DEDICATED
TO SUCCESS
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
For the Year
Net sales
Operating income
Earnings per basic share(1)
Earnings per diluted share(1)
Balance Sheet Data
Cash and cash equivalents
Average inventory per store
Working capital
Total assets
Long-term capitalized lease obligations
Stockholders’ investment
Treasury shares repurchased
Cost of treasury shares purchased
Fiscal 2014
Fiscal 2013
(52 Weeks)
(53 Weeks)
$ 851,965
$ 818,700
$ 113,891
$ 115,981
$ 0002.74
$ 0002.78
$ 0002.70
$ 0002.72
$ 266,227
$ 276,911
$ 0,02,244
$ 0,02,254
$ 232,235
$ 202,899
$ 416,345
$ 377,331
$ 0,02,889
$ 0,02,138
$ 304,023
$ 239,127
366
904
$ 220,095
$ 249,852
SALES, EARNINGS AND STORE GROWTH
$852.0
$818.7
$2.72
$2.70
927
873
832
798
767
$732.6
$665.0
$593.5
$2.15
$1.60
$1.12
2010 2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
NET SALES
(In Millions)
EARNINGS PER
DILUTED SHARE(1)
TOTAL STORES
(1)Except for fiscal 2013, which is comprised of 53 weeks, all fiscal years presented are comprised of 52 weeks. No dividends were declared or paid.
LETTER TO STOCKHOLDERS:
Hibbett Sports continues to be the store of the community offering premium athletic footwear,
apparel and equipment to small markets with an emphasis on customer service. Our long track
record of sales and earnings growth – not to mention exceptional long-term returns to our stockholders –
might give the impression that this strategy is easy to replicate. That’s far from the case. Like any
top athlete, it is the unseen daily commitment, dedication and focus that make the difference when
it matters the most. As we look forward to our next phase of growth, we would like to highlight
some of the initiatives that will help continue our success.
Our main focus for Fiscal 2015 will be to realize the benefits from our Fiscal 2014 initiatives and
to make progress on new initiatives that will improve sales, profitability and supply chain efficiency.
During Fiscal 2014, we began implementation of a new labor scheduling system, which should
help us engage our customers more effectively than ever. We continued to roll out our markdown
optimization system, with 57% of our volume converted at year-end and a plan to be fully
implemented by the end of this year. The early results of this system have been very encouraging
and should continue to improve as we expand into other categories. For Fiscal 2015, we will
begin implementation of a new business intelligence system, which will give us deeper insights
into our business and allow us to optimize product assortments, inventory levels and store
profitability. We will also upgrade our allocation system this year, which will significantly improve
our ability to allocate merchandise across our many different stores and geographies.
As of the writing of this letter, we are days away from bringing our new 416,000-square-foot
wholesaling and logistics facility online in Alabaster, Alabama with a full cut-over anticipated by
year-end. The state-of-art automation of this facility will dramatically improve our supply chain
efficiency and allow us to get the right products to the right stores better than ever before.
Localization of product is a competitive advantage of Hibbett, and we’ll look to exploit these
expanded capabilities.
As we look out over the next several years, store growth will remain a key component of our
strategy. We opened 72 new stores in Fiscal 2014 (including our first in Delaware and
Pennsylvania), expanded 14 high performing stores and closed 18 underperforming stores. For
the year ahead, we expect continued growth with 75 to 80 new stores, 10 to 15 expansions and
15 to 20 closures. By Fiscal 2019, we expect to have 1,300 stores in operation across the country.
Our store model is not limited by geography. It’s proven to work in the markets we’ve targeted.
The new wholesaling and logistics facility will certainly help us get there as it’s designed to
support up to 1,500 stores.
We executed on the major initiatives we outlined for Fiscal 2014, but our sales and earnings
results for the year reflected a challenging economic environment in the first half of the year and
severe impacts from some of the worst winter weather in recent memory in the fourth quarter. Net
sales for the 52-week Fiscal 2014 increased 4.1% to $852.0 million, full year comparable store
sales were up 1.8% on a calendar basis (comparable 52-week to 52-week period) and earnings
decreased 0.7% to $2.70 per diluted share.
Hibbett’s capital structure remains rock solid as we funded new store growth and expansions, a
new wholesaling and logistics facility, a full plate of IT projects and the repurchase of 366,000
shares of our common stock. We ended the year with $66.2 million in
cash and cash equivalents and no debt. For Fiscal 2015, we anticipate
fully funding another year of growth investments and share repurchases
with our strong cash flow.
The Hibbett growth story is built on convenience, brands and service.
We executed well on these growth pillars in Fiscal 2014, and our
initiatives for Fiscal 2015 will build on that success. This formula has
worked remarkably well over the years, but we recognize that our
customer is evolving and looking to engage with us in multiple ways.
Our targeted marketing program, which includes 3.8 million members
in our MVP loyalty program and a growing presence in social media,
reflects the influence of the digital economy. We have allocated more
investments to marketing in Fiscal 2015; our new campaign entitled “A
Constant State of Game” is highlighted in the margins of this letter and
should allow us to connect with our customers in a highly impactful way.
Omni-channel is certainly top of mind for all of us in retail, and at
Hibbett we have a roadmap in place that will allow us to begin to
engage our customer like never before. Over the next several years,
we will eventually move into the e-commerce channel in a meaningful
way. Although our plans are in early stages at this point, we would
anticipate having more announcements on our omni-channel strategy
later in the year. Stay tuned.
Over 7,500 associates in our stores, warehousing and logistics center
and store support center strive for excellence at Hibbett Sports every
day. Once again, I would like to thank them for their dedication and
commitment. Perhaps nobody at Hibbett embodies this spirit more than
Mickey Newsome, our long-time Executive Chairman who transitioned
to Chairman at year-end and gave up his day-to-day role after 48
years of leadership at Hibbett. We are all thankful for his innumerable
contributions to Hibbett over the years and for his continued leadership
on the Board of Directors.
To our vendor partners, customers and fellow stockholders, thank you
for your continued support, patronage and investment with us.
Sincerely,
Jeffry O. Rosenthal
Chief Executive Officer and President
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: February 1, 2014
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.)
2700 Milan Court, 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 Global Select Market
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
X
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 the definitions 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 $1,578,943,516 on August 3, 2013, based on
the closing sale price of $61.30 at August 2, 2013 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 15, 2014, was 25,817,480.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Annual Report to Stockholders for the year ended February 1, 2014 are incorporated by
reference into Part II and portions of the Registrant’s Proxy Statement for the 2014 Annual Meeting of Stockholders to
be held on May 29, 2014 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 24, 2014.
- 2 -
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64
HIBBETT SPORTS, INC.
INDEX
PART I
Item
Item
Item
Item
Item
Item
Business.
1.
1A. Risk Factors.
1B. Unresolved Staff Comments.
2.
Properties.
Legal Proceedings.
3.
4. Mine Safety Disclosures.
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
15.
Item
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 net 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 new wholesaling and logistics facility;
our ability to renew or replace store leases satisfactorily;
the cost of regulatory compliance, including 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 analysis of our risk factors and their possible effect on financial results;
our ability and plans to renew our revolving credit facilities;
our expectations regarding our capital expenditures;
our seasonal sales patterns and assumptions concerning customer buying behavior;
our expectations regarding competition;
our estimates and assumptions as they relate to preferable tax and financial accounting methods, accruals,
inventory valuations, dividends, long-lived assets, store closures, 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 and our expectations concerning employee
stock option exercise behavior;
the possible effect of inflation, market decline and other economic changes on our costs and profitability,
and ability to secure suitable locations for new stores;
the possible effects of uncertainty within the capital markets, the commercial credit environment and the
levels of consumer confidence;
our analyses of trends as related to earnings performance;
our target market presence and its expected impact on our net sales growth;
our expectations concerning vendor level purchases and related discounts;
our estimates and assumptions related to income tax liabilities, deferred taxes and uncertain tax positions;
the future reliability of, and cost associated with, our sources of supply, particularly imported goods;
the loss of key vendor support; and
our ability to mitigate the risk of possible business interruptions.
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” as well as “Management’s Discussion and Analysis of Financial Condition
and Results of Operations”.
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.
- 4 -
Introductory Note
References to “we”, “our”, “us” and the “Company” used throughout this document refer to Hibbett Sports,
Inc. and its subsidiaries as well as its predecessors. Unless specifically indicated otherwise, any reference to the
following years or fiscal years relates to:
Year
2015 or Fiscal 2015
2014 or Fiscal 2014
2013 or Fiscal 2013
2012 or Fiscal 2012
Related Fiscal Year End
January 31, 2015
February 1, 2014
February 2, 2013
January 28, 2012
Weeks in
Fiscal Period
52
52
53
52
PART 1
Item 1. Business.
Our Company
Our Company began in 1945 under the name Dixie Supply Company in Florence, Alabama. Although we
initially specialized primarily in the marine and small aircraft business, by 1960 we were solely in the sporting goods
business. In 1965, we opened our second store, Dyess & Hibbett Sporting Goods, in Huntsville, Alabama, and hired
Mickey Newsome, who is now our Chairman of the Board. The following 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 became a public company 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 and mid-sized markets predominantly in the South,
Southwest, Mid-Atlantic and the Midwest. As of February 1, 2014, we operated 927 stores consisting of 910 Hibbett
Sports stores and 17 smaller-format Sports Additions athletic shoe stores in 31 states, opening our first stores in
Delaware and Pennsylvania in Fiscal 2014. Our primary retail format and growth vehicle is Hibbett Sports, an
approximately 5,000 square foot store located primarily in strip centers, which are usually near a Wal-Mart store.
Approximately 80% of our Hibbett Sports store base is located in strip centers, which includes free-standing stores,
while approximately 20% of our Hibbett Sports store base is located in enclosed malls. We expect to continue our
store base growth in strip centers versus enclosed malls.
We offer convenient locations and a broad assortment of brand name quality athletic equipment, footwear
and apparel with a high level of customer service. Our merchandise assortment emphasizes team sports
complemented by localized apparel, footwear 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 Relations,” certain
reports that we file with or furnish to the Securities and Exchange Commission (SEC) in accordance with the
Securities Exchange Act of 1934 (Exchange Act). 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 February 1, 2014, at no charge, by writing to: Investor Relations, Hibbett Sports, Inc., 2700 Milan Court,
Birmingham, Alabama 35211.
- 5 -
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 100 F 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 25,000 to 75,000. This strong regional focus
enables us to achieve significant cost benefits including lower corporate expenses, reduced distribution costs and
increased economies of scale from marketing activities. We use sophisticated information systems to maintain tight
controls over inventory and operating costs and continually search for ways to improve efficiencies and the customer
experience through information system upgrades. In addition, we establish greater customer, vendor and landlord
recognition as a leading sporting goods retailer in these communities. We believe our ability to more effectively
merchandise to local community sporting interests differentiates us from our national competitors.
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, DVDs, 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, an approximately 5,000 square foot store located primarily in strip
centers, which are usually near 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, 730
Hibbett Sports stores are located in strip centers, which include free-standing stores, with the remaining 180 stores
located in enclosed malls, the majority of which are the only enclosed malls in their 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, footwear, equipment 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 as the dominance of the Southeastern Conference and consecutive appearances in
the Bowl Championship Series (BCS) National Championship games and similar sporting events in major league
baseball, football and basketball.
Sports Additions
Our 17 Sports Additions stores are small, primarily enclosed 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 more fashion-based merchandise assortment compared to
our Hibbett Sports stores. All but four Sports Additions stores are currently located in enclosed malls or strip centers
where a Hibbett Sports store is also present.
Team
Hibbett Team Sales, Inc. (Team), a wholly-owned subsidiary of the Company, is a supplier of customized
athletic apparel, equipment and footwear primarily to school athletic programs in Alabama and parts of Georgia,
Florida and Mississippi. Team sells its merchandise directly to educational institutions and youth associations. The
operations of Team are independent of the operations of our retail stores.
None of our store concepts meets the quantitative or qualitative requirements of the Accounting Standards
Codification (ASC) Topic 280, Segment Reporting.
- 6 -
Our Growth Strategy
We currently have identified markets for our Hibbett Sports stores within the states in which we operate to
grow to over 1300 stores. Our clustered expansion program, which calls for opening new stores primarily within
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 the
local market. In evaluating potential markets, we consider population, economic conditions, local competitive
dynamics, availability of suitable real estate and proximity to existing Hibbett stores.
In Fiscal 2015, we expect continued growth of our net store openings. In addition to new stores, we will
continue our successful strategy of expanding high performing existing stores. See “Risk Factors.”
Omni-channel development. Store growth will continue to be the cornerstone of our growth strategy.
However, we recognize that our customer is evolving and looking to engage with us in multiple ways. In Fiscal 2014,
we began to develop an omni-channel roadmap that will be used going forward as we focus on engaging our customer
specifically in the digital commerce channel.
Our Distribution
We maintain a single distribution center in Birmingham, Alabama. In July 2012, we purchased land in
Alabaster, Alabama (a suburb of Birmingham) and have since constructed a new wholesaling and logistics facility to
replace our current facility. See “Risk Factors.”
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. We also use third-party logistics providers to gain
efficiencies of distribution costs to approximately 19% of our outlying stores. Our new wholesaling and logistics
facility will be placed in service in early Fiscal 2015 and has been designed with significant automation and operation
efficiencies. We expect the facility will support our growth over the next several years.
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
system based on inventory levels and sales. Merchandise is typically delivered to stores weekly via Company-operated
vehicles or third-party logistics providers.
Our Merchandise
Our merchandising strategy is to provide a broad assortment of quality brand name footwear, apparel,
accessories and athletic equipment at competitive prices in a full service environment.
The following table indicates the approximate percentage of net sales represented by each of our major
product categories:
Footwear
Apparel
Equipment
Fiscal 2014
45%
32%
23%
100%
Fiscal 2013
45%
32%
23%
100%
Fiscal 2012
44%
32%
24%
100%
We believe that the breadth and the depth of brand name merchandise that we offer consistently exceed the
merchandise selection carried by most of our 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.
- 7 -
Although the core merchandise assortment tends to be similar for each Hibbett Sports store, important local or
regional differences exist. Accordingly, our stores 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 merchandising staff 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:
• maintaining close relationships with vendors and other retailers;
•
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;
actively participating in industry associations such as the National Sporting Goods Association (NSGA);
visiting competitor store locations;
•
•
• monitoring product selection at competing stores and online; 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. See “Risk Factors.”
Our Vendor Relationships
The sporting goods retail business is 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 of these products within our stores. In addition, as we
continue to increase our store base and enter new markets, our vendors increase their brand presence within these
regions. We also 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. See “Risk Factors.”
Our Information Systems
We use technology as an enabler of our business strategies. We have implemented systems targeted at
improving financial control, cost management, inventory control, merchandise planning, logistics, replenishment
and product allocation. In recent years, we have focused on information systems that are designed to be used in all
stores, yet are flexible enough to meet the unique needs of each specific store location.
A communications network sends and receives critical business data to and from our stores, providing
timely and extensive information on business activity in every location. Our information is processed in a secure
environment to protect both the actual data and the physical assets. We attempt to mitigate the risk of possible
business interruptions by maintaining a disaster recovery plan, which includes storing critical business information
off-site.
We strive to maintain highly qualified and motivated individuals to support our information systems, which
includes help desk staff, computer operators, programmers, system analysts, business analysts, project managers and
a security officer. Our systems are monitored 24 hours a day. Our management believes that our current systems
and practice of implementing regular updates position us well to support current needs and future growth. We use a
strategic information systems planning process that involves senior management and is integrated into our overall
business planning and enterprise risk management. Information systems projects are prioritized based upon
strategic, financial, regulatory and other business criteria.
- 8 -
Our Advertising and Promotion
We target advertising opportunities in our markets to increase the effectiveness of our advertising budget. Our
advertising and promotional spending is centrally directed. Print advertising, including direct mail catalogs and
postcards to customers, has historically served as the foundation of our promotional program and accounted for the
majority of our total advertising costs in Fiscal 2014. Other advertising, such as our MVP customer loyalty program,
the Hibbett website, social media, Hibbett trucks and outdoor billboards are used to reinforce Hibbett’s name
recognition and brand awareness. By allowing us to reach and interact with our customers on a consistent basis
through e-mail, the MVP program marketing effort has become the most efficient, timely and targeted segment of our
marketing program. Digital marketing, including mobile, social networks, website and MVP program marketing, will
become a more significant portion of our advertising budget over the next several years.
Our Competition
The business in which we are engaged is highly competitive. We have competition from national sporting
goods chains in some of our large and mid-size markets. The marketplace for sporting goods is 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 is different in smaller markets where retail
demand may not support larger format stores.
Although we face competition from a variety of competitors, including on-line retailers, we believe that our
stores are able to compete effectively by emphasizing team sports and fitness merchandise complemented by a
selection of localized apparel and accessories. Additionally, we differentiate our store experience through extensive
product knowledge, customer service and convenient locations. We believe we compete favorably with respect to
these factors in the smaller markets predominantly in the South, Southwest, Mid-Atlantic and Midwest regions of the
United States. 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
• Sports Additions, Registration No. 1767761
• Hibbett, Registration No. 3275037
Our Executive Officers
Our current executive officers and their prior business experience are as follows:
Jeffry O. Rosenthal, age 56, has been our Chief Executive Officer and President since March 2010.
Formerly, he served as President and Chief Operating Officer from February 2009 through March 2010 and as Vice
President of Merchandising from August 1998 through February 2009. Prior to joining us, Mr. Rosenthal was Vice
President and Divisional Merchandise Manager for Apparel with Champs Sports, a division of Foot Locker, Inc.
from 1981 to 1998.
Scott J. Bowman, age 47, was hired as our Senior Vice President and Chief Financial Officer in July 2012.
Prior to joining us, Mr. Bowman was Division Chief Financial Officer – Northern Division (Division CFO) of The
Home Depot, a large home improvement retailer. Previously, Mr. Bowman served The Home Depot as their Senior
Director, Finance – IT for approximately three years. In prior retail experience, he has worked in various controller
and accounting management positions.
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Rebecca A. Jones, age 54, was hired as our Vice President of Merchandising in August 2009 and is
currently a Senior Vice President of the Company. Prior to joining our Company, she served as Vice
President/General Merchandise Manager-Crafts at Jo-Ann Fabric and Craft Stores from 2003 to 2009 and as Vice
President/Divisional Merchandise Manager at Wal-Mart Stores from 1999 to 2003. In her prior retail experience,
Ms. Jones served in various operations, planning, buying and merchandising positions.
Cathy E. Pryor, age 50, is currently our Senior Vice President of Operations and has been with us since
1988. She has been our Vice President of Operations since 1995. Prior to 1995, Ms. Pryor held positions as a
district manager and Director of Store Operations.
Effective February 2, 2014, Michael J. Newsome transitioned from Executive Chairman to Chairman of the
Board of Directors.
Our Employees
As of February 1, 2014, we employed approximately 2,900 full-time and approximately 5,200 part-time
employees, none of whom are represented by a labor union. The number of part-time employees fluctuates
depending on seasonal needs. We consider our relationship with our employees to be good and have not
experienced significant interruptions of operations due to labor disagreements. 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.
Employee Development. We develop our training programs in a continuing effort to service the needs of
our customers and employees. These programs include DVD training in all stores for the latest in technical detail of
new products and new operational and customer 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.
One of the most significant training programs we have is Hibbett University or “Hibbett U”, which is an
intensive, four-day session 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.
Our third quarter experiences higher net sales during the back-to-school shopping period combined with tax-free
holidays in many of our markets. 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 and significant weather 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.
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Risks Related to Our Business and Industry.
A downturn in the economy could adversely affect consumer purchases of discretionary items, which could
reduce our net sales.
In general, our sales represent discretionary spending by our customers. A slowdown in the U.S. economy or
other economic conditions affecting disposable consumer income, such as volatile fuel and energy costs, depressed real
estate values, employment levels, inflation, deflation, business conditions, consumer debt levels, lack of available
credit, interest rates and tax rates may adversely affect our business. A reduction in customer traffic to our stores or a
shift in customer 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.
A slower pace of 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 real estate developers over the past several years, our new store
openings have slowed compared to our historical rate. We expect that the pressure on the commercial real estate
market will ease somewhat throughout Fiscal 2015, and we will be able to increase our overall square footage in Fiscal
2015.
We have grown rapidly, primarily through opening new stores, from 67 stores at the beginning of Fiscal 1997
to 927 stores at February 1, 2014. Our continued growth depends largely upon 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. 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.
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.
Failure to adequately plan and manage the transition to our new wholesaling and logistics facility may interrupt our
operations and lower our operating income.
The lease on our distribution facility expires in December 2014. In July 2012, we purchased land in
Alabaster, Alabama and have almost completed construction on a new wholesaling and logistics facility to replace our
current distribution facility.
The planned move of our distribution function entails risks that could cause disruptions in the operation of our
business, delays and cost overruns. Such risks include potential interruption in data flow, shortages of materials;
shortages of skilled labor or work stoppages; unforeseen construction, scheduling, engineering, environmental or
geological problems; weather interferences or other casualty losses; and unanticipated cost increases. There is also the
risk that we will not adequately adjust our business processes or appropriately manage our work force during the
transition. Failure to adequately plan and manage the relocation efforts or delays and cost overruns in or outside our
control, could cause a disruption in our operations and lower our operating income.
We rely heavily on information systems to conduct our business. Problems with our information systems could
disrupt our operations and negatively impact our financial results and materially adversely affect our business
operations.
The operation of our business is dependent on the successful integration and operation of our information
systems. We rely on our information systems to effectively manage our sales, distribution, merchandise planning
and replenishment, to process financial information and sales transactions and to optimize our overall inventory
levels. We attempt to mitigate the risk of possible business interruptions through change control protocols and a
disaster recovery plan, which includes storing critical business information off-site.
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Most of our information system infrastructure is centrally located at our headquarters, but we rely on third-
party service providers for certain system applications that are hosted remotely or in cloud-based applications.
There is a risk that we may not have adequately addressed risks associated with using third-party providers or cloud-
based applications including security issues such as adequate encryption and intrusion detection; user access
control; data separation; the impact of technical problems such as server outages; their disaster recovery capabilities;
and exit strategies. A service provider disruption or failure in any of these areas could have an adverse effect on our
business.
We may not have the technology infrastructure to support our current and future information needs.
Insufficient investment in technology, inadequate prevention maintenance, investment in the wrong technology,
delayed replacement of obsolete equipment, shifts in technology and inadequate policies to identify our technology
needs could have an adverse effect on our business.
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. We will only continue to operate existing stores if they meet required sales and profit
levels. In the current macroeconomic environment, the results of our existing stores are impacted not only by a volatile
sales environment, but by a number of things that are outside our control, such as the loss of traffic resulting from store
closures by other nearby retailers.
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 South, Southwest, Mid-Atlantic and Midwest regions of the United States,
which could subject us to regional risks.
Our stores are heavily concentrated in certain regions of the United States. We are subject to regional risks,
such as the regional economy, weather conditions and natural disasters, 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 that 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 and natural disasters such as earthquakes, hurricanes,
tornados, snow or ice 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 for such events;
however, our precautions may not be adequate to deal with such events in the future. If such events occur in areas in
which we have our distribution center or a concentration of retail stores, or if they occur during peak shopping seasons,
it could have a material adverse effect on our business, financial condition and results of operations.
Poor performance of college and professional sports teams within our core regions of operation, as well as
professional team lockouts, could adversely affect our financial results.
We sell a significant amount of licensed team sports merchandise, the sale of which may be subject to
fluctuations based on the success or failure of such teams. The poor performance by the college and professional sports
teams within our core regions of operations, as well as professional team lockouts, could cause our financial results to
fluctuate year over year.
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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.
•
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 return
privileges, volume purchasing allowances and cooperative advertising.
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, the loss or decline of key vendor support 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 criteria,
which is beyond our control.
We also rely on services and products from non-merchandise vendors. A disruption in these services or
products due to the financial condition or inefficient operations of these vendors could adversely affect our business
operations.
Our success depends substantially on the value and perception of the brand name merchandise we sell.
Our success is largely dependent on our consumers’ perception and connection to the brand names we carry,
such as Nike, Under Armour, Reebok, adidas, Easton, The North Face, etc. Brand value is based in part on our
consumer’s perception on a variety of subjective qualities so that even an isolated incident could erode brand value and
consumer trust, particularly if there is considerable publicity or litigation. Consumer demand for our products or
brands could diminish significantly in the event of erosion of consumer confidence or trust, resulting in lower sales
which could have a material adverse effect on our business, financial condition and results of operations.
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A disruption in the flow of imported merchandise or an increase in the cost of those goods could 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 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, labor availability and political unrest;
problems with oceanic shipping, including blockages or labor union strikes at U.S. or foreign
ports; and
economic crises and international disputes.
•
increases in the cost of purchasing or shipping foreign merchandise resulting from:
•
•
•
•
foreign government regulations;
rising commodity prices;
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.
Security threats, including physical and cyber security threats, and 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. Although we have security measures designed
to protect against the misappropriation or corruption of our information systems, our systems may still be vulnerable to
computer viruses, thefts, cyber attacks, acts of vandalism, programming and/or human errors, disruptions caused by
unauthorized tampering or outages caused by natural disasters or other similar events.
Cyber security threats are persistent and evolving. They include, but are not limited to, malicious software,
attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in
critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. Any
security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information,
intentional or unintentional, whether by us or our providers, could damage our reputation, expose us to risk of litigation
and liability and harm our business.
Pressure from our competitors may force us to reduce our prices or increase our spending, which would lower
our net sales, gross profit and operating income.
The business in which we are engaged is highly competitive. The marketplace for sporting goods is highly
fragmented as many different retailers compete for market share by utilizing a variety of store formats and
merchandising strategies. We compete with 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 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.
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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 holiday shopping 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 the past few years, we have also experienced higher than historical third quarter net
sales resulting from the back-to-school period complimented by sales tax holidays in many of our markets. 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 disgrace 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 could 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 income tax refunds to customers;
increases in personal income taxes paid by our customers;
calendar shifts or cancellations of sales tax-free holidays in certain states;
the success or failure of college and professional sports teams within our core regions;
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 distribution center in Birmingham, Alabama. While we plan to transition to our
new wholesaling and logistics facility in early Fiscal 2015, we will continue to receive and ship substantially all of our
merchandise at a single facility after the completion of the transition. Any natural disaster or other serious disruption to
this facility 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 net 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, the loss of which may adversely affect our ability to run our business effectively and
our results of operations.
We benefit from the leadership and performance of our senior management team and other key employees.
If we lose the services of any of our principal executive officers or other skilled and experienced personnel, we may
not be able to fully implement our business strategy or run our business effectively and operating results could
suffer.
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The Compensation Committee of our Board of Directors reviews a succession plan prepared by senior
management in consideration of the loss of key personnel positions on a regular basis. The goal of the succession plan
is to have a contingency plan that minimizes disruptions in the workplace until a suitable replacement can be found, but
no assurance can be given that we will be able to retain existing or attract additional qualified personnel when needed.
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:
•
•
•
•
•
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 common stockholders may only be called by the Board of Directors,
the Chairman of the Board of Directors or upon the demand of the holders of a majority of the total
voting power of all outstanding securities of the Company 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 results of operations.
We rely upon various means of transportation, including ship 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. 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.
In addition, labor shortages in the transportation industry could negatively affect transportation costs and our
ability to supply our stores in a timely manner. We also rely on efficient and effective operations within our
distribution center to ensure accurate product delivery to our stores. Failure to maintain such operations could
adversely affect net sales.
We manage cash and cash equivalents beyond federally insured limits per financial institution and purchase
investments not fully guaranteed by the Federal Deposit Insurance Corporation (FDIC), subjecting us to investment
and credit availability risks.
We manage cash and cash equivalents in various institutions at levels beyond federally insured limits per
institution, and we purchase investments not guaranteed by the FDIC. Accordingly, there is a risk that we will not
recover the full principal of our investments or that their liquidity may be diminished. In an attempt to mitigate this
risk, our investment policy emphasizes preservation of principal and liquidity. We cannot be assured that we will not
experience losses on our deposits.
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We face risk that financial institutions may fail to fulfill commitments under our committed credit facilities.
We have financial institutions that are committed to providing loans under our revolving credit facilities.
There is a risk that these institutions cannot deliver against these obligations in a timely matter, or at all. If the financial
institutions that provide these credit facilities were to default on their obligation to fund the commitments, these
facilities would not be available to us, which could adversely affect our liquidity and financial condition. For
discussion of our credit facilities, see “Liquidity and Capital Resources” in Item 7 and Note 5 to our consolidated
financial statements.
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. Our compensation packages are designed to provide benefits
commensurate with our level of expected service. However, within our retail and our distribution 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 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. 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.
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.
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Changes in federal, state or local laws, or our failure to comply with such laws, could increase our expenses and
expose us to legal risks.
Our Company is subject to numerous laws and regulatory matters relating to the conduct of our business. In
addition, certain jurisdictions have taken a particularly aggressive stance with respect to certain matters and have
stepped up enforcement, including fines and other sanctions. Such laws and regulatory matters include:
• The Americans with Disabilities Act and similar state laws that give civil rights protections to individuals
with disabilities in the context of employment, public accommodations and other areas;
• The Patient Protection and Affordable Care Act provisions;
• Labor and employment laws that govern employment matters such as minimum wages, overtime, family
leave mandates and workplace safety regulations;
• Securities and exchange laws and regulations;
• New or changing laws relating to state and local taxation and licensing, including sales and use tax laws,
withholding taxes and property taxes;
• New or changing laws relating to information security, privacy, cashless payments and consumer credit,
protection and fraud;
• New or changing environmental regulations, including measures related to climate change and
greenhouse gas emissions;
• New or changing laws and regulations concerning product safety or truth in advertising; and
• New or changing federal and state immigration laws and regulations.
Increasing regulations could expose us to a challenging enforcement environment or to third-party liability
(such as monetary recoveries and recoveries of attorney’s fees) and could have a material adverse effect on our
business and results of operations.
Our corporate legal department monitors regulatory activity and is active in notifying and updating applicable
departments and personnel on pertinent matters and legislation. Our Human Resources (HR) Department leads HR
compliance training programs to ensure our field managers are kept abreast of HR-related regulatory activity that
affects their areas of responsibility. 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
expenditure 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 numerous tax 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 on 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, expiration of tax credits formerly available, 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 that could adversely affect our results of
operations. For a description of current legal proceedings, see “Part I, Item 3, Legal Proceedings.”
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Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We currently lease all of our existing 927 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. See “Risk Factors.”
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, in recent years, we have experienced some difficulty securing leases for new stores related to
new construction due to the economic issues facing the commercial real estate market and landlords, thus reducing our
ability to open stores at our historical rates. This trend has continued, but has improved to some extent each year and
into Fiscal 2014. 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.
We moved our corporate office in Fiscal 2014 from a leased facility to a building owned by us. Our
distribution center is leased under an operating lease which expires in December 2014. We own the Team facility
located in Birmingham, Alabama that warehouses inventory for educational institutions and youth associations. We
have completed construction on a new wholesaling and logistics facility that we expect to be in operation in early
Fiscal 2015. We believe our new facility is suitable and adequate to support our operations in the coming years.
See “Risk Factors.”
Store Locations
As of February 1, 2014, we operated 927 stores in 31 contiguous states. Of these stores, 195 are located in
enclosed malls and 732 are located in strip-shopping centers, which are frequently near a Wal-Mart store. Strip-
shopping centers include free-standing stores. The following shows the number of locations by state as of February 1,
2014:
Alabama
Arizona
Arkansas
Colorado
Delaware
Florida
Georgia
Iowa
Illinois
Indiana
Kansas
87
6
42
8
1
49
92
9
26
23
23
Kentucky
Louisiana
Maryland
Minnesota
Mississippi
Missouri
Nebraska
New Mexico
North Carolina
Ohio
Oklahoma
56
48
2
1
62
33
9
11
54
20
42
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
West Virginia
Wisconsin
TOTAL
1
35
1
59
89
3
16
11
8
927
As of March 15, 2014, we operated 931 stores in 31 states.
- 19 -
Item 3. Legal Proceedings.
We are a party to various legal proceedings incidental to our business. Where we are able to reasonably
estimate an amount of probable loss in these matters based on known facts, we have accrued that amount as a
current liability on our balance sheet. We are not able to reasonably estimate the possible loss or range of loss in
excess of the amount accrued for these proceedings based on the information currently available to us, including,
among others, (i) uncertainties as to the outcome of pending proceedings (including motions and appeals) and (ii)
uncertainties as to the likelihood of settlement and the outcome of any negotiations with respect thereto. We do not
believe that any of these matters will, individually or in the aggregate, have a material effect on our business or
financial condition. We cannot give assurance, however, that one or more of these proceedings will not have a
material effect on our results of operations for the period in which they are resolved. At February 1, 2014 and
February 2, 2013, we estimated that the liability related to these matters was approximately $0.2 million and $0.3
million, respectively, and accordingly, we accrued $0.2 million and $0.3 million, respectively, as a current liability
in our consolidated balance sheets.
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.
Item 4. Mine Safety Disclosures.
Not applicable.
- 20 -
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 2014:
First Quarter ended May 4, 2013
Second Quarter ended August 3, 2013
Third Quarter ended November 2, 2013
Fourth Quarter ended February 1, 2014
Fiscal 2013:
First Quarter ended April 28, 2012
Second Quarter ended July 28, 2012
Third Quarter ended October 27, 2012
Fourth Quarter ended February 2, 2013
High
$
$
$
$
56.54
61.50
61.64
67.73
$
$
$
$
59.79
62.24
62.91
54.99
Low
$
$
$
$
51.00
55.00
51.16
58.74
$
$
$
$
47.91
54.34
53.45
50.71
On March 15, 2014, the last reported sale price for our common stock as quoted by NASDAQ was $55.70 per
share. As of March 15, 2014, we had 35 stockholders of record.
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, 2009 to
January 31, 2014. We have not paid any dividends. Total stockholder return for prior periods is not necessarily an
indication of future performance.
- 21 -
01/31/09
01/31/10
01/31/11
01/31/12
01/31/13
01/31/14
Hibbe tt Sports, Inc.
NASDAQ C omposite
NASDAQ Re tail Trade
100.00
100.00
100.00
155.91
145.73
176.03
235.27
185.35
231.96
352.17
196.13
262.10
386.92
222.33
333.70
440.93
296.73
401.19
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.”
- 22 -
Issuer Repurchases of Equity Securities
The following table presents our shares repurchase activity for the thirteen weeks ended February 1, 2014 (1):
Period
November 3, 2013 to November 30, 2013
December 1, 2013 to January 4, 2014
January 5, 2014 to February 1, 2014
Total
Total Number
of S hares
Purchased
9,500
5,000
7,000
21,500
Average
Price per
S hare
$
61.58
$
64.21
$
59.76
$
61.60
Total Number of
S hares
Purchased as
Part of Publicly
Announced
Programs
Approximate Dollar
Value of S hares that
may yet be
Purchased Under the
Programs (in
thousands)
9,500
5,000
7,000
21,500
$
$
$
$
230,352
230,031
229,613
229,613
(1) In November 2012, the Board of Directors authorized a Stock Repurchase Program of $250.0 million to
repurchase our common stock through January 29, 2016. See Note 1, “Stock Repurchase Program”.
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.
(In thousands, except per share amounts, Selected Store Data or where noted otherwise)
February 1,
2014
(52 weeks)
February 2,
2013
(53 weeks)
Fiscal Year Ended
January 28,
2012
(52 weeks)
January 29,
2011
(52 weeks)
January 30,
2010
(52 weeks)
$
851,965
$
818,700
$
732,645
$
664,954
$
593,492
542,700
309,265
519,818
298,882
470,237
262,408
434,552
230,402
397,292
196,200
S tatement of Operations 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 expense, net
Income before provision for income taxes
Provision for income taxes
Net income
181,527
13,847
113,891
188
113,703
42,826
70,877
$
Basic earnings per share
Diluted earnings per share
Basic weighted shares outstanding
Diluted weighted average shares outstanding
$
$
2.74
2.70
25,870
26,266
Note: No dividends have been declared or paid.
169,872
13,029
115,981
168
115,813
43,231
72,582
$
$
$
2.78
2.72
26,132
26,638
155,672
13,205
93,531
217
93,314
34,254
59,060
$
143,232
13,623
73,547
105
73,442
27,042
46,400
$
129,888
13,905
52,407
57
52,350
19,801
32,549
$
$
$
2.19
2.15
26,978
27,506
$
$
1.63
1.60
28,426
29,033
$
$
1.14
1.12
28,629
29,089
- 23 -
(In thousands, except per share amounts, Selected Store Data or where noted otherwise)
February 1,
2014
(52 weeks)
February 2,
2013
(53 weeks)
Fiscal Year Ended
January 28,
2012
(52 weeks)
January 29,
2011
(52 weeks)
January 30,
2010
(52 weeks)
Other Data:
Net sales increase
Comparable store sales increase
Gross profit (as a % to net sales)
Store operating, selling and administrative
expenses (as a % to net sales)
Depreciation and amortization (as a % to net
sales)
Provision for income taxes (as a % to net
sales)
Net income (as a % to net sales)
4.1%
1.8% (1)
36.3%
11.8%
6.9% (2)
36.5%
21.3%
20.8%
1.6%
5.0%
8.3%
1.6%
5.3%
8.9%
10.2%
6.8%
35.8%
21.2%
1.8%
4.7%
8.1%
12.0%
9.8%
34.7%
21.5%
2.1%
4.1%
7.0%
Balance S heet Data:
Cash and cash equivalents
Average inventory per store
Working capital
Total assets
Long-term capital lease obligations
Stockholders' investment
Treasury shares repurchased
Cost of treasury shares purchased
S elected S tore Data:
Stores open at beginning of period
New stores opened
Stores closed
Stores open at end of period
Stores expanded during the period
Estimated square footage at end of period
$
$
$
$
$
$
66,227
244
232,235
416,345
2,889
304,023
366
20,095
$
$
$
$
$
$
$
76,911
254
202,899
377,331
2,138
239,127
904
49,852
$
$
$
$
$
$
$
55,138
234
177,115
313,696
2,072
203,750
1,897
68,613
$
$
$
$
$
$
$
75,517
219
175,007
314,265
2,245
200,088
1,461
37,859
$
873
72
(18)
927
14
5,331
832
54
(13)
873
13
5,003
798
52
(18)
832
15
4,755
767
45
(14)
798
14
4,558
745
42
(20)
767
18
4,399
5.2%
0.1%
33.1%
21.9%
2.3%
3.3%
5.5%
$
$
$
$
$
$
49,691
221
147,583
276,704
152
175,079
-
$
-
(1) Represents the increase in comparable store sales for the period ended February 2, 2013 to February 1, 2014.
(2) As originally reported for the period ended February 2, 2013.
- 24 -
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with Item 6, “Selected Consolidated Financial
Data” and our consolidated financial statements and related notes appearing elsewhere in this report. This Annual
Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. See “Forward-Looking Statements” and Part I, Item 1A. “Risk Factors”.
Overview
Note: All references to comparable store sales in Fiscal 2013 refer to the 52-week comparison to Fiscal 2012
without consideration of the 53rd week in Fiscal 2013. All other Fiscal 2013 financial information includes the full 53-
week period.
Hibbett Sports, Inc. operates sporting goods stores in small to mid-sized markets, predominantly in the
South, Southwest, Mid-Atlantic and Midwest regions of the United States. We believe Hibbett Sports stores are
typically the primary sporting goods retailers in smaller markets due to the extensive selection of premium brand name
merchandise, availability of local merchandise, an emphasis on team sports and a high level of customer service. As of
February 1, 2014, we operated a total of 927 retail stores in 31 states composed of 910 Hibbett Sports stores and 17
Sports Additions athletic shoe stores.
Our primary retail format and growth vehicle is Hibbett Sports, an approximately 5,000-square-foot store
located primarily in strip centers, which are frequently near a Wal-Mart store. Approximately 80% of our Hibbett
Sports store base is located in strip centers, which includes free-standing stores, while approximately 20% 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 do not expect that the average size of our
stores opening in Fiscal 2015 will vary significantly from the average size of stores opened in Fiscal 2014.
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 2014 included 52 weeks of operations. The consolidated
statements of operations for Fiscal 2013 included 53 weeks of operations and Fiscal 2012 included 52 weeks of
operations. Fiscal 2015 will include 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.
Fiscal 2014 experienced a total company-wide square footage increase of 6.5%. Our plan for Fiscal 2015 is to
increase total company-wide square footage by 6% to 7%. To supplement new store openings, we continue to expand
high performing stores, increasing the square footage in 14 existing stores in Fiscal 2014 for an average increase in
square footage of 56%. We expect to expand an additional 10 to 15 stores in Fiscal 2015.
In Fiscal 2013, we began construction on a new wholesaling and logistics facility to support our expected
growth over the next several years with an expected operations date in early Fiscal 2015. The expected total cost of the
new facility is estimated at approximately $40.0 million.
We historically have had increases in comparable store net sales in the low to mid-single digit range. In Fiscal
2014, activewear, accessories and footwear experienced mid-single digit comparable store gains. Total comparable
store sales percentage growth is expected to be in the low to mid-single digits in Fiscal 2015. We expect a flat to
slightly positive increase in merchandise margin, but a slight decrease in overall gross profit rate in Fiscal 2015 due to
additional costs related to our new wholesaling and logistics facility.
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 increase slightly in
Fiscal 2015, primarily due to increases in marketing, information technology and health care costs. We also expect to
continue to generate sufficient cash to enable us to expand and remodel our store base, to provide capital expenditures
for our wholesaling and logistics facility, technology upgrade projects and to repurchase our common stock under our
stock repurchase program.
- 25 -
Due to the 53rd week in Fiscal 2013, each quarter in Fiscal 2014 started one week later than the same
quarter in Fiscal 2013. The chart below presents comparable store sales for Fiscal 2013 as originally reported and as
adjusted to represent the same 13-week period as the Fiscal 2014 quarters:
Comparable store sales increase (originally reported)
Comparable store sales increase (adjusted for week shift)
Impact of week shift
Second
Quarter
FISCAL 2013
Third
First
Quarter
Quarter
11.1% 4.8%
6.4%
8.6% 12.5% -0.7%
7.7%
-2.5%
4.9%
4.4%
-7.1% -0.5%
Fourth
Quarter Full Year
6.9%
6.0%
-0.9%
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
a store remodel, relocation or expansion 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.
Executive Summary
Following is a highlight of our financial results over the last three fiscal years:
Net sales (in millions)
Operating income, percentage to net sales
Comparable store sales increase
Net income (in millions)
Net income, percentage (decrease) increase
Diluted earnings per share
Fiscal 2014
(52 weeks)
$
852.0
13.4%
1.8%
70.9
(2.4)%
2.70
$
$
Fiscal 2013
(53 weeks)
$
818.7
14.2%
6.9%
72.6
22.9%
2.72
$
$
Fiscal 2012
(52 weeks)
$
732.6
12.8%
6.8%
59.1
27.3%
2.15
$
$
During Fiscal 2014, Hibbett opened 72 new stores and closed 18 underperforming stores, bringing the store
base to 927 in 31 states as of February 1, 2014. Inventory on a per store basis at February 1, 2014 decreased by
3.6% resulting from planned later receipts of spring inventory to better coincide with the timing of sales. Hibbett
ended Fiscal 2014 with $66.2 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 February 1, 2014, for
information regarding recent accounting pronouncements.
- 26 -
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.
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 (expense) income, net
Income before provision for income taxes
Provision for income taxes
Net income
Note: Columns may not sum due to rounding.
Fiscal 2014 Compared to Fiscal 2013
February 1,
2014
Fiscal Year Ended
February 2,
2013
January 28,
2012
100.0%
100.0%
100.0%
63.7
36.3
21.3
1.6
13.4
-
13.4
5.0
8.3%
63.5
36.5
20.8
1.6
14.2
-
14.2
5.3
8.9%
64.2
35.8
21.2
1.8
12.8
-
12.7
4.7
8.1%
Net sales. Net sales increased $33.3 million, or 4.1%, to $852.0 million for Fiscal 2014 from $818.7
million for Fiscal 2013. Furthermore:
• We opened 72 Hibbett Sports stores while closing 18 underperforming Hibbett Sports stores for net
stores opened of 54 stores in Fiscal 2014. Stores not in the comparable store net sales calculation
accounted for $19.9 million of the increase in net sales. We expanded, remodeled or relocated 17 high
performing stores. Store openings and closings are reported net of relocations.
• We achieved a 1.8% increase in comparable store net sales for Fiscal 2014 compared to Fiscal 2013.
Comparable store net sales contributed $13.4 million to the increase in net sales.
During Fiscal 2014, 799 stores were included in the comparable store sales comparison. The increase in
comparable store net sales was broad-based with gains across activewear, accessories and footwear. Product
performances were led by positive trends in youth and fleece activewear, branded accessories and youth footwear.
Basketball shoes were the highest performer in our footwear categories while our running business under performed
in Fiscal 2014. The majority of our comparable store sales increase was from increased sales per transaction
primarily due to a continued trend towards premium product.
Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy
and operating costs for our distribution center. Gross profit was $309.3 million, or 36.3% of net sales, in Fiscal
2014, compared with $298.9 million, or 36.5% of net sales, in Fiscal 2013.
• Gross profit rate decreased slightly as a percentage of net sales due to increased markdowns to
liquidate aged inventory. We expect gross profit rate to decrease slightly in Fiscal 2015 due to
increased expenses as we transition into our new wholesaling and logistics facility.
• Distribution expense as a percentage of net sales decreased 16 basis points resulting primarily from
decreased labor costs, which was due to improvements in labor efficiency and product flow through
the current facility. In Fiscal 2015, with the transition into our new wholesaling and logistics facility,
we expect this expense to increase as a percentage of net sales due to the transition to the new facility,
higher on-going operating costs of the new facility and duplicate expenses from the current facility
until the lease expires in December 2014.
- 27 -
• Store occupancy expense as a percentage of net sales increased 23 basis points due to weakened sales
resulting from closed store days caused by the unusual winter weather in a large portion of our markets
in January. The largest increase as a percent to net sales was rent expense.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses
were $181.5 million, or 21.3% of net sales, for Fiscal 2014, compared with $169.9 million, or 20.8% of net sales, for
Fiscal 2013. Expense trends we experienced included:
• Total salary and benefit costs increased in dollars and as a percentage to net sales by 32 basis points
due to Company growth, higher health care costs, annual pay rate increases and as a consequence of
weaker sales growth. As our store base grows, we expect an increase in salary and benefit dollars, but
believe these costs as a percentage to net sales will remain relatively stable.
• New store costs increased 6 basis points as a percentage of net sales resulting from an increase in new
store openings. We expect these costs to increase slightly in Fiscal 2015 as we continue to increase
new store openings.
• Stock-based compensation decreased by 8 basis points as a percentage of net sales due to the
achievement of certain performance awards at a lower level than those achieved in the prior year and
the expectation of future awards being achieved at less than the goal established.
• Expenses associated with our new corporate headquarters contributed an increase of 10 basis points as
a percentage of net sales. We expect these costs will increase in Fiscal 2015 as we record a complete
year of expense related to the new building.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 1.6% in
Fiscal 2014 and in Fiscal 2013. In Fiscal 2014, the addition of our new corporate headquarters and inventory
markdown optimization system resulted in an elevated depreciation expense in both dollars and in percentage of net
sales. This expense will increase in Fiscal 2015 as we place our new wholesaling and logistics facility into service.
Provision for income taxes. The combined federal, state and local effective income tax rate as a percentage
of pre-tax income was 37.7% for Fiscal 2014 and 37.3% for Fiscal 2013. The increase in rate resulted primarily
from less deductible stock option expense and fewer federal employment tax credits compared to Fiscal 2013.
Fiscal 2013 Compared to Fiscal 2012
Net sales. Net sales increased $86.1 million, or 11.8%, to $818.7 million for Fiscal 2013 from $732.6
million for Fiscal 2012. Furthermore:
• We opened 54 Hibbett Sports stores while closing 13 underperforming Hibbett Sports stores for net
stores opened of 41 stores in Fiscal 2013. Stores not in the comparable store net sales calculation
accounted for $37.7 million of the increase in net sales. The 53rd week contributed $11.9 million of the
increase in net sales. We expanded, remodeled or relocated18 high performing stores. Store openings
and closings are reported net of relocations.
• We achieved a 6.9% increase in comparable store net sales for Fiscal 2013 compared to Fiscal 2012.
Comparable store net sales contributed $48.4 million to the increase in net sales.
During Fiscal 2013, 763 stores were included in the comparable store sales comparison. The increase in
comparable store net sales was broad-based with strong performances across accessories, activewear and footwear.
Strong product performances were led by positive trends in footwear accessories, branded headwear, youth
activewear and all categories of footwear. Basketball shoes were the highest performer in our footwear categories
while our running business moderated in Fiscal 2013. The majority of our comparable store sales increase was from
increased sales per transaction primarily due to an assortment change mix to premium product.
- 28 -
Gross profit. Cost of goods sold included the cost of inventory, occupancy costs for stores and occupancy
and operating costs for our distribution center. Gross profit was $298.9 million, or 36.5% of net sales, in Fiscal
2013, compared with $262.4 million, or 35.8% of net sales, in Fiscal 2012.
• Gross profit percentage improved as a percentage of net sales due to continued improvements in
assortments by market, tight controls over markdowns and promotions and improved inventory
shrinkage. Strong sales performance and improved aged inventory negated the need for liquidating
promotions and resulted in higher initial sell-through of inventory at regular prices.
• Distribution expense as a percentage of net sales increased 9 basis points resulting primarily from
increases in data processing, third-party services and labor expenses. In Fiscal 2012, we initiated
broadband service in the majority of our stores and experienced its full cost impact in Fiscal 2013. We
also experienced an increase in freight costs due to higher gas prices.
• Store occupancy expense as a percentage of net sales decreased 53 basis points due to strong sales and
careful management of occupancy costs. The largest decrease as a percent to net sales was rent
expense as we continued to experience rent savings through lease renegotiations and from co-tenancy
violations by our landlords, offset somewhat by a decrease in construction allowances.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses
were $169.9 million, or 20.8% of net sales, for Fiscal 2013, compared with $155.7 million, or 21.2% of net sales, for
Fiscal 2012. Expense trends we experienced included:
• Total salary expense increased in dollars due to Company growth and annual pay rate increases but
decreased 21 basis points as a percentage of net sales due to strong sales results. Salary costs in our
stores decreased 20 basis points as a percentage of net sales. As our store base grows, we expect an
increase in salary and benefit dollars, but believe these costs as a percentage to net sales will remain
relatively stable.
• Credit card fees decreased 13 basis points as a percentage of net sales resulting from lower debit card
transaction fees.
• Stock-based compensation decreased by 6 basis points as a percentage of net sales due to the
achievement of certain performance awards at less than the rate of those achieved in the prior year.
We also experienced a larger than average forfeiture of restricted stock units compared to prior year.
• Expenses associated with preparing our new corporate headquarters contributed an increase of 2 basis
points as a percentage of net sales.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 1.6% in
Fiscal 2013 compared to 1.8% in Fiscal 2012. We attributed the decrease in depreciation expense as a percent of net
sales to a decrease in the investment in leasehold improvements in recent years as more of the build-out work was
being done by landlords offset somewhat by changes in estimates of useful lives of leasehold improvements in
underperforming stores.
Provision for income taxes. The combined federal, state and local effective income tax rate as a percentage
of pre-tax income was 37.3% for Fiscal 2013 and 36.7% for Fiscal 2012. The increase in rate resulted primarily
from lower federal income tax credits as a result of the expiration of the Work Opportunity Tax Credit program and
the resolution of an income tax matter with a state taxing authority in Fiscal 2012.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings, stock repurchases, facilities and systems to
support company growth 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. Due to the low interest rates currently available, we
are using excess cash on deposit to offset bank fees versus investing such funds in an equity market or in interest-
bearing deposits.
- 29 -
Our consolidated statements of cash flows are summarized as follows (in thousands):
February 1,
2014
Fiscal Year Ended
February 2,
2013
January 28,
2012
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Operating Activities.
$
$
$
53,301
(50,990)
(12,995)
(10,684)
87,124
(22,318)
(43,033)
21,773
$
$
$
54,921
(13,375)
(61,925)
(20,379)
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.
Net cash provided by operating activities was $53.3 million for Fiscal 2014 compared with net cash provided
by operating activities of $87.1 million and $54.9 million in Fiscal 2013 and Fiscal 2012, respectively. The decrease in
net cash provided by operating activities for Fiscal 2014 compared to Fiscal 2013 and Fiscal 2012 was impacted by the
following:
• The change in accounts payable used cash of $27.5 million, provided cash of $28.3 million in Fiscal 2013
and used cash of $2.3 million during Fiscal 2012. The decrease in Fiscal 2014 resulted from a later
receipt of inventory in advance of the spring season. The increase in Fiscal 2013 resulted from an earlier
receipt of inventory in advance of the spring season. The fluctuation in cash provided by accounts
payable in Fiscal 2012 resulted from the anniversary of payment term extensions initiated in Fiscal 2011
with the use of corporate purchasing cards.
• Ending inventory declined 3.6% and increased 8.2% on a per store level basis at February 1, 2014 and
February 2, 2013, respectively, compared to the prior year. This was primarily due to the later receipt of
spring inventory compared to the prior year. The increase in inventory used cash of $5.2 million, $26.3
million and $20.2 million during Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively.
• Net income provided cash of $70.9 million, $72.6 million and $59.1 million during Fiscal 2014, Fiscal
2013 and Fiscal 2012, respectively.
• Non-cash charges included depreciation and amortization expense of $13.8 million, $13.0 million and
$13.2 million during Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively, and stock-based
compensation expense of $5.8 million, $5.6 million and $5.5 million during Fiscal 2014, Fiscal 2013 and
Fiscal 2012, respectively. Depreciation expense increased in Fiscal 2014 due to investments in facilities
and information technology systems and will continue to increase as all facilities and systems are placed
into service. Fluctuations in stock-based compensation generally result from the achievement of
performance-based equity awards at greater or lesser than their granted level and fluctuations in the price
of our common stock.
Investing Activities.
Cash used in investing activities in the fiscal periods ended February 1, 2014, February 2, 2013 and January
28, 2012 totaled $51.0 million, $22.3 million and $13.4 million, respectively. Gross capital expenditures used $50.5
million, $22.0 million and $13.0 million during Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively. Capital
expenditures in Fiscal 2014 included our new corporate headquarters, our inventory markdown optimization system
and construction costs on our new wholesale and logistics facility.
We use cash in investing activities to build new stores and remodel, expand or relocate existing stores. We
opened 72 new stores and relocated, expanded and/or remodeled 17 existing stores during Fiscal 2014. We opened 54
new stores and relocated, expanded and/or remodeled 18 existing stores during Fiscal 2013. We opened 52 new stores
and relocated, expanded and/or remodeled 18 existing stores during Fiscal 2012.
- 30 -
We estimate the cash outlay for capital expenditures in the fiscal year ending January 31, 2015 will be
approximately $25.0 million to $30.0 million, which relates to expenditures for our new wholesaling and logistics
facility, the opening of 75 to 80 new stores, the remodeling, relocation or expansion of selected existing stores,
information system upgrades, and other departmental needs. Of the total budgeted dollars for capital expenditures for
Fiscal 2015, we anticipate that approximately 43% will be related to the opening of new stores and remodeling and/or
relocating of existing stores. Approximately 19% will be related to the completion of our new wholesaling and
logistics facility. The remaining 38% relates primarily to expenditures in information technology, but also includes
store fixtures, transportation equipment, automobiles and security equipment for our stores.
The lease for our existing distribution center expires in December 2014. We expect to relocate our new
wholesaling and logistics facility in early Fiscal 2015 at a total cost of $40.0 million of which $33.2 million was
expended by the end of Fiscal 2014.
Financing Activities.
Net cash used in financing activities was $13.0 million, $43.0 million and $61.9 million in Fiscal 2014, Fiscal
2013 and Fiscal 2012, respectively. The financing activity cash fluctuation between years is primarily the result of
repurchases of our common stock. We expended $15.8 million, $45.9 million and $67.5 million on repurchases of our
common stock during Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively.
Financing activities also consisted of proceeds from stock option exercises and employee stock plan purchases
and the excess tax benefit from the exercise of incentive stock options. As stock options are exercised and shares are
purchased through our employee stock purchase plan, we will continue to receive proceeds and expect a tax deduction;
however, the amounts and timing cannot be predicted.
At February 1, 2014, we had two unsecured revolving credit facilities that allow borrowings up to $30.0
million and $50.0 million, and which renew in August 2014 and November 2014, 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 February 1, 2014, we did not have any debt
outstanding under either of these facilities.
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 February 1, 2014 (in thousands):
Contractual Obligations
Long-term debt obligations
Capital lease obligations (1)
Interest on capital lease obligations (1)
Operating lease obligations (1)
Purchase obligations (2)
Other liabilities (3)
Total
Payment due by period
Less than 1
year
-
$
331
288
50,162
4,497
515
55,793
$
1 - 3 years
-
$
741
514
71,540
933
-
73,728
$
3 - 5 years
-
$
854
405
40,428
21
-
41,708
$
More than
5 years
-
$
1,285
406
29,941
-
2,437
34,069
$
Total
-
$
3,211
1,613
192,071
5,451
2,952
205,298
$
(1) See “Part II, Item 8, Consolidated Financial Statements Note 6 – Leases.”
(2) Purchase obligations include all material legally binding contracts such as software license commitments and
service contracts. The table above also includes a stand-by letter of credit in conjunction with our self-
insured workers’ compensation and general liability insurance coverage. Contractual obligations that are not
binding agreements, including purchase orders for inventory, are excluded from the table above. Store utility
contracts, including waste disposal agreements, are also excluded.
- 31 -
(3) Other liabilities include amounts accrued for various deferred compensation arrangements. See “Part II, Item
8, Consolidated Financial Statements Note 7 – Defined Contribution Benefit Plans” for a discussion regarding
our employee benefit plans.
Non-current liabilities, primarily consisting of deferred rent and unrecognized tax benefits, have been
excluded from the above table to the extent that the timing and/or amount of any cash payment are uncertain.
Excluded from this table are approximately $1.5 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. 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 9 – Income Taxes” for a discussion of our unrecognized tax benefits.
Off-Balance Sheet Arrangements
We have not provided any financial guarantees through February 1, 2014. 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 global financial
markets, U.S. government policies, the Middle East and Asia, 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 decline because of economic pressures. See “Risk Factors”.
We do not believe that inflation has had a material impact on our financial position or results of operations
to date. However, we are experiencing increased prices and a high rate of inflation in the future may have an
adverse effect on our ability to maintain current levels of gross profit and selling, general and administrative
expenses as a percentage of net sales if the selling prices of our merchandise do not increase with these increased
costs.
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.
We offer a customer loyalty program, the MVP Rewards program, whereby customers, upon registration,
can earn points in a variety of ways, including store purchases, website surveys and other activities on our website.
Based on the number of points accumulated, customers receive reward certificates on a quarterly basis that can be
redeemed in our stores. An estimate of the obligation related to the program, based on historical redemption rates, is
recorded as a current liability and a reduction of net sales in the period earned by the customer. The current liability
is reduced, and a corresponding amount is recognized in net sales, in the amount of and at the time of redemption of
the reward certificate. At February 1, 2014 and February 2, 2013, the amount recorded in current liabilities for
reward certificates issued was inconsequential.
- 32 -
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.
Gift card breakage revenue is recognized to the extent not required to be remitted to jurisdictions as
unclaimed property and is 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. Based on our analyses of redemption
activity, we have determined the likelihood of redemption for gift cards 5 years after the date of initial issuance is
remote. For Fiscal 2014, Fiscal 2013 and Fiscal 2012, $0.2 million, $0.3 million and $0.2 million of breakage
revenue, respectively, was recorded as other income and is included in the accompanying consolidated statements of
operations as a reduction to store operating, selling and administrative expenses. The net deferred revenue liability
at February 1, 2014 and February 2, 2013 was $4.5 million and $3.9 million, respectively.
Inventory Valuation.
Inventories are valued using the lower of weighted average cost or market method. Items are removed
from inventory using the weighted average cost method.
Lower of Cost or Market: 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 February 1, 2014 and February 2, 2013,
the accrual was $2.2 million and $2.3 million, respectively. 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 physical
inventories. These estimates are compared to actual results as physical inventory counts are performed and
reconciled to the general ledger. Store and distribution center physical counts are performed on a cyclical basis. As
of February 1, 2014 and February 2, 2013, the accrual was $1.3 million and $1.5 million, respectively.
Inventory Purchase Concentration: Our business is dependent to a significant degree upon close
relationships with our vendors. Our largest vendor, Nike, represented 52.3%, 48.9% and 48.3% of our purchases for
Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively. Our second largest vendor in Fiscal 2014 represented
15.6%, 12.8% and 9.3% of our purchases while our third largest vendor in Fiscal 2014 represented 8.6%, 10.9% and
11.4% of our purchases for Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively.
Consignment Inventories: Consignment inventories, which are owned by the vendor but located in our
stores, are not reported as our inventory until title is transferred to us or our purchase obligation is determined. At
February 1, 2014 and February 2, 2013, vendor-owned inventories held at our locations (and not reported as our
inventory) were $1.1 million and $1.6 million, respectively.
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.
- 33 -
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 9 – Income Taxes” for additional detail on our uncertain tax positions.
Legal Proceedings and Claims. 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. See “Risk Factors”.
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. See “Risk Factors”.
Stock-Based Compensation. We measure stock-based compensation for all share-based awards granted
based on the estimated fair value of those awards at grant date. The cost of restricted stock units and performance-
based restricted stock units is determined using the fair value of our common stock on the date of grant. For stock
options granted, we use the Black-Scholes valuation model to estimate the fair value at the date of grant for options
granted under our equity incentive plans and stock purchase rights associated with the Employee Stock Purchase
Plan.
Stock-based compensation is expensed over the service period of the awards. Performance-based awards
are expensed based on the probability of achievement of the underlying target, which is estimated and adjusted as
financial results dictate during the performance period. The Black-Scholes valuation model requires the input of
assumptions and estimates which are regularly evaluated and updated when applicable. These include estimating
the length of time vested stock options will be retained before being exercised (expected term), the estimated
volatility of our common stock price over the expected term and the risk-free interest rate based on the annual
continuously compounded risk-free rate with a term equal to the option’s expected term. In addition, we estimate
the number of awards that will ultimately not complete their vesting requirements (forfeitures).
Changes in these assumptions and estimates can materially affect the estimate of fair value of stock-based
compensation and consequently, the related expense recognized on the consolidated statements of operations. 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.
Insurance Accruals. We use a combination of insurance and self-insurance for a number of risks including
workers’ compensation, general liability, property 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.
Leases. We lease all our retail stores, our distribution center and certain equipment, including
transportation and office equipment. We evaluate each lease at inception to determine whether the lease will be
accounted for as an operating or capital lease. The term of the lease used for this evaluation includes renewal option
periods only in instances in which the exercise of the renewal option can be reasonably assured and failure to
exercise such option would result in an economic penalty. The majority of our retail stores and our distribution
center are operating leases.
- 34 -
Many of our operating 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.
We make judgments regarding the probable term for each lease, which can impact the classification and
accounting for a lease as capital or operating, the escalations in payments that are taken into consideration when
calculating straight-line rent and the term over which landlord allowances received are amortized. These judgments
may produce materially different amounts of depreciation, amortization and rent expense than would be reported in
a specific period if different assumed lease terms were used.
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”).
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Investment and Credit Availability Risk
We manage cash and cash equivalents in various institutions at levels beyond federally insured limits per
institution, and we may purchase investments not guaranteed by the FDIC. Accordingly, there is a risk that we will
not recover the full principal of our investments or that their liquidity may be diminished. In an attempt to mitigate
this risk, our investment policy emphasizes preservation of principal and liquidity.
We also have financial institutions that are committed to provide loans under our revolving credit facilities.
There is a risk that these institutions cannot deliver against these obligations. See “Risk Factors”.
Interest Rate Risk
Our net exposure to interest rate risk results primarily from interest rate fluctuations on our credit facilities,
which bears interest at a rate which varies with LIBOR, prime or federal funds rates. At the end of Fiscal 2014 and
Fiscal 2013, we had no borrowings outstanding under any credit facility, nor did we have any borrowings against
either of the facilities during Fiscal 2014 and Fiscal 2013.
- 35 -
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.
Over the past few years, our third quarter has experienced higher than historical net sales, resulting from back-to-
school shopping combined with tax-free holidays in many of our markets. 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.
Tax Matters
We do not believe that there are any tax matters that could materially affect our financial condition, results
of operations or cash flows.
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 February 1, 2014 and February 2, 2013
• Consolidated Statements of Operations for the fiscal year ended February 1, 2014, February
2, 2013 and January 28, 2012
• Consolidated Statements of Cash Flows for the fiscal year ended February 1, 2014, February
2, 2013 and January 28, 2012
• Consolidated Statements of Stockholders’ Investment for the fiscal year ended February 1,
2014, February 2, 2013 and January 28, 2012
• 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.
- 36 -
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 as of
February 1, 2014 and February 2, 2013, and the related consolidated statements of operations, stockholders’
investment, and cash flows for each of the years in the three-year period ended February 1, 2014. We also have
audited Hibbett Sports, Inc.’s internal control over financial reporting as of February 1, 2014, based on the criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Hibbett Sports, Inc.’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. Our responsibility is to express an opinion on these consolidated financial
statements and an opinion on Hibbett Sports, Inc.’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.
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 February 1, 2014 and February 2, 2013, and the
results of their operations and their cash flows for each of the years in the three-year period ended February 1, 2014,
in conformity with U.S. generally accepted accounting principles. Also in our opinion, Hibbett Sports, Inc.
maintained, in all material respects, effective internal control over financial reporting as of February 1, 2014, 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 31, 2014
- 37 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
ASSETS
Fe bruary 1, 2014
Fe bruary 2, 2013
Current Assets:
Cash and cash equivalents
T rade receivables, net
Accounts receivable, other
Inventories, net
Prepaid expenses and other
Deferred income taxes, net
T otal current assets
Property and Equipment:
Land and building
Buildings under capital lease
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
T otal Assets
LIABILITIES AND STO C KHO LDERS' INVESTMENT
Current Liabilities:
Accounts payable
Capital lease obligations
Accrued payroll expenses
Deferred rent
Other accrued expenses
T otal current liabilities
Capital lease obligations
Deferred rent
Unrecognized tax benefits
Other liabilities, net
T otal liabilities
$
66,227
3,798
4,602
226,545
13,429
9,048
323,649
$
76,911
3,346
2,608
221,378
8,603
8,768
321,614
6,280
3,247
61,604
501
29,717
72,216
37,639
211,204
125,190
86,014
245
2,662
58,660
510
28,041
68,661
11,781
170,560
121,484
49,076
3,497
3,185
416,345
$
4,085
2,556
377,331
$
$
74,532
322
8,464
3,792
4,304
91,414
$
102,021
714
8,112
3,492
4,376
118,715
2,889
13,803
1,738
2,478
112,322
2,138
12,006
3,027
2,318
138,204
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,
38,202,486 and 37,846,321 shares issued at February 1, 2014 and
February 2, 2013, respectively
Paid-in capital
Retained earnings
T reasury stock, at cost, 12,389,531 and 12,023,834 shares repurchased
at February 1, 2014 and February 2, 2013, respectively
T otal stockholders' investment
T otal Liabilities and Stockholders' Investment
-
-
382
154,533
492,471
378
140,423
421,594
(343,363)
304,023
416,345
$
(323,268)
239,127
377,331
$
See accompanying notes to consolidated financial statements.
- 38 -
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, 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
February 1, 2014
(52 weeks)
Fiscal Year Ended
February 2, 2013
(53 weeks)
January 28, 2012
(52 weeks)
$
851,965
$
818,700
$
732,645
542,700
309,265
181,527
13,847
113,891
11
(199)
(188)
113,703
519,818
298,882
169,872
13,029
115,981
14
(182)
(168)
115,813
470,237
262,408
155,672
13,205
93,531
25
(242)
(217)
93,314
$
42,826
70,877
$
43,231
72,582
$
34,254
59,060
$
$
2.74
2.70
$
$
2.78
2.72
$
$
2.19
2.15
25,870
26,266
26,132
26,638
26,978
27,506
See accompanying notes to consolidated financial statements.
- 39 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred and unrecognized income tax benefit, 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:
T rade receivables, net
Accounts receivable, other
Inventories, net
Prepaid expenses and other
Other assets, net, 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 capital lease obligations
Excess tax benefit from stock option exercises
Cash used to settle net share equity awards
Proceeds from options exercised and purchase of shares under
the employee stock purchase plan
Net cash used in financing activities
Fe bruary 1,
2014
Fiscal Ye ar Ende d
Fe bruary 2,
2013
January 28,
2012
$
70,877
$
72,582
$
59,060
13,847
(73)
(4,357)
173
5,838
(452)
(1,993)
(5,167)
36
(475)
(27,489)
1,798
738
53,301
(704)
(50,507)
221
(50,990)
(15,807)
(268)
4,357
(4,288)
3,011
(12,995)
13,029
(1,507)
(4,002)
68
5,649
577
(408)
(26,307)
34
(115)
28,286
435
(1,197)
87,124
(530)
(21,970)
182
(22,318)
(45,938)
(181)
4,002
(3,914)
2,998
(43,033)
13,205
(46)
(1,834)
151
5,453
(633)
(105)
(20,193)
3,146
(157)
(2,251)
(1,245)
370
54,921
(481)
(12,997)
103
(13,375)
(67,484)
(311)
1,834
(1,129)
5,165
(61,925)
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
(10,684)
76,911
66,227
$
21,773
55,138
76,911
$
(20,379)
75,517
55,138
$
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest
Income taxes, net of refunds
Supplemental Schedule of Non-Cash Activities:
Property and plant additions under capital leases
$
195
$
178
$
238
$
42,276
$
39,878
$
30,788
$
1,086
$
1,040
$
-
See accompanying notes to consolidated financial statements.
- 40 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT
(in thousands, except share information)
C ommon Stock
Tre asury Stock
Balance-January 29, 2011
Net income
Issuance of shares through the
Company's equity plans, including
tax benefit of $1,834
T ax 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 28, 2012
Net income
Issuance of shares through the
Company's equity plans, including
tax benefit of $4,002
Adjustment to income tax benefit
from exercises of employee stock
options
Purchase of shares under the
stock repurchase program
Stock-based compensation
Balance-February 2, 2013
Net income
Issuance of shares through the
Company's equity plans, including
tax benefit of $4,357
Adjustment to income tax benefit
from exercises of employee stock
options
Purchase of shares under the
stock repurchase program
Stock-based compensation
Balance-February 1, 2014
Numbe r of
Share s
37,130,646
-
Amount
371
$
-
Paid-In
C apital
$
114,568
-
Re taine d
Earnings
289,952
$
59,060
367,482
4
6,995
-
-
-
-
37,498,128
-
-
-
-
-
375
-
(51)
814
-
5,453
127,779
-
348,193
3
6,997
-
-
-
37,846,321
-
-
-
-
378
-
(2)
-
5,649
140,423
-
356,165
4
7,364
-
-
-
38,202,486
-
908
-
-
382
$
-
5,838
154,533
$
-
-
-
-
-
349,012
72,582
-
-
-
-
421,594
70,877
-
-
-
-
Numbe r of
Share s
9,223,038
Amount
$
(204,803)
-
-
-
-
-
-
-
-
1,897,002
-
(68,613)
-
11,120,040
(273,416)
-
-
-
-
-
-
903,794
-
(49,852)
-
12,023,834
(323,268)
-
-
-
-
-
-
365,697
-
(20,095)
-
Total
Stockholde rs'
Inve stme nt
200,088
$
59,060
6,999
(51)
814
(68,613)
5,453
203,750
72,582
7,000
(2)
(49,852)
5,649
239,127
70,877
7,368
908
(20,095)
5,838
304,023
$
$
492,471
12,389,531
$
(343,363)
See accompanying notes to consolidated financial statements.
- 41 -
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 South, Southwest, Mid-Atlantic and Midwest regions of the United States. References to “we,”
“our,” “us” and the “Company” refer to Hibbett Sports, Inc. and its subsidiaries as well as its predecessors. Our
fiscal year ends on the Saturday closest to January 31 of each year. The consolidated statement of operations for
Fiscal 2014 includes 52 weeks of operations while our consolidated statements of operations for Fiscal 2013
includes 53 weeks of operations and Fiscal 2012 includes 52 weeks of operations. Our merchandise assortment
features a core selection of brand name merchandise emphasizing athletic footwear, team sports equipment, athletic
and fashion apparel and related accessories. We complement this core assortment with a selection of localized
apparel, footwear and accessories designed to appeal to a wide range of customers within each market.
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 in any of the years
presented.
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 (U.S. GAAP) 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 could change significantly in future estimates due to changes in
circumstances and actual results could differ from those estimates.
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.
Customers
No customer accounted for more than 5.0% of our net sales during the fiscal years ended February 1, 2014,
February 2, 2013 and January 28, 2012.
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 inventories 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.
- 42 -
We also receive consideration from vendors through a variety of other programs, including markdown
reimbursements, vendor compliance charges and defective merchandise 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. Vendor compliance
charges and defective merchandise credits reduce the cost of inventories.
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):
February 1,
2014
$
8,980
(3,335)
5,645
Fiscal Year Ended
February 2,
2013
$
9,554
(4,002)
5,552
$
$
$
January 28,
2012
$
8,329
(3,748)
4,581
Gross advertising costs
Advertising reimbursements
Net advertising costs
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. Costs associated with moving merchandise to
and between stores are included in store operating, selling and administrative expenses.
Stock Repurchase Program
In November 2012, the Board of Directors (Board) authorized a Stock Repurchase Program (2012
Program) of $250.0 million to repurchase our common stock through January 29, 2016. The 2012 Program replaced
an existing plan that was adopted in November 2009 (2009 Program). 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.
Under the 2012 Program, we repurchased 0.4 million shares of our common stock during Fiscal 2014 at a
cost of $20.1 million, including 0.1 million shares acquired from holders of restricted stock unit awards to satisfy tax
withholding requirements of $4.3 million. Under both the 2012 Program and 2009 Program, we repurchased 0.9
million shares of our common stock during Fiscal 2013 at a cost of $49.9 million, including 0.1 million shares
acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $3.9 million.
Historically, under all stock repurchase authorizations, we have repurchased a total of 12.4 million shares
of our common stock at an approximate cost of $343.4 million as of February 1, 2014, and had approximately
$229.6 million remaining under the 2012 Program for stock repurchase. Shares acquired from holders of restricted
stock unit awards to satisfy tax withholding requirements do not reduce the authorization.
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 are exposed to credit risk in the event of
default by our financial institutions where we maintain deposits 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
February 1, 2014 and February 2, 2013 were $3.5 million and $3.6 million, respectively.
- 43 -
Investments
We hold investments in trust for the Hibbett Sports, Inc. Supplemental 401(k) Plan (Supplemental Plan)
and the Hibbett Sports, Inc. Executive Voluntary Deferral Plan (Deferral Plan). These are trading securities. At
February 1, 2014, we had $2.6 million of investments of which $0.5 million was included in prepaid expenses and
other and $2.1 million was included in other assets, net. At February 2, 2013, we had $1.9 million of investments
included in other assets, net. Net unrealized holding gains for Fiscal 2014 and Fiscal 2013 were $0.2 million and
$0.1 million, respectively.
Trade and Other Accounts Receivable
Trade accounts receivable consist primarily of amounts due to us from sales to educational institutions for
athletic programs. 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 February 1, 2014 and
February 2, 2013 was $42,000.
Other accounts receivable consists primarily of tenant allowances due from landlords and cooperative
advertising due from vendors. We analyze other accounts receivable for collectability based on aging of individual
components, underlying contractual terms and economic conditions. Recorded amounts are deemed to be
collectible.
Inventory Valuation
Inventories are valued using the lower of weighted average cost or market method. Items are removed
from inventory using the weighted average cost method.
Lower of Cost or Market: 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 February 1, 2014 and February 2, 2013,
the accrual was $2.2 million and $2.3 million, respectively. 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 physical
inventories. These estimates are compared to actual results as physical inventory counts are performed and
reconciled to the general ledger. Store and distribution center physical counts are performed on a cyclical basis. As
of February 1, 2014 and February 2, 2013, the accrual was $1.3 million and $1.5 million, respectively.
Inventory Purchase Concentration: Our business is dependent to a significant degree upon close
relationships with our vendors. Our largest vendor, Nike, represented 52.3%, 48.9% and 48.3% of our purchases for
Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively. Our second largest vendor in Fiscal 2014 represented
15.6%, 12.8% and 9.3% of our purchases while our third largest vendor in Fiscal 2014 represented 8.6%, 10.9% and
11.4% of our purchases for Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively.
Consignment Inventories: Consignment inventories, which are owned by the vendor but located in our
stores, are not reported as our inventory until title is transferred to us or our purchase obligation is determined. At
February 1, 2014 and February 2, 2013, vendor-owned inventories held at our locations (and not reported as our
inventory) were $1.1 million and $1.6 million, respectively.
- 44 -
Property and Equipment
Property and equipment are recorded at cost and include assets acquired through capital leases.
Depreciation on assets is principally provided using the straight-line method over the following estimated service
lives:
Buildings
Leasehold improvements
Furniture and fixtures
Equipment
39 years
3 – 10 years
7 years
3 – 5 years
In the case of leasehold improvements, we calculate depreciation using the shorter of the initial term of the
underlying leases or the estimated economic lives of the improvements. The term of the lease includes renewal
option periods only in instances in which the exercise of the renewal option can be reasonably assured and failure to
exercise such option would result in an economic penalty. 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 February 1, 2014, approximately
94% of the construction in progress balance was comprised of costs associated with our new wholesaling and logistics
facility. Information technology costs not associated with the new facility accounted for approximately 5% and
unopened stores accounted for approximately 1% of the construction in progress balance on February 1, 2014.
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 net 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 in accordance with the terms of the lease and a deferred
rent liability. This deferred rent is amortized into net 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.
In 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 $3.1 million and $2.9 million at February 1, 2014 and February 2, 2013,
respectively. The liability for the long-term portion of unamortized landlord allowances was $10.5 million and $8.8
million at February 1, 2014 and February 2, 2013, respectively. We estimate the non-cash portion of landlord
allowances was $2.1 million and $1.1 million in Fiscal 2014 and Fiscal 2013, respectively.
Revenue Recognition
We recognize revenue, including gift card and layaway sales, in accordance with the Accounting Standards
Codification (ASC) Topic 605, Revenue Recognition.
- 45 -
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.
We offer a customer loyalty program, the MVP Rewards program, whereby customers, upon registration,
can earn points in a variety of ways, including store purchases, website surveys and other activities on our website.
Based on the number of points accumulated, customers receive reward certificates on a quarterly basis that can be
redeemed in our stores. An estimate of the obligation related to the program, based on historical 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 February 1, 2014 and February 2, 2013, 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.
Gift card breakage revenue is recognized to the extent not required to be remitted to jurisdictions as
unclaimed property and is 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. Based on our analyses of redemption
activity, we have determined the likelihood of redemption for gift cards 5 years after the date of initial issuance is
remote. For Fiscal 2014, Fiscal 2013 and Fiscal 2012, $0.2 million, $0.3 million and $0.2 million of breakage
revenue, respectively, was recorded in net income as other income and is included in the accompanying consolidated
statements of operations as a reduction to store operating, selling and administrative expense. The net deferred
revenue liability at February 1, 2014 and February 2, 2013 was $4.5 million and $3.9 million, respectively.
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.
- 46 -
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 experience. 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 that reimburses us for losses over $0.2 million per covered person
per year, limited to a lifetime maximum reimbursement of $2.0 million per covered person. As of February 1, 2014
and February 2, 2013, the accrual for these liabilities was $0.8 million and $0.7 million, respectively, and was
included in accrued expenses in the consolidated balance sheets.
We are also self-insured for our workers’ compensation, property and general liability insurance up to an
established deductible with a cumulative stop-loss on workers’ compensation. As of February 1, 2014 and February
2, 2013, the accrual for these liabilities (which is not discounted) was $0.3 million and $0.2 million, respectively,
and was included in accrued expenses in the consolidated balance sheets.
Sales Returns
Net sales returns were $30.5 million for Fiscal 2014, $28.8 million for Fiscal 2013 and $25.7 million for
Fiscal 2012. The accrual for the effect of estimated returns was $0.4 million as of February 1, 2014 and February 2,
2013, 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
We continuously monitor and review all current accounting pronouncements and standards from the
Financial Accounting Standards Board (FASB) and other authoritative sources of U.S. GAAP for applicability to
our operations.
Proposed Amendments to Current Accounting Standards. The FASB is currently working on amendments
to existing accounting standards governing a number of areas including, but not limited to, accounting for leases. In
August 2010, the FASB issued an exposure draft, Leases, which would replace the existing guidance in ASC Topic
840, Leases. When and if effective, this proposed standard will likely have a significant impact on our consolidated
financial statements. However, as the standard-setting process is still ongoing, we are unable to determine the
impact this proposed change in accounting will have on the consolidated financial statements at this time.
NOTE 3. STOCK-BASED COMPENSATION
At February 1, 2014, we had four stock-based compensation plans:
(a) The Amended 2005 Equity Incentive Plan (EIP) provides that the Board of Directors may grant equity
awards to certain employees of the Company at its discretion. The EIP was adopted effective July 1,
2005 and authorizes grants of equity awards of up to 1,983,159 authorized but unissued shares of
common stock. At February 1, 2014, there were 651,869 shares available for grant under the EIP.
(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 February 1, 2014, there were 77,253 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 February 1, 2014, there were 48,675 shares
available for grant under the Deferred Plan.
- 47 -
(d) The 2012 Non-Employee Director Equity Plan (DEP) provides for grants of equity awards to non-
employee directors. The DEP was adopted effective May 24, 2012 and authorizes grants of equity
awards of up to 500,000 authorized but unissued shares of common stock. At February 1, 2014, there
were 473,235 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 February 1, 2014, we had only granted awards in the form of
stock options, restricted stock units (RSUs) and performance-based units (PSUs) to our employees. The annual
grant made for Fiscal 2014, Fiscal 2013 and Fiscal 2012 to employees consisted solely of RSUs. We have also
awarded PSUs to our Named Executive Officers (NEOs) and expect the Compensation Committee of the Board will
continue to grant PSUs to our NEOs in the future.
As of February 1, 2014, we had only granted awards in the form of stock, stock options and deferred stock
units (DSUs) to our Board members. Under the DEP, Board members currently receive an annual value of $75,000
worth of equity in the form of stock options or restricted stock units upon election to the Board and a value of
$100,000 worth of equity in any form allowed within the DEP, for each full year of service, pro-rated for Directors
who serve less than one full year. The Chairman of the Board, Mr. Newsome, will receive an annual value of
$150,000 worth of equity in any form he chooses allowed within the DEP beginning in Fiscal 2015.
The terms and vesting schedules for stock-based awards vary by type of grant and generally vest upon
time-based conditions. Under the DEP, Directors have the option with certain equity forms to set vest dates. Upon
exercise, stock-based compensation awards are settled with authorized but unissued company stock. All of our
awards are classified as equity awards.
The compensation cost for these plans was as follows (in thousands):
February 1,
2014
Fiscal Year Ended
February 2,
2013
January 28,
2012
Stock-based compensation expense by type:
Stock options
Restricted stock units
Employee stock purchases
Director deferred compensation
Total stock-based compensation expense
Income tax benefit recognized
Stock-based compensation expense, net of income tax
$
$
$
358
5,250
100
130
5,838
2,154
3,684
805
4,715
93
36
5,649
2,082
3,567
460
4,857
76
60
5,453
1,987
3,466
$
$
$
Stock-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 unit awards vested during the period. The actual income tax
benefit realized for the deductions considered on our income tax returns for Fiscal 2014, Fiscal 2013 and Fiscal 2012
was from option exercises and restricted stock unit releases and totaled $6.5 million, $5.9 million and $3.2 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 options granted awarded to
employees under the EIP 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 the DEP and Deferred Plan vest immediately upon grant and expire on the tenth
anniversary of the date of grant.
- 48 -
Following is the weighted average fair value of each option granted during Fiscal 2014. 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 4, 2013
Grant date
Exercise price
Weighted average fair value at date of grant
Expected option life (years)
Expected volatility
Risk-free interest rate
Dividend yield
M ar 19
$54.06
$17.50
4.71
36.96
0.74%
None
M ar 31
$56.27
$17.98
4.71
36.47
0.72%
None
Quarter Ended
August 3,
2013
Jun 30
$55.57
$17.40
4.71
34.38
1.31%
None
November 2,
2013
Sep 30
$56.11
$21.51
5.18
41.03
1.43%
None
February 1,
2014
Dec 31
$67.15
$26.10
5.18
40.95
1.79%
None
We calculate the expected term for our stock options based on the historical exercise behavior of our
participants. Historically, an increase in our stock price has led to a pattern of earlier exercise by participants.
Grants made to our Directors have a contractual term of 10 years, while grants made to our employees have a
contractual term of 8 years. We have not awarded a stock option grant to employees since 2009. With the absence
of option grants to employees, we anticipate the expected term will remain relatively stable.
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.
In accordance with ASC Topic 718, 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. The dividend yield is assumed to be zero
since we have no current plan to declare dividends.
Activity for our option plans during Fiscal 2014 was as follows:
Options outstanding at February 2, 2013
Granted
Exercised
Forfeited, cancelled or expired
Options outstanding at February 1, 2014
Number of
S hares
342,173
19,928
(118,075)
-
244,026
Weighted
Average
Remaining
Contractual
Term
(Years)
5.29
Aggregate
Intrinsic
Value
($000's)
$
8,875
5.69
$
6,841
Weighted
Average
Exercise
Price
$
27.34
54.74
22.34
-
31.99
$
Exercisable at February 1, 2014
244,026
$
31.99
5.69
$
6,841
The weighted average grant-date fair value of options granted during Fiscal 2014, Fiscal 2013 and Fiscal
2012 was $17.97, $19.39 and $12.95, respectively. The compensation expense included in store operating, selling
and administrative expenses and recognized during Fiscal 2014, Fiscal 2013 and Fiscal 2012 was $0.4 million, $0.8
million and $0.5 million, respectively, before the recognized income tax benefit of $0.1 million, $0.3 million and
$0.2 million, respectively.
The total intrinsic value of stock options exercised during Fiscal 2014, Fiscal 2013 and Fiscal 2012 was
$6.8 million, $4.0 million and $5.3 million, respectively. The total cash received from these stock option exercises
during Fiscal 2014, Fiscal 2013 and Fiscal 2012 was $2.6 million, $2.7 million and $4.9 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 February 1, 2014, there was no unrecognized
compensation cost related to nonvested stock options.
- 49 -
Restricted Stock and Performance-Based Units
RSUs and PSUs are granted with a fair value equal to the closing market price of our common stock on the
date of grant. All PSUs 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 PSUs, at the estimated percent of achievement. Restricted
stock unit awards to our employees generally cliff vest in four years from the date of grant for those awards that are
not performance-based. If a Director chooses to receive their annual equity award in stock and he or she sets the
vesting period in the future, then the form of stock is a DSU. PSUs provide for awards based on achievement of
certain predetermined corporate performance goals and 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 unit awards activity under all of our plans during Fiscal
2014:
RSUs
PSUs
Totals
We ighte d
Ave rage
Grant-Date
Fair Value
Numbe r of
Awards
We ighte d
Ave rage
Grant-Date
Fair Value
Numbe r of
Awards
W e ighte d
Ave rage
Grant-Date
Fair Value
Numbe r of
Awards
378,366
70,603
-
(117,862)
(10,790)
$
29.00
54.17
-
18.27
37.98
265,700
36,700
28,650
(110,000)
-
$
27.66
54.06
18.46
17.01
-
644,066
107,303
28,650
(227,862)
(10,790)
$
28.45
54.13
18.46
17.66
37.98
320,317
$
38.20
221,050
$
33.55
541,367
$
36.30
Restricted stock unit awards
outstanding at February 2, 2013
Granted
PSU multiplier earned (1)
Vested
Forfeited, cancelled or expired
Restricted stock unit awards
outstanding at February 1, 2014
(1)
PSU multiplier earned represents the net additional RSUs awarded to our NEOs above and below
their target grants resulting from the achievement of performance goals above or below the performance targets
established at grant.
The weighted average grant date fair value of our RSUs granted was $54.13, $52.26 and $31.31 for Fiscal
2014, Fiscal 2013 and Fiscal 2012, respectively. There were 107,303, 104,417 and 156,143 RSUs awarded during
Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively. The compensation expense included in store operating,
selling and administrative expenses and recognized during Fiscal 2014, Fiscal 2013 and Fiscal 2012 was $5.3
million, $4.7 million and $4.9 million, respectively, before the recognized income tax benefit of $2.0 million, $1.8
million and $1.8 million, respectively.
During Fiscal 2014, RSU awards of 227,862 unit awards, including 110,000 awards that were PSUs, vested
with an intrinsic value of $11.6 million. The total intrinsic value of our RSU awards outstanding and unvested at
February 1, 2014, February 2, 2013 and January 28, 2012 was $32.5 million, $34.3 million and $36.9 million,
respectively. As of February 1, 2014, there was approximately $8.5 million of total unamortized unrecognized
compensation cost related to RSU awards. This cost is expected to be recognized over a weighted average period of
2.1 years.
- 50 -
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 employee purchases of common stock and the average price per share
through the ESPP were as follows:
Fiscal Year Ended
February 1, 2014
February 2, 2013
January 28, 2012
S hares
Purchased
8,066
7,596
9,184
Average
Price Per
S hare
$
$
$
46.39
43.45
29.76
The assumptions used in the option pricing model were as follows:
Weighted average fair value at date of grant
Expected life (years)
Expected volatility
Risk-free interest rate
Dividend yield
February 1,
2014
$12.47
0.25
34.4% - 41.0%
0.01% - 0.05%
None
Fiscal Year Ended
February 2,
2013
$12.37
0.25
39.7% - 42.6%
0.02% - 0.10%
None
January 28,
2012
$8.23
0.25
43.6% - 45.2%
0.04% - 0.10%
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 each of Fiscal 2014, Fiscal 2013 and Fiscal 2012 was $0.1 million.
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. A total of 2,215, 646 and 1,561 stock units were deferred under this
plan in Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively. One director has elected to defer compensation into
stock units in calendar 2014.
The compensation expense included in store operating, selling and administrative expenses and recognized
during Fiscal 2014, Fiscal 2013 and Fiscal 2012 was $130,000, $36,000 and $60,000, respectively, before the
recognized income tax benefit of $49,000, $14,000 and $22,000, respectively.
- 51 -
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 in thousands:
Net income
Weighted average number of common shares
outstanding
Dilutive stock options
Dilutive restricted stock units
Weighted average number of common shares
outstanding and dilutive shares
February 1,
2014
$
70,877
Fiscal Year Ended
February 2,
2013
$
72,582
January 28,
2012
$
59,060
25,870
96
300
26,266
26,132
372
134
26,638
26,978
177
351
27,506
Basic earnings per share
Diluted earnings per share
$
$
2.74
2.70
$
$
2.78
2.72
$
$
2.19
2.15
In calculating diluted earnings per share for Fiscal 2014, Fiscal 2013 and Fiscal 2012, there were no options
to purchase shares of common stock outstanding as of the end of the period that were excluded in the computations
of diluted earnings per share due to their anti-dilutive effect.
We excluded 34,550 nonvested stock awards granted to certain employees from the computation of diluted
weighted average common shares and common share equivalents outstanding, because they are subject to
performance-based annual vesting conditions which had not been achieved by the end of Fiscal 2014. Assuming the
performance criteria had been achieved at target as of February 1, 2014, the incremental dilutive impact would have
been 12,242 shares.
NOTE 5. DEBT
At February 1, 2014, we had two unsecured credit facilities, which are renewable in August and November
2014. 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. We did not have any borrowings against either of these facilities during Fiscal 2014, nor
was there any debt outstanding under either of these facilities at February 1, 2014. At February 1, 2014, a total of
$80.0 million was available to us from these facilities.
At February 2, 2013, we had two unsecured credit facilities, which were renewable in August and
November 2013. The August facility allowed 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 allowed for borrowings up to $50.0
million at a rate of prime plus 2%. Under the provisions of both facilities, we did not pay commitment fees and
were not subject to covenant requirements. We did not have any borrowings against either of these facilities during
Fiscal 2013, nor was there any debt outstanding under either of these facilities at February 2, 2013.
- 52 -
NOTE 6. LEASES
We have entered into capital leases for certain property and transportation equipment. At February 1, 2014,
the total capital lease obligation was $3.2 million, of which $0.3 million was classified as a short-term liability and
included in capital lease obligations and $2.9 million was classified as a long-term liability as obligations under
capital leases in our consolidated balance sheet. At February 2, 2013, the total capital lease obligation was $2.8
million, of which $0.7 million was classified as a short-term liability and included in capital lease obligations and
$2.1 million was classified as a long-term liability as obligations under capital leases in our consolidated balance
sheet. The cost basis of total assets under capital leases at February 1, 2014 and February 2, 2013 was $3.7 million
and $3.2 million, respectively, with accumulated amortization at February 1, 2014 and February 2, 2013 of $0.8
million and $0.5 million, respectively. Amortization expense related to assets under capital leases was $0.3 million,
$0.2 million and $0.3 million in Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively.
We lease the majority of our retail sporting goods stores under non-cancelable operating leases. 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) based on net sales for the location. 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.
Most of our retail store leases contain provisions that allow for early termination of the lease 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.
We also lease certain office equipment and transportation equipment under non-cancelable operating leases
having initial 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 $0.9 million. The transaction is also subject to quarterly financial covenants based on certain ratios.
During Fiscal 2014, we increased our lease commitments by a net of 54 retail stores, each having initial
lease termination dates between April 2018 and April 2024 as well as various office and transportation equipment.
At February 1, 2014, the future minimum lease payments under capital leases and the present value of such
payments, and the future minimum lease payments under our operating leases, excluding maintenance, insurance
and real estate taxes, including the net 54 lease commitments added during Fiscal 2014, were as follows (in
thousands):
Fiscal 2015
Fiscal 2016
Fiscal 2017
Fiscal 2018
Fiscal 2019
Thereafter
Total minimum lease payments
Less amount representing interest
Present value of total minimum lease payments
Capital
$
Operating
Total
$
$
619
623
632
632
627
1,691
4,824
1,613
3,211
50,162
39,836
31,704
23,760
16,668
29,941
192,071
-
192,071
50,781
40,459
32,336
24,392
17,295
31,632
196,895
1,613
195,282
$
$
$
- 53 -
Rental expense for all operating leases consisted of the following (in thousands):
February 1,
2014
Fiscal Year Ended
February 2,
2013
January 28,
2012
M inimum rentals
Contingent rentals
$
$
44,984
5,280
50,264
$
$
40,075
6,331
46,406
$
$
37,971
5,767
43,738
NOTE 7. 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
18 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 Fiscal 2014, Fiscal 2013 and Fiscal 2012, 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 2014, Fiscal 2013 and Fiscal 2012 was $0.8 million.
We maintain 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 2015 has been set by
the Board to equal no more than $0.75 for each dollar of compensation deferred under both the 401(k) Plan and the
Supplemental Plan up to 6.0% of compensation. Contribution expense incurred under the Supplemental Plan for
Fiscal 2014, Fiscal 2013 and Fiscal 2012 was $0.1 million, $0.1 million and $0.2 million, respectively. The
Supplemental Plan is intended to comply with the requirements of Section 409A of the Internal Revenue Code of
1986, as amended.
We maintain the Hibbett Sports, Inc. Executive Voluntary Deferral Plan (Voluntary Plan) that 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 2 to 10 years. The Voluntary Plan is subject to the
Employee Retirement Income Security Act of 1974, as amended (ERISA) and was effective February 1, 2010 and is
also intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended.
We maintain 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, whereas 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.
- 54 -
NOTE 8. RELATED-PARTY TRANSACTIONS
The Company leases one store under a lease arrangement with AL Florence Realty Holdings 2010, LLC, a
wholly-owned subsidiary of Books-A-Million, Inc., (BAMM). One of our Directors, Terrance G. Finley is an
executive officer and stockholder of BAMM and another Director, Albert C. Johnson, is a Director and stockholder
of BAMM. Minimum annual lease payments are $0.1 million, if not in co-tenancy and the lease termination date is
February 2017. In Fiscal 2014 and Fiscal 2013, minimum lease payments were $0.1 million. In Fiscal 2012, there
were no minimum annual lease payments. Minimum lease payments remaining under this lease at February 1, 2014
were $0.3 million.
NOTE 9. INCOME TAXES
A summary of the components of the provision/(benefit) for income taxes is as follows (in thousands):
Federal:
Current
Deferred
State:
Current
Deferred
Provision for income taxes
February 1,
2014
$
37,313
312
37,625
5,205
(4)
5,201
42,826
$
Fiscal Year Ended
February 2,
2013
January 28,
2012
$
39,511
(1,418)
38,093
$
30,529
26
30,555
5,355
(217)
5,138
43,231
$
3,820
(121)
3,699
34,254
$
A reconciliation of the statutory federal income tax rate to the effective 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
February 1,
2014
Fiscal Year Ended
February 2,
2013
January 28,
2012
35.00%
2.81
(0.15)
37.66%
35.00%
2.76
(0.43)
37.33%
35.00%
2.61
(0.90)
36.71%
- 55 -
In accordance with ASC Topic 740, Income Taxes, deferred income taxes on the consolidated balance
sheets 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 taxes, net, are as follows (in
thousands):
February 1, 2014
February 2, 2013
Deferred rent
Inventories
Accruals
Stock-based compensation
Other
Total deferred tax assets
Current
$
1,452
4,649
3,068
1,267
17
10,453
Non-current
5,193
$
-
1,605
4,118
2
10,918
Accumulated depreciation and amortization
Prepaid expenses
Accruals
State taxes
Total deferred tax liabilities
Deferred income taxes, net
-
(927)
(42)
(436)
(1,405)
9,048
$
(7,289)
-
-
(132)
(7,421)
3,497
$
Current
$
1,406
4,439
2,980
1,308
17
10,150
-
(901)
(58)
(423)
(1,382)
8,768
$
Non-current
4,834
$
-
1,672
4,148
1
10,655
(6,414)
-
-
(156)
(6,570)
4,085
$
Deferred tax assets represent items that will be used as a tax deduction or credit in future tax returns or are
items of income that 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 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 tax asset. To the
extent recovery is not more likely than not, a valuation allowance is established against the deferred tax asset,
increasing our income tax expense in the year such determination is made. We have determined that no such
allowance is required.
We apply the provisions of ASC Subtopic 740-10 in accounting for uncertainty in income taxes. In
accordance with ASC Subtopic 740-10, we recognize a tax benefit associated with an uncertain tax position when, in
our judgment based on technical merits, 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.
We file income tax returns in the U.S. federal and various state jurisdictions. 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. Generally, we are not subject to changes in income taxes by the U.S. federal taxing
jurisdiction for years prior to Fiscal 2011 or by most state taxing jurisdictions for years prior to Fiscal 2010. 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.
- 56 -
A reconciliation of the unrecognized tax benefit under ASC Topic 740 follows (in thousands):
February 1,
2014
February 2,
2013
January 28,
2012
$
$
$
Unrecognized tax benefits - 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 benefits - end of year
2,708
245
(964)
277
(517)
(210)
1,539
2,604
55
(42)
278
-
(187)
2,708
3,887
31
(1,412)
496
(230)
(168)
2,604
$
$
$
We classify interest and penalties recognized on unrecognized tax benefits as income tax expense. We
have accrued interest and penalties in the amount of $0.2 million, $0.3 million and $0.3 million as of February 1,
2014, February 2, 2013 and January 28, 2012, respectively. During Fiscal 2014, Fiscal 2013 and Fiscal 2012, we
recorded ($43,000), $0.1 million and $0.1 million, respectively, for the accrual of interest and penalties in the
consolidated statement of operations.
Of the unrecognized tax benefits as of February 1, 2014, February 2, 2013 and January 28, 2012, $1.0
million, $1.1 million and $1.1 million, respectively, if recognized, would affect our effective income tax rate.
On September 13, 2013, the U.S. Treasury Department and the Internal Revenue Service issued final
Tangible Property Regulations (TPR) under Internal Revenue Code (IRC) Section 162 and IRC Section 263(a). The
regulations are not effective until tax years beginning on or after January 1, 2014; however, certain portions may
require an accounting method change on a retroactive basis, thus requiring an IRC Section 481(a) adjustment related
to fixed and real asset deferred taxes.
The accounting rules under ASC 740 treat the release of the regulations as a change in tax law as of the
date of issuance and required us to determine the impact on our financial statements for the period ended February 1,
2014. Any such impact of the final tangible property regulations would affect temporary deferred taxes only and
result in a balance sheet reclassification between current and deferred taxes. We have analyzed the impact of the
TPR and concluded that the impact is not material. We will continue to monitor the impact of any future changes to
the TPR on us prospectively.
NOTE 10. COMMITMENTS AND CONTINGENCIES
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 February 1, 2014 and February 2, 2013, there was $4.0 million and
$4.3 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 PSUs made in the form of RSUs to our NEOs under the EIP. The performance criteria are tied to
performance targets with respect to future sales and operating income over a specified period of time. These PSUs 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.
- 57 -
Legal Proceedings and Other Contingencies
We are a party to various legal proceedings incidental to our business. Where we are able to reasonably
estimate an amount of probable loss in these matters based on known facts, we have accrued that amount as a
current liability on our balance sheet. We are not able to reasonably estimate the possible loss or range of loss in
excess of the amount accrued for these proceedings based on the information currently available to us, including,
among others, (i) uncertainties as to the outcome of pending proceedings (including motions and appeals) and (ii)
uncertainties as to the likelihood of settlement and the outcome of any negotiations with respect thereto. We do not
believe that any of these matters will, individually or in the aggregate, have a material effect on our business or
financial condition. We cannot give assurance, however, that one or more of these proceedings will not have a
material effect on our results of operations for the period in which they are resolved. At February 1, 2014 and
February 2, 2013, we estimated that the liability related to these matters was approximately $0.2 million and $0.3
million, respectively, and accordingly, we accrued $0.2 million and $0.3 million, respectively, as a current liability
in our consolidated balance sheets.
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.
NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables set forth certain unaudited consolidated financial data for the quarters indicated (dollar
amounts in thousands, except per share amounts):
Net sales
Gross profit
Operating income
Net income
Fiscal Year Ended February 1, 2014
First
(13 weeks)
$
239,993
$
90,877
$
42,439
$
26,214
S econd
(13 weeks)
$
186,235
$
63,927
$
16,966
$
10,542
Third
(13 weeks)
$
207,971
$
76,488
$
27,443
$
17,250
Fourth
(13 weeks)
$
217,767
$
77,973
$
27,042
$
16,870
Basic earnings per share
Diluted earnings per share
$
$
1.01
1.00
$
$
0.41
0.40
$
$
0.67
0.66
$
$
0.65
0.64
- 58 -
Net sales
Gross profit
Operating income
Net income
Fiscal Year Ended February 2, 2013
First
(13 weeks)
$
232,914
$
88,428
$
42,399
$
26,363
S econd
(13 weeks)
$
165,445
$
56,525
$
12,377
$
7,895
Third
(13 weeks)
$
202,934
$
75,440
$
30,300
$
18,965
Fourth
(14 weeks)
$
217,407
$
78,489
$
30,906
$
19,359
Basic earnings per share
Diluted earnings per share
$
1.00
$
0.30
$
0.73
$
0.75
$
0.98
$
0.30
$
0.71
$
0.73
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.
NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC Topic 820, Fair Value Measurement, 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 (in thousands):
Short-term investments
Long-term investments
Total investments
February 1, 2014
Level II
-
$
-
$
-
Level III
-
$
-
$
-
Level I
509
$
2,107
2,616
$
February 2, 2013
Level II
-
$
-
$
-
Level III
-
$
-
$
-
Level I
-
$
1,912
1,912
$
Short-term investments are reported in prepaid and other while long-term investments are reported in other
assets in 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
We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms and that such information is accumulated and
communicated to our management, including the Chief Executive Officer and President (principal executive officer)
and Senior Vice President and Chief Financial Officer (principal financial officer), as appropriate, to allow timely
decisions regarding the required disclosures.
- 59 -
As of February 1, 2014, our management, under the supervision and with the participation of our principal
executive officer and principal financial officer, performed an evaluation of the effectiveness of our disclosure
controls and procedures (as such term is defined in the Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
Based upon this evaluation, our principal executive officer and principal financial officer concluded that our
disclosure controls and procedures were effective as of February 1, 2014.
(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 February 1, 2014, 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 February 1, 2014.
KPMG LLP, our independent registered public accounting firm, has issued an audit report on the Company’s
internal control over financial reporting as of February 1, 2014 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
2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information.
None.
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 2014 Annual Meeting of Stockholders (Proxy
Statement) to be held on May 29, 2014. We have also adopted a set of Corporate Governance Guidelines (Guidelines)
and charters for all of our Board Committees, including the Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee. 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 as well as any
change or amendments to our Guidelines or committee charters by posting such information on our website. The Code,
Guidelines and charters are posted on our website, www.hibbett.com under “Investor Relations.”
The information appearing in the Proxy Statement, 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.
- 60 -
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)
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(2)
Weighted
average
exercise price
of outstanding
options
(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)) (3)
789,815
-
789,815
$31.99
-
$31.99
1,251,032
-
1,251,032
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
TOTAL
(1) Information presented as of February 1, 2014.
(2) Includes 312,679 RSUs and 221,050 PSUs that may be awarded if specified targets and/or service periods
are met. It also includes 12,060 DSUs. The weighted average exercise price of outstanding options does
not include these awards.
(3) Includes 77,253 shares remaining under our ESPP and 48,675 shares remaining under our DEP without
consideration of shares subject to purchase in the purchasing period ending March 31, 2014.
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.
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.
(a) Documents filed as part of this report:
PART IV
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 2014 Annual Report to Stockholders, in Part
II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of February 1, 2014 and February 2, 2013
37
38
- 61 -
Consolidated Statements of Operations for the fiscal year ended February 1, 2014, February
2, 2013 and January 28, 2012
Consolidated Statements of Cash Flows for the fiscal year ended February 1, 2014, February
2, 2013 and January 28, 2012
Consolidated Statements of Stockholders’ Investment for the fiscal year ended February 1,
2014, February 2, 2013 and January 28, 2012
Notes to Consolidated Financial Statements
39
40
41
42
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 Registrant’s Form 8-K filed with the Securities and Exchange Commission on May
31, 2012.
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 May
31, 2012.
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 Master Note – Regions Bank Line of Credit; incorporated by reference as Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 12, 2013.
10.2 Amendment No. 6 to Loan Documents; incorporated by reference as Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on November 15, 2013.
10.3 Executive Transition Agreement and General Release between Michael J. Newsome and
Hibbett Sporting Goods, Inc.; attached as Exhibit 10.3 to this Annual Report on Form 10-
K.
10.4 Hibbett Sports, Inc. Non-Employee Director Equity Plan; incorporated by reference as
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 31, 2012.
10.5 Hibbett Sports, Inc. Non-Employee Director Non-Qualified Option Agreement (Initial
Grant, Service Requirement); incorporated by reference as Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 17, 2012.
10.6 Hibbett Sports, Inc. Non-Employee Director Restricted Stock Unit Award Agreement
(Initial Grant, Service Requirement); incorporated by reference as Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 17, 2012.
- 62 -
10.7 Hibbett Sports, Inc. Non-Employee Director Non-Qualified Option Agreement (Annual
Grant; Fully Vested); incorporated by reference as Exhibit 10.4 to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on August 17,
2012.
10.8 Hibbett Sports, Inc. Non-Employee Director Restricted Stock Unit Award Agreement
(Annual Grant; Fully Vested); incorporated by reference as Exhibit 10.5 to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 17, 2012.
10.9 Amended and Restated Agreement of Lease between Hibbett Sporting Goods, Inc. and
AL Florence Realty Holdings 2010, LLC, dated October 3, 2011; incorporated by
reference as Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 26, 2012.
10.10 Change in Control Severance Agreement; incorporated by reference as Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 24, 2008.
10.11 Executive Restricted Stock Unit Award Agreement; incorporated by reference as Exhibit
10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 11, 2008.
10.12 Amended and Restated 2005 Directors Deferred Compensation Plan; incorporated by
reference as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on November 20, 2008.
10.13 Amended and Restated 2006 Executive Cash Bonus Plan; incorporated by reference as
Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 20, 2008.
10.14 Hibbett Sports, Inc. Executive Voluntary Deferral Plan; incorporated by reference as
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 20, 2009.
10.15 Hibbett Sports, Inc. 2005 Equity Incentive Plan (as amended and restated); incorporated
by reference as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on March 14, 2011.
Annual Report to Security Holders
13.1 Fiscal 2014 Annual Report to Stockholders.
Subsidiaries of the Registrant
21 List of Company’s Subsidiaries:
1) Hibbett Sporting Goods, Inc., a Delaware Corporation
2) Hibbett Team Sales, Inc., an Alabama Corporation
3) Sports Wholesale, Inc., an Alabama Corporation
4) Hibbett Capital Management, Inc., a Nevada Corporation
5) Sports Holdings, Inc., a Nevada Corporation
6) Gift Card Services, LLC., a Virginia Limited Liability Company
7) Hibbett.com, Inc., a Nevada Corporation
8) Hibbett Wholesale, Inc., an Alabama Corporation
9) Hibbett Holdings, LLC, an Alabama Limited Liability Company
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)
- 63 -
Interactive Data Files
101 The following financial information from the Annual Report on Form 10-K for the fiscal
year ended February 1, 2014, formatted in XBRL (eXtensible Business Reporting
Language) and furnished electronically herewith: (i) the Audited Consolidated Balance
Sheets at February 1, 2014 and February 2, 2013; (ii) the Audited Consolidated Statements
of Operations for the fiscal year ended February 1, 2014, February 2, 2013 and January 28,
2012; (iii) the Audited Consolidated Statements of Cash Flows for the fiscal year ended
February 1, 2014, February 2, 2013 and January 28, 2012; (vi) the Audited Statements of
Stockholders’ Investment for the fiscal year ended February 1, 2014, February 2, 2013 and
January 28, 2012; (v) the Notes to Audited Consolidated Financial Statements.
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or
part of a registration statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the
Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability
under those sections.
SIGNATURES.
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 2014
HIBBETT SPORTS, INC.
By:
/s/ Scott J. Bowman
Scott J. Bowman
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
- 64 -
Pursuant to the requirements of the Exchange Act, 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, President and
Director (Principal Executive Officer)
March 31, 2014
/s/ Scott J. Bowman
Scott J. Bowman
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
March 31, 2014
/s/ Michael J. Newsome
Michael J. Newsome
/s/ Alton E. Yother
Alton E. Yother
/s/ Jane F. Aggers
Jane F. Aggers
/s/ Anthony F. Crudele
Anthony F. Crudele
/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
Chairman of the Board
March 31, 2014
Lead Director
March 31, 2014
Director
March 31, 2014
Director
March 31, 2014
Director
March 31, 2014
Director
March 31, 2014
Director
March 31, 2014
Director
March 31, 2014
/s/ Thomas A. Saunders III
Thomas A. Saunders III
Director
March 31, 2014
- 65 -
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors
Hibbett Sports, Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 333-96755, 333-63094, 333-21305,
333-21303, 333-21299, 333-182429, 333-126316, 333-126313 and 333-126311) of Hibbett Sports, Inc. of our report
dated March 31, 2014, with respect to (i) the consolidated balance sheets of Hibbett Sports, Inc. and subsidiaries as of
February 1, 2014 and February 2, 2013, and the related consolidated statements of operations, stockholders’
investment, and cash flows for each of the years in the three-year period ended February 1, 2014 and (ii) the
effectiveness of internal control over financial reporting as of February 1, 2014, which report appears in the February
1, 2014, Annual Report on Form 10-K of Hibbett Sports, Inc.
/s/ KPMG LLP
Birmingham, Alabama
March 31, 2014
End of Exhibit 23.1
- 66 -
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 fourth 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 31, 2014
/s/ Jeffry O. Rosenthal
Jeffry O. Rosenthal
President and Chief Executive Officer
(Principal Executive Officer)
End of Exhibit 31.1
- 67 -
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
I, Scott J. Bowman, 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 fourth 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 31, 2014
/s/ Scott J. Bowman
Scott J. Bowman
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
End of Exhibit 31.2
- 68 -
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Hibbett Sports, Inc. and Subsidiaries (the “Company”) for
the period ended February 1, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
we, Jeffry O. Rosenthal, President and Chief Executive Officer, and Scott J. Bowman, Senior Vice President and 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 31, 2014
Date: March 31, 2014
/s/ Jeffry O. Rosenthal
Jeffry O. Rosenthal
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Scott J. Bowman
Scott J. Bowman
Senior Vice President and Chief Financial Officer
(Principal Financial 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
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CORPORATE INFORMATION
Corporate Offices
2700 Milan Court
Birmingham, Alabama 35211
(205) 942-4292
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 February 1, 2014,
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 2014 Annual Meeting of Stockholders will be held at the principal executive offices of Hibbett Sports,
Inc., 2700 Milan Court, Birmingham, Alabama, on Thursday, May 29, 2014, 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 2014:
Quarter ended May 4, 2013
Quarter ended August 3, 2013
Quarter ended November 2, 2013
Quarter ended February 1, 2014
Fiscal 2013:
Quarter ended April 28, 2012
Quarter ended July 28, 2012
Quarter ended October 27, 2012
Quarter ended February 2, 2013
High
$56.54
$61.50
$61.64
$67.73
High
$59.79
$62.24
$62.91
$54.99
Low
$51.00
$55.00
$51.16
$58.74
Low
$47.91
$54.34
$53.45
$50.71
Independent Registered Public
Accounting Firm
KPMG LLP
Birmingham, Alabama
Company Counsel
Williams Mullen
Norfolk, Virginia
BOARD OF DIRECTORS
Michael J. Newsome - Chairman of the Board, Hibbett Sports, Inc.
Alton E. Yother - Lead Director, Senior Executive Vice President and Chief Financial Officer (Retired),
Regions Financial Corporation
Jane F. Aggers - Consultant
Anthony F. Crudele - Executive Vice President, Chief Financial Officer and Treasurer, Tractor Supply Company
Terrance G. Finley - Chief Executive Officer and President, Books-A-Million, Inc.
Albert C. Johnson - Independent Financial Consultant
Carl Kirkland - Chairman Emeritus, Kirkland’s, Inc.
Ralph T. Parks - President, RT Parks, Inc.
Jeffry O. Rosenthal - Chief Executive Officer , President and Principal Executive Officer, Hibbett Sports, Inc.
Thomas A. Saunders III - Private Investor
OFFICERS
Jeffry O. Rosenthal - Chief Executive Officer , President and Principal Executive Officer, Hibbett Sports, Inc.
Scott J. Bowman - Senior Vice President, Chief Financial and Principal Accounting Officer
Rebecca A. Jones - Senior Vice President of Merchandising, Marketing and Logistics
Cathy E. Pryor - Senior Vice President of Operations
H I B B E T T S P O R T S
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