Hibbett Sports 2010 Annual Report Download - page 52

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NOTE 9. COMMITMENTS AND CONTINGENCIES
Lease Commitments
We lease the premises for our retail sporting goods stores under non-cancelable operating leases having initial
or remaining terms of more than one year. The leases typically provide for terms of five to ten years with options to
extend at our discretion. Many of our leases contain scheduled increases in annual rent payments and the majority of
our leases also require us to pay maintenance, insurance and real estate taxes. Additionally, many of the lease
agreements contain tenant improvement allowances, rent holidays and/or rent escalation clauses (contingent rentals).
For purposes of recognizing incentives and minimum rental expenses on a straight-line basis over the terms of the
leases, we use the date of initial possession to begin amortization, which is generally when we enter the space and
begin to make improvements in preparation of our intended use. Contingent rental payments are based on net sales for
the location.
We also lease certain computer hardware, office equipment and transportation equipment under non-
cancelable operating leases having initial or remaining terms of more than one year.
In February 1996, we entered into a sale-leaseback transaction to finance our distribution center and office
facilities. In December 1999, the related operating lease was amended to include the Fiscal 2000 expansion of these
facilities. The amended lease rate is $0.9 million per year and can increase annually with the Consumer Price Index.
This lease will expire in December 2014. Future minimum lease payments under this non-cancelable lease aggregate
approximately $4.3 million. The transaction is also subject to quarterly financial covenants based on certain ratios.
We have never been in violation of any financial covenant requirement.
During the fiscal year ended January 30, 2010, we increased our lease commitments by a net of 22 retail
stores, each having initial lease termination dates between April 2012 and February 2020 as well as various office
and transportation equipment. At January 30, 2010, the future minimum lease payments, excluding maintenance,
insurance and real estate taxes, for our current operating leases and including the net 22 operating leases added
during Fiscal 2010 were as follows (in thousands):
Fiscal 2011 40,528$
Fiscal 2012 35,225
Fiscal 2013 28,708
Fiscal 2014 21,272
Fiscal 2015 14,775
Thereafter 19,511
TOTAL 160,019$
Rental expense for all operating leases consisted of the following (in thousands):
January 30, January 31, February 2,
2010 2009 2008
Minimum rentals 35,455$ 34,283$ 32,693$
Contingent rentals 4,165 2,689 2,342
39,620$ 36,972$ 35,035$
Fiscal Year Ended
Most of our retail store leases contain provisions that allow for early termination of the lease by either party if
certain pre-determined annual sales levels are not met. Generally, these provisions allow the lease to be terminated
between the third and fifth year of the lease. Should the lease be terminated under these provisions, in some cases, the
unamortized portion of any landlord allowances related to that property would be payable to the landlord.
Annual Bonuses and Equity Incentive Awards
Specified officers and corporate employees of our Company are entitled to annual bonuses, primarily based on
measures of Company operating performance. At January 30, 2010 and January 31, 2009, there was $3.3 million and
$2.9 million, respectively, of annual bonus related expense included in accrued expenses.
In addition, the Compensation Committee (Committee) of the Board of Directors places performance criteria
on awards of RSUs (PSAs) to our Named Executive Officers (NEOs) under the Incentive Plan. The performance
criteria are tied to performance targets with respect to future sales and operating income over a specified period of time.
These PSAs are expensed under the provisions of ASC Topic 718 and are evaluated each quarter to determine the
probability that the performance conditions set within will be met. We expect the Committee to continue to place
performance criteria on awards of RSUs to our NEOs in the future.