Hibbett Sports 2005 Annual Report Download - page 40

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Self-Insurance Reserve
The Company is self-insured for a significant portion of its health insurance. Liabilities associated with the
risks that are retained by the Company are estimated, in part, by considering historical claims of the Company.
The estimated accruals for these liabilities could be affected if future occurrences and claims differ from these
assumptions. As of January 29, 2005, and January 31, 2004, these reserves were $367,000 and
$400,000, respectively, and were included in accrued expenses in the consolidated balance sheets.
Sales Returns, net
Net sales returns were $10.5 million for fiscal 2005, $8.5 million for fiscal 2004 and $7.4 million for
fiscal 2003. The effect of the reserve for estimated returns on pre-tax income at January 29, 2005 was
$83,000 and was zero at January 31, 2004.
Stock-Based Compensation
The Company discloses stock-based compensation information in accordance with the Financial Accounting
Statement Board’s (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 148,
“Accounting for Stock-Based Compensation – Transition and Disclosure – an Amendment of FASB Statement
No. 123” and FASB issued SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 148
provides additional transition guidance for companies that elect to voluntarily adopt the provisions of SFAS
No. 123. SFAS No. 148 does not change the provisions of SFAS No. 123 that permit entities to continue to
apply the intrinsic value method of Accounting Principles Board (“APB”) No. 25, “Accounting for Stock Issued
to Employees.” Hibbett has elected to continue to account for its stock-based plans under APB No. 25, as well
as to provide disclosure of stock-based compensation as outlined in SFAS No. 123, as amended by SFAS
No. 148. No compensation expense has been recognized related to its stock-based plans. SFAS No. 123
requires disclosure of pro forma net income, earnings per share (“EPS”) and other information as if the fair
value method of accounting for stock options and other equity instruments described in SFAS No. 123 had
been adopted. All pro forma disclosures include the effects of all options granted by the Company.
In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” a revision of SFAS No.
123. As a result, the pro forma disclosures previously permitted under SFAS No. 123 will no longer be
an alternative to financial statement recognition. The Company is required to adopt SFAS No. 123R in
the third quarter of fiscal 2006. See “Recent Accounting Standards.”
At January 29, 2005, the Company had three active stock-based plans: the Amended and Restated
1996 Stock Option Plan, the Employee Stock Purchase Plan and the Stock Plan for Outside Directors.
The Company uses the Black-Scholes option pricing model to estimate the fair value at the date of grant
of stock options granted under its stock option plans and stock purchase rights associated with the
Employee Stock Purchase Plan. A summary of the assumptions used for stock option grants and stock
purchase right grants follows:
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