).
The Company also has an employee stock purchase plan (‘‘ESPP’’) that provides for eligible employees
to purchase shares of the Company’s common stock (see Note 9).
Income Taxes – The Company utilizes the asset and liability method of accounting for income taxes and
provides deferred income taxes for temporary differences between the amounts reported for assets and
liabilities for financial statement purposes and for income tax reporting purposes, using enacted tax
rates in effect in the years in which the differences are expected to reverse. The Company recognizes
the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the relevant taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the consolidated financial statements from such a position are
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