UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q
(Mark One)

[  X  ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 3, 2018

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)

NONE
(Former name, former address and former fiscal year, if changed since last report)

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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
   
Accelerated filer
X
         
Non-accelerated filer
   
Smaller reporting company
 

Emerging growth company
   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    _____

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 
Yes
   
No
X
 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Shares of common stock, par value $.01 per share, outstanding as of December 11, 2018, were 18,285,688 shares.



HIBBETT SPORTS, INC.
 
INDEX
 
Page
 
PART I.  FINANCIAL INFORMATION
 
Item 1.
     
 
2
 
 
3
 
 
4
 
 
5
 
Item 2.
13
 
Item 3.
23
 
Item 4.
23
 
PART II.  OTHER INFORMATION
 
Item 1.
24
 
Item 1A.
24
 
Item 2.
25
 
Item 6.
25
     
 
25
     
 
26

1

PART I.  FINANCIAL INFORMATION
ITEM 1.
Financial Statements.

HIBBETT SPORTS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)

ASSETS
 
November 3, 2018
   
February 3, 2018
 
Current Assets:
           
Cash and cash equivalents
 
$
121,177
   
$
73,544
 
Inventories, net
   
256,854
     
253,201
 
Other current assets
   
23,395
     
20,029
 
Total current assets
   
401,426
     
346,774
 
                 
Property and equipment
   
260,688
     
258,010
 
Less accumulated depreciation and amortization
   
156,789
     
148,312
 
Property and equipment, net
   
103,899
     
109,698
 
                 
Other assets, net
   
4,690
     
5,374
 
Total Assets
 
$
510,015
   
$
461,846
 
                 
LIABILITIES AND STOCKHOLDERS' INVESTMENT
               
Current Liabilities:
               
Accounts payable
 
$
109,445
   
$
93,435
 
Accrued payroll expenses
   
6,248
     
10,424
 
Deferred rent
   
5,855
     
5,909
 
Credit facilities
   
25,000
     
-
 
Capital lease obligations
   
644
     
663
 
Other accrued expenses
   
9,155
     
5,136
 
Total current liabilities
   
156,347
     
115,567
 
                 
Deferred rent
   
19,330
     
20,291
 
Other liabilities
   
5,857
     
6,392
 
Total liabilities
   
181,534
     
142,250
 
                 
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, 38,971,930 and 38,862,929 shares issued at November 3, 2018 and February 3, 2018, respectively
   
390
     
389
 
Paid-in capital
   
184,753
     
180,536
 
Retained earnings
   
753,042
     
731,901
 
Treasury stock, at cost; 20,682,342 and 19,910,291 shares repurchased at November 3, 2018 and February 3, 2018, respectively
   
(609,704
)
   
(593,230
)
Total stockholders' investment
   
328,481
     
319,596
 
Total Liabilities and Stockholders' Investment
 
$
510,015
   
$
461,846
 

See notes to unaudited condensed consolidated financial statements.

2

HIBBETT SPORTS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share information)

   
Thirteen Weeks Ended
   
Thirty-Nine Weeks Ended
 
   
November 3,
2018
   
October 28,
2017
   
November 3,
2018
   
October 28,
2017
 
Net sales
 
$
216,888
   
$
237,834
   
$
702,718
   
$
701,480
 
Cost of goods sold
   
146,376
     
161,721
     
469,082
     
472,741
 
Gross margin
   
70,512
     
76,113
     
233,636
     
228,739
 
                                 
Store operating, selling and administrative expenses
   
62,342
     
57,993
     
186,211
     
169,886
 
Depreciation and amortization
   
6,328
     
6,333
     
18,847
     
18,060
 
Operating income
   
1,842
     
11,787
     
28,578
     
40,793
 
                                 
Interest (income) expense, net
   
(277
)
   
53
     
(387
)
   
176
 
Income before provision for income taxes
   
2,119
     
11,734
     
28,965
     
40,617
 
                                 
Provision for income taxes
   
620
     
4,170
     
7,179
     
15,320
 
Net income
 
$
1,499
   
$
7,564
   
$
21,786
   
$
25,297
 
                                 
                                 
Basic earnings per share
 
$
0.08
   
$
0.37
   
$
1.16
   
$
1.22
 
Diluted earnings per share
 
$
0.08
   
$
0.37
   
$
1.15
   
$
1.21
 
                                 
Weighted average shares outstanding:
                               
Basic
   
18,495
     
20,318
     
18,763
     
20,805
 
Diluted
   
18,675
     
20,386
     
18,944
     
20,905
 

See notes to unaudited condensed consolidated financial statements.

3

HIBBETT SPORTS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

   
Thirty-Nine Weeks Ended
 
   
November 3,
2018
   
October 28,
2017
 
Cash Flows From Operating Activities:
           
Net income
 
$
21,786
   
$
25,297
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
18,847
     
18,060
 
Stock-based compensation
   
3,411
     
3,179
 
Other non-cash adjustments to net income:
   
548
     
237
 
Changes in operating assets and liabilities:
               
Inventories, net
   
(2,659
)
   
15,278
 
Prepaid expenses and other
   
(3,288
)
   
37
 
Accounts payable
   
15,818
     
14,178
 
Other assets and liabilities
   
(1,990
)
   
7,007
 
Net cash provided by operating activities
   
52,473
     
83,273
 
                 
Cash Flows From Investing Activities:
               
Capital expenditures
   
(13,949
)
   
(18,875
)
Other, net
   
257
     
39
 
Net cash used in investing activities
   
(13,692
)
   
(18,836
)
                 
Cash Flows From Financing Activities:
               
Borrowings under credit facilities, net
   
25,000
     
-
 
Cash used for stock repurchases
   
(16,058
)
   
(44,469
)
Net payments on capital lease obligations
   
(481
)
   
(444
)
Proceeds from options exercised and purchase of shares under the employee stock purchase plan
   
807
     
554
 
Other, net
   
(416
)
   
(711
)
Net cash used in financing activities
   
8,852
     
(45,070
)
                 
Net increase in cash and cash equivalents
   
47,633
     
19,367
 
Cash and cash equivalents, beginning of period
   
73,544
     
38,958
 
Cash and cash equivalents, end of period
 
$
121,177
   
$
58,325
 
                 

See notes to unaudited condensed consolidated financial statements.

4

HIBBETT SPORTS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation and Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Hibbett Sports, Inc. and its wholly-owned subsidiaries (including the condensed consolidated balance sheet as of February 3, 2018, which has been derived from audited financial statements) have been prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  References to “we,” “our,” “us” and the “Company” refer to Hibbett Sports, Inc. and its subsidiaries as well as its predecessors.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018 filed on March 30, 2018.  In our opinion, the unaudited condensed consolidated financial statements included herein contain all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position as of November 3, 2018 and the results of our operations and cash flows for the periods presented.

There were no material changes in our significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018 filed with the Securities and Exchange Commission on March 30, 2018, except as set forth below:

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers when control of the merchandise is transferred to our customer.  Sales are recorded net of expected returns at the time the customer takes possession of the merchandise.  Net sales exclude sales taxes because we are a pass-through conduit for collecting and remitting these taxes.

Retail Store Sales:  For merchandise sold in our stores, revenue is recognized at the point of sale when tender is accepted and the customer takes possession of the merchandise.

Retail Store Orders:  Retail store customers may order merchandise available in other Hibbett retail store locations for pickup in the selling store at a later date.  Customers make a deposit with the remaining balance due at pickup.  These deposits are recorded as deferred revenue until the transaction is completed and the customer takes possession of the merchandise.  Retail store customers may also order merchandise to be shipped to home.  Payment is received in full at the time of order and recorded as deferred revenue until delivery.

Layaways:  We offer a retail store program giving customers the option of paying a deposit and placing merchandise on layaway.  The customer may make further payments in installments, but the full purchase price must be received by us within 30 days.  The payments are recorded as deferred revenue until the transaction is completed and the customer takes possession of the merchandise.

Digital Channel Sales:  For merchandise shipped to home, customer payment is received when the order ships.  Revenue is deferred until control passes to the customer at delivery.  Shipping and handling costs billed to customers are included in net sales.

Hibbett Rewards Program:  We offer a customer loyalty rewards program.  Upon registration and in accordance with the terms of the program, customers earn points on retail store and online purchases.  Points convert into reward certificates at defined thresholds and may be redeemed in our retail stores or online.  The short-term future performance obligation liability is estimated at each reporting period based on historical conversion and redemption patterns.  The liability is included in other accrued expenses on our unaudited condensed consolidated balance sheet and was $1.6 million at November 3, 2018.

5


Gift Cards:  Proceeds received from the issuance of our non-expiring gift cards are initially recorded as deferred revenue.  At the time the cards are redeemed and the customer takes possession of the merchandise, revenue is recognized.  The liability is included in accounts payable on our unaudited condensed consolidated balance sheet and was $4.8 million at November 3, 2018.  During the quarter ended November 3, 2018, $0.5 million of gift card deferred revenue from prior periods was realized.  Gift card breakage income is recognized in net sales in proportion to the redemption pattern of rights exercised by the customer and was not material in any period presented.

Returned Sales:  The liability for return sales is estimated at each reporting period based on historical return patterns and is recognized at the transaction price.  The liability is included in accounts payable on our unaudited condensed consolidated balance sheet.  We also recognize a return asset and a corresponding adjustment to cost of goods sold for our right to recover the merchandise returned by the customer.  This right to recover asset is included in net inventory on our unaudited condensed consolidated balance sheet at the former carrying value of the merchandise less any expected recovery costs which was $0.5 million at November 3, 2018.

Revenues disaggregated by major product categories are as follows (in thousands):

   
Thirteen Weeks Ended
   
Thirty-Nine Weeks Ended
 
   
November 3, 2018
   
October 28, 2017
   
November 3, 2018
   
October 28, 2017
 
Footwear
 
$
118,298
   
$
131,646
   
$
395,948
   
$
389,641
 
Apparel
   
58,984
     
58,563
     
179,244
     
174,534
 
Equipment
   
39,606
     
47,625
     
127,526
     
137,305
 
Total
 
$
216,888
   
$
237,834
   
$
702,718
   
$
701,480
 

2. Recent Accounting Pronouncements

Standards that were adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard related to revenue recognition.  Under ASU 2014-09, Revenue from Contracts with Customers (Topic 606), revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive for those goods or services.  The standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  On February 4, 2018, we adopted ASU 2014-09 using the modified retrospective transition method.  Results for reporting periods beginning after February 3, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

In preparation for implementation of the standard, we identified the revenue streams that would be affected.  We then designed and implemented processes and internal controls to appropriately recognize and present the associated financial information.  Based on these efforts, we determined that the adoption of ASU 2014-09 changed the recognition and presentation of:

·
The stand-alone benefit received by customers through the Hibbett Rewards customer loyalty program recorded as a separate performance obligation,
·
Gift card breakage income recognized in net sales in proportion to the customer redemption pattern, and
·
The liability for net sales returns recognized on a gross basis including a right to recover asset measured at the former carrying value of the inventory less any expected recovery costs.

We applied ASU 2014-09 only to contracts that were not completed prior to Fiscal 2019.  The cumulative effect of initially applying ASU 2014-09 was a $0.6 million decrease to the opening balance of retained earnings as of February 4, 2018.  We expect the adoption to be immaterial to our financial position, results of operations and cash flows on an ongoing basis.


6


The effect of the adoption of ASU 2014-09 on our unaudited condensed consolidated balance sheet as of November 3, 2018 was (in thousands):

   
As Reported
   
ASU 2014-09 Effect (1)
   
Excluding ASU 2014-09 Effect
 
Inventories, net
 
$
256,854
   
$
(278
)
 
$
257,132
 
Other current assets
 
$
23,395
   
$
201
   
$
23,194
 
Accounts payable
 
$
109,445
   
$
1,116
   
$
108,329
 
Other accrued expenses
 
$
9,155
   
$
837
   
$
8,318
 

(1)  Does not include the cumulative effect of initially adopting ASU 2014-09 to our consolidated balance sheet as adjusted as of February 4, 2018.

The effect of the adoption of ASU 2014-09 on our unaudited condensed consolidated statement of operations for the thirteen weeks ended November 3, 2018 was (in thousands, except per share amounts):

   
As Reported
   
ASU 2014-09 Effect
   
Excluding ASU 2014-09 Effect
 
Net sales
 
$
216,888
   
$
508
   
$
216,380
 
Cost of goods sold
 
$
146,376
   
$
364
   
$
146,012
 
Gross margin
 
$
70,512
   
$
144
   
$
70,368
 
Store operating, selling and administrative expenses
 
$
62,342
   
$
51
   
$
62,291
 
Income before provision for income taxes
 
$
2,119
   
$
92
   
$
2,027
 
Provision for income taxes
 
$
620
   
$
27
   
$
593
 
Net income
 
$
1,499
   
$
65
   
$
1,434
 
Diluted earnings per share
 
$
0.08
   
$
-
   
$
0.08
 

The effect of the adoption of ASU 2014-09 on our unaudited condensed consolidated statement of operations for the thirty-nine weeks ended November 3, 2018 was (in thousands, except per share amounts):

   
As Reported
   
ASU 2014-09 Effect
   
Excluding ASU 2014-09 Effect
 
Net sales
 
$
702,718
   
$
(17
)
 
$
702,735
 
Cost of goods sold
 
$
469,082
   
$
42
   
$
469,040
 
Gross margin
 
$
233,636
   
$
(59
)
 
$
233,695
 
Store operating, selling and administrative expenses
 
$
186,211
   
$
(12
)
 
$
186,223
 
Income before provision for income taxes
 
$
28,965
   
$
(47
)
 
$
29,012
 
Provision for income taxes
 
$
7,179
   
$
(12
)
 
$
7,191
 
Net income
 
$
21,786
   
$
(35
)
 
$
21,821
 
Diluted earnings per share
 
$
1.15
   
$
-
   
$
1.15
 

Standards that are not yet adopted

In February 2016, the FASB established Topic 842, Leases, by issuing ASU 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements.  Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements.  The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.  Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.


7

The new standard is effective for us on February 3, 2019, with early adoption permitted.  We expect to adopt the new standard on its effective date.  A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application.  An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application.  If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date.  The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods.  We expect to adopt the new standard on February 3, 2019, and use the effective date as our date of initial application.  Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before February 3, 2019.

The new standard provided a number of optional practical expedients in transition.  We expect to elect the “package of practical expedients”, which permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs under the new standard.  We do not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us.

We expect that this standard will have a material effect on our financial statements.  While we continue to assess all of the effects of adoption, we currently believe the most significant effects relate to the recognition of new ROU assets and lease liabilities on our balance sheet for our operating leases and providing significant new disclosures about our leasing activities.  We do not expect a significant change in our leasing activities between now and adoption.

On adoption, we currently expect to recognize additional operating liabilities ranging from $160.0 million to $190.0 million, with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing Hibbett operating leases.  This expectation does not include the impact of leases acquired in connection with the acquisition of City Gear, LLC, which we are currently evaluating.  See Note 3, Pending Acquisition and Note 11, Subsequent Events.  The new standard also provides practical expedients for an entity’s ongoing accounting.  We currently expect to elect the short-term lease recognition exemption for certain classes of underlying assets.  This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.  We also currently expect to elect the practical expedient so as to not separate lease and non-lease components for certain classes of underlying assets.

We continuously monitor and review all current accounting pronouncements and standards from the FASB of U.S. GAAP for applicability to our operations.  As of November 3, 2018, there were no other new pronouncements or interpretations that had or were expected to have a significant impact on our operations.

3. Pending Acquisition

On October 29, 2018, through our wholly-owned subsidiary, Hibbett Sporting Goods, Inc., we entered into a Membership Interest and Warrant Purchase Agreement (Purchase Agreement) with City Gear, LLC, a Tennessee limited liability company (City Gear), the members and warrant holders of City Gear named in the Purchase Agreement (collectively, the Sellers), and Jeffrey B. Presley and Harbert Mezzanine Partners II SBIC, L.P. (in their collective capacity as Sellers’ Representative).  Under the Purchase Agreement, which was unanimously approved by our Board of Directors, we agreed to acquire all of the outstanding warrants and equity interests, other than certain preferred membership interests, of City Gear, a privately held city specialty retailer.

The initial purchase price is $88.0 million (Purchase Price) in cash payable at the closing of the transaction (Closing), subject to customary adjustments for City Gear’s cash on hand and net working capital as of the Closing date.  The Purchase Agreement provides that a portion of the Purchase Price will be used at Closing to pay off and redeem the outstanding preferred membership interests in City Gear as well as certain other outstanding indebtedness.  In addition, the aggregate consideration payable to the Sellers in connection with the transaction also includes two contingent payments based on City Gear’s achievement of certain EBITDA (as defined in the Purchase Agreement) thresholds for the 52-week periods ended February 1, 2020 and January 30, 2021, respectively.  The aggregate amount of both contingent payments, if any, will not exceed $25.0 million.

8

With over 130 stores, the acquisition provides us with substantially greater scale in the athletic specialty market and is an extension of our strategy to provide high demand, branded products to underserved markets.  We expect to incur approximately $5.0 million in acquisition-related expenses through Fiscal 2019, excluding acquisition-related interest expense, of which approximately $1.5 million in non-recurring expenses was incurred and recorded in store operating, selling and administrative expenses for the thirteen weeks ended November 3, 2018.  See Note 11, Subsequent Events.

4. Fair Value of Financial Instruments

We utilize 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 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 as of November 3, 2018 and February 3, 2018 (in thousands):

   
November 3, 2018
   
February 3, 2018
 
   
Level I
   
Level II
   
Level III
   
Level I
   
Level II
   
Level III
 
Short-term investments
 
$
161
   
$
-
   
$
-
   
$
463
   
$
-
   
$
-
 
Long-term investments
   
2,595
     
-
     
-
     
2,418
     
-
     
-
 
Total investments
 
$
2,756
   
$
-
   
$
-
   
$
2,881
   
$
-
   
$
-
 

Short-term investments are reported in other current assets on our unaudited condensed consolidated balance sheets.  Long-term investments are reported in other assets on our unaudited condensed consolidated balance sheets.

5. Debt

On October 29, 2018, we entered into restated agreements with Bank of America, N.A. and Regions Bank providing for an increase in the aggregate amount of credit available to us under each line of credit from $30.0 million to $50.0 million with the intent to borrow approximately $50.0 million from the facilities to finance a portion of the cash purchase price payable in the acquisition of City Gear.

The terms of the Bank of America facility allows for borrowings up to $50.0 million with an interest rate agreed upon between the lender and us at the time a loan is made.  The terms of the Regions Bank facility allows for borrowings up to $50.0 million with an interest rate at one month LIBOR plus 1.5%.  Both facilities are unsecured and expire in October 2021.  Under the provisions of both facilities, we do not pay commitment fees.  However, both are subject to negative pledge agreements that, among other things, restrict liens or transfers of assets including inventory, tangible or intangible personal property and land and land improvements.  At November 3, 2018, a total of $75.0 million was available to us from these facilities.

At February 3, 2018, we had two unsecured credit facilities, which were renewable in March 31 and April 2018, respectively.  The March facility allowed for borrowings up to $30.0 million with an interest rate agreed upon between the lender and us at the time a loan is made.  The April facility allowed for borrowings up to $30.0 million at a rate of one month LIBOR plus 2.5%.  Under the provisions of both facilities, we did not pay commitment fees nor were we subject to covenant requirements.

There were four days during the thirteen and thirty-nine weeks ended November 3, 2018, where we incurred borrowings against our credit facilities for an average and maximum borrowing of $25.0 million and an interest rate of 3.81%.  See Note 11, Subsequent Events.  There were seven days during the 53 weeks ended February 3, 2018, where we incurred borrowings against our credit facilities for an average and maximum borrowing of $4.1 million and $4.9 million, respectively, and an average interest rate of 2.78%.

9

6. Stock-Based Compensation

The compensation costs that have been charged against income for the thirteen weeks and thirty-nine weeks ended November 3, 2018 and October 28, 2017 were as follows (in thousands):

   
Thirteen Weeks Ended
   
Thirty-Nine Weeks Ended
 
   
November 3,
2018
   
October 28,
2017
   
November 3,
2018
   
October 28,
2017
 
Stock-based compensation expense by type:
                       
Stock options
 
$
8
   
$
8
   
$
185
   
$
181
 
Restricted stock units
   
702
     
796
     
3,074
     
2,905
 
Employee stock purchases
   
24
     
19
     
81
     
75
 
Director deferred compensation
   
24
     
6
     
71
     
18
 
Total stock-based compensation expense
   
758
     
829
     
3,411
     
3,179
 
Income tax benefit recognized
   
172
     
305
     
762
     
1,151
 
Stock-based compensation expense, net of income tax
 
$
586
   
$
524
   
$
2,649
   
$
2,028
 

In the thirteen weeks and thirty-nine weeks ended November 3, 2018 and October 28, 2017, we granted the following equity awards:

   
Thirteen Weeks Ended
   
Thirty-Nine Weeks Ended
 
   
November 3,
2018
   
October 28,
2017
   
November 3,
2018
   
October 28,
2017
 
Stock options
   
-
     
18,577
     
19,994
     
38,949
 
Restricted stock unit awards
   
-
     
-
     
169,572
     
108,429
 
Performance-based restricted stock unit awards
   
-
     
-
     
44,700
     
54,900
 
Deferred stock units
   
1,247
     
417
     
3,249
     
904
 

At November 3, 2018, the total compensation costs related to nonvested restricted stock unit awards not yet recognized was $5.7 million and the weighted-average period over which such awards are expected to be recognized was 3.0 years.  There were no compensation costs related to nonvested stock options at November 3, 2018.

Under the 2012 Non-Employee Director Equity Plan (2012 Plan), a total of 4,435 and 3,361 shares of our common stock were awarded during the thirty-nine weeks ended November 3, 2018 and October 28, 2017, respectively, as part of the annual equity award to directors in the first quarter.

The weighted-average grant date fair value of stock options granted during the thirty-nine weeks ended November 3, 2018  was $7.15.  The weighted-average grant date fair value of stock options granted during the thirteen and thirty-nine weeks ended October 28, 2017 was $4.20 and $6.20 per share, respectively.

The number of shares purchased, the average price per share and the weighted-average grant date fair value of shares purchased through our employee stock purchase plan were as follows:

   
Thirteen Weeks Ended
   
Thirty-Nine Weeks Ended
 
   
November 3,
2018
   
October 28,
2017
   
November 3,
2018
   
October 28,
2017
 
Shares purchased
   
6,029
     
6,239
     
18,360
     
16,984
 
Average price per share
 
$
15.98
   
$
12.11
   
$
17.56
   
$
18.00
 
Weighted average fair value at grant date
 
$
5.10
   
$
4.52
   
$
4.97
   
$
4.43
 

10

7. 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 weighted average common shares outstanding (in thousands):

   
Thirteen Weeks Ended
   
Thirty-Nine Weeks Ended
 
   
November 3,
2018
   
October 28,
2017
   
November 3,
2018
   
October 28,
2017
 
Weighted-average shares used in basic computations
   
18,495
     
20,318
     
18,763
     
20,805
 
Dilutive equity awards
   
180
     
68
     
181
     
100
 
Weighted-average shares used in diluted computations
   
18,675
     
20,386
     
18,944
     
20,905
 

For the thirteen weeks ended November 3, 2018, we excluded 251,314 options from the computation of diluted weighted-average common shares and common share equivalents outstanding because of their anti-dilutive effect.  For the thirteen weeks ended October 28, 2017, we excluded 288,235 options from the computation of diluted weighted-average common shares and common share equivalents outstanding because of their anti-dilutive effect.

We excluded 94,800 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 certain performance-based annual vesting conditions which had not been achieved by November 3, 2018.  Assuming the performance-criteria had been achieved as of November 3, 2018, the incremental dilutive impact would have been 72,960 shares.

8. Stock Repurchase Activity

In November 2015, the Board of Directors (Board) authorized a Stock Repurchase Program (Program) of $300.0 million to repurchase our common stock through February 2, 2019.  The Program replaced an existing program and authorizes repurchases of our common stock in open market or negotiated transactions, with the amount and timing of repurchases dependent on market conditions and at the discretion of our management.  In addition to the Program, we also acquire shares of our common stock from holders of restricted stock unit awards to satisfy tax withholding requirements due at vesting.  Shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements do not reduce the Program authorization.

During the thirteen weeks ended November 3, 2018, we repurchased 395,450 shares of our common stock at a cost of $7.6 million.  During the thirty-nine weeks ended November 3, 2018, we repurchased 772,051 shares of our common stock at a cost of $16.5 million, including 18,765 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.4 million.

During the thirteen weeks ended October 28, 2017, we repurchased 1.2 million shares of our common stock at a cost of $15.9 million, including 170 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $2,100.  During the thirty-nine weeks ended October 28, 2017, we repurchased 2.2 million shares of our common stock at a cost of $45.2 million, including 24,369 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.7 million.

As of November 3, 2018, we had approximately $188.0 million remaining under the Program for stock repurchases.  See Note 11, Subsequent Events.


11

9. Commitments and Contingencies

Lease Commitments.

We have entered into capital leases for certain property.  At November 3, 2018, total capital lease obligations were $2.5 million, of which $0.6 million was included in short-term capital lease obligations and $1.9 million was included in other liabilities on our unaudited condensed consolidated balance sheet.  At February 3, 2018, total capital lease obligations were $3.2 million, of which $0.7 million was included in short-term capital lease obligations and $2.5 million was included in other liabilities on our unaudited condensed consolidated balance sheet.

During the thirteen weeks ended November 3, 2018, we opened seven stores and closed 24 stores, thus decreasing our lease commitments by a net of 17 retail stores.  The stores we opened have initial lease termination dates between August 2023 and November 2028.

Annual Bonuses and Equity Incentive Awards.

Specified officers and corporate employees of our Company are eligible to receive annual bonuses, based on measures of Company operating performance.  At November 3, 2018 and February 3, 2018, there was $1.3 million and $1.9 million, respectively, of annual bonus related expenses included in accrued payroll expenses on our unaudited condensed consolidated balance sheets.

In addition, the Compensation Committee of the Board has placed performance criteria on awards of restricted stock units (PSUs) to our “named executive officers” as determined in accordance with Item 402(a) of Regulation S-K.  The performance criteria are tied to performance targets with respect to future return on invested capital and earnings before interest and taxes over a specified period of time.  These PSUs are expensed under the provisions of ASC Topic 718, Compensation – Stock Compensation, and are evaluated each quarter to determine the probability that the performance conditions set within will be met.

Legal Proceedings and Other Contingencies.

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.  No material amounts were accrued at November 3, 2018 or February 3, 2018 pertaining to legal proceedings or other contingencies.

10. Income Taxes

Our effective tax rate is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate.  For interim financial reporting, we estimate the annual effective tax rate based on expected taxable income for the full year and record a quarterly income tax provision (benefit) in accordance with the anticipated annual effective rate and adjust for discrete items.  We update the estimates of the taxable income throughout the year as new information becomes available, including year-to-date financial results.  This process often results in a change to our expected effective tax rate for the year.  When this occurs, we adjust the income tax provision (benefit) during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual effective tax rate.

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, 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.

12


At November 3, 2018, we had a liability of $1.3 million associated with unrecognized tax benefits.  We file income tax returns in the U.S. federal and various state jurisdictions.  Generally, we are not subject to changes in income taxes by the U.S. federal taxing jurisdiction for years prior to Fiscal 2016 or by most state taxing jurisdictions for years prior to Fiscal 2015.

11. Subsequent Events

Acquisition:  On November 5, 2018, we completed the acquisition of City Gear pursuant to the Purchase Agreement dated October 29, 2018 with an effective date of November 4, 2018. As a result of the transaction, City Gear became an indirect wholly-owned subsidiary of the Company.  We funded the acquisition with cash on hand and a total of $50.0 million in borrowings from our amended credit facilities.  Of the $50.0 million in total borrowings, we borrowed $25.0 million in the thirteen weeks ended November 3, 2018.  City Gear will be included in our consolidated financial statements and footnote disclosures beginning with our reporting period ending February 2, 2019.  We are presently conducting a valuation analysis to determine the allocation of the purchase price to the underlying assets acquired and liabilities assumed in the transaction.  See Note 3, Pending Acquisition.

For additional discussion of the City Gear acquisition, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this Form 10-Q.

Debt:  On November 5, 2018, we borrowed an additional $25.0 million for a total of $50.0 million from our credit facilities  in connection with the closing of the City Gear acquisition.  At December 11, 2018, a total of $59.3 million was available to us from these facilities.  See Note 5, Debt.

Stock Repurchase:  On November 29, 2018, our Board authorized the continuation of our existing Stock Repurchase Program (Program) until January 29, 2022.  The Program authorizes repurchases of our common stock in open market or negotiated transactions, with the amount and timing of repurchases dependent on market conditions and at the discretion of our management.  In addition to the Program, we also acquire shares of our common stock from holders of restricted stock unit awards to satisfy tax withholding requirements due at vesting.  Shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements do not reduce the Program authorization.  As of December 11, 2018, we had purchased 4,854,316 shares of our common stock at a cost of approximately $114.1 million under the Program, leaving approximately $188.0 million remaining for future stock repurchases under the Program’s original authorization of $300.0 million that was approved by the Board on November 19, 2015.  See Note 8, Stock Repurchase Activity.

ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Important Notice Regarding 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 or results and typically use words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “forecast,” “guidance,” “outlook,” “estimate” “will,” “may,” “could,” “possible,” “potential” or other similar words, phrases or expressions.  For example, our forward-looking statements include statements regarding:


·
our expectations concerning store growth, product margin, the remodeling, relocation or expansion of selected existing stores, and growth in our e-commerce business;

·
our expectations concerning cash needs and capital expenditures, including our intentions and ability to fund our new stores and other future capital expenditures and working capital requirements;

·
our expectations concerning the impact of the acquisition of City Gear, including the amount and timing of acquisition-related expenses;

·
the expected impact of the 53rd week shift and the sale of our Team Division on net sales for the fourth quarter of Fiscal 2019;

·
our ability and plans to renew our credit facilities;

·
our estimates and assumptions as they relate to preferable tax and financial accounting methods, accruals, inventory valuations, long-lived assets, store closures, carrying amount and liquidity of financial instruments, fair value of options and other stock-based compensation, economic and useful lives of depreciable assets and leases, income tax liabilities, deferred taxes and uncertain tax positions;

·
our assessment of the materiality and impact on our business of recent accounting pronouncements adopted by the Financial Accounting Standards Board;

·
our assumptions as they relate to pending legal actions and other contingencies; and

·
seasonality and the effect of inflation.

13


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 intentions 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 consider the risk factors described from time to time in our other documents and reports, including the factors described under “Risk Factors,” “Business” and “Properties” in our Form 10-K for the fiscal year ended February 3, 2018 filed with the Securities and Exchange Commission on March 30, 2018, and the risks and uncertainties relating to the City Gear acquisition described in Part II, Item 1A, “Risk Factors” in this report.  You should also read such information in conjunction with our unaudited condensed financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report.

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 Quarterly 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.

Investor Access to Company Filings

We make available free of charge on our website, www.hibbett.com under the heading “Investor Relations,” copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Securities Exchange Act) as well as all Forms 3, 4 and 5 filed by our executive officers and directors, as soon as the filings are made publicly available by the Securities and Exchange Commission on its EDGAR database at www.sec.gov.  In addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, at no charge, by writing to:  Investor Relations, Hibbett Sports, Inc., 2700 Milan Court, Birmingham, Alabama  35211.

General Overview

Hibbett, headquartered in Birmingham, Alabama, is a leading athletic-inspired fashion retailer with more than 1,000 Hibbett Sports stores nationwide, primarily located in small and mid-sized communities.  Additionally, effective as of November 4, 2018, Hibbett owns and operates more than 130 City Gear specialty retail stores.  Founded in 1945, Hibbett has a rich history of convenient locations, personalized customer service and access to coveted footwear, apparel and equipment from top brands like Nike, Jordan, Adidas, and Under Armour.  Consumers can browse styles, find new releases, shop looks and make purchases online or in their nearest store by visiting www.hibbett.com or www.citygear.com.  Follow us @hibbettsports and @citygear.  We became a public company in October 1996.

The Hibbett Sports store is our primary retail format and is an approximately 5,000 square foot store located primarily in strip centers which are usually near a major chain retailer such as a Wal-Mart store.  Our Hibbett Sports store base consisted of 79.7% of our stores located in strip centers, which includes free-standing stores and 20.3% in enclosed mall locations as of November 3, 2018.

Our primary strategy is to provide underserved markets a broad assortment of quality brand name footwear, apparel, accessories and athletic equipment at competitive prices in a conveniently located full-service environment.  At the end of the second quarter of Fiscal 2018, we successfully launched our e-commerce website.  We will continue to grow our online business aggressively, while continuing to enhance our stores to improve the overall customer experience.  We believe that the breadth and depth of our brand name merchandise consistently exceeds the product selection carried by most of our competitors, particularly in our smaller markets.  Many of these brand name products are highly technical and require expert sales assistance.  We continuously educate our sales staff on new products and trends through coordinated efforts with our vendors.

14

Due to the 53rd week in Fiscal 2018, each quarter in Fiscal 2019 starts one week later than the same quarter in Fiscal 2018.  The charts below present comparable sales and net sales for Fiscal 2018 as originally reported and as adjusted to represent the same thirteen-week period as the Fiscal 2019 quarters:

 
Fiscal 2018
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Full Year
 
Comparable sales change (originally reported)
   
-4.9
%
   
-11.7
%
   
-1.3
%
   
1.6
%
   
-3.8
%
Comparable sales change (adjusted for week shift)
   
-4.8
%
   
-11.0
%
   
0.3
%
   
1.0
%
   
-3.6
%
Impact of week shift
   
0.1
%
   
0.7
%
   
1.6
%
   
-0.6
%
   
0.2
%
                                         
 
Fiscal 2018
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Full Year
 
Net sales (originally reported)
 
$
275.7
   
$
188.0
   
$
237.8
   
$
266.7
   
$
968.2
 
Net sales (adjusted for one week)
 
$
275.2
   
$
206.0
   
$
220.6
   
$
265.8
   
$
967.6
 
Impact of week shift
 
$
(0.5
)
 
$
18.0
   
$
(17.2
)
 
$
(0.9
)
 
$
(0.6
)

Comparable sales data for the periods presented reflects sales for our retail stores open throughout the period and the corresponding period of the prior fiscal year, and e-commerce sales.  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 sales base until it has been open a full 12 months.  During the thirteen and thirty-nine weeks ended November 3, 2018, we included 996 and 977 stores in comparable sales, respectively.

Executive Summary

Net sales for the thirteen weeks ended November 3, 2018, decreased 8.8% to $216.9 million compared with $237.8 million for the thirteen weeks ended October 28, 2017.  This includes a decrease of $17.3 million due to the week shift resulting from the 53rd week last year and a decrease of $2.4 million due to the sale of our Team Division in December 2017.  For the fourth quarter ending on February 2, 2019, the 53rd week shift and the sale of our Team Division will result in a negative impact to sales of $0.9 million and $1.8 million, respectively.  Comparable store sales increased 0.1% for the thirteen weeks ended November 3, 2018, with strong performance in branded apparel offset by weaker performance in licensed, equipment and accessories.  E-commerce sales continue to increase, and accounted for 8.8% of total sales for the period compared to 8.0% of total sales for the second quarter ended August 4, 2018.

Gross margin was 32.5% of net sales for the thirteen weeks ended November 3, 2018, compared with 32.0% for the thirteen weeks ended October 28, 2017.  The increase in the gross margin percentage was mainly due to fewer clearance markdowns, partially offset by de-leverage of logistics and store occupancy expenses associated with lower net sales.  At the end of the third quarter of Fiscal 2019, aged inventory levels were significantly improved compared with the same period last year.

Net sales for the thirty-nine weeks ended November 3, 2018, increased 0.2% to $702.7 million compared with $701.5 million for the thirty-nine weeks ended October 28, 2017.  This includes a decrease of $5.8 million due to the sale of our Team Division in December 2017.  Comparable store sales increased 1.4%, with strong performance in branded apparel, footwear and cleats.  E-commerce sales accounted for 7.8% of total sales for the period.

Gross margin was 33.2% of net sales for the thirty-nine weeks ended November 3, 2018, compared with 32.6% for the thirty-nine weeks ended October 28, 2017.  The increase in the gross margin percentage was mainly due to fewer clearance markdowns and a decline in store occupancy expenses due to fewer stores.

During the third quarter of Fiscal 2019, we opened seven new stores and closed 24 underperforming stores, bringing the store base to 1,042 in 35 states as of November 3, 2018.  In addition, we relocated one store.  We ended the third quarter of Fiscal 2019 with $121.2 million of available cash and cash equivalents on the unaudited condensed consolidated balance sheet.  As of November 3, 2018, we had $25.0 million outstanding and $75.0 million available under our unsecured credit facilities. We also acquired 395,450 shares of our common stock for a total expenditure of $7.6 million during the thirteen weeks ended November 3, 2018.
15


On October 29, 2018, we entered into an agreement to purchase City Gear, a privately held city specialty retailer, for an initial purchase price of $88.0 million in cash payable at the closing of the transaction with two contingent payments (not to exceed $25.0 million) based on defined financial performance of City Gear over the next two fiscal years.  In addition, we amended our two credit facilities from $30.0 million each to $50.0 million each to provide the flexibility to borrow up to $50.0 million from the facilities to finance a portion of the cash purchase price payable to the sellers of City Gear.  Effective November 4, 2018, we closed the transaction with City Gear using cash on hand and $50.0 million in borrowings from the two facilities.  We expect to incur approximately $5.0 million in acquisition-related expenses through Fiscal 2019, excluding acquisition-related interest expense, of which approximately $1.5 million in non-recurring expenses had been incurred as of November 3, 2018.

About Non-GAAP Measures

This MD&A includes certain non-GAAP financial measures, including adjusted net income, earnings per diluted share and SG&A expenses as a percentage of net sales.  We believe that non-GAAP net income, earnings per diluted share and SG&A expenses as a percentage of net sales, which exclude the effect of non-recurring expenses related to the acquisition of City Gear, are useful measures for providing more accurate comparisons of our current financial results to historical operations, forward looking guidance and the financial results of peer companies.  These acquisition-related costs for the third quarter of Fiscal 2019 include professional service fees and expenses consisting primarily of investment banking, legal and accounting fees and expenses.  In future periods, such acquisition-related costs may include one or more of the following categories of expenses:  (i) transition and integration costs, (ii) professional service fees and expenses and (iii) acquisition-related adjustments.

While we use these non-GAAP financial measures as a tool to enhance our understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements.  Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance.  It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.

Critical Accounting Policies and Estimates

The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP.  The preparation of these unaudited condensed consolidated financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented.  Actual results could differ from those estimates and assumptions.  Our critical and significant accounting policies and estimates are described more fully in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, as filed on March 30, 2018.  There have been no changes in our accounting policies in the current period that had a material impact on our unaudited condensed consolidated financial statements.  The adoption of ASU 2014-09 is discussed in Notes 1 and 2 to the unaudited condensed consolidated financial statements included in this Form 10-Q.

Recent Accounting Pronouncements

See Note 2 to the unaudited condensed consolidated financial statements included in this Form 10-Q for the period ended November 3, 2018, for information regarding recent accounting pronouncements.
16


Results of Operations

Summarized Unaudited Information


   
Thirteen Weeks Ended
       
Thirty-Nine Weeks Ended
       
   
November 3,
2018
         
October 28,
2017
       
November 3,
2018
         
October 28,
2017
       
Statements of Operations
                                             
Net sales (decrease) increase
   
-8.8
%
         
0.4
%
       
0.2
%
         
-3.4
%
     
Comparable sales increase (decrease)
   
0.1
%
1




   
-1.3
%
 2
 
   
1.4
%
 
1
   
 
   
-5.7
%
 2
   
Gross margin (as a % to net sales)
   
32.5
%
           
32.0
%
         
33.2
%
           
32.6
%
       
Store operating, selling and administrative expenses (as a % to net sales)
   
28.7
%
           
24.4
%
         
26.5
%
           
24.2
%
       
Depreciation and amortization (as a % to net sales)
   
2.9
%
           
2.7
%
         
2.7
%
           
2.6
%
       
Provision for income taxes (as a % to net sales)
   
0.3
%
           
1.8
%
         
1.0
%
           
2.2
%
       
Net income (as a % to net sales)
   
0.7
%
           
3.2
%
         
3.1
%
           
3.6
%
       
 
                                                             
Diluted earnings per share
 
$
0.08
           
$
0.37
         
$
1.15
           
$
1.21
         
Weighted-average dilutive shares (in thousands)
   
18,675
             
20,386
           
18,944
             
20,905
         
                                                               
Balance Sheets
                                                             
Ending cash and cash equivalents (in thousands)
 
$
121,177
           
$
58,325
                                       
Average inventory per store
 
$
246,501
           
$
245,307
                                       
                                                               
Store Information
                                                             
 Beginning of period
   
1,059
             
1,080
           
1,079
             
1,078
         
 New stores opened
   
7
             
13
           
20
             
32
         
 Stores closed
   
(24
)
           
(11
)
         
(57
)
           
(28
)
       
 End of period
   
1,042
             
1,082
           
1,042
             
1,082
         
                                                               
Stores expanded or relocated
   
1
             
2
           
9
             
12
         
Estimated square footage at end of period (in thousands)
   
5,957
             
6,158
                                       
 
                                                             
Share Repurchase Activity
                                                             
Shares purchased
   
395,450
             
1,200,470
           
772,051
             
2,231,213
         
Cost (in thousands)
 
$
7,625
           
$
15,929
         
$
16,474
           
$
45,180
         

1)  Represents the increase in comparable sales from the thirteen and thirty-nine weeks ended November 4, 2017, to the thirteen and thirty-nine weeks ended November 3, 2018.
2)  As originally reported for the third quarter ended October 28, 2017.  The comparable sales decrease was 0.3% for the thirteen weeks and the comparable store sales decrease was 5.2% for the thirty-nine weeks ended October 28, 2017, adjusted for the week shift due to the 53rd week in Fiscal 2018.

17

Thirteen Weeks Ended November 3, 2018 Compared to Thirteen Weeks Ended October 28, 2017

Net sales.  Net sales decreased $20.9 million, or 8.8%, to $216.9 million for the thirteen weeks ended November 3, 2018 from $237.8 million for the comparable period in the prior year.  Furthermore:


·
We opened seven Hibbett Sports stores and closed 24 underperforming stores.  In addition, we relocated one store.

·
A decrease of $17.3 million in net sales was due to the week shift resulting from the 53rd week last year, and a decrease of $2.4 million was due to the sale of our Team Division in December 2017.  A negative impact of $0.9 million and $1.8 million from the 53rd week shift and the sale of our Team Division, respectively, will be realized in the fourth quarter ending February 2, 2019.

·
Comparable store sales increased 0.1% mainly due to strength in branded apparel, partially offset by weakness in licensed products, equipment and accessories.

·
Footwear was slightly positive with a high single-digit increase in men’s, offset by declines in women’s and kids.

·
Branded apparel experienced a high single-digit increase, and has been positive for four consecutive quarters.  Strength was driven by a double-digit increase in men’s and a high single-digit increase in women’s.  Increased investments in extended sizes in both men’s and women’s apparel also performed well.  Trend-relevant sportswear with a strong connection to footwear continued to be the primary driver of the increase.

·
Licensed products experienced a high single-digit decline, although college and NFL showed improvement from recent trends with a low single-digit decrease.  MLB experienced a double-digit decline due to the Astros World Series win last year.

·
Accessories experienced a mid-single digit decline with weak performance in socks and hydration, partially offset by gains in backpacks, cross body bags and footwear cleaner.

·
Equipment experienced a high single-digit decline due to weakness in fitness, football and basketball, partially offset by positive results in baseball, softball and volleyball.

Gross margin.  Cost of goods sold includes the cost of inventory, logistics expenses and store occupancy costs.  Gross margin was $70.5 million, or 32.5% of net sales, in the thirteen weeks ended November 3, 2018, compared with $76.1 million, or 32.0% of net sales, in the same period of the prior fiscal year.  Furthermore:


·
Product margin increased 113 basis points as a percentage of net sales primarily due to fewer markdowns resulting from lower aged inventory levels.

·
Logistics expenses increased 13 basis points as a percentage of net sales primarily due to de-leverage from lower net sales.

·
Store occupancy expense increased 50 basis points as a percentage of net sales primarily due to de-leverage from lower net sales.

Store operating, selling and administrative expenses.  Store operating, selling and administrative expenses were $62.3 million, or 28.7% of net sales, for the thirteen weeks ended November 3, 2018, compared to $58.0 million, or 24.4% of net sales, for the comparable period a year ago.  Excluding approximately $1.5 million (70 basis points as a percentage of net sales) in non-recurring costs related to the acquisition of City Gear, store operating, selling and administrative expenses were $60.8 million, or 28.0% of net sales.  Additionally, these expenses increased as a percentage of net sales due to a decrease of $17.3 million in net sales due to the week shift resulting from the 53rd week last year.  Furthermore:


·
Salary costs increased 91 basis points as a percentage of net sales primarily due to de-leverage associated with lower net sales.

·
Advertising costs increased 60 basis points due to additional direct mail initiatives to drive store traffic, and advertising related to e-commerce.

·
Data processing costs increased 35 basis points as a percentage of net sales mainly due to order processing, customer care, and other variable costs related to e-commerce.

·
Benefit costs increased 17 basis points as a percentage of net sales mainly due to de-leverage associated with lower net sales.

·
Professional fees increased 8 basis points as a percentage of net sales due to costs associated with the rollout of Buy Online, Pick up in Store and Reserve Online.

Depreciation and amortization.  Depreciation and amortization increased 26 basis points as a percentage of net sales for the thirteen weeks ended November 3, 2018 compared to the same period of the prior fiscal year.  This increase was mainly due to the acceleration of depreciation for stores likely to close.
18


Provision for income taxes.  The combined federal, state and local effective income tax rate as a percentage of pre-tax income was 29.3% and 35.5% for the thirteen weeks ended November 3, 2018 and October 28, 2017, respectively.  The decrease in rate was primarily due to the Tax Cuts and Jobs Act, which lowered the statutory federal income tax rate from 35% to 21%.

Non-GAAP financial measures.  The following table provides a reconciliation of our unaudited condensed consolidated statement of operations for the thirteen weeks ended November 3, 2018, as reported on a GAAP basis, to a statement of operations for the same period prepared on a non-GAAP basis.  For more information regarding our non-GAAP financial measures, see “Executive Summary – About Non-GAAP Measures” above.

GAAP to Non-GAAP Reconciliation
 
(Dollars in thousands, except per share amounts)
 
(Unaudited)
 
                   
   
Thirteen Weeks Ended
November 3, 2018
 
   
GAAP Basis
(As Reported)
   
Non-Recurring
Acquisition Costs (1)
   
Non-GAAP Basis
November 3,
2018
 
Net sales
 
$
216,888
   
$
-
   
$
216,888
 
Cost of goods sold
   
146,376
     
-
     
146,376
 
  Gross margin
   
70,512
     
-
     
70,512
 
Store operating, selling and administrative expenses
   
62,342
     
1,528
     
60,814
 
Depreciation and amortization
   
6,328
     
-
     
6,328
 
  Operating income
   
1,842
     
(1,528
)
   
3,370
 
Interest (income) expense, net
   
(277
)
   
-
     
(277
)
  Income before provision for income taxes
   
2,119
     
(1,528
)
   
3,647
 
Provision for income taxes
   
620
     
(447
)
   
1,067
 
  Net income
 
$
1,499
   
$
(1,081
)
 
$
2,580
 
 
                       
  Basic earnings per share
 
$
0.08
   
$
(0.06
)
 
$
0.14
 
  Diluted earnings per share
 
$
0.08
   
$
(0.06
)
 
$
0.14
 
                         
(1) Non-recurring acquisition costs represent costs incurred through November 3, 2018, related to the acquisition of City Gear, LLC and consists primarily of legal, accounting and professional fees.
 

Thirty-Nine Weeks Ended November 3, 2018 Compared to Thirty-Nine Weeks Ended October 28, 2017

Net sales.  Net sales increased $1.2 million, or 0.2%, to $702.7 million for the thirty-nine weeks ended November 3, 2018 from $701.5 million for the comparable period in the prior year.  Furthermore:


·
We opened 20 Hibbett Sports stores and closed 57 underperforming stores.  In addition, we expanded six high-performing stores and relocated three stores.

·
Comparable store sales increased 1.4% mainly due to strength in branded apparel, footwear and cleats partially offset by weakness in licensed products, equipment, and accessories.

·
A decrease of $5.8 million of net sales was realized due to the sale of our Team Division in December 2017.

·
Footwear experienced a low single-digit increase, driven by strength in lifestyle partially offset by weakness in performance running.

·
Branded apparel experienced a high single-digit increase, with broad-based strength across men’s, women’s and kids.

·
Licensed products experienced a double-digit decline, with weakness in college, MLB and NBA.

·
Accessories experienced a high single-digit decline mainly due to weakness in socks and hydration.

·
Equipment experienced a mid single-digit decline due to weakness in football, basketball and fitness.
19


Gross margin.  Cost of goods sold includes the cost of inventory, logistics expenses and store occupancy costs.  Gross margin was $233.6 million, or 33.2% of net sales, in the thirty-nine weeks ended November 3, 2018, compared with $228.7 million, or 32.6% of net sales, in the same period of the prior fiscal year.  Furthermore:

·
Product margin increased 38 basis points as a percentage of net sales.
·
Logistics expenses were relatively flat increasing three basis points as a percentage of net sales.
·
Store occupancy expense decreased 29 basis points as a percentage of net sales primarily due to fewer stores and higher e-commerce sales.

Store operating, selling and administrative expenses.  Store operating, selling and administrative expenses were $186.2 million, or 26.5% of net sales, for the thirty-nine weeks ended November 3, 2018, compared to $169.9 million, or 24.2% of net sales, for the comparable period a year ago.  Excluding approximately $1.5 million (22 basis points as a percentage of net sales) in non-recurring costs related to the acquisition of City Gear, store operating, selling and administrative expenses were $184.7 million, or 26.3% of net sales.  Furthermore:


·
Salary costs increased 76 basis points as a percentage of net sales primarily due to wage increases against relatively flat sales.  Benefit costs increased 36 basis points as a percentage of net sales primarily due to increased health care costs.

·
Advertising costs increased 75 basis points due to additional direct mail initiatives to drive store traffic and advertising related to e-commerce.

·
Data processing costs increased 69 basis points as a percentage of net sales mainly due to order processing, customer care and other variable costs related to e-commerce.

·
Professional fees decreased 16 basis points as a percentage of sales mainly due to reduced consulting and development costs associated with the e-commerce website and mobile app.

Depreciation and amortization.  Depreciation and amortization increased 11 basis points as a percentage of net sales for the thirty-nine weeks ended November 3, 2018 compared to the same period of the prior fiscal year.  This increase was mainly due to capitalization of costs associated with the new mobile app, other IT related projects and the acceleration of depreciation for stores likely to close.

Provision for income taxes.  The combined federal, state and local effective income tax rate as a percentage of pre-tax income was 24.8% and 37.7% for the thirty-nine weeks ended November 3, 2018 and October 28, 2017, respectively.  The decrease in rate was primarily due to the Tax Cuts and Jobs Act, which lowered the statutory federal income tax rate from 35% to 21%.

Non-GAAP financial measures.  The following table provides a reconciliation of our unaudited condensed consolidated statement of operations for the thirty-nine weeks ended November 3, 2018, as reported on a GAAP basis, to a statement of operations for the same period prepared on a non-GAAP basis.  For more information regarding our non-GAAP financial measures, see “Executive Summary – About Non-GAAP Measures” above.
20


GAAP to Non-GAAP Reconciliation
 
(Dollars in thousands, except per share amounts)
 
(Unaudited)
 
                   
   
Thirty-Nine Weeks Ended
November 3, 2018
 
   
GAAP Basis
(As Reported)
   
Non-Recurring
Acquisition Costs (1)
   
Non-GAAP Basis November 3,
2018
 
Net sales
 
$
702,718
   
$
-
   
$
702,718
 
Cost of goods sold
   
469,082
     
-
     
469,082
 
  Gross margin
   
233,636
     
-
     
233,636
 
Store operating, selling and administrative expenses
   
186,211
     
1,528
     
184,683
 
Depreciation and amortization
   
18,847
     
-
     
18,847
 
  Operating income
   
28,578
     
(1,528
)
   
30,106
 
Interest (income) expense, net
   
(387
)
   
-
     
(387
)
  Income before provision for income taxes
   
28,965
     
(1,528
)
   
30,493
 
Provision for income taxes
   
7,179
     
(379
)
   
7,558
 
  Net income
 
$
21,786
   
$
(1,149
)
 
$
22,935
 
 
                       
  Basic earnings per share
 
$
1.16
   
$
(0.06
)
 
$
1.22
 
  Diluted earnings per share
 
$
1.15
   
$
(0.06
)
 
$
1.21
 
                         
(1) Non-recurring acquisition costs represent costs incurred through November 3, 2018, related to the acquisition of City Gear, LLC and consists primarily of legal, accounting and professional fees.
 

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 credit facilities.  We use excess cash to invest in interest bearing securities and money market accounts, as well as to offset bank fees.

Our unaudited condensed consolidated statements of cash flows are summarized as follows (in thousands):

   
Thirty-Nine Weeks Ended
 
   
November 3,
2018
   
October 28,
2017
 
Net cash provided by operating activities
 
$
52,473
   
$
83,273
 
Net cash used in investing activities
   
(13,692
)
   
(18,836
)
Net cash provided by (used in) financing activities
   
8,852
     
(45,070
)
Net increase in cash and cash equivalents
 
$
47,633
   
$
19,367
 

Operating Activities.

We use cash flow from operations to increase inventory in advance of peak selling seasons, such as spring sports, back-to-school and winter holidays.  Inventory levels are reduced following peak selling seasons and this inventory reduction, combined with proportionately higher net income, typically produces a positive cash flow.

21


Net cash provided by operating activities was $52.5 million for the thirty-nine weeks ended November 3, 2018 compared with net cash provided by operating activities of $83.3 million for the thirty-nine weeks ended October 28, 2017.  Operating activities consist primarily of net income, adjusted for certain non-cash items and changes in operating assets and liabilities.  Adjustments to net income for non-cash items include depreciation and amortization, deferred income taxes and stock-based compensation.  The primary drivers of operating activities were net income ($21.8 million), depreciation and amortization ($18.8 million) and an increase in accounts payable ($15.8 million).  The increase in accounts payable was primarily due to the timing of inventory receipts compared to the prior year.  Net inventories increased $2.7 million as selections increased for the holiday season.  Accounts payable and net inventories fluctuate between quarters due to the seasonality of purchases.

Investing Activities.

Net cash used in investing activities in the thirty-nine weeks ended November 3, 2018 totaled $13.7 million compared with net cash used in investing activities of $18.8 million in the thirty-nine weeks ended October 28, 2017.  Capital expenditures used $13.9 million of cash in the thirty-nine weeks ended November 3, 2018 versus $18.9 million of cash in the thirty-nine weeks ended October 28, 2017.  Capital expenditures were used mainly to open new stores, remodel, expand or relocate existing stores, and to invest in our new mobile app and other omni-channel initiatives.

We opened 20 new stores and relocated or expanded nine existing stores during the thirty-nine weeks ended November 3, 2018 as compared to opening 32 new stores and relocating or expanding 12 existing stores during the thirty-nine weeks ended October 28, 2017.  We remodeled 61 existing stores during the thirty-nine weeks ended November 3, 2018 as compared to 35 existing stores during the thirty-nine weeks ended October 28, 2017.

We estimate the cash outlay for capital expenditures in the fiscal year ending February 2, 2019 will be approximately $18.0 million to $22.0 million, which relates to expenditures for:

·
continued enhancements to our omni-channel capability (including our new mobile app);
·
information system infrastructure, projects, and security;
·
the opening of new stores, and the remodeling, relocation or expansion of selected existing stores; and
·
other departmental needs.

Of the total budgeted dollars for capital expenditures for Fiscal 2019, we anticipate that approximately 39% will be related to information technology, consisting primarily of expenditures for projects, infrastructure and various system enhancements, and security.  Approximately 36% will be related to the opening new stores, store expansions and relocations and store remodels.  The remaining 25% relates primarily to specific department expenditures and includes facility upgrades, transportation equipment, automobiles, fixtures and security equipment for our stores.

Financing Activities.

Net cash provided by financing activities was $8.9 million in the thirty-nine weeks ended November 3, 2018 compared to net cash used in financing activities of $45.1 million in the prior year period.  During the thirty-nine weeks ended November 3, 2018, we borrowed $25.0 million against our credit facilities in the acquisition of City Gear.  We also repurchased $16.5 million of our common stock, including $0.4 million from holders of restricted stock unit awards to satisfy tax withholding requirements.  During the thirty-nine weeks ended October 28, 2017, we repurchased $45.2 million of our common stock, including $0.7 million from holders of restricted stock unit awards to satisfy tax withholding requirements.  See Note 7 to the unaudited condensed consolidated financial statements, “Stock Repurchase Activity”.  On November 5, 2018, we subsequently borrowed an additional $25.0 million to complete the acquisition of City Gear, which will be reflected in financing activities for the fourth quarter ended February 2, 2019.

At November 3, 2018, we had two unsecured credit facilities; one which allows for borrowings up to $50.0 million with an interest rate agreed upon between the lender and us at the time a loan is made and one which allows for borrowings up to $50.0 million with an interest rate at one month LIBOR plus 1.5%.  Both facilities expire in October 2021.  We do not pay commitment fees.  However, both are subject to negative pledge agreements that, among other things, restrict liens or transfers of assets including inventory, tangible or intangible personal property and land and land improvements.  At November 3, 2018, a total of $75.0 million was available to us from these facilities.
22


Based on our current operating plans, store plans, plans for the repurchase of our common stock and budgeted capital expenditures, we believe that we can fund our cash needs for the foreseeable future through cash generated from operations and, if necessary, through periodic future borrowings against our credit facilities.

Off-Balance Sheet Arrangements.

We have not provided any financial guarantees as of November 3, 2018.  All merchandise purchase obligations are cancelable.  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 included in the unaudited condensed consolidated financial statements.

Quarterly and Seasonal Fluctuations

We experience seasonal fluctuations in our net sales and results of operations.  We typically experience higher net sales in early spring due to spring sports and annual tax refunds, late summer due to back-to-school shopping and winter due to holiday shopping.  In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including weather fluctuations, the timing of high demand footwear launches, demand for merchandise driven by local interest in sporting events, back-to-school sales and the timing of sales tax holidays and annual income tax refunds.

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.

ITEM 3.
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 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.  For a further discussion of this risk and risks related to our deposits, see “Risk Factors” in our Form 10-K for the fiscal year ended February 3, 2018.

Interest Rate Risk

Our exposure to market risks results primarily from fluctuations in interest rates.  There have been no material changes to our exposure to market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018 filed with the Securities and Exchange Commission on March 30, 2018.



ITEM 4.
Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of November 3, 2018.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

23

Changes in Internal Control Over Financial Reporting.

We have not identified any changes in our internal control over financial reporting that occurred during the period ended November 3, 2018, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.
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.  No material amounts were accrued at November 3, 2018 or February 3, 2018.

ITEM 1A.
Risk Factors.

We operate in an environment that involves a number of risks and uncertainties which are described in our Form 10-K for the year ended February 3, 2018.  If any of the risks described in our Fiscal 2018 Form 10-K were to actually occur, our business, operating results and financial results could be adversely affected.  There were no material changes to the risk factors disclosed in our Form 10-K for the fiscal year ended February 3, 2018, with the exception of risks and uncertainties related to the acquisition of City Gear.

Risks and uncertainties related to the acquisition of City Gear include, among others: potential adverse reactions or changes to business or employee relationships resulting from the acquisition; competitive responses to the acquisition; costs and difficulties related to the integration of City Gear’s business and operations with our business and operations; the inability to obtain, or delays in obtaining, the cost savings and synergies contemplated by the acquisition; uncertainty of the expected financial performance of the combined company; the allocation of the acquisition price to net assets acquired in accordance with applicable accounting rules and methodologies; unexpected costs, charges or expenses resulting from the acquisition; the potential for litigation or governmental investigations relating to the acquisition; the inability to retain key personnel; any changes in general economic and/or industry specific conditions; and the effect of new laws, tariffs and governmental regulations on the combined company.  The foregoing list of risks related to the acquisition of City Gear is not exhaustive. Consequentially, investors and stockholders should carefully consider the foregoing factors, along with the other risks and uncertainties described in our Form 10-K for the fiscal year ended February 3, 2018 filed with the Securities and Exchange Commission on March 30, 2018.

24

ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds.


The following table presents our stock repurchase activity for the thirteen weeks ended November 3, 2018 (1):

Period
 
Total Number of Shares Purchased
   
Average Price per Share
   
Total Number of Shares Purchased as Part of Publicly Announced Programs
   
Approximate Dollar Value of Shares that may yet be Purchased Under the Programs (in thousands)
 
August 5, 2018 to September 1, 2018
   
82,500
   
$
19.76
     
82,500
   
$
194,029
 
September 2, 2018 to October 6, 2018
   
187,200
   
$
19.53
     
187,200
   
$
190,372
 
October 7, 2018 to November 3, 2018
   
125,750
   
$
18.60
     
125,750
   
$
188,034
 
   Total
   
395,450
   
$
19.28
     
395,450
   
$
188,034
 
                                 

(1)
In November 2015, the Board authorized a Stock Repurchase Program (Program) of $300.0 million to repurchase our common stock through February 2, 2019 that replaced an existing authorization.  See Note 7, Stock Repurchase Activity and Note 11, Subsequent Events, to the unaudited condensed consolidated financial statements.

ITEM 6.
Exhibits.

The exhibits listed on the Exhibit Index immediately preceding such exhibits, which is incorporated herein by reference, are filed or furnished as part of this Quarterly Report on Form 10-Q.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
HIBBETT SPORTS, INC.
     
Date:  December 13, 2018
By:
/s/ Scott J. Bowman
   
Scott J. Bowman
   
Senior Vice President & Chief Financial Officer
   
(Principal Financial and Accounting Officer)
25


Exhibit Index

Exhibit No.

Description
     
   
Certificate of Incorporation and Bylaws
3.1
 
Certificate of Incorporation of the Registrant; 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 Stock Certificate; attached as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed on September 26, 2007.
     
   
Material Agreements
10.1
 
Membership Interest and Warrant Purchase Agreement; incorporated herein by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2018.
10.2
 
Second Amended and Restated Demand Note with Bank of America, N.A.; incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2018.
10.3
 
Amended and Restated Demand Note with Regions Bank; incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2018.
     
     
   
Certifications
31.1
*
31.2
*
32.1
*
     
   
Interactive Data Files
   
The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended November 3, 2018, formatted in XBRL (eXtensible Business Reporting Language) and submitted electronically herewith: (i) the Unaudited Condensed Consolidated Balance Sheets at November 3, 2018 and February 3, 2018; (ii) the Unaudited Condensed Consolidated Statements of Operations for the thirteen and thirty-nine weeks ended November 3, 2018 and October 28, 2017; (iii) the Unaudited Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended November 3, 2018 and October 28, 2017; and (iv) the Notes to Unaudited Condensed Consolidated Financial Statements.

101.INS
*
101.SCH
*
101.CAL
*
101.DEF
*
101.LAB
*
101.PRE
*
     
 
 *
Filed Within
     



26
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 quarterly report on Form 10-Q 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:  December 13, 2018
/s/ Jeffry O. Rosenthal
 
Jeffry O. Rosenthal
 
Chief Executive Officer and President
 
(Principal Executive Officer)
 
 

 

End of Exhibit 31.1
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 quarterly report on Form 10-Q 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:  December 13, 2018
/s/ Scott J. Bowman
 
Scott J. Bowman
 
Senior Vice President and Chief Financial Officer
 
(Principal Financial Officer)
 
 
 
 


End of Exhibit 31.2
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Nov. 03, 2018
Dec. 13, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name HIBBETT SPORTS INC  
Entity Central Index Key 0001017480  
Current Fiscal Year End Date --01-31  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   18,285,688
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Nov. 03, 2018  
v3.10.0.1
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Nov. 03, 2018
Feb. 03, 2018
Current Assets:    
Cash and cash equivalents $ 121,177 $ 73,544
Inventories, net 256,854 253,201
Other current assets 23,395 20,029
Total current assets 401,426 346,774
Property and equipment 260,688 258,010
Less accumulated depreciation and amortization 156,789 148,312
Property and equipment, net 103,899 109,698
Other assets, net 4,690 5,374
Total Assets 510,015 461,846
Current Liabilities:    
Accounts payable 109,445 93,435
Accrued payroll expenses 6,248 10,424
Deferred rent 5,855 5,909
Line of Credit, Current 25,000 0
Capital lease obligations 644 663
Other accrued expenses 9,155 5,136
Total current liabilities 156,347 115,567
Deferred rent 19,330 20,291
Other liabilities 5,857 6,392
Total liabilities 181,534 142,250
Stockholders' Investment:    
Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued 0 0
Common stock, $.01 par value, 80,000,000 shares authorized, 38,971,930 and 38,862,929 shares issued at November 3, 2018 and February 3, 2018, respectively 390 389
Paid-in capital 184,753 180,536
Retained earnings 753,042 731,901
Treasury stock, at cost; 20,682,342 and 19,910,291 shares repurchased at November 3, 2018 and February 3, 2018, respectively (609,704) (593,230)
Total stockholders' investment 328,481 319,596
Total Liabilities and Stockholders' Investment $ 510,015 $ 461,846
v3.10.0.1
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS Parenthetical - $ / shares
Nov. 03, 2018
Feb. 03, 2018
Stockholders' Investment:    
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 1,000,000 1,000,000
Preferred stock, shares issued (in shares) 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 80,000,000 80,000,000
Common stock, shares issued (in shares) 38,971,930 38,862,929
Treasury stock, shares (in shares) 20,682,342 19,910,291