Hibbett Sports 2012 Annual Report Download - page 53

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A reconciliation of the unrecognized tax benefit under ASC Topic 740 follows (in thousands):
January 28, 2012 January 29, 2011 January 30, 2010
Unrecognized tax benefits - beginning of year 3,887$ 2,351$ 2,501$
Gross increases - tax positions in prior period 31 264 105
Gross decreases - tax positions in prior period (1,412) - -
Gross increases - tax positions in current period 496 2,191 259
Settlements (230) - -
Lapse of statute of limitations (168) (919) (514)
Unrecognized tax benefits - end of year 2,604$ 3,887$ 2,351$
Fiscal Year Ended
We classify interest and penalties recognized on unrecognized tax benefits as income tax expense. As of January 28,
2012, January 29, 2011 and January 30, 2010, we have accrued interest and penalties in the amount of $0.3 million, $0.3 million
and $0.4 million, respectively. During Fiscal 2012, Fiscal 2011 and Fiscal 2010, we recorded $0.1 million in each year for the
accrual of interest and penalties in the consolidated statement of operations.
Of the unrecognized tax benefits as of January 28, 2012, January 29, 2011 and January 30, 2010, $1.1 million, $1.2
million and $1.0 million, respectively, if recognized, would affect our effective income tax rate.
NOTE 10. COMMITMENTS AND CONTINGENCIES
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 28, 2012 and January 29, 2011, there was $4.2 million and $4.1 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
PSUs made in the form of RSUs to our NEOs under the EIP. The performance criteria are tied to performance targets with respect to
future sales and operating income over a specified period of time. These PSUs 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.
Legal Proceedings and Other Contingencies
We are a party to various legal proceedings incidental to our business. We do not believe that any of these matters will,
individually or in the aggregate, have a material effect on our business or financial condition. We cannot give assurance,
however, that one or more of these lawsuits will not have a material effect on our results of operations for the period in which
they are resolved. It is reasonably possible that losses in addition to the amount accrued could be incurred. However, we cannot
predict the outcome of these matters or make an estimate of the possible loss or range of loss based on the information currently
available to the Company. At January 28, 2012, we estimate that the liability related to these matters is approximately $0.3
million and accordingly, have accrued $0.3 million as a current liability in our consolidated balance sheet. As of January 29,
2011, we had accrued $0.4 million as it related to our estimated liability for legal proceedings.
The estimates of our liability for pending and unasserted potential claims do not include litigation costs. It is our policy
to accrue legal fees when it is probable that we will have to defend against known claims or allegations and we can reasonably
estimate the amount of the anticipated expense.
From time to time, we enter into certain types of agreements that require us to indemnify parties against third-party claims
under certain circumstances. Generally, these agreements relate to: (a) agreements with vendors and suppliers under which we may
provide customary indemnification to our vendors and suppliers in respect to actions they take at our request or otherwise on our
behalf; (b) agreements to indemnify vendors against trademark and copyright infringement claims concerning merchandise
manufactured specifically for or on behalf of the Company; (c) real estate leases, under which we may agree to indemnify the lessors
from claims arising from our use of the property; and (d) agreements with our directors, officers and employees, under which we
may agree to indemnify such persons for liabilities arising out of their relationship with us. We have director and officer liability
insurance, which, subject to the policy’s conditions, provides coverage for indemnification amounts payable by us with respect to our
directors and officers up to specified limits and subject to certain deductibles.
If we believe that a loss is both probable and estimable for a particular matter, the loss is accrued in accordance with the
requirements of ASC Topic 450, Contingencies. With respect to any matter, we could change our belief as to whether a loss is
probable or estimable, or its estimate of loss, at any time.