Acquisition

12 Months Ended

Jan. 30, 2021

ACQUISITION

In November 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.

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 included 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 could not exceed $25.0 million.

The acquisition provided 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.

The results of operations of City Gear are included in our results of operations beginning on November 5, 2018. From November 5, 2018 through February 2, 2019, City Gear generated net sales of $49.1 million and net loss of $0.4 million. These results included $1.9 million related to the amortization of the step-up of the inventory value related to purchase accounting.

The following unaudited consolidated pro forma summary was 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). Both Hibbett and City Gear's fiscal year statements of operations for the fiscal year ended February 2, 2019 contained 52 weeks of operations.


(in thousands, except per share data)	Fiscal 2019
Net sales	$	1,152,628
Net income	$	27,265
Basic earnings per share	$	1.46
Diluted earnings per share	$	1.45

The results for Fiscal 2019 were 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 listed adjustments. In addition, Fiscal 2019 results were adjusted to exclude the impact of acquisition-related expenses and purchase accounting adjustments incurred by the Company that were directly attributable to the transaction.

The proforma financial information has been prepared for comparative purposes only and includes certain adjustments, as noted above. The adjustments were based on estimates derived from available information and were 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 were expected to result from the integration of the City Gear integration.