Hibbett Sports 2012 Annual Report Download - page 44

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In our consolidated statements of cash flows, the current and long-term portions of landlord allowances are included as
changes in cash flows from operations. The current portion is included as a change in accrued expenses and the long-term
portion is included as a change in deferred rent, non-current. The liability for the current portion of unamortized landlord
allowances was $3.1 million and $3.4 million at January 28, 2012 and January 29, 2011, respectively. The liability for the long-
term portion of unamortized landlord allowances was $8.2 million and $9.4 million at January 28, 2012 and January 29, 2011,
respectively. We estimate the non-cash portion of landlord allowances was $0.9 million and $0.5 million in Fiscal 2012 and
Fiscal 2011, respectively.
Revenue Recognition
We recognize revenue, including gift card and layaway sales, in accordance with the Accounting Standards
Codification (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.
We offer a customer loyalty program, the MVP Rewards program, whereby customers, upon registration, can earn
points in a variety of ways, including store purchases, website surveys and other activities on our website. Based on the number
of points accumulated, customers receive reward certificates on a quarterly basis that can be redeemed in our stores. An estimate
of the obligation related to the program, based on historical redemption rates, is recorded as a current liability and a reduction of
net retail sales in the period earned by the customer. The current liability is reduced, and a corresponding amount is recognized
in net retail sales, in the amount of and at the time of redemption of the reward certificate. At January 28, 2012 and January 29,
2011, the amount recorded in current liabilities for reward certificates issued was inconsequential.
The cost of coupon sales incentives is recognized at the time the related revenue is recognized by us. Proceeds
received from the issuance of gift cards are initially recorded as deferred revenue. Revenue is subsequently recognized at the
time the customer redeems the gift cards and takes possession of the merchandise. Unredeemed gift cards are recorded as a
current liability.
Gift card breakage revenue is recognized to the extent not required to be remitted to jurisdictions as unclaimed property
and is based upon historical redemption patterns and represents the balance of gift cards for which we believe the likelihood of
redemption by the customer is remote. Based on our analyses of redemption activity, we have determined the likelihood of
redemption for gift cards 5 years after the date of initial issuance is remote. For Fiscal 2012, Fiscal 2011 and Fiscal 2010, $0.2
million, $0.2 million and $0.3 million of breakage revenue, respectively, was recorded in net income as other income and is
included in the accompanying consolidated statements of operations as a reduction to store operating, selling and administrative
expense. The net deferred revenue liability at January 28, 2012 and January 29, 2011 was $3.5 million and $3.1 million,
respectively.
Store Opening and Closing Costs
New store opening costs, including pre-opening costs, are charged to expense as incurred. Store opening costs
primarily include payroll expenses, training costs and straight-line rent expenses. All pre-opening costs are included in store
operating, selling and administrative expenses as a part of operating expenses.
We consider individual store closings to be a normal part of operations and regularly review store performance against
expectations. Costs associated with store closings are recognized at the time of closing or when a liability has been incurred.
Impairment of Long-Lived Assets
We continually evaluate whether events and circumstances have occurred that indicate the remaining balance of long-
lived assets may be impaired and not recoverable. Our policy is to recognize any impairment loss on long-lived assets as a
charge to current income when certain events or changes in circumstances indicate that the carrying value of the assets may not
be recoverable. Impairment is assessed considering the estimated undiscounted cash flows over the asset’s remaining life. If
estimated cash flows are insufficient to recover the investment, an impairment loss is recognized based on a comparison of the
cost of the asset to fair value less any costs of disposition. Evaluation of asset impairment requires significant judgment and
estimates.