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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  __________________________ to __________________________
COMMISSION FILE NUMBER:          000-20969

HIBBETT, INC.
(Exact name of registrant as specified in its charter)
Delaware
20-8159608
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
2700 Milan Court, Birmingham, Alabama 35211
(Address of principal executive offices, including zip code)
205-942-4292
(Registrant’s telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share
HIBB
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Shares of common stock, par value $0.01 per share, outstanding as of September 3, 2021, were 14,805,414 shares.




HIBBETT, INC.
INDEX
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1

Index
PART I.  FINANCIAL INFORMATION
ITEM 1.    Financial Statements.
HIBBETT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
ASSETS July 31,
2021
January 30,
2021
August 1,
2020
Current assets:
Cash and cash equivalents
$ 176,841  $ 209,290  $ 217,809 
Receivables, net
14,230  11,905  13,907 
Inventories, net
216,789  202,038  182,035 
Other current assets
11,062  16,567  6,015 
Total current assets
418,922  439,800  419,766 
Property and equipment, net
115,133  107,159  98,574 
Operating right-of-use assets
222,654  216,224  222,896 
Finance right-of-use assets, net
2,881  3,285  2,560 
Tradename intangible asset 23,500  23,500  23,500 
Deferred income taxes, net
13,509  14,625  15,161 
Other assets, net 3,475  3,573  4,386 
Total assets $ 800,074  $ 808,166  $ 786,843 
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable
$ 102,361  $ 107,215  $ 124,303 
Operating lease obligations 59,709  58,613  61,463 
Finance lease obligations 997  956  868 
Accrued payroll expenses
23,063  29,948  19,907 
Other accrued expenses
16,989  28,588  40,887 
Total current liabilities
203,119  225,320  247,428 
Operating lease obligations 191,459  186,133  188,593 
Finance lease obligations 2,144  2,599  1,994 
Unrecognized tax benefits
674  725  690 
Other liabilities
2,499  2,353  2,459 
Total liabilities
399,895  417,130  441,164 
Stockholders' investment:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued
—  —  — 
Common stock, $0.01 par value, 80,000,000 shares authorized, 39,578,018, 39,379,865 and 39,286,920 shares issued at July 31, 2021, January 30, 2021, and August 1, 2020, respectively
396  394  393 
Paid-in capital
199,713  194,534  190,992 
Retained earnings
986,568  858,951  809,754 
Treasury stock, at cost; 24,472,892, 22,901,101 and 22,743,290 shares repurchased at July 31, 2021, January 30, 2021, and August 1, 2020, respectively
(786,498) (662,843) (655,460)
Total stockholders' investment
400,179  391,036  345,679 
Total liabilities and stockholders' investment $ 800,074  $ 808,166  $ 786,843 
See notes to unaudited condensed consolidated financial statements.
2


HIBBETT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share information)
13-Weeks Ended 26-Weeks Ended
July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
% to Sales % to Sales % to Sales % to Sales
Net sales $ 419,257  $ 441,607  $ 926,117  $ 711,445 
Cost of goods sold 255,930  61.0  % 278,010  63.0  % 552,827  59.7  % 473,701  66.6  %
Gross margin 163,327  39.0  % 163,597  37.0  % 373,290  40.3  % 237,744  33.4  %
Store operating, selling, and administrative expenses 93,442  22.3  % 99,835  22.6  % 185,181  20.0  % 169,508  23.8  %
Goodwill impairment —  —  % —  —  % —  —  % 19,661  2.8  %
Depreciation and amortization 8,385  2.0  % 7,484  1.7  % 16,459  1.8  % 14,354  2.0  %
Operating income 61,500  14.7  % 56,278  12.7  % 171,650  18.5  % 34,221  4.8  %
Interest expense, net 28  —  % 206  —  % 127  —  % 376  0.1  %
Income before provision for income taxes 61,472  14.7  % 56,072  12.7  % 171,523  18.5  % 33,845  4.8  %
Provision for income taxes 14,776  3.5  % 15,717  3.6  % 40,061  4.3  % 8,777  1.2  %
Net income $ 46,696  11.1  % $ 40,355  9.1  % $ 131,462  14.2  % $ 25,068  3.5  %
Basic earnings per share $ 2.98  $ 2.44  $ 8.21  $ 1.52 
Diluted earnings per share $ 2.86  $ 2.38  $ 7.90  $ 1.50 
Weighted-average shares:
Basic 15,691  16,535  16,008  16,540 
Diluted 16,305  16,982  16,635  16,764 
See notes to unaudited condensed consolidated financial statements.
Percentages may not foot due to rounding.

3

HIBBETT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
26-Weeks Ended
July 31,
2021
August 1,
2020
Cash Flows From Operating Activities:
Net income $ 131,462  $ 25,068 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
16,459  14,354 
Stock-based compensation
3,183  1,854 
Impairment charges 402  33,173 
Contingent earnout, net (13,761) (1,746)
Other non-cash adjustments 75  (6,712)
Changes in operating assets and liabilities:
Inventories, net
(14,751) 105,976 
Receivables, net (2,324) (5,686)
Accounts payable
(8,260) (7,359)
Income tax payable, net 8,956  14,490 
Other assets and liabilities
(5,909) 5,457 
Net cash provided by operating activities 115,532  178,869 
Cash Flows From Investing Activities:
Capital expenditures
(20,835) (12,452)
Other, net
79  562 
Net cash used in investing activities (20,756) (11,890)
Cash Flows From Financing Activities:
Proceeds under credit facilities —  117,535 
Repayments under credit facilities —  (117,535)
Stock repurchases (120,477) (9,748)
Cash used for contingent earnout (1,239) (4,761)
Cash dividends paid to stockholders (3,846) — 
Proceeds from options exercised and purchase of shares under the employee stock purchase plan
1,997  261 
Other, net
(3,660) (1,000)
Net cash used in financing activities (127,225) (15,248)
Net (decrease) increase in cash and cash equivalents (32,449) 151,731 
Cash and cash equivalents, beginning of period
209,290  66,078 
Cash and cash equivalents, end of period
$ 176,841  $ 217,809 
See notes to unaudited condensed consolidated financial statements.
4

HIBBETT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders' Investment
(in thousands)
13-Weeks Ended July 31, 2021
Common Stock
Treasury Stock
Number of
Shares
Amount
Paid-In
Capital
Retained
Earnings
Number of
Shares
Amount
Total
Stockholders'
Investment
Balance - May 1, 2021 39,559  $ 395  $ 198,356  $ 943,718  23,484  $ (703,003) $ 439,466 
Net income —  —  —  46,696  —  —  46,696 
Issuance of shares through the Company's equity plans 19  225  —  —  —  226 
Purchase of shares under the stock repurchase program —  —  —  —  985  (83,164) (83,164)
Settlement of net share equity awards —  —  —  —  (331) (331)
Cash dividends declared, $0.25 per common share
—  —  —  (3,846) —  —  (3,846)
Stock-based compensation —  —  1,131  —  —  —  1,131 
Balance - July 31, 2021 39,578  $ 396  $ 199,713  $ 986,568  24,473  $ (786,498) $ 400,179 

13-Weeks Ended August 1, 2020
Common Stock
Treasury Stock
Number of
Shares
Amount
Paid-In
Capital
Retained
Earnings
Number of
Shares
Amount
Total
Stockholders'
Investment
Balance - May 2, 2020 39,255  $ 393  $ 190,260  $ 769,315  22,739  $ (655,401) $ 304,567 
Net income —  —  —  40,355  —  —  40,355 
Issuance of shares through the Company's equity plans 32  —  95  —  —  —  95 
Adjustment for adoption of accounting standard(1)
—  —  —  84  —  —  84 
Purchase of shares under the stock repurchase program —  —  —  —  —  —  — 
Settlement of net share equity awards —  —  —  —  (59) (59)
Stock-based compensation —  —  637  —  —  —  637 
Balance - August 1, 2020 39,287  $ 393  $ 190,992  $ 809,754  22,743  $ (655,460) $ 345,679 
Note: Columns may not foot due to rounding.

(1) Adoption of Accounting Standards Update ("ASU") No. 2016-13, Topic 326, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. See Note 2, Recent Accounting Pronouncements, in our Annual Report on Form 10-K filed on April 7, 2021.


See notes to unaudited condensed consolidated financial statements.

5

HIBBETT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders' Investment
(in thousands)

26-Weeks Ended July 31, 2021
Common Stock
Treasury Stock
Number of
Shares
Amount
Paid-In
Capital
Retained
Earnings
Number of
Shares
Amount
Total
Stockholders'
Investment
Balance - January 30, 2021 39,380  $ 394  $ 194,534  $ 858,951  22,901  $ (662,843) $ 391,036 
Net income —  —  —  131,462  —  —  131,462 
Issuance of shares through the Company's equity plans 198  1,995  —  —  —  1,997 
Purchase of shares under the stock repurchase program —  —  —  —  1,527  (120,477) (120,477)
Settlement of net share equity awards —  —  —  —  45  (3,178) (3,178)
Cash dividends declared, $0.25 per common share
—  —  —  (3,846) —  —  (3,846)
Stock-based compensation —  —  3,183  —  —  —  3,183 
Balance - July 31, 2021 39,578  $ 396  $ 199,713  $ 986,568  24,473  $ (786,498) $ 400,179 

26-Weeks Ended August 1, 2020
Common Stock Treasury Stock
Number of
Shares
Amount Paid-In
Capital
Retained
Earnings
Number of
Shares
Amount Total
Stockholders'
Investment
Balance - February 1, 2020 39,141  $ 391  $ 188,879  $ 784,942  22,280  $ (645,229) $ 328,983 
Net income —  —  —  25,068  —  —  25,068 
Issuance of shares through the Company's equity plans 146  259  —  —  —  261 
Adjustment for adoption of accounting standard(1)
—  —  —  (256) —  —  (256)
Purchase of shares under the stock repurchase program —  —  —  —  428  (9,748) (9,748)
Settlement of net share equity awards —  —  —  —  35  (483) (483)
Stock-based compensation —  —  1,854  —  —  —  1,854 
Balance - August 1, 2020 39,287  $ 393  $ 190,992  $ 809,754  22,743  $ (655,460) $ 345,679 
Note: Columns may not foot due to rounding.

(1) Adoption of Accounting Standards Update ("ASU") No. 2016-13, Topic 326, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. See Note 2, Recent Accounting Pronouncements, in our Annual Report on Form 10-K filed on April 7, 2021.


See notes to unaudited condensed consolidated financial statements.

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HIBBETT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

1.    Basis of Presentation and Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Hibbett, Inc. and its wholly-owned subsidiaries (including the condensed consolidated balance sheet as of January 30, 2021, which has been derived from audited financial statements) have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. References to “Hibbett,” “we,” “our,” “us,” and the “Company” refer to Hibbett, Inc. and its subsidiaries, as well as its predecessors.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021, filed on April 7, 2021 ("2021 Annual Report"). The unaudited condensed consolidated financial statements have been prepared on a basis consistent in all material respects with the accounting policies described in the 2021 Annual Report and reflect all adjustments of a normal recurring nature that are, in management’s opinion, necessary for the fair presentation of the results of operations, financial position, and cash flows for the periods presented.

Occasionally, certain reclassifications are made to conform previously reported data to the current presentation. Such reclassifications have no impact on total assets, total liabilities, net income, cash flows or stockholders’ investment in any of the periods presented.

Property and Equipment

Property and equipment are recorded at cost. Finance lease assets are shown as right-of-use ("ROU") assets and are excluded from property and equipment (see Note 3, Leases). The fixed asset component of asset group impairment charges was not material in any period presented.

Property and equipment consist of the following (in thousands):

July 31,
2021
January 30,
2021
August 1,
2020
Land $ 7,277  $ 7,277  $ 7,277 
Buildings 21,718  21,505  21,635 
Equipment 109,647  104,431  97,909 
Furniture and fixtures 43,126  42,448  37,654 
Leasehold improvements 117,845  109,220  104,322 
Construction in progress 6,602  1,470  1,515 
Total property and equipment 306,215  286,351  270,312 
Less: accumulated depreciation and amortization 191,082  179,192  171,738 
Total property and equipment, net $ 115,133  $ 107,159  $ 98,574 

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers, when control of the merchandise is transferred to our customer which is at delivery. Sales are recorded net of expected returns at the time the customer takes possession of the merchandise. Net sales exclude sales taxes because we are a pass-through conduit for collecting and remitting these taxes.

Gift Cards, Customer Orders, and Layaways: The net deferred revenue liability for gift cards, customer orders, and layaways at July 31, 2021, January 30, 2021, and August 1, 2020 was $10.4 million, $8.8 million, and $9.5 million, respectively, recognized in accounts payable on our unaudited condensed consolidated balance sheets. We recognize revenue when a gift card is redeemed by the customer and recognize gift card breakage income in net sales in proportion to the redemption pattern of rights exercised by the customer. For all periods presented, gift card breakage was immaterial.
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During the 13-weeks ended July 31, 2021 and August 1, 2020, $0.6 million and $0.5 million, respectively, of gift card deferred revenue from prior periods was realized. During the 26-weeks ended July 31, 2021 and August 1, 2020, $1.0 million and $0.8 million, respectively, of gift card deferred revenue from prior periods was realized.

Loyalty Program: We offer the Hibbett Rewards program whereby upon registration and in accordance with the terms of the program, customers earn points on certain purchases. Points convert into rewards at defined thresholds. The short-term future performance obligation liability is estimated at each reporting period based on historical conversion and redemption patterns. The liability is included in other accrued expenses on our unaudited condensed consolidated balance sheets and was $3.6 million, $3.4 million, and $3.2 million at July 31, 2021, January 30, 2021, and August 1, 2020, respectively.

Return Sales: The liability for return sales is estimated at each reporting period based on historical return patterns and is recognized at the transaction price. The liability is included in other accrued expenses on our unaudited condensed consolidated balance sheets. The return asset and corresponding adjustment to cost of goods sold for our right to recover the merchandise returned by the customer is immaterial.

Retail Store Sales: For merchandise sold in our stores, revenue is recognized at the point of sale when tender is accepted and the customer takes possession of the merchandise.

Revenues disaggregated by major product categories are as follows (in thousands):

13-Weeks Ended 26-Weeks Ended
July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
Footwear $ 270,142  $ 287,010  $ 592,723  $ 474,224 
Apparel 110,424  119,748  241,531  178,184 
Equipment 38,691  34,849  91,863  59,037 
Total $ 419,257  $ 441,607  $ 926,117  $ 711,445 

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and the City Gear tradename are indefinite-lived assets which are not amortized, but rather tested for impairment at least annually, or on an interim basis if events and circumstances have occurred that indicate that it is more likely than not that an asset is impaired. Such events or circumstances could include, but are not limited to, significant negative industry or economic trends, unanticipated changes in the competitive environment and a significant sustained decline in the market price of our stock. If an asset is impaired, the amount that the carrying value exceeds the fair value is recorded as an impairment charge to current income.

Due to the macroeconomic impact of the COVID-19 pandemic, we determined that indicators of potential impairment were present during the 13-weeks ended May 2, 2020. As a result, we performed interim impairment testing on goodwill and the City Gear tradename as of April 15, 2020, using updated assumptions around prospective financial information, growth rates, discount rates applied to future cash flows, and comparable multiples from publicly traded companies in our industry.

In valuing goodwill, we use a combination of the Discounted Cash Flow methodology and the Guideline Public Company methodology, which require assumptions related to future cash flows, discount rate, and comparable public company entities. In the 13-weeks ended May 2, 2020 and year ended January 30, 2021, we determined that goodwill of our City Gear reporting unit was fully impaired and recognized a non-cash impairment charge of $19.7 million. No impairment related to goodwill was recognized during the 13-weeks or 26-weeks ended July 31, 2021.

In valuing the tradename intangible, we use the Relief from Royalty method which requires assumptions related to future revenues, royalty rate, and discount rate. In the 13-weeks ended May 2, 2020 and year ended January 30, 2021, we determined that the City Gear tradename was partially impaired and recognized a non-cash impairment charge of $8.9 million in store operating, selling, and administrative expenses on our unaudited condensed consolidated statements of operations. No impairment related to the tradename intangible was recognized during the 13-weeks or 26-weeks ended July 31, 2021.

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2.    Recent Accounting Pronouncements

Standards that were adopted

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, “Income Taxes ("Topic 740"): Simplifying the Accounting for Income Taxes,” as part of its overall simplification initiative. ASU 2019-12 was issued in order to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to financial statement users. The amendments remove certain exceptions to the general provisions of Topic 740 and provide simplification in other areas of Topic 740. We adopted ASU 2019-12 on January 31, 2021, with no material impact to our consolidated financial statements.

Standards that are not yet adopted

We continuously monitor and review all current accounting pronouncements and standards from the FASB of U.S. GAAP for applicability to our operations. As of July 31, 2021, there were no other new pronouncements or interpretations that had or were expected to have a significant impact on our financial reporting.

3.    Leases

ROU lease assets are periodically reviewed for impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment - Overall, to determine when to test ROU assets (or asset groups that contain one or more ROU assets for impairment), whether ROU assets are impaired, and if so, the amount of the impairment loss to recognize. An asset group impairment charge of approximately $0.1 million and $0.5 million was recognized in the 13-weeks ended July 31, 2021 and August 1, 2020, respectively. An asset group impairment charge of approximately $0.5 million and $4.6 million was recognized in the 26-weeks ended July 31, 2021 and August 1, 2020, respectively.

Lease costs are as follows (in thousands):

13-Weeks Ended 26-Weeks Ended
July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Operating lease cost $ 15,679  $ 16,629  $ 30,561  $ 33,769 
Finance lease cost:
Amortization of assets 235  244  414  479 
Interest on lease liabilities 38  46  79  94 
Variable lease cost 5,056  1,555  10,921  347 
$ 21,008  $ 18,474  $ 41,975  $ 34,689 

Finance ROU assets on the unaudited condensed consolidated balance sheets at July 31, 2021, January 30, 2021, and August 1, 2020 are shown net of accumulated amortization of $2.1 million, $1.7 million, and $1.0 million, respectively.

The following table provides supplemental balance sheet information related to leases:

July 31,
2021
January 30,
2021
August 1,
2020
Weighted-average remaining lease term (in years):
Operating leases 5 5 5
Finance leases 3 4 4
Weighted-average discount rate:
Operating leases 3.4  % 3.5  % 3.8  %
Finance leases 5.3  % 5.5  % 7.4  %
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The following table provides supplemental cash flow and other information related to leases (in thousands):

26-Weeks Ended
July 31, 2021 August 1, 2020
Operating cash flows from operating leases $ 37,166  $ 37,827 
Operating cash flows from finance leases $ 79  $ 94 
Financing cash flows from finance leases $ 482  $ 517 
ROU assets obtained in exchange for lease obligations, net:
  Operating leases $ 36,509  $ 29,158 
  Finance leases $ 68  $ 789 

Maturities of lease obligation as of July 31, 2021 (in thousands):

Operating Finance Total
Remainder of Fiscal 2022 $ 31,379  $ 561  $ 31,940 
Fiscal 2023 68,822  1,095  69,917 
Fiscal 2024 55,187  980  56,167 
Fiscal 2025 42,572  397  42,969 
Fiscal 2026 30,614  302  30,916 
Thereafter 45,227  42  45,269 
Total minimum lease payments 273,801  3,377  277,178 
Less amount representing interest 22,633  236  22,869 
$ 251,168  $ 3,141  $ 254,309 

As of July 31, 2021, we have entered into approximately $12.3 million of operating lease obligations related to future store locations that have not yet commenced.

4.    Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement, establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:
Level I      – Quoted prices in active markets for identical assets or liabilities.
Level II      – Observable inputs other than quoted prices included in Level I.
Level III     – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The table below segregates all financial assets and financial liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value (in thousands):

July 31, 2021 January 30, 2021 August 1, 2020
Level I Level II Level III Level I Level II Level III Level I Level II Level III
Short-term investments $ 129  $ —  $ —  $ 219  $ —  $ —  $ 222  $ —  $ — 
Long-term investments
2,264  —  —  2,107  —  —  2,177  —  — 
Short-term contingent earnout —  —  —  —  —  15,000  —  —  14,550 
Long-term contingent earnout
—  —  —  —  —  —  —  —  — 
Total investments $ 2,393  $ —  $ —  $ 2,326  $ —  $ 15,000  $ 2,399  $ —  $ 14,550 

Short-term investments are reported in other current assets on our unaudited condensed consolidated balance sheets. Long-term investments are reported in other assets on our unaudited condensed consolidated balance sheets. Short-term contingent earnout is reported in other accrued expenses on our unaudited condensed consolidated balance sheets. Long-term contingent earnout is reported in other liabilities on our unaudited condensed consolidated balance sheets.

The short-term and long-term contingent earnouts represent the fair value of potential additional payments outlined in the Purchase Agreement to the former members and warrant holders of City Gear if certain financial goals were achieved in Fiscal 2020 and Fiscal 2021 ("Earnout"). The total Earnout was valued using a Monte Carlo simulation analysis in a risk-neutral framework with assumptions for volatility, risk-free rate, and dividend yield. The Earnout was re-valued each quarter in Fiscal 2020 and Fiscal 2021 and any change in valuation was recognized in our consolidated statements of operations. No revaluation was required in Fiscal 2022 and therefore no costs were recognized in store operating, selling, and administrative expenses in Fiscal 2022 as both Earnouts had been fully determined and paid out by the first quarter of Fiscal 2022. As a result of the revaluation for the 13-weeks and 26-weeks ended August 1, 2020, an increase of $14.5 million and a decrease of $6.5 million was recognized in store operating, selling, and administrative expenses, respectively.

The table below are reconciliations of the contingent earnout balance for each period presented (in thousands):

26-Weeks Ended 52-Weeks Ended 26-Weeks Ended
July 31, 2021 January 30, 2021 August 1, 2020
Short-term Long-term Short-term Long-term Short-term Long-term
Beginning balance $ 15,000  $ —  $ 9,958  $ 11,099  $ 9,958  $ 11,099 
Change in valuation, net —  —  3,943  —  3,493
Payment (15,000) —  (10,000) —  $ (10,000) — 
Reclassification from long-term, net —  —  11,099  (11,099) 11,099  (11,099)
Ending balance $ —  $ —  $ 15,000  $ —  $ 14,550  $ — 

5.    Debt

In October 2018, we entered into amended agreements with Bank of America, N.A. and Regions Bank providing for an aggregate amount of credit available to us under each line of credit of $50.0 million for the purpose of financing a portion of the cash purchase price payable in the acquisition of City Gear.

On April 16, 2020, we entered into the Second Amended and Restated Note with Regions Bank ("Amended Credit Facility") that provided for an aggregate amount of credit available to us of $75.0 million. The Amended Credit Facility superseded the Regions Bank credit agreement dated October 2018, with a maturity date of April 19, 2021, and was secured by all assets of the Company with the exception of real property. Simultaneous with the execution of the Amended Credit Facility, the $50.0 million outstanding under the previous credit agreements was paid in full, the Bank of America credit agreement dated October 2018 was terminated and we incurred borrowings under the Amended Credit Facility of $50.0 million. On June 5, 2020, we entered into a Note Modification Agreement that extended the maturity date of the Amended Credit Facility from April 19, 2021 to July 18, 2021. No other provisions of the Amended Credit Facility were affected.
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On July 9, 2021, we executed a new unsecured Credit Agreement ("2021 Credit Facility") between the Company and its subsidiaries and Regions Bank. The 2021 Credit Facility supersedes the Amended Credit Facility. The 2021 Credit Facility provides an unsecured line of credit of up to $100.0 million. The 2021 Credit Facility is effective through July 9, 2026 with an interest rate of one-month LIBOR plus 1.0% to 1.8% depending on specified leverage levels.

The 2021 Credit Facility includes an annual commitment fee, payable quarterly in arrears, in an amount between 15 and 20 basis points of the unused portion of the line of credit as determined on a daily basis, dependent on the amount of debt outstanding. In addition, the Company is subject to certain financial covenants which include:
Advance limitation of 55% of the net book value of the Company's inventory;
A Consolidated Lease-Adjusted Leverage Ratio comparing lease-adjusted funded debt (funded debt plus all lease
liabilities) to EBITDAR (as defined in the 2021 Credit Facility) with a maximum of 3.5x; and
A Consolidated Fixed Coverage Charge Ratio comparing EBITDAR to fixed charges and certain current liabilities (as defined in the 2021 Credit Facility) with a minimum of 1.2x.
As of July 31, 2021, we were in compliance with these covenants.
Given the International Exchange Benchmark Administration’s announced phase-out of LIBOR, the 2021 Credit Facility includes a LIBOR phase-out provision. If, during the term of the 2021 Credit Facility, the lender determines that LIBOR is unavailable, impracticable or unreliable for use, the variable interest rate will be determined based on a substitute index which may be Term SOFR, Daily Simple SOFR, or an alternate rate index that has been selected by the Lender as the replacement for LIBOR. The replacement index will then become the operative interest rate index for borrowings under the 2021 Credit Facility, subject to provisions set forth in the 2021 Credit Facility.
We did not incur any borrowings against the 2021 Credit Facility or Amended Credit Facility during the 13-weeks or 26-weeks ended July 31, 2021. At July 31, 2021, a total of $100.0 million was available to us from the 2021 Credit Facility.

There were 97 days during the 52-weeks ended January 30, 2021, where we incurred borrowings against the credit facilities for an average and maximum borrowing of $43.3 million and $50.0 million, respectively, and an average interest rate of 3.45%.

There were 39 days during the 13-weeks ended August 1, 2020, where we incurred borrowings against the credit facilities for an average and maximum borrowing of $50.0 million and $50.0 million, respectively. The average interest rate during the 13-weeks ended August 1, 2020 was 3.94%. There were 97 days during the 26-weeks ended August 1, 2020, where we incurred borrowings against the credit facilities for an average and maximum borrowing of $43.3 million and $50.0 million, respectively. The average interest rate during the 26-weeks ended August 1, 2020 was 3.95%.

6.    Stock-Based Compensation

The compensation costs that have been charged against income were as follows (in thousands):

13-Weeks Ended 26-Weeks Ended
July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
Stock-based compensation expense by type:
Stock options
$ —  $ —  $ 174  $ 90 
Restricted stock units 1,092  587  2,880  1,647 
Employee stock purchases
24  27  108  70 
Director deferred compensation 15  23  21  47 
  Total stock-based compensation expense 1,131  637  3,183  1,854 
Income tax benefit recognized 279  168  758  423 
  Stock-based compensation expense, net of income tax $ 852  $ 469  $ 2,425  $ 1,431 

Expense for restricted stock units is shown net of forfeitures of approximately $0.1 million and $0.7 million for the 13-weeks ended July 31, 2021 and August 1, 2020, respectively. Expense for restricted stock units is shown net of forfeitures of approximately $0.2 million and $0.9 million for the 26-weeks ended July 31, 2021 and August 1, 2020, respectively.
We have granted the following equity awards:
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13-Weeks Ended 26-Weeks Ended
July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
Stock options
—  —  4,384  27,000 
Restricted stock unit awards
790  3,264  62,031  337,749 
Performance-based restricted stock unit awards
—  —  22,492  — 
Deferred stock units
174  1,120  258  3,263 

At July 31, 2021, the total compensation costs not yet recognized related to unvested restricted stock unit awards was $9.3 million and the weighted-average period over which such awards are expected to be recognized is 2.4 years. There were no unrecognized compensation costs related to unvested stock options at July 31, 2021.

During the 13-weeks ended July 31, 2021 and August 1, 2020, no stock options were granted. During the 26-weeks ended July 31, 2021 and August 1, 2020, 4,384 and 27,000 stock options were granted, respectively. The weighted-average grant date fair value of stock options granted during the 26-weeks ended July 31, 2021 and August 1, 2020 was $39.73 and $3.33 per share, respectively.
Under the 2012 Non-Employee Director Equity Plan ("2012 Plan"), no shares of our common stock were awarded during the 13-weeks or 26-weeks ended July 31, 2021 or August 1, 2020.
The number of shares purchased, the average price per share, and the weighted-average grant date fair value of shares purchased through our employee stock purchase plan were as follows:
13-Weeks Ended 26-Weeks Ended
July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
Shares purchased 2,063  11,143  9,508  28,901 
Average price per share $ 58.56  $ 8.60  $ 43.44  $ 9.03 
Weighted-average fair value at grant date $ 11.39  $ 2.39  $ 11.44  $ 3.51 

7.    Earnings Per Share
The computation of basic earnings per share ("EPS") is based on the weighted-average number of common shares outstanding during the period. The computation of diluted EPS is based on the weighted-average number of shares outstanding plus the incremental shares that would be outstanding assuming exercise of dilutive stock options and issuance of restricted stock. The number of incremental shares is calculated by applying the treasury stock method. The following table sets forth the weighted-average number of common shares outstanding (in thousands):
13-Weeks Ended 26-Weeks Ended
July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
Weighted-average shares used in basic computations 15,691  16,535  16,008  16,540 
Dilutive equity awards
614  447  627  224 
Weighted-average shares used in diluted computations 16,305  16,982  16,635  16,764 

For the 13-weeks ended July 31, 2021, we did not exclude any options from the computations of diluted weighted-average common shares or common stock equivalents. For the 13-weeks ended August 1, 2020, all stock-based awards were excluded from the computation of diluted weighted-average common shares and common share equivalents outstanding because of their anti-dilutive effect.

We also excluded 55,084 unvested stock awards granted to certain employees from the computations of diluted weighted-average common shares and common share equivalents outstanding because they are subject to certain performance-based annual vesting conditions which had not been achieved by July 31, 2021. Assuming the performance-criteria had been achieved as of July 31, 2021, the incremental dilutive impact would have been 17,216 shares.
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8.    Stock Repurchase Activity
On May 26, 2021, the Board of Directors ("Board") authorized the expansion and extension of our existing Stock Repurchase Program ("Program") by $500.0 million to a total of $800.0 million to repurchase our common stock through February 1, 2025. The Program's original authorization was approved in November 2015, in the amount of $300.0 million and prior to the Board's action, was scheduled to expire on January 29, 2022.
The Program authorizes repurchases of our common stock in open market or negotiated transactions, with the amount and timing of repurchases dependent on market conditions and at the discretion of our management. In addition to the Program, we also acquire shares of our common stock from holders of restricted stock unit awards to satisfy tax withholding requirements due at vesting. Shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements do not reduce the Program authorization.
The number of shares repurchased under the program and acquired from holders of restricted stock unit awards to satisfy tax withholding requirements were as follows:
13-Weeks Ended 26-Weeks Ended
July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
Common stock repurchased under the Program 985,263  —  1,526,546  428,018 
Aggregate cost of repurchases under the Program (in thousands) $ 83,163  $ —  $ 120,477  $ 9,748 
Shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements (in thousands) 4,125  4,061  45,245  34,956 
Tax withholding requirement $ 331  $ 59  $ 3,177  $ 483 

As of July 31, 2021, we had approximately $515.9 million remaining under the Program for stock repurchases.

For information regarding share repurchases subsequent to July 31, 2021, see Note 12, Subsequent Events.
9.    Commitments and Contingencies
Legal Proceedings and Contingencies.

From time to time, the Company is a party to various legal matters in the ordinary course of its business, including actions by employees, consumers, suppliers, government agencies, or others. The Company has recorded accruals with respect to these matters, where appropriate, which are reflected in the Company's unaudited condensed consolidated financial statements. For some matters, a liability is not probable or the amount cannot be reasonably estimated and therefore an accrual has not been made.

The Company believes that its pending legal matters, both individually and in the aggregate, will be resolved without a material adverse effect on the Company's consolidated financial statements as a whole. However, litigation and other legal matters involve an element of uncertainty. Adverse decisions and settlements, including any required changes to the Company's business, or other developments in such matters could affect our operating results in future periods or result in a liability or other amounts material to the Company's annual consolidated financial statements. No material amounts were accrued at July 31, 2021, January 30, 2021, or August 1, 2020 pertaining to legal proceedings or other contingencies.

10.    Income Taxes
Our effective tax rate is based on expected annual income, statutory tax rates, and tax planning opportunities available in the various jurisdictions in which we operate. For interim financial reporting, we estimate the annual effective tax rate based on expected taxable income or loss for the full year and record a quarterly income tax provision (benefit) in accordance with the anticipated annual effective rate and adjust for discrete items. We update the estimates of the taxable income or loss throughout the year as new information becomes available, including year-to-date financial results. This process often results in a change to our expected effective tax rate for the year. When this occurs, we adjust the income tax provision (benefit) during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual effective tax rate.
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We apply the provisions of ASC Subtopic 740-10 in accounting for uncertainty in income taxes. We recognize a tax benefit associated with an uncertain tax position when, in our judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, we initially and subsequently measure the tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. Our liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments, and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. Our effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management.
At July 31, 2021, we had a liability of $0.7 million associated with unrecognized tax benefits. We file income tax returns in U.S. federal and various state jurisdictions. Generally, we are not subject to changes in income taxes by the U.S. federal taxing jurisdiction for years prior to Fiscal 2018 or by most state taxing jurisdictions for years prior to Fiscal 2017.

11.    Related-Party Transactions
The Company leases one store under a lease arrangement with AL Florence Realty Holdings 2010, LLC, a wholly owned subsidiary of Books-A-Million, Inc. ("BAMM"). One of our Directors, Terrance G. Finley is an executive officer of BAMM. Minimum annual lease payments are $0.1 million, if not in co-tenancy, and the lease termination date is February 2022. Minimum lease payments remaining under this lease at July 31, 2021 and August 1, 2020 were $0.1 million and $0.2 million, respectively.
The Company honored certain contracts in place for its wholly owned subsidiary, City Gear, LLC, upon acquisition. The following listing represents those contracts of which Michael E. Longo, the Company's President and CEO, has or had an interest in, either directly or indirectly:

Memphis Logistics Group ("MLG")

MLG provides logistics and warehousing services to City Gear. Mr. Longo owned a majority interest in MLG and the initial contract term was effective through June 2020 but was extended to June 2021. Effective January 29, 2021, Mr. Longo fully divested his ownership interest in MLG and he no longer has any involvement with its management. In the 13-weeks and 26-weeks ended August 1, 2020, payments to MLG under the contract were $1.7 million and $3.4 million, respectively. The amount outstanding to MLG at January 30, 2021 and August 1, 2020 was $0.3 million and $0.5 million, respectively, and is included in accounts payable on our unaudited condensed consolidated balance sheets.

T.I.G. Construction ("TIG")

TIG historically performed the majority of new store and store remodel construction for City Gear and is owned by a close relative of Mr. Longo. For the 13-weeks ended July 31, 2021 and August 1, 2020, payments to TIG for its services were $1.5 million and $1.7 million, respectively. For the 26-weeks ended July 31, 2021 or August 1, 2020, payments to TIG for its services were $2.9 million and $2.4 million, respectively. The amount outstanding to TIG at July 31, 2021, January 30, 2021, and August 1, 2020 was approximately $0.4 million, $26,000, and $19,000, respectively, and is included in accounts payable on our unaudited condensed consolidated balance sheets.

Retail Security Gates, LLC ("RSG")

During the second quarter of Fiscal 2022, a close relative of Mr. Longo purchased a 50% interest in an existing Company vendor, which was reorganized as RSG. We utilize RSG for specially manufactured store front security gates. For the 13-weeks ended July 31, 2021, payments to RSG were $0.1 million. There were no amounts outstanding to RSG at July 31, 2021.

Merchant's Capital ("MC")

Merchant's Capital owned the office building where City Gear had its corporate offices in Memphis, Tennessee. Mr. Longo is a 33.3% partner in MC. The initial lease term ended on December 31, 2019 but was extended to April 30, 2020 to allow for the transition of City Gear's corporate office to the Company's Birmingham, Alabama headquarters. In the 13-weeks ended July 31, 2021 and August 1, 2020, there were no lease payments to MC. In the 26-weeks ended August 1, 2020, lease payments to MC were $51.2 thousand. There were no amounts outstanding to MC at July 31, 2021, January 30, 2021, or August 1, 2020.

In addition to the related party interests listed above, Mr. Longo also has a membership interest in the earnout discussed in Note
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4 - Fair Value of Financial Instruments. Pursuant to the Membership Interest and Warrant Purchase Agreement dated October 29, 2018, and based on Fiscal 2020 financial results, the former members and warrant holders of City Gear were entitled to and were paid the first earnout payment of $10.0 million in June 2020. Based on Fiscal 2021 financial results, the remaining earnout payment of $15.0 million was achieved and paid to the former members and warrant holders of City Gear in April 2021. Mr. Longo's share of the earnout payments was approximately 22.8% or approximately $2.3 million of the initial earnout payment and approximately 22.8% or approximately $3.4 million of the second earnout payment.

12.    Subsequent Events
Stock Repurchase
Subsequent to July 31, 2021, we repurchased 304,712 shares of our common stock at a cost of $28.9 million. As of September 3, 2021, we had approximately $487.0 million remaining under the Program for stock repurchases.
Dividends
On August 25, 2021, our Board declared a dividend of $0.25 per share of common stock payable on September 21, 2021 to stockholders of record as of the close of business on September 9, 2021.
ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Statement Regarding Forward-Looking Statements

This document contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments, and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. They include statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “forecast,” “guidance,” “outlook,” “estimate” “will,” “may,” “could,” “possible,” “potential,” or other similar words, phrases or expressions. For example, our forward-looking statements include statements regarding:
the impact of the duration and scope of the COVID-19 pandemic on our business, operations, and financial results, including the time it will take for vaccines to be broadly produced, distributed, and administered, and the effectiveness of such vaccines in slowing or stopping the spread of COVID-19, variant strains of the virus, additional waves of infections or periods of increases in the number of COVID-19 cases in areas in which we operate, and the measures that might be imposed by federal, state, or local governments in response to the pandemic, including restrictions impacting school closures and remote learning requirements, sporting events, and local sports leagues and programs;
the impact that future stimulus payments and extended unemployment benefits, if any, will have on consumer demand for our products and our overall business operations;
the potential impact of new trade, tariff, and tax regulations on our profitability;
our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands;
our cash needs, including our ability to fund our future capital expenditures, working capital requirements, and repurchases of Company common stock under our stock repurchase program ("Program");
our relationships with vendors and the loss of key vendor support;
our ability to retain key personnel at Hibbett and City Gear;
our anticipated net sales, comparable store net sales changes, net sales growth, gross margins, expenses, and earnings;
our business strategy, omni-channel platform, logistics structure, target market presence, and the expected impact of such factors on our net sales growth;
our store growth, including our plans to add, expand, relocate or close stores, our markets' ability to support such growth, expected changes in total square footage, our ability to secure suitable locations for new stores and the suitability of our wholesale and logistics facility;
our expectations regarding the growth of our online business and the role of technology in supporting such growth;
our policy of leasing rather than owning stores and our ability to renew or replace store leases satisfactorily;
the cost of regulatory compliance, including the costs and possible outcomes of pending legal actions and other contingencies, and new or additional legal, legislative, and regulatory requirements to reduce or mitigate the effects of climate change;
our analysis of our risk factors and their possible effect on financial results;
our expectations regarding our capital expenditures and dividend policy;
our seasonal sales patterns and assumptions concerning customer buying behavior;
our ability to retain new customers;
our expectations regarding competition;
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our estimates and assumptions as they relate to preferable tax and financial accounting methods, accruals, inventory valuations, long-lived assets, carrying amount and liquidity of financial instruments, fair value of options and other stock-based compensation, economic and useful lives of depreciable assets and leases, income tax liabilities, deferred taxes, and uncertain tax positions;
our expectations concerning future stock-based award types and the exercise of outstanding stock options;
the possible effects of inflation, market decline, and other economic changes on our costs and profitability;
our assessment of the materiality and impact on our business of adopting recent accounting pronouncements issued by the Financial Accounting Standards Board;
the possible effects of uncertainty within the capital markets, on the commercial credit environment, and on levels of consumer confidence;
our analyses of trends as related to marketing, sales, and earnings performance;
our ability to receive favorable brand name merchandise and pricing from key vendors;
the future reliability of, and cost associated with, disruptions in the global supply chain and the potential impacts on our domestic and international sources of product, including the actual and potential effect of tariffs on Chinese goods imposed by the United States and other potential impediments to imports;
the impact of technology on our operations and business, including cyberattacks, cyber liability, or potential liability for breaches of our privacy or information security systems; and
our ability to mitigate the risk of possible business interruptions, including, without limitation, from political or social unrest (including vandalism and looting).

A forward-looking statement is neither a prediction nor a guarantee of future results, events or circumstances. You should not place undue reliance on forward-looking statements. Our forward-looking statements are based on currently available operational, financial, and business information and speak only as of the date of this report. Our business, financial condition, results of operations, and prospects may have changed since that date. For a discussion of the risks, uncertainties, and assumptions that could affect our future events, developments, or results, you should carefully consider the risk factors described from time to time in our other documents and reports, including the factors described under “Risk Factors” in our Form 10-K for the fiscal year ended January 30, 2021, filed with the Securities and Exchange Commission ("SEC") on April 7, 2021 ("2021 Annual Report"). You should also read such information in conjunction with our unaudited condensed consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. Moreover, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on our forward-looking statements.

We do not undertake to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, or otherwise, and you should not expect us to do so.
Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, we do not, by policy, selectively disclose to them any material non-public information with any statement or report issued by any analyst regardless of the content of the statement or report. We do not, by policy, confirm forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

Investor Access to Company Filings

We make available free of charge on our website, www.hibbett.com under the heading “Investor Relations,” copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ("Securities Exchange Act") as well as all Forms 3, 4, and 5 filed by our executive officers and directors, as soon as the filings are made publicly available by the SEC on its EDGAR database at www.sec.gov. In addition to accessing copies of our reports online, you may request a copy of our 2021 Annual Report, at no charge, by writing to: Investor Relations, Hibbett, Inc., 2700 Milan Court, Birmingham, Alabama 35211.


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General Overview

Hibbett, Inc., headquartered in Birmingham, Alabama, is a leading athletic-inspired fashion retailer primarily located in underserved communities across the country. Founded in 1945, Hibbett stores have a rich history of convenient locations, personalized customer service, and access to coveted footwear and apparel from top brands like Nike, Jordan, and adidas. Consumers can browse styles, find new releases, and make purchases by visiting www.hibbett.com. Purchases can be made online or by visiting their nearest store. Follow us @hibbettsports and @citygear on Facebook, Instagram, and Twitter. As of July 31, 2021, we operated a total of 1,080 retail stores in 35 states composed of 888 Hibbett stores, 174 City Gear stores, and 18 Sports Additions athletic shoe stores.

Our Hibbett stores average 5,800 square feet and are located primarily in strip centers, which are usually near a major chain retailer. Our City Gear stores average 5,100 square feet and are located primarily in strip centers. As of July 31, 2021, our store base consisted of 816 stores located in strip centers, 32 free-standing stores, and 232 enclosed mall locations.

Our primary merchandising strategy is to provide a broad assortment of quality brand name footwear, apparel, and accessories at competitive prices in a conveniently located full-service environment. We continue to grow our online business aggressively, while enhancing our stores to improve the overall customer experience. We believe that the breadth and depth of our brand name merchandise consistently exceeds the product selection carried by most of our competitors, particularly in our smaller markets. Many of these brand name products are highly technical and require expert sales assistance. We continuously educate our sales staff on new products and trends through coordinated efforts with our vendors.

Comparable store sales - Comparable store sales for a particular period include our Hibbett, City Gear, and Sports Additions stores open throughout that period and the corresponding period of the prior fiscal year, and e-commerce sales. We consider comparable store sales to be a key indicator of our current performance; measuring the growth in sales and sales productivity of existing stores. Management believes that positive comparable store sales contribute to greater leveraging of operating costs, particularly payroll and occupancy costs, while negative comparable store sales contribute to deleveraging of costs. Comparable store sales also have a direct impact on our total net sales and the level of cash flow.
If a store remodel, relocation, or expansion results in the store being closed for a significant period, its sales are removed from the comparable store sales base until it has been open a full 12 months. In addition, rebranded stores are treated as new stores and are not presented in comparable store sales until they have been open a full 12 months under the new brand.

During the 13-weeks ended July 31, 2021, we included 1,045 stores in comparable store sales. During the 26-weeks ended July 31, 2021, we included 1,040 stores in comparable store sales.

Executive Summary

Net sales for the 13-weeks ended July 31, 2021, decreased 5.1% to $419.3 million, compared with $441.6 million for the 13-weeks ended August 1, 2020. Comparable store sales decreased 6.4%, as brick and mortar comparable store sales decreased 3.8%. E-commerce sales decreased by 20.4% and represented 13.1% of total net sales for the second quarter compared to 15.7% in the prior year second quarter. On a two-year basis, net sales increased 66.1% and comparable sales increased 72.8%. This year, despite reduced stimulus payments compared to the prior year second quarter and less disruption to our largest competitors than in the comparable period last year, we believe our increased market share, improved customer engagement, and availability of in-demand product were significant offsets to these headwinds. Sales in the prior year second quarter ended August 1, 2020, were positively impacted by pent-up consumer demand, temporary and permanent store closures by our competitors, and stimulus money which increased traffic to our stores and website.

Net sales for the 26-weeks ended July 31, 2021, increased 30.2% to $926.1 million, compared with $711.4 million for the 26-weeks ended August 1, 2020. Comparable store sales increased 30.3%. Brick and mortar comparable store sales increased 39.9%. E-commerce sales decreased 11.4% and represented 12.4% of total net sales in the current year compared to 18.2% of total sales in the comparable period last year. On a two-year basis, net sales have increased by 55.5% and comparable sales increased 63.5%.

Store operating, selling, and administrative ("SG&A") expenses were 22.3% of net sales for the 13-weeks ended July 31, 2021, compared with 22.6% of net sales for the 13-weeks ended August 1, 2020. This decrease was the result of minimal costs in the current year associated with City Gear acquisition and integration activities. Second quarter SG&A expenses of 22.3% of net sales compares to prior year second quarter adjusted SG&A expenses of 19.3% of net sales, which excludes certain City Gear acquisition and integration activities. This increase of approximately 300 basis points was primarily related to the incremental
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cost of our stores operating at regular business hours with full staffs as well as increased investments to attract new customers, improve the customer experience, and make back-office processes more efficient.

SG&A expenses were 20.0% of net sales for the 26-weeks ended July 31, 2021, compared with 26.6% of net sales for the 26-weeks ended August 1, 2020. A large portion of this decrease resulted from the reduced impact of City Gear acquisition and integration costs and COVID-19 pandemic adjustments on the current year results. SG&A expenses of 20.0% of net sales for the 26-weeks ended July 31, 2021, compared favorably with adjusted SG&A expenses of 21.0% of net sales for the 26-weeks ended August 1, 2020.

During the second quarter of Fiscal 2022, we opened 11 new stores and closed two underperforming stores bringing the store base to 1,080 in 35 states as of July 31, 2021. We ended the second quarter of Fiscal 2022 with $176.8 million of available cash and cash equivalents with no outstanding debt. Net inventory was $216.8 million at July 31, 2021, a 19.1% increase compared to the prior year second quarter. Our inventory position improved during the quarter despite ongoing disruptions in the supply chain due to COVID-19 impacts on manufacturing capacity, port backlogs, and transportation equipment availability. Foundational improvements to the customer experience and our ability to attract and stay connected to underserved customers continues to strengthen our relationships with our vendor partners.

About Non-GAAP Measures

This Management Discussion and Analysis includes certain non-GAAP financial measures for the 13-weeks and 26-weeks ended August 1, 2020, including adjusted net income, diluted earnings per share, cost of goods sold, gross margin, SG&A expenses (including goodwill impairment), operating income, and provision for income taxes as a percentage of net sales. Management believes these non-GAAP financial measures are useful to investors to facilitate comparisons of our current financial results to historical operations and the financial results of peer companies, as they exclude the effects of items that may not be indicative of, or are unrelated to, our underlying operating results, such as expenses related to the COVID-19 pandemic and the acquisition of City Gear. Costs related to the COVID-19 pandemic include impairment charges of goodwill, tradename, and other assets and lower of cost or net realizable value inventory reserve charges. The costs related to the acquisition of City Gear include change in valuation of the contingent earnout and professional fees. There were no non-GAAP financial measures for the 13-weeks or 26-weeks ended July 31, 2021.

While our management uses these non-GAAP financial measures as a tool to enhance their ability to assess certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.

Reconciliations of our unaudited condensed consolidated statements of operations for the 13-weeks and 26-weeks ended August 1, 2020, as reported on a GAAP basis, to statements of operations for the same period prepared on a non-GAAP basis, are provided below under the heading “GAAP to Non-GAAP Reconciliations.”

References to “adjusted” results indicates that the impact of non-GAAP financial measures have been excluded.

Critical Accounting Policies and Estimates

The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Our critical and significant accounting policies and estimates are described more fully in our 2021 Annual Report. There have been no changes in our accounting policies in the current period ended July 31, 2021, that had a material impact on our unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, to the unaudited condensed consolidated financial statements included in this Form 10-Q for the period ended July 31, 2021, for information regarding recent accounting pronouncements.
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Results of Operations
Summarized Unaudited Information
13-Weeks Ended 26-Weeks Ended
July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
Statements of Operations
Net sales (decrease) increase (5.1  %) 74.9  % 30.2  % 19.4  %
Comparable store sales (decrease) increase (6.4  %) 79.2  % 30.3  % 22.2  %
Gross margin (as a % to net sales) 39.0  % 37.0  % 40.3  % 33.4  %
SG&A expenses (as a % to net sales) 22.3  % 22.6  % 20.0  % 23.8  %
Goodwill impairment (as a % of net sales) —  % —  % —  % 2.8  %
Depreciation and amortization (as a % to net sales) 2.0  % 1.7  % 1.8  % 2.0  %
Provision for income taxes (as a % to net sales) 3.5  % 3.6  % 4.3  % 1.2  %
Net income (as a % to net sales) 11.1  % 9.1  % 14.2  % 3.5  %
Diluted earnings per share $ 2.86  $ 2.38  $ 7.90  $ 1.50 
Weighted-average dilutive shares (in thousands) 16,305  16,982  16,635  16,764 
Balance Sheets
Ending cash and cash equivalents (in thousands) $ 176,841  $ 217,809 
Average inventory per store $ 200,731  $ 169,020 
Store Information
Beginning of period 1,071  1,078  1,067  1,081 
New stores opened 11  17 
Rebranded stores —  — 
Stores closed (2) (8) (4) (16)
End of period 1,080  1,077  1,080  1,077 
Estimated square footage at end of period (in thousands) 6,089  6,069 
Share Repurchase Information
Shares purchased under our Program 985,263  —  1,526,546  428,018 
Cost (in thousands) $ 83,163  $ —  $ 120,477  $ 9,748 
Settlement of net share equity awards 4,125  4,061  45,245  34,956 
Cost (in thousands) $ 331  $ 59  $ 3,177  $ 483 

13-Weeks Ended July 31, 2021 Compared to 13-Weeks Ended August 1, 2020

Net sales

Net sales for the 13-weeks ended July 31, 2021, decreased 5.1% to $419.3 million compared with $441.6 million for the 13-weeks ended August 1, 2020. Comparable store sales decreased 6.4%. Brick and mortar comparable sales decreased 3.8%. E-commerce sales decreased by 20.4% and represented 13.1% of total net sales for the second quarter compared to 15.7% in the prior year second quarter.

Relative to two years ago in the second quarter of Fiscal 2020, comparable sales increased 72.8%. Brick and mortar comparable sales increased 64.5% and e-commerce sales grew 153.3% over the 2-year period.

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Sales in the second quarter of Fiscal 2021 were positively impacted by pent-up consumer demand, temporary and permanent store closures by our competitors, and stimulus money which increased traffic to our stores and website. This year, despite reduced stimulus payments and less disruption to our largest competitors, we believe our increased market share, improved customer engagement and the availability of in-demand product were significant offsets to these headwinds.

Gross margin

Gross margin was 39.0% of net sales for the 13-weeks ended July 31, 2021, compared with 37.0% of net sales for the 13-weeks ended August 1, 2020. The approximate 200 basis point increase was driven by higher sell through of premium priced product, a low promotional environment, improved profitability of e-commerce sales, and a slight mix shift away from e-commerce sales which, despite an overall improved margin, still carry a lower rate due to incremental fulfillment costs.

Gross margin of 39.0% for the second quarter of the current year compares to the prior year second quarter adjusted gross margin of 36.7%, which excludes adjustments to our non-cash inventory valuation reserves.

SG&A expenses

SG&A expenses were 22.3% of net sales for the 13-weeks ended July 31, 2021, compared with 22.6% of net sales for the 13-weeks ended August 1, 2020. This decrease was the result of having minimal costs in the current year associated with City Gear acquisition and integration activities. This year's second quarter SG&A expenses of 22.3% of net sales compares to prior year second quarter adjusted SG&A expenses of 19.3% of net sales, which excludes certain City Gear acquisition and integration activities. This approximate 300 basis point increase was primarily related to the incremental costs of our stores operating at regular hours with full staffs as well as increased investments to attract new customers, improve the customer experience, and make back-office processes more efficient. In the prior year second quarter, many of our stores operated at less than regular business hours with slightly reduced staffing levels.
Depreciation and amortization
Depreciation and amortization of $8.4 million increased approximately 30 basis points as a percentage of net sales for the 13-weeks ended July 31, 2021, compared to the same period of the prior fiscal year. This increase was mainly due to investments in new stores, existing store remodels and refreshes, and other merchandising, digital, and corporate IT initiatives.

Provision for income taxes

The combined federal, state, and local effective income tax rate as a percentage of pre-tax income was 24.0% for the 13-weeks ended July 31, 2021 and was 28.0% for the 13-weeks ended August 1, 2020. The quarterly effective tax rate fluctuates based on full-year taxable income projections, the impact of discrete items, and the relative level of pre-tax income or loss in each quarter.

Net income

Net income for the 13-weeks ended July 31, 2021, was $46.7 million, or $2.86 per diluted share, compared with a net income of $40.4 million, or $2.38 per share, for the 13-weeks ended August 1, 2020. As there were no adjustments in the second quarter of the current year, net income for the 13-weeks ended July 31, 2021, was $46.7 million, or $2.86 per diluted share, compared to adjusted net income for the 13-weeks ended August 1, 2020, of $50.0 million, or $2.95 per diluted share.

26-Weeks Ended July 31, 2021 Compared to 26-Weeks Ended August 1, 2020
Net sales
Net sales increased $214.7 million, or 30.2%, to $0.9 billion for the 26-weeks ended July 31, 2021, from $0.7 billion for the comparable period in the prior year. Comparable store sales increased 30.3%. Brick and mortar comparable sales increased by 39.9% and e-commerce sales decreased by 11.4%. E-commerce sales represented 12.4% of total sales compared to 18.2% for the comparable period in the prior year.

Compared to two years ago in the first half of Fiscal 2020, comparable sales increased 63.5%. Brick and mortar comparable sales increased 56.9% and e-commerce sales grew 127.7% over the 2-year period.


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Gross margin

Gross margin was $373.3 million, or 40.3% of net sales for the 26-weeks ended July 31, 2021, compared with $237.7 million, or 33.4% of net sales in the same period of the prior fiscal year. Excluding adjustments to our non-cash inventory valuation reserves in the first half of the prior year, the current gross margin of 40.3% of net sales is comparable to the adjusted gross margin of 33.9% of net sales in the prior year.

SG&A expenses

SG&A expenses, including goodwill impairment, were $185.2 million, or 20.0% of net sales, for the 26-weeks ended July 31, 2021, compared to $169.5 million, or 23.8% of net sales for the comparable period a year ago. Excluding certain City Gear acquisition and integration expenses and COVID-19 pandemic related impairment and valuation costs that occurred in the prior year period, current year SG&A expenses of 20.0% of net sales reflected an improvement of approximately 100 basis points from adjusted SG&A expenses of 21.0% of net sales in the comparable prior year period due to leverage from the significant year over year revenue growth.
Depreciation and amortization. Depreciation and amortization of $16.5 million decreased approximately 20 basis points as a percentage of net sales for the 26-weeks ended July 31, 2021, compared to the same period of the prior fiscal year. This decrease was mainly due to the leverage from higher net sales.

Provision for income taxes. The combined federal, state, and local effective income tax rate as a percentage of pre-tax income was 23.4% for the 26-weeks ended July 31, 2021 and was 25.9% of the pre-tax income for the 26-weeks ended August 1, 2020. The lower rate in the current year was primarily the result of additional equity compensation deductions in the 26-weeks ended July 31, 2021, resulting from the Company's increased common stock price.

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GAAP to Non-GAAP Reconciliations
(Dollars in thousands, except per share amounts)
(Unaudited)

The following table provides a reconciliation of our unaudited condensed consolidated statement of operations for the 13-weeks ended August 1, 2020, as reported on a GAAP basis, to a statement of operations for the same period prepared on a non-GAAP basis.

13-Weeks Ended August 1, 2020
Excluded Amounts
GAAP Basis (As Reported)
Acquisition Costs(1)
COVID-19
(2)
Non-GAAP Basis
(As Adjusted)
% of Sales
Cost of goods sold $ 278,010  $ —  $ (1,353) $ 279,363  63.3  %
Gross margin $ 163,597  $ —  $ (1,353) $ 162,244  36.7  %
SG&A expenses $ 99,835  $ 3,493  $ 11,309  $ 85,033  19.3  %
Operating income $ 56,278  $ 3,493  $ 9,956  $ 69,727  15.8  %
Provision for income taxes $ 15,717  $ 979  $ 2,791  $ 19,487  4.4  %
Net income $ 40,355  $ 2,514  $ 7,166  $ 50,035  11.3  %
Diluted earnings per share $ 2.38  $ 0.15  $ 0.42  $ 2.95 
1) Excluded acquisition amounts during the 13-weeks ended August 1, 2020, related to the acquisition of City Gear, LLC consist primarily of change in valuation of contingent earnout and accounting and professional fees.
2) Excluded amounts during the 13-weeks ended August 1, 2020, related to the COVID-19 pandemic consist primarily of non-cash LCM reserve adjustments in cost of goods sold and reversal of the change in valuation of contingent earnout recorded during the 13-weeks ended May 2, 2020 in SG&A.


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The following table provides a reconciliation of our unaudited condensed consolidated statement of operations for the 26-weeks ended August 1, 2020, as reported on a GAAP basis, to a statement of operations for the same period prepared on a non-GAAP basis.

26-Weeks Ended August 1, 2020
Excluded Amounts
GAAP Basis (As Reported)
Acquisition Costs(1)
COVID-19
(2)
Non-GAAP Basis
(As Adjusted)
% of Sales
Cost of goods sold $ 473,701  $ —  $ 3,736  $ 469,965  66.1  %
Gross margin $ 237,744  $ —  $ 3,736  $ 241,480  33.9  %
SG&A expenses $ 169,508  $ 4,147  $ 15,743  $ 149,618  21.0  %
Goodwill impairment $ 19,661  $ —  $ 19,661  $ —  —  %
Operating income $ 34,221  $ 4,147  $ 39,140  $ 77,508  10.9  %
Provision for income taxes $ 8,777  $ 1,183  $ 11,903  $ 21,863  3.1  %
Net income $ 25,068  $ 2,964  $ 27,237  $ 55,270  7.8  %
Diluted earnings per share $ 1.50  $ 0.18  $ 1.62  $ 3.30 
1) Excluded acquisition amounts during the 26-weeks ended August 1, 2020, related to the acquisition of City Gear, LLC consist primarily of change in valuation of contingent earnout and accounting and professional fees.
2) Excluded amounts during the 26-weeks ended August 1, 2020, related to the COVID-19 pandemic consist primarily of net non-cash LCM reserve charges in cost of goods sold and impairment (goodwill, tradename and other assets) costs and paid-not-worked salaries net of related tax credits in SG&A.

Liquidity and Capital Resources

Impact of the COVID-19 Pandemic on Liquidity

In response to the uncertain market conditions resulting from the COVID-19 pandemic early in the first quarter of Fiscal 2021, we enhanced our liquidity position through the following actions:
In March 2020, we borrowed $50.0 million, $25.0 million from each of our two separate $50.0 million unsecured, demand lines of credit. This was done as a precautionary measure in order to increase our cash position and preserve financial flexibility.
In April 2020, we replaced these two lines of credit with a single $75.0 million secured line of credit with a one-year term and continued to have $50.0 million in outstanding borrowings. In June 2020, the term of the secured line of credit was extended to July 2021. The outstanding $50.0 million balance was subsequently paid off during the second quarter of Fiscal 2021.
We worked with merchandise and non-merchandise vendors to extend payment terms temporarily through the middle of the second quarter of Fiscal 2021.
We negotiated rent deferrals with landlords at select locations.

As the result of strong sales beginning in the second quarter of Fiscal 2021, our liquidity position improved significantly. We ended the second quarter of Fiscal 2022 with $176.8 million of available cash and cash equivalents on the unaudited condensed consolidated balance sheet. As of July 31, 2021, we had no debt outstanding and full availability under our 2021 Credit Facility discussed in Note 5, Debt, to the unaudited condensed consolidated financial statements.

Inventory at the end of the second quarter of Fiscal 2022 was $216.8 million, a 19.1% increase compared to the prior year second quarter. The inventory balance at the end of the prior year second quarter was well below historical levels. Higher order quantities and strong relationships with our vendor partners have allowed us to slowly build inventory back toward preferred levels.
Analysis of Cash Flows

24

Our capital requirements relate primarily to new store openings, relocations, and remodels, stock repurchases, investments in facilities, dividends, and systems to support company growth and working capital requirements. Our working capital requirements are somewhat seasonal in nature and typically reach their peak near the end of the third and the beginning of the fourth quarters of our fiscal year. Historically, we have funded our cash requirements primarily through our cash flow from operations and occasionally from borrowings under our credit facilities. We use excess cash to offset bank fees and may invest in interest-bearing securities and money market accounts at management's discretion.
Our unaudited condensed consolidated statements of cash flows are summarized as follows (in thousands):
26-Weeks Ended
July 31, 2021 August 1, 2020
Net cash provided by operating activities $ 115,532  $ 178,869 
Net cash used in investing activities (20,756) (11,890)
Net cash used in financing activities (127,225) (15,248)
Net (decrease) increase in cash and cash equivalents $ (32,449) $ 151,731 
Operating Activities.

Cash flow from operations is seasonal in our business. Typically, we use cash flow from operations to increase inventory in advance of peak selling seasons, such as winter holidays, the spring sales period, and late summer back-to-school shopping season. Inventory levels are reduced in connection with higher sales during the peak selling seasons and this inventory reduction, combined with proportionately higher net income, typically produces a positive cash flow.

Net cash provided by operating activities was $115.5 million for the 26-weeks ended July 31, 2021, compared with net cash provided by operating activities of $178.9 million for the 26-weeks ended August 1, 2020. Operating activities consist primarily of net income adjusted for certain non-cash items and changes in operating assets and liabilities. Adjustments to net income for non-cash items include depreciation and amortization, valuation changes in the contingent City Gear earnout liability, impairments, deferred income taxes, and stock-based compensation. Net cash provided by operating activities for July 31, 2021 and August 1, 2020 was impacted by the following:
Net income provided cash of $131.5 million and $25.1 million during the 26-weeks ended July 31, 2021 and August 1, 2020, respectively.
Non-cash charges included depreciation and amortization expense of $16.5 million and $14.4 million and stock-based compensation expense of $3.2 million and $1.9 million during the 26-weeks ended July 31, 2021 and August 1, 2020, respectively. Depreciation expense increased due to capital expenditure investments in new stores, existing store remodels and refreshes, and supporting corporate infrastructure. Fluctuations in stock-based compensation generally result from the variability associated with performance-based equity awards, fluctuations in the price of our common stock, and the effects of forfeitures in any given period.
Other non-cash adjustments to net income for the 26-weeks ended August 1, 2020, included $33.2 million of asset impairment charges with the largest impact resulting from a significant temporary decrease in the market valuation of the Company at the onset of the COVID-19 pandemic, partially offset by a change of $1.7 million in the valuation of the contingent earnout related to the City Gear acquisition.
The net changes in inventory used cash of $14.8 million and provided cash of $106.0 million during the 26-weeks ended July 31, 2021 and August 1, 2020, respectively. Inventory levels in the prior year were reduced significantly due to a surge in demand combined with a disruption in the supply chain that made it difficult to replenish balances. In the current year, inventory balances have been slowly building off of historically low levels.
The change in receivables in the 26-weeks ended August 1, 2020, of $5.7 million resulted primarily from employee retention credits under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and an increase in receivables related to strong e-commerce sales.
The change in accounts payable used cash of $8.3 million and $7.4 million during the 26-weeks ended July 31, 2021 and August 1, 2020, respectively. This change is due mainly to the timing of payments in relation to inventory receipts.
The change in income tax payable, net, provided cash of $9.0 million and $14.5 million during the 26-weeks ended July 31, 2021 and August 1, 2020, respectively. This change is impacted by the timing of estimated tax payments that are determined based on projected annual taxable income.

25

Additionally, we paid $15.0 million during the 26-weeks ended July 31, 2021, to the former members and warrant holders of City Gear for achievement of previously defined financial goals in the second-year post acquisition. Of this amount, $13.8 million was reflected as operating activities and $1.2 million was reflected as financing activities, which represents the fair value of the long-term portion of the contingent earnout booked through the purchase price allocation.

Investing Activities.

Net cash used in investing activities in the 26-weeks ended July 31, 2021, totaled $20.8 million compared with net cash used in investing activities of $11.9 million in the 26-weeks ended August 1, 2020. Capital expenditures used $20.8 million of cash in the 26-weeks ended July 31, 2021, versus $12.5 million of cash in the 26-weeks ended August 1, 2020. Capital expenditures are primarily related to opening new stores, remodeling, expanding or relocating existing stores, and continued investment in digital initiatives and corporate infrastructure.
We opened 17 new stores during the 26-weeks ended July 31, 2021, as compared to opening six new stores and rebranding six existing stores during the 26-weeks ended August 1, 2020.
We anticipate that our capital expenditures for the fiscal year ending January 29, 2022 will be approximately $70.0 million and primarily related to:
the opening of new stores;
the remodeling, expansion, or relocation of selected existing stores;
digital initiatives;
corporate, distribution, and information system infrastructure and enhancements; and
other departmental needs.
Financing Activities.

Net cash used in financing activities was $127.2 million in the 26-weeks ended July 31, 2021, compared to net cash used in financing activities of $15.2 million in the prior year period. During the 26-weeks ended July 31, 2021 and August 1, 2020, we had no borrowings against our credit facilities. In the current year, we have repurchased $120.5 million of our common stock under our Program. This compares to $9.7 million used to repurchase our common stock under our Program in the same period of the prior year. See Note 8, Stock Repurchase Activity, to the unaudited condensed consolidated financial statements for additional information.

On July 9, 2021, we executed a new unsecured Credit Agreement ("2021 Credit Facility") between the Company and its subsidiaries and Regions Bank. The 2021 Credit Facility supersedes the Amended Credit Facility. The 2021 Credit Facility provides an unsecured line of credit of up to $100.0 million. The 2021 Credit Facility is effective through July 9, 2026, with an interest rate of one-month LIBOR plus 1.0% to 1.8% depending on specified leverage levels.

There were no origination fees paid by the Company. However, the 2021 Credit Facility includes an annual commitment fee,
payable quarterly in arrears, in an amount between 15 and 20 basis points of the unused portion of the line of credit as
determined on a daily basis, dependent on the amount of debt outstanding. In addition, the Company is subject to certain
financial covenants which include:
Advance limitation of 55% of the net book value of the Company's inventory;
A Consolidated Lease-Adjusted Leverage Ratio comparing lease-adjusted funded debt (funded debt plus all lease
liabilities) to EBITDAR (as defined in the 2021 Credit Facility) with a maximum of 3.5x; and
A Consolidated Fixed Coverage Charge Ratio comparing EBITDAR to fixed charges and certain current liabilities (as defined in the 2021 Credit Facility) with a minimum of 1.2x.
As of July 31, 2021, we were in compliance with these covenants. See Note 5, Debt, to the unaudited condensed consolidated financial statements for additional information.

During the 26-weeks ended July 31, 2021, we paid $3.8 million of dividends to our stockholders. On August 25, 2021, our Board declared a dividend of $0.25 per share of common stock payable on September 21, 2021 to stockholders of record as of the close of business on September 9, 2021. No dividends were paid during the 26-weeks ended August 1, 2020.

The declaration of future dividends and the establishment of the per share amount, record dates and payment dates for any such future dividends are subject to authorization by our Board of Directors and are dependent upon multiple factors, including future earnings, cash flows, financial requirements, and other considerations.

26

Based on our current operating plans, store forecasts, plans for the repurchase of our common stock, and expected capital expenditures, we believe that we can fund our cash needs for the foreseeable future through cash generated from operations and, if necessary, through periodic future borrowings against the 2021 Credit Facility.

Quarterly and Seasonal Fluctuations

We experience seasonal fluctuations in our net sales and results of operations. We typically experience higher net sales in early spring due to spring sports and annual tax refunds, late summer due to back-to-school shopping and winter due to holiday shopping. In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including unseasonal weather patterns, the timing of high demand footwear launches, demand for merchandise driven by local interest in sporting events, back-to-school sales, and the timing of sales tax holidays and annual income tax refunds. The COVID-19 pandemic has negatively impacted youth and high school team sports and has resulted in some shifts of normal seasonal patterns during the periods presented.

Although our operations are influenced by general economic conditions, we do not believe that, historically, inflation has had a material impact on our results of operations as we are generally able to pass along inflationary increases in costs to our customers.

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk.
Investment and Credit Availability Risk
We manage cash and cash equivalents in various institutions at levels beyond federally insured limits per institution, and we purchase investments not guaranteed by the FDIC. Accordingly, there is a risk that we will not recover the full principal of our investments or that their liquidity may be diminished. In an attempt to mitigate this risk, our investment policy emphasizes preservation of principal and liquidity.
Additionally, Regions Bank is committed to provide loans under our Amended Credit Facility. There is a risk that Regions Bank cannot deliver against these obligations. For a further discussion of this risk and risks related to our deposits, see “Risk Factors” in our 2021 Annual Report.
Interest Rate Risk
Our exposure to market risks results primarily from fluctuations in interest rates. There have been no material changes to our exposure to market risks from those disclosed in our 2021 Annual Report.

Borrowing under the 2021 Credit Facility uses the London Interbank Offering Rate (LIBOR) as a benchmark for establishing the interest rate. Given the International Exchange Benchmark Administration’s announced phase-out of LIBOR, the 2021 Credit Facility includes a LIBOR phase-out provision. If, during the term of the 2021 Credit Facility, the lender determines that LIBOR is unavailable, impracticable or unreliable for use, the variable interest rate will be determined based on a substitute index which may be Term Secured Overnight Financing Rate ("SOFR"), Daily Simple SOFR, or an alternate rate index that has been selected by the Lender as the replacement for LIBOR. The replacement index will then become the operative interest rate index for borrowings under the 2021 Credit Facility, subject to provisions set forth in the 2021 Credit Facility.

Based on historical levels of borrowing under our credit facilities and the short-term nature of such, we do not expect any transition away from LIBOR to impact us in any material way.

ITEM 4.    Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of July 31, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

27

Index
Changes in Internal Control Over Financial Reporting.

We have not identified any changes in our internal control over financial reporting that occurred during the period ended July 31, 2021, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.    Legal Proceedings.

Information relating to material legal proceedings is set forth in Note 9, Commitments and Contingencies, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and is incorporated herein by reference.

ITEM 1A.    Risk Factors.

We operate in an environment that involves a number of risks and uncertainties which are described in our 2021 Annual Report. If any of the risks described in our 2021 Annual Report were to actually occur, our business, results of operations, and financial results could be adversely affected. There were no material changes to the risk factors disclosed in our 2021 Annual Report.

ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

The following table presents our stock repurchase activity for the 13-weeks ended July 31, 2021:

Period
Total Number
of Shares
Purchased
Average
Price Paid per
Share
Total Number of
Shares Purchased
as Part of Publicly
Announced
Programs(1)
Approximate Dollar
Value of Shares that
may yet be Purchased
Under the Programs (in
thousands)
May 2, 2021 to May 29, 2021 4,125  $ 80.35  —  $ 599,032 
May 30, 2021 to July 3, 2021 684,238  $ 81.38  684,238  $ 543,351 
July 4, 2021 to July 31, 2021 301,025  $ 91.29  301,025  $ 515,870 
Total
989,388  $ 84.39  985,263  $ 515,870 
(1)In May 2021, our Board of Directors authorized an expansion of the Program by $500.0 million to $800.0 million and extended the date through February 1, 2025. The Company may repurchase shares on the open market, including through Rule 10b5-1 plans, in privately negotiated transactions, through block purchases, or otherwise in compliance with applicable laws, including Rule 10b-18 of the Securities Exchange Act. The timing and amount of stock repurchases will depend on a variety of factors, including business and market conditions as well as corporate and regulatory considerations. The Program may be suspended, modified or discontinued at any time and the Company has no obligation to repurchase any amount of its common stock under the Program. See Note 8, Stock Repurchase Activity, to the unaudited condensed consolidated financial statements for additional information.
28

Index
ITEM 6.    Exhibits.

The following exhibits are being filed or furnished as part of this Quarterly Report on Form 10-Q:
Exhibit No.
Description
Certificate of Incorporation and By-Laws
3.1
Certificate of Incorporation of the Registrant; incorporated herein by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 31, 2012.
3.2
Certificate of Amendment to the Certificate of Incorporation of the Registrant; incorporated herein by reference to Exhibit 3.1 of the Registrant’s Form Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2021.
3.3
Amended and Restated Bylaws of the Registrant; incorporated herein by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2021.
Form of Stock Certificate
4.1
Form of Common Stock Certificate; incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2021
Material Agreements
* Credit Agreement, dated as of July 9, 2021, among Hibbett, Inc., as Borrower, subsidiaries of Borrower, as Guarantors, and Regions Bank, as Lender.
Certifications
*
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
*
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
*
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Interactive Data Files
101.INS
*
Inline XBRL Instance Document
101.SCH
*
Inline XBRL Taxonomy Extension Schema Document
101.CAL
*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 *
The cover page for the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 2021, has been formatted in Inline XBRL.
*
Filed Within
29

Index


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HIBBETT, INC.
Date: September 7, 2021 By: /s/ Robert Volke
Robert Volke
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

30


Exhibit 10.1




================================================================================



CREDIT AGREEMENT

dated as of July 9, 2021

among

HIBBETT, INC.
as Borrower,

THE SUBSIDIARIES OF THE BORROWER
IDENTIFIED HEREIN,
as Guarantors,

and

REGIONS BANK



===========================================================================





Exhibit 10.1
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS AND INTERPRETATION 1
     Section 1.1      Definitions. 1
     Section 1.2      Accounting Terms. 18
     Section 1.3      Rules of Interpretation. 18
     Section 1.4      Divisions. 19
     Section 1.5      LIBOR Phase-Out 20
Section 2. LOANS AND LETTERS OF CREDIT 20
     Section 2.1      Revolving Loans. 20
     Section 2.2      Issuances of Letters of Credit. 21
     Section 2.3      Evidence of Debt; Lender’s Books and Records; Note. 22
     Section 2.4      Scheduled Principal Payments. 23
     Section 2.5      Interest on Loans. 23
     Section 2.6      Conversion/Continuation. 24
     Section 2.7      Default Rate of Interest. 24
     Section 2.8      Fees. 25
     Section 2.9      Prepayments/Commitment Reductions. 25
     Section 2.10      Application of Prepayments. 26
     Section 2.11      General Provisions Regarding Payments. 26
Section 3. YIELD PROTECTION 27
     Section 3.1      Making or Maintaining LIBOR Loans. 27
     Section 3.2      Increased Costs. 29
Section 4. GUARANTY 30
     Section 4.1      The Guaranty. 30
     Section 4.2      Obligations Unconditional. 30
     Section 4.3      Reinstatement. 31
     Section 4.4      Certain Additional Waivers. 31
     Section 4.5      Remedies. 31
     Section 4.6      Rights of Contribution. 31
     Section 4.7      Guarantee of Payment; Continuing Guarantee. 32
     Section 4.8      Keepwell. 32
Section 5. CONDITIONS PRECEDENT 32
     Section 5.1      Conditions Precedent to Effectiveness 32
     Section 5.2      Conditions to Each Credit Extension 33
Section 6. REPRESENTATIONS AND WARRANTIES 33
     Section 6.1      Organization; Requisite Power and Authority; Qualification. 33
     Section 6.2      Equity Interests and Ownership. 33
     Section 6.3      Due Authorization. 33
     Section 6.4      No Conflict. 33
     Section 6.5      Governmental Consents. 33
     Section 6.6      Due Execution and Delivery; Binding Obligations. 33
     Section 6.7      Financial Statements. 34
     Section 6.8      No Material Adverse Effect; No Default. 34

i



Exhibit 10.1
     Section 6.9      Tax Matters. 34
     Section 6.10      Properties. 34
     Section 6.11      Environmental Matters. 34
     Section 6.12      No Litigation. 35
     Section 6.13      Information Regarding the Borrower and its Subsidiaries. 35
     Section 6.14      Governmental Regulation. 35
     Section 6.15      Pension Plans. 36
     Section 6.16      Solvency. 36
     Section 6.17      Conpliance with Laws. 36
     Section 6.18      Disclosure. 36
     Section 6.19      Insurance. 36
     Section 6.20      Compliance with Anti-Corruption Laws; Beneficial Ownership
     Regulation, Anti-Money Laundering Laws and Sanctions. 36
Section 7. AFFIRMATIVE COVENANTS 37
     Section 7.1      Financial Statements and Other Reports. 37
     Section 7.2      Existence. 38
     Section 7.3      Payment of Taxes and Other Obligations. 38
     Section 7.4      Maintenance of Properties. 38
     Section 7.5      Insurance. 38
     Section 7.6      Inspections Access to Representatives. 38
     Section 7.7      Compliance with Laws and Contractual Obligations. 39
     Section 7.8      Use of Proceeds. 39
     Section 7.9      [Reserved] 39
     Section 7.10      Books and Records. 39
     Section 7.11      Additional Subsidiaries. 39
Section 8. NEGATIVE COVENANTS 39
     Section 8.1      Indebtedness. 39
     Section 8.2      Liens. 39
     Section 8.3      Restricted Payments. 40
     Section 8.4      Burdensome Agreements. 40
     Section 8.5      Investments. 40
     Section 8.6      Financial Covenants. 40
     Section 8.7      [Reserved] 41
     Section 8.8      Fundamental Changes; Asset Sales. 41
     Section 8.9      Transactions with Affiliates. 41
     Section 8.10      Use of Proceeds. 41
     Section 8.11      Conduct of Business. 41
     Section 8.12      Amendments to Organizational Agreements. 41
Section 9. EVENTS OF DEFAULT; REMEDIES; APPLICATION OF FUNDS 41
     Section 9.1      Events of Default. 41
     Section 9.2      Remedies. 43
     Section 9.3      Application of Funds. 43
Section 10. MISCELLANEOUS 44
     Section 10.1      Notices; Effectiveness; Electronic Communications. 44
     Section 10.2      Expenses; Indemnity; Damage Waiver. 44
     Section 10.3      Set-Off. 45
ii



Exhibit 10.1
     Section 10.4      Amendments and Waivers. 46
     Section 10.5      Successors and Assigns. 46
     Section 10.6      Survival of Representations, Warranties and Agreements. 46
     Section 10.7      No Waiver; Remedies Cumulative. 46
     Section 10.8      Marshalling; Payments Set Aside. 46
     Section 10.9      Severability. 47
     Section 10.10      Applicable Laws. 47
     Section 10.11      WAIVER OF JURY TRIAL. 47
     Section 10.12      Usury Savings Clause. 48
     Section 10.13      Counterparts; Integration; Effectiveness. 48
     Section 10.14      No Advisory of Fiduciary Relationship. 48
     Section 10.15      Electronic Execution of Assignments and Other Documents. 48
     Section 10.16      USA PATRIOT Act. 48
     Section 10.17      Beneficial Ownership. 48
     Section 10.18      Termination. 49
     Section 10.19      Fee Waiver. 49

Schedules
Schedule 6.2    Equity Interests and Ownership
Schedule 6.13     Name, Jurisdiction and Tax Identification Numbers
Schedule 8.1     Existing Indebtedness
Schedule 8.2     Existing Liens
Schedule 8.5     Existing Investments
Schedule 10.1     Notice Information

Exhibits
Exhibit 2.1     Form of Funding Notice
Exhibit 2.2     Form of Issuance Notice
Exhibit 2.3     Form of Note
Exhibit 2.6     Form of Conversion/Continuation Notice
Exhibit 7.1(c)     Form of Compliance Certificate
Exhibit 7.11     Form of Guarantor Joinder Agreement


iii



Exhibit 10.1

CREDIT AGREEMENT

This CREDIT AGREEMENT (this “Agreement”) dated as of July 9, 2021 (the “Closing Date”) is entered into by and among HIBBETT, INC., a Delaware corporation (the “Borrower”), the Guarantors (defined herein) and Regions Bank (the “Lender”).

RECITALS:

WHEREAS, the Borrower has requested that the Lender provide a $100,000,000 credit facility for the purposes set forth herein; and

WHEREAS, the Lender has agreed to make the requested credit facility available on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of these premises and the mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. DEFINITIONS AND INTERPRETATION

Section 1.1    Definitions. The following terms used herein, including in the introductory paragraph, recitals, exhibits and schedules hereto, shall have the following meanings:

Acquisition” means (whether by purchase, exchange, issuance of stock, or other equity or debt securities, merger, reorganization, amalgamation, or any other method and whether by a single transaction or a series of related or unrelated transactions) any acquisition by any Credit Party of (a) any other Person, which Person shall then become consolidated with any Credit Party or any Subsidiary in accordance with generally accepted accounting principles; (b) voting equity interests issued by any other Person, but only if such acquisition results in any Credit Party owning more than fifty percent (50%) of such voting equity interests; (c) all or substantially all of the assets of any other Person; or (d) the assets which constitute all or any substantial part of any division, line of business or operating unit of the business of any other Person.

Affected Loans” means as defined in Section 3.1(b).

Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

Agreement” means as defined in the introductory paragraph hereto.

Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction from time to time concerning or relating to bribery or corruption, including the United States Foreign Corrupt Practices Act of 1977 and the rules and regulations thereunder.

Anti-Money Laundering Laws” means any and all laws, statutes, regulations or obligatory government orders, decrees, ordinances or rules related to terrorism financing, money laundering, any predicate crime to money laundering or any financial record keeping, including any applicable provision of the PATRIOT Act and The Currency and Foreign Transactions Reporting Act (also known as the “Bank Secrecy Act,” 31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959).

1



Exhibit 10.1

Applicable Laws” means all applicable laws, including all applicable provisions of constitutions, statutes, rules, ordinances, regulations and orders of all Governmental Authorities and all orders, rulings, writs and decrees of all courts, tribunals and arbitrators.

Applicable Margin” means (a) from the Closing Date through the date two (2) Business Days immediately following the date a Compliance Certificate is delivered pursuant to Section 7.1(c) for the first fiscal quarter ending after the Closing Date, the percentage per annum based upon Pricing Level I in the table set forth below and (b) thereafter, the percentage per annum determined by reference to the table set forth below using the Consolidated Lease-Adjusted Leverage Ratio as set forth in the Compliance Certificate most recently delivered to the Lender pursuant to Section 7.1(c), with any increase or decrease in the Applicable Margin resulting from a change in the Consolidated Lease-Adjusted Leverage Ratio becoming effective on the date two (2) Business Days immediately following the date on which such Compliance Certificate is delivered.

Pricing Level Consolidated Lease‑Adjusted Leverage Ratio LIBOR Loans and Letter of Credit Fee Base Rate Loans Commitment Fee
I Less than or equal to 1.25 to 1.00
1.00% 0.00% 0.15%
II Greater than 1.25 to 1.00 but less than or equal to 1.75 to 1.00
1.20% 0.20% 0.15%
III Greater than 1.75 to 1.00 but less than or equal to 2.50 to 1.00
1.40% 0.40% 0.15%
IV Greater than 2.50 to 1.00 but less than or equal to 3.00 to 1.00
1.60% 0.60% 0.20%
V Greater than 3.00 to 1.00 1.80% 0.80% 0.20%

Notwithstanding the foregoing, (x) if at any time a Compliance Certificate is not delivered when due in accordance herewith, then Pricing Level V as set forth in the table above shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall remain in effect until the date on which such Compliance Certificate is delivered and (y) the determination of the Applicable Margin for any period shall be subject to the provisions of Section 2.5(e).

Asset Sale” means a sale, lease, sale and leaseback, assignment, conveyance, exclusive license (as licensor), transfer or other disposition of property (including the Equity Interests of any Subsidiary) to any Person in one transaction or a series of transactions by the Borrower or any Subsidiary other than (a) dispositions of surplus, obsolete or worn out property or property no longer used or useful in the business of the Borrower or any Subsidiary in the ordinary course of business; (b) dispositions of inventory sold, and intellectual property licensed, in the ordinary course of business; (c) dispositions of accounts receivable resulting from the compromise or settlement thereof for less than the full amount thereof in the ordinary course of business; (d) dispositions of Cash Equivalents in the ordinary course of business; (e) licenses, sublicenses, leases or subleases granted to any third parties in arm’s-length commercial transactions in the ordinary course of business that do not interfere in any material respect with the business of the Borrower
2



Exhibit 10.1

or any Subsidiary; and (f) dispositions of property to a Credit Party or any Subsidiary provided that if the transferor of such property is a Credit Party then the transferee thereof is a Credit Party.

Authorized Officer” means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president, vice president (or the equivalent thereof), chief financial officer or treasurer.

Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”.

Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus ½ of one percent (0.5%) and (c) the LIBOR Index Rate in effect on such day plus one percent (1.0%), and if the Base Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement. Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the LIBOR Index Rate shall be effective on the effective day of such change in the Prime Rate, the Federal Funds Effective Rate or the LIBOR Index Rate, respectively.

Base Rate Loan” means a Loan bearing interest at a rate determined by reference to the Base Rate.

Beneficial Ownership Certification” means a certification regarding beneficial ownership of any Credit Party as required by the Beneficial Ownership Regulation.

Beneficial Ownership Regulation” means 31 CFR § 1010.230.

Borrower” means as defined in the introductory paragraph hereto.

Business Day” means (a) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of Alabama or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close, and (b) with respect to all notices, determinations, fundings and payments in connection with the LIBOR Rate and LIBOR Rate Loans, the term “Business Day” means any day which is a Business Day described in clause (a) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market.

Cash Equivalents