SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~August 3, 2019~~


☐			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

2700 Milan Court, Birmingham, Alabama 35211

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on which registered

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

☒

☐

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~~

☐

☒

Yes

☐

☒

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~~June 5, ~~2019,~~2020, were ~~17,629,584~~16,532,357 shares.

~~HIBBETT SPORTS, INC.~~

HIBBETT SPORTS, INC.

INDEX

~~INDEX~~

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

Unaudited Condensed Consolidated Balance Sheets at ~~August 3,~~May 2, 2020 , February 1, 2020 and May 4, 2019 ~~and February 2, 2019~~

Unaudited Condensed Consolidated Statements of Operations for the 13 -weeks ended May 2, 2020 and ~~26 weeks ended August 3, 2019 and August~~May 4, ~~2018~~2019

Unaudited Condensed Consolidated Statements of Cash Flows for the 26 13 -weeks ended ~~August 3,~~May 2, 2020 and May 4, 2019 ~~and August 4, 2018~~

Unaudited Condensed Consolidated Statements of Stockholders’ Investment for the 13 -weeks ended May 2, 2020 and ~~26 weeks ended August 3,~~May 4, 2019 ~~and August 4, 2018~~

Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Item 4.

Controls and Procedures.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Item 1.1A.

~~Legal Proceedings.~~

~~Item 1A.~~

Risk Factors.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Item 6.5.

~~Exhibits.~~Other Information.

Item 6.

~~Signature~~Exhibits.

~~Exhibit Index~~Signature

~~Index~~

Index

PART I. FINANCIAL INFORMATION

~~ITEM 1.~~

~~Financial Statements~~.

ITEM 1. Financial Statements.

HIBBETT SPORTS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)


ASSETS	August 3, 2019			February 2, 2019			ASSETS	May 2, 2020		February 1, 2020		May 4, 2019
Current Assets:							Current Assets:
Cash and cash equivalents	$	97,790		$	61,756		Cash and cash equivalents	$	106,205	$	66,078	$	116,963
Receivables, net		8,574			9,470		Receivables, net	20,003		8,477		8,284
Inventories, net		270,563			280,287		Inventories, net	241,984		288,011		248,548
Other current assets		5,711			16,343		Other current assets	12,302		9,946		12,995
Total current assets		382,638			367,856		Total current assets	380,494		372,512		386,790

Property and equipment, net		103,864			115,394		Property and equipment, net	97,771		100,956		107,673
Operating right-of-use assets		218,443			-		Operating right-of-use assets	219,436		229,155		224,870
Finance right-of-use assets, net		1,691			-		Finance right-of-use assets, net	2,548		2,250		2,228

Goodwill		19,661			23,133		Goodwill	—		19,661		19,661
Trade name intangible asset		32,400			32,400
Tradename intangible asset							Tradename intangible asset	23,500		32,400		32,400
Deferred income taxes, net		6,846			2,278		Deferred income taxes, net	11,429		8,996		3,216
Other assets, net		4,068			5,004		Other assets, net	3,391		3,829		3,868
Total Assets	$	769,611		$	546,065		Total Assets	$	738,569	$	769,759	$	780,706

LIABILITIES AND STOCKHOLDERS' INVESTMENT							LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:							Current Liabilities:
Accounts payable	$	124,859		$	107,315		Accounts payable	$	98,149	$	131,662	$	105,834
Operating lease liabilities		57,232			-		Operating lease liabilities	66,791		60,649		66,268
Credit facilities		17,000			35,000		Credit facilities	50,000		—		26,000
Finance/capital lease obligations		896			1,017
Finance lease obligations							Finance lease obligations	876		886		973
Accrued payroll expenses		15,014			13,929		Accrued payroll expenses	6,359		20,530		7,322
Deferred rent		-			5,838
Other accrued expenses		17,706			10,174		Other accrued expenses	21,473		19,934		15,604
Total current liabilities		232,707			173,273		Total current liabilities	243,648		233,661		222,001

Operating lease liabilities		184,927			-		Operating lease liabilities	185,035		190,699		188,839
Finance/capital lease obligations		1,149			1,994
Deferred rent		-			19,522
Finance lease obligations							Finance lease obligations	1,994		1,704		1,777
Unrecognized tax benefits		1,184			1,401		Unrecognized tax benefits	954		955		1,370
Other liabilities		9,699			13,826		Other liabilities	2,371		13,757		9,537
Total liabilities		429,666			210,016		Total liabilities	434,002		440,776		423,524

Stockholders' Investment:							Stockholders' Investment:
Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued		-			-
Common stock, $.01 par value, 80,000,000 shares authorized, 39,125,222 and 38,983,232 shares issued at August 3, 2019 and February 2, 2019, respectively		391			390
Preferred stock, $0.01 par value, 1,000,000 shares authorized, 0 shares issued							Preferred stock, $0.01 par value, 1,000,000 shares authorized, 0 shares issued	—		—		—
Common stock, $0.01 par value, 80,000,000 shares authorized, 39,255,293, 39,140,575 and 39,100,509 shares issued at May 2, 2020, February 1, 2020 and May 4, 2019, respectively							Common stock, $0.01 par value, 80,000,000 shares authorized, 39,255,293, 39,140,575 and 39,100,509 shares issued at May 2, 2020, February 1, 2020 and May 4, 2019, respectively	393		391		391
Paid-in capital		186,947			185,752		Paid-in capital	190,260		188,879		186,462
Retained earnings		776,677			759,677		Retained earnings	769,315		784,942		785,454
Treasury stock, at cost; 21,375,638 and 20,686,242 shares repurchased at August 3, 2019 and February 2, 2019, respectively		(624,070	)		(609,770	)
Treasury stock, at cost; 22,739,229, 22,280,316 and 20,945,674 shares repurchased at May 2, 2020, February 1, 2020 and May 4, 2019, respectively							Treasury stock, at cost; 22,739,229, 22,280,316 and 20,945,674 shares repurchased at May 2, 2020, February 1, 2020 and May 4, 2019, respectively	(655,401)		(645,229)		(615,125)
Total stockholders' investment		339,945			336,049		Total stockholders' investment	304,567		328,983		357,182
Total Liabilities and Stockholders' Investment	$	769,611		$	546,065		Total Liabilities and Stockholders' Investment	$	738,569	$	769,759	$	780,706

See notes to unaudited condensed consolidated financial statements.

Index

HIBBETT SPORTS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share information)


	13 Weeks Ended						26 Weeks Ended							13-Weeks Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018				May 2, 2020		May 4, 2019
Net sales	$	252,440		$	211,123		$	595,735		$	485,830		Net sales	$	269,837	$	343,295
Cost of goods sold		176,067			144,772			400,759			322,706		Cost of goods sold	195,690		224,692
Gross margin		76,373			66,351			194,976			163,124		Gross margin	74,147		118,603
Store operating, selling and administrative expenses		80,334			61,965			154,373			123,869		Store operating, selling and administrative expenses	69,673		74,038
Goodwill impairment													Goodwill impairment	19,661		—
Depreciation and amortization		7,680			6,271			14,903			12,519		Depreciation and amortization	6,870		7,223
Operating (loss) income		(11,641	)		(1,885	)		25,700			26,736		Operating (loss) income	(22,057)		37,342
Interest expense, net		(73	)		(167	)		(29	)		(111	)
Interest income, net													Interest income, net	170		46
(Loss) income before provision for income taxes		(11,568	)		(1,718	)		25,729			26,847		(Loss) income before provision for income taxes	(22,227)		37,296
(Benefit) provision for income taxes		(2,790	)		(496	)		6,650			6,560		(Benefit) provision for income taxes	(6,940)		9,439
Net (loss) income	$	(8,778	)	$	(1,222	)	$	19,079		$	20,287		Net (loss) income	$	(15,287)	$	27,857

Basic (loss) earnings per share	$	(0.49	)	$	(0.06	)	$	1.05		$	1.07		Basic (loss) earnings per share	$	(0.92)	$	1.52
Diluted (loss) earnings per share	$	(0.49	)	$	(0.06	)	$	1.05		$	1.06		Diluted (loss) earnings per share	$	(0.92)	$	1.50

Weighted average shares outstanding:													Weighted average shares outstanding:
Basic		17,906			18,823			18,107			18,896		Basic	16,546		18,308
Diluted		17,906			18,823			18,220			19,079		Diluted	16,546		18,535

See notes to unaudited condensed consolidated financial statements.

Index

HIBBETT SPORTS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	26 Weeks Ended							13-Weeks Ended
	August 3, 2019			August 4, 2018				May 2, 2020		May 4, 2019
Cash Flows From Operating Activities:							Cash Flows From Operating Activities:
Net income	$	19,079		$	20,287
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							Net (loss) income	$	(15,287)	$	27,857
Adjustments to reconcile net (loss) income to net cash provided by operating activities:							Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		14,903			12,519		Depreciation and amortization	6,870		7,223
Stock-based compensation		906			2,653		Stock-based compensation	1,217		507
Other non-cash adjustments to net income:		9,861			415
Impairment charges							Impairment charges	32,648		—
Contingent earnout valuation							Contingent earnout valuation	(10,980)		600
Other non-cash adjustments to net income							Other non-cash adjustments to net income	(2,914)		3,622
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Inventories, net		8,769			6,060		Inventories, net	46,027		30,783
Prepaid expenses and other		3,114			(118	)
Receivables, net							Receivables, net	(11,866)		2,131
Accounts payable		17,544			19,131		Accounts payable	(33,513)		(1,481)
Other assets and liabilities		(32	)		1,580		Other assets and liabilities	(8,320)		816
Net cash provided by operating activities		74,144			62,527		Net cash provided by operating activities	3,882		72,058

Cash Flows From Investing Activities:							Cash Flows From Investing Activities:
Capital expenditures		(5,873	)		(7,993	)	Capital expenditures	(4,059)		(2,469)
Other, net		254			172		Other, net	612		(54)
Net cash used in investing activities		(5,619	)		(7,821	)	Net cash used in investing activities	(3,447)		(2,523)

Cash Flows From Financing Activities:							Cash Flows From Financing Activities:
Repayments under credit facilities, net		(18,000	)		-
Proceeds under credit facilities							Proceeds under credit facilities	115,918		—
Repayments under credit facilities							Repayments under credit facilities	(65,918)		(9,000)
Cash used for stock repurchases		(13,745	)		(8,432	)	Cash used for stock repurchases	(9,748)		(4,799)
Net payments on finance/capital lease obligations		(481	)		(319	)
Net payments on finance lease obligations							Net payments on finance lease obligations	(301)		(242)
Proceeds from options exercised and purchase of shares under the employee stock purchase plan		290			508		Proceeds from options exercised and purchase of shares under the employee stock purchase plan	165		203
Other, net		(555	)		(416	)	Other, net	(424)		(490)
Net cash used in financing activities		(32,491	)		(8,659	)
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	39,692		(14,328)

Net increase in cash and cash equivalents		36,034			46,047		Net increase in cash and cash equivalents	40,127		55,207
Cash and cash equivalents, beginning of period		61,756			73,544		Cash and cash equivalents, beginning of period	66,078		61,756
Cash and cash equivalents, end of period	$	97,790		$	119,591		Cash and cash equivalents, end of period	$	106,205	$	116,963

See notes to unaudited condensed consolidated financial statements.

~~Index~~

~~HIBBETT SPORTS, INC. AND SUBSIDIARIES~~

~~Unaudited Condensed Consolidated Statements of Stockholders Investment~~

~~(in thousands)~~

13 Weeks Ended August 3, 2019

Common Stock Treasury Stock

Number
of Shares
Amount
Paid-In
Capital

Retained
Earnings

Number
of Shares
Amount
Total
Stockholders'
Investment

Balance - May 4, 2019
39,101

$
391

$
186,462

$
785,454

20,945

$
(615,125
)

$
357,182

Net loss
-

-

-

(8,778
)

-

-

(8,778
)
Issuance of shares through the Company's equity plans
24

-

86

-

-

-

86

Purchase of shares under the stock repurchase program
-

-

-

-

430

(8,946
)

(8,946
)
Stock-based compensation
-

-

399

-

-

-

399

Balance - August 3, 2019
39,125

$
391

$
186,947

$
776,677

21,376

$
(624,070
)

$
339,945

13 Weeks Ended August 4, 2018

Common Stock Treasury Stock

Number
of Shares
Amount
Paid-In
Capital

Retained
Earnings

Number
of Shares
Amount
Total
Stockholders'
Investment

Balance - May 5, 2018
38,946

$
389

$
182,630

$
752,765

19,951

$
(594,101
)

$
341,683

Net loss
-

-

-

(1,222
)

-

-

(1,222
)
Issuance of shares through the Company's equity plans
8

-

150

-

-

-

150

Purchase of shares under the stock repurchase program
-

-

-

-

336

(7,977
)

(7,977
)
Stock-based compensation
-

-

917

-

-

-

917

Balance - August 4, 2018
38,954

$
389

$
183,697

$
751,543

20,287

$
(602,078
)

$
333,551

~~Note: Columns may not foot due to rounding.~~

~~See notes to unaudited condensed consolidated financial statements.~~

Index

HIBBETT SPORTS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders Investment ~~(continued)~~

(in thousands)

26 Weeks Ended August 3, 2019

13-Weeks Ended May 2, 2020																		13-Weeks Ended May 2, 2020
																			Common Stock													Treasury Stock
	Common Stock									Treasury Stock									Number of Shares		Amount			Paid-In Capital			Retained Earnings			Number of Shares		Amount			Total Stockholders' Investment
	Number of Shares		Amount		Paid-In Capital		Retained Earnings			Number of Shares		Amount			Total Stockholders' Investment
Balance - February 2, 2019		38,983	$	390	$	185,752	$	759,677			20,686	$	(609,770	)	$	336,049
Net income		-		-		-		19,079			-		-			19,079
Balance - February 1, 2020																		Balance - February 1, 2020	39,141		$	391		$	188,879		$	784,942		22,280		$	(645,229)		$	328,983
Net loss																		Net loss	—		—			—			(15,287)			—		—			(15,287)
Issuance of shares through the Company's equity plans		142		1		289		-			-		-			290		Issuance of shares through the Company's equity plans	114		2			164			—			—		—			166
Adjustment for adoption of accounting standard(1)		-		-		-		(2,080	)		-		-			(2,080	)	—		—			—			(340)			—		—			(340)
Purchase of shares under the stock repurchase program		-		-		-		-			660		(13,745	)		(13,745	)	Purchase of shares under the stock repurchase program	—		—			—			—			428		(9,748)			(9,748)
Settlement of net share equity awards		-		-		-		-			29		(556	)		(556	)	Settlement of net share equity awards	—		—			—			—			31		(424)			(424)
Stock-based compensation		-		-		906		-			-		-			906		Stock-based compensation	—		—			1,217			—			—		—			1,217
Balance - August 3, 2019		39,125	$	391	$	186,947	$	776,677			21,376	$	(624,070	)	$	339,945
Balance - May 2, 2020																		Balance - May 2, 2020	39,255		$	393		$	190,260		$	769,315		22,739		$	(655,401)		$	304,567

26 Weeks Ended August 4, 2018

Common Stock Treasury Stock

Number
of Shares
Amount
Paid-In
Capital

Retained
Earnings

Number
of Shares
Amount
Total
Stockholders'
Investment

Balance - February 3, 2018
38,863

$
389

$
180,536

$
731,901

19,910

$
(593,230
)

$
319,596

Net income
-

-

-

20,287

-

-

20,287

Issuance of shares through the Company's equity plans
91

-

508

-

-

-

508

Adjustment for adoption of accounting standard
-

-

-

(645
)

-

-

(645
)
Purchase of shares under the stock repurchase program
-

-

-

-

358

(8,432
)

(8,432
)
Settlement of net share equity awards
-

-

-

-

19

(416
)

(416
)
Stock-based compensation
-

-

2,653

-

-

-

2,653

Balance - August 4, 2018
38,954

$
389

$
183,697

$
751,543

20,287

$
(602,078
)

$
333,551


13-Weeks Ended May 4, 2019
	Common Stock								Treasury Stock
	Number of Shares	Amount		Paid-In Capital		Retained Earnings		Number of Shares	Amount		Total Stockholders' Investment
Balance - February 2, 2019	38,983	$	390	$	185,752	$	759,677	20,686	$	(609,770)	$	336,049
Net income	—	—		—		27,857		—	—		27,857
Issuance of shares through the Company's equity plans	118	1		203		—		—	—		204
Adjustment for adoption of accounting standard⁽²⁾	—	—		—		(2,080)		—	—		(2,080)
Purchase of shares under the stock repurchase program	—	—		—		—		230	(4,799)		(4,799)
Settlement of net share equity awards	—	—		—		—		29	(556)		(556)
Stock-based compensation	—	—		507		—		—	—		507
Balance - May 4, 2019	39,101	$	391	$	186,462	$	785,454	20,945	$	(615,125)	$	357,182

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 this Quarterly Report on Form 10-Q.

(2) Adoption of ASU 2016-02, Topic 842, Leases. See Note 2, Recent Accounting Pronouncements, in our Annual Report on Form 10-K filed on April 16, 2020.

See notes to unaudited condensed consolidated financial statements.

Index

HIBBETT SPORTS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

1.	~~Basis of Presentation and Accounting Policies~~

1. Basis of Presentation and Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Hibbett Sports, Inc. and its wholly-owned subsidiaries (including the condensed consolidated balance sheet as of February ~~2, 2019,~~1, 2020, 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 “we,” “our,” “us” and the “Company” refer to Hibbett Sports, 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 February ~~2, 2019~~1, 2020 filed on April ~~18, 2019.~~16, 2020. The unaudited condensed consolidated financial statements have been prepared on a basis consistent in all material respects with the accounting policies described in our ~~2019~~2020 Annual Report ~~except as described in Note 4,~~ ~~Leases~~, 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.

~~Acquisition~~Impact of the Novel Coronavirus (COVID-19)

~~We acquired City Gear, LLC (City Gear)~~COVID-19 was declared a global pandemic by the World Health Organization on ~~November 5, 2018 with an effective date~~March 11, 2020 and has led to adverse impacts on the U.S. and global economies. The outbreak of ~~November 4, 2018 for approximately $88.0 million,~~COVID-19 and related measures to quell the outbreak have impacted our inventory supply chain, operations and customer demand. The Company’s stores and distribution centers have continued to operate where permitted by governmental jurisdictions during the COVID-19 pandemic, and the Company is committed to maintaining a safe work and shopping environment. The COVID-19 pandemic could further affect the Company's operations and the operations of its suppliers and vendors as a result of continuing shelter-in-place orders, restrictions and limitations on travel, limitations on store or facility operations up to and including ~~$86.8 million of cash paid. (See Note 3, Acquisition~~)closures, and other governmental, business or consumer actions. The extent to which the COVID-19 pandemic will impact the Company’s operations, liquidity or financial results in subsequent periods is uncertain, but such impact could be material.

Property and Equipment

Property and equipment are recorded at ~~cost and at February 2, 2019 included assets acquired through capital leases. At August 3, 2019, finance~~cost. Finance lease assets are shown as right-of-use (ROU) assets and are excluded from property and ~~equipment.~~equipment (~~See~~see Note 4,3, Leases). In Fiscal 2020, we initiated a strategic realignment that incorporates the closure of more than 90 stores. The asset impairment charge related to the strategic realignment was not material in the 13 weeks or 26 weeks ended August 3, 2019.

Property and equipment as of ~~August 3, 2019~~May 2, 2020, February 1, 2020 and ~~February 2,~~May 4, 2019 consists of the following (in thousands):


	August 3, 2019		February 2, 2019			May 2, 2020		February 1, 2020		May 4, 2019
Land	$	7,277	$	7,277	Land	$	7,277	$	7,277	$	7,277
Buildings		21,347		21,311	Buildings	21,635		21,635		21,311
Buildings under capital lease		-		3,363
Equipment		95,098		96,402	Equipment	96,606		95,100		96,003
Equipment under capital lease		-		678
Automobiles under capital lease		-		1,829
Furniture and fixtures		35,541		36,980	Furniture and fixtures	36,931		37,048		37,225
Leasehold improvements		101,394		101,572	Leasehold improvements	103,642		102,528		101,540
Construction in progress		1,202		2,080	Construction in progress	603		1,660		1,485
Total property and equipment		261,859		271,492	Total property and equipment	266,694		265,248		264,841
Less: accumulated depreciation and amortization		157,995		156,098	Less: accumulated depreciation and amortization	168,923		164,292		157,168
Total property and equipment, net	$	103,864	$	115,394	Total property and equipment, net	$	97,771	$	100,956	$	107,673

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. 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.

~~Index~~
6

Index

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.

Retail Store Orders: Retail store customers may order merchandise available in other retail store locations for pickup in the selling store at a later date. Customers make a deposit with the remaining balance due at pickup. These deposits are recorded as deferred revenue until the transaction is completed and the customer takes possession of the merchandise. Retail store customers may also order merchandise to be shipped to home. Payment is received in full at the time of order and recorded as deferred revenue until delivery.

Layaways: We offer a retail store program giving customers the option of paying a deposit and placing merchandise on layaway. The customer may make further payments in installments, but the full purchase price must be received by us within 30 days. The payments are recorded as deferred revenue until the transaction is completed and the customer takes possession of the merchandise.

Digital Channel Sales: For merchandise shipped to home, customer payment is received when the order ships. Revenue is deferred until control passes to the customer at delivery. Shipping and handling costs billed to customers are included in net sales. We offer an extended payment option through a third party who assumes all credit risk. On these orders, payment is received by us when the order ships and revenue is recorded when the product is delivered to the customer.

Loyalty ~~Programs~~Program: We offer ~~two loyalty programs;~~ the Hibbett Rewards program ~~and the City Gear Reward Points program. Upon~~whereby upon registration and in accordance with the terms of the ~~programs,~~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 ~~$2.4~~$2.3 million, $2.7 million and ~~$2.2~~$2.3 million at ~~August 3,~~May 2, 2020, February 1, 2020 and May 4, 2019, ~~and February 2, 2019,~~ respectively.

Gift Cards: Proceeds received from the issuance of our non-expiring gift cards are initially recorded as deferred revenue. Revenue is subsequently recognized at the time the customer redeems the gift cards and takes possession of the merchandise. Unredeemed gift cards are recorded in accounts payable on our unaudited condensed consolidated balance sheets.

The net deferred revenue liability for gift cards, customer orders and layaways at ~~August 3, 2019~~May 2, 2020, February 1, 2020 and ~~February 2,~~May 4, 2019 was ~~$8.4~~$13.2 million, $7.7 million and $7.5 million, respectively, and is recognized in accounts payable on our unaudited condensed consolidated balance sheets. Gift card breakage income is recognized in net sales in proportion to the redemption pattern of rights exercised by the customer and was not material in any period presented.

During the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3,~~May 4, 2019, ~~$0.6~~$0.5 million and ~~$1.2~~$0.8 million of gift card deferred revenue from prior periods was realized, 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 accounts payable on our unaudited condensed consolidated balance ~~sheet. We also recognize a~~sheets. The return asset and a corresponding adjustment to cost of goods sold for our right to recover the merchandise returned by the ~~customer. This right to recover asset~~customer is included in net inventory on our unaudited condensed consolidated balance sheet at the former carrying value of the merchandise less any expected recovery costs which was $0.9 million at August 3, 2019.immaterial.

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


	13 Weeks Ended				26 Weeks Ended					13-Weeks Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018			May 2, 2020		May 4, 2019
Footwear	$	152,468	$	119,062	$	367,543	$	277,650	Footwear	$	166,242	$	215,075
Apparel		66,597		55,896		146,154		120,260	Apparel	79,407		79,557
Equipment		33,375		36,165		82,038		87,920	Equipment	24,188		48,663
Total	$	252,440	$	211,123	$	595,735	$	485,830	Total	$	269,837	$	343,295

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

~~Index~~
7

Index

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 it is more likely than not than 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, we determined that goodwill of our City Gear reporting unit was fully impaired and recognized a non-cash impairment charge of $19.7 million. NaN impairment related to goodwill was recognized during the year ended February 1, 2020 or the 13-weeks ended May 4, 2019.

2.	~~Recent Accounting Pronouncements~~
(in thousands)
Goodwill balance at February 1, 2020		$	19,661
Impairment losses		(19,661)
Goodwill balance at May 2, 2020		$	—

~~Standards~~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, we determined that ~~were adopted~~

~~We adopted Accounting Standards Update (ASU) 2016-02, Topic 842,~~ ~~Leases, as~~the City Gear tradename was partially impaired and recognized a non-cash impairment charge of February 3, 2019 using the modified retrospective transition method with the cumulative effect adjustment to the opening balance of retained earnings as of the effective date (effective date method). Under the effective date method, financial results reported$8.9 million in ~~periods prior to Fiscal 2020 are unchanged.~~

We elected the package of practical expedients, which among other things, does not require reassessment of lease classification. We did not elect to use hindsight in determining the lease term of existing contracts at the effective date. We also elected the short-term lease recognition exemption for all our leases. For those leases that qualified as short-term, we did not recognize ROU assets or lease liabilities at adoption. We have lease agreements with non-lease components that relate to the lease components. We elected not to separate the non-lease components for store ~~lease assets. We elected to separate the non-lease components for office~~operating, selling and ~~transportation equipment lease assets.~~

The adoption of ASU 2016-02 had a material impact on our unaudited condensed consolidated balance. Adoption of the standard resulted in the recognition of operating and finance lease ROU assets and operating and finance lease liabilities of $234.0 million and $265.6 million, respectively, and a reduction to retained earnings of $2.1 million, net of tax, as of February 3, 2019. The operating lease ROU assets recorded at transition include the impact of net unfavorable lease rights of approximately $2.0 million, deferred rent of approximately $25.4 million, and the impairment of ROU assets recognized in retained earnings as of February 3, 2019 of approximately $3.4 million. The adoption did not have a material impactadministrative expenses on our unaudited condensed consolidated statement of ~~operations~~operations. NaN impairment related to the tradename was recognized during the year ended February 1, 2020 or ~~statement of cash flows. See Note~~the 13-weeks ended May 4, ~~Leases, in these unaudited condensed consolidated financial statements for additional information.~~2019.


(in thousands)
Tradename intangible asset balance at February 1, 2020	$	32,400
Impairment losses	(8,900)
Tradename intangible asset balance at May 2, 2020	$	23,500

2. Recent Accounting Pronouncements

Standards that ~~are not yet~~were adopted

~~In August 2018, the~~We adopted Financial Accounting ~~Standards~~Standard Board (FASB) ~~issued~~ ASU ~~No. 2018-15,~~ ~~Intangibles – Goodwill and Other-Internal-Use Software~~, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The adoption of ASU 2018-15 is not expected to have a material impact on our financial statements and related disclosures.

~~In June 2016, the FASB issued ASU No.~~ 2016-13, Topic 326, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which ~~establishes ASC 326,~~ ~~Financial Instruments - Credit Losses. The ASU revises~~revised the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. Historical experience, current economic conditions and reasonable supportable forecasts are considered in establishing an allowance for credit losses which is shown on the unaudited condensed consolidated balance sheet in receivables, net. The adoption of ASU-2016-03 did not have a material impact on our unaudited condensed consolidated financial statements.

We adopted ASU ~~affects trade receivables, debt securities, net investment~~2017-04, Topic 350, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, which is intended to simplify the subsequent measurement of goodwill. The amendments in ~~leases,~~ASU 2017-04 modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. Goodwill impairment is no longer determined by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and ~~most other financial assets~~liabilities, as if that ~~represent~~reporting unit had been acquired in a ~~right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19,~~ ~~Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU clarifies that receivables from operating leases are accounted for~~business combination. As a result, we will measure impairment using the ~~lease guidance~~difference between the carrying amount and ~~not as financial instruments. In May 2019,~~ the ~~FASB issued ASU No. 2019-05,~~ ~~Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at~~ fair value instead of amortized cost. The effective date will be the first quarter of Fiscal 2021. We expect the ASUs will be adopted using a modified-retrospective approach. We are currently evaluating the timing and effect that adoption of the ~~ASUs will have on our financial statements and related disclosures.~~reporting unit, if required.

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 ~~August 3, 2019,~~May 2, 2020, there were no other new pronouncements or interpretations that had or were expected to have a significant impact on our operations.

Index

3.	~~Acquisition~~

On November 5, 2018, through our wholly-owned subsidiary, Hibbett Sporting Goods, Inc., we acquired City Gear, a Tennessee limited liability company. Under the Purchase Agreement, we agreed to acquire all the outstanding warrants and equity interests, other than certain preferred membership interests, of City Gear, a privately held city specialty retailer.

93. Leases

~~Index~~

The purchase price was $88.0 million (Purchase Price) in cash payable at the closing of the transaction (Closing), subject to customary adjustments for City Gear’s cash on hand and net working capital as of the Closing date. The Purchase Agreement provided that a portion of the Purchase Price be used at Closing to pay off and redeem the outstanding preferred membership interests in City Gear as well as certain other outstanding indebtedness. In addition, the aggregate consideration payable to the Sellers in connection with the transaction includes two contingent payments (Earnout) based on City Gear’s achievement of certain EBITDA thresholds (as defined in the Purchase Agreement) for the 52-week periods ended February 1, 2020 and January 30, 2021, respectively. The aggregate amount of the Earnout, if any, will not exceed $25.0 million.

The acquisition provides us with substantially greater scale in the athletic specialty market and is an extension of our strategy to provide high demand, branded products to underserved markets. During the 13 weeks and 26 weeks ended August 3, 2019, we incurred $7.6 million and $9.2 million in acquisition-related expenses, respectively, excluding acquisition-related interest expense.

The following table summarizes the preliminary estimates of the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date of November 4, 2018. The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are based on estimates and assumptions and are subject to revisions, which may result in adjustments to the preliminary values presented below, when management’s estimates are finalized (in thousands):

As Reported
February 2,
2019

As Revised
August 3,
2019
Adjustments
Assets Acquired:
Current assets:
Receivables $ 3,168 $ 3,732 $ 564
Inventories 44,807 44,807 -
Prepaid expense, other current and intangible assets 2,716 2,689 (27 )
Total current assets 50,691 51,228 537
Goodwill 23,133 19,661 (3,472 )
Property and equipment 16,530 16,530 -
Long-term intangible assets 33,601 33,503 (98 )
Deposits and other assets 567 567 -
Deferred tax asset 24 638 614
Total assets $ 124,546 $ 122,127 $ (2,419 )

Liabilities Assumed:
Current liabilities:
Accounts payable $ 23,615 $ 23,615 $ -
Other accrued expenses and intangible liabilities 3,366 3,526 160
Total current liabilities 26,981 27,141 160
Other long-term liabilities and intangible liabilities 2,613 3,234 621
Total liabilities 29,594 30,375 781
Total purchase price $ 94,952 $ 91,752 $ (3,200 )

Cash paid at closing $ 86,837 $ 86,837 $ -
Fair value of contingent earnout 9,200 6,000 (3,200 )
Net working capital and debt-like items adjustment (1,085 ) (1,085 ) -
$ 94,952 $ 91,752 $ (3,200 )

~~Index~~

There were no adjustments recorded in the 13 weeks ended August 3, 2019 to the preliminary estimates of the fair values of the identifiable assets acquired and liabilities assumed as of November 4, 2018. The adjustments recorded in the 26 weeks ended August 3, 2019 to the preliminary estimates of the fair values of the identifiable assets acquired and liabilities assumed as of November 4, 2018 were due to refinement of management’s appraisals and estimates during the period. Measurement period adjustments are calculated as if they were known at the acquisition date but are recognized during the quarter they became determined. The provisional fair values of lease-to-market intangibles and the contingent earnout were adjusted during the 26 weeks ended August 3, 2019 when third party valuation services were updated. The provisional fair value of tenant allowance receivables related to contributions from landlords was adjusted during the 26 weeks ended August 3, 2019 when the assessment of amounts and likelihood of collection were updated. The adjustments recorded did not have a material impact on results reported in prior reporting periods.

We are still in the process of completing our fair market valuations and the purchase price allocation related to the evaluation of certain tax liabilities, but the purchase price allocation is substantially complete as of August 3, 2019.

Goodwill is calculated as the excess of the purchase price over the net assets acquired and represents the value of City Gear’s brand, our expansion in the city specialty market and expected synergies resulting from the acquisition. Goodwill is amortized for tax purposes.

Intangible assets and liabilities represent two separately identified assets and one liability. First, we identified the City Gear tradename as an indefinite-lived intangible asset with a fair value of $32.4 million. The tradename is not subject to amortization but will be evaluated at least annually for impairment. Second, we recognized an intangible asset of $1.4 million for favorable City Gear leases and a liability of $3.4 million for unfavorable City Gear leases (as compared to prevailing markets). Under ASU Topic 842, these intangible lease assets and lease liabilities became a component of the ROU asset as of February 3, 2019. (~~See Note 2, Recent Accounting Pronouncements~~)

The results of operations of City Gear are included in our results of operations beginning on November 5, 2018. From February 3, 2019 through August 3, 2019, City Gear generated net sales of $101.5 million. Also, $1.0 million related to the amortization of the step-up of the inventory value related to purchase accounting was included in gross margin for the 26 weeks ended August 3, 2019.

The following unaudited consolidated pro forma summary has been prepared by adjusting the Company’s historical data to give effect to the City Gear acquisition as if it had occurred on January 29, 2017 (the beginning of Hibbett’s fiscal year ended February 3, 2018).

Ended August 4, 2018
(in thousands, except per share data) 13 Weeks 26 Weeks
Net sales $ 254,592 $ 588,588
Net (loss) income $ (2,805 ) $ 24,701
Basic earnings per share $ (0.15 ) $ 1.31
Diluted earnings per share $ (0.15 ) $ 1.29

~~The results for the 13 weeks and 26 weeks ended August 4, 2018 have been primarily adjusted to include:~~

~~the pro forma impact of amortization of intangible assets;~~

~~the depreciation of property and equipment, based on purchase price allocations;~~

~~the pro forma impact of additional interest expense relating to the acquisition;~~

~~the pro forma impact of acquisition-related costs incurred by the Company directly attributable to the transaction; and~~

~~the pro forma tax effect of income taxes on the above adjustments.~~

~~Results have been adjusted to exclude the impact of acquisition-related expenses and purchase accounting adjustments incurred by the Company that are directly attributable to the transaction.~~

The pro forma financial information has been prepared for comparative purposes only and includes certain adjustments, as noted above. The adjustments are based on estimates derived from currently available information and not indicative of the results of operations that would have occurred if the City Gear acquisition had been completed on the date indicated. They do not reflect the effect of costs or synergies that are expected to result from the integration of the City Gear acquisition.

~~Index~~

4.	~~Leases~~

We lease all of our retail store locations; nearly all of which are operating leases. Store leases typically provide for initial terms of five to ten years. Many of our store leases contain the following provisions:

•scheduled increases in rent payments over the lease term,

•tenant inducements,

•free rent periods,

•contingent rent based on net sales in excess of stipulated amounts,

•one or more renewal options at our discretion, and

•payments for common area maintenance, insurance and real estate taxes, most of which are variable in nature.

~~Our store leases typically contain one or more options for us to renew the lease beyond the initial five to ten year term. In addition, most~~Most of our store leases contain provisions that allow for early termination between the third and fifth year of the term if predetermined sales levels are not met, or upon the occurrence of other specified contingent events. When we have the option to extend the lease term (including by not exercising an available termination option) or purchase the leased asset, and it is reasonably certain that we will do so, we consider these options in determining the classification and measurement of the lease. However, generally at ~~store~~ lease commencement, it is not reasonably certain that we will exercise an extension or purchase option. ~~When considering~~For contingent termination provisions, we generally consider both the likelihood of the contingency occurring in addition to the economic factors we consider when assessing any other termination or renewal option.

We also lease certain office space, office equipment and transportation equipment under operating and finance leases. Generally, these leases have initial terms of two to six years.

We determine whether a contract is or contains a lease at contract inception. ~~Beginning in Fiscal~~We have lease agreements that contain both lease and non-lease components. For store leases, we account for the lease components together with the non-lease components, such as common area maintenance. For office and transportation equipment leases, we separate the non-lease components from the lease components.

In April 2020, ~~operating~~the Financial Accounting Standards Board (FASB) issued a staff question-and-answer document (Staff Q&A) to respond to some frequently asked questions about accounting for lease ~~liabilities are recognized based on~~concessions related to the ~~present value~~effects of ~~remaining fixed~~the COVID-19 pandemic. Under current U.S. GAAP, subsequent changes to lease payments ~~over~~that are not stipulated in the original lease ~~term. Operating~~are generally accounted for as lease ~~ROU assets are recognized based on~~modifications under ASC Topic 842, Leases. The Staff Q&A grants relief by allowing companies to make an accounting policy election to not evaluate lease concessions related to the calculated lease liability, as adjusted for lease prepayments, initial direct costs and landlord incentives. Because the implicit rate is generally not readily determinable for our leases, we use our estimated incremental borrowing rate as the discount rate for the leases when measuring operating lease liabilities. The incremental borrowing rate represents an estimateeffects of the ~~interest rate we would incur at~~COVID-19 pandemic as lease ~~commencement~~modifications. We did not elect to ~~borrow an amount equal to the~~utilize this alternative accounting.

Our lease payments on a collateralized basis over a similar term as the lease term. Operating lease cost for fixed lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred.

~~None of our leases~~agreements do not contain material residual value guarantees or material restrictive covenants. 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~~$4.1 million and ~~$0.9~~$1.1 million was recognized in the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3,~~May 4, 2019, respectively.

Store operating lease cost and logistics-related transportation equipment operating lease cost are included in cost of goods sold in the unaudited condensed consolidated ~~statement~~statements of operations. Office equipment and other transportation equipment operating lease cost is included in store operating, selling and administrative expenses in the unaudited condensed consolidated ~~statement~~statements of operations.

13 Weeks Ended
August 3, 2019

26 Weeks Ended
August 3, 2019

Operating lease cost

$
18,404

$
35,542

Finance lease cost:

Amortization of assets
223

460

Interest on lease liabilities
58

123

Variable lease cost

(281
)

104

$
18,404

$
36,229


	13-weeks ended
	May 2, 2020		May 4, 2019
Operating lease cost	$	17,139	$	17,138
Finance lease cost:
Amortization of assets	235		237
Interest on lease liabilities	48		65
Variable lease cost	(1,208)		385
	$	16,214	$	17,825

~~Index~~

Short-term lease cost ~~was~~is immaterial.

Index

Finance right-of-use assets on the ~~face of the~~ unaudited condensed consolidated balance sheet ~~for the period ended August 3,~~at May 2, 2020, February 1, 2020 and May 4, 2019 are shown net of accumulated amortization of ~~$0.4 million.~~$1.0 million, $0.8 million and $0.2 million, respectively.

The following table provides supplemental balance sheet information ~~as of August 3, 2019,~~ related to leases:

~~Weighted average remaining lease term (in years):~~
~~Operating leases~~	5
~~Finance leases~~	3

~~Weighted average discount rate:~~
~~Operating leases~~	~~4.2~~	%
~~Finance leases~~	~~13.5~~	%


	May 2, 2020		February 1, 2020		May 4, 2019
Weighted average remaining lease term (in years):
Operating leases	5		5		5
Finance leases	4		4		4

Weighted average discount rate:
Operating leases	3.9	%	4.1	%	4.2	%
Finance leases	7.6	%	8.8	%	11.6	%

The following table provides supplemental cash flow and other information related to leases ~~for the 26 weeks ended August 3, 2019~~ (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:


				13-weeks ended
				May 2, 2020		May 4, 2019
Operating cash flows from operating leases	$	35,225	Operating cash flows from operating leases	$	19,724	$	17,269
Operating cash flows from finance leases	$	123	Operating cash flows from finance leases	$	48	$	65
Financing cash flows from finance leases	$	481	Financing cash flows from finance leases	$	301	$	242

ROU assets obtained in exchange for lease liabilities, net			ROU assets obtained in exchange for lease liabilities, net
Operating leases	$	19,416	Operating leases	$	9,524	$	10,142
Finance leases	$	-	Finance leases	$	533	$	—

Maturities of lease liabilities as of ~~August 3, 2019~~May 2, 2020 (in thousands):

	Operating		Finance		Total
Remainder of Fiscal 2020	$	30,905	$	579	$	31,484
Fiscal 2021		68,345		869		69,214
								Operating		Finance		Total
Remainder of Fiscal 2021							Remainder of Fiscal 2021	$	57,757	$	840	$	58,597
Fiscal 2022		54,803		383		55,186	Fiscal 2022	65,452		740		66,192
Fiscal 2023		40,049		343		40,392	Fiscal 2023	50,045		707		50,752
Fiscal 2024		27,267		240		27,507	Fiscal 2024	35,575		597		36,172
Fiscal 2025							Fiscal 2025	25,043		178		25,221
Thereafter		47,798		23		47,821	Thereafter	43,039		169		43,208
Total minimum lease payments		269,167		2,437		271,604	Total minimum lease payments	276,911		3,231		280,142
Less amount representing interest		27,008		392		27,400	Less amount representing interest	25,085		361		25,446
	$	242,159	$	2,045	$	244,204		$	251,826	$	2,870	$	254,696

As of ~~August 3, 2019,~~May 2, 2020, we have entered into operating leases of approximately ~~$3.6~~$0.9 million related to future store locations that have not yet commenced.

Prior to the adoption of ASC 842, we had entered into capital leases for certain property. At February 2, 2019, total capital lease obligations were $3.0 million, of which $1.0 million was included in short-term capital lease obligations and $2.0 million was included in long-term capital lease obligations on our unaudited condensed consolidated balance sheet.

~~Index~~

As previously disclosed in our 2019 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments due under non-cancelable capital and operating leases as of February 2, 2019 were as follows:

Capital Operating Total
Fiscal 2020 $ 1,259 $ 68,002 $ 69,261
Fiscal 2021 951 58,666 59,617
Fiscal 2022 451 46,683 47,134
Fiscal 2023 408 34,011 34,419
Fiscal 2024 306 22,426 22,732
Thereafter 217 40,181 40,398
Total minimum lease payments 3,592 269,969 273,561
Less amount representing interest 581 - 581
$ 3,011 $ 269,969 $ 272,980

5.	4. Fair Value of Financial Instruments

We utilize 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.

Index

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.

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 as of ~~August 3, 2019~~May 2, 2020, February 1, 2020 and ~~February 2,~~May 4, 2019 (in thousands):


	August 3, 2019						February 2, 2019							May 2, 2020										February 1, 2020								May 4, 2019
	Level I		Level II		Level III		Level I		Level II		Level III			Level I		Level II		Level III		Level I		Level II		Level III		Level I		Level II		Level III
Short-term investments	$	95	$	-	$	-	$	158	$	-	$	-	Short-term investments	$	468	$	—	$	—	$	554	$	—	$	—	$	199	$	—	$	—
Long-term investments		2,588		-		-		2,377		-		-	Long-term investments	1,844		—		—		2,208		—		—		2,499		—		—
Short-term contingent earnout		-		-		6,998							Short-term contingent earnout	—		—		10,000		—		—		9,958		—		—		—
Long-term contingent earnout		-		-		6,672		-		-		9,200	Long-term contingent earnout	—		—		77		—		—		11,099		—		—		6,600
Total investments	$	2,683	$	-	$	13,670	$	2,535	$	-	$	9,200	Total investments	$	2,312	$	—	$	10,077	$	2,762	$	—	$	21,057	$	2,698	$	—	$	6,600

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 members and warrant holders of City Gear if certain financial goals are achieved ~~over the next two fiscal years (Fiscal~~in Fiscal 2020 and Fiscal ~~2021).~~2021. 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 is re-valued each quarter and any change in valuation is recognized in our statements of operations. As a result of the revaluation for the ~~13 weeks and 26 weeks~~13-weeks ended ~~August 3, 2019, an increase~~May 2, 2020, a decrease of ~~$7.1 million and $7.7~~$11.0 million was recognized in store operating, selling and administrative ~~expenses, respectively. Subsequent to February 2, 2019, we made~~expenses. As a ~~$3.2 million adjustment to~~result of the ~~acquisition date contingent earnout valuation from $9.2 million to $6.0 million. The impact of this measurement period adjustment flowed through goodwill in~~revaluation for the ~~quarter~~13-weeks ended May 4, ~~2019.~~2019, an increase of $0.6 million was recognized in store operating, selling and administrative expenses.

~~Index~~

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.

The terms of the Bank of America facility ~~allow~~allowed for borrowings up to $50.0 million with an interest rate agreed upon between the lender and us at the time a loan is made. The terms of the Regions Bank facility ~~allow~~allowed for borrowings up to $50.0 million with an interest rate at one-month LIBOR plus 1.5%. Both facilities ~~are~~were unsecured, due on demand and set to expire in October 2021. Under the provisions of both facilities, we dodid not pay commitment fees. However, both ~~are~~were subject to negative pledge agreements that, among other things, ~~restrict~~restricted liens or transfers of assets including inventory, tangible or intangible personal property and land and land improvements.

In March 2020, we borrowed $50.0 million under these credit agreements as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic. The proceeds from such borrowings were used for working capital, capital expenditures and general corporate purposes.

On April 16, 2020, we entered into the Second Amended and Restated Note with Regions Bank (Amended Credit Facility) that provides for an aggregate amount of credit available to us of $75.0 million. The Amended Credit Facility supersedes the Regions Bank credit agreement dated October 2018, matures April 19, 2021, and is secured by all assets of the Company with the exception of real property. Simultaneous to the execution of the Amended Credit Facility, the $50.0 million outstanding under the previous credit agreements were 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.

Borrowings under the Amended Credit Facility bear interest at the one-month LIBOR rate plus 2.5% from April 16, 2020 through October 16, 2020 and the one-month LIBOR rate plus 3.0% from October 17, 2020 through the maturity date. There were no origination fees and we do not pay any commitment fees. The Amended Credit Facility includes a loan fee of $50,000 payable to Regions Bank at the maturity date or if the agreement is terminated prior to the maturity date for any reason

Index

including due to an event of default. The loan fee will be waived if the Amended Credit Facility is terminated due to refinancing of the loan with an asset-based loan facility provided by Regions Bank.

The Amended Credit Facility has one financial covenant which requires us to maintain inventory with a minimum value of $150.0 million at all times (measured at the lower of cost or market consistent with generally accepted accounting principles). As of May 2, 2020, we were in compliance with this covenant. The Amended Credit Facility also restricts us from engaging in certain acquisitions and from incurring indebtedness, other than certain customary permitted indebtedness related to business operations.

There were ~~91 and 182~~58 days during the ~~13 weeks and 26 weeks~~13-weeks ended ~~August 3, 2019,~~May 2, 2020, where we incurred borrowings against ~~our~~all credit facilities ~~with Bank of America and Regions Bank~~ for an average ~~borrowing of $21.7 million and $26.3 million, respectively,~~ and maximum borrowing of ~~$26.0~~$38.7 million and ~~$35.0~~$50.0 million, respectively. The average interest rate during the ~~13 weeks and 26 weeks~~13-weeks ended ~~August 3, 2019~~May 2, 2020 was ~~3.91% and 3.95%, respectively.~~3.22%. At ~~August 3, 2019,~~May 2, 2020, a total of ~~$83.0~~$25.0 million was available to us from ~~these facilities.~~the Amended Credit Facility.

There were 95331 days during the ~~52 weeks~~52-weeks ended February 2,1, 2020, where we incurred borrowings against these credit facilities for an average and maximum borrowing of $21.5 million and $38.0 million, respectively, and an average interest rate of 3.73%. There were 91 days during the 13-weeks ended May 4, 2019 where we incurred borrowings against these credit facilities for an average and maximum borrowing of ~~$45.4~~$30.9 million and ~~$75.0~~$35.0 million, respectively, and an average interest rate of ~~3.70%~~4.00%.

7.	~~Stock-Based Compensation~~

On June 5, 2020, we entered into a Note Modification Agreement that extends 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.

6. Stock-Based Compensation

The compensation costs that have been charged against income for the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3,~~May 4, 2019 ~~and August 4, 2018~~ were as follows (in thousands):


	13 Weeks Ended				26 Weeks Ended					13-Weeks Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018			May 2, 2020		May 4, 2019
Stock-based compensation expense by type:									Stock-based compensation expense by type:
Stock options	$	-	$	17	$	92	$	177	Stock options	$	90	$	92
Restricted stock units		354		849		716		2,372	Restricted stock units	1,060		363
Employee stock purchases		21		28		51		57	Employee stock purchases	44		29
Director deferred compensation		24		23		47		47	Director deferred compensation	23		23
Total stock-based compensation expense		399		917		906		2,653	Total stock-based compensation expense	1,217		507
Income tax benefit recognized		89		225		203		593	Income tax benefit recognized	391		113
Stock-based compensation expense, net of income tax	$	310	$	692	$	703	$	2,060	Stock-based compensation expense, net of income tax	$	826	$	394

Expense for restricted stock units is shown net of forfeitures of ~~$0.5~~$0.3 million and ~~$1.8~~$1.3 million for the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3,~~May 4, 2019, respectively. ~~Expense for restricted stock units is shown net of forfeitures of $0.1 million for both the 13 weeks and 26 weeks ended August 4, 2018.~~

In the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3,~~May 4, 2019, ~~and August 4, 2018,~~ we granted the following equity awards:


	13 Weeks Ended				26 Weeks Ended					13-Weeks Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018			May 2, 2020	May 4, 2019
Stock options		--		--		16,798		19,994	Stock options	27,000	16,798
Restricted stock unit awards		31,573		--		222,594		169,572	Restricted stock unit awards	334,485	191,021
Performance-based restricted stock unit awards		--		--		34,300		44,700	Performance-based restricted stock unit awards	—	34,300
Deferred stock units		1,288		1,023		2,315		2,002	Deferred stock units	2,143	1,027

Index

At ~~August 3, 2019,~~May 2, 2020, the total compensation costs related to ~~nonvested~~unvested restricted stock unit awards not yet recognized was ~~$6.7~~$7.9 million and the weighted-average period over which such awards are expected to be recognized was ~~2.7~~2.9 years. There were no compensation costs related to ~~nonvested~~unvested stock options at ~~August 3, 2019.~~

~~Index~~

May 2, 2020.

Under the 2012 Non-Employee Director Equity Plan (2012 Plan), no0 shares of our common stock were awarded during the ~~13 weeks~~13-weeks ended ~~August 3, 2019 and August 4, 2018.~~May 2, 2020. A total of 13,858 ~~and 4,435~~ shares of our common stock were awarded during the ~~26 weeks~~13-weeks ended ~~August 3,~~May 4, 2019, ~~and August 4, 2018, respectively,~~ as part of the annual equity award to directors in the first quarter.

NoDuring the 13-weeks ended May 2, 2020 and May 4, 2019, 27,000 and 16,798 stock options were granted, ~~during the 13 weeks ended August 3, 2019 and August 4, 2018.~~respectively. The weighted-average grant date fair value of stock options granted during the ~~26 weeks~~13-weeks ended ~~August 3,~~May 2, 2020 and May 4, 2019 was $3.33 and ~~August 4, 2018 was~~ $5.46 ~~and $7.15~~ per share, respectively.

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					13-Weeks Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018			May 2, 2020		May 4, 2019
Shares purchased		5,628		5,777		15,553		12,331	Shares purchased	17,758		9,925
Average price per share	$	15.47	$	19.47	$	13.35	$	18.34	Average price per share	$	9.29	$	12.16
Weighted average fair value at grant date	$	5.20	$	5.35	$	3.89	$	4.91	Weighted average fair value at grant date	$	4.21	$	3.14

8.	7. Earnings Per Share

The computation of basic earnings per share (EPS) is based on the number of weighted average 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 common shares outstanding (in thousands):


	13-Weeks Ended
	May 2, 2020	May 4, 2019
Weighted-average shares used in basic computations	16,546	18,308
Dilutive equity awards	—	227
Weighted-average shares used in diluted computations	16,546	18,535

13 Weeks Ended 26 Weeks Ended
August 3,
2019 August 4,
2018 August 3,
2019 August 4,
2018
Weighted-average shares used in basic computations 17,906 18,823 18,107 18,896
Dilutive equity awards - - 113 183
Weighted-average shares used in diluted computations 17,906 18,823 18,220 19,079

For the 13-weeks ended May 2, 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. For the 13-weeks ended May 4, 2019, we excluded 253,142 options from the computation of diluted weighted-average common shares and common share equivalents outstanding because of their anti-dilutive effect.

During periods of net income, we exclude anti-dilutive ~~options and nonvested stock~~stock-based awards granted to certain employees from the computation 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 period end. During periods of net loss, no effect is given for anti-dilutive options or ~~nonvested~~unvested stock awards.

9.	8. Stock Repurchase Activity

In November 2018, the Board of Directors (Board) authorized the extension of our Stock Repurchase Program (Program) in the amount of $300.0 million to repurchase our common stock through ~~January~~Jan. 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.

During the ~~13 weeks~~13-weeks ended ~~August 3,~~May 2, 2020, we repurchased 428,018 shares of our common stock under a 10b5-1 plan at a cost of $9.7 million under the Program and acquired 30,895 shares from holders of restricted stock unit awards to satisfy tax

Index

withholding requirements of $0.4 million. During the 13-weeks ended May 4, 2019, we repurchased ~~429,964~~230,000 shares of our common stock at a cost of ~~$8.9~~$4.8 million ~~under the Program. During the 26 weeks ended August 3, 2019, we repurchased 659,964 shares of our common stock at a cost of $13.7 million under the Program~~ and acquired 29,432 shares from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.6 million.

During the 13 weeks ended August 4, 2018, we repurchased 336,302 shares of our common stock at a cost of $8.0 million under the Program. During the 26 weeks ended August 4, 2018, we repurchased 357,836 shares of our common stock at a cost of $8.4 million under the Program and acquired 18,765 shares from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.4 million.

~~Index~~

As of ~~August 3, 2019,~~May 2, 2020, we had approximately ~~$174.2~~$143.3 million remaining under the Program for stock repurchases. ~~Subsequent to August 3, 2019, we have repurchased 120,000 shares of our common stock at a cost of $2.0 million under the program as of September 5, 2019.~~

~~10.~~

9. Commitments and Contingencies

Annual Bonuses and Equity Incentive Awards.

Specified officers and corporate employees of our Company are eligible to receive annual bonuses, based on measures of Company operating performance. ~~At both August 3, 2019~~For Fiscal 2021, the Compensation Committee of our Board again based the short-term cash incentive on earnings before interest and ~~February 2, 2019, there was $3.9 million~~taxes (EBIT) for Fiscal 2021 but in light of ~~annual~~the COVID-19 pandemic, the Compensation Committee expects that adjustments to the set goal will be made in its discretion. Annual bonus related expenses included in accrued payroll expenses on our unaudited condensed consolidated balance ~~sheets.~~sheets was $0.9 million, $8.7 million and $1.5 million at May 2, 2020, February 1, 2020 and May 4, 2019, respectively.

In addition, the Compensation Committee of the Board has placed performance criteria on awards of restricted stock units (PSUs) to our “named executive officers” as determined in accordance with Item 402(a) of Regulation S-K. The performance criteria are tied to performance targets with respect to future return on invested capital and earnings before interest and taxes over a specified period of time. These PSUs are expensed under the provisions of ASC Topic 718, Compensation – Stock Compensation, and are evaluated each quarter to determine the probability that the performance conditions set within will be met.

In May 2019, our President and CEO, Jeffry Rosenthal, entered into a Retirement Agreement (Agreement) with the Company. The Agreement provides, among other things, a salary continuation of $0.6 million payable after his effective retirement date in equal installments over one year and a lump sum cash payment equal Due to the ~~number~~current macroeconomic environment and unprecedented disruption caused by the COVID-19 pandemic, the resulting significant global market decline, and its effect on the value of ~~outstanding~~our common stock, the Compensation Committee decided to make adjustments to the compensation structure for Fiscal 2021. For Fiscal 2021 only, equity awards ~~granted~~ to Mr. Rosenthal (which terminated effective May 10, 2019) multiplied by a computed value defined in the Agreement, but not less than $1.0 million. At August 3, 2019, $2.4 million was accrued under the Agreement and is included in accrued payroll expenses on our unaudited condensed consolidated balance sheet.

executive officers were service-based only, with no performance criteria.

Legal Proceedings and Other Contingencies.

If we believe that a loss is both probable and estimable for a particular matter, the loss is accrued in accordance with the requirements of ASC Topic 450, Contingencies. No material amounts were accrued at ~~August 3, 2019~~May 2, 2020, February 1, 2020 or ~~February 2,~~May 4, 2019 pertaining to legal proceedings or other contingencies.

~~11.~~

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.

We apply the provisions of ASC Subtopic 740-10 in accounting for uncertainty in income taxes. In accordance with ASC Subtopic 740-10, 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 ~~August 3, 2019,~~May 2, 2020, we had a liability of ~~$1.2~~$1.0 million associated with unrecognized tax benefits. We file income tax returns in ~~the~~ 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 2017 or by most state taxing jurisdictions for years prior to Fiscal 2016.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted on March 27, 2020. The CARES Act includes, among other things, refundable payroll tax credits, deferral of employer-side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and

Index

17technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017. We have recognized an income tax benefit of $1.9 million in the 13-weeks ended May 2, 2020, due to enactment of the CARES Act.

11. Related-Party Transactions

The Company leases 1 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 May 2, 2020 and May 4, 2019 were $0.2 million and $0.3 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 an interest in, either directly or indirectly:

Memphis Logistics Group (MLG)

MLG provides logistics and warehousing services to City Gear. Mr. Longo owns a majority interest in MLG and the existing contract is effective through June 2020. The supply chain and logistic transition is currently in the planning stages. In the 13-weeks ended May 2, 2020 and May 4, 2019 payments to MLG under the contract were $1.7 million and $2.0 million, respectively. The amount outstanding to MLG at May 2, 2020, February 1, 2020 and May 4, 2019 was $0.2 million, $0.5 million and $0.4 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. These functions are currently being transitioned to the Company's property management department. For the 13-weeks ended May 2, 2020 and May 4, 2019, payments to TIG for its services were $0.7 million and $0.4 million, respectively. The amount outstanding to TIG at May 2, 2020, February 1, 2020 and May 4, 2019 was $0.2 million, $0.1 million and $0.2 million, respectively, and is included in accounts payable on our unaudited condensed consolidated balance sheets.

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 May 2, 2020 and May 4, 2019, minimum lease payments to MC were $51.2 thousand. There were 0 minimum lease payments remaining under this lease at May 2, 2020. There were 0 amounts outstanding to MC at May 2, 2020, February 1, 2020 or May 4, 2019.

In addition to the related party interests listed above, Mr. Longo also has a membership interest in the Earnout discussed in Note 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, original members and warrant holders of City Gear are entitled to the first Earnout payment of $10.0 million, which was paid on June 1, 2020. Mr. Longo is entitled to approximately 22.8% of any Earnout payment or up to $2.3 million of the initial Earnout payment. If the maximum remaining Earnout payment of $15.0 million is earned based on Fiscal 2021 financial results, Mr. Longo would be entitled up to an additional $4.4 million payable in Fiscal 2022.

~~Index~~

Index

~~ITEM 2.~~

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Important Notice~~Cautionary Statement Regarding Forward-Looking Statements

•the anticipated impact to our business operations consumer demand and supply chain due to the recent global pandemic of a novel strain of the coronavirus (COVID-19);

•our ~~expectations concerning store growth, product margin,~~cash needs, including our ability to fund our future capital expenditures, working capital requirements and repurchases of Company common stock under our repurchase program;

•our relationships with vendors and the ~~remodeling, relocation or expansion~~loss of ~~selected existing stores, and growth in our e-commerce business;~~

key vendor support;

•our plans, expectations and ~~assumptions related to the implementation of our accelerated store closure plan, including~~ estimates ~~of impairment and store closure charges;~~

~~our expectations concerning cash needs and capital expenditures, including our intentions and ability to fund our new stores and other future capital expenditures and working capital requirements;~~

~~our expectations~~ concerning the ~~impact of the acquisition and~~ integration of City Gear and related costs;

•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 ~~amount~~costs and ~~timing~~possible outcomes of ~~acquisition-related expenses;~~

pending legal actions and other contingencies;

•our analysis of our risk factors and their possible effect on financial results;

•our ability and plans to renew our credit ~~facilities;~~

•our expectations regarding our capital expenditures and dividend policy;

•our seasonal sales patterns and assumptions concerning customer buying behavior;

•our expectations regarding competition;

•our estimates and assumptions as they relate to the fair value of assets acquired and liabilities assumed in the purchase of City Gear, preferable tax and financial accounting methods, accruals, inventory valuations, ~~long-lived~~long-live assets, store closure charges, 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 effect of inflation, market decline and other economic changes on our costs and profitability;

•our assessment of the materiality and impact on our business of recent accounting pronouncements ~~or interpretations adopted~~adoption 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 ~~assumptions~~analyses of trends as ~~they relate~~related to ~~pending legal actions~~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, our sources of supply, particularly imported goods, including the actual and potential effect of tariffs on Chinese goods imposed by the United States and other ~~contingencies;~~

~~seasonality and the effect of inflation; and~~

•the impact of technology on our operations and business, including cyberattacks, cyberliability, or potential liability for breaches of our privacy or information security systems; and

•our ability to mitigate the ~~transition~~risk of possible business interruptions, including, without limitation, from ~~LIBOR as an interest rate benchmark to other potential alternative reference rates.~~

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 ~~assume that the~~not place undue reliance on forward-looking statements. Our forward-looking statements are based on currently available operation, financial and business information ~~appearing in this report is accurate~~and speak only as of the date ~~it was issued.~~of this report. Our business, financial condition, results of operations, financial condition, results of operations and ~~intentions~~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,” “Business” and “Properties”~~

~~Our~~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 ~~be wrong in light of these risks, uncertainties and assumptions. The future events, developments or results~~differ materially from those described in ~~this report~~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 ~~turn out to be materially different.~~ have an impact on our forward-looking statements.

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 Securities and Exchange Commission on its EDGAR database at www.sec.gov. In addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K for the fiscal year ended February ~~2, 2019,~~1, 2020, at no charge, by writing to: Investor Relations, Hibbett Sports, Inc., 2700 Milan Court, Birmingham, Alabama 35211.

•Total comparable sales were down less than 20% versus the prior year despite having our store fleet open for approximately 60% of the total available selling days in the quarter.

•Digital traffic was up over 80% for the quarter compared to the prior year. Over 40% of online sales in the second half of the quarter were new customers.

•Inventory allocation systems and distribution infrastructure ramped up to support increased online demand.

•The Merchandise team proactively managed the flow of goods in collaboration with our vendor partners, resulting in a decrease in year-over-year inventory and an inventory balance that remained in line with demand.

•We worked with merchandise and non-merchandise vendors to extend terms.

•We borrowed $50.0 million under our two unsecured, demand lines of credit as a precautionary measure in order to increase our cash position and preserve financial flexibility, and subsequently converted these lines of credit into a single secured line of credit with a one-year term.

•Nearly 700 stores were open to the public at the end of the quarter and over 1,000 are open as of the date of this filing with a majority of them reporting significant comparable sales increases upon their reopening.

In addition, the Company continues to be proactive in protecting the health and safety of our team members and customers and all locations are subject to the following safety guidelines:

•Stores are being extensively cleaned on a daily basis.

•The number of customers allowed in stores open to the public is limited and social distancing is being practiced and maintained.

•Store employees or customers exhibiting any symptoms are not permitted to enter the store.

•Hand sanitizer is readily available to all team members and customers.

•Curbside pick-up is available for all Buy Online, Pick-up In-Store orders where allowed.

•Contactless payment is available in all stores.

For more information, please visit www.hibbett.com/shop-safely-in-stores.html.

Hibbett Sports, Inc. is a leading athletic-inspired fashion retailer primarily located in small and mid-sized communities across the country. Founded in 1945, Hibbett has a rich history of convenient locations, personalized customer service and access to coveted footwear, apparel and equipment from top brands like Nike, Jordan, Adidas and Under Armour. Consumers can browse styles, find new releases, shop looks and make purchases online or in their nearest store or by visiting www.hibbett.com or ~~www.citygear.com.~~ ~~Follow~~www.citygear.com and can follow us ~~@hibbettsports~~@HibbettSports and ~~@citygear.~~@CityGear. We became a public company in October 1996. As of ~~August 3, 2019,~~May 2, 2020, we operated a total of ~~1,108~~1,078 retail stores in 35 states composed of ~~950~~908 Hibbett Sports stores, ~~140~~152 City Gear stores and 18 Sports Additions athletic shoe stores.

Ourprimary merchandising strategy is to provide ~~underserved markets~~ a broad assortment of quality brand name footwear, apparel, accessories and ~~athletic~~team sports equipment at competitive prices in conveniently located full-service environment. In July 2017, we successfully launched our e-commerce website. We continue to grow our online business aggressively, while enhancing our stores ~~and online.~~to imporve 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.

As the retail environment continues to evolve, we remain focused on improving the productivity of the store base while continuing to grow our omni-channel business to serve customers where and when they want to shop and improve the overall customer experience. As a result, subsequent to the year ended February 2, 2019, we decided to close approximately 95 underperforming Hibbett stores during Fiscal 2020, while opening 10 to 15 new Hibbett and City Gear stores in more relevant locations. We expect these closures will result in impairment and store closure charges in the range of $0.10 to $0.15 per diluted share in Fiscal 2020.

Net sales for the 26 weeks ended August 3, 2019, increased 22.6% to $595.7 million compared with $485.8 million for the 26 weeks ended August 4, 2018. Comparable store sales, which did not include City Gear stores, increased 3.1% for the 26 weeks ended August 3, 2019. E-commerce sales accounted for 8.4% of total sales for the 26 week period. Gross margin was 32.7%33.1% of net sales for the ~~26 weeks~~13-weeks ended ~~August 3, 2019,~~May 2, 2020, compared with ~~33.6%~~21.6% of net sales for the ~~26 weeks~~13-weeks ended ~~August~~May 4, ~~2018.~~2019. The ~~decrease in~~main drivers of the ~~gross margin percentage was primarily due to liquidation stores which trended at low to negative product margin, increased freight costs from strong e-commerce sales~~SG&A increase were non-cash impairment charges for goodwill of $19.7 million, City Gear tradename of $8.9 million and other asset impairment of $4.1 million, partially offset by a ~~$1.0~~reduction of $11.0 million ~~non-cash expense incurred to amortize an inventory step-up value~~for the second year earnout liability related to the ~~acquisition of~~ City ~~Gear.~~

About Non-GAAP Measures

Critical Accounting Policies and Estimates

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 ~~August 3, 2019,~~May 2, 2020, for information regarding recent accounting pronouncements.

Results of Operations

Summarized Unaudited Information

Statements of Operations

Share Repurchase Information

13-Weeks Ended ~~August 3, 2019~~May 2, 2020 Compared to ~~13 Weeks~~13-Weeks Ended ~~August~~May 4, ~~2018~~2019

Net sales. Net sales ~~increased $41.3~~decreased ($73.5) million, or ~~19.6%~~(21.4%), to ~~$252.4~~$269.8 million for the ~~13 weeks~~13-weeks ended ~~August 3, 2019~~May 2, 2020 from ~~$211.1~~$343.3 million for the comparable period in the prior year. Furthermore:

•We opened 2three stores, rebranded 2two Hibbett Sports stores to City Gear stores and closed ~~40 underperforming~~eight stores. ~~In addition, we expanded one store.~~

•Comparable store sales ~~increased 0.3%~~decreased 19.5% mainly due to ~~strength~~the large number of stores that were closed entirely or were limited to fulfill e-commerce orders and curbside pick-up which began in footwear and sneaker-connected apparel and accessories offset by softer sales in licensed products and team sports. Sales were also negatively impacted by a shift of peak back to school sales into the third quarter, as we are seeing shoppers make back to school purchases closer to the school start date.

March.

~~Stores not in the comparable store net sales calculation accounted for $51.9 million in net sales of which $42.1 million was attributable to City Gear.~~

•E-commerce sales represented ~~8.6%~~22.3% of total ~~sales. Excluding City Gear~~ sales ~~which has a low online penetration, e-commerce sales were 10.1% of total sales.~~

compared to 8.3% for the comparable period in the prior year.

•Footwear ~~increased low single-digits and has been positive for eight consecutive quarters. Men’s, women’s and kid’s footwear categories were all positive, with the women’s category up double-digits.~~

~~The apparel business was down low single-digits. Activewear, particularly products that connect to footwear for a toe-to-head presentation~~ was positive ~~low single-digits. Women’s and kid’s apparel were down driven primarily by a shift~~across all genders with key investments in ~~timing of back~~women's footwear showing strong results.

•Apparel was positive prior to ~~school sales.~~

~~Accessories were positive low single-digits,~~COVID-19 as we ~~continue to~~believe that our renewed selling focus on ~~this category~~connecting our apparel assortment to sneakers resonated with customers.

•Accessories performed well and was supported by our initiative to connect accessories ~~with footwear~~to sneakers and ~~deliver on-trend products. Licensed business remains soft, down high single-digits.~~by vendor-funded selling initiatives and contests.

~~Equipment continued to experience declines. Strength in baseball, particularly gloves and bats, was more than offset by continued declines in football and fitness.~~20

Index

Gross margin. Cost of goods sold includes the cost of merchandise, occupancy costs for stores, occupancy and operating costs for our wholesale and logistics facility and ship-to-home freight. Gross margin was ~~$76.4~~$74.1 million, or ~~30.3%~~27.5% of net sales, in the ~~13 weeks~~13-weeks ended ~~August 3, 2019,~~May 2, 2020, compared with ~~$66.4~~$118.6 million, or ~~31.4%~~34.5% of net sales, in the same period of the prior fiscal year. ~~Furthermore:~~

~~Product~~Excluding certain COVID-19 expenses, non-GAAP gross margin ~~decreased approximately 110 basis points as a percentage~~was $79.2 million, or 29.4% of net ~~sales. Margin~~sales in the 13-weeks ended May 2, 2020, compared to $119.6 million or 34.8% of net sales, in the same period of the prior fiscal year.

GAAP gross margin was negatively impacted by ~~inventory liquidation of 32 stores related~~the significant mix shift toward e-commerce sales, which carry a lower margin rate due to ~~our previously announced accelerated store closure plan, and limited markdowns to drive sales, resulting in very low aged inventory at quarter end.~~

incremental shipping costs. Logistics expenses were relatively flat year over year ~~as a percentage of net sales.~~

~~Store occupancy costs~~in dollars, but increased ~~approximate 10~~38 basis points as a percentage of net sales ~~primarily~~ due to ~~higher City Gear~~lower sales volume. Store occupancy costs increased approximately 130 basis points as a ~~percent~~percentage of ~~sales.~~

net sales also due to lower sales volume. An increase in aged inventory, defined as items six months past the date of last receipt, resulted in a $5.1 million increase in the LCM inventory reserve during the quarter. This amount was excluded from the non-GAAP gross margin figure.

Store operating, selling and administrative (SG&A) expenses. ~~Store operating, selling and administrative (“~~SG~~&A”)~~&A expenses, including goodwill impairment, were ~~$80.3~~$89.3 million, or ~~31.8%~~33.1% of net sales, for the ~~13 weeks~~13-weeks ended ~~August 3, 2019,~~May 2, 2020, compared to ~~$62.0~~$74.0 million, or ~~29.4%~~21.6% of net sales, for the comparable period a year ago. ~~Furthermore:~~

~~As discussed in Note 3~~Excluding non-GAAP adjustments, SG&A was $64.6 million, or 23.9% net sales, for the 13-weeks ended May 2, 2020, from $72.4 million, or 21.1% of net sales for the same period in the ~~accompanying notes~~prior year.

A large portion of the SG&A increase resulted from impacts related to ~~unaudited condensed consolidated financial statements,~~COVID-19. This included non-cash intangible asset impairments to goodwill in the amount of $19.7 million and the City Gear ~~acquisition purchase agreement included two contingent~~tradename of $8.9 million, partially offset by a reduction of $11.0 million for the second year earnout ~~payments based on City Gear’s achievement of certain EBITDA thresholds for Fiscal 2020 and Fiscal 2021. The preliminary fair value of the~~ liability was included in other liabilities in the Fiscal 2019 year-end consolidated balance sheet. Subsequent changes in the liability are recorded through current period earnings. Based on current forecasts for City Gear performance for Fiscal 2020 and Fiscal 2021, the earnout liability was increased $7.1 million, an impact of 281 basis point as a percentage to net sales, in the current quarter. Additionally, we incurred $0.5 million (19 basis points as a percentage of net sales) in acquisition and integration costs.

~~SG&A includes $0.9 million (36 basis points as a percentage of net sales), in costs related to our accelerated store closure plan.~~

~~SG&A also includes a one-time charge~~ related to the ~~previously announced transition~~City Gear acquisition. These adjustments resulted from a significant decrease in the market valuation of ~~our CEO~~the Company. Other COVID-19 impacts included net payroll costs to support team members at closed stores of approximately 74$2.4 million and other right-of-use asset impairments of approximately $4.1 million.

On a non-GAAP basis, ~~points as a percentage of net sales.~~

~~Excluding these costs, SG&A was $70.0 million, or 27.7% of sales, which represents a 170~~the 280 basis point ~~improvement from~~increase in SG&A compared to the prior year resulted mainly from incremental marketing expenses that drove more customers to our website during the second half of the quarter.

We experienced strong leverage in retail personnel costs as digital continues to increase as a percentage of total sales (thus leveraging store payroll). Additionally, we had positive savings in health and business insurance costs. We also experienced strong leverage in advertising as we continue to move toward more productive advertising programs.

Depreciation and amortization. Depreciation and amortization ~~were relatively flat~~of $6.9 million increased 45 basis points as a percentage of net sales for the ~~13 weeks~~13-weeks ended ~~August 3, 2019~~May 2, 2020 compared to the same period of the prior fiscal year. This increase was mainly due to the deleverage from lower net sales.

Provision for income taxes.The combined federal, state and local effective income tax rate as a percentage of pre-tax ~~income~~loss was ~~24.1% and 28.9%~~31.2% for the ~~13 weeks~~13-weeks ended ~~August 3, 2019~~May 2, 2020 and ~~August 4, 2018, respectively. The decrease in rate~~ was ~~primarily due to resolution~~25.3% of ~~uncertain tax positions.~~

~~Index~~

~~26 Weeks Ended August 3, 2019 Compared to 26 Weeks Ended August 4, 2018~~

~~Net sales~~. ~~Net sales increased $109.9 million, or 22.6%, to $595.7 million~~the pre-tax income for the ~~26 weeks~~13-weeks ended ~~August 3, 2019 from $485.8 million for the comparable period in the prior year. Furthermore:~~

~~We opened 5 stores, rebranded~~May 4, ~~Hibbett Sports stores to City Gear stores and closed 64 underperforming stores. In addition, we expanded 3 stores.~~

Comparable store sales increased 3.1% mainly due to strength in footwear and sneaker-connected apparel and accessories. These strengths were partially offset by softer sales in licensed products and team sports and a shift of peak back to school sales into the third quarter, as we are seeing shoppers make back to school purchases closer to the school start date.

~~Stores not in the comparable store net sales calculation accounted for $125.8 million in net sales of which $101.5 million was attributable to City Gear.~~

~~E-commerce sales represented 8.4% of total sales and 9.9% of total sales excluding City Gear.~~

Footwear increased mid single-digits and has been positive for eight consecutive quarters posting strong gains in men’s, women’s and kids, despite a headwind from launch calendar changes compared to prior year.

Apparel was up low single-digits driven by product that had strong connectivity to our footwear business. Men’s apparel had high single-digit gains. Women’s and kid’s apparel were both down, primarily due to the shift in peak back-to-school sales into the third quarter.

~~Accessories experienced a mid single-digit increase with strong performance in items that had strong sneaker-connectivity to our footwear business.~~

~~Licensed business remains soft, down low double-digits. Equipment experienced a high single-digit decline due to weakness in all key seasonal categories.~~

~~Gross margin~~. Cost of goods sold includes the cost of merchandise, occupancy costs for stores, occupancy and operating costs for our wholesale and logistics facility and ship-to-home freight. Gross margin was $195.0 million, or 32.7% of net sales, in the 26 weeks ended August 3, 2019, compared with $163.1 million, or 33.6% of net sales, in the same period of the prior fiscal year. Excluding approximately $1.0 million (16 basis points as a percentage of net sales) in costs related to the acquisition of City Gear, non-GAAP gross margin was $195.9 million, or 32.9% of net sales. Furthermore:

Excluding the $1.0 million amortization of inventory step-up for City Gear, product margin decreased approximately 70 basis points as a percentage of net sales primarily due to margin pressures from the complete inventory liquidation of 32 stores in the second quarter. These stores were part of a previously announced store closure plan. Product margin was also impacted by markdown activity which resulted in a clean inventory position at the end of the quarter as well as freight costs associated with higher e-commerce sales.

~~Store occupancy and logistic expenses as a percentage of net sales remained relatively flat.~~

~~Store operating, selling and administrative expenses~~. Store operating, selling and administrative expenses were $154.4 million, or 25.9% of net sales, for the 26 weeks ended August 3, 2019, compared to $123.9 million, or 25.5% of net sales, for the comparable period a year ago. Furthermore:

Excluding approximately $8.3 million (139 basis points as a percentage of net sales) in costs related to the acquisition of City Gear and $1.8 million (31 basis points as a percentage of net sales), in costs related to our accelerated store closure plan, non-GAAP store operating, selling and administrative expenses were $144.2 million, or 24.2% of net sales. This adjusted 130 basis point improvement as a percentage to net sales was predominately driven by the strong sales performance.

~~Leverage was experienced primarily in personnel, advertising and data processing costs.~~

~~Additionally, salary costs included a reduction in stock-based compensation expense of approximately $1.8 million related to the forfeiture of certain stock awards from employee departures.~~

~~SG&A also includes a one-time charge related to the previously announced transition of our CEO of approximately 31 basis points as a percentage of net sales.~~

~~Depreciation and amortization~~. Depreciation and amortization decreased 8 basis points as a percentage of net sales for the 26 weeks ended August 3, 2019 compared to the same period of the prior fiscal year. This decrease was mainly due to leverage from higher net sales.

~~Index~~

~~Provision for income taxes~~.~~The combined federal, state and local effective income tax rate as a percentage of pre-tax income was 25.8% and 24.4% for the 26 weeks ended August 3, 2019 and August 4, 2018, respectively.~~2019. The increase in rate was primarily ~~due~~the result of the income tax benefit generated by the Federal net operating loss (NOL) carryback provided for under the Coronavirus Aid, Relief, and Economic Security Act(CARES Act). This provision provides for a five-year NOL carryback for taxable years beginning after December 31, 2017, and before January 1, 2021. As a result, the NOL projected to ~~executive compensation deduction limitations under IRC Section 162(m) and fluctuations~~be generated for Fiscal 2021 may be carried back to Fiscal 2016, a tax year in which the ~~value of stock-based awards between the award grant and vesting dates.~~Federal income tax rate was 35.0%.

Index

GAAP to Non-GAAP ~~financial measures~~. Reconciliations

(Dollars in thousands, except per share amounts)

(Unaudited)

The following ~~table provides a reconciliation~~tables provide reconciliations of our unaudited condensed consolidated statement of operations for the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3,~~May 4, 2019, as reported on a GAAP basis, to a statement of operations for the same period prepared on a non-GAAP basis. ~~For more information regarding our non-GAAP financial measures, see “Executive Summary – About Non-GAAP Measures” above.~~

~~GAAP to Non-GAAP Reconciliations~~


13-Weeks Ended May 2, 2020
			Excluded Amounts
	GAAP Basis (As Reported)		Acquisition Costs⁽¹⁾		COVID-19⁽²⁾		Non-GAAP Basis (As Adjusted)		% of Sales
Cost of goods sold	$	195,690	$	—	$	5,089	$	190,601	70.6	%
Gross margin	$	74,147	$	—	$	5,089	$	79,236	29.4	%
SG&A expenses	$	69,673	$	654	$	4,433	$	64,586	23.9	%
Goodwill impairment	$	19,661	$	—	$	19,661	$	—	—	%
Operating (loss) income	$	(22,057)	$	654	$	29,183	$	7,780	2.9	%
(Loss) income before provision for income taxes	$	(22,227)	$	654	$	29,183	$	7,610	2.8	%
(Benefit) provision for income taxes	$	(6,940)	$	204	$	9,112	$	2,376	0.9	%
Net (loss) income	$	(15,287)	$	450	$	20,072	$	5,235	1.9	%
Diluted (loss) earnings per share⁽³⁾	$	(0.92)	$	0.03	$	1.21	$	0.31

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

13 Weeks Ended August 3, 2019

GAAP Basis
(As Reported)

Acquisition
Costs⁽¹⁾

Strategic
Realignment
Costs⁽²⁾

Non-GAAP
Basis

% of
Sales

Net sales
$
252,440

$
-

$
-

$
252,440

Cost of goods sold
176,067

-

-

176,067

69.7
%
Gross margin
76,373

-

-

76,373

30.3

Store operating, selling and administrative expenses
80,334

7,553

892

71,889

28.5

Depreciation and amortization
7,680

-

-

7,680

3.0

Operating (loss) income
(11,641
)

7,553

892

(3,196
)

-1.3

Interest expense, net
(73
)

-

-

(73
)

-

Loss before provision for income taxes
(11,568
)

7,553

892

(3,123
)

-1.2

(Benefit) provision for income taxes
(2,790
)

1,822

215

(753
)

-0.3

Net (loss) income
$
(8,778
)

$
5,731

$
677

$
(2,370
)

-0.9
%

Basic (loss) earnings per share
$
(0.49
)

0.32

0.04

(0.13
)

Diluted (loss) earnings per share
$
(0.49
)

$
0.32

$
0.04

$
(0.13
)

26 Weeks Ended August 3, 2019

GAAP Basis
(As Reported)

Acquisition
Costs⁽¹⁾

Strategic
Realignment
Costs⁽²⁾

Non-GAAP
Basis

% of
Sales

Net sales
$
595,735

$
-

$
-

$
595,735

Cost of goods sold
400,759

956

-

399,803

67.1
%
Gross margin
194,976

956

-

195,932

32.9

Store operating, selling and administrative expenses
154,373

8,287

1,846

144,240

24.2

Depreciation and amortization
14,903

-

-

14,903

2.5

Operating income
25,700

9,243

1,846

36,789

6.2

Interest expense, net
(29
)

-

-

(29
)

-

Income before provision for income taxes
25,729

9,243

1,846

36,818

6.2

Provision for income taxes
6,650

2,389

477

9,516

1.6

Net income
$
19,079

$
6,854

$
1,369

$
27,302

4.6
%

Basic earnings per share
$
1.05

0.38

0.08

1.51

Diluted earnings per share
$
1.05

$
0.38

$
0.08

$
1.50

	~~(1)~~
1) Excluded acquisition amounts during the 13-week period ended May 2, 2020, related to the acquisition of City Gear, LLC consist primarily of accounting and professional fees.
2) Excluded amounts during the 13-week period ended May 2, 2020, related to COVID-19 consist primarily of non-cash LCM reserve charges in cost of goods sold and impairment (goodwill, tradename and other assets) costs, change in valuation of contingent earnout and paid-not-worked salaries net of related tax credits.
3)Weighted average diluted shares outstanding were not adjusted for dilutive options and restricted stock in the calculation of GAAP loss per share.


13-Weeks Ended May 4, 2019
			Excluded Amounts
	GAAP Basis (As Reported)		Acquisition Costs⁽¹⁾		Strategic Realignment ⁽²⁾		Non-GAAP Basis (As Adjusted)		% of Sales
Cost of goods sold	$	224,692	$	956	$	—	$	223,736	65.2	%
Gross margin	$	118,603	$	956	$	—	$	119,559	34.8	%
SG&A expenses	$	74,038	$	734	$	900	$	72,404	21.1	%
Operating income	$	37,342	$	1,690	$	900	$	39,932	11.6	%
Income before provision for income taxes	$	37,296	$	1,690	$	900	$	39,886	11.6	%
Provision for income taxes	$	9,439	$	428	$	228	$	10,095	2.9	%
Net income	$	27,857	$	1,262	$	672	$	29,791	8.7	%
Diluted earnings per share	$	1.50	$	0.07	$	0.04	$	1.61

~~Acquisition~~


1) Excluded acquisition costs represent costs incurred during the ~~13 weeks~~13-week period ended ~~August 3,~~May 4, 2019, related to the acquisition of City Gear, LLC and consists ~~primarily~~ of amortization of inventory step-up, contingent earnout valuation update and legal, accounting and professional fees. ~~Acquisition costs represent costs incurred~~
2) Excluded strategic realignment amounts during the ~~26 weeks~~13-week period ended August 3, 2019, related to the acquisition of City Gear, LLC and consists primarily of contingent earnout valuation update, amortization of inventory step-up and legal, accounting and professional fees.

~~Index~~

~~(2)~~

~~Strategic realignment costs represent costs incurred during the 13 weeks and 26 weeks ended August 3,~~May 4, 2019, related to our accelerated store closure plan and consists of ~~professional fees, loss on fixed assets and operating leases and~~ impairment ~~costs.~~

costs net of reductions in lease liabilities related to accelerated store closures.

Index

Liquidity and Capital Resources

Impact of COVID-19 on Liquidity

In response to the uncertain market conditions resulting from the COVID-19 pandemic, we have enhanced our liquidity position through the following actions:

•In March 2020, we borrowed $50.0 million under our two unsecured, demand lines of credit as a precautionary measure in order to increase our cash position and preserve financial flexibility;

•In April 2020, we converted these lines of credit into a single secured line of credit with a one-year term;

•We worked with merchandise and non-merchandise vendors to extend terms; and

•We temporarily suspended our stock repurchase program.

Analysis of Cash Flows

Our capital requirements relate primarily to new store openings, stock repurchases, facilities 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 invest in interest-bearing securities and money market accounts, as well as to offset bank fees.

Our unaudited condensed consolidated statements of cash flows are summarized as follows (in thousands):


	26 Weeks Ended							13-Weeks Ended
	August 3, 2019			August 4, 2018				May 2, 2020		May 4, 2019
Net cash provided by operating activities	$	74,144		$	62,527		Net cash provided by operating activities	$	3,882	$	72,058
Net cash used in investing activities		(5,619	)		(7,821	)	Net cash used in investing activities	(3,447)		(2,523)
Net cash used in financing activities		(32,491	)		(8,659	)
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	39,692		(14,328)
Net increase in cash and cash equivalents	$	36,034		$	46,047		Net increase in cash and cash equivalents	$	40,127	$	55,207

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. 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 ~~$74.1~~$3.9 million for the ~~26 weeks~~13-weeks ended ~~August 3, 2019~~May 2, 2020 compared with net cash provided by operating activities of ~~$62.5~~$72.1 million for the ~~26 weeks~~13-weeks ended ~~August~~May 4, ~~2018.~~2019. 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 of the contingent earnout liability, impairments, deferred income taxes, amortization of inventory step-up valuation from the City Gear opening balance sheet, and stock-based compensation. Net cash provided by operating activities for ~~August 3,~~May 2, 2020 and May 4, 2019 ~~and August 4, 2018~~ was impacted by the following:

•Net income used cash of $15.3 million and provided cash of ~~$19.1 million and $20.3~~$27.9 million during the ~~26 weeks~~13-weeks ended ~~August 3,~~May 2, 2020 and May 4, 2019, ~~and August 4, 2018,~~ respectively.

•Net inventories decreased ~~$8.8~~$46.0 million and ~~$6.1~~$30.8 million during the ~~26 weeks~~13-weeks ended ~~August 3,~~May 2, 2020 and May 4, 2019, ~~and August 4, 2018, respectively,~~respectively. Inventory levels typically decline during the first quarter, but the decrease was more pronounced this year due ~~partially~~ to ~~a lower store base resulting from store closures and a reduction~~aggressive inventory management in ~~aged inventory.~~

response to the COVID-19 pandemic.

•The change in accounts payable ~~provided~~used cash of ~~$17.5~~$33.5 million and ~~$19.1~~$1.5 million during the ~~26 weeks~~13-weeks ended ~~August 3,~~May 2, 2020 and May 4, 2019, ~~and August 4, 2018, respectively, and is typically affected by the timing of receipts prior to peak selling seasons. Accounts payable~~respectively. The current year impact was ~~additionally~~ impacted by the ~~decrease~~significant reduction in inventory receipts in the ~~number~~last month of ~~stores and resulting inventory balance.~~

the quarter.

•The change in ~~prepaid expenses~~other assets and liabilities is impacted by changes in income tax payable and other contract payments due to the timing of payments.

~~Index~~

•Non-cash charges included depreciation and amortization expense of ~~$14.9~~$6.9 million and ~~$12.5~~$7.2 million and stock-based compensation expense of ~~$0.9~~$1.2 million and ~~$2.7~~$0.5 million during the ~~26 weeks~~13-weeks ended ~~August 3,~~May 2, 2020 and May 4, 2019, ~~and August 4, 2018,~~ respectively. Depreciation expense ~~increased~~decreased due to ~~additional depreciation for City Gear property and equipment, offset in part by~~ a lower store sales base. Fluctuations in stock-based compensation generally result from the achievement of performance-based equity awards at greater or lesser than their granted level, fluctuations in the price of our common stock and levels and effects of forfeitures in any given period. ~~The current 26-week expense was impacted by a reduction in stock-based compensation of approximately $1.8 million related to the forfeiture of certain stock awards from employee departures.~~

Index

•Other non-cash adjustments to net income for the 13-weeks ended May 2, 2020 included ~~$7.7~~$32.6 million of impairment charges of intangible assets resulting from a significant decrease in the market valuation of the Company during the pandemic, partially offset by an $11.0 million change in the valuation of the contingent earnout related to City ~~Gear, $1.0~~Gear.

•The change in receivables of $11.9 million ~~inventory amortization~~resulted primarily from employee retention credits under the CARES Act and an increase in receivables related to ~~the acquisition of City Gear and $0.4 million of impairment charges.~~

strong e-commerce sales.

Investing Activities.

We opened 5three new stores and rebranded 4two Hibbett Sports stores to City Gear stores during the 13-weeks ended May 2, 2020, as compared to opening three new stores and ~~relocated or expanded 6~~rebranding two existing stores during the ~~26 weeks~~13-weeks ended ~~August 3, 2019 as compared to opening 13 new stores and relocating or expanding 8 existing stores during the 26 weeks ended August~~May 4, ~~2018.~~

We ~~estimate the cash outlay for~~anticipate that our capital expenditures infor the fiscal year ending ~~February 1, 2020~~January 30, 2021 will ~~be approximately $18.0 million to $20.0 million, which relates~~primarily relate to expenditures for:

~~The~~•the opening of new stores, the remodeling, relocation or expansion of selected existing stores;

~~Information~~•information system infrastructure, projects, upgrades and ~~security (including City Gear integration);~~security; and

~~Other~~•other departmental needs.

~~Of the total estimated dollars~~Our plan for capital expenditures for Fiscal ~~2020,~~2021 will remain flexible as we ~~anticipate that approximately 50% will be~~navigate through the economic impact related to COVID-19. We will assess our capital expenditure needs against our cash availability during the ~~opening of new stores, store expansions and relocations and store remodels. Approximately 30% will be related~~crisis to information technology, consisting primarily of expenditures for projects and software, City Gear integration, omni-channel, infrastructure and various system enhancements, upgrades and security. The remaining expenditures relate primarily to specific department expenditures and includes facility upgrades, transportation equipment, automobiles, fixtures and security equipmentmake the most strategic decisions for our ~~stores.~~business. We have the ability to defer or accelerate much of the anticipated capital expenditure budget depending on our financial position and the needs of the business.

Financing Activities.

Net cash ~~used in~~provided by financing activities was ~~$32.5~~$39.7 million in the ~~26 weeks~~13-weeks ended ~~August 3, 2019~~May 2, 2020 compared to net cash used in financing activities of ~~$8.7~~$14.3 million in the prior year period. During the ~~26 weeks~~13-weeks ended ~~August 3, 2019,~~May 2, 2020, net borrowings on our credit facilities provided cash of $50.0 million compared to net repayments on our credit facilities ~~used cash~~ of ~~$18.0 million.~~$9.0 million in the same period of the prior year. We also repurchased ~~$13.7~~$9.7 million of our common stock under our Program ~~and an~~per a 10b5-1 plan that was enacted prior to the COVID-19 pandemic. An additional ~~$0.6~~$0.4 million was purchased from holders of restricted stock unit awards to satisfy tax withholding ~~requirements, which~~requirements. Combined, this is an increase of ~~$5.5~~$4.8 million from the prior year ~~26 weeks~~13-weeks ended ~~August~~May 4, ~~2018.~~2019. See Note 9, 8, Stock Repurchase Activity, to the unaudited condensed consolidated financial ~~statements.~~statements for additional information.

At ~~August 3, 2019,~~May 2, 2020, we had ~~two unsecured~~one secured credit ~~facilities~~facility with Regions Bank that ~~allow~~allows borrowings up to ~~$50.0~~$75.0 million ~~each,~~ and ~~which expire in October~~had an expiration date of April 19, 2021. On June 5, 2020, the Company and Regions Bank entered into a Note Modification Agreement (Agreement) that extends the maturity date of the Amended Credit Facility to July 18, 2021. No other provisions of the Amended Credit Facility were affected by the Agreement. Under the provisions of ~~both facilities,~~the facility, we do not pay commitment ~~fees. However, both are subject to negative pledge agreements that, among other things, restrict liens or transfers~~fees; however, it is secured by all assets of assets including inventory, tangible or intangible personal property and land and land improvements. We plan to renew these facilities as they expire and do not anticipate any problems in doing so; however, no assurance can be given that we will be granted a renewal or terms which are acceptable to us.the Company with the exception of real property. As of ~~August 3, 2019,~~May 2, 2020, a total of ~~$83.0~~$25.0 million was available to us ~~from these facilities.~~

under the facility. See Note 5, Debt, to the unaudited condensed consolidated financial statements for additional information.

Off-Balance Sheet Arrangements.

Quarterly and Seasonal Fluctuations

~~ITEM 3.~~

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Investment and Credit Availability Risk

We also have a financial ~~institutions~~institution that ~~are~~is committed to provide loans under our credit ~~facilities.~~facility. There is a risk that ~~these institutions~~this institution cannot deliver against these obligations. For a further discussion of this risk and risks related to our deposits, see “Risk Factors” in our Form 10-K for the fiscal year ended February ~~2, 2019.~~

~~In July 2017,~~Borrowing under the ~~Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates~~Amended Credit Facility uses the London Interbank Offering Rate (LIBOR) as a benchmark for establishing the ~~calculation~~interest rate. LIBOR has been the subject of LIBOR after 2021. The Alternative Reference Rates Committee (AARC) has proposed that the Secured Overnight Financing Rate (SOFR) is the rate that represents best practice as the alternative to LIBOR for use in derivativesrecent national, international and other regulatory guidance and proposals for reform, and the financial ~~contracts~~industry is currently ~~indexed to LIBOR. AARC has proposed a paced market transition plan to SOFR from LIBOR. We are currently evaluating the impact of the transition~~transitioning away from LIBOR as ~~an interest rate~~a benchmark for the interbank lending market. Due to ~~other potential alternative reference rates, including SOFR. We do not currently have material contracts, with~~ the ~~exception~~short-term nature of our current secured credit ~~facilities, that are indexed to LIBOR. We will continue to actively assess~~facility, the ~~related opportunities and risks involved in this transition.~~potential transition away from LIBOR does not impact us.

~~ITEM 4.~~

~~Controls~~

ITEM 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Changes in Internal Control Over Financial Reporting.

~~During the 13 weeks ended August 3, 2019, we implemented certain internal controls in connection with our adoption of Topic 842,~~ ~~Leases. The adoption of FASB Topic 842 is discussed in Notes 1, 2 and 4 to the unaudited condensed consolidated financial statements in this Form 10-Q. There were no other~~We have not identified any changes in our internal control over financial reporting that occurred during the ~~quarter~~period ended ~~August 3, 2019,~~May 2, 2020, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

~~ITEM 1.~~

ITEM 1. Legal Proceedings.

~~ITEM 1A.~~

ITEM 1A. Risk Factors.

The continuing impacts of the COVID-19 pandemic are highly unpredictable, volatile, and uncertain, and could continue to adversely affect our business operations, demand for our products and services, our costs of doing business, availability of labor, access to inventory, supply chain operations, our ability to predict future performance, our exposure to litigation, and our financial performance, among other things.

•the severity and duration of the pandemic, including whether there is a “second wave” or other additional periods of increases or spikes in the number of COVID-19 cases in future periods in the communities or states we operate;

•the rapidly changing and fluid circumstances caused by the pandemic and our ability to respond quickly enough or appropriately to those circumstances;

•the duration and degree of governmental, business or other actions in response to the pandemic, including but not limited to quarantine or shelter-in-place measures; restrictions on our operations up to and including complete or partial closure of our stores and distribution centers; economic measures; access to unemployment compensation; fiscal policy changes; or additional measures that may yet be effected;

•the health of, and effect of, the pandemic on our team members and our ability to maintain staffing needs to effectively operate our business;

•evolving macroeconomic factors, including general economic uncertainty, unemployment rates, and recessionary pressures;

•our ability to enter into rent deferral arrangements with our landlords;

•our ability to move existing inventory, including potentially having to sell existing inventory at a discount or write-down of value of inventory, and the costs and expenses of updating and replacing inventory;

•our ability to attract customers to our stores when, or if, they reopen, given the risks, or perceived risks, of gathering in public places;

•the impact of the pandemic and related economic uncertainty on consumer confidence, economic well-being, spending, and shopping behaviors, both during and after the crisis;

•impacts – financial, operational or otherwise – on our supply chain, including manufacturers or suppliers of our products and logistics or transportation providers;

•unknown consequences on our business performance and strategic initiatives stemming from the substantial investment of time and other resources to the pandemic response, including potential delays in or adjustments to our strategic investments;

•the incremental costs of doing business during and/or after the crisis;

•volatility in the credit and financial markets during and after the pandemic;

•the potential effects on our internal control environment and data security as a result of changes to a remote work environment;

•the impact of regulatory and judicial changes in liability for workers compensation;

•potential increases in insurance premiums, medical claims costs, and workers’ compensation claim costs;

•the availability of, and prevalence of access to, effective medical treatments and vaccines for COVID-19;

•the impact of litigation or claims from customers, team members, suppliers, regulators or other third parties relating to COVID-19 or our actions in response thereto;

•the pace of recovery when the pandemic subsides; and

•the long-term impact of the pandemic on our business.

Team Member and Customer Safety-Related Risks. In response to the COVID-19 pandemic, we have taken a number of actions across our business to help protect our team members, customers, and others in the communities we serve. These measures include, among other things, adjusted store hours; remote working opportunities for our store support center, increased cleaning and sanitizing measures; limits on customer traffic in stores to maintain physical and social distancing protocols; other physical and social distancing efforts such as markings on floors, signage and plexiglass shields; providing masks to team members in stores, store support center and distribution centers; offering curbside pick-up from stores; and instituting contactless payment in all stores.

Information Technology-Related Risks. As a result of the pandemic and related quarantines, shelter-in-place orders, and similar restrictions, we have experienced increased demand for online purchases of products. While we have managed this increased volume to date without interruption, there are no assurances that we will continue to be able to do so. We have also had to rapidly modify certain technology to support our interconnected offerings in connection with the pandemic, such as the addition of curbside pick-up. Disruptions, failures or other performance issues with our customer-facing technology systems, either due to the increased volume or other factors, could impair the benefits they provide, adversely impact our sales, and negatively affect our relationship with our customers. In addition, as more business activities have shifted online due to COVID-19 restrictions, and as many of our store support team members are working remotely, we face an increased risk due potential failure of internal or external information technology infrastructure as well as increased cybersecurity threats and attempts to breach our security networks.

Supply Chain-Related Risks. Circumstances related to the COVID-19 pandemic have significantly impacted the global supply chain, particularly those products that are sourced from China, with restrictions and limitations on business activities causing disruption and delay. These disruptions and delays, which may expand depending on the progression of the pandemic, are placing strain on the domestic and international supply chain, which has affected and could continue to negatively affect the flow or availability of certain products. Customer demand for certain products has also fluctuated as the pandemic has progressed and customer behaviors have changed, which has challenged our ability to anticipate and/or adjust inventory levels to meet that demand. These factors have challenged our management of inventory positions as well as some delays in delivering products to our distribution centers, stores or customers. Increased demand for online purchases of products has impacted our fulfillment operations and, if it continues, could result in delays in delivering products to customers. The operation of our distribution centers and stores as fulfillment centers is crucial to our business operations.

~~ITEM 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

Financial and Liquidity Risks. In an effort to strengthen our liquidity position while navigating the COVID-19 pandemic, we took proactive steps during the first quarter of Fiscal 2021, including suspending our share repurchase program, converting two unsecured, demand lines of credit into a single secured line of credit with a one-year term, working with merchandise and non-merchandise vendors to extend terms, ramping up inventory allocation systems and distribution infrastructure to support increased online demand and managing the flow of goods in collaboration with our vendor partners, resulting in a decrease in year-over-year inventory and an inventory balance that remained in line with demand.

Additionally, changes in our capital allocation strategy could have adverse impacts, both short- and long-term, on our results of operations and financial position. Temporary suspension of our share repurchase program impacts our earnings per share and return on invested capital, which in turn could adversely impact our stock price.

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

May 5, 2019 to June 1, 2019

June 2, 2019 to July 6, 2019

July 7, 2019 to August 3, 2019


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)
February 2, 2020 to February 29, 2020	373,423	$	23.24	373,423	$	144,385
March 1, 2020 to April 4, 2020	85,490	$	17.46	54,595	$	143,316
April 5, 2020 to May 2, 2020	—	$	—	—	$	143,316
Total	458,913	$	22.17	428,018	$	143,316

(1)In November 2018, the Board authorized the extension of our Program of $300.0 million to repurchase our common stock through January 29, 2022 that replaced an existing authorization. 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.

Item 5. Other Information.

~~(1)~~

In November 2018, the Board authorized the extension of our Stock Repurchase Program (Program) of $300.0 million to repurchase our common stock through January 29, 2022 that replaced an existing authorization. See Note 9, ~~Stock Repurchase Activity,~~ ~~to the unaudited condensed consolidated financial statements.~~

On June 5, 2020, the Company and Regions Bank entered into a Note Modification Agreement (Agreement) that extends the maturity date of the Amended Credit Facility from April 19, 2021 to July 18, 2021. No other provisions of the Amended Credit Facility disclosed in Note 5, Debt, were affected.

~~ITEM 6.~~

~~Exhibits.~~

~~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.~~

~~Date:~~ ~~September 11, 2019~~

~~/s/ Christine E. Skold~~

~~Christine E. Skold~~

~~Interim Chief Financial Officer~~

~~(Principal Financial and Accounting Officer)~~

Certificate of Incorporation and By-Laws

Form of Stock Certificate

Interactive Data Files

The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended ~~August 3, 2019,~~May 2, 2020, formatted in XBRL (eXtensible Business Reporting Language) and submitted electronically herewith: (i) the Unaudited Condensed Consolidated Balance Sheets at ~~August 3, 2019~~May 2, 2020, February 1, 2020 and ~~February 2,~~May 4, 2019; (ii) the Unaudited Condensed Consolidated Statements of Operations for the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3, 2019 and August~~May 4, ~~2018;~~2019; (iii) the Unaudited Condensed Consolidated Statements of Cash Flows for the ~~26 weeks~~13-weeks ended ~~August 3, 2019~~May 2, 2020 and ~~August~~May 4, ~~2018;~~2019; (iv) the Unaudited Condensed Consolidated Statements of Stockholders Investment for the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3, 2019 and August~~May 4, ~~2018;~~2019; and (v) the Notes to Unaudited Condensed Consolidated Financial Statements.

HIBBETT SPORTS, INC.

Date:

June 8, 2020

By:

/s/ Robert Volke

Robert Volke

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

~~DELAWARE~~
Delaware						20-8159608
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share	HIBB	~~NASDAQ~~Nasdaq Global Select Market

Period	Total Number of Shares Purchased		Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Approximate Dollar Value of Shares that may yet be Purchased Under the Programs (in thousands)
May 5, 2019 to June 1, 2019		204,873	$	21.06		204,873	$	178,853
June 2, 2019 to July 6, 2019		99,291	$	21.32		99,291	$	176,737
July 7, 2019 to August 3, 2019		125,800	$	19.98		125,800	$	174,223
Total		429,964	$	20.81		429,964	$	174,223

~~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 Form 8-K filed with the Securities and Exchange Commission on May 31, 2012.
3.2			Bylaws of the Registrant, as amended; incorporated herein by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on ~~May 28, 2019.~~June 1, 2020.

			Form of Stock Certificate
4.1			Form of Stock Certificate; incorporated herein by reference to Exhibit 99.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 26, 2007.

			Material Agreements
~~10.1~~	~~NONE~~

	~~Certifications~~
10.1		†	Separation Agreement and Release, between Hibbett Sports, Inc. and Cathy Pryor, effective April 1, 2020; incorporated herein by reference to Exhibit 10.26 of the Registrant’s Form 10-K filed with the Securities and Exchange Commission on April 16, 2020.
10.2			Second Amended and Restated Note with Regions Bank; incorporated herein by reference to Exhibit 10.27 of the Registrant's Form 10-K filed with the Securities and Exchange Commission on April 16, 2020.
10.3		†	Hibbett Sports, Inc. Amended and Restated 2015 Equity Incentive Plan; incorporated herein by reference to Exhibit 99.1 of the Registrant’s Registration Statement on Form S-8 (File No .333-238767) filed with the Securities and Exchange Commission on May 29, 2020.
10.4		*	Note Modification Agreement with Regions Bank (filed herewith).

			Certifications
31.1		*	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2		*	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32.1		*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

			Interactive Data Files
			The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended ~~August 3, 2019,~~May 2, 2020, formatted in XBRL (eXtensible Business Reporting Language) and submitted electronically herewith: (i) the Unaudited Condensed Consolidated Balance Sheets at ~~August 3, 2019~~May 2, 2020, February 1, 2020 and ~~February 2,~~May 4, 2019; (ii) the Unaudited Condensed Consolidated Statements of Operations for the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3, 2019 and August~~May 4, ~~2018;~~2019; (iii) the Unaudited Condensed Consolidated Statements of Cash Flows for the ~~26 weeks~~13-weeks ended ~~August 3, 2019~~May 2, 2020 and ~~August~~May 4, ~~2018;~~2019; (iv) the Unaudited Condensed Consolidated Statements of Stockholders Investment for the ~~13 weeks~~13-weeks ended May 2, 2020 and ~~26 weeks ended August 3, 2019 and August~~May 4, ~~2018;~~2019; and (v) the Notes to Unaudited Condensed Consolidated Financial Statements.

101.INS		*	XBRL Instance Document
101.SCH		*	XBRL Taxonomy Extension Schema Document
101.CAL		*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE		*	XBRL Taxonomy Extension Presentation Linkbase Document

		*	Filed Within
		†	Management Contract or Compensatory Plan or Arrangement

13 Weeks Ended August 3, 2019

	Common Stock									Treasury Stock
	Number of Shares		Amount		Paid-In Capital		Retained Earnings			Number of Shares		Amount			Total Stockholders' Investment
Balance - May 4, 2019		39,101	$	391	$	186,462	$	785,454			20,945	$	(615,125	)	$	357,182
Net loss		-		-		-		(8,778	)		-		-			(8,778	)
Issuance of shares through the Company's equity plans		24		-		86		-			-		-			86
Purchase of shares under the stock repurchase program		-		-		-		-			430		(8,946	)		(8,946	)
Stock-based compensation		-		-		399		-			-		-			399
Balance - August 3, 2019		39,125	$	391	$	186,947	$	776,677			21,376	$	(624,070	)	$	339,945

13 Weeks Ended August 4, 2018

	Common Stock									Treasury Stock
	Number of Shares		Amount		Paid-In Capital		Retained Earnings			Number of Shares		Amount			Total Stockholders' Investment
Balance - May 5, 2018		38,946	$	389	$	182,630	$	752,765			19,951	$	(594,101	)	$	341,683
Net loss		-		-		-		(1,222	)		-		-			(1,222	)
Issuance of shares through the Company's equity plans		8		-		150		-			-		-			150
Purchase of shares under the stock repurchase program		-		-		-		-			336		(7,977	)		(7,977	)
Stock-based compensation		-		-		917		-			-		-			917
Balance - August 4, 2018		38,954	$	389	$	183,697	$	751,543			20,287	$	(602,078	)	$	333,551

26 Weeks Ended August 4, 2018

	Common Stock									Treasury Stock
	Number of Shares		Amount		Paid-In Capital		Retained Earnings			Number of Shares		Amount			Total Stockholders' Investment
Balance - February 3, 2018		38,863	$	389	$	180,536	$	731,901			19,910	$	(593,230	)	$	319,596
Net income		-		-		-		20,287			-		-			20,287
Issuance of shares through the Company's equity plans		91		-		508		-			-		-			508
Adjustment for adoption of accounting standard		-		-		-		(645	)		-		-			(645	)
Purchase of shares under the stock repurchase program		-		-		-		-			358		(8,432	)		(8,432	)
Settlement of net share equity awards		-		-		-		-			19		(416	)		(416	)
Stock-based compensation		-		-		2,653		-			-		-			2,653
Balance - August 4, 2018		38,954	$	389	$	183,697	$	751,543			20,287	$	(602,078	)	$	333,551

	As Reported February 2, 2019			As Revised August 3, 2019			Adjustments
Assets Acquired:
Current assets:
Receivables	$	3,168		$	3,732		$	564
Inventories		44,807			44,807			-
Prepaid expense, other current and intangible assets		2,716			2,689			(27	)
Total current assets		50,691			51,228			537
Goodwill		23,133			19,661			(3,472	)
Property and equipment		16,530			16,530			-
Long-term intangible assets		33,601			33,503			(98	)
Deposits and other assets		567			567			-
Deferred tax asset		24			638			614
Total assets	$	124,546		$	122,127		$	(2,419	)

Liabilities Assumed:
Current liabilities:
Accounts payable	$	23,615		$	23,615		$	-
Other accrued expenses and intangible liabilities		3,366			3,526			160
Total current liabilities		26,981			27,141			160
Other long-term liabilities and intangible liabilities		2,613			3,234			621
Total liabilities		29,594			30,375			781
Total purchase price	$	94,952		$	91,752		$	(3,200	)

Cash paid at closing	$	86,837		$	86,837		$	-
Fair value of contingent earnout		9,200			6,000			(3,200	)
Net working capital and debt-like items adjustment		(1,085	)		(1,085	)		-
	$	94,952		$	91,752		$	(3,200	)

	Ended August 4, 2018
(in thousands, except per share data)	13 Weeks			26 Weeks
Net sales	$	254,592		$	588,588
Net (loss) income	$	(2,805	)	$	24,701
Basic earnings per share	$	(0.15	)	$	1.31
Diluted earnings per share	$	(0.15	)	$	1.29

	13 Weeks Ended August 3, 2019			26 Weeks Ended August 3, 2019
Operating lease cost	$	18,404		$	35,542
Finance lease cost:
Amortization of assets		223			460
Interest on lease liabilities		58			123
Variable lease cost		(281	)		104
	$	18,404		$	36,229

	Capital		Operating		Total
Fiscal 2020	$	1,259	$	68,002	$	69,261
Fiscal 2021		951		58,666		59,617
Fiscal 2022		451		46,683		47,134
Fiscal 2023		408		34,011		34,419
Fiscal 2024		306		22,426		22,732
Thereafter		217		40,181		40,398
Total minimum lease payments		3,592		269,969		273,561
Less amount representing interest		581		-		581
	$	3,011	$	269,969	$	272,980

13 Weeks Ended August 3, 2019
	GAAP Basis (As Reported)			Acquisition Costs⁽¹⁾		Strategic Realignment Costs⁽²⁾		Non-GAAP Basis			% of Sales
Net sales	$	252,440		$	-	$	-	$	252,440
Cost of goods sold		176,067			-		-		176,067			69.7	%
Gross margin		76,373			-		-		76,373			30.3
Store operating, selling and administrative expenses		80,334			7,553		892		71,889			28.5
Depreciation and amortization		7,680			-		-		7,680			3.0
Operating (loss) income		(11,641	)		7,553		892		(3,196	)		-1.3
Interest expense, net		(73	)		-		-		(73	)		-
Loss before provision for income taxes		(11,568	)		7,553		892		(3,123	)		-1.2
(Benefit) provision for income taxes		(2,790	)		1,822		215		(753	)		-0.3
Net (loss) income	$	(8,778	)	$	5,731	$	677	$	(2,370	)		-0.9	%

Basic (loss) earnings per share	$	(0.49	)		0.32		0.04		(0.13	)
Diluted (loss) earnings per share	$	(0.49	)	$	0.32	$	0.04	$	(0.13	)

	~~HIBBETT SPORTS, INC.~~
Exhibit No.				Description
~~Date:~~ ~~September 11, 2019~~			~~By:~~	~~/s/ Christine E. Skold~~
		~~Christine E. Skold~~
		~~Interim Chief Financial Officer~~
		~~(Principal Financial and Accounting Officer)~~