Hibbett Sports 2012 Annual Report Download - page 41

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HIBBETT SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Hibbett Sports, Inc. is an operator of sporting goods retail stores in small to mid-sized markets predominately in the
Southeast, Southwest, Mid-Atlantic and Midwest regions of the United States. References to “we,” “our,” “us” and the “Company”
refer to Hibbett Sports, Inc. and its subsidiaries as well as its predecessors. Our fiscal year ends on the Saturday closest to
January 31 of each year. The consolidated statements of operations for Fiscal 2012, Fiscal 2011 and Fiscal 2010 include 52
weeks of operations. Our merchandise assortment features a core selection of brand name merchandise emphasizing athletic
footwear, team sports equipment, athletic and fashion apparel and related accessories. We complement this core assortment with
a selection of localized apparel, footwear and accessories designed to appeal to a wide range of customers within each market.
Principles of Consolidation
The consolidated financial statements of our Company include its accounts and the accounts of all wholly-owned
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Occasionally, certain
reclassifications are made to conform previously reported data to the current presentation. Such reclassifications had no impact
on total assets, net income or stockholders’ investment in any of the years presented.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting
Principles (U.S. GAAP) requires management to make estimates and assumptions that affect:
 the reported amounts of certain assets, including inventories and property and equipment;
 the reported amounts of certain liabilities, including legal and other accruals; and
 the reported amounts of certain revenues and expenses during the reporting period.
The assumptions used by management could change significantly in future estimates due to changes in circumstances
and actual results could differ from those estimates.
Reportable Segments
Given the economic characteristics of the store formats, the similar nature of products offered for sale, the type of
customers, the methods of distribution and how our Company is managed, our operations constitute only one reportable segment.
Revenues from external customers by product category are impractical for us to report.
Customers
No customer accounted for more than 5.0% of our net sales during the fiscal years ended January 28, 2012, January 29,
2011 and January 30, 2010.
Vendor Arrangements
We enter into arrangements with some of our vendors that entitle us to a partial refund of the cost of merchandise
purchased during the year or reimbursement of certain costs we incur to advertise or otherwise promote their product. The
volume-based rebates, supported by vendor agreements, are estimated throughout the year and reduce the cost of inventories and
cost of goods sold during the year. This estimate is regularly monitored and adjusted for current or anticipated changes in
purchase levels and for sales activity.
We also receive consideration from vendors through a variety of other programs, including markdown reimbursements,
vendor compliance charges and defective merchandise credits. If the payment is a reimbursement for costs incurred, it is
recognized as an offset against those related costs; otherwise, it is treated as a reduction to the cost of merchandise. Markdown
reimbursements related to merchandise that has been sold are negotiated by our merchandising teams and are credited directly to
cost of goods sold in the period received. If vendor funds are received prior to merchandise being sold, they are recorded as a
reduction of merchandise cost. Vendor compliance charges and defective merchandise credits reduce the cost of inventories.
Advertising
We expense advertising costs when incurred. We participate in various advertising and marketing cooperative
programs with our vendors, who, under these programs, reimburse us for certain costs incurred. A receivable for cooperative
advertising to be reimbursed is recorded as a decrease to expense as advertisements are run.