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Hibbett Sports, Inc.

“Game Tested. Athlete Approved.”. Hibbett Sports, Inc. Kevin A. Pribil. Module 2. Net Enterprise Assets (NEA) Enterprise Assets Enterprise Liabilities NEA Summary Net Financial Liabilities (NFL) Financing Assets Financing Liabilities NFL Summary Enterprise Profit after Tax (EPAT)

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Hibbett Sports, Inc.

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  1. “Game Tested. Athlete Approved.” Hibbett Sports, Inc. Kevin A. Pribil Module 2

  2. Net Enterprise Assets (NEA) • Enterprise Assets • Enterprise Liabilities • NEA Summary • Net Financial Liabilities (NFL) • Financing Assets • Financing Liabilities • NFL Summary • Enterprise Profit after Tax (EPAT) • Financing Expense after Tax (FEAT) Agenda

  3. Production activities the company undertakes Vs. • Borrowing and lending activities that are in support of the core business activity Enterprise v. Financing

  4. Sift through Balance Sheet to classify each item as enterprise or financing • NEA = Enterprise Assets – Enterprise Liabilities • Individual classification explanations to follow Net Enterprise Assets (NEA)

  5. Cash & Cash Equivalents: typically, cash on hand is determined by the amount of sales revenue. The rule of thumb, 2% of sales revenue, is $16,374 and represents the portion included in NEA • A/R: a necessity for operations; entire amount is included in NEA. Note: Trade receivables are contracts with school districts for sporting goods (Source: Hibbett10-K) • Inventory: the items sold in Hibbett’s operations; entire amount is included in NEA Enterprise Assets

  6. Prepaid Expenses & other: a combination of various items, this line item is typically an enterprise asset. Until further info is uncovered, include full amount in NEA • Other Assets, net: a combination of various items, this line item is typically an enterprise asset. Until further info is uncovered, include full amount in NEA • Deferred Income Taxes, net: usually a combination of enterprise and financing activities. Until further info is uncovered, include full amount in NEA. Both the current and non-current line items are included Enterprise Assets

  7. Net Property & Equipment: this infrastructure is required to carry out enterprise operations in therefore is included in NEA Enterprise Assets

  8. A/P: arise from operations and should be included in enterprise liabilities (EL) • Capital Lease Obligations: although leases are undergone to acquire enterprise assets, the lease obligation is merely financing. With more than ½ of HIBB stock authorized but not issued, Hibbett could have financed their lease assets using stock sales. This is excluded from EL Enterprise Liabilities

  9. Accrued Payroll Expense: in order to conduct operations, the company must hire staff. Therefore, payroll associated with its workforce is included in EL • Deferred Rent:Hibbett rents all of its offices, storefronts, and warehouse. These rentals are directly related to carrying out operations and are included in EL • Other Accrued Expenses: reasonable to assume these are associated with operations and are included in EL Enterprise Liabilities

  10. Unrecognized Tax Benefits: are likely associated with operations since Hibbett has no financing income. This is included in EL • Other Liabilities, net: assume these are related to operations and include in EL Enterprise Liabilities

  11. Net Enterprise Assets (NEA)

  12. After splitting NEA in previous section; enables us to view balance sheet affects from financing • Companies that are net borrowers will have an NFL • NFL = Financial Assets – Financial Liabilities Net Financial Liabilities (NFL)

  13. Cash and Cash Equivalents (above 2%): the cash amount above 2% represents the amount of cash that was reinvested and not used in operations. This number is the only financial asset used in calculating NFL Financial Assets

  14. Capital Lease Obligations: as determined earlier, these were not a part of operations due to the other financing options available. This is included in FL • Preferred Stock: similar to a bond because of its payoff structure, preferred stock is included in FL Financial Liabilities

  15. Net Financial Liabilities (NFL) Check figure ensures all line items are accounted for. CSE should equal (NEA-NFL).

  16. Sift through Income Statement to classify line items as enterprise or financing • Individual classification explanations to follow Enterprise Profit after Tax (EPAT)

  17. Net Sales: an obvious component of operations. This is the income from goods sold and is included in EPAT • COGS, including Distribution: expenses directly related to performing operations are included in EPAT • Store Operating, Selling, and Administrative Expenses: also directly related to operations and is included in EPAT EPAT

  18. Deprec. & Amort: related to the items supporting operations and included in EPAT • Provision for Income Taxes: includes both original provision on Income Statement and includes the income tax shield from interest income/expense in the EPAT EPAT

  19. EPAT

  20. EPAT

  21. After completing EPAT, an implied value of FEAT is determined; the difference between the comprehensive income minus EPAT. • Create a schedule to illustrate line item classifications and arrive at FEAT Financing Expense after Tax (FEAT)

  22. FEAT

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