NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies
DICK’S Sporting Goods, Inc. (together with its subsidiaries, referred to as “the Company”, “we”, “us” and “our” unless specified otherwise) is a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories. As of January 30, 2021, we operated 728 DICK’S Sporting Goods locations across the United States, serving and inspiring athletes and outdoor enthusiasts to achieve their personal best through a blend of dedicated teammates, in-store services and unique specialty shop-in-shops. The Company also owns and operates Golf Galaxy and Field & Stream specialty concept stores, as well as GameChanger, a youth sports mobile app for video streaming, scorekeeping, scheduling and communications. In addition, the Company offers its products through an eCommerce platform that is integrated with its store network, providing athletes with expertise as well as the convenience of a 24-hour storefront.
Fiscal Year
The Company’s fiscal year ends on the Saturday closest to the end of January. Unless otherwise stated, references to years in this report relate to fiscal years, rather than to calendar years. Fiscal years 2020, 2019 and 2018 ended on January 30, 2021, February 1, 2020 and February 2, 2019, respectively. All fiscal years presented include 52 weeks of operations.
Principles of Consolidation
The Consolidated Financial Statements include DICK’S Sporting Goods, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications
Certain reclassifications have been made to prior year amounts within the consolidated financial statements and related footnotes to conform to the current year presentation, including reclassification of non-cash lease costs from depreciation, amortization and other as a separate line within the Consolidated Statements of Cash Flows.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and all highly liquid instruments purchased with a maturity of three months or less at the date of purchase. Cash and cash equivalents are stated at fair value.
Cash Management
The Company’s cash management system provides for the reimbursement of all major bank disbursement accounts on a daily basis. Accounts payable at January 30, 2021 and February 1, 2020 include $111.2 million and $54.0 million, respectively, of checks drawn in excess of cash balances not yet presented for payment.
Accounts Receivable
Accounts receivable primarily consist of amounts due from vendors and landlords. The Company’s allowance for credit losses totaled $2.7 million and $3.0 million at January 30, 2021 and February 1, 2020, respectively.
Inventories
Inventories are stated at the lower of weighted average cost and net realizable value. Inventory costs consist of the direct cost of merchandise including freight. Inventories are net of shrinkage, obsolescence, other valuation accounts and vendor allowances totaling $101.3 million and $131.7 million at January 30, 2021 and February 1, 2020, respectively.
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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Property and Equipment
Property and equipment are recorded at cost and include finance leases. Renewals and betterments are capitalized. Repairs and maintenance are expensed as incurred.
Depreciation is computed using the straight-line method over the following estimated useful lives:
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Buildings
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40 years
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Leasehold improvements
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10-25 years
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Furniture, fixtures and equipment
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3-7 years
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Computer software
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3-10 years
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For leasehold improvements and property and equipment under finance lease agreements, depreciation is calculated using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term. Leasehold improvements made after lease commencement are depreciated over the shorter of their estimated useful lives or the remaining lease term, including renewal periods, if reasonably assured. The Company recognized depreciation expense of $317.5 million, $307.2 million and $285.8 million, in fiscal 2020, 2019 and 2018, respectively.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets and assesses whether the carrying values have been impaired whenever events and circumstances indicate that the carrying value of these assets may not be recoverable based on estimated undiscounted future cash flows. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus eventual net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation techniques. The related impairment expense is recorded within selling, general and administrative expenses on the Consolidated Statements of Income.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired entities. The Company assesses the carrying value of goodwill annually or whenever circumstances indicate that a decline in value may have occurred.
The Company’s goodwill impairment test compares the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using a combination of the income approach, by using a discounted cash flow model, and a market value approach. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, an impairment charge to selling, general and administrative expenses is recorded to reduce the carrying value to the fair value. A reporting unit is the operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by management.
Intangible Assets
Intangible assets consist of both indefinite-lived and finite-lived assets. A majority of the Company’s intangible assets are indefinite-lived, consisting primarily of trademarks and acquired trade names, which the Company tests annually for impairment, or whenever circumstances indicate that a decline in value may have occurred, using Level 3 inputs. The Company estimates the fair value of these intangible assets based on an income approach using the relief-from-royalty method.
The Company’s finite-lived intangible assets consist primarily of customer lists and other acquisition-related assets. Finite-lived intangible assets are amortized over their estimated useful economic lives and are reviewed for impairment when factors indicate that an impairment may have occurred. The Company recognizes an impairment charge when the estimated fair value of the intangible asset is less than its carrying 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.
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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Pre-opening Expenses
Pre-opening expenses, which consist primarily of rent, marketing, payroll and recruiting costs, are expensed as incurred. Rent is recognized within pre-opening expense from the date the Company takes possession of a site through the date of store opening.
Earnings Per Common Share
Basic earnings per common share is computed based on the weighted average number of shares of common stock outstanding for a given period.
Diluted earnings per common share is computed based on the weighted average number of shares of common stock outstanding for a period, plus the effect of dilutive potential common shares outstanding using the treasury stock method. Dilutive potential common shares include shares the Company could be obligated to issue from its Convertible Senior Notes and warrants (see Note 9-Convertible Senior Notes for further discussion) and stock-based awards, such as stock options and restricted stock.
Stock-Based Compensation
The Company has the ability to grant teammates a number of different stock-based awards, including restricted shares of common stock, restricted stock units and stock options to purchase common stock, under the DICK’S Sporting Goods, Inc. 2012 Stock and Incentive Plan, as Amended and Restated (the “2012 Plan”). The Company records stock-based compensation expense based on the fair value of stock awards at the grant date and recognizes the expense over the employees’ service periods.
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 measured based on the largest benefit that will more likely than not be realized upon ultimate settlement. Interest and penalties from income tax matters are recognized in income tax expense.
Revenue Recognition
Sales Transactions
Revenue is recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer and is measured as the amount of consideration to which the Company expects to be entitled to in exchange for corresponding goods or services. Substantially all of the Company’s sales are single performance obligation arrangements for retail sale transactions for which the transaction price is equivalent to the stated price of the product or service, net of any stated discounts applicable at a point in time. Each sales transaction results in an implicit contract with the customer to deliver a product or service at the point of sale. Revenue from retail sales is recognized at the point of sale. Sales tax amounts collected from customers that are assessed by a governmental authority are excluded from revenue.
Revenue from eCommerce sales, including vendor-direct sales arrangements, is recognized upon shipment of merchandise. Shipping and handling activities occurring subsequent to the transfer of control to the customer are accounted for as fulfillment costs rather than as a promised service. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.
Deferred Revenue
Revenue from gift cards and returned merchandise credits (collectively the “cards”) is deferred and recognized upon their redemption. Income from unredeemed cards is recognized on the Consolidated Statements of Income within net sales in proportion to the pattern of rights exercised by the customer in future periods. The Company performs an evaluation of historical redemption patterns from the date of original issuance to estimate future period redemption activity. During the fiscal years ended January 30, 2021 and February 1, 2020, the Company recognized $18.3 million and $17.4 million of gift card breakage revenue, respectively, and experienced approximately $74.7 million and $82.0 million of gift card redemptions in fiscal 2020 and fiscal 2019, respectively, that had been included in its gift card liability as of February 1, 2020 and February 2, 2019, respectively. Based on the Company’s historical experience, the majority of gift card revenue is recognized within 12 months of deferral. The cards have no expiration date.
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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Loyalty program points are accrued at the estimated retail value per point, net of estimated breakage. The Company estimates the breakage of loyalty points based on historical redemption rates experienced within the loyalty program. Based on the Company’s customer loyalty program policies, the majority of program points earned are redeemed or expire within 12 months. See Note 6–Deferred Revenue and Other Liabilities for additional information regarding the amount of these liabilities at January 30, 2021 and February 1, 2020.
Net sales by category
The following table disaggregates the amount of net sales attributable to hardlines, apparel and footwear for the periods presented (in millions):
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Fiscal Year
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2020
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2019
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2018
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Hardlines (1)
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$
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4,428.5
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$
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3,695.2
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$
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3,632.1
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Apparel
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3,180.2
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3,109.0
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2,962.4
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Footwear
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1,834.3
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1,811.4
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|
|
1,719.5
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Other (2)
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141.0
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135.1
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|
122.6
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Total net sales
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$
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9,584.0
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$
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8,750.7
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$
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8,436.6
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(1)Includes items such as sporting goods equipment, fitness equipment, golf equipment and hunting and fishing gear.
(2)Includes the Company’s non-merchandise sales categories, including in-store services, shipping revenues, software subscription revenues and credit card processing revenues.
Cost of Goods Sold
Cost of goods sold includes: the cost of merchandise (inclusive of vendor allowances, inventory shrinkage and inventory write-downs for the lower of cost or net realizable value); freight; distribution; shipping; and store occupancy costs. The Company defines merchandise margin as net sales less the cost of merchandise sold. Store occupancy costs include rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include store and field support payroll and fringe benefits, advertising, bank card charges, operating costs associated with the Company’s internal eCommerce platform, information systems, marketing, legal, accounting, other store expenses and all expenses associated with operating the Company’s Customer Support Center (“CSC”).
Advertising Costs
Production costs for all forms of advertising and the costs to run the advertisements are expensed the first time the advertisement takes place. Advertising expense, net of cooperative advertising, was $293.4 million, $338.7 million and $322.2 million for fiscal 2020, 2019 and 2018, respectively.
Business Development Allowances
Business development allowances include allowances, rebates and cooperative advertising funds received from vendors. These funds are determined for each fiscal year and the majority are based on various quantitative contract terms. Amounts expected to be received from vendors for the purchase of merchandise inventories (“vendor allowances”) are recognized as a reduction of cost of goods sold as the merchandise is sold. Amounts that represent a reimbursement of costs incurred, such as advertising (“cooperative advertising”), are recorded as a reduction to the related expense in the period that the related expense is incurred. The Company records an estimate of earned allowances based on the latest projected purchase volumes and advertising forecasts.
Segment Information
The Company is a specialty omni-channel retailer that offers a broad range of products in its specialty retail stores, which are primarily located in the eastern United States. Given the economic characteristics of the store formats, the similar nature of the products sold, the type of customer and method of distribution, the Company’s operating segments are aggregated within one reportable segment. Refer to Revenue Recognition within this Note for additional disclosure of net sales by merchandise category.
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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Construction Allowances
All of the Company’s store locations are leased. The Company may receive reimbursement from a landlord for some of the cost of the structure, subject to satisfactory fulfillment of applicable lease provisions. These reimbursements may be referred to as tenant allowances, construction allowances or landlord reimbursements (“construction allowances”). The Company’s accounting for construction allowances differs depending on whether the Company is deemed to have control of the underlying asset prior to commencement of the lease.
•If the Company is not deemed to have control of the underlying asset prior to lease commencement, reimbursement from a landlord for tenant improvements is classified as a lease incentive and included as a reduction to the related operating lease asset on the Consolidated Balance Sheets. The incentive is amortized as part of operating lease expense on a straight-line basis over the term of the lease. Landlord reimbursements from these transactions are included in cash flows from operating activities as a change in deferred construction allowances.
•If the Company is deemed to have control of the underlying asset prior to lease commencement, a sale and leaseback of the asset occurs when construction of the asset is complete and the lease term begins, if relevant sale-leaseback accounting criteria are met. Any gain or loss from the transaction is included within deferred revenue and other liabilities on the Consolidated Balance Sheets and is deferred and amortized as rent expense on a straight-line basis over the term of the lease. The Company reports the amount of cash received for the construction allowance as construction allowance receipts within the financing activities section of its Consolidated Statements of Cash Flows when such allowances are received prior to completion of the sale-leaseback transaction. The Company reports the amount of cash received from construction allowances as proceeds from sale leaseback transactions within the investing activities section of its Consolidated Statements of Cash Flows when such amounts are received after the sale-leaseback accounting criteria have been achieved.
Leases
The Company determines whether a contract is or contains a lease at contract inception. Beginning in fiscal 2019, operating lease assets and operating lease liabilities are recognized at the lease’s commencement date based on the present value of remaining fixed lease payments over the lease term. As the rate implicit in the lease is not readily determinable in most of the Company’s leases, the Company uses its incremental borrowing rate based on the information available at a lease’s commencement date to determine the present value of lease payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The operating lease asset also includes any fixed lease payments made, net of lease incentives, and incurred initial direct costs.
Operating lease expense for fixed lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred and may include certain index-based changes in rent and other non-fixed payments for services provided by the lessor. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company’s leases do not contain any material residual guarantees or material restrictive covenants.
In response to the COVID-19 pandemic, the FASB issued interpretive guidance in April 2020 that provided entities the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease. The Company did not elect this option; accordingly, any rent deferrals or concessions that were granted by landlords during fiscal 2020 were treated as lease modifications and not as variable rent reductions. Since lease modification accounting generally requires recognition of changes in rent payments over the lease term, the Company’s fiscal 2020 earnings were not materially impacted by rent deferrals or concessions.
COVID-19 Update
In response to the public health crisis posed by the COVID-19 pandemic, the Company prioritized the health and safety of its teammates and athletes by temporarily closing its stores to the public, with all stores being re-opened by the end of June 2020. The Company also closed its corporate office, using its business continuity plans to operate corporate support functions under remote work arrangements that currently remain in place.
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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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In response to the potential impacts and uncertainty about the duration of the COVID-19 pandemic, the Company took precautionary measures to increase and maintain its liquidity, which included reducing planned operating expenses, inventory receipts and capital expenditures, negotiating rent deferrals with landlords, amending its Credit Facility to increase borrowing capacity and issuing $575 million of convertible senior notes due 2025 (“Convertible Senior Notes”). As a result of the Company’s precautionary measures and its operating results since the re-opening of all of its stores, the Company had $1.66 billion of cash and cash equivalents on hand and no borrowings outstanding on its Credit Facility as of January 30, 2021.
In response to the COVID-19 pandemic, the Company implemented additional safety and cleaning protocols at its stores, distribution centers and corporate offices and provided a 15% pay premium to store and distribution center teammates through the end of fiscal 2020. As a result of these and other actions it took to prioritize the health and well-being of its teammates and athletes, the Company incurred pre-tax teammate compensation and safety costs of approximately $175 million during fiscal 2020.
On March 27, 2020, the United States Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which among other things, promulgated various income tax provisions, including but not limited to, modifications for net operating losses, an accelerated time frame for refunds associated with prior minimum taxes and modifications of the limitation on business interest. The CARES Act also provides for refundable employee retention tax credits for wages paid to employees who are unable to work during the COVID-19 pandemic and the deferral of the employer-paid portion of social security taxes. Through January 30, 2021, employee retention tax credits provided under the CARES Act reduced the Company’s operating expenses by approximately $17.4 million, substantially all of which related to wages and benefits the Company paid to teammates during the period of its temporary store closures earlier in the fiscal year. In addition, the Company has deferred qualifying payroll and other tax payments of approximately $53.2 million in the current year as permitted by the CARES Act, of which $26.8 million is due within 12 months and was classified within current liabilities at January 30, 2021.
The impact of the COVID-19 pandemic on the Company’s business remains uncertain, including the longer-term economic recovery and consumer discretionary spending behavior when the pandemic subsides. Therefore, the Company currently cannot estimate the full impact that the COVID-19 pandemic may have on its financial condition and future results of operations, and it will continue to actively monitor its impact to the business. Accordingly, the Company continues to consider and assess the potential impact that the COVID-19 pandemic could have on its operations, as well as the assumptions and estimates used to prepare its financial statements such as inventory valuations, fair value measurements and potential asset impairment charges. These assumptions and estimates may change in the future as new events occur and additional information is obtained. If the COVID-19 pandemic causes another period of store closures or a change in customer behavior, such future events may have a material adverse impact on the Company's results of operations, financial position and liquidity.
Recently Adopted Accounting Pronouncements and Transition
Revenue Recognition
On February 4, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 (“Topic 606”) using the modified retrospective approach for all contracts not completed as of the adoption date. The primary impact to the Company’s accounting policies of adopting Topic 606 related to the timing of revenue recognition for gift card breakage. Gift card breakage prior to adoption was recognized at the point gift card redemption was deemed remote. As a result of the adoption of Topic 606, the Company recognizes gift card breakage over time in proportion to the pattern of rights exercised by the customer. This change in accounting policy was accounted for through a cumulative effect adjustment to increase beginning retained earnings during the first quarter of fiscal 2018. The Company reclassified $27.7 million from deferred revenue and other liabilities resulting in a cumulative effect adjustment of $20.5 million, net of tax, to retained earnings on the Company’s Consolidated Balance Sheets and Consolidated Statement of Changes in Stockholders’ Equity. Additionally, the adoption of Topic 606 resulted in insignificant financial statement presentation reclassifications related to the Company’s customer loyalty program and sales return reserve.
In addition, the Company elected the practical expedient within Topic 606 related to sales taxes that are assessed by a governmental authority, which allows for the exclusion of sales tax from the transaction price. The Company also elected the practical expedient within Topic 606 related to shipping and handling costs, which allows for shipping and handling activities occurring subsequent to the transfer of control to the customer to be accounted for as fulfillment costs rather than a promised service.
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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842), which required an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about an entity’s leasing arrangements. ASU 2016-02 was effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and ASU 2018-11, Leases (Topic 842), Targeted Improvements, which affected certain aspects of the previously issued guidance. Amendments included an additional transition option that allowed entities to apply the new standard on the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings, as well as a new practical expedient for lessors.
On February 3, 2019, the Company adopted ASU 2016-02 and all related amendments using the optional transition method and elected the package of practical expedients permitted under the transition guidance within the new standard. Such election allowed the Company to not reassess whether any expired or existing contracts are or contain leases, not to reassess the lease classification for any expired or existing leases, and not to reassess initial direct costs for any existing leases. The Company also elected the practical expedient related to land easements. The Company did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date.
The Company has lease agreements with non-lease components that relate to the lease components and elected the practical expedient to account for non-lease components, and the lease components to which they relate, as a single lease component for all classes of underlying assets. The Company also elected to keep short-term leases with an initial term of 12 months or less off the Consolidated Balance Sheet.
Adoption of these standards did not materially affect our consolidated net income or cash flows, but resulted in the recognition of $2.5 billion of lease assets and $3.1 billion of lease liabilities as of February 3, 2019. In connection with the adoption, pre-existing liabilities for deferred rent and various lease incentives were reclassified as a component of the lease assets. Accordingly, the Company recorded an $8.0 million adjustment to opening retained earnings, primarily resulting from the impairment of lease assets recognized at adoption.
Financial Instruments
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which introduces new guidance for estimating credit losses on certain types of financial instruments based on expected losses and the timing of the recognition of such losses. The Company adopted ASU 2016-13 during the first quarter of fiscal 2020. The adoption did not have a significant impact on the Company’s financial condition, results of operations, cash flows and disclosures.
Intangible Assets
In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted Subtopic 350-40 during the first quarter of fiscal 2020 using a prospective approach; the adoption did not have a significant impact on the Company's financial statements.
Recently Issued Accounting Pronouncements
Income Taxes
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This update simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standard Codification (“ASC”) 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 15, 2020. Early adoption of the amendments is permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. The Company is currently evaluating the impact of adoption on the Company’s financial condition, results of operations, cash flows and disclosures, which is not expected to be significant.
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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The amendments in this ASU can be applied anytime between the first quarter of fiscal 2020 and the fourth quarter of fiscal 2022 and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The impact of Topic 848 on the Company's financial statements and related disclosures is not expected to be significant.
Convertible Instruments
In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. It is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years, and it permits the use of either the modified retrospective or fully retrospective method of transition. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the timing of adoption as well as the impact that the adoption of ASU 2020-06 will have on its financial statements, but it anticipates that adoption will result in a reduction in non-cash interest expense related to the Convertible Senior Notes.
2. Earnings per Common Share
The computations for basic and diluted earnings per common share were as follows for the periods presented (in thousands, except per share data):
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Fiscal Year Ended
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2020
|
|
2019
|
|
2018
|
Net income
|
$
|
530,251
|
|
|
$
|
297,462
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|
|
$
|
319,864
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|
Weighted average common shares outstanding - basic
|
84,258
|
|
|
87,502
|
|
|
97,743
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|
Dilutive effect of stock-based awards
|
4,185
|
|
|
1,564
|
|
|
1,038
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|
Dilutive effect of Convertible Senior Notes and warrants
|
4,196
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|
—
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|
|
—
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|
Weighted average common shares outstanding - diluted
|
92,639
|
|
|
89,066
|
|
|
98,781
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|
Earnings per common share - basic
|
$
|
6.29
|
|
|
$
|
3.40
|
|
|
$
|
3.27
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|
Earnings per common share - diluted
|
$
|
5.72
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|
|
$
|
3.34
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|
|
$
|
3.24
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|
|
Potentially dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. Anti-dilutive options and restricted stock awards excluded from the calculation of earnings per share for fiscal years 2020, 2019, and 2018 were 1.7 million, 3.0 million, and 3.5 million, respectively. Approximately 3.5 million shares included in weighted average common shares outstanding for the year ended January 30, 2021 from the Convertible Senior Notes will be offset at settlement by shares delivered from the bond hedge purchased by the Company. The shares provided by the bond hedge are anti-dilutive; accordingly, they are not treated as a reduction to diluted weighted average shares outstanding for fiscal 2020. See Note 9–Convertible Senior Notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
3. Property and Equipment
Property and equipment are recorded at cost and consist of the following as of the end of the fiscal periods presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Buildings and land
|
$
|
328,417
|
|
|
$
|
322,618
|
|
Leasehold improvements
|
1,729,239
|
|
|
1,671,782
|
|
Furniture, fixtures and equipment
|
1,158,691
|
|
|
1,148,670
|
|
Computer software
|
460,004
|
|
|
424,584
|
|
Total property and equipment
|
3,676,351
|
|
|
3,567,654
|
|
Less: accumulated depreciation and amortization
|
(2,376,086)
|
|
|
(2,151,926)
|
|
Net property and equipment
|
$
|
1,300,265
|
|
|
$
|
1,415,728
|
|
|
|
|
|
The amounts above include construction in progress of $69.2 million and $44.7 million for fiscal 2020 and 2019, respectively.
4. Goodwill and Intangible Assets
Goodwill
The following table summarizes changes in the carrying amount of goodwill, which is reported net of $111.3 million in accumulated impairments in each period, for the fiscal periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Goodwill, balance at beginning of year
|
$
|
245,857
|
|
|
|
|
$
|
250,476
|
|
|
|
Sale of subsidiaries
|
—
|
|
|
|
|
(4,619)
|
|
|
|
Goodwill, balance at end of year
|
$
|
245,857
|
|
|
|
|
$
|
245,857
|
|
|
|
|
|
|
|
|
|
|
|
No impairment charges were recorded against goodwill in fiscal 2020, 2019 or 2018.
Intangible Assets
The components of intangible assets were as follows as of the end of the fiscal years presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Gross Amount
|
|
Accumulated Amortization
|
|
Gross Amount
|
|
Accumulated Amortization
|
Trademarks (indefinite-lived)
|
$
|
61,315
|
|
|
$
|
—
|
|
|
$
|
60,910
|
|
|
$
|
—
|
|
Trade names (indefinite-lived)
|
15,660
|
|
|
—
|
|
|
15,660
|
|
|
—
|
|
Customer lists
|
18,195
|
|
|
(11,604)
|
|
|
18,195
|
|
|
(9,176)
|
|
Acquired technology and other finite-lived intangible assets
|
12,016
|
|
|
(10,773)
|
|
|
20,634
|
|
|
(17,551)
|
|
Other indefinite-lived intangible assets
|
5,242
|
|
|
—
|
|
|
6,096
|
|
|
—
|
|
Total intangible assets
|
$
|
112,428
|
|
|
$
|
(22,377)
|
|
|
$
|
121,495
|
|
|
$
|
(26,727)
|
|
|
|
|
|
|
|
|
|
The Company had indefinite-lived and finite-lived intangible assets, net of accumulated amortization, of $82.2 million and $7.8 million, respectively, as of January 30, 2021 and $82.7 million and $12.1 million, respectively, as of February 1, 2020. Amortization of the Company’s finite-lived intangible assets was $4.3 million, $5.3 million, and $6.4 million in fiscal 2020, 2019, and 2018, respectively.
In fiscal 2019, the Company sold two technology subsidiaries, Blue Sombrero and Affinity Sports, to Stack Sports (unaffiliated with the Company’s Executive Chairman, Edward Stack) for net cash proceeds of $40.4 million. In connection with the sale, the Company recorded a pre-tax gain of $33.8 million and disposed of goodwill and intangible assets, net of accumulated amortization, of $4.6 million and $2.1 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
The Company expects to recognize amortization expense on existing finite-lived intangible assets over the next five years as follows (in thousands):
|
|
|
|
|
|
Fiscal Year
|
Estimated Amortization Expense
|
2021
|
$
|
3,626
|
|
2022
|
2,473
|
|
2023
|
1,544
|
|
2024
|
191
|
|
|
|
Total
|
$
|
7,834
|
|
|
|
5. Accrued Expenses
Accrued expenses consist of the following as of the end of the fiscal periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Accrued payroll, withholdings and benefits
|
$
|
270,895
|
|
|
$
|
203,200
|
|
Accrued real estate taxes, utilities and other occupancy costs
|
78,836
|
|
|
67,354
|
|
Accrued property and equipment
|
26,981
|
|
|
32,756
|
|
Accrued sales tax
|
30,175
|
|
|
21,214
|
|
Other
|
111,247
|
|
|
90,977
|
|
Total accrued expenses
|
$
|
518,134
|
|
|
$
|
415,501
|
|
|
|
|
|
6. Deferred Revenue and Other Liabilities
Deferred revenue and other liabilities consist of the following as of the end of the fiscal periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Current:
|
|
|
|
Deferred gift card revenue
|
$
|
173,786
|
|
|
$
|
159,417
|
|
Customer loyalty program
|
41,600
|
|
|
32,955
|
|
Other
|
44,918
|
|
|
33,587
|
|
Total current deferred revenue and other liabilities
|
$
|
260,304
|
|
|
$
|
225,959
|
|
Long-term:
|
|
|
|
Deferred compensation
|
$
|
125,696
|
|
|
$
|
99,686
|
|
|
|
|
|
Other
|
59,630
|
|
|
34,169
|
|
Total other long-term liabilities
|
$
|
185,326
|
|
|
$
|
133,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
7. Leases
The Company leases all of its stores, three of its distribution centers and certain equipment under non-cancellable operating leases that expire at various dates through 2033. The Company’s stores generally have initial lease terms of 10 to 15 years and contain multiple five-year renewal options and rent escalation provisions. The lease agreements provide primarily for the payment of minimum annual rentals, costs of utilities, property taxes, maintenance, common areas and insurance.
The components of lease cost for the following fiscal periods presented were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Operating lease cost
|
|
$
|
584,392
|
|
|
$
|
590,381
|
|
|
Short-term lease cost
|
|
10,625
|
|
|
7,579
|
|
|
Variable lease cost
|
|
119,007
|
|
|
119,452
|
|
|
Sublease income
|
|
(10,798)
|
|
|
(5,135)
|
|
|
Total lease cost
|
|
$
|
703,226
|
|
|
$
|
712,277
|
|
|
|
|
|
|
|
|
Prior to the adoption of ASU 2016-02, Leases (Topic 842), rent expense under operating leases totaled $530.9 million in fiscal 2018.
Supplemental cash flow information related to operating leases for the following fiscal years presented were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
$
|
620,529
|
|
|
$
|
655,679
|
|
Non-cash operating lease assets and liabilities obtained in exchange for new or
modified leases
|
|
$
|
299,619
|
|
|
$
|
244,153
|
|
Supplemental balance sheet information related to operating leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 30,
2021
|
|
February 1,
2020
|
Weighted average remaining lease term for operating leases
|
|
6.40 years
|
|
6.71 years
|
Weighted average discount rate for operating leases
|
|
6.44
|
%
|
|
6.57
|
%
|
Future maturities of operating lease liabilities as of January 30, 2021 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
|
|
|
2021
|
|
$
|
687,983
|
|
|
|
|
|
|
|
2022
|
|
614,897
|
|
|
|
|
|
|
|
2023
|
|
535,486
|
|
|
|
|
|
|
|
2024
|
|
436,699
|
|
|
|
|
|
|
|
2025
|
|
344,066
|
|
|
|
|
|
|
|
Thereafter
|
|
707,293
|
|
|
|
|
|
|
|
Total future undiscounted lease payments
|
|
3,326,424
|
|
|
|
|
|
|
|
Less: imputed interest
|
|
(594,446)
|
|
|
|
|
|
|
|
Total reported lease liability
|
|
$
|
2,731,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has entered into operating leases, primarily related to future store locations, that have not yet commenced. As of January 30, 2021, the future minimum payments on these leases approximated $67.3 million.
The Company acts as sublessor on several operating leases. As of January 30, 2021, total future minimum rentals under non-cancellable subleases approximated $66.6 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
8. Revolving Credit Facility
On March 27, 2020, the Company amended its existing $1.6 billion senior secured revolving credit facility, which matures on June 28, 2024, to increase aggregate commitments to $1.855 billion (the “Credit Facility”). The amended Credit Facility includes the ability to issue letters of credit up to $150.0 million in the aggregate to be issued in the form of letters of credit and allows the Company, upon the satisfaction of certain conditions, to request up to approximately $245.0 million in additional borrowing capacity, subject to existing or new lenders agreeing to provide such additional revolving commitments. The Credit Facility is secured by a first priority security interest in certain property and assets, including receivables, inventory, deposit accounts, securities accounts and other personal property of the Company and is guaranteed by the Company’s domestic subsidiaries. The unused portion of the Credit Facility is subject to a commitment fee of 0.20% per year.
The annual interest rates applicable to loans under the Credit Facility are, at the Company’s option, equal to a base rate or an adjusted LIBOR rate plus, in each case, an applicable margin percentage. The March 27, 2020 amendment increased the applicable margins to the highest level under the existing pricing grid, or from 0.125% to 0.375% for base rate loans and from 1.125% to 1.375% for adjusted LIBOR rate loans. These margin percentages will be in effect until the Company elects to lower the aggregate commitments under the Credit Facility so that they no longer exceed $1.6 billion. Other modifications included introducing a LIBOR “floor” of 0.75% for purposes of calculating the interest rate on LIBOR based loans and modifying the borrowing base definition so that certain junior liens do not automatically disqualify eligible receivables and inventory from inclusion in the borrowing base.
The Credit Facility contains a covenant that requires the Company to maintain a minimum adjusted availability of 7.5% of its borrowing base. The Credit Facility also contains certain covenants that could, within specific predefined circumstances, limit the Company’s ability to, among other things: incur or guarantee additional indebtedness; pay distributions on, redeem or repurchase capital stock; redeem or repurchase subordinated debt; make certain investments; sell assets; or consolidate, merge or transfer all or substantially all of the Company’s assets. Other than in certain limited conditions, the Company is permitted under the Credit Facility to continue to pay dividends and repurchase shares pursuant to its stock repurchase program. As of January 30, 2021, the Company was in compliance with the terms of the Credit Facility.
The table below presents selected Credit Facility information as of the end of the following fiscal years (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Outstanding borrowings under Credit Facility
|
$
|
—
|
|
|
$
|
224,100
|
|
Remaining borrowing capacity under Credit Facility
|
$
|
1,396,436
|
|
|
$
|
1,359,769
|
|
Outstanding letters of credit under Credit Facility
|
$
|
16,128
|
|
|
$
|
16,131
|
|
9. Convertible Senior Notes
Overview
In April 2020, the Company closed on an aggregate $575.0 million of 3.25% Convertible Senior Notes due 2025, including the exercise of the full $75.0 million over-allotment option, receiving proceeds of $557.6 million, net of $17.4 million of transaction fees and other third-party offering expenses. The Convertible Senior Notes accrue interest at a rate of 3.25% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2020 and mature on April 15, 2025, unless earlier repurchased, redeemed or converted.
The Convertible Senior Notes are the Company’s unsecured, unsubordinated obligations and are equal in right of payment with the Company’s existing and future unsecured, unsubordinated indebtedness; senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Convertible Senior Notes; effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and preferred equity, if any, of the Company’s subsidiaries.
|
|
|
|
|
|
|
|
|
Table of Contents
|
|
|
|
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Conversion Terms
Upon issuance of the Convertible Senior Notes in April 2020, the initial conversion rate was 28.2618 shares of the Company’s common stock per $1,000 principal amount of Convertible Senior Notes, which represented an initial conversion price of approximately $35.38 per share. The conversion rate is subject to customary adjustments upon the occurrence of certain events, such as the payment of dividends. In addition, upon the occurrence of a fundamental change prior to the maturity of the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate by a specified number of additional shares for a holder that elects to convert the Convertible Senior Notes in connection with such a fundamental change.
As of January 30, 2021, the conversion rate for the Convertible Senior Notes was 28.8028, which represents a conversion price of $34.72 per share. The difference between the initial conversion rate and the conversion rate as of January 30, 2021 is due to dividends that have been declared and paid on shares of the Company’s common stock following the issuance of the Convertible Senior Notes. Because the closing price of the Company’s common stock of $67.01 at the end of fiscal 2020 exceeded the conversion price of $34.72, the if-converted value exceeded the principal amount of the Convertible Senior Notes by approximately $534.8 million at January 30, 2021. As described below, the Company entered into convertible note hedge transactions, which are expected to reduce the potential dilution with respect to the Company’s common stock upon conversion of the Convertible Senior Notes.
Upon conversion, the Company may settle the Convertible Senior Notes for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option. The Company also has the ability to irrevocably elect to settle the Convertible Senior Notes in cash without amending the indentures or the Notes themselves. The Company currently intends to settle the principal amount of the Convertible Senior Notes in cash and any conversion premium in shares of its common stock.
Convertible debt instruments that may be settled in cash are required to be separated into liability and equity components. The allocation to the liability component is based on the fair value of a similar instrument that does not contain an equity conversion option. Based on this debt to equity ratio, debt issuance costs are then allocated to the liability and equity components in a similar manner. Accordingly, at issuance the Company allocated $396.9 million to the debt liability and $160.7 million to additional paid in capital.
Financial Statement Impacts
The difference between the principal amount of the Convertible Senior Notes and the liability component, inclusive of issuance costs, represents the debt discount, which the Company will amortize to interest expense over the term of the Convertible Senior Notes using an effective interest rate of 11.6%. During fiscal 2020, the Company recognized $36.4 million of total interest expense related to the Convertible Senior Notes, of which $21.6 million was attributed to non-cash amortization of the debt discount.
A summary of the composition of the net carrying values of the liability and equity components of the Convertible Senior Notes is as follows:
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
January 30, 2021
|
|
|
Principal
|
|
$
|
575.0
|
|
|
|
Debt discount
|
|
$
|
(156.5)
|
|
|
|
Carrying amount
|
|
$
|
418.5
|
|
|
|
Equity component (*)
|
|
$
|
160.7
|
|
|
|
(*) Included in additional paid-in capital on the Consolidated Balance Sheets.
Early Conversion
Prior to the close of business on the business day immediately preceding December 2, 2024, noteholders may convert their Convertible Senior Notes into shares of the Company’s common stock at their option only in the following circumstances:
•during any calendar quarter, if the last reported sale price per share of the Company’s common stock for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter, exceeds 130% of the conversion price then in effect on each applicable trading day;
|
|
|
|
|
|
|
|
|
Table of Contents
|
|
|
|
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
•during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “Measurement Period”) if the trading price per $1,000 principal amount of Convertible Senior Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;
•upon the occurrence of certain corporate events or distributions on the Company’s common stock, including but not limited to a fundamental change; or
•if the Company calls all or any Convertible Senior Notes for redemption.
At January 30, 2021, the stock price conditions under which the Convertible Senior Notes could be convertible at the holders’ option were met. However, the Company has not received any conversion requests through the filing date of this Form 10-K.
On or after December 2, 2024, until the close of business on the second scheduled trading day immediately before the maturity date of the Convertible Senior Notes, noteholders may convert their Convertible Senior Notes at their option at any time, regardless of the foregoing conditions.
The Company may redeem the Convertible Senior Notes at its option at any time on or after April 17, 2023 at a cash redemption price equal to the principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Convertible Senior Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Convertible Senior Note, in which case the conversion rate applicable to the conversion of that Convertible Senior Note will be increased in certain circumstances if it is converted after it is called for redemption.
Upon the occurrence of a fundamental change prior to the maturity date of the Convertible Senior Notes, holders of the Convertible Senior Notes may require the Company to repurchase all or a portion of the Convertible Senior Notes for cash at a price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Convertible Note Hedge and Warrant Transactions
In connection with the sale of the Convertible Senior Notes, the Company purchased a bond hedge designed to mitigate the potential dilution to shareholders from the conversion of the Convertible Senior Notes. Under the five-year term of the bond hedge, upon a conversion of the bonds the Company will receive shares of common stock equal to the shares issued under the conversion feature of the Convertible Senior Notes. The aggregate number of shares that the Company could be obligated to issue upon conversion of the Convertible Senior Notes, and that the Company would receive under the bond hedge, is equal to the number of shares underlying the Convertible Senior Notes, or approximately 16.6 million shares.
The cost of the bond hedge was partially offset by the Company’s sale of warrants to acquire approximately 16.6 million shares of the Company’s common stock. The warrants were initially exercisable at a price of at least $52.42 per share and are subject to customary adjustments upon the occurrence of certain events, such as the payment of dividends. As of January 30, 2021, the warrants were exercisable at a price of at least $51.44 per share. The difference between the initial and current exercise price is due to dividends that have been declared and paid on shares of the Company’s common stock following the issuance of the warrants.
The bond hedge and warrant transactions effectively increased the conversion price associated with the Convertible Senior Notes during the term of these transactions from 35% to 100% at their issuance, thereby reducing the dilutive economic effect to shareholders upon actual conversion. There would be dilution from the conversion of the Convertible Senior Notes to the extent that the then-market price per share of the common stock exceeds the exercise price of the warrants at the time of conversion.
The bond hedges and warrants are indexed to, and potentially settled in shares of, the Company’s common stock. The net cost of $55.8 million for the purchase of the bond hedges and sale of the warrants was recorded as a reduction to additional paid-in capital in the Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
Table of Contents
|
|
|
|
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
10. Fair Value Measurements
ASC 820, “Fair Value Measurement and Disclosures”, outlines a valuation framework and creates a fair value hierarchy for assets and liabilities as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop
its own assumptions.
Recurring
The Company measures its deferred compensation plan assets held in trust at fair value on a recurring basis using Level 1 inputs. Such assets consist of investments in various mutual funds made by eligible individuals as part of the Company’s deferred compensation plans, as discussed in Note 14–Retirement Savings Plans. As of January 30, 2021 and February 1, 2020, the fair value of the Company’s deferred compensation plans was $125.7 million and $99.7 million, respectively, as determined by quoted prices in active markets.
The Company bases the fair value of its Convertible Senior Notes on Level 2 inputs, specifically their quoted price in an inactive market on the last trading day in a reporting period. On January 30, 2021, the fair value of the Convertible Senior Notes was approximately $1.2 billion, compared to their carrying value of $418.5 million. The carrying value excluded amounts classified within additional paid-in capital and any unamortized discounts. See Note 9–Convertible Senior Notes for additional information.
Due to the short-term nature of these instruments, the fair value of cash and cash equivalents, accounts receivable, accounts payable, borrowings under the Credit Facility and certain other liabilities approximated their carrying values at both January 30, 2021 and February 1, 2020.
Nonrecurring
Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis may include property and equipment, goodwill and other intangible assets, equity and other assets. These assets are required to be assessed for impairment when events or circumstances indicate that the carrying value may not be recoverable, and at least annually for goodwill and indefinite-lived intangible assets. In the event that an impairment is required, the asset is adjusted to fair value, using Level 3 inputs.
In connection with the planned removal of hunt category merchandise from the majority of DICK’S Sporting Goods stores, the Company incurred restructuring charges of $57.7 million in fiscal 2019, which included a $28.3 million non-cash impairment charge to reduce the carrying value of a trademark associated with its hunt business to its estimated fair value, a $7.4 million non-cash impairment of store assets, a $13.1 million write-down of hunt inventory and an $8.9 million charge related to its exit from eight Field & Stream stores, which were subleased to Sportsman’s Warehouse, Inc. With the exception of the write-down of hunt inventory, which was included within cost of goods sold, the restructuring charges were included within selling, general and administrative expenses on the Consolidated Statements of Income.
11. Stockholders' Equity
Common Stock, Class B Common Stock and Preferred Stock
The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of 200,000,000 shares of common stock, par value $0.01 per share, and the issuance of 40,000,000 shares of Class B common stock, par value $0.01 per share. In addition, the Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock.
Holders of common stock generally have rights identical to holders of Class B common stock, except that holders of common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes per share. A related party, relatives of the related party and their trusts hold all outstanding Class B common stock, which can only be held by members of this group. Class B common shares are not publicly tradable. Each share of Class B common stock can be converted at any time into one share of common stock at the holder’s option.
|
|
|
|
|
|
|
|
|
Table of Contents
|
|
|
|
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Dividends per Common Share
The Company declared and paid aggregate cash dividends of $1.25, $1.10 and $0.90 per share of common stock and Class B common stock during fiscal 2020, 2019 and 2018, respectively.
Treasury Stock
The Company’s Board of Directors authorized a five-year $1.0 billion share repurchase program on March 16, 2016, under which it repurchased shares as follows for the fiscal years presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
2020
|
|
2019
|
|
2018
|
Shares of common stock repurchased
|
—
|
|
11,052
|
|
9,572
|
Cash paid for treasury stock
|
$
|
—
|
|
|
$
|
402,240
|
|
|
$
|
323,352
|
|
|
|
|
|
|
|
As of January 30, 2021, the Company had $31.2 million remaining under the program authorized in 2016. On June 12, 2019, the Company’s Board of Directors authorized an additional five-year share repurchase program of up to $1.0 billion of its common stock, under which the Company has yet to repurchase any shares through January 30, 2021.
12. Income Taxes
Provision for Income Taxes
The components of the provision for income taxes are as follows for the fiscal years presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Current:
|
|
|
|
|
|
Federal
|
$
|
185,197
|
|
|
$
|
87,263
|
|
|
$
|
94,729
|
|
State
|
42,537
|
|
|
24,139
|
|
|
22,585
|
|
Total current provision
|
227,734
|
|
|
111,402
|
|
|
117,314
|
|
Deferred:
|
|
|
|
|
|
Federal
|
(37,376)
|
|
|
(606)
|
|
|
(3,943)
|
|
State
|
(8,874)
|
|
|
(554)
|
|
|
(1,315)
|
|
Total deferred provision
|
(46,250)
|
|
|
(1,160)
|
|
|
(5,258)
|
|
Total provision
|
$
|
181,484
|
|
|
$
|
110,242
|
|
|
$
|
112,056
|
|
|
|
|
|
|
|
The Company’s effective income tax rate differs from the federal statutory rate as follows for the fiscal years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Federal statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
State tax, net of federal benefit
|
3.8
|
%
|
|
4.6
|
%
|
|
3.8
|
%
|
|
|
|
|
|
|
Other permanent items
|
0.7
|
%
|
|
1.4
|
%
|
|
1.1
|
%
|
Effective income tax rate
|
25.5
|
%
|
|
27.0
|
%
|
|
25.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table of Contents
|
|
|
|
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Components of deferred tax assets (liabilities) consist of the following as of the end of the fiscal years presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Operating lease liabilities
|
$
|
718,349
|
|
|
$
|
756,660
|
|
Inventory
|
29,744
|
|
|
43,499
|
|
Employee benefits and withholdings
|
56,245
|
|
|
38,554
|
|
|
|
|
|
Stock-based compensation
|
18,123
|
|
|
19,494
|
|
Gift cards
|
16,474
|
|
|
14,044
|
|
Deferred revenue currently taxable
|
1,948
|
|
|
2,450
|
|
Other accrued expenses not currently deductible for tax purposes
|
12,304
|
|
|
6,343
|
|
Net operating loss carryforward
|
527
|
|
|
1,207
|
|
Non income-based tax reserves
|
4,107
|
|
|
3,675
|
|
Capital loss carryforward
|
920
|
|
|
922
|
|
Uncertain income tax positions
|
497
|
|
|
905
|
|
Insurance
|
2,486
|
|
|
2,175
|
|
Convertible senior notes
|
1,382
|
|
|
—
|
|
Other
|
832
|
|
|
1,043
|
|
Total deferred tax assets
|
863,938
|
|
|
890,971
|
|
Operating lease assets
|
(553,997)
|
|
|
(597,553)
|
|
Property and equipment
|
(217,204)
|
|
|
(232,832)
|
|
Inventory valuation
|
(26,298)
|
|
|
(40,049)
|
|
Intangibles
|
(7,880)
|
|
|
(7,518)
|
|
Prepaid expenses
|
(4,338)
|
|
|
(3,928)
|
|
Other
|
(2,746)
|
|
|
(3,866)
|
|
Total deferred tax liabilities
|
(812,463)
|
|
|
(885,746)
|
|
Net deferred tax asset
|
$
|
51,475
|
|
|
$
|
5,225
|
|
|
|
|
|
|
|
|
|
The deferred tax asset from net operating loss carryforwards of $0.5 million represents state net operating losses, which expire in 2034. In 2020, the $51.5 million net deferred tax asset is included within long-term assets on the Consolidated Balance Sheet. In 2019, of the $5.2 million net deferred tax asset, approximately $14.4 million was included within other long-term assets and approximately $9.2 million was included within long-term liabilities.
Under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), a one-time transition tax resulted in the elimination of the excess of the amount of financial reporting basis over the tax basis in the foreign subsidiaries and subjected $66.6 million of undistributed foreign earnings to tax. The tax owed on the Company’s deemed repatriation of $4.2 million is payable in uneven annual installments through 2025. No additional income taxes have been provided for any remaining undistributed foreign earnings or foreign withholdings and US state taxes not subject to the one-time transition tax, as the Company intends to permanently reinvest the earnings from foreign subsidiaries outside the United States.
Unrecognized Tax Benefits
The following table provides a reconciliation of the Company’s total balance of unrecognized tax benefits, excluding interest and penalties (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Beginning of fiscal year
|
$
|
2,786
|
|
|
$
|
4,318
|
|
|
$
|
8,047
|
|
Increases as a result of tax positions taken in a prior period
|
35
|
|
|
422
|
|
|
456
|
|
Decreases as a result of tax positions taken in a prior period
|
—
|
|
|
(1,532)
|
|
|
(411)
|
|
Decreases as a result of settlements during the current period
|
(1,380)
|
|
|
(422)
|
|
|
(2,977)
|
|
Reductions as a result of a lapse of statute of limitations during the current period
|
(383)
|
|
|
—
|
|
|
(797)
|
|
End of fiscal year
|
$
|
1,058
|
|
|
$
|
2,786
|
|
|
$
|
4,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table of Contents
|
|
|
|
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
The balance at January 30, 2021 includes $0.8 million of unrecognized tax benefits that would impact our effective tax rate if recognized. The Company recognizes accrued interest and penalties from unrecognized tax benefits in income tax expense.
As of January 30, 2021, the Company’s total liability for uncertain tax positions, including $1.3 million for interest and penalties, was approximately $2.4 million. During fiscal 2020, 2019 and 2018, the Company recorded $0.1 million, $0.3 million and $0.3 million, respectively, for the accrual of interest and penalties in the Consolidated Statements of Income. 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 2021.
Audits
The Company participates in the Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”). As part of CAP, tax years are audited on a contemporaneous basis so that all or most issues are resolved prior to the filing of the tax return. The IRS has completed examinations of 2018 and all prior tax years. The Company is no longer subject to examination in any of its major state jurisdictions for years prior to 2015.
13. Stock-Based Compensation
The Company has the ability to grant restricted shares of common stock, restricted stock units and options to purchase common stock under the 2012 Plan. As of January 30, 2021, there were 848,800 shares of common stock available for the future issuance of awards pursuant to the 2012 Plan. The following table provides total stock-based compensation recognized in the Consolidated Statements of Income for the fiscal years presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Stock option expense
|
$
|
6,186
|
|
|
$
|
6,286
|
|
|
$
|
7,147
|
|
Restricted stock expense
|
43,991
|
|
|
37,207
|
|
|
34,794
|
|
Total stock-based compensation expense
|
$
|
50,177
|
|
|
$
|
43,493
|
|
|
$
|
41,941
|
|
Total related tax benefit
|
$
|
10,443
|
|
|
$
|
9,620
|
|
|
$
|
9,104
|
|
|
|
|
|
|
|
Stock Options
Stock options are generally granted on an annual basis, vest 25% per year over four years and have a seven-year contractual life. When options are exercised, the Company issues new shares of common stock.
The fair value of stock options is estimated on their grant date using the Black-Scholes option valuation model. The assumptions used to calculate their fair value are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience. Stock options are expensed on a straight-line basis over the vesting period, which is considered to be the requisite service period. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations.
The following assumptions were used in the Black-Scholes option valuation model for awards granted in the fiscal years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Option Plans
|
Black-Scholes Valuation Assumptions
|
2020
|
|
2019
|
|
2018
|
Expected term (years) (1)
|
5.56
|
|
5.39
|
|
5.20
|
Expected volatility (2)
|
38.16% - 47.90%
|
|
35.15% - 38.40%
|
|
33.15% - 37.41%
|
Weighted average volatility
|
41.31
|
%
|
|
35.75
|
%
|
|
34.61
|
%
|
Risk-free interest rate (3)
|
0.21% - 1.32%
|
|
1.39% - 2.43%
|
|
2.55% - 3.04%
|
Expected dividend yield
|
2.08% - 6.58%
|
|
2.31% - 3.25%
|
|
2.40% - 2.82%
|
Weighted average grant date fair value
|
$
|
3.70
|
|
|
$
|
10.59
|
|
|
$
|
9.02
|
|
(1)Represents the estimated period of time until exercise and is based on historical experience of similar awards giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.
(2)Based on the historical volatility of the Company’s common stock over a time frame consistent with the expected life of the stock options.
(3)Based on the implied yield available on U.S. Treasury constant maturity interest rates whose term is consistent with the expected life of the stock options.
|
|
|
|
|
|
|
|
|
Table of Contents
|
|
|
|
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Stock option activity for the last three fiscal years is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Subject to Options
|
|
Weighted Average Exercise Price per Share
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
Aggregate Intrinsic Value (in thousands)
|
Outstanding, February 3, 2018
|
3,129,949
|
|
|
$
|
48.97
|
|
|
4.08
|
|
$
|
389
|
|
Granted
|
881,334
|
|
|
34.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited / Expired
|
(880,856)
|
|
|
45.96
|
|
|
|
|
|
Outstanding, February 2, 2019
|
3,130,427
|
|
|
$
|
45.65
|
|
|
4.07
|
|
$
|
1,783
|
|
Granted
|
605,574
|
|
|
38.58
|
|
|
|
|
|
Exercised
|
(144,275)
|
|
|
38.59
|
|
|
|
|
|
Forfeited / Expired
|
(528,352)
|
|
|
43.97
|
|
|
|
|
|
Outstanding, February 1, 2020
|
3,063,374
|
|
|
$
|
44.87
|
|
|
3.88
|
|
$
|
10,254
|
|
Granted
|
2,462,854
|
|
|
17.80
|
|
|
|
|
|
Exercised
|
(781,386)
|
|
|
48.15
|
|
|
|
|
|
Forfeited / Expired
|
(391,946)
|
|
|
41.40
|
|
|
|
|
|
Outstanding, January 30, 2021
|
4,352,896
|
|
|
$
|
29.28
|
|
|
4.96
|
|
$
|
164,231
|
|
Exercisable, January 30, 2021
|
1,151,449
|
|
|
$
|
47.13
|
|
|
2.70
|
|
$
|
22,888
|
|
Vested and expected to vest, January 30, 2021
|
3,991,508
|
|
|
$
|
29.92
|
|
|
4.87
|
|
$
|
148,047
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value reported in the table above is based on the closing prices of the Company’s common shares as of the last business day of the period indicated. The intrinsic value for stock options exercised during fiscal 2020 and fiscal 2019 totaled $8.3 million and $1.0 million, respectively. No stock options were exercised in fiscal 2018.
Nonvested stock option activity for the year ended January 30, 2021 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Subject to Options
|
|
Weighted Average Grant Date Fair Value
|
Nonvested, February 1, 2020
|
1,432,571
|
|
|
$
|
10.66
|
|
Granted
|
2,462,854
|
|
|
3.70
|
|
Vested
|
(546,873)
|
|
|
11.16
|
|
Forfeited
|
(147,105)
|
|
|
7.43
|
|
Nonvested, January 30, 2021
|
3,201,447
|
|
|
$
|
5.37
|
|
|
|
|
|
The fair value of options that vested during 2020, 2019 and 2018 totaled $6.1 million, $7.0 million and $8.1 million, respectively.
As of January 30, 2021, unrecognized stock-based compensation expense from nonvested stock options was approximately $10.4 million, net of estimated forfeitures, which is expected to be recognized over a weighted average period of approximately 2.8 years.
|
|
|
|
|
|
|
|
|
Table of Contents
|
|
|
|
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Additional information regarding stock options outstanding as of January 30, 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of
Exercise Prices
|
|
Shares
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
Weighted Average Exercise Price
|
|
Shares
|
|
Weighted Average Exercise Price
|
$16.81 - $24.48
|
|
2,297,002
|
|
|
6.14
|
|
$
|
16.84
|
|
|
—
|
|
|
$
|
—
|
|
$27.21 - $35.60
|
|
557,921
|
|
|
4.41
|
|
33.14
|
|
|
197,168
|
|
|
33.38
|
|
$36.47 - $43.91
|
|
502,038
|
|
|
5.25
|
|
38.63
|
|
|
100,628
|
|
|
38.78
|
|
$44.37 - $51.72
|
|
689,166
|
|
|
2.74
|
|
47.98
|
|
|
570,732
|
|
|
47.91
|
|
$52.01 - $60.17
|
|
306,769
|
|
|
1.62
|
|
58.09
|
|
|
282,921
|
|
|
58.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$16.81 - $60.17
|
|
4,352,896
|
|
|
4.96
|
|
$
|
29.28
|
|
|
1,151,449
|
|
|
$
|
47.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
The Company issues shares of restricted stock to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. The awards generally vest on the third anniversary of the date of grant, subject to the employee’s continuing employment as of that date.
Restricted stock activity for the last three fiscal years is presented in the following table:
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Shares
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Weighted Average Grant Date Fair Value
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Nonvested, February 3, 2018
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3,604,237
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$
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44.84
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Granted
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1,616,600
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33.96
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Vested
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(549,293)
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49.88
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Forfeited
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(1,213,927)
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45.05
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Nonvested, February 2, 2019
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3,457,617
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$
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38.88
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Granted
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1,578,677
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37.37
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Vested
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(852,549)
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38.96
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Forfeited
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(796,795)
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39.84
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Nonvested, February 1, 2020
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3,386,950
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$
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37.94
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Granted
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2,744,671
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18.29
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Vested
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(803,743)
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46.17
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Forfeited
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(434,146)
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26.96
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Nonvested, January 30, 2021
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4,893,732
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$
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26.54
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From time-to-time, the Company may issue a special grant of performance-based restricted stock in support of strategic initiatives. The Company issued such special grants totaling 782,931 shares of restricted stock throughout fiscal 2019 and fiscal 2020 under the 2019 Long-Term Incentive Plan. As of January 30, 2021, nonvested restricted stock included 656,526 shares outstanding under the 2019 Long-Term Incentive Plan, which are scheduled to vest in April 2022, subject to the employees’ continued employment through that date.
As of January 30, 2021, total unrecognized stock-based compensation expense, net of estimated forfeitures, from nonvested shares of restricted stock was approximately $47.9 million, which the Company expects to recognize over a weighted average period of approximately 1.5 years.
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Table of Contents
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DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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14. Retirement Savings Plans
The Company’s retirement savings plan, established pursuant to Section 401(k) of the Internal Revenue Code, covers regular status full-time hourly and salaried employees and part-time employees after one month of employment with the Company. Employees must be 21 years of age to participate. Under the terms of the retirement savings plan, the Company may make a discretionary matching contribution equal to a percentage of each participant’s contribution, up to 10% of the participant’s compensation. The Company’s discretionary matching contribution percentage is typically 50%; however, for the year ended January 30, 2021 the discretionary matching contribution was 75%. Total employer contributions recorded under the plan, net of forfeitures, was $17.1 million, $10.0 million and $9.8 million in fiscal 2020, 2019 and 2018, respectively.
The Company also has non-qualified deferred compensation plans for highly compensated employees whose contributions are limited under qualified defined contribution plans. Amounts contributed and deferred under the deferred compensation plans are credited or charged with the performance of investment options offered under the plans and elected by the participants. In the event of bankruptcy, the assets of these plans are available to satisfy the claims of general creditors. The liability for compensation deferred under the Company’s plans was $125.7 million and $99.7 million as of January 30, 2021 and February 1, 2020, respectively, and is included within long-term liabilities on the Consolidated Balance Sheets. Total employer contributions recorded under these plans, net of forfeitures, was $5.8 million, $3.2 million and $2.1 million in fiscal 2020, 2019 and 2018, respectively.
15. Commitments and Contingencies
Marketing and Naming Rights Commitments
Within the ordinary course of business, the Company enters into contractual commitments in order to promote the Company’s brand and products, including media and naming rights extending through 2026. The aggregate payments under these commitments were $13.5 million, $15.5 million and $18.0 million during fiscal 2020, 2019 and 2018, respectively.
As of January 30, 2021, the aggregate amount of future minimum payments related to these commitments is as follows (in thousands):
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Fiscal Year
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2021
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$
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14,018
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2022
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4,054
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2023
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2,888
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2024
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2,975
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2025
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3,064
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Thereafter
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3,156
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Total
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$
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30,155
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Licenses for Trademarks
Within the ordinary course of business, the Company enters into licensing agreements for the exclusive or preferential rights to use certain trademarks extending through 2022. Under specific agreements, the Company is obligated to pay annual guaranteed minimum royalties. Also, the Company is required to pay additional royalties when the royalties that are based on qualified purchases or retail sales (dependent upon the agreement) exceed the guaranteed minimum. The aggregate payments under these commitments were $6.0 million, $11.1 million and $12.1 million during fiscal 2020, 2019 and 2018, respectively.
As of January 30, 2021, the aggregate amount of future minimum payments under these commitments is as follows (in thousands):
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Fiscal Year
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2021
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$
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2,208
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2022
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1,250
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Total
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$
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3,458
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Table of Contents
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DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Other
The Company has other non-cancellable contractual commitments, including minimum requirements with its third-party eCommerce fulfillment provider, and technology-related commitments extending through 2025. The aggregate payments under these commitments were $49.0 million, $46.9 million and $48.5 million during fiscal 2020, 2019 and 2018, respectively.
As of January 30, 2021, the aggregate amount of future minimum payments under these commitments is as follows (in thousands):
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Fiscal Year
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2021
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$
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44,418
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2022
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36,035
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2023
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4,014
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2024
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1,368
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2025
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1,368
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Total
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$
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87,203
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The Company is involved in legal proceedings incidental to the normal conduct of its business. Although the outcome of any pending legal proceedings cannot be predicted with certainty, management believes that adequate insurance coverage is maintained and that the ultimate resolution of these matters will not have a material adverse effect on the Company’s liquidity, financial position or results of operations.
16. Subsequent Event
On March 5, 2021, the Company’s Board of Directors declared a quarterly cash dividend in the amount of $0.3625 per share on the Company’s common stock and Class B common stock payable on March 26, 2021 to stockholders of record as of the close of business on March 19, 2021.
ITEM 16. FORM 10-K SUMMARY
Not applicable.