A n I n s p i r i n g S t o r y o f G r o w t h i n t h e S p o r t i n g G o o d s I n d u s t r y
GOOD
SPORTS
2 0 1 0 A n n u a l R e p o r t t o S t o c k h o l d e r s
H i b b e t t S p o r t s , I n c .
F I N A N C I A L H I G H L I G H T S
(Dollars in thousands, except per share amounts)
Fiscal 2010
Fiscal 2009
Percent
Change
$ 593,492
$ 052,407
$ 0001.14
$ 0001.12
$ 147,583
$ 276,704
$ 0,00152
$ 175,079
$ 564,188
$ 047,972
$ 0001.03
$ 0001.02
$ 107,055
$ 235,087
$ 000,00–
$ 136,575
5%
9%
11%
10%
38%
18%
28%
For the Year
Net sales
Operating income
Earnings per basic share(1)
Earnings per diluted share(1)
At Year End
Working capital
Total assets
Long-term debt
Stockholders’ investment
S A L E S , E A R N I N G S A N D S T O R E G R O W T H
$593.5
$564.2
$520.7
$512.1
$440.3
$1.17
$1.12
$0.98
$1.02
$0.96
767
745
688
613
549
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
NET SALES
(In Millions)
EARNINGS PER
DILUTED SHARE(1)
TOTAL STORES
(1) Except for fiscal 2007 which includes 53 weeks, all fiscal years presented are comprised of 52 weeks. All share and per share information has been revised to reflect
the effects of the 3-for-2 stock split effective September 27, 2005. No dividends were declared or paid.
D E A R F E L L O W S T O C K H O L D E R S :
While in the midst of a challenging period for consumer spending, our goal for Fiscal 2010 was to be
one of the premier growth stories in retail sporting goods. We delivered on that goal. It was a great year,
highlighted by a record finish in the fourth quarter, year-over-year improvement in operating margins
and a 10% increase in earnings per share. We’re also proud of the fact we were able to reduce costs
through disciplined operating expense management. We are even more excited about our outlook for
Fiscal 2011 and the infrastructure investments we have made and will continue to make.
Our successful model over the last 60 years has been anchored by growth in small markets throughout
the Sunbelt. We will continue this strategy by growing in small markets where we are needed by
consumers, landlords and vendors. In our 24 state operating area, we have specifically identified 350
to 375 additional small markets where we intend to open in the future. During these tough economic
times, we have been very successful in the strategy of increasing the selling square footage of our high-
performing stores. Last year we expanded 20 locations, and expect to expand at least 20 more in the
next twelve months.
In the last several years, we have made considerable investments in systems that will support our growth
over the coming years. In Fiscal 2010, we implemented software tools that will aid our merchants and
planners in developing more localized assortments for our small markets. Later this year, we will be
implementing software enhancements for that process as well as tools to increase our ability to define
market level customer demand by refining our replenishment process. In February, we introduced a
Labor Management application that is assisting stores in the allocation of store personnel to achieve our
customer service goals.
We continue to make improvements in our customer experience. Delivering relevant and timely
communication to our most loyal customers has proven to be an asset to Hibbett Sports. We currently
have over 1 million Hibbett Sports MVP reward members, up from 600,000 this time a year ago. In our
search for new loyal customers, we have begun to expand our presence in the outdoor category by adding
The North Face and Columbia to our vendor line-up in both apparel and footwear while still growing
our presence with Nike and Under Armour. These brands will play a key role in our success this year.
Over the last twelve months, we have experienced positive changes in our senior management team. In
conjunction with last year’s elevation of Jeff Rosenthal to President/Chief Operating Officer, we brought
on board Becky Jones as Vice President of Merchandising. Becky is a 30-year retail veteran and has been
an excellent addition to our team. In December, in recognition of their tremendous leadership and
contributions to the growth of the company, we promoted Gary Smith, our Chief Financial Officer,
Cathy Pryor, our Vice President of Store Operations, and Becky Jones to Senior Vice Presidents.
In March 2010, Mickey Newsome became the Executive Chairman of the Board and Jeff was promoted
to President and Chief Executive Officer. Jeff has been with Hibbett for 12 years. During his tenure, he
has contributed to our growth from 100 stores to 767 stores at the end of Fiscal 2010. He understands
our culture and model and will be very effective in leading us to 1,200 stores in the foreseeable future.
Our strong results and continued success of our new store model enabled us to increase the cash on our
balance sheet by nearly $30 million to $49.7 million. Our financial strength demonstrates we are a
financially healthy and growing retailer which allows us to negotiate with all vendors and landlords with
confidence.
Based on our strong start to Fiscal 2011, we believe that consumer confidence is healthier this year and
will continue to show improvement throughout the year. We are well positioned for a prolonged period
of growth.
Thank you for your continued support and investment with us.
Sincerely,
Mickey Newsome
Executive Chairman
Jeffry O. Rosenthal
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: January 30, 2010
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from: __________________________ to __________________________
Commission file number: 000-20969
HIBBETT SPORTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
20-8159608
(I.R.S. Employer
Identification No.)
451 Industrial Lane, Birmingham, Alabama 35211
(Address of principal executive offices, including zip code)
205-942-4292
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 Par Value Per Share
Title of Class
NASDAQ Stock Market, LLC
Name of each exchange on which registered
Securities registered pursuant to section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes X
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ____
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
X
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
No X
The aggregate market value of the voting stock held by non-affiliates of the Registrant (assuming for purposes of this calculation
that all executive officers and directors are “affiliates”) was $527,232,465 on July 31, 2009, based on the closing sale price of
$18.41 at July 31, 2009 for the common stock on such date on the NASDAQ Global Select Market.
The number of shares outstanding of the Registrant’s common stock, as of March 22, 2010 was 28,745,777.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for the 2010 Annual Meeting of Stockholders to be held on May 27, 2010 are
incorporated by reference into Part III of this Annual Report on Form 10-K. Registrant’s definitive Proxy Statement will be
filed with the Securities and Exchange Commission on or before April 26, 2010.
2
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5
9
14
15
15
16
16
18
19
28
29
50
50
50
51
51
51
51
52
52
54
HIBBETT SPORTS, INC.
INDEX
PART I
Item
Item
Item
Item
Item
Item
Business.
1.
1A. Risk Factors.
1B. Unresolved Staff Comments.
2.
3.
4.
Properties.
Legal Proceedings.
Removed and Reserved.
PART II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Item
Item
Item
Item
Item
Purchases of Equity Securities.
Selected Consolidated Financial Data.
6.
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
7A. Quantitative and Qualitative Disclosures About Market Risk.
Consolidated Financial Statements and Supplementary Data.
8.
Changes in and Disagreements with Accountants on Accounting and Financial
9.
Disclosure.
Item
Item
9A. Controls and Procedures.
9B. Other Information.
Part III
Item
Item
Item
10. Directors, Executive Officers and Corporate Governance.
11.
12.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
Item
Item
13. Certain Relationships and Related Transactions, and Director Independence.
14.
Principal Accounting Fees and Services.
Part IV
Item
15.
Exhibits and Consolidated Financial Statement Schedules.
Signatures.
3
A warning about Forward-Looking Statements
This document contains “forward-looking statements” as that term is used in the Private Securities Litigation
Reform Act of 1995. Forward-looking statements address future events, developments and results. They include
statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,”
“target” or “estimate.” For example, our forward-looking statements include statements regarding:
our anticipated sales, including comparable store net sales changes, net sales growth and earnings;
our growth, including our plans to add, expand or relocate stores and square footage growth, our markets’ ability
to support such growth and the suitability of our distribution facility;
the cost of regulatory compliance, including those directed at climate change and its effects and the costs and
possible outcomes of pending legal actions and other contingencies;
our cash needs, including our ability to fund our future capital expenditures and working capital requirements;
our ability and plans to renew or increase our revolving credit facilities;
our seasonal sales patterns and assumptions concerning customer buying behavior;
our expectations regarding competition;
our ability to renew or replace store leases satisfactorily;
our estimates and assumptions as they relate to preferable tax and financial accounting methods, accruals,
inventory valuations, dividends, carrying amount and liquidity of financial instruments and fair value of options
and other stock-based compensation as well as our estimates of economic and useful lives of depreciable assets
and leases;
our expectations concerning future stock-based award types;
our expectations concerning employee stock option exercise behavior;
the possible effect of inflation, market decline and other economic changes on our costs and profitability,
including the impact of changes in fuel costs and a downturn in the retail industry or changes in levels of store
traffic;
the possible effects of continued volatility and further deterioration of the capital markets, the commercial and
consumer credit environment and the continuation of lowered levels of consumer spending resulting from the
global economic downturn, lowered levels of consumer confidence and higher levels of unemployment;
our analyses of trends as related to earnings performance;
our target market presence and its expected impact on our sales growth;
our expectations concerning vendor level purchases and related discounts;
our estimates and assumptions related to income tax liabilities and uncertain tax positions;
the future reliability of, and cost associated with, our sources of supply, particularly imported goods; and
the possible effect of recent accounting pronouncements.
You should assume that the information appearing in this report is accurate only as of the date it was issued.
Our business, financial condition, results of operations and prospects may have changed since that date.
For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments
or results, you should carefully review the “Risk Factors” described beginning on page 9, as well as “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 19.
Our forward-looking statements could be wrong in light of these risks, uncertainties and assumptions. The
future events, developments or results described in this report could turn out to be materially different. We have no
obligation to publicly update or revise our forward-looking statements after the date of this annual report and you
should not expect us to do so.
Investors should also be aware that while we do, from time to time, communicate with securities analysts and
others, we do not, by policy, selectively disclose to them any material non-public information with any statement or
report issued by any analyst regardless of the content of the statement or report. We do not, by policy, confirm
forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any
projections, forecasts or opinions, such reports are not our responsibility.
Introductory Note
Unless specifically indicated otherwise, any reference to “2011” or “Fiscal 2011” relates to our year ending
January 29, 2011. Any reference to “2010” or “Fiscal 2010” relates to our year ended January 30, 2010. Any
reference to “2009” or “Fiscal 2009” relates to our year ended January 31, 2009. Any reference to “2008” or “Fiscal
2008” relates to our year ended February 2, 2008.
4
Item 1. Business.
Our Company
PART 1
Our Company was originally organized in 1945 under the name Dixie Supply Company in Florence,
Alabama, specializing primarily in the marine and small aircraft business. In 1951, the Company started targeting
school athletic programs in North Alabama and by the end of the 1950’s had developed a profitable team sales
business. In 1960, we sold the marine portion of our business and have been solely in the sporting goods business since
that time. In 1965, we opened Dyess & Hibbett Sporting Goods in Huntsville, Alabama, and hired Mickey Newsome,
our current Executive Chairman of the Board. The next year, we opened another sporting goods store in Birmingham
and by the end of 1980, we had 12 stores in central and northwest Alabama with a distribution center located in
Birmingham and our central accounting office in Florence. We went public in October 1996 when we had 79 stores
and were incorporated under the laws of the State of Delaware as Hibbett Sporting Goods, Inc. We incorporated under
the laws of the State of Delaware as Hibbett Sports, Inc. in January 2007 and on February 10, 2007, Hibbett Sports,
Inc. became the successor holding company for Hibbett Sporting Goods, Inc., which is now our operating
subsidiary.
Today, we operate sporting goods stores in small to mid-sized markets predominantly in the Southeast,
Southwest, Mid-Atlantic and the lower Midwest. As of January 30, 2010, we operated 747 Hibbett Sports stores as
well as 16 smaller-format Sports Additions athletic shoe stores and 4 larger-format Sports & Co. superstores in 24
states. Over the past two fiscal years, we have increased the number of stores from 688 stores to 767 stores, an increase
in store base of approximately 11%. Our primary retail format and growth vehicle is Hibbett Sports, a 5,000 square
foot store located primarily in strip centers which are usually influenced by a Wal-Mart store. Approximately 75% of
our Hibbett Sports store base is located in strip centers, while approximately 25% of our Hibbett Sports store base is
located in enclosed malls.
Although competitors in some markets may carry similar product lines and national brands as our stores,
we believe that our stores are typically the primary sporting goods retailers in these markets due to the extensive
selection of quality brand-name merchandise, a high level of customer service and prime real estate locations. Our
merchandise assortment emphasizes team sports complemented by localized apparel and accessories designed to
appeal to a wide range of customers within each individual market.
Available Information
The Company maintains an Internet website at the following address: www.hibbett.com.
We make available free of charge on or through our website under the heading “Investor Information,”
certain reports that we file with or furnish to the Securities and Exchange Commission (SEC) in accordance with the
Securities Exchange Act of 1934. These include our annual reports on Form 10-K, our quarterly reports on Form
10-Q and our current reports on Form 8-K. We make this information available on our website as soon as
reasonably practicable after we electronically file the information with or furnish it to the SEC. In addition to
accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K for the fiscal
year ended January 30, 2010, at no charge, by writing to: Investor Relations, Hibbett Sports, Inc., 451 Industrial
Lane, Birmingham, Alabama 35211.
Reports filed with or furnished to the SEC are also available free of charge upon request by contacting our
corporate office at (205) 942-4292.
The public may also read or copy any materials filed by us with the SEC at the SEC’s Public Reference
Room at 100F Street, N.E., Washington, DC 20549. Information may be obtained on the operation of the Public
Reference Room by calling the SEC at 1-800-732-0330. The SEC also maintains a website that contains reports,
proxy and information statements, and other information regarding issuers that file electronically at www.sec.gov.
Our Business Strategy
We target markets with county populations that range from 30,000 to 100,000. By targeting these smaller
markets, we believe that we achieve important strategic advantages, including expansion opportunities, comparatively
low operating costs and a more limited competitive environment than generally faced in larger markets. In addition, we
establish greater customer, vendor and landlord recognition as the leading sporting goods retailer in these local
communities.
We believe our ability to merchandise to local sporting and community interests differentiates us from our
national competitors. This strong regional focus also enables us to achieve significant cost benefits including lower
corporate expenses, reduced distribution costs and increased economies of scale from marketing activities.
5
Additionally, we also use sophisticated information systems to maintain tight controls over inventory and operating
costs and continually search for ways to improve efficiencies through information system upgrades.
We strive to hire enthusiastic sales people with an interest in sports. Our extensive training program focuses
on product knowledge and selling skills and is conducted through the use of in-store clinics, videos, self-study courses,
interactive group discussions and “Hibbett University” designed specifically for store management.
Our Store Concepts
Hibbett Sports
Our primary retail format is Hibbett Sports, a 5,000 square foot store located primarily in strip centers which
are usually influenced by a Wal-Mart store. In considering locations for our Hibbett Sports stores, we take into account
the size, demographics, quality of real estate and competitive conditions of each market. Of these stores, 556 Hibbett
Sports stores are located in strip centers with the remaining 191 stores located in enclosed malls, the majority of which
are the only enclosed malls in the county.
Hibbett Sports stores offer a core selection of quality, brand name merchandise with an emphasis on team
sports. This merchandise mix is complemented by a selection of localized apparel and accessories designed to appeal
to a wide range of customers within each market. We strive to respond quickly to major sporting events of local
interest. Such events in Fiscal 2010 included the Alabama Crimson Tide’s historic season and ultimate victory in the
Bowl Championship Series (BCS) National Championship game as well as the successful seasons of the New Orleans
Saints professional football team and the University of Kentucky basketball program.
Sports Additions
Our 16 Sports Additions stores are small, mall-based stores, averaging 2,500 square feet with approximately
90% of merchandise consisting of athletic footwear and the remainder consisting of caps and a limited assortment of
apparel. Sports Additions stores offer a broader assortment of athletic footwear, with a greater emphasis on fashion
than the athletic footwear assortment offered by our Hibbett Sports stores. All but two Sports Additions stores are
currently located in malls in which Hibbett Sports stores are also present.
Sports & Co.
We opened four Sports & Co. superstores between March 1995 and September 1996. Sports & Co.
superstores average 25,000 square feet and offer a broader assortment of athletic footwear, apparel and equipment than
our Hibbett Sports stores. Athletic equipment and apparel represent a higher percentage of the overall merchandise mix
at Sports & Co. superstores than they do at Hibbett Sports stores. Sports & Co. superstores are designed to project the
same in-store atmosphere as our Hibbett Sports stores but on a larger scale. We have no plans to open any superstores
in the future.
Team Sales
Hibbett Team Sales, Inc. (Team Sales), a wholly-owned subsidiary of the Company, is a leading supplier of
customized athletic apparel, equipment and footwear to school, athletic and youth programs primarily in Alabama and
North Georgia. Team Sales sells its merchandise directly to educational institutions and youth associations. The
operations of Team Sales are independent of the operations of our retail stores. Team Sales does not meet the
quantitative or qualitative reporting requirements of the Accounting Standards Codification (ASC) Topic 280, Segment
Reporting.
Our Expansion Strategy
In Fiscal 1994, we began to accelerate our rate of new store openings to take advantage of the growth
opportunities in our target markets. We have currently identified 350 to 375 potential markets for future Hibbett Sports
stores within the states in which we operate. Our clustered expansion program, which calls for opening new stores
within a two-hour driving distance of an existing Hibbett location, allows us to take advantage of efficiencies in
distribution, marketing and regional management. It also allows us to build on our understanding of merchandise
selection for that area. We believe our current distribution center can support over 1,200 stores.
In Fiscal 2011, we expect our net store openings will be similar to Fiscal 2010. We have identified potential
markets but have experienced increasing difficulty in securing suitable real estate or leases within the targeted market.
While we expect overall new store growth, we anticipate that the current economic environment, particularly in the
commercial real estate market, will continue to make it harder to open our stores at our historical rate of growth.
Because of the new store opening slowdown, we have turned our focus somewhat on expanding high performing stores
and have seen successful results from this strategy.
6
In evaluating potential markets, we consider population, economic conditions, local competitive dynamics,
availability of suitable real estate and proximity to existing Hibbett stores. Our continued growth largely depends on
our ability to open new stores in a timely manner, to operate them profitably and to manage them effectively.
Additionally, successful expansion is subject to various contingencies, many of which are beyond our control. See
“Risk Factors.”
Our Distribution
We maintain a single 220,000 square foot distribution center in Birmingham, Alabama, which services our
existing stores. The distribution process is centrally managed from our corporate headquarters, which is located in the
same building as the distribution center. We believe strong distribution support for our stores is a critical element of
our expansion strategy and is central to our ability to maintain a low cost operating structure. In addition, we have
made investments in our current distribution center and have also begun to use third party logistics providers to gain
efficiencies in the cost of distribution to approximately 15% of our outlying stores, which also saves space in our
distribution center. We believe our current distribution infrastructure, which includes the use of third party logistics
providers, improved technology and vendor assistance with cross-docking, can service over 1,200 stores.
We receive substantially all of our merchandise at our distribution center. For key products, we maintain
backstock at the distribution center that is allocated and distributed to stores through an automatic replenishment
program based on items that are sold. Merchandise is typically delivered to stores weekly via Company-operated
vehicles or third party logistics providers.
Our Merchandising Strategy
Our merchandising strategy is to provide a broad assortment of quality brand name footwear, athletic
equipment, and apparel at competitive prices in a full service environment. Historically, as well as for Fiscal 2010, our
most popular consumer item was athletic footwear, followed by performance and fashion apparel and team sports
equipment, ranked according to sales.
We believe that the breadth and depth of our brand name merchandise selection generally exceeds the
merchandise selection carried by local independent competitors. Many of these brand name products are highly
technical and require considerable sales assistance. We coordinate with our vendors to educate the sales staff at the
store level on new products and trends.
Although the core merchandise assortment tends to be similar for each Hibbett Sports store, important local or
regional differences frequently exist. Accordingly, our stores regularly offer products that reflect preferences for
particular sporting activities in each community and local interests in college and professional sports teams. Our
knowledge of these interests, combined with access to leading vendors, enables our stores to react quickly to emerging
trends or special events, such as college or professional championships.
Our merchandising staff, operations staff and management analyze current sporting goods trends primarily
through the gathering and analyzing of daily sales activity available through point-of-sale terminals located in the
stores. Other strategic measures we utilize to recognize trends or changes in our industry include:
studying other retailers for best practices in merchandising;
attending various trade shows, both in our industry and outside as well as reviewing industry trade publications;
staying active in industry associations such as the National Sporting Goods Association (NSGA);
visiting competitor store locations;
monitoring product selection at competing stores;
maintaining close relationships with vendors and other retailers; and
communicating with our regional vice presidents, district managers and store managers.
The merchandising staff works closely with store personnel to meet the requirements of individual stores for
appropriate merchandise in sufficient quantities.
Our success depends in part on our ability to anticipate and respond to changing merchandise trends and
consumer demand on a store level in a timely manner. See “Risk Factors.”
Our Vendor Relationships
The sporting goods retail business is very brand name driven. Accordingly, we maintain positive relationships
with a number of well-known sporting goods vendors to satisfy customer demand. We believe that our stores are
among the primary retail distribution avenues for brand name vendors that seek to penetrate our target markets. As a
result, we are able to attract considerable vendor interest and establish long-term partnerships with vendors. As our
vendors expand their product lines and grow in popularity, we expand sales and promotions of these products within
our stores. In addition, as we continue to increase our store base and enter new markets, our vendors increase their
7
brand presence within these regions. We also emphasize and work with our vendors to establish favorable pricing and
to receive cooperative marketing funds. We believe that we maintain good working relationships with our vendors.
For the fiscal year ended January 30, 2010, Nike, our largest vendor, represented 49.9% of our total purchases while
our next largest vendor represented 9.0% of our total purchases. For the fiscal year ended January 31, 2009, Nike, our
largest vendor, represented 51.4% of our total purchases while our next largest vendor represented 8.4% of our total
purchases.
The loss of key vendor support could be detrimental to our business, financial condition and results of
operations. We believe that we have long-standing and strong relationships with our vendors and that we have
adequate sources of brand name merchandise on competitive terms; however, we cannot guarantee that we will be
able to acquire such merchandise at competitive prices or on competitive terms in the future. In this regard, certain
merchandise that is high profile and in high demand may be allocated by vendors based upon the vendors’ internal
criterion, which is beyond our control. See “Risk Factors.”
Our Advertising and Promotion
We target special advertising opportunities in our markets to increase the effectiveness of our advertising
budget. In particular, we prefer advertising in local media as a way to further differentiate Hibbett from national chain
competitors. Substantially all of our advertising and promotional spending is centrally directed. Print advertising,
including direct mail catalogs and postcards to customers, serves as the foundation of our promotional program and
accounted for the majority of our total advertising costs in Fiscal 2010.
Other advertising means, such as television commercials, outdoor billboards, Hibbett trucks, our MVP loyalty
program and the Hibbett website, are used to reinforce Hibbett’s name recognition and brand awareness in the
community. Our internet marketing program, featuring our MVP loyalty program, has provided an expanded customer
database that helps us target the specific needs of our customers. By allowing us to reach and interact with our
customers on a regular basis through e-mail, this marketing effort is quickly becoming the most efficient, timely and
targeted segment of our marketing program.
Our Competition
The business in which we are engaged is highly competitive. Many of the items we offer in our stores are also
sold by local sporting goods stores, athletic footwear and other specialty athletic stores, traditional shoe stores and
national and regional sporting goods stores. The marketplace for sporting goods remains highly fragmented as many
different retailers compete for market share by utilizing a variety of store formats and merchandising strategies.
However, we believe the competitive environment for sporting goods remains different in smaller markets where retail
demand may not support larger format stores. In such markets as those targeted by Hibbett, national chains compete by
focusing on a specialty category like athletic footwear.
Our stores compete with national chains that focus on athletic footwear, local sporting goods stores,
department and discount stores, traditional shoe stores and mass merchandisers. On a limited basis, we have
competition from national sporting goods chains in some of our mid-sized markets. Although we face competition
from a variety of competitors, including on-line competitors, we believe that our stores are able to compete effectively
by being distinguished as sporting goods stores emphasizing team sports and fitness merchandise complemented by a
selection of localized apparel and accessories. Our competitors may carry similar product lines and national brands,
but we believe the principal competitive factors for all of our stores are service, breadth of merchandise offered,
availability of brand names and availability of local merchandise. We believe we compete favorably with respect to
these factors in the smaller markets predominantly in the Southeast, Southwest, Mid-Atlantic and lower Midwest
regions of the United States. However, we cannot guarantee that we will be able to continue to compete successfully
against existing or future competitors. Expansion into markets served by our competitors, entry of new competitors or
expansion of existing competitors into our markets, could be detrimental to our business, financial condition and results
of operations. See “Risk Factors.”
Our Trademarks
Our Company, by and through subsidiaries, is the owner or licensee of trademarks that are very important
to our business. For the most part, trademarks are valid as long as they are in use and/or their registrations are
properly maintained. Registrations of trademarks can generally be renewed indefinitely as long as the trademarks
are in use.
Following is a list of active trademarks registered and owned by the Company:
Hibbett Sports, Registration No. 2717584
Hibbett, Registration No. 3275037
Sports Additions, Registration No. 1767761
8
Our Employees
As of January 30, 2010, we employed approximately 2,100 full-time and approximately 3,800 part-time
employees, none of whom are represented by a labor union. The number of part-time employees fluctuates
depending on seasonal needs. We cannot guarantee that our employees will not, in the future, elect to be
represented by a union. We consider our relationship with our employees to be good and have not experienced
significant interruptions of operations due to labor disagreements.
Employee Development. We develop our training programs in a continuing effort to service the needs of
our customers and employees. These programs are designed to increase employee knowledge and include video
training in all stores for the latest in technical detail of new products and new operational and service techniques.
Because we primarily promote or relocate current employees to serve as managers for new stores, training and
assessment of our employees is essential to our sustained growth.
We have implemented programs in our stores and corporate offices to ensure that we hire and promote the
most qualified employees in a non-discriminatory way. One of the most significant programs we have is Hibbett
University or “Hibbett U” which is an intensive, four-day training session held at our corporate offices and designed
specifically for store management.
Seasonality
We experience seasonal fluctuations in our net sales and results of operations. Customer buying patterns
around the spring sales period and the holiday season historically result in higher first and fourth quarter net sales.
In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including
the timing of new store openings, the amount and timing of net sales contributed by new stores, merchandise mix
and demand for apparel and accessories driven by local interest in sporting events.
Item 1A. Risk Factors.
You should carefully consider the following risks, as well as the other information contained in this report,
before investing in shares of our common stock. If any of the following risks actually occur, our business could be
harmed. In that case, the trading price of our common stock could decline, and you might lose all or part of your
investment.
Risks Related to Our Business and Industry.
An extended downturn in the economy could affect consumer purchases of discretionary items, which could
reduce our net sales.
In general, our sales represent discretionary spending by our customers. The failure of U.S. government
programs to bolster the economy, a further slowdown in the U.S. economy or other economic conditions affecting
disposable consumer income, such as employment levels, inflation, business conditions, fuel and energy costs,
consumer debt levels, lack of available credit, interest rates and tax rates may adversely affect our business. A
reduction in overall consumer spending which causes customers to shift their spending to products other than those sold
by us or to products sold by us that are less profitable could result in lower net sales, decreases in inventory turnover or
a reduction in profitability due to lower margins. At this time, we are unable to determine the impact on our customers
and our business, if any, of programs adopted by the U.S. government to stabilize and support the economy.
The slower pace of our new store openings may negatively impact our net sales growth and operating income and
we may be unable to achieve our expansion plans for future growth.
The opening of new retail stores has contributed significantly to our growth in net sales. In light of the
challenging economic environment that has faced retailers and real estate developers over the past two years, we have
slowed down the pace of our new store openings. We expect that this pressure on the commercial market and
developers will continue throughout Fiscal 2011 and that we will only be able to increase our overall store base by
approximately 2% in Fiscal 2011 compared to 3% in Fiscal 2010 and 8% in Fiscal 2009. The slower pace of our new
store openings may negatively impact our net sales growth and operating income.
We have grown rapidly, primarily through opening new stores, growing from 67 stores at the beginning of
Fiscal 1997 to 767 stores at January 30, 2010. Our continued growth depends, in large part, upon our ability to open
new stores in a timely manner and to operate them profitably. Successful expansion is subject to various contingencies,
many of which are beyond our control. In order to open and operate new stores successfully, we must secure leases on
suitable sites with acceptable terms, build-out and equip the stores with furnishings and appropriate merchandise, hire
and train personnel and integrate the stores into our operations.
In addition, our expansion strategy may be subject to rising real estate and construction costs, available credit
to landlords and developers and landlord bankruptcies that could inhibit our ability to sustain our rate of growth. We
9
may also face new competitive, distribution and merchandising challenges different from those we currently face. We
cannot give any assurances that we will be able to continue our expansion plans successfully; that we will be able to
achieve results similar to those achieved with prior locations; or that we will be able to continue to manage our growth
effectively. Our failure to achieve our expansion plans could materially and adversely affect our business, financial
condition and results of operations. Furthermore, our operating margins may be impacted in periods in which
incremental expenses are incurred as a result of new store openings.
Our estimates concerning long-lived assets and store closures may accelerate.
Our long-term success depends, in part, on our ability to operate stores in a manner that achieves appropriate
returns on capital invested. This is particularly challenging in the current economic environment. We will only
continue to operate existing stores if they meet required sales or profit levels. In the current macroeconomic
environment, the results of our existing stores are impacted not only by a reduced sales environment, but by a number
of things that are outside our control, such as the loss of traffic resulting from store closures by significant other
retailers in our stores’ immediate vicinity.
The uncertainty of the economy, coupled with the volatility in the capital markets, affects our business and,
ultimately, our revenue and profitability. To the extent our estimates for net sales, gross profit and store expenses are
not realized, future assessments of recoverability could result in impairment charges. In addition, if we were to close
stores, we could be subject to costs and charges that may adversely affect our financial results.
Our stores are concentrated within the Southeast, Southwest, Mid-Atlantic and lower Midwest regions of the United
States, which could subject us to regional risks.
Because our stores are located primarily in a concentrated area of the United States, we are subject to regional
risks, such as the regional economy, weather conditions and natural disasters such as floods, droughts, tornadoes and
hurricanes, increasing costs of electricity, oil and natural gas, as well as, government regulations specific in the states
and localities within which we operate. We sell a significant amount of team sports merchandise which can be
adversely affected by significant weather events that postpone the start of or shorten sports seasons or that limit
participation of fans and sports enthusiasts.
The occurrence of severe weather events, catastrophic health events or natural disasters could significantly damage
or destroy our retail locations, could prohibit consumers from traveling to our retail locations or could prevent us
from resupplying our stores or distribution center, especially during peak shopping seasons.
Unforeseen events, including public health issues, such as the H1N1 flu pandemic, and natural disasters such
as earthquakes, hurricanes, snow storms, floods and heavy rains, could disrupt our operations or the operations of our
suppliers, as well as the behavior of our consumer. We believe that we take reasonable precautions to prepare
particularly for weather-related events, however, our precautions may not be adequate to deal with such events in the
future. As these events occur in the future, if they should impact areas in which we have our distribution center or a
concentration of retail stores, such events could have a material adverse effect on our business, financial condition and
results of operations, particularly if they occur during peak shopping seasons.
Unauthorized disclosure of sensitive or confidential information could harm our business and reputation with our
consumers.
The protection of Company, customer and employee data is critical to us. We rely on third-party systems,
software and monitoring tools to provide security for processing, transmission and storage of confidential customer and
employee information such as payment card and personal information. Despite the security measures we and our third-
party providers have in place, our data may be vulnerable to security breaches, acts of vandalism, computer viruses,
misplaced or lost data, programming and/or human errors, theft or other similar events. Any security breach involving
the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us or our providers,
could damage our reputation, expose us to risk of litigation and liability and harm our business.
Our inability to identify, and anticipate changes in consumer demands and preferences and our inability to respond
to such consumer demands in a timely manner could reduce our net sales.
Our products appeal to a broad range of consumers whose preferences cannot be predicted with certainty and
are subject to rapid change. Our success depends on our ability to identify product trends as well as to anticipate and
respond to changing merchandise trends and consumer demand in a timely manner. We cannot assure you that we will
be able to continue to offer assortments of products that appeal to our customers or that we will satisfy changing
consumer demands in the future. Accordingly, our business, financial condition and results of operations could be
materially and adversely affected if:
we are unable to identify and respond to emerging trends, including shifts in the popularity of certain products;
we miscalculate either the market for the merchandise in our stores or our customers’ purchasing habits; or
consumer demand unexpectedly shifts away from athletic footwear or our more profitable apparel lines.
10
In addition, we may be faced with significant excess inventory of some products and missed opportunities
for other products, which could decrease our profitability.
If we lose any of our key vendors or any of our key vendors fail to supply us with merchandise, we may not be
able to meet the demand of our customers and our net sales could decline.
We are a reseller of manufacturers’ branded items and are thereby dependent on the availability of key
products and brands. Our business is dependent to a significant degree upon close relationships with vendors and our
ability to purchase brand name merchandise at competitive prices. As a reseller, we cannot control the supply, design,
function or cost of many of the products we offer for sale. In addition, many of our vendors provide us with incentives,
such as return privileges, volume purchasing allowances and cooperative advertising. The loss of key vendor support
or decline or discontinuation of vendor incentives could have a material adverse effect on our business, financial
condition and results of operations. We cannot guarantee that we will be able to acquire such merchandise at
competitive prices or on competitive terms in the future. In this regard, certain merchandise that is in high demand may
be allocated by vendors based upon the vendors’ internal criterion which is beyond our control.
A disruption in the flow of imported merchandise or an increase in the cost of those goods may significantly
decrease our net sales and operating income.
We believe many of our largest vendors source a substantial majority of their products from foreign
countries. Imported goods are generally less expensive than domestic goods and indirectly contribute significantly
to our favorable profit margins. We may experience a disruption or increase in the cost of imported vendor products
at any time for reasons beyond our control. If imported merchandise becomes more expensive or unavailable, the
transition to alternative sources by our vendors may not occur in time to meet our demands or the demands of our
customers. Products from alternative sources may also be more expensive than those our vendors currently import.
Risks associated with reliance on imported goods include:
disruptions in the flow of imported goods because of factors such as:
raw material shortages, work stoppages, strikes and political unrest;
problems with oceanic shipping, including blockages at U.S. or foreign ports;
economic crises and international disputes; and
increases in the cost of purchasing or shipping foreign merchandise resulting from:
foreign government regulations;
changes in currency exchange rates or policies and local economic conditions; and
trade restrictions, including import duties, import quotas or loss of “most favored nation” status with
the United States.
In addition, to the extent that any foreign manufacturer from whom our vendors are associated may directly
or indirectly utilize labor practices that are not commonly accepted in the United States, we could be affected by any
resulting negative publicity. Our net sales and operating income could decline if vendors are unable to promptly
replace sources providing equally appealing products at a similar cost.
Problems with our information system software could disrupt our operations and negatively impact our financial
results and materially adversely affect our business operations.
The efficient operation of our business is dependent on the successful integration and operation of our
information systems. In particular, we rely on our information systems to manage effectively our sales, distribution,
merchandise planning and replenishment, to process financial information and sales transactions and to optimize our
overall inventory levels. Most of our information systems are centrally located at our headquarters, with offsite
backup at other locations. Our systems, if not functioning properly, could disrupt our ability to track, record and
analyze sales and inventory movement and could cause disruptions of operations, including, among other things, our
ability to process and ship inventory, process financial information including credit card transactions, process
payrolls or vendor payments or engage in other similar normal business activities. Any material disruption,
malfunction or any other similar problem in or with our information systems could negatively impact our financial
results and materially adversely affect our business operations.
Pressure from our competitors may force us to reduce our prices or increase our spending, which would lower
our net sales and operating income.
The business in which we are engaged is highly competitive. The marketplace for sporting goods remains
highly fragmented as many different retailers compete for market share by utilizing a variety of store formats and
merchandising strategies. We compete with national chains that focus on athletic footwear, local sporting goods stores,
department and discount stores, traditional shoe stores and mass merchandisers and, on a limited basis, national
sporting goods stores. Many of our competitors have greater financial resources than we do. In addition, many of our
competitors employ price discounting policies that, if intensified, may make it difficult for us to reach our sales goals
11
without reducing our prices. As a result of this competition, we may also need to spend more on advertising and
promotion than we anticipate. We cannot guarantee that we will continue to be able to compete successfully against
existing or future competitors. Expansion into markets served by our competitors, entry of new competitors or
expansion of existing competitors into our markets could be detrimental to our business, financial condition and results
of operations.
Our operating results are subject to seasonal and quarterly fluctuations. Furthermore, our quarterly operating
results, including comparable store net sales, will fluctuate and may not be a meaningful indicator of future
performance.
We have historically experienced and expect to continue to experience seasonal fluctuations in our net sales,
operating income and net income. Our net sales, operating income and net income are typically higher in the spring,
back-to-school and Christmas holiday seasons. An economic downturn during these periods could adversely affect us
to a greater extent than if a downturn occurred at other times of the year.
Customer buying patterns around the spring sales period and the holiday season historically result in higher
first and fourth quarter net sales. In addition, our quarterly results of operations may fluctuate significantly as a result
of a variety of factors, many outside our control, including the timing of new store openings, the amount and timing of
net sales contributed by new stores, merchandise mix, demand for apparel and accessories driven by local interest in
sporting events, the demise of sports superstars key to certain product promotions or strikes or lockouts involving
professional sports teams. Any of these events, particularly in the fourth quarter, could have a material adverse effect
on our business, financial condition and operating results for the entire fiscal year.
Comparable store net sales vary from quarter to quarter, and an unanticipated decline in comparable store net
sales may cause the price of our common stock to fluctuate significantly. Factors which have historically affected, and
will continue to affect our comparable store net sales results, include:
shifts in consumer tastes and fashion trends;
calendar shifts of holiday or seasonal periods;
the timing of new store openings and the relative proportion of new stores to mature stores;
the level of pre-opening expenses associated with new stores;
the amount and timing of net sales contributed by new stores;
changes in the other tenants in the shopping centers in which we are located;
pricing, promotions or other actions taken by us or our existing or possible new competitors; and
unseasonable weather conditions or natural disasters.
We cannot assure you that comparable store net sales will trend at the rates achieved in prior periods or that
rates will not decline.
We would be materially and adversely affected if our single distribution center were shut down.
We currently operate a single centralized distribution center in Birmingham, Alabama. We receive and ship
substantially all of our merchandise at our distribution center. Any natural disaster or other serious disruption to this
facility due to fire, tornado or any other cause would damage a portion of our inventory and could impair our ability to
adequately stock our stores and process returns of products to vendors and could adversely affect our sales and
profitability. In addition, we could incur significantly higher costs and longer lead times associated with distributing
our products to our stores during the time it takes for us to reopen or replace the center.
We depend on key personnel.
We have benefited from the leadership and performance of our senior management, especially Michael J.
Newsome, our Executive Chairman and former Chief Executive Officer. If we lose the services of any of our
principal executive officers, including Mr. Newsome, we may not be able to run our business effectively and
operating results could suffer. In particular, Mr. Newsome has been instrumental in directing our business strategy
and maintaining long-term relationships with our key vendors.
On March 9, 2005, we entered into a Retention Agreement (the Agreement) with Mr. Newsome. The purpose
of the Agreement is to secure the continued employment of Mr. Newsome as an advisor to us following his future
retirement from the duties of Chief Executive Officer of our Company. Although, Mr. Newsome stepped down as
Chief Executive Officer, effective March 15, 2010, he is actively involved in the daily operations of our Company and
his retirement is not currently planned.
Provisions in our charter documents and Delaware law might deter acquisition bids for us.
Certain provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects
and may discourage, delay or prevent a takeover attempt that a stockholder might consider in its best interest. These
provisions, among other things:
12
classify our Board of Directors into three classes, each of which serves for different three-year periods;
provide that a director may be removed by stockholders only for cause by a vote of the holders of not less than
two-thirds of our shares entitled to vote;
provide that all vacancies on our Board of Directors, including any vacancies resulting from an increase in the
number of directors, may be filled by a majority of the remaining directors, even if the number is less than a
quorum;
provide that special meetings of the stockholders may only be called by the Chairman of the Board of
Directors, a majority of the Board of Directors or upon the demand of the holders of a majority of the shares
entitled to vote at any such special meeting; and
call for a vote of the holders of not less than two-thirds of the shares entitled to vote in order to amend the
foregoing provisions and certain other provisions of our certificate of incorporation and bylaws.
In addition, our Board of Directors, without further action of the stockholders, is permitted to issue and fix the
terms of preferred stock which may have rights senior to those of common stock. We are also subject to the Delaware
business combination statute, which may render a change in control of us more difficult. Section 203 of the Delaware
General Corporation Laws would be expected to have an anti-takeover effect with respect to transactions not approved
in advance by the Board of Directors, including discouraging takeover attempts that might result in a premium over the
market price for the shares of common stock held by stockholders.
Increases in transportation costs due to rising fuel costs, climate change regulation and other factors may negatively
impact our operating results.
We rely upon various means of transportation, including sea and truck, to deliver products from vendors to
our distribution center and from our distribution center to our stores. Consequently, our results can vary depending
upon the price of fuel. The price of oil has fluctuated drastically over the last few years, and may rapidly increase
again, which would sharply increase our fuel costs. In addition, efforts to combat climate change through reduction of
greenhouse gases may result in higher fuel costs through taxation or other means. Any such future increases in fuel
costs would increase our transportation costs for delivery of product to our distribution center and distribution to our
stores, as well as our vendors’ transportation costs, which could decrease our operating results.
In addition, labor shortages in the transportation industry could negatively affect transportation costs and our
ability to supply our stores in a timely manner. In particular, our business is highly dependent on the trucking industry
to deliver products to our distribution center and our stores. Our operating results may be adversely affected if we or
our vendors are unable to secure adequate trucking resources at competitive prices to fulfill our delivery schedules to
our distribution center or our stores.
Our costs may change as a result of currency exchange rate fluctuations.
We source goods from various countries, including China, and thus changes in the value of the U.S. dollar
compared to other currencies may affect the costs of goods that we purchase.
Risks Related to Ownership of Our Common Stock.
The market price of our common stock, like the stock market in general, is likely to be highly volatile.
Factors that could cause fluctuation in our common stock price may include, among other things:
actual or anticipated variations in quarterly operating results;
changes in financial estimates by investment analysts and our inability to meet or exceed those estimates;
additions or departures of key personnel;
market rumors or announcements by us or by our competitors of significant acquisitions, divestitures or joint
ventures, strategic partnerships, large capital commitments or other strategic initiatives; and
sales of our common stock by key personnel or large institutional holders.
Many of these factors are beyond our control and may cause the market price of our common stock to decline,
regardless of our operating performance.
Risks Related to Regulatory, Legislative and Legal Matters.
We operate in a number of jurisdictions. It can be cumbersome to fill needed positions and comply with labor laws
and regulations, many of which vary from jurisdiction to jurisdiction.
We are heavily dependent upon our labor force. We attempt to attract and retain an appropriate level of
personnel in both field operations and corporate functions. Our compensation packages are designed to provide
benefits commensurate with our level of expected service. However, within our retail operations, we face the challenge
of filling many positions at wage scales that are appropriate to the industry and competitive factors. We operate in a
number of jurisdictions which can make it cumbersome to comply with labor laws and regulations, many of which vary
13
from jurisdiction to jurisdiction. As a result of these and other factors, we face many external risks and internal factors
in meeting our labor needs, including competition for qualified personnel, overall unemployment levels, prevailing
wage rates, as well as rising employee benefit costs, including insurance costs and compensation programs. We also
engage third parties in some of our process such as delivery and transaction processing and these providers may face
similar issues. Changes in any of these factors, including a shortage of available workforce in areas in which we
operate, could interfere with our ability to adequately service our customers or to open suitable locations and could
result in increasing labor costs.
We cannot be assured that we will not experience pressure from labor unions or become the target of labor union
campaigns.
While we believe we maintain good relations with our employees, we cannot be assured that we will not
experience pressure from labor unions or become the target of labor union campaigns. The potential for unionization
could increase in the United States if Congress passes federal legislation that would facilitate labor organization. The
unionization of a significant portion of our workforce could increase our overall costs at the affected locations and
adversely affect our flexibility to run our business in the most efficient manner to remain competitive or acquire new
business. In addition, significant union representation would require us to negotiate wages, salaries, benefits and other
terms with many of our employees collectively and could adversely affect our results of operations by increasing our
labor costs or otherwise restricting our ability to maximize the efficiency of our operations.
Changes in federal, state or local law, or our failure to comply with such laws, could increase our expenses and
expose us to legal risks.
While businesses are subject to regulatory matters relating to the conduct of their business, including
consumer protection laws, consumer credit privacy acts, product safety regulations, advertising regulations, zoning and
land use regulations, sales and use tax laws, wage and hour regulations, environmental laws (including measures
related to climate change, greenhouse gas emissions, soil and groundwater contamination and disposal of waste and
hazardous materials) and the like, certain jurisdictions have taken a particularly aggressive stance with respect to such
matters and have stepped up enforcement, including fines and other sanctions. An increasing regulatory environment
could expose us to a challenging enforcement environment or to third party liability (such as monetary recoveries and
recoveries of attorneys fees) and could have a material adverse affect on our business and results of operations,
including the added cost of increased preventative measures that we may determine to be necessary to conduct our
business in certain locales.
We believe that we are in substantial compliance with applicable environment and other laws and regulations
and, although no assurance can be given, we do not foresee the need for any significant expenditures in this area in the
near future.
Changes in rules related to accounting for income taxes, changes in tax laws in any of the jurisdictions in which we
operate or adverse outcomes from audits by taxing authorities could result in an unfavorable change in our effective
tax rate.
We operate our business in several jurisdictions. As a result, our effective tax rate is derived from a
combination of the federal rate and applicable tax rates in the various states in which we operate. Our effective tax rate
may be lower or higher than our tax rates have been in the past due to numerous factors, including the sources of our
income and the tax filing positions we take. We base our estimate of an effective tax rate at any given point in time
upon a calculated mix of the tax rates applicable to our Company and to estimates of the amount of business likely to
be done in any given jurisdiction. Changes in rules related to accounting for income taxes, changes in tax laws in any
of the jurisdictions in which we operate or adverse outcomes from tax audits that we may be subject to in any of the
jurisdictions in which we operate could result in an unfavorable change in our effective tax rate.
Litigation may adversely affect our business, financial condition and results of operations.
Our business is subject to the risk of litigation by employees, consumers, suppliers, competitors, stockholders,
government agencies or others through private actions, class actions, administrative proceedings, regulatory actions or
other litigation. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess
or quantify. We may incur losses relating to these claims and, in addition, these proceedings could cause us to incur
costs and may require us to devote resources to defend against these claims which could adversely affect our results of
operations. For a description of current legal proceedings, see “Part I, Item 3, Legal Proceedings.”
Item 1B. Unresolved Staff Comments.
None.
14
Item 2. Properties.
We currently lease all of our existing 767 store locations and expect that our policy of leasing rather than
owning will continue as we continue to expand. Our leases typically provide for terms of five to ten years with options
on our part to extend. Most leases also contain a kick-out clause if projected sales levels are not met and an early
termination/remedy option if co-tenancy and exclusivity provisions are violated. We believe this leasing strategy
enhances our flexibility to pursue various expansion opportunities resulting from changing market conditions and to
periodically re-evaluate store locations. Our ability to open new stores is contingent upon locating satisfactory sites,
negotiating favorable leases, recruiting and training qualified management personnel and the availability of market
relevant inventory.
As current leases expire, we believe we will either be able to obtain lease renewals for present store locations
or to obtain leases for equivalent or better locations in the same general area. Historically, we have not experienced
any significant difficulty in either renewing leases for existing locations or securing leases for suitable locations for
new stores. However, we experienced difficulty in securing leases for new stores related to new construction in Fiscal
2010 due to the economic issues facing the commercial real estate market and landlords, thus reducing our ability to
open stores at our historical rates. Based primarily on our belief that we maintain good relations with our landlords,
that most of our leases are at approximate market rents and that generally we have been able to secure leases for
suitable locations, we believe our lease strategy will not be detrimental to our business, financial condition or results of
operations. Nonetheless, we do expect continued difficulty in securing leases for new stores throughout Fiscal 2011.
Our corporate offices and our retail distribution center are leased under an operating lease. We own the
Team Sales’ facility located in Birmingham, Alabama that warehouses inventory for educational institutions and
youth associations. We believe our current distribution center is suitable and adequate to support our immediate
needs in the next few years.
Store Locations
As of January 30, 2010, we currently operate 767 stores in 24 contiguous states. Of these stores, 209 are
located in malls and 558 are located in strip-shopping centers which are typically influenced by a Wal-Mart store. The
following shows the number of locations by state as of January 30, 2010:
Alabama
Arizona
Arkansas
Florida
Georgia
Iowa
79
7
39
36
85
Illinois
Indiana
Kansas
Kentucky
Louisiana
6 Missouri
18 Mississippi
19
18
37
43
24
Nebraska
New Mexico
North Carolina
Ohio
Oklahoma
As of March 22, 2010, we operated 767 stores in 24 states.
Item 3. Legal Proceedings.
South Carolina
54
Tennessee
5
Texas
9
45
Virginia
20 West Virginia
32 Wisconsin
TOTAL
31
52
78
20
8
2
767
We are a party to various legal proceedings incidental to our business. We do not believe that any of these
matters will, individually or in the aggregate, have a material adverse effect on our business or financial condition.
We cannot give assurance, however, that one or more of these lawsuits will not have a material adverse effect on our
results of operations for the period in which they are resolved. At January 30, 2010, we estimate that the liability
related to these matters is approximately $0.3 million and accordingly, have accrued $0.3 million as a current
liability on our consolidated balance sheet. As of January 31, 2009, we had accrued $47,000 as it related to our
estimated liability for legal proceedings.
The estimates of our liability for pending and unasserted potential claims do not include litigation costs. It
is our policy to accrue legal fees when it is probable that we will have to defend against known claims or allegations
and we can reasonably estimate the amount of the anticipated expense.
From time to time, we enter into certain types of agreements that require us to indemnify parties against third
party claims under certain circumstances. Generally, these agreements relate to: (a) agreements with vendors and
suppliers under which we may provide customary indemnification to our vendors and suppliers in respect to actions
they take at our request or otherwise on our behalf; (b) agreements to indemnify vendors against trademark and
copyright infringement claims concerning merchandise manufactured specifically for or on behalf of the Company; (c)
15
real estate leases, under which we may agree to indemnify the lessors from claims arising from our use of the property;
and (d) agreements with our directors, officers and employees, under which we may agree to indemnify such persons
for liabilities arising out of their relationship with us. We have director and officer liability insurance, which, subject to
the policy’s conditions, provides coverage for indemnification amounts payable by us with respect to our directors and
officers up to specified limits and subject to certain deductibles.
If we believe that a loss is both probable and estimable for a particular matter, the loss is accrued in
accordance with the requirements of ASC Topic 450, Contingencies. With respect to any matter, we could change our
belief as to whether a loss is probable or estimable, or its estimate of loss, at any time. Even though we may not believe
a loss is probable or estimable, it is reasonably possible that we could suffer a loss with respect to that matter in the
future.
Item 4. Removed and Reserved.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Our common stock is traded on the NASDAQ Global Select Market (NASDAQ/GS) under the symbol HIBB.
The following table sets forth, for the periods indicated, the high and low sales prices of shares of our Common Stock
as reported by NASDAQ.
Fiscal 2010:
First Quarter ended May 2, 2009
Second Quarter ended August 1, 2009
Third Quarter ended October 31, 2009
Fourth Quarter ended January 30, 2010
Fiscal 2009:
First Quarter ended May 3, 2008
Second Quarter ended August 2, 2008
Third Quarter ended November 1, 2008
Fourth Quarter ended January 31, 2009
High
Low
$
$
$
$
22.39
21.62
21.17
23.61
$
$
$
$
19.74
23.85
25.75
18.28
$
$
$
$
12.82
16.08
16.00
18.24
$
$
$
$
13.06
16.50
12.43
10.06
On March 22, 2010, the last reported sale price for our common stock as quoted by NASDAQ was $26.51 per
share. As of March 22, 2010, we had 23 stockholders of record.
16
The Stock Price Performance Graph below compares the percentage change in our cumulative total
stockholder return on our common stock against a cumulative total return of the NASDAQ Composite Index and the
NASDAQ Retail Trade Index. The graph below outlines returns for the period beginning on January 31, 2005 to
January 31, 2010. We have not paid any dividends. Total stockholder return for prior periods is not necessarily an
indication of future performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Hibbett Sports, Inc., The NASDAQ Composite Index
And The NASDAQ Retail Trade Index
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
1/05
1/06
1/07
1/08
1/09
1/10
Hibbett Sports, Inc.
NASDAQ Composite
NASDAQ Retail Trade
*$100 invested on January 31, 2005 in stock or index, including reinvestment of dividends.
Fiscal year ending January 31.
Dividend Policy. We have never declared or paid any dividends on our common stock. We currently intend
to retain our future earnings to finance the growth and development of our business and for our stock repurchase
program, and therefore do not anticipate declaring or paying cash dividends on our common stock for the foreseeable
future. Any future decision to declare or pay dividends will be at the discretion of our Board of Directors and will be
dependent upon our financial condition, results of operations, capital requirements and such other factors as our Board
of Directors deems relevant.
Equity Compensation Plans. For information on securities authorized for issuance under our equity
compensation plans, see “Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.”
17
Item 6. Selected Consolidated Financial Data.
The following selected consolidated financial data has been derived from the consolidated financial statements
of the Company. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our “Consolidated Financial Statements and Supplementary
Data” and “Notes to Consolidated Financial Statements” thereto.
Income Statement Data:
Net sales
Cost of goods sold, including distribution center
and store occupancy costs
Gross profit
Store operating, selling and administrative
expenses
Depreciation and amortization
Operating income
Interest income
Interest expense
Interest (expense) income, net
Income before provision for income taxes
Provision for income taxes
Net income
Earnings per common share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Balance Sheet Data:
Working capital
Total assets
Long-term debt and obligations under capital
lease
Stockholders' investment
Selected Operating Data:
Number of stores open at end of period:
Hibbett Sports
Sports & Co.
Sports Additions
Total
Note: No dividends have been declared or paid.
(In thousands, except per share amounts and Selected Operating Data)
Fiscal Year Ended
February 2,
2008
(52 weeks)
January 31,
2009
(52 weeks)
February 3,
2007
(53 weeks)
January 30,
2010
(52 weeks)
January 28,
2006
(52 weeks)
$
593,492
$
564,188
$
520,720
$
512,094
$
440,269
397,292
196,200
378,817
185,371
351,876
168,844
338,963
173,131
293,368
146,901
129,888
13,905
52,407
60
(117)
(57)
52,350
123,075
14,324
47,972
41
(660)
(619)
47,353
108,463
12,154
48,227
582
(151)
431
48,658
100,461
10,932
61,738
906
(30)
876
62,614
85,060
10,119
51,722
1,170
(24)
1,146
52,868
19,801
32,549
$
17,905
29,448
$
18,329
30,329
$
24,541
38,073
$
19,244
33,624
$
$
$
1.14
1.12
$
$
1.03
1.02
$
$
0.98
0.96
$
$
1.19
1.17
$
$
1.00
0.98
28,629
29,089
28,547
28,954
31,049
31,525
32,094
32,620
33,606
34,393
$
147,583
276,704
$
107,055
235,087
$
89,383
216,734
$
106,428
212,853
$
98,623
195,829
152
175,079
-
136,575
-
119,055
-
136,641
-
124,773
723
4
18
745
666
4
18
688
593
4
16
613
527
4
18
549
747
4
16
767
18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Hibbett Sports, Inc. operates sporting goods stores in small to mid-sized markets, predominantly in the
Southeast, Southwest, Mid-Atlantic and lower Midwest regions of the United States. Our stores offer a broad
assortment of quality athletic equipment, footwear and apparel with a high level of customer service. As of January
30, 2010, we operated a total of 767 retail stores composed of 747 Hibbett Sports stores, 16 Sports Additions athletic
shoe stores and 4 Sports & Co. superstores in 24 states.
Our primary retail format and growth vehicle is Hibbett Sports, a 5,000-square-foot store located primarily in
strip centers which are usually influenced by a Wal-Mart store. Approximately 75% of our Hibbett Sports store base is
located in strip centers, while approximately 25% of our Hibbett Sports store base is located in enclosed malls. Over
the last several years, we have concentrated and expect to continue our store base growth in strip centers versus
enclosed malls. We believe Hibbett Sports stores are typically the primary sporting goods retailers in their markets due
to the extensive selection of quality brand name merchandise and a high level of customer service. We do not expect
that the average size of our stores opening in Fiscal 2011 will vary significantly from the average size of stores opened
in Fiscal 2010.
The deteriorating global economic conditions experienced in Fiscal 2009 improved slightly in Fiscal 2010 and
we were able to increase net income through effective management of expenses. Although footwear experienced an
overall decline during the fiscal year, we saw improvement in all our other areas of merchandise which generally have
a higher product margin.
We historically have increases in comparable store net sales in the low to mid-single digit range. We plan to
increase total company-wide square footage by over 3% in Fiscal 2011, which is at the lower end of our historical
range of 3% to 12%. To somewhat offset the current slowing of new store openings, we have increased our rate of
expanding and relocating high performing stores, increasing the square footage in 19 existing stores in Fiscal 2010. We
expect to expand an additional 20 stores in Fiscal 2011. Total sales percentage growth is expected to be in the low to
mid-single digits in Fiscal 2011. Over the past several years, we have increased our product margin through improved
vendor discounts, fewer retail reductions and increased efficiencies in logistics. We expect a slight improvement in
product margin rate in Fiscal 2011 as we continue to benefit from increased efficiencies from our previous investment
in systems.
Although the macroeconomic environment has presented many challenges in the last two years, our
management believes that our business fundamentals remain strong and that we are well-positioned for the future. We
are a leader in the markets in which we compete and we will continue to benefit from our comparatively low operating
costs compared to the costs of our competitors. We intend to manage our costs and inventories prudently as dictated by
the current economic environment. Although at a slower pace than in prior years, we intend to continue to invest in
initiatives to prepare our infrastructure for long-term growth.
Our management expects that the uncertainty of global economic conditions experienced over the last two
years will continue. Any negative impact on customer discretionary spending could negatively impact our net sales
and level of profitability in Fiscal 2011.
Due to our increased net sales, we have historically leveraged our store operating, selling and administrative
expenses. Based on projected net sales, we expect operating, selling and administrative rates to decrease slightly in
Fiscal 2011, primarily due to a return of comparable store sales growth. We also expect to continue to generate
sufficient cash to enable us to expand and remodel our store base and to provide capital expenditures for both
distribution center and technology upgrade projects.
We maintain a merchandise management system that allows us to identify and monitor trends. However, this
system does not produce U.S. generally accepted accounting principle (GAAP) financial information by product
category. Therefore, it is impracticable to provide GAAP net sales by product category.
Hibbett operates on a 52- or 53-week fiscal year ending on the Saturday nearest to January 31 of each year.
The consolidated statements of operations for fiscal years ended January 30, 2010, January 31, 2009 and February 2,
2008 includes 52 weeks of operations. We have operated as a public company and have been incorporated under the
laws of the State of Delaware since October 6, 1996.
Comparable store net sales data for the periods presented reflects sales for our traditional format Hibbett
Sports and Sports Additions stores open throughout the period and the corresponding period of the prior fiscal year. If
19
a store remodel or relocation results in the store being closed for a significant period of time, its sales are removed from
the comparable store base until it has been open a full 12 months. Our four Sports & Co., stores are not and have never
been included in the comparable store net sales comparison because we have not opened a superstore since September
1996 and we do not have plans to open additional superstores in the future.
Executive Summary
Net sales for the fiscal year ended January 30, 2010, increased to $593.5 million compared with $564.2
million and $520.7 million for the fiscal years ended January 31, 2009 and February 2, 2008, respectively.
Operating income was 8.8% of net sales for Fiscal 2010 compared to 8.5% for Fiscal 2009 and 9.3% for Fiscal
2008. Comparable store sales increased 0.7% in Fiscal 2010, compared to a comparable store sales increase of 0.5%
in Fiscal 2009 and a comparable store sales decrease of 2.9% in Fiscal 2008. Net income in Fiscal 2010 increased
10.5% to $32.5 million compared with $29.4 million in Fiscal 2009. Earnings per diluted share increased to $1.12
compared with $1.02 for Fiscal 2009 and $0.96 for Fiscal 2008.
During the fiscal year, Hibbett opened forty-two new stores and closed twenty stores, bringing the store
base to 767 in 24 states as of January 30, 2010. Inventory on a per store basis at January 30, 2010 increased by
8.4% compared to January 31, 2009, as we made a concerted effort to increase levels in advance of the spring sports
season. Hibbett ended the fiscal year with $49.7 million of available cash and cash equivalents on the consolidated
balance sheet and full availability under its $80.0 million unsecured credit facilities.
Recent Accounting Pronouncements
See Note 2 of Item 8 of this Annual Report on Form 10-K for the fiscal year ended January 30, 2010, for
information regarding recent accounting pronouncements.
Results of Operations
The following table sets forth the percentage relationship to net sales of certain items included in our
consolidated statements of operations for the periods indicated.
January 30,
2010
Fiscal Year Ended
January 31,
2009
February 2,
2008
100.0%
100.0%
100.0%
66.9
33.1
21.9
2.3
8.8
-
-
-
8.8
3.3
5.5%
67.1
32.9
21.8
2.5
8.5
-
(0.1)
(0.1)
8.4
3.2
5.2%
67.6
32.4
20.8
2.3
9.3
0.1
-
0.1
9.3
3.5
5.8%
Net sales
Costs of goods sold, including distribution and store
occupancy costs
Gross profit
Store operating, selling and administrative expenses
Depreciation and amortization
Operating income
Interest income
Interest expense
Interest (expense) income, net
Income before provision for income taxes
Provision for income taxes
Net income
Note: Columns may not sum due to rounding.
Fiscal 2010 Compared to Fiscal 2009
Net sales. Net sales increased $29.3 million, or 5.2%, to $593.5 million for the 52 weeks ended January 30,
2010, from $564.2 million for the 52 weeks ended January 31, 2009. Furthermore:
We opened 42 Hibbett Sports stores while closing 20 Hibbett Sports stores for net stores opened of 22 stores
in the 52 weeks ended January 30, 2010. Nineteen high performing stores were expanded. New stores and
20
stores not in the comparable store net sales calculation accounted for $25.5 million of the increase in net
sales. Store openings and closings are reported net of relocations.
We experienced a 0.7% increase in comparable store net sales for the 52 weeks ended January 30, 2010
compared to the 52 weeks ended January 31, 2009. Higher comparable store net sales contributed $3.8
million to the increase in net sales.
Items per sales transaction improved by 3.3% compared to last year.
During Fiscal 2010, 646 stores were included in the comparable store sales comparison. The slight
increase in comparable store net sales was primarily attributable to an increase in the number of items per
transaction and improved efficiencies in systems that enhanced our ability to offer the right product in the right
store. We also believe that the close proximity of our stores, coupled with brand name merchandise selection and
successful college and professional sports seasons within our markets in the fourth quarter contributed to our
increase in comparable store net sales. With the exception of footwear, we experienced an overall increase in
comparable store sales across our merchandise categories. Accessories made the largest comparable stores sales
gains in the high teens and twenties while footwear, excluding cleats, declined mid-single digits. We believe the
gains in accessory sales is the direct result of concentrated efforts of our Operations and Marketing teams to increase
items per transaction by offering accessories as add-ons at the point of sale.
We believe that the decline in footwear sales resulted from the lack of economic stimulus checks that were
in the market one year ago and also from the tougher macroeconomic environment which has affected discretionary
spending. All other categories of merchandise performed within the levels we expected. Strip center locations
continue to outperform enclosed mall stores. Strip center locations now comprise approximately 75% of our total
store base.
Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy
and operating costs for the distribution center. Gross profit was $196.2 million, or 33.1% of net sales, in the 52
weeks ended January 30, 2010, compared with $185.4 million, or 32.9% of net sales, in the 52 week period of the
prior fiscal year. We attribute this increase in gross profit to increased markups, improved vendor contributions and
reduced freight costs. Of the store occupancy related costs, rent expense had the greatest increase due to the 3%
increase in our store base and fewer construction allowance dollars to offset rent as landlords are delivering more
complete stores. Utility expenses and real estate taxes also increased as a percent to net sales. Distribution expense
decreases contributed the most to our increase in gross profit percent to net sales. The most significant decreases
were in data processing costs and fuel costs as we move towards delivery by third-party logistics providers to our
outlying stores, increasing the efficiency of the Hibbett fleet.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses
were $129.9 million, or 21.9% of net sales, for the 52 weeks ended January 30, 2010, compared with $123.1 million,
or 21.8% of net sales, for the 52 weeks ended January 31, 2009. Expense trends we experienced included:
Salary and benefit costs in our stores increased by 24 basis points, resulting primarily from increased
incentive sales pay and increases in the minimum wage. Administrative salary and benefit costs decreased
slightly, although stock-based compensation increased 7 basis points as the result of the achievement of
performance-based awards and a higher stock price at the date of grant as compared to last year.
As a result of fewer store openings compared to last year, new store costs decreased 14 basis points and
store training costs associated primarily with the training of new store managers decreased 5 basis points.
Credit and debit card fees increased as a percent to net sales due to higher exchange rates.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.3% in the
52 weeks ended January 30, 2010, and 2.5% in the 52 weeks ended January 31, 2009. The average lease term of
new store leases added in Fiscal 2010 compared to those added in Fiscal 2009 decreased to 6.38 years compared to
6.65 years, respectively. We attribute the decrease in depreciation expense as a percent of net sales to the lower
number of new stores added in the last two years and a lower investment in leasehold improvements for each new
location as landlords are moving toward delivering more occupant-ready stores and moving away from construction
allowances and tenant-completed units.
Provision for income taxes. Provision for income taxes as a percentage of net sales was 3.3% in the 52
weeks ended January 30, 2010, compared to 3.2% for the 52 weeks ended January 31, 2009. The combined federal,
state and local effective income tax rate as a percentage of pre-tax income was 37.8% for Fiscal 2010 and Fiscal
2009.
21
Fiscal 2009 Compared to Fiscal 2008
Net sales. Net sales increased $43.5 million, or 8.4%, to $564.2 million for the 52 weeks ended January 31,
2009, from $520.7 million for the 52 weeks ended February 2, 2008. We attributed this increase to the following
factors:
We opened 69 Hibbett Sports stores while closing 12 Hibbett Sports stores for net stores opened of 57 stores
in the 52 weeks ended January 31, 2009. New stores and stores not in the comparable store net sales
calculation accounted for $41.0 million of the increase in net sales. Store openings and closings are reported
net of relocations.
We experienced a 0.5% increase in comparable store net sales for the 52 weeks ended January 31, 2009
compared to the 52 weeks ended February 2, 2008. Higher comparable store net sales contributed $2.5
million to the increase in net sales.
Although we saw a decrease in store traffic, items per sales transaction improved by 2.8%.
During the 52 weeks ended January 31, 2009, 581 stores were included in the comparable store net sales
comparison. The slight increase in comparable store net sales was primarily attributable to an increase in the
number of items per transaction and improved efficiencies in systems that enhanced our ability to offer the right
product in the right store. We also believe that the close proximity of our stores, coupled with branded merchandise
selection and the higher average fuel costs for most of the year, encouraged the customer in our smaller markets to
shop closer to home.
We experienced the following trends in Fiscal 2009:
Children’s footwear performed well, while women’s footwear weakened. Men’s marquee product
performed well.
The decline in the urban apparel business was offset by increases in Mixed Martial Arts apparel and
equipment.
Our strip center stores outperformed our enclosed mall stores.
Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy
and operating costs for the distribution center. Gross profit was $185.4 million, or 32.9% of net sales, in the 52
weeks ended January 31, 2009, compared with $168.8 million, or 32.4% of net sales, in the 52 week period of the
prior fiscal year. We attributed this increase in gross profit to improvement in shrinkage and markdowns. Store
occupancy experienced its largest decrease in rent expense due to favorable lease terms resulting from co-tenancy
violations and from renegotiating certain leases, while utility expenses increased as a percent to net sales.
Distribution expenses experienced decreases in data processing costs while fuel costs increased.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses
were $123.1 million, or 21.8% of net sales, for the 52 weeks ended January 31, 2009, compared with $108.5 million,
or 20.8% of net sales, for the 52 weeks ended February 2, 2008. Expenses contributing to this increase included:
Salary and benefit costs in our stores increased by 57 basis points resulting primarily from increased
incentive sales pay and increases in the minimum wage. These expenses increased by 60 basis points at the
administrative level primarily as the result of increased bonus accruals.
Legal fees decreased by 9 basis points due to the settlement of employment litigation early in the year.
Inventory counting expenses decreased by 8 basis points as the result of taking fewer second store
inventories compared to a year ago. Data processing costs decreased by 7 basis points as we passed the
anniversary of our implementation of our new merchandising system. Freight and shipping expenses
increased overall by 6 basis points, but have been decreasing with lower fuel costs in the last half of our
fiscal year.
Stock-based compensation accounted for a decrease of 7 basis points primarily due to lower stock prices in
Fiscal 2009 compared to Fiscal 2008.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.5% in the
52 weeks ended January 31, 2009, and 2.3% in the 52 weeks ended February 2, 2008. The average lease term of
new store leases added in Fiscal 2009 compared to those added in Fiscal 2008 decreased to 6.65 years compared to
6.71 years, respectively. We attributed the slight increase in depreciation expense as a percent to net sales primarily
due to a change in estimate of the economic useful life of leasehold improvements in certain underperforming stores.
Provision for income taxes. Provision for income taxes as a percentage of net sales was 3.2% in the 52
weeks ended January 31, 2009, compared to 3.5% for the 52 weeks ended February 2, 2008. The combined federal,
state and local effective income tax rate as a percentage of pre-tax income was 37.8% for Fiscal 2009 and 37.7% for
Fiscal 2008.
22
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings, stock repurchases and working capital
requirements. Our working capital requirements are somewhat seasonal in nature and typically reach their peak near
the end of the third and the beginning of the fourth quarters of our fiscal year. Historically, we have funded our cash
requirements primarily through our cash flow from operations and occasionally from borrowings under our revolving
credit facilities.
Our consolidated statements of cash flows are summarized as follows (in thousands):
January 30,
2010
Fiscal Year Ended
January 31,
2009
February 2,
2008
Net cash provided by operating activities:
Net cash used in investing activities:
Net cash provided by (used in) financing activities:
Net increase (decrease) in cash and cash equivalents
Operating Activities.
$
$
$
36,914
(9,603)
1,730
29,041
38,997
(13,781)
(15,308)
9,908
48,022
(16,549)
(51,098)
(19,625)
$
$
$
Cash flow from operations is seasonal in our business. Typically, we use cash flow from operations to
increase inventory in advance of peak selling seasons, such as winter holidays and back-to-school. Inventory levels are
reduced in connection with higher sales during the peak selling seasons and this inventory reduction, combined with
proportionately higher net income, typically produces a positive cash flow. In recent periods, we have experienced a
trend of increasing free rent provisions in lieu of cash construction allowances in our leases. We believe this is
primarily the result of the tightening of commercial credit on our landlords. Because of this, the non-cash portion of
landlord allowances has also experienced increases.
Net cash provided by operating activities was $36.9 million for the 52 weeks ended January 30, 2010
compared with net cash provided by operating activities of $39.0 million and $48.0 million in the 52 weeks ended
January 31, 2009 and February 2, 2008, respectively.
Inventory levels have continued to increase year over year as the number of stores have increased, although
the inventory per store has historically trended slightly down to flat. Ending inventory at January 30, 2010 was up
11.6% compared to January 31, 2009 as the result of management’s decision to bring in certain merchandise in advance
of the spring sports seasons. The increase in inventory used cash of $17.6 million, $10.4 million and $16.0 million
during Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively. The accounts payable increase provided cash of $0.5
million, $0.3 million and $22.1 million during Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively, as we managed
cash while protecting vendor discounts. Offsetting uses of cash was net income which provided cash of $32.5 million,
$29.4 million and $30.3 million during Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively. Also contributing to the
offset of uses of cash were non-cash charges, including depreciation and amortization expense of $13.9 million, $14.3
million and $12.2 million during Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively, and stock-based compensation
expense of $4.2 million, $3.6 million and $3.7 million during Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively.
Investing Activities.
Cash used in investing activities in the fiscal periods ended January 30, 2010, January 31, 2009 and February
2, 2008 totaled $9.6 million, $13.8 million and $16.5 million, respectively. Gross capital expenditures used $9.6
million, $13.7 million and $16.4 million during Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively.
We use cash in investing activities to build new stores and remodel or relocate existing stores. Furthermore,
net cash used in investing activities includes purchases of information technology assets and expenditures for our
distribution facility and corporate headquarters.
We opened 42 new stores and relocated and/or remodeled 21 existing stores during the 52 weeks ended
January 30, 2010. We opened 69 new stores and relocated and/or remodeled 19 existing stores during the 52 weeks
ended January 31, 2009. We opened 81 new stores and relocated and/or remodeled 16 existing stores during the 52
weeks ended February 2, 2008.
We estimate the cash outlay for capital expenditures in the fiscal year ended January 29, 2011 will be
approximately $10.3 million, which relates to the opening of approximately 30 new stores, remodeling of selected
existing stores, information system upgrades and various improvements at our headquarters and distribution center. Of
the total budgeted dollars for capital expenditures for Fiscal 2011, we anticipate that approximately 63% will be related
to the opening of new stores and remodeling and/or relocating existing stores. Approximately 22% will be related to
23
information systems with the remaining 15% related primarily to office expansion, distribution center improvement and
security equipment for our stores.
As of January 30, 2010, we had an approximate $0.2 million outlay remaining on enhancements to our
merchandising system relating to inventory planning. We anticipate these upgrades will be implemented in the first
quarter of Fiscal 2011 and believe these enhancements will enable us to analyze and generally improve sales across all
markets and merchandise by allowing us to better analyze inventory at the store level.
Financing Activities.
Net cash provided by financing activities was $1.7 million in the 52 weeks ended January 30, 2010 compared
to net cash used of $15.3 and $51.1 million in the 52 weeks ended January 31, 2009 and February 2, 2008, respectively.
The cash fluctuation as compared to prior fiscal years was primarily the result of the repurchase of our common stock.
We did not repurchase any of our common stock during Fiscal 2010. We expended $16.9 million and $52.7 million on
repurchases of our common stock during Fiscal 2009 and Fiscal 2008, respectively.
Financing activities also consisted of proceeds from transactions in our common stock and the excess tax
benefit from the exercise of incentive stock options. As stock options are exercised, we will continue to receive
proceeds and expect a tax deduction; however, the amounts and timing cannot be predicted.
At January 30, 2010, we had two unsecured revolving credit facilities that allow borrowings up to $30.0
million and $50.0 million, respectively, and which renew in August 2010 and November 2010, respectively. The
facilities do not require a commitment or agency fee nor are there any covenant restrictions. We plan to renew these
facilities as they expire and do not anticipate any problems in doing so; however, no assurance can be given that we
will be granted a renewal or terms which are acceptable to us. As of January 30, 2010, we did not have any debt
outstanding under either of these facilities.
At January 31, 2009, we had two unsecured revolving credit facilities that allow borrowings up to $30.0
million and $50.0 million, respectively, and which renewed in August 2009 and December 2009, respectively. At
February 2, 2008, we had a revolving credit facility that allowed borrowings up to $30.0 million and which renewed in
August 2008. None of our credit facilities in any year presented required a commitment or agency fee nor were there
any covenant restrictions.
The following table lists the aggregate maturities of various classes of obligations and expiration amounts
of various classes of commitments related to Hibbett Sports, Inc. at January 30, 2010 (in thousands):
Contractual Obligations
Long-term debt obligations (1)
Capital lease obligations (1)
Interest on capital lease obligations (1)
Operating lease obligations (2)
Purchase obligations (3)
Other long-term liabilities (4)
Total
Payment due by period
Less than 1
year
$
-
117
57
40,528
1,840
-
42,542
$
1 - 3 years
$
-
151
22
63,933
736
-
64,842
$
3 - 5 years
$
-
-
-
36,047
8
-
36,055
$
More than 5
years
$
-
-
-
19,511
-
518
20,029
$
Total
$
-
268
79
160,019
2,584
518
163,468
$
(1) See “Part II, Item 8, Consolidated Financial Statements Note 5 – Debt and Capital Lease Obligations.”
(2) See “Part II, Item 8, Consolidated Financial Statements Note 9 – Lease Commitments.”
(3) Purchase obligations include all material legally binding contracts such as software license commitments and service
contracts. The table above also includes stand-by letters of credit in conjunction with our self-insured worker’s
compensation and general liability insurance coverages. Contractual obligations, including purchase orders for inventory,
that are not binding agreements are excluded from the table above. Utility contracts (excluding waste disposal contracts
that are binding agreements) and contracts which are binding (but have no minimum fee or purchase requirements) are
also excluded.
(4) Other long-term liabilities on our consolidated balance sheet primarily consists of deferred rent and deferred income
taxes. These liabilities have been excluded from the above table as the timing and/or amount of any cash payment is
uncertain. See “Part II, Item 8, Consolidated Financial Statements Note 1 – Deferred Rent” for a discussion on our
deferred rent liabilities. See “Part II, Item 8, Consolidated Financial Statements Note 8 – Income Taxes” for a discussion
of our deferred income tax positions and accruals for uncertain tax positions. The table above includes amounts accrued
for various deferred compensation arrangements on our consolidated balance sheets. See “Part II, Item 8, Consolidated
Financial Statements Note 6 – Defined Contribution Benefit Plans” for a discussion regarding our employee benefit plans.
24
Excluded from this table are approximately $2.4 million of unrecognized tax benefits which have been
recorded as liabilities in accordance with ASC Topic 740, Income Taxes, as the timing of such payments cannot be
reasonably determined.
Off-Balance Sheet Arrangements
We have not provided any financial guarantees as of January 30, 2010. We have not created, and are not
party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or
operating our business. We do not have any arrangements or relationships with entities that are not consolidated
into the financial statements.
Inflation and Other Economic Factors
Our ability to provide quality merchandise on a profitable basis may be subject to economic factors and
influences that we cannot control. National or international events, including uncertainties in the financial markets,
policies of the newly elected administration and unrest in the Middle East, could lead to disruptions in economies in
the United States or in foreign countries where a significant portion of our merchandise is manufactured. These and
other factors could increase our merchandise costs and other costs that are critical to our operations. Consumer
spending could also continue to decline because of economic pressures.
Merchandise Costs. Based on current economic conditions, we expect that any increase in merchandise
costs per unit will be offset by improved vendor discounts and increased retail prices in Fiscal 2011.
Freight Costs. We experienced lower fuel costs during most of Fiscal 2010 that decreased our overall
freight costs for the year. At the end of Fiscal 2010, freight costs had somewhat stabilized, and we expect fuel costs
to remain stable or rise slightly in Fiscal 2011. We do not expect volatility in freight costs to have a material effect
on our results of operations as we have historically leveraged the costs associated with inbound freight against the
cost of outbound freight.
Minimum Wage. Recent increases in the mandated minimum wage have impacted our payroll costs.
Congress approved federal minimum wage increases over a three-year period with the first increase of 13.6% taking
place during Fiscal 2008, the second increase of 12.0% taking place during Fiscal 2009 and the third increase of
10.7% taking place in Fiscal 2010. Currently, no new increases to minimum wage have been proposed. All of the
states we operate in have either passed legislation to raise the minimum wage or their minimum wage is increasing
in conjunction with the federal minimum wage. Some of the states have automatic provision for future increase
based on the Consumer Price Index or on inflation. We expect wage increases to have a slight affect on our store
operating, selling and administrative expenses.
Insurance Costs. In Fiscal 2010 and Fiscal 2009, we experienced a decrease in general business insurance,
while seeing an increase in the retention portion of workers’ compensation and general liability claims. We are
primarily self-insured for health claims, and during all three fiscal periods, have experienced an increase in our
average monthly health insurance claims. In Fiscal 2011, we expect that both general business insurance costs and
health insurance costs will increase slightly, but do not expect these increases to have a significant impact on our
consolidated financial statements.
Recent Accounting Pronouncements
In September 2009, the Financial Accounting Standards Board (FASB) issued ASC Topic 605-25,
Multiple-Element Arrangements. ASC Topic 605-25 addresses the determination of when the individual
deliverables included in a multiple arrangement may be treated as separate units of accounting. ASC Topic 605-25
also modified the manner in which the transaction consideration is allocated across separately identified deliverables
and establishes definitions for determining fair value of elements in an arrangement. This guidance must be adopted
by us no later than January 1, 2011 with earlier adoption permitted. We do not expect the adoption of this guidance
to have any impact on our consolidated financial statements.
In June 2009, the FASB issued ASC Topic 105, Generally Accepted Accounting Principles, effective for
financial statements issued for interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued U.S. GAAP pronouncements in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued accounting standards have been replaced
by ASC references. Subsequent revisions to U.S. GAAP will be incorporated into the ASC through Accounting
Standards Updates (ASU).
In June 2009, the FASB issued ASC Topic 810, Consolidation, which amends the consolidation guidance
applicable to variable interest entities. This guidance is effective for annual periods beginning after November 15,
25
2009, or our Fiscal 2011. The adoption of ASC Topic 810 is not expected to have a material effect on our
consolidated financial statements.
Our Critical Accounting Policies
Our critical accounting policies reflected in the consolidated financial statements are detailed below.
Revenue Recognition. We recognize revenue, including gift card and layaway sales, in accordance with
ASC Topic 605, Revenue Recognition.
Retail merchandise sales occur on-site in our retail stores. Customers have the option of paying the full
purchase price of the merchandise upon sale or paying a down payment and placing the merchandise on layaway.
The customer may make further payments in installments, but the entire purchase price for merchandise placed on
layaway must be received by us within 30 days. The down payment and any installments are recorded by us as
short-term deferred revenue until the customer pays the entire purchase price for the merchandise. We recognize
revenue at the time the customer takes possession of the merchandise. Retail sales are recorded net of returns and
discounts and exclude sales taxes.
In Fiscal 2009, we began a customer loyalty program, the MVP Rewards program, whereby customers
enroll in the program and receive points in a variety of ways that are automatically converted into reward certificates
based on program parameters that are subject to change. An estimate of the obligation related to the program, based
on estimated redemption rates, is recorded as a current liability and a reduction of net retail sales in the period
earned by the customer. The current liability is reduced, and a corresponding amount is recognized in net retail
sales, in the amount of and at the time of redemption of the reward certificate. At January 30, 2010 and January 31,
2009, the amount recorded in current liabilities for reward certificates issued was inconsequential.
The cost of coupon sales incentives is recognized at the time the related revenue is recognized by us.
Proceeds received from the issuance of gift cards are initially recorded as deferred revenue. Revenue is
subsequently recognized at the time the customer redeems the gift cards and takes possession of the merchandise.
Unredeemed gift cards are recorded as a current liability.
Beginning in Fiscal 2010, to the extent not required to be remitted to jurisdictions as unclaimed property,
gift card breakage revenue is recognized based upon historical redemption patterns and represents the balance of gift
cards for which we believe the likelihood of redemption by the customer is remote. Prior to Fiscal 2010, gift card
breakage revenue was not recognized due to the absence of reliable historical data. For Fiscal 2010, $0.3 million of
breakage revenue was recorded in income as other income and is included in the accompanying consolidated
statements of operations as a reduction to store operating, selling and administrative expense. For Fiscal 2009 and
Fiscal 2008, there was no breakage revenue recorded in our consolidated statements of operations. The net deferred
revenue liability at January 30, 2010 and January 31, 2009, was $2.5 million and $2.4 million, respectively. Prior to
Fiscal 2010, we escheated unredeemed gift cards.
Inventory Valuation.
Lower of Cost or Market: Inventories are valued using the lower of weighted average cost or market
method. Market is determined based on estimated net realizable value. We regularly review inventories to
determine if the carrying value exceeds realizable value, and we record an accrual to reduce the carrying value to net
realizable value as necessary. We account for obsolescence as part of our lower of cost or market accrual based on
historical trends and specific identification. As of January 30, 2010 and January 31, 2009, the accrual was $2.0
million. A determination of net realizable value requires significant judgment and estimates.
Shrink Reserves: We accrue for inventory shrinkage based on the actual historical results of our recent
physical inventories. These estimates are compared to actual results as physical inventory counts are performed and
reconciled to the general ledger. Store counts are typically performed on a cyclical basis, and the distribution
center’s counts are performed quarterly. As of January 30, 2010 and January 31, 2009, the accrual was $1.8 million
and $1.4 million, respectively.
Inventory Purchase Concentration: Our business is dependent to a significant degree upon close
relationships with our vendors. Our largest vendor, Nike, represented 49.9% and 51.4% of our purchases for Fiscal
2010 and Fiscal 2009, respectively. Our second largest vendor represented 9.0% and 8.4% of our purchases while
our third largest vendor represented 6.4% and 7.9% of our purchases for Fiscal 2010 and Fiscal 2009, respectively.
Consignment Inventories: Beginning in Fiscal 2010, we expanded our business model to include
consignment merchandise. Consignment inventories, which are owned by the vendor but located in our stores, are
properly segregated and controlled and are not reported as our inventory until title is transferred to us or our
purchase obligation is determined. At January 30, 2010, vendor-owned inventories held at our locations and not
26
reported as our inventory was $0.3 million. There were no vendor-owned inventories held at our locations and not
reported as our inventory prior to Fiscal 2010.
Accrued Expenses. On a monthly basis, we estimate certain significant expenses in an effort to record
those expenses in the period incurred. Our most significant estimates relate to payroll and payroll tax expenses,
property taxes, insurance-related expenses and utility expenses. Estimates are primarily based on current activity
and historical results and are adjusted as our estimates change. Determination of estimates and assumptions for
accrued expenses requires significant judgment.
Income Taxes. We estimate the annual tax rate based on projected taxable income for the full year and
record a quarterly income tax provision in accordance with the anticipated annual rate. As the year progresses, we
refine the estimates of the year’s taxable income as new information becomes available, including year-to-date
financial results. This continual estimation process often results in a change to our expected effective tax rate for the
year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate
occurs so that the year-to-date provision reflects the expected annual tax rate. Significant judgment is required in
determining our effective tax rate and in evaluating our tax position and changes in estimates could materially
impact our results of operations and financial position.
Uncertain Tax Positions. We account for uncertain tax positions in accordance with ASC Topic 740,
Income Taxes. The application of income tax law is inherently complex. Laws and regulations in this area are
voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and
judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax laws and
regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect
amounts recognized in the consolidated balance sheets and statements of operations. See “Part II, Item 8,
Consolidated Financial Statements Note 8 – Income Taxes” for additional detail on our uncertain tax positions.
Litigation Accruals. Estimated amounts for claims that are probable and can be reasonably estimated are
recorded as liabilities in the consolidated balance sheets. The likelihood of a material change in these estimated
accruals is dependent on new claims as they may arise and the favorable or unfavorable outcome of a particular
litigation. As additional information becomes available, we assess the potential liability related to pending litigation
and revise estimates as appropriate. Such revisions in estimates of the potential liability could materially impact our
results of operations and financial position.
Impairment of Long-Lived Assets. We continually evaluate whether events and circumstances have
occurred that indicate the remaining balance of long-lived assets may be impaired and not recoverable. Our policy
is to adjust the remaining useful life of depreciable assets and to recognize any impairment loss on long-lived assets
as a charge to current income when events or changes in circumstances indicate that the carrying value of the assets
may not be recoverable. Impairment is assessed considering the estimated undiscounted cash flows over the asset’s
remaining life. If estimated cash flows are insufficient to recover the investment, an impairment loss is recognized
based on a comparison of the cost of the asset to fair value less any costs of disposition. Evaluation of asset
impairment requires significant judgment and estimates.
Stock-Based Compensation. We use the Black-Scholes option-pricing model to estimate the fair value at
the date of grant of stock options granted under our stock option plans and stock purchase rights associated with the
Employee Stock Purchase Plan. Volatility is estimated as of the date of grant or purchase date based on
management’s estimate of the time period that captures the relative volatility of our stock. We base the risk-free
interest rate on the annual continuously compounded risk-free rate with a term equal to the option’s expected term.
Prior to Fiscal 2008, we used the risk free interest rate on the date of grant or purchase date based on the U.S.
Treasury rate with maturities approximating the expected lives of our options. The effects on net income and
earnings per share (EPS) of stock-based compensation expense, net of tax, calculated using the fair value of stock
options and stock purchase rights in accordance with the Black-Scholes options-pricing model are not necessarily
representative of the effects of our results of operations in the future. In addition, the compensation expense utilizes
an option-pricing model developed for traded options with relatively short lives. Our stock option grants have a life
of up to ten years and are not transferable. Therefore, the actual fair value of a stock option grant may be different
from our estimates. We believe that our estimates incorporate all relevant information and represent a reasonable
approximation in light of the difficulties involved in valuing non-traded stock options. All estimates and
assumptions are regularly evaluated and updated when applicable.
Insurance Accruals. We use a combination of insurance and self-insurance for a number of risks including
workers’ compensation, general liability and employee-related health benefits, a portion of which is paid by our
employees. The estimates and accruals for the liabilities associated with these risks are regularly evaluated for
adequacy based on the most current available information, including historical claims experience and expected
future claims costs.
27
Operating Leases. We lease our retail stores and distribution center under operating leases. Many lease
agreements contain rent holidays, rent escalation clauses and/or contingent rent provisions. We recognize rent
expense on a straight-line basis over the expected lease term, including cancelable option periods where failure to
exercise such options would result in an economic penalty. We use a time period for our straight-line rent expense
calculation that equals or exceeds the time period used for depreciation on leasehold improvements. In addition, the
commencement date of the lease term is the earlier of the date when we become legally obligated for the rent
payments or the date when we take possession of the building for initial setup of fixtures and merchandise.
Dividend Policy
We have never declared or paid any dividends on our common stock. We currently intend to retain our future
earnings to finance the growth and development of our business and for our stock repurchase program, and therefore do
not anticipate declaring or paying cash dividends on our common stock for the foreseeable future. Any future decision
to declare or pay dividends will be at the discretion of our Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements and such other factors as our Board of Directors deems relevant.
Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer (see “Part II, Item 9A, Controls and
Procedures”).
Quarterly and Seasonal Fluctuations
We experience seasonal fluctuations in our net sales and results of operations. Customer buying patterns
around the spring sales period and the holiday season historically result in higher first and fourth quarter net sales.
In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including
the timing of new store openings, the amount and timing of net sales contributed by new stores, merchandise mix
and demand for apparel and accessories driven by local interest in sporting events.
Although our operations are influenced by general economic conditions, we do not believe that, historically,
inflation has had a material impact on our results of operations as we are generally able to pass along inflationary
increases in costs to our customers. However, in recent periods, we have experienced an impact on overall sales due to
a consumer spending slowdown attributable to higher unemployment, falling equity and real estate values and the
limited availability of credit.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our financial condition, results of operations and cash flows are subject to market risk from interest rate
fluctuations on our credit facilities, which bear an interest at a rate that varies with LIBOR, prime or federal funds
rates. We have cash and cash equivalents at financial institutions that are in excess of federally insured limits per
institution. With the current financial environment and the instability of financial institutions, we cannot be assured
that we will not experience losses on our deposits.
At the end of Fiscal 2010, Fiscal 2009 and Fiscal 2008, we had no borrowings outstanding under any credit
facility. There were 110 days during the 52 weeks ended January 30, 2010, where we incurred borrowings against
our credit facilities for an average borrowing of $7.3 million. During Fiscal 2010, the maximum amount
outstanding against these agreements was $13.9 million and the weighted average interest rate was 1.82%.
There were 348 days during the 52 weeks ended January 31, 2009, where we incurred borrowings against
our credit facility for an average and maximum borrowing of $23.2 million and $47.1 million, respectively, and an
average interest rate of 2.85%. There were 106 days during the 52 weeks ended February 2, 2008, where we
incurred borrowings against our credit facility for an average and maximum borrowing of $7.8 million and $18.4
million, respectively, and an average interest rate of 5.64%.
A 10.0% increase or decrease in market interest rates would not have a material impact on our financial
condition, results of operations or cash flows.
28
Item 8. Consolidated Financial Statements and Supplementary Data.
The following consolidated financial statements and supplementary data of our Company are included in
response to this item:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of January 30, 2010 and January 31, 2009
Consolidated Statements of Operations for the fiscal years ended January 30, 2010, January
31, 2009 and February 2, 2008
Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2010, January
31, 2009 and February 2, 2008
Consolidated Statements of Stockholders’ Investment for the fiscal years ended January 30,
2010, January 31, 2009 and February 2, 2008
Notes to Consolidated Financial Statements
All other schedules are omitted because they are not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
29
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Hibbett Sports, Inc.:
We have audited the accompanying consolidated balance sheets of Hibbett Sports, Inc. and subsidiaries (the Company) as
of January 30, 2010 and January 31, 2009, and the related consolidated statements of operations, stockholders’ investment,
and cash flows for each of the years in the three-year period ended January 30, 2010. We also have audited the Company’s
internal control over financial reporting as of January 30, 2010, based on the criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting (Item 9A(b)). Our
responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s
internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Effective February 4, 2007, as discussed in Note 1 to the consolidated financial statements, the Company changed its
method of accounting for inventories and, as discussed in Note 8 to the consolidated financial statements, the Company
adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, included in ASC Subtopic 740-10,
Income Taxes – Overall.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Hibbett Sports, Inc. and subsidiaries as of January 30, 2010 and January 31, 2009, and the results of their
operations and their cash flows for each of the years in the three-year period ended January 30, 2010, in conformity with
U.S. generally accepted accounting principles. Also in our opinion, Hibbett Sports, Inc. and subsidiaries maintained, in all
material respects, effective internal control over financial reporting as of January 30, 2010, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
/s/ KPMG LLP
Birmingham, Alabama
March 26, 2010
30
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
ASSETS
January 30, 2010
January 31, 2009
Current Assets:
Cash and cash equivalents
Short-term investments
Trade receivables, net
Accounts receivable, other
Inventories, net
Prepaid expenses and other
Deferred income taxes, net
Total current assets
Property and Equipment:
Land and building
Equipment
Equipment under capital lease
Furniture and fixtures
Leasehold improvements
Construction in progress
Less accumulated depreciation and amortization
Net property and equipment
Deferred income taxes, net
Other assets, net
Total Assets
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable
Short-term debt and capital lease obligations
Accrued income taxes
Accrued payroll expenses
Deferred rent
Other accrued expenses
Total current liabilities
Obligations under capital leases
Deferred rent
Deferred income taxes
Other liabilities, net
Total liabilities
Stockholders' Investment:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
no shares issued
Common stock, $.01 par value, 80,000,000 shares authorized,
36,436,503 and 36,304,735 shares issued at January 30, 2010
and January 31, 2009, respectively
Paid-in capital
Retained earnings
Treasury stock, at cost; 7,761,813 shares repurchased
at January 30, 2010 and January 31, 2009
Total stockholders' investment
Total Liabilities and Stockholders' Investment
$
49,691
-
2,693
1,936
169,394
1,643
6,163
231,520
$
20,650
191
2,624
2,764
151,776
3,822
3,938
185,765
245
48,715
345
24,352
61,908
691
136,256
95,172
41,084
3,507
593
276,704
$
$
64,949
117
2,459
8,012
4,915
3,485
83,937
152
14,224
2,775
537
101,625
245
44,171
-
23,280
61,152
2,776
131,624
86,315
45,309
3,481
532
235,087
$
$
64,460
-
-
7,149
4,445
2,656
78,710
-
16,543
2,957
302
98,512
-
-
364
98,107
243,552
363
92,153
211,003
(166,944)
175,079
276,704
$
(166,944)
136,575
235,087
$
See accompanying notes to consolidated financial statements.
31
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
Net sales
Cost of goods sold, including distribution
center and store occupancy costs
Gross profit
Store operating, selling and administrative
expenses
Depreciation and amortization
Operating income
Interest income
Interest expense
Interest (expense) income, net
Income before provision for income taxes
Provision for income taxes
Net income
Basic earnings per share
Diluted earnings per share
Weighted average shares outstanding:
Basic
Diluted
January 30, 2010
(52 weeks)
Fiscal Year Ended
January 31, 2009
(52 weeks)
February 2, 2008
(52 weeks)
$
593,492
$
564,188
$
520,720
397,292
196,200
129,888
13,905
52,407
60
(117)
(57)
52,350
378,817
185,371
123,075
14,324
47,972
41
(660)
(619)
47,353
351,876
168,844
108,463
12,154
48,227
582
(151)
431
48,658
$
19,801
32,549
$
17,905
29,448
$
18,329
30,329
$
$
1.14
1.12
$
$
1.03
1.02
$
$
0.98
0.96
28,629
29,089
28,547
28,954
31,049
31,525
See accompanying notes to consolidated financial statements.
32
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share information)
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Deferred income tax (benefit) expense, net
Excess tax benefit from stock option exercises
Loss on disposal and write-down of assets, net
Stock-based compensation
Changes in operating assets and liabilities:
Trade receivables, net
Accounts receivable, other
Inventories
Prepaid expenses and other current assets
Accrued income taxes
Other assets, non-current
Accounts payable
Deferred rent, non-current
Accrued expenses and other
Net cash provided by operating activities
Cash Flows From Investing Activities:
Purchase of investments, net
Capital expenditures
Proceeds from sale of property and equipment
Net cash used in investing activities
Cash Flows From Financing Activities:
Cash used for stock repurchases
Net payments on revolving credit facility and
capital lease obligations
Excess tax benefit from stock option exercises
Proceeds from options exercised and purchase of
shares under the employee stock purchase plan
Net cash provided by (used in) financing activities
January 30,
2010
Fiscal Year Ended
January 31,
2009
February 2,
2008
$
32,549
$
29,448
$
30,329
13,905
(2,433)
(781)
232
4,157
(70)
829
(17,618)
2,177
3,232
169
489
(2,319)
2,396
36,914
(39)
(9,605)
41
(9,603)
-
(77)
781
1,026
1,730
14,324
(925)
(388)
513
3,556
(724)
912
(10,369)
1,525
(476)
71
336
(1,469)
2,663
38,997
(141)
(13,697)
57
(13,781)
12,154
673
(520)
230
3,677
(314)
(610)
(16,022)
(326)
(4,154)
(288)
22,109
2,296
(1,212)
48,022
(191)
(16,376)
18
(16,549)
(16,940)
(52,672)
-
388
1,244
(15,308)
-
520
1,054
(51,098)
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
29,041
20,650
49,691
$
9,908
10,742
20,650
$
(19,625)
30,367
10,742
$
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest
Income taxes, net of refunds
$
$
117
16,955
$
$
659
21,162
$
$
151
22,031
Supplemental Schedule of Non-Cash Financing Activities:
Deferred board compensation
Shares awarded to satisfy deferred board compensation
Capital leases
-
$
-
$
345
$
10
664
$
-
$
33
1,306
$
-
See accompanying notes to consolidated financial statements.
33
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT
(in thousands, except share information)
Common Stock
Treasury Stock
Number of
Shares
Amount
Paid-In
Capital
Retained
Earnings
Number of
Shares
Amount
Total
Stockholders'
Investment
$
(97,332)
-
$
136,641
30,329
Balance-February 3, 2007
Net income
Cumulative effect of adopting
uncertain tax positions
Cumulative effect of change in
accounting principle, net
Issuance of shares from the employee
stock purchase plan and the exercise of
stock options, including tax benefit of
$275
Purchase of shares under the stock
repurchase program
Stock-based compensation
36,047,732
-
-
-
114,469
-
-
360
$
-
$
81,916
-
$
151,697
30,329
-
-
-
-
-
-
2
1,549
-
3,677
(554)
83
-
-
-
4,306,413
-
-
-
-
Balance-February 2, 2008
36,162,201
362
87,142
181,555
6,723,113
(150,004)
119,055
(554)
83
1,551
(52,672)
3,677
29,448
1,426
(176)
206
(16,940)
3,556
136,575
32,549
1,431
(6)
-
-
-
-
-
-
2,416,700
-
(52,672)
-
-
-
-
-
-
-
-
-
1,038,700
-
7,761,813
(16,940)
-
(166,944)
-
-
-
-
-
7,761,813
Net income
Issuance of shares from the employee
stock purchase plan and the exercise of
stock options, including tax benefit of
$212
-
142,534
Tax shortfall on release of restricted
stock and option exercises
Adjustment to income tax benefit from
exercises of employee stock options
Purchase of shares under the stock
repurchase program
Stock-based compensation
Balance-January 31, 2009
Net income
Issuance of shares from the employee
stock purchase plan and the exercise of
stock options, including tax benefit of
$781
Tax shortfall on release of restricted
stock and option exercises
Adjustment to income tax benefit from
exercises of employee stock options
Stock-based compensation
Balance-January 30, 2010
-
-
-
-
36,304,735
-
131,768
-
-
-
36,436,503
1
1,425
-
29,448
-
-
-
-
-
211,003
32,549
(176)
206
-
3,556
92,153
-
-
-
$
363
1
1,430
(6)
-
-
-
-
-
-
-
-
-
$
364
373
4,157
98,107
$
-
-
243,552
$
-
-
(166,944)
$
373
4,157
175,079
$
See accompanying notes to consolidated financial statements.
34
HIBBETT SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Hibbett Sports, Inc. is an operator of sporting goods retail stores in small to mid-sized markets
predominately in the Southeast, Southwest, Mid-Atlantic and lower Midwest regions of the United States. Our fiscal
year ends on the Saturday closest to January 31 of each year. The consolidated statements of operations for fiscal
years ended January 30, 2010, January 31, 2009 and February 2, 2008, include 52 weeks of operations. Our
merchandise assortment features a core selection of brand name merchandise emphasizing team sports equipment,
athletic and fashion apparel and footwear related accessories. We complement this core assortment with a selection
of localized apparel and accessories designed to appeal to a wide range of customers within each market.
Subsequent Events
In accordance with ASC Topic 855, Subsequent Events, we performed an evaluation of subsequent events
for the accompanying consolidated financial statements through March 26, 2010, the date these consolidated
financial statements were issued. We have concluded that no subsequent events have occurred that would require
recognition or disclosure in the consolidated financial statements other than Mr. Newsome being named the
Company’s Executive Chairman of the Board and stepping down as Chief Executive Officer and Mr. Rosenthal’s
promotion to Chief Executive Officer as described in Form 8-K filed on March 16, 2010.
Accounting Change
On the first day of Fiscal 2008, we changed our inventory valuation method. Previously, inventories were
principally valued at the lower of cost or market using the retail method. Commencing in Fiscal 2008, inventories
are principally valued at the lower of cost or market using the weighted average cost method.
ASC Topic 250, Accounting Changes and Error Corrections, requires a retrospective application of
changes in accounting principles. However, the effect of this change in accounting principle for periods prior to
Fiscal 2008 is not determinable, as the period specific information required to value inventory using the weighted
average cost method is not available for periods prior to Fiscal 2008. This change was recognized as a net increase
of $143,000 to inventory, an increase of $60,000 to deferred income tax liabilities and a cumulative effect to
retained earnings of $83,000. This change in valuation method did not have a material impact on net income or
diluted earnings per share.
We believe the adopted accounting method of weighted average cost is preferable to the retail method of
inventory valuation because it will produce more accurate inventory amounts reported in the balance sheet and, in
turn, more accurate cost of sales in the income statement. Our merchandising system, implemented in Fiscal 2008,
has facilitated our ability to value our inventory on the weighted average cost method.
Principles of Consolidation
The consolidated financial statements of our Company include its accounts and the accounts of all wholly-
owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Occasionally, certain reclassifications are made to conform previously reported data to the current presentation.
Such reclassifications had no impact on total assets, net income or stockholders’ investment.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect:
the reported amounts of certain assets, including inventories and property and equipment;
the reported amounts of certain liabilities, including legal and other accruals; and
the reported amounts of certain revenues and expenses during the reporting period.
The assumptions used by management in future estimates could change significantly due to changes in
circumstances and actual results could differ from those estimates.
35
Reportable Segments
Given the economic characteristics of the store formats, the similar nature of products offered for sale, the
type of customers, the methods of distribution and how our Company is managed, our operations constitute only one
reportable segment. Revenues from external customers by product category are impractical for us to report.
Customers
No customer accounted for more than 5.0% of our net sales during the fiscal years ended January 30, 2010,
January 31, 2009 and February 2, 2008.
Vendor Arrangements
We enter into arrangements with some of our vendors that entitle us to a partial refund of the cost of
merchandise purchased during the year or reimbursement of certain costs we incur to advertise or otherwise promote
their product. The volume based rebates, supported by vendor agreements, are estimated throughout the year and
reduce the cost of inventory and cost of goods sold during the year. This estimate is regularly monitored and
adjusted for current or anticipated changes in purchase levels and for sales activity.
We also receive consideration from vendors through a variety of other programs, including markdown
reimbursements, vendor compliance charges and defective merchandise and return-to-vendor credits. If the payment
is a reimbursement for costs incurred, it is recognized as an offset against those related costs; otherwise, it is treated
as a reduction to the cost of merchandise. Markdown reimbursements related to merchandise that has been sold are
negotiated by our merchandising teams and are credited directly to cost of goods sold in the period received. If
vendor funds are received prior to merchandise being sold, they are recorded as a reduction of merchandise cost.
Cost of Goods Sold
We include inbound freight charges, merchandise purchases, store occupancy costs and a portion of our
distribution costs related to our retail business in cost of goods sold. Outbound freight charges associated with
moving merchandise to and between stores are included in store operating, selling and administrative expenses.
Advertising
We expense advertising costs when incurred. We participate in various advertising and marketing
cooperative programs with our vendors, who, under these programs, reimburse us for certain costs incurred. A
receivable for cooperative advertising to be reimbursed is recorded as a decrease to expense as advertisements are
run.
The following table presents the components of our advertising expense (in thousands):
January 30,
2010
$
5,572
(2,268)
3,304
Fiscal Year Ended
January 31,
2009
$
6,145
(3,054)
3,091
February 2,
2008
$
6,519
(3,609)
2,910
$
$
$
Gross advertising costs
Advertising reimbursements
Net advertising costs
Stock Repurchase Program
In November 2009, the Board of Directors (Board) authorized a new Stock Repurchase Program (Program)
of $250.0 million to repurchase our common stock through February 2, 2013. The Program replaced our existing
plan that was adopted in August 2004. Stock repurchases may be made in the open market or in negotiated
transactions, with the amount and timing of repurchases dependent on market conditions and at the discretion of our
management. We have not made any purchases of our common stock under the Program and have the full $250.0
million available for stock repurchase as of January 30, 2010.
Under the old authorization, we repurchased 1,038,700 and 2,416,700 shares of our common stock during
the years ended January 31, 2009 and February 2, 2008, respectively, at a cost of approximately $16.9 million and
$52.7 million, respectively. As of January 30, 2010, we had repurchased a total of 7,761,813 shares of our common
stock at an approximate cost of $166.9 million in total under the authorizations. We do not have plans to make any
significant repurchases of our common stock in the near future.
36
Cash and Cash Equivalents
We consider all short-term, highly liquid investments with original maturities of 90 days or less, including
commercial paper and money market funds, to be cash equivalents. We place our cash equivalents in high credit
quality financial institutions. We are exposed to credit risk in the event of default by these institutions to the extent
the amount recorded on the consolidated balance sheet exceeds the FDIC insurance limits per institution. Amounts
due from third party credit card processors for the settlement of debit and credit card transactions are included as
cash equivalents as they are generally collected within three business days. Cash equivalents related to credit and
debit card transactions at January 30, 2010 and January 31, 2009 were $2.8 million and $2.7 million, respectively.
Investments
All investments with original maturities of greater than 90 days are accounted for in accordance with ASC
Topic 320, Investments – Debt and Equity Securities. We determine the appropriate classification at the time of
purchase. We did not hold any short-term investments in securities at January 30, 2010. We held approximately
$0.2 million of short-term investments in securities at January 31, 2009.
Our short-term investments in securities consisted of municipal bonds classified as available-for-sale.
Investments in these securities are recorded at cost, which approximates fair value. Despite the long-term nature of
their stated contractual maturities, we believe there is a ready liquid market for these securities. As a result, there
are no cumulative gross unrealized holding gains (losses) or gross realized gains (losses) from our short-term
investments. All income generated from these securities is recorded as interest income. We continually evaluate
our short-term investments for other than temporary impairment.
We also hold investments in trust for the Hibbett Sports, Inc. Supplemental 401(k) Plan (Supplemental
Plan) which are trading securities and are classified as a long-term asset on the consolidated balance sheet included
in other assets, net. At January 30, 2010 and January 31, 2009, we had approximately $0.4 million and $0.1 million,
respectively, of investments included in other assets, net. Unrealized holding gains or losses are inconsequential.
Trade and Other Accounts Receivable
Trade accounts receivable consists primarily of amounts due to us from sales to educational institutions and
youth associations. We do not require collateral and we maintain an allowance for potential uncollectible accounts
based on an analysis of the aging of accounts receivable at the date of the financial statements, historical losses and
existing economic conditions, when relevant. The allowance for doubtful accounts at January 30, 2010 and January
31, 2009 was $46,000 and $50,000, respectively.
Other accounts receivable consisted primarily of tenant allowances due from landlords and cooperative
advertising due from vendors, all of which are deemed to be collectible.
Inventories and Valuation
Lower of Cost or Market: Inventories are valued using the lower of weighted average cost or market
method. Market is determined based on estimated net realizable value. We regularly review inventories to
determine if the carrying value exceeds realizable value, and we record an accrual to reduce the carrying value to net
realizable value as necessary. We account for obsolescence as part of our lower of cost or market accrual based on
historical trends and specific identification. As of January 30, 2010 and January 31, 2009, the accrual was $2.0
million. A determination of net realizable value requires significant judgment and estimates.
Shrinkage: We accrue for inventory shrinkage based on the actual historical results of our most recent
physical inventories. These estimates are compared to actual results as physical inventory counts are performed and
reconciled to the general ledger. Store counts are typically performed on a cyclical basis and the distribution
center’s counts are performed quarterly. As of January 30, 2010 and January 31, 2009, the accrual was $1.8 million
and $1.4 million, respectively.
Inventory Purchase Concentration: Our business is dependent to a significant degree upon close
relationships with our vendors. Our largest vendor, Nike, represented 49.9%, 51.4% and 48.5% of our purchases in
Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively. Our next largest vendor in Fiscal 2010 represented 9.0%,
8.4% and 6.6% of our purchases in Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively. Our third largest vendor
in Fiscal 2010 represented 6.4%, 7.9% and 9.3% of our purchases in Fiscal 2010, Fiscal 2009 and Fiscal 2008,
respectively.
Consignment Inventories: Beginning in Fiscal 2010, we expanded our business model to include
consignment merchandise. Consignment inventories, which are owned by the vendor but located in our stores, are
properly segregated and controlled and are not reported as our inventory until title is transferred to us or our
purchase obligation is determined. At January 30, 2010, vendor-owned inventories held at our locations and not
37
reported as our inventory was $0.3 million. There were no vendor-owned inventories held at our locations and not
reported as our inventory prior to Fiscal 2010.
Property and Equipment
Property and equipment are recorded at cost. Depreciation on assets is principally provided using the
straight-line method over their estimated service lives (3 to 5 years for equipment, 7 years for furniture and fixtures
and 39 years for buildings) or, in the case of leasehold improvements, the shorter of the initial term of the underlying
leases or the estimated economic lives of the improvements (typically 3 to 10 years). We continually reassess the
remaining useful life of leasehold improvements in light of store closing plans.
Construction in progress has historically been comprised primarily of property and equipment related to
unopened stores and costs associated with technology upgrades at period end. At fiscal year ended January 30, 2010,
over 73.0% of the construction in progress balance was comprised of costs associated with technology projects.
Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of
assets sold, retired or otherwise disposed of are removed from property and equipment and the related gain or loss is
credited or charged to income.
Deferred Rent
Deferred rent primarily consists of step rent and allowances from landlords related to our leased properties.
Step rent represents the difference between actual operating lease payments due and straight-line rent expense,
which we record over the term of the lease, including the build-out period. This amount is recorded as deferred rent
in the early years of the lease, when cash payments are generally lower than straight-line rent expense, and reduced
in the later years of the lease when payments begin to exceed the straight-line rent expense. Landlord allowances
are generally comprised of amounts received and/or promised to us by landlords and may be received in the form of
cash or free rent. We record a receivable from the landlord and a deferred rent liability when the allowances are
earned. This deferred rent is amortized into income (through lower rent expense) over the term (including the pre-
opening build-out period) of the applicable lease, and the receivable is reduced as amounts are received from the
landlord.
On our consolidated statements of cash flows, the current and long-term portions of landlord allowances
are included as changes in cash flows from operations. The current portion is included as a change in accrued
expenses and the long-term portion is included as a change in deferred rent, non-current. The liability for the current
portion of unamortized landlord allowances was $4.4 million and $4.0 million at January 30, 2010 and January 31,
2009, respectively. The liability for the long-term portion of unamortized landlord allowances was $10.8 million
and $13.1 million at January 30, 2010 and January 31, 2009, respectively. We estimate the non-cash portion of
landlord allowances was $0.9 million and $0.8 million in Fiscal 2010 and Fiscal 2009, respectively.
Revenue Recognition
We recognize revenue, including gift card and layaway sales, in accordance with the ASC Topic 605,
Revenue Recognition.
Retail merchandise sales occur on-site in our retail stores. Customers have the option of paying the full
purchase price of the merchandise upon sale or paying a down payment and placing the merchandise on layaway.
The customer may make further payments in installments, but the entire purchase price for merchandise placed on
layaway must be received by us within 30 days. The down payment and any installments are recorded by us as
short-term deferred revenue until the customer pays the entire purchase price for the merchandise. We recognize
revenue at the time the customer takes possession of the merchandise. Retail sales are recorded net of returns and
discounts and exclude sales taxes.
In Fiscal 2009, we began a customer loyalty program, the MVP Rewards program, whereby customers
enroll in the program and receive points in a variety of ways that are automatically converted into reward certificates
based on program parameters that are subject to change. An estimate of the obligation related to the program, based
on estimated redemption rates, is recorded as a current liability and a reduction of net retail sales in the period
earned by the customer. The current liability is reduced, and a corresponding amount is recognized in net retail
sales, in the amount of and at the time of redemption of the reward certificate. At January 30, 2010 and January 31,
2009, the amount recorded in current liabilities for reward certificates issued was inconsequential.
The cost of coupon sales incentives is recognized at the time the related revenue is recognized by us.
Proceeds received from the issuance of gift cards are initially recorded as deferred revenue. Revenue is
subsequently recognized at the time the customer redeems the gift cards and takes possession of the merchandise.
Unredeemed gift cards are recorded as a current liability.
38
Beginning in Fiscal 2010, to the extent not required to be remitted to jurisdictions as unclaimed property,
gift card breakage revenue is recognized based upon historical redemption patterns and represents the balance of gift
cards for which we believe the likelihood of redemption by the customer is remote. Prior to Fiscal 2010, gift card
breakage revenue was not recognized due to the absence of reliable historical data. For Fiscal 2010, $0.3 million of
breakage revenue was recorded in income as other income and is included in the accompanying consolidated
statements of operations as a reduction to store operating, selling and administrative expense. For Fiscal 2009 and
Fiscal 2008, there was no breakage revenue recorded in our consolidated statements of operations. The net deferred
revenue liability at January 30, 2010 and January 31, 2009, was $2.5 million and $2.4 million, respectively. Prior to
Fiscal 2010, we escheated unredeemed gift cards.
Store Opening and Closing Costs
New store opening costs, including pre-opening costs, are charged to expense as incurred. Store opening
costs primarily include payroll expenses, training costs and straight-line rent expenses. All pre-opening costs are
included in store operating, selling and administrative expenses as a part of operating expenses.
We consider individual store closings to be a normal part of operations and regularly review store
performance against expectations. Costs associated with store closings are recognized at the time of closing or when
a liability has been incurred.
Impairment of Long-Lived Assets
We continually evaluate whether events and circumstances have occurred that indicate the remaining
balance of long-lived assets may be impaired and not recoverable. Our policy is to recognize any impairment loss
on long-lived assets as a charge to current income when certain events or changes in circumstances indicate that the
carrying value of the assets may not be recoverable. Impairment is assessed considering the estimated undiscounted
cash flows over the asset’s remaining life. If estimated cash flows are insufficient to recover the investment, an
impairment loss is recognized based on a comparison of the cost of the asset to fair value less any costs of
disposition. Evaluation of asset impairment requires significant judgment and estimates.
Insurance Accrual
We are self-insured for a significant portion of our health insurance. Liabilities associated with the risks
that are retained by us are estimated, in part, by considering our historical claims. The estimated accruals for these
liabilities could be affected if future occurrences and claims differ from our assumptions. To minimize our potential
exposure, we carry stop-loss insurance which reimburses us for losses over $0.1 million per covered person per year
or $2.0 million per year in the aggregate. As of January 30, 2010 and January 31, 2009, the accrual for these
liabilities was $0.7 million and $0.6 million, respectively, and was included in accrued expenses in the consolidated
balance sheets.
We are also self-insured for our workers’ compensation and general liability insurance up to an established
deductible with a cumulative stop loss. As of January 30, 2010 and January 31, 2009, the accrual for these liabilities
(which is not discounted) was $0.6 million and $0.3 million, respectively, and was included in accrued expenses in
the consolidated balance sheets.
Sales Returns, Net
Net sales returns were $20.3 million for Fiscal 2010, $19.6 million for Fiscal 2009 and $18.3 million for
Fiscal 2008. The accrual for the effect of estimated returns on pre-tax income was $0.4 million and $0.3 million as
of January 30, 2010 and January 31, 2009, and was included in accrued expenses in the consolidated balance sheets.
Determination of the accrual for estimated returns requires significant judgment and estimates.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
In September 2009, the Financial Accounting Standards Board (FASB) issued ASC Topic 605-25,
Multiple-Element Arrangements. ASC Topic 605-25 addresses the determination of when the individual
deliverables included in a multiple arrangement may be treated as separate units of accounting. ASC Topic 605-25
also modified the manner in which the transaction consideration is allocated across separately identified deliverables
and establishes definitions for determining fair value of elements in an arrangement. This guidance must be adopted
by us no later than January 1, 2011 with earlier adoption permitted. We do not expect the adoption of this guidance
to have any impact on our consolidated financial statements.
In June 2009, the FASB issued ASC Topic 105, Generally Accepted Accounting Principles, effective for
financial statements issued for interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued U.S. GAAP pronouncements in one comprehensive set of guidance organized by
39
subject area. In accordance with the ASC, references to previously issued accounting standards have been replaced
by ASC references. Subsequent revisions to U.S. GAAP will be incorporated into the ASC through Accounting
Standards Updates (ASU).
In June 2009, the FASB issued ASC Topic 810, Consolidation, which amends the consolidation guidance
applicable to variable interest entities. This guidance is effective for annual periods beginning after November 15,
2009, or our Fiscal 2011. The adoption of ASC Topic 810 is not expected to have a material effect on our
consolidated financial statements.
NOTE 3. STOCK-BASED COMPENSATION
At January 30, 2010, we had four stock-based compensation plans:
(a) The Amended 2005 Equity Incentive Plan (Incentive Plan) provides that the Board of Directors may grant
equity awards to certain employees of the Company at its discretion. The Incentive Plan was adopted
effective July 1, 2005 and authorizes grants of equity awards of up to 1,233,159 authorized but unissued
shares of common stock. At January 30, 2010, there were 529,430 shares available for grant under the
Incentive Plan.
(b) The Amended 2005 Employee Stock Purchase Plan (ESPP) allows for qualified employees to participate in
the purchase of up to 204,794 shares of our common stock at a price equal to 85% of the lower of the
closing price at the beginning or end of each quarterly stock purchase period. The ESPP was adopted
effective July 1, 2005. At January 30, 2010, there were 115,114 shares available for purchase under the
ESPP.
(c) The Amended 2005 Director Deferred Compensation Plan (Deferred Plan) allows non-employee directors
an election to defer all or a portion of their fees into stock units or stock options. The Deferred Plan was
adopted effective July 1, 2005 and authorizes grants of stock up to 112,500 authorized but unissued shares
of common stock. At January 30, 2010, there were 74,169 shares available for grant under the Deferred
Plan.
(d) The Amended 2006 Non-Employee Director Equity Plan (DEP) provides for grants of equity awards to non-
employee directors. The DEP was adopted effective June 1, 2006 and authorizes grants of equity awards of
up to 672,975 authorized but unissued shares of common stock. At January 30, 2010, there were 580,989
shares available for grant under the DEP.
Our plans allow for a variety of equity awards including stock options, restricted stock awards, stock
appreciation rights and performance awards. As of January 30, 2010, we had only granted awards in the form of
stock options, restricted stock units (RSUs) and performance-based awards (PSAs). RSUs and options to purchase
our common stock have been granted to officers, directors and key employees. Beginning with the adoption of the
Incentive Plan, a greater proportion of the awards granted to employees, including executive employees, have been
RSUs as opposed to stock options when compared to grants made in prior years. The annual grant made for Fiscal
2010, Fiscal 2009 and Fiscal 2008 to employees consisted solely of RSUs. We have also awarded PSAs to our
Named Executive Officers (NEOs) and expect the Compensation Committee of the Board will continue to grant
PSAs to our NEOs in the future. The terms and vesting schedules for stock-based awards vary by type of grant and
generally vest upon time-based conditions. Upon exercise, stock-based compensation awards are settled with
authorized but unissued company stock. On March 17, 2009, the Compensation Committee of the Board awarded a
grant of 46,800 non-qualified stock options to our Chief Executive Officer that vest equally over four years and have
an eight-year life.
The compensation cost that has been charged against income for these plans was as follows for the fiscal
years ended January 30, 2010, January 31, 2009 and February 2, 2008 (in thousands):
January 30,
2010
Fiscal Year Ended
January 31,
2009
February 2,
2008
Stock-based compensation expense by type:
Stock options
Restricted stock awards
Employee stock purchase
Director deferred compensation
Total stock-based compensation expense
Income tax benefit recognized
Stock-based compensation expense, net of income tax
40
$
$
$
1,799
2,278
80
-
4,157
1,277
2,880
1,968
1,482
96
10
3,556
941
2,615
2,068
1,479
97
33
3,677
894
2,783
$
$
$
Share-based and deferred stock compensation expenses are included in store operating, selling and
administrative expenses. There is no capitalized stock-based compensation cost.
The income tax benefit recognized in our consolidated financial statements, as disclosed above, is based on
the amount of compensation expense recorded for book purposes. The actual income tax benefit realized in our
income tax return is based on the intrinsic value, or the excess of the market value over the exercise or purchase
price, of stock options exercised and restricted stock awards vested during the period. The actual income tax benefit
realized for the deductions considered on our income tax returns for the fiscal year ended January 30, 2010, was
from option exercises, deferred stock releases and restricted stock releases and totaled $0.5 million. The actual
income tax benefit realized for the deductions considered on our income tax returns for the fiscal years ended
January 31, 2009 and February 2, 2008, was from option exercises and totaled $0.6 million and $0.6 million,
respectively.
Stock Options
Stock options are granted with an exercise price equal to the closing market price of our common stock on
the date of grant. Vesting and expiration provisions vary between equity plans, but typically vest over a four- or
five-year period in equal installments beginning on the first anniversary of the grant date and typically expire on the
eighth or tenth anniversary of the date of grant. Grants awarded to outside directors under both the DEP and
Deferred Plan vest immediately upon grant and expire on the tenth anniversary of the date of grant.
Following is the weighted average fair value of each option granted during the fiscal year ended January
30, 2010. The fair value was estimated on the date of grant using the Black-Scholes pricing model with the
following weighted average assumptions for each period:
May 2,
2009
Grant date
Exercise price
Weighted average fair value at date of grant
Expected option life (years)
Expected volatility
Risk-free interest rate
Dividend yield
Mar 17
$18.00
$9.22 - $9.81
4.76 - 5.51
59.85% - 60.25%
1.91% - 2.09%
None
Quarter Ended
August 1,
2009
Jun 30
$18.00
$8.33
4.76
52.10%
2.40%
None
Mar 31
$19.22
$9.57
4.76
58.64%
1.64%
None
October 31,
2009
Sep 30
$18.23
$7.69
4.63
47.54%
2.17%
None
January 30,
2010
Dec 31
$21.99
$9.08
4.63
45.86%
2.40%
None
We calculate the expected term for our stock options based on historical employee exercise behavior.
Historically, an increase in our stock price has led to a pattern of earlier exercise by employees. We also expected
the reduction of the contractual term from 10 years to 8 years to facilitate a pattern of earlier exercise by employees
and to contribute to a gradual decline in the average expected term in future periods. With the absence of substantial
new option grants, the expected term may increase slightly because it will be affected to a greater extent by director
options which have a longer contractual life.
The volatility used to value stock options is based on historical volatility. We calculate historical volatility
using an average calculation methodology based on daily price intervals as measured over the expected term of the
option. We have consistently applied this methodology since our adoption of the original disclosure provisions of
ASC Topic 718, Stock Compensation.
Beginning with awards granted in the second quarter of Fiscal 2008, we base the risk-free interest rate on
the annual continuously compounded risk-free rate with a term equal to the option’s expected term. Previously, we
used the market yield on U.S. Treasury securities. While the difference between the two rates is minimal and has
only a slight effect on the fair value calculation, we believe using the annual continuously compounded risk-free rate
is more compliant with ASC Topic 718. The dividend yield is assumed to be zero since we have no current plan to
declare dividends.
41
Activity for our option plans during the fiscal year ended January 30, 2010 was as follows:
Options outstanding at January 31, 2009
Granted
Exercised
Forfeited, cancelled or expired
Options outstanding at January 30, 2010
Number of
Shares
1,260,168
84,718
(99,753)
(3,919)
1,241,214
Weighted
Average
Exercise
Price
$
16.46
18.13
7.54
23.65
17.27
$
Weighted
Average
Remaining
Contractual
Term (Years)
5.06
Aggregate
Intrinsic
Value
($000's)
$
3,001
4.47
$
7,331
Exercisable at January 30, 2010
1,100,315
$
16.55
4.31
$
7,176
The weighted average grant fair value of options granted during the fiscal years ended January 30, 2010,
January 31, 2009 and February 2, 2008 was $9.48, $7.43 and $10.39, respectively. The compensation expense
included in store operating, selling and administrative expenses and recognized during the fiscal years ended
January 30, 2010, January 31, 2009 and February 2, 2008 was $1.8 million, $2.0 million and $2.1 million,
respectively, before the recognized income tax benefit of $0.4 million, $0.4 million and $0.3 million, respectively.
The total intrinsic value of stock options exercised during the fiscal years ended January 30, 2010, January
31, 2009 and February 2, 2008 was $1.3 million, $1.2 million and $1.9 million, respectively. The total cash received
from these stock option exercises during Fiscal 2010, Fiscal 2009 and Fiscal 2008 was $0.8 million, $0.7 million
and $0.9 million, respectively. Excess income tax proceeds from stock option exercises are included in cash flows
from financing activities as required by ASC Topic 230, Statement of Cash Flows. As of January 30, 2010, there
was $0.3 million of unrecognized compensation cost related to nonvested stock options. This cost is expected to be
recognized over a weighted average period of 0.3 years.
Restricted Stock and Performance-Based Awards
Restricted stock and performance-based awards (RSUs and PSAs) are granted with a fair value equal to the
closing market price of our common stock on the date of grant. All PSAs have been awarded in the form of
restricted stock units. Compensation expense is recorded straight-line over the vesting period and, in the case of
PSAs, at the estimated percent of achievement. Restricted stock awards generally cliff vest in four to five years
from the date of grant for those awards that are not performance-based. PSAs cliff vest in one to five years from the
date of grant after achievement of stated performance criterion and upon meeting stated service conditions.
The following table summarizes the restricted stock awards activity under all of our plans during the fiscal
year ended January 30, 2010:
Restricted stock awards outstanding at January 31, 2009
Granted
Vested
Forfeited, cancelled or expired
Restricted stock awards outstanding at January 30, 2010
Weighted
Average
Grant Date
Fair Value
19.95
$
18.06
18.51
18.90
19.23
$
Number of
Awards
311,918
238,607
(13,167)
(7,174)
530,184
The weighted average grant date fair value of our RSUs granted was $18.06, $15.12 and $28.30 for the
fiscal years ended January 30, 2010, January 31, 2009 and February 2, 2008, respectively. There were 238,607,
231,255 and 124,325 RSUs granted during Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively. The
compensation expense included in store operating, selling and administrative expenses and recognized during Fiscal
2010, Fiscal 2009 and Fiscal 2008 was $2.3 million, $1.5 million and $1.5 million, respectively, before the
recognized income tax benefit of $0.9 million, $0.6 million and $0.6 million, respectively.
42
During the fiscal year ended January 30, 2010, restricted stock awards of 13,167 units, including 12,165
awards that were PSAs, vested with an intrinsic value of $0.2 million. The total intrinsic value of our restricted
stock awards outstanding and unvested at January 30, 2010, January 31, 2009 and February 2, 2008 was $11.3
million, $4.2 million and $2.7 million, respectively. As of January 30, 2010, there was approximately $5.2 million
of total unamortized unrecognized compensation cost related to restricted stock awards. This cost is expected to be
recognized over a weighted average period of 2.5 years.
Employee Stock Purchase Plan
The Company’s ESPP allows eligible employees the right to purchase shares of our common stock, subject
to certain limitations, at 85% of the lesser of the market value at the end of each calendar quarter (purchase date) or
the beginning of each calendar quarter. Our employees purchased 19,152 shares of common stock at an average
price of $14.34 per share through the ESPP for the fiscal year ended January 30, 2010. Our employees purchased
25,263 shares of common stock at an average price of $14.11 per share through the ESPP for the fiscal year ended
January 31, 2009. Our employees purchased 18,462 shares of common stock at an average price of $21.25 per share
during the fiscal year ended February 2, 2008.
The assumptions used in the option pricing model for the fiscal years ended January 30, 2010, January 31,
2009 and February 2, 2008 were as follows:
Weighted average fair value at date of grant
Expected life (years)
Expected volatility
Risk-free interest rate
Dividend yield
January 30,
2010
$4.27
0.25
47.5% - 68.0%
0.03% - 0.22%
None
Fiscal Year Ended
January 31,
2009
$4.35
0.25
48.0% - 51.5%
1.14% - 3.06%
None
February 2,
2008
$5.90
0.25
36.3% - 41.8%
3.99% - 5.08%
None
The expense related to the ESPP was determined using the Black-Scholes option pricing model and the
provisions of ASC Topic 718 as it relates to accounting for certain employee stock purchase plans with a look-back
option. The compensation expense included in store operating, selling and administrative expenses and recognized
during the fiscal years ended January 30, 2010, January 31, 2009 and February 2, 2008 was $0.1 million in all three
years.
Director Deferred Compensation
Under the Deferred Plan, non-employee directors can elect to defer all or a portion of their Board and
Board Committee fees into cash, stock options or deferred stock units. Those fees deferred into stock options are
subject to the same provisions as provided for in the DEP and are expensed and accounted for accordingly. Director
fees deferred into our common stock are calculated and expensed each calendar quarter by taking total fees earned
during the calendar quarter and dividing by the closing price on the last day of the calendar quarter, rounded to the
nearest whole share. The total annual retainer, Board and Board Committee fees for non-employee directors that are
not deferred into stock options, but which includes amounts deferred into stock units under the Deferred Plan, are
expensed as incurred in all periods presented. No stock units were deferred under this plan in Fiscal 2010. A total
of 664 and 1,306 stock units were deferred under this plan in Fiscal 2009 and Fiscal 2008, respectively. Currently,
no director is deferring compensation into stock units.
There was no compensation expense related to director deferred compensation included in store operating,
selling and administrative expenses during Fiscal 2010. The compensation expense included in store operating,
selling and administrative expenses and recognized during Fiscal 2009 and Fiscal 2008 was $10,000 and $33,000,
respectively, before the recognized income tax benefit of $4,000 and $12,000, respectively.
43
NOTE 4. EARNINGS PER SHARE
The computation of basic earnings per share (EPS) is based on the number of weighted average common
shares outstanding during the period. The computation of diluted EPS is based on the weighted average number of
shares outstanding plus the incremental shares that would be outstanding assuming exercise of dilutive stock options
and issuance of restricted stock. The number of incremental shares is calculated by applying the treasury stock
method. The following table sets forth the computation of basic and diluted earnings per share:
January 30,
2010
Fiscal Year Ended
January 31,
2009
February 2,
2008
Net income, in thousands
$
32,549
$
29,448
$
30,329
Weighted average number of common shares outstanding
Dilutive stock options
Dilutive restricted stock
Weighted average number of common shares outstanding and
dilutive shares
Basic earnings per share
Diluted earnings per share
28,629,023
281,213
178,510
28,547,435
312,537
93,724
31,049,058
427,822
48,170
29,088,746
28,953,696
31,525,050
$
$
1.14
1.12
$
$
1.03
1.02
$
$
0.98
0.96
In calculating diluted earnings per share for the 52 weeks ended January 30, 2010, options to purchase
304,361 shares of common stock were outstanding as of the end of the period, but were not included in the
computations of diluted earnings per share due to their anti-dilutive effect. In calculating diluted earnings per share
for the 52 weeks ended January 31, 2009, options to purchase 603,330 shares of common stock were outstanding as
of the end of the period, but were not included in the computations of diluted earnings per share due to their anti-
dilutive effect. In calculating diluted earnings per share for the 52 weeks ended February 2, 2008, options to
purchase 455,598 shares of common stock were outstanding as of the end of the period, but were not included in the
computations of diluted earnings per share due to their anti-dilutive effect.
NOTE 5. DEBT AND CAPITAL LEASE OBLIGATIONS
At January 30, 2010, we had two unsecured credit facilities, which are renewable in August and November
2010. The August facility allows for borrowings up to $30.0 million at a rate equal to the higher of prime rate, the
federal funds rate plus 0.5% or LIBOR. The November facility allows for borrowings up to $50.0 million at a rate
of prime plus 2%. Under the provisions of both facilities, we do not pay commitment fees and are not subject to
covenant requirements. There were 110 days during the 52 weeks ended January 30, 2010, where we incurred
borrowings against our credit facilities for an average and maximum borrowing of $7.3 million and $13.9 million,
respectively, at an average interest rate of 1.82%. At January 30, 2010, a total of $80.0 million was available to us
from these facilities.
We entered into a capital lease in March 2009 for certain technology hardware. At January 30, 2010, the
total capital lease obligation was $0.3 million, of which $0.1 million was classified as a short-term liability and
included in other accrued expenses and $0.2 million was classified as a long-term liability and included in other
liabilities on our consolidated balance sheet. At January 31, 2009, we did not have any capital lease obligations.
Future minimum lease payments under capital leases and the present value of such payments as of January
30, 2010 are as follows (in thousands):
Fiscal 2011
Fiscal 2012
Fiscal 2013
Fiscal 2014
Fiscal 2015
Thereafter
Total minimum lease payments
Less amount representing interest
Present value of total minimum lease payments
174
174
-
-
-
-
348
79
269
$
$
44
At January 31, 2009, we had two unsecured credit facilities, which were renewable in August and
December 2009. The facilities allowed for borrowings up to $30.0 million and $50.0 million, respectively, at a fixed
rate, a rate based on prime or LIBOR plus 0.375%, at our election. There were 348 days during the 52 weeks ended
January 31, 2009, where we incurred borrowings against our credit facilities for an average and maximum
borrowing of $23.2 million and $47.1 million, respectively, at an average interest rate of 2.85%. At January 31,
2009, a total of $80.0 million was available to us from these facilities.
At February 2, 2008, we had one facility that allowed borrowings up to $30.0 million. There were 106
days during the 52 weeks ended February 2, 2008, where we incurred borrowings against this credit facility for an
average and maximum borrowing of $7.8 million and $18.4 million, respectively, at an average interest rate of
5.64%. At February 2, 2008, $30.0 million was available to us from this facility.
NOTE 6. DEFINED CONTRIBUTION BENEFIT PLANS
We maintain the Hibbett Sports, Inc. 401(k) Plan (401(k) Plan) for the benefit of our employees. The
401(k) Plan covers all employees who have completed one year of service, worked 1,000 hours and who are at least
21 years of age. Participants of the 401(k) Plan may voluntarily contribute from 1% to 100% of their compensation
subject to certain yearly dollar limitations as allowed by law. These elective contributions are made under the
provisions of Section 401(k) of the Internal Revenue Code which allows deferral of income taxes on the amount
contributed to the 401(k) Plan. The Company’s contribution to the 401(k) Plan equals (1) an amount determined at
the discretion of the Board of Directors plus (2) a matching contribution equal to a discretionary percentage of up to
6.0% of a participant’s compensation. For each of Fiscal 2010, Fiscal 2009 and Fiscal 2008, we matched $0.75 for
each dollar of compensation deferred by the employees up to 6.0% of compensation. Contribution expense incurred
under the 401(k) Plan for Fiscal 2010, Fiscal 2009 and Fiscal 2008 was $0.4 million, $0.5 million and $0.4 million,
respectively.
In November 2007, our Board of Directors adopted the Hibbett Sports, Inc. Supplemental 401(k) Plan
(Supplemental Plan) for the purpose of supplementing the employer matching contribution and salary deferral
opportunity available to highly compensated employees whose ability to receive Company matching contributions
and defer salary under our existing 401(k) Plan has been limited because of certain restrictions applicable to
qualified plans. The non-qualified deferred compensation Supplemental Plan allows participants to defer up to 40%
of their compensation and receive an employer matching contribution equal to $0.75 for each dollar of compensation
deferred, subject to a maximum of 4.5% of compensation and subject to Board discretion. The matching
contribution for Fiscal 2011 has also been set by the Board as $0.75 for each dollar of compensation deferred up to
4.5% of compensation. Contribution expense incurred under the Supplemental Plan for Fiscal 2010 and Fiscal 2009
was $0.1 million for each year. No contribution expense was incurred for the Supplemental Plan for Fiscal 2008.
In November 2009, the Board adopted the Hibbett Sports, Inc. Executive Voluntary Deferral Plan
(Voluntary Plan) which provides key executives of the Company an opportunity to defer, on a pre-tax basis, up to
50% of their base salary and up to 100% of any bonus earned. Participants, at election, determine the date payout is
to be made with payout options as either a lump-sum payout or installment payments over two to five years. The
Voluntary Plan is subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA) and was
effective February 1, 2010. The Voluntary Plan is also intended to comply with the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended.
In January 2010, we introduced a Flexible Spending Account Plan (FSA) that allows employees to set aside
pre-tax amounts for out-of-pocket health care and dependent care expenses. The health care FSA is subject to
ERISA, whereby the dependent care FSA is not. Employees are eligible to participate in the FSA upon meeting
eligibility requirements or upon a defined “qualifying event,” and may enroll annually during an open enrollment
period. Plan amounts are determined annually by the employee in advance and are subject to IRS dollar limitations.
Employee elections, in general, cannot be increased, decreased or discontinued during the election period. Unused
amounts at the end of the plan year are subject to forfeiture and such forfeitures can be used to offset administrative
expenses related to any benefit plan. The first withholdings began in February 2010.
45
NOTE 7. RELATED-PARTY TRANSACTIONS
The Company leases one store under a sublease arrangement from Books-A-Million, Inc., (BAMM) of
which one of our Directors, Terrance G. Finley is an executive officer and stockholder and another Director, Albert
C. Johnson, is a Director and stockholder. The sublease agreement expired in June 2008, but was renewed under a
five-year term to expire in June 2013. Minimum lease payments were $191,000 in Fiscal 2010, Fiscal 2009 and
Fiscal 2008. Future minimum lease payments under this non-cancelable sublease aggregate approximately $0.7
million.
NOTE 8. INCOME TAXES
Our effective tax rate is based on our income, statutory tax rates and tax planning opportunities available in
the various jurisdictions in which we operate. Significant judgment is required in determining our effective tax rate
and in evaluating our tax positions.
A summary of the components of the provision (benefit) for income taxes is as follows (in thousands):
Federal:
Current
Deferred
State:
Current
Deferred
January 30,
2010
Fiscal Year Ended
January 31,
2009
February 2,
2008
$
19,686
(1,741)
17,945
$
17,122
(827)
16,295
$
18,077
(1,298)
16,779
2,366
(510)
1,856
1,698
(88)
1,610
1,577
(27)
1,550
$
19,801
$
17,905
$
18,329
A reconciliation of the statutory federal income tax rate as a percentage of income before provision for
income taxes follows:
Tax provision computed at the federal statutory rate
Effect of state income taxes, net of federal benefits
Other, net
January 30,
2010
Fiscal Year Ended
January 31,
2009
February 2,
2008
35.00%
2.31
0.52
37.83%
35.00%
1.99
0.82
37.81%
35.00%
2.36
0.31
37.67%
In accordance with ASC Topic 740, Income Taxes, deferred income taxes on the consolidated balance sheet
result from temporary differences between the amount of assets and liabilities recognized for financial reporting and
income tax purposes. The components of the deferred income tax asset, net, are as follows (in thousands):
January 30, 2010
January 31, 2009
Deferred rent
Accumulated depreciation and amortization
Inventories
Prepaid expenses
Accruals
Stock-based compensation
Other
Deferred income taxes
Non-current
$
5,712
(5,906)
-
(13)
942
2,902
(130)
3,507
$
Current
$
1,782
-
2,209
(704)
854
40
(243)
3,938
Non-current
$
6,630
(5,775)
-
(85)
769
1,942
-
3,481
$
$
$
Current
$
1,972
-
3,169
(640)
1,647
297
(282)
6,163
46
Deferred income tax assets represent items which will be used as a tax deduction or credit in future tax
returns or are items of income which have not been recognized for financial statement purposes but were included in
the current or prior tax returns for which we have already properly recorded the tax benefit in the consolidated
statements of operations. At least quarterly, we assess the likelihood that the deferred income tax assets balance will
be recovered. We take into account such factors as prior earnings history, expected future earnings, carryback and
carryforward periods and tax strategies that could potentially enhance the likelihood of a realization of a deferred
income tax asset. To the extent recovery is not more likely than not, a valuation allowance is established against the
deferred income tax asset, increasing our income tax expense in the year such determination is made. We have
determined that no such allowance is required.
On February 4, 2007, we adopted the provisions of FASB Interpretation No. 48 (FIN No. 48), Accounting
for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109, codified primarily in ASC Topic
740. In accordance with ASC Topic 740, we recognize a tax benefit associated with an uncertain tax position when,
in our judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority.
For a tax position that meets the more-likely-than-not recognition threshold, we initially and subsequently measure
the tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized upon
ultimate settlement with a taxing authority. Our liability associated with unrecognized tax benefits is adjusted
periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or
emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. Our
effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent
adjustments as considered appropriate by management.
A number of years may elapse before a particular matter for which we have recorded a liability related to
an unrecognized tax benefit is audited and finally resolved. The number of years with open tax audits varies by
jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax
matter, we believe our liability for unrecognized tax benefits is adequate. Favorable settlement of an unrecognized
tax benefit could be recognized as a reduction in our effective tax rate in the period of resolution. Unfavorable
settlement of an unrecognized tax benefit could increase the effective tax rate and may require the use of cash in the
period of resolution. Our liability for unrecognized tax benefits is generally presented as non-current. However, if
we anticipate paying cash within one year to settle an uncertain tax position, the liability is presented as current.
A reconciliation of the unrecognized tax benefit under ASC Topic 740 during Fiscal 2010, Fiscal 2009 and
Fiscal 2008 follows (in thousands):
Unrecognized tax benefit - beginning of year
Gross increases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross increases - tax positions in current period
Settlements
Lapse of statute of limitations
Unrecognized tax benefit - end of year
January 30, 2010
$
2,501
105
-
259
-
(514)
2,351
$
Fiscal Year Ended
January 31, 2009
$
2,623
-
(100)
241
-
(263)
2,501
$
February 2, 2008
$
5,117
836
(3,259)
-
(29)
(42)
2,623
$
Due to a lapse of the statute of limitations, we expect a decrease in our unrecognized tax benefit liability in
the next 12 months of approximately $0.9 million related to compensation deductions claimed on prior income tax
returns. We classify interest and penalties recognized on unrecognized tax benefits as income tax expense. As of
January 30, 2010, January 31, 2009 and February 2, 2008, we have accrued interest and penalties in the amount of
$0.4 million, $0.5 million and $0.3 million, respectively.
Of the unrecognized tax benefits as of January 30, 2010, January 31, 2009 and February 2, 2008, $1.3
million, $1.1 million and $1.0 million, respectively, if recognized, would affect our effective income tax rate.
We file income tax returns in the U.S. federal and various state jurisdictions. Generally, we are not subject
to changes in income taxes by the U.S. federal taxing jurisdiction for years prior to Fiscal 2007 or by most state
taxing jurisdictions for years prior to Fiscal 2006.
47
NOTE 9. COMMITMENTS AND CONTINGENCIES
Lease Commitments
We lease the premises for our retail sporting goods stores under non-cancelable operating leases having initial
or remaining terms of more than one year. The leases typically provide for terms of five to ten years with options to
extend at our discretion. Many of our leases contain scheduled increases in annual rent payments and the majority of
our leases also require us to pay maintenance, insurance and real estate taxes. Additionally, many of the lease
agreements contain tenant improvement allowances, rent holidays and/or rent escalation clauses (contingent rentals).
For purposes of recognizing incentives and minimum rental expenses on a straight-line basis over the terms of the
leases, we use the date of initial possession to begin amortization, which is generally when we enter the space and
begin to make improvements in preparation of our intended use. Contingent rental payments are based on net sales for
the location.
We also lease certain computer hardware, office equipment and transportation equipment under non-
cancelable operating leases having initial or remaining terms of more than one year.
In February 1996, we entered into a sale-leaseback transaction to finance our distribution center and office
facilities. In December 1999, the related operating lease was amended to include the Fiscal 2000 expansion of these
facilities. The amended lease rate is $0.9 million per year and can increase annually with the Consumer Price Index.
This lease will expire in December 2014. Future minimum lease payments under this non-cancelable lease aggregate
approximately $4.3 million. The transaction is also subject to quarterly financial covenants based on certain ratios.
We have never been in violation of any financial covenant requirement.
During the fiscal year ended January 30, 2010, we increased our lease commitments by a net of 22 retail
stores, each having initial lease termination dates between April 2012 and February 2020 as well as various office
and transportation equipment. At January 30, 2010, the future minimum lease payments, excluding maintenance,
insurance and real estate taxes, for our current operating leases and including the net 22 operating leases added
during Fiscal 2010 were as follows (in thousands):
Fiscal 2011
Fiscal 2012
Fiscal 2013
Fiscal 2014
Fiscal 2015
Thereafter
TOTAL
$
40,528
35,225
28,708
21,272
14,775
19,511
160,019
$
Rental expense for all operating leases consisted of the following (in thousands):
January 30,
2010
Fiscal Year Ended
January 31,
2009
February 2,
2008
Minimum rentals
Contingent rentals
$
$
35,455
4,165
39,620
$
$
34,283
2,689
36,972
$
$
32,693
2,342
35,035
Most of our retail store leases contain provisions that allow for early termination of the lease by either party if
certain pre-determined annual sales levels are not met. Generally, these provisions allow the lease to be terminated
between the third and fifth year of the lease. Should the lease be terminated under these provisions, in some cases, the
unamortized portion of any landlord allowances related to that property would be payable to the landlord.
Annual Bonuses and Equity Incentive Awards
Specified officers and corporate employees of our Company are entitled to annual bonuses, primarily based on
measures of Company operating performance. At January 30, 2010 and January 31, 2009, there was $3.3 million and
$2.9 million, respectively, of annual bonus related expense included in accrued expenses.
In addition, the Compensation Committee (Committee) of the Board of Directors places performance criteria
on awards of RSUs (PSAs) to our Named Executive Officers (NEOs) under the Incentive Plan. The performance
criteria are tied to performance targets with respect to future sales and operating income over a specified period of time.
These PSAs are expensed under the provisions of ASC Topic 718 and are evaluated each quarter to determine the
probability that the performance conditions set within will be met. We expect the Committee to continue to place
performance criteria on awards of RSUs to our NEOs in the future.
48
Legal Proceedings and other Contingencies
We are a party to various legal proceedings incidental to our business. We do not believe that any of these
matters will, individually or in the aggregate, have a material adverse effect on our business or financial condition.
We cannot give assurance, however, that one or more of these lawsuits will not have a material adverse effect on our
results of operations for the period in which they are resolved. At January 30, 2010, we estimate that the liability
related to these matters is approximately $0.3 million and accordingly, have accrued $0.3 million as a current
liability on our consolidated balance sheet. As of January 31, 2009, we had accrued $47,000 as it related to our
estimated liability for legal proceedings.
The estimates of our liability for pending and unasserted potential claims do not include litigation costs. It
is our policy to accrue legal fees when it is probable that we will have to defend against known claims or allegations
and we can reasonably estimate the amount of the anticipated expense.
From time to time, we enter into certain types of agreements that require us to indemnify parties against third
party claims under certain circumstances. Generally, these agreements relate to: (a) agreements with vendors and
suppliers under which we may provide customary indemnification to our vendors and suppliers in respect to actions
they take at our request or otherwise on our behalf; (b) agreements to indemnify vendors against trademark and
copyright infringement claims concerning merchandise manufactured specifically for or on behalf of the Company; (c)
real estate leases, under which we may agree to indemnify the lessors from claims arising from our use of the property;
and (d) agreements with our directors, officers and employees, under which we may agree to indemnify such persons
for liabilities arising out of their relationship with us. We have director and officer liability insurance, which, subject to
the policy’s conditions, provides coverage for indemnification amounts payable by us with respect to our directors and
officers up to specified limits and subject to certain deductibles.
If we believe that a loss is both probable and estimable for a particular matter, the loss is accrued in
accordance with the requirements of ASC Topic 450, Contingencies. With respect to any matter, we could change our
belief as to whether a loss is probable or estimable, or its estimate of loss, at any time. Even though we may not believe
a loss is probable or estimable, it is reasonably possible that we could suffer a loss with respect to that matter in the
future.
NOTE 10. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables set forth certain unaudited consolidated financial data for the thirteen-week quarters
indicated (dollar amounts in thousands, except per share amounts):
Net sales
Gross profit
Operating income
Net income
Fiscal Year Ended January 30, 2010
$
First
157,700
52,696
17,558
10,912
Second
Third
Fourth
$
123,118
36,788
1,938
1,109
$
145,855
49,637
13,944
8,775
$
166,819
57,079
18,966
11,752
Basic earnings per share
Diluted earnings per share
$
$
0.38
0.38
$
$
0.04
0.04
$
$
0.31
0.30
$
$
0.41
0.40
Net sales
Gross profit
Operating income
Net income
Fiscal Year Ended January 31, 2009
$
First
145,825
47,812
15,434
9,372
Second
Third
Fourth
$
130,289
42,266
7,811
4,792
$
140,148
46,692
12,032
7,652
$
147,926
48,601
12,695
7,633
Basic earnings per share
Diluted earnings per share
$
$
0.33
0.32
$
$
0.17
0.17
$
$
0.27
0.26
$
$
0.27
0.26
In the opinion of our management, this unaudited information has been prepared on the same basis as the
audited information presented elsewhere herein and includes all adjustments necessary to present fairly the
information set forth herein. The operating results from any quarter are not necessarily indicative of the results to be
expected for any future period.
49
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC Topic 820, Fair Value Measurements and Disclosures, establishes a three-level fair value hierarchy
that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as
follows:
Level I – Quoted prices in active markets for identical assets or liabilities.
Level II – Observable inputs other than quoted prices included in Level I.
Level III – Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
The table below segregates all financial assets and liabilities that are measured at fair value on a recurring
basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to
determine the fair value at January 30, 2010 and January 31, 2009 (in thousands):
Short-term investments
Long-term investments
Total investments
January 30, 2010
Level II
-
$
-
$
-
Level III
-
$
-
$
-
Level I
-
$
372
372
$
January 31, 2009
Level II
-
$
-
$
-
Level III
-
$
-
$
-
Level I
191
$
141
332
$
Long-term investments are reported in other assets on our consolidated balance sheets.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A.
Controls and Procedures.
(a) Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Securities Exchange Act) as of October 31, 2009. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures were designed and functioning
effectively to provide reasonable assurance that the information required to be disclosed in our Securities Exchange
Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
(b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of
our management, including our principal executive officer and principal financial officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting as of January 30, 2010, based on the Internal
Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on our evaluation under the framework in Internal Control – Integrated Framework, our management
concluded that our internal control over financial reporting was effective as of January 30, 2010.
KPMG LLP, our independent registered public accounting firm, has issued an attestation report on the
Company’s internal control over financial reporting as of January 30, 2010 included in Item 8 herein.
(c) Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the fourth quarter of Fiscal
2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information.
None.
50
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
We have adopted a Code of Business Conduct and Ethics (Code) for all Company employees, including our
Named Executive Officers as determined for our Proxy Statement for the Annual Meeting of Stockholders (Proxy
Statement). The Code is posted on our website, www.hibbett.com under “Investor Information.” We intend to make
all required disclosures regarding any amendment to, or a waiver of, a provision of the Code for Senior Executive and
Financial Officers by posting such information on our website.
The information appearing in the Proxy Statement for the Annual Meeting to be held on May 27, 2010,
relating to the members of the Audit Committee and the Audit Committee financial expert under the caption “Board
and Committees of the Board” as well as the information appearing in the Proxy Statement under the caption “Section
16(a) Beneficial Ownership Reporting Compliance” is hereby incorporated by reference.
The balance of the information required in this item is incorporated by reference from the sections entitled
“Directors and Executive Officers”, “The Board of Directors”, “Annual Compensation of Executive Officers” and
“Related Person Transactions” in the Proxy Statement.
Item 11. Executive Compensation.
The information required in this item is incorporated by reference from the section entitled “Annual
Compensation of Executive Officers,” “Compensation Committee Report” and “Compensation Committee Interlocks
and Insider Participation” in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required in this item is incorporated by reference from the sections entitled “Security
Ownership of Certain Beneficial Owners,” “Compensation of Non-Employee Directors,” “Annual Compensation of
Executive Officers” and “Directors and Executive Officers” in the Proxy Statement.
Equity Compensation Plan Information (1)
(a)
(b)
(c)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights (2)
Weighted
average exercise
price of
outstanding
options
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a)) (3)
1,771,398
-
1,771,398
$17.27
-
$17.27
1,299,702
-
1,299,702
Plan Category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by
security holders
TOTAL
(1) Information presented as of January 30, 2010.
(2) Includes 373,249 RSUs and 156,935 PSAs that may be awarded if specified targets and/or service periods
are met. The weighted average exercise price of outstanding options does not include these awards.
(3) Includes 115,114 shares remaining under our ESPP and 74,169 shares remaining under our DEP of which
approximately 4,000 shares were subject to purchase in the purchasing period ending March 31, 2010.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
The information required in this item is incorporated by reference from the section entitled “Related Person
Transactions” and “Governance Information” in the Proxy Statement.
51
Item 14. Principal Accounting Fees and Services.
The information required in this item is incorporated by reference from the section entitled “Independent
Registered Public Accounting Firm” and “Proposal Number 2 – Ratification of the Appointment by the Audit
Committee of the Board of Directors of KPMG LLP as the Company’s Independent Registered Public Accounting
Firm” in the Proxy Statement.
Item 15.
Exhibits and Consolidated Financial Statement Schedules.
PART IV
(a) Documents filed as part of this report:
1.
Financial Statements.
Page
The following Financial Statements and Supplementary Data of the Registrant and Independent
Registered Public Accounting Firm’s Report on such Financial Statements are incorporated by
reference from the Registrant’s 2010 Annual Report to Stockholders, in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of January 30, 2010 and January 31, 2009
Consolidated Statements of Operations for the fiscal years ended January 30, 2010, January 31,
2009 and February 2, 2008
Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2010, January 31,
2009 and February 2, 2008
Consolidated Statements of Stockholders’ Investment for the fiscal years ended January 30,
2010, January 31, 2009 and February 2, 2008
Notes to Consolidated Financial Statements
30
31
32
33
34
35
2.
Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are not required under the related instructions or are not
applicable, and therefore have been omitted.
3.
Exhibits.
The Exhibits listed below are the exhibits of Hibbett Sports, Inc. and its wholly owned
subsidiaries and are filed as part of, or incorporated by reference into, this report.
Number Description
Certificates of Incorporation and By-Laws
3.1 Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 of
the Company’s Form 8-K filed with the Securities and Exchange Commission on February 15,
2007.)
3.2 Bylaws of the Registrant, as amended; incorporated herein by reference to Exhibit 3.2 of the
Registrant’s Form 8-K filed with the Securities and Exchange Commission on June 1, 2009.
Form of Stock Certificate
4.1 Form of Common Stock Certificate; attached as Exhibit 99.1 to the Registrant’s Current
Report on Form 8-K filed on September 26, 2007.
Material Contracts
10.1 Sub-Sub-Sublease Agreement between Hibbett Sporting Goods, Inc. and Books-A-Million,
dated April 23, 1996; incorporated by reference as Exhibit 10.3 to the Registrant’s Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission on September 7,
2006.
10.2 Amendment to 2006 Non-Employee Director Equity Plan Agreement for Non-Qualified Stock
Options; incorporated by reference as Exhibit 10.1 to the Registrant’s Form 8-K filed with the
Securities and Exchange Commission on February 17, 2009.
52
10.3 Master Note – Regions Bank Line of Credit; attached as Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed August 20, 2009.
10.4 Authorization by Board of Directors of Hibbett Sports, Inc. for stock repurchase program, dated
November 18, 2009; incorporated by reference to the Registrant’s Form 8-K filed with the
Securities and Exchange Commission on November 20, 2009.
10.5 Hibbett Sports, Inc. Executive Voluntary Deferral Plan approved by the Board of Directors,
dated November 18, 2009; incorporated by reference as Exhibit 10.1 to the Registrant’s Form 8-
K filed with the Securities and Exchange Commission on November 20, 2009.
10.6 Amendment No. 2 to Credit Agreement between the Company and Bank of America, N.A.,
dated as of November 20, 2009; incorporated by reference as Exhibit 10.1 to the Registrant’s
Form 8-K filed with the Securities and Exchange Commission on November 23, 2009.
Annual Report to Security Holders
13.1 Fiscal 2010 Annual Report to Stockholders.
Subsidiaries of the Registrant
21 List of Company’s Subsidiaries:
1) Hibbett Sporting Goods, Inc.
2) Hibbett Team Sales, Inc.
3) Sports Wholesale, Inc.
4) Hibbett Capital Management, Inc.
5) Sports Holdings, Inc.
6) Gift Card Services, LLC
7) Hibbett.com, Inc.
Consents of Experts and Counsel
23.1 Consent of Independent Registered Public Accounting Firm (filed herewith)
Certifications
31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer (filed herewith)
31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer (filed herewith)
32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer (filed
herewith)
55
56
57
58
53
SIGNATURES.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HIBBETT SPORTS, INC.
Date: March 26, 2010
By:
/s/ Gary A. Smith
Gary A. Smith
Senior Vice President and Chief Financial
Officer (Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Jeffry O. Rosenthal
Jeffry O. Rosenthal
Chief Executive Officer and President
(Principal Executive Officer)
March 26, 2010
/s/ Gary A. Smith
Gary A. Smith
Senior Vice President and Chief Financial
Officer (Principal Financial Officer and
Chief Accounting Officer)
March 26, 2010
/s/ Michael J. Newsome
Michael J. Newsome
/s/ Terrance G. Finley
Terrance G. Finley
/s/ Albert C. Johnson
Albert C. Johnson
/s/ Carl Kirkland
Carl Kirkland
/s/ Ralph T. Parks
Ralph T. Parks
/s/ Thomas A. Saunders, III
Thomas A. Saunders, III
/s/ Alton E. Yother
Alton E. Yother
Executive Chairman of the Board
March 26, 2010
Director
March 26, 2010
Director
March 26, 2010
Director
March 26, 2010
Director
March 26, 2010
Director
March 26, 2010
Lead Director
March 26, 2010
54
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors and Stockholders
Hibbett Sports, Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 333-21299, 333-21303, 333-21305, 333-
63094, 333-96755, 333-126316, 333-126313, 333-126311, and 333-135217) of Hibbett Sports, Inc. and subsidiaries (the
Company) of our report dated March 26, 2010, with respect to (i) the consolidated balance sheets of Hibbett Sports, Inc. and
subsidiaries as of January 30, 2010 and January 31, 2009, and the related consolidated statements of operations, stockholders’
investment, and cash flows for each of the years in the three-year period ended January 30, 2010 and (ii) the effectiveness of
internal control over financial reporting as of January 30, 2010, which report appears in the January 30, 2010, Annual Report
on Form 10-K of Hibbett Sports, Inc. and subsidiaries.
Our report refers to the Company’s change in its method of accounting for inventories, as well as the adoption of FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, included in ASC Subtopic 740-10, Income Taxes –
Overall, for the fiscal year ended February 2, 2008.
/s/ KPMG LLP
Birmingham, Alabama
March 26, 2010
End of Exhibit 23.1
55
Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
I, Jeffry O. Rosenthal, certify that:
1. I have reviewed this annual report on Form 10-K of Hibbett Sports, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 26, 2010
/s/ Jeffry O. Rosenthal
Jeffry O. Rosenthal
Chief Executive Officer and President
(Principal Executive Officer)
End of Exhibit 31.1
56
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
I, Gary A. Smith, certify that:
1. I have reviewed this annual report on Form 10-K of Hibbett Sports, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 26, 2010
/s/ Gary A. Smith
Gary A. Smith
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Chief Accounting
Officer)
End of Exhibit 31.2
57
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Hibbett Sports, Inc. and Subsidiaries (the “Company”) for
the period ended January 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
we, Jeffry O. Rosenthal, Chief Executive Officer, and Gary A. Smith, Chief Financial Officer of the Company, certify, to the
best of each of our knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of
2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities
Exchange Act of 1934 as amended; and
(2) the information contained in the Report fairly presents in all material respects, the financial condition and results of
operations of the Company.
Date: March 26, 2010
Date: March 26, 2010
/s/ Jeffry O. Rosenthal
Jeffry O. Rosenthal
Chief Executive Officer and President
(Principal Executive Officer)
/s/ Gary A. Smith
Gary A. Smith
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Chief Accounting
Officer)
A signed original of this written statement required by Section 906, or other document authenticating,
acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.
End of Exhibit 32.1
58
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C O R P O R A T E I N F O R M A T I O N
Corporate Offices
451 Industrial Lane
Birmingham, Alabama 35211
(205) 942-4292
(205) 912-7293 Fax
www.hibbett.com
Stock Transfer Agent and Registrar
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
(800) 568-3476
Stockholders seeking information concerning stock transfers, change of
address, and lost certificates should contact Computershare directly.
Annual Report on Form 10-K
A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010, as filed
with the Securities and Exchange Commission, may be obtained without charge upon written request to the
Company’s Investor Relations department.
Annual Meeting
The 2010 Annual Meeting of Stockholders will be held at the principal executive offices of Hibbett Sports, Inc., 451
Industrial Lane, Birmingham, Alabama, on Thursday, May 27, 2010, at 11:00 A.M., local time.
Stock Market Information
The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol HIBB.The
following table sets forth, for the periods indicated, the high and low sales prices of shares of the common stock
as reported by NASDAQ:
Fiscal 2010:
Quarter ended May 2, 2009
Quarter ended August 1, 2009
Quarter ended October 31, 2009
Quarter ended January 30, 2010
Fiscal 2009:
Quarter ended May 3, 2008
Quarter ended August 2, 2008
Quarter ended November 1, 2008
Quarter ended January 31, 2009
Independent Registered Public
Accounting Firm
KPMG LLP
Birmingham, Alabama
High
$22.39
$21.62
$21.17
$23.61
High
$19.74
$23.85
$25.75
$18.28
Low
$12.82
$16.08
$16.00
$18.24
Low
$13.06
$16.50
$12.43
$10.06
Company Counsel
Williams Mullen
Norfolk,Virginia
B O A R D O F D I R E C T O R S
Michael J. Newsome - Executive Chairman of the Board, Hibbett Sports, Inc.
Alton E.Yother - Lead Director, Senior Executive Vice President and Chief Financial Officer (Retired),
Regions Financial Corporation
Terrance G. Finley - Executive Vice President, Chief Merchandising Officer, Books-A-Million, Inc.
Albert C. Johnson - Independent Financial Consultant
Carl Kirkland - Chairman Emeritus, Kirkland’s, Inc.
Ralph T. Parks - President, RT Parks, Inc.
Thomas A. Saunders, III - Private Investor
O F F I C E R S
Michael J. Newsome - Executive Chairman of the Board
Jeffry O. Rosenthal - President and Chief Executive Officer
Gary A. Smith - Senior Vice President, Principal Accounting and Chief Financial Officer
Cathy E. Pryor - Senior Vice President of Store Operations
Rebecca A. Jones - Senior Vice President of Merchandising
H I B B E T T S P O R T S , I N C .
4 5 1 I n d u s t r i a l L a n e B i r m i n g h a m , A l a b a m a 3 5 2 1 1
2 0 5 . 9 4 2 . 4 2 9 2
w w w . h i b b e t t . c o m