A N N U A L R E P O R T 2 0 1 5
HIGHLIGHTSSALESATHLETE APPROVEDGAME TESTED Financial Highlights
(In thousands, except per share amounts)
For the Year
Net sales
Operating income
Earnings per basic share
Earnings per diluted share
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 2015
Fiscal 2014
$ 913,486
$ 118,146
2.90
$
2.87
$
88,397
$
243
$
$ 253,373
$ 452,397
$
3,029
$ 324,781
1,206
60,971
$
$ 851,965
$ 113,891
2.74
$
2.70
$
$ 66,227
244
$
$ 232,235
$ 416,345
$
2,889
$ 304,023
366
$ 20,095
$913.5
$2.87
988
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.
HIGHLIGHTSSALESEPSSTORES111213141511121314151112131415$665.0$732.6$818.7$852.0$913.5$1.60$2.15$2.72$2.70$2.87798832873927988
Letter to Stockholders
I am pleased to write you about another successful
year for Hibbett Sports. The Company rallied like a true
competitor as fiscal 2015 came to a close, with growing
momentum in sales and earnings. We look to maintain
this momentum in fiscal 2016 as we continue to make
progress on major initiatives that will sharpen our game
on the fundamentals that have historically delivered
exceptional long-term returns. Our model of convenience,
brands, and service continues to be the core of what
we do, and we will continue to enhance this model as
we focus on improving the customer experience. Our
competitive spirit is as strong as ever, and we look forward
to the opportunities that lie ahead.
Net sales for fiscal 2015 rose 7% to $913.5 million,
while comparable store sales for the year increased
2.9%. Full year earnings per diluted share increased 6%
to $2.87. The final quarter of fiscal 2015 reflected the
strongest year-over-year increases in sales and earnings,
as we took advantage of increased consumer demand
through excellent customer service, product assortments,
operational excellence, and support from the entire Hibbett
team and all of our suppliers.
Reflecting this performance, our balance sheet
remained as strong as ever, as we ended the year with
a cash position exceeding $88 million, no debt, and
credit availability totaling $80 million under our lines of
credit. Our capital allocation strategy continues to drive
impressive shareholder returns, and we continue to
invest in our future earnings potential through continued
store growth, investment in major initiatives, and the
repurchase of our common shares. During fiscal 2015,
we repurchased more than 1.2 million common shares,
representing an expenditure of approximately $61 million.
Our small-box strategy, with stores of approximately 5,000
square feet, remains at the core of our business model
and continues to serve us well. This approach allows
us to be nimble as we enter smaller areas that cannot
effectively support big-box competition. Even as some
markets become viable for larger sporting goods stores,
we differentiate through greater convenience, excellent
customer service, and the unique product focus we offer
our customers. For fiscal 2015, we delivered a record
year of store growth, opening 80 new stores, closing 19
under-performing stores, and expanding 9 high-performing
stores. We ended the year at 988 stores and expect to
open our 1,000th store in the spring of fiscal 2016. For
fiscal 2016, we expect to open 80-85 stores, close 15-
20 under-performing stores, and expand 10-15 existing
stores. We are confident that we can reach our goal of
1,300 stores by fiscal 2019.
We made significant progress on our major initiatives in
fiscal 2015 and are starting to see early positive results.
We completed the rollout of our labor management
system, and our stores are using this capability to service
our customers more effectively than ever. Our markdown
optimization system has been fully deployed across all
major categories, and we are starting to see the long-term
benefit this system can provide. This system uses a highly
predictive and proven approach to quickly address slow
selling and aged inventory and helps instill discipline in
our merchandising efforts. As it continues to accumulate
more and more product history, we expect the system
will further smooth markdown trends and boost gross
margin. Our new wholesale and logistics facility continues
to exceed our expectations, and we have been
impressed with the productivity this facility provides.
We are especially excited about the ability to hold
back quantities of new product releases, which
can be shipped later to specific stores as demand
trends emerge, rather than experience store-by-
store overstocks or shortages. We also recently
completed the first phase of our business
intelligence system, which will give us better
insight into the business and will allow us to
make more timely adjustments to better
serve our customers.
We will continue to drive value from
our existing initiatives and are excited to
begin our journey on our next major initiative
of enabling a true omni-channel experience for
our customers. The initiative begins with the
implementation of a new point-of-sale system,
which will give us real-time inventory visibility across
the chain, allowing stores to quickly locate items
and improve our sales conversion rate. As part
of this phase, we will also implement a customer
relationship management tool, which will allow
us to communicate with our customers in a more
meaningful way. Longer term, with those pieces in
place, we will commence the last phase of our omni-
channel strategy with the development of a true
e-commerce site, enabling our customers to
purchase directly from Hibbett Sports online.
FOOTWEARAPPAREL Corporate Information
Board of Directors
Officers
Our floor plans are
designed with multiple
aisle ways that allow
the stores to be
user friendly, feature
more product, and
implement seasonal
initiatives throughout
the year.
Hibbett Sports continues to target the core footwear,
apparel and equipment interests of our customers. We’ve
successfully executed this strategy for almost 20 years
as a public company, and we have teamed with leading
brands like Nike, Under Armour and adidas to offer our
customers premium products backed by convenient
locations and unmatched customer service. Our brand
message, embodied in our corporate slogan “A Constant
State of Game” continues to resonate increasingly with
customers, as indicated by our MVP loyalty program that
increased 23% to more than 4.6 million members last year.
All of these factors encourage a strong sense of optimism
and confidence of our team regarding the long-term
performance potential of our company. I would like to
thank over 8,000 employees in our stores, wholesale and
logistics facility, and store support center for
making this possible and for their continued dedication
and commitment.
On behalf of the Board of Directors, management and
our employees, please accept our gratitude for your
continued support and investment with us.
Sincerely,
Jeffry O. Rosenthal
Chief Executive Officer and President
FOOTWEARACCESSORIES UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended: January 31, 2015
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. __X__
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 $1,247,074,896 on August 2, 2014, based on
the closing sale price of $49.55 at August 1, 2014 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 14, 2015, was 24,826,022.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Annual Report to Stockholders for the year ended January 31, 2015 are incorporated by
reference into Part II and portions of the Registrant’s Proxy Statement for the 2015 Annual Meeting of Stockholders to
be held on May 28, 2015 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 27, 2015.
- 2 -
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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, relocate or close stores, our square footage growth, our
markets’ ability to support such growth and the suitability of our new wholesale and logistics facility;
our expectations regarding our investment in and development of our technology initiatives, including our
e-commerce platform and other methods for engaging our customers;
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 the exercise of outstanding stock options;
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, on the commercial credit environment and on
levels of consumer confidence;
our analyses of trends as related to sales and 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
2016 or Fiscal 2016
2015 or Fiscal 2015
2014 or Fiscal 2014
2013 or Fiscal 2013
Related Fiscal Year End
January 30, 2016
January 31, 2015
February 1, 2014
February 2, 2013
Weeks in
Fiscal Period
52
52
52
53
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 January 31, 2015, we operated 988 stores consisting of 969 Hibbett
Sports stores and 19 smaller-format Sports Additions athletic shoe stores in 31 states. 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 influenced by 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 footwear, apparel and athletic
equipment 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
Hibbett Sports, Inc.’s website address is www.hibbett.com. Our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, reports on beneficial ownership of our securities on Forms 3, 4
and 5 and all amendments to those reports are available free of charge through our website, as soon as reasonably
practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange
Commission (SEC). The website is the primary source of publicly disclosed news about Hibbett Sports, Inc. In
addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K for
the fiscal year ended January 31, 2015, at no charge, by writing to: Investor Relations, Hibbett Sports, Inc., 2700
Milan Court, Birmingham, Alabama 35211.
- 5 -
The SEC also maintains a website at www.sec.gov where reports, proxy and information statements, and
other information regarding issuers that file electronically can be accessed. In addition, we make available, through
our website, the Company’s Code of Business Conduct and Ethics, Corporate Governance Guidelines and the
written charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance
Committee. Information contained on our website is not included as part of, or incorporated by reference into, this
annual report.
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 logistics costs and increased
economies of scale from marketing activities. We use 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
sports retailer in these communities. We believe our ability to more effectively merchandise to local community sports
and trends 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 in each market. Of these stores, 790
Hibbett Sports stores are located in strip centers, which include free-standing stores, with the remaining 179 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. The merchandise mix contains 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 such
as Bowl or National Championship games and similar sporting events in college or major league baseball, football and
basketball involving teams of local interest within our markets.
Sports Additions
Our 19 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 five 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 identify markets for our Hibbett Sports stores under a clustered expansion program. This approach
primarily focuses on opening new stores within two-hour driving distance of an existing Hibbett location, allowing us
to take advantage of efficiencies in logistics, marketing and regional management. It also aids us in building a better
understanding of appropriate merchandise selection for the local market. In addition to proximity to existing Hibbett
stores, we also consider population, economic conditions, local competitive dynamics, availability of suitable real
estate and potential for return on investment when evaluating potential markets.
In Fiscal 2016, we expect continued growth of our net store openings year over year. In addition to new
stores, we will also continue our successful strategy of expanding high performing existing stores. See “Risk Factors.”
Omni-channel strategy. 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. We continue to invest in
infrastructure that will enable us to engage our customer specifically in the digital commerce channel. The
foundational components for our future e-commerce platform began in Fiscal 2015 with the completion of our
wholesale and logistics facility and will continue in Fiscal 2016 with an upgrade to our point-of-sale system, which
includes enhanced inventory visibility across all stores and a new Customer Relationship Management platform.
Our Logistics
We maintain a single wholesale and logistics facility in Alabaster, Alabama (a suburb of Birmingham) where
we receive and ship substantially all of our merchandise. For key products, we maintain backstock at the facility that is
allocated and shipped 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.
See “Risk Factors.”
We believe strong logistics 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 use third-party logistics providers to gain efficiencies to
approximately 19% of our outlying stores. Our wholesale and logistics facility is designed with significant automation
and operational efficiencies. We expect the facility will support our growth over the next several years.
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 2015
47%
31%
22%
100%
Fiscal 2014
45%
32%
23%
100%
Fiscal 2013
45%
32%
23%
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, particularly in our smaller markets. Many of these brand
name products are highly technical and require considerable sales assistance. We coordinate with our vendors to
educate the sales staff at the store level on new products and trends.
Although the core merchandise assortment tends to be similar for each Hibbett retail 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.
- 7 -
Our merchandising staff, operations staff and management analyze current 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 industry data sources and periodicals;
• 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 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. 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 cyber-security
threats and business interruptions by maintaining strong security protocols and 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 security, help desk, development, engineering, system analysts, business analysts and project managers.
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 2015. We expect this trend to continue in Fiscal 2016. 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 and mobile devices, the MVP program marketing effort has
become the most efficient, timely and targeted segment of our marketing program. Digital marketing, including mobile
devices, 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 providing 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 57, has been our Chief Executive Officer and President since March 2010. He
also currently serves on our Board of Directors. 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 48, 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 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.
- 9 -
Jared S. Briskin, age 42, was appointed our Senior Vice President and Chief Merchant in September 2014.
Formerly, he served as Vice President/Divisional Merchandise Manager of Footwear and Equipment from March
2010 through September 2014 and Vice President/Divisional Merchandise Manager of Apparel and Equipment from
June 2004 through March 2010. Prior to his appointment to Vice President in 2004, Mr. Briskin held various
merchandising positions across multiple categories since joining the Company in April 1998.
Cathy E. Pryor, age 51, has been our Senior Vice President of Operations since 2012. Formerly, she
served as Vice President of Operations from 1995 to 2012. She joined our Company in 1988 serving in areas of
increasing responsibility including district manager and Director of Store Operations.
On February 2, 2014, Michael J. Newsome transitioned from Executive Chairman to Chairman of our
Board of Directors.
Our Employees
As of January 31, 2015, we employed approximately 3,200 full-time and approximately 5,500 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, five-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 winter 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, significant weather events and the timing of tax-free holidays.
- 10 -
Item 1A. Risk Factors.
You should carefully consider the following risks, as well as the other information contained in this report,
before investing in shares of our common stock. If any of the following risks actually occur, our business could be
harmed. In that case, the trading price of our common stock could decline, and you might lose all or part of your
investment.
Risks Related to Our Business and Industry.
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, lack of wage and income growth, 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. 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. Economic and other challenges faced by real estate developers can also impact our ability to open
new stores at the pace we prefer. 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.
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, logistics, 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.
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. Such risks include 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.
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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, the failure to attract and retain highly-qualified IT
personnel 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. 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.
Uncertainty in the economy, coupled with 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 asset 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. In addition, recent
falling oil prices may adversely affect employment and consumer spending in those states that are within our regions
that rely on oil revenues as a significant part of the economies of those states. 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.
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;
significantly damage or destroy our retail locations; prohibit consumers from traveling to our retail locations; or prevent
us from resupplying our stores or wholesale and logistics facility. 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 wholesale and logistics facility 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.
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 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.
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.
•
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In addition, we may be faced with significant excess inventory of some products and missed opportunities
for other products, which could decrease our profitability.
We believe that an increasing number of our customers browse or shop through the use of computers and
mobile internet devices. A delay in the development and implementation of our omni-channel initiative, or lack of
acceptance of the completed platform by our customers, may adversely impact our revenues and growth.
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 retailer 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 retailer, 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.
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.
Many of our largest vendors source a 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, for example:
•
•
•
foreign government regulations;
rising commodity prices;
changes in currency exchange rates or policies and local economic conditions; and
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•
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. Our ability to effectively manage
our business depends on the security, reliability and capacity of our IT systems. Information technology system
failures, network disruptions or breaches of security could disrupt our operations, impacting timely order or receipt
of inventory, payment to vendors and employees, processing of transactions or reporting of financial results. An
attack or other problem with our systems could also result in the disclosure of proprietary information about our
business or confidential information concerning our customers or employees, which could result in significant
damage to our business and our reputation.
We have security measures designed to protect against the misappropriation or corruption of our systems,
intentional or unintentional disclosure of confidential information or disruption of our operations. Our risk
remediation procedures include an annual IT risk assessment based on the SANS Institute Critical Security Controls
framework which prioritizes security functions that are effective against the latest Advanced Targeted Threats while
emphasizing security controls that have demonstrated real world effectiveness. Even so, advanced cyber-security
threats are persistent and continue to evolve making them increasingly difficult to identify and prevent. They
include, but are not limited to, distributed denial of service attacks, 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. Protecting against
these threats may require significant resources, and we may not be able to implement measures that will protect
against all of the significant risks to our information technology systems.
In addition, we rely on a number of third party service providers to execute certain business processes and
maintain certain IT systems and infrastructure. Any breach of security on their part could impair our ability to
effectively operate. 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 could have a material adverse effect on 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, including outlet
centers, and merchandising strategies. We compete with department and discount stores, traditional shoe stores, local
sporting goods stores, mass merchandisers and, on a limited basis, national sporting goods stores. In addition, we face
competition from vendors that sell directly to consumers. Direct sales by vendors may adversely affect our market
share and reduce our revenues. 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.
- 14 -
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, 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 wholesale and logistics facility were shut down.
We currently operate a single wholesale and logistics facility in Alabaster, Alabama, a suburb of Birmingham,
where we receive and ship substantially all of our merchandise. 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 shipping our products to our stores during the
time it takes for us to reopen or replace the facility.
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.
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.
- 15 -
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, 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 wholesale and logistics facility and from our wholesale and logistics facility 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 increases in fuel costs would increase our transportation costs for delivery of
product to our wholesale and logistics facility and shipment 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 wholesale
and logistics facility 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 or investments.
- 16 -
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;
changes in retail sales data that indicate consumers may spend less on discretionary purchases; 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 logistics 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.
- 17 -
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 wage, 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, failure to manage and utilize
available tax credits, 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.
Product liability claims or product recalls can adversely affect our business reputation, expose us to lawsuits or
increased scrutiny by federal and state regulators and may not be fully covered by insurance.
We sell products, particularly equipment, which entail an inherent risk of product liability and product
recall and the resultant adverse publicity. We may be subject to significant claims if the purchase of a defective
product from any of our stores causes injury or death. Our merchandise could be subject to a product recall which
could reflect negatively on our business reputation. We cannot be assured that product liability claims will not be
asserted against us in the future. Any claims made may create adverse publicity that would have a material adverse
effect on our business, reputation, financial condition and results of operations.
- 18 -
We and our vendors maintain insurance with respect to certain of these risks, including product liability
insurance and general liability insurance, but in many cases such insurance is expensive, difficult to obtain and no
assurance can be given that such insurance can be maintained in the future on acceptable terms, or in sufficient
amounts to protect us against losses due to any such events, or at all. Moreover, even though our insurance coverage
may be designed to protect us from losses attributable to certain events, it may not adequately protect us from
liability and expenses we incur in connection with such events.
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.”
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We currently lease all of our existing 988 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. We do not anticipate any such difficulties into Fiscal 2016. 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 own our corporate office building, our wholesale and logistics facility and our Team facility, the latter
of which is located in Birmingham, Alabama and warehouses inventory for educational institutions and youth
associations. We believe our wholesale and logistics facility is suitable and adequate to support our operations for
many years. See “Risk Factors.”
- 19 -
Store Locations
As of January 31, 2015, we operated 988 stores in 31 contiguous states. Of these stores, 195 are located in
enclosed malls and 793 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 January 31,
2015:
Alabama
Arizona
Arkansas
Colorado
Delaware
Florida
Georgia
Iowa
Illinois
Indiana
Kansas
90
8
42
7
1
58
97
10
27
24
23
Kentucky
Louisiana
Maryland
Minnesota
Mississippi
Missouri
Nebraska
New Mexico
North Carolina
Ohio
Oklahoma
58
53
3
2
64
34
10
12
55
26
44
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
West Virginia
Wisconsin
TOTAL
3
35
4
63
97
3
17
10
8
988
As of March 14, 2015, we operated 989 stores in 31 states.
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 January 31, 2015 and
February 1, 2014, we estimated that the liability related to these matters was approximately $0.4 million and $0.2
million, respectively, and accordingly, we accrued $0.4 million and $0.2 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.
- 20 -
Item 4. Mine Safety Disclosures.
None.
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 2015:
First Quarter ended May 3, 2014
Second Quarter ended August 2, 2014
Third Quarter ended November 1, 2014
Fourth Quarter ended January 31, 2015
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
High
$
$
$
$
59.64
57.47
50.69
50.54
$
$
$
$
56.54
61.50
61.64
67.73
Low
$
$
$
$
52.32
49.55
41.57
43.95
$
$
$
$
51.00
55.00
51.16
58.74
On March 14, 2015, the last reported sale price for our common stock as quoted by NASDAQ was $50.83 per
share. As of March 14, 2015, we had 24 stockholders of record.
- 21 -
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, 2010 to
January 31, 2015. We have not paid any dividends. Total stockholder return for prior periods is not necessarily an
indication of future performance.
Hibbett Sports, Inc.
NASDAQ Composite
NASDAQ Retail Trade
1/10
100.00
100.00
100.00
1/11
150.90
126.90
128.20
1/12
225.87
134.50
143.05
1/13
248.16
152.96
176.27
1/14
282.80
204.19
219.05
1/15
221.68
231.72
232.39
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.
- 22 -
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.”
Issuer Repurchases of Equity Securities
The following table presents our share repurchase activity for the thirteen weeks ended January 31, 2015 (1):
Period
November 2, 2014 to November 29, 2014
November 30, 2014 to January 3, 2015
January 4, 2015 to January 31, 2015
Total
Total Number
of S hares
Purchased
4,100
43,991
85,620
133,711
Average
Price per
S hare
$
43.96
$
48.43
$
47.69
$
47.82
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)
4,100
43,991
85,620
133,711
$
$
$
$
179,525
177,394
173,311
173,311
(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)
January 31,
2015
(52 weeks)
February 1,
2014
(52 weeks)
Fiscal Year Ended
February 2,
2013
(53 weeks)
January 28,
2012
(52 weeks)
January 29,
2011
(52 weeks)
$
913,486
$
851,965
$
818,700
$
732,645
$
664,954
586,702
326,784
542,700
309,265
519,818
298,882
470,237
262,408
434,552
230,402
192,648
15,990
118,146
293
117,853
44,269
73,584
$
181,527
13,847
113,891
188
113,703
42,826
70,877
$
$
$
2.74
2.70
25,870
26,266
169,872
13,029
115,981
168
115,813
43,231
72,582
$
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
$
$
$
2.78
2.72
26,132
26,638
$
$
2.19
2.15
26,978
27,506
$
$
1.63
1.60
28,426
29,033
S tatement of Operations Data:
Net sales
Cost of goods sold, including wholesale and
logistics facility 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
Basic earnings per share
Diluted earnings per share
Basic weighted shares outstanding
Diluted weighted average shares outstanding
$
$
2.90
2.87
25,369
25,620
Note: No dividends have been declared or paid.
- 23 -
(In thousands, except per share amounts, Selected Store Data or where noted otherwise)
January 31,
2015
(52 weeks)
February 1,
2014
(52 weeks)
Fiscal Year Ended
February 2,
2013
(53 weeks)
January 28,
2012
(52 weeks)
January 29,
2011
(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)
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
7.2%
2.9%
35.8%
4.1%
1.8%
36.3%
21.1%
21.3%
1.8%
4.8%
8.1%
1.6%
5.0%
8.3%
11.8%
6.9%
36.5%
20.8%
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%
$
$
$
$
$
$
88,397
243
253,373
452,397
3,029
324,781
1,206
60,971
$
$
$
$
$
$
$
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
$
927
80
(19)
988
9
5,649
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
- 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
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 sports retailer 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
January 31, 2015, we operated a total of 988 retail stores in 31 states composed of 969 Hibbett Sports stores and 19
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 82% of our Hibbett
Sports store base is located in strip centers, which includes free-standing stores, while approximately 18% 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 2016 will vary significantly from the average size of stores opened in Fiscal 2015.
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 2015 and Fiscal 2014 included 52 weeks of operations. The
consolidated statements of operations for Fiscal 2013 included 53 weeks of operations. Fiscal 2016 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 2015 experienced a total company-wide square footage increase of 6.0%. Our plan for Fiscal 2016 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 9 existing stores in Fiscal 2015 for an average increase in
square footage of 43%. We expect to expand an additional 10 to 15 stores in Fiscal 2016.
We historically have had increases in comparable store net sales in the low to mid-single digit range. In Fiscal
2015, footwear and activewear 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 2016. We expect a slightly positive
increase in merchandise margin and a slight increase in overall gross profit rate in Fiscal 2016 as we expect wholesale
and logistics expenses and store occupancy expenses to be relatively flat as a percentage of net sales.
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 as a
percentage of net sales in Fiscal 2016, primarily due to increases in 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 including technology upgrade projects and to repurchase our common stock under our stock repurchase
program.
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.
- 25 -
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 2015
(52 weeks)
913.5
$
12.9%
2.9%
73.6
3.8%
2.87
$
$
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
$
$
During Fiscal 2015, Hibbett opened 80 new stores and closed 19 underperforming stores, bringing the store
base to 988 in 31 states as of January 31, 2015. Inventory on a per store basis at January 31, 2015, decreased by
0.4%. Hibbett ended Fiscal 2015 with $88.4 million of available cash and cash equivalents on the consolidated
balance sheet and full availability under its $80.0 million unsecured credit facilities.
Recent Accounting Pronouncements
See Note 2 of Item 8 of this Annual Report on Form 10-K for the fiscal year ended January 31, 2015, for
information regarding recent accounting pronouncements.
Results of Operations
The following table sets forth the percentage relationship to net sales of certain items included in our
consolidated statements of operations for the periods indicated.
Net sales
Costs of goods sold, including wholesale and logistics
facility 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 2015 Compared to Fiscal 2014
January 31,
2015
Fiscal Year Ended
February 1,
2014
February 2,
2013
100.0%
100.0%
100.0%
64.2
35.8
21.1
1.8
12.9
-
12.9
4.8
8.1%
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%
Net sales. Net sales increased $61.5 million, or 7.2%, to $913.5 million for Fiscal 2015 from $852.0
million for Fiscal 2014. Furthermore:
• We opened 80 Hibbett Sports stores while closing 19 underperforming Hibbett Sports stores for net
stores opened of 61 stores in Fiscal 2015. Stores not in the comparable store net sales calculation
accounted for $38.3 million of the increase in net sales. We expanded, remodeled or relocated 10 high
performing stores. Store openings and closings are reported net of relocations.
- 26 -
• We achieved a 2.9% increase in comparable store net sales for Fiscal 2015 compared to Fiscal 2014.
Comparable store net sales contributed $23.2 million to the increase in net sales.
During Fiscal 2015, 836 stores were included in the comparable store sales comparison. The increase in
comparable store net sales was broad-based with gains across footwear, activewear and cleats. Significant increases
were achieved in basketball and lifestyle footwear, branded apparel, and wrestling, volleyball and soccer cleats. 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 wholesale and logistics facility. Gross profit was $326.8 million, or 35.8% of net sales,
in Fiscal 2015, compared with $309.3 million, or 36.3% of net sales, in Fiscal 2014.
• Gross profit rate decreased as a percentage of net sales due to increased markdowns to liquidate aged
inventory. We expect gross profit rate to remain flat or increase slightly in Fiscal 2016 resulting from
an anticipated positive product gross margin rate compared to Fiscal 2015.
• Wholesale and logistics expenses as a percentage of net sales remained relatively flat, decreasing 1
basis point. Decreased labor costs as a percentage of net sales due to improvements in labor efficiency
as well as a decrease in occupancy costs offset other volume-related cost increases. In Fiscal 2016, we
expect this expense to remain relatively stable as we realize a full-year’s operation of our new facility
without the duplicate costs of our old distribution center.
• Store occupancy expense as a percentage of net sales increased 12 basis points due to increases in rent,
utility and real estate taxes. However, as comparable sales improved in the fourth quarter, these
expenses decreased 4 basis points as a percentage of net sales.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses
were $192.6 million, or 21.1% of net sales, for Fiscal 2015, compared with $181.5 million, or 21.3% of net sales, for
Fiscal 2014. Expense trends we experienced included:
• Total salary and benefit costs increased in dollars, but decreased as a percentage of net sales by 16
basis points due to higher comparable store sales and lower health care costs. As our store base grows,
we expect an increase in salary and benefit dollars, but believe these costs as a percentage of net sales
will remain relatively stable.
• Stock-based compensation decreased by 19 basis points as a percentage of net sales due to a larger
number of equity award forfeitures in the current year compared to last year.
• Expenses associated with costs of our old distribution center not included in cost of goods sold
increased 5 basis points as a percentage of net sales. The lease on our old center expired in December
2014. A complete year of expense related to our new corporate headquarters added 5 basis points as a
percentage of net sales.
• Professional fees increased 7 basis points as a percentage of net sales due to an increase in consulting
fees for the planning of our omni-channel initiative and other elements of our strategic plan.
• We expect overall store operating, selling and administrative expenses as a percent of net sales to
increase in Fiscal 2016 due to an anticipated increased in health care costs and IT costs.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 1.8% in
Fiscal 2015 and 1.6% in Fiscal 2014. In Fiscal 2015, the addition of our new wholesale and logistics facility placed
in service in April 2014, the addition of new stores and the capitalization of IT investments, resulted in an elevated
depreciation expense in both dollars and in percentage of net sales. We expect this trend to continue into Fiscal
2016.
Provision for income taxes. The combined federal, state and local effective income tax rate as a percentage
of pre-tax income was 37.6% for Fiscal 2015 and 37.7% for Fiscal 2014. The decrease in rate resulted primarily
from a settlement with a state taxing authority during Fiscal 2015.
- 27 -
Fiscal 2014 Compared to Fiscal 2013
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 included 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.
• 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.
• 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 of 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.
• New store costs increased 6 basis points as a percentage of net sales resulting from an increase in 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.
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.
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.
- 28 -
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.
Our consolidated statements of cash flows are summarized as follows (in thousands):
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Operating Activities.
$
January 31,
2015
102,392
(22,559)
(57,663)
22,170
$
Fiscal Year Ended
February 1,
2014
February 2,
2013
$
$
53,301
(50,990)
(12,995)
(10,684)
87,124
(22,318)
(43,033)
21,773
$
$
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 $102.4 million for Fiscal 2015 compared with net cash provided
by operating activities of $53.3 million and $87.1 million in Fiscal 2014 and Fiscal 2013, respectively. The increase in
net cash provided by operating activities for Fiscal 2015 compared to Fiscal 2014 and Fiscal 2013 was impacted by the
following:
• The change in accounts payable provided cash of $9.9 million in Fiscal 2015, used cash of $27.5 million
in Fiscal 2014 and provided cash of $28.3 million in Fiscal 2013. The increases in Fiscal 2015 and Fiscal
2013 resulted from an earlier receipt of inventory in advance of the spring season. The decrease in Fiscal
2014 resulted from a later receipt of inventory in advance of the spring season.
• Ending inventory declined 0.4% and 3.6% on a per store level basis at January 31, 2015 and February 1,
2014, respectively, compared to the prior year. Fiscal 2015 was affected by later receipts resulting from
the port labor disputes ongoing on the West coast. Fiscal 2014 was affected by the later receipt of spring
inventory compared to the prior year. The increase in inventory used cash of $13.9 million, $5.2 million
and $26.3 million during Fiscal 2015, Fiscal 2014 and Fiscal 2013, respectively.
• Prepaid expenses and other provided cash of $6.6 million in Fiscal 2015 resulting from a decrease in
refundable income taxes and a decrease in tax benefits due to fewer stock option exercises in Fiscal 2015
compared to Fiscal 2014. The effect of the change in prepaid expenses and other was negligible in Fiscal
2014 and Fiscal 2013.
• Net income provided cash of $73.6 million, $70.9 million and $72.6 million during Fiscal 2015, Fiscal
2014 and Fiscal 2013, respectively.
• Non-cash charges included depreciation and amortization expense of $16.0 million, $13.8 million and
$13.0 million during Fiscal 2015, Fiscal 2014 and Fiscal 2013, respectively, and stock-based
compensation expense of $4.5 million, $5.8 million and $5.6 million during Fiscal 2015, Fiscal 2014 and
Fiscal 2013, respectively. Stock-based compensation in Fiscal 2015 was affected by a higher than
historical forfeiture of restricted stock and performance-based awards. Depreciation expense increased in
Fiscal 2015 due to investments in facilities and information technology systems and will continue to
increase as additional 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, fluctuations in the price of our common stock and levels of forfeitures in any given period.
- 29 -
Investing Activities.
Cash used in investing activities in the fiscal periods ended January 31, 2015, February 1, 2014 and February
2, 2013 totaled $22.6 million, $51.0 million and $22.3 million, respectively. Gross capital expenditures used $22.9
million, $50.5 million and $22.0 million during Fiscal 2015, Fiscal 2014 and Fiscal 2013, 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 80 new stores and relocated, expanded and /or remodeled 10 existing stores during Fiscal 2015. 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 estimate the cash outlay for capital expenditures in the fiscal year ending January 30, 2016 will be
approximately $33.0 million, which relates to expenditures for information system infrastructure and upgrades, the
opening of 80 to 85 new stores; the remodeling, relocation or expansion of selected existing stores, and other
departmental needs. Of the total budgeted dollars for capital expenditures for Fiscal 2016, we anticipate that
approximately 43% will be related to the information infrastructure and upgrades. Approximately 36% will be related
to the opening new stores, store expansions and relocations and store remodels. The remaining 21% relates primarily
to specific department expenditures and includes information technology, facility upgrades, transportation equipment,
automobiles and security equipment for our stores.
The lease for our old distribution center expired in December 2014. We relocated to our new wholesale and
logistics facility in April 2014 at a total capitalized cost of $38.7 million.
Financing Activities.
Net cash used in financing activities was $57.7 million, $13.0 million and $43.0 million in Fiscal 2015, Fiscal
2014 and Fiscal 2013, respectively. The financing activity cash fluctuation between years is primarily the result of
repurchases of our common stock. We expended $56.3 million, $15.8 million and $45.9 million on repurchases of our
common stock during Fiscal 2015, Fiscal 2014 and Fiscal 2013, respectively. In addition, cash used to settle net share
equity awards expended $4.7 million, $4.3 million and $3.9 million during Fiscal 2015, Fiscal 2014 and Fiscal 2013,
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 January 31, 2015, we had two unsecured revolving credit facilities that allow borrowings up to $30.0
million and $50.0 million, and which renew in August 2015 and November 2015, respectively. The facilities do not
require a commitment or agency fee nor are there any covenant restrictions. We plan to renew these facilities as
they expire and do not anticipate any problems in doing so; however, no assurance can be given that we will be
granted a renewal or terms which are acceptable to us. As of January 31, 2015, we did not have any debt
outstanding under either of these facilities.
- 30 -
The following table lists the aggregate maturities of various classes of obligations and expiration amounts
of various classes of commitments related to Hibbett Sports, Inc. at January 31, 2015 (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
-
$
726
289
51,414
3,462
322
56,213
$
1 - 3 years
-
$
1,470
501
77,907
1,188
-
81,066
$
3 - 5 years
-
$
1,433
368
44,713
196
-
46,710
$
More than
5 years
-
$
1,288
294
32,670
-
2,765
37,017
$
Total
-
$
4,917
1,452
206,704
4,846
3,087
221,006
$
(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.
(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 $1.3 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 January 31, 2015. 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.
- 31 -
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. We recognize revenue at the time the customer
takes possession of the merchandise. 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. 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 January 31, 2015 and February 1, 2014, the amount recorded in current liabilities for
reward certificates issued was not significant.
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.
Income from gift card breakage 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. We have determined the likelihood of
redemption is remote when redemptions are equal to or less than five percent of the remaining balances of gift cards
aged by activation year. For Fiscal 2015, Fiscal 2014 and Fiscal 2013, $0.7 million, $0.2 million and $0.3 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 January 31, 2015 and February 1, 2014 was $4.7 million and $4.5 million, respectively.
Inventory.
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 January 31, 2015 and February 1, 2014,
the accrual was $3.5 million and $2.2 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. Physical counts are performed on a cyclical basis. As of January 31, 2015 and
February 1, 2014, the accrual was $1.2 million and $1.3 million, respectively.
- 32 -
Inventory Purchase Concentration: Our business is dependent to a significant degree upon close
relationships with our vendors. Our largest vendor, Nike, represented 55.7%, 52.3% and 48.9% of our purchases for
Fiscal 2015, Fiscal 2014 and Fiscal 2013, respectively. Our second largest vendor in Fiscal 2015 represented
15.4%, 15.6% and 12.8% of our purchases while our third largest vendor in Fiscal 2015 represented 6.4%, 8.6% and
10.9% of our purchases for Fiscal 2015, Fiscal 2014 and Fiscal 2013, 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
January 31, 2015 and February 1, 2014, vendor-owned inventories held at our locations (and not reported as our
inventory) were $3.8 million and $1.1 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.
We account for uncertain tax positions in accordance with ASC Subtopic 740-10. 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
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. 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.
- 33 -
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 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 are operating leases.
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”).
- 34 -
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 2015 and
Fiscal 2014, we had no borrowings outstanding under any credit facility, nor did we have any borrowings against
either of the facilities during Fiscal 2015 and Fiscal 2014.
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 winter 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, demand for apparel and
accessories driven by local interest in sporting events and timing of sales tax holidays.
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.
- 35 -
Item 8. Consolidated Financial Statements and Supplementary Data.
The following consolidated financial statements and supplementary data of our Company are included in
response to this item:
• Report of Independent Registered Public Accounting Firm
• Consolidated Balance Sheets as of January 31, 2015 and February 1, 2014
• Consolidated Statements of Operations for the fiscal year ended January 31, 2015, February
1, 2014 and February 2, 2013
• Consolidated Statements of Cash Flows for the fiscal year ended January 31, 2015, February
1, 2014 and February 2, 2013
• Consolidated Statements of Stockholders’ Investment for the fiscal year ended January 31,
2015, February 1, 2014 and February 2, 2013
• 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
January 31, 2015 and February 1, 2014, and the related consolidated statements of operations, stockholders’
investment, and cash flows for each of the years in the three-year period ended January 31, 2015. We also have
audited Hibbett Sports, Inc.’s internal control over financial reporting as of January 31, 2015, based on the criteria
established in Internal Control – Integrated Framework (2013) 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 January 31, 2015 and February 1, 2014, and the
results of their operations and their cash flows for each of the years in the three-year period ended January 31, 2015,
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 January 31, 2015, based
on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
/s/ KPMG LLP
Birmingham, Alabama
March 31, 2015
- 37 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
ASSETS
January 31, 2015
Fe bruary 1, 2014
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 buildings
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
$
88,397
3,681
3,896
240,408
9,296
9,820
355,498
$
66,227
3,798
4,602
226,545
13,429
9,048
323,649
27,892
3,144
71,280
1,121
31,303
74,085
3,369
212,194
119,213
92,981
6,280
3,247
61,604
501
29,717
72,216
37,639
211,204
125,190
86,014
306
3,612
452,397
$
3,497
3,185
416,345
$
$
84,439
436
8,249
3,821
5,180
102,125
$
74,532
322
8,464
3,792
4,304
91,414
3,029
16,043
1,457
4,962
127,616
2,889
13,803
1,738
2,478
112,322
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,
38,465,814 and 38,202,486 shares issued at January 31, 2015 and
February 1, 2014, respectively
Paid-in capital
Retained earnings
T reasury stock, at cost, 13,595,537 and 12,389,531 shares repurchased
at January 31, 2015 and February 1, 2014, respectively
T otal stockholders' investment
T otal Liabilities and Stockholders' Investment
-
-
385
162,675
566,055
382
154,533
492,471
(404,334)
324,781
452,397
$
(343,363)
304,023
416,345
$
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 wholesale and
logistics facility 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
January 31, 2015
(52 weeks)
Fiscal Year Ended
February 1, 2014
(52 weeks)
February 2, 2013
(53 weeks)
$
913,486
$
851,965
$
818,700
586,702
326,784
192,648
15,990
118,146
22
(315)
(293)
117,853
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
$
44,269
73,584
$
42,826
70,877
$
43,231
72,582
$
$
2.90
2.87
$
$
2.74
2.70
$
$
2.78
2.72
25,369
25,620
25,870
26,266
26,132
26,638
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 income taxes 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
Proceeds from insurance
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
January 31,
2015
Fiscal Ye ar Ende d
Fe bruary 1,
2014
Fe bruary 2,
2013
$
73,584
$
70,877
$
72,582
15,990
13,847
13,029
4,220
(2,911)
181
4,468
117
706
(13,863)
6,614
46
9,907
2,240
1,093
102,392
(90)
(22,873)
320
84
(22,559)
(56,302)
(377)
2,911
(4,669)
774
(57,663)
(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)
(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)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
22,170
66,227
88,397
$
(10,684)
76,911
66,227
$
21,773
55,138
76,911
$
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest
Income taxes, net of refunds
$
306
$
195
$
178
$
32,626
$
42,276
$
39,878
Supplemental Schedule of Non-Cash Activities:
Property and plant additions under capital leases
$
909
$
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 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
Net income
Issuance of shares through the
Company's equity plans, including
tax benefit of $2,911
Adjustment to income tax benefit
from exercises of employee stock
options
Purchase of shares under the
stock repurchase program
Stock-based compensation
Balance-January 31, 2015
Numbe r of
Share s
37,498,128
-
Amount
375
$
-
Paid-In
C apital
$
127,779
-
Re taine d
Earnings
349,012
$
72,582
348,193
3
6,997
-
-
-
37,846,321
-
-
-
-
378
-
(2)
-
5,649
140,423
-
356,165
4
7,364
-
-
-
38,202,486
-
-
-
-
382
-
908
-
5,838
154,533
-
263,328
3
3,682
-
-
-
38,465,814
-
(8)
-
-
385
$
-
4,468
162,675
$
-
-
-
-
421,594
70,877
-
-
-
-
492,471
73,584
-
-
-
-
Numbe r of
Share s
11,120,040
Amount
$
(273,416)
-
-
-
-
-
-
903,794
-
(49,852)
-
12,023,834
(323,268)
-
-
-
-
-
-
365,697
-
(20,095)
-
12,389,531
(343,363)
-
-
-
-
-
-
1,206,006
-
(60,971)
-
Total
Stockholde rs'
Inve stme nt
203,750
$
72,582
7,000
(2)
(49,852)
5,649
239,127
70,877
7,368
908
(20,095)
5,838
304,023
73,584
3,685
(8)
(60,971)
4,468
324,781
$
$
566,055
13,595,537
$
(404,334)
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 statements of operations for
Fiscal 2015 and Fiscal 2014 include 52 weeks of operations while our consolidated statement of operations for
Fiscal 2013 includes 53 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, total liabilities, 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, tax-related 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 January 31, 2015,
February 1, 2014 and February 2, 2013.
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. 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):
January 31,
2015
$
9,763
(3,456)
6,307
Fiscal Year Ended
February 1,
2014
$
8,980
(3,335)
5,645
$
$
$
February 2,
2013
$
9,554
(4,002)
5,552
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
logistics 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 1.2 million shares of our common stock during Fiscal 2015 at a
cost of $61.0 million, including 0.1 million shares acquired from holders of restricted stock unit awards to satisfy tax
withholding requirements of $4.7 million. 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.
Historically, under all stock repurchase authorizations, we have repurchased a total of 13.6 million shares
of our common stock at an approximate cost of $404.3 million as of January 31, 2015, and had approximately
$173.3 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
January 31, 2015 and February 1, 2014 were $5.2 million and $3.5 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
January 31, 2015, we had $2.7 million of investments of which $0.1 million was included in prepaid expenses and
other and $2.6 million was included in other assets, net. 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.
Net unrealized holding gains for Fiscal 2015 and Fiscal 2014 were $31,000 and $0.2 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 January 31, 2015 and
February 1, 2014 was $79,000 and $42,000, respectively.
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
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 January 31, 2015 and February 1, 2014,
the accrual was $3.5 million and $2.2 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. Physical counts are performed on a cyclical basis. As of January 31, 2015 and
February 1, 2014, the accrual was $1.2 million and $1.3 million, respectively.
Inventory Purchase Concentration: Our business is dependent to a significant degree upon close
relationships with our vendors. Our largest vendor, Nike, represented 55.7%, 52.3% and 48.9% of our purchases for
Fiscal 2015, Fiscal 2014 and Fiscal 2013, respectively. Our second largest vendor in Fiscal 2015 represented
15.4%, 15.6% and 12.8% of our purchases while our third largest vendor in Fiscal 2015 represented 6.4%, 8.6% and
10.9% of our purchases for Fiscal 2015, Fiscal 2014 and Fiscal 2013, 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
January 31, 2015 and February 1, 2014, vendor-owned inventories held at our locations (and not reported as our
inventory) were $3.8 million and $1.1 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 amounts associated with technology upgrades at period-end. At January 31, 2015,
approximately 84% of the construction in progress balance was comprised of costs associated with information
technology capital projects. The remaining balance consisted of costs associated with unopened stores and facility
leasehold improvements.
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 realized 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 $3.3 million and $3.1 million at January 31, 2015 and February 1, 2014,
respectively. The liability for the long-term portion of unamortized landlord allowances was $12.4 million and
$10.5 million at January 31, 2015 and February 1, 2014, respectively. We estimate the non-cash portion of landlord
allowances was $1.3 million and $2.1 million at January 31, 2015 and February 1, 2014, 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. We recognize revenue at the time the customer
takes possession of the merchandise. 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. 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 monthly 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 January 31, 2015 and February 1, 2014, the amount recorded in current
liabilities for reward certificates issued was not significant.
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.
Income from gift card breakage 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. We have determined the likelihood of
redemption is remote when redemptions are equal to or less than five percent of the remaining balances of gift cards
aged by activation year. For Fiscal 2015, Fiscal 2014 and Fiscal 2013, $0.7 million, $0.2 million and $0.3 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 January 31, 2015 and February 1, 2014 was $4.7 million and $4.5 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. As of January 31, 2015 and February 1, 2014, the accrual for these liabilities was $0.8 million 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 January 31, 2015 and February
1, 2014, the accrual for these liabilities (which is not discounted) was $0.4 million and $0.3 million, respectively,
and was included in accrued expenses in the consolidated balance sheets.
Sales Returns
Net sales returns were $32.3 million for Fiscal 2015, $30.5 million for Fiscal 2014 and $28.8 million for
Fiscal 2013. The accrual for the effect of estimated returns was $0.5 million and $0.4 million as of January 31, 2015
and February 1, 2014, respectively, 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.
In April 2014, the FASB issued Accounting Standard Update (ASU) 2014-08, Discontinued Operations.
This ASU stipulates that the disposal of a component of an entity is to be reported in discontinued operations only if
the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial
results. The ASU also removed the conditions that a) the operations and cash flows of the component have been (or
will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction and b) the entity
will not have any significant continuing involvement in the operations of the component after the disposal
transaction. We adopted this guidance as of the beginning of Fiscal 2015. The guidance applies to components of
the Company that are disposed or classified as held for sale after the effective date. The adoption of this guidance
had no impact on our consolidated financial statements for Fiscal 2015.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU is a
comprehensive new revenue recognition model that expands disclosure requirements and requires a company to
recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the
consideration it expects to receive in exchange for those goods or services. This ASU is effective for annual and
interim reporting periods beginning after December 15, 2016 and early adoption is not permitted. Accordingly, we
will adopt this ASU in the first quarter of Fiscal 2017. We are currently evaluating the impact of the adoption of this
pronouncement on our results of operations and cash flows; however, it is not expected to be material.
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.
- 47 -
NOTE 3. STOCK-BASED COMPENSATION
At January 31, 2015, 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 January 31, 2015, there were 559,095 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 January 31, 2015, there were 68,371 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 up to 112,500 authorized but
unissued shares of common stock. At January 31, 2015, there were 42,928 shares available for grant
under the Deferred Plan.
(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 January 31, 2015, there
were 447,567 shares available for grant under the DEP.
Our plans allow for a variety of equity awards including stock options, restricted stock awards, stock
appreciation rights and performance awards. As of January 31, 2015, 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 2015, Fiscal 2014 and Fiscal 2013 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 January 31, 2015, 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, receives an annual value of $150,000
worth of equity in any form he chooses allowed within the DEP.
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):
January 31,
2015
Fiscal Year Ended
February 1,
2014
February 2,
2013
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
$
$
$
469
3,833
96
70
4,468
1,645
2,823
358
5,250
100
130
5,838
2,154
3,684
805
4,715
93
36
5,649
2,082
3,567
$
$
$
- 48 -
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 2015, Fiscal 2014 and Fiscal 2013
was from option exercises and restricted stock unit releases and totaled $5.3 million, $6.5 million and $5.9 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 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.
Following is the weighted average fair value of each option granted during Fiscal 2015. 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 3, 2014
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 18
$56.84
$24.31
5.18
46.46
1.59%
None
M ar 31
$52.88
$22.74
5.18
46.42
1.76%
None
Quarter Ended
August 2,
2014
Jun 30
$54.17
$18.99
5.18
36.42
1.64%
None
November 1,
2014
Sep 30
$42.63
$15.36
5.36
36.47
1.82%
None
January 31,
2015
Dec 31
$48.43
$18.58
5.36
39.73
1.68%
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 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.
- 49 -
Activity for our option plans during Fiscal 2015 was as follows:
Options outstanding at February 1, 2014
Granted
Exercised
Forfeited, cancelled or expired
Options outstanding at January 31, 2015
Number of
S hares
244,026
20,314
(22,046)
-
242,294
Weighted
Average
Remaining
Contractual
Term
(Years)
5.69
Aggregate
Intrinsic
Value
($000's)
$
6,841
5.34
$
3,439
Weighted
Average
Exercise
Price
$
31.99
55.19
18.71
-
35.15
$
Exercisable at January 31, 2015
242,294
$
35.15
5.34
$
3,439
The weighted average grant-date fair value of options granted during Fiscal 2015, Fiscal 2014 and Fiscal
2013 was $23.12, $17.97 and $19.39, respectively. The compensation expense included in store operating, selling
and administrative expenses and recognized during Fiscal 2015, Fiscal 2014 and Fiscal 2013 was $0.5 million, $0.4
million and $0.8 million, respectively, before the recognized income tax benefit of $0.2 million, $0.1 million and
$0.3 million, respectively.
The total intrinsic value of stock options exercised during Fiscal 2015, Fiscal 2014 and Fiscal 2013 was
$1.1 million, $6.8 million and $4.0 million, respectively. The total cash received from these stock option exercises
during Fiscal 2015, Fiscal 2014 and Fiscal 2013 was $0.4 million, $2.6 million and $2.7 million, respectively.
Excess income tax proceeds from stock option exercises are included in cash flows from financing activities as
required by ASC Topic 230, Statement of Cash Flows. As of January 31, 2015, there was no unrecognized
compensation cost related to nonvested stock options.
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
2015:
RSUs
PSUs
Totals
We ighte d
Ave rage
Grant-Date
Fair Value
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
Numbe r of
Awards
320,317
73,074
-
(109,721)
(17,781)
$
38.20
56.80
-
27.95
37.01
221,050
25,300
4,075
(120,400)
(31,250)
$
33.55
56.84
(20.07)
26.98
40.61
541,367
98,374
4,075
(230,121)
(49,031)
$
36.30
56.81
(20.07)
27.44
39.31
265,889
$
47.62
98,775
$
43.08
364,664
$
46.39
Restricted stock unit awards
outstanding at February 1, 2014
Granted
PSU multiplier earned (1)
Vested
Forfeited, cancelled or expired
Restricted stock unit awards
outstanding at January 31, 2015
- 50 -
(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 $56.81, $54.13 and $52.26 for Fiscal
2015, Fiscal 2014 and Fiscal 2013, respectively. There were 98,374, 107,303 and 104,417 RSUs awarded during
Fiscal 2015, Fiscal 2014 and Fiscal 2013, respectively. The compensation expense included in store operating,
selling and administrative expenses and recognized during Fiscal 2015, Fiscal 2014 and Fiscal 2013 was $3.8
million, $5.3 million and $4.7 million, respectively, before the recognized income tax benefit of $1.4 million, $2.0
million and $1.8 million, respectively.
During Fiscal 2015, RSU awards of 230,121 unit awards, including 120,400 awards that were PSUs, vested
with an intrinsic value of $13.1 million. The total intrinsic value of our RSU awards outstanding and unvested at
January 31, 2015, February 1, 2014 and February 2, 2013 was $17.2 million, $32.5 million and $34.3 million,
respectively. As of January 31, 2015, there was approximately $7.8 million of total unamortized unrecognized
compensation cost related to RSU awards. This cost is expected to be recognized over a weighted average period of
2.2 years.
Employee Stock Purchase Plan
The Company’s ESPP allows eligible employees the right to purchase shares of our common stock, subject
to certain limitations, at 85% of the lesser of the market value at the end of each calendar quarter (purchase date) or
the beginning of each calendar quarter. Our employee purchases of common stock and the average price per share
through the ESPP were as follows:
Fiscal Year Ended
January 31, 2015
February 1, 2014
February 2, 2013
S hares
Purchased
8,882
8,066
7,596
Average
Price Per
S hare
$
$
$
42.16
46.39
43.45
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
January 31,
2015
$10.78
0.25
36.4% - 46.4%
0.04% - 0.16%
None
Fiscal Year Ended
February 1,
2014
$12.47
0.25
34.4% - 41.0%
0.01% - 0.05%
None
February 2,
2013
$12.37
0.25
39.7% - 42.6%
0.02% - 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 2015, Fiscal 2014 and Fiscal 2013 was $0.1 million.
- 51 -
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 stock units are calculated and expensed each calendar quarter by taking total fees earned during
the calendar quarter and dividing by the closing price of our common stock 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 1,426, 2,215 and 646 stock units were
deferred under this plan in Fiscal 2015, Fiscal 2014 and Fiscal 2013, respectively. One director has elected to defer
compensation into stock units in calendar 2015.
The compensation expense included in store operating, selling and administrative expenses and recognized
during Fiscal 2015, Fiscal 2014 and Fiscal 2013 was $70,000, $130,000 and $36,000, respectively, before the
recognized income tax benefit of $26,000, $49,000 and $14,000, respectively.
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
January 31,
2015
$
73,584
Fiscal Year Ended
February 1,
2014
$
70,877
February 2,
2013
$
72,582
25,369
66
185
25,620
25,870
96
300
26,266
26,132
372
134
26,638
Basic earnings per share
Diluted earnings per share
$
$
2.90
2.87
$
$
2.74
2.70
$
$
2.78
2.72
In calculating diluted earnings per share for Fiscal 2015, 677 options to purchase shares of common stock
outstanding as of the end of the period were excluded in the computations of diluted earnings per share due to their
anti-dilutive effect. In calculating diluted earnings per share for Fiscal 2014 and Fiscal 2013, 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 24,950 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 2015. Assuming the
performance criteria had been achieved at target as of January 31, 2015, the incremental dilutive impact would have
been 17,316 shares.
- 52 -
NOTE 5. DEBT
At January 31, 2015, we had two unsecured credit facilities, which are renewable in August and November
2015. 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 2015, nor
was there any debt outstanding under either of these facilities at January 31, 2015. At January 31, 2015, a total of
$80.0 million was available to us from these facilities.
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.
NOTE 6. LEASES
We have entered into capital leases for certain property and transportation equipment. At January 31, 2015,
total capital lease obligations were $3.5 million, of which $0.4 million was classified as a short-term liability and
included in capital lease obligations and $3.1 million was classified as a long-term liability and included in capital
lease obligations in our consolidated balance sheet. At February 1, 2014, total capital lease obligations were $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 and included in capital lease obligations in our consolidated
balance sheet. The cost basis of total assets under capital leases at January 31, 2015 and February 1, 2014 was $4.3
million and $3.7 million, respectively, with accumulated amortization at January 31, 2015 and February 1, 2014 of
$1.1 million and $0.8 million, respectively. Amortization expense related to assets under capital leases was $0.5
million, $0.3 million and $0.2 million in Fiscal 2015, Fiscal 2014 and Fiscal 2013, respectively.
We lease the majority of our retail sporting goods stores under 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 operating leases having initial
terms of more than one year.
- 53 -
During Fiscal 2015, we increased our lease commitments by a net of 61 retail stores, each having initial
lease termination dates between January 2019 and May 2025 as well as various office and transportation equipment.
At January 31, 2015, 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 61 lease commitments added during Fiscal 2015, were as follows (in
thousands):
Fiscal 2016
Fiscal 2017
Fiscal 2018
Fiscal 2019
Fiscal 2020
Thereafter
Total minimum lease payments
Less amount representing interest
Present value of total minimum lease payments
Capital
$
Operating
Total
$
$
726
735
735
730
703
1,288
4,917
1,452
3,465
51,414
43,329
34,578
26,462
18,251
32,670
206,704
-
206,704
52,140
44,064
35,313
27,192
18,954
33,958
211,621
1,452
210,169
$
$
$
Rental expense for all operating leases consisted of the following (in thousands):
January 31,
2015
Fiscal Year Ended
February 1,
2014
February 2,
2013
M inimum rentals
Contingent rentals
$
$
49,323
4,647
53,970
$
$
44,984
5,280
50,264
$
$
40,075
6,331
46,406
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 is determined at the discretion of the
Board of Directors. For Fiscal 2015, Fiscal 2014 and Fiscal 2013, 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 2015, Fiscal 2014 and Fiscal 2013 was $0.7 million, $0.8 million and $0.8 million,
respectively.
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 under the Supplemental Plan was
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 2015, Fiscal 2014 and Fiscal 2013 was $0.1 million. The Supplemental Plan is intended to comply
with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended.
For Fiscal 2016, the Board adopted the Safe Harbor provisions for our 401(k) Plan. Under this election,
contributions will be matched at 100% of the first 3% of eligible compensation and 50% of the next 3% of eligible
compensation for a total possible match of 4.5% of the first 6% of eligible compensation. Beginning in Fiscal 2016,
contributions made to the Supplemental Plan will no longer be subject to a matching provision.
- 54 -
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.
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 of BAMM and another Director, Albert C. Johnson, was a former director 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 2015, Fiscal 2014 and Fiscal 2013, minimum lease payments were $0.1 million. Minimum lease payments
remaining under this lease at January 31, 2015 were $0.2 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
January 31,
2015
$
35,013
4,059
39,072
4,756
441
5,197
44,269
$
Fiscal Year Ended
February 1,
2014
$
37,313
312
37,625
5,205
(4)
5,201
42,826
$
February 2,
2013
$
39,511
(1,418)
38,093
5,355
(217)
5,138
43,231
$
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
January 31,
2015
Fiscal Year Ended
February 1,
2014
February 2,
2013
35.00%
2.85
(0.29)
37.56%
35.00%
2.81
(0.15)
37.66%
35.00%
2.76
(0.43)
37.33%
- 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):
January 31, 2015
February 1, 2014
Deferred rent
Inventories
Accruals
Stock-based compensation
Other
Total deferred tax assets
Current
$
1,486
5,552
2,898
996
31
10,963
Non-current
5,893
$
-
1,656
3,393
92
11,034
Accumulated depreciation and amortization
Prepaid expenses
Accruals
State taxes
Total deferred tax liabilities
Deferred income taxes, net
-
(645)
(26)
(472)
(1,143)
9,820
$
(12,809)
-
-
-
(12,809)
(1,775)
$
Current
$
1,452
4,649
3,068
1,267
17
10,453
-
(927)
(42)
(436)
(1,405)
9,048
$
Non-current
5,193
$
-
1,605
4,118
2
10,918
(7,289)
-
-
(132)
(7,421)
3,497
$
Non-current deferred income taxes, net, at January 31, 2015, includes $2.1 million of deferred income tax
liability reported in other liabilities, net, on our consolidated balance sheet.
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 2012 or by most state taxing jurisdictions for years prior to Fiscal 2011. 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 Subtopic 740-10 follows (in thousands):
January 31,
2015
February 1,
2014
February 2,
2013
$
$
$
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
1,539
122
(168)
162
(119)
(197)
1,339
2,708
245
(964)
277
(517)
(210)
1,539
2,604
55
(42)
278
-
(187)
2,708
$
$
$
We classify interest and penalties recognized on unrecognized tax benefits as income tax expense. We
have accrued interest and penalties in the amount of $0.1 million, $0.2 million and $0.3 million as of January 31,
2015, February 1, 2014 and February 2, 2013, respectively. During Fiscal 2015, Fiscal 2014 and Fiscal 2013, we
recorded ($0.1) million, ($43,000) 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 January 31, 2015, February 1, 2014 and February 2, 2013, $1.0
million, $1.0 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 were effective for tax years beginning on or after January 1, 2014; however, certain portions 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. We have analyzed the impact of the TPR and determined that the impact was not
material.
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 January 31, 2015 and February 1, 2014, there was $3.5 million and
$4.0 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.
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 January 31, 2015 and
February 1, 2014, we estimated that the liability related to these matters was approximately $0.4 million and $0.2
million, respectively, and accordingly, we accrued $0.4 million and $0.2 million, respectively, as a current liability
in our consolidated balance sheets.
- 57 -
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 January 31, 2015
First
(13 weeks)
$
261,909
$
98,196
$
45,664
$
28,388
S econd
(13 weeks)
$
193,918
$
64,408
$
13,723
$
8,380
Third
(13 weeks)
$
218,321
$
79,150
$
26,812
$
16,890
Fourth
(13 weeks)
$
239,338
$
85,030
$
31,947
$
19,925
Basic earnings per share
Diluted earnings per share
$
$
1.10
1.09
$
$
0.33
0.32
$
$
0.67
0.67
$
$
0.80
0.79
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
In the opinion of our management, this unaudited information has been prepared on the same basis as the
audited information. The operating results from any quarter are not necessarily indicative of the results to be
expected for any future period.
- 58 -
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
January 31, 2015
Level II
-
$
-
$
-
Level III
-
$
-
$
-
Level I
87
$
2,619
2,706
$
February 1, 2014
Level II
-
$
-
$
-
Level III
-
$
-
$
-
Level I
509
$
2,107
2,616
$
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.
As of January 31, 2015, 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 January 31, 2015.
(b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of
our management, including our principal executive officer and principal financial officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting as of January 31, 2015, based on the Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on our evaluation under the framework in Internal Control – Integrated Framework
(2013), our management concluded that our internal control over financial reporting was effective as of January 31,
2015.
KPMG LLP, our independent registered public accounting firm, has issued an audit report on the Company’s
internal control over financial reporting as of January 31, 2015 included in Item 8 herein.
- 59 -
(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
2015 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 2015 Annual Meeting of Stockholders (Proxy
Statement) to be held on May 28, 2015. 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 and Management,” “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)
613,286
-
613,286
$35.15
-
$35.15
1,117,961
-
1,117,961
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
TOTAL
(1) Information presented as of January 31, 2015.
(2) Includes 265,889 RSUs and 99,775 PSUs that may be awarded if specified targets and/or service periods
are met. It also includes 5,328 DSUs. The weighted average exercise price of outstanding options does
not include these awards.
(3) Includes 68,371 shares remaining under our ESPP and 42,928 shares remaining under our DEP without
consideration of shares subject to purchase in the purchasing period ending March 31, 2015.
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.
PART IV
(a) Documents filed as part of this report:
1. Financial Statements.
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 2015 Annual Report to Stockholders, in Part
II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of January 31, 2015 and February 1, 2014
- 61 -
Page
37
38
Consolidated Statements of Operations for the fiscal year ended January 31, 2015, February
1, 2014 and February 2, 2013
Consolidated Statements of Cash Flows for the fiscal year ended January 31, 2015, February
1, 2014 and February 2, 2013
Consolidated Statements of Stockholders’ Investment for the fiscal year ended January 31,
2015, February 1, 2014 and February 2, 2013
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 14, 2014.
10.2 Amendment No. 7 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 21, 2014.
10.3 Separation Agreement and General Release of All Claims; incorporated by reference as
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities
and Exchange Commission on December 8, 2014.
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 2015 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) Gift Card Services, LLC., a Virginia Limited Liability Company
4) Hibbett.com, Inc., a Nevada Corporation
5) Hibbett Wholesale, Inc., an Alabama Corporation
6) 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 pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
- 63 -
Interactive Data Files
101 The following financial information from the Annual Report on Form 10-K for the fiscal
year ended January 31, 2015, formatted in XBRL (eXtensible Business Reporting
Language) and furnished electronically herewith: (i) the Audited Consolidated Balance
Sheets at January 31, 2015 and February 1, 2014; (ii) the Audited Consolidated Statements
of Operations for the fiscal year ended January 31, 2015, February 1, 2014 and February 2,
2013; (iii) the Audited Consolidated Statements of Cash Flows for the fiscal year ended
January 31, 2015, February 1, 2014 and February 2, 2013; (vi) the Audited Statements of
Stockholders’ Investment for the fiscal year ended January 31, 2015, February 1, 2014 and
February 2, 2013; (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.
HIBBETT SPORTS, INC.
Date: March 31, 2015
By:
/s/ Scott J. Bowman
Scott J. Bowman
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
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, 2015
/s/ Scott J. Bowman
Scott J. Bowman
/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
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
March 31, 2015
Chairman of the Board
March 31, 2015
Lead Director
March 31, 2015
Director
March 31, 2015
Director
March 31, 2015
Director
March 31, 2015
Director
March 31, 2015
Director
March 31, 2015
Director
March 31, 2015
/s/ Thomas A Saunders III
Thomas A. Saunders III
Director
March 31, 2015
- 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, 333-126311 and 333-135217) of Hibbett Sports, Inc.
of our report dated March 30, 2015, with respect to (i) the consolidated balance sheets of Hibbett Sports, Inc. and
subsidiaries as of January 31, 2015 and February 1, 2014, and the related consolidated statements of operations,
stockholders’ investment, and cash flows for each of the years in the three-year period ended January 31, 2015 and
(ii) the effectiveness of internal control over financial reporting as of January 31, 2015, which report appears in the
January 31, 2015, Annual Report on Form 10-K of Hibbett Sports, Inc.
/s/ KPMG LLP
Birmingham, Alabama
March 31, 2015
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, 2015
/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, 2015
/s/ Scott J. Bowman
Scott J. Bowman
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
End of Exhibit 31.2
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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 January 31, 2015, 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, 2015
Date: March 31, 2015
/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 and Accounting Officer)
A signed original of this written statement required by Section 906, or other document authenticating,
acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.
End of Exhibit 32.1
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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
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 Meeting
The 2015 Annual Meeting of Stockholders will be held at the
principal executive offices of Hibbett Sports, Inc., 2700 Milan
Court, Birmingham, Alabama, on Thursday, May 28, 2015, at
11:00 A.M., local time.
Company Counsel
Williams Mullen
Norfolk, Virginia
Independent Registered Public Accounting Firm
KPMG LLP
Birmingham, Alabama
Annual Report on Form 10-K
A copy of the Company’s Annual Report on Form 10-K for
the fiscal year ended January 31, 2015, as filed with the
Securities and Exchange Commission, may be obtained
without charge upon written request to the Company’s
Investor Relations department.
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 2015:
Quarter ended May 3, 2014
Quarter ended August 2, 2014
Quarter ended November 1, 2014
Quarter ended January 31, 2015
Fiscal 2014:
Quarter ended May 4, 2013
Quarter ended August 3, 2013
Quarter ended November 2, 2013
Quarter ended February 1, 2014
High
$ 59.64
$ 57.47
$ 50.69
$ 50.54
High
$ 56.54
$ 61.50
$ 61.64
$ 67.73
Low
$ 52.32
$ 49.55
$ 41.57
$ 43.95
Low
$ 51.00
$ 55.00
$ 51.16
$ 58.74
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
Board of Directors
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
Officers
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
Jeffry O. Rosenthal
Chief Executive Officer, President and
Principal Executive Officer
Jared Briskin
Senior Vice President and
Chief Merchant
Scott J. Bowman
Senior Vice President, Chief Financial
and Principal Accounting Officer
Cathy E. Pryor
Senior Vice President of Operations
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