Hibbett Sports 2012 Annual Report Download - page 31

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(3) Purchase obligations include all material legally binding contracts such as software license commitments and service
contracts. The table above also includes stand-by letters of credit in conjunction with our self-insured workers’
compensation and general liability insurance coverage. Contractual obligations, including purchase orders for inventory,
that are not binding agreements are excluded from the table above. Utility contracts, including waste disposal
agreements, are also excluded.
(4) Other liabilities include amounts accrued for various deferred compensation arrangements and the current portion of
unrecognized tax benefits. See “Part II, Item 8, Consolidated Financial Statements Note 7 – Defined Contribution Benefit
Plans” for a discussion regarding our employee benefit plans. Non-current liabilities, primarily consisting of deferred rent
and unrecognized tax benefits, have been excluded from the above table to the extent that the timing and/or amount of any
cash payment are uncertain. See “Part II, Item 8, Consolidated Financial Statements Note 1 – Deferred Rent” for a
discussion on our deferred rent liabilities. See “Part II, Item 8, Consolidated Financial Statements Note 9 – Income
Taxes” for a discussion of our unrecognized tax benefits.
Excluded from this table are approximately $2.6 million of unrecognized tax benefits, which have been recorded as
liabilities in accordance with ASC Topic 740, Income Taxes, as the timing of such payments cannot be reasonably determined.
Off-Balance Sheet Arrangements
We have not provided any financial guarantees as of January 28, 2012. We have not created, and are not party to, any
special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do
not have any arrangements or relationships with entities that are not consolidated into the financial statements.
Inflation and Other Economic Factors
Our ability to provide quality merchandise on a profitable basis may be subject to economic factors and influences that
we cannot control. National or international events, including uncertainties in the global financial markets, U.S. government
policies, the Middle East and Asia, could lead to disruptions in economies in the United States or in foreign countries where a
significant portion of our merchandise is manufactured. These and other factors could increase our merchandise costs and other
costs that are critical to our operations. Consumer spending could also decline because of economic pressures.
We do not believe that inflation has had a material impact on our financial position or results of operations to date.
However, we are experiencing increased prices and a high rate of inflation in the future may have an adverse effect on our ability
to maintain current levels of gross profit and selling, general and administrative expenses as a percentage of net sales if the
selling prices of our merchandise do not increase with these increased costs. Based on current economic conditions, we expect
that any increase in merchandise costs per unit will be offset by improved vendor discounts and increased retail prices in Fiscal
2013.
Recent Accounting Pronouncements
We continuously monitor and review all current accounting pronouncements and standards from the Financial
Accounting Standards Board (FASB) and other authoritative sources of U.S. GAAP for applicability to our operations.
Proposed Amendments to Current Accounting Standards. The FASB is currently working on amendments to existing
accounting standards governing a number of areas including, but not limited to, accounting for leases. In August 2010, the FASB
issued an exposure draft, Leases, which would replace the existing guidance in ASC Topic 840, Leases. When and if effective,
this proposed standard will likely have a significant impact on our consolidated financial statements. However, as the standard-
setting process is still ongoing, we are unable to determine the impact this proposed change in accounting will have on our
consolidated financial statements at this time.
Our Critical Accounting Policies
Our critical accounting policies reflected in the consolidated financial statements are detailed below.
Revenue Recognition. We recognize revenue, including gift card and layaway sales, in accordance with ASC Topic
605, Revenue Recognition.
Retail merchandise sales occur on-site in our retail stores. Customers have the option of paying the full purchase price
of the merchandise upon sale or paying a down payment and placing the merchandise on layaway. The customer may make
further payments in installments, but the entire purchase price for merchandise placed on layaway must be received by us within
30 days. The down payment and any installments are recorded by us as short-term deferred revenue until the customer pays the
entire purchase price for the merchandise. We recognize revenue at the time the customer takes possession of the merchandise.
Retail sales are recorded net of returns and discounts and exclude sales taxes.