Hibbett Sports 2007 Annual Report Download - page 24

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foregoing provisions and certain other provisions of our certificate of incorporation and bylaws.
In addition, our Board of Directors, without further action of the stockholders, is permitted to issue and fix the
terms of preferred stock which may have rights senior to those of common stock. We are also subject to the
Delaware business combination statute, which may render a change in control of us more difficult. Section 203 of the
Delaware General Corporation Laws would be expected to have an anti-takeover effect with respect to transactions
not approved in advance by the Board of Directors, including discouraging takeover attempts that might result in a
premium over the market price for the shares of Common Stock held by stockholders.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We currently lease all of our existing 613 store locations and expect that our policy of leasing rather than
owning will continue as we continue to expand. Our leases typically provide for terms of five to ten years with options on
the part of Hibbett to extend. Most leases also contain a kick-out clause if projected sales levels are not met and an-
early termination/remedy option if co-tenancy and exclusivity provisions are violated. We believe that this lease strategy
enhances our flexibility to pursue various expansion opportunities resulting from changing market conditions and to
periodically re-evaluate store locations. Our ability to open new stores is contingent upon locating satisfactory sites,
negotiating favorable leases and recruiting and training qualified management personnel.
As current leases expire, we believe that we will be able either to obtain lease renewals for present store
locations or to obtain leases for equivalent or better locations in the same general area. For the most part, we have not
experienced any significant difficulty in either renewing leases for existing locations or securing leases for suitable
locations for new stores. Based primarily on our belief that we maintain good relations with our landlords, that most of
our leases are at approximate market rents and that generally we have been able to secure leases for suitable locations,
we believe that our lease strategy will not be detrimental to our business, financial condition or results of operations.
Our offices and our distribution center are leased under an operating lease. We own Team Sales’
warehousing and distribution center located in Birmingham, Alabama. We believe our facilities are suitable and
adequate to meet our immediate needs and we expect to open a second distribution center in or around Dallas,
Texas in the last half of fiscal 2008 to meet our future needs with continued expansion westward.
Store Locations
We currently operate 613 stores in 23 contiguous states. Of these stores, 219 are located in malls and 394 are
located in strip-shopping centers which are generally the centers of commerce within the area and which are usually
anchored by a Wal-Mart store. The following shows the number of locations by state as of March 30, 2007:
Alabama - 76 Kansas - 15 Ohio - 10
Arizona - 2
Kentucky - 30 Oklahoma - 25
Arkansas - 30 Louisiana - 28 South Carolina - 26
Florida - 26
Missouri - 21 Tennessee - 46
Georgia - 79 Mississippi - 48 Texas - 51
Iowa - 5
Nebraska - 3 Virginia - 11
Illinois - 14 New Mexico - 4 West Virginia - 4
Indiana - 16
North Carolina - 43
Item 3. Legal Proceedings.
In October 2005, three former employees filed a lawsuit in Mississippi federal court alleging negligence and
various violations of the Fair Labor Standards Act (“FLSA”). The violations allege that the Company improperly
classified certain employees as exempt salaried employees and that we owe back wages for overtime as a result of the
alleged misclassification. The suit asks the court to certify the case as a collective action under the FLSA on behalf of all
similarly situated former and current employees. Plaintiffs seek to recover overtime pay, liquidated damages,
declaratory relief and attorney’s fees. Currently, the Court has not ruled upon whether or not to certify the collective
action. No trial date has been scheduled.
The outcome of any litigation is inherently uncertain. At trial, the Company would bear the burden of
establishing its entitlement to the exemption from the overtime requirements of the FLSA, and no assurances could be
given that we would be successful. The rulings by the Court on both substantive and procedural motions and issues,
including evidentiary issues at trial, could significantly affect the course and outcome of these proceedings positively or